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Speaker 3: This is just one of those days, right Amy, It's
Speaker 3: just hard to keep up. It just fast and furious.
Speaker 3: You're doing great, all right, Amy Morris There, Hey listen,
Speaker 3: folks who do want to get to a Bloomberg exclusive.
Speaker 3: SpaceX is in talks to sell insider shares in a
Speaker 3: transaction valuing the rocket and satellite maker at about three
Speaker 3: hundred and fifty billion. That's accring to those familiar with
Speaker 3: the matter. It's a massive jump, highlighting the post election
Speaker 3: gains across Elon Musk's business empire. It turns out it's
Speaker 3: good to be acquainted with the president elect.
Speaker 4: Just look at Tesla since you know, November up forty
Speaker 4: in the month of November alone. Back SpaceX, though, would
Speaker 4: be a significant premium to a previously Muld evaluation of
Speaker 4: two hundred and fifty five at billion dollars, as reported
Speaker 4: by Bloomberg News and other media outlets.
Speaker 5: Just last month.
Speaker 4: SpaceX was last valued at about two hundred and ten
Speaker 4: billion dollars.
Speaker 5: That was a tender offer earlier this year.
Speaker 4: For more on all of this and the big glon universe,
Speaker 4: back with us as Max Chafkin Bloomberg Business with Columnists.
Speaker 4: He's also the co host of Elon Inc. The podcast.
Speaker 4: He's also the author of the contrarian Peter Thiel and
Speaker 4: Silicon Valley's Pursuit of Power. Max joins us here in
Speaker 4: the studio. So SpaceX operates in a space where they're
Speaker 4: pretty much the only player in certain certain elements of it.
Speaker 4: I mean, look at what Boeing had to like call,
Speaker 4: you know, the US government had to call on SpaceX
Speaker 4: to rescue those astronauts because Boeing couldn't do it.
Speaker 6: They are the only player in the United States for
Speaker 6: at launching astronauts, and they are the major player for
Speaker 6: all rocket launches of all kinds.
Speaker 4: Okay, so that huge share of the market overall. Why
Speaker 4: why is the world so much better for SpaceX under Trump?
Speaker 6: Because SpaceX is a government contractor and most of its
Speaker 6: money comes from the US gun That would have happened
Speaker 6: under It's true but so, but you know, it's it's
Speaker 6: easy to get you don't want to you don't want
Speaker 6: to overstate their dominance. So they dominate, But there are
Speaker 6: a bunch of other players, including a bunch of large
Speaker 6: defense contractors that also have programs uh, both for launches
Speaker 6: and also for for astronauts.
Speaker 7: And if you look at.
Speaker 6: The plans for the Moon mission, right it, SpaceX is
Speaker 6: only one of a handful of companies that have contracts
Speaker 6: for this mission. Now if now, Trump could very easily
Speaker 6: change that mix, and and there's already talk. Musk has
Speaker 6: has suggested that it would be you know, better to
Speaker 6: to skip the Moon and you know, go straight to
Speaker 6: Mars or something like that. So so there are lots
Speaker 6: of ways that Trump or Trump administration could help elon Musk.
Speaker 6: And like the most basic basic one has to do
Speaker 6: with Starlink. So starlink was in the running for subsidies
Speaker 6: for rural internet. It lost out on some of those subsidies.
Speaker 6: Musk has been very angry about that, and the nominee
Speaker 6: Trumps nomine to run the FCC was one of the
Speaker 6: voices saying, hey, this is a great injustice. He's a
Speaker 6: huge fan of SpaceX and of Elon Musk.
Speaker 7: So, so like, even if.
Speaker 6: You don't see some kind of dramatic shift in space policy,
Speaker 6: this is very likely to lead to more revenue for
Speaker 6: SpaceX than it was already going to get. And you
Speaker 6: know that's why the valuation has gone up. It's actually
Speaker 6: much more straightforward than the case for you know, why
Speaker 6: Tesla should be worth forty or fifty percent more than
Speaker 6: was worth before.
Speaker 3: So in other words, their businesses make sense and it's
Speaker 3: likely to just keep growing exactly.
Speaker 7: Yeah, there's there are there are a bunch of clear ways.
Speaker 6: And you see analysts, both telecom analysts and space analysts
Speaker 6: talking about this.
Speaker 7: This is not Isn't that some kind of like hypothetical.
Speaker 6: You have to squint and imagine some some weird huge
Speaker 6: regulatory changes to to you know, how how the government
Speaker 6: regulates Elon musks empire. This is just like the government
Speaker 6: taking out it's it's very large paycheck and and giving
Speaker 6: Elon Musk a little bit more money.
Speaker 5: It's interesting because we're seeing it play out. So this
Speaker 5: is this is this, This is.
Speaker 4: Playing out in the private markets right now. We've seen
Speaker 4: it play out in the public markets over the last
Speaker 4: month with Tesla forty percent basically in the month of November. Yeah,
Speaker 4: why why is SpaceX more of a beneficiary than Tesla,
Speaker 4: Because certainly public market investors are saying, hey, Tesla's a
Speaker 4: huge winner here too.
Speaker 6: Yeah, I mean it's it's essentially the same argument, and
Speaker 6: I would be surprised. You know, this is what makes
Speaker 6: it surprising is the size of the figure and the
Speaker 6: fact that they just had they just wrote up the
Speaker 6: valuation very recently, as you said. But I would not
Speaker 6: be shocked if everywhere in Elon Musk's empire, so x
Speaker 6: XAI that's his AI thing, the boring company.
Speaker 7: If we are, if they are also quietly.
Speaker 6: Doing this kind of thing, looking at higher valuations, looking
Speaker 6: at what they can do to take advantage of this moment,
Speaker 6: because investors are very excited about this, and we should
Speaker 6: one thing to I should note about SpaceX that also
Speaker 6: makes it different from Tesla. And one of the reasons
Speaker 6: why this is more likely, it's more likely that they
Speaker 6: will benefit is that they have a good argument for this.
Speaker 7: Their product, as you said, is good it.
Speaker 6: You know, they are doing a good job, so you
Speaker 6: don't have to squint and see some kind of back
Speaker 6: room political thing you could just move the needle a
Speaker 6: little bit and it might lead to a lot.
Speaker 5: Max mentioned X.
Speaker 3: Yeah.
Speaker 4: Axios reported earlier this week that Fidelity actually wrote up
Speaker 4: the value of X, which is, you know, in the
Speaker 4: last few months they've written down the value of their
Speaker 4: investment in X, but a lot of that.
Speaker 5: Might have to do with XAI.
Speaker 6: I mean, it's no I think it makes sense that
Speaker 6: they wrote the value up. And we've been saying that
Speaker 6: on the Elon podcast that this was going to happen.
Speaker 7: I mean X.
Speaker 6: If the election of Donald Trump a few weeks back
Speaker 6: showed us anything, it is that Elon Musk's media company
Speaker 6: is influential. And yes, the advertising business isn't looking great,
Speaker 6: but they have other ways to make money AI and
Speaker 6: making their data available to AI companies including X is
Speaker 6: one way.
Speaker 7: Subscriptions could be another way. This is a company that has.
Speaker 6: Gotten more important than it was before, and I think
Speaker 6: there's a case for raising the valuation.
Speaker 3: We were just showing some footage of was it last
Speaker 3: month where president like Donald Trump was there with Elon
Speaker 3: Musk at another launch by SpaceX having said that, so
Speaker 3: great for Elon to be able to say, hey, Trump,
Speaker 3: you know he's there right very accessible in terms of
Speaker 3: talking to him. If they have a falling out, does
Speaker 3: everybody kind of rethink some stuff, and especially when it
Speaker 3: comes to valuations.
Speaker 6: Look, any time you a business politicizes itself, it creates risk.
Speaker 6: And one of the reasons that business leaders try not
Speaker 6: to do this, try not to show up on stage
Speaker 6: with Donald Trump, is because if there is a break
Speaker 6: or if the political wind shift, then.
Speaker 7: All of a sudden, you're in a box.
Speaker 6: Now, I would say that I think Elon Musk has
Speaker 6: a lot to work with Even if the relationship this
Speaker 6: probably stressful and inevitably, you know, there may be a
Speaker 6: fracture interpersonal relationship.
Speaker 7: Even if it falls apart.
Speaker 6: Musk is going to have power or both in terms
Speaker 6: of at the negotiating table with the US government as
Speaker 6: SpaceX tries to sell it more launches or tries to
Speaker 6: sell at satellite internet services, because the competition is not
Speaker 6: that well established, because no one is shuttling astronauts back
Speaker 6: and forth, and also because Elon Musk will be important
Speaker 6: within the conservative movement whether or not Donald Trump likes him.
Speaker 3: So are all the other billionaires who are doing space
Speaker 3: Jeff Bezos and Richard Brandson. It's not happening anymore.
Speaker 7: No, No, they are all trying to do this.
Speaker 6: And we saw Bezos, you know, offer his congratulations to
Speaker 6: the President elect on x on Twitter, where he hadn't
Speaker 6: posted for a long time. He also saw, you know,
Speaker 6: the Washington Post declined to make an endorsement, which at
Speaker 6: least some critics we're seeing as a you know, politically
Speaker 6: motivated thing designed to help Bezos' rocket company.
Speaker 7: Now he denied that.
Speaker 6: No, he very much wants to sell launches to the
Speaker 6: US government. And you're going to see other defense contractors,
Speaker 6: traditional defense contractors push back.
Speaker 7: And it's not like they have nothing to work with.
Speaker 6: These companies provide jobs and states, they operate factories, they
Speaker 6: have constituencies as well.
Speaker 7: So it's not like Elon Musk.
Speaker 6: Can can overnight take over the entire aerospace industry. He's
Speaker 6: just in a much better position than he was a
Speaker 6: month ago.
Speaker 4: Okay, so Max talking about how powerful Elon is or
Speaker 4: t love excuse me, Yeah, Max talking about how powerful
Speaker 4: Elon is. Certainly when it comes to Tesla, when it
Speaker 4: comes to having the year of the President elect.
Speaker 3: He doesn't win all the time.
Speaker 5: Yeah.
Speaker 4: I was going to say, there's a Delaware judge that
Speaker 4: seems to sort of have an edge right now.
Speaker 5: Yeah, he's going on with this pay package.
Speaker 6: So for a second time, Elon Musk's very very large,
Speaker 6: historically large pay package, which you know, as of now
Speaker 6: is worth more than one hundred million dollars according to
Speaker 6: the Bloomberg story that we published, although has been worth
Speaker 6: you know, fifty billion dollars. The last time it was
Speaker 6: rejected was rejected. Now, if you remember a judge had
Speaker 6: rejected this, there was a shareholder vote. Shareholders approved the
Speaker 6: pay package, and the thought, at least from Elon Musk
Speaker 6: and Tesla's point of view, was that this would essentially.
Speaker 7: Invalidate the Delaware ruling.
Speaker 6: The judge said, no, you can't undo a court ruling
Speaker 6: by having a vote of shareholders. That's a novel application
Speaker 6: of law. That's invalid. And so we're sort of back
Speaker 6: where we started. Tesla's shareholders would very much like to
Speaker 6: keep Elon Musk happy, which as far as they many
Speaker 6: of them see it, and he sees it, means paying
Speaker 6: him a huge amount of money, and Delaware is not
Speaker 6: amenable yet, although we'll see, Musk and his lawyers have
Speaker 6: said they're going to appeal to the Supreme Court of Delaware,
Speaker 6: so it's possible they could overturn it, and then it's
Speaker 6: also possible he could just take his business to Texas,
Speaker 6: as he's threatened to do.
Speaker 4: We do you does this change when I know this
Speaker 4: is a state issue right now? But does this change
Speaker 4: when Donald Trump becomes president?
Speaker 6: No? I mean it's a state issue. And it's also again,
Speaker 6: Musk has already.
Speaker 7: Moved the company to tech Exis.
Speaker 6: You could imagine trying to do this again and then
Speaker 6: fighting it out in a Texas court, which in theory
Speaker 6: would probably be more amenable to the pay package than
Speaker 6: than Delaware was. I just look at this as it.
Speaker 6: Musk doesn't need the money right now. He's very wealthy.
Speaker 3: Well, you don't need to start a go fundme page
Speaker 3: for him.
Speaker 7: No, he'll be fund on.
Speaker 8: Later.
Speaker 6: Yeah, I'm sure he'll take any checks we send him,
Speaker 6: but he doesn't need the money now. I do think
Speaker 6: this is a reminder that Elon Musk cannot He cannot
Speaker 6: change the laws of gravity, and he cannot.
Speaker 7: Change the law laws.
Speaker 6: You know, there are a lot of people making huge
Speaker 6: investments in his companies right now, including in Tesla, and
Speaker 6: even with this SpaceX deal based on some kind of
Speaker 6: vague sense that politics will sort of shift the laws
Speaker 6: of business in his favor. And but there are there
Speaker 6: are laws of business that are not in his favor,
Speaker 6: and this is one of them. He's he's repeatedly gone
Speaker 6: out against this Delaware judge. Remember this is the same
Speaker 6: judge that forced him to buy Twitter slash x.
Speaker 7: So, so you know, he can't do everything.
Speaker 6: And again there are going to be battles ahead, legal battles,
Speaker 6: political battles, and and he's vulnerable to you know, the
Speaker 6: whims of law and democracy and all that, just like
Speaker 6: everyone else.
Speaker 3: I mean, he can't get it everything he wants.
Speaker 7: What almost what?
Speaker 4: Well, why is the Why is the money so important
Speaker 4: to him? I don't know, honestly, Like if you were
Speaker 4: let's see, you know here it goes in.
Speaker 3: There, it's it's three hundred and fifty three.
Speaker 4: Billion dollars ethicly SpaceX right. I mean, he's what's an
Speaker 4: extra fifty billion dollars? What can you buy with four
Speaker 4: hundred million dollars that you can't buy with three hundred
Speaker 4: and fifty million dollars.
Speaker 6: I mean, he has said that he intends to, you know,
Speaker 6: play a big role in the midterm elections. There also
Speaker 6: there's chatter about potential huge donations to British politicians, so
Speaker 6: maybe he wants to just a little extra cash for
Speaker 6: his political stuff. But really I think this is more
Speaker 6: for him and the people who back him. About the principle,
Speaker 6: and Elon Musk is somebody who has put now now
Speaker 6: a principle. You know, I think there are people who
Speaker 6: would snicker at that. But Elon Musk has put his
Speaker 6: own role in Tesla, in Tesla and its growth central
Speaker 6: to its brand, and he sees this as an.
Speaker 7: Attack, you know, right, rightfully wrongly.
Speaker 3: Max Chafkin always appreciated co host of the Elon Inc Podcast.
Speaker 3: A new episode downloading you're.
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Speaker 3: Well, I got to say to politics, yes, you know,
Speaker 3: there is so much going on Russia, Ukraine, Middle East,
Speaker 3: US China relations. And then it feels like, out of nowhere,
Speaker 3: what has become one of our most read stories on
Speaker 3: the Bloomberg. It's been a top the list for most
Speaker 3: of the day about a declaration of martial law in
Speaker 3: South Korea by the South Korean President Yun, only to
Speaker 3: be followed hours later by the country's parliament voting to
Speaker 3: lift the declaration. I gotta say, Tim, it's a bit
Speaker 3: of a whipsite, yea it is.
Speaker 4: We got a great live log on it from our
Speaker 4: team over at Bloomberg News. If you're on the URN,
Speaker 4: do check that out by going to tliv here with
Speaker 4: what is going on? Sidney Siler Senior Advisor, nonresident or
Speaker 4: career Chair, Center for Strategic and International Studies. Sidney was
Speaker 4: the National Intelligence Officer for North Korea at the National
Speaker 4: Intelligence Council from twenty twenty to twenty twenty three, one
Speaker 4: of the nation's top experts when it comes to North
Speaker 4: Korea and Carol. Before that, he was the US Forces
Speaker 4: Korea Senior Analyst and Senior Defense Intelligence Expert for North Korea,
Speaker 4: serving as the principal advisor and senior expert on Korean
Speaker 4: Peninsula security issues to the USFK Commander and the US
Speaker 4: Defense Intelligence Enterprise.
Speaker 3: All Right, we had to lay it out, and this
Speaker 3: is why we wanted to talk to Sidney. Hey, Sidney,
Speaker 3: great to have you here back on Bloomberg. Tell us
Speaker 3: about marshal law. Came as a shock I think to
Speaker 3: many domestically and abroad when they declared martial law. But
Speaker 3: the country has a history of martial law and military rules.
Speaker 3: So give us the history. What's important for the Bloomberg
Speaker 3: audience to know at this hour.
Speaker 9: Well, thank you first vote for the vitation to speak
Speaker 9: on this. The history is relevant and important only because
Speaker 9: it's so from a different era. It's worth a warning
Speaker 9: not to actually view these recent developments in that context.
Speaker 9: North Korea, as you call the Korean Peninsula, divided right
Speaker 9: after World War Two, underwent a war trying to unify
Speaker 9: from nineteen fifty to fifty three, and South Korea's history
Speaker 9: has been moving from a very right wing pro US
Speaker 9: authoritarian dictaintorship to the democracy we have today. Along the lines,
Speaker 9: there's been a couple of military coups, again ensuring a
Speaker 9: conservative hardline towards North Korea authoritarian in terms of its
Speaker 9: domestic system, but a gradual growth today to the economic
Speaker 9: miracle that has begun. And the last coup was nineteen eighty,
Speaker 9: so many years ago, such a different context today. That said,
Speaker 9: you know, it is one of the few tools at
Speaker 9: the dispo of the president. It's one you don't want
Speaker 9: to break the glass on too early when you have
Speaker 9: the type of political deadlock that President Un has faced
Speaker 9: with the opposition, which is all focused on trying to
Speaker 9: regain power. In South Korea has a five year presidential system.
Speaker 9: One term you become a lane duck real quickly, and
Speaker 9: the opposition has been tasting blood. With President Un having
Speaker 9: twenty percent and below approval ratings, it was a surprise
Speaker 9: that he chose this tool at this time. At the
Speaker 9: same time, there are elements of it that warned us
Speaker 9: not taking it too alarmedly and have reacting with caution,
Speaker 9: as the US government has so far.
Speaker 4: Well, why is that the US government was certainly caught
Speaker 4: off guard? The White House was not notified ahead of
Speaker 4: time about this, but it sounds pretty alarmist. I mean,
Speaker 4: the idea of martiall rule in a democracy, that is
Speaker 4: certainly one of those things that I think people would say,
Speaker 4: you know, it'd be fair to respond with alarm there.
Speaker 4: Why should we be cautious about doing that?
Speaker 9: Well, yeah, I hate to draw parallels, but I mean,
Speaker 9: if you just look at the dynamics of US political system,
Speaker 9: you know, back around the first Trump administration or even today,
Speaker 9: you know, worries about mobilizing national guards and using military capabilities.
Speaker 9: I mean, it, unfortunately, is something that we've seen in
Speaker 9: other democracies throughout the world. I think the quickness. You know,
Speaker 9: first of all, President yun is a career prosecutor. He
Speaker 9: was very heavily involved in the impeachment that removed Pacinet
Speaker 9: from office, and so you know what he embarked on this,
Speaker 9: he does so from a position of understanding the constitution
Speaker 9: and probably understanding that has happened, it would be overturned
Speaker 9: or rejected within hours. And so the fact that the
Speaker 9: system worked so quickly to have the National Assembly come
Speaker 9: together and reject the declaration, and that it looks like,
Speaker 9: you know, the initial steps involved with martial law are
Speaker 9: being backed off. It is a time to now kind
Speaker 9: of focus on the morning after, as it were.
Speaker 3: Hey, I want to also bring into the conversation Rosalind Matheson,
Speaker 3: Bloomberg News News director of EMEA. Of course we're talking
Speaker 3: about Europe, the Mid East, in Africa. She's typically based
Speaker 3: in our London bureau, but lucky for us and we
Speaker 3: have been tapping into her big time that because she
Speaker 3: is here in New York and with all the news
Speaker 3: she's here in our New York studio, Raz we're listening
Speaker 3: to Sydney his view and giving us some context. How
Speaker 3: are you seeing about what's going in South Korea? Because
Speaker 3: I have to say, when we all walked in, we're like,
Speaker 3: what is going on? And how do we make sense
Speaker 3: of it?
Speaker 10: Everybody was shaking their heads.
Speaker 11: We were quite stunned to see this news and particularly
Speaker 11: you know, coming in that late night televised address just
Speaker 11: denouncing you know, emergency martial law and the words marshal
Speaker 11: law of course resonating you know, in a very tricky
Speaker 11: environment historically in South Korea. And it's interesting to see
Speaker 11: how quickly again parliament, they managed to get into parliament
Speaker 11: and they voted to overturn it. So the question is
Speaker 11: what was he trying to achieve with this and what
Speaker 11: does he do next? I mean, does he remain defiant
Speaker 11: in the face of parliament and trying marshal military support
Speaker 11: or does he accept you know, what people are saying
Speaker 11: here about his actions and does he resign or is
Speaker 11: he impeached at some point? I mean, it can't be
Speaker 11: necessarily a good outcome for him here. So does that
Speaker 11: plunge South Korean into a further period of political term
Speaker 11: or where you've got to maybe have elections, you've got
Speaker 11: to have a new administration. And what does that mean
Speaker 11: for stability in South Korea?
Speaker 3: Which we think that's North Korea we expects stuff to happen,
Speaker 3: not South Korea.
Speaker 4: Well, we'll talk about the North Korean angle in a second,
Speaker 4: but City, I want to get your thoughts on you know,
Speaker 4: this idea of an unpopular leader declaring martial law. Does
Speaker 4: that make him less popular? I mean, this doesn't necessarily,
Speaker 4: as an outsider, seem like something that would you know,
Speaker 4: engender him with a larger group of folks.
Speaker 9: Good point. Well, he did open his, you know, his
Speaker 9: announcement by stating that, you know, kind of using deep
Speaker 9: state like language, that there was no Korean agents throughout
Speaker 9: the US government, anti state agents that were out to
Speaker 9: undermine the very you know, foundations of the state of
Speaker 9: the Republic of Korea. So it seems like he was
Speaker 9: hoping to try to galvanize support from the right, his
Speaker 9: conservative base, and maybe even some in the middle who
Speaker 9: would be more concerned about what the opposition was successfully
Speaker 9: doing and building support to challenge the ruling party in
Speaker 9: the next presidential Chile election, or even potentially to impeach Union.
Speaker 9: Talk about impeaching Union was already in play, and you
Speaker 9: may have just concluded that, you know, again, he had
Speaker 9: nothing to lose. Most likely, when you look at the
Speaker 9: number of ruling party members who would now join with
Speaker 9: opposition forces, there's probably enough votes to you know, challenge
Speaker 9: whether Union will stay in power. He but Un is
Speaker 9: a guy who does what he believes is is right.
Speaker 9: Agree or disagree with his worldview that he was doing
Speaker 9: something for the to protect the Republic of Korea, and
Speaker 9: he was probably willing to accept whatever consequences would come
Speaker 9: out of there.
Speaker 3: I wondered Ros if you had a question, because here
Speaker 3: he is like someone who's had some history, understands and
Speaker 3: has followed and you look at the world more broadly.
Speaker 10: Yeah, I'm very interested, Sidney.
Speaker 11: You were talking about how Ying perhaps felt he had
Speaker 11: nothing to lose, and could he try and galvanize people
Speaker 11: with this maneuver.
Speaker 10: But again, in a country that's had.
Speaker 11: A really difficult history when it comes to martial law
Speaker 11: and military rule and a real strong sense of wanting
Speaker 11: democracy amongst ordinary South Koreans. I mean, where do you
Speaker 11: see this going for you do you feel he's going
Speaker 11: to have to step down or he will be impeached.
Speaker 9: My sense is he'll stay the course. He will say
Speaker 9: he acted in accordance with the constitution definitions, with some
Speaker 9: subjectivity as to whether the emergency justified or warranted the action,
Speaker 9: you know. And again, when you look at the history
Speaker 9: of martial law in Korea, it's not forty years passed
Speaker 9: since you know, the last coupdetas that kind of facilitated
Speaker 9: martial law in that nineteen eighty time period. And again,
Speaker 9: having been my first tour in Korea in nineteen eighty two,
Speaker 9: it is a markedly different environment, markedly different world today.
Speaker 9: Other elements of the government system are functioning. They're not
Speaker 9: being rejected, you know, during the martial laws or when
Speaker 9: the when the military seizes power from civilians back in
Speaker 9: you know, nineteen sixty one, nineteen seventy, nine eighty, they
Speaker 9: were overturning the system. So far, all Yun seems to
Speaker 9: be doing is addressing the people in that system. And
Speaker 9: so I think, again, you know, this is not too
Speaker 9: apocalyptic in terms of domestic South Korean politics. It survived
Speaker 9: challenges like this in the past. Yun will not, though, I.
Speaker 3: Think sending what does this mean for the relationship between
Speaker 3: the North and the South. Is it an opportunity for
Speaker 3: North Korea to maybe potentially go on the offensive.
Speaker 9: So what's interesting when you think about it, that would
Speaker 9: be the natural thought, right that Kim Jong lunn may
Speaker 9: see a weakness in South Korea that he could exploit.
Speaker 9: At the same time, Kim Jong Lund's got his own
Speaker 9: challenge and issues at home. Yeah, heavily involved in supporting
Speaker 9: the war in Russia. And perhaps more importantly, you know,
Speaker 9: with many people expecting Kim to do something, he is
Speaker 9: likely not to play into their hand and only provide
Speaker 9: further evidence that what Eton was saying about the North
Speaker 9: Korea threat was right. There's a lot of value for
Speaker 9: North creator to stand down right now.
Speaker 3: Sidney, thank you so much, So appreciate you finding some
Speaker 3: time for us. Sidney Siler, Senior advisor at the Career
Speaker 3: Chair Center for Strategic and International Studies, joining us from
Speaker 3: the nation's capital. Roz Mathison staying with us because I
Speaker 3: got to say, Roz, geopolitics, it's all we've talked about.
Speaker 3: I feel like for the last couple of years, and
Speaker 3: I'm not even quite sure where to go next.
Speaker 5: Which geographically where to go?
Speaker 3: Where would you go next? Like when you think about France,
Speaker 3: the Republic of Georgia, the Middle East, ongoing Syria, Aran,
Speaker 3: where would you go next?
Speaker 10: Well, there's a lot going on, isn't there.
Speaker 11: Yeah, that France is particularly interesting at the moment because
Speaker 11: we are careering towards the collapse of the government there
Speaker 11: as soon as tomorrow, and interestingly because the right and
Speaker 11: the left are joining together to do that, and that's
Speaker 11: going to be a really tricky moment for a very
Speaker 11: big economy in Europe and a lot of political instability ahead.
Speaker 11: I mean, if Barnier goes, then you've got a period
Speaker 11: where Emmanuel Macron has to try and find another prime
Speaker 11: minister who'll be able to navigate a very tricky fiscal environment.
Speaker 11: I mean, if Barneo failed, and this is a very
Speaker 11: experienced politician with many years in Brussels, so he couldn't
Speaker 11: manage it, then who can.
Speaker 4: I think a lot of Americans, with the system of
Speaker 4: government that we have here in the US and the
Speaker 4: dominance of the Democrats and Republicans, might have trouble comprehending
Speaker 4: the idea of the right and left coming together to
Speaker 4: top of a government.
Speaker 5: Explain this to the American mind.
Speaker 11: Yeah, it's not because they're supporters of each other, put
Speaker 11: it that way. In fact, they really don't like each
Speaker 11: other at all. But they have a common enemy, which
Speaker 11: is the French budget, and they all have problems with
Speaker 11: the French budget and they want changes to it. And
Speaker 11: the kind of changes that they're asking for are very
Speaker 11: populist and they're what the markets don't want because you've
Speaker 11: got a very big fiscal deficityel Like, I've seen this
Speaker 11: with you before. Yeah, So it's not so they're comfortable bedfellows,
Speaker 11: but they've got a united enemy. And of course the
Speaker 11: backdrop is this is coming at a time when we
Speaker 11: have Donald Trump coming to.
Speaker 10: Power in the US.
Speaker 11: You've got elections coming in Germany next door. So you've
Speaker 11: got a period potentially of political uncertainty in Germany. I
Speaker 11: mean often after German election you don't have a functioning
Speaker 11: government for sometimes six months or more. You're low coalition
Speaker 11: wrangling that goes on. So you're not going to if
Speaker 11: you're talking about European unity right now, and a unified
Speaker 11: European view on everything from Ukraine to the Middle East,
Speaker 11: to trade to tariffs with the US, to you how
Speaker 11: to handle Donald Trump in a second administration. You've got
Speaker 11: a lot of fragmentation occurring in particularly again the two
Speaker 11: biggest economies in Europe, France and Germany, And so what
Speaker 11: does that do in terms of a cohesive European approach
Speaker 11: to a second Trump administration.
Speaker 3: I'm like questioning where to go next Georgia, Like, is
Speaker 3: that what is going on there? We know there's pro
Speaker 3: European protests, we're watching that, We've been watching some of
Speaker 3: the footage throughout the day. What do we need to
Speaker 3: know about that?
Speaker 11: There was a little talk about whether that's a Madan
Speaker 11: revolution similar to what happened in Ukraine, that pro European
Speaker 11: push protests, and how successful they can be. But in Georgia,
Speaker 11: you know, the protests are big, but they're very fragmented.
Speaker 11: There's not a strong sense of who's driving.
Speaker 3: Is Russia well that's.
Speaker 11: Always a question. That was a question in Ukraine as well.
Speaker 11: Obviously during the protests that we saw there. Russia does
Speaker 11: not want these countries going into Europe's orbit. We saw
Speaker 11: that recently, gain questions over the elections in Moldova, for example,
Speaker 11: the referendum in Moldova about joining the EU. Wants to
Speaker 11: pull these countries away and make them argue with each
Speaker 11: other and make that kind of weaker.
Speaker 4: We could talk to you about more about Russia, Ukraine,
Speaker 4: the Middle East, we could talk about Syria and iron
Speaker 4: We don't have time to do any of those things.
Speaker 4: What I want to do is just in our last
Speaker 4: forty five seconds, talk about the significance of all of
Speaker 4: this happening against a backdrop of the changing administration here
Speaker 4: in the United States, one that was caught off guard
Speaker 4: by South Korea today.
Speaker 11: Well, that is the question, but also it just reflects
Speaker 11: a changing world beyond the US. You know, we're in
Speaker 11: a world where the US is no longer the singular
Speaker 11: dominant power. So you've see a lot of change erupting
Speaker 11: from that. Countries deciding to work out can they have
Speaker 11: that power block? Are they in that group instead? Where
Speaker 11: do they belong? The rise of the global South in
Speaker 11: that so a lot of fragmentation into different power groups.
Speaker 11: And that's just natural when you see, you know, arguably
Speaker 11: a declining singular global power and more of a multi
Speaker 11: polar world.
Speaker 3: Twenty seconds is there any Is there a common thread?
Speaker 3: Is it the rise of populism? Is it just another
Speaker 3: cycle in the world's history. How do you see that.
Speaker 10: It's a bit of everything.
Speaker 11: But it is that question again of populist movements in
Speaker 11: several countries.
Speaker 10: It's not just all on.
Speaker 11: The right, I would add as well, it's parties on
Speaker 11: the left and the idea of you know, public saying
Speaker 11: I want to party. A leadership is going to talk
Speaker 11: with you know, talk with me, not at me. And
Speaker 11: so politicians who are stute you pick up on that
Speaker 11: are the ones who are being successful.
Speaker 3: Don't go home.
Speaker 4: Just I was just going to say, this is why
Speaker 4: we love Bloomberg because people like you.
Speaker 3: Thank you so much. Ros Mathis and Bloomberg's news new
Speaker 3: director News director, I should say, overseeing Ema.
Speaker 2: You're listening to the Bloomberg Business Week podcast. Listen live
Speaker 2: each weekday starting at two pm Eastern on applecar Play
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Speaker 2: York station, Just say Alexa play Bloomberg eleven thirty.
Speaker 3: All right. Just about one year ago, our Bloomberg News
Speaker 3: team put together a great story highlighting the stock optimists
Speaker 3: who nailed twenty twenty three and saw more gains ahead.
Speaker 3: One of those stock optimists who made the right call
Speaker 3: last year's Ryan Dietrich. Dietrich expected the US economy to
Speaker 3: avoid a recession in twenty twenty three. Check it did right.
Speaker 3: Some say a little bit of a rolling recession, but
Speaker 3: really we kind of missed it in a big way.
Speaker 3: You also bet inflation would cool sooner than the market
Speaker 3: was expecting.
Speaker 5: Check it's it's still getting there. It's still getting there.
Speaker 5: We're still getting there.
Speaker 7: Sticky.
Speaker 5: Yeah.
Speaker 3: He added exposure to stocks during the banking turmoil in
Speaker 3: March twenty twenty three, and as the S and P
Speaker 3: five hundred sank in October of twenty twenty three. You
Speaker 3: gotta say, tim check check good calls.
Speaker 4: Yeah, Ryan Dietrich T, chief market strategist at the RIA
Speaker 4: and platform for advisors of the Carson Group. He joins
Speaker 4: us here in the Bloomberg Business Week.
Speaker 8: Well done, well, Carol can hold on.
Speaker 5: The year's not over here?
Speaker 2: Okay.
Speaker 8: Every time I present or something and I have you
Speaker 8: come and give that little intro that was that was
Speaker 8: very nice.
Speaker 5: Thank you.
Speaker 3: Listen, we are when people make bad calls. We kind
Speaker 3: of pointed out, oh yeah, and the same goes for
Speaker 3: when you make a really good call.
Speaker 5: Well, thank you.
Speaker 2: Yeah.
Speaker 8: It was two years ago this month, December of twenty two,
Speaker 8: Carson Group went on a record. We went overweight stocks.
Speaker 8: We manage real money for our advisors, and we said
Speaker 8: no recession. It wasn't very popular, but as we know
Speaker 8: now we're looking at fifty four new all time highs,
Speaker 8: the back to back twenty percent games. We can get
Speaker 8: into all of it, but yeah, it's it's been a
Speaker 8: great run.
Speaker 4: So some people might say the US stocks are expensive
Speaker 4: right now by certain measures, but you argue that they're
Speaker 4: still room with Do you argue the bull market is
Speaker 4: still young?
Speaker 8: That's correct, you know. I mean a couples that answer
Speaker 8: this one. Stocks are a little pricy. I mean you
Speaker 8: look at the forward s and P five hundred earnings,
Speaker 8: they are a little bit pricey. But then you look
Speaker 8: at other parts of the market. I've come on with
Speaker 8: you guys for two years talking about some of these things.
Speaker 8: Small caps still are cheap, mid cap still our cheap industrials, financials,
Speaker 8: there are parts that are cheap. Yes, large caps are expensive.
Speaker 8: When you talk about bull markets. So it's so fascinating.
Speaker 8: This one's about two years old right October twenty two,
Speaker 8: so I had two years, so we'll call it twenty
Speaker 8: five twenty six months right now. Once a bull market
Speaker 8: gets into its third year, like this one is right
Speaker 8: now into the third, that's yeah, not really, because it
Speaker 8: looks like a cruise ship. Once they get moving, they
Speaker 8: keep moving. I went back forty years, last five bowl
Speaker 8: markets that got into a third year. Everyone that made
Speaker 8: it to at least their fifth year, and actually it
Speaker 8: was an average of eight years. I'm not saying this
Speaker 8: one's gonna go eight years. We're just saying these cycles
Speaker 8: can last a lot longer than you think.
Speaker 4: But we're stocks as expensive in their second year as
Speaker 4: they are now in other bull markets.
Speaker 8: I guess the short answer is no, that's a great point,
Speaker 8: they're not. And one other concern, if you want to
Speaker 8: use that is if you look at like we gained
Speaker 8: over sixty percent, okay the first two years, is bol
Speaker 8: market looking at like the last nine bowl markets that
Speaker 8: made it into the third year, that third year is
Speaker 8: up only like two or three percent. So some consolidation,
Speaker 8: we think we're gonna gain more than that the next
Speaker 8: twelve months will be clear, but those are some things
Speaker 8: to think about. We just had a huge rally. We
Speaker 8: don't see a recession. Look at the economic data, all
Speaker 8: time highs and construction spending just yesterday, you know, all
Speaker 8: time highs and earnings estimates we still think are going
Speaker 8: to be strong, that we can get into more of
Speaker 8: the weeds of that. But there's no recession coming. So
Speaker 8: we still be overweight equities like we have been for
Speaker 8: twenty four months now.
Speaker 3: You know, I'm looking at the equal weighted S and
Speaker 3: P five hundred and it's up about just shive eighteen
Speaker 3: percent for the year. S and P five hundred is
Speaker 3: up about twenty seven percent. If I look at both
Speaker 3: equal weighted, just coming off overbought levels, I'm assuming. Let
Speaker 3: me just pull it up on the Bloomberg the RSI
Speaker 3: and if you look at the relative strength on the
Speaker 3: S and P five hundred, yeah, overbought. So I mean,
Speaker 3: what is it? Just momentum creates momentum, which to me
Speaker 3: doesn't say that's necessarily good thing to buy into. It's
Speaker 3: a different if it's fundamentals, it's earnings based, it's you know,
Speaker 3: those kind of things that I can actually trade on.
Speaker 8: Yeah, there's different things you can look at there. When
Speaker 8: you think about the equal weight, what's that tell us?
Speaker 8: What tell us is a lot of participation, right, we
Speaker 8: know that. Look at various advanced cline lines of we've
Speaker 8: seen it brought me downs. Oh my goodness, yes, absolutely,
Speaker 8: just two weeks ago, right, there's eleven sectors. Ten of
Speaker 8: them outperformed the SP five hundred. Last week, eight of
Speaker 8: them outperformed the SP five hundred. What's happened since the election?
Speaker 8: Small caps, midcaps, A lot of other areas, not just tech,
Speaker 8: not just communications, have been doing well. So that's that
Speaker 8: broadening up. But I'm with you one hundred percent. Those
Speaker 8: are the technicals. Then we look at the fundamentals. I mean,
Speaker 8: what are the credit spreads doing. You mentioned March of
Speaker 8: twenty three when you have the banking crisis. Yeah, we
Speaker 8: didn't really see much stress in the credit markets. Think
Speaker 8: about the yen carry trade on win those three very
Speaker 8: scary days early here in August. You know what the
Speaker 8: US dollar did. US dollar went down. Then historically when
Speaker 8: the dollar goes up, that's a worry. Now, I will
Speaker 8: say right here and now one of our worry.
Speaker 3: We're sold as a safe haven.
Speaker 8: Exactly seen of the safe haven. But you've got dollar strength.
Speaker 8: I'm surprised, honestly, dollar has been as strong as I'm sorry,
Speaker 8: the market, stock market's been as strong as it has
Speaker 8: been with the dollar strength we've seen so into next year.
Speaker 8: If the dollar continues to strengthen, that is a concern
Speaker 8: of ours. We don't expect it to, but if it does,
Speaker 8: that could be a sign then you know, maybe a
Speaker 8: little more risk off is in play, but we're not
Speaker 8: seeing it yet.
Speaker 4: Let's be clear, what is the difference going into twenty
Speaker 4: twenty five versus what you saw a year ago?
Speaker 8: Sitting question, Yeah, that's good. Well, I guess we're one
Speaker 8: we're all one year older, you know, and that's that's
Speaker 8: for sure. But I will say one big difference what
Speaker 8: we're seeing now kind of the other answer. We are
Speaker 8: seeing broadening out. We are seeing a lot of participation.
Speaker 8: Remember those last two months last year big rally small
Speaker 8: caps rustled too by small caps gain like twenty one percent.
Speaker 8: Then they were flat the first six months of this year.
Speaker 8: But since the middle of the year, we are seeing
Speaker 8: more of a broadening out, which is a nice thing. Also,
Speaker 8: manufacturing has not done very well in our country. We
Speaker 8: get it. But just look at that data we saw yesterday.
Speaker 8: Maybe we're starting, you know, maybe telling me there's a
Speaker 8: chance here, you're starting to see a bottom, if you will,
Speaker 8: in some of the manufacturing data, which is a positive.
Speaker 8: But services has been strong on the whole time. Earnings
Speaker 8: have been pretty strong in the whole time. So there
Speaker 8: are some similarities. But you know, the reality again is
Speaker 8: one more thing on this. So we're up another Let's
Speaker 8: assume we're up twenty percent this year. I know we're
Speaker 8: not there yet, but we probably will be. We looked
Speaker 8: to back to back twenty percent gains since nineteen fifty
Speaker 8: found eight of them. What happened to next year? Marco
Speaker 8: was up six out of six times, up thirteen percent
Speaker 8: on average. So it's not like a huge game. But
Speaker 8: just because we're up twenty percent two years in a row,
Speaker 8: that is not a reason to be bearish. And there's
Speaker 8: other stuff to look at. I get it, but that's
Speaker 8: just something to be aware of.
Speaker 3: Any of those eight years have a new president in
Speaker 3: the White House.
Speaker 2: Hmm.
Speaker 8: That's a very good question. I'm not sure, but I
Speaker 8: can dive into that for a second here. When you
Speaker 8: look at you know, uh, well, as a new president
Speaker 8: is a re elected president. I get, we can look
Speaker 8: at it either way. But when you look at re
Speaker 8: elected presidents, year one stocks do really well and you're
Speaker 8: two to do really well, it's later in a re
Speaker 8: elected president's term they don't do as well versus the
Speaker 8: exact mirror image of that what we just saw President
Speaker 8: Biden first second year not as good, but third and
Speaker 8: fourth are strong. And again get into the weeds of
Speaker 8: why this is probably because you know what you're gonna get.
Speaker 8: There's less uncertainty with someone who's potentially won a reelection,
Speaker 8: and I get it this time is a little bit different.
Speaker 8: But the reality again is, you know, you look what's happening.
Speaker 8: And then we can get into the F word the
Speaker 8: FED if you want. I mean, that's another big driver here.
Speaker 5: Well, I want to do before we get to the
Speaker 5: F flord, let's do the T word tariffs.
Speaker 8: What's that? Oh?
Speaker 4: Okay, okay, because and I think Carol was getting at this,
Speaker 4: but yeah, I it was Thanksgiving that is coming gone
Speaker 4: unfortunately in the rearview.
Speaker 5: But I'm wondering about the.
Speaker 4: What that does to the market if President elect ends
Speaker 4: up going through with the tariffs that he's threatened. We
Speaker 4: had any head of trays on last week from data
Speaker 4: who said, you know he's going to do it. If
Speaker 4: he says he's going to do it, what does that do,
Speaker 4: especially to small caps?
Speaker 8: Yeah, well, what do we know? We had a fifteen
Speaker 8: month rally after the election in twenty sixteen. February fourth
Speaker 8: is when we all say, slapped on tariffs and the
Speaker 8: market didn't have a very good year in twenty eighteen.
Speaker 8: Maybe there are other factors in there, but that's the
Speaker 8: reality what happened now. I will say this, we're all
Speaker 8: talking about it now, all right, mister market's probably priced
Speaker 8: a lot of this in the reality is, if you
Speaker 8: do the twenty five percent tariffs on you know what,
Speaker 8: it's Canada and Mexico and ten percent tariffs on China
Speaker 8: the full thing, that probably will slow down the rally
Speaker 8: we've seen, maybe potentially cause a little bit more inflation.
Speaker 8: I will say this, though you look at inflation, you're
Speaker 8: your CPI in twenty eighteen and twenty nineteen when those
Speaker 8: tariff started, It's not like we saw massive inflation. I
Speaker 8: get it. Parts of the economy saw inflation, but the
Speaker 8: overall economy you really didn't see inflation, so that's something
Speaker 8: important to remember.
Speaker 3: My last question, I get a little hanky when everybody's
Speaker 3: so enthusiastic. We've the story about the strategists and their targets, and.
Speaker 5: You should get Warren Buffett on. He's not super enthusiastic.
Speaker 3: Not everybody is. And it makes me a little hinky.
Speaker 3: Whether it's still corporate real estate or office properties, or
Speaker 3: whether it's private credit because we don't have much transparency.
Speaker 3: What's the one thing that you think man keep an
Speaker 3: eye on, because that could be kind of the canary
Speaker 3: in the coal mine.
Speaker 8: Yeah, I think I answered a little bit ago. The
Speaker 8: US dollar, right, if the dollar continues to be strong,
Speaker 8: that's the one thing. And honestly, yields. If yields keep
Speaker 8: going higher, look at the housing data. Housing is an issue.
Speaker 8: Small business confidence come back a little bit, but we're
Speaker 8: not seeing small business investment. That's why we think with
Speaker 8: the higher productivity that we're seeing in our country, with
Speaker 8: inflation being last year's problem, the FED still can cut
Speaker 8: one will I'll leave you on this when the FED
Speaker 8: is cut with the market of all time highs. We
Speaker 8: took a look at this using Bloomberg data back in
Speaker 8: nineteen eighty. One year later, SP's been higher twenty times.
Speaker 8: It's happened twenty out of twenty times one year later.
Speaker 8: So we just saw a cut of all time highs.
Speaker 8: You know. Recently we might see another one cut near
Speaker 8: all time highs here in December. That is a bolish thing.
Speaker 8: Do not fight the Fed, is what they taught us
Speaker 8: a long time ago. We'd still side with them.
Speaker 3: Yeah, that kind of still holds it, so it always does. Hey, Ryan,
Speaker 3: thank you so much. Happy holidays.
Speaker 8: I appreciate it and love being in your city.
Speaker 3: Thank you nice having you in studio, Ryan Dietrich. He's
Speaker 3: chief market strategist at the Carson Group. As we said,
Speaker 3: joining us here in our Business Week studio.
Speaker 2: You're listening to the Bloomberg Business Week Podcast. Listen live
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Speaker 2: and Android Auto with the Bloomberg Business App. You can
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Speaker 2: York station, Just say Alexa Play Bloomberg eleven thirty Carol.
Speaker 4: Many Americans agree there's a housing crisis totally radically different
Speaker 4: though than from the last housing crisis. So instead of
Speaker 4: the values of homes dropping too fast as they did
Speaker 4: during the foreclosures debacle starting in two thousand and seven.
Speaker 5: You covered that a lot.
Speaker 3: Yeah, Oh my god, I remember going to people in
Speaker 3: uh I think it was Florida, forgive me, I'm trying
Speaker 3: to remember, but talking to homeowners who were just you know,
Speaker 3: losing their homes, couldn't afford it. It was just a really,
Speaker 3: really tough situation and just such a low And we
Speaker 3: know homes not only important for people to live in,
Speaker 3: but it's often their biggest investment.
Speaker 4: So fast forward a few years and instead of home
Speaker 4: prices dropping too fast as they did during that foreclosure
Speaker 4: debacle back in two thousand and seven, they've stayed stubbornly high,
Speaker 4: locking many would be buyers out of the market, raising
Speaker 4: rants and adding to anxiety about the cost of living.
Speaker 4: Amy Rubinstein has spent her career in real estate. She's
Speaker 4: seen the industry through different cycles. She's the CEO of
Speaker 4: Clear Investment Group. It's a Chicago based firm focuses on
Speaker 4: distressed mid size multifamily assets I think three hundred to
Speaker 4: twelve hundred unit portfolios and secondary and tertiary markets here
Speaker 4: in the US. The company currently has assets in Syracuse,
Speaker 4: New York, Columbus, Ohio, Shreveport, Louisiana, and in Illinois and
Speaker 4: Decalm in Chicago.
Speaker 3: Amy, welcome, thank you, thanks for having me here.
Speaker 4: So let's talk a little bit about the overall market
Speaker 4: right now and where you're seeing opportunity because we spend
Speaker 4: a lot of time talking about high prices. Yes, but
Speaker 4: you're going after a different type of market.
Speaker 5: Where are you see value?
Speaker 12: Yeah, you know, we're looking at renters who are renters
Speaker 12: by necessity and not lifestyle renters, so a little bit
Speaker 12: different than that housing market. But you know, we see
Speaker 12: a lot of We particularly love to invest where there's
Speaker 12: stable markets, not necessarily growth markets, because growth markets have
Speaker 12: a lot of speculation in them. They're really looking towards
Speaker 12: the future, what's going to happen, and they're usually priced
Speaker 12: that way. But we like markets that are very, very stable,
Speaker 12: and of course we do try to stay away from
Speaker 12: so stable. You're just saying not a lot of price fluctuation,
Speaker 12: Well I'm not so much there. But stable as far
Speaker 12: as population, as far as rental growth, it at least
Speaker 12: keeps up with inflation, as far as job opportunity and
Speaker 12: employment stability. So it's that it's that kind of stable
Speaker 12: that we're looking for.
Speaker 1: Pricing is going to go up, right.
Speaker 12: That's as far as like we're in a we've been
Speaker 12: in a period of time where multifamily the real estate
Speaker 12: market is really segregated as far as different asset classes.
Speaker 12: But multifamily itself right now has had a bit of
Speaker 12: a pause for the last two years. Right There haven't
Speaker 12: been a ton of transactions going. And now I think
Speaker 12: we're starting to see those transactions pick up and so
Speaker 12: pricing will start to rise with it. But we did
Speaker 12: have quite high pricing in twenty twenty twenty twenty twenty
Speaker 12: one and then started to drop down twenty twenty two,
Speaker 12: twenty twenty three.
Speaker 4: Where exactly do you play in terms of what you
Speaker 4: do with an asset when you get it?
Speaker 5: Do you then do you own and operate it? Do
Speaker 5: you flip it? Explain for everyone what you do.
Speaker 12: What we particularly do is we look for assets that
Speaker 12: are distressed themselves in communities that are stable, and so
Speaker 12: we look for things that have severe problems and then
Speaker 12: we solve those problems and then we go ahead and
Speaker 12: turn around and sell it.
Speaker 4: Okay, So what kind of problem, for example, a property
Speaker 4: in Syracuse.
Speaker 12: High vacancies, high delinquencies. Sometimes that comes with some crime.
Speaker 12: Sometimes that comes with physical distress. Well, it almost always
Speaker 12: comes with some physical distress. And we're figuring out, what
Speaker 12: are all those problems, Why isn't this particular property performing
Speaker 12: like the ones that are surrounding it, and then how
Speaker 12: do we get it to be stable so that we
Speaker 12: can then go ahead and sell though.
Speaker 3: It's when you buy distressed property, it's not like everything's
Speaker 3: in distressed. You're saying, here's one property and there's other
Speaker 3: properties multifamily around them that are actually doing okay, So
Speaker 3: why is it this particular property exactly?
Speaker 12: Exactly that's what we're looking for, because then we understand
Speaker 12: the value because.
Speaker 3: You're not going to necessarily buy into an area where
Speaker 3: it's all distressed.
Speaker 12: No, because that's speculative. Then you have to guess, how
Speaker 12: do you get this whole community back up and running,
Speaker 12: which is a thing. It's just that's a lot to overcome. Right,
Speaker 12: So we're saying we understand the value of our asset
Speaker 12: because we know the value of all of our neighbor's assets.
Speaker 12: Now our assets not performing, so we have to figure
Speaker 12: out how to get it to that performance place.
Speaker 4: In general, real estate is a pretty efficient market. Yes,
Speaker 4: what are you able to do that other players aren't
Speaker 4: able to do? Like why is that thing sitting there
Speaker 4: distressed until you come along?
Speaker 12: I think a lot of buyers look for what is
Speaker 12: your incoming cap rate? What are you going to buy it?
Speaker 12: What's your NOI going to be when you first buy
Speaker 12: that property? And for us, that's not going to deter
Speaker 12: us if the property is negative cash flowing, because what
Speaker 12: we're really looking for is where are we going to
Speaker 12: get this property to what is the NI going to
Speaker 12: be when we complete this property? And what is the
Speaker 12: cap rate going to be when we sell this property?
Speaker 12: As opposed to where is it now? Where is it
Speaker 12: now is just a variable, it's a place mark, right,
Speaker 12: So we're saying, all right now we're negative cash flowing.
Speaker 12: Here are all the problems on the table we needed
Speaker 12: to get it to this point, and we know exactly
Speaker 12: where that point is because we're not trying to change
Speaker 12: our asset class and how much time and how much
Speaker 12: money is it going to take us to get from
Speaker 12: point A to point Z? And that's basically our what
Speaker 12: our company does and what we when we raise a
Speaker 12: fund we're looking to. Our diversification comes from our geographic diversification,
Speaker 12: but the assets that we're buying all look exactly the same.
Speaker 3: You keep saying NI net operating income, correct, all right,
Speaker 3: So basically you're looking at expenses versus the income that
Speaker 3: you're getting from property. So it's kind of a basic
Speaker 3: metric that tells you a lot. What does your sector
Speaker 3: that you are involved in tell us more broadly about
Speaker 3: the real estate market?
Speaker 12: Yeah, so we specifically are working with affordable housing, not
Speaker 12: affordable housing from a technical government standpoint. There's no restrictions
Speaker 12: on the properties that we buy, but we're servicing a
Speaker 12: tenant based sit somewhere between thirty five and eighty five
Speaker 12: thousand dollars of annual household income. And what we're right now,
Speaker 12: we're really servicing an area of great need because we
Speaker 12: are buying assets and even selling our assets far below
Speaker 12: replacement cost.
Speaker 1: So when someone's trying to build.
Speaker 12: A new property, they're not going to be able to
Speaker 12: compete with the pricing that we're going to be able
Speaker 12: to offer, and that's created a major shortage of affordable
Speaker 12: housing in the country because the costs of construction are
Speaker 12: really high right now, with interest rates high, the cost
Speaker 12: of construction is high, and therefore new affordable housing is
Speaker 12: not coming under the market.
Speaker 3: So what are the rents that you typically charge in
Speaker 3: that kind of affordable housing?
Speaker 12: It could be somewhere on average between seven hundred and
Speaker 12: twelve hundred dollars of rent.
Speaker 3: Okay, yeah, how long?
Speaker 5: How long does it typically take you to turn a
Speaker 5: building around?
Speaker 12: We're stabilizing anywhere from twelve to thirty six months.
Speaker 4: And do you what's the scale that you're able to
Speaker 4: bring given that it's relatively geographically diverse, so you need
Speaker 4: to have different people in those areas. It's not like
Speaker 4: you have one local company that you work with that
Speaker 4: you can scale that goes around and fixes things up.
Speaker 4: You have to actually find those folks market.
Speaker 12: We're big on those sporting pa Well, we want to
Speaker 12: support the local markets that we're in. Those are the
Speaker 12: people that we're servicing. Those are the people we want
Speaker 12: to give the jobs to. So when we get to
Speaker 12: a property, we'll bring our staff out there to get
Speaker 12: it started up and running. But we're really trying to
Speaker 12: help to hire locally so that we can actually help
Speaker 12: that community that we're in. It's beneficial for everybody that.
Speaker 3: How much is about getting it up and running well
Speaker 3: so that you can then sell it off. Like how
Speaker 3: long do you hold on to a property?
Speaker 12: We're somewhere from two to four years usually, okay, typically
Speaker 12: what we're.
Speaker 4: Doing, Yeah, what does turnover look like in terms of
Speaker 4: tenants during that time?
Speaker 12: So our goal is not to displace people we really want, but.
Speaker 4: Don't you have to raise rent in order to actually
Speaker 4: make the changes and have the money.
Speaker 12: Beauty of what we do is we're really trying to
Speaker 12: go for efficiencies of the particular property itself. So we're
Speaker 12: really trying to figure out why aren't people paying their
Speaker 12: rent today, why are there so many vacancies today? And
Speaker 12: how do we sell for that? More so than how
Speaker 12: do we hike up everybody's rents, Because we're not trying
Speaker 12: to gentrify our areas. We're really trying to dig into
Speaker 12: that particular community. We want everyone to stay in their places,
Speaker 12: we want them to pay rent. We want to be
Speaker 12: able to offer that affordable housing. We're not trying to
Speaker 12: price people out of that market. So it's less about
Speaker 12: raising people's rents and more about getting people to pay
Speaker 12: rent and to move into our builty But.
Speaker 4: If someone's not paying their rent, then they can't really
Speaker 4: stay right.
Speaker 12: So if someone is absolutely not paying the rent, usually
Speaker 12: we find that people aren't paying their rent for various reasons,
Speaker 12: and maybe they're not getting the services that they need,
Speaker 12: which is really why we have a massive shortage of
Speaker 12: affordable housing. I mean, yes, it's also because you can't
Speaker 12: get new construction, but it's also because you have a
Speaker 12: lot of owners who've run out of money and they're
Speaker 12: no longer putting money into their properties, and so someone
Speaker 12: has to come back and restore that value.
Speaker 3: We've only got about twenty seconds left. You've been doing
Speaker 3: this forever, twenty years. You founded your company back in
Speaker 3: two thousand and three. I am curious when you find
Speaker 3: that distressed property among other properties that are doing well,
Speaker 3: is it typically the reason it's not doing well because
Speaker 3: owners are run out of money.
Speaker 12: Yes, that's what our fund is really based off of,
Speaker 12: just buying deals where the sellers have been in distress,
Speaker 12: where there's there are dollars that have been lost on
Speaker 12: the table, and we're going to come back and bring
Speaker 12: back that value.
Speaker 3: Pretty that is yeah, pretty interesting stuff. Amy, Thank you
Speaker 3: so much, Thank you, thanks for stopping by. Amy Rubinstein.
Speaker 3: She's chief executive officer of Clear Investment Group. Joining us
Speaker 3: right here in our Bloomberg Interactive Broker studio.
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Speaker 3: All right, TikTok, everybody. We've got just about eighteen minutes
Speaker 3: left in today's trading session, getting ready to wrap up
Speaker 3: with the Tuesday trade. Just as you heard, Amy Morris,
Speaker 3: we're kind of rolling over our best levels of the
Speaker 3: session on both the S and P and the Dow
Speaker 3: No excuse me, S and P and the Nasdaq one hundred,
Speaker 3: but little change, really flat on the day, and I
Speaker 3: just feel like we're taking maybe a bit of a breather.
Speaker 3: We're going to hear from Jay Powell Fed Chair J
Speaker 3: Powell tomorrow. We just talked with our Stuart Paul about that,
Speaker 3: and of course you got the big jobs report on Friday,
Speaker 3: so those will be really key in sentiment, economic backdrop,
Speaker 3: and then what it means, particularly the backdrop that companies
Speaker 3: are going to be living under for at least the
Speaker 3: next month or so. All right, let's get to it.
Speaker 3: Our drive to the closed guest on this Tuesday is
Speaker 3: Alexis Brown Robert. She's COO at Alexis Investment Partners and
Speaker 3: she joins us from Houston, Texas. She the firm, i
Speaker 3: should say, has about one hundred and seventy million dollars
Speaker 3: in assets under management. Alexis, good to have you here
Speaker 3: with us. Tell us a little bit about the investors
Speaker 3: that you predominantly deal with, institutional retail, family offices. Just
Speaker 3: give us some background.
Speaker 13: Well, Hi, Carolyn, Tim, thanks so much for having me on.
Speaker 13: It's great to be here and it's great to meet
Speaker 13: you guys.
Speaker 3: So what we have is we really work with a
Speaker 3: variety of people.
Speaker 13: We do work with high net worth individuals, individual investors
Speaker 13: in general, we work with small businesses retirement plans. For
Speaker 13: one case, we primarily though host a run and exchange
Speaker 13: trade and fund called the Alexis Practical Tactical ETF, and
Speaker 13: that's really the core of what we do, since that's
Speaker 13: where we make most of our tactical trades. It's really
Speaker 13: a flexible, go anywhere portfolio. It's one hundred percent of
Speaker 13: what I'm invested in and what my father's invested in.
Speaker 13: Were a father daughter team, it's really just the two
Speaker 13: of us in the shop.
Speaker 4: But you got the name of the fund. It's not
Speaker 4: called you know Dad, Yeah, Okay.
Speaker 3: To be there.
Speaker 13: My dad just really enjoys naming things Alexis or after no.
Speaker 1: No, So I'm totally kidding.
Speaker 13: Really it's I was the first Alexis and obviously I'm
Speaker 13: his child, and he named the firm Alexis Investment Partners.
Speaker 13: So prior life, he has been in this for thirty
Speaker 13: odd years and was chief investment officer president of a
Speaker 13: series of funds out of a firm out of San Francisco.
Speaker 13: And then when I went to college and decided to
Speaker 13: follow in his footstuffs like I had always dreamed, I
Speaker 13: had grown up in the business idolizing him and getting
Speaker 13: to do jobs of his prior firm even when I
Speaker 13: was in high school researching.
Speaker 1: And then when I went to college and decided.
Speaker 13: To pursue this, he created Alexis Investment Partners and from there,
Speaker 13: together we launched the Alexis Practical Tactical ETF. And the
Speaker 13: Trickerson was Lexi there because it is the core of Alexis.
Speaker 13: It's the core of what we do. We're benchmarked seventy
Speaker 13: to thirty, but we can go as high as one
Speaker 13: hundred percent equity as low as we want.
Speaker 1: We don't tend to go quite.
Speaker 13: To those extremes, but we're very flexible and really our
Speaker 13: goal is to add value through full market cycles by
Speaker 13: participating more and upmoves than we do in the down
Speaker 13: and some of the ways we look to achieve that
Speaker 13: are by incorporating a broader range of asset classes, so
Speaker 13: not just being stuck in equities and bonds. And it's
Speaker 13: really been all in this environment and being more model
Speaker 13: informed instead of just purely model driven.
Speaker 4: So it has six about ninety six million dollars in
Speaker 4: assets in the Alexis Practical Tactical Fund expense ratio of
Speaker 4: about one percent is the money in the fund? How
Speaker 4: much of the money in the fund is from your
Speaker 4: clients like you place them in there, versus people who
Speaker 4: externally end up buying the fund.
Speaker 13: I want to say about seventy five million and maybe
Speaker 13: close to eighty is ones that we that are part
Speaker 13: of the Alexis Investment Partners bucket, and then the rest
Speaker 13: is from outside investors. We do have a partnership with
Speaker 13: a firm out in Florida that has about a billion
Speaker 13: dollars in assets where we're a model provider for them
Speaker 13: for their tactical sleeves also called practical tactical and so
Speaker 13: a portion of that goes into the fund as well.
Speaker 4: So it's interesting the let's see the holdings, am I
Speaker 4: looking at the right page, Carol, I think is that
Speaker 4: gold is the top? Is the top holding here?
Speaker 7: Is that right?
Speaker 1: Gold is the top holding? That is correct?
Speaker 13: So, like I said, we incorporate a broader range of
Speaker 13: asset classes. Obviously, inflation has been a big worry for
Speaker 13: investors as well as geopolitical.
Speaker 1: Risks and monetary risks.
Speaker 13: I mean, it's not just the American Fed that's moving
Speaker 13: things around right now. Federal reserve banks all over the
Speaker 13: world are having to deal with very tough monetary conditions,
Speaker 13: and so gold has a tendency to do very well
Speaker 13: environments like that, and it has been so that is
Speaker 13: currently our top holding. Now we're not bears by any means,
Speaker 13: if you look through we're actually quite neutrally positioned right now.
Speaker 13: We're right about that seventy percent equity exposure as well.
Speaker 3: Interesting tell us about and have you uped that recently
Speaker 3: or have you reduced that recently?
Speaker 1: You know, it's fluctuated.
Speaker 13: We had upped it and then we reduced it, and
Speaker 13: right now we're kind of nibbling back into things. We're
Speaker 13: really looking at it as there's a lot to like
Speaker 13: in markets at this moment.
Speaker 3: There's equity markets in general or markets in total.
Speaker 13: That's a really good question, I guess both, because we
Speaker 13: do have equity exposure. We have bought into a reads
Speaker 13: position lately. We do like our golds position really the
Speaker 13: part that we're not so crazy about sponds. We'd prefer
Speaker 13: cash and just other alternative there. But I think from
Speaker 13: an equity perspective, things are still looking strong and still
Speaker 13: looking good there, but it's not the only place we
Speaker 13: want to be, and we do want to recognize that
Speaker 13: this has been a great year. Despite all of the
Speaker 13: headwinds and the crazy headlines, it's been a really great year,
Speaker 13: and so it would be very normal to take a
Speaker 13: breather here, and we'd want to have some buying power there.
Speaker 3: Listen, it's been a great two years, certainly for the
Speaker 3: equity side of things, right. Anybody who's trying to be
Speaker 3: a bear as that our short this market has had
Speaker 3: maybe some moments of opportunity, but it's been tough. Having
Speaker 3: said that, post election, did you guys rethink any allocations.
Speaker 1: You know, the election has been a funny one. So
Speaker 1: about half our clients.
Speaker 13: Are super happy and the other half are freaking out
Speaker 13: and not happy at all.
Speaker 5: I don't have the country for the world, true.
Speaker 1: It's very so. I think really, no matter where you
Speaker 1: are politically.
Speaker 13: Though, there's going to be good and bad to this administration,
Speaker 13: like there is to every administration. I mean, on one hand,
Speaker 13: you have tariffs and deportation and those are definitely risks.
Speaker 13: And then on the other hands, I mean, you do
Speaker 13: have a much better business environment, you have taxes, and
Speaker 13: so from a market's perspective, we've really chosen to focus
Speaker 13: more domestically Since then, I would say there's just not
Speaker 13: a lot of benefit to being foreign in foreign stocks
Speaker 13: that we can see given that environment, And we do
Speaker 13: see a lot of fit to being domestics and from
Speaker 13: a more of a client side, from a financial planning side,
Speaker 13: we have no tax cuts are probably going to continue,
Speaker 13: so roth conversions, we've been pushing those out, whereas we
Speaker 13: may have had more urgency around those otherwise.
Speaker 3: And the key Q too. You like those big cap
Speaker 3: tech names, right, you're still okay with that? Just quickly
Speaker 3: get about twenty seconds.
Speaker 13: Yes, No, we still do like tech for sure. I
Speaker 13: mean they have come up a long way, but they
Speaker 13: have great earnings. When you're looking at AI productivity, that's
Speaker 13: really where it's going to be.
Speaker 1: But at the same time, with thing as important.
Speaker 13: As AI, similar to we saw with the Internet, it's
Speaker 13: important to recognize that other players are going to be
Speaker 13: the ultimate beneficiaries.
Speaker 1: Of that AI trade.
Speaker 13: So while we still definitely do love tech, we also
Speaker 13: are a fan of diversifying outside of there because a
Speaker 13: lot of those names are really good out.
Speaker 3: Of it as well. I want an ETF named after me.
Speaker 5: You can do it, I can do it.
Speaker 1: I recommend it.
Speaker 3: That ETF. By the way, I have twenty nineteen, almost
Speaker 3: twenty percent this year. Alexis Brown Roberts, thank you so much.
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