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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live

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Speaker 2: weekdays at ten am Eastern on Apple, card Playing and

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Speaker 2: Broun Auto with the Bloomberg Business App. Listen on demand

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Speaker 2: wherever you get your podcasts, or watch us live on YouTube.

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Speaker 3: Mollie Smith sitting in for Alex Steel on Paul Sweeney.

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Speaker 3: You're live here on our Bloomberg Interactive Broker Studio or

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Speaker 3: streaming live on YouTube as well. Which seems like for

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Speaker 3: the last five, six, seven years, there's been this growing

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Speaker 3: tech cold war between China and the West, and now

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Speaker 3: we've got a story out about the chip maker. ASML

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Speaker 3: Holdings a CEO, he expects pressure to grow from the

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Speaker 3: US to further restrict sales of semiconductor technology to China.

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Speaker 3: That's the biggest market for the Dutch producer of chip

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Speaker 3: making machines. Man Deep Sing joins us, he's the our

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Speaker 3: tech dude, He's ahead of all the technology stuff at

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Speaker 3: Bloomberg Intelligence. Man Deep talk to us about the chip

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Speaker 3: market China as a customer, how do you think this

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Speaker 3: is going to play out? Because again it feels like

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Speaker 3: there is this tech cold war that's right there.

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Speaker 4: Yeah, I mean when you look at a company like SML,

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Speaker 4: which almost did you know, forty five percent of their

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Speaker 4: revenue from selling to Chinese customers over the past twelve

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Speaker 4: months and they guide it to that percentage going to

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Speaker 4: about twenty percent next year. So clearly the deceleration is

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Speaker 4: huge in terms of the China exposure, and partly that

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Speaker 4: has to do with the you know, the Cold War

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Speaker 4: or the geopolitical element that you just alluded to. And look,

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Speaker 4: it's not surprising given ASML the machines they make underpin

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Speaker 4: the latest factories that are producing these chips that everyone

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Speaker 4: wants to train their AI on. So when you look

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Speaker 4: at the semiconductor chain, I mean ASML sits at pretty

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Speaker 4: much at the bottom end of what it takes to

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Speaker 4: set up a semiconductor factory. They are deemed as one

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Speaker 4: of the biggest beneficiaries of the Chips Act. When you

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Speaker 4: think about you know, the US government wanting to set

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Speaker 4: up semiconductor fabs in the US, they are one of

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Speaker 4: the prime beneficiaries. But then the offset is the China

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Speaker 4: business that is going down, and that's why you're seeing

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Speaker 4: you know, valuation compressed recently.

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Speaker 5: Can you just help catch us all up here, Mandy,

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Speaker 5: because this has been a crazy week with ASML, going

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Speaker 5: back to the earnings announcement last week when they cut

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Speaker 5: their outlook for next year. You know, the orders were

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Speaker 5: very disappointing. This triggered this whole route in the semiconductor industry.

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Speaker 5: Can you just catch us all up here on like

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Speaker 5: what the past week has been like?

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Speaker 4: Yeah, in fact, it's been a roller coaster because you

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Speaker 4: had the ASML disappointment and then TSMC comes out the

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Speaker 4: next day and they say AI revenue will be almost

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Speaker 4: mid teens, which was negligible over the past you know,

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Speaker 4: three quarters. So clearly there's been a big kind of

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Speaker 4: sentiment when it comes to TSMC being very bullish on

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Speaker 4: AI versus ASML downplaying you know, the next twelve months.

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Speaker 4: And that's partly to do with where TSMC sits, which

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Speaker 4: is they are getting all these orders from Nvidia as

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Speaker 4: well as other hyperscalers who want to get their chips

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Speaker 4: manufactured at TSMC, whereas ASML has got two companies that

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Speaker 4: are pulling back on their orders, Intel and Samsung, and

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Speaker 4: TSMC is the only one that's buying from ASML right now.

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Speaker 4: So TSMC has a lot of bargaining power because they

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Speaker 4: are the only ones who can raise their capex. Intel

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Speaker 4: is really struggling. Samsung, we have heard, is also struggling now.

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Speaker 4: So both those companies, the next two big buyers of ASML,

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Speaker 4: are looking to pair back their spend and that's why

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Speaker 4: I think TSMC is in a great spot both from

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Speaker 4: the customer side as well as having the supplier bargaining power.

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Speaker 3: All Right, ASML is a Dutch company. If the US

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Speaker 3: tells me to do something, why don't I just tell

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Speaker 3: them to go take a hike?

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Speaker 4: Well, I mean it goes back to how these kind

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Speaker 4: of countries work as a block. Look, I think when

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Speaker 4: the US government kind of asks a country to enforce

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Speaker 4: their restrictions, then most of the times they end up

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Speaker 4: doing that because of you know, the trading aspect of

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Speaker 4: how these companies just operate as a block. And in

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Speaker 4: this case, I think the restrictions are very targeted towards

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Speaker 4: the advanced machines that are used for latest leading node manufacturing.

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Speaker 4: So I think again it comes down to how the

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Speaker 4: politics of it is really focused on, and it's hard

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Speaker 4: for the companies to control that, right, So if the

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Speaker 4: governments agree on something they have to comply with the restrictions.

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Speaker 6: So we have the ASML CEO.

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Speaker 5: He's been speaking at the Bloomberg Tech Summit recently, and

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Speaker 5: he said last week that he sees the chip market's

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Speaker 5: long way to recovery extending well into next year. I

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Speaker 5: think that's a fair timeline given all of what's going

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Speaker 5: on in the industry right now.

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Speaker 4: I mean there are two pockets here. One is the

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Speaker 4: AI pocket, which is really firing on all cylinders. I mean,

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Speaker 4: companies have insatiable demand and we've seen that with TSMC

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Speaker 4: and Nvidia really kind of talking about it endlessly. On

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Speaker 4: the other side, the traditional markets like smartphones, PCs, autos,

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Speaker 4: they're still slow. I mean, there has been a rebound,

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Speaker 4: but it's been very kind of flatish for a few quarters.

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Speaker 4: And even the prognosis is not like you're going to

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Speaker 4: see massive acceleration in top round growth. So that's where

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Speaker 4: I think companies that are exposed to AI are growing

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Speaker 4: much faster than the companies that are exposed to these

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Speaker 4: traditional land markets.

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Speaker 5: And is that just because the market for smartphones is

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Speaker 5: pretty saturated at this point? Like don't we all pretty

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Speaker 5: much a lot? I mean, it seems pretty ubiquitous now,

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Speaker 5: I mean, how much more are there really like these

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Speaker 5: big markets that are waiting to be tapped into.

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Speaker 4: I mean that's where AI will play a role in

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Speaker 4: terms of driving upgrade for your smartphone. It's just right now,

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Speaker 4: AI is being consumed and deployed almost solely on cloud.

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Speaker 4: That's where the cloud vendors are seeing it in their results.

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Speaker 4: But for every edge device, whether it's PC, smartphone, nobody

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Speaker 4: has talked about using AI on the device. I mean,

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Speaker 4: you can do it through your app that is running

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Speaker 4: on the cloud, but you don't need to upgrade your

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Speaker 4: smartphone for that, And that's the big driver.

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Speaker 3: I just upgraded to the iPhone sixteen pro. Somebody told

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Speaker 3: me that you're partner what's his name, anurag upgrade. Look

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Speaker 3: you show me a bill of goods here trying to

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Speaker 3: pad the Apple numbers it is.

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Speaker 4: And look it's it still has a great camera, So

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Speaker 4: I think that upgrade.

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Speaker 3: I was in Ireland. I was in Ireland for like

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Speaker 3: eight days. I took three pictures, two of like sheep

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Speaker 3: and one of the pig.

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Speaker 4: You're under your lif outset fall.

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Speaker 2: What's the fascination.

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Speaker 7: With the sheep ball?

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Speaker 3: There's more sheep than people there, and they're everywhere.

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Speaker 7: I mean, it's unbelievable. No wonder my.

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Speaker 3: People left when the first potato a bit All right,

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Speaker 3: men Deep saying thank you so much.

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Speaker 7: We appreciated.

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Speaker 3: Men Deep sing senior tech industry analysts for Bloomberg Intelligence,

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Speaker 3: trying to figure out what's going on in the chip

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Speaker 3: business again ASML, they're cautious.

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Speaker 7: Taiwan Simmy says, no, no, no, no, no.

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Speaker 3: Business is still good.

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Speaker 5: So honestly, I'm trying to more figure out what's going

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Speaker 5: on with your picture taking.

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Speaker 6: Yeah, personally, I'm like what you have to show for

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Speaker 6: from that?

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Speaker 3: You know, you got to live the moment, be in

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Speaker 3: the moment, stop recording it and taking photos of it,

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Speaker 3: just live in it.

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Speaker 5: I think this is really just like right here, this

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Speaker 5: is like the difference between what a man and a

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Speaker 5: woman would take pictures of.

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Speaker 7: I think it's more generational. Actually yeah, okay, we could

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Speaker 7: do generational too.

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Speaker 3: I mean, you know, you see a picture from thirty

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Speaker 3: forty years ago, if Tiger Woods hitting a shout a

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Speaker 3: Jack Nicholas, nobody has a phone out.

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Speaker 7: But now go figure.

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Speaker 2: You're listening to the Bloomberg Intelligence podcast. Catch us Live

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Speaker 2: weekdays at ten am Eastern on applecard Play and Android

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Speaker 2: Auto with the Bloomberg Business app. You can also listen

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Speaker 2: live on Amazon Alexa from our flagship New York station

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Speaker 2: just say Alexa playing Bloomberg eleven thirty.

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Speaker 3: Let's talk about European banks. We had the big US

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Speaker 3: banks report over the last week or so, really strong

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Speaker 3: numbers coming out of the big global US banks and

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Speaker 3: investment banks. We're going to get some of the European

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Speaker 3: folks coming up, and we also got some news coming

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Speaker 3: out of HSBC, one of the big European and Asian banks.

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Speaker 7: Kind of a little restructuring there.

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Speaker 3: So let's check in with our euro banks official, Tamash Netzel.

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Speaker 3: He's a senior European banks analyst for Bloomberg Intelligence. Tomash,

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Speaker 3: thanks so much for joining us here.

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Speaker 7: Talk to us about HSBC.

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Speaker 3: First here they got a pretty big restructuring going on

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Speaker 3: at this bank. Tell us what's going on there at HSBC.

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Speaker 8: Yes, thank you very much for having me. Yes, definitely. Today,

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Speaker 8: all over the U you can hear the biggest restructuring

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Speaker 8: in almost a decade. And I would say that I

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Speaker 8: think it is the continuation of overhaul over restructuring of

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Speaker 8: the business which started at the beginning of twenty twenty

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Speaker 8: more or less by previous COEO. We have got new

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Speaker 8: CEO starting his job at first of September, and I

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Speaker 8: think one of his one of his priority was how

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Speaker 8: to how to make sure that we can sustain meetings

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Speaker 8: rot for beyond two the twenty four to twenty five

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Speaker 8: how do we deal with the business in the clinic

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Speaker 8: interest rate environment? And what do we do with the costs?

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Speaker 8: And the restructuring of the of his business he proposed

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Speaker 8: and introduced from first January twenty twenty five is just

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Speaker 8: to address others the issues that the HSBC is facing,

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Speaker 8: and the biggest one is of course controlling the cost

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Speaker 8: Can you talk.

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Speaker 6: To us about what some of those costs are?

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Speaker 5: And I mean when I hear firms are trying to

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Speaker 5: cut costs, I immediately think they're trying to cut jobs.

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Speaker 5: And if that's also going to be part of this restructuring, yeah, that's.

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Speaker 8: You know, that's very interesting because you know they talk

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Speaker 8: about the restatturing, they talk about new divisions, new heads

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Speaker 8: of the divisions, et cetera. And maybe there's a maybe

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Speaker 8: six cuts on the executive committee. But we don't get

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Speaker 8: any numbers. We don't know how much the restructuring is

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Speaker 8: gonna cost. We don't know what is the black figure

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Speaker 8: in terms of cost savings they would have to expect

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Speaker 8: and more more important, we don't know how much this

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Speaker 8: restructuring will cost. So yes, definitely there's lots of details.

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Speaker 8: There's lots of promises with restructuring, but you know, we

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Speaker 8: are yet still short on details. So we would like

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Speaker 8: definitely know where the cost CUDEG may come. Where they're

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Speaker 8: gonna cut jobs, potentially some jobs if they emerge two divisions.

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Speaker 8: There are definitely some overlaps in operations, so there's definitely

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Speaker 8: some podcasts jobs, potential cuts. So of course we don't

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Speaker 8: know anything of this yet right. I think there was

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Speaker 8: a rumors that two fo weeks ago that reported by

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Speaker 8: Field of Times that there's a around three hundred millions

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Speaker 8: of savings planned by new new management. We don't know

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Speaker 8: whether that's true. It has not been confirmed, but I

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Speaker 8: think three hundred millions would not be enough for HSBC

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Speaker 8: to move that on the investment sentiment. If you look

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Speaker 8: at the forecast for for for HSBC at the moment,

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Speaker 8: you know the revenue is going to grow by not

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Speaker 8: around five million dollars in the next two years, threw

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Speaker 8: twenty twenty six. Costs are going to grow by more

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Speaker 8: than two billions, So they have quite negative gap which

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Speaker 8: they which the CEO I think will have to address

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Speaker 8: with more details and more and more more about to

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Speaker 8: the point of the plan.

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Speaker 6: It sounds like you could all use a lot more

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Speaker 6: detail here.

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Speaker 5: What I heard you just say is that we don't

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Speaker 5: know a lot of what all of these details are

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Speaker 5: going to be. I mean, it looks like the stocks

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Speaker 5: mildly up a little bit today, houses generally being received

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Speaker 5: you know, by you, by the broader analyst community.

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Speaker 9: Yeah.

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Speaker 8: Well our initial directional Yeah, well, well done. This is

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Speaker 8: this is the right step in the right directional shoulding

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Speaker 8: separating Hong Kong and China business, creating new new divisions,

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Speaker 8: hoping creating some synergies post PRODUCTIBA. It's all good, it's

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Speaker 8: all good on paper, but you know, we don't know details.

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Speaker 8: We don't know. That's why the h shares price today

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Speaker 8: shroud off this news kind of right with flatish. I

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Speaker 8: think market is expecting more from from more bold moves

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Speaker 8: by new CEO. There's definitely more deeply cost savings measure

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Speaker 8: needed for a bout the banks. So I think we're

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Speaker 8: going to expect day reporting three KY results next week.

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Speaker 8: We don't know how much they're going to disclose over there.

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Speaker 8: Maybe more will be disclosed during the four KY results,

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Speaker 8: but as soon as as as long as we don't

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Speaker 8: have much details nothing to work on, it's very difficult

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Speaker 8: to gauge what is the direction of travels for ROT

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Speaker 8: and HBC and where they want to go to. We

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Speaker 8: do have our focus at the on HSBC. We we

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Speaker 8: talk about where they can cut costs, how they can

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Speaker 8: boost productivity with a better age of those but you know,

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Speaker 8: we expect as well as management to come with a

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Speaker 8: solid plan to do deliver on those metrics.

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Speaker 3: To mush let's zoom out a little bit on your

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Speaker 3: European bank coverage. We've had the US some of the

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Speaker 3: big US banks report and some pretty solid numbers, mostly

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Speaker 3: on the capital market side. What are you expecting from

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Speaker 3: the European banks this earnings season?

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Speaker 8: Yeah, so definitely know the focus will be on on

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Speaker 8: the clinic interest rates and the impact on NII because

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Speaker 8: European banks being running on this on this high interest

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Speaker 8: rates for quite a long time and with now the

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Speaker 8: expectations the interest will gone down, so there's some revenue

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Speaker 8: pressure coming. But if you look at the geographical you know,

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Speaker 8: it's very interesting to look at Europe from perspective or

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Speaker 8: UK banks and europe banks or UK banks are very

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Speaker 8: well positioned to the clinic interest rates because of the hedges.

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Speaker 8: The for revenue forecast is for four to six persons

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Speaker 8: through twenty twenty six, which is much higher than other

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Speaker 8: European banks. So there are some banks which are exposed

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Speaker 8: positively let's put to the clinic interest rates, which can

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Speaker 8: be against common sense, but yes they are UK bank

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Speaker 8: to go the headges. European banks know they struggle more

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Speaker 8: with an II revenue generation. Then when when you look

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Speaker 8: at you know, low base of investment bank revenues for

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Speaker 8: backers and the others know that can be a positively

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Speaker 8: maybe a positive surprise over there as well. So in

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Speaker 8: general I think, you know, we're going to expect more

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Speaker 8: comments on out of twenty five and how revenue will

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Speaker 8: will travel next year. Course rights are going to cut

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Speaker 8: more aggrecively and that would be determined the performance of

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Speaker 8: the short crisis.

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Speaker 3: Tomash Great Stuff has always appreciated Tomas set so he's

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Speaker 3: a senior European banks analyst for Bloomberg Intelligency is based

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Speaker 3: in London. HSBC is in the news today kicking off

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Speaker 3: for restructuring and trying to get that cost structure more

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Speaker 3: in line with what they expect to be at a

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Speaker 3: tighter revenue environment with interest rates coming down. New CFO,

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Speaker 3: the first female CFO, and the bank's history.

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Speaker 7: How cool is that.

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Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live

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Speaker 2: weekdays at ten am Eastern on Affo card playing Android

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Speaker 2: otto with the Bloomberg Business App. Listen on demand wherever

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Speaker 2: you get your podcasts, or watch us live on YouTube.

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Speaker 3: Let's talk about real banking, regional banking.

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Speaker 7: Joe Castillia joins us.

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Speaker 3: Castilia joins us President and CEO of Citizens Bank of Edmond.

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Speaker 7: That would be Edmen, Oklahoma.

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Speaker 3: Right now, which is basically by Google maps, oklahom.

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Speaker 7: Because I have no idea where that is.

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Speaker 3: It's basically Oklahoma City, so you're right there in Oka City.

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Speaker 3: So there's a lot of stuff going on in the

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Speaker 3: National Cowboy and Western Heritage Museum.

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Speaker 7: That would be my first stop.

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Speaker 6: I mean, I would think going on Oklahoma football game now.

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Speaker 3: That yeah, Oklahoma that would be a little bit, Yes,

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Speaker 3: a little bit. Jill, thanks so much for joining us here.

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Speaker 3: Talk to us about your bank. Who is your customer

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Speaker 3: for your bank?

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Speaker 1: Yeah, So I get the privilege of being a CEO

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Speaker 1: of a one location, one hundred and twenty four year

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Speaker 1: old community bank located in suburban Oklahoma City and we're

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Speaker 1: located on the same intersection and.

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Speaker 10: We've been since nineteen oh one.

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Speaker 1: So that's history, very very trying to a very traditional

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Speaker 1: community bank. The name of citizens been citizens since nineteen

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Speaker 1: oh one. Literally citizens pulling their money together kind of

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Speaker 1: the first like crowdsourcing and then loaning and money out

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Speaker 1: to the rest of the community. But on our board

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Speaker 1: about in two thousand and eight, thousand and nine, the

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Speaker 1: bank went through a turnaround and after that point decided

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Speaker 1: we want to be here.

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Speaker 10: For another one hundred years. And so it's a very

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Speaker 10: technologic forward bank.

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Speaker 1: So we just launched a digital military bank, so we

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Speaker 1: have a large military group that's part of our customer base.

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Speaker 1: But it's primarily just a traditional community bank where the

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Speaker 1: geographic center.

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Speaker 3: Militaries all through your family, right.

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Speaker 1: Yeah, So I was enlisted, my husband retired Army's sons

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Speaker 1: Army daughters.

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Speaker 10: Navy, well not just West Point Enaval Academy. That's right, Wow,

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Speaker 10: you did your research.

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Speaker 3: Yeah, So I mean so I mean so for a

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Speaker 3: bank like yours, I mean it's I need a checking account,

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Speaker 3: I need a savings account.

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Speaker 7: Do I do?

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Speaker 3: Do you guys also do like a mortgage and we

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Speaker 3: do business loans and all that type of thing.

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Speaker 1: It is the whenever people say like you should have

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Speaker 1: a niche market and that's the way to be successful,

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Speaker 1: we're the antithesis to that.

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Speaker 10: So we do everything. So one stop shop for every

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Speaker 10: it is everything.

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Speaker 1: So I literally will work with a small business perspective

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Speaker 1: owner for three years to help them get bankable so

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Speaker 1: they can achieve their dream, help with families, buy their

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Speaker 1: first home, get that first checking account, stavements account for

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Speaker 1: a youngster. So I mean it's being part of someone's life.

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Speaker 1: And even like when in this environment where the interst

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Speaker 1: rate's changing, if there's any kind of difficulty with the business,

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Speaker 1: we're just walking along the entire way. As someone gets alone.

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Speaker 1: It's not just ending in with that transaction. It's really

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Speaker 1: a relationship over time.

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Speaker 5: And what are your clients coming to you for? Like

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Speaker 5: when whether it's an individual or a business like what.

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Speaker 5: I'm sure they most hear, Oh, rates are going down,

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Speaker 5: but you know, inflation and whatever, and they're probably all like,

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Speaker 5: they have a lot of questions for you, I'm sure,

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Speaker 5: So what are they coming to you for most these days?

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Speaker 1: Yeah, so we talk really more holistically about the whole business.

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Speaker 1: So it may be that their costs are going up,

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Speaker 1: and how do I know achieve some a scale or

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Speaker 1: how do I partner to be able to get input

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Speaker 1: costs lower?

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Speaker 10: What are some different labor options.

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Speaker 1: Some of them have left their businesses where they've hired

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Speaker 1: employees now to run and start off the family owned business.

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Speaker 1: Well now they're having to move back in the business

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Speaker 1: because they can't afford the labor costs associated with it.

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Speaker 1: So it's really talking about it all holistically and how

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Speaker 1: do we help them be a competitive advantage for them

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Speaker 1: to be able to manage their business the best way possible.

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Speaker 1: And if that means that it's a lowe own that

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Speaker 1: we can provide, or if it's investing in some type

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Speaker 1: of money market or other asset, and then we're helping

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Speaker 1: them make those decisions.

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Speaker 3: You know, when Molly and I hear from the you know,

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Speaker 3: the big banks when they report their earning is one

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Speaker 3: of the things they say they're spending money is in

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Speaker 3: tech technology. But for a bank of your size, how

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Speaker 3: does technology do you? Guys have to play in that

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Speaker 3: game too and have all the apps and do all

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Speaker 3: that kind of stuff.

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Speaker 1: There is no customers not going to say I'm not

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Speaker 1: going to have the same quality of banking services at

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Speaker 1: your bank that I can have somewhere.

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Speaker 10: Else at Chase.

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Speaker 1: So we have to provide the same level of technology,

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Speaker 1: and even better we invent technology. We have a patent

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Speaker 1: on a small business remote small business kind ATM and

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Speaker 1: they're a little bank invented.

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Speaker 10: And I would.

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Speaker 1: Challenge you if you open your account as a doesn's

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Speaker 1: bank evment, I bet that you would have a better

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Speaker 1: experience doing that then you would at a large institution

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Speaker 1: for no cost. You can sit there and have your

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Speaker 1: checking account, wunch your credit score, not have a lot

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Speaker 1: of fees, and then be able to call me or

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Speaker 1: tech spee twenty four to seven the bank CEO to

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Speaker 1: say hey, I have a question about this.

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Speaker 10: Wow that yeah, imagine, I'm not sure.

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Speaker 5: I think you're probably much more accessible than he is,

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Speaker 5: probably to your customers.

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Speaker 1: And I said in the lobby, so you're able to

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Speaker 1: see if there's any anxiety or if there's any concerns,

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Speaker 1: and so you're really accountable and transparent with your customers

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Speaker 1: so that you can really help your community grow.

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Speaker 5: It was so interesting when you were just saying, I

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Speaker 5: assume this is about small businesses talking about still grappling

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Speaker 5: with labor costs, because I feel like that's something that

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Speaker 5: anecdotally and in the data, we see a lot of

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Speaker 5: that has subsided from really the peak times of you know,

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Speaker 5: maybe two three years ago. But you're saying this is

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Speaker 5: still really a prevalent issue in your community.

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Speaker 1: For sure, labor availability I think, O, let me say

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Speaker 1: we have thirty seven months that consistently get below four

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Speaker 1: percent unemployment, and if we hit one more month.

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Speaker 10: It's a record hot a record long.

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Speaker 1: Period of time of low unemployment. So labor availability is

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Speaker 1: really scarce. And so then you see again like people

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Speaker 1: recruiting their sons and daughters to be working in their

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Speaker 1: food truck where they could previously be able to hire

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Speaker 1: someone to do that.

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Speaker 3: So talks about the economy in Great Oklahoma City. Is

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Speaker 3: it what is the basis? Is it still energy or

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Speaker 3: is it have you diversity from what is the e commune.

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Speaker 1: It's quite diverse, and so you have to come and

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Speaker 1: visit Oka City and let me give you the grand tour.

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Speaker 1: But I mean a large amount that we have military

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Speaker 1: basis there, large federal government presence, still energy.

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Speaker 10: Some agriculture.

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Speaker 1: But it's a much more diverse community than it was

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Speaker 1: back in the eighties whenere we were so dependent upon

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Speaker 1: oil and gas. But it still permeates everything in our economy.

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Speaker 5: And how about like what are some of like the

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Speaker 5: you know, the bigger small businesses in the area, Like

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Speaker 5: what kind of what kind of work are they engaged in?

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Speaker 1: Yes, so we have a large presence in the aerospace industry.

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Speaker 1: So Boeing has a large manufacturing plant.

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Speaker 10: There, exactly a small business, not a small business.

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Speaker 1: Really great restaurant scene if you're a foodie, would love

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Speaker 1: a city. So lots of manufacturing, so parts for especially

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Speaker 1: the oil and gas industry. You find there lots of

443
00:20:56,240 --> 00:20:59,800
Speaker 1: great small businesses. Loves travel stops not a small business now,

444
00:20:59,840 --> 00:21:03,639
Speaker 1: but started in Oklahoma City. So really great stories of

445
00:21:03,680 --> 00:21:05,040
Speaker 1: growth and resiliency.

446
00:21:05,240 --> 00:21:07,000
Speaker 5: You know, the only time I actually have been to

447
00:21:07,080 --> 00:21:10,320
Speaker 5: Oklahoma was back after one of the tornadoes.

448
00:21:10,520 --> 00:21:12,920
Speaker 6: I think it was about ten years ago near More.

449
00:21:12,880 --> 00:21:15,879
Speaker 5: Oklahoma, And I'm thinking now, you know, as we've just

450
00:21:15,920 --> 00:21:19,560
Speaker 5: had these pair of devastating hurricanes in the southeast, I mean,

451
00:21:19,640 --> 00:21:21,240
Speaker 5: how has it been with I mean, you guys have

452
00:21:21,240 --> 00:21:23,600
Speaker 5: obviously had your fair share of tornadoes over the years.

453
00:21:23,680 --> 00:21:25,960
Speaker 5: Like what is it like for you in the banking

454
00:21:26,040 --> 00:21:27,840
Speaker 5: seat when you have these kind of events and the

455
00:21:27,920 --> 00:21:30,520
Speaker 5: rebuilding efforts and how much are you involved?

456
00:21:31,119 --> 00:21:33,320
Speaker 1: I mean, what a great question. So as a community bank,

457
00:21:33,359 --> 00:21:35,480
Speaker 1: you're just always ready. And so whether those are really

458
00:21:35,520 --> 00:21:38,000
Speaker 1: small disasters that really only you see in your community

459
00:21:38,000 --> 00:21:39,919
Speaker 1: that don't make the national news, you're running to the

460
00:21:39,960 --> 00:21:42,159
Speaker 1: aid of your community there, and it certainly at a

461
00:21:42,160 --> 00:21:44,240
Speaker 1: broader scale, And we're so grateful to be part of

462
00:21:44,240 --> 00:21:47,359
Speaker 1: a greater community banking network that when are even in

463
00:21:47,400 --> 00:21:50,000
Speaker 1: this situation where the hurricanes were able to rally around

464
00:21:50,000 --> 00:21:52,680
Speaker 1: our community makers that are directly impacted to help them

465
00:21:52,680 --> 00:21:56,200
Speaker 1: in their customers. So I'm having those networks of communities

466
00:21:56,240 --> 00:21:59,119
Speaker 1: both internally in this little small community kind sector as

467
00:21:59,119 --> 00:22:01,880
Speaker 1: well as kind of broad in the nation has really

468
00:22:01,960 --> 00:22:04,040
Speaker 1: allowed a community bank to be much more impactful than

469
00:22:04,119 --> 00:22:05,000
Speaker 1: just the bank itself.

470
00:22:05,400 --> 00:22:08,639
Speaker 3: What's a typical consumer customer for your bank.

471
00:22:09,520 --> 00:22:11,080
Speaker 10: Oh wow, there's just no typical.

472
00:22:11,200 --> 00:22:14,280
Speaker 1: So it could be I just had a conversation this

473
00:22:14,320 --> 00:22:17,920
Speaker 1: weekend with an elderly woman who was wanting to buy

474
00:22:17,920 --> 00:22:20,080
Speaker 1: a trailer, and so we were talking about options for

475
00:22:20,119 --> 00:22:23,159
Speaker 1: her to be able to have an independent living.

476
00:22:23,320 --> 00:22:24,959
Speaker 10: Where she wanted to be. So it could be at

477
00:22:24,960 --> 00:22:25,560
Speaker 10: that level.

478
00:22:25,920 --> 00:22:28,600
Speaker 1: Or it could be that you're buying their second home

479
00:22:28,640 --> 00:22:31,520
Speaker 1: on a really nice lake, or a new car, or

480
00:22:31,520 --> 00:22:33,840
Speaker 1: that they're trying to finance their kids' education.

481
00:22:33,960 --> 00:22:36,680
Speaker 10: So it really runs the gamut. So, but it's typically

482
00:22:36,680 --> 00:22:37,240
Speaker 10: someone I know.

483
00:22:37,440 --> 00:22:39,480
Speaker 1: I mean, usually I'm working with them face to face,

484
00:22:39,520 --> 00:22:42,560
Speaker 1: but it could be just a connection. Actually, last time

485
00:22:42,600 --> 00:22:43,960
Speaker 1: I was in New York City, there was a small

486
00:22:43,960 --> 00:22:45,960
Speaker 1: business customer I was connected with. I was trying to

487
00:22:46,000 --> 00:22:48,560
Speaker 1: sustain their small business. So it just happens, all three

488
00:22:48,600 --> 00:22:49,880
Speaker 1: connections and relationships.

489
00:22:50,040 --> 00:22:53,640
Speaker 5: How much are you seeing both between individuals and businesses

490
00:22:53,760 --> 00:22:56,199
Speaker 5: looking for any kind of loans right now? I imagine that

491
00:22:56,240 --> 00:22:59,199
Speaker 5: they're still probably pretty spooked by the interest rates that

492
00:22:59,200 --> 00:23:01,800
Speaker 5: are out there, maybe thinking oh rates are coming down,

493
00:23:01,840 --> 00:23:03,280
Speaker 5: can hold out a little bit longer.

494
00:23:03,400 --> 00:23:04,920
Speaker 6: Is that kind of the narrative right now?

495
00:23:05,040 --> 00:23:05,240
Speaker 7: Yeah?

496
00:23:05,240 --> 00:23:06,800
Speaker 1: I mean, but a lot of them are like, if

497
00:23:06,800 --> 00:23:09,520
Speaker 1: there are truck stops working, they need the truck now,

498
00:23:09,680 --> 00:23:11,840
Speaker 1: they can't wait, and so they're trying to figure out

499
00:23:11,840 --> 00:23:14,120
Speaker 1: how to I work away around this interest rate environment

500
00:23:14,200 --> 00:23:16,520
Speaker 1: to ensure that can still be profitable. So they're not

501
00:23:16,560 --> 00:23:19,159
Speaker 1: really playing like the markets like you may do at

502
00:23:19,200 --> 00:23:21,520
Speaker 1: a larger scale. They really are having to buy something

503
00:23:21,520 --> 00:23:23,520
Speaker 1: when they need it, but they are considering it as

504
00:23:23,960 --> 00:23:28,040
Speaker 1: I think about growing or expanding locations or scaling their businesses.

505
00:23:28,240 --> 00:23:29,400
Speaker 10: But many have adjusted to.

506
00:23:29,359 --> 00:23:31,880
Speaker 1: This rate environment and there's still a lot of demand

507
00:23:31,920 --> 00:23:34,080
Speaker 1: out there, and there's a lot of other cash sources

508
00:23:34,119 --> 00:23:39,000
Speaker 1: beyond loans still with private equity investors and other government

509
00:23:39,040 --> 00:23:41,639
Speaker 1: type of programs still available for small business to scale

510
00:23:41,640 --> 00:23:44,199
Speaker 1: without having necessarily get loans. So the raid environment then

511
00:23:44,240 --> 00:23:45,880
Speaker 1: it becomes a little bit less consequential.

512
00:23:46,200 --> 00:23:47,800
Speaker 6: Is there a lot of going on in the housing

513
00:23:47,800 --> 00:23:48,720
Speaker 6: market right there?

514
00:23:48,920 --> 00:23:49,160
Speaker 8: Wow?

515
00:23:49,240 --> 00:23:51,560
Speaker 1: The housing market I think is just tough everywhere. Supply

516
00:23:51,760 --> 00:23:54,200
Speaker 1: is just so limited, and you have those low rates

517
00:23:54,240 --> 00:23:57,040
Speaker 1: that people have in their mortgages keeping them from moving,

518
00:23:57,119 --> 00:23:59,760
Speaker 1: and then the cost of constructions. We didn't have transformers

519
00:23:59,760 --> 00:24:01,560
Speaker 1: of itailable forever, so they've may be able to bring

520
00:24:01,600 --> 00:24:04,680
Speaker 1: online developments and you didn't have a lot of availability

521
00:24:04,720 --> 00:24:06,720
Speaker 1: to be able to build. And so there's still some

522
00:24:06,800 --> 00:24:09,879
Speaker 1: supply hiccups, especially when you think about municipalities and a

523
00:24:09,920 --> 00:24:12,399
Speaker 1: lot of the infrastructure that's occurring that's taken away some

524
00:24:12,440 --> 00:24:15,159
Speaker 1: of the pavers and earth movers that would normally be

525
00:24:15,280 --> 00:24:18,960
Speaker 1: used to be able to provide greater development opportunities.

526
00:24:18,400 --> 00:24:20,200
Speaker 10: For one to four family loans.

527
00:24:20,440 --> 00:24:23,399
Speaker 3: Was during the pandemic, was Oklahoma City a city that

528
00:24:23,600 --> 00:24:25,760
Speaker 3: maybe gained population or lost population, goes to New York

529
00:24:25,800 --> 00:24:28,040
Speaker 3: City here everybody left, you know, and all went down

530
00:24:28,080 --> 00:24:29,040
Speaker 3: to Florida and so on.

531
00:24:29,160 --> 00:24:30,760
Speaker 10: Yeah, everybody's becoming in Oklahoma.

532
00:24:30,920 --> 00:24:33,000
Speaker 1: So it's like a reverse great Sir Wrath, you know

533
00:24:33,040 --> 00:24:35,679
Speaker 1: where how so many Californians coming in and so that

534
00:24:35,840 --> 00:24:39,320
Speaker 1: is putting prices, you know, some price pressure on one

535
00:24:39,359 --> 00:24:41,359
Speaker 1: to four family homes. But yeah, we have we are

536
00:24:41,400 --> 00:24:44,520
Speaker 1: a net gain and when it came to migration, both

537
00:24:44,960 --> 00:24:46,680
Speaker 1: during COVID and afterwards.

538
00:24:46,240 --> 00:24:49,840
Speaker 3: We're Norman, Oklahoma, home of the university. Oklahoma's right there. Yeah,

539
00:24:49,880 --> 00:24:51,159
Speaker 3: So is that where you guys get a lot like

540
00:24:51,200 --> 00:24:52,920
Speaker 3: your employees, if you need some employees to should hire

541
00:24:52,960 --> 00:24:53,320
Speaker 3: some graduates.

542
00:24:53,359 --> 00:24:56,919
Speaker 1: Community we're smacked between University of Oklahoma and Oklahoma State University,

543
00:24:56,960 --> 00:25:00,159
Speaker 1: and then the state's oldest institution, University of centralklahom It

544
00:25:00,200 --> 00:25:02,280
Speaker 1: is about two blocks away from the bank. Wow, our

545
00:25:02,320 --> 00:25:05,399
Speaker 1: bank helps secure the land prior to statehood for that

546
00:25:05,520 --> 00:25:06,440
Speaker 1: university to be built.

547
00:25:06,680 --> 00:25:08,280
Speaker 5: I would think that's got to be pretty good for

548
00:25:08,359 --> 00:25:10,040
Speaker 5: labor costs if you've got a whole lot of college

549
00:25:10,160 --> 00:25:11,000
Speaker 5: kids right around there.

550
00:25:11,080 --> 00:25:13,879
Speaker 1: Now, it helps with having that, but we also have

551
00:25:13,960 --> 00:25:17,040
Speaker 1: to compete against Texas, which is a growing market and recreuse.

552
00:25:17,400 --> 00:25:19,439
Speaker 1: More than half the students that are at the University

553
00:25:19,440 --> 00:25:22,560
Speaker 1: of Oklahoma from Texas. Yes, so we have to keep

554
00:25:22,560 --> 00:25:23,720
Speaker 1: them in Oklahoma so that.

555
00:25:23,760 --> 00:25:25,359
Speaker 6: We can better growing.

556
00:25:25,520 --> 00:25:25,720
Speaker 9: Yes.

557
00:25:25,920 --> 00:25:29,320
Speaker 5: I mean I went to Syracuse University. Obviously very different

558
00:25:29,520 --> 00:25:31,399
Speaker 5: climate than in Oklahoma.

559
00:25:31,359 --> 00:25:34,080
Speaker 6: But similar in the sense that they like.

560
00:25:34,200 --> 00:25:35,920
Speaker 5: A lot of the employers in the area would say, like,

561
00:25:36,000 --> 00:25:38,640
Speaker 5: the biggest struggle is that the graduates don't want to stay.

562
00:25:38,880 --> 00:25:40,800
Speaker 6: They want to go back to wherever they came from.

563
00:25:40,880 --> 00:25:42,760
Speaker 6: I imagine maybe that sounds like a little bit of

564
00:25:42,800 --> 00:25:43,440
Speaker 6: what you're talking about.

565
00:25:43,480 --> 00:25:45,239
Speaker 1: Yeah, we're much more successful now, and there's a lot

566
00:25:45,240 --> 00:25:47,879
Speaker 1: of regional institutions that in the rural communities that are

567
00:25:47,960 --> 00:25:49,359
Speaker 1: producing a lot great talent.

568
00:25:49,920 --> 00:25:51,920
Speaker 7: Jill, thank you so much for joining us. Jill Stee.

569
00:25:52,000 --> 00:25:55,480
Speaker 3: She's a president and CEO of Citizens Bank of Edmund, Oklahoma.

570
00:25:55,560 --> 00:25:57,800
Speaker 3: So for Ever and Edmund, I Google mapped that it's

571
00:25:58,040 --> 00:26:00,680
Speaker 3: basically part of the Oklahoma City metropley a little bit north,

572
00:26:01,000 --> 00:26:02,160
Speaker 3: but I mean everything's right there.

573
00:26:02,560 --> 00:26:04,840
Speaker 5: Yeah. So anyway, I mean, my brother and his friends

574
00:26:04,920 --> 00:26:08,240
Speaker 5: actually for a bachelor party just went to a football

575
00:26:08,280 --> 00:26:10,639
Speaker 5: game at Oklahoma, which was, like, I think, got'd be

576
00:26:10,720 --> 00:26:12,800
Speaker 5: one of the more fun ideas, you know, not doing

577
00:26:12,880 --> 00:26:14,800
Speaker 5: like the Vegas booze cruise scene, but going to a

578
00:26:14,840 --> 00:26:15,800
Speaker 5: college football game.

579
00:26:15,920 --> 00:26:18,600
Speaker 7: Yes, awesome, big big player, love that Oklahoma.

580
00:26:20,160 --> 00:26:24,000
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live

581
00:26:24,119 --> 00:26:27,040
Speaker 2: weekdays at ten am Eastern on Apple car Play and

582
00:26:27,160 --> 00:26:30,400
Speaker 2: Android Auto with the Bloomberg Business. You can also listen

583
00:26:30,560 --> 00:26:33,640
Speaker 2: live on Amazon Alexa from our flagship New York station,

584
00:26:34,040 --> 00:26:36,760
Speaker 2: Just Say Alexa playing Bloomberg eleven thirty.

585
00:26:38,119 --> 00:26:40,040
Speaker 3: Let's break it down to the GM stuff with David

586
00:26:40,040 --> 00:26:42,800
Speaker 3: Welche's the Detroit Burea, chief of Bloomberg News. Hey, David

587
00:26:43,000 --> 00:26:45,320
Speaker 3: stocks up. Big market likes what they see. I guess

588
00:26:45,480 --> 00:26:47,240
Speaker 3: the world wants big trucks.

589
00:26:48,040 --> 00:26:51,480
Speaker 9: Big trucks, big SUVs. Yes they do, and and they're

590
00:26:51,520 --> 00:26:54,359
Speaker 9: selling them a huge prices. GM's average vehicle in the

591
00:26:54,400 --> 00:26:58,040
Speaker 9: quarter soldess sold for more than forty nine thousand dollars.

592
00:26:58,320 --> 00:27:02,840
Speaker 10: WOWW what happened to the the incentive thirty market vehicles?

593
00:27:02,880 --> 00:27:04,800
Speaker 7: Not even I mean wow, which is amazing.

594
00:27:04,960 --> 00:27:08,160
Speaker 3: I mean I got the Ford F one fifty electric

595
00:27:08,240 --> 00:27:10,320
Speaker 3: one Matt Miller got for me to test drive.

596
00:27:10,480 --> 00:27:12,280
Speaker 7: That was ninety four thousand dollars to the price.

597
00:27:12,600 --> 00:27:15,960
Speaker 3: So give it with What's what's GM saying these days

598
00:27:16,000 --> 00:27:19,640
Speaker 3: about how they're managing this transition to evs.

599
00:27:21,480 --> 00:27:24,240
Speaker 9: Look, there are sales in the quarter for evs. They

600
00:27:24,320 --> 00:27:27,960
Speaker 9: sold over thirty thousand of them, which by Tesla standards

601
00:27:28,040 --> 00:27:30,199
Speaker 9: not a big number, but it was enough to put

602
00:27:30,280 --> 00:27:32,760
Speaker 9: GM in second place in the US market EV sales.

603
00:27:33,600 --> 00:27:36,240
Speaker 9: The real story there is they're getting sales volume up,

604
00:27:36,640 --> 00:27:39,639
Speaker 9: which is a good thing, and that means they're getting

605
00:27:39,760 --> 00:27:42,160
Speaker 9: scale in their battery plants. The battery is the most

606
00:27:42,160 --> 00:27:45,040
Speaker 9: expensive part of the vehicle, and so they can start

607
00:27:45,040 --> 00:27:47,160
Speaker 9: to bring costs down. And they're saying that fourth quarter

608
00:27:47,280 --> 00:27:50,800
Speaker 9: and into next year they will be at be making

609
00:27:50,880 --> 00:27:53,919
Speaker 9: a variable profit on the vehicles, which means that if

610
00:27:53,960 --> 00:27:56,000
Speaker 9: you forget about all the fixed costs, the billions they've

611
00:27:56,040 --> 00:27:58,639
Speaker 9: invested in battery plans, forget about those vehicle plants and

612
00:27:58,640 --> 00:28:01,800
Speaker 9: all the engineering, they're making money. But look that it's

613
00:28:01,800 --> 00:28:04,720
Speaker 9: a step toward making money on vehicles that are pretty

614
00:28:04,760 --> 00:28:09,160
Speaker 9: expensive to produce. And you know, GM's gaining market share.

615
00:28:09,200 --> 00:28:16,840
Speaker 9: And the EV situation is very interesting because Tesla has

616
00:28:17,320 --> 00:28:21,840
Speaker 9: five models if you count the cyber truck for sale GM.

617
00:28:22,000 --> 00:28:23,440
Speaker 9: By the end and next year, by the end of

618
00:28:23,440 --> 00:28:25,000
Speaker 9: this year, they're going to have I think ten, and

619
00:28:25,080 --> 00:28:26,359
Speaker 9: by the end and next year they'll have about a

620
00:28:26,440 --> 00:28:29,960
Speaker 9: dozen different models. That's a lot of variety. It's also

621
00:28:30,000 --> 00:28:32,560
Speaker 9: a lot of production. So if the market for evs

622
00:28:32,680 --> 00:28:35,880
Speaker 9: continues to grow pretty nicely, GM will have the best

623
00:28:35,960 --> 00:28:37,879
Speaker 9: variety and a lot of production to be able to

624
00:28:37,920 --> 00:28:41,120
Speaker 9: get it, which is exactly what that the domestic producers

625
00:28:41,160 --> 00:28:44,960
Speaker 9: in China did to steal their home market away from GM,

626
00:28:45,040 --> 00:28:48,800
Speaker 9: Volksweg and Toyota, Ford, et cetera. It's a market doesn't

627
00:28:49,080 --> 00:28:52,000
Speaker 9: materialize and you know GM is going to probably have

628
00:28:52,120 --> 00:28:54,120
Speaker 9: to lay off a few workers in some of these

629
00:28:54,200 --> 00:28:54,800
Speaker 9: EV plans.

630
00:28:54,960 --> 00:28:56,040
Speaker 6: Yeah, maybe just a few.

631
00:28:56,160 --> 00:28:58,880
Speaker 5: I mean you're talking though about how GM was able

632
00:28:58,960 --> 00:29:01,400
Speaker 5: to sell a but like all these cars at these

633
00:29:01,440 --> 00:29:04,440
Speaker 5: above average prices. Is that true for the evy market

634
00:29:04,520 --> 00:29:06,440
Speaker 5: as well, or are we talking more gas powered there.

635
00:29:07,200 --> 00:29:10,200
Speaker 9: It's both because evs are pretty expensive. The difference though,

636
00:29:10,480 --> 00:29:12,120
Speaker 9: and this is where GM is starting to get a

637
00:29:12,160 --> 00:29:14,840
Speaker 9: lot of its electric vehicle growth, is they have an

638
00:29:14,880 --> 00:29:17,480
Speaker 9: electric version of the Chevy Equinox that starts at thirty

639
00:29:17,560 --> 00:29:21,720
Speaker 9: five thousand after government credit, it's about twenty seven and

640
00:29:21,800 --> 00:29:24,680
Speaker 9: a half. There are many vehicles for sale period of

641
00:29:24,720 --> 00:29:29,240
Speaker 9: any kind that run on anything, you know, alcohol, electricity,

642
00:29:30,600 --> 00:29:33,840
Speaker 9: a fusel earlier, you name it. But that self for

643
00:29:33,960 --> 00:29:37,640
Speaker 9: blow of thirty thousand dollars, so you know, and probably

644
00:29:37,680 --> 00:29:39,680
Speaker 9: most of them are selling for closer to forty before

645
00:29:39,720 --> 00:29:42,280
Speaker 9: the federal tax credit. So but that's a pretty cheap vehicle,

646
00:29:42,320 --> 00:29:45,560
Speaker 9: and they're getting a lot of growth there. But generally speaking, yeah,

647
00:29:45,920 --> 00:29:50,080
Speaker 9: Cadillac lyric expensive vehicle, even the Chevy Blazer, a lot

648
00:29:50,120 --> 00:29:52,000
Speaker 9: of those can go from more than fifty thousand. Then

649
00:29:52,040 --> 00:29:54,080
Speaker 9: you know that's an electric as well. They're pick up

650
00:29:54,160 --> 00:29:58,920
Speaker 9: certainly very expensive Silverado pickup in the GMCCRA pickup, and

651
00:29:59,120 --> 00:30:02,360
Speaker 9: the Hummers are well one hundred, so you know, these

652
00:30:02,360 --> 00:30:03,960
Speaker 9: are expensive vehicles for the most part.

653
00:30:05,600 --> 00:30:06,880
Speaker 7: All right, very good, David Welch.

654
00:30:06,960 --> 00:30:07,600
Speaker 10: We appreciate that.

655
00:30:07,720 --> 00:30:11,600
Speaker 3: David Welch, Detroit, Burachief for Bloomberg News, joining us from Detroit.

656
00:30:11,840 --> 00:30:14,440
Speaker 3: And again I was looking at the stock of you know,

657
00:30:15,040 --> 00:30:17,920
Speaker 3: GM at fifty two week high today, just a really

658
00:30:18,960 --> 00:30:21,240
Speaker 3: nice move. Stocks up about eight percent and change. It's

659
00:30:21,320 --> 00:30:23,720
Speaker 3: up about close to forty eight percent.

660
00:30:23,600 --> 00:30:24,320
Speaker 7: Year to date.

661
00:30:24,960 --> 00:30:27,480
Speaker 3: Whereas you look at General Motors, I'm sorry you look

662
00:30:27,480 --> 00:30:30,080
Speaker 3: at Ford year to data sucks down ten ten percent.

663
00:30:30,360 --> 00:30:33,040
Speaker 5: I think the more amazing thing here is that David

664
00:30:33,200 --> 00:30:35,400
Speaker 5: was talking about is how they've been able to sell

665
00:30:35,520 --> 00:30:38,560
Speaker 5: at all these above average prices. I mean, the story

666
00:30:38,720 --> 00:30:41,680
Speaker 5: of the car market lately has been incentives and markdowns,

667
00:30:42,000 --> 00:30:44,600
Speaker 5: you know, and especially with like auto loans being as

668
00:30:44,680 --> 00:30:46,840
Speaker 5: expensive as they are, how they're able to do this

669
00:30:46,960 --> 00:30:47,760
Speaker 5: is remarkable to me.

670
00:30:48,160 --> 00:30:50,360
Speaker 3: Yeah, and I remember talking to Kevin Tynan, who was

671
00:30:50,360 --> 00:30:52,560
Speaker 3: the auto analyst of Bloomberg Intelligence for many years, and

672
00:30:52,640 --> 00:30:55,480
Speaker 3: he just said, listen, they make so much money with

673
00:30:55,600 --> 00:30:58,680
Speaker 3: these crossovers, SUVs, trucks, whatever you want to call them. Literally,

674
00:30:58,760 --> 00:31:02,440
Speaker 3: on a perdutive basis there so profitable that the incentive

675
00:31:02,520 --> 00:31:05,160
Speaker 3: to switch over to EV's is just isn't there, and

676
00:31:05,240 --> 00:31:08,480
Speaker 3: they're not going to do it until the economics makes sense.

677
00:31:09,160 --> 00:31:11,760
Speaker 6: So you're saying, as GM or as a customer, to

678
00:31:11,800 --> 00:31:12,160
Speaker 6: sweat no.

679
00:31:12,400 --> 00:31:15,240
Speaker 3: As GM said, automakers they're so incentive to make these

680
00:31:15,280 --> 00:31:18,440
Speaker 3: big trucks because they sell them and they're very profitable

681
00:31:18,480 --> 00:31:21,000
Speaker 3: to the highest profit margin products they have. So the

682
00:31:21,720 --> 00:31:24,960
Speaker 3: US auto companies have very little financial incentive, economic incentive

683
00:31:25,440 --> 00:31:28,320
Speaker 3: they switched to evs. Now it's the government's gonna, you know,

684
00:31:28,480 --> 00:31:30,520
Speaker 3: incentivize you to do so or force you to do so.

685
00:31:30,600 --> 00:31:32,280
Speaker 7: Well, that's another whole thing.

686
00:31:32,360 --> 00:31:34,920
Speaker 3: But I think as most auto investors, they were just concerned,

687
00:31:34,960 --> 00:31:37,720
Speaker 3: do I want to own a company where you know,

688
00:31:37,800 --> 00:31:40,640
Speaker 3: their incentives are not really aligned with maximizing profits.

689
00:31:40,680 --> 00:31:41,400
Speaker 7: So often see.

690
00:31:42,880 --> 00:31:46,720
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live

691
00:31:46,840 --> 00:31:50,360
Speaker 2: weekdays at ten am Eastern on applecar Play and Android

692
00:31:50,400 --> 00:31:53,120
Speaker 2: Auto with the Bloomberg Business App. You can also listen

693
00:31:53,280 --> 00:31:56,360
Speaker 2: live on Amazon Alexa from our flagship New York station

694
00:31:56,760 --> 00:31:59,480
Speaker 2: Just Say Alexa, playing Bloomberg eleven thirty.

695
00:32:00,800 --> 00:32:01,440
Speaker 7: Let's switch gears.

696
00:32:01,520 --> 00:32:03,719
Speaker 3: Let's talk about real estate, commercial real estate. We love

697
00:32:03,720 --> 00:32:05,320
Speaker 3: to talk about commercial real estate because I have no

698
00:32:05,440 --> 00:32:07,640
Speaker 3: idea what's going on. I know I've made the mistake

699
00:32:07,640 --> 00:32:09,680
Speaker 3: in the past thinking commercial real estate's office, but that's

700
00:32:09,720 --> 00:32:11,800
Speaker 3: only like three and a half percent of readesks to talk.

701
00:32:11,720 --> 00:32:12,440
Speaker 11: About the malls.

702
00:32:12,560 --> 00:32:12,760
Speaker 7: I know.

703
00:32:12,960 --> 00:32:15,280
Speaker 3: I know Rich Hill, he joins us. He's had of

704
00:32:15,320 --> 00:32:18,560
Speaker 3: real estate strategy and research at Cohen and Steers. Before that,

705
00:32:18,680 --> 00:32:20,440
Speaker 3: he was at Morgan Stanley with all those other Morgan

706
00:32:20,480 --> 00:32:23,080
Speaker 3: Stanley real estate crazy people, which they just have owned

707
00:32:23,120 --> 00:32:26,240
Speaker 3: real estate across Wall Street my entire career at Ward Stanley.

708
00:32:26,320 --> 00:32:28,240
Speaker 3: So those are the folks that get it done. Rich

709
00:32:28,280 --> 00:32:29,920
Speaker 3: thanks so much for joining us here in our studio.

710
00:32:30,760 --> 00:32:33,040
Speaker 3: I mean, where do you go in commercial real estate today?

711
00:32:33,040 --> 00:32:34,360
Speaker 7: I know there are different silos.

712
00:32:34,960 --> 00:32:37,040
Speaker 3: Where do you guys think the best opportunities are these days?

713
00:32:37,120 --> 00:32:37,720
Speaker 7: Yeah, maybe we.

714
00:32:37,720 --> 00:32:41,120
Speaker 11: Can just take a step back. It has been a

715
00:32:41,280 --> 00:32:45,240
Speaker 11: really tough two years for commercial real estate, but we

716
00:32:45,480 --> 00:32:49,200
Speaker 11: think the market is finally in the process of bottoming.

717
00:32:49,960 --> 00:32:53,400
Speaker 11: There's been three price in disease that we follow pretty closely,

718
00:32:53,600 --> 00:32:56,440
Speaker 11: all of which showed increases for the first time in

719
00:32:56,480 --> 00:33:00,360
Speaker 11: more than two years in recent months. So valuations down

720
00:33:00,960 --> 00:33:04,280
Speaker 11: more than twenty percent, and that doesn't happen very often.

721
00:33:04,520 --> 00:33:06,640
Speaker 11: You go back to the early nineteen nineties in the GFC,

722
00:33:07,120 --> 00:33:10,480
Speaker 11: those are the only two times evaluations have fallen. So

723
00:33:10,800 --> 00:33:14,200
Speaker 11: it's getting people pretty excited again. I will note, though,

724
00:33:14,280 --> 00:33:16,880
Speaker 11: before I talk about the opportunities, we think the cycles

725
00:33:17,000 --> 00:33:19,400
Speaker 11: playing out sort of in textbook fashion. What do I

726
00:33:19,480 --> 00:33:22,640
Speaker 11: mean by that? Well, list it reached trough first, they

727
00:33:22,720 --> 00:33:26,400
Speaker 11: troughed about a year ago. Then private valuations trough twelve

728
00:33:26,440 --> 00:33:29,160
Speaker 11: months later. But there's a really important point here. See

729
00:33:29,200 --> 00:33:32,520
Speaker 11: our debt distress. So distress in the debt markets doesn't

730
00:33:32,560 --> 00:33:35,280
Speaker 11: peak out for twelve to twenty four months after property

731
00:33:35,320 --> 00:33:38,760
Speaker 11: valuations trough out, So the headlines are actually going to

732
00:33:38,800 --> 00:33:40,640
Speaker 11: get worse before they get better. You're going to be

733
00:33:40,680 --> 00:33:44,840
Speaker 11: talking about office valuations being down, borrowers given the keys

734
00:33:44,880 --> 00:33:48,000
Speaker 11: back to lender. That's what happens at this point in

735
00:33:48,040 --> 00:33:48,480
Speaker 11: the cycle.

736
00:33:49,080 --> 00:33:51,560
Speaker 5: So what if you're looking at valuations bottoming but you

737
00:33:51,720 --> 00:33:53,560
Speaker 5: know that this distress is still going to be coming.

738
00:33:53,600 --> 00:33:56,120
Speaker 5: That's still got to be a really tricky position. If

739
00:33:56,160 --> 00:33:59,880
Speaker 5: the equity valuation is maybe looking more appealing, but you're

740
00:34:00,000 --> 00:34:02,160
Speaker 5: worried about the death side coming back to bite you.

741
00:34:02,560 --> 00:34:06,760
Speaker 11: Yeah, so commercial real estates inherently elever a class. What

742
00:34:06,880 --> 00:34:08,920
Speaker 11: do I mean by that, Well, there's very few people

743
00:34:08,960 --> 00:34:11,160
Speaker 11: that buy a property and don't put some level of

744
00:34:11,239 --> 00:34:13,800
Speaker 11: debt on it. So the availability of debt and the

745
00:34:13,920 --> 00:34:18,000
Speaker 11: cost of debt is super super important. We are beginning

746
00:34:18,080 --> 00:34:21,600
Speaker 11: to see signs of thawing in the debt markets. I'm

747
00:34:21,640 --> 00:34:23,560
Speaker 11: gonna get really wonky here for a second, but we

748
00:34:23,640 --> 00:34:27,040
Speaker 11: follow something called the Senior Loan Officer Opinion Survey quarterly.

749
00:34:26,920 --> 00:34:31,920
Speaker 6: Sur We love that survey. We don't have to call

750
00:34:32,000 --> 00:34:32,319
Speaker 6: this loose.

751
00:34:32,600 --> 00:34:33,439
Speaker 11: I do too loose.

752
00:34:33,520 --> 00:34:37,320
Speaker 6: On the loose, I'm sorry, this is the place to

753
00:34:37,360 --> 00:34:37,920
Speaker 6: go wonky go.

754
00:34:38,080 --> 00:34:38,279
Speaker 2: Yeah.

755
00:34:38,920 --> 00:34:43,160
Speaker 11: So, look, what we've seen is that that metric is

756
00:34:43,239 --> 00:34:45,680
Speaker 11: turning less bad, and it has been for several quarters

757
00:34:45,760 --> 00:34:48,879
Speaker 11: right now. The last observation, it's set around twenty five

758
00:34:48,920 --> 00:34:51,439
Speaker 11: percent of lenders or tightening lending standards. That still sounds

759
00:34:51,520 --> 00:34:54,080
Speaker 11: like a lot, but at the tightness of the market

760
00:34:54,160 --> 00:34:55,600
Speaker 11: it was almost seventy.

761
00:34:55,320 --> 00:34:57,400
Speaker 6: Percent, So it's entering SVB.

762
00:34:59,040 --> 00:35:03,400
Speaker 11: Shortly on the heels of SPHEEDBA. Lenders get more conservative

763
00:35:03,440 --> 00:35:05,880
Speaker 11: on the heels of things like that, So we are

764
00:35:05,960 --> 00:35:07,439
Speaker 11: seeing things turn less bad.

765
00:35:08,160 --> 00:35:08,719
Speaker 7: Believe it or not.

766
00:35:08,960 --> 00:35:11,680
Speaker 11: One of the largest CMBs deals that has been done

767
00:35:11,719 --> 00:35:14,160
Speaker 11: in quite some time. A three billion dollar deal by

768
00:35:14,200 --> 00:35:16,560
Speaker 11: the way back by a New York City office building

769
00:35:17,000 --> 00:35:19,640
Speaker 11: was just done last week. So things are beginning to

770
00:35:19,760 --> 00:35:23,120
Speaker 11: thaw here a little bit, which I think is a

771
00:35:23,200 --> 00:35:25,040
Speaker 11: sign of why the market's beginning to bottom.

772
00:35:25,760 --> 00:35:28,880
Speaker 3: Warehouses and stuff like that. That's the one that's been

773
00:35:28,960 --> 00:35:31,279
Speaker 3: ripping over the last several years. Has that played out?

774
00:35:31,320 --> 00:35:32,600
Speaker 3: I mean, do you see where do you find.

775
00:35:32,520 --> 00:35:33,120
Speaker 7: Value these days?

776
00:35:33,160 --> 00:35:36,719
Speaker 11: So here's here's a remarkable statistic that no one believes me.

777
00:35:37,320 --> 00:35:40,760
Speaker 11: Industrial rates or warehouse rates are the worst performing sector

778
00:35:40,960 --> 00:35:44,360
Speaker 11: of listed roats this year. They're down around four percent

779
00:35:44,480 --> 00:35:48,120
Speaker 11: or so, almost five percent probably as of today, while

780
00:35:48,160 --> 00:35:50,040
Speaker 11: the market is up more than ten percent, the listed

781
00:35:50,080 --> 00:35:53,359
Speaker 11: remark is up ten percent. Why is that happening? Well,

782
00:35:54,120 --> 00:35:56,440
Speaker 11: what the market's telling you, well the public markets are

783
00:35:56,480 --> 00:35:59,279
Speaker 11: telling you, is that long term growth is going to

784
00:35:59,360 --> 00:36:02,959
Speaker 11: mean reverted. So this is an asset class that has really,

785
00:36:03,040 --> 00:36:05,720
Speaker 11: really strong fundamentals. We think it's a great asset class.

786
00:36:06,120 --> 00:36:09,080
Speaker 11: But guess what commercial real estate developers do in a

787
00:36:09,160 --> 00:36:11,839
Speaker 11: market like that, They build new supply. So we think

788
00:36:11,880 --> 00:36:14,640
Speaker 11: supply for such demand is going to equiliberate over time,

789
00:36:14,719 --> 00:36:17,640
Speaker 11: and that will bring long term growth down. And that's

790
00:36:17,680 --> 00:36:20,120
Speaker 11: exactly what the list of remarket's telling you about. So

791
00:36:21,360 --> 00:36:22,840
Speaker 11: that's a long way of saying, we don't think the

792
00:36:22,920 --> 00:36:26,200
Speaker 11: past cycle winners are going to be the next cycle winners.

793
00:36:26,680 --> 00:36:28,640
Speaker 6: How about the office space right now? How would you

794
00:36:28,719 --> 00:36:29,200
Speaker 6: describe that?

795
00:36:30,760 --> 00:36:35,880
Speaker 11: Still challenged, but it's starting to get maybe a little

796
00:36:35,920 --> 00:36:38,839
Speaker 11: bit interesting. I was in the Pacific Northwest last week

797
00:36:39,200 --> 00:36:41,800
Speaker 11: and client asked me, what do you think you're what

798
00:36:41,880 --> 00:36:43,719
Speaker 11: do you think the best performing asset types are going

799
00:36:43,800 --> 00:36:45,960
Speaker 11: to be over the next ten years? And I told

800
00:36:46,000 --> 00:36:47,680
Speaker 11: them I was like, I sort of want to put

801
00:36:47,800 --> 00:36:50,480
Speaker 11: office at the top of that list. The problem is

802
00:36:51,200 --> 00:36:53,160
Speaker 11: it might go lower before it goes higher. I don't

803
00:36:53,160 --> 00:36:55,279
Speaker 11: know if it's a good entry point today, tomorrow, next week,

804
00:36:55,360 --> 00:36:58,399
Speaker 11: or next year. But valuations are starting to get really, really,

805
00:36:58,480 --> 00:37:02,840
Speaker 11: really interesting. I'll give you three green shoots that we

806
00:37:03,000 --> 00:37:08,520
Speaker 11: look at. First family offices, ultra high worth family offices

807
00:37:08,560 --> 00:37:10,640
Speaker 11: that can take more than a ten year view, like

808
00:37:10,680 --> 00:37:13,160
Speaker 11: one hundred year of view are beginning to step in

809
00:37:13,640 --> 00:37:17,160
Speaker 11: and buy office properties because the basis is so attractive.

810
00:37:17,239 --> 00:37:20,160
Speaker 11: They haven't seen the basis like that in decades and decades.

811
00:37:20,440 --> 00:37:22,759
Speaker 11: So that's point number one point number two. I just

812
00:37:22,800 --> 00:37:25,239
Speaker 11: talked about how industrial reads or the second or the

813
00:37:25,320 --> 00:37:28,440
Speaker 11: worst beforming sector of listed reads this year. Guess what

814
00:37:28,719 --> 00:37:32,160
Speaker 11: office is the second best? So the market has sort

815
00:37:32,200 --> 00:37:33,640
Speaker 11: of brought them back from the dead. And then I

816
00:37:33,719 --> 00:37:36,160
Speaker 11: talked about the green shoots that we're starting to see

817
00:37:36,480 --> 00:37:39,440
Speaker 11: very selectively in the lending markets for office. So we're

818
00:37:39,480 --> 00:37:42,400
Speaker 11: still cautious, but I think there's going to come a

819
00:37:42,480 --> 00:37:45,880
Speaker 11: time pretty soon, and I say pretty soon call it

820
00:37:46,000 --> 00:37:48,920
Speaker 11: next twelve to twenty four months where you're going to

821
00:37:49,000 --> 00:37:51,400
Speaker 11: look back and you're gonna say, hey, I wish I

822
00:37:51,400 --> 00:37:53,680
Speaker 11: would have stepped in because it was a really good

823
00:37:53,719 --> 00:37:55,640
Speaker 11: buying opportunity. It's a long way of saying someone's going

824
00:37:55,680 --> 00:37:56,399
Speaker 11: to make a ton of money.

825
00:37:56,520 --> 00:37:56,719
Speaker 2: Yeah.

826
00:37:56,760 --> 00:37:57,200
Speaker 7: Absolutely.

827
00:37:57,200 --> 00:38:01,400
Speaker 3: I mean my personal barometers, just like anything on Third Avenue.

828
00:38:01,440 --> 00:38:03,200
Speaker 3: When I see like the Lipstick building or something like

829
00:38:03,280 --> 00:38:05,680
Speaker 3: that trade at forty cents on the dollar or something,

830
00:38:05,719 --> 00:38:06,640
Speaker 3: I was saying, that's the boss.

831
00:38:06,719 --> 00:38:08,160
Speaker 6: What with the wolfgangs? Are you kidding?

832
00:38:08,200 --> 00:38:10,480
Speaker 7: I don't know, think about this, think about this.

833
00:38:10,560 --> 00:38:12,120
Speaker 11: Are you adding to bet against New York City?

834
00:38:12,520 --> 00:38:12,680
Speaker 7: Yeah?

835
00:38:13,160 --> 00:38:14,640
Speaker 3: I don't know what hard press to do that way

836
00:38:14,640 --> 00:38:16,920
Speaker 3: we've seen that we've seen that movie before. Richell, thank

837
00:38:16,960 --> 00:38:19,520
Speaker 3: you so much for joining us here in our studio. Richell,

838
00:38:19,719 --> 00:38:22,160
Speaker 3: he's head of real estate strategy and Research at Cohen

839
00:38:22,600 --> 00:38:22,960
Speaker 3: and Steers.

840
00:38:23,040 --> 00:38:25,000
Speaker 7: Joining us here on our Bloomberg Interrupt approp for Studio.

841
00:38:25,239 --> 00:38:29,759
Speaker 2: This is the Bloomberg Intelligence podcast, available on Apple, Spotify,

842
00:38:29,960 --> 00:38:32,839
Speaker 2: and anywhere else you will get your podcasts. Listen live

843
00:38:32,960 --> 00:38:36,319
Speaker 2: each weekday, ten am to noon Eastern on Bloomberg dot com,

844
00:38:36,640 --> 00:38:40,000
Speaker 2: b iHeart Radio app, tune In, and the Bloomberg Business App.

845
00:38:40,160 --> 00:38:43,160
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846
00:38:43,400 --> 00:38:45,120
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