Speaker 1: This is Bloomberg Wall Street Week. The global push into infrastructure,
Speaker 1: breaking the IPO logjam in text, the financial stories that
Speaker 1: shape our world, cutting inflation without losing jobs. Do we
Speaker 1: need rate cuts? And if so? How many? Investing in
Speaker 1: a time of geopolitical turmoil. Through the eyes of the
Speaker 1: most influential voices. Ten Rogueff, economist of Harvard, former FDIC
Speaker 1: had Shila bet Ge CEO, Larry Coulp, San Francisco FED
Speaker 1: President Mary Daily Bloomberg.
Speaker 2: Wall Street Week with David Weston from Bloomberg Radio.
Speaker 1: A presidential debate, an historic commercial spacewalk, and Europe leads
Speaker 1: the way in rate cuts. This is Bloomberg Wall Street Week.
Speaker 1: I'm David Weston. This week, Devre Lair of Basselina on
Speaker 1: what's gone wrong with China for Sheer Sharma of Rockefeller
Speaker 1: International on what's gone wrong with housing prices in the
Speaker 1: United States? And Michael Wolf of Activate on what the
Speaker 1: explosion in online gambling means for the media world. We
Speaker 1: start with the upcoming election and what that means potentially
Speaker 1: for Global Wall Street and we're delighted to have with us.
Speaker 1: Blair Ephron. He is co founder of Centerview partners. Blair.
Speaker 1: Great to have you back with us on Wall Street Week.
Speaker 1: We had a debate this week which gave us some
Speaker 1: sort of a peek into the economic plans of Kamala Harris,
Speaker 1: the vice president on hand, the former president Donald Trump
Speaker 1: or together. What did we learn from it?
Speaker 3: So we learned a few things.
Speaker 4: We learned who Kamala Harris was on a broad basis,
Speaker 4: those who know her well and those non business community
Speaker 4: no she is. They expected her to do what she did,
Speaker 4: which was to be presidential, authoritative, approachable, well rounded on
Speaker 4: the issues, and disciplined. And I think it played as
Speaker 4: a big contrast obviously to form prisident Trump talking about
Speaker 4: dogs and the like. But most importantly I got an
Speaker 4: email immediately last night from a fortune we called S
Speaker 4: and P one hundred CEO who had met her but
Speaker 4: was on the fence, and.
Speaker 3: He said, boy, this is really just positive to me.
Speaker 3: She knows how to lead explorers.
Speaker 1: To talk about the plan specifically, I mean atmosphere is
Speaker 1: really counted election, as we know, but also it counts
Speaker 1: what these people plan to do. You are in a
Speaker 1: particular position to understand what the vice president might plan
Speaker 1: to do. An econoic policy. You work with her and
Speaker 1: her team fairly regularly, give us a sense of exactly
Speaker 1: how she would address the middle class, because that's the
Speaker 1: way she started a debate. I really care about the
Speaker 1: middle class. What is she proposing that would actually make
Speaker 1: a difference for the middle class on anybody?
Speaker 3: Four int one thousand or less.
Speaker 4: We'll actually see lower taxes. Two, if you're looking for
Speaker 4: a new home, we'll get a twenty five thousand dollars credit,
Speaker 4: and state and local communities will have incentives to build
Speaker 4: more quickly, cut through a red tape and make it
Speaker 4: more affordable.
Speaker 3: Three.
Speaker 4: She looks at the middle class and she says it's
Speaker 4: not enough for healthcare to have and sulend go down
Speaker 4: to thirty five dollars.
Speaker 3: You need lower health care costs more generally and.
Speaker 4: Very importantly, David, you start thinking about what she wants
Speaker 4: to do on the innovation economy. How do you help
Speaker 4: middle class families do well? You support them in building businesses.
Speaker 4: The idea that she wants to see twenty five million
Speaker 4: new applications during four years his.
Speaker 3: Presidency is a big deal. And she's raised the deductibility
Speaker 3: to fifty thousand dollars.
Speaker 4: In terms of expenses. She's making it so that if
Speaker 4: you have an idea, if you have an opportunity, she
Speaker 4: wants to help you most importantly. Also as importantly, she's
Speaker 4: looking at skills based jobs, not just college based jobs,
Speaker 4: and she wants to see a lot of private public
Speaker 4: partnership do that. And then in terms of the middle class, again,
Speaker 4: she's done nearly a trillion dollars of public private partnerships
Speaker 4: across the country, and that money is spent in communities,
Speaker 4: whether it's Chips up in Syracuseton, New York, Arizona, Ohio.
Speaker 4: Those are all creating great jobs or the middle class.
Speaker 1: There's no such thing as a free lunch. As you
Speaker 1: go through those programs, there are price tags, substantial price
Speaker 1: tags attached to each number one of them. How is
Speaker 1: she going to pay for it? If she can get
Speaker 1: them done?
Speaker 4: So, she is incredibly focused on fiscal discipline, but she's
Speaker 4: doing it in a way that is everybody pays their
Speaker 4: fair share, but not necessarily punitively. So the highest tax
Speaker 4: bracket goes to thirty nine point six percent. We've been
Speaker 4: there before. Cap gain is twenty eight percent. We've been
Speaker 4: there before. Ronald Reaguan's a twenty eight percent billionaire attacks.
Speaker 4: What she's telling you is she will figure out responsibly
Speaker 4: how billionaires pay their fair share.
Speaker 3: And I say responsibly.
Speaker 4: You have to pay attention to what she says about
Speaker 4: her plans versus what she doesn't say.
Speaker 3: And there's a lot in.
Speaker 4: The Biden Harris platform, like unrealized gains doesn't mean that's
Speaker 4: where the candidate is. She's going to look at everything
Speaker 4: and say, how can we raise that kind of revenue.
Speaker 3: She looks at buybacks.
Speaker 4: Right now stock buybacks are one percent. There has been
Speaker 4: zero difference in impact on buybacks. In fact, twenty twenty
Speaker 4: three was the largest amount of buybacks by companies ever.
Speaker 4: That goes from one percent to four percent. So she's
Speaker 4: highly focused on it. And she looks at the Trump
Speaker 4: plan and she says that's upwards between four trillion to
Speaker 4: five trillion have increased debt on top of the eight
Speaker 4: trillion of debt that was created during his first term.
Speaker 3: So she's very focused on the paid for.
Speaker 1: Us very So the people who would be paying more
Speaker 1: money are a lot of those people who are emailing
Speaker 1: you after the debates. They are in that top tax bracket.
Speaker 1: They're running companies will be affected. Why should Wall Street
Speaker 1: support Kamala Harris given her emphasis on the middle class
Speaker 1: and taking the money from some of the more wealthy.
Speaker 3: Okay, so let's.
Speaker 4: Put to bed something that people simply don't understand. The
Speaker 4: markets have done better under democratic presidencies over the past
Speaker 4: fifty years than Republican presidencies.
Speaker 3: The third year of Divide.
Speaker 4: Administration, which means no COVID impact versus the third year
Speaker 4: of the Trump administration, which means no COVID impact, higher GDP, more.
Speaker 3: Jobs, better market performance.
Speaker 4: The CEO he or she wants stability, wants a free
Speaker 4: market based economy, does not want to be sitting here
Speaker 4: with ten and twenty percent tariffs across the board, which
Speaker 4: is upwards of one percent hit.
Speaker 3: To GDP seven hundred thousand jobs.
Speaker 4: They want support from the public sector in a way
Speaker 4: that helps their business. If they know what the certain
Speaker 4: with certainty, what the environments will look.
Speaker 3: Like, it helps them.
Speaker 4: And I also do think the signally matters. When the
Speaker 4: VP talks about business, she talks about small business, which
Speaker 4: has been a big focus of hers for a long time.
Speaker 4: She talks about the entrepreneurial business, the startup community, and
Speaker 4: she talks about big business that we're all in here together,
Speaker 4: aligned to figure out how to grow the economy for
Speaker 4: broad based growth again back to the middle class.
Speaker 1: And I think most CEOs understand that Blair take us
Speaker 1: through your business at least the way I think the
Speaker 1: business of deals. When you've been on before, you've predicted
Speaker 1: that actually this year we'd start to see those deals
Speaker 1: come back after all sort of a quass period. Are
Speaker 1: we seeing it?
Speaker 3: So it has come back a bit, and not just
Speaker 3: deals but.
Speaker 4: Financings as well, but it is by no means where
Speaker 4: it will be. I think in twenty five there's still
Speaker 4: been a lot of uncertainty for my world in terms
Speaker 4: of the interest rate environment, in terms of the election
Speaker 4: and what that would lead to things. Always the last quarter,
Speaker 4: the last six months before an election always people settled
Speaker 4: down and want to see what's going to happen, momentum
Speaker 4: in the economy and rerogatory aspects. So it's it has
Speaker 4: been a market where companies are still highly focused on
Speaker 4: M and A, but I would say more highly focused
Speaker 4: David on M and A that is more tactical rather
Speaker 4: than large ten billion, twenty billion above transformational. I think
Speaker 4: what you need for that which I do believe will
Speaker 4: be coming. Is one interest rates to come down. Remember
Speaker 4: the last four cycles we've had interest rate declines after
Speaker 4: the first interest rate cut, growth has been on average
Speaker 4: three percent GDP. The markets on average have been up
Speaker 4: twenty percent. It becomes a tailwind. It is less relevant
Speaker 4: whether rates come down over eighteen months under fifty basis
Speaker 4: points versus one hundred. It's the trend, and it encourages
Speaker 4: an investment from companies, whether it's in their own business,
Speaker 4: making ten year bets or buying a business. And they
Speaker 4: believe that they're in the right part of the curve,
Speaker 4: they are more willing to make strategic ten year bets
Speaker 4: in their investment. So I see I think you'll see
Speaker 4: a lot of that. I think you'll also see a
Speaker 4: lot of pent up demand for financings, and I would
Speaker 4: expect that the markets both on equity and debt, but
Speaker 4: particularly on equity would.
Speaker 3: Open up quite a bit.
Speaker 4: That gives companies currency and that matters. Then finally, I
Speaker 4: think you see a balance between price EXTI between a
Speaker 4: buyer and a seller much more not in line now
Speaker 4: than they work perhaps in the beginning of twenty twenty four.
Speaker 1: Take us through that interest rate analysis, more debate about
Speaker 1: where does the FED end up? How important is that
Speaker 1: in making decisions about making deals?
Speaker 3: Great question.
Speaker 4: I think it is so much less important than people
Speaker 4: ascribe to it.
Speaker 3: The CEO doesn't look.
Speaker 4: At his or her balance sheet and says, wow, if
Speaker 4: I can finance it three and a half percent versus
Speaker 4: three seventy five percent, I'll do the transaction. You're making
Speaker 4: a long term strategic decision. Therefore, what you're trying to
Speaker 4: do is say what will long term the impact of
Speaker 4: the economy, of the impact of the rate environment mean
Speaker 4: to me? And when you see the curb decline, it
Speaker 4: increases confidence, increases optimism, And that's the difference. I'm always
Speaker 4: struck by how people are focused on what will happen
Speaker 4: over the next three months and determining how they want
Speaker 4: to make tre I understand for certain traders great, but
Speaker 4: for my world, where you're talking about businesses, talking about companies,
Speaker 4: they just don't have that mindset. They're looking at the
Speaker 4: overall economic picture generally, of which the rate environment is
Speaker 4: one part of it.
Speaker 1: If there is a pent up demand for deals that's
Speaker 1: sort of being held off for both when the FED
Speaker 1: starts really cutting and where it's going. And for the elections,
Speaker 1: where do you see particular demand that is pent up?
Speaker 1: I mean, where are there transformationional areas? I mean, certainly
Speaker 1: we cover media a lot, for example, there's a lot
Speaker 1: in tech. Where do you see sectors that particularly might
Speaker 1: be ripe for deals?
Speaker 4: So I think actually most sectors. There's been in most
Speaker 4: of these sectors, David, a couple of big deals already.
Speaker 4: So talk about media. You know, Paramount obviously a big deal.
Speaker 4: It's a sector that is entirely under disruption. You should
Speaker 4: assume we will see more consumer you already saw a
Speaker 4: big deal klean over Mars. I assume that will lead
Speaker 4: other companies to think about what they want to do
Speaker 4: tech in there have Finally, I think a calibration and
Speaker 4: equalization between buyer expectations and seller expectation.
Speaker 3: You'll see more there healthcare.
Speaker 4: Healthcare has been busy throughout, no reason to think it
Speaker 4: won't continue to be busy. So I would actually argue
Speaker 4: it's not going to be from my perspective, just one
Speaker 4: or two sectors. I think there'll be a general lifting
Speaker 4: of the market. And to me that means a good
Speaker 4: market in our world now is five trillion or above,
Speaker 4: But a perfectly fine market is three and a half
Speaker 4: trillion to four trillion. It's hard to imagine that we
Speaker 4: don't have at least a perfectly fine market in twenty
Speaker 4: twenty five.
Speaker 1: Has the deal area been held back a bit by
Speaker 1: private equity? Is that less of a factor for you
Speaker 1: than it was a year or five years ago.
Speaker 3: Absolutely. I think the private equity community.
Speaker 4: Is thirty five to forty percent of the overall market
Speaker 4: in a good year.
Speaker 3: I'd be surprised if in twenty twenty five you.
Speaker 4: Don't see that part of the market being very active, very.
Speaker 1: Robust, and corporation's stepping into that to do their own deals.
Speaker 3: Well, not so oparations are doing already.
Speaker 4: Mostly you're seeing a lot of corporate activity already, and
Speaker 4: I don't in any way think that's going to slow down. Remember,
Speaker 4: the market ps are down two and a half points
Speaker 4: from the peak a couple of years ago, and earnings
Speaker 4: are still pretty good SMP five hundred earnings for this
Speaker 4: year and for the next quarter, we'll again eighty percent
Speaker 4: of the companies will all perform estimates. CEOs feel this
Speaker 4: kind of tailwind, and my bet is that they will
Speaker 4: invest against it.
Speaker 1: Blair It's always great to have you on Wilsherbeg. Thank
Speaker 1: you so much. Let's Blair e Fron of Centerview Partners
Speaker 1: coming up. Football ratings are up and so is online
Speaker 1: betting on the games. Are the two related? We ask
Speaker 1: Michael Wolf of Activating. That's next on Wall Street Week
Speaker 1: on Bloomberg.
Speaker 2: This is Bloomberg Wall Street Week with David Weston from
Speaker 2: Bloomberg Radio.
Speaker 1: This is Wall Street Week. I'm David Weston. The NFL
Speaker 1: season is now underway, which means a whole new season
Speaker 1: of sports betting, at least for some fans. To take
Speaker 1: us through this explosion and what it means for the
Speaker 1: media of sports, we welcome back now Michael Wolf. He's Activated,
Speaker 1: founder and CEO. Michael, always great to have you. Let's
Speaker 1: talk about this sports betting, boy, it is everywhere.
Speaker 5: I mean, if you look at overall in the US
Speaker 5: we have where this year we're going to have about
Speaker 5: one hundred and forty billion in legalized sports betting that
Speaker 5: we forecast that within three years this is going to
Speaker 5: be a two hundred billion.
Speaker 6: But here's where the prize is.
Speaker 5: There's five hundred billion of sports betting in the US
Speaker 5: that is not legal. So what we're about to see
Speaker 5: is the transition from illicit to legal, and so it's
Speaker 5: like going from your bookie to bet MGM and DraftKings,
Speaker 5: and that's what's going to explode.
Speaker 7: Now.
Speaker 5: The numbers for the NFL twenty three billion last year
Speaker 5: in sports betting, thirty five billion this year, but almost
Speaker 5: twenty six percent of that is one day the Super Bowl.
Speaker 1: Wow, that's amazing. So there's a lot of upside at
Speaker 1: least for somebody, maybe not for the bookies, but upside
Speaker 1: for somebody Besides the DraftKings and the MGM sports who
Speaker 1: else benefits from this?
Speaker 5: For example, the leagues, well, the league's the NFL has
Speaker 5: made about a billion dollars worth of deals with these
Speaker 5: with all of the sports betting companies partnerships. But at
Speaker 5: the same time, those sports betting companies are spending about
Speaker 5: the same amount, about a billion dollars on advertising across
Speaker 5: television and digital and other places. And so it's providing
Speaker 5: a big, big boost to media companies.
Speaker 6: And part of what's going.
Speaker 5: To change is a lot of what's driven the growth
Speaker 5: is the number of states that have legalized sports betting.
Speaker 5: So we're about thirty nine states, so far, there's only
Speaker 5: a couple that came online last year of Florida, Kentucky
Speaker 5: and other places. It's not clear that there's going to
Speaker 5: be anymore. So this is going to be about moving
Speaker 5: that five hundred billion into that core sports betting.
Speaker 1: Talk to us about what this means in streaming, because
Speaker 1: that is the future obviously of the media companies that
Speaker 1: are all trying to get there, trying to be profitable
Speaker 1: even more than get there. How essential is sports to
Speaker 1: a streaming strategy.
Speaker 5: If we look at the top the top shows overall
Speaker 5: on television, they're pretty much all sports and depending on
Speaker 5: the time of the year, pretty much all NFL with
Speaker 5: a couple of things like wrestling in the meantime.
Speaker 6: But if you look going forward.
Speaker 5: You can get the NFL on practically over the top
Speaker 5: outside of television on streaming services only a very small
Speaker 5: percentage of the games you're only going to be on television.
Speaker 1: So what does that mean again for the leagues, because
Speaker 1: it's good news for them if they have more bidders,
Speaker 1: and every time I turn around there's an Amazon bidding
Speaker 1: or an Apple bidding, Well we're.
Speaker 5: About to see if you just look at the recent
Speaker 5: NBA where the NBA was able to sell their games
Speaker 5: pretty much across the board, whether it was Amazon or Disney.
Speaker 6: We're going to see more of that.
Speaker 5: These rights become extraordinarily valuable in a world where this
Speaker 5: is what's getting people to go into these streaming services
Speaker 5: and getting them to watch television.
Speaker 1: So what does this mean for a company like Paramount.
Speaker 1: We now know since we last talked, we know for
Speaker 1: sure what you predicted, which is that mister Ellison actually
Speaker 1: is going to run the place.
Speaker 6: Well, it's fascinating.
Speaker 5: Mister Ellison is going to run it, but he's bringing
Speaker 5: in Jeff Schell, who ran NBC, really understands people don't realize.
Speaker 5: He understands both the studio side of the business and
Speaker 5: the network side, including the sports and the streaming business
Speaker 5: through Peacock. So I would expect bringing in the new
Speaker 5: management team would make a huge difference. To a large extent,
Speaker 5: this company has really suffered from a lack of investment
Speaker 5: and a lack of creative leadership.
Speaker 1: Are they going to keep it all together? Would you expect?
Speaker 1: Or are we going to have sort of if you will,
Speaker 1: good company, bad company, the streaming and the studio on
Speaker 1: the one hand, good company maybe some of the traditional
Speaker 1: linear media not so good.
Speaker 5: Well, here's the challenge. Most of these media companies still
Speaker 5: make most of their money on linear, and the studios
Speaker 5: and the streaming services for the moment aren't going to
Speaker 5: make really make a lot of money. But each of
Speaker 5: these networks, and the TV stations and the broadcast networks,
Speaker 5: they have to learn to manage in a world where
Speaker 5: there are fifty million cable subscribers. Just a few years ago,
Speaker 5: we were at one hundred million homes in the US.
Speaker 5: Practically every home in the US had some sort of
Speaker 5: cable or satellite. Now our firm is forecasting that we're
Speaker 5: going to go from seventy million homes around now to
Speaker 5: within three years fifty million homes.
Speaker 6: They're all going to learn how to manage against that.
Speaker 5: But still there's a lot of upside through these assets.
Speaker 1: Well, a lot fewer cable basic cable husholds, a lot
Speaker 1: more streaming husholes. I saw a report on Bloomberg actually
Speaker 1: that said that actually, the good news is streaming now
Speaker 1: makes money. The bad news is Netflix makes more than
Speaker 1: one hundred percent of the money because the other guys
Speaker 1: are losing, but Netflix is making up for all the
Speaker 1: other losses.
Speaker 5: You know, if you look back in the history of media,
Speaker 5: all of the cable networks lost money for their first
Speaker 5: five or six years, and then they all started to
Speaker 5: make money. We're just seeing a lot of competition. And
Speaker 5: as much as they say they're going to reduce the
Speaker 5: amount that they're spending on programming, it's a little deceptive
Speaker 5: because they'll put that programming on their balance sheets.
Speaker 6: They all have to keep spending.
Speaker 5: They all have to spend to keep up with Netflix,
Speaker 5: and they a of have to spend to keep up
Speaker 5: with Amazon Prime. Prime video is also taking a lot
Speaker 5: of people's viewing time, especially as they start to ad sports.
Speaker 1: Thank you so much, Michael. Always a treat to have
Speaker 1: you here. That is Michael Wolf of Activate Come Back Now.
Speaker 1: Rushir Sharma. He is the chairman of Rockefeller International and
Speaker 1: author most recently What Went Wrong with Capitalism? Roushure. Always
Speaker 1: great to have you on the program.
Speaker 3: I say you have a columna in.
Speaker 1: The Financial Times this week about affordable housing, which has
Speaker 1: become a center point in this presidential campaign, with both
Speaker 1: sides trying to address sort of the real plight of
Speaker 1: people trying to buy house.
Speaker 8: What's the problem, Well, I think that if you look
Speaker 8: at what went wrong with capitalism, the single biggest issue
Speaker 8: for me is the fact that the average American can't
Speaker 8: afford to buy a home, and so you have this
Speaker 8: flight today where more than half of the twenty year
Speaker 8: olds in our country are living in with their parents
Speaker 8: because it's too hard for them to go out and
Speaker 8: buy their own home. We've had this incredible appreciation in
Speaker 8: home prices that's happened over the last few decades. In fact,
Speaker 8: home prices in real terms in America are up more
Speaker 8: than any other developed country that I really know off
Speaker 8: of significance. And it's the home prices have tripled while
Speaker 8: this century, while incomes have only doubled.
Speaker 1: So you have a real.
Speaker 8: Sort of affordability issue out here.
Speaker 6: Why has this happened?
Speaker 1: And this is what the.
Speaker 8: Column tries to address, that we have people sort of
Speaker 8: offering all these solutions about rent controls, price controls. The
Speaker 8: real problem with the housing market is the fact that
Speaker 8: there's a massive supply shortage. By some measures, the number
Speaker 8: of new homes being created in America today is the
Speaker 8: same as it was in the nineteen fifties. That's like
Speaker 8: such a big discond of the population in nearly doubles
Speaker 8: since then, but we're still creating the same number of homes.
Speaker 8: And after two thousand and eight financial crisis, it's been
Speaker 8: even more acute.
Speaker 1: How much of it was the two thousand and eight
Speaker 1: financial crisis, because it strikes me there's probably a hangover
Speaker 1: from that to some extent. It damaged the housing work.
Speaker 1: It's so much a lot of people really didn't want
Speaker 1: to invest in building houses.
Speaker 8: Yeah, I think that there's a bit of that, but
Speaker 8: this has been this even predates that. So the supply
Speaker 8: is where the rail issue is, which that they said
Speaker 8: that if you look at the supply curve, we just
Speaker 8: haven't been link enough homes for a very long period
Speaker 8: of time for a whole bunch of reasons. A lot
Speaker 8: of this has to do with the government regulatory state,
Speaker 8: which is that it's very difficult to build here today,
Speaker 8: get the permits, deal with all the zoning laws, the
Speaker 8: coding laws. So the problem with America today is that
Speaker 8: the zoning laws we have are go back to a
Speaker 8: vision of American back in the nineteen fifties or so.
Speaker 8: We're on large laws who had single family homes, whereas
Speaker 8: that's changed today. But the laws having changed, And then
Speaker 8: of course you have some cultural issues too. The whole
Speaker 8: issue of nimbism, which has become so popular.
Speaker 1: Here in my backyard.
Speaker 8: Yeah, not in my own backyard, is the thing that
Speaker 8: you don't want anybody else. So you say, yeah, yeah,
Speaker 8: it's an issue like we need to address, but not
Speaker 8: in our own backyard. We don't want more homes out there.
Speaker 8: So I think that this is a very serious issue.
Speaker 8: And in fact, i'm I know you mentioned just now
Speaker 8: that it's become a bigger issue in the campaign, and
Speaker 8: I'm surprised it's not an even bigger issue. But still
Speaker 8: in the debate this week between Kamala Harris and Trump,
Speaker 8: at least Kamala Harris led with that, which was impressive.
Speaker 8: But the real irony here it is that Trump is
Speaker 8: the builder, and given the fact that he's a builder,
Speaker 8: I thought he would make a much bigger issue with
Speaker 8: this or do something about it, because he both campaigns
Speaker 8: on being the deregulator as the King of deregulation, and
Speaker 8: he should understand the housing markets. So I'm just a
Speaker 8: bit mystified why it's not an even bigger issue with
Speaker 8: the Trump campaign.
Speaker 1: So focusing on the regulation, because presumably these regulations, including
Speaker 1: particularly zoning, are not evenly distributed across the country. Does
Speaker 1: that mean that the unaffordability is not evenly distributed across
Speaker 1: the country.
Speaker 8: Yeah, so, I'd say that the big cities in America
Speaker 8: in particular have much more zoning coding laws, And of
Speaker 8: course you have places like New York and San Francisco
Speaker 8: dealing with the rent controls, which further distort the market.
Speaker 8: So these markets have been suffering from an affordability issue
Speaker 8: for a long period of time. But the dramatic change
Speaker 8: that's happened is this decade. Now pretty much all of America,
Speaker 8: many cities across America, not just the large ones, housing
Speaker 8: has become unaffordable. If you look at it from a
Speaker 8: very basic measure that economists would say that if you
Speaker 8: spend more than thirty percent of your income on housing,
Speaker 8: that means that you're stretched. Now practically everyone is being
Speaker 8: forced to spend more than thirty percent of their income
Speaker 8: on housing if they want to buy a new home,
Speaker 8: because it's just so difficult to afford a home given
Speaker 8: the massive escalation we've seen in prices, and also, of
Speaker 8: course it doesn't help that interest rates are on the
Speaker 8: higher side but I'd say the bigger issue is the
Speaker 8: massive price appreciation that's taking place in America because of
Speaker 8: a big shortage on the supply side over the last
Speaker 8: few decades, which has.
Speaker 1: Led to inflation. We're all focused on inflation and therefore
Speaker 1: real wages, a real income. What's the relationship between the
Speaker 1: growth and real income over time and the cost of housing?
Speaker 8: As I said that if you look at it that
Speaker 8: over the last few decades, this same jury, in fact,
Speaker 8: the cost of housing has been increasing at a far
Speaker 8: greater rate than either inflation or rail wages, so therefore
Speaker 8: made the affordability become very difficult in this country. So
Speaker 8: I think that this is a broader statement here, David
Speaker 8: about the regulatory state that we have in America, which
Speaker 8: is that we have created so many new regulations in
Speaker 8: our as that O line goes that the road to
Speaker 8: hell is paved with good intentions. So the government thinks
Speaker 8: it's doing the right thing, but in terms of it's
Speaker 8: trying to create more and more protection, it thinks, but
Speaker 8: in doing so, it's created this regulatory state which is
Speaker 8: stifling business. So the other related topic here, which also
Speaker 8: I've written about in the past, is that small and
Speaker 8: mid size businesses, their confidence today is very low.
Speaker 1: It's almost back.
Speaker 8: To where it was near the two thousand and eight
Speaker 8: global financial crisis. Whereas the large conglomerates and the large businesses,
Speaker 8: which can deal with the regular state in a more
Speaker 8: efficient way, their confidence is far higher. So we're seeing
Speaker 8: this across the state, and the housing market is obviously
Speaker 8: what it impacts the average consumer the most.
Speaker 1: For sure. Thank you so much. It's always great having
Speaker 1: Weshir Sharma with us from Rockefeller International. Coming up, China
Speaker 1: is struggling to attract foreign investment. We talk with Deborah
Speaker 1: Lair of Baselina about why that's next on Wall Street
Speaker 1: Week on Bloomberg.
Speaker 2: This is Bloomberg Wall Street Week with David Weston from
Speaker 2: Bloomberg Radio.
Speaker 1: This is Wall Street Week. I'm David Weston. China continues
Speaker 1: to fight an uphill battle to attract foreign investment, with
Speaker 1: the European Union Chamber of Commerce in China this week
Speaker 1: issue a paper that says that the risks are really
Speaker 1: starting to outweigh the rewards of investment in China. For
Speaker 1: an update on the state of the Chinese economy and
Speaker 1: where it is headed, we welcome back now Debra Lair.
Speaker 1: She's head of the Baselina. Thanks so much, Betva for
Speaker 1: being back with us, so give us your take. You
Speaker 1: know China so well, what is going on? Great?
Speaker 9: Delighted to be back, David, so good to see you.
Speaker 10: And yes, for it was only in twenty twenty one
Speaker 10: that China actually was number one in the world when
Speaker 10: it came to direct foreign investment, and now we are
Speaker 10: seeing a decline. And this is around a number of factors,
Speaker 10: foremost being confidence in Hi Jinping and his administration's economic
Speaker 10: and financial policies. There's tremendous concern about the ongoing drags
Speaker 10: on the economy around the reduction in consumption, the inability
Speaker 10: to stimulate growth through further government investment given local debt levels,
Speaker 10: the inability to stimulate the economy through massive exports, given
Speaker 10: that many countries now are watching very carefully what China
Speaker 10: is doing with its oversupply, and the real estate continues
Speaker 10: to be a drag on the economy. And that's putting aside,
Speaker 10: of course, all the geopolitical issues that they're facing now,
Speaker 10: as well as the issues around this move that gigmping
Speaker 10: has really engaged on, preferring national security to economic policy.
Speaker 1: Yeah, and particularly making a drive here against some of
Speaker 1: the people who've been most successful and wealthiest, which is
Speaker 1: interjected I think a degree of uncertainty for those people
Speaker 1: who want to really be the Jack Maas of this world.
Speaker 1: It's not such a happy place to be necessarily.
Speaker 6: That's very true.
Speaker 10: I mean you can see it from the statistics that
Speaker 10: actually have just come out about venture capital, where just
Speaker 10: in twenty eighteen there were over fifty thousand startups in
Speaker 10: China and last year it was a little over one thousand,
Speaker 10: and they expect that number to even drop this year.
Speaker 10: There's a concern about investing and the access to capital,
Speaker 10: but also it's just the overall drag on the economy
Speaker 10: and these concerns about the continued insertion of party values
Speaker 10: into innovation in the private sector.
Speaker 1: Is there any indication the presidence she might back off
Speaker 1: of that that's really been very central in recent years
Speaker 1: to his policy. Is there any chance they might actually
Speaker 1: tack a little bit away from that direction.
Speaker 10: Well, that's really the billion dollar question, isn't it. In
Speaker 10: terms of where we see China's economic future. We have
Speaker 10: not seen shebacking away from this emphasis on national security.
Speaker 10: There are all kinds of examples that we can cite
Speaker 10: related to that.
Speaker 9: What we have seen is they've been on.
Speaker 10: A real term campaign with international business. They've been sending
Speaker 10: delegations over here. They've been meeting with a number of
Speaker 10: Western companies to encourage them to continue to grow. They've
Speaker 10: been engaging in some market opening and reform to welcome
Speaker 10: the foreign firms and make it easier for them to
Speaker 10: do business. But the overall atmosphere continues to be one
Speaker 10: of concern, first, of course, because of where the economy
Speaker 10: is going, but to these concerns that American companies and
Speaker 10: European companies have about the focus on national security.
Speaker 1: There's a host of factors of peers going into this.
Speaker 1: But how important are the trade issues both of the
Speaker 1: European Union and the United States, because there are real
Speaker 1: issues here. And by the way, going back to what
Speaker 1: you were saying about national security, to a large degree,
Speaker 1: the Bide adminstration has made it sort of a national
Speaker 1: security issue.
Speaker 9: Absolutely.
Speaker 10: I mean, we saw this begin under President Trump and
Speaker 10: definitely be continued with President Biden, and whoever wins in November,
Speaker 10: I'm sure will continue this trend where trade is no
Speaker 10: longer looked at as a way of opening markets and
Speaker 10: promoting reform. But in many ways it's a tool to
Speaker 10: influence policy, and so we see it as a negative
Speaker 10: tool to influence policy. And as China can continues to
Speaker 10: grow and try and grow in areas where the United
Speaker 10: States or the Europeans might have concern, whether it's in
Speaker 10: climate technologies or if it's in artificial intelligence, we in
Speaker 10: the West have been much more sophisticated in how we've
Speaker 10: used our trade tools to close our markets and attempt
Speaker 10: to slow China's growth in those areas. So I see
Speaker 10: this definitely as an ongoing issue, and it not only
Speaker 10: affects it substantively, but obviously it affects the whole atmosphere
Speaker 10: for companies willing to do business in China. There are many,
Speaker 10: many sectors and many many opportunities. Still you'll hear the
Speaker 10: Secretary of Commerce talk about the fact that the overwhelming
Speaker 10: majority of our trade with China is benign and we
Speaker 10: should continue to still engage with China. But the willingness
Speaker 10: of many of these companies who hear what's happening in
Speaker 10: the market are concerned about the future of the overall
Speaker 10: relationship and at what it means for them to be
Speaker 10: able to do business in China has become a real
Speaker 10: way on their willingness to start to export or invest
Speaker 10: in China.
Speaker 1: Here in the United States right now, we're all fashioned
Speaker 1: on the presidential election, and as part of that coverage,
Speaker 1: we spend a lot of time talking without the team
Speaker 1: around a Vice President Harris, if she were elected to
Speaker 1: the team around Donald Trump, what's the team around President
Speaker 1: She when it comes to economic policy.
Speaker 10: Yeah, that is actually a really good question. President She
Speaker 10: has brought many of his longtime loyal allies with him
Speaker 10: into the most senior positions, and many of them come
Speaker 10: from great expertise in provincial background, but are not as
Speaker 10: strong as previous administrations have been on international experience. If
Speaker 10: we even look at in the financial sector, the two
Speaker 10: people who lead the financial sector and the financial regulatory body,
Speaker 10: the Premier League Chung and the Vice Premier Khalifung, have
Speaker 10: no financial experience, certainly not internationally. And the top regulator,
Speaker 10: the head of the People's Bank, is actually not even
Speaker 10: on the financial regulatory body. And we've seen sort of
Speaker 10: a systematic sweep against moving out many of those experts
Speaker 10: in the financial sector who were educated in the West,
Speaker 10: who actually have been part of China's integration into the
Speaker 10: international financial community. Being moved out and provincial financial leaders
Speaker 10: being moved up and into office. Maybe that's a reflection
Speaker 10: of where China seeds it's concerned. Obviously with all this
Speaker 10: local debt, it continues to be a big concern for
Speaker 10: the government and a drag on the economy.
Speaker 9: But it is a bigger concern as.
Speaker 10: We look internationally in China's continuing important role in the
Speaker 10: international financial community.
Speaker 1: And that's in the public sector. There are reports in
Speaker 1: Bloomberg this week that there have been actions taken by
Speaker 1: the government against some leading investment bankers actually over in China,
Speaker 1: where they're being detained or their passport's being taken whatever.
Speaker 1: What is the chilling effect here on the professional bankers
Speaker 1: as it were in China?
Speaker 10: And China's engaged in several anti corruption campaigns and several
Speaker 10: waves of anti corruption campaigns, both in the financial sector
Speaker 10: and others, and it has been a concern. We see
Speaker 10: it in the financial sector in current terms of even
Speaker 10: for Western companies executives who are willing to relocate to China,
Speaker 10: you're not getting necessarily the best and brightest. In the past,
Speaker 10: it was often a path to promotion. Now it's being
Speaker 10: viewed as China for China, and China is an island
Speaker 10: that's unto itself.
Speaker 9: In the financial infrastructure.
Speaker 10: Of many of these investment banks, it's been a chilling
Speaker 10: effect on the venture capital I already cited some of
Speaker 10: the statistics, but we see many of these vcs moving
Speaker 10: offshore or looking for investment overseas. So it does have
Speaker 10: a significant effect. And particularly if they're going and they're
Speaker 10: going to arrest or detain local entrepreneurs, it just further
Speaker 10: adds to that concern of the willingness to go into
Speaker 10: the private sector and start your own companies.
Speaker 1: Okay, Dere, it's always such a pleasure having with us.
Speaker 1: Thank you so much. That's Devrelaiir of the Besselina Group.
Speaker 1: This one is about Wall Street Week itself. It's a
Speaker 1: program that goes back over fifty years to the days
Speaker 1: of Lewis Rockeiser on PBS.
Speaker 3: Good Evening. I'm Lewis Rucheiser. This is a Wall Street
Speaker 3: Week welcome back.
Speaker 11: This was the week when the stock market stage what
Speaker 11: it euphemistically calls a correction a country's trade balance, which
Speaker 11: have been delivering its own brand of bad news for
Speaker 11: many a month. Some assaulted in February and recorded the
Speaker 11: biggest one month surplus in American history.
Speaker 1: As of next week, we enter a new generation. We'll
Speaker 1: get out of the studio and travel around the world
Speaker 1: to bring you stories of capitalism, from Chinese funded industrial
Speaker 1: parks in Mexico to the halls of academia in the
Speaker 1: United States and the United Kingdom. Starting with Gillian Tett
Speaker 1: in her new role as head of King's College, Cambridge.
Speaker 6: Public money is drying.
Speaker 1: Up, the story of higher education, challenged on both sides
Speaker 1: of the Atlantic by a business model that can get
Speaker 1: in the way of teaching the workforce of the future.
Speaker 4: Teaching kids is not just a business in the sense
Speaker 4: of having a profit and lost balance sheet.
Speaker 9: It's above all else, it's a mission.
Speaker 7: The hardest business to change is one that's succeeded for
Speaker 7: a long time.
Speaker 1: Welcome to the New Wall Street Week, telling the investors' stories.
Speaker 1: Stories from business, markets, economics, tech and climate, like how
Speaker 1: a derelict building became a symbol for restoring pride.
Speaker 12: The train station felt like the right kind of challenger
Speaker 12: project for four to be part of, so that we
Speaker 12: could be part of the revitalization of destroyed and this
Speaker 12: felt like the kind of project that would be emblematic
Speaker 12: of our recovery as a company.
Speaker 1: We'll bring you the story of how one lender used
Speaker 1: prudent investing along with its position in between the megabanks
Speaker 1: and the community banks, to help build a law local,
Speaker 1: family owned company into a billion dollar, world class business.
Speaker 1: How long have you been banking with PNC.
Speaker 7: Since the beginning? Our first meeting with PNC he occurred
Speaker 7: in my parents' basement when we were just starting our company.
Speaker 7: And you know, it was over a couple of foldout tables,
Speaker 7: and the relationships started there and it's done nothing but
Speaker 7: grow immensely.
Speaker 8: Over the years.
Speaker 6: Food is inclusive.
Speaker 13: Food doesn't really discriminate.
Speaker 1: Melibelle Wilson helps us tell the story of the New
Speaker 1: York restaurant business. It takes good food, good people, good economics,
Speaker 1: and like any recipe, it only works when it all
Speaker 1: comes together, using.
Speaker 13: Food as a conduit to bring people together, but also
Speaker 13: to show people that come from the Harlems of the
Speaker 13: world that we can invest in our community and we
Speaker 13: can be the change that we want to see.
Speaker 1: And what could be the story of the century Artificial intelligence.
Speaker 1: Wall Street Week takes you behind the scenes of a
Speaker 1: data center in Texas to tell the tale of an
Speaker 1: insatiable demand and how it can be met.
Speaker 14: When you see the world's leading technology companies who are
Speaker 14: as close to this as anybody making the scale of
Speaker 14: investments that they are, to me, that's an extraordinary sign
Speaker 14: of the potential that they see in the future.
Speaker 1: Our pets are a story in themselves, but the companionship
Speaker 1: we crave from them turned into the story of a
Speaker 1: healthcare industry amounting to tens of billions of dollars a
Speaker 1: year and innovating fast. What if there's a twenty percent
Speaker 1: production in your take home income? Would you change what
Speaker 1: you spend for your pet when it's sick?
Speaker 9: And they wouldn't change it a dime.
Speaker 6: It's a member of your family.
Speaker 1: In coming episodes of The New Wall Street Week, we'll
Speaker 1: go to Silicon Savannah in Nairobi, where the United States
Speaker 1: and China are waging a war over the future of AI,
Speaker 1: and to Mexico, where near shoring is supposed to be
Speaker 1: cooling the appetite for Chinese goods. We'll tell the story
Speaker 1: of San Francisco and what it's struggle with crime means
Speaker 1: for business We'll check you in out a World Bank
Speaker 1: development project to see what effect those extra special drawing
Speaker 1: rights have had, and go behind the scenes of the
Speaker 1: art world, the passion asset for many on Global Wall Street.
Speaker 1: All that and more on the next generation of Wall
Speaker 1: Street Week. More than what you need to know, it's
Speaker 1: what you need to think about.