WEBVTT - Treasuries, ETFs, GE, and Private Credit (Podcast) 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day, we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:21.840 at Bloomberg dot com slash podcast. Still, you know, we're 0:00:21.840 --> 0:00:24.400 talking about earnings, but let's be honest, the Fed has 0:00:24.440 --> 0:00:26.599 really been moving this market is likely to continue to 0:00:26.600 --> 0:00:29.240 do so for some time. So that means we have 0:00:29.400 --> 0:00:31.680 to talk to Ira Jersey. Whether we want to or not, 0:00:31.760 --> 0:00:33.640 we have to talk to Ira Jersey because he is 0:00:33.720 --> 0:00:36.159 the go to guy. He's the chief US interest rate 0:00:36.159 --> 0:00:40.839 strategist for Bloomberg Intelligence. So Ira, you know, what do 0:00:40.920 --> 0:00:43.440 you expect from your Federal Reserve Here? The talk is 0:00:43.520 --> 0:00:45.640 kind of really ramped up on. Hey, we only need 0:00:45.640 --> 0:00:48.800 twenty five basis points this time. Yeah, I still think 0:00:48.840 --> 0:00:51.400 that they'll they'll do twenty five basis points and they'll 0:00:51.440 --> 0:00:53.760 leave the door open to doing one or two more 0:00:54.120 --> 0:00:56.360 um interest rate hikes. Remember, we don't get a summary 0:00:56.360 --> 0:00:58.560 of economic projections this time, so there won't be any 0:00:58.600 --> 0:01:01.080 new Dot plot or anything like that. But but it 0:01:01.160 --> 0:01:05.240 will be parsing very carefully j Powell's post meeting statement 0:01:05.280 --> 0:01:07.880 next Wednesday, because um, you know, we want to get 0:01:07.920 --> 0:01:10.600 a hint of what their reaction function is based on 0:01:10.800 --> 0:01:15.400 incoming data, Like will they potentially stop at the March meeting. Um, 0:01:15.440 --> 0:01:17.880 we don't think that they will, but um, but it's 0:01:17.920 --> 0:01:21.240 going to be a very close call thereafter, we think so. Um, 0:01:21.400 --> 0:01:23.640 And it will be very data dependent. So if if 0:01:23.680 --> 0:01:27.440 inflation keeps on the down trajectory that has been on 0:01:27.840 --> 0:01:30.240 in recent months, then you know, we might be very 0:01:30.240 --> 0:01:33.800 close to nearing the end of interest rate tykes. Um, 0:01:33.840 --> 0:01:37.360 that's a big if, right, because as China reopens and 0:01:37.400 --> 0:01:41.240 Europe seems to avoid a deep procession, there could be 0:01:41.360 --> 0:01:44.399 a lot more a lot more spending on commodities that 0:01:44.440 --> 0:01:47.960 could push prices up and that could come through an inflation. Yeah, 0:01:48.040 --> 0:01:50.840 that's true, man. You know, I think one of the 0:01:50.880 --> 0:01:53.320 one of the risks though, and one of the one 0:01:53.320 --> 0:01:56.520 of the key factors that's helping the inflationary environment right 0:01:56.560 --> 0:01:59.200 now is is base effects. Right. So, so the spring 0:01:59.240 --> 0:02:01.600 of last year, when you saw the largest month on 0:02:01.680 --> 0:02:05.160 month increases in a lot of prices and now you're 0:02:05.480 --> 0:02:07.600 going to see some of those base effects roll off, 0:02:07.680 --> 0:02:10.359 so you'll actually have, um, you know, somewhat of a 0:02:10.400 --> 0:02:13.440 stabilization on a year on year perspective. UM. But but 0:02:13.440 --> 0:02:15.320 but you're right, like and and one of the things 0:02:15.320 --> 0:02:18.280 that we've often noted is, look, if if the Federal 0:02:18.320 --> 0:02:21.440 Reserve hikes to five percent, you know, plus or minus points, 0:02:21.440 --> 0:02:24.600 so let's say it's five percent UM then and and 0:02:24.680 --> 0:02:28.280 you wind up having the PC deflator more or less 0:02:28.320 --> 0:02:30.960 five percent, which seems like it's very likely going to 0:02:31.000 --> 0:02:34.120 happen over the next couple of months. UM. Then really 0:02:34.120 --> 0:02:36.320 the Federal Reserve will say, Okay, look, our job is 0:02:36.360 --> 0:02:39.160 not done, but we're we're just not cutting policy. And 0:02:39.440 --> 0:02:42.480 what's still amazing to me is that even though the 0:02:42.520 --> 0:02:45.360 Fed's been very consistent for the last six seven months, 0:02:45.760 --> 0:02:48.160 with almost every member saying, look, once we reach the peak, 0:02:48.200 --> 0:02:50.280 we're going to stay there for a long period of time, 0:02:50.800 --> 0:02:53.080 the market still doesn't believe that. Right. The market is 0:02:53.120 --> 0:02:56.679 still pricing in cuts that I don't want to sit 0:02:56.720 --> 0:03:00.280 around with five percent inflation. I mean, base effect was 0:03:00.360 --> 0:03:03.280 the mantra that we heard at the beginning of twenty two, 0:03:03.280 --> 0:03:05.240 and it still didn't slow inflation down that much. Right, 0:03:05.280 --> 0:03:07.400 if you look at year over year cp I, it 0:03:07.520 --> 0:03:10.639 averaged seven percent in two thousand twenty one, it averaged 0:03:10.680 --> 0:03:13.560 six and a half percent in twenty two. So let's 0:03:13.600 --> 0:03:15.360 say we get down to five and a half percent 0:03:15.360 --> 0:03:17.400 in twenty three. I don't want to look forward to 0:03:17.440 --> 0:03:20.560 five percent in four like, get it done. Well, that's 0:03:20.600 --> 0:03:22.040 and that's the reason why they're not going to be 0:03:22.040 --> 0:03:24.560 cutting right, So I think, you know, the we we 0:03:24.600 --> 0:03:28.200 have to well, they they're not going to probably raise 0:03:28.280 --> 0:03:30.120 much more than five and a half percent or five 0:03:30.160 --> 0:03:34.160 and a quarter um in part because the the some 0:03:34.200 --> 0:03:36.760 of the underlying inflationary pressures are coming down. So you 0:03:37.040 --> 0:03:40.880 mentioned things like commodities and and um uh and and 0:03:41.040 --> 0:03:44.080 good prices, and good prices have already been falling, right, 0:03:44.080 --> 0:03:46.320 So so I think we we throughout all of this, 0:03:46.360 --> 0:03:49.200 we've actually missed the fact that core goods prices are 0:03:49.240 --> 0:03:52.360 actually falling on a month a month basis. What's continuing 0:03:52.400 --> 0:03:56.520 to rise significantly is our services prices, and those are 0:03:56.560 --> 0:04:00.000 driven in large part by by wages and wage games um. 0:04:00.040 --> 0:04:03.640 And obviously the employment situation continues to be um, you know, 0:04:04.000 --> 0:04:07.880 reasonably good. So so the federal Reserve will be pretty happy, 0:04:08.040 --> 0:04:11.480 I think to maintain interest rates this year. Look if Matt, 0:04:11.520 --> 0:04:13.680 if you if you're you know, you're right, And there 0:04:13.760 --> 0:04:16.360 is a large portion of the market that still thinks 0:04:16.360 --> 0:04:18.080 that the Federal Reserve is behind the curve and they 0:04:18.120 --> 0:04:21.080 need to continue to hike well beyond five there's a 0:04:21.080 --> 0:04:24.280 whole another part side of the market that's actually, you know, 0:04:24.320 --> 0:04:26.560 clearly winning saying that hey, we're going to be in 0:04:26.600 --> 0:04:28.279 a recession in the second half of the year, and 0:04:28.320 --> 0:04:29.920 because of that, the Fed is going to be cutting 0:04:30.200 --> 0:04:33.960 sooner rather than later before um uh, you know, and 0:04:34.360 --> 0:04:36.440 even before year end. We we actually did a piece 0:04:36.520 --> 0:04:39.719 yesterday looking at what options markets are pricing and option 0:04:39.800 --> 0:04:41.880 and even though the market is currently pricing for about 0:04:41.920 --> 0:04:44.400 forty basis points of interest rate cuts by the end 0:04:44.400 --> 0:04:47.280 of the year, it's what the market is really pricing 0:04:47.320 --> 0:04:51.560 for is either one cut or four or five six cuts, right, So, 0:04:51.560 --> 0:04:55.839 so we're really pricing this bimodal distribution of of uh, 0:04:55.960 --> 0:04:58.560 but but all leaning toward cuts and not much more 0:04:58.560 --> 0:05:00.600 in terms of hikes. So so, even though there were 0:05:00.640 --> 0:05:03.160 some that are sympathetic to your view, Matt Well, um 0:05:03.200 --> 0:05:04.880 that most of the market is not and and that 0:05:05.000 --> 0:05:07.960 we're priced for four cuts and which I personally thinks 0:05:08.000 --> 0:05:10.640 won't happen. I just want them to take care of 0:05:10.720 --> 0:05:15.599 inflation before we get into such a deepercession that my 0:05:15.720 --> 0:05:18.120 boss isn't willing to give me a raise to keep 0:05:18.200 --> 0:05:23.080 up with inflation. Right, this is a bad situation. And uh, 0:05:23.240 --> 0:05:25.880 it's been going on for too long already. And if 0:05:25.920 --> 0:05:28.080 they continue just to let it go on, it's going 0:05:28.160 --> 0:05:30.680 to get much worse. Because until now, wage gains have 0:05:30.920 --> 0:05:33.800 almost kept up with inflation. They they still have been 0:05:33.839 --> 0:05:36.679 outpaced by inflation. But if you get into a situation 0:05:36.680 --> 0:05:40.400 where inflation keeps smoldering and not only you know, we 0:05:40.520 --> 0:05:43.359 see three m like starting to fire people, they're definitely 0:05:43.400 --> 0:05:46.840 not giving any raises. Now. You know the the FC 0:05:47.880 --> 0:05:51.039 Central New Jersey tickets that cost me twenty dollars last 0:05:51.120 --> 0:05:53.080 year and thirty dollars this year, that cost me forty 0:05:53.080 --> 0:05:54.799 dollars next year. I'm not gonna be able to afford 0:05:54.839 --> 0:05:56.640 to go anymore. Well, and and that's one of the 0:05:56.640 --> 0:05:59.839 reasons why, and that that the Federal Reserve, I think 0:05:59.880 --> 0:06:02.919 is not is going to take away and see approach 0:06:02.960 --> 0:06:05.360 once they once they reached the next couple of a 0:06:05.400 --> 0:06:07.680 couple of meetings and they reached that five percent level. 0:06:07.760 --> 0:06:09.520 That not that that five percent levels any kind of 0:06:09.560 --> 0:06:13.800 magic number, UM, but they they know that there is 0:06:13.839 --> 0:06:16.920 starting to see a slowdown in the in economic activity. 0:06:16.960 --> 0:06:20.599 And usually slowdowns in economic activity are followed by UM, 0:06:21.279 --> 0:06:24.400 followed by slower price gains and and uh, and inflation 0:06:24.440 --> 0:06:26.960 tends to come down. So that's the reason why I 0:06:27.000 --> 0:06:28.400 think that the Fed is going to take a little 0:06:28.440 --> 0:06:31.080 bit of a wait and see approach. And UM, you know, 0:06:31.120 --> 0:06:34.440 if if, certainly, if if inflation re accelerates in a 0:06:34.440 --> 0:06:37.560 major way, UM, then the Federal Reserve at that point 0:06:37.640 --> 0:06:39.520 would be able to hike more. But but I think, 0:06:39.720 --> 0:06:42.760 you know, taking a pause and then trying to maintain 0:06:42.880 --> 0:06:46.320 rates at five five and a quarter percent is what 0:06:46.400 --> 0:06:49.080 they intend on doing, right And and look, my job 0:06:49.120 --> 0:06:51.520 also met is not to not to tell them what 0:06:51.600 --> 0:06:54.320 to do and not to give my opinion, but trying 0:06:54.360 --> 0:06:56.880 to point out what they should be doing. What they 0:06:56.920 --> 0:06:58.720 will do, and what I think that they will do 0:06:59.120 --> 0:07:00.880 is maintain interest rate. It's for the rest of this year, 0:07:00.920 --> 0:07:05.120 probably into because if the employment situation is strong enough, 0:07:05.120 --> 0:07:07.360 they'll have the ability to do that. That's what we 0:07:07.400 --> 0:07:09.960 need though, someone to tell us what they will do. 0:07:10.000 --> 0:07:12.320 You don't need to hear from me and Vince tell 0:07:12.400 --> 0:07:15.360 them what they should do. Good stuff. We'll get to 0:07:15.760 --> 0:07:18.880 a soccer discussion at another time. IRA Jersey, Chief US 0:07:18.920 --> 0:07:22.800 Interest rate strategist for Bloomberg Intelligence. We wove in the soccer, Yeah, yeah, 0:07:22.800 --> 0:07:25.640 we woven into a little bit f C United FC 0:07:25.720 --> 0:07:28.920 Central Jersey or something like that, Central Jersey or something 0:07:28.960 --> 0:07:31.160 like that Rayal Center, New Jersey, Real Central New Jersey. 0:07:31.160 --> 0:07:37.200 All right, there we go. I have a buddy, uh, 0:07:37.360 --> 0:07:40.920 David Auerbach. He's a managing director at Armada E T 0:07:41.120 --> 0:07:45.760 F Advisors and also a fellow Fish fan. Oh. We 0:07:45.920 --> 0:07:47.960 actually went to see the New Year's Eve shows together, 0:07:48.080 --> 0:07:52.160 one of them ye at Madison Square. Wasn't it was amazing? 0:07:53.200 --> 0:07:55.360 That's it. It was fantastic. But the funny thing is, 0:07:55.720 --> 0:07:58.960 so we're sitting there and we had a suite, a 0:07:59.040 --> 0:08:02.200 couple of couple of c eats, um great view. The 0:08:02.320 --> 0:08:05.800 light show is insane, and in the second set we 0:08:05.880 --> 0:08:10.480 get into this deep, like spacey discussion about Mall Reads 0:08:11.440 --> 0:08:14.080 and I thought, you know what, in this entire stadium, 0:08:14.080 --> 0:08:16.920 in all of MSG, nobody else is talking about Mall ranks. 0:08:17.000 --> 0:08:19.640 Right now, let's bring in David on the phone, joining 0:08:19.720 --> 0:08:21.960 us out of Texas. UM great to have you on 0:08:21.960 --> 0:08:25.840 the program. David, Let's start by talking about the situation 0:08:25.920 --> 0:08:29.800 that that the real estate industry, or the residential real 0:08:29.880 --> 0:08:32.520 estate industry funds itself in right now. We'll get to 0:08:32.559 --> 0:08:36.520 the malls later. But you run house h a U S, 0:08:36.559 --> 0:08:38.920 which is an e t F and actively managed e 0:08:39.080 --> 0:08:41.800 t F that invests in publicly traded reads. Talk to 0:08:41.800 --> 0:08:45.680 me about the state of your industry. Well, good morning, 0:08:45.720 --> 0:08:47.440 thanks for having me back on the air, and of 0:08:47.480 --> 0:08:50.560 course I'd rather talk about our fun experience. But you know, 0:08:50.720 --> 0:08:53.320 right now, in the world of publicly traded reads, you know, 0:08:53.520 --> 0:08:56.080 we see really a lot of upside as you know, 0:08:56.200 --> 0:08:59.840 after the ball told results, you know, a lot of 0:08:59.840 --> 0:09:02.360 the reats are coming out basically forecasting we're not going 0:09:02.400 --> 0:09:04.199 to have as great of a year and o Y 0:09:04.360 --> 0:09:07.360 growth and you know, really crushed it like we did 0:09:07.400 --> 0:09:09.880 last year, because last year was almost unprecedented for some 0:09:09.920 --> 0:09:13.079 of the residential reeths. But these guys are still forecasting 0:09:13.160 --> 0:09:15.920 growth and in the wake of rising interest rates and 0:09:16.040 --> 0:09:20.520 rising inflation, we're focused on that end rental payment. We 0:09:20.600 --> 0:09:24.320 call it the residential reat income ets because we say 0:09:24.360 --> 0:09:27.760 that the rent payment goes into your pocket as income 0:09:27.760 --> 0:09:30.760 in the form of dividends, and pretty much across the board, 0:09:30.800 --> 0:09:35.280 these residential reeths have been raising their UH dividends over 0:09:35.320 --> 0:09:39.160 the past couple of years through COVID. That's great for Paul, Paul, 0:09:39.200 --> 0:09:44.120 how good is you? You You love dividends stuff. So 0:09:44.559 --> 0:09:48.319 has the residential real estate market, I mean, is it's 0:09:48.360 --> 0:09:52.440 still adjusting to this higher mortgage rate environment. Has it steadied? 0:09:52.480 --> 0:09:56.520 What are we seeing here? Yeah, it's definitely adjusting, there's 0:09:56.559 --> 0:09:58.520 no question about it. You know, some of the home 0:09:58.559 --> 0:10:01.240 sales numbers that have been coming out recently, though there's 0:10:01.280 --> 0:10:04.520 somewhat kind of dated results, are showing somewhat of a 0:10:04.559 --> 0:10:06.880 turnaround compared to what we had seen, you know, in 0:10:06.920 --> 0:10:09.800 the mid second mid second half of the year last year. 0:10:10.040 --> 0:10:12.079 I hate to use the term, and everybody kicks around 0:10:12.120 --> 0:10:15.560 that new normal. Look. Interested interest rates have gone from 0:10:15.679 --> 0:10:18.200 zero to four and a half percent. Mortgage rates you know, 0:10:18.240 --> 0:10:21.040 went from like two to six three to six percent 0:10:21.160 --> 0:10:24.640 last year. We're in this six percent mortgage range right now, 0:10:25.000 --> 0:10:27.880 and so I think people are accepting it. The problem 0:10:27.880 --> 0:10:29.520 is that you know, hey, I get this great job 0:10:29.559 --> 0:10:32.080 opportunity to move from Dallas, Texas to New York, and 0:10:32.120 --> 0:10:34.800 I'm trading my two seven five mortgage for a six 0:10:34.840 --> 0:10:37.360 and change mortgage in New York. I'm you know, I'm 0:10:37.360 --> 0:10:41.120 basically locked in. I'm kind of geographically constrained at that point. 0:10:41.400 --> 0:10:43.880 And so from the rental payment from the rental side, 0:10:44.080 --> 0:10:46.120 you know, unless you're in the market to go out 0:10:46.120 --> 0:10:48.600 and buy that house right now, you're really focused on 0:10:48.640 --> 0:10:51.240 what's my end rent payment going to be next month? 0:10:51.880 --> 0:10:53.720 Is it going up ten percent or is it going 0:10:53.800 --> 0:10:57.079 up a hundred percent? Well, and I mean so many 0:10:57.320 --> 0:10:59.240 people who haven't been able to buy have been and 0:10:59.240 --> 0:11:02.439 put in that position. And in terms of the investment though, David, 0:11:02.520 --> 0:11:06.480 for those listening who don't quite get the E t F, 0:11:06.640 --> 0:11:10.280 you know, functionality, How does that work when when when 0:11:10.320 --> 0:11:12.800 you get paid dividends by the public reads you invest in. 0:11:12.840 --> 0:11:15.360 How does say Paul buys a share of house, how 0:11:15.400 --> 0:11:18.600 does that come through to him? Uh, It's it's a 0:11:18.600 --> 0:11:21.760 great question. And basically it's passed through directly to the 0:11:21.840 --> 0:11:26.240 end shareholder. We pay a quarterly dividend and it's basically 0:11:26.240 --> 0:11:30.240 a culmination of the income received from our underlying constituents. 0:11:30.240 --> 0:11:33.439 Our fund owns twenty five publicly traded reefs. Those are 0:11:33.480 --> 0:11:38.360 comprised of apartment reads, single family rental reads, manufactured housing, 0:11:38.440 --> 0:11:42.679 senior housing. All these companies are reporting monthly and quarterly dividends. 0:11:42.720 --> 0:11:45.240 That adds up and that basically event goes into your 0:11:45.280 --> 0:11:47.640 pocket at the end of the day as a shareholder 0:11:47.679 --> 0:11:49.080 on the phone of the dividends. So it's just like 0:11:49.120 --> 0:11:51.520 any other stuff. So Paul calls this guy at pain 0:11:51.559 --> 0:11:55.400 Weber or wherever and says around for a while and says, 0:11:55.600 --> 0:11:58.120 you just reinvest those dividends or they just cut him 0:11:58.120 --> 0:12:00.880 a check every quarter. That's right, right, And you know, 0:12:00.920 --> 0:12:03.839 past seem probably more like a you know, day one 0:12:03.960 --> 0:12:06.640 Robin Hood type of guy who is well ahead of there. 0:12:07.600 --> 0:12:10.880 But yes, that is correct. Again. Ets are publicly traded vehicles. 0:12:10.880 --> 0:12:13.680 They trade just like stocks. Bid ask spreads trade during 0:12:13.720 --> 0:12:16.959 the market hours, you know, and we highlight that liquidity. 0:12:17.000 --> 0:12:18.920 You know, Matt, you and I talked about the private 0:12:19.040 --> 0:12:20.880 versus public and what we've been seeing in some of 0:12:20.920 --> 0:12:24.199 the private resets out there, you know, talking about gaining redemptions, 0:12:24.200 --> 0:12:27.240 investors having a hard time pulling their money out. You know, 0:12:27.280 --> 0:12:28.720 they're never going to be able to get out of 0:12:28.720 --> 0:12:32.800 this maze of you know, trying to capture their investment. 0:12:33.120 --> 0:12:36.000 And so for us, we're highlighting the liquidity of publicly 0:12:36.000 --> 0:12:39.079 traded reafs and ets. You want to put a million 0:12:39.120 --> 0:12:41.800 dollars into house, thank you very much. You can pull 0:12:41.800 --> 0:12:44.439 out a million dollars of house very quickly, just as 0:12:44.480 --> 0:12:46.560 well versus you may have a harder time at some 0:12:46.600 --> 0:12:49.240 of these private vehicles right now, So, David, talk about 0:12:49.240 --> 0:12:52.400 mortgage rates up that six percent range, is the expectation 0:12:52.520 --> 0:12:53.960 that you know, a lot of folks are saying if 0:12:53.960 --> 0:12:55.360 it's going to be cutting rates at the end of 0:12:55.400 --> 0:12:58.360 this year early next year, So is that Are the 0:12:58.400 --> 0:13:00.760 mortgage folks you talked to saying, hey, the mortgage rates 0:13:00.760 --> 0:13:04.280 will come back down along with the Fed. Yes, the 0:13:04.280 --> 0:13:07.720 answer is yes. Mortgage rates staly traditionally do tend to 0:13:07.760 --> 0:13:10.520 move hand in hand with interest rates. If we do 0:13:10.720 --> 0:13:13.600 see that correction coming back in later in the back 0:13:13.600 --> 0:13:16.079 half of the year, yes, I would expect to see that. However, 0:13:16.160 --> 0:13:18.200 at the end of the day though, until we really 0:13:18.240 --> 0:13:20.720 see the mortgage rates go back from let's say six percent, 0:13:20.800 --> 0:13:23.200 so you know, a more manageable level of four percent. 0:13:23.480 --> 0:13:25.440 I still think we're gonna see, you know, some popsy 0:13:25.480 --> 0:13:30.480 turbunus in the housing market. What does this? What are 0:13:30.520 --> 0:13:33.079 these big changes? And I mean I don't know when's 0:13:33.080 --> 0:13:35.959 the last time the FED raised four fifty basis points 0:13:36.480 --> 0:13:40.120 in a year? Um? What do they do to e 0:13:40.240 --> 0:13:43.040 t F s and net asset values? I mean, they're 0:13:43.080 --> 0:13:48.760 bigger and bigger divergences, right, how do those fix themselves? Well, 0:13:48.840 --> 0:13:50.880 you know, for us again, we're looking for us at 0:13:50.880 --> 0:13:54.640 the residential reefs and focusing on the underlying constituents themselves. 0:13:55.000 --> 0:13:58.359 I will highlight that many of these reefs took advantage 0:13:58.440 --> 0:14:01.760 during COVID to re capitalized, you know, their balance sheets, 0:14:01.800 --> 0:14:04.880 and we're able to lock in very long term debt 0:14:04.920 --> 0:14:08.760 at a very attractive rates. So unfortunately, you know, I 0:14:08.840 --> 0:14:11.080 can't control as I as I tell people, I can't 0:14:11.080 --> 0:14:13.480 control my et F stock price. I can't control my 0:14:13.520 --> 0:14:16.960 constituent stock price. All I can focus is on the narrative, 0:14:17.240 --> 0:14:21.240 highlighting how well capitalized these companies are, and I focus 0:14:21.280 --> 0:14:23.120 on the fundamentals. And usually at the end of the day, 0:14:23.160 --> 0:14:25.480 matters we talked about. I take, you know, pick your 0:14:25.520 --> 0:14:30.680 favorite Wall Street stock reets, Apple, Microsoft, whoever, take your 0:14:30.680 --> 0:14:33.120 fore fait, your favorite company, and I try to boil 0:14:33.120 --> 0:14:34.760 it down to four bullet points. What do you want 0:14:34.760 --> 0:14:36.680 a good company to do well? At the end of 0:14:36.680 --> 0:14:39.640 the day, It's very simple. You want them to grow revenues, 0:14:40.120 --> 0:14:44.760 grow profits, grow dividends, and grow guidance. And that's pretty 0:14:44.840 --> 0:14:47.600 much what you have been seeing from the residential reads 0:14:47.640 --> 0:14:50.960 across the board over the past year two years coming 0:14:50.960 --> 0:14:54.440 out of COVID, and so from the fundamental perspective, the 0:14:54.480 --> 0:14:57.600 bottom line is, these guys are in a pretty solid 0:14:57.640 --> 0:15:00.960 position right now. Let's just CLEI really touch on malls 0:15:00.960 --> 0:15:03.120 for a second, because I thought it was such a 0:15:03.120 --> 0:15:07.640 cool conversation that we had um in an extended version 0:15:07.640 --> 0:15:12.440 of Tweezer. It wasn't It wasn't really tweezer. What what? What? What? What? 0:15:12.440 --> 0:15:14.640 What is up with that business? Like? Can it ever 0:15:14.760 --> 0:15:18.040 come back? Um? What do they need to do? And 0:15:18.160 --> 0:15:21.320 what do you think about it? Ecap Rates in the 0:15:21.360 --> 0:15:23.680 mall sector have been going backwards down the number line. 0:15:23.720 --> 0:15:26.800 To throw another reference at you, and when we look 0:15:26.840 --> 0:15:30.360 at some of the high quality properties versus you know 0:15:30.440 --> 0:15:32.080 you and I spent a lot of time talking about 0:15:32.080 --> 0:15:35.840 American Dream and uh in fact. Bloomberg Opinion ran a 0:15:35.840 --> 0:15:39.800 great piece yesterday talking about how mall landlords are spending 0:15:40.080 --> 0:15:44.680 huge dollars to offer these exponential type experiences and indoor 0:15:44.800 --> 0:15:48.600 ski malls and the retail location as an example. And 0:15:48.640 --> 0:15:51.000 the question is if you if you build it, will 0:15:51.040 --> 0:15:54.520 they come? And you know, at the end of the day, Look, 0:15:54.560 --> 0:15:57.560 there is no place like the mall. I have fond 0:15:57.600 --> 0:16:00.840 memories and going to the arcade, going to Mrs Fields 0:16:00.840 --> 0:16:03.320 Cookies and you know that was where we spent our weekends. 0:16:03.480 --> 0:16:05.440 And I know it's a different generation, but the mall 0:16:05.520 --> 0:16:08.120 guys are trying to reach out towards that next generation, 0:16:08.160 --> 0:16:10.440 whether it's through e sports venus. I do see the 0:16:10.480 --> 0:16:13.200 mall isn't going away. I think we're going to see 0:16:13.200 --> 0:16:16.200 an evolution of the mall space. I'm looking forward to it. 0:16:16.240 --> 0:16:18.560 Good stuff. I hope they put in pickleball. Pickleball, you're 0:16:18.560 --> 0:16:20.920 a big pickleball fan. Yeah, all on and whatever the 0:16:20.960 --> 0:16:24.080 latest fat is. David auerback Managing Director Armada E. T 0:16:24.280 --> 0:16:26.840 F S giving us his thoughts on the residential real 0:16:26.960 --> 0:16:30.920 estate market in their Residential reet Um Income et F 0:16:31.600 --> 0:16:35.320 H A U S House. Uh So we'll see how 0:16:35.320 --> 0:16:37.560 that goes, but mortgage rates at six percent makes it 0:16:37.600 --> 0:16:45.360 tough for some buyers. Now, let's talk about some industrial America, 0:16:45.560 --> 0:16:49.360 agricultural equipment, turbine engines, all that kind of good stuff. 0:16:49.400 --> 0:16:51.440 We can do that with Karen Herbal Hall Hubal Heart. 0:16:51.520 --> 0:16:55.640 She covers all that industrial stuff for Bloomberg Intelligence. Uh, 0:16:55.800 --> 0:16:58.440 Karen lots to talk about. Let's start with one of 0:16:58.440 --> 0:17:01.680 your all time faves. You've been following this company for decades, Ge, 0:17:01.920 --> 0:17:04.080 what do we learned today with their earnings and kind 0:17:04.080 --> 0:17:07.280 of what's their story going forward? Uh, well, you know, 0:17:07.520 --> 0:17:10.560 um on just briefly on the fourth quarter, I guess, uh, 0:17:10.800 --> 0:17:14.600 there was positive surprises and negative surprises on aerospace. That 0:17:14.720 --> 0:17:17.200 was kind of in line power, which is a big 0:17:17.200 --> 0:17:20.639 turnaround story. They did much better than expected on margins 0:17:21.119 --> 0:17:25.440 um double digit margins, which they haven't done in four years. UM. However, 0:17:25.480 --> 0:17:28.439 they lost that in renewables, which is um uh you know, 0:17:28.480 --> 0:17:33.720 an ongoing issue for them. UM. As far as the outlook, uh, 0:17:33.760 --> 0:17:36.200 you know, again it's going to be driven by aerospace. 0:17:36.520 --> 0:17:39.680 The outlook was lower than people expected on EPs spaces. 0:17:40.040 --> 0:17:43.160 I think they're probably low bowling on air on aerospace, 0:17:43.560 --> 0:17:47.200 and they're giving themselves the room for problems again in renewables, 0:17:47.200 --> 0:17:49.240 although the long term out look is good for renewable, 0:17:49.280 --> 0:17:50.560 so we might want to talk about that a bit. 0:17:50.720 --> 0:17:53.080 So all right, let's talk about that, and let's talk 0:17:53.119 --> 0:17:56.159 about the longer term outlook for General Electric for the stock. 0:17:56.160 --> 0:17:58.960 What do you think? What do you think? You know? 0:18:00.119 --> 0:18:03.280 I think is gonna be another wishy washy year because 0:18:03.359 --> 0:18:05.879 A they've still got a spin off Power Power, the 0:18:06.280 --> 0:18:10.080 energy business now called Veranova. That is a problem. It's 0:18:10.119 --> 0:18:12.560 going to lose money again this year. They're gonna try 0:18:12.600 --> 0:18:14.480 to get it out the door in the spin in 0:18:14.520 --> 0:18:17.760 the first quarter. So that's gonna be hovering over while 0:18:17.840 --> 0:18:22.000 we have the overlay of their ongoing business. Aerospace is 0:18:22.000 --> 0:18:25.560 going to have you know, over growth, uh you know, uh, 0:18:25.600 --> 0:18:28.359 you know, high double digit margins. And then the big 0:18:28.400 --> 0:18:30.399 issue that came up in the quarter, it was probably 0:18:30.440 --> 0:18:32.840 eight of the ten questions, was on what is free 0:18:32.840 --> 0:18:36.320 cash we're gonna look like next year? Um? What is 0:18:37.400 --> 0:18:40.600 look like? Okay, here we go, okay, um on that Okay, 0:18:40.640 --> 0:18:43.360 on that front, um, free cash. So it's gonna look 0:18:43.359 --> 0:18:47.880 good for airspace, but renewables and and powers since they 0:18:47.880 --> 0:18:50.480 have it's a very long term business. When they get orders, 0:18:50.480 --> 0:18:52.960 they have to disperse UM money up front on these 0:18:52.960 --> 0:18:55.720 long term projects, and they're gonna pay out three to 0:18:55.760 --> 0:18:59.760 four billion dollars in disbursements for projects in the renewable 0:18:59.800 --> 0:19:03.280 busines this which is really going to significantly impact free 0:19:03.280 --> 0:19:06.480 cash flow. They are gonna have positive free cash flow, 0:19:06.520 --> 0:19:09.200 it will be up from this year, but there's a 0:19:09.200 --> 0:19:11.639 lot of uncertainty about the timing and magnitude of the 0:19:11.960 --> 0:19:16.080 renewable up from payments. They will get that money back. 0:19:16.560 --> 0:19:19.560 But again, um, eight out of the ten questions were 0:19:19.640 --> 0:19:21.960 on how does free cash flow look next year? So 0:19:22.000 --> 0:19:23.520 I think that's what the focus is going to be 0:19:23.520 --> 0:19:25.960 on this, Karen. I like to look at, especially with 0:19:26.320 --> 0:19:28.480 big behemoths like this. I like to look at a 0:19:28.520 --> 0:19:31.840 comp screen CEMP on the Bloomberg. It automatically pulls up 0:19:31.880 --> 0:19:34.679 the stock over a five year window. And if I 0:19:34.720 --> 0:19:36.840 pull up GE over a five year window, put them 0:19:36.880 --> 0:19:41.359 up against Honeywell, Semens A, b B, what dogs, What 0:19:41.440 --> 0:19:46.480 a horrible, horrible investment it's been. Um, is it is 0:19:46.520 --> 0:19:48.439 that going to change? I mean, do I need to 0:19:49.119 --> 0:19:51.520 start from square one, wipe out the last four years 0:19:51.560 --> 0:19:53.600 and and and start my comp screen from you know 0:19:53.680 --> 0:19:58.199 yesterday or this month's yeah, you know once this you know, 0:19:58.560 --> 0:20:01.800 I think the long term picture for GE Aerospace is 0:20:01.800 --> 0:20:05.399 tremendous and that is gonna be GE core once everything 0:20:05.440 --> 0:20:08.760 else is gone. Um their market leader in engine in 0:20:08.760 --> 0:20:12.119 in the commercial engine business. They have um, you know 0:20:12.160 --> 0:20:14.080 a good position in military as well, but the focus 0:20:14.119 --> 0:20:17.200 will be commercial airspace. That recovery is still in very 0:20:17.200 --> 0:20:20.359 early phases. It's got a long way to go. Um, 0:20:20.400 --> 0:20:24.680 that business can probably plus margins. It's at eighteen percent. Now, 0:20:25.080 --> 0:20:28.800 that's story they're gonna when when they divest power the 0:20:28.840 --> 0:20:31.720