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Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.

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Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live

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Speaker 1: Let's go to Starbucks.

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Speaker 3: Here, thousands of Starbucks workers who walked off the job

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Speaker 3: have concluded.

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Speaker 1: What a minute.

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Speaker 3: It's about a five day strike against the coffee giant.

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Speaker 3: From Rollness, we're joined by Bloomberg's Emily Cohne. Emily, thanks for

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Speaker 3: coming into studio. You get the gold star for coming

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Speaker 3: in the studio. We appreciate that the coveted gold star.

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Speaker 4: I did it.

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Speaker 1: What's going on to Starbucks? Why are they striking?

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Speaker 4: So? Starbucks workers have been in a bitter battle with

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Speaker 4: the company for since twenty twenty one, end of twenty

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Speaker 4: twenty one, when the first store voted to unionize. So

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Speaker 4: they have this growing union presence at Starbucks. I think

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Speaker 4: about five percent of their stores are unionized now and

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Speaker 4: they're in the final stages of negotiating their union contract.

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Speaker 4: So that final stage is when you start talking about

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Speaker 4: money and wages and all the really contentious stuff. So

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Speaker 4: the company is alleging that the union walked off the

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Speaker 4: left the negotiating table prematurely. The union is saying Starbucks

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Speaker 4: came to the table with no raise offers, so that

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Speaker 4: led to this strike that lasted five days. The last

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Speaker 4: day was Christmas Eve. This is a really important time

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Speaker 4: for Starbucks. People stop into the store to get lattes

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Speaker 4: while they're doing their last minute shopping. They're buying gift

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Speaker 4: cards as stocking stuffers. But only about two percent of

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Speaker 4: their stores actually closed as a result of that the strike,

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Speaker 4: so probably not a huge impact on the business, but

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Speaker 4: definitely a morale hit for the company. This is something

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Speaker 4: that we're all talking about that we all noticed. There

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Speaker 4: were lots of headlines about it, so about it's unclear

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Speaker 4: about how many stores strike. It was like probably between

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Speaker 4: two hundred and three hundred between what the union is

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Speaker 4: saying what the company is saying. That's a small percentage

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Speaker 4: of their ten thousand stores, but definitely got a lot

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Speaker 4: of attention.

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Speaker 5: Just ask you to sort of give us some context

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Speaker 5: into how this holiday retail season went. Now that we're

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Speaker 5: sort of piecing together how many people went out in

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Speaker 5: shopping stories and online and all of that. What are

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Speaker 5: you kind of tracking or following here in the waning

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Speaker 5: days of twenty twenty four when it comes to just

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Speaker 5: sort of how the consumer performed at the end of

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Speaker 5: the year.

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Speaker 4: Yeah, it's a good question. I think we're seeing a

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Speaker 4: lot of what we have seen throughout the year, which

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Speaker 4: is what we talk about we call the bifurcation of

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Speaker 4: consumer spending, where we see the upper income consumer households

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Speaker 4: making one hundred thousand dollars or more a year doing

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Speaker 4: quite well. They're splurging on gifts, they're getting out there

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Speaker 4: and they're shopping. The stock market's doing well, their houses

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Speaker 4: are worth more than they were a year ago. They

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Speaker 4: feel pretty good in our shopping. And then at the

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Speaker 4: lower end we see shoppers pulling back, not shopping as much,

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Speaker 4: not splurging. We had a great story last week the

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Speaker 4: CEO of Newell Brands, which is the maker of Sharpie

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Speaker 4: and rubber Maid and Mister Coffee, saying that they're having

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Speaker 4: a much easier time selling three hundred dollars coffee makers

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Speaker 4: than they are selling thirty dollars coffee makers, which tells

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Speaker 4: you everything that you need to know about the economy

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Speaker 4: right now. The upper income households are spending, the lower

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Speaker 4: ones are pulling back.

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Speaker 3: How about tariff's I mean, what is the expected impact

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Speaker 3: on the consumer here? I wonder if the folks have

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Speaker 3: voted for Donald Trump, are they aware that in some

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Speaker 3: scenarios tariffs can result in higher prices that we pay

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Speaker 3: for stuff and maybe is that a concern for the.

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Speaker 1: Consumer out there.

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Speaker 4: Yeah, it's a really good question. I think it's somewhat

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Speaker 4: ironic that we saw a lot of voters who I

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Speaker 4: think were really frustrated with the cost of their groceries

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Speaker 4: and how much they were spending on things, come out

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Speaker 4: and vote for because they thought he would lower prices. Meanwhile,

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Speaker 4: like Trump's platform is very open and honest about his

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Speaker 4: protectionist policies, the core of that being increasing tariffs. And

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Speaker 4: if you know how tariffs work, like they most of

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Speaker 4: the time get passed down to the consumer and raise prices.

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Speaker 4: So that is going to be a big theme of

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Speaker 4: our coverage and what we're looking for next year. Obviously,

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Speaker 4: tariffs are really complicated. We don't know what industries are

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Speaker 4: they're going to hit first, what types of products are

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Speaker 4: going to hit, how big they will be, what countries

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Speaker 4: they will affect. These are all still unknown, but generally speaking,

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Speaker 4: what economists think will happen is that tariffs will raise

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Speaker 4: prices for consumers and will slow economic growth, which ultimately

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Speaker 4: is not great for the consumer, not great for the

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Speaker 4: companies that we cover on the consumer beat. And you know,

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Speaker 4: we got a little bit of a preview of this

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Speaker 4: in the consumer confidence ratings that were just out a

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Speaker 4: couple weeks ago. They tanked for the first time in

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Speaker 4: a while because of this concern and uncertainty over tariffs.

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Speaker 5: Very quickly here about thirty seconds. We know consumers are

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Speaker 5: talking about this. How about companies themselves? As you listen

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Speaker 5: to earnings calls and CEO speaking, are they engaging with

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Speaker 5: the notion of what tariffs might mean for their bottom line?

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Speaker 4: Some are, Some are saying, we just don't know. I

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Speaker 4: think a lot of companies that were maybe already planning

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Speaker 4: on moving their production outside of China or closer to

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Speaker 4: the US are speaking out about it. A lot of

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Speaker 4: companies are just saying they don't know. Walmart obviously said yes,

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Speaker 4: like tariffs will ultimately raise prices for US, So it's

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Speaker 4: different answers across the board. It'll be really interesting to

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Speaker 4: watch I think there's a lot we don't know that

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Speaker 4: we will learn soon once the new administration enters the

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Speaker 4: White House.

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Speaker 6: We know you'd be watching it closely.

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Speaker 5: Emily con joining us here in the studio in New

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Speaker 5: York getting that gold star from one Paul Sweeney, which

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Speaker 5: is not worth nothing, I promise you, consumer editor here

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Speaker 5: at Bloomberg News, talking about what twenty twenty five is like.

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Speaker 6: They look like across a variety of sectors.

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Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live

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Speaker 2: weekdays at ten am Eastern on applecar Play and Android

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Speaker 2: Just say Alexa Play Bloomberg eleven thirty.

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Speaker 5: Something might not be feeling that's good about is the

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Speaker 5: federal deficit. The incoming Trump administration facing the worst trajectory

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Speaker 5: for federal borrowing in modern day history, with the deficit

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Speaker 5: projected to exceed six percent of GDP next year. At

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Speaker 5: something I spoke about with current Treasury Sectory Jennet Yellen,

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Speaker 5: I asked her about her concerns.

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Speaker 7: Well, I am concerned about the fiscal out loo can

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Speaker 7: I believe the deficit reduction is necessary to keep us

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Speaker 7: on a sustainable fiscal course.

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Speaker 8: Now.

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Speaker 7: President Biden signed into law a trillion dollars of deficit

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Speaker 7: reduction over the next years. He did that in the

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Speaker 7: agreement to raise the debt ceiling. And our budget proposes

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Speaker 7: an additional three trillion dollars of deficit reduction over ten years,

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Speaker 7: and I think that's necessary to make sure that our

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Speaker 7: fiscal path is sustainable. Now, Congress hasn't really done anything to,

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Speaker 7: you know, beyond what I've mentioned, to improve the fiscal outlook,

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Speaker 7: and I think that's a shame. I'm disappointed in that,

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Speaker 7: and I think Congress needs to work hard on that.

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Speaker 7: There is a threat going forward that many of the

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Speaker 7: provisions on the individual tax side of the jobs, job

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Speaker 7: cuts and tax JCTA enacted by the Trump administration in

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Speaker 7: Congress in twenty seventeen, they will sunset at the end

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Speaker 7: of next year, and many Republicans have expressed a desire

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Speaker 7: to keep all those provisions in place. CBO said that

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Speaker 7: will cost five trillion dollars over ten years. So that

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Speaker 7: really is and so that would be a blow in

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Speaker 7: a situation where I believe an additional three trillion. You

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Speaker 7: know that not doing the five trillion and three trillion

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Speaker 7: more is necessary, and if the provisions are just extended,

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Speaker 7: this will be a serious blow without finding ways to

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Speaker 7: pay for them. We proposed a lot of pay fors

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Speaker 7: that we think would fairly ask corporations, wealthy individuals to

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Speaker 7: pay their fair share. We've negotiated an international tax agreement

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Speaker 7: that would create a level playing field worldwide from multinationals.

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Speaker 7: The United States has not yet joined, although many other

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Speaker 7: countries have, and that would be a revenue raising measure

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Speaker 7: that I think would be very valuable, and there is

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Speaker 7: certainly more so. I do hope that the new administration

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Speaker 7: in Congress will, if they extend features of JCTA, find

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Speaker 7: ways to pay for what they do and also make

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Speaker 7: sure that the benefits go not to the wealthiest individuals

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Speaker 7: but to middle class families.

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Speaker 5: As Treasury Secretary Jenna Yellen, of course, and joining us

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Speaker 5: now is Lauren sidel Baker. She's an economist at ITR Economics,

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Speaker 5: and Lauren, let me pick up from what the Treasury

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Speaker 5: Secretary was saying. They're talking about what might happen when

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Speaker 5: it comes to taxes as you look ahead to twenty

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Speaker 5: twenty five, let's zoom in on that variable in particular,

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Speaker 5: how much does that that kind of define or could

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Speaker 5: it define sort of the economic trajectory of the country

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Speaker 5: going forward, whether or not those so called Trump era

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Speaker 5: tax cuts are are extended here in twenty twenty five.

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Speaker 9: Well, clearly there will be some knock on effects, but

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Speaker 9: generally we're seeing the consumer be in a very stable position.

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Speaker 9: So if we're talking about individual tax rates, yes, that's

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Speaker 9: something we consider in our spending, but our dollars do

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Speaker 9: tend to walk based on many other fundamental factors. The

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Speaker 9: big one that I'm looking at right now is the

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Speaker 9: strength of the labor market. We've been talking a lot

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Speaker 9: about that recently, but very low new unemployment claims, we

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Speaker 9: have very low layoffs and other discharge discharges excuse me.

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Speaker 9: And generally, if you want a job today with this

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Speaker 9: low unemployment rate, you can typically find one. There are

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Speaker 9: more job openings out there than there are unemployed job seekers.

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Speaker 10: So at the end of the day, yes, the.

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Speaker 9: Tax rate matters, but just having that strong consumer position

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Speaker 9: from an employment perspective is what matters more.

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Speaker 3: And Lauren, we're seeing, we're starting to hear from some

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Speaker 3: of the retailers about some of the retail spending this season,

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Speaker 3: you know, up low single it seems like the consumer

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Speaker 3: is in decent shape.

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Speaker 1: Is that kind of what your data shows?

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Speaker 9: That is absolutely what our data show the consumer. We

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Speaker 9: like to complain about a number of factors.

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Speaker 10: Right we see prices going up.

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Speaker 9: We've clearly been hit by inflation, but overall, our wages

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Speaker 9: have still been rising, so our purchasing power is actually

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Speaker 9: better off today than it has been at any point

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Speaker 9: in history. So I think that low single digit growth

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Speaker 9: that we're seeing from retailers, in some ways, we were

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Speaker 9: spoiled in the post pandemic kind of stimulus era where

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Speaker 9: consumers just had so much essentially windfall to go out

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Speaker 9: and spend a lot of those very high growth rates

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Speaker 9: in retail spending, those were never going to be sustainable.

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Speaker 10: So what we're seeing today.

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Speaker 9: Is these growth rates come back down to something more sustainable,

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Speaker 9: a little bit more healthy for our kind of retail sector.

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Speaker 9: But this is overall growth. It's slowing growth, yes, but

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Speaker 9: it is still positive movement. And many of the fundamental

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Speaker 9: leading indicators that we see today are putting in place

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Speaker 9: an even better growth picture.

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Speaker 10: In twenty twenty five.

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Speaker 5: Lauren, I wondered what stood at to you from the

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Speaker 5: most recent comments from the FED chair from Jerome Powell.

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Speaker 5: Of course, he is adamant as he always has been,

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Speaker 5: that the FED is data driven. There's this kind of

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Speaker 5: complementary argument about the FED being data point driven. What

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Speaker 5: if you've taken away just about their approach to the numbers,

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Speaker 5: to the economic data that we've been getting, and what

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Speaker 5: they're going to sort of treat as paramount most important here.

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Speaker 6: In twenty twenty five.

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Speaker 5: Yes, there's the FED favorite, the PCE flavor, all of that,

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Speaker 5: But when the FED looks at that kind of panoply

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Speaker 5: of data at the dashboard down in Washington, d C.

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Speaker 5: What's most important to them and indeed what's most important

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Speaker 5: to you here as we turn the corner into twenty

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Speaker 5: twenty five.

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Speaker 9: So the FED, with their duel mandate, we always have

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Speaker 9: this kind of seesaw effect. Where are they putting more

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Speaker 9: attention more focus. For a while, it was inflation, because

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Speaker 9: that was the side of their dual mandate that really

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Speaker 9: got away from us with very very high inflation numbers.

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Speaker 9: Once we saw inflation start to come down, and I

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Speaker 9: will be absolutely clear, even those core PC numbers were

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Speaker 9: not yet at the fed's target two percent rate, but

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Speaker 9: we're moving enough in that direction that they shifted their

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Speaker 9: focus away from the inflation side and toward that labor

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Speaker 9: market side. Now the labor market, well, some directional deterioration

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Speaker 9: is happening. This is coming from such a tight starting point.

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Speaker 9: This is still a tight labor market. So I think

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Speaker 9: if we do see as we at ITR have been saying,

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Speaker 9: we expect to see inflation start to build in the

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Speaker 9: back half of twenty twenty five, I think it will

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Speaker 9: be very easy for that focus to shift back to

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Speaker 9: inflation very quickly. That's something we saw in especially the

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Speaker 9: dot plot that came out in the most recent meeting.

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Speaker 9: BED officials are starting to scale down their expectations for

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Speaker 9: the number of cuts we'll get in twenty twenty five. Again,

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Speaker 9: this is something we've had on our horizon for a while. Now,

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Speaker 9: we do see those mounting inflation pressures coming back.

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Speaker 10: Not to the recent highs. I don't want to.

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Speaker 9: Scare anyone, but starting to see some of those fundamental

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Speaker 9: pressures build. I don't think we're going to be comfortably

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Speaker 9: at that two percent rate, and with the labor markets

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Speaker 9: still relatively healthy again. It's going to be very easy

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Speaker 9: to shift away from that side of the dual mandate.

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Speaker 9: And I don't expect that we'll get rate hikes anytime soon,

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Speaker 9: but by the end of twenty twenty five, it's not

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Speaker 9: unimaginable that we could even see rates not just level off,

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Speaker 9: but start to climb again.

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Speaker 1: Lauren, new administration coming in.

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Speaker 3: We don't know a lot about their economic policies, but

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Speaker 3: what we do know is tariffs are on the table.

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Speaker 3: Potential changes to immigration and migrant policy are on the table.

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Speaker 3: Some have suggested that those two in and of themselves

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Speaker 3: could be inflationary.

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Speaker 1: Is that a material risk for you?

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Speaker 10: Absolutely.

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Speaker 9: We don't know a lot about those programs, but we

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Speaker 9: do know that they tend historically to be inflationary. Tariffs,

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Speaker 9: I mean, the inflation is almost built into the goal

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Speaker 9: right to increase the cost of foreign imports. Back in

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Speaker 9: the twenty eighteen Trump taraff round, we did see even

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Speaker 9: domestic producers they felt like they had a little more

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Speaker 9: wiggle room right with the cost of their competition products

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Speaker 9: going up, So we saw domestic producers increase their prices

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Speaker 9: back in twenty eighteen.

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Speaker 10: Immigration, if we see mass deportations.

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Speaker 9: Again, I mentioned there are more jobs available than there

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Speaker 9: are job seekers, So taking, however, many million people kind

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Speaker 9: of out of our labor force, even if they are

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Speaker 9: not documented legal workers today, that will cause a little

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Speaker 9: bit more upside pressure on wages. So we don't have

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Speaker 9: full details. It remains to be seen what is actually

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Speaker 9: policy proposal versus campaign rhetoric.

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Speaker 10: But if we do tend in that direction, which.

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Speaker 9: Seems a pretty good bet at this point, those would

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Speaker 9: tend to put more upside pressure on prices.

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Speaker 5: And we know that the FED is now wrestling with

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Speaker 5: all of these various permutations of what could happen and

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Speaker 5: what effect that could have on the economy. Lauren, let

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Speaker 5: me ask you about the so called neutral rate and

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Speaker 5: the Fed's necessary obsession with kind of figuring that out.

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Speaker 5: Of course it can't pinpoint it in real time, but

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Speaker 5: what's your sense of where it is? How much of

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Speaker 5: a struggle this has been, indeed it's going to be

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Speaker 5: for the FED here going forward? You mentioned the fact

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Speaker 5: that they haven't reached that inflation target of two percent?

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Speaker 5: Is it coming into any better focus here as we

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Speaker 5: get into twenty twenty five?

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Speaker 9: So we have to keep in mind that is made

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Speaker 9: up of academics, So something like where is the neutral rate?

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Speaker 9: That's a very academic argument. We will never know in

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Speaker 9: real time. We'll only look back and say what did

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Speaker 9: we get right and what did we get wrong? So

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Speaker 9: at this point, I'm not sure it matters where the

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Speaker 9: neutral rate is. What does matter is how many of

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Speaker 9: these fundamental factors will be increasing inflation and then those

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Speaker 9: add on risks right from the policy side that you

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Speaker 9: just mentioned. What will that do to the inflation rate?

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Speaker 9: How much does the FED need to move to keep

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Speaker 9: inflation and check versus our labor market issues? Those are

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Speaker 9: really long term demographic problems. So that's not something that's

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Speaker 9: quite so easy to just for the FED to kind

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Speaker 9: of put their hand on the scale to tilt that

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Speaker 9: down to show balance in the labor market.

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Speaker 10: It's demographics.

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Speaker 9: That's not something they can fight with birth rates, right,

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Speaker 9: That just isn't what the FED is here to do.

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Speaker 3: So, Lauren, what is your GDP call for twenty twenty

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Speaker 3: five and what are the real variables there that could

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Speaker 3: kind of move that one way or the other.

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Speaker 9: I do expect solid steady GDP growth. We're looking for

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Speaker 9: about two and a half percent growth, in twenty twenty five. Again,

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Speaker 9: a lot of those fundamental leading indicators that we tend

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Speaker 9: to follow, they're showing upturn. We've had much more subdued

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Speaker 9: growth lately, especially in things like our manufacturing economy, our

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Speaker 9: industrial sector, but we see green shoots going forward. We

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Speaker 9: see with this lower interest rate environment, now having had

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Speaker 9: some room to run, businesses are looking to invest next year.

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Speaker 10: There will be.

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Speaker 9: Of course added policy implications, but the general underlying fundamental

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Speaker 9: factors those are the ones that we find much more

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Speaker 9: consistently important to business investment and to the long term

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Speaker 9: growth of the economy. So I'm looking for steady consumer

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Speaker 9: spending to really be the engine fueling that growth, but.

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Speaker 10: A resurgence in business investment.

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Speaker 9: The government side of GDP, they keep on spending, as

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Speaker 9: we just heard from Yellen. So I do fully expect

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Speaker 9: steady but rather broad based growth in twenty twenty five.

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Speaker 5: I'll ask you lastly just to place this the US

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Speaker 5: economy in a wider context, to global context. It does

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Speaker 5: seem that things here are much better, certainly than they

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Speaker 5: are in many parts many parts of Europe. Do you

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Speaker 5: expect for that to persist?

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Speaker 10: I think the.

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Speaker 9: Reasons that our economy is doing better than Europe. Those

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Speaker 9: are very foundational and it's a strong foundation. So we

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Speaker 9: see a lot of foreign direct investments still coming into

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Speaker 9: the United States. I don't think the re onshoring story

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Speaker 9: has completely played out. There is more movement in that

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Speaker 9: direction globally. We're just in a point of nationalism as

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Speaker 9: opposed to globalism.

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Speaker 10: The pendulum is shifting that direction.

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Speaker 9: So with our strong consumer base that did get a

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Speaker 9: little bit more boost than their European counterparts from that

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Speaker 9: pandemic era stimulus spending. Yes, I think we are in

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Speaker 9: a broad kind of strong position that's going to encourage

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Speaker 9: the foreign direct investment to keep flowing this way. So

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Speaker 9: for the foreseeable future, I think the US is a

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Speaker 9: very good place to do business.

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Speaker 1: All right, Lauren, thank you so much. We appreciate that.

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Speaker 3: As always, Lauren sidel A Baker its economics, getting your

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Speaker 3: thoughts on economic conditions out there are Federal Reserve and

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Speaker 3: maybe a little bit of a peak ahead to twenty

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Speaker 3: twenty five.

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Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live

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Speaker 2: weekdays at ten am Eastern on Apple card Playing and

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Speaker 2: broud Otto with the Bloomberg Business app listen on demand

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Speaker 2: wherever you get your podcasts, or watch us live on YouTube.

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Speaker 8: What do you go for?

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Speaker 6: Let's talk about real estate now.

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Speaker 5: New home sales in the US rebounded last month as

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Speaker 5: builders and consumers sealed deals that have been delayed by

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Speaker 5: storms in the South, and buyers took advantage of heavy

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Speaker 5: sales incentives. He's the Best Freeman set of Luxury real

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Speaker 5: Estate broke which Brown Harris Stevens had to say about

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Speaker 5: the market.

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Speaker 11: All real estate is local, so it depends on where

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Speaker 11: you are and what the demand is. I'll give you

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Speaker 11: an example, a place like Palm Beach. You put something

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Speaker 11: on the market, there is a swarm of people who

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Speaker 11: want to buy. But that's obviously more typically more high end,

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Speaker 11: more expensive Connecticut. There's no supply, so when people put

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Speaker 11: their homes on the market, there's a rush of people

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Speaker 11: to line up to bid on the homes. I think

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Speaker 11: once we have more supply than we're going to get

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Speaker 11: prices to come down. And if sellers start to put

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Speaker 11: their homes on the market and buyers get into the market,

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Speaker 11: we start to see fluidness and supply and demand intersect,

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Speaker 11: which is a healthy housing market, which we didn't have

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Speaker 11: in twenty twenty four.

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Speaker 10: Well, you talk about Palm Beach, you talk about Connecticut.

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Speaker 10: I'm going to be selfish and ask about Manhattan.

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Speaker 9: What does the supply picture look like there and how

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Speaker 9: does that feed into the pricing dynamic.

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Speaker 11: We have a decent supply, you know, the market in

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Speaker 11: the city has been pretty flat. High end has done well,

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Speaker 11: which it usually does because it's discretionary. I mean, look

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Speaker 11: at Wall Street. The bonuses are going to be incredible.

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Speaker 11: You know, a lot of people are saying the stock

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Speaker 11: market is obviously pushes or drives a real estate market here,

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Speaker 11: and it's been very frothy, and people are saying, is

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Speaker 11: there a bubble coming? Do we know?

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Speaker 6: I don't.

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Speaker 11: It's unclear to us, but I do think that, you know,

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Speaker 11: people are it's been moderate, it's been decent. I would

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Speaker 11: like to see a pickup in that market. There's been

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Speaker 11: a big portion of this market that's been cash. So

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Speaker 11: remember the mortgage rates don't necessarily impact our byers and

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Speaker 11: sellers as much, although it does play into it.

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Speaker 12: When you think about that tension, that push pull between

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Speaker 12: renting and buying, I feel like you're so close to

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Speaker 12: the ground where you see people making that decision in

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Speaker 12: real time. What are they choosing at this point in time?

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Speaker 12: Is there a reason to wait to buy and rent

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Speaker 12: for now instead?

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Speaker 11: I think, you know, it's like they say, renting is

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Speaker 11: more like dating. It's temporary, and so if you don't

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Speaker 11: like it. I have a friend who's renting right now

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Speaker 11: in the Upper east Side in one bedroom. She doesn't

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Speaker 11: like the neighborhood. She's like, I'm definitely moving out. It's

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Speaker 11: sort of like you're dating before you get married, right,

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Speaker 11: And so I think if you want to commit to

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Speaker 11: economic security in building intergenerational wealth, you buy a home.

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Speaker 11: Because if the stock market plummets and your coinage goes

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Speaker 11: way down, you know that you just look at your

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Speaker 11: You're looking at your portfolio, go damn, I have less money.

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Speaker 11: The stinks. Versus, if you bought a home and that

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Speaker 11: value goes down, you have a roof over your head,

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Speaker 11: do you have a place where you can eat, sleep,

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Speaker 11: have dinner, have fun, and it's sort of it goes

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Speaker 11: up in value. So I think that we have to

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Speaker 11: think about the housing market as a law term investment,

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Speaker 11: and it is still the American dream. It's a commitment

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Speaker 11: to your future.

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Speaker 2: All right.

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Speaker 1: That was best Friedman.

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Speaker 3: She is the CEO of luxury real estate brokerage of

442
00:22:09,040 --> 00:22:14,520
Speaker 3: Brown Harris Stevens. Let's keep on this real estate story here,

443
00:22:14,680 --> 00:22:17,679
Speaker 3: residential real estate. We do that with Russell Galbot. He

444
00:22:17,720 --> 00:22:21,480
Speaker 3: is managing Principal Crest Heights. Russell, thanks so much for

445
00:22:21,800 --> 00:22:26,280
Speaker 3: joining us here Residential real Estate, South Florida. Is there

446
00:22:26,440 --> 00:22:29,280
Speaker 3: any reason for this market not to continue to be

447
00:22:29,960 --> 00:22:33,120
Speaker 3: strong going forward? It just seems like everybody up here

448
00:22:33,119 --> 00:22:34,879
Speaker 3: on this island of Manhattan has moved down to Florida.

449
00:22:34,880 --> 00:22:35,680
Speaker 1: I don't know what's going on.

450
00:22:36,720 --> 00:22:39,320
Speaker 8: I think you're right on that, Paul. In fact, we're

451
00:22:39,400 --> 00:22:43,240
Speaker 8: very fortunate in South Florida. Somebody says that it's always location,

452
00:22:43,359 --> 00:22:45,960
Speaker 8: and they're quite correct. Not every city is born equally,

453
00:22:46,640 --> 00:22:49,800
Speaker 8: and not every state is equal. So we're very excited

454
00:22:49,800 --> 00:22:53,240
Speaker 8: about what's happening South Florida. We're cautiously optimistic for the future,

455
00:22:54,080 --> 00:22:56,040
Speaker 8: and things seem to be really going in our way.

456
00:22:56,920 --> 00:22:59,359
Speaker 5: Talk a bit about what it has going for it.

457
00:22:59,440 --> 00:23:01,920
Speaker 5: I know again there's enthusiasm among many companies to move

458
00:23:02,440 --> 00:23:06,000
Speaker 5: large offices down there, save for the weather, which of

459
00:23:06,000 --> 00:23:08,760
Speaker 5: course we're all in VSF here in Manhattan. What are

460
00:23:08,760 --> 00:23:11,399
Speaker 5: the draws and what has South Florida done to incentivize

461
00:23:11,440 --> 00:23:12,720
Speaker 5: companies to move down there.

462
00:23:14,240 --> 00:23:18,440
Speaker 8: So look, capitalism and business follows the path of least resistance,

463
00:23:19,000 --> 00:23:22,840
Speaker 8: and Florida has created that path because we have spent

464
00:23:22,920 --> 00:23:27,000
Speaker 8: so much money on infrastructure and created the schools and

465
00:23:27,040 --> 00:23:31,359
Speaker 8: the housing and all of the other things that are necessary,

466
00:23:31,560 --> 00:23:36,560
Speaker 8: such as are cultural centers of excellence and support and

467
00:23:36,640 --> 00:23:39,679
Speaker 8: more housing. So we're very, very pleased to be in

468
00:23:39,720 --> 00:23:42,199
Speaker 8: South Florida. As I said to you earlier, we have

469
00:23:42,280 --> 00:23:45,280
Speaker 8: a thousand people coming to our state every day and

470
00:23:45,320 --> 00:23:46,879
Speaker 8: it is doing incredibly well.

471
00:23:47,359 --> 00:23:50,080
Speaker 1: I don't know where you're putting them down there? Are

472
00:23:50,119 --> 00:23:54,120
Speaker 1: you building new communities? Where do you build new communities?

473
00:23:54,119 --> 00:23:56,640
Speaker 3: You can't build any more on the coast because since

474
00:23:56,720 --> 00:23:58,960
Speaker 3: the fifties the coast has been pretty full up.

475
00:23:58,960 --> 00:23:59,879
Speaker 1: Where are you putting people?

476
00:24:00,680 --> 00:24:03,560
Speaker 8: Well, we're putting people inland as well, So we're building

477
00:24:03,560 --> 00:24:06,760
Speaker 8: all over and South Florida. You know, we still have

478
00:24:07,320 --> 00:24:09,640
Speaker 8: a great amount of land to build, and we're really

479
00:24:09,680 --> 00:24:12,760
Speaker 8: creating urbanism. In the last ten years in Miami, we

480
00:24:12,840 --> 00:24:17,199
Speaker 8: have for the first time a true urban urbanism. And

481
00:24:17,240 --> 00:24:19,520
Speaker 8: the way we started that was our cultural centers of

482
00:24:19,640 --> 00:24:23,760
Speaker 8: excellence in the downtown area and the Edgewater area. So

483
00:24:24,400 --> 00:24:26,520
Speaker 8: and we have a new train now that goes directly

484
00:24:26,520 --> 00:24:29,760
Speaker 8: to Orlando with numerous stocks in between, as well as

485
00:24:30,080 --> 00:24:33,240
Speaker 8: public transportation at second to none. We've also put a

486
00:24:33,320 --> 00:24:36,520
Speaker 8: lot of energy into our school systems, including private schools,

487
00:24:36,600 --> 00:24:41,280
Speaker 8: charter schools, and we've embraced the concept of excellence, something

488
00:24:41,320 --> 00:24:44,359
Speaker 8: that other states had forgotten. And we're very proud of

489
00:24:44,400 --> 00:24:46,280
Speaker 8: what's happening in the state of Florida, for sure.

490
00:24:46,400 --> 00:24:48,040
Speaker 6: Well let's talk about some of those other states.

491
00:24:48,040 --> 00:24:49,800
Speaker 5: And I'm curious as you kind of pull back and

492
00:24:49,960 --> 00:24:52,720
Speaker 5: look at the health of the residential real estate sector

493
00:24:53,280 --> 00:24:56,959
Speaker 5: more broadly, where you see bright spots, where you see growth,

494
00:24:57,760 --> 00:24:59,760
Speaker 5: maybe not as strong as in your beloved South Florida,

495
00:24:59,800 --> 00:25:02,840
Speaker 5: but you're seeing positive and promising signs.

496
00:25:04,000 --> 00:25:06,440
Speaker 8: So you know, I often joke that the greatest real

497
00:25:06,520 --> 00:25:10,400
Speaker 8: estate salesman we had in South Florida was Deblasio, and

498
00:25:10,440 --> 00:25:13,000
Speaker 8: to some extent it's true because he sent it off

499
00:25:13,040 --> 00:25:16,280
Speaker 8: a lot of people to South Florida. So I think

500
00:25:16,280 --> 00:25:20,960
Speaker 8: that between Florida and Texas, I mean, we're truly growing states.

501
00:25:21,400 --> 00:25:24,520
Speaker 8: And the reason is that we welcome entrepreneurship. We make

502
00:25:25,200 --> 00:25:28,840
Speaker 8: it easy to form your companies. And I think what

503
00:25:29,000 --> 00:25:31,880
Speaker 8: happened here is with COVID, so many people work from

504
00:25:31,920 --> 00:25:35,639
Speaker 8: home and create businesses from home. It used to be

505
00:25:35,760 --> 00:25:38,919
Speaker 8: that you weren't proud to say you're a capitalist, but

506
00:25:39,040 --> 00:25:42,840
Speaker 8: things have changed. Elections change things, and today I think

507
00:25:42,880 --> 00:25:45,520
Speaker 8: people would be proud to say that they're a capitalists,

508
00:25:45,600 --> 00:25:48,360
Speaker 8: proud to say that they're working at home. And when

509
00:25:48,400 --> 00:25:50,680
Speaker 8: you can work at home, why would you want to

510
00:25:50,720 --> 00:25:53,080
Speaker 8: not be in an area where we have beautiful beaches,

511
00:25:53,800 --> 00:25:58,440
Speaker 8: sunshine and incredible weather, and that is places like South Florida.

512
00:25:59,119 --> 00:26:02,639
Speaker 3: Interest rates, presumably the Federal Reserve, they're cutting rates, they're

513
00:26:03,400 --> 00:26:06,160
Speaker 3: how do you think that's going to impact your business,

514
00:26:06,160 --> 00:26:09,320
Speaker 3: your market over the next year, twelve to twenty four months.

515
00:26:10,119 --> 00:26:12,240
Speaker 8: Well, first of all, I think the fact that interest

516
00:26:12,280 --> 00:26:15,719
Speaker 8: rates are stable is very important, and I think the

517
00:26:15,760 --> 00:26:18,359
Speaker 8: public is starting to feel that we know where interest

518
00:26:18,400 --> 00:26:20,919
Speaker 8: rates are in the near future, and maybe they'll come

519
00:26:20,960 --> 00:26:23,200
Speaker 8: down a few more quarter points, But I think that

520
00:26:23,200 --> 00:26:26,320
Speaker 8: that's the most important thing. And I'll tell you next

521
00:26:26,720 --> 00:26:30,040
Speaker 8: next year will be fifty years that I'm building condominians.

522
00:26:30,240 --> 00:26:34,440
Speaker 8: My first condominium was in nineteen seventy five. In nineteen

523
00:26:34,480 --> 00:26:38,399
Speaker 8: eighty one, interest rates were sixteen point one percent for

524
00:26:39,240 --> 00:26:42,400
Speaker 8: condos and you know what we still sold. Then The

525
00:26:42,440 --> 00:26:45,400
Speaker 8: average over the last one hundred years has been six

526
00:26:45,440 --> 00:26:49,160
Speaker 8: point five. The median is five point six. So we're

527
00:26:49,240 --> 00:26:51,720
Speaker 8: right in the range. Yes, we have to come down

528
00:26:51,760 --> 00:26:54,920
Speaker 8: another point or two, maybe half a point next year,

529
00:26:55,520 --> 00:26:58,080
Speaker 8: but I think we're okay when it comes to interest rates. Today.

530
00:26:58,520 --> 00:27:02,080
Speaker 5: You're in the building business and there is so much speculation,

531
00:27:02,440 --> 00:27:06,040
Speaker 5: some concern about what terift policies might mean for any

532
00:27:06,119 --> 00:27:09,680
Speaker 5: number of goods. But I imagine timber, other construction supplies

533
00:27:09,760 --> 00:27:12,159
Speaker 5: high on the list. There is it something that you

534
00:27:12,240 --> 00:27:15,080
Speaker 5: are thinking about with any real seriousness? Is it something

535
00:27:15,119 --> 00:27:17,919
Speaker 5: you're just monitoring? So how are you looking at some

536
00:27:18,000 --> 00:27:20,760
Speaker 5: of the policy proposals pronouncements that we've heard from the president?

537
00:27:20,800 --> 00:27:26,160
Speaker 8: Elivet Look, governance is extremely important. When you see how

538
00:27:26,280 --> 00:27:28,760
Speaker 8: our particular governor in the state of Florida has run

539
00:27:29,520 --> 00:27:36,320
Speaker 8: streamlining processes, creating local a great, great law that will

540
00:27:36,440 --> 00:27:41,960
Speaker 8: allow for workforce housing, and you see the level of

541
00:27:42,119 --> 00:27:46,480
Speaker 8: competency exercised by our legislation. Our bodies are sentate in

542
00:27:46,520 --> 00:27:46,920
Speaker 8: our house.

543
00:27:47,640 --> 00:27:48,800
Speaker 6: It is really terrific.

544
00:27:48,840 --> 00:27:51,679
Speaker 8: And then you compare us to cities or states like

545
00:27:51,760 --> 00:27:55,600
Speaker 8: California where they have builders remedy. It's a difference between

546
00:27:55,680 --> 00:27:58,440
Speaker 8: day and night. So government does count. I'll tell you

547
00:27:58,520 --> 00:28:02,320
Speaker 8: another benefit that South Florida has with the recent elections

548
00:28:02,320 --> 00:28:05,560
Speaker 8: in Mexico, in South America and Columbia and so on

549
00:28:05,640 --> 00:28:08,440
Speaker 8: and so forth, we're going to get a huge influx

550
00:28:08,840 --> 00:28:14,280
Speaker 8: because South Florida, Miami especially is such a cultural diverse community.

551
00:28:14,480 --> 00:28:17,280
Speaker 8: It is the most cultural diverse community I think in

552
00:28:17,320 --> 00:28:19,240
Speaker 8: the state in the United States.

553
00:28:19,960 --> 00:28:23,080
Speaker 1: Yeah, it is an extraordinary story there, Russell.

554
00:28:23,680 --> 00:28:25,960
Speaker 3: Part and partial to that is I think in the

555
00:28:26,480 --> 00:28:29,960
Speaker 3: construction business, you go to any construction site around the country,

556
00:28:30,400 --> 00:28:33,320
Speaker 3: it feels like there's a lot of migrant and labor there,

557
00:28:34,080 --> 00:28:38,120
Speaker 3: legal and illegal. How concerned is your industry about what

558
00:28:38,320 --> 00:28:43,560
Speaker 3: might be stricter immigration, maybe even forced repatriation of certain

559
00:28:44,200 --> 00:28:46,680
Speaker 3: people out there that may be critical to the workforce.

560
00:28:48,000 --> 00:28:50,880
Speaker 8: You know, the workforce is extremely important in South Florida,

561
00:28:51,000 --> 00:28:54,200
Speaker 8: and we do have a culturally diverse workforce as well,

562
00:28:55,400 --> 00:28:58,880
Speaker 8: but we believe that most of them are are fully

563
00:28:59,000 --> 00:29:03,600
Speaker 8: legitimate and and are welcomed into our country. And the

564
00:29:03,640 --> 00:29:06,760
Speaker 8: great thing about South Florida is that it's been building

565
00:29:07,120 --> 00:29:10,080
Speaker 8: now through the last four years when other parts of

566
00:29:10,120 --> 00:29:13,320
Speaker 8: the country have been stagnant, and therefore we've had a

567
00:29:13,360 --> 00:29:17,680
Speaker 8: lot of immigration into Florida of actually great construction workers.

568
00:29:18,000 --> 00:29:22,440
Speaker 8: So the quality of our product has been maintained and

569
00:29:22,480 --> 00:29:25,760
Speaker 8: we're the recipient of that. Now. It may cause problems

570
00:29:25,800 --> 00:29:28,680
Speaker 8: in such states as New York and other states that

571
00:29:29,120 --> 00:29:32,520
Speaker 8: receive so many of this illegal immigration. Thank god, in

572
00:29:32,600 --> 00:29:35,720
Speaker 8: South Florida, we were not recipients of that. In fact,

573
00:29:36,120 --> 00:29:39,000
Speaker 8: our recipients are a thousand people are the people of

574
00:29:39,200 --> 00:29:43,360
Speaker 8: economic substance, the people who want to search for excellence

575
00:29:43,400 --> 00:29:46,440
Speaker 8: and want to have the right schools and infrastructure. So

576
00:29:46,760 --> 00:29:50,880
Speaker 8: while places like New York may have gained those illegal immigrants,

577
00:29:51,520 --> 00:29:58,560
Speaker 8: Florida gained the wealthy and medium wealthy who wanted a change.

578
00:29:58,480 --> 00:30:00,840
Speaker 5: Rus So let's talk about climate Imagine. It's something you

579
00:30:00,840 --> 00:30:02,720
Speaker 5: have to keep in front of mind as you undergo

580
00:30:02,800 --> 00:30:05,880
Speaker 5: the developments that you're undergoing. And there in South Florida

581
00:30:05,880 --> 00:30:07,840
Speaker 5: we make a little light here of how much better

582
00:30:07,880 --> 00:30:09,560
Speaker 5: the weather is than it is here in New York.

583
00:30:09,560 --> 00:30:11,600
Speaker 5: But you have to be thinking about climate change and

584
00:30:12,280 --> 00:30:14,120
Speaker 5: rise of sea levels and the like. How is it

585
00:30:14,160 --> 00:30:16,720
Speaker 5: shaping the kind of development projects that you have been

586
00:30:16,880 --> 00:30:20,480
Speaker 5: undertaking the way that you think about what residentss look

587
00:30:20,520 --> 00:30:21,920
Speaker 5: like long term there in South Florida.

588
00:30:23,160 --> 00:30:25,160
Speaker 8: I think that's a great question, by the way, and

589
00:30:25,600 --> 00:30:29,520
Speaker 8: we do follow ULI and all.

590
00:30:29,360 --> 00:30:31,080
Speaker 6: Of the issues of racing sea levels.

591
00:30:31,320 --> 00:30:33,240
Speaker 8: Buildings are going to have to come out of the

592
00:30:33,240 --> 00:30:36,080
Speaker 8: ground higher out of the ground, and build taller and

593
00:30:36,160 --> 00:30:38,760
Speaker 8: leave more open space. And I think that's what you're

594
00:30:38,760 --> 00:30:41,920
Speaker 8: seeing in South Florida. People are beginning to recognize that

595
00:30:42,040 --> 00:30:45,280
Speaker 8: climate change is real and that there's ways to deal

596
00:30:45,320 --> 00:30:48,280
Speaker 8: with it and ways to handle it. And we certainly

597
00:30:48,360 --> 00:30:52,360
Speaker 8: have a legislature and a governor that's relentlessly focused on

598
00:30:52,440 --> 00:30:58,320
Speaker 8: new legislation to ensure the safety and welfare of our residents.

599
00:30:58,760 --> 00:31:02,000
Speaker 8: Some of those laws again like live Local we're in

600
00:31:02,560 --> 00:31:05,440
Speaker 8: and inspections where we have a forty year certification, forty

601
00:31:05,480 --> 00:31:08,880
Speaker 8: five year certification, those types of laws, that type of

602
00:31:08,960 --> 00:31:11,280
Speaker 8: leadership is what makes South Florida different.

603
00:31:11,640 --> 00:31:14,120
Speaker 3: Russell, one of the challenges I do hear about Florida,

604
00:31:14,160 --> 00:31:17,040
Speaker 3: particularly real estate ownership in Florida is insurance. Getting some

605
00:31:17,080 --> 00:31:21,320
Speaker 3: of that insurance against whether you know, the floods, the hurricanes,

606
00:31:21,760 --> 00:31:23,360
Speaker 3: and that is a challenge for the state.

607
00:31:23,400 --> 00:31:25,240
Speaker 1: How would you like to see that play out.

608
00:31:26,720 --> 00:31:29,120
Speaker 8: That is probably one of our biggest challenges in the

609
00:31:29,160 --> 00:31:31,720
Speaker 8: state of Florida, and we deal with it every day.

610
00:31:32,480 --> 00:31:35,960
Speaker 8: I believe that that the state itself is going to

611
00:31:36,000 --> 00:31:38,760
Speaker 8: have to get more involved, and they are getting more involved.

612
00:31:39,080 --> 00:31:43,000
Speaker 8: And by the way, the increases in insurance has been

613
00:31:43,640 --> 00:31:45,920
Speaker 8: becoming less and less each year.

614
00:31:47,480 --> 00:31:49,959
Speaker 3: Interesting because we've heard from a lot of insurance companies

615
00:31:50,040 --> 00:31:54,800
Speaker 3: that continues to be a challenge there. But again, you're right,

616
00:31:55,120 --> 00:31:57,320
Speaker 3: folks are coming down. They're to figure that out. Russell,

617
00:31:57,320 --> 00:31:58,960
Speaker 3: thank you so much for joining us, Russell Gal. But

618
00:31:59,280 --> 00:32:03,120
Speaker 3: Cresent Heights principle certainly chemical.

619
00:32:03,520 --> 00:32:04,280
Speaker 6: I mean, it's just thriving.

620
00:32:04,320 --> 00:32:06,120
Speaker 5: But point about insurance, I know this was something that

621
00:32:06,160 --> 00:32:09,080
Speaker 5: came up with the context of those hurricanes earlier this year.

622
00:32:09,240 --> 00:32:12,960
Speaker 5: Just the number of individuals quoted in the news who

623
00:32:12,960 --> 00:32:14,960
Speaker 5: said that, you know, they've seen their premiums go up

624
00:32:14,960 --> 00:32:17,160
Speaker 5: by a ton and have to worry about it. So

625
00:32:17,240 --> 00:32:19,040
Speaker 5: if it's not an issue for everybody, I think it's

626
00:32:19,120 --> 00:32:20,080
Speaker 5: likely to be a bigger deal.

627
00:32:20,120 --> 00:32:21,920
Speaker 3: And you've seen a lot of the private insurans you know,

628
00:32:22,080 --> 00:32:24,680
Speaker 3: have pulled out over out of the state over the years.

629
00:32:24,800 --> 00:32:28,240
Speaker 3: Warren Buffett made his insurance business made a I think

630
00:32:28,280 --> 00:32:31,680
Speaker 3: a pretty high profile re engagement with Florida a couple

631
00:32:31,720 --> 00:32:32,280
Speaker 3: of years ago.

632
00:32:32,480 --> 00:32:33,160
Speaker 6: Thought that that.

633
00:32:33,360 --> 00:32:35,960
Speaker 3: Again there was an opportunity there, given the risk, to

634
00:32:36,000 --> 00:32:37,400
Speaker 3: maybe make some good return there.

635
00:32:37,400 --> 00:32:38,920
Speaker 1: But I know that has been a challenge.

636
00:32:39,160 --> 00:32:43,680
Speaker 2: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify,

637
00:32:43,880 --> 00:32:46,800
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638
00:32:46,880 --> 00:32:50,440
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639
00:32:50,560 --> 00:32:53,960
Speaker 2: the iHeart Radio app tune In, and the Bloomberg Business app.

640
00:32:54,080 --> 00:32:57,200
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641
00:32:57,320 --> 00:32:59,040
Speaker 2: and always on the Bloomberg terminal.

642
00:33:00,160 --> 00:33:01,720
Speaker 6: Un contain Cott