WEBVTT - Aireon’s Space-Based System Tracks Planes In Real Time 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penl podcast. I'm Paul swing you. 0:00:05.360 --> 0:00:07.680 Along with my co host Lisa Brahma Wicks. 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 --> 0:00:22.960 at Bloomberg dot com. Well. On April two, a technology 0:00:23.000 --> 0:00:27.360 company plans to go live with a space based aircraft 0:00:27.440 --> 0:00:29.960 surveillance system which will track plans globally in real time 0:00:30.000 --> 0:00:33.000 for the first time ever. Now plans are tracked by radar, 0:00:33.080 --> 0:00:36.320 but sev of the planet is uncovered by radar, which 0:00:36.320 --> 0:00:39.199 is especially problematic over oceans. I did not know that 0:00:39.960 --> 0:00:42.320 joining us here to walk us through this new technology 0:00:42.400 --> 0:00:46.280 is Don Toma, CEO of Arion, based on McClean Virginia. Don, 0:00:46.400 --> 0:00:50.479 this sounds like a game changer technology to me, is it. 0:00:51.840 --> 0:00:54.040 That's great? That's right, Paul, thanks for having having me 0:00:54.080 --> 0:00:57.480 on the program. Now this is really being hailed as 0:00:57.560 --> 0:01:02.319 a major technological advancement in aviation. As you mentioned, your 0:01:03.400 --> 0:01:06.479 of the world is not tracked by any any means 0:01:06.560 --> 0:01:08.920 at this point in real time and meaning there's no 0:01:08.959 --> 0:01:13.399 surveillance for air traffic controllers. And you know, typically the 0:01:13.440 --> 0:01:16.759 world has been using radar technology that has been developed 0:01:17.080 --> 0:01:20.000 back in the nineteen thirties and forties as the primary 0:01:20.040 --> 0:01:24.280 means of of tracking aircraft for air traffic control. But 0:01:24.800 --> 0:01:28.679 the world's air traffic control organizations are in a program 0:01:28.720 --> 0:01:31.600 to upgrade that technology to a g P, a GPS 0:01:31.680 --> 0:01:35.000 based system for tracking the aircraft. And what Arean is 0:01:35.000 --> 0:01:38.319 doing is bringing that technology to the entire world. Currently 0:01:38.319 --> 0:01:41.800 it's limited to some certain regions like the continental US, 0:01:42.200 --> 0:01:45.679 your parts of Europe, parts of Australia, etcetera. But you know, 0:01:45.880 --> 0:01:48.480 starting next week will begin providing this service to air 0:01:48.520 --> 0:01:52.080 traffic controllers all over the world immediately. So, John, when 0:01:52.120 --> 0:01:54.560 I first started reading about this, my my initial question 0:01:54.720 --> 0:01:58.360 was what took so long? Because we've had space satellites 0:01:58.360 --> 0:02:00.840 for a long time that track lot of things, So 0:02:00.920 --> 0:02:04.640 why shouldn't we have some sort of all encompassing surveillance system. 0:02:04.640 --> 0:02:07.120 And then it struck me maybe this is a security 0:02:07.120 --> 0:02:10.600 issue and international issue, and I'm wondering what that challenge 0:02:10.720 --> 0:02:13.560 was like getting this up and running in order to 0:02:13.600 --> 0:02:16.519 get clearance to surveill areas that were not within the 0:02:16.600 --> 0:02:19.720 United States. Yeah, that's a that's a good question. As 0:02:19.760 --> 0:02:22.160 I mentioned, part of this part of the reason why 0:02:22.160 --> 0:02:25.960 this is possible now is first that the world's air 0:02:26.000 --> 0:02:28.560 traffic control organizations are making this upgrade. You may have 0:02:28.639 --> 0:02:31.480 heard next gen for the next gen program, the next 0:02:31.520 --> 0:02:35.200 Generation air traffic Control program within the US UM, but 0:02:35.400 --> 0:02:39.320 the US, Europe, Australia, Singapore, a few other countries have 0:02:39.480 --> 0:02:44.560 mandated that all aircraft by have on board a transponder 0:02:44.600 --> 0:02:48.000 that will broadcast out that GPS information from the aircraft 0:02:48.280 --> 0:02:51.680 at a very frequent, very precise level. So first you 0:02:51.720 --> 0:02:54.239 had to have all the aircraft equip with this new 0:02:54.280 --> 0:02:56.960 technology to make it possible. But then you you have 0:02:57.040 --> 0:03:00.680 the limitations of where you can put towers to receive 0:03:00.760 --> 0:03:03.760 that information. So, as I mentioned, the US has deployed 0:03:03.800 --> 0:03:07.679 six thirty five towers, Australia's air space has covered. Other 0:03:07.720 --> 0:03:10.680 countries have put this this technology in, but it really 0:03:10.720 --> 0:03:13.600 limits the access to it to roughly thirty percent of 0:03:13.639 --> 0:03:16.079 the world that you know that has you know, this 0:03:16.120 --> 0:03:19.720 type of ground based technology. So really the the innovation 0:03:19.840 --> 0:03:23.080 came due to the fact that not only were the 0:03:23.080 --> 0:03:25.720 aircraft craft being equipped but a ridium. You know, the 0:03:25.760 --> 0:03:29.320 Satellite Communications Company was in the process of launching their 0:03:29.360 --> 0:03:34.160 next generation satellite network. So part of that innovation came 0:03:34.240 --> 0:03:36.480 when we said, well why don't we when I would 0:03:36.560 --> 0:03:38.840 used to be at a ridium when we were looking 0:03:38.880 --> 0:03:41.640 at the plans for the next generation, and we said, 0:03:41.640 --> 0:03:45.720 why don't we use this global satellite based infrastructure two 0:03:46.000 --> 0:03:48.680 that sees every place on Earth and has connections that 0:03:48.880 --> 0:03:52.200 gets that information back in real time to put these 0:03:52.200 --> 0:03:54.880 A D s B or these these receivers on board 0:03:55.040 --> 0:03:58.280 the satellites to receive the information being transmitted by the aircraft. 0:03:58.360 --> 0:04:02.040 So we put the company together, We raised the investment 0:04:02.120 --> 0:04:05.080 with our partners at nav Canada and the air traffic 0:04:05.120 --> 0:04:10.040 control organizations of Italy, Ireland, Denmark and the UK formed 0:04:10.040 --> 0:04:13.720 the company and seven years later we have completed the 0:04:13.800 --> 0:04:15.680 launch of that system and are now ready to go 0:04:15.800 --> 0:04:18.480 operational live with it. So it's a lot of different 0:04:18.480 --> 0:04:21.520 components that really drove the you know, the implementation of 0:04:21.600 --> 0:04:25.000 this capability. So come April two, talk to us about 0:04:25.040 --> 0:04:26.800 the adoption. Here do you have to go sell it 0:04:26.880 --> 0:04:29.719 kind of country by country? How do you get this 0:04:29.760 --> 0:04:32.440 technology out into the marketplace? Well, it's a it's a 0:04:32.440 --> 0:04:36.000 good question, Paul. Then the issue here is that this 0:04:36.040 --> 0:04:39.160 is such a game changer, you know, in in you know, 0:04:39.279 --> 0:04:41.919 in the aviation that countries have been working with us 0:04:42.000 --> 0:04:44.920 for a very long time. So currently, on April two, 0:04:45.040 --> 0:04:48.080 will go live with the Canadian air traffic control organization 0:04:48.160 --> 0:04:52.680 nav Canada and the UK air Traffic control organization called NETS, 0:04:53.200 --> 0:04:56.040 and we'll begin using this service in northern Canada and 0:04:56.120 --> 0:04:58.839 in the North Atlantic. Now, the North Atlantic is a 0:04:58.960 --> 0:05:02.400 very busy set the air space flights a day, you know, 0:05:02.440 --> 0:05:04.680 it's it's running out of capacity because there's so much 0:05:04.680 --> 0:05:07.560 traffic going back and forth between the Europe, Europe and 0:05:07.600 --> 0:05:10.080 North America, you know, and this is an innovation that 0:05:10.120 --> 0:05:12.920 not only improves the safety of air travel, but also 0:05:12.920 --> 0:05:16.440 allows them to add additional flight paths for aircraft into 0:05:16.440 --> 0:05:18.840 that that airspace. So we'll go live with those two 0:05:18.920 --> 0:05:21.120 right away, but right behind them, we have nine other 0:05:21.560 --> 0:05:25.520 air traffic control organizations representing twenty eight countries around the 0:05:25.520 --> 0:05:29.479 world that will be are currently receiving the data, doing 0:05:29.520 --> 0:05:32.560 their own test and valuation validation of the service, and 0:05:32.600 --> 0:05:37.400 we'll begin operationally using it throughout just in thirty seconds. 0:05:37.400 --> 0:05:40.560 How do you make money. Very very easy to think 0:05:40.560 --> 0:05:42.800 of us as a subscription service. So instead of an 0:05:42.800 --> 0:05:47.560 air traffic control organization deploying your radars or ground based infrastructure, 0:05:47.600 --> 0:05:50.000 we basically collect the data and provided to them as 0:05:50.040 --> 0:05:52.840 a subscription service, so they pay us a fee for 0:05:53.040 --> 0:05:57.760 providing them the surveillance data for their airspace. Really interesting, 0:05:58.040 --> 0:05:59.640 Don Thomas, thank you so much for being with us. 0:05:59.680 --> 0:06:02.960 Don Tom chief executive officer of Arian, which is based 0:06:03.000 --> 0:06:09.719 in McLean, Virginia, offering space based aircraft surveillance tracking planes globally, 0:06:09.760 --> 0:06:12.560 which to me, honestly my first impression. Again, I mean, 0:06:12.560 --> 0:06:15.359 given how many satellites are up there, it's interesting that 0:06:15.440 --> 0:06:28.360 this is the first of its kind. There has been 0:06:28.400 --> 0:06:32.680 a big discussion about how the migration from rural areas 0:06:32.720 --> 0:06:36.640 to urban areas will likely continue in the years to come. 0:06:37.000 --> 0:06:39.440 The question is number one, will it? And number two, 0:06:39.640 --> 0:06:42.120 how does that affect your investments both in real estate 0:06:42.160 --> 0:06:45.039 and beyond. Joining us now, Melissa Reagan, head of research 0:06:45.120 --> 0:06:48.760 for New Vine Real Estate, overseeing a hundred billion dollars 0:06:48.760 --> 0:06:50.840 of assets in New York, Joining us here in our 0:06:50.839 --> 0:06:53.560 Bloomberg Interactive Broker Studios. Melissa, thank you so much for 0:06:53.600 --> 0:06:56.400 being with us, Let's just start with this premise that 0:06:56.480 --> 0:07:00.280 there will be increased urbanization where you do see people 0:07:00.320 --> 0:07:04.479 moving from urban and suburban areas into cities. How much 0:07:04.480 --> 0:07:07.760 do you think that will continue? Yeah? Sure, thinks um 0:07:07.800 --> 0:07:10.320 you know, listen, we believe it will continue. And this 0:07:10.400 --> 0:07:11.880 is not just in the next couple of years, but 0:07:11.920 --> 0:07:15.160 really over the coming decades. Uh and and why so 0:07:15.280 --> 0:07:19.680 think about what cities offer. They offer an economic based jobs. 0:07:19.840 --> 0:07:22.520 It's where the vibrancy of these cities, it's where people 0:07:22.560 --> 0:07:25.800 want to live. It's where when you think about what's 0:07:25.800 --> 0:07:28.320 a what's a really growing area right now? Technology right, well, 0:07:28.360 --> 0:07:31.440 we know that that is actually cluster based. Right so 0:07:31.520 --> 0:07:33.440 once you're not in your this technology coming that techno, 0:07:33.520 --> 0:07:35.640 you're like, y'all want to cluster together. And that's happened. 0:07:35.640 --> 0:07:37.880 That happens in cities. And so we think this is 0:07:37.920 --> 0:07:41.680 a decades long trend that will continue. Well, one of 0:07:41.720 --> 0:07:43.800 the things that I think is a concern for some 0:07:43.840 --> 0:07:47.840 people is just infrastructure through cities today. Some of the 0:07:47.920 --> 0:07:51.520 largest cities that are you know, maybe drawing populations, do 0:07:51.600 --> 0:07:55.520 they have the infrastructure to support it? Uh? Yes, and no, 0:07:55.920 --> 0:07:58.400 so I would say, but also with that as an opportunity. 0:07:58.440 --> 0:08:00.000 So when you think about a place like New York 0:08:00.120 --> 0:08:02.400 and you think about its mass transit, one of the 0:08:02.400 --> 0:08:05.239 best probably mess transit systems across the entire world in fact. 0:08:05.400 --> 0:08:10.400 But but it's from a but but but you missed 0:08:10.400 --> 0:08:13.200 the butt. But it's but it's aging. But it's aging, 0:08:13.360 --> 0:08:18.080 and therein is the opportunity kind and therein lies the 0:08:18.120 --> 0:08:20.000 opportunity right when you think about how to how to 0:08:20.040 --> 0:08:25.120 invest around infrastructure, municipal financing and things like that. So, um, 0:08:24.920 --> 0:08:27.240 I would say there's there's yes and no, and there's 0:08:27.240 --> 0:08:29.600 opportunities within that. I will just say that I was 0:08:29.640 --> 0:08:31.480 on the train the other day and it was stopped 0:08:31.560 --> 0:08:34.319 and my nine year old son called the m t 0:08:34.480 --> 0:08:38.760 A to complain, saying that it was unacceptable. Because yes, anyway, 0:08:38.800 --> 0:08:41.320 moving right along, I will say a lot of the 0:08:41.679 --> 0:08:45.400 investing strategy also depends on real estate valuations. And there's 0:08:45.440 --> 0:08:50.360 a question especially is the affordability uh question rises it's 0:08:50.360 --> 0:08:53.800 getting harder for people to buy homes in cities. How 0:08:53.800 --> 0:08:57.800 does that affect your thesis here? Actually pretty well? Uh 0:08:57.840 --> 0:09:00.160 so from a from a commercial real estate person back 0:09:00.200 --> 0:09:02.160 to think about it, I mean, we're not in the home. 0:09:02.240 --> 0:09:04.800 We're not in buying homes, We're buying apartment buildings, right, 0:09:04.800 --> 0:09:07.320 and so the demand for apartments and we've seen this, 0:09:07.360 --> 0:09:10.559 I mean, vacancy rates for apartments are your twenty year lows. 0:09:10.600 --> 0:09:13.080 Why is that? Because home prices are are are high 0:09:13.160 --> 0:09:15.520 and so it's an affordability issue and so it's really 0:09:15.600 --> 0:09:19.760 driven demand, particularly in the urban cores for apartments. So, 0:09:19.800 --> 0:09:22.400 given your urbanization theme, what are some of the markets 0:09:22.480 --> 0:09:25.880 that surprised you were attractive markets? Iman? I know people 0:09:25.880 --> 0:09:27.319 think of New York, San Francisco, but what were some 0:09:27.360 --> 0:09:29.120 of the markets that kind of surprised you as boy 0:09:29.120 --> 0:09:32.720 these are interesting? Yeah, So that's been fascinating in fact, 0:09:32.760 --> 0:09:34.480 and so we have this sort of way we look 0:09:34.480 --> 0:09:36.760 at cities kind of globally and we take that into 0:09:36.760 --> 0:09:37.959 the U S and we think about, you know, where 0:09:37.960 --> 0:09:41.280 are people moving to millennials, concentration of wealth and places 0:09:41.280 --> 0:09:43.679 like Salt Lake City pop up Nashville, but even in 0:09:43.720 --> 0:09:47.360 places like Orlando, these are not places that an institutional 0:09:47.360 --> 0:09:49.880 real estate investor would have thought of twenty years ago. 0:09:49.960 --> 0:09:53.280 It just there was a nope, not interested. But given 0:09:53.320 --> 0:09:55.480 our analysis and the way we see the world moving, 0:09:55.880 --> 0:09:57.559 this is where millennials want to be There's a quality 0:09:57.559 --> 0:09:59.959 of life there, there's a connectivity there. And so those 0:10:00.080 --> 0:10:02.360 are the cities that actually and there's I could name 0:10:02.520 --> 0:10:04.280 ten more of those that would be like, really, that's 0:10:04.400 --> 0:10:08.800 that's really interesting. So this all makes sense. I buy it. 0:10:09.080 --> 0:10:12.040 I'm buying the picture that you set out there for 0:10:12.160 --> 0:10:15.040 a longer term. Is now the time to be getting 0:10:15.080 --> 0:10:17.880 in given where we are in the housing cycle. So 0:10:17.920 --> 0:10:20.520 I think there's two components that in terms of the 0:10:21.120 --> 0:10:24.040 you know, there's the residential site, there's the residential market. 0:10:24.440 --> 0:10:27.000 Um and and already there there's been softening. But from 0:10:27.040 --> 0:10:31.560 a commercial perspective, which is entirely different. Um, we actually 0:10:31.600 --> 0:10:33.760 look at it from a very long term perspective, right, 0:10:33.800 --> 0:10:36.719 and so kind of almost outside of a cycle perspective 0:10:36.720 --> 0:10:39.200 and saying that these are the cities people want to 0:10:39.280 --> 0:10:42.600 be in that is not going to end and thereby 0:10:42.640 --> 0:10:45.000 that is the opportunity. Okay, fair enough. Although in New 0:10:45.080 --> 0:10:47.400 York City, which is a very vibrant city, it's the 0:10:47.440 --> 0:10:50.840 most populous city in the United States, we have storefront 0:10:50.840 --> 0:10:54.600 after storefront that's empty, that's vacant, that is eating into 0:10:54.760 --> 0:10:57.480 the value of that commercial real estate. So I have 0:10:57.600 --> 0:11:01.120 to wonder how this thesis square is worth retail worth 0:11:01.120 --> 0:11:05.559 the model is completely shifting. Yeah, absolutely, Listen agreed a 0:11:05.640 --> 0:11:09.280 hundred percent that in retail land there are structural shifts 0:11:09.320 --> 0:11:12.240 under way. Winners and losers there, and so that what 0:11:12.360 --> 0:11:14.160 you're seeing when you walk through New York City and 0:11:14.200 --> 0:11:18.080 the vacant storefront losers, but then there's a whole other winner, right, 0:11:18.120 --> 0:11:21.600 But but think about it, there's a winner. But that's 0:11:21.600 --> 0:11:23.959 just the world is divided in retail, right, and that's 0:11:24.000 --> 0:11:26.079 where it's going. But but here's the hard part of that. 0:11:26.240 --> 0:11:28.160 So you're saying, that's great, there's winners and losers. Who's 0:11:28.200 --> 0:11:29.920 going to be the winner, right, And so most of 0:11:29.960 --> 0:11:32.800 my day is spend thinking about who's who is the 0:11:32.800 --> 0:11:34.600 winner in that in retail And so when we think 0:11:34.600 --> 0:11:37.719 about it, we think about necessity, think about a single tenant, right, 0:11:38.080 --> 0:11:40.520 or you think about grocery, or you think about what 0:11:40.720 --> 0:11:45.480 serves an urban community from a necessity local sustainable, authentic, 0:11:45.559 --> 0:11:49.000 like what what does the millennial want? And they want 0:11:49.080 --> 0:11:54.240 that authentic, local, sustainable offering. So the winners and losers, 0:11:54.400 --> 0:11:56.559 and it's picking the right winner, which is not which 0:11:56.640 --> 0:12:01.200 is the day job and is really hard right. Well, Melissa, 0:12:01.240 --> 0:12:03.040 one of the things that I've noticed you mentioned Salt 0:12:03.120 --> 0:12:04.720 Lake and I was just kind of going through that 0:12:04.760 --> 0:12:08.560 market recently in that airport and they're building a huge, 0:12:08.800 --> 0:12:14.400 brand new airport and it's still there's silicon slopes. I 0:12:14.480 --> 0:12:16.680 was just about to say, and it's technology. When I 0:12:16.679 --> 0:12:20.720 think about it, technology Austin, Texas, it was technology. Is 0:12:20.760 --> 0:12:24.800 technology kind of what you look for to see sustainable, 0:12:24.800 --> 0:12:28.480 long term growth. It's certainly that's one component of it. 0:12:28.480 --> 0:12:30.480 I wouldn't say that's the only component, because there can 0:12:30.520 --> 0:12:32.880 be other things that you know, there's finance and certainly 0:12:32.920 --> 0:12:35.320 just business professional jobs. But technology has become at the 0:12:35.320 --> 0:12:37.360 forefront because I think about it. Used to be when 0:12:37.360 --> 0:12:39.400 you thought about technology, it was really Sanrancisco in Austin, 0:12:39.480 --> 0:12:41.719 but that's not true. Today. It's New York, it's it's 0:12:41.720 --> 0:12:45.079 Salt Lake City, it's Chicago, it's it's Atlanta, it's natural 0:12:45.120 --> 0:12:47.400 it's everywhere. Um So it is one thing we look 0:12:47.440 --> 0:12:49.640 at it and say it's like the only factor, but 0:12:49.679 --> 0:12:52.200 it's definitely one thing we look at. Do you think 0:12:52.240 --> 0:12:57.160 that the interest in warehouses and in uh aging homes 0:12:57.160 --> 0:13:00.319 and facilities that that has gone too far? Are at 0:13:00.320 --> 0:13:02.880 this point. It is now where the opportunity lies anymore 0:13:03.320 --> 0:13:08.000 in the warehouse sector. Yeah, oh no, I think so. 0:13:08.120 --> 0:13:09.920 I get that common a lot of seeing well, isn't 0:13:09.960 --> 0:13:12.600 warehouse sort of you know, it's it's it's peak pricing, 0:13:12.760 --> 0:13:15.560 or isn't all the demand you know, fully baked in um? 0:13:15.760 --> 0:13:19.120 Actually no, I think they're if you believe remember my 0:13:19.200 --> 0:13:21.840 retail comment winners and losers. What is driving that the 0:13:21.840 --> 0:13:24.559 e commerce rate of retail sales? And I don't think 0:13:24.600 --> 0:13:26.680 that's going away, Like I think people are going to 0:13:26.720 --> 0:13:29.880 continue to shop online. It creates winners and losers in retail, 0:13:29.920 --> 0:13:34.200 but it is a long term structural winner behind industrial um. 0:13:34.240 --> 0:13:36.560 And I don't see if that tail wind stops then 0:13:36.679 --> 0:13:38.520 then yes, we've got issues we need to look at 0:13:38.520 --> 0:13:40.880 in the industrial space, but I don't see that stopping. 0:13:41.240 --> 0:13:44.480 Interesting Melissa, Thank you so much. Melissa Reagan ahead of 0:13:44.480 --> 0:13:47.320 research for Neuvin Real Estate, joining us in our Bloomberg 0:13:47.320 --> 0:13:50.760 Interactive Broker's studio talking about urbanization and it's at least 0:13:50.800 --> 0:13:52.559 it's one of the things you know, you think about it. 0:13:52.760 --> 0:13:54.760 I hear about it in so many different cities, whether 0:13:54.800 --> 0:13:57.400 it's in Atlanta or a Richmond, because you know, not 0:13:57.480 --> 0:14:00.680 necessarily big top ten markets, but if they've got a 0:14:00.720 --> 0:14:04.000 technology hub or maybe healthcare hub, um, that is what 0:14:04.040 --> 0:14:06.160 can drive growth in some of those markets. Look, it's 0:14:06.320 --> 0:14:08.760 for the younger people, it's the jobs. For the older people, 0:14:08.800 --> 0:14:13.120 it's access to healthcare and easy you know, food and transportation. 0:14:13.240 --> 0:14:31.360 So a lot of arguments for this. Well, interest rates 0:14:31.400 --> 0:14:34.920 globally continue to grind lower. We actually have negative interest 0:14:35.000 --> 0:14:39.640 rates and major economies such as Japan, Germany, Switzerland. So 0:14:39.760 --> 0:14:41.640 help us get a sense of how to navigate through 0:14:41.680 --> 0:14:45.440 this unique environment. We welcome Dr Brendan Brown. Dr Brown 0:14:45.520 --> 0:14:47.960 is a Senior fellow at the Hudson Institute and publisher 0:14:48.000 --> 0:14:51.640 of the newsletter Monetary Scenarios UH and he is based 0:14:51.640 --> 0:14:54.120 in London. Dr Brown, thank you so much for joining us. 0:14:54.480 --> 0:14:58.520 So what do you make of this persistent negative yields 0:14:58.520 --> 0:15:03.360 in against some major markets like Switzerland, Germany and Japan. Well, 0:15:03.400 --> 0:15:07.160 the negative rates in Europe and Japan essentially are are 0:15:08.200 --> 0:15:13.840 result of serious monetary manipulation, and the central banks in 0:15:13.840 --> 0:15:17.040 Europe and Japan have made it clear in response to 0:15:17.240 --> 0:15:21.000 the softening of the global economy that we're going to 0:15:21.960 --> 0:15:28.200 go even further into these radical monetary policies um in 0:15:28.200 --> 0:15:32.720 in the total picture. It's difficult to see these negative 0:15:32.800 --> 0:15:36.280 rates is telling you or anything seriously about the real economy, 0:15:36.320 --> 0:15:39.040 because it's a long time since bond markets in those 0:15:39.080 --> 0:15:44.160 countries have had any economic meaning. Well, Brennan, one thing 0:15:44.200 --> 0:15:46.960 that I'm struck by is the fact that, yes, this 0:15:47.240 --> 0:15:50.640 is a symptom of central bank policies in the region. 0:15:51.000 --> 0:15:54.360 True has been for a long time, not necessarily free 0:15:54.360 --> 0:15:57.840 market kind of gauge there. That said, the fact that 0:15:57.880 --> 0:16:00.280 the European economy is not taking off, in fact that 0:16:00.400 --> 0:16:04.160 is slowing down in many measurable ways, is raising a 0:16:04.240 --> 0:16:07.440 really existential question. Here are negative rates hurting more than 0:16:07.440 --> 0:16:09.400 they're helping, And so far the e c B is 0:16:09.480 --> 0:16:11.400 kind of saying, well, the jury is sort of out, 0:16:11.680 --> 0:16:15.320 but they're starting to play with the idea that perhaps 0:16:15.320 --> 0:16:18.200 helping out banks in different ways. Can you speak a 0:16:18.200 --> 0:16:20.400 little bit about them and do you think that they 0:16:20.440 --> 0:16:23.880 are addressing the issue of the dutchmental effects of negative 0:16:23.920 --> 0:16:28.000 yields in an expedient way right now? Well, the main 0:16:28.200 --> 0:16:33.160 effect of negative rates on the economies comes through the currency, 0:16:33.520 --> 0:16:39.400 and the yen and the euro have been seriously depressed 0:16:39.400 --> 0:16:44.720 by this negative rate regime. The puzzle here is, given 0:16:44.800 --> 0:16:49.120 the cheapness of the currencies, why investment in the export 0:16:49.200 --> 0:16:53.240 sectors in Germany in particular and Japan has only been 0:16:53.840 --> 0:16:57.000 lukewarm even at the peak of a boom last year. 0:16:57.000 --> 0:16:59.880 And I think what we're seeing there is that businesses 0:17:00.040 --> 0:17:04.600 realize that this is an artificial situation, and so they're 0:17:04.600 --> 0:17:07.560 not prepared to rev up fully and haven't been prepared 0:17:07.600 --> 0:17:11.800 to rev up fully on what may be a transitory 0:17:12.000 --> 0:17:16.159 manipulated rate. Now, on top of that, we've got the 0:17:16.240 --> 0:17:20.040 position of the banks, and you mentioned Europe. In Japan 0:17:20.240 --> 0:17:23.960 in many ways, I think there's a greater hidden problem there. 0:17:24.040 --> 0:17:29.359 The Japanese banks and Japanese financial institutions, to escape negative rates, 0:17:30.000 --> 0:17:34.840 have been involved in more and more risky particularly cross 0:17:34.920 --> 0:17:40.199 border lending, and that could create a serious funding is 0:17:40.240 --> 0:17:42.960 to particularly in dollar funds, if we get into another 0:17:43.320 --> 0:17:47.560 period of financial market downturnal stress. So Dr Brown, we've 0:17:47.560 --> 0:17:49.760 been talking about the weakness in Europe, and certainly the 0:17:49.960 --> 0:17:54.800 Brexit uncertainty has certainly been a contributor to that weakness. 0:17:54.920 --> 0:17:57.600 I have to ask you, you know you're based in London, 0:17:57.640 --> 0:17:59.920 You're right there in ground zero what is your sense 0:18:00.040 --> 0:18:01.920 of how this thing is going to play out in 0:18:02.040 --> 0:18:05.880 terms of Brexit over the next several days. I think 0:18:05.880 --> 0:18:09.639 it's leaning more and more towards no deal. But no 0:18:09.800 --> 0:18:12.439 deal doesn't mean crash out or anything else. It probably 0:18:12.480 --> 0:18:18.200 means everyone staying where they are until there's a bit 0:18:18.240 --> 0:18:21.680 more clarity on the political direction. In particular, I would 0:18:21.720 --> 0:18:24.879 imagine that there could be a temporary standstill of the 0:18:24.960 --> 0:18:28.280 clock turned back to allow time for a leadership election 0:18:28.359 --> 0:18:31.320 to take place in the Conservative Party, and then we 0:18:31.400 --> 0:18:34.119 see what happens. If I had to plot a central 0:18:34.119 --> 0:18:36.960 scenario through all that, it's going to be that we 0:18:37.480 --> 0:18:40.840 get a new leader of a Conservative party more in 0:18:40.920 --> 0:18:45.120 the Brexit side, and that new leader will want to 0:18:45.160 --> 0:18:50.000 start negotiations again on a deal rather than just taking 0:18:50.040 --> 0:18:52.320 the May Deal as it is. So there will be 0:18:52.359 --> 0:18:56.600 a period most likely of so called no deal Brexit. 0:18:56.680 --> 0:18:59.280 To me, reminds me of like a Monty Python sketch. 0:18:59.600 --> 0:19:01.639 I mean, as Lee at a certain point, you know, 0:19:02.080 --> 0:19:04.119 let's vote on the vote of the vote of maybe 0:19:04.240 --> 0:19:07.280 meeting and maybe we can discuss something that might actually happen, 0:19:07.320 --> 0:19:09.520 and maybe we can extend the deadline a little bit further. 0:19:10.080 --> 0:19:12.719 But Brendan. I do have to wonder, especially as German 0:19:12.720 --> 0:19:15.600 bond yields continue to decline. Today they're they're taking a 0:19:15.600 --> 0:19:17.920 bit of a breather. But right now ten year bond 0:19:18.000 --> 0:19:22.520 yields in Germany lower than similarly dated bonds in Japan. 0:19:22.680 --> 0:19:26.480 Are we seeing the full on Japanification of the Eurozone, 0:19:26.640 --> 0:19:29.600 in particular Germany, and what are the implications for raids 0:19:29.640 --> 0:19:34.160 going forward. I don't think with the Japanification, partly because 0:19:34.160 --> 0:19:36.720 I think that Japanification is a myth. Anyhow, Japan, if 0:19:36.760 --> 0:19:40.000 you adjusted of a democratic demographic factor, has been doing 0:19:40.040 --> 0:19:42.320 remarkably well and on some measures even better than the 0:19:42.400 --> 0:19:46.159 US in terms of employed person per head. But I 0:19:46.200 --> 0:19:51.040 think when you look at the German negative yields, why 0:19:51.080 --> 0:19:54.240 are there minus nor point one zero? I would say 0:19:54.240 --> 0:19:58.920 the critical factor there is that the market has discounted 0:19:59.480 --> 0:20:05.000 consider r or likelihood of Italy leaving European monetary Union 0:20:05.320 --> 0:20:07.760 at some point in the next few years, if not sooner. 0:20:08.160 --> 0:20:10.280 So what you're seeing in the German bond market is 0:20:10.280 --> 0:20:13.560 in fact an option that what you might have there 0:20:13.680 --> 0:20:15.680 if you hold the German government bond at some point 0:20:16.119 --> 0:20:19.760 is a reincarnated Deutsche Mark. Now that that's that's why 0:20:19.800 --> 0:20:23.240 we are where we are. But nonetheless, negative bond deals 0:20:23.280 --> 0:20:27.840 are a huge incentive to real estate speculation in Germany, 0:20:28.000 --> 0:20:30.280 and in a recent note I put out, I do 0:20:30.440 --> 0:20:33.240 draw attention to the construction boom and the real estate 0:20:33.359 --> 0:20:37.679 boom in Germany as being an important offset all the 0:20:37.680 --> 0:20:41.080 bad news we're getting on the export side. So do 0:20:41.119 --> 0:20:43.040 you feel well, let's just push it out there. In 0:20:43.160 --> 0:20:45.399 terms of the European Union, you talked about Italy maybe 0:20:45.400 --> 0:20:48.639 falling out. What is your view of the European Union 0:20:48.720 --> 0:20:50.960 in general over the next five to ten years. Is 0:20:51.000 --> 0:20:55.800 it going to look materially different than today? Very much so. 0:20:56.080 --> 0:20:58.440 I think first a lot of that would will turn 0:20:58.640 --> 0:21:04.040 on the key developments in Germany and Italy, and I 0:21:04.040 --> 0:21:08.160 would say in particular that any sort of Brexit crisis 0:21:08.240 --> 0:21:13.000 or hard breakout or whatever could accelerate that through leading 0:21:13.119 --> 0:21:19.000 to political quake Germany. In particular, middle sized businesses who 0:21:19.000 --> 0:21:23.879 are very dependent on the UK market may take what's 0:21:23.920 --> 0:21:28.720 happening here as a reason to push harder vote against 0:21:28.840 --> 0:21:33.120 Merkel as soon as the European elections in in late May. 0:21:33.400 --> 0:21:38.080 So I do see a growing divergence coming about between 0:21:38.400 --> 0:21:41.199 the German and Italian situation and that being crucial to 0:21:41.280 --> 0:21:44.840 how you pant out. Dr Brendon Brown, thank you so 0:21:44.920 --> 0:21:47.080 much for being with us. Dr Brendon Brown, Senior Fellow 0:21:47.119 --> 0:21:51.600 at the Hudson Institute and publisher of the newsletter Monetary Scenarios. 0:21:51.680 --> 0:22:08.960 Joining us from London, I want to talk about one 0:22:09.000 --> 0:22:12.080 particular financial issue in New York City, and that is 0:22:12.119 --> 0:22:15.960 congestion pricing. It does seem like that plan is moving 0:22:16.000 --> 0:22:19.439 closer to reality. Joining us now, Henry Goldman, government importer 0:22:19.600 --> 0:22:22.959 for Bloomberg News. Joining us from New York City Hall. Henry, 0:22:23.040 --> 0:22:26.800 what is the latest on the congestion pricing proposals currently 0:22:26.840 --> 0:22:31.040 working its way through state n city legislatures. Well, the 0:22:31.800 --> 0:22:35.280 there's sort of an agreement in principle between the Assembly, 0:22:35.480 --> 0:22:38.840 the Senate, and the governor that this is the way 0:22:38.840 --> 0:22:41.879 to go. UH. Why is it the way to go? 0:22:42.000 --> 0:22:46.640 Because New York City UH is facing a twin crisis 0:22:46.760 --> 0:22:51.520