Speaker 1: This is Bloomberg business Week Inside from the reporters and
Speaker 1: editors who bring you America's most trusted business magazine, plus
Speaker 1: global business finance and tech news. The Bloomberg Business Week
Speaker 1: Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Speaker 2: If you're just now joining us in breaking news, US
Speaker 2: regulators for the first time approving ETFs that invest directly
Speaker 2: in bitcoin. This is a move heralded as a landmark
Speaker 2: event for the roughly one point seven trillion dollar asset industry,
Speaker 2: the digital asset sector that will broaden access to the
Speaker 2: largest cryptocurrency on Wall Street and beyond. The SEC, whose
Speaker 2: three part mandate includes investor protection authorized eleven funds to
Speaker 2: begin trading on Thursday. Let's now go to Carol Masser,
Speaker 2: who's standing by with Kathy Wood, the CIO, CEO and
Speaker 2: co founder of ARC invest.
Speaker 3: All right, so, Kathy, what do you think about in
Speaker 3: this moment of time, As we said, this has been
Speaker 3: long in coming.
Speaker 4: Yes, well, you described two ways this could happen. It
Speaker 4: can happen very quickly or will it happen very slowly?
Speaker 4: When you're talking about institutions that that you know have
Speaker 4: been very fearful of this space because of Gary Gensler
Speaker 4: and you know, all of the drama. I think they're
Speaker 4: going to tread lightly. I don't know if you saw,
Speaker 4: but Gary Gensler put out a piece today right as
Speaker 4: we're about to go effective, and I'm sure we all
Speaker 4: went effective roughly around the same time, and he just
Speaker 4: denigrated the whole crypto space.
Speaker 5: It was just like I couldn't believe it.
Speaker 4: So anyway, it's with that kind of trepidation that institutions
Speaker 4: are going to have to, you know, work through and
Speaker 4: do all of their due diligence. However, I do think
Speaker 4: that a lot of investors have considered, you know, have
Speaker 4: been curious. And you'll see we've been from a marketing campaign.
Speaker 4: We've been using this tagline, aren't you a bit curious?
Speaker 4: There are so many people who are curious out there.
Speaker 4: Of course, a lot of our existing clients know all
Speaker 4: about bitcoin because we have owned it since twenty fifteen,
Speaker 4: but there are a lot of people who really have
Speaker 4: a hunger to know, and we can see that as
Speaker 4: more and more people read our research, tune into our
Speaker 4: Bitcoin brainstorm that we do with Rod and Bitcoin Park
Speaker 4: in Nashville, Tennessee. Read our Bitcoin monthlies and you know,
Speaker 4: read all we have to say about crypto and blogs
Speaker 4: and in our Brainstorm summary. So you know, we are
Speaker 4: getting all the curiosity. I think that's why we started.
Speaker 4: So we know a lot of people are waiting and
Speaker 4: believe it or not, Carol the curious extend to state
Speaker 4: pension funds and state treasurers we're talking to. So it's
Speaker 4: a really broad swap.
Speaker 5: Well catch people.
Speaker 3: And I do wonder what you think success will be
Speaker 3: out of the gate in terms of investment flows.
Speaker 6: What's your hope, what's your goal or estimate in terms
Speaker 6: of bringing investors into the fund.
Speaker 5: Well, it's very interesting.
Speaker 4: I was, we were I was speaking to Eric Beltunis,
Speaker 4: her colleague, and according to his estimates, there's there's four
Speaker 4: billion dollars waiting, you know, in the wings. And I
Speaker 4: said to him, well, from your lips to God's ears,
Speaker 4: that would be amazing.
Speaker 5: And you know, we hope we get our fair share
Speaker 5: of it.
Speaker 4: I mean, we've certainly, we've certainly done a lot to
Speaker 4: educate the community, and we experience a lot of gratitude
Speaker 4: for that too, from from from the innovation communities, including
Speaker 4: the bitcoin community. But also from the financial community, those
Speaker 4: who really are trying to find the next big idea.
Speaker 4: The old guard you know, basically throw out there all
Speaker 4: kinds of risks, and you know, some people call it fear,
Speaker 4: uncertainty and doubt. It happens every time, Carol, And I'm
Speaker 4: not saying it's a bad thing for people to really
Speaker 4: do their homework. They should do their homework, they should
Speaker 4: understand the risks. But this is par for the course
Speaker 4: in disruptive innovation, you know. And thank you, Carol. You
Speaker 4: gave us our first interview twenty fifteen when we were
Speaker 4: barely off the ground.
Speaker 5: You believed in us back then.
Speaker 4: And at the time, you remember, we were talking about Tesla.
Speaker 4: So fear uncertainty and doubt, not even about autonomous which
Speaker 4: is the next set.
Speaker 5: Of fears, but about evs.
Speaker 4: Wouldn't traditional auto manufacturers absolutely choke them to death? This
Speaker 4: is completely new DNA, and so it's the old DNA
Speaker 4: as the old car companies were the old DNA, you know,
Speaker 4: basically bashing the old new DNA.
Speaker 5: But truth wins out.
Speaker 4: Truth wins out, better, factor, cheaper, more productive.
Speaker 3: So yeah, you know, one thing I want to ask
Speaker 3: you is as like yourself all of us here in
Speaker 3: the newsroom, you know, watching just you know, new things
Speaker 3: come into the market over decades, and this is certainly interesting,
Speaker 3: but we are still wondering about the real case use.
Speaker 3: I mean that no one has really demonstrated a real
Speaker 3: life use case when it comes to bitcoin.
Speaker 5: We think about it all the time.
Speaker 4: Our first paper, white paper, was all about could bitcoin
Speaker 4: serve the three rolls of money means of exchange, store value,
Speaker 4: unit of account. Most people are thinking store of value
Speaker 4: right now. But I'm going to plug one of our
Speaker 4: bitcoin brainstorms if you want a mind blowing experience. And
Speaker 4: I am lucky to be able to ask questions on
Speaker 4: these brainstorms. But we had I think it was either
Speaker 4: our second or third brainstorm, which was about the convergence
Speaker 4: of bitcoin and artificial intelligence. And we had on people
Speaker 4: who are toiling to make all of this happen, one
Speaker 4: of them a roast beef from the Lightning Network or
Speaker 4: Lightning Labs. And I have to tell you what's going
Speaker 4: on in the emerging markets and the division of labor,
Speaker 4: the redefinition of labor a little bit like what happened
Speaker 4: to the gig economy here, but put that on steroids.
Speaker 4: Put that on steroids. It's already starting to happen. So
Speaker 4: I would highly, highly highly advise anyone interested in trying
Speaker 4: to figure out how the world is going to work
Speaker 4: listen to that Bitcoin brainstorm, because it's already starting to
Speaker 4: work in the emerging markets where they need it so desperately.
Speaker 3: Kathy, what's the advantage of the arc spot Bitcoin etf
Speaker 3: over the others who also got to prove today? You know,
Speaker 3: we've been, as you know, reporting a lot about this
Speaker 3: kind of war on fees. Again today you guys cutting
Speaker 3: your fee. So what's the advantage of going with you
Speaker 3: versus a black Rock or a Fidelity or some of
Speaker 3: the other players who are out there.
Speaker 4: So at least three advantages, Carol. First, we selected our
Speaker 4: partner very carefully. Twenty one Shares is the largest peer
Speaker 4: play crypto ETP provider in the world with two and
Speaker 4: a half billion dollars in assets.
Speaker 5: So what does that mean.
Speaker 4: That means with their forty funds before we launched with them,
Speaker 4: with their forty funds launched over five years, they have
Speaker 4: battle tested their infrastructure over booms and busts, over crises, over.
Speaker 5: Havings, over four kings.
Speaker 4: This is not normal for the ETF world, and we
Speaker 4: think the other ETF providers have a lot to learn,
Speaker 4: and I'm sure they are and they will as we
Speaker 4: go through these different kinds of experiences and the end
Speaker 4: they have economies of scale, believe it or not that
Speaker 4: have enabled us to drive down our fees.
Speaker 5: This way.
Speaker 4: We have more economies of scale because of the infrastructure
Speaker 4: that twenty one shares have built out.
Speaker 5: So that's the first. The second is research.
Speaker 4: Both of us give our research away for free. Our
Speaker 4: research started in two twenty fourteen. We were trying to
Speaker 4: understand the technology, and then when Chris Berniski took over,
Speaker 4: we fast forwarded into understanding bitcoin is money and then
Speaker 4: a new asset class. So we have been taking our clients' perspective. Clients,
Speaker 4: anyone who wants to read our research, this journey with
Speaker 4: us through deep, deep research, and it's getting deeper under
Speaker 4: Yassin's leadership.
Speaker 5: So that's the second. And then the third, and this
Speaker 5: one is not to.
Speaker 4: Be underestimated us, especially when it comes to the wirehouses
Speaker 4: like the Morgan Stanley's, the merri Lynch, the ubs Wells Fargo.
Speaker 4: Our salesforce, our distributor, Resolute, has had our ETF specials
Speaker 4: specialists have had to understand bitcoin since we struck our
Speaker 4: partnership in twenty sixteen.
Speaker 5: I had a funny story.
Speaker 4: Rebecca Burke, who's our most senior ETF specialist, joked with
Speaker 4: me the other day.
Speaker 5: She said, do you know when I was coming to
Speaker 5: interview to I looked up what is bitcoin?
Speaker 4: And we all laughed about it because now she not
Speaker 4: only understands it, she believes in it. Her conviction is
Speaker 4: how she's able to share that message and hold client's
Speaker 4: hands when bitcoin goes through some of the volatility that
Speaker 4: we see it go through regularly. So I think those three.
Speaker 4: We have the infrastructure and operations. We have the research,
Speaker 4: deep research, and we've been doing it longer than anyone else.
Speaker 4: And three we have a support team a sales team
Speaker 4: that I don't think anyone else out there can beat
Speaker 4: because we've been doing it together for seven years already,
Speaker 4: and the same for twenty one shares. More on the
Speaker 4: institutional side, they have been working with their clients for
Speaker 4: five years.
Speaker 3: I want to remind everybody we are, of course on
Speaker 3: X basis. I'm Carol Master of Bloomberg TV and Radio.
Speaker 3: I'm talking with Kathy Wood ourc invest founder CEO CIO
Speaker 3: on a day when the SEC approves bitcoin spot.
Speaker 2: You're hearing a conversation that Carol Masser is having with
Speaker 2: Kathy Wood, the CEO, CIO and founder of ARC Invest,
Speaker 2: talking all about the news today that the US regulators
Speaker 2: have approved an ETF that invests directly in bitcoin. Let's
Speaker 2: go back to that conversation.
Speaker 6: Listing some of the concerns that could happen.
Speaker 3: One of the things we wondered about Kathy, and I'm curious,
Speaker 3: you know, I'm thinking people who are listening to this,
Speaker 3: what is the recourse if a custodian who holds the
Speaker 3: keys to bitcoin loses them, you know, are they're hacked?
Speaker 6: What's the investor recourse?
Speaker 4: You know what we have with us on those calls
Speaker 4: of Felia and Haney, who are the founders of twenty
Speaker 4: one shares this you're talking about infrastructure operations.
Speaker 5: This is what I'm talking about. May I open up
Speaker 5: the floor to them?
Speaker 6: Aphelia, you want to come in on that. You are partnership.
Speaker 3: You know, it's a partnership with you at our absolutely
Speaker 3: what's your thought on that in terms of concerns that
Speaker 3: if something happens, if it is hacked, what's the investor recourse?
Speaker 7: So people are completely right to be concerned. This is
Speaker 7: the whole point. This is not like stocks and bonds.
Speaker 7: This requires a very different level of infrastructure, and so
Speaker 7: I think the first step in this discussion is very
Speaker 7: clearly prevention. You need to build as robust of a
Speaker 7: setup as possible, and you need to battle test it.
Speaker 7: So we've been battle testing our implementations with custodians, our
Speaker 7: technical infrastructure and the way in which we safeguard assets
Speaker 7: for five years. That's the entire point. You can't treat
Speaker 7: this like any other asset in the world. It's a
Speaker 7: it's a bearer asset, and it's held in a very
Speaker 7: technical way. So one of the things that we do
Speaker 7: is we obviously we use a concept called cold storage.
Speaker 7: That means is that these assets are held offline in
Speaker 7: wallets that have never been brought into the Internet, so
Speaker 7: you've never used them before, which means that they are
Speaker 7: the information related to the private key doesn't exist on
Speaker 7: the Internet. It's sort of the you can think of
Speaker 7: it as the diametric opposite of cloud storage. You essentially
Speaker 7: end up with a private key that's been charted, so
Speaker 7: it's been split into multiple pieces, and you need to
Speaker 7: bring multiple pieces online at the same time. Those pieces
Speaker 7: are held in vaults that are geographically distributed in order
Speaker 7: to control access to these products, and then we obviously
Speaker 7: have a really robust set of controls around that in
Speaker 7: terms of how you initiate transfers and how you actually
Speaker 7: move assets, because the most dangerous part of custody is
Speaker 7: actually very much the point at which you access it right.
Speaker 7: Very frequently, you know, when people say, oh, somebody took
Speaker 7: over my exchange account, the underlying wallet's not being hacked.
Speaker 7: What's actually happening is that their security and access protocols
Speaker 7: are being compromised in some way not dissimilar from certain
Speaker 7: social media issues which might have happened yesterday. And so
Speaker 7: it's really important how you actually secure these assets and
Speaker 7: why you need to go with a provider that's actually
Speaker 7: going has a track record of doing this and knows
Speaker 7: what they're doing through a variety of market conditions, because
Speaker 7: this is actually a very very technical space.
Speaker 6: I appreciate that Ophilias Knightder co founder president of twenty one.
Speaker 3: Years and of course offering up the Bitcoin ETF with
Speaker 3: our investments. Kathy One thing I also think is concerns
Speaker 3: about the price of bitcoin, the volatility. The last three
Speaker 3: full year returns were gains of three hundred and five
Speaker 3: percent twenty twenty up another sixty twenty one, followed by
Speaker 3: a loss of sixty four twenty twenty two. It's it's
Speaker 3: a market that can move around. We saw a little
Speaker 3: bit of a pop a bitcoin. Will volatility continue to
Speaker 3: be a risk or something that investors have to be
Speaker 3: very much aware of? And I'm curious, what is your
Speaker 3: price forecast at this point now that you've got the
Speaker 3: SEC approval for bitcoin?
Speaker 5: Sure, a couple of things.
Speaker 4: So the volatility, this again is natural for disruptive innovation
Speaker 4: that is really going taking market share in any market.
Speaker 4: So it's it's normal, Carol. You've seen from our funs
Speaker 4: how how disruptive innovation can be affected by exogitiveness factors
Speaker 4: that don't have anything to do with the share they're
Speaker 4: actually gaining. In fact, we know that during tough time,
Speaker 4: innovation gains more traction because it's better, cheaper, faster, more productive,
Speaker 4: and so forth. And this and you saw this during
Speaker 4: the regional bank crisis. The regional banks imploded, the KRRY
Speaker 4: index imploded, we saw bankruptcies and bitcoin shot up forty percent.
Speaker 5: Why it's a flight to safety.
Speaker 4: It is not it will not be a victim of
Speaker 4: counter of counterparty risk the way the banks will. So
Speaker 4: it's it's actually as time goes on and we go
Speaker 4: through more and more crises, and it seems the way
Speaker 4: government spending and monetary policies go, you know that that
Speaker 4: is not going to change. I think bitcoin is going
Speaker 4: to prove it's worth you know, one in terms of price,
Speaker 4: and then I'd like to just talk about fees because
Speaker 4: that's so context. Yes, so our price target are our
Speaker 4: bull price target, and I would say institution tuitional money
Speaker 4: moving in makes our bull price target more likely. Now
Speaker 4: is one point five million dollars in twenty thirty And
Speaker 4: you can see in Big Ideas, our big ideas from
Speaker 4: last year ar at ark dash Invest ourdash invest dot
Speaker 4: com how we the building blocks for that number, right,
Speaker 4: and institutional is one of the biggest reasons. In terms
Speaker 4: of fees, you'll notice twenty one that's a very special number.
Speaker 4: First of all, those are our partners twenty one year,
Speaker 4: but also twenty one million units, our twenty one million
Speaker 4: bitcoin will that is the total number that will be
Speaker 4: printed or minted right there. It will not go past
Speaker 4: twenty one million. This is called this is called a
Speaker 4: rules based monetary system. And so that fee we thought
Speaker 4: that was clever and we were going to start out
Speaker 4: with that one, but we knew what was going to happen,
Speaker 4: so we ended up there. But I want to bring
Speaker 4: back something I mentioned other before. We already have the
Speaker 4: economies of scale that others do not because of our
Speaker 4: partner twenty one shares, and so we've been able to
Speaker 4: negotiate down service provider fees in a way that we
Speaker 4: would not have been able to if we had done
Speaker 4: this by ourselves. And the other thing I want to
Speaker 4: emphasize we are not looking to maximize profits with this.
Speaker 4: We are looking at bitcoin as a public good. It
Speaker 4: is a financial super highway and we want to increase
Speaker 4: the access to bitcoin, and one of the ways to
Speaker 4: do that is this low fee product. We have other
Speaker 4: actively managed strategies where we can do more on the
Speaker 4: profitability side, right, It's not our objective here, Kathy.
Speaker 3: Just one last question and that I'm glad we got
Speaker 3: that thirty seconds is to wrap up. I mean, what
Speaker 3: does success look for you guys in a year from
Speaker 3: now with this particular product.
Speaker 4: Well, I think I think we will be a part
Speaker 4: of the success of bitcoin broadly. I think this opens
Speaker 4: a new chapter for bitcoin, and I would like to
Speaker 4: believe we would we will be within the top top
Speaker 4: three or two top providers of bitcoin through this Bitcoin ETF.
Speaker 3: All right, Just lastly, as you know, I like to
Speaker 3: squeeze and stuff fifteen seconds. Is there new cryptocurrent products
Speaker 3: ETFs that might come out from you guys as well
Speaker 3: in the near future.
Speaker 5: Well, we already put with twenty one shares out five
Speaker 5: futures products. Those are right strategy. One last thing I'd
Speaker 5: like like to I'd like to.
Speaker 4: Honor all of those who have toiled to make bitcoin
Speaker 4: happen through this ETF.
Speaker 5: I want to reassure the community, the bitcoin community.
Speaker 1: That.
Speaker 4: Self custody, self custody and an ETF are not mutually exclusive.
Speaker 4: We want to see this ecosystem continue to decentralize, but
Speaker 4: we want to bring billions of people into the ecosystem.
Speaker 4: And this is why twenty one basis points ARKB.
Speaker 3: Kathy, I so appreciate you including me on this platform. Kathy,
Speaker 3: would arcinvest founder CEO CIO.
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Speaker 3: All right, everybody, So a recent story from our pre
Speaker 3: and on here at Bloomberg on how the demise of
Speaker 3: San Francisco's has been greatly exaggerated. She talked about kind
Speaker 3: of walking around and things weren't as bad as everybody's
Speaker 3: been talking about. She also noted that in the twelve
Speaker 3: months ending July twenty twenty three, the city actually gained
Speaker 3: forty nine hundred residents after also seeing some slight growth
Speaker 3: in the prior year, according to some new data that
Speaker 3: was out.
Speaker 2: Yeah, some actually good data though, was you know, it's
Speaker 2: not just anecdotal, based on her experience there, believing in
Speaker 2: this city. Our next guest, who acquired the Transamerica Pyramid
Speaker 2: Center in San Francisco for six hundred and fifty million
Speaker 2: dollars at the height of the pandemic. Back with us.
Speaker 2: We got Michael Schave, chairman and CEO of Cheveaux, a
Speaker 2: real estate owner, investor, and developer of unique and innovative
Speaker 2: luxury and landmark properties. Michael, good to have you back
Speaker 2: with us. How are you, thank you? Happy New Year,
Speaker 2: Happy New Year. So let's take a step back and
Speaker 2: just talk about your history in San Francisco and how
Speaker 2: it came about that you found yourself at you know,
Speaker 2: the height of the pandemic acquiring such an iconic building
Speaker 2: in the city.
Speaker 8: You know, since my business is really focused on owning,
Speaker 8: operating super prime real estate, when the opportunity came about
Speaker 8: to acquire the Pyramid, it was not really a matter
Speaker 8: of time having these type of opportunities at once in
Speaker 8: a lifetime. I'm the second owner of the property, after
Speaker 8: the original owner of trans America, which built the building
Speaker 8: as their headquarters. But when you buy building for you know,
Speaker 8: fifty years or not for five years, you're not really
Speaker 8: concerned about the little bumps in the market. You know.
Speaker 8: Everybody sees black when when it's dark, and they see
Speaker 8: light when it's light, and that's really not the time
Speaker 8: to buy real estate. I took a quite a large bed,
Speaker 8: not only on San Francisco, San Francisco, Chicago, Miami, LA.
Speaker 8: All through COVID. We bought around five billion dollars of
Speaker 8: real estate through COVID and a lot of office buildings went.
Speaker 8: There was a notion that people are never going to
Speaker 8: come back to work. Obviously, that was another demise that
Speaker 8: was well, it was so.
Speaker 3: Confident that you thought, well, you know what, that's not
Speaker 3: exactly going to happen. Or is the case that you
Speaker 3: just bought top tier properties that you know that for
Speaker 3: the folks who were coming back to work, that's where
Speaker 3: they were going to want to be.
Speaker 8: I think you hit you hit both nails on the head.
Speaker 8: But the first notion is that that people are not
Speaker 8: meant to be alone. When you walk here to the
Speaker 8: Bloomberg's offices, I mean pretty cool stuff, right, cool stuff,
Speaker 8: and everybody's together, and everybody's sitting together and want to
Speaker 8: be together. The idea of working from home in your
Speaker 8: pajamas on zoom is not sustainable, and that was that
Speaker 8: was my initial bet. The San Francisco idea was again
Speaker 8: a city that took a big hit through COVID because
Speaker 8: of you know, tech issues that these are the first
Speaker 8: companies that work from home. But in San Francisco is
Speaker 8: a resilient city. It's a city that constantly reinvents itself
Speaker 8: and the Boom and AI right now is unbelievable.
Speaker 3: It's one you know, one thing I was gonna think about,
Speaker 3: tim because I know we've had a lot of conversations
Speaker 3: about work from home. If you talk to a lot
Speaker 3: of the West Coast tech companies, they're like, we were
Speaker 3: already working from home. We were already flexible with how
Speaker 3: we were. So I almost wonder that maybe the impact
Speaker 3: wasn't going to be as strong. I don't know.
Speaker 8: Again, there was there was a mental impact because it
Speaker 8: was it became not just a tech thing. It was
Speaker 8: there was a there was a conversation that offices is
Speaker 8: absolute right, and and that obviously is was and ended
Speaker 8: up being nonsense. And we're seeing today, I mean, our
Speaker 8: New York offices on Fifth Avenue are fully occupied. The
Speaker 8: Pyramid is renting at two and a half times the
Speaker 8: rent that it rented pre COVID. So not only people
Speaker 8: are coming back, you know, we've obviously were just completing
Speaker 8: a four hundred million dollars renovation there.
Speaker 6: Who is coming back?
Speaker 8: What type of tenants, VC's financial services, law firms. You're
Speaker 8: seeing really the gamut, but the pyramids specifically, these are
Speaker 8: leaders of the industry, right, It's a building that was
Speaker 8: built for for kind of built for the future, right,
Speaker 8: and that that's the type of tenants that that we're
Speaker 8: getting there. But it's also now become the the you know,
Speaker 8: the center of San Francisco. This is what San Francisco
Speaker 8: believes is going to be the next thing that's going
Speaker 8: to rejuvenate downtown. And when you walk the streets, I
Speaker 8: believe you were saying, you walk the streets of San Francisco,
Speaker 8: it feels great. You feel the energy. I just came
Speaker 8: back a week and a half ago. You feel the
Speaker 8: energy on the street. That's something that obviously, through COVID
Speaker 8: didn't exist.
Speaker 2: Where in your portfolio around the country, are you seeing
Speaker 2: the highest vacancy.
Speaker 8: Rates again, it's it's a it's a it's not a
Speaker 8: fair question because we have really high occumvicies because we
Speaker 8: only own trophy acids, and the trophy acid category, you know,
Speaker 8: vacancy rates are quite low. I mean, if you look
Speaker 8: at San Francisco alone, right, vacancy rates and in trophy
Speaker 8: office buildings are seven percent, while the entire market is
Speaker 8: in the thirties.
Speaker 2: So in New York has similar issues with men and
Speaker 2: Marst buildings, every mark and I think I I.
Speaker 8: You know, when we spoke last I said, you know,
Speaker 8: there's this notion of converting, converting bad office buildings to
Speaker 8: to residences. It's like taking you know, I remember I
Speaker 8: told you it's like taking bad milk and making milkshake
Speaker 8: out of it. It's still going to be sour milkshake.
Speaker 8: It's never gonna work.
Speaker 2: So what makes an office good in twenty twenty four,
Speaker 2: Because it's not the world of twenty nineteen anymore, there
Speaker 2: is this hybrid work environment. Even if you have a
Speaker 2: return to the office, you're still doing a lot of zooms,
Speaker 2: you're still doing a lot of teleconferencing. Not everybody's going
Speaker 2: to be in your meeting. What's different about an office
Speaker 2: space in twenty twenty four.
Speaker 8: Let's start by the fact that you're asking the question
Speaker 8: that's already what's different. The difference is that now we're
Speaker 8: actually thinking about our office. When you know, five years ago,
Speaker 8: before COVID, nobody would never ask me, what's the new
Speaker 8: thing about office? Why do people come to work? It
Speaker 8: was just natural. Let's put people like like, you know,
Speaker 8: like a little fish in a cubicle, and that was
Speaker 8: basically Now we understand the same thing that we've been
Speaker 8: doing in the residential side and the commercial side that
Speaker 8: people actually care about where they work. Your lifestyle at
Speaker 8: your office shouldn't be worse than it is at your home.
Speaker 8: That's kind of what we've been doing. So what we've
Speaker 8: been focused on doing over the last decade is really
Speaker 8: transforming the office space to be as similar as it
Speaker 8: can to your home environment as far as services, as
Speaker 8: far as you know in the environment, the air, the luxury,
Speaker 8: the services. If you again, your office is a great
Speaker 8: example because it's where people come to collaborate. So you
Speaker 8: have the spaces where people can collaborate, open space, you
Speaker 8: have the closed offices where they consume. But there these
Speaker 8: are flexible spaces. It's not one size fits all, which
Speaker 8: was the traditional office kind of pre COVID.
Speaker 3: Hey, Michael, one thing I wonder do you think we
Speaker 3: talk a lot about the rate environment. Obviously, what the
Speaker 3: Fed's gonna do, What are your expectations in terms of rates?
Speaker 3: And obviously a lower rate environment is good for folks
Speaker 3: in the real estate world. So how are you thinking
Speaker 3: about it and how it might shape some of the
Speaker 3: activities you do here in twenty twenty.
Speaker 8: Four, So again I think that, as some of your
Speaker 8: previous speakers said before, I think there's obviously an expectation
Speaker 8: that that rates are going to go down. I'm looking
Speaker 8: for the crystal ball here at the Bloomberg headquarters of
Speaker 8: how much they're going to go down.
Speaker 2: Show me where you find the crystal ball.
Speaker 8: I don't know.
Speaker 3: I'm asking you in this way slept away a central
Speaker 3: bank safe.
Speaker 8: But but I think that that there's definitely a consensus
Speaker 8: that they are going to go down. How much we
Speaker 8: don't We don't know yet.
Speaker 3: Yeah, but that's shape what you do this year.
Speaker 8: Well, look, I think from from our point of view,
Speaker 8: because you know we part of what we do is
Speaker 8: we're partners with with a lot of the German state
Speaker 8: pension fund insurance companies. Yeah, and we buy long term
Speaker 8: real estate. We'll buy in cash, we'll buy with debt.
Speaker 8: Obviously with that would rather buy real estate with debt
Speaker 8: if if the debt markets allow it. But were first
Speaker 8: and foremost focused on finding the right trophy assets. So
Speaker 8: that's why so when I bought the Trans America Pyramid,
Speaker 8: it was you know, in the midst of COVID, we
Speaker 8: still ended up buying it. So so interest rates are
Speaker 8: going to you know, are going to move the market right,
Speaker 8: and I think what the more important thing is that
Speaker 8: they're going to open the debt markets which were fairly
Speaker 8: you know, static over the last three years.
Speaker 3: Us talk to us about New York. You've got a
Speaker 3: property right six eighty fifth Fifth Avenue here in New York.
Speaker 8: We got so in New York again, like in most markets,
Speaker 8: we developed high end residential, the Mandarin Oriental Residences that
Speaker 8: was just completed. We just opened an amazing private restaurant
Speaker 8: with Danielle Blued. There lots of fun at the rooftop
Speaker 8: loft Danielle. He just opened Cafe Blued, which is also amazing.
Speaker 8: We're opening one in Beverly Hills with him. So that
Speaker 8: property is really geared to making people's lives better. What
Speaker 8: does that mean? You're buying an apartment at the Manden
Speaker 8: Residences and you don't even bring your toothbrush because Mandarin
Speaker 8: will give you everything from your flippers, from your slippers
Speaker 8: to the rope to the toothbrush. And then we have our
Speaker 8: office portfolio here. You know, we own seven eleven Fifth Avenue.
Speaker 8: We own the Amanta New York five point thirty Broadway
Speaker 8: office buildings that we have, you know, severely kind of
Speaker 8: upgraded and seven eleven Fifth Avenue again fully occupied building today.
Speaker 8: Cork Club just came in there, Raffles just came in there.
Speaker 8: So really, you know, Alan and Company, one of one
Speaker 8: of the folks in your world, are headquartered there. So
Speaker 8: we've created really an environment of a high end boutique
Speaker 8: office building designed by Peter Reno, which is fully occupied
Speaker 8: in the market that again is not on averages, is
Speaker 8: not showing those returns.
Speaker 3: Let's crease something in my producer is going to have
Speaker 3: a heart attack. But you got fifteen twenty seconds. Is
Speaker 3: the idea of transforming office into residential? Can it be done?
Speaker 8: Or is that like very very selective. It has to
Speaker 8: have the building has to have the right bones, in
Speaker 8: the right location, the right ceiling heights, in the right windows.
Speaker 3: You were quick and you save Paul's heart.
Speaker 6: Thank you so much.
Speaker 3: Michael Schaveau, Chairman and CEO of Chaveau real Estate, owner, investor,
Speaker 3: developer of innovative, luxury.
Speaker 9: And landmark properties.
Speaker 3: Joining us right here in our Bloomberg Interactive Broker studio.
Speaker 6: This is Bloemoo.
Speaker 1: Marco a journal Now about you let me drive, Oh no, no, no,
Speaker 1: no drive, honey, please, I'll do the gravel.
Speaker 3: Great, I want to drive.
Speaker 8: It's a good question.
Speaker 1: This is the Drive to the Clothes dot com. Think
Speaker 1: well by run Janda Don on Bloomberg Radio.
Speaker 6: All right, everybody.
Speaker 3: Something we talked about at the end of twenty twenty
Speaker 3: three the rally in emerging markets ex China. The group
Speaker 3: up seventeen percent in twenty twenty three at in China,
Speaker 3: and the game was only seven percent as measure measured
Speaker 3: excuse me, by the MSCI indexes. So it's interesting. We
Speaker 3: know China was certainly a drag on the global economy
Speaker 3: and also certainly on the investment landscape.
Speaker 2: Well, A Drive to the closed guest has certainly has
Speaker 2: some thoughts on emerging markets. Alison Shimada is senior portfolio
Speaker 2: manager and head of Total Emerging Markets team at all
Speaker 2: Spring Global Investments. Alison joins us on Zoom from San Francisco. Allison,
Speaker 2: good to have you with us this afternoon. As Carol noted,
Speaker 2: not all emerging markets are created equal. How's the outlook
Speaker 2: for the category in twenty four and where do you
Speaker 2: think investors this year specifically should be putting their money?
Speaker 9: Well, thank you, Carolyn. Sev for having me. I think
Speaker 9: there are very solid opportunities in the e M. I
Speaker 9: think it has, you know, really been ignored for quite
Speaker 9: some time, and I think in three respects. Number one
Speaker 9: is that it's somewhat under owned by investors globally. Number two,
Speaker 9: it's underappreciated for all the opportunities we see in individual countries.
Speaker 9: And number three is that's really undervalued versus particularly the
Speaker 9: US SO only selling it about eleven point seven times
Speaker 9: PE and one point six times price to book. So
Speaker 9: you know, we see opportunities here at the beginning of
Speaker 9: the year. You know, we particularly look at growth and income,
Speaker 9: and we see a lot of dividends that can be paid.
Speaker 9: We see strong companies in terms of the areas we're
Speaker 9: focusing on. Really, as you mentioned countries ex China are
Speaker 9: interesting to US, India, Brazil, South Korea, Taiwan, there are
Speaker 9: a lot of quite a few of the larger companies
Speaker 9: are quite promising.
Speaker 5: Is hey.
Speaker 3: One thing I do want to ask you, and we
Speaker 3: appreciate you laying out where you do find interesting opportunities,
Speaker 3: but I do want to talk about China because our
Speaker 3: folks and our team have been talking about how China
Speaker 3: is the contrarian trade of twenty twenty four. I mean
Speaker 3: people don't like it. You know, when we talk to people,
Speaker 3: they're like, no, we don't want to commit new money.
Speaker 3: And to me, you know, when everybody's running from something
Speaker 3: and something's been an area of the investment landscape, global
Speaker 3: investment landscape has been beat up, to me, maybe there
Speaker 3: is some opportunity then, so.
Speaker 9: I totally agree with you. Yeah, no, that is absolutely true.
Speaker 9: We have been investing in China for the better part
Speaker 9: of twenty five years, many of us on this team
Speaker 9: and have seen it since it opened. And you know,
Speaker 9: I think this that there have been many crises in China. However,
Speaker 9: I think that there is with selectivity and proper stock
Speaker 9: selection and the history of understanding these companies and the policy,
Speaker 9: one can properly invest in China. I don't think it's
Speaker 9: to be entirely avoided, but I think you need to
Speaker 9: be selective and until we understand the greater, the intermedia term,
Speaker 9: the longer term objectives of the country, it is somewhat
Speaker 9: of a trading opportunity, but we certainly have we are
Speaker 9: underway China, but we do have quite a few holdings
Speaker 9: in China. And not only in the industrial space, but
Speaker 9: in the financial space and somewhat limited to the in
Speaker 9: the consumer space as well.
Speaker 2: What do you think is the biggest risk in China
Speaker 2: right now and do you think that the country can
Speaker 2: get beyond that?
Speaker 5: Yeah.
Speaker 9: I think that one of the biggest risks is just
Speaker 9: not doing enough and not staying the course in terms
Speaker 9: of reopening and supporting industry.
Speaker 2: Do you mean not doing enough in terms of government support?
Speaker 9: Yeah. I think that they have done some policy that
Speaker 9: has been supportive, but it's been here and there, unlike
Speaker 9: the US with the inflation reduct very early on. I
Speaker 9: think that was a very effective policy because we got
Speaker 9: it out there, started working on it, and now you
Speaker 9: see some very positive effects of that. I think China
Speaker 9: has hesitated a bit on policy and had hoped that
Speaker 9: they could just you know, make it through the difficulties
Speaker 9: of the property industry. But it's a very large scale
Speaker 9: and I think that that has to be addressed, and
Speaker 9: I think that the markets are lacking confidence. It's really
Speaker 9: a sentiment issue. I think that the overall the country
Speaker 9: is okay. Policy worth regards to property will take some time.
Speaker 9: It's just it's going to take a lot of time.
Speaker 2: Do you think we get back to a Do we
Speaker 2: get to a point where, I mean, the S and
Speaker 2: P five hundred has been an incredible force over the
Speaker 2: last decade or so?
Speaker 1: Absolutely? Yeah.
Speaker 2: Do we get to a point where emerging markets start
Speaker 2: to hold a candle? I mean, even at seventeen percent,
Speaker 2: if you exclude China, it underperformed. Emerging markets underperformed the
Speaker 2: S and P five hundred last year. Again, do we
Speaker 2: get to a point where the emerging markets as a
Speaker 2: whole outperform large caps in the US?
Speaker 9: I really hope so in over the next few years.
Speaker 9: And the reason I think so is for the three
Speaker 9: reasons that I stated earlier on. I do think that
Speaker 9: the forty five percent discount of emerging markets overall to
Speaker 9: DM is too big, and you know, everything is like
Speaker 9: a rubber band, it eventually kind of goes back the
Speaker 9: other direction. I think it's purely a sentiment issue. There's
Speaker 9: a very strong home market bias on the US. People
Speaker 9: do not want to give up on it despite valuations
Speaker 9: high valuations, and they're just hesitant to go overseas. But
Speaker 9: I think if the dollar starts to roll over, which
Speaker 9: I think, you know, it peaks in October, right, that
Speaker 9: that's going to be a count you know that is
Speaker 9: going to the minute the dollar rolls over, it's going
Speaker 9: to flash a green sign and people will have to
Speaker 9: look for other forms of returns in other places. And
Speaker 9: it's not necessarily China, but it could be in other
Speaker 9: countries in em Hey.
Speaker 3: Listen, just get about a minute left and you actually
Speaker 3: had you know, shared with our producer Paul some names
Speaker 3: that you find interesting. Just pick one that you think investors,
Speaker 3: global investors should have on their radar.
Speaker 5: Yeah.
Speaker 9: I think Bijoj Auto is a very interesting name. It's India,
Speaker 9: you know, the largest two wheeler and three wheeler producer
Speaker 9: in India and they have had very strong earnings. It's
Speaker 9: a great group, an industrial group bag and I think
Speaker 9: that it's a play on the rural space in India
Speaker 9: as well. But the overall economy of India is a
Speaker 9: multi year growth story, as I think most investors understand now.
Speaker 9: But we really see it as a very strong player
Speaker 9: in the market and has a three percent divit in
Speaker 9: yield as well, so we really.
Speaker 3: We get to buy it in a fund, right because
Speaker 3: there's no ADR here in the United States?
Speaker 9: Correct? Correct? Yes, many of these names, and you know
Speaker 9: it's true for India overall, right, a lot of have ADRs,
Speaker 9: but there are some of the larger names, for instance,
Speaker 9: the banks or the enterprise software enterprise hardware software companies
Speaker 9: they do have they do have US listed.
Speaker 3: Since it's refreshing to talk about emerging markets, I feel
Speaker 3: like a few years back, and you know, whether it
Speaker 3: was a Mark Mobis or somebody, you would just talk
Speaker 3: about it constantly. It kind of took a back seat
Speaker 3: as we've really focused only totally take some of the
Speaker 3: runs right that we've seen in like US big caps
Speaker 3: and the indexing. Allison Shamada, thank you so much, Senior
Speaker 3: portfolio manager, head of the Total Emerging Markets team over
Speaker 3: at all Spring Global Investments on zoom in San Francisco.
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