WEBVTT - Amazon's Erstwhile NYC Site Will Lure In New Money 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penl Podcast. I'm Paul Sweene. You, 0:00:05.360 --> 0:00:07.680 along with my co host Lisa Brahma wits each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money, whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg Penl podcast on Apple 0:00:15.520 --> 0:00:17.959 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:23.280 at Bloomberg dot com. Let's go back to the Amazon story. 0:00:23.360 --> 0:00:26.720 I'm sure there was a real estate investors and speculators 0:00:26.720 --> 0:00:29.040 and Queens were screaming into their pillows last night as 0:00:29.080 --> 0:00:32.200 they were trying to process the news that Amazon will 0:00:32.280 --> 0:00:35.080 not be coming to Long Island City. To get a 0:00:35.120 --> 0:00:37.440 sense of what that means for the local real estate 0:00:37.479 --> 0:00:40.720 market over in Queens, let's bring on Ken Weissenberg. Ken 0:00:40.800 --> 0:00:43.040 is a partner in charge of the real estate services 0:00:43.080 --> 0:00:46.680 group at Eisner amper Uh. He is in New York City. 0:00:46.840 --> 0:00:50.000 So Ken, you know what does it really mean short 0:00:50.120 --> 0:00:54.520 term and long term for the Queen's and nyc um 0:00:54.720 --> 0:00:58.720 real estate market. On a short term basis, the speculation 0:00:58.800 --> 0:01:01.160 that was going on in the Long Island City area 0:01:01.560 --> 0:01:03.680 in terms of people buying up the condos that were 0:01:03.680 --> 0:01:07.160 available is going to pretty much stop for the time being. Um. 0:01:07.160 --> 0:01:08.920 I think the contracts that were into the two will 0:01:08.959 --> 0:01:10.880 go through and be completed, but a lot of the 0:01:11.000 --> 0:01:13.880 other transactions that work that were happening were probably going 0:01:13.920 --> 0:01:17.240 to slow down or stop for the time being. The 0:01:17.319 --> 0:01:20.080 overall market in the Long Island City area is continuing 0:01:20.120 --> 0:01:23.920 to show, you know, significant progress and growth. Uh. If 0:01:23.920 --> 0:01:25.679 you look at the site that Amazon was going to pick, 0:01:25.720 --> 0:01:28.560 it's in an opportunity zone. There's huge interest in the 0:01:28.600 --> 0:01:31.640 real estate community and developing an opportunity zones. The site 0:01:31.680 --> 0:01:34.840 happens to be basically on the water on the East River. Um, 0:01:34.840 --> 0:01:38.520 it's a prime for development. I think you'll see a 0:01:38.560 --> 0:01:41.560 project happen there, whether Amazon, it's Amazon or someone else. 0:01:42.400 --> 0:01:43.800 In other words, do you think it's not that big 0:01:43.800 --> 0:01:46.360 of a deal. I think it's a big deal. I mean, 0:01:46.400 --> 0:01:50.480 I think the political ramifications are a big deal to 0:01:50.840 --> 0:01:54.000 two sides within the Democratic Party have to kind of 0:01:54.040 --> 0:01:59.120 work things out. But Umland City is going to continue 0:01:59.160 --> 0:02:01.120 to grow. New York City is going to continue to grow. 0:02:01.320 --> 0:02:02.840 When you look at the number of jobs in New 0:02:02.920 --> 0:02:05.680 York City, Yes, another twenty five thousand jobs would have 0:02:05.680 --> 0:02:09.640 been great um, the construction jobs, you know, to build 0:02:09.639 --> 0:02:12.200 that that project would have been great, But other things 0:02:12.240 --> 0:02:15.480 will be built, other jobs will come in. New York 0:02:15.600 --> 0:02:18.760 is out out growing San Francisco as a tech center. 0:02:19.520 --> 0:02:23.280 UM in Long Island City is seven minutes from Midtown 0:02:23.440 --> 0:02:27.360 by subway. So, Ken, are you concerned, however, that what 0:02:27.480 --> 0:02:29.600 happened here with Amazon in the city, in a state 0:02:29.639 --> 0:02:32.200 of New York perhaps might send a signal to other 0:02:32.240 --> 0:02:35.520 corporations considering New York City, New York City that maybe 0:02:35.600 --> 0:02:38.520 New York is not open for business. I don't think so. 0:02:38.800 --> 0:02:45.080 I think this was a UM targeted political campaign UM 0:02:45.280 --> 0:02:49.079 that ended Amazon. Amazon didn't want to have any controversy 0:02:49.080 --> 0:02:53.560 around this UM with open arms. And then you know, 0:02:53.600 --> 0:02:55.120 there was a lot of a lot of a lot 0:02:55.160 --> 0:02:59.880 of pushback from local politicians. But honestly, Ken, I gotta wonder, 0:03:00.120 --> 0:03:02.960 if Amazon didn't want local pushback, why didn't they do 0:03:03.040 --> 0:03:06.000 more groundwork ahead of this. I mean, it seems kind 0:03:06.040 --> 0:03:09.920 of strange that everybody was shocked by this decision on 0:03:09.960 --> 0:03:12.880 the ground, uh, and that Amazon didn't realize that this 0:03:12.919 --> 0:03:15.680 would be waiting for them. That is kind of strange. 0:03:16.040 --> 0:03:20.800 I would have thought that the political politicians would have 0:03:20.800 --> 0:03:24.880 been lined up, you know, either for against way beforehand. Yeah. 0:03:25.040 --> 0:03:27.720 So here's my question for you, Ken, Um. Focused on 0:03:27.760 --> 0:03:29.560 the real estate sector, you're saying that you don't think 0:03:29.560 --> 0:03:31.440 it's going to have a material effect that there, that 0:03:31.560 --> 0:03:34.120 the area will continue to grow. But we'll put a 0:03:34.120 --> 0:03:35.800 long term, I mean a short term. It's going to 0:03:35.880 --> 0:03:38.320 be a shock to the system, because this was a 0:03:38.360 --> 0:03:41.440 real impetus to grow that that particular section of Long 0:03:41.480 --> 0:03:46.760 Island City could prices decline unreal estate there um from 0:03:46.800 --> 0:03:51.280 the speculative prices that hit recently. Yes, in a long term, 0:03:51.320 --> 0:03:54.080 I think they'll come back. I think they'll be just 0:03:54.120 --> 0:03:56.640 as strong and the growth we will continue. So, Ken, 0:03:56.720 --> 0:03:59.080 does this call into question at all the use of 0:03:59.120 --> 0:04:02.400 incentive to corporations. Let's just focus on New York City 0:04:02.400 --> 0:04:04.160 that seemed to be one of the areas that received 0:04:04.160 --> 0:04:06.720 a lot of pushback. Um. Do you think the city 0:04:06.760 --> 0:04:09.560 and the state will rethink some of the incentives it 0:04:09.680 --> 0:04:12.720 offers for corporations. Well, this this was quite a prize 0:04:12.760 --> 0:04:16.760 for whoever got the headquarters UM, and we were in 0:04:16.839 --> 0:04:20.800 competition with almost every major metropolitan area in the country 0:04:21.200 --> 0:04:26.040 for the H two q UM for h Q two 0:04:26.160 --> 0:04:29.320 rather UM so I think I think they had to 0:04:29.360 --> 0:04:32.520 put together sweeteners to make make the deal happen. But 0:04:32.560 --> 0:04:36.240 that's been going on so you know decades where they 0:04:36.279 --> 0:04:40.159 have been enticing large corporations to move headquarters with with sweeteners. 0:04:40.760 --> 0:04:45.679 I think that will continue. UM. Maybe you know, maybe 0:04:45.680 --> 0:04:49.000 the package was too sweet under the current economic climate, 0:04:49.440 --> 0:04:53.560 UM and political climate. But you know, even without the 0:04:53.960 --> 0:04:56.280 packages that they put together, there was you know, large 0:04:56.279 --> 0:05:00.000 incentives under under existing law that they could have benefited from. 0:05:00.000 --> 0:05:02.560 One thing that I'm wondering is how much of a 0:05:02.600 --> 0:05:05.719 pressure the subway system in New York affected this. In 0:05:05.720 --> 0:05:09.239 other words, that train line that went to Long Island 0:05:09.279 --> 0:05:12.800 City is already very crowded that if Amazon was going 0:05:12.839 --> 0:05:15.000 to come, it would strain the infrastructure more than it 0:05:15.040 --> 0:05:17.080 would help it in the short term, and in the 0:05:17.120 --> 0:05:19.400 long term that could make the city less appealing. What 0:05:19.440 --> 0:05:21.240 do you say to that and sort of what will 0:05:21.279 --> 0:05:26.800 this do to efforts to upgrade the subway system. When 0:05:26.800 --> 0:05:29.840 you look at the overall infrastructure for New York, the 0:05:29.920 --> 0:05:32.760 infrastructure has been in place probably longer than any other 0:05:32.800 --> 0:05:36.279 major major metropolitan area in the United States, UM, and 0:05:36.360 --> 0:05:40.880 it does need refresh and continue rebuild. The first major 0:05:40.920 --> 0:05:43.240 project in the subway system in fifty years was the 0:05:43.240 --> 0:05:46.039 Second Avenue subway line, and that's been going on for 0:05:46.080 --> 0:05:50.160 thirty years and not finished yet. Uh. They do need 0:05:50.240 --> 0:05:53.839 to put significant investment into the infrastructure of New York 0:05:53.839 --> 0:05:57.200 City and the major metropolitan areas around the country. That's 0:05:57.240 --> 0:06:01.039 more of a federal UM and say combined program, and 0:06:01.040 --> 0:06:03.599 I'd like to see that happen. UM. A lot of 0:06:03.600 --> 0:06:06.280 it will be done with private partner you know, public 0:06:06.279 --> 0:06:08.800 private partnerships, like what's going on at the airport's right now. 0:06:09.839 --> 0:06:12.880 So can as New York City in particular continues to 0:06:12.920 --> 0:06:15.800 try to attract a new corporate citizens and they've had 0:06:15.800 --> 0:06:19.039 some tremendous success with technology companies, with Google having a 0:06:19.040 --> 0:06:24.720 big presence in Lower Manhattan, Facebook as well. UM. Talk 0:06:24.760 --> 0:06:26.960 to me about how the city positions its cost of 0:06:27.040 --> 0:06:29.880 living challenges to some of these corporations and how that 0:06:29.920 --> 0:06:32.680 gets balanced, because you know, that has to be a 0:06:32.680 --> 0:06:37.360 big challenge for New York cities that attracts corporations. Our 0:06:37.360 --> 0:06:40.120 rent is cheaper than San Francisco, not by much, but 0:06:40.160 --> 0:06:44.000 it's a little cheaper than San Francisco. UM. I think 0:06:44.000 --> 0:06:46.359 the city is is and and state have to address. 0:06:46.400 --> 0:06:49.200 You know that the housing need for affordable housing for 0:06:49.240 --> 0:06:56.040 the workforce. Workforce meaning UM policeman, teachers, UM office workers, 0:06:56.480 --> 0:07:02.480 UM young lawyers and accountants. The prices of Manhattan are 0:07:02.800 --> 0:07:07.160 basically pushing people out. UM. You're seeing development happening in 0:07:07.680 --> 0:07:12.080 the outer boroughs. Brooklyn and Queens are seeing a tremendous 0:07:12.080 --> 0:07:15.000 amount of development interests. The Bronx is atreading to see 0:07:15.000 --> 0:07:20.600 significant development interests and certain companies are developing in the 0:07:20.600 --> 0:07:23.280 transit hubs in the suburbs. So that's going to take 0:07:23.320 --> 0:07:25.040 some sub of the pressure off New York City. But 0:07:25.120 --> 0:07:28.600 that also requires infrastructure because people have to be on 0:07:28.600 --> 0:07:34.600 on accessible and clean, safe transit. Ken Weisenberg, thank you 0:07:34.640 --> 0:07:36.760 so much for being with us. Ken Weisenberg, partner in 0:07:36.840 --> 0:07:39.200 charge of the real estate services group at Eisner Amper 0:07:39.560 --> 0:07:44.520 in New York. Talking about the potential ramifications of Amazon 0:07:44.600 --> 0:07:47.800 withdrawing from the Long Island City site for its headquarters 0:07:47.800 --> 0:07:51.840 to project a HQ two UH seems to be a 0:07:52.000 --> 0:07:54.440 growing feeling that in the short run it might have 0:07:54.480 --> 0:07:57.240 an issue, it might have an impact on prices over 0:07:57.240 --> 0:08:00.480 the long term, a little bit more optimism New York 0:08:00.520 --> 0:08:03.680 and in terms of its tech growth yeah, we've we've 0:08:03.720 --> 0:08:06.160 already seen a lot of tech coming as I mentioned before. 0:08:06.200 --> 0:08:09.240 You know, Facebook and Alphabet is here, and of course 0:08:09.280 --> 0:08:12.000 Cornell has their big tech center UH in the city 0:08:12.040 --> 0:08:14.400 as well, so up and we've seen news reports about 0:08:14.400 --> 0:08:16.520 how you know, New York is adding more tech jobs 0:08:16.520 --> 0:08:18.720 than than San Francisco. So it certainly has a strong 0:08:18.800 --> 0:08:21.640 foundation there. But you have to wonder about the political 0:08:21.720 --> 0:08:25.360 support of you know, making tech even a bigger part 0:08:25.360 --> 0:08:27.760 of the New York City corporate scene. When you think 0:08:27.760 --> 0:08:31.800 about the twenty seven billion dollars of economic value added 0:08:31.840 --> 0:08:34.760 over or created over twenty five year period by this Walmart, 0:08:34.960 --> 0:08:37.760 I mean by the Amazon move against the three billion 0:08:37.800 --> 0:08:43.079 dollars in subsidies. That seems like favorable economics. Yet that 0:08:43.160 --> 0:08:57.040 perhaps wasn't enough. Let's find out a little bit more 0:08:57.120 --> 0:09:01.480 about what is expected to come from this declaration of 0:09:01.520 --> 0:09:04.680 an emergency. And Edgar Tennis joining us now congressional reporter 0:09:04.760 --> 0:09:08.240 for Bloomberg News, joining us from One Studios in Washington, 0:09:08.320 --> 0:09:10.800 d c uh and thank you so much for being 0:09:10.840 --> 0:09:14.720 with us. So talk about what the precedent is for 0:09:14.840 --> 0:09:19.120 declaring a state of emergency, a national emergency to divert 0:09:19.200 --> 0:09:22.240 funds away from other projects towards something that the president 0:09:22.280 --> 0:09:25.600 would like to see. Well, that's that's an interesting question. 0:09:25.600 --> 0:09:28.520 It's kind of two different questions because declaring a national 0:09:28.559 --> 0:09:32.360 emergency is not unheard of. Barack Obama declared a national 0:09:32.360 --> 0:09:36.839 emergency to combat the swine flu. George George W. Bush 0:09:36.880 --> 0:09:40.200 declared and a national emergency after nine eleven, So declaring 0:09:40.200 --> 0:09:44.240 a national emergency happens from time to time. But yours 0:09:44.280 --> 0:09:47.000 the second part of your question, to shift funds from 0:09:47.040 --> 0:09:50.480 one part of the budget to another part is unprecedented. 0:09:50.520 --> 0:09:52.680 And that's where we're going to run into a real 0:09:52.760 --> 0:09:56.520 constitutional challenge because according to Article one of the Constitution, 0:09:56.840 --> 0:09:59.040 it's Congress that has the power of the purse, and 0:09:59.040 --> 0:10:02.720 there's an appropriation process that goes through Congress. And what 0:10:02.800 --> 0:10:05.200 the president is trying to do with this declaration is 0:10:05.520 --> 0:10:11.200 divert taxpayer money to his priority outside the regular appropriation process, 0:10:11.240 --> 0:10:14.960 and that's gonna be challenged on constitutional grounds, clearly, um 0:10:15.000 --> 0:10:17.800 I think, Lisa. The issue here is we know his 0:10:17.920 --> 0:10:21.079 intention is to uh continue to fund the board of Wall. 0:10:21.120 --> 0:10:23.640 The question is what type of uh I think? Uh 0:10:24.040 --> 0:10:26.960 I think challenge will he received various members of Congress 0:10:27.000 --> 0:10:29.559 and over what time frame. Well, I will say this, 0:10:29.840 --> 0:10:32.440 it's interesting to see how he's going to try to 0:10:32.520 --> 0:10:35.000 cast this as a win, and it will be interesting 0:10:35.000 --> 0:10:37.600 to see President Trump's tone. I was interested in the 0:10:37.640 --> 0:10:41.400 Wall Street Journal opinion article that came out today from 0:10:41.440 --> 0:10:46.760 the editorial board talking about how signing declaring a national 0:10:46.760 --> 0:10:51.880 emergency is a problem and is actually basically how he 0:10:51.920 --> 0:10:54.079 painted himself into a corner. Kind of interesting the Wall 0:10:54.120 --> 0:10:58.520 Street Journal editorial page, usually a conservative place with his 0:10:58.679 --> 0:11:02.959 conservative opinions, but really highlighting this fissure in the Republican 0:11:03.000 --> 0:11:05.840 party over declaring a national emergency? Will this give a 0:11:05.880 --> 0:11:09.559 precedent to the Democrats to do the same if there 0:11:09.640 --> 0:11:13.200 is a Democratic president? Also trying to figure out what 0:11:13.280 --> 0:11:16.839 kinds of lawsuits this exposes the Trump administration to not 0:11:16.960 --> 0:11:21.200 only from opponents of some of these funding read diversions, 0:11:21.440 --> 0:11:24.800 but also frankly, the residents that would have to exit 0:11:24.880 --> 0:11:27.560 their homes due to eminent domain in order to allow 0:11:27.640 --> 0:11:30.400 this wall to be built. So a lot of issues here. 0:11:30.440 --> 0:11:31.960 This is going to get tied up in the courts 0:11:32.000 --> 0:11:35.000 for a while. Uh. Also a question of where the 0:11:35.040 --> 0:11:37.480 money is going to come from, and you know what 0:11:37.520 --> 0:11:40.440 projects will have to be jeopardized as a result of that. 0:11:40.840 --> 0:11:44.080 But that said, there still is a core of President 0:11:44.120 --> 0:11:46.480 Trump supporters who would like to see the wall. He 0:11:46.559 --> 0:11:49.960 has made this a campaign speech issue, he has made 0:11:49.960 --> 0:11:53.440 this one of the hallmarks of his tenure, and he 0:11:53.640 --> 0:11:55.880 doesn't want to go down without this victory, even if 0:11:55.880 --> 0:11:58.560 it's just on paper. Yeah, it could be a puperic victory, 0:11:58.600 --> 0:12:02.000 but clearly looks President Trump and the administration is going 0:12:02.040 --> 0:12:03.520 to fight very hard for this. We do have Anna 0:12:03.559 --> 0:12:06.520 Edgerton back Coggression, reporter for Bloomberg News, calling from our 0:12:06.520 --> 0:12:08.960 Bloomberg ninety nine one studio in Washington, d C. Anna, 0:12:09.440 --> 0:12:11.640 thanks for coming back up. I guess the question here 0:12:11.720 --> 0:12:13.520 now is just kind of next steps. How does this 0:12:13.520 --> 0:12:16.160 play out in your opinion there? So, there are two 0:12:16.200 --> 0:12:19.120 things that we're looking for from the democratically led House 0:12:19.120 --> 0:12:22.000 to Representatives. The first is a legal challenge. I spoke 0:12:22.080 --> 0:12:25.559 with Jerry Nadler, he's the Democrat in charge of the 0:12:25.640 --> 0:12:29.800 Judiciary Committee, and he said that the House Council will 0:12:29.960 --> 0:12:33.520 pursue legal challenges to this. The other avenue to challenge 0:12:33.559 --> 0:12:37.040 this is a joint resolution that would start in the 0:12:37.080 --> 0:12:40.520 House of Representatives. So, uh, Nadler has already said that 0:12:40.559 --> 0:12:44.840 he is going to put question this, this National Emergency 0:12:44.880 --> 0:12:48.200 declaration in a resolution now that's privileged, so that means 0:12:48.240 --> 0:12:50.880 it will go through the Judiciary Committee, it will go 0:12:51.040 --> 0:12:53.600 put on the floor of the House. It will probably 0:12:53.679 --> 0:12:56.760 pass a Democratic House, and within fifteen days it has 0:12:56.800 --> 0:12:59.000 to be voted in the Senate. So it's not up 0:12:59.000 --> 0:13:01.760 to Mitch McConnell, the Senate majority leader, whether or not 0:13:01.800 --> 0:13:03.720 to put it on the floor. So it's gonna be 0:13:03.760 --> 0:13:07.640 really interesting to see if all Democrats vote against this 0:13:07.760 --> 0:13:11.120 National Emergency declaration and some Republicans who have kind of 0:13:11.320 --> 0:13:15.240 constitutional qualms with this um, it could pass because it 0:13:15.280 --> 0:13:17.360 only needs to be one votes. If it's privilege, it 0:13:17.400 --> 0:13:20.000 doesn't have to get past the filibuster. I think it's 0:13:20.040 --> 0:13:26.360 interesting though, Mitch McConnell supports declaration of a national emergency, 0:13:26.440 --> 0:13:30.200 and we've seen this, uh, just the leadership of the 0:13:30.240 --> 0:13:32.880 Republicans seems to be behind President Trump. What can you 0:13:32.960 --> 0:13:36.280 draw from that? That was a really interesting development, and 0:13:36.520 --> 0:13:39.920 he almost kind of used that as a way to 0:13:40.080 --> 0:13:44.000 encourage some of his hesitant members to vote for the 0:13:44.240 --> 0:13:46.959 spending bill yesterday, to say, you know, there will be 0:13:47.040 --> 0:13:49.280 wall money coming from elsewhere, the President will declare a 0:13:49.360 --> 0:13:52.640 national emergency. I think this is a political calculation from 0:13:52.679 --> 0:13:55.320 Mitch McConnell. He knows that this is a very strong 0:13:55.600 --> 0:13:59.000 campaign promise from the President and in order to kind 0:13:59.040 --> 0:14:01.720 of keep that core base with them, they need to 0:14:01.760 --> 0:14:04.920 do more than they were allowed to do under the 0:14:05.080 --> 0:14:08.720 normal appropriations process and divided government. So it definitely looks 0:14:08.760 --> 0:14:12.040 like a kind of a a political move the McConnell 0:14:12.120 --> 0:14:15.600 might not like, but kind of weighing what's at stake, 0:14:15.840 --> 0:14:18.320 it felt like he had to so, and what's the 0:14:18.360 --> 0:14:22.480 sense of where the rank and file Republican Party, particularly 0:14:22.520 --> 0:14:25.040 in the in the Senate, where are they falling down 0:14:25.160 --> 0:14:28.520 on this issue? Are they really willing to go uh 0:14:28.560 --> 0:14:32.160 and stand behind the president on this. It's pretty divided 0:14:32.240 --> 0:14:34.920 right now and senators yesterday we're a little wary to 0:14:35.000 --> 0:14:37.240 kind of get ahead of their skis before the national 0:14:37.280 --> 0:14:41.360 declaration is the emergency declaration is actually declared, and also 0:14:41.400 --> 0:14:44.040 to see which pots of money will be tapped for this. 0:14:44.560 --> 0:14:48.000 But with there was one really interesting response from Mike 0:14:48.120 --> 0:14:52.200 Simpson that I wanted to highlight. He said that he 0:14:52.280 --> 0:14:55.360 does think the president has pretty broad legal authority to 0:14:55.400 --> 0:14:58.400 do this the way that the National Emergency Statute is written. 0:14:58.880 --> 0:15:01.800 But he does worry about the precedent, and he said, 0:15:02.120 --> 0:15:04.840 you know, I do think the president has legal to 0:15:04.880 --> 0:15:09.080 do this. Maybe it's the best course of action since 0:15:09.120 --> 0:15:11.960 he couldn't get Wall money any other way. But the 0:15:12.040 --> 0:15:14.320 next time we have a democratic president, we could have 0:15:14.400 --> 0:15:17.080 a healthcare national emergency that gets us Medicare for all. 0:15:17.400 --> 0:15:20.120 We could have a climate emergency that gets us the 0:15:20.280 --> 0:15:23.520 Green New Deal. So, you know, kind of opening this 0:15:24.200 --> 0:15:28.240 up as an acceptable practice really kind of changes the 0:15:28.280 --> 0:15:31.080 way to two bridges of government interact. We're speaking with 0:15:31.120 --> 0:15:35.640 Anna Edgerton, uh congressional reporter for Bloomberg News as we 0:15:35.680 --> 0:15:39.680 await President Trump to make comments after his expected signing 0:15:39.920 --> 0:15:43.000 of the bill to stave off another government shutdown, as 0:15:43.040 --> 0:15:45.960 well as a declaration of a national emergency, which he's 0:15:46.000 --> 0:15:49.280 also expected to do. And I'd love to get your sense, 0:15:49.520 --> 0:15:52.840 just going forward, where would the money actually come from. 0:15:52.880 --> 0:15:55.640 Can you give us a sense of the projects that 0:15:55.720 --> 0:15:59.480 could get delayed, postponed, not happen as a result of 0:15:59.560 --> 0:16:03.120 money diverted to the Wall. Should this happen? Yeah, My 0:16:03.600 --> 0:16:07.520 colleague Margaret's talent reported yesterday that the president has identified 0:16:07.760 --> 0:16:11.440 eight billion dollars, almost eight billion dollars that could be 0:16:11.560 --> 0:16:14.520 directed for this purpose, and the kind of pots of 0:16:14.560 --> 0:16:18.080 money we're looking at our unobligated funds that could come 0:16:18.080 --> 0:16:22.000 from military accounts, although speaking with Jerry Nadler, a Democratic 0:16:22.080 --> 0:16:24.680 chair of the Judiciary Committee yesterday, he said, you can't 0:16:24.760 --> 0:16:28.680 use military money for this purpose because military money can 0:16:28.720 --> 0:16:32.000 only be directed to military uses, and by law, the 0:16:32.120 --> 0:16:36.320 military can't enforce domestic law, so that could be one snag. 0:16:36.360 --> 0:16:40.680 We could also see money being moved from UH funds 0:16:40.760 --> 0:16:44.000 to rebuild an air base in Florida that was damaged 0:16:44.040 --> 0:16:47.800 by the hurricane, and also in Campbell June in North 0:16:47.840 --> 0:16:50.600 Carolina that was damaged by the floods. So there are 0:16:50.600 --> 0:16:53.200 a few different things that the president's looking at, but um, 0:16:53.280 --> 0:16:56.680 we expect that to be clear pretty much before the 0:16:56.680 --> 0:17:01.080 beginning of next week. So Anna, Obviously, this border wall 0:17:01.200 --> 0:17:06.359 is a arguably the foundational element of the Trump presidency, 0:17:06.400 --> 0:17:08.679 at least to this point. But is there any sense 0:17:08.800 --> 0:17:12.640 that you know, fatigue as setting in within the administration 0:17:12.720 --> 0:17:15.880 that maybe it's just not worth it. Too many roadblocks 0:17:15.920 --> 0:17:17.520 here and it doesn't seem to be a clear path 0:17:18.320 --> 0:17:22.240 to get this funding. I don't know if there's I mean, 0:17:22.400 --> 0:17:24.240 I think there's a kind of a constant fatigue in 0:17:24.280 --> 0:17:27.560 the administration just because it's just, you know, kind of happens. 0:17:27.600 --> 0:17:31.600 It's such a high frequency. But there's certainly as a 0:17:31.800 --> 0:17:35.400 kind of political concern that the more the president kind 0:17:35.400 --> 0:17:40.280 of sacrifices or puts himselves out there to pursue this 0:17:40.320 --> 0:17:43.199 one priority, the more damage she could be doing in 0:17:43.359 --> 0:17:47.480 other areas. Like for example, the government shut down, you know, 0:17:47.680 --> 0:17:51.200 was supported by those who really really want to build 0:17:51.200 --> 0:17:55.000 a border wall, but it really made the president's approval 0:17:55.080 --> 0:17:57.040 ratings take a hit, and you kind of see him 0:17:57.080 --> 0:17:59.280 compensating for that a little bit. There was an really 0:17:59.320 --> 0:18:02.919 interesting peace in political last week kind of highlighting the 0:18:03.640 --> 0:18:08.600 overt embrace of pro life priorities and kind of really 0:18:08.640 --> 0:18:11.680 attacking the state laws that have been in the news 0:18:11.720 --> 0:18:14.880 recently about abortion. And that's the president trying to shore 0:18:14.960 --> 0:18:18.399 up his evangelical basis. So even as he pursues the 0:18:18.480 --> 0:18:21.159 wall and does everything he can, maybe even you know, 0:18:21.240 --> 0:18:23.400 using some of his political capital to do that, he's 0:18:23.400 --> 0:18:26.560 trying to kind of shore up his coalition and other 0:18:26.600 --> 0:18:30.600 areas as well, and adgertain we will please be speaking 0:18:30.600 --> 0:18:44.800 with you soon. Well, lots of news coming out of Washington, 0:18:44.880 --> 0:18:48.120 d c is. We just listened to President Trump's press 0:18:48.200 --> 0:18:53.320 conference about the government funding UH for border security, talking 0:18:53.359 --> 0:18:56.359 about China trade. It's got a sense of how a 0:18:56.359 --> 0:18:59.840 lot of these geopolitical issues are impacting the US and 0:19:00.040 --> 0:19:02.680 global credit market. We bring in Michael Temple. Michael's a 0:19:02.760 --> 0:19:06.000 director of Corporate Credit US and portfolio manager for a 0:19:06.080 --> 0:19:09.640 Mundy Pioneer. A Mundy Pioneer has approximately eighty billion dollars 0:19:09.720 --> 0:19:13.240 under management. Michael joins us here in our Bloomberg Interactive 0:19:13.520 --> 0:19:17.560 Broker studio. Michael, thanks for being with us. UM A 0:19:17.600 --> 0:19:21.120 lot of geopolitical noise out there, news out there, whether 0:19:21.160 --> 0:19:23.560 it is China, whether it is the US government shutdown, 0:19:23.560 --> 0:19:27.080 whether it's Brexit. How does that factor into your analysis 0:19:27.160 --> 0:19:30.000 of the credit markets? Well, you know, I think it's 0:19:30.000 --> 0:19:32.280 a top down factor that we have to think about. 0:19:32.880 --> 0:19:35.840 How it might affect um consumer confidence, how it might 0:19:35.880 --> 0:19:39.400 affect business confidence, and whether or not at the margin 0:19:39.880 --> 0:19:43.320 it's going to create a slower economic activity, either in 0:19:43.359 --> 0:19:45.760 the US or overseas. So if you look at the 0:19:45.800 --> 0:19:49.080 bottom up, you see companies that still have pretty high leverage, 0:19:49.119 --> 0:19:51.480 even though there's some d leveraging going on. You see 0:19:51.720 --> 0:19:54.760 YO bond yields that have come down dramatically more than 0:19:54.800 --> 0:19:57.760 five percent returns so far this year. Are we out 0:19:57.760 --> 0:19:59.720 of the woods with respect to another credit crisis or 0:19:59.720 --> 0:20:02.080 could we see another one? Well? I think a lot 0:20:02.080 --> 0:20:05.959 of it depends on whether or not the slowdown that 0:20:06.000 --> 0:20:09.879 we're seeing globally, in particular in Europe and you just 0:20:09.960 --> 0:20:14.360 heard about China, whether or not that ends up causing 0:20:14.359 --> 0:20:17.080 a much more rapid deceleration of growth in the US. 0:20:17.480 --> 0:20:20.400 If it does, then we're going to revisit this problem 0:20:20.720 --> 0:20:23.320 sometime in the near future. If it doesn't, if the 0:20:23.359 --> 0:20:27.320 fedbacking away causes an improvement and confidence and the economy 0:20:27.359 --> 0:20:31.280 is fine, then uh, I think we've probably seen seen 0:20:31.320 --> 0:20:33.360 this for the last time for a while. Okay, So, 0:20:33.480 --> 0:20:37.080 if the economy does slow materially in the US, what 0:20:37.160 --> 0:20:40.520 will be the epicenter of the next credit crisis? Well, 0:20:41.480 --> 0:20:42.960 you know, it's a good question. A lot of people 0:20:43.000 --> 0:20:46.840 are looking at the US credit markets as the point 0:20:46.880 --> 0:20:49.320 of a problem, and of course everybody looks back to 0:20:49.359 --> 0:20:53.879 the last cycle when bank loans are doing really poorly 0:20:53.920 --> 0:20:56.880 and had enormous defaults in the US I actually don't 0:20:56.920 --> 0:20:58.879 think it's necessarily going to be the U S as 0:20:58.920 --> 0:21:03.040 the epicenter. I think it's going to be overseas UM. Clearly, 0:21:03.320 --> 0:21:06.600 growth is a lot slower in Europe right now, and 0:21:06.720 --> 0:21:10.160 you're seeing a number of countries in recession. So could 0:21:10.160 --> 0:21:14.520 you see defaults and increasing problems in Europe that ultimately 0:21:14.560 --> 0:21:17.560 cycle back to the US. And what about China? What 0:21:17.680 --> 0:21:23.959 if China cannot reinvigorate growth with its current stimulus program, um, 0:21:24.040 --> 0:21:27.360 then we can start to see problems coming out of China. 0:21:27.600 --> 0:21:31.040 So if if the FED is on the sidelines, which 0:21:31.040 --> 0:21:33.240 it appears to be, does that imply that we're in 0:21:33.320 --> 0:21:36.040 a trading range here, if at least for the short term. 0:21:36.080 --> 0:21:38.920 I think so. You know, you've seen a tremendous rebound 0:21:38.960 --> 0:21:42.320 in credit spreads. So the question will be, now that 0:21:42.320 --> 0:21:44.880 the Feds off the table, what will be the next 0:21:44.920 --> 0:21:48.639 factor that could potentially either cause credit what credit spreads 0:21:48.680 --> 0:21:51.520 to tighten or widen? UM. I think now the market 0:21:51.600 --> 0:21:55.400 is going to be focused on the um earnings growth. 0:21:55.440 --> 0:21:57.720 So you know, I coined a phrase fed up with 0:21:57.760 --> 0:22:00.520 the Fed. I think the market's done trying to figure 0:22:00.520 --> 0:22:01.760 out what the FED is going to do. The FED 0:22:01.880 --> 0:22:03.840 is basically said, we're on hold for some period of time, 0:22:03.880 --> 0:22:06.719 so everyone's going to be focusing on different things. So 0:22:07.000 --> 0:22:08.840 is the market fed up with the Fed? They are 0:22:08.880 --> 0:22:11.199 for right now. Next week though, the Federal meet, and 0:22:11.240 --> 0:22:14.680 I'm sure everybody will be laser focused on them once again, 0:22:14.680 --> 0:22:17.680 im parsing every word of FED speak. Michael Temple, thank 0:22:17.680 --> 0:22:19.560 you so much for being with us. Michael Temple, director 0:22:19.560 --> 0:22:23.359 of Corporate Credit US and portfolio manager for a Moondy 0:22:23.400 --> 0:22:27.720 Pioneer which oversees eighty billion dollars. Definitely interesting to think 0:22:27.880 --> 0:22:29.600