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Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. You're listening to the

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Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am

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Speaker 1: Eastern on Apple card playing Android Auto with the Bloomberg

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Speaker 1: Business App. Listen on demand wherever you get your podcasts,

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Speaker 1: or watch us live on YouTube.

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Speaker 2: Malex you alongside Paulsweenian. Finally back John Tucker. This is

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Speaker 2: Bloomberg Intelligence Radio. We're broadcasting to live from the Interactive

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Speaker 2: Brooker Studio right here in midtown Manhattan. But maybe one

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Speaker 2: day we should actually broadcast from Industry City in Brooklyn.

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Speaker 3: Paul's never been there.

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Speaker 4: I don't do Brooklyn.

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Speaker 2: He doesn't do He's going to do Brooklyn. So I

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Speaker 2: live in Park Slow. Industry City is a go to place.

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Speaker 2: It's good for adults, it's good for kids. They have games,

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Speaker 2: they have free things on the weekends. They got salsa classes,

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Speaker 2: they got concerts, they have ice skating in the winter.

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Speaker 2: They have a lot of stuff. It is a very

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Speaker 2: popular place to go when you have kids. Joining us

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Speaker 2: now is Jim Simosa. He's managing director of Industry City

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Speaker 2: and he joined us there right now. Hey, Jim, are

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Speaker 2: you are you surprised? It just how successful industry city

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Speaker 2: has become.

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Speaker 5: I'm not surprised.

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Speaker 6: I think that, you know, we have a lot of

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Speaker 6: history doing adaptive reuse projects like this, like Insery City,

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Speaker 6: like Chelsea Market, which at one time, just like this project,

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Speaker 6: was you know a number of older buildings that were

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Speaker 6: past their prime. But people really like classic old buildings

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Speaker 6: that you take and redevelop into offices and retail and

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Speaker 6: things that are fun. So we've seen this before, and

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Speaker 6: we've done it other locations. So look, I'm surprised we

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Speaker 6: took on something as large if you really want to know,

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Speaker 6: that's six million square feet. But we've been able to

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Speaker 6: do it so as far. But from a success standpoint,

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Speaker 6: I'm not surprised.

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Speaker 4: Jim talked to us about how you're thinking about real estate,

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Speaker 4: mixed use, real estate, office, real state in the context

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Speaker 4: of what appears to be a post pandemic, you know,

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Speaker 4: different way people work and live and go to the

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Speaker 4: office and all that kind of stuff.

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Speaker 6: Sure, you know we've been doing We've been at this

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Speaker 6: since doing exactly what we do, which is adaptive reuse

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Speaker 6: and activation and fun place, you know, creating a fun

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Speaker 6: place to work.

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Speaker 5: For a long time, we didn't know a pandemic was coming.

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Speaker 6: It just so happens that it came and what we

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Speaker 6: do was more attractive to people. So what we do

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Speaker 6: here is create a place that people like to come

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Speaker 6: and work. And so we've actually been at eighty percent

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Speaker 6: of the employees that work I see have been back

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Speaker 6: in the office regularly for several years now, and so

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Speaker 6: you know, that's kind of what we do is create

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Speaker 6: fun places to work that are not commodity real estate.

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Speaker 6: I worked and by the way, I worked in many

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Speaker 6: classes steal office buildings in my career, and these are

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Speaker 6: just more fun places to work.

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Speaker 5: And people like coming to work and when they come

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Speaker 5: to places like this.

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Speaker 3: So how do you keep how do you know when

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Speaker 3: a project's going to work?

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Speaker 2: Right? Like you mentioned Chelsea Market and then Entry City, Like,

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Speaker 2: what's the secret, Sauce.

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Speaker 5: I will tell you the secret, Sauce is.

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Speaker 6: So what you first do is you start with the

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Speaker 6: ground floor and the place making. And for us, when

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Speaker 6: you do something like this, when you have a project,

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Speaker 6: you need retail, you need food and beverage, you need shopping,

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Speaker 6: you need things like that. But how do you do

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Speaker 6: that without any foot traffic? Nobody wants to come and

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Speaker 6: do retail with you when you do that. So what

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Speaker 6: we did at Chelsea Market and the same thing here

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Speaker 6: is we went to wholesalers and commissaries and bakeries and

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Speaker 6: things like that, people that really were interested in the

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Speaker 6: production space more than retail.

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Speaker 5: But they had to retail with us.

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Speaker 6: That was part of the deal, you know, and we

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Speaker 6: gave them a favorable rate in the beginning to do that.

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Speaker 6: But they needed ground floor space. They needed space that

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Speaker 6: had plenty of loading. Getting priced out of New York

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Speaker 6: City was something that they didn't want. They wanted to

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Speaker 6: be near their customers. So we would go to those

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Speaker 6: and you go back to Chelsea Market. Lobster Place was

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Speaker 6: a classic example wholesale fish a seafood place for us.

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Speaker 6: It was other bakeries such as Colson's and Lilac Chocolates

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Speaker 6: and things like that, companies that really were interested in

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Speaker 6: production space, but we wanted them to do retail.

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Speaker 5: So that way there are two businesses.

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Speaker 6: You don't have to worry about the foot traffic in

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Speaker 6: the beginning while you're getting this going. But you're starting,

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Speaker 6: what you do is you start to get retail and

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Speaker 6: amenity type tenants on the ground floor and placemaking, and

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Speaker 6: that's how you start to lease the upper floors. Once

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Speaker 6: you start to do that, then you have tenants in

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Speaker 6: the building that are just happy to be right next

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Speaker 6: door to those retailers, and then the retail takes off.

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Speaker 6: And if you're to answer your specific question, how.

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Speaker 1: Do you know?

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Speaker 7: You know when those folks who, by the way, didn't

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Speaker 7: really want to do retail with you in the beginning

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Speaker 7: because you didn't have foot traffic. You know, when those

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Speaker 7: folks come to you and say, can you do more

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Speaker 7: marketing for me? And can you get me more foot traffic?

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Speaker 6: This is fantastic because they're doing you know, retail margins

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Speaker 6: instead of wholesale margins in their space.

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Speaker 5: As soon as that happens, that's when you know you

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Speaker 5: got something.

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Speaker 4: So, Jim, how about on the on like the corporate

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Speaker 4: tenant side, what type of companies want to be in

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Speaker 4: a space like yours?

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Speaker 6: So we tend to have more creative type companies, lots

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Speaker 6: of designers, architects, marketing firms, things like that. You know

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Speaker 6: that that's kind of very consistent with the Brooklyn market.

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Speaker 5: And Paul, we're going to have to get you out here.

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Speaker 6: So I grew up By the way, I grew up

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Speaker 6: in Manhattan and I now live in Brooklyn, and if

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Speaker 6: you told me back when I was in high school,

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Speaker 6: I'd be.

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Speaker 3: Living you see me.

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Speaker 5: Okay, okay, But so anyway, but we have a lot

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Speaker 5: of that.

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Speaker 6: We are starting to see some more traditional type of

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Speaker 6: companies like finance firms and law firms and things like that,

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Speaker 6: which we we we did not see in the beginning,

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Speaker 6: but we have a lot of that. We have a

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Speaker 6: lot of industrial. We're six million square feet first of all,

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Speaker 6: so that's a lot of space to fill up with,

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Speaker 6: you know, with just one or two types of industries.

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Speaker 6: So we have a lot of distribution and warehouse still.

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Speaker 6: But but our office itself focuses more on creative companies.

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Speaker 6: And then we have people like the Brooklyn Nets, you know,

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Speaker 6: so the Brooklyn Nets there headquarters and players, players, player personnel,

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Speaker 6: and back office are all here. So it's really it's

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Speaker 6: a much wider range of types of companies than you

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Speaker 6: would normally see in a project, partially because we are

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Speaker 6: sick million square feet and sixteen buildings, so we have

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Speaker 6: the ability to do things differently building by building that

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Speaker 6: you may not be able to do if you were

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Speaker 6: one or two buildings.

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Speaker 2: Okay, so what are you going to do next? Like

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Speaker 2: what's on the gym's list of.

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Speaker 3: Things to do?

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Speaker 6: We are looking at a lot more retail. We One

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Speaker 6: of the things that we've been very successful with is

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Speaker 6: our home furnishings. So we've got ABC Carpet and Design

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Speaker 6: within reach and restoration hardware and places like that, and

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Speaker 6: we have city foundry or antiquelace, so we've we've really

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Speaker 6: done very in West Elm, we've done very well. And

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Speaker 6: Cohler see I keep I keep I'm going to keep

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Speaker 6: remembering as we keep going along. But we've done very

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Speaker 6: well with the home furnishings and and home goods sector.

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Speaker 6: So we've become known as the place where if you

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Speaker 6: want to come and shop for furniture and things like

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Speaker 6: that in Brooklyn, this is where you come because you

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Speaker 6: can you can go to six different places. So we

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Speaker 6: are continuing with that. That's very interesting to us. We

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Speaker 6: are are very design centric type of property. If you

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Speaker 6: walk around, you'll notice that we do specific design elements

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Speaker 6: that you may not see elsewhere. So that's kind of

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Speaker 6: who we are and it kind of makes us happy

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Speaker 6: and we enjoy doing that. That's what gets us, you know,

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Speaker 6: sort of out of the bed in the morning, So

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Speaker 6: we're going to continue to do that. We're going to

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Speaker 6: continue to do more retail food and beverage. We are

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Speaker 6: continuing to grow japan Village, which everybody which is one

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Speaker 6: of the things that we are known for, which is

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Speaker 6: a large Japanese eating, drinking, but now hard goods and

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Speaker 6: cultural center. We started with them at twenty thousand square feet.

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Speaker 6: We've now gone to sixty thousand square feet. We've got

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Speaker 6: karaoke and Japanese barbecue and Japanese cooking school, Japanese bakery coming,

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Speaker 6: so we're.

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Speaker 5: Going to continue to do that. We continue to.

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Speaker 6: Use our courtyards, which is one of our best assets,

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Speaker 6: and that is just large outdoor space to kind of

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Speaker 6: function like city parks, but they are not city parks.

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Speaker 5: We own and operate them, so we do a lot

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Speaker 5: of concerts and things like that. So I think that.

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Speaker 6: Nothing really that different than what we've been doing from

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Speaker 6: an activation standpoint. We are also very much getting into

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Speaker 6: renewable energy. We have Equinor as a major tenant and

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Speaker 6: a large piece of property just adjacent to us, which

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Speaker 6: is the staging area for a large wind farm. That's

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Speaker 6: going on in the south coast of Long Island. So

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Speaker 6: that is really sort of charged us up and made

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Speaker 6: us attractive to other renewable energy companies and industries, and

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Speaker 6: we're very interested in doing that as.

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Speaker 5: Well as biotech.

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Speaker 6: You know, biotech is something that we are very interested in,

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Speaker 6: you know, I think, and we're hearing this from a

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Speaker 6: lot of people. You know, some folks that when they

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Speaker 6: get out of school, they're not that interested in working

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Speaker 6: in an office park the middle of New Jersey.

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Speaker 5: Nothing wrong with New Jersey. I go there a lot.

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Speaker 3: But disclaimer, Jim, we appreciate.

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Speaker 5: The disclaimer, right.

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Speaker 6: I actually have a house there on the Jersey Shore,

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Speaker 6: just to be clear. So, but but you know what

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Speaker 6: we're hearing a lot of and we we knew this.

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Speaker 6: This is how we started doing this years even before

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Speaker 6: the pandemic. Is people want to work in places where

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Speaker 6: they enjoy and they have fun and they meet people

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Speaker 6: and there's a social life to it as well. And

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Speaker 6: it turns out people, highly educated people coming out of

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Speaker 6: school that are going into biotech want the same thing.

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Speaker 6: And so we are looking into a lot of industries

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Speaker 6: like that, which frankly was not originally something that we

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Speaker 6: really thought about that much when we first started it.

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Speaker 5: But that's how projects like this evolve.

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Speaker 4: All right, Jim, great stuff really interesting. You have to

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Speaker 4: head over.

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Speaker 3: There, so you're never going to come.

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Speaker 4: My daughter lives in Brooklyn, so I've been.

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Speaker 3: There, but just begrudgingly coming out.

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Speaker 5: In the eighties.

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Speaker 3: Well, nobody very different stories. But the best part for

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Speaker 3: those of you who like.

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Speaker 2: To things in the design within reach the super expensive

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Speaker 2: mid century Modern furniture as an outlet store there, and

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Speaker 2: if you go on Friday Saturday, there's like an extra

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Speaker 2: twenty percent discount.

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Speaker 3: Like you can get an Eames chair for like six

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Speaker 3: gram five grams for a chair, a cheer Eames chair,

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Speaker 3: EMS chair? What's an EMS chair?

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Speaker 5: Yeah?

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Speaker 8: What?

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Speaker 3: Look what I'm dealing with you guys?

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Speaker 2: Eight twelve thousand dollars. Like they're right, they're really really comfortable. Anyway,

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Speaker 2: it's super fun.

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Speaker 3: You get to go.

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Speaker 2: It's like a scavenger hunt, ABC car Fish. I'm like

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Speaker 2: basically shilling for industry City Emes E A M.

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Speaker 3: E S chair c h A.

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Speaker 5: I R got it.

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Speaker 3: Those chairs. Don't know what Eames chair is? Is this

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Speaker 3: a Jersey thing? I don't understand?

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Speaker 2: Okay, anyway, you're listening to the Bloomberg Intelligence podcast.

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Speaker 1: Catch us live weekdays at ten am Eastern on Apple

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Speaker 1: card Play and Android Auto with a Bloomberg Business app.

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Speaker 1: You can also listen live on Amazon Alexa from our

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Speaker 1: flagship New York State. Just say Alexa playing Bloomberg eleven thirty.

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Speaker 4: All right, I've got interest rates coming down. I don't

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Speaker 4: know if it's twenty five or fifty basis points this week,

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Speaker 4: but I know they're going down. I got an earnings

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Speaker 4: backed up. That seems pretty good to me. We had

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Speaker 4: a good quarterly earnings. Geena Martin Adams from Bloomberg Intelligence

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Speaker 4: tells me that, So isn't that constructive for stocks? Brian

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Speaker 4: Levit joins is here. He's a professional. He does this

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Speaker 4: stuff for a living, global market strategist for Investco. Dudes

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Speaker 4: on the road all the time. We got him in

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Speaker 4: our studio here today, so that's a good thing. Brian,

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Speaker 4: What are you telling your clients these days about kind

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Speaker 4: of where to be in this market?

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Speaker 8: It's interesting because the leading indicators of the economy are

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Speaker 8: pointing lower, so they're pointing towards below trend weaker growth,

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Speaker 8: which is when, of course, you then need to follow

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Speaker 8: through on the policy side. So in the short term,

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Speaker 8: you're getting more of a signal to be a little

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Speaker 8: bit more defensive, a little bit more higher quality in

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Speaker 8: your investments. And you've seen that in government bonds, not

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Speaker 8: necessarily as much in stocks, given how overvalued some of

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Speaker 8: the biggest high quality names were. But we are getting

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Speaker 8: more of a defensive signal in here. What you hope

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Speaker 8: for and what you're alluding to is as the FED

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Speaker 8: starts to normalize rates, do you get the proverbial soft

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Speaker 8: landing and markets doing well over the next couple of years.

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Speaker 8: And I'm in that camp. I think the markets will

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Speaker 8: do well over the next year's intermediate term, given that

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Speaker 8: we're past peak inflation and peak tightening.

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Speaker 2: So there's a great chart on Bloomberg that showed if

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Speaker 2: you go back to the top that we saw I

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Speaker 2: think in June, what's led since then has been anything

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Speaker 2: but tech. Yeah, and which is quite interesting, And I'm

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Speaker 2: just wondering which area of anything but tech can continue

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Speaker 2: to lead.

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Speaker 8: Yeah, it's nice to see the equo weight. It's nice

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Speaker 8: to see some broadening out in these markets. Look, if

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Speaker 8: you're defensive in the short term like we are, than

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Speaker 8: the type of sectors that tend to do well, or

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Speaker 8: things that are a bit more rate sensitive, like real estate,

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Speaker 8: healthcare has done well, staples when you start to think

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Speaker 8: about the recovery. So I want to be clear here,

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Speaker 8: our tactical indicator says more defensive. We would expect as

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Speaker 8: you move into twenty twenty five to see more of

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Speaker 8: a recovery feel, meaning that growth is below trend but

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Speaker 8: starting to pick up on the back of easing. That's

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Speaker 8: when you want to be more exposed to cyclical sectors.

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Speaker 8: That's when you want to be more exposed to you know,

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Speaker 8: international markets, full risk on in the portfolios. I think

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Speaker 8: we're going to get there right now. Though again our

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Speaker 8: tactical indicators suggesting to be a little bit cautious here.

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Speaker 2: Well, when you take cautious, how then do you manage that,

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Speaker 2: Like what's the best kind of allocation?

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Speaker 8: Well, we would we would increase duration in the portfolio,

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Speaker 8: which has certainly worked. Right, So we've seen rates come

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Speaker 8: down pretty significantly higher quality bonds and within equities. Not

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Speaker 8: that we're saying you need to eliminate your equity exposure,

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Speaker 8: not at all. It's just where inequities do you position

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Speaker 8: and typically in a growth slowdown, you will see more

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Speaker 8: defense sectors outperform. You'll see higher quality, low volatility tends

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Speaker 8: to win. It's more recovery phase again, as we either

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Speaker 8: get this soft landing or come out of an economic downturn,

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Speaker 8: where you tend to see more cyclical parts of the

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Speaker 8: market outperform.

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Speaker 4: How do you feel about valuation broadly defined here, Doo,

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Speaker 4: I have to pull out those MAC seven and then

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Speaker 4: just the market for valuation. How do you think about it?

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Speaker 8: The first thing I always say about valuations is they're

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Speaker 8: not timing tools, and I think too many people get

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Speaker 8: caught up thinking that markets can't do well because stocks

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Speaker 8: are trading above average. So that would be point one.

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Speaker 8: I don't view it as a timing tool. Point two.

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Speaker 8: You're right the S and P five hundred and aggregate

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Speaker 8: is trading above valuations, but the average stock is not

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Speaker 8: all that excessive, and the valuations on the equal way

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Speaker 8: compared to its average is about fair. So I wouldn't

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Speaker 8: view this as an environment where stocks are particularly expensive.

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Speaker 8: And I'm also looking at it from an environment where

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Speaker 8: rates are going to come down, and as rates come

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Speaker 8: down down, that should be supportive evaluations.

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Speaker 3: What do you do with, Well.

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Speaker 2: What do you think will be done with all the

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Speaker 2: money and money market funds? As in like first cut, zoom,

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Speaker 2: they come out and go to other things. Or is

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Speaker 2: it like once we get the cycle going, is there

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Speaker 2: a threshold rate where that money finally starts to move.

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Speaker 8: Some of that money came out of bank deposits, so

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Speaker 8: it was money down no one of them, right, yeah,

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Speaker 8: So if you're getting zero in the big money center banks,

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Speaker 8: going to money markets at you know, five and a

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Speaker 8: quarter makes sense even at three, even at three, right,

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Speaker 8: So does all of that find its way into the

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Speaker 8: equity market or the high yeald bomb market? Probably not.

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Speaker 8: Some of that is still going to be considered a

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Speaker 8: cash like instrument. But I would advise investors to think

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Speaker 8: about quickly, and we've been saying it for a while,

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Speaker 8: how you're going to take advantage of the yields that

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Speaker 8: presented themselves, you know as well as I knew as

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Speaker 8: I do. In twenty nineteen, people were begging for four percent.

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Speaker 8: They used to ask me, how do I get four percent?

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Speaker 8: I would say, you either have to put it all

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Speaker 8: in high yield or you have to lend money to

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Speaker 8: the Russian government. So that was a difficult conversation. Today

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Speaker 8: you could get close to four percent in or you

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Speaker 8: can get four percent municipal bonds in high quality corporate bonds.

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Speaker 8: So I would advise investors to take advantage of it. Unfortunately,

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Speaker 8: I think a lot of that money still sitting there

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Speaker 8: with the reinvestment risk that it's had for a while.

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Speaker 4: Small and mid cap, what do you think about looking

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Speaker 4: there for value?

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Speaker 8: It's interesting, so I mean small So small cap has

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Speaker 8: become four percent of total market cap. I think it

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Speaker 8: used to be ten. So over the next number of years,

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Speaker 8: small cap should see performance, should see good performance as

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Speaker 8: that reverts to some type of mean. What's interesting is

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Speaker 8: in a growth slowdown, which we're forecasting, small cap tends

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Speaker 8: to not do well. Small cap has performed well on

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Speaker 8: the expectation of lower rates, and you know, lower rates

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Speaker 8: across the yeal curve. So I'd be a little bit

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Speaker 8: cautious on small cap while we're maintaining a defe posture.

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Speaker 8: But again, the recovery phase of this, the recovery phase

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Speaker 8: of this should benefit small and I would think over

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Speaker 8: the next few years benefits small again just because of

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Speaker 8: how undervalued it is to the to the megacap names.

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Speaker 4: This Saturday, USC comes into the Big House. How you're

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Speaker 4: feeling about you Wolverines this year?

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Speaker 8: Well, it's a little bit mixed. I think we're playing

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Speaker 8: a little bit with house money. After winning a national

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Speaker 8: championship last year, new coach, new quarterback, a nice win

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Speaker 8: against Arkansas, but the Texas overhang is still there, so

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Speaker 8: we'll see. I don't know if if my confidence is

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Speaker 8: anywhere near what it was in the twenty twenty three seasons.

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Speaker 4: USC. Are they in Big ten?

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Speaker 8: Now they are in the Big ten.

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Speaker 5: This is ridiculous.

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Speaker 1: It's hard to follow it.

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Speaker 5: It's silly. Okay, all right?

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Speaker 4: Well I got Stanford coming in to play my dookies

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Speaker 4: at some point this year, so we'll see how that goes.

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Speaker 4: You're going to send you the field hockey team from Piscatowy,

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Speaker 4: New Jersey, Rutgers all the way to like Los Angeles

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Speaker 4: to play field hockey.

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Speaker 3: It feels out long?

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Speaker 4: Is that what we're doing? Brian had Brian Leviy, global

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Speaker 4: market strategist for Invesco, joining us here in our studio today,

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Speaker 4: given us his thoughts.

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Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on Afocarplay and Android Auto

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Speaker 1: with the Bloomberg Business app, Listen on demand wherever you

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Speaker 1: get your podcasts, or watch us live on YouTube.

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Speaker 2: All right within the markets, there was some really interesting

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Speaker 2: commodity positioning. And I don't just say that because I'm

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Speaker 2: a commodity's nerd, but oil has seen such a strong rerating,

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Speaker 2: and it's so interesting because hedge funds are net short

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Speaker 2: on oil for the first time since the data started

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Speaker 2: being collected back in twenty eleven. Oils up by about

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Speaker 2: two to three percent today. Joining us now is Mike mcgloon.

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Speaker 2: He is Bloomberg Intelligence senior commodity strategist from London.

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Speaker 3: This is a new background.

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Speaker 4: I can't believe they took us passport. He got into

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Speaker 4: London amazing after all the last they put him on

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Speaker 4: where we're doing good.

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Speaker 3: Well, good to see you.

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Speaker 2: Let's just start with oil for a second. I mean,

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Speaker 2: at this point, are we so short sort of the

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Speaker 2: market that there's no way we're not going to get

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Speaker 2: some kind of snapback.

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Speaker 9: I think that's a good response. The first way you

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Speaker 9: look at it as a commodity trader, yes, it's mostly

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Speaker 9: it's really prent that's short, twelve thousand contracts. It's never

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Speaker 9: been short, and that's most ever, as you mentioned, since

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Speaker 9: twenty eleven. Like WG, I still somewhat long, but I

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Speaker 9: think Brent's more reflective. But everybody sees what's going on

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Speaker 9: with China excess supply and the fact that you need

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Speaker 9: Opec to stay to keep oil off the market, or

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Speaker 9: market's going to do what it usually does and get cheap.

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Speaker 9: And it just kind of hit tilting the words there.

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Speaker 9: But to me this is indicative overall commodity is a

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Speaker 9: bearer sentiment, and I think it has good reason. Just

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Speaker 9: look at that ten note yield in China two point

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Speaker 9: zero seven percent. It's the lowest ever. I mean, compare

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Speaker 9: that to US at three sixty six. At the moment.

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Speaker 9: To me, it's just yeah, you said, I have a

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Speaker 9: bounce from here. But I think the responsive traders are

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Speaker 9: going to be looking for rallies to sell, which I

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Speaker 9: put for good resistance WTA around seventy five, and I'm

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Speaker 9: still expecting to do what it has been since two

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Speaker 9: thousand and eight, get really cheap, which Rowbury means around

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Speaker 9: forty dollars a arrow.

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Speaker 4: My favorite indexes is BCom are you guys celebrating a

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Speaker 4: BCom kind of anniversary or something coming up?

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Speaker 9: Exactly what. I'm glad you mentioned. That's why I'm in London.

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Speaker 9: We having the becom indict Advisory Committee. I think I've

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Speaker 9: been going to these for about twenty years, particularly when

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Speaker 9: the Become was at F and P and I managed

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Speaker 9: it there. But now it's a get a better place

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Speaker 9: at Bloomberg. But it's a bit of an anniversary. It's

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Speaker 9: also where everbody gets together and we talk about how

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Speaker 9: the properly managed and boundary bouncy index.

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Speaker 3: So how do you do that?

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Speaker 9: Yeah, well it's off of the methodology, but you have

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00:21:31,880 --> 00:21:33,679
Speaker 9: to take advice and council from the people who are

441
00:21:33,680 --> 00:21:35,960
Speaker 9: involved in actually tracking it. I used to actually do

442
00:21:36,040 --> 00:21:39,280
Speaker 9: that math, but it's very systematic. It's mostly based on

443
00:21:39,359 --> 00:21:42,199
Speaker 9: the becomes, based on total volume, and it's broken up

444
00:21:42,200 --> 00:21:45,560
Speaker 9: between the three sectors energy, metals and agriculture, keeps them

445
00:21:45,560 --> 00:21:47,920
Speaker 9: somewhat equal rather than having too much of a weight

446
00:21:47,960 --> 00:21:48,560
Speaker 9: and energy.

447
00:21:48,920 --> 00:21:50,720
Speaker 4: All right, I want to go right to one of

448
00:21:50,720 --> 00:21:56,200
Speaker 4: my favorite commodities. Corn. It's thirteen today, people.

449
00:21:56,720 --> 00:21:56,959
Speaker 3: I love.

450
00:21:58,480 --> 00:21:59,320
Speaker 5: You don't need corn?

451
00:21:59,600 --> 00:22:00,120
Speaker 1: I love.

452
00:22:02,400 --> 00:22:04,240
Speaker 3: I can see that and like, so it can be

453
00:22:04,240 --> 00:22:06,879
Speaker 3: hard to digest like some of those guys. Okay, I

454
00:22:06,920 --> 00:22:07,960
Speaker 3: will go into detail.

455
00:22:08,040 --> 00:22:10,840
Speaker 4: All right, give us a smart call on corn here.

456
00:22:10,720 --> 00:22:13,040
Speaker 9: Mike, you do, but you don't know it. Corn is

457
00:22:13,040 --> 00:22:16,639
Speaker 9: the most significant global agricultural commodity in terms of dollar

458
00:22:16,720 --> 00:22:19,000
Speaker 9: value metric production. That's part of the methodology we'll be

459
00:22:19,080 --> 00:22:22,080
Speaker 9: talking about on Wednesday. But it's in everything, and actually

460
00:22:22,119 --> 00:22:24,520
Speaker 9: it's animal feed, corn syrup and everything. But the key

461
00:22:24,520 --> 00:22:27,120
Speaker 9: thing is corn got way too expensive in twenty and

462
00:22:27,160 --> 00:22:30,080
Speaker 9: twenty two. Now it's getting towards really cheap. It got

463
00:22:30,080 --> 00:22:33,120
Speaker 9: down below four The last two contracts closed around three

464
00:22:33,240 --> 00:22:35,680
Speaker 9: eighty or so, which is right around the US cost

465
00:22:35,680 --> 00:22:37,879
Speaker 9: of production. And to me, the significance of corn is

466
00:22:37,920 --> 00:22:39,880
Speaker 9: that's what all commodities are doing. They have to get

467
00:22:39,920 --> 00:22:42,280
Speaker 9: below that cost of production. I have to shut down

468
00:22:42,320 --> 00:22:47,359
Speaker 9: those accesses supply and reinvigorate that demand. And corns is elite.

469
00:22:47,359 --> 00:22:49,560
Speaker 9: It's the most elastic of the commodities because you can

470
00:22:49,600 --> 00:22:51,560
Speaker 9: bring on that supply in about a year. So to me,

471
00:22:51,560 --> 00:22:53,399
Speaker 9: that's part of the reason I'm still bearish Crudel. And

472
00:22:53,440 --> 00:22:55,960
Speaker 9: actually one of those indicators in middle space was natural gas.

473
00:22:55,960 --> 00:22:59,000
Speaker 9: Why because natural gas is a top form of fertilizer.

474
00:22:58,640 --> 00:23:01,040
Speaker 3: For corny See it all comes back.

475
00:23:01,520 --> 00:23:04,040
Speaker 2: What about coffee, so on the flip side, corns low

476
00:23:04,040 --> 00:23:05,840
Speaker 2: of four dollars a barrel a bushel. At one point

477
00:23:06,480 --> 00:23:10,240
Speaker 2: coffee is just crushing to the upside, I mean Robusta

478
00:23:10,359 --> 00:23:11,240
Speaker 2: or Arabica.

479
00:23:11,400 --> 00:23:12,520
Speaker 3: Talk to us about it.

480
00:23:13,280 --> 00:23:15,240
Speaker 9: Yeah, we don't track it too much. I think is

481
00:23:15,320 --> 00:23:18,359
Speaker 9: significance of coffee and cocoa's they're both born right around

482
00:23:18,440 --> 00:23:22,480
Speaker 9: are grown sown right around the equator. And climate change,

483
00:23:22,480 --> 00:23:25,439
Speaker 9: I think it's directly affecting those commodities, despite things like

484
00:23:25,560 --> 00:23:28,520
Speaker 9: corn and soybeans and wheat which are more born in

485
00:23:28,560 --> 00:23:32,440
Speaker 9: the northern country, potentially in Brazil and US where's the

486
00:23:34,119 --> 00:23:36,880
Speaker 9: weather's still been quite productive for production.

487
00:23:37,320 --> 00:23:40,480
Speaker 4: All right, let's go over to the metals here. Copper

488
00:23:40,600 --> 00:23:42,840
Speaker 4: up about ten percent year to day. What's the call

489
00:23:42,920 --> 00:23:44,240
Speaker 4: here on copper?

490
00:23:45,000 --> 00:23:48,200
Speaker 9: I think the risk of copper goes down partly because

491
00:23:48,320 --> 00:23:50,080
Speaker 9: just look at bonio, so one good way to look

492
00:23:50,080 --> 00:23:52,159
Speaker 9: at copper. The price of copper on the screen right

493
00:23:52,160 --> 00:23:54,359
Speaker 9: now is about four dollars and thirty cents a pound.

494
00:23:54,560 --> 00:23:57,920
Speaker 9: If you overlay the pounds of copper with the percentage yield.

495
00:23:58,000 --> 00:24:00,560
Speaker 9: The tenure note that's usually where they've been traded almost

496
00:24:00,560 --> 00:24:02,760
Speaker 9: the last ten years. So I pointed out China's tenure

497
00:24:02,760 --> 00:24:05,640
Speaker 9: notes two point zero seven percent US is three point

498
00:24:05,640 --> 00:24:07,800
Speaker 9: sixty five. I think copper is just on the custom

499
00:24:07,880 --> 00:24:11,399
Speaker 9: breaking lower with most other commodities. Last few weeks it's

500
00:24:11,440 --> 00:24:13,680
Speaker 9: been crudel just kind of catching up to the grains.

501
00:24:13,760 --> 00:24:16,160
Speaker 9: And the key thing for copper to state to stay

502
00:24:16,160 --> 00:24:18,800
Speaker 9: resilient is US stock market has to stay strong. But

503
00:24:18,920 --> 00:24:21,560
Speaker 9: yet we've priced in so much by the rumor into

504
00:24:21,600 --> 00:24:23,879
Speaker 9: the studies. To me, the risk is sell the fact

505
00:24:23,960 --> 00:24:26,320
Speaker 9: and copper to have to mention the same sentences China.

506
00:24:26,560 --> 00:24:29,720
Speaker 9: China is in a pretty severe deflationary trajectory at the moment.

507
00:24:29,840 --> 00:24:32,560
Speaker 2: Yeah, I have somely was reading City put out like

508
00:24:32,560 --> 00:24:35,359
Speaker 2: a quarterly note on commodity outlook, and then for copper,

509
00:24:35,440 --> 00:24:38,240
Speaker 2: like longer term they still see that structural shift, energy

510
00:24:38,240 --> 00:24:40,600
Speaker 2: transition and all that demand. But then in the near

511
00:24:40,680 --> 00:24:43,439
Speaker 2: term you just can't escape sort of the downdraft in

512
00:24:43,560 --> 00:24:45,479
Speaker 2: China there and then how you kind of manage that.

513
00:24:45,560 --> 00:24:48,720
Speaker 2: But there's still broad growth in like the trough maybe

514
00:24:48,760 --> 00:24:51,840
Speaker 2: being like eight to nine thousand versus four to five thousand,

515
00:24:51,880 --> 00:24:54,160
Speaker 2: which it might have been in different cycles.

516
00:24:54,200 --> 00:24:55,920
Speaker 3: All right, what else you got? What else you're looking at?

517
00:24:56,600 --> 00:24:59,240
Speaker 9: Well, the number one commodity that's going up on the planet,

518
00:24:59,240 --> 00:25:00,480
Speaker 9: it was more of the store of he was gold.

519
00:25:00,520 --> 00:25:02,120
Speaker 9: I got to stick with something to my space that's

520
00:25:02,160 --> 00:25:04,600
Speaker 9: going up on a year today. Well, there you go.

521
00:25:04,600 --> 00:25:07,200
Speaker 9: On a year today, Basis golds up about thirty four percent.

522
00:25:07,240 --> 00:25:09,320
Speaker 9: To compare that to the total return of the S

523
00:25:09,359 --> 00:25:12,080
Speaker 9: and P five hundred and twenty eight percent three years now,

524
00:25:12,160 --> 00:25:15,359
Speaker 9: the rock is beating stocks. The risk is it continues.

525
00:25:15,560 --> 00:25:16,879
Speaker 9: I think it will. And the thing is you have

526
00:25:16,920 --> 00:25:18,600
Speaker 9: to just look at the macro one thing and manage

527
00:25:18,640 --> 00:25:21,200
Speaker 9: money net positions. We pointed out early hedgephones are quite long,

528
00:25:21,440 --> 00:25:24,760
Speaker 9: but etf have been in significant outpows. They're really just

529
00:25:24,800 --> 00:25:26,960
Speaker 9: starting to turn the inflows. So I think that's going

530
00:25:27,040 --> 00:25:29,960
Speaker 9: to continue. You could should get some bucking of that bowl.

531
00:25:30,160 --> 00:25:32,200
Speaker 9: But overall, to me, that's the market that's heading towards

532
00:25:32,240 --> 00:25:35,159
Speaker 9: three thousand dollars an ounce and it's probably backing up.

533
00:25:35,200 --> 00:25:37,359
Speaker 9: Maybe you'll see good supporter on twenty four hundred.

534
00:25:37,960 --> 00:25:39,800
Speaker 4: All right, Mike, thanks so much for joining us. Hey, Mike,

535
00:25:39,800 --> 00:25:42,000
Speaker 4: you go across the street from the Bloomberg headquarters, the

536
00:25:42,240 --> 00:25:45,320
Speaker 4: old Wattling pub mention my name. They'll take care of

537
00:25:45,320 --> 00:25:48,160
Speaker 4: you over there. Okay, thank god. Mike mcglohane, senior commodity

538
00:25:48,119 --> 00:25:50,119
Speaker 4: strategist for Bloomberg Intel. It's a great pub.

539
00:25:53,240 --> 00:25:57,119
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

540
00:25:57,200 --> 00:26:00,720
Speaker 1: weekdays at ten am Eastern on applecar Play and Android

541
00:26:00,760 --> 00:26:03,560
Speaker 1: Auto with the Bloomberg Business at You can also listen

542
00:26:03,640 --> 00:26:06,720
Speaker 1: live on Amazon Alexa from our flagship New York station,

543
00:26:07,119 --> 00:26:09,879
Speaker 1: Just Say Alexa Play Bloomberg eleven thirty.

544
00:26:11,359 --> 00:26:14,760
Speaker 2: Joining us now in studio is Uma Moriarty, senior investment

545
00:26:14,840 --> 00:26:18,080
Speaker 2: strategist and Global ESG lead over at Center Square, and

546
00:26:18,119 --> 00:26:20,280
Speaker 2: she joins us for her outlook on the market.

547
00:26:20,359 --> 00:26:21,720
Speaker 3: Uma, the moment is here.

548
00:26:22,080 --> 00:26:25,400
Speaker 2: We're like twenty four hours away from that first rate cut,

549
00:26:25,680 --> 00:26:27,280
Speaker 2: whether it's twenty five or fifty.

550
00:26:27,640 --> 00:26:29,120
Speaker 3: How does that impact the space you cover?

551
00:26:29,800 --> 00:26:31,440
Speaker 10: Yeah, I think this is probably going to be the

552
00:26:31,440 --> 00:26:35,000
Speaker 10: most widely anticipated rate cut of all time, definitely in

553
00:26:35,080 --> 00:26:38,080
Speaker 10: the space that we cover here at Center Square, in

554
00:26:38,400 --> 00:26:40,719
Speaker 10: real estate across the red market. I think this has

555
00:26:40,720 --> 00:26:43,080
Speaker 10: been a big catalyst that we've been waiting for. If

556
00:26:43,119 --> 00:26:45,480
Speaker 10: you look at just where the rates are trading compared

557
00:26:45,480 --> 00:26:48,680
Speaker 10: to broader equities. In terms of multiples, we're trading a

558
00:26:48,680 --> 00:26:51,960
Speaker 10: lot cheaper than we typically do compared to historical averages.

559
00:26:52,240 --> 00:26:53,880
Speaker 10: And I think this has been the catalyst that we've

560
00:26:53,920 --> 00:26:56,240
Speaker 10: been waiting for in the red market to really see

561
00:26:56,520 --> 00:26:59,200
Speaker 10: some good momentum. We've been seeing it so far this year.

562
00:26:59,280 --> 00:27:01,560
Speaker 10: Reads have had a bit of a bid and I

563
00:27:01,560 --> 00:27:04,159
Speaker 10: think that's going to really continue as we see further

564
00:27:04,600 --> 00:27:06,440
Speaker 10: further rate cuts on the horizon from the FED.

565
00:27:08,040 --> 00:27:11,159
Speaker 4: So we're in the rebusiness, do you guys prefer to

566
00:27:11,240 --> 00:27:15,199
Speaker 4: play commercial residential? Where within? I know there's a lot

567
00:27:15,200 --> 00:27:17,480
Speaker 4: of subsectors even within those two broad categories, where do

568
00:27:17,520 --> 00:27:18,639
Speaker 4: you guys typically like to play?

569
00:27:19,040 --> 00:27:21,119
Speaker 10: You know, what we're really focused on right now is

570
00:27:21,240 --> 00:27:23,960
Speaker 10: looking at not only the things that are going to

571
00:27:23,960 --> 00:27:26,280
Speaker 10: be benefiting from rate cuts, but also things that are

572
00:27:26,280 --> 00:27:29,159
Speaker 10: going to be winners in a secular way. Right, So,

573
00:27:29,160 --> 00:27:31,400
Speaker 10: there are a lot of different opportunities within the REP

574
00:27:31,480 --> 00:27:34,800
Speaker 10: market to find secular growth. One of those areas is

575
00:27:34,800 --> 00:27:38,800
Speaker 10: in healthcare seniors housing. For example, you have aging demographics

576
00:27:38,800 --> 00:27:41,159
Speaker 10: that are really going to create an insane amount of

577
00:27:41,240 --> 00:27:43,960
Speaker 10: demand I think for the senior housing space, and couple

578
00:27:44,040 --> 00:27:46,200
Speaker 10: that with the fact that you see you just put it.

579
00:27:48,960 --> 00:27:51,200
Speaker 3: He just read in his bathroom. He doesn't need senior

580
00:27:51,240 --> 00:27:54,560
Speaker 3: living space anyway, Go ahead anyway.

581
00:27:55,760 --> 00:27:58,280
Speaker 10: Yeah, So we've got some great demographic tailwinds here for

582
00:27:58,320 --> 00:28:00,879
Speaker 10: the senior housing space. Kind of couple that with a

583
00:28:01,040 --> 00:28:04,119
Speaker 10: few other things, right, So during COVID, we saw margins

584
00:28:04,400 --> 00:28:07,000
Speaker 10: really being impacted because of labor costs in the senior

585
00:28:07,000 --> 00:28:10,240
Speaker 10: housing space. You're seeing recovery from that. Plus you're seeing

586
00:28:10,240 --> 00:28:12,719
Speaker 10: that space being institutionalized, right, and so there is a

587
00:28:12,760 --> 00:28:15,560
Speaker 10: massive opportunity from an acquisition perspective there as well. So

588
00:28:15,920 --> 00:28:18,800
Speaker 10: all of those things playing into senior housing data centers,

589
00:28:18,800 --> 00:28:21,280
Speaker 10: I mean, another great play within the commercial real estate sector.

590
00:28:21,880 --> 00:28:23,840
Speaker 10: So those are the types of things that we're looking at.

591
00:28:23,880 --> 00:28:26,560
Speaker 10: We're not only benefiting from the rate cut environment, but

592
00:28:26,600 --> 00:28:29,000
Speaker 10: also really benefiting from secular tailwinds.

593
00:28:29,440 --> 00:28:32,800
Speaker 2: So based on that, okay, but the senior housing, the

594
00:28:32,880 --> 00:28:34,879
Speaker 2: data center, et cetera. I hear that a lot from

595
00:28:34,960 --> 00:28:37,640
Speaker 2: read people. So is the market really crowded?

596
00:28:38,440 --> 00:28:39,920
Speaker 10: There is still be a little bit of crowding in

597
00:28:39,960 --> 00:28:41,920
Speaker 10: some of those areas. The other thing we were just

598
00:28:41,960 --> 00:28:44,880
Speaker 10: talking about here, right, A couple tactical opportunities within the

599
00:28:44,880 --> 00:28:47,600
Speaker 10: office sector. I think could be really interesting here for investors.

600
00:28:47,960 --> 00:28:51,040
Speaker 10: I think within the broader commercial, rural state world, office

601
00:28:51,120 --> 00:28:53,200
Speaker 10: is a part of the real estate world that is

602
00:28:53,240 --> 00:28:56,520
Speaker 10: really troubled, especially on the private market side. Whereas the

603
00:28:56,600 --> 00:28:59,120
Speaker 10: rates have top tier assets. When you think about the

604
00:28:59,120 --> 00:29:01,440
Speaker 10: best assets here in New York City, they're really owned

605
00:29:01,440 --> 00:29:04,600
Speaker 10: by the reads. The reads have great balance sheets, low leverage,

606
00:29:04,760 --> 00:29:07,640
Speaker 10: access to capital from the unsecured bond market, from the

607
00:29:07,680 --> 00:29:10,680
Speaker 10: equity market that you just don't have across the private market.

608
00:29:10,880 --> 00:29:13,400
Speaker 10: So I think in some areas, the office market within

609
00:29:13,440 --> 00:29:15,320
Speaker 10: the read space is going to benefit here and be

610
00:29:15,360 --> 00:29:18,360
Speaker 10: a capital solution for what's happening on the private market side.

611
00:29:18,440 --> 00:29:22,360
Speaker 4: Because we really haven't seen that much activity in the

612
00:29:22,560 --> 00:29:25,280
Speaker 4: office space to really get a sense of where value

613
00:29:25,560 --> 00:29:27,400
Speaker 4: is have we We just haven't had a lot of

614
00:29:27,440 --> 00:29:32,600
Speaker 4: transactions to say, hey, is the discount fifty seventy percent?

615
00:29:32,640 --> 00:29:35,400
Speaker 4: We really don't know that. Are the reads going to

616
00:29:35,400 --> 00:29:36,680
Speaker 4: be the ones that set those levels?

617
00:29:36,760 --> 00:29:37,200
Speaker 11: Do you think?

618
00:29:37,680 --> 00:29:38,440
Speaker 3: I think they could be?

619
00:29:38,520 --> 00:29:40,200
Speaker 10: And I think the reason you really haven't seen that

620
00:29:40,320 --> 00:29:43,080
Speaker 10: is because there's been such a bifurcation between the haves

621
00:29:43,080 --> 00:29:45,920
Speaker 10: and have nots in the office market. Right One Vanderbilt

622
00:29:45,920 --> 00:29:48,040
Speaker 10: here in New York City leasing up at really really

623
00:29:48,080 --> 00:29:51,200
Speaker 10: topy rental rates, whereas if you try to go lease

624
00:29:51,240 --> 00:29:54,320
Speaker 10: a commodity office space, it's probably sitting vacant. You're going

625
00:29:54,360 --> 00:29:56,240
Speaker 10: to continue to lose vacancy. So I think there is

626
00:29:56,320 --> 00:29:59,440
Speaker 10: a big differentiation between quality, and so you'll see the

627
00:29:59,480 --> 00:30:02,400
Speaker 10: reads in it. In general, the market really open up

628
00:30:02,520 --> 00:30:05,080
Speaker 10: as we see a bit more stability on the rate side,

629
00:30:05,240 --> 00:30:07,600
Speaker 10: as we try to figure out what happens from the

630
00:30:07,640 --> 00:30:09,160
Speaker 10: debt perspective here as well.

631
00:30:09,560 --> 00:30:12,000
Speaker 2: Is it like one rate cut that makes a difference,

632
00:30:12,120 --> 00:30:14,400
Speaker 2: or is it just the cycle that we're starting, or

633
00:30:14,440 --> 00:30:16,520
Speaker 2: is it how many cuts we're expecting is going to

634
00:30:16,560 --> 00:30:17,920
Speaker 2: be a catalyst for the market.

635
00:30:18,360 --> 00:30:20,959
Speaker 10: I think just the fact that we're getting rate cuts

636
00:30:21,040 --> 00:30:24,600
Speaker 10: and we're kind of out of this potential type situation

637
00:30:24,920 --> 00:30:27,800
Speaker 10: right exactly, and you get a little bit more clarity

638
00:30:27,880 --> 00:30:30,400
Speaker 10: in terms of where things are going. So I think

639
00:30:30,440 --> 00:30:32,840
Speaker 10: this week, when we get some economic projections from the Fed,

640
00:30:32,880 --> 00:30:34,800
Speaker 10: will be important to see where that dot plot sits

641
00:30:34,800 --> 00:30:36,160
Speaker 10: in the end of this year at the end of

642
00:30:36,200 --> 00:30:39,880
Speaker 10: next year, to see where they're going from a rate perspective.

643
00:30:40,560 --> 00:30:42,520
Speaker 10: That being said, a lot of real estate also really

644
00:30:42,520 --> 00:30:44,720
Speaker 10: prices off of the long end of the old curve right,

645
00:30:44,760 --> 00:30:46,960
Speaker 10: and we've seen that kind of a little bit range

646
00:30:47,000 --> 00:30:48,960
Speaker 10: bound around the three and a half to four and

647
00:30:49,000 --> 00:30:51,280
Speaker 10: a half percent range, and so you'll see a bit

648
00:30:51,280 --> 00:30:53,880
Speaker 10: more price discovery as we kind of accept that that's

649
00:30:53,920 --> 00:30:57,280
Speaker 10: where long rates end up staying versus where we have

650
00:30:57,440 --> 00:31:01,120
Speaker 10: been seeing those rates kind of POSTGFC through COVID at

651
00:31:01,160 --> 00:31:02,840
Speaker 10: significantly lower levels.

652
00:31:03,120 --> 00:31:06,600
Speaker 4: All right, Let's say I'm a real estate investor. I've

653
00:31:06,600 --> 00:31:09,520
Speaker 4: got some equity behind me. I'd strike a deal to

654
00:31:09,560 --> 00:31:11,960
Speaker 4: buy one of these office towers on Third Avenue forty

655
00:31:12,000 --> 00:31:15,440
Speaker 4: sixth Street at maybe fifty cents on the dollar. Can

656
00:31:15,480 --> 00:31:18,360
Speaker 4: I go to a bank and get money to do this?

657
00:31:18,440 --> 00:31:20,480
Speaker 4: Will they lend me money for that type of transaction?

658
00:31:21,160 --> 00:31:23,880
Speaker 10: Currently, I think the banks are really relationship driven. It's

659
00:31:23,880 --> 00:31:26,600
Speaker 10: based on whether you have an existing relationship.

660
00:31:26,080 --> 00:31:29,600
Speaker 3: For you TVD. Yeah, they'd probably definitely lend a Paul.

661
00:31:30,400 --> 00:31:32,560
Speaker 10: But I think a lot of where the debt capital

662
00:31:32,600 --> 00:31:34,920
Speaker 10: is coming from currently within the marketplace is a lot

663
00:31:34,960 --> 00:31:39,680
Speaker 10: of alternative providers of debt, private lenders. Banks in general

664
00:31:39,760 --> 00:31:42,360
Speaker 10: are still a little bit over exposed in the real

665
00:31:42,440 --> 00:31:45,240
Speaker 10: estate space. As you're going to continue to see banks

666
00:31:45,320 --> 00:31:48,920
Speaker 10: needing to pull down their real estate exposure. Office definitely

667
00:31:48,960 --> 00:31:51,240
Speaker 10: is not one of their top priorities in terms of

668
00:31:51,320 --> 00:31:54,440
Speaker 10: increasing exposure at this point. Right, So it's not really

669
00:31:54,480 --> 00:31:56,920
Speaker 10: clear in terms of whether bank lending might exist for

670
00:31:56,960 --> 00:31:59,560
Speaker 10: something like that without a relationship, But I think the

671
00:31:59,600 --> 00:32:02,320
Speaker 10: private markets are starting to get a little bit more

672
00:32:02,320 --> 00:32:05,960
Speaker 10: interested in opportunities within the office space at the right price.

673
00:32:06,360 --> 00:32:08,360
Speaker 2: All right, Uma, thanks a lot. We really appreciate thanks

674
00:32:08,360 --> 00:32:11,440
Speaker 2: for coming in. Umer Moriarty joining us, Senior investment strategist

675
00:32:11,480 --> 00:32:14,160
Speaker 2: at Global ESG lead at Center Square, joining us on

676
00:32:14,240 --> 00:32:15,760
Speaker 2: the remarket, thank you very much.

677
00:32:17,360 --> 00:32:21,240
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

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681
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682
00:32:36,240 --> 00:32:39,120
Speaker 2: Okay, this is Monday, and usually around this time we

683
00:32:39,240 --> 00:32:42,480
Speaker 2: check in with our folks at Bloomberg BNEF. They cover

684
00:32:42,560 --> 00:32:45,360
Speaker 2: all the data, They have all the analysis on everything

685
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Speaker 2: from transport, industry, commodities, power buildings, AG sectors, anything that

686
00:32:49,200 --> 00:32:52,160
Speaker 2: you need in the energy transition they do. So joining

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00:32:52,240 --> 00:32:55,400
Speaker 2: us now for more is bo Chin, lead US carbon

688
00:32:55,440 --> 00:32:58,280
Speaker 2: analyst at Bloomberg b n EF and she joins us

689
00:32:58,280 --> 00:33:02,040
Speaker 2: now in the interactive Brooker Studio in midtown Manhattan. Okay,

690
00:33:02,120 --> 00:33:05,160
Speaker 2: so first of all, what is the carbon market in

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00:33:05,200 --> 00:33:06,280
Speaker 2: the US right now?

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00:33:06,320 --> 00:33:07,920
Speaker 3: What does that mean? Let's done this down.

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00:33:08,440 --> 00:33:11,040
Speaker 11: Yeah, carbon markets is one of the most exciting markets

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00:33:11,120 --> 00:33:14,520
Speaker 11: right now because it quantifies energy transition, which could be

695
00:33:14,640 --> 00:33:18,720
Speaker 11: quite fluffy, and having a carbon price, it basically shows

696
00:33:18,720 --> 00:33:22,440
Speaker 11: to you where are the opportunities and risks for industries,

697
00:33:22,960 --> 00:33:24,960
Speaker 11: lawmakers as well as investors.

698
00:33:25,160 --> 00:33:27,880
Speaker 2: So we say carbon market like it means the price

699
00:33:27,880 --> 00:33:29,680
Speaker 2: of IMIg a smet maker and I am a one

700
00:33:29,800 --> 00:33:32,920
Speaker 2: ton of carbon. What that price of that carbon is?

701
00:33:33,520 --> 00:33:36,400
Speaker 11: Yeah, exactly. So there are two kinds of carbon markets.

702
00:33:36,440 --> 00:33:39,600
Speaker 11: So there's compliance carbon markets and voluntary carbon markets. You

703
00:33:39,720 --> 00:33:42,600
Speaker 11: probably heard quite a lot of news about forestry at

704
00:33:42,640 --> 00:33:46,480
Speaker 11: carbon offsets this year, but there's also that compliance carbon market,

705
00:33:46,640 --> 00:33:49,880
Speaker 11: particularly in US that has been a rising star this year,

706
00:33:50,680 --> 00:33:53,200
Speaker 11: the compliance carbon mark. So what it is, it's basically

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00:33:53,320 --> 00:33:58,920
Speaker 11: regulators setting a scope and a target for the carbonization

708
00:33:59,200 --> 00:34:02,600
Speaker 11: and this market decides the price and it decides who

709
00:34:02,640 --> 00:34:05,400
Speaker 11: are the cheapest to abate, And what is the We

710
00:34:05,480 --> 00:34:07,800
Speaker 11: call it a marrit order, but what is the order

711
00:34:07,960 --> 00:34:12,400
Speaker 11: in which the polluters would reduce their emissions and the

712
00:34:12,520 --> 00:34:17,040
Speaker 11: chiapist would reduce first and the most expensive work first

713
00:34:17,280 --> 00:34:20,520
Speaker 11: buy the allowances and later reduce their emissions.

714
00:34:21,200 --> 00:34:24,759
Speaker 4: So California, I just I don't know that much about

715
00:34:24,760 --> 00:34:26,879
Speaker 4: this market, but I know California is kind of out

716
00:34:26,920 --> 00:34:29,440
Speaker 4: in front. And number two, I know it's a kind

717
00:34:29,440 --> 00:34:31,799
Speaker 4: of a big state. So what's happening in the price

718
00:34:31,840 --> 00:34:33,000
Speaker 4: of carbon in California.

719
00:34:33,280 --> 00:34:36,680
Speaker 11: Yeah, the California has been really in the news right

720
00:34:36,719 --> 00:34:39,719
Speaker 11: now because of the reforms that are going on in

721
00:34:39,760 --> 00:34:43,560
Speaker 11: California carbon market. So California carbon market is just one

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00:34:43,600 --> 00:34:47,160
Speaker 11: of the pieces that California, one of the tools that

723
00:34:47,440 --> 00:34:51,799
Speaker 11: California uses to direct their energy transition. And this whole

724
00:34:51,840 --> 00:34:55,359
Speaker 11: story really started from the Scoping Plan of twenty twenty two,

725
00:34:55,680 --> 00:35:00,000
Speaker 11: where the new target of net zero by twenty five

726
00:35:00,040 --> 00:35:03,040
Speaker 11: it has been set and the California carbon market has

727
00:35:03,080 --> 00:35:07,720
Speaker 11: been selected to guide this transition amidst other policy tools.

728
00:35:08,400 --> 00:35:10,040
Speaker 3: So yeah, good, Okay.

729
00:35:09,920 --> 00:35:12,520
Speaker 11: Yeah, So there has been it's been kind of we

730
00:35:12,600 --> 00:35:14,799
Speaker 11: have been watching us open here, so it's kind of

731
00:35:14,840 --> 00:35:18,520
Speaker 11: been watching a long set of that tennis game where

732
00:35:18,560 --> 00:35:23,640
Speaker 11: we have been seeing how this target been translated into

733
00:35:24,080 --> 00:35:27,440
Speaker 11: a cap trajectory. So what cap means for compliance market

734
00:35:27,480 --> 00:35:31,640
Speaker 11: is basically supply complace. Carbon market is very commodity based,

735
00:35:31,680 --> 00:35:34,480
Speaker 11: so you would look at supply which is the allowances,

736
00:35:34,520 --> 00:35:38,560
Speaker 11: and then demand which is emissions, and the supply has

737
00:35:38,840 --> 00:35:43,759
Speaker 11: been in this reform process that has been given a

738
00:35:43,800 --> 00:35:47,080
Speaker 11: lot of different guidances which have been kind of exciting

739
00:35:47,160 --> 00:35:50,440
Speaker 11: the market but also confusing the market. So looking at

740
00:35:50,719 --> 00:35:54,120
Speaker 11: just the prices, the price have gone up since from

741
00:35:54,600 --> 00:35:57,120
Speaker 11: nineteen dollars per metric down in twenty twenty one and

742
00:35:57,160 --> 00:36:00,000
Speaker 11: shooting up to this year in February hitting a four

743
00:36:00,200 --> 00:36:02,800
Speaker 11: four dollars per metric ton, So investing in this asset

744
00:36:02,840 --> 00:36:07,640
Speaker 11: has been a massive rally. However, the prices have come

745
00:36:07,719 --> 00:36:10,880
Speaker 11: down now, so we're now around thirty five point six.

746
00:36:11,920 --> 00:36:15,160
Speaker 2: Is it better for the energy transition to have higher

747
00:36:15,160 --> 00:36:17,720
Speaker 2: prices or lower prices as in like if it's higher,

748
00:36:17,719 --> 00:36:19,200
Speaker 2: companies are gonna be like ACT, I don't want to

749
00:36:19,200 --> 00:36:21,800
Speaker 2: pay that, I'm going to go upset my emissions or lower,

750
00:36:21,960 --> 00:36:23,760
Speaker 2: meaning that it can be a more robust market.

751
00:36:24,360 --> 00:36:27,840
Speaker 11: Yeah, exactly, that's a good question. We typically want a

752
00:36:27,920 --> 00:36:34,000
Speaker 11: gradually increasing price so it shows an incentive for industrials

753
00:36:34,040 --> 00:36:37,360
Speaker 11: and compliance entities or just entity in stents in general

754
00:36:37,440 --> 00:36:44,480
Speaker 11: to decarbonise. But we don't want big price volatility because

755
00:36:44,480 --> 00:36:49,160
Speaker 11: that could make it difficult to direct strategy and make

756
00:36:49,200 --> 00:36:54,160
Speaker 11: those big investments to killan tech. And this is why

757
00:36:54,200 --> 00:36:57,920
Speaker 11: also we do think like in US, it's important to

758
00:36:58,120 --> 00:37:01,120
Speaker 11: make sure that we have big enough carbon markets. So

759
00:37:01,160 --> 00:37:04,600
Speaker 11: we mentioned California. California is the biggest carbon market right

760
00:37:04,640 --> 00:37:08,920
Speaker 11: now and it's linked with Quebec Quebec in Canada, and

761
00:37:09,280 --> 00:37:12,480
Speaker 11: there is actually another carbon market that started last year

762
00:37:12,520 --> 00:37:15,600
Speaker 11: which was very exciting for US. It was Washington State

763
00:37:15,640 --> 00:37:19,880
Speaker 11: and it hit a carbon price of seventy three dollars

764
00:37:19,880 --> 00:37:22,359
Speaker 11: per metric tile in the futures market, which was very

765
00:37:22,360 --> 00:37:24,520
Speaker 11: exciting for US. This is the record price ever in

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00:37:25,200 --> 00:37:28,600
Speaker 11: US and it's right next to California, which there has

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00:37:28,640 --> 00:37:32,480
Speaker 11: been also bills proposed to link these carbon markets together.

768
00:37:32,719 --> 00:37:35,479
Speaker 11: And we do see that this would be great for

769
00:37:35,600 --> 00:37:38,960
Speaker 11: both of this carbon markets. One is because it would

770
00:37:39,160 --> 00:37:44,240
Speaker 11: reduce that price volatility, okay we mentioned, but also bring

771
00:37:44,360 --> 00:37:46,400
Speaker 11: the carbon leakage down as.

772
00:37:46,280 --> 00:37:49,120
Speaker 2: Well as but we gotta leave it there, Robings to break,

773
00:37:49,120 --> 00:37:52,160
Speaker 2: but Butch and thank you Bloomberg the any f carbon

774
00:37:52,200 --> 00:37:53,400
Speaker 2: analysts joining us there.

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00:37:53,480 --> 00:37:58,000
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776
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777
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778
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