1 00:00:02,520 --> 00:00:13,760 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 2 00:00:13,840 --> 00:00:17,920 Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern 3 00:00:18,200 --> 00:00:22,000 Speaker 1: on Apple CarPlay or Android Auto with the Bloomberg Business app. 4 00:00:22,360 --> 00:00:25,680 Speaker 1: Listen on demand wherever you get your podcasts, or watch 5 00:00:25,760 --> 00:00:27,000 Speaker 1: us live on YouTube. 6 00:00:27,160 --> 00:00:30,440 Speaker 2: Joining us now. And just an incredibly important time. I 7 00:00:30,440 --> 00:00:32,600 Speaker 2: think in all the years that I've talked to Robert Caplan, 8 00:00:32,640 --> 00:00:35,839 Speaker 2: maybe this is the most important time. The chaos out there, 9 00:00:35,880 --> 00:00:39,839 Speaker 2: the confusion that we have on steel tariffs, and tweets 10 00:00:39,840 --> 00:00:42,720 Speaker 2: at two o'clock in the morning, a lot of unusual. 11 00:00:42,320 --> 00:00:45,800 Speaker 3: Truths that tweets their truths. 12 00:00:44,840 --> 00:00:49,160 Speaker 2: Truth excuse me? And fiscal discussion. A four hour conversation 13 00:00:49,240 --> 00:00:52,800 Speaker 2: with Robert Kaplan of the Dallas Fed, of Harvard Business School, 14 00:00:52,840 --> 00:00:57,160 Speaker 2: and of course always his Goldman Sacks, Robert Caplin. The 15 00:00:57,240 --> 00:01:00,840 Speaker 2: Dallas Fed website is easily one of the two or 16 00:01:00,840 --> 00:01:05,040 Speaker 2: three most interesting of our federal reserve system. And there 17 00:01:05,120 --> 00:01:08,760 Speaker 2: is a brilliant article two days ago about a place 18 00:01:08,880 --> 00:01:13,920 Speaker 2: twenty five miles northwest of El Paso called Santa Theresa, 19 00:01:14,480 --> 00:01:20,280 Speaker 2: New Mexico, where they built an export import hub into Mexico. 20 00:01:20,560 --> 00:01:23,880 Speaker 2: I mean, this is the granularity of what we're dealing. 21 00:01:23,880 --> 00:01:27,279 Speaker 2: It's like the Bridge and windsor Canada, except at Santa 22 00:01:27,360 --> 00:01:32,360 Speaker 2: Theresa in New Mexico. With all your experience, Robert Kaplan, 23 00:01:32,720 --> 00:01:37,320 Speaker 2: how turned upside down is our export import relations? 24 00:01:38,560 --> 00:01:46,039 Speaker 4: Well, it's challenging right now because if you're gonna domicile 25 00:01:47,120 --> 00:01:54,640 Speaker 4: manufacturing in the United States, the relationship between Canada and Mexico, 26 00:01:55,840 --> 00:01:58,880 Speaker 4: or with Canada Mexico are critical, meaning we tend to 27 00:01:59,160 --> 00:02:03,080 Speaker 4: source goods which are helped by cheap labor from Mexico 28 00:02:03,640 --> 00:02:07,880 Speaker 4: and cheap or cheaper natural resources from Canada. And so 29 00:02:07,960 --> 00:02:10,040 Speaker 4: you have these hubs like the one you mentioned in 30 00:02:10,040 --> 00:02:15,960 Speaker 4: New Mexico that have been situated to facilitate integrated logistics 31 00:02:16,040 --> 00:02:21,079 Speaker 4: and supply chain arrangements, other import export arrangements which are 32 00:02:21,240 --> 00:02:26,639 Speaker 4: critical to North America and have allowed North America on 33 00:02:26,680 --> 00:02:30,320 Speaker 4: the margin to take share from Asia. And so the 34 00:02:30,480 --> 00:02:35,600 Speaker 4: recent tariff events have basically put sand in the gears 35 00:02:36,160 --> 00:02:39,239 Speaker 4: of some of those relationships and made it more challenging. 36 00:02:39,400 --> 00:02:43,400 Speaker 2: These are the granularities, folks, that are so important. Robert 37 00:02:43,480 --> 00:02:47,160 Speaker 2: Kaplan did when you were running the FED in Dallas, 38 00:02:47,200 --> 00:02:52,040 Speaker 2: did you ever visit the LVMH factory in Alvarado, Texas. 39 00:02:53,440 --> 00:02:57,280 Speaker 4: I don't think I did, but I visited. I visited 40 00:02:57,320 --> 00:03:00,960 Speaker 4: lots of sites north of the order and south of 41 00:03:01,000 --> 00:03:06,120 Speaker 4: the border, and I learned about the velocity the frequency 42 00:03:06,280 --> 00:03:08,720 Speaker 4: of goods going back and forth across the border. 43 00:03:09,600 --> 00:03:14,800 Speaker 2: Do you have a confidence weaken supply an American manufacturing 44 00:03:15,240 --> 00:03:17,919 Speaker 2: might I mean, folks about Kaplan is one of the 45 00:03:17,960 --> 00:03:20,680 Speaker 2: most qualified people on this question. I know he's a 46 00:03:20,720 --> 00:03:25,120 Speaker 2: business guy working in economics. Robert Kaplan, can we actually 47 00:03:25,160 --> 00:03:29,560 Speaker 2: develop a skilled American manufacturing working force? 48 00:03:30,680 --> 00:03:33,919 Speaker 4: We can develop it, but it's expensive. That's the issue. 49 00:03:34,080 --> 00:03:37,440 Speaker 4: Most companies I talk with want to be able to 50 00:03:37,760 --> 00:03:44,160 Speaker 4: use either Mexico, Canada, to some extent, even Vietnam, which 51 00:03:44,200 --> 00:03:47,560 Speaker 4: is more farther afield. But they want they use these 52 00:03:47,760 --> 00:03:50,960 Speaker 4: logistics and supply chain arrangements because if you did it 53 00:03:51,040 --> 00:03:55,400 Speaker 4: all in the United States, their judgment is because costs 54 00:03:55,440 --> 00:03:57,920 Speaker 4: are hire that it would not be globally competitive. This 55 00:03:58,000 --> 00:04:02,880 Speaker 4: allows them to domicile in Innia States predominantly manufacturer in 56 00:04:02,880 --> 00:04:07,280 Speaker 4: the United States, and if they didn't have those relationships, 57 00:04:07,320 --> 00:04:08,200 Speaker 4: it would be harder to do. 58 00:04:08,760 --> 00:04:11,600 Speaker 2: Damien Sas are with me this morning. Robert Kaplan here, 59 00:04:11,760 --> 00:04:14,600 Speaker 2: expert on em in the Pacific RIM as well with 60 00:04:14,680 --> 00:04:17,160 Speaker 2: Bloomberg LP Damien. 61 00:04:17,000 --> 00:04:19,840 Speaker 3: Mister Kaplan, Sarah, I'd like to ask you about global growth, right, 62 00:04:20,040 --> 00:04:22,280 Speaker 3: I mean, as Tom just pointed out, right, we are 63 00:04:22,360 --> 00:04:26,720 Speaker 3: seeing a weeker dollar, weaker oil. We are seeing fiscal 64 00:04:26,720 --> 00:04:29,120 Speaker 3: stimulus out of the US, China, and the EU, and 65 00:04:29,200 --> 00:04:32,640 Speaker 3: more importantly, we're seeing monetary stimulus out of the emerging markets, 66 00:04:32,680 --> 00:04:35,120 Speaker 3: right because you know, basically China's dumping in a lot 67 00:04:35,120 --> 00:04:39,160 Speaker 3: of them and they're basically suppressing inflation domestically. You know, 68 00:04:39,520 --> 00:04:41,479 Speaker 3: isn't this good for global growth? I mean, walk me 69 00:04:41,520 --> 00:04:41,880 Speaker 3: through this. 70 00:04:43,000 --> 00:04:48,160 Speaker 4: Yeah, So, going into this year, we had a oversupply 71 00:04:48,600 --> 00:04:53,120 Speaker 4: and still do of goods globally. China over capacity is 72 00:04:53,160 --> 00:04:56,840 Speaker 4: a big part of that story. So goods have been disinflating, 73 00:04:57,080 --> 00:05:00,880 Speaker 4: including by the way, in the United States. Relation issue 74 00:05:01,279 --> 00:05:07,880 Speaker 4: was in services, not in goods. The global goods disinflation continues, 75 00:05:08,480 --> 00:05:12,080 Speaker 4: except there's a question whether it will continue in the 76 00:05:12,160 --> 00:05:16,320 Speaker 4: United States because of what we do on tariffs. But 77 00:05:17,040 --> 00:05:19,720 Speaker 4: the fact of the matter is we've had this goods 78 00:05:19,720 --> 00:05:24,480 Speaker 4: over supply. What the tariffs have done is caused businesses 79 00:05:24,520 --> 00:05:26,760 Speaker 4: around the world and particularly in the United States, to 80 00:05:26,960 --> 00:05:30,800 Speaker 4: pause and be more uncertain as to how they're going 81 00:05:30,839 --> 00:05:34,880 Speaker 4: to redo logistics and supply chains. Remember, only twelve percent 82 00:05:34,960 --> 00:05:40,560 Speaker 4: of US GDP is manufacturing. We import another twelve percent 83 00:05:40,680 --> 00:05:45,000 Speaker 4: in goods. We're basically a service economy. But these tariffs 84 00:05:45,080 --> 00:05:49,200 Speaker 4: have created uncertainty in both goods and services, not just 85 00:05:49,240 --> 00:05:53,000 Speaker 4: here but globally, which have put a damper on growth. 86 00:05:53,520 --> 00:05:54,960 Speaker 4: And that's what you're seeing. 87 00:05:55,160 --> 00:05:57,360 Speaker 3: Mister Kaplinser. I'd like to get your panel some of 88 00:05:57,400 --> 00:05:58,960 Speaker 3: the things we're seeing out here on the long end 89 00:05:58,960 --> 00:06:01,400 Speaker 3: of the US Treasury curve tens thirty steepening. I mean, 90 00:06:01,400 --> 00:06:04,120 Speaker 3: it's not a US specific phenomenon. We're seeing similar price 91 00:06:04,120 --> 00:06:06,680 Speaker 3: action across global fixed income in Europe and Japan, etc. 92 00:06:07,080 --> 00:06:09,040 Speaker 3: And you know, my question for you, is that more 93 00:06:09,160 --> 00:06:12,680 Speaker 3: a function not of growth expectations in thirty year real 94 00:06:12,760 --> 00:06:15,760 Speaker 3: yields breaking out, but is it more just the players 95 00:06:15,760 --> 00:06:18,839 Speaker 3: at that end of the market, the limited number of players, 96 00:06:18,880 --> 00:06:23,040 Speaker 3: the lack of market depth. I'm just talking lifers, pension funes, endowments. 97 00:06:23,040 --> 00:06:24,960 Speaker 3: There's just not that many of them out there, So 98 00:06:25,240 --> 00:06:27,360 Speaker 3: talk to us a little bit about what you're witnessing 99 00:06:27,400 --> 00:06:28,160 Speaker 3: out on the long end. 100 00:06:28,760 --> 00:06:32,040 Speaker 4: It's a supply and a demand issue. First of all, 101 00:06:33,480 --> 00:06:36,279 Speaker 4: the world and the United States is in the middle 102 00:06:36,320 --> 00:06:39,000 Speaker 4: of this is much more highly leveraged than we were 103 00:06:39,080 --> 00:06:42,400 Speaker 4: right before. Covid Us is a good example. Debt to 104 00:06:42,480 --> 00:06:45,280 Speaker 4: GDP or net debt was in the seventies. It's now 105 00:06:45,320 --> 00:06:48,320 Speaker 4: over one hundred percent. The Western world and the developed 106 00:06:48,320 --> 00:06:52,800 Speaker 4: world is more leveraged, and as a result of that, 107 00:06:53,320 --> 00:06:56,520 Speaker 4: there's more paper to sell at the long end of 108 00:06:56,560 --> 00:07:00,960 Speaker 4: the curve. On the other hand, global buyers are very 109 00:07:00,960 --> 00:07:04,560 Speaker 4: aware of that, and they're more reluctant to buy duration 110 00:07:05,080 --> 00:07:08,400 Speaker 4: because they're worried. As we saw from Silicon Valley Bank 111 00:07:08,520 --> 00:07:10,720 Speaker 4: and First Republic, you can lose a lot of money 112 00:07:10,800 --> 00:07:13,520 Speaker 4: if you overdo it and buying duration. So we have 113 00:07:13,560 --> 00:07:17,120 Speaker 4: a supply and demand issue. That's why the administration, the 114 00:07:17,160 --> 00:07:20,320 Speaker 4: Trump administration came into office saying we're going to try 115 00:07:20,320 --> 00:07:24,720 Speaker 4: to chip away at that debt and that leverage because 116 00:07:24,720 --> 00:07:28,520 Speaker 4: we're worried about the term premium and it doesn't seem 117 00:07:28,520 --> 00:07:30,720 Speaker 4: to be materializing. But that was the motivation. 118 00:07:31,520 --> 00:07:33,840 Speaker 2: Robert Kaplan with US folks, who welcome all of you 119 00:07:34,400 --> 00:07:37,679 Speaker 2: on your commute across the nation. Good morning, Serious XM 120 00:07:37,760 --> 00:07:41,640 Speaker 2: Channel one twenty one, Flabbergasted by the support on the 121 00:07:41,680 --> 00:07:45,520 Speaker 2: oldest of digital media. Good morning, Android auto was in 122 00:07:45,520 --> 00:07:47,640 Speaker 2: a car yesterday or the Android auto? Good to see 123 00:07:47,680 --> 00:07:51,200 Speaker 2: that as all they were listening to Bloomberg eleven three. Ah, 124 00:07:51,240 --> 00:07:54,320 Speaker 2: I guess through Android Auto. Thank you Apple cart play 125 00:07:54,360 --> 00:07:57,800 Speaker 2: good morning on YouTube. It's our new digital distribution, Robert 126 00:07:57,840 --> 00:08:00,200 Speaker 2: Caplan said, Tom, you got to get with it. So 127 00:08:00,280 --> 00:08:03,840 Speaker 2: we did this YouTube thing and subscribe to Bloomberg podcast. 128 00:08:03,880 --> 00:08:07,800 Speaker 2: It's shocking, the digital distribution, Robert Kaphen. That goes to 129 00:08:07,840 --> 00:08:12,120 Speaker 2: the innovation of America. We've all noted the distinction of 130 00:08:12,160 --> 00:08:17,960 Speaker 2: Europe versus America, the technology shift in America, the innovation 131 00:08:18,680 --> 00:08:22,600 Speaker 2: it's going to a part of America. How do we 132 00:08:22,720 --> 00:08:27,040 Speaker 2: drag the rest of America into our new technology, our 133 00:08:27,080 --> 00:08:28,160 Speaker 2: new productivity. 134 00:08:29,080 --> 00:08:34,320 Speaker 4: Yeah. So technology enabled disruption has been with us for 135 00:08:34,640 --> 00:08:37,160 Speaker 4: now the last several years. And oh, by the way, 136 00:08:37,160 --> 00:08:39,320 Speaker 4: if you've lost your job in the United States in 137 00:08:39,320 --> 00:08:42,520 Speaker 4: the last ten years in the past, that might have 138 00:08:42,559 --> 00:08:45,360 Speaker 4: been due to globalization. In the last ten years, it's 139 00:08:45,480 --> 00:08:50,199 Speaker 4: due to technology enabled disruption. And that disruption is accelerating. 140 00:08:50,320 --> 00:08:57,240 Speaker 4: AI will accelerate it. And what we're seeing when I 141 00:08:57,280 --> 00:09:00,640 Speaker 4: talk to clients across sectors in the United States and globally. 142 00:09:00,880 --> 00:09:05,640 Speaker 4: It's affecting every single sector. Any sector in goods and services, 143 00:09:05,679 --> 00:09:09,400 Speaker 4: you name it is being affected by this. The challenge 144 00:09:09,440 --> 00:09:12,960 Speaker 4: is when a worker loses his or her job or 145 00:09:12,960 --> 00:09:17,600 Speaker 4: their job gets restructured because of technology, can we retrain 146 00:09:17,679 --> 00:09:20,400 Speaker 4: them so they can stay employed either in that business 147 00:09:20,520 --> 00:09:23,679 Speaker 4: or find a high productive job in another business. And 148 00:09:23,720 --> 00:09:26,880 Speaker 4: that's where the United States has been lagging. We need 149 00:09:26,920 --> 00:09:32,040 Speaker 4: to improve early childhood literacy, secondary education, digital divide skills training, 150 00:09:32,960 --> 00:09:36,440 Speaker 4: and we have not been as quick to do that. 151 00:09:37,040 --> 00:09:38,679 Speaker 4: I would say as other countries. 152 00:09:39,160 --> 00:09:43,240 Speaker 3: Mister Kaplincer, private credit is consolidating. Private equity fundraising has 153 00:09:43,240 --> 00:09:44,960 Speaker 3: plunged by more than a third over the first three 154 00:09:45,000 --> 00:09:47,720 Speaker 3: months of this year. I'm curious to hear your thoughts 155 00:09:47,760 --> 00:09:50,920 Speaker 3: on quote unquote shadow financing here in the US. You know, 156 00:09:50,960 --> 00:09:55,439 Speaker 3: I'm hearing about these continuation vehicles deteriorating COLO demand weekem, 157 00:09:55,440 --> 00:09:58,319 Speaker 3: and you know, I want to know if another year 158 00:09:58,360 --> 00:10:00,800 Speaker 3: of needed realizations tom are going to sour long term 159 00:10:00,800 --> 00:10:02,120 Speaker 3: investors on the asset class. 160 00:10:02,800 --> 00:10:05,199 Speaker 4: Well, so let's go through what's going on. First of all, 161 00:10:05,200 --> 00:10:11,000 Speaker 4: as I just said, there's more business uncertainty, valuations, have recovered, 162 00:10:11,240 --> 00:10:15,520 Speaker 4: but they're more muted. Cost of financing has gone up. 163 00:10:16,160 --> 00:10:18,960 Speaker 4: You know, we talked about duration. Long end of the 164 00:10:19,040 --> 00:10:23,240 Speaker 4: curve is stickier, and all that feeds together and makes 165 00:10:23,280 --> 00:10:30,280 Speaker 4: it harder to either do monetizations or to do new transactions. 166 00:10:30,640 --> 00:10:34,840 Speaker 4: And so what we're seeing is it's not that the 167 00:10:35,040 --> 00:10:39,240 Speaker 4: equity markets and other markets aren't open for monetizations. I 168 00:10:39,240 --> 00:10:41,640 Speaker 4: think a lot of the firms feel like if they 169 00:10:41,920 --> 00:10:44,960 Speaker 4: the prices they could sell out today are lower than 170 00:10:45,080 --> 00:10:48,000 Speaker 4: some cases where they have the asset marked. And so 171 00:10:48,040 --> 00:10:51,960 Speaker 4: there's indigestion in the system. It won't last forever. Right 172 00:10:52,120 --> 00:10:53,920 Speaker 4: we're in the middle of it right now where we've 173 00:10:53,960 --> 00:10:58,120 Speaker 4: got some indigestion where it's why you're not seeing more transactions, 174 00:10:58,120 --> 00:11:01,920 Speaker 4: more modernizations, more equity offices and mergers because of it. 175 00:11:02,000 --> 00:11:06,040 Speaker 2: Okay, come on, Robert Kaplan to Danien's good question, and 176 00:11:06,120 --> 00:11:07,800 Speaker 2: you're one of the great qual I think of you 177 00:11:07,880 --> 00:11:10,880 Speaker 2: and Richard Fisher as being like at the apex of 178 00:11:10,920 --> 00:11:15,480 Speaker 2: this of the link between economics, finance and investment. Robert Kaplan, 179 00:11:15,559 --> 00:11:19,480 Speaker 2: as simple as I can mark to market in private equity, 180 00:11:19,520 --> 00:11:22,520 Speaker 2: in private credit, is it a challenge right now? 181 00:11:23,280 --> 00:11:26,880 Speaker 4: It's a challenge right now. And I think many private 182 00:11:26,880 --> 00:11:31,280 Speaker 4: equity firms will tell you that it's not that they 183 00:11:31,320 --> 00:11:34,040 Speaker 4: couldn't sell the asset. They're just not happy with where 184 00:11:34,080 --> 00:11:36,880 Speaker 4: they could sell it, and they want to do modetizations, 185 00:11:36,880 --> 00:11:39,760 Speaker 4: but they want to do them at more attractive valuations. 186 00:11:40,160 --> 00:11:42,480 Speaker 2: What do you expect from the fedure to finish up here, 187 00:11:42,559 --> 00:11:45,920 Speaker 2: Robert kaplan? A number of firms are saying they will 188 00:11:45,960 --> 00:11:49,360 Speaker 2: do nothing until into twenty twenty six. I mean, on 189 00:11:49,400 --> 00:11:53,720 Speaker 2: an next post basis, that's the safest path for mister Boyle, 190 00:11:53,880 --> 00:11:54,720 Speaker 2: isn't it. 191 00:11:55,520 --> 00:11:58,920 Speaker 4: I don't know about that, So they'll they'll take it 192 00:11:58,960 --> 00:12:02,600 Speaker 4: may turn out that way, but that's not I wouldn't. 193 00:12:02,880 --> 00:12:06,120 Speaker 4: I don't think the FED is planning that. It's taking 194 00:12:06,120 --> 00:12:08,080 Speaker 4: a one meeting at a time. And the reason it's 195 00:12:08,120 --> 00:12:12,120 Speaker 4: shortening up the time horizon is you've got a tax bill. 196 00:12:12,760 --> 00:12:16,120 Speaker 4: That's that's that we don't know what what out stimulative 197 00:12:16,120 --> 00:12:19,160 Speaker 4: it it's going to be. We have tariffs that haven't 198 00:12:19,200 --> 00:12:22,400 Speaker 4: been set yet, and so this uncertainly needs to get 199 00:12:22,440 --> 00:12:26,440 Speaker 4: clarified before the FED can be clear on what it 200 00:12:26,760 --> 00:12:30,520 Speaker 4: wants to do next, and that may take at least 201 00:12:30,600 --> 00:12:34,800 Speaker 4: until the fall. But I wouldn't assume that the FED 202 00:12:34,840 --> 00:12:37,800 Speaker 4: won't act this year. But the FED can't prejudge that 203 00:12:37,960 --> 00:12:40,480 Speaker 4: and can't get rigid about it. And so that's why 204 00:12:40,480 --> 00:12:43,640 Speaker 4: you're seeing them be noncommittal, and they'll continue to be noncommittal. 205 00:12:43,800 --> 00:12:45,960 Speaker 2: Rour Caplin, thank you so much for the generous time 206 00:12:46,000 --> 00:12:49,760 Speaker 2: this morning. Vice chairman at gulb and Sex always associated 207 00:12:49,800 --> 00:12:53,120 Speaker 2: with Harvard Business School and his federal I say, mister 208 00:12:53,360 --> 00:12:55,880 Speaker 2: Tier and the rest are saying it's not his bank. 209 00:12:56,240 --> 00:13:04,280 Speaker 2: Robert Caplin and the Dallas Fed, thank you. 210 00:13:04,280 --> 00:13:07,840 Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live 211 00:13:07,920 --> 00:13:11,080 Speaker 1: weekday afternoons from seven to ten am Eastern. Listen on 212 00:13:11,160 --> 00:13:14,840 Speaker 1: Applecarplay and Android Auto with the Bloomberg Business app, or 213 00:13:14,960 --> 00:13:16,480 Speaker 1: watch us live on YouTube. 214 00:13:16,600 --> 00:13:20,640 Speaker 2: Every time a crisis shows up, a new institution shows up. 215 00:13:20,679 --> 00:13:24,880 Speaker 2: That's magical. It is the Budget Lab at Yale with 216 00:13:24,960 --> 00:13:29,040 Speaker 2: the backing of Pete Peterson's Foundation and many other good people, 217 00:13:29,120 --> 00:13:32,120 Speaker 2: Martha Gimble and Ernie to Desk any others drive in 218 00:13:32,200 --> 00:13:38,080 Speaker 2: this forward and they've had a profound impact on analysis 219 00:13:38,240 --> 00:13:41,520 Speaker 2: and clearing through the depart in the phrase the bs 220 00:13:41,559 --> 00:13:44,400 Speaker 2: of the moment, Ernie Tdesky joins us from the Budget 221 00:13:44,480 --> 00:13:48,400 Speaker 2: Lab this morning, Ernie, what's a number one message you 222 00:13:48,480 --> 00:13:55,040 Speaker 2: would send both Republicans and Democrats in Congress. 223 00:13:55,559 --> 00:13:59,000 Speaker 5: Number one message is that where we're at right now 224 00:13:59,120 --> 00:14:03,600 Speaker 5: is not writing our fiscal shit. We need ten trillion 225 00:14:03,679 --> 00:14:06,600 Speaker 5: dollars of deficit reduction over the next decade just to 226 00:14:06,679 --> 00:14:10,680 Speaker 5: stabilize our debt to GDP, which is probably all the 227 00:14:10,800 --> 00:14:13,640 Speaker 5: United States needs. We don't need to balance the budget fully, 228 00:14:13,679 --> 00:14:16,400 Speaker 5: we just need to stabilize, you know, get debt growing 229 00:14:16,400 --> 00:14:20,680 Speaker 5: at the same rate as the economy. And what they're 230 00:14:20,680 --> 00:14:23,720 Speaker 5: doing in Congress right now is not even close to that. 231 00:14:24,440 --> 00:14:27,960 Speaker 5: It's a four trillion dollar bill if you make permanent 232 00:14:28,160 --> 00:14:31,360 Speaker 5: all of the tax cuts in it, and even if 233 00:14:31,360 --> 00:14:34,280 Speaker 5: you include tariff revenue, tariff revenue is only raising two 234 00:14:34,320 --> 00:14:37,840 Speaker 5: trillion dollars at this point, so we're still making the 235 00:14:37,880 --> 00:14:39,160 Speaker 5: debt situation worse. 236 00:14:39,760 --> 00:14:42,280 Speaker 2: The critics of earning to Desk and Martha Gimble and 237 00:14:42,320 --> 00:14:45,360 Speaker 2: the rest, what they would say is the growth rate 238 00:14:45,440 --> 00:14:48,520 Speaker 2: is too gloomy. At CBO, we're going to be more 239 00:14:48,560 --> 00:14:51,960 Speaker 2: optimistic about mourning in America. We're going to get a 240 00:14:51,960 --> 00:14:57,000 Speaker 2: better little g in life will go on. Is that possible? 241 00:14:57,480 --> 00:15:01,520 Speaker 2: Feasible remotely be a constructive outcome. 242 00:15:03,120 --> 00:15:05,920 Speaker 5: I mean, look, any more growth that we can get 243 00:15:06,000 --> 00:15:11,320 Speaker 5: is nice, it's cherry on top. But extra growth that 244 00:15:11,360 --> 00:15:15,680 Speaker 5: we get is not nearly going to be enough to 245 00:15:15,720 --> 00:15:18,560 Speaker 5: solve the problem for us. You know, even if we 246 00:15:18,720 --> 00:15:23,240 Speaker 5: had three percent growth, you know, sustained for a decade, 247 00:15:23,240 --> 00:15:28,200 Speaker 5: which is infeasible. Most most economists think that trend growth 248 00:15:28,240 --> 00:15:31,680 Speaker 5: in the United States is two percent. We would not 249 00:15:31,920 --> 00:15:34,960 Speaker 5: stabilize the debt to GDP over ten years alone by 250 00:15:34,960 --> 00:15:38,160 Speaker 5: getting to three percent growth. And you know, this bill 251 00:15:38,640 --> 00:15:42,320 Speaker 5: they go above and beyond just straight TCGA extension. So 252 00:15:42,360 --> 00:15:44,720 Speaker 5: there's probably gonna be a little bit of fiscal impulse 253 00:15:44,760 --> 00:15:46,840 Speaker 5: in the short run. But this bill is not going 254 00:15:46,920 --> 00:15:50,440 Speaker 5: to get us to three percent growth persistently, especially when 255 00:15:50,480 --> 00:15:54,120 Speaker 5: you add on top the terrorists that they've passed, which 256 00:15:54,440 --> 00:15:56,680 Speaker 5: you know, shave off half a point of growth this year, 257 00:15:57,120 --> 00:16:00,440 Speaker 5: and keep you know, GDP persistently lower long run. 258 00:16:01,040 --> 00:16:02,760 Speaker 3: Ernie, I know you and your team have done a 259 00:16:02,880 --> 00:16:04,680 Speaker 3: lot of work on this, but I think most market 260 00:16:04,680 --> 00:16:06,800 Speaker 3: practitioners believe the effective twer F rate by the end 261 00:16:06,800 --> 00:16:08,320 Speaker 3: of this year is going to come in somewhere between 262 00:16:08,360 --> 00:16:12,080 Speaker 3: fifteen to eighteen percent. Yet you know, I mean, recession 263 00:16:12,120 --> 00:16:15,480 Speaker 3: probabilities are like down, and basically people are calling for 264 00:16:15,520 --> 00:16:17,520 Speaker 3: the US economy. I mean, I think it's growing at 265 00:16:17,560 --> 00:16:19,760 Speaker 3: a four percent plus clip here in the second quarter. 266 00:16:20,040 --> 00:16:22,480 Speaker 3: So look, we all wanted nickx Pacis to go nine games. 267 00:16:22,520 --> 00:16:24,600 Speaker 3: But just where is this catchup of the heart to 268 00:16:24,640 --> 00:16:25,520 Speaker 3: the soft data here? 269 00:16:26,840 --> 00:16:29,960 Speaker 5: Yeah, like it's a great point. We're at fifteen percent 270 00:16:29,960 --> 00:16:33,880 Speaker 5: effective rate right now, and and we think that that 271 00:16:34,000 --> 00:16:36,240 Speaker 5: takes off half a point of growth off of twenty 272 00:16:36,280 --> 00:16:38,840 Speaker 5: twenty five. Now, we want to be very sober about 273 00:16:38,880 --> 00:16:41,640 Speaker 5: what that means. Half a point off of growth is 274 00:16:41,680 --> 00:16:45,520 Speaker 5: a significant headwind to the US economy. But on the 275 00:16:45,520 --> 00:16:47,760 Speaker 5: other hand, if you thought that the US economy was 276 00:16:47,800 --> 00:16:50,800 Speaker 5: two percent in twenty twenty five, and you shave off 277 00:16:50,880 --> 00:16:54,640 Speaker 5: half a point, you're at one five, which is, you know, 278 00:16:54,800 --> 00:16:58,120 Speaker 5: not as great as it was, but that's not recessionary 279 00:16:58,240 --> 00:17:01,640 Speaker 5: by itself. I will say that what we don't capture 280 00:17:01,680 --> 00:17:05,320 Speaker 5: in our modeling is the uncertainty effects of tariffs. And 281 00:17:05,359 --> 00:17:07,880 Speaker 5: so what I tell people is that we probably don't 282 00:17:07,880 --> 00:17:10,680 Speaker 5: have a central estimate in our estimates of terriff effects. 283 00:17:10,800 --> 00:17:13,919 Speaker 5: We're probably a floor in terms of the effects, So 284 00:17:14,000 --> 00:17:17,320 Speaker 5: there is still more recession risk than there was a 285 00:17:17,400 --> 00:17:17,800 Speaker 5: year ago. 286 00:17:18,080 --> 00:17:21,080 Speaker 2: A special Treatnie, you'dski with us for an extended conversation 287 00:17:21,200 --> 00:17:24,400 Speaker 2: this morning with the budget lab all of us work 288 00:17:24,480 --> 00:17:27,679 Speaker 2: for ed Himan at Evercore ISI over the years. Just 289 00:17:27,680 --> 00:17:30,480 Speaker 2: a real treat folks within the market and the futures 290 00:17:30,520 --> 00:17:33,280 Speaker 2: up thirteen. What's going on? You know what it is 291 00:17:33,400 --> 00:17:37,439 Speaker 2: about our debt and deficit, Ernie. I was weaned on 292 00:17:37,600 --> 00:17:42,159 Speaker 2: how Bronner's the debt in the deficit, a cruel accounting 293 00:17:42,280 --> 00:17:43,960 Speaker 2: and all that. I don't want to go into that 294 00:17:44,119 --> 00:17:46,800 Speaker 2: too early in the morning. To go into debt. You 295 00:17:46,880 --> 00:17:49,639 Speaker 2: are magical because you had to work for Ed Hyman. 296 00:17:49,920 --> 00:17:53,000 Speaker 2: You had to work with the granularity of the American 297 00:17:53,040 --> 00:17:57,040 Speaker 2: economy that Ed Heyman and ed Yardnny frankly invented at CJ. 298 00:17:57,200 --> 00:18:00,480 Speaker 2: Lawrence years ago. When you look at the granu larity 299 00:18:00,520 --> 00:18:04,960 Speaker 2: of the American economy, does this debt in deficit break us? 300 00:18:05,080 --> 00:18:08,760 Speaker 2: Or do we just keep going with the American dream? 301 00:18:09,359 --> 00:18:09,479 Speaker 6: So? 302 00:18:09,560 --> 00:18:11,520 Speaker 5: I don't so. On the one hand, I don't think 303 00:18:11,560 --> 00:18:14,320 Speaker 5: that it breaks the US treasury market, you know, I 304 00:18:14,359 --> 00:18:18,400 Speaker 5: think you would need something close to a meteor strike 305 00:18:18,680 --> 00:18:21,960 Speaker 5: or you know, maybe a debt ceiling in pass to 306 00:18:22,320 --> 00:18:24,800 Speaker 5: fully break the treasury market. If we're talking about just 307 00:18:24,880 --> 00:18:27,160 Speaker 5: adding to our debt, I think it's going to have 308 00:18:27,200 --> 00:18:29,919 Speaker 5: a mostly linear effect. I think it's going to just 309 00:18:30,040 --> 00:18:32,640 Speaker 5: keep adding to interest rates. Now there's a limit to that. 310 00:18:33,040 --> 00:18:35,640 Speaker 5: We can obviously go too far, but I don't think 311 00:18:35,680 --> 00:18:38,760 Speaker 5: that that's a short run risk. On the other hand, 312 00:18:38,960 --> 00:18:41,320 Speaker 5: like when you look at estimates of the term premium, 313 00:18:41,359 --> 00:18:44,399 Speaker 5: there we go term premium is up and it's and 314 00:18:44,440 --> 00:18:46,639 Speaker 5: it's up not just because of debt, it's up because 315 00:18:46,640 --> 00:18:49,440 Speaker 5: of tariffs as well. You know. The big Uh. This 316 00:18:49,640 --> 00:18:53,200 Speaker 5: continuity in the rise of the term premium recently was 317 00:18:53,240 --> 00:18:57,080 Speaker 5: after April second, not after we got news about what 318 00:18:57,160 --> 00:19:00,080 Speaker 5: was going on in Congress. So I think what we 319 00:19:00,080 --> 00:19:03,040 Speaker 5: we need to appreciate, without getting too pollyannish here, what 320 00:19:03,119 --> 00:19:06,400 Speaker 5: we need to appreciate is that it's not just the debt. 321 00:19:06,880 --> 00:19:10,720 Speaker 5: It's that investors are reacting to this new reality of 322 00:19:10,840 --> 00:19:13,359 Speaker 5: trade and the risk of the United States is not 323 00:19:13,400 --> 00:19:15,920 Speaker 5: going to be as central to world financial markets as 324 00:19:15,920 --> 00:19:16,680 Speaker 5: it was in the past. 325 00:19:17,040 --> 00:19:19,679 Speaker 3: Ernie, the changes we're witnessing, I'm talking dollar hedging by 326 00:19:19,680 --> 00:19:23,639 Speaker 3: Asian lifers, difine benefit contract conversion by European pensions like 327 00:19:23,680 --> 00:19:26,359 Speaker 3: the Dutch JGB loss is harvesting by the BOJ. Are 328 00:19:26,359 --> 00:19:28,359 Speaker 3: they structural or is it short term in nature? 329 00:19:29,640 --> 00:19:31,680 Speaker 5: I mean, I think that they're mostly strung. I think 330 00:19:31,680 --> 00:19:33,600 Speaker 5: it's mostly short term right now. I think that they 331 00:19:33,640 --> 00:19:39,160 Speaker 5: are mostly you know, reacting to idiosyncratic factors in those countries. 332 00:19:39,240 --> 00:19:41,919 Speaker 5: You know, things like insurance companies in Japan, just the 333 00:19:41,960 --> 00:19:45,320 Speaker 5: fact that the BOG has less demand in general right 334 00:19:45,359 --> 00:19:49,160 Speaker 5: now because they have such relative to japan high inflation. 335 00:19:49,560 --> 00:19:51,919 Speaker 5: I think also a lot of investors are reacting to 336 00:19:52,080 --> 00:19:55,200 Speaker 5: the change and the short run US outlook. But look, 337 00:19:55,240 --> 00:19:58,720 Speaker 5: I wouldn't call anything structural yet because nobody knows what 338 00:19:59,240 --> 00:20:01,359 Speaker 5: the final tear rate is going to be. In the 339 00:20:01,440 --> 00:20:04,639 Speaker 5: United States. I would say that the court decision, the 340 00:20:05,040 --> 00:20:09,440 Speaker 5: US Court of International Trade, if anything, tightened the uncertainty 341 00:20:10,200 --> 00:20:14,520 Speaker 5: rather than diminishing it, because now we have uncertainty bands 342 00:20:14,520 --> 00:20:18,000 Speaker 5: that reach to zero percent tariffs. Right That's that's not 343 00:20:18,080 --> 00:20:22,399 Speaker 5: my likeliest outcome, but now it's applausible. It's a plausibility 344 00:20:22,480 --> 00:20:25,359 Speaker 5: that the courts could strike down most of the Trump 345 00:20:25,400 --> 00:20:28,800 Speaker 5: administration tariffs, and so you as a business or a consumer, 346 00:20:29,359 --> 00:20:31,439 Speaker 5: it's even more uncertain now what things are going to 347 00:20:31,440 --> 00:20:32,200 Speaker 5: look like in a year. 348 00:20:32,359 --> 00:20:34,680 Speaker 3: Are any some of the largest and most venerable fund 349 00:20:34,680 --> 00:20:37,640 Speaker 3: managers in the country, Double Line, Pimco, TCW are avoiding 350 00:20:37,640 --> 00:20:39,200 Speaker 3: the thirty year. In fact, some of them are actually 351 00:20:39,200 --> 00:20:41,240 Speaker 3: recommending to short the thirty year. But then I think 352 00:20:41,280 --> 00:20:44,399 Speaker 3: about the negative carry associated on a marked market basis 353 00:20:44,400 --> 00:20:46,680 Speaker 3: with shorting treasuries. Talk to us a little bit about 354 00:20:46,680 --> 00:20:48,680 Speaker 3: what exactly is going on out there at the long 355 00:20:48,760 --> 00:20:51,640 Speaker 3: end of the curve from a practitioner standpoint, I mean, 356 00:20:51,800 --> 00:20:53,840 Speaker 3: is there is there going to be a bit is 357 00:20:53,880 --> 00:20:55,879 Speaker 3: there demand? And at what level do you think people 358 00:20:56,000 --> 00:20:58,280 Speaker 3: just start to, you know, kind of get weed back 359 00:20:58,320 --> 00:20:59,040 Speaker 3: into that market. 360 00:21:00,119 --> 00:21:03,200 Speaker 5: Yeah, it's a good question. So you know what we've seen, 361 00:21:03,280 --> 00:21:07,520 Speaker 5: you know, we've particularly seen the thirty ten spread rising lately. 362 00:21:07,640 --> 00:21:12,400 Speaker 5: I think that that is primarily being driven by fiscal 363 00:21:12,440 --> 00:21:18,040 Speaker 5: concerns right now. It'll be interesting to see sort of 364 00:21:18,080 --> 00:21:21,160 Speaker 5: as we get more news on tariffs. You know, tariffs 365 00:21:21,240 --> 00:21:25,359 Speaker 5: are tariffs are in a funny way of offsetting that 366 00:21:25,440 --> 00:21:28,440 Speaker 5: concern a little bit because they obviously raise revenue while 367 00:21:28,480 --> 00:21:32,480 Speaker 5: at the same time swallowing growth. So so if tariffs 368 00:21:32,480 --> 00:21:35,720 Speaker 5: diminish because of court cases, or because you know, the 369 00:21:35,720 --> 00:21:39,480 Speaker 5: Trump administration comes to deals with other countries, like it'll 370 00:21:39,480 --> 00:21:42,760 Speaker 5: be interesting. Like it's actually quite uncertain what effect that's 371 00:21:42,800 --> 00:21:45,320 Speaker 5: going to have on the long end. If we raise 372 00:21:45,359 --> 00:21:47,520 Speaker 5: more tariff revenue, that might, on the one hand, a 373 00:21:47,600 --> 00:21:52,240 Speaker 5: swage fiscal concerns, but it might also raise growth doubts 374 00:21:52,240 --> 00:21:52,919 Speaker 5: about the US. 375 00:21:53,080 --> 00:21:55,040 Speaker 2: Ernie, thank you so much, Ernie. To Deski with us 376 00:21:55,080 --> 00:21:57,840 Speaker 2: the budget labit you can't say enough about how they 377 00:21:57,880 --> 00:22:02,280 Speaker 2: have just overnight definitively changed the fiscal dialogue in America. 378 00:22:02,400 --> 00:22:03,120 Speaker 2: That's a real treat. 379 00:22:03,680 --> 00:22:07,600 Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday 380 00:22:07,640 --> 00:22:10,920 Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto 381 00:22:11,080 --> 00:22:14,040 Speaker 1: with the Bloomberg Business app. You can also listen live 382 00:22:14,119 --> 00:22:17,679 Speaker 1: on Amazon Alexa from our flagship New York station, Just 383 00:22:17,720 --> 00:22:20,280 Speaker 1: say Alexa play Bloomberg eleven thirty. 384 00:22:21,040 --> 00:22:24,840 Speaker 2: This is a joy with a fabulous old world perspective. 385 00:22:24,880 --> 00:22:28,240 Speaker 2: I think of Rubini, Teleban, so many others coming out 386 00:22:28,280 --> 00:22:32,520 Speaker 2: of the levant in points east of there, in Persia, 387 00:22:33,359 --> 00:22:38,399 Speaker 2: in Iran and joining us right now is Sasan Garamani, 388 00:22:38,600 --> 00:22:43,880 Speaker 2: President and CEO at SGH Macro Advisors, associated with Medley 389 00:22:44,640 --> 00:22:46,800 Speaker 2: for years. Wonderful to have you here. Thank you so much, 390 00:22:46,920 --> 00:22:49,159 Speaker 2: Thank you Tom for coming in. You've got such a 391 00:22:49,200 --> 00:22:52,959 Speaker 2: different perspective. And I think of China, I think of 392 00:22:53,000 --> 00:22:57,480 Speaker 2: like Baghdad and the Sassoon family from a zillion years ago. 393 00:22:58,119 --> 00:23:04,560 Speaker 2: Nobody understands the heritage of Persia and the greater Persia 394 00:23:05,119 --> 00:23:09,359 Speaker 2: in setting up the Pacific rim over centuries. And so 395 00:23:09,440 --> 00:23:11,520 Speaker 2: you've got this one with your family. You have this 396 00:23:11,640 --> 00:23:16,000 Speaker 2: wonderful perspective on China. Do we understand China or are 397 00:23:16,000 --> 00:23:17,240 Speaker 2: we ugly Americans? 398 00:23:18,480 --> 00:23:22,639 Speaker 6: I think we're increasingly understanding China. And I think the 399 00:23:22,680 --> 00:23:26,680 Speaker 6: evolution of our thinking has changed over time, and quite simply, 400 00:23:26,680 --> 00:23:33,199 Speaker 6: it's gone from from a trading partner and to increasingly 401 00:23:33,240 --> 00:23:36,880 Speaker 6: to a competitor, and increasingly to an aggressive competitor. And 402 00:23:36,920 --> 00:23:41,159 Speaker 6: I think, you know, we get a lot of missives 403 00:23:41,200 --> 00:23:47,359 Speaker 6: from Beijing and I read through them, and I'm always 404 00:23:48,960 --> 00:23:56,719 Speaker 6: almost shocked by the adversarial tone and strategy really towards visa. 405 00:23:55,880 --> 00:23:59,720 Speaker 2: Bets In the Secretary of Treasury's bet, is there going 406 00:23:59,800 --> 00:24:05,159 Speaker 2: to men to a United States X a United States timeline? 407 00:24:05,600 --> 00:24:08,359 Speaker 2: I've seen no evidence of that. If I read Albert 408 00:24:08,400 --> 00:24:13,160 Speaker 2: Harani and the Mediterranean from Persia to Morocco. I don't 409 00:24:13,200 --> 00:24:16,560 Speaker 2: see a US timeline. I don't see a US timeline 410 00:24:16,600 --> 00:24:17,800 Speaker 2: in China. Am I wrong? 411 00:24:18,880 --> 00:24:21,920 Speaker 6: I think what you're referring to, or what you're elading 412 00:24:22,119 --> 00:24:26,240 Speaker 6: alluding to, is a timeline on trade negotiations, and in particular, 413 00:24:26,280 --> 00:24:28,400 Speaker 6: but maybe you know more broadly. I'm sure you call 414 00:24:28,480 --> 00:24:33,280 Speaker 6: it with this as well. They yes and no. I 415 00:24:33,400 --> 00:24:37,400 Speaker 6: think that what we are seeing in China, and if 416 00:24:37,440 --> 00:24:41,200 Speaker 6: you look in particular visa VIV negotiations with US, there 417 00:24:41,240 --> 00:24:44,080 Speaker 6: is a narrative that China can hold out for you know, 418 00:24:44,520 --> 00:24:48,920 Speaker 6: fifty years, one hundred years, you know whatever. And they're 419 00:24:49,480 --> 00:24:52,600 Speaker 6: a strategic imperative to try to put the squeeze on 420 00:24:52,640 --> 00:24:56,080 Speaker 6: the US. You're seeing that with rare earth minerals and 421 00:24:56,160 --> 00:25:01,680 Speaker 6: all these other negotiating leverage points. But China needs a 422 00:25:01,720 --> 00:25:06,080 Speaker 6: deal as well. Underneath the numbers, there's some weakness. There's 423 00:25:06,119 --> 00:25:09,520 Speaker 6: weakness in the consumer spending if they had yet a 424 00:25:09,680 --> 00:25:12,320 Speaker 6: very big stimulus boost in the fall of last year, 425 00:25:12,560 --> 00:25:14,600 Speaker 6: and that's starting to tail off a little bit now. 426 00:25:15,040 --> 00:25:19,679 Speaker 7: So what does the US administration not get about China? 427 00:25:20,280 --> 00:25:22,080 Speaker 6: What do they not get about China? 428 00:25:25,760 --> 00:25:26,680 Speaker 2: I think that. 429 00:25:29,280 --> 00:25:36,359 Speaker 6: The administration is has thinks that they can, especially the 430 00:25:36,359 --> 00:25:40,040 Speaker 6: President thinks that he can break through more quickly on 431 00:25:40,280 --> 00:25:44,560 Speaker 6: negotiations and the decision making process, and the Chinese keep 432 00:25:45,040 --> 00:25:49,480 Speaker 6: insisting that the negotiations be conducted from the technical and 433 00:25:49,560 --> 00:25:55,120 Speaker 6: deputy level up and so that the apparatus is slower 434 00:25:56,040 --> 00:26:00,240 Speaker 6: than I think than what the administration believes. They a 435 00:26:00,240 --> 00:26:03,840 Speaker 6: lot of faith in this Trump she call that should 436 00:26:03,840 --> 00:26:06,920 Speaker 6: be coming this week or next week for a breakthrough, 437 00:26:06,960 --> 00:26:10,080 Speaker 6: and I think there'll be some positive noises coming out 438 00:26:10,080 --> 00:26:12,639 Speaker 6: of it, because I do think both sides want to 439 00:26:12,680 --> 00:26:15,720 Speaker 6: de escalate, but as far as getting a concrete agreement, 440 00:26:15,800 --> 00:26:19,600 Speaker 6: like the Chinese have put together a deal on between 441 00:26:19,680 --> 00:26:23,959 Speaker 6: rare earths and the and the semiconductor ban, and they 442 00:26:24,000 --> 00:26:27,600 Speaker 6: want to have a trade off to loosen those and 443 00:26:27,840 --> 00:26:29,280 Speaker 6: that's going to be hard to come by. 444 00:26:29,440 --> 00:26:33,520 Speaker 2: It's the same ceremony with this SGH Macro advisors thrilled 445 00:26:33,440 --> 00:26:37,880 Speaker 2: these with us today. I would be remiss if I 446 00:26:38,119 --> 00:26:43,359 Speaker 2: ask you about the Western stereotypes of Persia and the 447 00:26:43,560 --> 00:26:48,960 Speaker 2: overwhelming reality I've seen across my life is a basic idea. 448 00:26:49,200 --> 00:26:51,680 Speaker 2: It's the only thing standing in the Greater Mid East 449 00:26:51,720 --> 00:26:56,160 Speaker 2: with the legitimate Middle class and somehow, some way we're 450 00:26:56,200 --> 00:27:00,760 Speaker 2: going to migrate it ran from nineteen seven nine on 451 00:27:01,320 --> 00:27:04,920 Speaker 2: back to something new and more benevolent. Is there any 452 00:27:04,920 --> 00:27:07,360 Speaker 2: hope for that or do you just give it up? 453 00:27:07,520 --> 00:27:09,879 Speaker 2: Not that we would go back to a show structure, 454 00:27:10,240 --> 00:27:13,439 Speaker 2: but that we would amend back to some form of 455 00:27:13,560 --> 00:27:14,240 Speaker 2: new government. 456 00:27:15,080 --> 00:27:17,280 Speaker 6: I'm not sure about the form of new government, but 457 00:27:17,400 --> 00:27:19,919 Speaker 6: I do think that the progress is very real. On 458 00:27:19,960 --> 00:27:23,080 Speaker 6: the nuclear negotiations, I was talking with a friend of 459 00:27:23,119 --> 00:27:27,359 Speaker 6: mine who's very knowledgeable on these issues, John Alterman at CSIS. 460 00:27:27,400 --> 00:27:30,359 Speaker 6: I don't know them, and I said, I think, after 461 00:27:32,200 --> 00:27:38,080 Speaker 6: sixty five years, whatever the math, that this might be 462 00:27:38,560 --> 00:27:40,199 Speaker 6: the deal. And he said, I don't think this is 463 00:27:40,280 --> 00:27:42,800 Speaker 6: the deal, but I think this is a deal, and 464 00:27:43,119 --> 00:27:45,399 Speaker 6: we're getting very close on that. So I thing on 465 00:27:45,440 --> 00:27:49,879 Speaker 6: the economic front and that we might see some loosening, 466 00:27:50,119 --> 00:27:53,000 Speaker 6: but the government is very entrenched there. So I don't see. 467 00:27:53,680 --> 00:27:57,639 Speaker 2: What is the biggest myth of Iran and Americans have 468 00:27:57,800 --> 00:28:01,760 Speaker 2: right now? If I travel fifty south of Tehran, say 469 00:28:02,280 --> 00:28:07,000 Speaker 2: to all that heritage, the gorgeosity of Iran and all 470 00:28:07,040 --> 00:28:11,119 Speaker 2: the ancient history and the rugs is a stereotype in 471 00:28:11,160 --> 00:28:16,199 Speaker 2: that what's the biggest myth Americans get wrong about your Persia. 472 00:28:16,600 --> 00:28:20,879 Speaker 6: I think it's really the attitude of the Iranian people 473 00:28:20,960 --> 00:28:25,960 Speaker 6: towards Americans in particular. And we've used since nineteen seventy 474 00:28:26,080 --> 00:28:28,800 Speaker 6: nine to see a lot of hostility in the Middle 475 00:28:28,840 --> 00:28:31,760 Speaker 6: East towards towards the US. You see that from the government, 476 00:28:32,119 --> 00:28:37,000 Speaker 6: but the Iranian people are very friendly towards foreigners in 477 00:28:37,080 --> 00:28:41,680 Speaker 6: general and Americans in particular. Actually right, and people get 478 00:28:41,680 --> 00:28:44,560 Speaker 6: really people who travel there. There's a there's an amazing 479 00:28:46,440 --> 00:28:49,680 Speaker 6: CNN the show Anthony Bourdain where he to Iran. I 480 00:28:49,720 --> 00:28:51,480 Speaker 6: don't know if you saw. Thats one of the classics, 481 00:28:51,960 --> 00:28:55,800 Speaker 6: and people get surprised by you know, how they roll 482 00:28:55,840 --> 00:28:57,120 Speaker 6: out the rugs, so to speak. 483 00:28:57,400 --> 00:28:59,880 Speaker 2: So Sam, thank you so much, greatly, greatly appreciate your 484 00:29:00,080 --> 00:29:03,000 Speaker 2: tendance today. Sassan Garamouni, where he's president of the Chief 485 00:29:03,000 --> 00:29:06,960 Speaker 2: Executive Officer SGH. Macro Advisor is an important note there 486 00:29:07,560 --> 00:29:12,800 Speaker 2: with some optimism on a China US discussion as well. 487 00:29:18,920 --> 00:29:22,800 Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday 488 00:29:22,840 --> 00:29:26,160 Speaker 1: starting at seven am Eastern on Apple, Coarclay, and Android Auto. 489 00:29:26,280 --> 00:29:29,120 Speaker 1: With the Bloomberg Business app. You can also watch us 490 00:29:29,160 --> 00:29:33,000 Speaker 1: live every weekday on YouTube and always on the Bloomberg terminal. 491 00:29:33,120 --> 00:29:37,600 Speaker 2: This is a great honor and incredibly well timed. Sheila 492 00:29:37,960 --> 00:29:42,760 Speaker 2: Koglu is with Jeffrey. She was legendary Credit Suis, winning 493 00:29:42,840 --> 00:29:46,080 Speaker 2: all sorts of awards from I and the rest, and 494 00:29:46,160 --> 00:29:49,840 Speaker 2: now at Jeffries and what's different every cell side analyst 495 00:29:49,880 --> 00:29:55,800 Speaker 2: Folks is different. Sheila is bulletproof at the relationship inside 496 00:29:55,840 --> 00:30:00,640 Speaker 2: the Beltway to your economy, premium and bil business class 497 00:30:00,680 --> 00:30:03,760 Speaker 2: seat on a commercial airline. We're going to stay really 498 00:30:03,800 --> 00:30:06,720 Speaker 2: today on the safety of the American system coming out 499 00:30:06,760 --> 00:30:09,800 Speaker 2: of FAA in defense and all. She looks thrilled to 500 00:30:09,840 --> 00:30:11,080 Speaker 2: have you here. I'm going to cut right to the 501 00:30:11,160 --> 00:30:16,920 Speaker 2: chase on the airline business Delta, Hold Air Canada, Hold, Hold, Hold, Hold, 502 00:30:16,920 --> 00:30:21,080 Speaker 2: Hold United A bye. What's unique about United versus all? 503 00:30:21,160 --> 00:30:25,479 Speaker 8: It's your only buy Why we really like it's offering 504 00:30:25,600 --> 00:30:28,840 Speaker 8: internationally premium. We think it can catch up to Delta, 505 00:30:29,320 --> 00:30:33,920 Speaker 8: and their strategy is to grow those premium seats, and 506 00:30:33,960 --> 00:30:35,680 Speaker 8: we think it has an edge. Delta is the clear 507 00:30:35,760 --> 00:30:38,479 Speaker 8: leader in premium, but we think United is catching up. 508 00:30:38,520 --> 00:30:40,880 Speaker 8: An American is a bar behind them. 509 00:30:40,920 --> 00:30:43,760 Speaker 2: Can you do something about luggage and CDG in Paris. 510 00:30:44,240 --> 00:30:47,640 Speaker 8: I don't know, but three international trips in the next 511 00:30:47,640 --> 00:30:50,440 Speaker 8: six weeks. I do think that there's some book away 512 00:30:51,400 --> 00:30:55,040 Speaker 8: with Newark, but the runways opening up early. Scott Kirby's 513 00:30:55,040 --> 00:30:59,080 Speaker 8: inviting people back, folks back to EWR and we'll. 514 00:30:58,880 --> 00:31:02,400 Speaker 2: See across this name RHO question. This is the most 515 00:31:02,400 --> 00:31:07,080 Speaker 2: important conversation of the day. Do you perceive a damaged 516 00:31:07,360 --> 00:31:12,840 Speaker 2: safety to our air system because of Washington budget challenges 517 00:31:13,760 --> 00:31:14,280 Speaker 2: a little bit? 518 00:31:14,360 --> 00:31:17,240 Speaker 8: You know, I've spoken with the former FAA administrators. There's 519 00:31:17,280 --> 00:31:19,560 Speaker 8: so much data out there, and there's systems that we 520 00:31:19,600 --> 00:31:21,760 Speaker 8: could put in place that will prevent the next crashes. 521 00:31:21,800 --> 00:31:26,240 Speaker 8: I was with three corporates yesterday, Letos, SA, c Raytheon Parsons. 522 00:31:26,440 --> 00:31:29,960 Speaker 8: They all make equipment for air traffic controllers, or train them, 523 00:31:30,200 --> 00:31:32,960 Speaker 8: or make software systems. We just need to move some 524 00:31:33,000 --> 00:31:35,160 Speaker 8: of those forward. And President Trump is doing part of that. 525 00:31:35,360 --> 00:31:36,120 Speaker 2: Well, Sheila doesn't. 526 00:31:36,120 --> 00:31:40,760 Speaker 3: Trump's budget proposal boost spending not only on shipbuilding, port infrastructure, 527 00:31:40,800 --> 00:31:42,280 Speaker 3: but on air traffic control as well. 528 00:31:42,720 --> 00:31:45,600 Speaker 8: It does, but it takes time. There's you know, the 529 00:31:45,720 --> 00:31:50,240 Speaker 8: air traffic controllers unionized, and you know, the equipment takes 530 00:31:50,600 --> 00:31:52,840 Speaker 8: years to put in place. So I think one of 531 00:31:52,840 --> 00:31:56,520 Speaker 8: the things this administration is doing positively is moving things forward. 532 00:31:56,720 --> 00:31:58,960 Speaker 3: How do you think the military build up in the EU? 533 00:31:59,040 --> 00:32:01,440 Speaker 3: I mean, we got that new that the European Commission 534 00:32:01,800 --> 00:32:05,200 Speaker 3: approved the joint ventship between BAE, Leonardo and Mitsubishi over night. 535 00:32:05,280 --> 00:32:06,640 Speaker 3: I mean, talk to us a little bit about this 536 00:32:06,720 --> 00:32:09,280 Speaker 3: build up that's coming, This fiscal spend on military at 537 00:32:09,320 --> 00:32:10,840 Speaker 3: the EU. How's that impacting your sector? 538 00:32:10,920 --> 00:32:13,080 Speaker 8: So I actually think the best place away to play 539 00:32:13,080 --> 00:32:16,320 Speaker 8: European defense is two stocks in my coverage, Lachux and Northrop. 540 00:32:16,360 --> 00:32:19,440 Speaker 8: I was with the CEO of Northrop yesterday morning and 541 00:32:19,760 --> 00:32:22,360 Speaker 8: the news came out on NATO air defense build up. 542 00:32:22,520 --> 00:32:25,560 Speaker 8: So NATO right now they're barely spending the two percent. 543 00:32:25,960 --> 00:32:28,040 Speaker 8: Their goal is to spend five percent in total, of 544 00:32:28,080 --> 00:32:30,840 Speaker 8: which three and a half percent is on actual equipment. 545 00:32:31,400 --> 00:32:33,440 Speaker 8: What I think is going to happen is the European 546 00:32:33,480 --> 00:32:36,280 Speaker 8: industrial base is going to build their own fighters. They're 547 00:32:36,280 --> 00:32:39,240 Speaker 8: going to support their home teams. Right, So that might 548 00:32:39,360 --> 00:32:41,200 Speaker 8: leave F thirty five out in the cold, but the 549 00:32:41,240 --> 00:32:44,080 Speaker 8: backlogs fine through twenty thirty, so it's fine. But what 550 00:32:44,160 --> 00:32:47,920 Speaker 8: they do need is air missile systems. The systems and 551 00:32:47,960 --> 00:32:50,400 Speaker 8: the missiles they don't yet have in place, the weapons 552 00:32:50,400 --> 00:32:53,360 Speaker 8: and the fighters they could make themselves. So north A 553 00:32:53,480 --> 00:32:54,360 Speaker 8: been LACHUCKX for that. 554 00:32:54,760 --> 00:32:57,280 Speaker 3: What do you think about this kill switch? And you 555 00:32:57,360 --> 00:32:59,600 Speaker 3: have thirty five that everybody's been talking about is being 556 00:32:59,640 --> 00:33:01,719 Speaker 3: I don't think think that's it isn't it? Just like 557 00:33:01,760 --> 00:33:04,640 Speaker 3: the data package needs to be constantly updated by the US. 558 00:33:04,960 --> 00:33:06,880 Speaker 3: And that's the real risk with owning F thirty fives 559 00:33:06,920 --> 00:33:07,560 Speaker 3: in Europe. 560 00:33:08,000 --> 00:33:10,320 Speaker 8: F thirty five has had a lot of issues, but 561 00:33:10,360 --> 00:33:13,080 Speaker 8: so is every major development program. It just this one 562 00:33:13,160 --> 00:33:16,520 Speaker 8: seems to be plagued consistently. We're on lot eighteen of production. 563 00:33:16,640 --> 00:33:19,760 Speaker 8: Lot nineteen is coming up, and we still have upgrades 564 00:33:19,800 --> 00:33:22,920 Speaker 8: that are just gaining stability after the last four years. 565 00:33:23,280 --> 00:33:25,160 Speaker 3: Well, let's tear up the script here. We saw China 566 00:33:25,240 --> 00:33:28,480 Speaker 3: ways ordering hundreds of airbus jets in some major deal, 567 00:33:28,560 --> 00:33:31,120 Speaker 3: but then we're also hearing that negotiations are breaking down. 568 00:33:31,160 --> 00:33:33,000 Speaker 3: I mean, how do you make sense of all this? 569 00:33:34,960 --> 00:33:36,760 Speaker 8: So this is the way I simply think about it. 570 00:33:36,840 --> 00:33:39,120 Speaker 8: China's fifteen percent of air traffic, so they're going to 571 00:33:39,200 --> 00:33:41,760 Speaker 8: take fifteen percent of planes, whether that's airbus are bowing, 572 00:33:42,080 --> 00:33:44,920 Speaker 8: I don't really mind I actually rather it be Airbus 573 00:33:44,960 --> 00:33:48,320 Speaker 8: because then Boeing has a more diverse customer base and 574 00:33:48,320 --> 00:33:50,480 Speaker 8: doesn't have risk on with a single country in twenty 575 00:33:50,520 --> 00:33:52,680 Speaker 8: forty when Komac actually gets to build. 576 00:33:52,600 --> 00:33:55,160 Speaker 2: You're a stock pick. But I want to recapitulate this. 577 00:33:55,280 --> 00:34:00,120 Speaker 2: I think it's so important you see an urgency to 578 00:33:59,840 --> 00:34:03,320 Speaker 2: fix the safety after the horror of what we saw 579 00:34:03,360 --> 00:34:05,160 Speaker 2: at Reagan next number of months ago. 580 00:34:06,960 --> 00:34:09,560 Speaker 8: I think the the number of air traffic controllers we 581 00:34:09,680 --> 00:34:13,279 Speaker 8: have is quite small. You know, I haven't been able 582 00:34:13,280 --> 00:34:15,920 Speaker 8: to verify this, but I think Newark has something like 583 00:34:16,320 --> 00:34:19,440 Speaker 8: forty percent more passengers coming through since twenty nineteen. 584 00:34:19,600 --> 00:34:20,680 Speaker 2: Okay, but the number. 585 00:34:20,520 --> 00:34:22,240 Speaker 8: Of air traffic controllers is stagnant. 586 00:34:22,280 --> 00:34:26,040 Speaker 2: Everyone listening to see everyone listening to this program knows 587 00:34:26,120 --> 00:34:31,319 Speaker 2: that's insane. Do you suggest a new urgency to fix this? 588 00:34:31,719 --> 00:34:34,839 Speaker 8: Now more air traffic controllers? The attrition rate is quite high, 589 00:34:34,880 --> 00:34:38,279 Speaker 8: sa I see the company I saw the more or 590 00:34:38,440 --> 00:34:41,160 Speaker 8: increase the age. They have a fifty five year year 591 00:34:41,640 --> 00:34:44,160 Speaker 8: retirement limit, which the union is pushing back. 592 00:34:44,160 --> 00:34:46,120 Speaker 2: Okay, well, maybe that it's still hard for you to 593 00:34:46,120 --> 00:34:49,279 Speaker 2: become traffic you know, Sheila where I stand on that. 594 00:34:49,600 --> 00:34:52,680 Speaker 2: But isn't it just simply, these are air traffic controllers. 595 00:34:52,719 --> 00:34:56,640 Speaker 2: They control our lives. Lift the wage? Does that work? 596 00:34:57,760 --> 00:35:00,600 Speaker 8: I think? What what has happened in aerospace defense? And 597 00:35:00,680 --> 00:35:04,240 Speaker 8: because it's such an interesting it's such a specified industry, 598 00:35:04,280 --> 00:35:07,120 Speaker 8: whether it's shipbuilding, whether it's air traffic control, you can't 599 00:35:07,160 --> 00:35:10,160 Speaker 8: find those folks on the street, and those wages might 600 00:35:10,200 --> 00:35:14,240 Speaker 8: not you know, yes, lift the wage, but also the age. 601 00:35:14,560 --> 00:35:17,520 Speaker 8: And it's a hard profession. You don't find those folks 602 00:35:17,520 --> 00:35:18,320 Speaker 8: off the street. 603 00:35:18,440 --> 00:35:21,000 Speaker 2: I hate you. You told me to buy Woodward WWD 604 00:35:21,200 --> 00:35:26,560 Speaker 2: Fort Collins College. I totally to buy August twenty, It's 605 00:35:26,600 --> 00:35:30,720 Speaker 2: done a double Okay? What is Woodword Inc? WWD? 606 00:35:31,640 --> 00:35:34,560 Speaker 8: Woodward is a small cap supplier, which there aren't a 607 00:35:34,560 --> 00:35:37,480 Speaker 8: lot of because everybody's been taken out Walkwall, Collins b 608 00:35:37,560 --> 00:35:39,959 Speaker 8: Airspace my favorite companies to cover back in the day. 609 00:35:40,440 --> 00:35:43,160 Speaker 8: What Woodward does is half of its business is aerospace, 610 00:35:43,200 --> 00:35:45,960 Speaker 8: half is energy. Think about it is it makes it 611 00:35:46,040 --> 00:35:50,920 Speaker 8: controls energy in an aircraft or an aircraft engine or 612 00:35:50,960 --> 00:35:55,680 Speaker 8: an industrial gas turbine. So it makes actuators, fuel control systems. 613 00:35:55,960 --> 00:35:58,120 Speaker 8: It has about three hundred thousand worth of content on 614 00:35:58,160 --> 00:36:01,080 Speaker 8: a seven three seven max, so smaller than other big 615 00:36:01,120 --> 00:36:04,760 Speaker 8: suppliers like a Raithian or a Honeywell, but gaining steam 616 00:36:04,800 --> 00:36:05,520 Speaker 8: and gaining share. 617 00:36:06,800 --> 00:36:07,960 Speaker 3: You know, I'd like to go back to what you 618 00:36:07,960 --> 00:36:10,160 Speaker 3: were saying earlier about raising the retirement age on air 619 00:36:10,160 --> 00:36:13,120 Speaker 3: traffic controllers, because that means that Tom has life after Bloomberg. 620 00:36:13,200 --> 00:36:13,319 Speaker 1: Right. 621 00:36:13,320 --> 00:36:15,520 Speaker 3: I can see him with the glowy sticks and the headphones, 622 00:36:15,600 --> 00:36:16,480 Speaker 3: you know, in. 623 00:36:16,440 --> 00:36:18,200 Speaker 2: The room shielder where these guys are doing. 624 00:36:18,360 --> 00:36:21,200 Speaker 8: No, I haven't had that privilege. It must be quite stressful, 625 00:36:21,560 --> 00:36:23,399 Speaker 8: just as stressful as being in this room right now. 626 00:36:23,520 --> 00:36:27,480 Speaker 2: It is love that stress. Kind of a knight should 627 00:36:27,520 --> 00:36:30,960 Speaker 2: have killed you. With the Jeffers, you greatly appreciate it. 628 00:36:31,080 --> 00:36:33,960 Speaker 2: Just he and I can't say enough about her synthesis 629 00:36:34,000 --> 00:36:36,520 Speaker 2: of Aviation United as your buy. 630 00:36:37,239 --> 00:36:41,160 Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday 631 00:36:41,200 --> 00:36:44,240 Speaker 1: starting at seven am Eastern on Apple Corplay and Android 632 00:36:44,239 --> 00:36:47,280 Speaker 1: Auto with the Bloomberg Business app. You can also listen 633 00:36:47,360 --> 00:36:50,600 Speaker 1: live on Amazon Alexa from our flagship New York station, 634 00:36:51,160 --> 00:36:53,840 Speaker 1: Just say Alexa play Bloomberg eleven thirty. 635 00:36:54,360 --> 00:36:57,200 Speaker 2: This is joy. Eric Rosen stops by, and we could 636 00:36:57,239 --> 00:36:59,000 Speaker 2: go a couple of ways here with his work on 637 00:36:59,040 --> 00:37:02,520 Speaker 2: Wall Street. You do like private credit, private disc credit trading, 638 00:37:02,760 --> 00:37:05,239 Speaker 2: DA da DA, da da. We could do his philanthropy, 639 00:37:05,360 --> 00:37:10,120 Speaker 2: including pediacric commitment to wild Cornell. Forget about it. He's 640 00:37:10,120 --> 00:37:13,520 Speaker 2: down in Florida now, and from coast to coast people 641 00:37:13,560 --> 00:37:16,640 Speaker 2: are like, is Boca gonna fall into the ocean? Okay? 642 00:37:16,680 --> 00:37:20,560 Speaker 2: Boca three three four three two four beds, John Tucker 643 00:37:21,160 --> 00:37:27,160 Speaker 2: six baths. It's substantial, six five hundred square feet. It's 644 00:37:27,200 --> 00:37:30,600 Speaker 2: popin twenty nine point five million, but it just had 645 00:37:30,640 --> 00:37:34,920 Speaker 2: a five million dollars price cut. Eric Rosen is Florida 646 00:37:34,960 --> 00:37:36,640 Speaker 2: real estate falling into the ocean. 647 00:37:37,239 --> 00:37:39,400 Speaker 9: Well, thanks for having me on again. It's great to 648 00:37:39,440 --> 00:37:42,000 Speaker 9: be with you. So things have definitely slowed down, right, 649 00:37:42,040 --> 00:37:45,080 Speaker 9: So a handful of events have taken place. We've seen 650 00:37:45,120 --> 00:37:47,520 Speaker 9: a huge uptick in prices over the last five or 651 00:37:47,560 --> 00:37:50,840 Speaker 9: six years, two three hundred percent. We've seen mortgage rates 652 00:37:50,880 --> 00:37:53,840 Speaker 9: go up, We've seen much higher, insurance rates tripled in 653 00:37:53,880 --> 00:37:57,839 Speaker 9: many cases. And that the result is we're definitely seeing 654 00:37:57,880 --> 00:37:58,839 Speaker 9: pressure on the low end. 655 00:37:59,480 --> 00:37:59,960 Speaker 5: The lower end. 656 00:38:00,120 --> 00:38:03,680 Speaker 9: Houses are definitely staying on the market longer. Inventory in 657 00:38:03,680 --> 00:38:05,560 Speaker 9: Florida is one hundred and eighty three thousand units as 658 00:38:05,560 --> 00:38:07,839 Speaker 9: to the end of April, and it was at the 659 00:38:07,840 --> 00:38:11,160 Speaker 9: lows in twenty twenty two, twenty thirty five thousand units, 660 00:38:11,200 --> 00:38:13,279 Speaker 9: and before COVID it was one hundred and twenty nine 661 00:38:13,280 --> 00:38:16,200 Speaker 9: thousand units. So you're seeing much more inventory and at 662 00:38:16,200 --> 00:38:19,000 Speaker 9: the high end, the choicest stuff in Miami and Palm 663 00:38:19,080 --> 00:38:21,879 Speaker 9: Beach on the water forty fifty million, sixty million tents 664 00:38:21,920 --> 00:38:24,560 Speaker 9: to sell pretty well. Everything else is on the market 665 00:38:24,719 --> 00:38:28,080 Speaker 9: right longer, and you're seeing price reductions and inventory built. 666 00:38:28,239 --> 00:38:31,120 Speaker 2: I think of the macro flows, like middle class people 667 00:38:31,120 --> 00:38:33,600 Speaker 2: in Florida saying I'm done with this. They're moving to Georgia, 668 00:38:33,640 --> 00:38:36,120 Speaker 2: They're moving to the Carolinas, or I think of the 669 00:38:36,239 --> 00:38:41,000 Speaker 2: money of South America and Central America coming in. Is 670 00:38:41,040 --> 00:38:44,640 Speaker 2: that money still flowing in from nations to the South. 671 00:38:45,200 --> 00:38:47,720 Speaker 9: Yeah, I mean so, listen, the great migration has slowed. 672 00:38:47,760 --> 00:38:49,960 Speaker 9: What we saw in twenty twenty two and twenty twenty one, 673 00:38:50,360 --> 00:38:52,520 Speaker 9: we're not seeing those numbers anymore. But we saw a 674 00:38:52,560 --> 00:38:55,759 Speaker 9: flurry of buying from Californians post the Palisades fires that 675 00:38:55,800 --> 00:38:59,200 Speaker 9: they were displaced. I said, one of my friend brokers 676 00:38:59,440 --> 00:39:02,600 Speaker 9: was showing a showing houses and one day, four out 677 00:39:02,600 --> 00:39:03,080 Speaker 9: of the fi I. 678 00:39:03,080 --> 00:39:06,000 Speaker 2: Have you know other real estate brokers who are friends. 679 00:39:06,360 --> 00:39:09,840 Speaker 9: Friends is a strong term acquaintances. I miss foths, I 680 00:39:09,880 --> 00:39:13,560 Speaker 9: misspoke acquaintances. In one day, four out of the five 681 00:39:13,600 --> 00:39:15,640 Speaker 9: people that showed up for a very expensive open house 682 00:39:15,680 --> 00:39:17,960 Speaker 9: were all displaced, all from California. 683 00:39:18,000 --> 00:39:20,799 Speaker 2: I should say you're a Douglas Element shat talker. Would 684 00:39:20,840 --> 00:39:21,200 Speaker 2: you like that? 685 00:39:21,640 --> 00:39:24,759 Speaker 7: I'm going to guess your customers don't care about mortgage rates. 686 00:39:24,800 --> 00:39:28,040 Speaker 7: Do they care about homeowners insurance and getting homeowners insurance? 687 00:39:28,200 --> 00:39:31,720 Speaker 9: Well, so homeowods insurance rates have gone up double triple 688 00:39:31,800 --> 00:39:33,600 Speaker 9: or quadruple depending on where you are, And if you 689 00:39:33,680 --> 00:39:36,400 Speaker 9: have a mortgage, you have to have hurricane insurance, you 690 00:39:36,440 --> 00:39:38,640 Speaker 9: have to have insurance, and so a lot of most 691 00:39:38,719 --> 00:39:41,360 Speaker 9: of the focus folks that I focus on are not 692 00:39:41,719 --> 00:39:45,480 Speaker 9: super focused on interest rates. But one of my friends 693 00:39:45,800 --> 00:39:48,720 Speaker 9: has a two point five percent mortgage and their insurance 694 00:39:48,760 --> 00:39:52,439 Speaker 9: got canceled and it went from seventeen thousand to eighty 695 00:39:52,480 --> 00:39:56,400 Speaker 9: five thousand dollars per year with much much worse coverages, 696 00:39:56,480 --> 00:39:59,360 Speaker 9: higher deductibles. So he didn't want to repay his mortgage 697 00:39:59,400 --> 00:40:01,920 Speaker 9: because such a cheap mortgage. But most of the high 698 00:40:01,960 --> 00:40:04,279 Speaker 9: end buyers are not super focused on mortgage rates, but 699 00:40:04,680 --> 00:40:07,080 Speaker 9: under a million dollars two million dollars, you're seeing it. 700 00:40:07,600 --> 00:40:10,640 Speaker 9: I spoke with someone who said that three of their showings, 701 00:40:10,880 --> 00:40:12,520 Speaker 9: through their listings that are in the one to three 702 00:40:12,560 --> 00:40:16,800 Speaker 9: million range are offering forty thousand dollars for the buyers 703 00:40:16,840 --> 00:40:19,439 Speaker 9: to buy down mortgage rates, so that instead of paying 704 00:40:19,480 --> 00:40:21,520 Speaker 9: seven percent, they're paying four four and a half percent 705 00:40:21,680 --> 00:40:24,640 Speaker 9: to make their monthly payments more affordable. So rates are 706 00:40:24,640 --> 00:40:25,440 Speaker 9: definitely a factor. 707 00:40:25,600 --> 00:40:29,320 Speaker 7: Okay, the weaker dollar, how does that influence the foreign buyers? 708 00:40:30,000 --> 00:40:32,280 Speaker 9: You know, in Miami there's a lot more foreign buyers 709 00:40:32,560 --> 00:40:36,919 Speaker 9: than other places. But you know, I think it's too soon. 710 00:40:36,960 --> 00:40:39,000 Speaker 9: I don't think we've seen a flurry of new buying 711 00:40:39,120 --> 00:40:41,920 Speaker 9: from foreigners, but they're always in Miami, have a lot 712 00:40:41,719 --> 00:40:43,440 Speaker 9: a lot of Americans come there. 713 00:40:43,600 --> 00:40:47,320 Speaker 2: So what is the hurricane insurance at a one point 714 00:40:47,320 --> 00:40:51,360 Speaker 2: one million price cut thirty five thousand, twenty two hundred 715 00:40:51,400 --> 00:40:55,120 Speaker 2: square feet, four bedroom, three bath and scenic Boca three 716 00:40:55,160 --> 00:40:58,680 Speaker 2: three four nine eight, what's the insurance on that? Well? 717 00:40:58,719 --> 00:40:59,680 Speaker 9: I can only say I don't. 718 00:40:59,680 --> 00:41:00,000 Speaker 7: I can't. 719 00:41:00,040 --> 00:41:02,239 Speaker 9: It's quote that's a house, but I would say it's 720 00:41:02,280 --> 00:41:04,520 Speaker 9: probably up two to three times, especially are you near 721 00:41:04,520 --> 00:41:06,840 Speaker 9: the water. Are you inland by ten miles or are 722 00:41:06,840 --> 00:41:08,400 Speaker 9: you near the beach, because that makes a big nu 723 00:41:08,600 --> 00:41:09,080 Speaker 9: of the beach. 724 00:41:09,400 --> 00:41:11,840 Speaker 2: Not on the beach, but near the beach. You know 725 00:41:11,920 --> 00:41:13,000 Speaker 2: Bar Michael barr. 726 00:41:12,800 --> 00:41:13,399 Speaker 6: Wood live there. 727 00:41:14,200 --> 00:41:16,840 Speaker 9: Yeah, So, I mean, whatever it was, it's probably up 728 00:41:16,880 --> 00:41:18,800 Speaker 9: two and a half times in the last. 729 00:41:19,200 --> 00:41:22,919 Speaker 2: Give me a rough number. I don't you know, nobody's listening, Eric, 730 00:41:23,000 --> 00:41:23,920 Speaker 2: Just give me a number. 731 00:41:24,040 --> 00:41:26,920 Speaker 9: You know, I'm thinking about what my what my insurance 732 00:41:27,000 --> 00:41:29,920 Speaker 9: rates are? You know, you know it would be hard 733 00:41:29,920 --> 00:41:30,479 Speaker 9: for me to guess. 734 00:41:30,480 --> 00:41:32,520 Speaker 2: I don't know, what would you like to guess? Johnsince 735 00:41:32,520 --> 00:41:33,960 Speaker 2: I'm not going to get an answer out. 736 00:41:33,800 --> 00:41:37,040 Speaker 7: Of mister Roses, but I'll be polite mode say well here, no, 737 00:41:37,160 --> 00:41:39,640 Speaker 7: I'll ask this. What are your commissions? What are they? 738 00:41:39,840 --> 00:41:42,480 Speaker 7: Is it still six percent? Or is that negotiable? 739 00:41:43,320 --> 00:41:46,319 Speaker 9: It's always negotiable, you know at the high end you 740 00:41:46,320 --> 00:41:46,640 Speaker 9: know they have. 741 00:41:46,760 --> 00:41:48,640 Speaker 7: It's not going to go. Is the future of real 742 00:41:48,760 --> 00:41:52,880 Speaker 7: estate transactions to is that under threat? Those commissions? 743 00:41:53,600 --> 00:41:55,719 Speaker 9: Listen, you know there's been a lot of talk about it, 744 00:41:55,760 --> 00:42:00,040 Speaker 9: but the commissions for high end product people continue to 745 00:42:00,080 --> 00:42:02,839 Speaker 9: pay for it. But it's denevochable. 746 00:42:03,080 --> 00:42:05,240 Speaker 2: Thank you for coming in really appreciate. 747 00:42:05,640 --> 00:42:10,520 Speaker 1: This is the Bloomberg Surveillance Podcast, available on Apple, Spotify, 748 00:42:10,600 --> 00:42:14,920 Speaker 1: and anywhere else you get your podcasts. Listen live each weekday, 749 00:42:15,040 --> 00:42:18,480 Speaker 1: seven to ten am Eastern on Bloomberg dot com, the 750 00:42:18,560 --> 00:42:22,600 Speaker 1: iHeartRadio app, tune In, and the Bloomberg Business app. You 751 00:42:22,640 --> 00:42:26,000 Speaker 1: can also watch us live every weekday on YouTube and 752 00:42:26,200 --> 00:42:27,960 Speaker 1: always on the Bloomberg terminal