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

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

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Speaker 2: Just men sitting in for Alex Steele here today. I'm

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Speaker 2: pol swhen you're live here on a Bloomberg Interactive Brokers Studio.

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Speaker 2: Earnings Day, Big Earning, State's Big earnings week actually coming

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Speaker 2: up a lot of tech names. We'll keep an eye

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Speaker 2: on that. The story of the morning is, I think

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Speaker 2: kind of just from the earning's perspective, is Ben McDonald's.

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Speaker 2: It's been in the news a lot recently with Coli breakout,

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Speaker 2: cole Ye break up. Anyway, Stock put out some numbers today.

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Speaker 2: I thought they were okay, but some international weakness. Same

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Speaker 2: store sales still negative. That's a challenge for them. They

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Speaker 2: try to build traffic there. Again, this quarter does not

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Speaker 2: include some of the concerns that they've seen over recent weeks.

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Speaker 2: Michael Halen joins US senior restaurant in food service analysts

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Speaker 2: for Bloomberg Intelligence. Hey Mike, what did you make from

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Speaker 2: McDonald's in the latest quarter, and then like, maybe more importantly,

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Speaker 2: what is management saying about kind of what they expect

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Speaker 2: their fourth quarter traffic.

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Speaker 3: To look like.

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Speaker 4: Yeah, Unfortunately, they didn't give us too much information about

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Speaker 4: the fourth quarter. I'd say the biggest takeaway from this

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Speaker 4: call and the reason why the stock is up right now,

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Speaker 4: although it's you know, not knocking to cover off the ball,

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Speaker 4: is the fact that they their initiatives, including the five

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Speaker 4: dollar value meal Buntdill, the five dollars meal deal I

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Speaker 4: should say, the Chicken Big Mac, and some of the

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Speaker 4: other initiatives better operations, had actually led to a mid

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Speaker 4: single digit same store sales increase and positive traffic for

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Speaker 4: the first three weeks of October, and so the streets

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Speaker 4: kind of taken that as a positive. Right now, in

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Speaker 4: terms of the fourth quarter, it was, you know, they

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Speaker 4: didn't give us much information. We did get a nice

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Speaker 4: report from Bloomberg second measured Data yesterday that showed Seamstar

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Speaker 4: sales were down nine percent last week, so that basically

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Speaker 4: wiped out the mid signal digit gain and they're probably

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Speaker 4: a little bit from like flat to upp modestly here

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Speaker 4: in October, right And so yeah, it's it was kind

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Speaker 4: of a good news bad news last couple of days

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Speaker 4: for McDonald's.

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Speaker 2: Well, John, you were asking, what is a five dollars

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Speaker 2: meal deal include? It includes a micdouble or a McChicken sandwich,

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Speaker 2: small fries, four piece chicken, McNuggets, and a small soft

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Speaker 2: drink that's.

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Speaker 5: Solid for five dollars.

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Speaker 6: So that's what I missed. The proper dollar menu, Yes

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Speaker 6: they were, but I was always a big fan of

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Speaker 6: that in college. But I would point out, like in

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Speaker 6: twenty fifteen, you saw other companies like Chipotle that were

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Speaker 6: hit by E. Coli outbreaks and unfortunately at that time,

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Speaker 6: chapotely had to temporary close a number of restaurants on

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Speaker 6: the West Coast. What do you think we can glean

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Speaker 6: from other instances when this has happened in the restaurant

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Speaker 6: industry and how quickly this could be cleared up?

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Speaker 4: Yeah, well we think this is very different than Chipotle.

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Speaker 4: So a big part of it is just the operational differences.

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Speaker 4: You know, McDonald's is a clothes kitchen. You know, it

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Speaker 4: turned out to be the slivered onions, and so it

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Speaker 4: was one item it wasn't you know, beef patties spread

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Speaker 4: across many different products. Right, it was just the onions

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Speaker 4: served in the quarter pounders with cheese. So we think

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Speaker 4: this outbreak will be smaller than we saw with a

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Speaker 4: lot of other chains. Chipotle was also unique. Chipotle same

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Speaker 4: star sales dropped for five straight quarters. They were down

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Speaker 4: twenty percent that first year. But you know, their food

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Speaker 4: is out in the open, right, it's behind a sneeze guard,

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Speaker 4: but you know it can get you know, contaminated by

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Speaker 4: multiple different employees, even some of the customers potentially, right.

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Speaker 4: So it's a much harder operation to get right at Chipotle,

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Speaker 4: And for some of those reasons, we think it's gonna

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Speaker 4: be a lot shorter, and it's gonna be a lot shallower,

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Speaker 4: you know. That being said, I think fourth quarter same

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Speaker 4: store sales are definitely going to take a hit. I

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Speaker 4: think people are going to be turned off from McDonald's.

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Speaker 4: I think it will probably spread a little bit into

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Speaker 4: the first quarter next year. But McDonald's is working hard

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Speaker 4: to get those same US same store sales kind of

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Speaker 4: back on the right trunk. You know, it's gonna be

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Speaker 4: about value. There's gonna be more, you know, the five

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Speaker 4: dollars meal deal is going to go through your end

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Speaker 4: and expect to see more of those type promotions next year.

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Speaker 4: They're gonna roll out in everyday Value menu in the

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Speaker 4: first quarter. That's should should help boost results next year.

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Speaker 4: You know, better operations, more chicken sales like the Chicken

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Speaker 4: Big Mac, more digital sales, and they even hinted at

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Speaker 4: some fourth quarter food innovation coming out. So they're working

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Speaker 4: hard to try to try to course correct here.

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Speaker 6: Something with McDonald's I always like to keep an eye

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Speaker 6: on for a telltale sign of consumer confidence is the

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Speaker 6: French fry indicator because you can tell if how French

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Speaker 6: fries are done and how the number of people or

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Speaker 6: fries can indicate sort of sentiment, what do you think

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Speaker 6: with sort of the latest earnings and what you can

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Speaker 6: glean from that and what that really means when it

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Speaker 6: comes to what consumer confidence can tell us when the

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Speaker 6: French freredicator.

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Speaker 4: Well, listen, I'm not looking at the French fry indicator

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Speaker 4: to be honest, you know, but but you know what

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Speaker 4: we're seeing and what we think will continue to see

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Speaker 4: is low income consumers struggling. And so McDonald's that their

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Speaker 4: strong result in the first three weeks of October. A

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Speaker 4: lot of that was driven by being able to track

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Speaker 4: low income consumers in with a very strong price point.

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Speaker 4: And you know, but inflation continues to hurt these low

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Speaker 4: income consumers. Right we see this ke shaped economy where

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Speaker 4: low income consumers are really pulling back on their restaurants spending.

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Speaker 4: But right now, asset prices are near you know, a

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Speaker 4: lot of them are near all time high. Stock the

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Speaker 4: US stock markets near an all time high, Gold and

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Speaker 4: silver have been ripping higher, bitcoins approaching another all time high.

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Speaker 4: Home prices have held in throughout the higher rates and

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Speaker 4: everything else in our near all time highs. And so

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Speaker 4: we think, you know, upper middle income, middle income, high

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Speaker 4: higher income consumers are all doing well and spending, and

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Speaker 4: you know, our chains are trying to attract those customers.

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Speaker 2: So, Mike, you, in your research coverage universe, what's kind

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Speaker 2: of the best name or two or three that kind

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Speaker 2: of standout as or sector in a restaurant business that

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Speaker 2: you like better than others?

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Speaker 1: Yeah?

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Speaker 4: Yeah, Well, I think past Casual is kind of outperformed

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Speaker 4: a bit that some of the names we cover anyway,

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Speaker 4: not that the entire industry, but Wingstop has done a

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Speaker 4: great job attracting both younger and higher income consumers into

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Speaker 4: their brand and they're absolutely knocking to cover off the ball.

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Speaker 4: You know, Chipotle has done a great job with their

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Speaker 4: digital sales and strategic part pricing and they're continuing to

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Speaker 4: draw consumers that see value on the plate there. And

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Speaker 4: then Texas Roadhouse is another one that's absolutely crushed it.

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Speaker 5: You know, we're not super.

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Speaker 4: High on casual dining, but they've been a machine man.

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Speaker 4: They're they're driving people into the restaurant with a lot

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Speaker 4: of value on that plate, right, and a very good experience.

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Speaker 4: And that's another one that's that's killing it. I think

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Speaker 4: there's Seams sourch sales are actually even better than Chipotle's

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Speaker 4: over the last five years, trailing.

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Speaker 3: So okay, all.

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Speaker 1: Right, Mike.

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Speaker 2: Always good to catch up with you and get the

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Speaker 2: latest on the restaurant biz. And McDonald's here today with

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Speaker 2: their earnings stock trading a little bit higher. Here McMichael Halem.

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Speaker 2: He's a senior restaurant and food service analysts for Bloomberg Intelligence.

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

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Speaker 1: weekdays at ten am Eastern on Apple.

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

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Speaker 2: Jess meant sitting in for Alex Steele on Paul Sweeney.

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Speaker 2: We are live here on Bloomberg Interactive Brokers Studio, streaming

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Speaker 2: live on YouTube as well. So go check us out there.

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Speaker 2: Big Tech Earnings it starts today after the close with

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Speaker 2: your friends at Google, and then we're gonna hear from

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Speaker 2: you know, Meta and everybody else along the line, Apple

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Speaker 2: and Amazon and all that kind of good good stuff.

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Speaker 2: So when you want to talk tech company, you want

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Speaker 2: to talk tech earnings, you need to talk to Gene Monster,

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Speaker 2: managing partner and co founder at Loop Ventures. I think

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Speaker 2: one of the more tenured reasonable voices on all things technology. Gene,

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Speaker 2: thanks so much for joining us here. Let's start with Google.

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Speaker 2: We're gonna hear from them after the close. Year This

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Speaker 2: stacks ABO up a little over twenty percent, but it

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Speaker 2: just feels like there's some concerns around Google in their

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Speaker 2: core search business, perhaps under some type of threat from AI.

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Speaker 2: How do you position the Google story here and what

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Speaker 2: will you be looking for?

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Speaker 7: Paul, you nailed it. I mean that is what I

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Speaker 7: would identify as the pressure point, the single piece that

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Speaker 7: matters the most. This is more important than the Google

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Speaker 7: Cloud number. A lot of investors are going to be

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Speaker 7: focusing on the Google Cloud, but keep in mind clouds

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Speaker 7: call it twelve percent of revenue. Search is just over

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Speaker 7: fifty and cloud is not in front of some existential

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Speaker 7: threat related to AI. And so the quick backstory is

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Speaker 7: that Google Search in the March quarter was up fourteen

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Speaker 7: percent year of year. It was up fourteen percent in

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Speaker 7: the June quarter, so showed some surprising strength quarter to quarter.

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Speaker 7: There the streets looking for plus twelve. But this is

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Speaker 7: where the plot thickens is that in the September quarter,

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Speaker 7: this will be the first full quarter where AI overviews

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Speaker 7: powered Google Search in the US. They launched in May,

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Speaker 7: so it got a partial quarter in the June quarter,

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Speaker 7: but we're going to see the first full quarter. And

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Speaker 7: then they launched another one hundred countries in the month

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Speaker 7: of October, so that's going to impact the December results.

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Speaker 7: But the reason why this search number is so important

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Speaker 7: is that if in fact the US search business holds

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Speaker 7: together for the first full quarter, that would be the

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Speaker 7: most I think substantial data point that Google investors can

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Speaker 7: have to feel comfortable about how this transition over the

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Speaker 7: next one two five years is going to go for Google,

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Speaker 7: that they're not going to lose share to the likes

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Speaker 7: of Open Ai, and so I'm really focused on that number.

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Speaker 7: Just one other kind of the inside baseball here. Google

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Speaker 7: doesn't break out US search revenue, so we're not going

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Speaker 7: to get really a clean look at that number. It's

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Speaker 7: just a global number. They do break out Google revenue

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Speaker 7: in the US. It was up eighteen percent in the

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Speaker 7: Just Reporter quarter. It's expected to be up twelve percent

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Speaker 7: in the September quarter. So if they do better than

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Speaker 7: that twelve I think it's going to be a good

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Speaker 7: view of AI overviews and keep Google investors confident that

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Speaker 7: this company can navigate this seismic change.

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Speaker 6: Of course, as you know, Gene, we're going to have

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Speaker 6: meta platforms after the bell on Wednesday, And when you

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Speaker 6: look here to date for Meta up about sixty six

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Speaker 6: percent compared to about twenty percent roughly for Google. What

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Speaker 6: are you watching when it comes to meta and the

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Speaker 6: AI story.

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Speaker 7: I mean, then the bars much higher the plus twenty

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Speaker 7: four the streets looking for I think eighteen percent growth

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Speaker 7: for this quarter or twenty two I should say it

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Speaker 7: peaked at twenty four percent. Growth is at twenty two percent.

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Speaker 7: I mean, it really comes down to their advertising growth

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Speaker 7: and ultimately if they can continue to keep that going,

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Speaker 7: you know, as impacting all their business. Another important factor

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Speaker 7: is their daily active users three point three billion. I mean,

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Speaker 7: this remarkable number, up six percent year of a year,

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Speaker 7: is up seven percent in the previous quarter. They just

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Speaker 7: keep cranking, and I think it's testimony to how addictive

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Speaker 7: Metas products are just really incredible.

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Speaker 2: And the stock market agrees with the genius stocks up.

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Speaker 2: You know, it's been one of the best performers of

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Speaker 2: kind of the big tech.

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Speaker 7: It games, particularly twenty four percent YEP over the past

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Speaker 7: three months, NAZEKX up seven Paul, Yeah, and it's just

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Speaker 7: continued to power forward. And I just I would stress

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Speaker 7: that point that the bar is high from Meta going

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Speaker 7: into this earnings UH trades at twenty four times. But

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Speaker 7: this is just an overall revenue growth story. And Zuckerberg

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Speaker 7: has kind of made the case to investors more recently

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Speaker 7: at their dev day that you know, they're just going

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Speaker 7: to be AI across all of their.

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Speaker 2: Products and gene There was a time not too far

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Speaker 2: ago long ago when people are worre concerned about the

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Speaker 2: spending at Meta, particularly on the metaverse, what's the thinking

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Speaker 2: now about how management's thinking about that.

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Speaker 7: Well, they've gotten to pass because the growth is accelerated

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Speaker 7: essentially to a kind of had bottom that right around

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Speaker 7: twelve percent and then accelerated up to twenty four percent

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Speaker 7: over the past year and a half. And so that

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Speaker 7: kind of, as I think, kept investors in a comfortable place.

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Speaker 7: But the spending on reality labs, this is the group

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Speaker 7: that's predominantly working on some form of AI glasses, something

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Speaker 7: that's more like the ray bands that they have. They're

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Speaker 7: very different than Apple's Vision Pro, but the spending on

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Speaker 7: that group continues to be aggressive, and specifically is that

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Speaker 7: they're expected to lose about twenty billion dollars this year.

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Speaker 7: I mean to put that into perspective is that on

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Speaker 7: a similar type of initiative for Vision Pro, Apple will

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Speaker 7: spend about two billion dollars in development a year. And

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Speaker 7: so we're talking about kind of a ten x magnitude

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Speaker 7: of investment that they're making. And the answer question, Paul,

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Speaker 7: is that investors are giving Meta a pass right now.

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Speaker 7: I see their aggressive spending in reality labs as a

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Speaker 7: win win for Meta long term. If in fact these

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Speaker 7: wearables do take off with their oryan project in the

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Speaker 7: next few years, then you're going to see some revenue

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Speaker 7: growth and that would be viewed as a positive. And

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Speaker 7: if they don't, if this doesn't take off, they're going

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Speaker 7: to cut spending and that should be good for earnings.

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Speaker 7: And so, in kind of a strange twist of events,

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Speaker 7: this Reality Labs is actually setting up to be a

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Speaker 7: positive for the stock in the next couple of years

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Speaker 7: when it comes.

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Speaker 6: To people talking about the AI potential slowdown in growth.

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Speaker 6: But of course there are all those base effects right

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Speaker 6: when it comes to big tech, because in twenty twenty two,

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Speaker 6: obviously there was such a low bar. We were in

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Speaker 6: a bear market. Earnings projections were a lot lower than

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Speaker 6: obviously last year. Once in Nvidia had that gangbuster revenue

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Speaker 6: forecast last May in twenty twenty three, obviously the base

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Speaker 6: effects were a lot more dramatic. So when you're looking

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Speaker 6: at the kind of year over year growth, the numbers

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Speaker 6: around twenty percent for the BAG seven obviously not quite

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Speaker 6: as high as the average more than thirty percent growth

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Speaker 6: in twenty three, But what do you make of that

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Speaker 6: when you see more of the growth stocks and in

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Speaker 6: the projections for their profit growth coming more in line

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Speaker 6: with the rest of the S and P five hundred

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Speaker 6: next year.

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Speaker 7: I think investors are missing this. I think that this

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Speaker 7: may be kind of an uncomfortable I believe this is

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Speaker 7: going to be an uncomfortable truth around AI, and what

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Speaker 7: it means for big tech is that this is going

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Speaker 7: to be more significant than what I think. Investors believe.

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Speaker 7: It's going to grow faster for longer, and I think

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Speaker 7: what you just described agree with all those facts, and

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Speaker 7: ultimately there's this sense for investors that were just one

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Speaker 7: quarter away from some sort of data point that's going

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Speaker 7: to show that AIS the substance is not going to

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Speaker 7: reach the hype, and I suspect that, well, we may

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Speaker 7: get occasional data points that are to kind of the

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Speaker 7: barish case of AI. The overwhelming body of evidence we're

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Speaker 7: going to see in the quarters ahead are going to

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Speaker 7: suggest that this trend is unstoppable. And that's some pretty

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Speaker 7: high bars I like to be measured in my expectations,

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Speaker 7: but I do believe that these companies, most of them,

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Speaker 7: are going to see growth higher than what investors think.

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Speaker 7: I'm already tuned into the twenty twenty six growth numbers.

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Speaker 7: Most of them for these big companies are kind of

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Speaker 7: in the low teens range, and I suspect that the

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Speaker 7: growth will be mid to high teens.

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Speaker 2: Gene, thanks so much for joining us. Really appreciate getting

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Speaker 2: a few minutes of your time. As always, Gene Mounster.

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Speaker 2: He's a managing partner. He's a co founder at Loop

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Speaker 2: Ventures based in Minneapolis.

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

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Speaker 1: weekdays at ten am Eastern on.

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Speaker 5: Fo card Playing and Broudoto with the Bloomberg Business app.

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Speaker 1: Listen on demand wherever you get your podcasts, or watch

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Speaker 1: us live on YouTube.

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Speaker 2: Custumer competence data came out one away point seven. The

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Speaker 2: consensus was ninety nine point five prior period was revised

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Speaker 2: up to ninety nine point two. So a big, big

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Speaker 2: jump here relative to expectations in the last period. Let's

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Speaker 2: break it down. Jess re checking with Dana Peterson, chief

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Speaker 2: economists at the Conference Board. Dana put this number into

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Speaker 2: context for us. It seems certainly really good relative to

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Speaker 2: what the market was expecting.

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Speaker 8: Yes, definitely, consumers were on the whole pretty happy in

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Speaker 8: October certainly they think the present situation is better. And

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Speaker 8: also expectations and notably expectations for jobs were positive for

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Speaker 8: the first time in almost a year and a half.

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Speaker 8: So there's really good news out there.

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Speaker 6: So what do you think this means as far as

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Speaker 6: the direction of the economy here, Well, the.

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Speaker 8: US economy has been doing quite well, and indeed consumers

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Speaker 8: have been driving it. We saw on the tracking data

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Speaker 8: from retail sales and also from the BEA that consumers

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Speaker 8: are buying goods, they're buying services. That's certainly supporting growth,

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Speaker 8: and we're seeing that finally show up in confidence. Indeed,

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Speaker 8: consumers were getting a little bit worried about the labor

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Speaker 8: market over the summer, but then we had those blockbuster

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Speaker 8: payrolls numbers. Most consumers are seeing their incomes rise because

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Speaker 8: wages are elevated. Most consumers are working. We are seeing

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Speaker 8: a little bit of layoffs here and there, but again,

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Speaker 8: the predominant sense among consumers, at least for this month,

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Speaker 8: is that they're okay.

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Speaker 2: How much data do you think is impacted at all

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Speaker 2: by the Fed cutting rates? Does that come into your

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Speaker 2: calculation here?

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Speaker 8: Absolutely? We have one question where we ask about interest

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Speaker 8: rate expectations, and that measure actually ticked up. And we

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Speaker 8: do have items where consumers said that they're not as

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Speaker 8: convinced that rates are going to come off. But then

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Speaker 8: we did see some who were saying, look, the Fed

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Speaker 8: has cut interest rates. We're seeing a little bit of

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Speaker 8: improvement in that. So certainly we're going to need more

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Speaker 8: interest rate cuts before consumers pretty come out, probably come

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Speaker 8: out strongly and say yes, we're confident in this rate

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Speaker 8: cutting cycle. But consumers are starting to get out there

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Speaker 8: and buy big ticket items because they're cheaper, not so

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Speaker 8: much because interest rates are lower, but as streets ball,

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Speaker 8: we think they'll buy more cars and furniture, things that

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Speaker 8: they need to finance.

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Speaker 2: All right, some pretty solid numbers also know the Conference

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Speaker 2: Board Expectations data point came in at eighty nine point one.

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Speaker 2: That's versus revised eighty two point eight from last month.

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Speaker 2: So also in terms of expectations, better than expected. Dana Peterson,

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Speaker 2: thanks so much for joining us. Dana Peterson a chief

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Speaker 2: economist at the Conference Board.

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Speaker 2: Jess Meant and sitting in for Alex Steel today, I'm

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Speaker 2: Paul Scoeneyer live here in our bloomergen Director Broker Studio.

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Speaker 2: Our next guest. This is how it's gonna work post.

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Speaker 2: I'm gonna ask a question and I'm gonna turn off

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Speaker 2: my Mike and John and I are going to sit

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Speaker 2: here and listen and try to get a little bit

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Speaker 2: smarter and take notes and take notes. Neil Grossman. He's

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Speaker 2: a co founder and former CIO of K n G

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Speaker 2: Capital joints us here in our Bloomberg Interactive Broker studio.

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Speaker 2: We're in a suit today. Can remember last time I

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Speaker 2: saw you in a suit?

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Speaker 3: Neil.

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Speaker 2: We got a lot of economic data, we got right

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Speaker 2: smack in the middle of earnings. All that's important. But

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Speaker 2: I think since we have you here, I would just

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Speaker 2: love to get your opinions about how you think the

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Speaker 2: markets are digesting a big, pretty big election next Tuesday.

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Speaker 2: Are you when you talk to clients, are you saying, hey,

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Speaker 2: if Trump wins, think this, if Harris wins, think that,

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Speaker 2: how are you kind of positioning all that?

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Speaker 3: Well? I think there's two levels to this. But by

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Speaker 3: the way, thank you very much for having me. It's

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Speaker 3: a pleasure as always. At least as a start, both

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Speaker 3: of the platforms seemed to be talking about spending a

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Speaker 3: lot of money. So the first question is what's the

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Speaker 3: impact of that on the economy, on the FED? And

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Speaker 3: then you can try and maybe zero in on what

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Speaker 3: the theoretical differences are between the two. Look, if you look

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Speaker 3: at the economy and where we are and where we've been,

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Speaker 3: I would look at the July September FED meetings and

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Speaker 3: just scratch my head we had functionally two fairly when

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Speaker 3: one fairly weak and one moderate job number job numbers

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Speaker 3: that propelled the FED to what looked to me like

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Speaker 3: they were panicking. And it turned out, of course, with

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Speaker 3: the revision, that that really wasn't the case. So I

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Speaker 3: think where we find ourselves right now is a couple

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Speaker 3: of things. One, the labor market is fine. There are

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Speaker 3: going to be some real unusual impacts over the next

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Speaker 3: number two because of the Boeing strike and the hurricanes,

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Speaker 3: which really affected a pretty significant part of the population.

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Speaker 3: And I don't know how to read the employment numbers now,

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Speaker 3: but I will tell you this. You know, I think

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Speaker 3: you know my daughter lives in Saint Pete. If you

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Speaker 3: go down to Saint Petersburg and you drive, and the

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Speaker 3: miles and the miles and the miles of people's lives

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Speaker 3: have been destroyed but have to be rebuilt. There is

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Speaker 3: an enormous amount of money that is going to be

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Speaker 3: put to work in this economy. Forget the fact that

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Speaker 3: we're running eight or nine percent, you know, deficits, which

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Speaker 3: is historically staggering. The biggest question you might ask yourself

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Speaker 3: is can they actually address the deficits without having a

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Speaker 3: significant economic impact, because to go from a deficit growth

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Speaker 3: rate of eight or nine to back to traditional three

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Speaker 3: percent probably will be a very difficult task.

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Speaker 9: I've heard candidates promising the world, and I don't know

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Speaker 9: how they're going to fund it. Liz Trust kind of

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Speaker 9: ran into the same problem. Where are the bond vigilantes

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Speaker 9: and all this? You're starting to see it a bit.

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Speaker 9: Look the yield curve. I mean, I think the last

438
00:22:10,040 --> 00:22:11,800
Speaker 9: time we were on we were talking about yield curve

439
00:22:11,920 --> 00:22:15,720
Speaker 9: structure and it steepened a lot. Yeah, and I suspect

440
00:22:15,760 --> 00:22:17,919
Speaker 9: that the long, long, this is one of the problems

441
00:22:17,920 --> 00:22:20,879
Speaker 9: with the FED did. I mean, there was absolute panic

442
00:22:20,880 --> 00:22:23,320
Speaker 9: in the way they did things. And I mean this

443
00:22:23,400 --> 00:22:27,760
Speaker 9: concept of recalibration to me, it's an awful, laughable world word.

444
00:22:27,800 --> 00:22:30,439
Speaker 9: It's going to be recalibration is going to become the

445
00:22:30,440 --> 00:22:31,360
Speaker 9: new transitory.

446
00:22:33,040 --> 00:22:36,520
Speaker 3: You know. The bottom line is they don't really know

447
00:22:36,600 --> 00:22:39,520
Speaker 3: what a neutral rate is, and they certainly don't know

448
00:22:39,560 --> 00:22:42,560
Speaker 3: what a neutral rate is when we're spending money fiscally

449
00:22:42,200 --> 00:22:47,080
Speaker 3: like its rain. So if they really wanted to try

450
00:22:47,119 --> 00:22:49,560
Speaker 3: and ease in and understand the impact, this would have

451
00:22:49,600 --> 00:22:53,360
Speaker 3: been a very slow, elongated process. Watching in the meantime,

452
00:22:53,359 --> 00:22:57,520
Speaker 3: what happened They not only cut fifty, but they've sort

453
00:22:57,520 --> 00:22:59,440
Speaker 3: of promised that they think you're going to be another

454
00:22:59,440 --> 00:23:02,600
Speaker 3: two hundred points in short order. And the first thing

455
00:23:02,640 --> 00:23:04,760
Speaker 3: that happened, of course, is the yield curves started to

456
00:23:04,800 --> 00:23:07,600
Speaker 3: steepen like this note tomorrow if you really want to

457
00:23:07,600 --> 00:23:10,080
Speaker 3: look at things. To me, you know, we've the FED

458
00:23:10,119 --> 00:23:12,440
Speaker 3: focuses on short rates, but at the end of the day,

459
00:23:12,800 --> 00:23:15,600
Speaker 3: long term interest rates are an indicator and a measure

460
00:23:15,640 --> 00:23:19,359
Speaker 3: of what you should be expecting for long term growth

461
00:23:19,400 --> 00:23:24,479
Speaker 3: and how you manage, you know, the investment and capital

462
00:23:24,520 --> 00:23:28,000
Speaker 3: allocation decisions. And I don't see any reason to think

463
00:23:28,040 --> 00:23:31,480
Speaker 3: that if they keep cutting with liquidity or already its

464
00:23:31,960 --> 00:23:36,200
Speaker 3: just beyond imagination. Stocks at all time highs, very high deficits.

465
00:23:36,240 --> 00:23:39,640
Speaker 3: We're still at relatively low rates of unemployment. A lot

466
00:23:39,640 --> 00:23:42,200
Speaker 3: of the wage settlements have been very large, by the way,

467
00:23:42,200 --> 00:23:44,320
Speaker 3: I mean the last one, which is and we have

468
00:23:44,480 --> 00:23:48,400
Speaker 3: not seen most of the government workers union workers ask

469
00:23:48,720 --> 00:23:50,560
Speaker 3: can you imagine I mean, I think there are twenty

470
00:23:50,600 --> 00:23:53,240
Speaker 3: five million people employed by governments in this country, which

471
00:23:53,280 --> 00:23:56,160
Speaker 3: is about one in six. Can you imagine if these

472
00:23:56,720 --> 00:23:59,280
Speaker 3: if those union workers are going to insist in the

473
00:23:59,280 --> 00:24:05,360
Speaker 3: same nature of wage agreements going forward. I mean, this

474
00:24:05,480 --> 00:24:05,960
Speaker 3: can't be.

475
00:24:05,960 --> 00:24:09,240
Speaker 2: Handled so, but I mean in terms of the deficits

476
00:24:09,240 --> 00:24:11,919
Speaker 2: in the national debt. I started working on Wall Street

477
00:24:11,960 --> 00:24:14,160
Speaker 2: in June of nineteen eighty six. It was an issue.

478
00:24:14,200 --> 00:24:18,080
Speaker 2: Then it's still an issue.

479
00:24:18,640 --> 00:24:20,919
Speaker 9: Debt clock, Yes, it is.

480
00:24:21,680 --> 00:24:23,000
Speaker 3: And do you know what do you know what the

481
00:24:23,080 --> 00:24:27,840
Speaker 3: unfunded liabilities are? Stud of three hundred trillion, which is

482
00:24:27,920 --> 00:24:30,040
Speaker 3: I mean that's dwarfs all the problems. Yes, and part

483
00:24:30,040 --> 00:24:31,920
Speaker 3: of that is Look, social Security is going to run

484
00:24:31,920 --> 00:24:34,480
Speaker 3: out of money trust fund and then that will go

485
00:24:34,600 --> 00:24:35,800
Speaker 3: on to the budget as well.

486
00:24:35,880 --> 00:24:36,320
Speaker 9: So there.

487
00:24:36,640 --> 00:24:39,560
Speaker 3: Look, I don't know if there's time left to solve

488
00:24:39,600 --> 00:24:42,000
Speaker 3: the problems or not. I think I don't think history

489
00:24:42,560 --> 00:24:46,480
Speaker 3: teaches you that you can avoid reality. And our deficits

490
00:24:46,520 --> 00:24:54,800
Speaker 3: relative to the nation's capacity are are certainly put causing

491
00:24:54,840 --> 00:24:57,720
Speaker 3: the seams or may cause the seams to burst. And

492
00:24:58,000 --> 00:25:00,520
Speaker 3: you know, the sooner you deal with a problem, the

493
00:25:00,600 --> 00:25:03,720
Speaker 3: less you usually have to do to solve it, and

494
00:25:03,840 --> 00:25:05,639
Speaker 3: the easier the transit.

495
00:25:05,720 --> 00:25:08,080
Speaker 2: But there's just no political there's never ever ever been

496
00:25:08,119 --> 00:25:09,239
Speaker 2: in political will to do well.

497
00:25:09,240 --> 00:25:11,000
Speaker 3: How do you, Paul, how do you? How do you look?

498
00:25:11,119 --> 00:25:13,200
Speaker 3: I think something on the order of sixty five percent

499
00:25:13,240 --> 00:25:16,280
Speaker 3: of the of the working populations pays no net taxes.

500
00:25:17,080 --> 00:25:19,040
Speaker 2: And since they pay no net taxes.

501
00:25:18,800 --> 00:25:20,800
Speaker 3: Yes, when you look at all the benefits and add

502
00:25:20,840 --> 00:25:24,439
Speaker 3: it all together, how do you tell people? And I

503
00:25:24,480 --> 00:25:26,280
Speaker 3: have this discussion with a lot of people. I mean,

504
00:25:26,440 --> 00:25:29,800
Speaker 3: how do you tell them that they can't they're going

505
00:25:29,840 --> 00:25:32,439
Speaker 3: to lose something. That's a very difficult thing to start with.

506
00:25:32,520 --> 00:25:35,160
Speaker 3: And then you end up with these discussions about well,

507
00:25:35,200 --> 00:25:37,840
Speaker 3: you're social Security and Medicare Medicaid need to be cut

508
00:25:37,920 --> 00:25:39,080
Speaker 3: and they said, well I paid for this, said, well,

509
00:25:39,119 --> 00:25:40,800
Speaker 3: you really didn't pay for it when you look at

510
00:25:41,080 --> 00:25:46,080
Speaker 3: the projections. The problem is you're relying on the future

511
00:25:46,119 --> 00:25:48,400
Speaker 3: to continue to pay for your problem. And I don't

512
00:25:48,440 --> 00:25:51,760
Speaker 3: know the answer to this. I think we've missed opportunity

513
00:25:51,800 --> 00:25:53,400
Speaker 3: after opportunity to address it.

514
00:25:54,160 --> 00:25:56,680
Speaker 2: And you know, and again, as john said, I don't

515
00:25:56,680 --> 00:25:58,159
Speaker 2: hear either candidate talking about that.

516
00:25:58,240 --> 00:26:02,240
Speaker 3: Nobody can directly even their problem. What's his name? McCarthy

517
00:26:02,280 --> 00:26:06,280
Speaker 3: and Mike Johnson, both of them, when asked every time

518
00:26:06,320 --> 00:26:08,520
Speaker 3: they sit down to negotiate, the first thing they say,

519
00:26:08,560 --> 00:26:13,160
Speaker 3: or entitlements are sacricient, they won't be touched that's functionally

520
00:26:13,280 --> 00:26:17,360
Speaker 3: I think. I think the actual number is we historically

521
00:26:17,480 --> 00:26:20,520
Speaker 3: take in eighteen percent of GDP and traditionally spend twenty

522
00:26:20,560 --> 00:26:23,840
Speaker 3: one percent. And by the way, that eighteen percent is

523
00:26:25,920 --> 00:26:30,119
Speaker 3: consistent across almost every tax regimen we've ever seen. But

524
00:26:30,160 --> 00:26:33,240
Speaker 3: if you went back twenty years ago, one third of

525
00:26:33,280 --> 00:26:37,920
Speaker 3: government spending of that eighteen percent was entitlements. We're beginning

526
00:26:37,920 --> 00:26:39,800
Speaker 3: to push. I think we're very close to where almost

527
00:26:39,880 --> 00:26:43,119
Speaker 3: every dollar coming into the government is going out in

528
00:26:43,160 --> 00:26:46,399
Speaker 3: the form of entitlements, and we're not. You know, so

529
00:26:46,480 --> 00:26:49,920
Speaker 3: the extra eight or nine percent or above that or

530
00:26:50,040 --> 00:26:52,320
Speaker 3: you know, actually, I guess it's about nine percent of

531
00:26:52,520 --> 00:26:57,159
Speaker 3: incremental spending is all deficit funded, and it's going to

532
00:26:57,200 --> 00:26:59,040
Speaker 3: get to be it's going to be a very painful.

533
00:27:00,040 --> 00:27:03,840
Speaker 9: There was a time where you had bipartisan kind of consensus,

534
00:27:03,880 --> 00:27:08,080
Speaker 9: like a committee Simpson bulls the balls, But I suspect

535
00:27:08,119 --> 00:27:10,720
Speaker 9: that environment is long gone though.

536
00:27:10,800 --> 00:27:13,920
Speaker 3: What was Phil Graham's partner's name, and the same thing, Graham.

537
00:27:13,880 --> 00:27:18,119
Speaker 9: Graham, the same thing, you know.

538
00:27:18,160 --> 00:27:19,840
Speaker 3: That's the way. I mean, it's sort of kick it

539
00:27:19,880 --> 00:27:22,359
Speaker 3: down and put it to it some sort of you know,

540
00:27:22,480 --> 00:27:26,080
Speaker 3: under the counter committee and hopefully you listen.

541
00:27:26,119 --> 00:27:27,080
Speaker 9: But again it doesn't.

542
00:27:27,119 --> 00:27:27,560
Speaker 3: It doesn't.

543
00:27:27,840 --> 00:27:30,720
Speaker 2: Given that dire what do you do in the financing world?

544
00:27:30,720 --> 00:27:33,000
Speaker 2: What do you do in the economic the investing world?

545
00:27:33,520 --> 00:27:34,159
Speaker 2: How do you think about it?

546
00:27:34,280 --> 00:27:37,919
Speaker 3: Field curve number one. I believe if the FED is

547
00:27:37,960 --> 00:27:40,120
Speaker 3: going to continue easing, the long end of the Yeld

548
00:27:40,200 --> 00:27:43,920
Speaker 3: curve is going to be under pressure. How high it goes,

549
00:27:44,280 --> 00:27:47,040
Speaker 3: that's up to that will be a function of inflation.

550
00:27:47,080 --> 00:27:49,080
Speaker 3: I do think you're going to start to see inflation

551
00:27:49,160 --> 00:27:51,040
Speaker 3: in ways you don't want to want to. For example,

552
00:27:51,160 --> 00:27:54,360
Speaker 3: again the Southeastern issue, used cart prices are already being

553
00:27:54,359 --> 00:27:59,040
Speaker 3: pushed very high down there, cost of construction materials going high,

554
00:27:59,080 --> 00:28:02,000
Speaker 3: Probably labor calls are going up in those ways. So

555
00:28:02,080 --> 00:28:04,960
Speaker 3: some of the broader pictures. That's not the whole United States, obviously,

556
00:28:05,000 --> 00:28:07,760
Speaker 3: but there is likely to be cost of housing, by

557
00:28:07,800 --> 00:28:10,480
Speaker 3: the way. So I think that there is a lot

558
00:28:10,480 --> 00:28:14,640
Speaker 3: of risks that you are going to see higher inflation

559
00:28:14,800 --> 00:28:18,000
Speaker 3: numbers over the next six to eighteen months just from that. Now,

560
00:28:18,440 --> 00:28:19,639
Speaker 3: was that going to be from a two and a

561
00:28:19,680 --> 00:28:21,600
Speaker 3: quarter in two and a half or is it going

562
00:28:21,600 --> 00:28:23,359
Speaker 3: to be from a three or is it two? I

563
00:28:23,440 --> 00:28:27,359
Speaker 3: don't know, but I suspect that the progress towards lower

564
00:28:27,359 --> 00:28:31,320
Speaker 3: inflation is going to find itself struggling for the moment.

565
00:28:31,520 --> 00:28:34,200
Speaker 2: So what does the Fed do November seventh, here, two

566
00:28:34,280 --> 00:28:37,639
Speaker 2: days after the election. We probably won't know, you know,

567
00:28:37,640 --> 00:28:38,200
Speaker 2: who's the one.

568
00:28:38,280 --> 00:28:41,200
Speaker 3: I suspect they have more room to say, look things

569
00:28:41,240 --> 00:28:44,040
Speaker 3: of the data since we talked about this has been

570
00:28:44,320 --> 00:28:47,640
Speaker 3: well above expectations. We'll see what the employment problem is.

571
00:28:47,680 --> 00:28:50,560
Speaker 3: The employment data could be really weak, and so they

572
00:28:50,600 --> 00:28:53,200
Speaker 3: could take say, look that number is really bad, or

573
00:28:53,200 --> 00:28:57,480
Speaker 3: they could say that number is sort of distorted by

574
00:28:57,560 --> 00:29:01,160
Speaker 3: factors beyond our control. My suspicion is as supposed to

575
00:29:01,200 --> 00:29:06,120
Speaker 3: say that unless you see an inflation rate drop to

576
00:29:06,240 --> 00:29:09,160
Speaker 3: two percent or below, and that includes a core rate

577
00:29:09,480 --> 00:29:11,719
Speaker 3: which is still above three, that say, drops the two

578
00:29:11,880 --> 00:29:14,480
Speaker 3: six all of a sudden. I think they're supposed to say,

579
00:29:14,880 --> 00:29:18,160
Speaker 3: we need to you know, we've already had a significant impact,

580
00:29:18,680 --> 00:29:22,240
Speaker 3: and other things being equal, we have time to take

581
00:29:22,320 --> 00:29:24,720
Speaker 3: our take our time. I don't know if they feel

582
00:29:24,760 --> 00:29:26,880
Speaker 3: that they can do that, because I think there are

583
00:29:27,320 --> 00:29:29,600
Speaker 3: things like stock markets that they worry about more than

584
00:29:29,640 --> 00:29:30,400
Speaker 3: other things.

585
00:29:30,240 --> 00:29:31,760
Speaker 2: And they kind of it's almost like they did set

586
00:29:31,760 --> 00:29:32,880
Speaker 2: the expectations for it.

587
00:29:33,560 --> 00:29:34,280
Speaker 9: But that's the problem.

588
00:29:34,320 --> 00:29:36,280
Speaker 3: They shouldn't be setting an expect when they tell you

589
00:29:36,320 --> 00:29:39,959
Speaker 3: the data dependent, I guess that's you can laugh about it.

590
00:29:40,000 --> 00:29:42,400
Speaker 3: But when they tell you the data the dependent and

591
00:29:42,440 --> 00:29:46,720
Speaker 3: the data is up in opposition to what they thought

592
00:29:46,720 --> 00:29:49,400
Speaker 3: it was going to be, that they're supposed to, you know,

593
00:29:49,880 --> 00:29:52,479
Speaker 3: take a step back and try and understand what they

594
00:29:52,480 --> 00:29:54,880
Speaker 3: were doing. So I don't know what they do, but

595
00:29:55,160 --> 00:29:58,480
Speaker 3: I suspect given all the current data that nine months

596
00:29:58,480 --> 00:30:00,960
Speaker 3: from now, whatever you thought there, we're going to be

597
00:30:01,040 --> 00:30:03,600
Speaker 3: in the absence of a significant change. They're going to

598
00:30:03,640 --> 00:30:05,520
Speaker 3: be harder than what you thought at the front end,

599
00:30:05,720 --> 00:30:07,120
Speaker 3: and they're going to be harder than what your thought

600
00:30:07,160 --> 00:30:07,800
Speaker 3: at the back end.

601
00:30:07,840 --> 00:30:10,480
Speaker 2: All right, Neil, great stuff, as always Neil Grossman. He's

602
00:30:10,480 --> 00:30:12,440
Speaker 2: the co founder and he's a former CIO of k

603
00:30:12,800 --> 00:30:15,320
Speaker 2: n G Capital. Coming into our Bloomberg Interactive Brokers studio.

604
00:30:15,400 --> 00:30:17,840
Speaker 2: Just give us some thoughts here as we parse out

605
00:30:18,320 --> 00:30:19,000
Speaker 2: this market.

606
00:30:20,520 --> 00:30:24,400
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

607
00:30:24,480 --> 00:30:27,960
Speaker 1: weekdays at ten am Eastern on applecard Play and Android

608
00:30:28,000 --> 00:30:30,800
Speaker 1: Auto with the Bloomberg Business app. You can also listen

609
00:30:30,920 --> 00:30:34,000
Speaker 1: live on Amazon Alexa from our flagship New York station.

610
00:30:34,360 --> 00:30:37,120
Speaker 1: Just say Alexa playing Bloomberg eleven thirty.

611
00:30:38,240 --> 00:30:40,600
Speaker 2: Let's look at crude oil here. We've had a kind

612
00:30:40,600 --> 00:30:42,880
Speaker 2: of a de risking of crude oil in the last

613
00:30:43,360 --> 00:30:46,080
Speaker 2: week or so, I guess on the backs of Israel's

614
00:30:46,560 --> 00:30:50,080
Speaker 2: retaliation against around was a little bit less than expected,

615
00:30:50,080 --> 00:30:52,120
Speaker 2: maybe dialing down the tensions a little bit there. But

616
00:30:52,600 --> 00:30:54,680
Speaker 2: whenever we talk about global oil, we want to talk

617
00:30:54,680 --> 00:30:58,200
Speaker 2: to Ellen Wald. She's a president of Transversal Consulting. Ellen,

618
00:30:58,280 --> 00:31:00,080
Speaker 2: what do you make of kind of what's happening the

619
00:31:00,080 --> 00:31:03,040
Speaker 2: global crude oil prices here? Is it's simply kind of

620
00:31:03,080 --> 00:31:06,080
Speaker 2: taking maybe a little bit of that geopolitical risk out

621
00:31:06,120 --> 00:31:07,480
Speaker 2: of the price of oil.

622
00:31:08,480 --> 00:31:12,320
Speaker 10: Yeah, that's what I think we're seeing. At least yesterday

623
00:31:13,200 --> 00:31:16,440
Speaker 10: was quite the day for de risking. I think it's

624
00:31:17,080 --> 00:31:21,400
Speaker 10: Israel really made a very concerted effort to let people

625
00:31:21,920 --> 00:31:26,280
Speaker 10: believe that they were about to attack Iran's oil production

626
00:31:26,400 --> 00:31:30,560
Speaker 10: and export infrastructure, and it seemed that the market was

627
00:31:31,080 --> 00:31:34,080
Speaker 10: really taken with this, and there was definitely.

628
00:31:33,560 --> 00:31:35,600
Speaker 11: A lot of talk about, you.

629
00:31:35,520 --> 00:31:38,040
Speaker 10: Know, Israel potentially doing this and the effect it might

630
00:31:38,080 --> 00:31:40,760
Speaker 10: have on the market. And so I think that now

631
00:31:40,840 --> 00:31:44,320
Speaker 10: that that risk seems to have passed or at least

632
00:31:44,320 --> 00:31:48,240
Speaker 10: been postponed for a while. We're seeing oil prices really

633
00:31:48,320 --> 00:31:49,440
Speaker 10: come down as a result.

634
00:31:49,680 --> 00:31:52,880
Speaker 11: I do think that that fear was totally misplaced.

635
00:31:52,920 --> 00:31:55,880
Speaker 10: I think Israel cultivated an image that it was going

636
00:31:55,920 --> 00:31:58,880
Speaker 10: to do this, even though the likelihood that they would

637
00:31:58,920 --> 00:32:01,760
Speaker 10: do that was actually quite small. Also for people who

638
00:32:01,800 --> 00:32:04,120
Speaker 10: didn't actually think that that this was going to happen,

639
00:32:04,560 --> 00:32:07,000
Speaker 10: there was definitely the possibility to kind of ride this

640
00:32:07,120 --> 00:32:10,520
Speaker 10: in in an interesting way. But now that we're past

641
00:32:10,640 --> 00:32:14,640
Speaker 10: this you know, kind of hump at least right now, Uh,

642
00:32:14,680 --> 00:32:18,480
Speaker 10: there's more of an opportunity for the supply and demand

643
00:32:18,560 --> 00:32:21,040
Speaker 10: issues to you know, to come to the forefront.

644
00:32:21,080 --> 00:32:22,960
Speaker 11: And I think that's what we're seeing in oil prices now.

645
00:32:23,120 --> 00:32:25,840
Speaker 6: I'm glad you brought up supply because walk us through

646
00:32:26,000 --> 00:32:28,520
Speaker 6: how oil traders are really split right now and whether

647
00:32:28,560 --> 00:32:30,760
Speaker 6: OPEC will hike supply in December.

648
00:32:31,840 --> 00:32:34,560
Speaker 10: Yeah, this is I think the really big issue that

649
00:32:35,360 --> 00:32:38,280
Speaker 10: you know, oil traders are looking at now because OPEK

650
00:32:38,320 --> 00:32:41,040
Speaker 10: has already you know, pushed its plans off once they

651
00:32:41,080 --> 00:32:44,080
Speaker 10: made they set up this, this whole plan for these

652
00:32:44,200 --> 00:32:47,760
Speaker 10: very gradual increases, they set it up, they announced it.

653
00:32:47,800 --> 00:32:50,360
Speaker 11: They've given the market ample time to get.

654
00:32:50,240 --> 00:32:52,640
Speaker 10: Used to this, and yet we're still seeing it being

655
00:32:52,640 --> 00:32:56,280
Speaker 10: pushed off and pushed off. Initially, OPEC's forecasters had a

656
00:32:56,400 --> 00:33:00,560
Speaker 10: much much more optimistic picture for what demand was going

657
00:33:00,640 --> 00:33:02,600
Speaker 10: to look like this year. I think then other people

658
00:33:02,600 --> 00:33:05,840
Speaker 10: did and they've really had to trim that forecast for

659
00:33:05,840 --> 00:33:08,480
Speaker 10: for demand growth back. And so as a result, the

660
00:33:08,560 --> 00:33:12,400
Speaker 10: group has pushed off its planned to increase production and

661
00:33:12,440 --> 00:33:15,000
Speaker 10: to implement this kind of gradual plan. They already pushed

662
00:33:15,000 --> 00:33:18,480
Speaker 10: it off, but they're set to start doing this December January,

663
00:33:18,560 --> 00:33:20,920
Speaker 10: and so, you know, the big question is now that

664
00:33:21,240 --> 00:33:23,880
Speaker 10: demand is looking pretty weak. You know, we're still waiting

665
00:33:23,920 --> 00:33:24,600
Speaker 10: to see what's.

666
00:33:24,440 --> 00:33:26,280
Speaker 11: Going on with China.

667
00:33:26,720 --> 00:33:30,080
Speaker 10: Is the group going to you know, make another another

668
00:33:30,240 --> 00:33:32,880
Speaker 10: push it off again? And I think that's a really

669
00:33:32,880 --> 00:33:35,000
Speaker 10: big question. There definitely seems to be a split. I

670
00:33:35,040 --> 00:33:39,280
Speaker 10: think OPEK itself doesn't know. They did recently issue a revision,

671
00:33:39,280 --> 00:33:41,479
Speaker 10: a downward revision in their forecast, which could be an

672
00:33:41,480 --> 00:33:46,200
Speaker 10: indication that they're setting things up for another uh, you know,

673
00:33:46,280 --> 00:33:48,880
Speaker 10: another uh to push it off again when they meet

674
00:33:48,920 --> 00:33:51,520
Speaker 10: in December, but you know, no one really knows.

675
00:33:52,080 --> 00:33:55,120
Speaker 2: So Ellen, you mentioned China, What is the feeling about

676
00:33:55,200 --> 00:33:58,480
Speaker 2: demand coming out of China here, it's I guess in

677
00:33:58,480 --> 00:34:00,520
Speaker 2: the margin it's been weaker than expected. Is that something

678
00:34:00,560 --> 00:34:03,240
Speaker 2: that the market things could go into next year.

679
00:34:04,960 --> 00:34:06,240
Speaker 11: I think it is at this point.

680
00:34:06,560 --> 00:34:09,440
Speaker 10: It's very interesting because there's definitely a lot of skepticism

681
00:34:09,560 --> 00:34:10,919
Speaker 10: about demand.

682
00:34:10,600 --> 00:34:11,600
Speaker 11: At China where it's going.

683
00:34:11,760 --> 00:34:15,160
Speaker 10: What this stimulus plan that they've been talking about, is

684
00:34:15,160 --> 00:34:19,239
Speaker 10: that really going to actually result in higher demand? Is

685
00:34:19,239 --> 00:34:22,400
Speaker 10: that really going to provide the kind of economic stimulus

686
00:34:22,480 --> 00:34:26,920
Speaker 10: that is needed to really, you know, push oil demand higher.

687
00:34:27,000 --> 00:34:29,080
Speaker 10: I think that there's a lot of skepticism about that.

688
00:34:29,280 --> 00:34:32,880
Speaker 10: What's interesting, though, is that the CEO of a Ramco

689
00:34:33,239 --> 00:34:37,760
Speaker 10: recently spoken he's much more optimistic about demand from China.

690
00:34:38,280 --> 00:34:40,840
Speaker 11: I think that that may impart come from.

691
00:34:40,680 --> 00:34:44,600
Speaker 10: The fact that he's very much focused on crude oil

692
00:34:44,680 --> 00:34:48,680
Speaker 10: products and petrochemicals as opposed to just straight crude oil demand.

693
00:34:48,680 --> 00:34:51,560
Speaker 11: The market has been very focused on.

694
00:34:51,280 --> 00:34:55,040
Speaker 10: The diesel the distillate demand in China, which has been

695
00:34:55,960 --> 00:34:59,960
Speaker 10: rather rather disappointing, whereas I think he's much more focused

696
00:35:00,200 --> 00:35:03,560
Speaker 10: on the petrochemical demand, which he sees as growing as

697
00:35:03,560 --> 00:35:06,480
Speaker 10: opposed to just straight crude oil. Which is why there's

698
00:35:06,560 --> 00:35:09,800
Speaker 10: kind of disconnect between what a Ramco sees for China

699
00:35:09,800 --> 00:35:13,720
Speaker 10: and maybe what other forecasters are are looking at for China.

700
00:35:13,120 --> 00:35:15,640
Speaker 6: As you know, especially when it comes to looking what

701
00:35:15,960 --> 00:35:18,840
Speaker 6: oil could mean for the trajectory of the global economy.

702
00:35:18,880 --> 00:35:20,640
Speaker 6: I mean, just looking right now, the Atlanta fed GP

703
00:35:20,760 --> 00:35:23,440
Speaker 6: model just got updated. It's actually for the third quarter

704
00:35:23,520 --> 00:35:26,000
Speaker 6: to two point eight percent, revised slightly lower from three

705
00:35:26,040 --> 00:35:30,160
Speaker 6: point three percent recently as well, but still nonetheless it's

706
00:35:30,160 --> 00:35:32,759
Speaker 6: been trending higher over the past month as we get

707
00:35:32,760 --> 00:35:34,840
Speaker 6: more of the third quarter data coming in here. But

708
00:35:34,880 --> 00:35:36,840
Speaker 6: when it comes to OPEC and if whether or not

709
00:35:36,880 --> 00:35:39,080
Speaker 6: they push again off those plan increases, what do you

710
00:35:39,080 --> 00:35:41,000
Speaker 6: think that could translate when we're looking kind of more

711
00:35:41,040 --> 00:35:43,080
Speaker 6: globally and especially US economic growth.

712
00:35:44,239 --> 00:35:44,920
Speaker 11: Yeah, I think.

713
00:35:44,800 --> 00:35:47,440
Speaker 10: It's it's really a big question right now. You know,

714
00:35:48,200 --> 00:35:50,160
Speaker 10: I don't think that you can't say, you know, it's

715
00:35:50,160 --> 00:35:52,960
Speaker 10: not bad economic growth. We're not you know, we're not

716
00:35:53,040 --> 00:35:56,280
Speaker 10: in a depression. We're not we're not seeing things go backwards.

717
00:35:56,360 --> 00:35:58,480
Speaker 10: But it's just not the kind of growth numbers that

718
00:35:58,760 --> 00:36:00,800
Speaker 10: we were expecting, or they that a lot of people

719
00:36:00,840 --> 00:36:04,240
Speaker 10: were expecting to happen. I do think, you know, growth

720
00:36:04,360 --> 00:36:08,239
Speaker 10: is cyclical, you know, there are these cycles and you know,

721
00:36:08,280 --> 00:36:10,239
Speaker 10: it's not like this is, you know, kind of the

722
00:36:10,880 --> 00:36:13,160
Speaker 10: end or anything like that. There's still a lot of

723
00:36:13,200 --> 00:36:16,080
Speaker 10: opportunity for growth out there. I do think it, you know,

724
00:36:16,160 --> 00:36:19,360
Speaker 10: depends on where you're looking, what indicators are looking at.

725
00:36:19,960 --> 00:36:24,160
Speaker 10: Different sectors, you know, are experiencing different different issues right now.

726
00:36:24,280 --> 00:36:27,359
Speaker 10: When it comes to crude oil, I do think that

727
00:36:27,440 --> 00:36:31,680
Speaker 10: we are seeing a big shift to increased petrochemical production

728
00:36:32,280 --> 00:36:34,240
Speaker 10: and and so there's a lot.

729
00:36:34,120 --> 00:36:36,440
Speaker 11: More crew that's going to that, and also.

730
00:36:36,239 --> 00:36:38,759
Speaker 10: A lot more natural gas feedstuck that's going to that

731
00:36:38,760 --> 00:36:41,879
Speaker 10: as opposed to just straight crude for transportation fuels. And

732
00:36:42,000 --> 00:36:45,200
Speaker 10: so I do think that that we're seeing this as

733
00:36:45,239 --> 00:36:47,279
Speaker 10: a shift and a change in the market, and so

734
00:36:47,800 --> 00:36:50,359
Speaker 10: we need to maybe look at the numbers a little

735
00:36:50,360 --> 00:36:53,120
Speaker 10: bit differently than how we were looking at them previously.

736
00:36:54,360 --> 00:36:58,080
Speaker 2: Ellen, how's the US or the North American oil producer

737
00:36:58,560 --> 00:37:03,480
Speaker 2: behaving these days, mournering? Are they are they supportive of

738
00:37:03,520 --> 00:37:06,000
Speaker 2: the market or are they, you know, drill baby, Drill's

739
00:37:06,080 --> 00:37:08,800
Speaker 2: what's going on with the North American supply source.

740
00:37:09,960 --> 00:37:12,239
Speaker 10: That's a really good question, especially because there's a lot

741
00:37:12,280 --> 00:37:15,960
Speaker 10: of speculation about kind of the fracking industry starting to

742
00:37:16,000 --> 00:37:18,400
Speaker 10: fall off, the production is gonna you know, start to

743
00:37:18,440 --> 00:37:21,000
Speaker 10: decline or at least a second grow. We're really at

744
00:37:21,040 --> 00:37:23,280
Speaker 10: a high point right now. I mean we're we're having

745
00:37:23,440 --> 00:37:26,480
Speaker 10: massive amounts of production. The US is the largest producer

746
00:37:26,760 --> 00:37:28,960
Speaker 10: in the world. You know, the question is can it

747
00:37:29,040 --> 00:37:31,560
Speaker 10: go higher or should it go higher?

748
00:37:31,600 --> 00:37:34,120
Speaker 11: And I think that US crew.

749
00:37:33,920 --> 00:37:35,960
Speaker 10: To oil producers are at a very different position now

750
00:37:36,000 --> 00:37:38,719
Speaker 10: than they were two years ago, three years ago, five

751
00:37:38,760 --> 00:37:42,480
Speaker 10: years ago, certainly, And so there's a lot less emphasis

752
00:37:42,560 --> 00:37:44,239
Speaker 10: on you know, we need to drill, baby drill.

753
00:37:44,719 --> 00:37:46,080
Speaker 11: We don't need to drill, baby drill.

754
00:37:46,520 --> 00:37:51,279
Speaker 10: We've got much more complicated production techniques that can get

755
00:37:51,280 --> 00:37:53,279
Speaker 10: a lot more out of every well. So there isn't

756
00:37:53,320 --> 00:37:55,760
Speaker 10: a need to necessarily drill new wells all the time

757
00:37:56,480 --> 00:37:59,120
Speaker 10: in order to produce those barrels. And I think that

758
00:37:59,200 --> 00:38:02,360
Speaker 10: because of the map amount of consolidation that we've seen,

759
00:38:03,040 --> 00:38:05,960
Speaker 10: they can be a lot more strategic about it. And so, no,

760
00:38:06,160 --> 00:38:07,960
Speaker 10: that doesn't mean the US oil entry is abst to

761
00:38:07,960 --> 00:38:10,440
Speaker 10: follow a cliff, but it does mean that they are

762
00:38:10,520 --> 00:38:14,640
Speaker 10: making more strategic decisions about production and how production is

763
00:38:14,680 --> 00:38:17,080
Speaker 10: going to come online, when it's going to come online,

764
00:38:17,120 --> 00:38:21,640
Speaker 10: whether it's worthwhile and that can maybe look like fewer

765
00:38:21,680 --> 00:38:25,160
Speaker 10: wells being drilled, but it doesn't necessarily mean that, you know,

766
00:38:25,160 --> 00:38:26,920
Speaker 10: we're about to hit a cliff and production's going to

767
00:38:27,040 --> 00:38:28,239
Speaker 10: necessarily decline.

768
00:38:28,440 --> 00:38:28,680
Speaker 5: Hail.

769
00:38:28,840 --> 00:38:31,279
Speaker 6: Whenever you're talking with oil traders, what are some of

770
00:38:31,360 --> 00:38:33,560
Speaker 6: the key sort of technical levels they're looking at, whether

771
00:38:33,600 --> 00:38:36,600
Speaker 6: it's a WTI or brint well.

772
00:38:36,640 --> 00:38:39,360
Speaker 10: I think that there's a lot of discussion about, you know, okay,

773
00:38:39,360 --> 00:38:42,399
Speaker 10: what's the point that wt t I has to hit

774
00:38:42,440 --> 00:38:44,200
Speaker 10: when it's going down in order for the US to

775
00:38:44,200 --> 00:38:47,680
Speaker 10: start buying barrels to refill the SPR, because that has

776
00:38:47,680 --> 00:38:52,360
Speaker 10: definitely resulted in some you know, increasing in the price today.

777
00:38:52,480 --> 00:38:54,640
Speaker 10: Just today the US said, oh we'd like to you know,

778
00:38:55,040 --> 00:38:57,080
Speaker 10: we're thinking about buying some more oil for the SPR,

779
00:38:57,200 --> 00:38:58,239
Speaker 10: and the prices go up.

780
00:38:58,520 --> 00:38:59,680
Speaker 11: So there's there's.

781
00:38:59,560 --> 00:39:02,160
Speaker 10: Certain it's there. I do think also that there's this

782
00:39:02,239 --> 00:39:05,560
Speaker 10: indicator for Opek. You know, Opek wants you know, ex

783
00:39:05,640 --> 00:39:07,359
Speaker 10: price per barrel and they're going to do whatever they

784
00:39:07,360 --> 00:39:07,759
Speaker 10: have to do.

785
00:39:07,760 --> 00:39:08,160
Speaker 11: To get it.

786
00:39:08,360 --> 00:39:12,000
Speaker 10: I think that that's that's not necessarily the case.

787
00:39:12,440 --> 00:39:15,000
Speaker 11: I do think that Opek and certainly Saudi Arabia would

788
00:39:15,040 --> 00:39:17,360
Speaker 11: love to keep Brent around eighty dollars a barrel.

789
00:39:17,400 --> 00:39:20,000
Speaker 10: But I do think they realized that they may not

790
00:39:20,080 --> 00:39:22,200
Speaker 10: get that, and they're willing to work with, you know,

791
00:39:22,239 --> 00:39:24,840
Speaker 10: within the confines of what they can. But there's certainly

792
00:39:24,840 --> 00:39:28,280
Speaker 10: this idea that they'd like it to be a bit higher.

793
00:39:28,320 --> 00:39:31,440
Speaker 10: They'd like it to be more closer to eighty than seventy.

794
00:39:32,400 --> 00:39:34,360
Speaker 2: Ellen, thank you so much for joining us. Really appreciate it,

795
00:39:34,360 --> 00:39:37,040
Speaker 2: Ellen Waller. She is the president of Transversal Consulting and

796
00:39:37,080 --> 00:39:40,279
Speaker 2: a Senior Fellow at the Atlanta Council. Joining us via

797
00:39:40,480 --> 00:39:41,840
Speaker 2: zoom talking about global oil.

798
00:39:43,400 --> 00:39:47,280
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

799
00:39:47,360 --> 00:39:50,520
Speaker 1: weekdays at ten am Eastern on applecard.

800
00:39:49,920 --> 00:39:52,440
Speaker 5: Play and Androyd Auto with the Bloomberg Business.

801
00:39:52,800 --> 00:39:55,640
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802
00:39:55,680 --> 00:40:01,680
Speaker 1: flagship New York station, Just say Alexa play Bloomberg eleven thirty.

803
00:40:01,719 --> 00:40:03,960
Speaker 2: This is a story I've been wanting to read for

804
00:40:04,000 --> 00:40:06,560
Speaker 2: the longest time. In chess. Men's here sitting in fra

805
00:40:06,560 --> 00:40:10,280
Speaker 2: Alex Steel and Paul Sweeney, Triple A bonds go bust

806
00:40:10,320 --> 00:40:13,600
Speaker 2: and revealed depths of US office market crash. This is

807
00:40:13,640 --> 00:40:14,680
Speaker 2: exactly what I've been waiting for.

808
00:40:15,040 --> 00:40:16,960
Speaker 6: We're all about the office.

809
00:40:17,800 --> 00:40:19,880
Speaker 2: Yeah, and I just looked down Third Avenue and I

810
00:40:19,880 --> 00:40:24,160
Speaker 2: say empty, empty, empty, half empty. Somebody owns the mortgages

811
00:40:24,160 --> 00:40:26,360
Speaker 2: on those things. Yeah, it's gonna have to come home

812
00:40:26,560 --> 00:40:28,959
Speaker 2: to roost at some point. Carmen Arroyo and her team

813
00:40:29,239 --> 00:40:31,560
Speaker 2: at Bloomberg News. She's a credit reporter for Bloomberg News.

814
00:40:31,600 --> 00:40:33,960
Speaker 2: They have this story out here today, Karmer, what are

815
00:40:33,960 --> 00:40:37,760
Speaker 2: you finding on some of these bonds that were triple

816
00:40:37,800 --> 00:40:40,919
Speaker 2: A rated, which means I don't have any real risk here?

817
00:40:41,000 --> 00:40:43,640
Speaker 2: What's happening to some of these real estate backed bonds

818
00:40:43,640 --> 00:40:44,640
Speaker 2: that were triple A rated?

819
00:40:45,080 --> 00:40:48,920
Speaker 12: Sure? So in May we saw the first triple A

820
00:40:49,040 --> 00:40:53,239
Speaker 12: bond commercial mortgage, triple A bond being hit backed by

821
00:40:53,280 --> 00:40:56,320
Speaker 12: a single office property, and then we started like digging

822
00:40:56,360 --> 00:40:58,839
Speaker 12: into basically the data to see what other buildings could

823
00:40:58,840 --> 00:41:02,719
Speaker 12: get hit. And the results there's a few a ton

824
00:41:02,800 --> 00:41:05,320
Speaker 12: of Like the office properties across across the US have

825
00:41:05,400 --> 00:41:09,520
Speaker 12: been distressed for years. It just takes a long time

826
00:41:09,520 --> 00:41:12,000
Speaker 12: for that to reach bond holders, and now it's starting

827
00:41:12,040 --> 00:41:15,120
Speaker 12: to get there. So we kind of like analyze the data.

828
00:41:15,200 --> 00:41:18,399
Speaker 12: We saw at least like twelve other buildings are said

829
00:41:18,400 --> 00:41:20,840
Speaker 12: to have some type of loss some will be at

830
00:41:20,840 --> 00:41:23,960
Speaker 12: the TRIPLEA level, some will be just the investment grade portion.

831
00:41:24,840 --> 00:41:26,479
Speaker 12: There's definitely a lot of more pain to come.

832
00:41:26,800 --> 00:41:29,520
Speaker 6: Which regions across the US are most vulnerable.

833
00:41:30,320 --> 00:41:33,080
Speaker 12: It's all over, It's all over the US. Actually we

834
00:41:33,120 --> 00:41:35,600
Speaker 12: saw there's buildings in New York, of course, Chicago, La

835
00:41:35,640 --> 00:41:38,680
Speaker 12: San Francisco, but there's also buildings in Kansas City. Like

836
00:41:38,719 --> 00:41:40,000
Speaker 12: it's it's kind of everywhere.

837
00:41:41,080 --> 00:41:44,600
Speaker 2: But if I'm holding a triple A bond, I expect

838
00:41:44,640 --> 00:41:48,280
Speaker 2: to get paid back here. So what's happening to these bonds?

839
00:41:48,280 --> 00:41:50,919
Speaker 2: Are they coming up for maturity and then the owner

840
00:41:50,920 --> 00:41:53,600
Speaker 2: has to refinance the bond or house this soft playing out?

841
00:41:54,000 --> 00:41:56,840
Speaker 12: Sure, so every triple A bone holder thinks they're going

842
00:41:56,880 --> 00:41:59,440
Speaker 12: to get paid back. Actually that's why you buy it.

843
00:41:59,480 --> 00:42:02,920
Speaker 12: But they, like a lot of these buildings have not

844
00:42:03,040 --> 00:42:06,040
Speaker 12: been receiving interest on the bonds for a while, and

845
00:42:06,120 --> 00:42:09,040
Speaker 12: the minute like the presoul's drop and kind of like

846
00:42:09,080 --> 00:42:11,000
Speaker 12: the owners of the buildings get rid of them or

847
00:42:11,080 --> 00:42:17,200
Speaker 12: like sell them. The losses are realized, and the gist

848
00:42:17,200 --> 00:42:19,319
Speaker 12: of it is that the buildings are worth like a

849
00:42:19,440 --> 00:42:21,640
Speaker 12: fraction of what they were worth like a few years ago.

850
00:42:21,680 --> 00:42:23,880
Speaker 12: So there's just not enough money to pay back everyone,

851
00:42:24,600 --> 00:42:26,640
Speaker 12: not even the Triple A holders, and that that's the

852
00:42:26,680 --> 00:42:29,439
Speaker 12: whole issue, Like the real estate is just not worth it.

853
00:42:29,520 --> 00:42:32,040
Speaker 6: When you're speaking to triple A bondholders, what are they

854
00:42:32,040 --> 00:42:34,120
Speaker 6: telling you as far as why they might still be

855
00:42:34,120 --> 00:42:36,600
Speaker 6: holding onto that and what's the risk reward.

856
00:42:37,480 --> 00:42:40,359
Speaker 12: I A lot of the Triple A bondholders will get

857
00:42:40,400 --> 00:42:45,160
Speaker 12: some money back, like the lower trenches won't. And I'm

858
00:42:45,200 --> 00:42:47,759
Speaker 12: not sure if there's some market for that type of

859
00:42:47,840 --> 00:42:50,279
Speaker 12: like those type of bonds at the bit they may

860
00:42:50,320 --> 00:42:51,080
Speaker 12: want them.

861
00:42:51,520 --> 00:42:53,040
Speaker 2: And I'm looking at I mean, you have a big

862
00:42:53,080 --> 00:42:55,320
Speaker 2: take story, which means it has great graphics in addition

863
00:42:55,400 --> 00:42:58,120
Speaker 2: to being well reported, well sourced. Some of these buildings,

864
00:42:58,120 --> 00:43:01,240
Speaker 2: I mean New York Chicago, Las, I mean five fifty

865
00:43:01,239 --> 00:43:03,880
Speaker 2: five West fitth Street, seven twenty five South Figaroa. I

866
00:43:03,960 --> 00:43:06,480
Speaker 2: know that building. But these things are being valued at

867
00:43:06,640 --> 00:43:10,160
Speaker 2: significant discounts, right, and some not even covering the amount

868
00:43:10,200 --> 00:43:13,919
Speaker 2: of the outstanding loan. So that's where the that's where

869
00:43:13,960 --> 00:43:14,680
Speaker 2: the problems come in.

870
00:43:14,880 --> 00:43:17,040
Speaker 12: Yeah, that's the problem. And it's also like a lot

871
00:43:17,040 --> 00:43:19,279
Speaker 12: of those buildings depend on one single tenant. So the

872
00:43:19,320 --> 00:43:22,640
Speaker 12: minute that tenant's like, look my lease is up, I'm leaving.

873
00:43:22,640 --> 00:43:25,279
Speaker 12: I want a newer office. This building is really old.

874
00:43:26,200 --> 00:43:29,400
Speaker 12: The bond's just shoppen price because that's where they're getting

875
00:43:29,400 --> 00:43:29,800
Speaker 12: the income.

876
00:43:30,080 --> 00:43:33,440
Speaker 6: I think anytime it comes to anything revolving around real estate,

877
00:43:33,480 --> 00:43:35,520
Speaker 6: as we know very well, people want to harken back

878
00:43:35,560 --> 00:43:37,560
Speaker 6: to the global financial crisis in two thousand and eight.

879
00:43:37,560 --> 00:43:40,400
Speaker 6: But this is a very different situation, especially coming out

880
00:43:40,440 --> 00:43:42,279
Speaker 6: of the pandemic, and talk to us more about how

881
00:43:42,280 --> 00:43:45,240
Speaker 6: this is a very small subset of the bond market

882
00:43:45,280 --> 00:43:46,160
Speaker 6: when you're looking at this.

883
00:43:46,280 --> 00:43:48,840
Speaker 12: Yes, definitely, like there's definitely some type of eco to

884
00:43:48,880 --> 00:43:51,040
Speaker 12: the like similar to the financial crisis in the sense

885
00:43:51,080 --> 00:43:53,760
Speaker 12: that like you don't really see losses on the principal

886
00:43:53,800 --> 00:43:56,320
Speaker 12: level and triple A bonds like that hasn't happened since oaight.

887
00:43:57,520 --> 00:44:00,080
Speaker 12: But again, like it's just a few bonds with the

888
00:44:00,080 --> 00:44:02,200
Speaker 12: commercial mortgage backed securities market.

889
00:44:02,280 --> 00:44:04,160
Speaker 6: Right, So when you're speaking with your sources, I mean,

890
00:44:04,200 --> 00:44:07,200
Speaker 6: what are the risks of other broader ripple effects or

891
00:44:07,239 --> 00:44:09,839
Speaker 6: any sort of other red flags potentially brewing. And then

892
00:44:09,880 --> 00:44:12,680
Speaker 6: maybe the off side of that where there's more optimism

893
00:44:12,719 --> 00:44:13,600
Speaker 6: of what could happen.

894
00:44:14,000 --> 00:44:16,319
Speaker 12: Yeah, I think like the risk is mainly for any

895
00:44:16,360 --> 00:44:20,440
Speaker 12: building that's old like and that the tenants are walking,

896
00:44:20,640 --> 00:44:23,560
Speaker 12: there's going to be issues. But if any new building that,

897
00:44:23,719 --> 00:44:26,200
Speaker 12: like you know, has a great reputation has a lot

898
00:44:26,200 --> 00:44:29,080
Speaker 12: of tenants, like there's that market is kind of booming

899
00:44:29,160 --> 00:44:31,920
Speaker 12: like right now in new issue markets, like buyers are

900
00:44:31,960 --> 00:44:34,520
Speaker 12: like just gobbling up the dead like, So it really

901
00:44:34,520 --> 00:44:35,280
Speaker 12: depends on the building.

902
00:44:35,440 --> 00:44:37,120
Speaker 9: I used to work in one of those buildings in

903
00:44:37,200 --> 00:44:38,440
Speaker 9: the Garments Center.

904
00:44:38,800 --> 00:44:43,440
Speaker 13: Really and talk about old. The elevators would break down

905
00:44:43,440 --> 00:44:46,279
Speaker 13: at least once a week, and the elevator, the shaft,

906
00:44:46,600 --> 00:44:49,600
Speaker 13: the gears were all made out of wood.

907
00:44:49,760 --> 00:44:50,839
Speaker 6: Did you ever get stuck in one?

908
00:44:50,920 --> 00:44:51,080
Speaker 2: Oh?

909
00:44:51,160 --> 00:44:53,319
Speaker 6: Yeah, all the how long were you?

910
00:44:54,000 --> 00:44:54,080
Speaker 5: Oh?

911
00:44:54,120 --> 00:44:57,600
Speaker 9: I don't remember. Ago Fly had some beers with us.

912
00:44:57,560 --> 00:45:00,680
Speaker 2: So find back in the day karma. Is there any

913
00:45:00,680 --> 00:45:03,640
Speaker 2: sense from your reporting that the office real estate market

914
00:45:03,680 --> 00:45:06,160
Speaker 2: is at or near bottom or is anybody calling that

915
00:45:06,280 --> 00:45:06,480
Speaker 2: or too?

916
00:45:06,640 --> 00:45:08,759
Speaker 12: Yeah, a lot of people are calling that. Like when

917
00:45:08,800 --> 00:45:12,160
Speaker 12: we start to see the office buildings get sold, that's

918
00:45:12,280 --> 00:45:14,880
Speaker 12: that's where we've reached the bottom and then everything is

919
00:45:15,000 --> 00:45:15,560
Speaker 12: going to go up.

920
00:45:15,600 --> 00:45:18,640
Speaker 6: Is there a time period timeline as far as how

921
00:45:18,680 --> 00:45:19,359
Speaker 6: long that could take.

922
00:45:19,480 --> 00:45:22,480
Speaker 12: Yeah, it could take a long time because the leases

923
00:45:22,560 --> 00:45:25,040
Speaker 12: are so long that tenants may be locked in for

924
00:45:25,080 --> 00:45:28,399
Speaker 12: like years, but most people are saying it's between now

925
00:45:28,400 --> 00:45:29,640
Speaker 12: in the next few months.

926
00:45:29,920 --> 00:45:30,160
Speaker 1: Wow.

927
00:45:30,280 --> 00:45:33,239
Speaker 2: Interesting because you know there's some iconic buildings here in

928
00:45:33,280 --> 00:45:35,960
Speaker 2: your thing. I mean, six hundred California Street in San Francisco,

929
00:45:36,360 --> 00:45:40,280
Speaker 2: fifteen hundred Market Street, market in Fifteenth Street in Philly.

930
00:45:40,719 --> 00:45:43,440
Speaker 2: These are some big ones. The Aon Center, which was

931
00:45:43,440 --> 00:45:46,279
Speaker 2: the former Sears Tower in Chicago. Look at it, I mean,

932
00:45:46,560 --> 00:45:49,279
Speaker 2: basically half of it's underwater, so crazy, crazy stuff there.

933
00:45:49,520 --> 00:45:52,399
Speaker 2: We knew it was coming, but you just somebody's gonna

934
00:45:52,400 --> 00:45:56,120
Speaker 2: have to pay, unfortunately. Carmen Arroyal credit reporter for Bloomberg News,

935
00:45:56,280 --> 00:45:58,800
Speaker 2: joining us here on a Bloomberg interactive broker studio. You

936
00:45:58,840 --> 00:46:03,640
Speaker 2: can read story and more stories from Bloomberg on at

937
00:46:03,680 --> 00:46:06,000
Speaker 2: the Bloomberg Terminal and at Bloomberg dot com slash Big

938
00:46:06,040 --> 00:46:08,879
Speaker 2: Take again. The Big Take stories come out every day

939
00:46:09,320 --> 00:46:12,560
Speaker 2: from Bloomberg News. They're deep dive stories into really compelling stories,

940
00:46:13,160 --> 00:46:16,879
Speaker 2: deeply sourced, deeply researched, great graphics, and we just love

941
00:46:16,920 --> 00:46:18,359
Speaker 2: highlighting them whenever we can.

942
00:46:18,400 --> 00:46:19,040
Speaker 9: It's a great read.

943
00:46:19,440 --> 00:46:23,960
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944
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945
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00:46:30,880 --> 00:46:34,279
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00:46:34,400 --> 00:46:37,560
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