Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
Speaker 2: weekdays at ten am Eastern on Apple, card Play and
Speaker 2: Android Auto with the Bloomberg Business App. Listen on demand
Speaker 2: wherever you get your podcasts, or watch us live on YouTube.
Speaker 3: Let's get more on the jobs out of here. Jonny
Speaker 3: Biley is chief workforced Analyst over at employ Bridge. Employbridge
Speaker 3: is the largest industrial staffing firm in the United States.
Speaker 3: It's great to see you Joinny. We love having you
Speaker 3: every job day to get the perspective. What was your
Speaker 3: take on the numbers?
Speaker 1: Well, certainly a lot stronger than I expected to see,
Speaker 1: as many of us were surprised by the big number.
Speaker 1: But you know, overall, I think, just as your last guest,
Speaker 1: Vince was saying, you know, there is a little bit
Speaker 1: of a disconnect between the establishment survey and the household survey,
Speaker 1: you know, so overall, looking at the job growth, you know,
Speaker 1: again we've talked about.
Speaker 4: This in the past.
Speaker 1: We're seeing some strong growth, certainly coming from the healthcare sector,
Speaker 1: the government sector, leisure and hospitality. But in this report,
Speaker 1: we really did see that the establishment survey had many
Speaker 1: sectors across the board adding jobs, and I was very
Speaker 1: happy to see that the professional and business service sector
Speaker 1: kind of.
Speaker 4: Bounced back because that had been very weak.
Speaker 1: So we're seeing more of those white collar professional jobs
Speaker 1: come back, specifically in the in the technical and scientific area.
Speaker 5: Hey, Jonny Cute, I'd love to get your thoughts on
Speaker 5: just kind of the impact that immigration, both legal and
Speaker 5: more importantly illegal immigration, because that's where the numbers are.
Speaker 5: How about the immigrants are impacting the labor market?
Speaker 1: Well, you know, certainly we're seeing immigration over you know,
Speaker 1: if you look at even you know, the past ten
Speaker 1: to fifteen years, we're seeing an increasing percentage of our
Speaker 1: overall labor force, you know, from foreign born workers, and
Speaker 1: that is projected to certainly continue and it's actually helping
Speaker 1: the overall job market. So that of course is specific
Speaker 1: to the documented workers. You know, if we look at
Speaker 1: illegal immigration, you know, the government is certainly trying to
Speaker 1: work with the different states to get people documented so
Speaker 1: they can get to work. What we are seeing, you know,
Speaker 1: I know, in particular in New York, you know, there's
Speaker 1: a tremendous amount of processing for these workers to get
Speaker 1: them documented and then to get them to work.
Speaker 4: But they most of them will be looking.
Speaker 1: For those lower leveled, lower level jobs that don't really
Speaker 1: require as much much you know, skills and experience, and unfortunately,
Speaker 1: there's not a ton of those jobs out there, so
Speaker 1: so that could have a big impact on unemployment in
Speaker 1: the future.
Speaker 3: So I guess if we were to read between all
Speaker 3: of the lines, and if you're an economist looking at
Speaker 3: the data, what is your read like, are we as
Speaker 3: strong as a number say some survey datas? Uh say
Speaker 3: data say something different? What do you what do you
Speaker 3: believe like? What's your read on the ground.
Speaker 1: So, you know, I don't know if many people would
Speaker 1: like my answer, but I actually think that this headline
Speaker 1: number is a bit misleading. I don't believe the job
Speaker 1: market is as strong as the Establishment survey is saying.
Speaker 1: I actually think the numbers in the household survey are
Speaker 1: a bit more accurate. You know, we are seeing unemployment
Speaker 1: pick up for the first time.
Speaker 4: We saw four in front of the number. We also
Speaker 4: saw that, you.
Speaker 1: Know, not only are we seeing unemployment go up, but
Speaker 1: but people are leaving the labor force and opting out
Speaker 1: of the labor force. We saw some big, you know,
Speaker 1: big numbers there and I'm just not you know.
Speaker 4: On the front lines, I have to tell you.
Speaker 1: And you know employ Bridge, as you mentioned, you know,
Speaker 1: we focus on supply chain. We are certainly seeing more
Speaker 1: people looking for work and unfortunately there are less jobs
Speaker 1: to place them in. So I'm not saying it's a
Speaker 1: terrible job market. I mean, there are still jobs out there,
Speaker 1: but it certainly is a challenging and tough job market.
Speaker 5: How about for recent college graduates. I mean, so that's
Speaker 5: how a year when you ask me for a friend, No, yes,
Speaker 5: exactly asking for a friend. So how about what's that
Speaker 5: environment look like.
Speaker 1: Yeah, I worry about recent college graduate. There's less opportunities
Speaker 1: for them. We're seeing that. If you look at the
Speaker 1: overall jolts, you know, job data, we're seeing a decline.
Speaker 1: We're down to eight million you know jobs, job openings
Speaker 1: out there, So less opportunities for them this year even
Speaker 1: then last year. I will say, though, if they're going
Speaker 1: into healthcare, there's a tremendous amount of job opportunities in
Speaker 1: the healthcare sector, all different fields, all different types of positions.
Speaker 1: That is one of the strongest areas. So scientific healthcare
Speaker 1: continues to remain strong. But you know, We're seeing a lot,
Speaker 1: a lot less in the financial sector. Consulting, even software
Speaker 1: has declined. You know that used to be such a
Speaker 1: hot skill. It still is a hot skill, but less
Speaker 1: jobs available today than last year or the year prior.
Speaker 3: So based on that, what are the wages like than
Speaker 3: in the healthcare sector, Is that need for talent or
Speaker 3: just humans reflected in wages also, or we still look
Speaker 3: at like eight dollars people to get paid to take
Speaker 3: care of you in your home, which like is not
Speaker 3: a nice proposition for anybody.
Speaker 1: Wages have gone up significantly and almost doubled from the
Speaker 1: number of tites that you've quoted. So yeah, we've seen
Speaker 1: you know, certainly since the pandemic, we've seen a lot
Speaker 1: of movement in wages across the board, all sectors, you know, logistics, manufacturing,
Speaker 1: but particular in healthcare.
Speaker 4: They were some of the strongest.
Speaker 1: Wage gains in twenty one and twenty two and twenty three.
Speaker 1: But I would say right now we're seeing a little
Speaker 1: bit more of stabilization. I'm not expecting big wage gains
Speaker 1: moving forward. I think you'll see it just kind of stabilize.
Speaker 1: But the wages have improved a lot over the last
Speaker 1: few years.
Speaker 5: Jenny, what are your clients or corporate clients saying about
Speaker 5: kind of their policies for work from home, hybrid all
Speaker 5: that kind of stuff where we kind of settled out
Speaker 5: on that whole thing.
Speaker 1: Yeah, you know, that is such a hot topic. It's
Speaker 1: a it's a great question.
Speaker 4: Certainly.
Speaker 1: There are many jobs that it's it's not an option, right,
Speaker 1: like the logistics manufacturing.
Speaker 3: Oh, we know, we know, don't you know.
Speaker 4: You know, for you have to be there.
Speaker 1: So there's many jobs that really require you to be
Speaker 1: in the office or be on site. But employers that
Speaker 1: you know, have kind of taken the strategy of offering
Speaker 1: more flexibility where they can because they know that workers
Speaker 1: want that workers want flexibility in their schedules. They don't
Speaker 1: mind going into the office, but maybe having like a
Speaker 1: hybrid schedule is like the best, you know, where they
Speaker 1: still get to collaborate with their you know, co workers
Speaker 1: and then still have some flexibility maybe to work from
Speaker 1: home for a few days. So that's where I see
Speaker 1: kind of the trend as these hybrid schedules. But you know,
Speaker 1: for many people's that's not an option and you kind
Speaker 1: of have to come back to the office.
Speaker 3: All right, Jenny. We really appreciate you. It's such great insight.
Speaker 3: Jenny Bailey, chief workforce Analysts at employee Bridge. Again, they
Speaker 3: hire a lot of industrial employees, so they really have
Speaker 3: a pulse on what's happening within the US. Thank you
Speaker 3: so much for joining us.
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
Speaker 2: weekdays at ten am Eastern on applecar Play and Android
Speaker 2: Auto with the Bloomberg Business. You can also listen live
Speaker 2: on Amazon Alexa from our flagship New York station Just
Speaker 2: say Alexa playing Bloomberg eleven thirty.
Speaker 3: I'm Alex ste alongside at Paul Sweeney. This at Bloomberg
Speaker 3: Intelligence Radio. We bring you all the top news and
Speaker 3: finance and business through a lens of our Bloomberg Intelligence folks.
Speaker 3: They cover two thousand companies and one hundred and thirty
Speaker 3: industries around the world. We want to take you outside
Speaker 3: Bloomberg Intelligence to get the read on the market and
Speaker 3: investment and what do you do when you have a
Speaker 3: day like today. David Deet's a senior investment strategist at
Speaker 3: Pepack Private and he joins us now. So clearly we're
Speaker 3: looking at a market reaction from the jobs that now
Speaker 3: we're looking at flat equities despite the bond sell off.
Speaker 3: What do you think about this market right now?
Speaker 6: Sure? So absolutely.
Speaker 7: We saw basically a divergent jobs report, and I think
Speaker 7: as we're looking at the market right now, is really
Speaker 7: better for the US worker, better for stocks, and it
Speaker 7: is for fixed income. On the positive side, of course,
Speaker 7: more jobs are created than expected, and ultimately, as we know,
Speaker 7: you know, seventy percent of that economy is a consumer.
Speaker 7: Not only are more jobs being created, but we saw
Speaker 7: a nice tickof in terms of wage growth in the
Speaker 7: last month. Indeed, a positive science in terms of real
Speaker 7: wage growth, and so that's all good for spending, that's
Speaker 7: good for corporate profits. Therefore, that's better than you would
Speaker 7: think for stocks. I think that's why stocks are shaking
Speaker 7: off some initial weakness there.
Speaker 6: Having said that from fixed income.
Speaker 7: Point of view, is not a positive because, of course,
Speaker 7: it continues the narrative that inflation is sticky. Remember, wages
Speaker 7: are such an important part of the overall inflation picture.
Speaker 7: This four point one percent year over year, our target
Speaker 7: is two. So that's unacceptable if you're a fixed income creator.
Speaker 7: That's not acceptable for the FED. And so that's why
Speaker 7: we're seeing bond sell off, stocks get back on their feet.
Speaker 5: David, if there's some that are suggesting that this job's
Speaker 5: report maybe even pushes out a rate cut till next year,
Speaker 5: If that's in fact the case, can stocks work in
Speaker 5: that environment?
Speaker 7: Well, so, you know, at the end of the day,
Speaker 7: as long as interest rates or the FED doesn't hike,
Speaker 7: I think we're all right with stocks. I mean, at
Speaker 7: the end of the day, you're buying stocks for earnings,
Speaker 7: and we just saw great earnings report in Q one.
Speaker 7: At the end of the quarter, the reports came in
Speaker 7: almost doubled in what had been expected, and we see
Speaker 7: that trend continuing for the rest of the year. So
Speaker 7: right now, Fed Fund Future's quite frankly saying, is a
Speaker 7: coin toss for what we see in September. The real
Speaker 7: debate is now we're going to get one or we're
Speaker 7: going to.
Speaker 6: Get two rate cuts.
Speaker 7: You know, from an investor's point of view, we urge
Speaker 7: our clients not to overreact to just one metric. I mean,
Speaker 7: jobs are great, but you know, we're talking about what
Speaker 7: happened last month in stocks, and stock investors should be
Speaker 7: focused on what's the outlook for the next six to
Speaker 7: twelve months, and of course when it comes time to
Speaker 7: the FED making decisions September, we're going to have several
Speaker 7: more months of data under our belt. From a stock investor,
Speaker 7: the worst situation is a recession. And of course there
Speaker 7: was really no evidence in the jobs report today to
Speaker 7: suggest that the overall economy was weakening.
Speaker 3: So what's your top sector pick then? Based on all
Speaker 3: that for the six to twelves.
Speaker 7: You know, we like everything other than those top three
Speaker 7: stocks which we're urging our clients to lighten up on,
Speaker 7: which would be Nvidia, Microsoft, and Apple.
Speaker 3: And is that just evaluation call though?
Speaker 6: Absolutely so.
Speaker 7: Small caps of course, if you strip out two small
Speaker 7: caps in the Wrestle two thousand, that are very much
Speaker 7: pushed forward because the AI height Wrestle two thousand is
Speaker 7: down for the year. Historically, if you look long term,
Speaker 7: small stocks have outperformed large caps. Is more room to grow.
Speaker 7: We think they're very much out of favor. We would
Speaker 7: just go with like an ETF that takes an index
Speaker 7: approach to the Wrestle two thousand.
Speaker 6: We think that might be the way to go. The
Speaker 6: only reason where all.
Speaker 7: Bets feet off if you see a very hard landing
Speaker 7: in the economy but you know, the fact of the
Speaker 7: matter is we.
Speaker 6: Have still a FED foot underneath us.
Speaker 7: So if we still weakening, if we do see further
Speaker 7: weakening in the economy, that Fed will rush to the rescue.
Speaker 7: So we think that the actually the small caps might
Speaker 7: be an area to take some of your winnings from
Speaker 7: those mag seven put them into the smaller fraud.
Speaker 5: Hey, David, a lot of folks are suggesting, if you
Speaker 5: want to get some value, that perhaps international is a
Speaker 5: way to go, less tech waiting in some of the
Speaker 5: European indexes, for example, how do you think that internationale.
Speaker 6: We think that makes a whole lot of sense.
Speaker 7: The dividend yields, for example, over in the continent are
Speaker 7: almost double what they are here, valuations are much lower.
Speaker 7: Yet their interest rates are even lower than they are here,
Speaker 7: and so the difference between what you get and fixed
Speaker 7: income and what you can get in terms of earning
Speaker 7: yields and dividends on stocks much greater. We think that's
Speaker 7: a nice opportunity. Of course, Japan has come back to
Speaker 7: where it was in the nineteen eighties, and of course
Speaker 7: the real sleeper could be China, which is, you know,
Speaker 7: at close to a four to five year low here,
Speaker 7: but we just saw a big tick up in exports
Speaker 7: coming from in China. Remember, China's doing almost the exact
Speaker 7: opposite of what our fed's doing here. We have restrictive
Speaker 7: policies at least on the monetary side. When China they're
Speaker 7: trying to press the accelerator down to lift the economy
Speaker 7: out of their kind of pandemic and post pandemic meles
Speaker 7: and so I think that could be a real tail
Speaker 7: when they're they could have some of the best technology
Speaker 7: in the world, but their tech companies are trading at
Speaker 7: about half the valuation of what US tech companies are
Speaker 7: training have.
Speaker 3: What's interesting too, You like real estate, and Moody's said
Speaker 3: at least six US regional banks have a substantial exposure
Speaker 3: to commercial real estate loans, and they're at risk of
Speaker 3: having their debt ratings downgraded. What do you like in
Speaker 3: real estate? What do you not like? And how do
Speaker 3: you kind of avoid this kind of headline?
Speaker 6: Yeah, absolutely so.
Speaker 7: In terms of real estate, what we're looking at is
Speaker 7: what has now already reflected the concerns there. So let
Speaker 7: me give you an example by virtue of Bunstock. We
Speaker 7: like Boston properties there they have the commercial exposure, but
Speaker 7: they're limiting themselves to the sixth cities in America where
Speaker 7: people still.
Speaker 6: Want to go there.
Speaker 7: You're in New York's Bosses, Washington's the high end, and
Speaker 7: then they have the high end properties there. The stock
Speaker 7: is down by two thirds of where it was, so
Speaker 7: obviously it's reflected a lot of damage there. But because
Speaker 7: their free cash flow has stayed strong, they have never
Speaker 7: cut that dividend. Now you've got a six point two
Speaker 7: percent dividend, so you know, at the end of the day,
Speaker 7: I don't think it's everyone loves commercial real estate. No,
Speaker 7: we'll ever go back to the office. It's going to
Speaker 7: be somewhere in between. So we're looking at those high
Speaker 7: quality landlords that are publicly traded where the prices have
Speaker 7: not reflected some bad news.
Speaker 6: And sometimes you do.
Speaker 7: Well by buying when things aren't rosy and then writing
Speaker 7: and then waiting for the situation to turn around.
Speaker 5: David, how about financials? People are still I think a
Speaker 5: little leery about some of the banks in particular.
Speaker 7: Yes, certainly that's what we heard from Moody's. I'm not
Speaker 7: sure new news that some of their debt is on
Speaker 7: credit watch for weakness in terms of commercial properties. A
Speaker 7: lot of that, of course, has been reflected in the
Speaker 7: stock prices.
Speaker 6: You know.
Speaker 7: At the end of the day, I do think that
Speaker 7: there is a strong policy coming from watching to make
Speaker 7: sure that this banking system stays strong. Remember, that's the
Speaker 7: lifeline for a lot of smaller businesses in main street USA.
Speaker 7: They can't tap publicly treated markets directly, and so I
Speaker 7: think if we want to you know, grow this economy
Speaker 7: and keep main street employed, we're going to have to
Speaker 7: make sure that those smaller banks get the lifelines they need.
Speaker 7: So that's going to be one reason why, of course
Speaker 7: the FED is going to be probably more devish than
Speaker 7: the inflation statistics might otherwise warnt.
Speaker 3: And just to wrap up, you also like three M.
Speaker 3: I'm kind of obsessed with three M. There's still a
Speaker 3: big conglomerate. They're changing CEOs and they've really just like
Speaker 3: stuck stuck in and said, like we're not spinning stuff off. Like, yes,
Speaker 3: they make the beck of posts as sticky stuff, but that
Speaker 3: sticky stuff goes everywhere in the world. Why do you
Speaker 3: like three M.
Speaker 7: Yeah, so this echoes general electric where you have an
Speaker 7: industrial conglomerate which is way out of favor. They have
Speaker 7: many different divisions. They were perhaps undermanaged, and of course
Speaker 7: they had all sorts of litigation woes.
Speaker 6: Now they've got.
Speaker 7: A new man in there, mister Brown, they've already spun
Speaker 7: off one of their divisions, Selventum. The stock is trading
Speaker 7: at a big discount to the market and way off
Speaker 7: where it was. We think that if the US dollar
Speaker 7: softens a little bit, because there's such a big international trader,
Speaker 7: that will benefit them.
Speaker 6: Of Course, you know, people talk about innovation.
Speaker 7: Six cents of every dollar that they generate goes back
Speaker 7: into research and development. They're coming up with all sorts
Speaker 7: of patents. So we think that, you know, here is
Speaker 7: a situation just like what happened in ge New management,
Speaker 7: rationalized things, perhaps do some corporate restructuring, and you could
Speaker 7: see a stock rice that could outpace the S and
Speaker 7: P five hundred going forward, and of course the dividend
Speaker 7: is still much higher than the S and P five hundred.
Speaker 5: All right, David, thank you so much for joining us.
Speaker 5: Always appreciate getting a few minutes of your time. David Deets,
Speaker 5: managing principle at pe PEC Private.
Speaker 2: You're listening to the Bloomberg Intelligence podcast. Catch us live
Speaker 2: weekdays at ten am Eastern on Apple car Playing and
Speaker 2: Broun Auto with the Bloomberg Business App. Listen on demand
Speaker 2: wherever you get your podcasts, or watch us live on YouTube.
Speaker 5: You know, folks, how much we love these big take
Speaker 5: stories coming out of Bloomberg newsaser super in depth reported
Speaker 5: source stories at really some key key issues out there today.
Speaker 5: Is know a different headline Wall Street's cr the commercial
Speaker 5: real estate COLO machine is wiping out apartment investors. I
Speaker 5: thought that was the safe part of the real estate market.
Speaker 5: I thought we're all just worried about office but apartments
Speaker 5: also seeing some damage as well. One of the reporters
Speaker 5: on that story choices here in a bloom getteract to
Speaker 5: Broker Studio, Sam Scott's Carpenter Bond market reporter for Bloomberg News,
Speaker 5: Scott talk to us about what's going on in the
Speaker 5: apartment real estate market.
Speaker 8: Hi, good to be here, Thanks very much. So here's
Speaker 8: what's happening. You have retail investors, ordinary people with with
Speaker 8: the little they're you know, pretty wealthy people say you've
Speaker 8: got around one million dollars of net worth, you can
Speaker 8: take that money, you can invest in apartments. But this
Speaker 8: is this is risky. People don't realize how risky this
Speaker 8: is because when you put money into apartments in the
Speaker 8: way that they're doing, you're actually getting leveraged behind the
Speaker 8: scenes from Wall Street in the form of loans that
Speaker 8: are packaged into ceries, clos or collateralized loan obligations for
Speaker 8: a long time, for years, Actually this works really well.
Speaker 8: Retail investors will make you a lot of money. But
Speaker 8: that was because mainly apartment values were consistently climbing and
Speaker 8: interest rates were going down. This is very good for
Speaker 8: commercial real estate. Then that when the Fed started raising
Speaker 8: interest rates, it started to go badly. The loan all
Speaker 8: the leverage meant that the retail investors were exposed to
Speaker 8: really big losses. So we talked to a retail investor
Speaker 8: who lives in Yakima, Washington. She invested two hundred thousand
Speaker 8: dollars and most of that is now gone.
Speaker 3: So what is the problem? I mean, is it specifically
Speaker 3: rent controlled apartments, is its luxury apartments, is its mid apartments?
Speaker 3: Where is the issue in that?
Speaker 8: This is we're talking here about multifamily apartments. It is
Speaker 8: not you know, maybe some of it could be recontrolled.
Speaker 8: Mostly it's just plain old apartment complexes full of renters,
Speaker 8: and largely in the Sun Belt as well. The issue
Speaker 8: is that the valuations of these properties are very sensitive
Speaker 8: to interest rates, and when interest rates started going up,
Speaker 8: the property values started going down. And a lot of
Speaker 8: the companies that had bought this bought these things and
Speaker 8: into which the retail investors had contributed money, suddenly they
Speaker 8: couldn't afford their interest payments, and in some cases they
Speaker 8: had to sell the properties, and when they sold them,
Speaker 8: they sold them at a really big loss. I mean,
Speaker 8: we know that apartment values have gone down about thirty
Speaker 8: percent since their peak, and so when they had to sell,
Speaker 8: they were selling out these huge losses and passing those
Speaker 8: losses onto the retail investors. A lot of what made
Speaker 8: these investments possible in many cases is because they were
Speaker 8: borrowing money, taking out large loans from from mainly non
Speaker 8: bank specialists on a Wall Street, and that provided the leverage,
Speaker 8: and that is what exposed them to these big losses.
Speaker 5: What are the I guess the apartment owners. What did
Speaker 5: they do? I guess when when they have some I
Speaker 5: guess when they're in their inability to pay interest or
Speaker 5: pay principle, they just sell these apartments to try and
Speaker 5: kind of rate raise cash.
Speaker 8: Sometimes they get in a cash crunch. Yeah, they have
Speaker 8: to pay interest and they but they don't have the cash.
Speaker 8: So what can you do. You can go to your lender,
Speaker 8: you can try to get an extension perhaps, or you
Speaker 8: can sell to somebody that is willing to buy it,
Speaker 8: even if it's at a big discount. In a couple
Speaker 8: of the cases that where we talked to the retail investor,
Speaker 8: the property and these are properties in Texas and Arizona
Speaker 8: had to be sold at a very big discount. It
Speaker 8: gave the owner cash, but it was not enough cash
Speaker 8: to repay the money that the retail investors put in.
Speaker 8: It wasn't enough cash. It was enough cash to repay
Speaker 8: the debt from Wallstreet. And that's the thing. The debt
Speaker 8: has to get repaid first. So when you sell it
Speaker 8: a discount in this way, it's enough money to repay
Speaker 8: the debt, it's not enough money to repay the retail investors.
Speaker 3: So how many retail investors are getting affected by this,
Speaker 3: and what are some of the total losses that we're
Speaker 3: looking at, and is there any recourse for them.
Speaker 8: It's really hard to know exactly how many people are
Speaker 8: exposed to this. But we do know that the altogether
Speaker 8: series clos is about an eighty billion dollar universe, So
Speaker 8: I think it's fair to say that there's dozens of
Speaker 8: billions of dollars of weeks. You know, I'm speculating a
Speaker 8: little bit there. We don't have great data and exactly
Speaker 8: how many retail investors are in this thing, but it's
Speaker 8: a lot and is there recourse Well, a lot of
Speaker 8: retail investors are waiting right now. So in this case,
Speaker 8: the retail investor we talked to, she was exposed to
Speaker 8: losses because the owners sold. But there's a lot of
Speaker 8: other retail investors out there right now who are just waiting.
Speaker 8: They're not getting cash distributions from the investments they've made.
Speaker 8: They know that they could face losses down the road
Speaker 8: when the owner has to sell. That moment has not
Speaker 8: arrived yet. It could arrive later. Also, owners could perhaps
Speaker 8: somehow recover, Apartment values could go back up again, interest
Speaker 8: rates could go back down. It could give them an
Speaker 8: off ramp down the road. But there's a lot of
Speaker 8: retail investors out there right now who are just waiting
Speaker 8: and they don't know what's going to happen to their money.
Speaker 5: You know, the Apartment Reached that I know are very
Speaker 5: savvy investors. They know how to value things, they know
Speaker 5: how to put a proper capital structure on things so
Speaker 5: they don't get in those cash crunches. But that's not
Speaker 5: what's necessarily happening here. Noted from your reporting here firms
Speaker 5: known as real estate syndicators. It sounds a little dicey
Speaker 5: to me.
Speaker 8: Yeah, it's a real state.
Speaker 3: Syndications syndicator, not a bad word in financial syndicator.
Speaker 8: And when we say syndicator in the way that we
Speaker 8: use it in the story, we're talking about typically mid
Speaker 8: size firms that are relatively young, they weren't around before
Speaker 8: the Great Financial Crisis. They rely heavily on social media.
Speaker 8: They have their own podcast shows to get the word
Speaker 8: out about their investments. They talk about how good generally
Speaker 8: multi family investing is. They play up the stories of
Speaker 8: investors who've made a lot of money doing this. Uh,
Speaker 8: that's how they get the word out. And they're on
Speaker 8: there on YouTube. You know, they're out there and they're
Speaker 8: they're saying invested with us. And part of what makes
Speaker 8: it possible for them to do this is there was
Speaker 8: a change in the Jobs Act during the Obama administration
Speaker 8: that made it more possible to market these investments in
Speaker 8: a more public way.
Speaker 5: All right, so that seems like a good way. We're
Speaker 5: gonna have this stop it there due to time, but
Speaker 5: that people read the story, the Big Take story, Yeah, story,
Speaker 5: because you learn a lot about kind of some of
Speaker 5: the pitfalls out there in real estate and believe or not.
Speaker 5: Just reading this story, I was like, boy, We've seen
Speaker 5: this time and time again in different asset classes.
Speaker 3: Just not with social media exactly.
Speaker 5: Scott Carpenter, thanks for joining. Scott Carpenter is a bond
Speaker 5: up market reporter for Bloomberg News. Check out the Big
Speaker 5: Take story Bloomberg dot com slash Big Take, or you
Speaker 5: can go on the terminal n I space Big Take
Speaker 5: to get the stories.
Speaker 2: Now on Bloomberg Intelligence. You needs in Focus with Joe Maisak.
Speaker 5: All Right, folks, Today's Munies in Focus in Munis is
Speaker 5: brought to you by Build American Mutual. Build American Mutual
Speaker 5: ensures US municipal bonds that finance essential American infrastructure and
Speaker 5: provides guaranteed income to improve any portfolio. Be part of
Speaker 5: Building America invest in BAM BAM insured bonds.
Speaker 3: I was late on them.
Speaker 5: Sorry little later on that. Yeah right, sorry, we'll get
Speaker 5: more time. I mean, I thought this guy was retiring,
Speaker 5: but we can't get rid of him. He's still here.
Speaker 5: He's still here. He's still doing all this municipal bond stuff.
Speaker 5: I think he did the first municipal bond way back
Speaker 5: in the Revolutionary War. He was back there. Covernet, Joe,
Speaker 5: you're almost done this whole minicipal bond thing. But thank
Speaker 5: you for not leaving before we had this whole mess
Speaker 5: with the congestion pricing. I mean, I'm sending you down
Speaker 5: a city hall and you can just fix it.
Speaker 6: I mean, so what is madness?
Speaker 5: So talks about how the I guess the pause of
Speaker 5: congestion pricing im implementation, how that's impacting the missipal bond market.
Speaker 9: No, what a disaster. What this is just ridiculous. You
Speaker 9: know you were supposed to this was supposed to be
Speaker 9: gained in a couple of weeks, and you know you
Speaker 9: would have been able to bond off of this and
Speaker 9: help the MTA out. But Governor Hokel all of a sudden,
Speaker 9: uh just plays politics and what a disaster, and they're
Speaker 9: you know, the legislature now is scrambling to come up
Speaker 9: with some sort of revenue, you know, extra revenue for
Speaker 9: the MTA, A billion dollars which is not easy to
Speaker 9: find in your budget. So crazy crazy, this is nuts.
Speaker 3: Let me let me ask the question. So, how would
Speaker 3: you have sort of packaged the bonds from the congestion pricing?
Speaker 3: Can you just connect those dots for me?
Speaker 9: Oh? Sure, well, you know, you get the money comes
Speaker 9: in fifteen dollars a car, and you see how that's operating,
Speaker 9: and you see the revenue stream come in. And the
Speaker 9: old axiom is you show me a revenue stream, and
Speaker 9: I'll show you a bond isshoet.
Speaker 3: Okay, and then the bonds will be backed down the
Speaker 3: revenue stream.
Speaker 9: And yes, the bonds are backed by the revenue stream.
Speaker 9: And you could you know, get a multiple of that.
Speaker 9: So that would have been very helpful the MTA.
Speaker 6: And you know, this is really.
Speaker 9: Most people think a short term thing, more of like
Speaker 9: an temporary embarrassment, if you will. And in November, after
Speaker 9: the elections, we might we might see it return. Liam
Speaker 9: Denning had a nice interesting column today NYC balked, but
Speaker 9: it can still lead on congestion fee and he said
Speaker 9: there was a decent chance the suspension gets lifted once
Speaker 9: the elections are out of the way, and Governor Hochal
Speaker 9: herself doesn't face voters until twenty twenty six.
Speaker 5: So here's how the math works. As Alex was mentioning,
Speaker 5: the MTA was planning to borrow against the one billion
Speaker 5: dollars in yearly congestion pricing revenue to help raise fifteen
Speaker 5: billion to upgrade subway signals and tracks and all that
Speaker 5: kind of stuff. So that's kind of the leverage there
Speaker 5: in terms of you know.
Speaker 9: Oh yeah, because you know it's over time. You know,
Speaker 9: you're not going to sell over fifteen billion in one
Speaker 9: year obviously. But speaking of billion dollar issues, thank you
Speaker 9: for bringing that up. We have so far this year.
Speaker 9: You know, in the communi market, billion dollar issues are
Speaker 9: very unusual. Okay, they're rare, And so far this year
Speaker 9: we've had twenty five twenty five mega deals of a
Speaker 9: billion dollars or more and the record set in twenty
Speaker 9: twenty is twenty six for the year, so we're going
Speaker 9: to far surpass that.
Speaker 3: So what do you make of that, Like, what's your
Speaker 3: read on it?
Speaker 9: Well, you know, the analysts have been saying, you know,
Speaker 9: inflation has driven up costs of projects, so places have
Speaker 9: to borrow more and for in two weeks. JFK, for
Speaker 9: the Terminal one has a one point five billion dollar
Speaker 9: issue planned, so we might be able to make that.
Speaker 9: We might be able to say that the record is
Speaker 9: by the time I retire.
Speaker 5: Okay, very good. I love the minor league stadium business
Speaker 5: out there because munismal bond market plays a role there. Right.
Speaker 9: Oh man, we saw two minor league stadium deals in
Speaker 9: one week. I think you know, we probably saw two
Speaker 9: minor league stadium deals in the last year, but we had,
Speaker 9: you know, both in one week, and the the most
Speaker 9: recent one was for the Spartan Burgers Spartan Burgers, and yeah,
Speaker 9: I think you know, I had kind of an interesting
Speaker 9: little deal and it was federally taxable, so you had
Speaker 9: over six percent coupons on that one or six percent coupon.
Speaker 3: Well, actually, that just me circle back for a second
Speaker 3: to the billion dollar bonds that we've seen. You said
Speaker 3: twenty five really go at JFK one and a half, Like,
Speaker 3: what's the takedown for that? But what's the takedown for that?
Speaker 3: Is there a strong demand for that stuff?
Speaker 9: Oh? We have seen blowout demand on deals this year,
Speaker 9: demand for tax exemption. So far we have let's see,
Speaker 9: I think it's about two hundred and five billion dollars
Speaker 9: have been sold so far this year and not even
Speaker 9: you know, we're not even done with the first half.
Speaker 9: So we could very well see in the communi market. Again,
Speaker 9: four hundred billion dollar deals are unusual, so we're certainly
Speaker 9: going to see an excess to that. I would imagine
Speaker 9: I wouldn't be surprised if we saw four hundred and
Speaker 9: fifty billion, But of course I won't be able to
Speaker 9: defend that. Blamed for that prediction ou.
Speaker 5: To lower mean en right by the offices that used
Speaker 5: to be for kid or Peabody on Hanover Square, Power
Speaker 5: Power part of Lower Manhattan. Back in the day, there
Speaker 5: is a is a classic bar Wall Street trader banker
Speaker 5: bar Harry's on Hanover Square.
Speaker 3: Oh I know Harry, Yeah, yeah, I used to work
Speaker 3: down on Wall Street big time.
Speaker 6: Joe.
Speaker 5: What's Harry's a hand to square?
Speaker 2: Me to you?
Speaker 9: Oh Man? So you know a lot of I remember
Speaker 9: getting a lot of stories in Harry's, believe it or not,
Speaker 9: because it was primarily a Muni bond hangout. Which seemed
Speaker 9: to me didn't know that.
Speaker 3: Uh, and that like mean that all the MUNI people
Speaker 3: who like it and talk about it go and chill there.
Speaker 9: Yeah, they would, they would go there. And of course
Speaker 9: now it's it's it's a sort of reconfigured. But there
Speaker 9: was this big rectangular bar in the middle of the
Speaker 9: room and uh, be surrounded like four and five deep
Speaker 9: smoking because you know smoking was allowed. Then you know,
Speaker 9: you just be listening to people bark about trades they
Speaker 9: made that day. I remember I went to an especially
Speaker 9: long lunch and I needed a I needed to get
Speaker 9: a preliminary official statement for a as a matter of fact,
Speaker 9: it was a billion dollar deal for a very small
Speaker 9: Texas community, and of course the bonds were going to
Speaker 9: be locked away in some investment vehicle and you know,
Speaker 9: never really used and the irs not like that idea.
Speaker 9: But I did get that document out of such a
Speaker 9: launch at Harry's. It hand over square.
Speaker 3: So it's important you need that stuff. But it has
Speaker 3: a place in the MUNI bond market too, right, like
Speaker 3: not just hanging out and chatting like is there a
Speaker 3: bigger MUNI.
Speaker 9: Well, we had the we used to have two mutifact
Speaker 9: screens there as a matter of fact, and yeah, just
Speaker 9: it's one of those places where everyone used to go
Speaker 9: and then just chat about how you know, what's going on?
Speaker 3: I love that.
Speaker 8: When's the last day, June twenty eighth.
Speaker 3: We're getting there.
Speaker 5: So how many years Joe's retiring? So how many years
Speaker 5: total in covering this municipal bond space?
Speaker 9: Forty three?
Speaker 5: Forty three years covering the municipal bond industry.
Speaker 9: I'm not sure who's going to challenge that.
Speaker 5: I don't know who's going to challenge it? And how
Speaker 5: many years doing that at.
Speaker 9: Bloomberg twenty five?
Speaker 7: Wow?
Speaker 5: Okay, So what's the biggest change in meuni bond market
Speaker 5: from when you started? Well, and it's never going anywhere, yo, No.
Speaker 9: You know, when I started, a fifty billion dollar year
Speaker 9: was kind of the average, and now it's you know,
Speaker 9: nearing four hundred billion a year, and that took quite
Speaker 9: a while to get there. It's always been a you know,
Speaker 9: a retail oriented market, but now you have a growth
Speaker 9: of the separately managed accounts, you know, which is individuals,
Speaker 9: but it's very professionals. You know, a lot of professional involvement. Boy,
Speaker 9: and gosh, the earliest things we're covering were pay to
Speaker 9: play at the municipal bond market, and the MSRB prohibited
Speaker 9: pay to place. Underwriters can no longer give money to
Speaker 9: issuers from whom they're soliciting a business. I think the
Speaker 9: treasurers were very angry about that.
Speaker 6: Yep.
Speaker 5: I'm sure they were, all right, Joe, guess what.
Speaker 9: That's it.
Speaker 5: That's it. That's it this week. It's not it because
Speaker 5: we got till June twenty eighth with you, so we
Speaker 5: will get you on again, no doubt about that. Mark Maker.
Speaker 5: Note of that, Joe Myisek. He is the editor of
Speaker 5: Bloomberg Brief to cover all the minisional bonds markets, as
Speaker 5: he's been doing it for forty three years. Yes, forty
Speaker 5: three years. Holy cow.
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
Speaker 2: weekdays at ten am Eastern on applecar Play and Android
Speaker 2: Otto with the Bloomberg Business Act. You can also listen
Speaker 2: live on Amazon Alexa from our flagship New York station
Speaker 2: Just Say Alexa playing Bloomberg eleven thirty.
Speaker 3: It's Bloomberg and Intelligence Radio. We bring you all the
Speaker 3: top news and finance and economics and business through our
Speaker 3: lens of Bloomberg Intelligence analysts. They cover two thousand companies
Speaker 3: in one hundred and thirty industries worldwide, and for the
Speaker 3: month of June, Bloomberg Radio is committed to bringing you
Speaker 3: segments and guests that are focused on the topic of equality.
Speaker 3: And today we're speaking with Laura Maudi. She's CEO and
Speaker 3: co founder of Bobby. Laura, thank you so much for
Speaker 3: joining us. We appreciate you being on this first segment
Speaker 3: for us this month. What is Bobby.
Speaker 10: Bobby is an organic pasture raised infant formula company and
Speaker 10: we are raising the bar and quality of infant formula
Speaker 10: here in the country.
Speaker 5: So we talked to you during what we had a
Speaker 5: shortage of infant baby formula. Can you remind us how
Speaker 5: that all developed and how that came about and maybe
Speaker 5: how that impacted your business?
Speaker 10: Well, I think we can all remember. It happened overnight.
Speaker 10: No one saw it coming. As a country, we weren't prepared.
Speaker 10: Bobby itself, being a small company at the time, also
Speaker 10: wasn't prepared. One company that was feeding over fifty percent
Speaker 10: of babies born in the country had a contamination and
Speaker 10: they had to close their doors, and when they did,
Speaker 10: they weren't able to meet the supply needs. Of feeding
Speaker 10: American babies, and overnight we saw out of stock rates
Speaker 10: climb to around seventy percent, which essentially meant that American
Speaker 10: families were driving town to town and in some situations,
Speaker 10: state to state where there was only a third chance
Speaker 10: of being able to find food to feed their baby.
Speaker 3: So, what is the problem with infant formula that you're
Speaker 3: trying to fix.
Speaker 10: It's pretty simple. We need to be more resilient. Let
Speaker 10: me give you a little bit of a mother's opinion
Speaker 10: on this as well. I think the infant formula shortage,
Speaker 10: a moment where we were not resilient enough to be
Speaker 10: able to feed our next generation, was actually a bit
Speaker 10: more symbolic in many ways of what's really broken in
Speaker 10: the country. One might argue that our entire democracy is
Speaker 10: only as strong is our ability to be able to
Speaker 10: feed our babies, and we were not resilient in any way.
Speaker 10: One facility went down and the entire industry fell to
Speaker 10: its knees. What we need to see is more manufacturers,
Speaker 10: more manufacturers in the heartland of America where we can
Speaker 10: ensure that there's always enough supply to be able to
Speaker 10: feed babies. Yeah, I think the way we do that
Speaker 10: is incentivize more domestic manufacturing.
Speaker 3: But aside from that, Laura, with Bobby, what is the
Speaker 3: problem that you're trying to fix with the formula that's
Speaker 3: so entrenched in our society today.
Speaker 10: We need to be able to look at this essential
Speaker 10: good as not just a necessary, but a necessary that's
Speaker 10: extremely important in the development of our next generation. The
Speaker 10: quality of what goes into that baby bottle, the nutrition
Speaker 10: that we're giving again our babies and the next generation
Speaker 10: is fundamental for their growth and development, and I think
Speaker 10: we've ignored it for far too long. For the last
Speaker 10: few decades. The same infant formula that you yourself was
Speaker 10: drinking as a child is probably the same infant formula
Speaker 10: that you're now buying for your own baby. Science as
Speaker 10: a ball a very long time ago, and in every
Speaker 10: other industry we've seen an evolution, and I think this
Speaker 10: might be the last remaining industry we've seen this so.
Speaker 5: Talked about, Laurie. We need more manufacturing and more diversified
Speaker 5: manufacturing sourcing here in the US. What are you guys
Speaker 5: doing on that front?
Speaker 10: Well, not only did we go out and we made
Speaker 10: a commitment that we were going to invest one hundred
Speaker 10: million dollars into domestic manufacturing. We bought and we have
Speaker 10: reinvested in a facility in the heartland in Ohio, and
Speaker 10: that facility now has the ability to be able to
Speaker 10: feed up to fifteen percent of babies born in the country.
Speaker 10: But on top of that, we also worked very closely
Speaker 10: with legislators to introduce the Infant Formula Made in America
Speaker 10: Act this last month with Congress. And what did is
Speaker 10: said mely allows is incentivizing more players like Bobby to
Speaker 10: be able to break into the industry. It takes a
Speaker 10: lot of capital and a lot of time, and we
Speaker 10: need a lot of support from government officials to make
Speaker 10: this happen. So hopefully if this bill gets past, which
Speaker 10: is what I believe is a very bipartisan solution to
Speaker 10: being able to not be in another shortage again.
Speaker 3: And how did you come up with this idea?
Speaker 6: Like what?
Speaker 3: Like, yeah, did you come from Wall Street? Had you
Speaker 3: always been an advocate of this? Like where did this
Speaker 3: all come from?
Speaker 10: Great question? Do not come from all? Forred, I didn't
Speaker 10: even come from CpG infant formula at all. My background
Speaker 10: is in tech before this, at Google and at Airbnb.
Speaker 10: I had my first daughter while I was an executive
Speaker 10: at Airbnb, and I experienced all the ups and downs
Speaker 10: of parenthood, and one of many being the disappointment that
Speaker 10: I wasn't able to exclusively breastfeed her, and when I
Speaker 10: turned to infant formula, I felt I felt a feeling
Speaker 10: I had never experienced before, that shame and guilt that
Speaker 10: I wasn't able to give her what I thought was
Speaker 10: so natural. And then, as you know, a business woman,
Speaker 10: I was staring at the back of the can, going
Speaker 10: we can do better. And that set me on a
Speaker 10: crazy research journey to study what was best for my
Speaker 10: baby and I I'm here now, eight years later, and
Speaker 10: many more children. By the way, I just said, my
Speaker 10: fourth kid, who is happily guzzling some Bobby.
Speaker 5: Congratulations, Lauren, Laura. What's the risk that we have another
Speaker 5: type of you know, supply shock here to supply to disruption?
Speaker 5: Are we any better off today than we were before?
Speaker 10: I get sad even trying to answer that, because I
Speaker 10: don't believe. So. It's very easy to get complacent in
Speaker 10: these moments when shelves are stocked, But when you look
Speaker 10: at the reason that we got here, Have we introduced
Speaker 10: many more manufacturs?
Speaker 7: No?
Speaker 10: Have we been incentivizing new players to break in and
Speaker 10: break up the concentration. No, so I believe we're still
Speaker 10: one bacteria away from this potentially happening again. And my
Speaker 10: big call to action is that we just don't allow
Speaker 10: complacency seeing shelves get stocked as a way to ignore
Speaker 10: the real solution, which is, let's get this bill passed
Speaker 10: and more manufacturers up and running.
Speaker 3: What is this aside from money and funding, What is
Speaker 3: the next step after we try and get this bill
Speaker 3: passed that you're sort of looking at right now.
Speaker 10: You know, I think it's culture change and so taking
Speaker 10: a hard pivot from domestic manufacturing. We need to have
Speaker 10: the level of respect that infant formula deserves, and not
Speaker 10: just infant formula. I mentioned it was symbolic to so
Speaker 10: many different things. What's broken in our society is that
Speaker 10: the same government who says that you should be exclusively
Speaker 10: breastfeeding is also telling mothers that they need to get
Speaker 10: back to work immediately. We need to pass paid we
Speaker 10: need to fix childcare. We need to be able to
Speaker 10: support parents being parents in America. And if Bobby can
Speaker 10: have any role in changing the culture by which it
Speaker 10: means to have a baby in this country, then we're
Speaker 10: doing our job.
Speaker 3: How are you doing that? Just these kind of conversations.
Speaker 3: Is it advertising, Like, how do you do that?
Speaker 10: Yeah? I mean it's a lot. It's a lot of activism,
Speaker 10: and I think I think it's a word that sometimes
Speaker 10: gets overly used, but it's it's activism and the underlying
Speaker 10: meaning of that is action. And we're taking a lot
Speaker 10: of action by reaching out to our customers and the
Speaker 10: public and saying sign sign this petition to be able
Speaker 10: to get this bill pass, raise awareness on the black
Speaker 10: maternal mortality crisis by putting our own brand dollars behind
Speaker 10: raising awareness on this. We've recently won a few awards
Speaker 10: for again not just marketing infant formula, but marketing the
Speaker 10: issues around it. And I think if more companies again
Speaker 10: can lean into fixing the systemic issues for why they
Speaker 10: fundamentally exist and you get to change culture.
Speaker 3: Hey, Laura, we gotta leave it there. I really enjoyed
Speaker 3: talking to you. I wish Bobby was around when I
Speaker 3: had my daughter almost ten years ago. Laura Mody Maudy,
Speaker 3: CEO and co founder of Bobby, We're going to bring
Speaker 3: you some of these great stories over the month of June.
Speaker 3: That was just an fascinating conversation.
Speaker 5: Yeah, well we first, at least I was introduced to
Speaker 5: it during the shortage experience.
Speaker 2: Dam This is the Bloomberg Intelligence Podcast, available on apples, Spotify,
Speaker 2: and anywhere else you'll get your podcasts. Listen live each weekday,
Speaker 2: ten am to noon Eastern on Bloomberg dot com, the
Speaker 2: iHeartRadio app, tune In, and the Bloomberg Business app. You
Speaker 2: can also watch us live every weekday on YouTube and
Speaker 2: always on the Bloomberg terminal