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Speaker 3: Hi everyone, Welcome to the Bloomberg Business Week Weekend Podcast. Yes,
Speaker 3: it's been a topsy turvy week. Reciprocal tariffs and almost
Speaker 3: every US trading partner went into effect, stoking recession fears
Speaker 3: and bond market turmoil. Then, in a sudden shift, President
Speaker 3: Trump announced a ninety day pause on those tariffs, but
Speaker 3: kept an earlier ten percent baseline rate in place. Now
Speaker 3: that ninety day pause, well, it caused the major US
Speaker 3: stock indices to surge, with the S and P five
Speaker 3: hundred staging historic and its best stock rally since two
Speaker 3: thousand and eight.
Speaker 4: The notable exception to the tariff pause was China, which
Speaker 4: responded with an eighty four percent tit for tat tariffs
Speaker 4: on US imports. The retaliation prompted Trump to then respond
Speaker 4: with an even higher tariff on China of one hundred
Speaker 4: and twenty five.
Speaker 3: Percent, and let's not forget earning season got underway with
Speaker 3: the big banks reporting all those details on the Bloomberg
Speaker 3: and at Bloomberg dot Com. This hour the CEO of
Speaker 3: autoparts manufacturer Magna, who describes today's environment as being like
Speaker 3: the Great Financial Crisis, the COVID shutdown, and the auto
Speaker 3: union walkout all rolled into one.
Speaker 4: All that to come. We begin with an investment strategist
Speaker 4: who sounded the alarm on the Trump administration even when
Speaker 4: Wall Street was feeling all in. Just after the US election.
Speaker 3: Peter Barrison and his team at the research shop BCA
Speaker 3: predicted that broad based, unilateral tariffs were coming and that
Speaker 3: the new administration's proposals would go well beyond what had
Speaker 3: been implemented in President Trump's first term. Needless to say,
Speaker 3: he was right.
Speaker 4: Peter is chief Global investment strategist at BCA Research. He's
Speaker 4: noted that the quote worst is yet to come. We
Speaker 4: should note that we spoke to Peter before the President
Speaker 4: announced a ninety day pause on reciprocal global tariffs.
Speaker 3: Hi. Everyone, Welcome to the Bloomberg Business Week Weekend Podcast. Yes,
Speaker 3: it's been a topsy turvy week. Reciprocal tariffs and almost
Speaker 3: every US trading partner went into effect, stoking recession fears
Speaker 3: and bond market turmoil. Then, in a sudden shift, President
Speaker 3: Trump announced a ninety day pause on those tariffs, but
Speaker 3: kept an earlier ten percent baseline rate in place. Now
Speaker 3: that ninety day pause, well, it caused the major US
Speaker 3: stock indseaes to surge, with the S and P five hundred,
Speaker 3: staging historic bounce and its best stock rally since two
Speaker 3: thousand and eight.
Speaker 4: The notable exception to the tariff pause was China, which
Speaker 4: responded with an eighty four percent tit for tat tariffs
Speaker 4: on US imports. The retaliation prompted Trump to then respond
Speaker 4: with an even higher tariff on China of one hundred
Speaker 4: and twenty five percent.
Speaker 3: And let's not forget earning season got underway with the
Speaker 3: big banks reporting all those details on the Bloomberg and
Speaker 3: at Bloomberg dot com. This hour conversations from the C
Speaker 3: suite on tariff's, Trump, earnings, and the global outlook.
Speaker 4: That includes our interview with the CEO of the industrial
Speaker 4: supply and tool company fast Enow, also.
Speaker 3: The CEO of autoparts manufacturer Magna, who describes today's environment
Speaker 3: as being like the Great Financial Crisis, the COVID shutdown,
Speaker 3: and the auto union walkout all rolled into one.
Speaker 4: All that to come. We begin with an investment strategist
Speaker 4: who sounded the alarm on the Trump administration even when
Speaker 4: Wall Street was feeling all in. Just after the US election.
Speaker 3: Peter Barrison and his team at the research shop BCA
Speaker 3: predicted that broad based, unilateral tariffs were coming and that
Speaker 3: the new administration's proposals would go well beyond what had
Speaker 3: been implemented in President Trump's first term. Needless to say,
Speaker 3: he was right.
Speaker 4: Peter is chief Global investment strategist at BCA Research. He's
Speaker 4: noted that the quote worst is yet to come. We
Speaker 4: should note that we spoke to Peter before the President
Speaker 4: announced a ninety day pause on recip global tariffs.
Speaker 5: I don't think the stock market has yet fully priced
Speaker 5: in recession. I mean keep in mind that up until
Speaker 5: a couple of years, up until a couple of days ago,
Speaker 5: the four hundred and ninety three SMP companies that are
Speaker 5: not the Magnificent seven were still actually up slightly for
Speaker 5: the year. And these are generally cyclical companies that one
Speaker 5: would expect to go down in recessionary scenario. So we're
Speaker 5: starting to see that being priced in, but we're not
Speaker 5: there yet. To get down to forty four to fifty,
Speaker 5: which is my target, you don't need to make any
Speaker 5: wild assumptions. All you need to assume is that the
Speaker 5: forward P multiple drops to eighteen and the earnings estimates
Speaker 5: followed by ten percent points. That's not crazy at all.
Speaker 5: On average, between twenty fifteen and twenty nineteen, the P
Speaker 5: multiple was sixteen point eight, and I'm talking about eighteen
Speaker 5: in recessionary scenario. So if anything, my target, even though
Speaker 5: going into this year it was fifteen hundred points below
Speaker 5: the nearest person, might actually turn out to be a
Speaker 5: little bit too bullish.
Speaker 3: Could we even go lower than that?
Speaker 5: We certainly could go lower than that. I think it
Speaker 5: would require a deepercession, but we could get a deepercession
Speaker 5: if policy continues to be very unfavorable. And I'm not
Speaker 5: just talking about tariff policy. We also have kind of
Speaker 5: this discussion of the Morrow logo accord, this idea that
Speaker 5: perhaps holders of Treasury bills will be forced to roll
Speaker 5: their money over into low yielding long term bonds. I mean,
Speaker 5: this is crazy, right. The treasury market is the ultimate
Speaker 5: risk free asset. If we undermine the sanctity of the
Speaker 5: treasury market, then we're looking at a worse financial crisis
Speaker 5: than what occurred in two thousand and eight.
Speaker 4: This was supposed to be the year.
Speaker 3: Wait you said we could, Sorry, tim a go ahead.
Speaker 3: I remember living through two thousand and eight. I know
Speaker 3: you did too, and I just remember are you talking
Speaker 3: to me? Yeah, I'm talking to you. I mean, Peter,
Speaker 3: we thought the financial market system globally was coming down.
Speaker 3: I remember not going to bed because headlines were crossing,
Speaker 3: and it was like which Wall Street firm was being
Speaker 3: bought by whom and which one wasn't going to make it,
Speaker 3: and so on and so forth, and what the government
Speaker 3: was going to do. Say that again so that we
Speaker 3: understand kind of the theft of what you are saying.
Speaker 5: The fact that the dollar is weakening now is very,
Speaker 5: very unnerving because the dollar is supposed to be a
Speaker 5: risk off currency. You buy treasuries when everything is going
Speaker 5: to hell, and that requires more dollars, and that pushes
Speaker 5: up the value of the dollar. The fact that the
Speaker 5: dollar is weakening now is telling you that increasingly investors
Speaker 5: are losing confidence in the US financial markets. And you know,
Speaker 5: President Trump wants a lower trade deficit. The counter the
Speaker 5: mirror image of a trade deficit as a capital count surplus. Yeah,
Speaker 5: foreigners decide that they don't want to hold US assets anymore.
Speaker 5: That's going to drive down the value of the dollar.
Speaker 5: That will make imports more expensive, make exports cheaper. That'll
Speaker 5: result in a lower trade deficit. But we're talking about
Speaker 5: something that will also entail a huge decline in stock
Speaker 5: prices and probably a financial crisis.
Speaker 3: So not exactly making America great again.
Speaker 5: Not quite.
Speaker 6: No.
Speaker 4: You know, it raises the question about how much damage
Speaker 4: can be done before you believe that Trump will reverse
Speaker 4: his policies. If that is something you believe, well, I.
Speaker 5: Think, for one thing, we've already sort of passed the
Speaker 5: event horizon. I think at this point it's going to
Speaker 5: be very difficult to avoid a recession, just based on
Speaker 5: everything that's already happened. They kind of wasn't that strong
Speaker 5: going into the latest escalation of the trade war. In February,
Speaker 5: real wage and salary income was only one was only
Speaker 5: up one percent year of a year. The CPI swap
Speaker 5: more is telling us that these tariffs could push inflation
Speaker 5: to well over three percent. We're potentially looking at negative
Speaker 5: income growth that's going to be very difficult to maintain
Speaker 5: without the economy weakening significantly in spending drawing up. So
Speaker 5: I think the outlook is quite worrying at this point,
Speaker 5: and it's probably too late to avoid recession. And I
Speaker 5: don't think that Trump is willing to reverse course anyway.
Speaker 6: He's been very.
Speaker 5: Very clearly for like thirty years about how you want
Speaker 5: to build this protectionist wall around the US. I don't
Speaker 5: understand where this group thing came from, where people were
Speaker 5: just saying, oh, it's going to be a negotiating ploy.
Speaker 5: It's not a negotiating ploy. He wants something that resembles autarchy.
Speaker 4: Are you concerned that we're going to see in financial
Speaker 4: conditions titan too much right now? We could start to
Speaker 4: see some sort of panic or freeze.
Speaker 3: Yeah.
Speaker 5: We estimate that easing financial conditions last year mainly because
Speaker 5: of rising stock prices, added around half a percentage point
Speaker 5: to growth. The fact that financial conditions have tightened mainly
Speaker 5: because stock prices have fallen, credit spreads have widened, is
Speaker 5: based on kind of a very back of the envelope
Speaker 5: and back of the envelope calculation will shave around half
Speaker 5: a percentage points from growth, and that's not huge, but
Speaker 5: the risk is that you get kind of in this
Speaker 5: feedback loop situation where stocks go down that means people
Speaker 5: feel less wealthy, that means they spend less, so there's
Speaker 5: less sales, less profits, and even lower stock prices. That's
Speaker 5: what we often see during recessions. And I think that's
Speaker 5: what we're starting to see now.
Speaker 3: You know, I'm looking at something I think you either
Speaker 3: said or shared with market Watch, and this was around
Speaker 3: late March, March twenty first, and that even though you
Speaker 3: had this outlook for the S and P five hundred
Speaker 3: this year, forty four fifty by the end of the year,
Speaker 3: and I think when you compared it to any nobody else,
Speaker 3: it was the lowest on the street, you did have
Speaker 3: five scenarios that could boost stocks this year. And you
Speaker 3: talk about the president, you know, walking back much of
Speaker 3: his tariff agenda, kind of caving to pressure from the market,
Speaker 3: and a few other things. Do you still believe that
Speaker 3: there are scenarios where the market could actually rally.
Speaker 5: There's certainly scenarios, and you know, but that's not my
Speaker 5: base case. I think that probably the trade war gets
Speaker 5: worse rather than better, because Donald Trump had kind of
Speaker 5: had this well, i'd almost say, like naive idea in
Speaker 5: his mind that he's going to raise tariffs and that's
Speaker 5: going to force other countries to reduce their tariffs. Well,
Speaker 5: there's two flaws without argument. The first flaw is that
Speaker 5: most rich countries don't actually have very large tariffs against
Speaker 5: the US and don't really have very large non tariff
Speaker 5: barriers against the US. I mean, they have regulations. All
Speaker 5: countries have regulations, but they're not specifically targeted at US companies.
Speaker 5: For the most part, there's going to be exceptions of
Speaker 5: so there's not a lot that other countries can do anyway.
Speaker 5: And the second thing, which is more politically relevant, we've
Speaker 5: seen this is certainly true here in Canada, that retaliation
Speaker 5: is politically popular. Donald Trump has single handedly resurrected the
Speaker 5: Liberal Party, which was heading for a huge defeat in
Speaker 5: the elections, and so people are saying, well, wait a second,
Speaker 5: if we can get more votes by retaliating, we'll retaliate.
Speaker 5: And so we're not going to get countries acquiescing to
Speaker 5: Donald Trump's demands we're going to get retaliation, and that
Speaker 5: could very well spark another round of tariffs.
Speaker 7: You know.
Speaker 3: One of the things I also wonder is that is
Speaker 3: it possible that you know this? I guess what I'm
Speaker 3: thinking about is what you said before a tarchy, and
Speaker 3: that is the idea that right the US produces everything
Speaker 3: that we need within our borders. Is that really you
Speaker 3: think the goal of present Trump, because I think that's
Speaker 3: one of the things that we've tried to figure out
Speaker 3: with the tariffs, is that what's really his endgame, what's
Speaker 3: really his mission here? But do you believe that his
Speaker 3: mission is to that the US is kind of self
Speaker 3: sufficient in providing everything it needs for its citizens within
Speaker 3: its borders, and then cut down trade.
Speaker 5: I think Donald Trump sees trade as a zero sum game,
Speaker 5: meaning that if one country is running a trade surplus
Speaker 5: with the US, somehow that country is exploiting the US,
Speaker 5: ripping the US off, as he likes to say. He
Speaker 5: doesn't see trade as something that can lift all boats,
Speaker 5: which is the way most economists see trade.
Speaker 6: Nor does he kind of.
Speaker 5: Realize that the reason the US has this trade deficit
Speaker 5: is because the US has been a very good place
Speaker 5: in which to invest rather than buying US goods. Foreigners
Speaker 5: have been buying in Nvidia stock or treasuries. That has
Speaker 5: been a vote of confidence in the financial system. And yeah,
Speaker 5: if you force people to not buy US assets, you
Speaker 5: leve a week or dollar to lower trade deficit. But
Speaker 5: it's not really what you want.
Speaker 4: Hey, you know you mentioned politics a little early, or
Speaker 4: at least from the Canadian perspective. Here in the United States,
Speaker 4: I'm wondering the sort of guardrails that you see on
Speaker 4: this president and his policies. How do you see the
Speaker 4: guardrails around this president here?
Speaker 5: So I think that's going to be what happens next.
Speaker 5: You're going to see more and more Republicans abandon Trump
Speaker 5: and we're going to have real discord wow within the
Speaker 5: Republican Party. But unfortunately, the way the system works is
Speaker 5: that Trump does have a lot of discretion over tariffs.
Speaker 5: And unless his popularity plunges, and I would say, like
Speaker 5: it's come down, but it hasn't plunged, He's not going
Speaker 5: to change direction. I mean, realistically, if you spend like
Speaker 5: a month talking about Liberation Day and then say, oh
Speaker 5: wait a second, the stocks stocks have gone down. Just kidding,
Speaker 5: he can't do that without looking really foolish. And so
Speaker 5: he's not going to do that unless there's a lot
Speaker 5: more pressure. We're just not there yet.
Speaker 3: Hey, one thing I want to ask you, all right,
Speaker 3: So if we buy what you're say saying about forty
Speaker 3: four to fifty by the end, and it looks, you know,
Speaker 3: certainly possible, considering what we're going through right now, where
Speaker 3: are you investing or suggesting investors suggest this money? You
Speaker 3: guys advise a ton of advisors, share your research. Where
Speaker 3: would you be putting money in this environment? Or is
Speaker 3: it too late to move anything around right now?
Speaker 5: I think it still makes sense to have a defensive
Speaker 5: bias in one's portfolio. That means holding more cash than
Speaker 5: one otherwise would hold. It means holding more bonds, although
Speaker 5: there's of course risk around bonds given a large fiscal
Speaker 5: deficit and the whole moral logo cord discussion. But nevertheless,
Speaker 5: the Fed probably will be forced to cut rates quite
Speaker 5: aggressively more than what the market is pricing in. So
Speaker 5: you want to have more fixed income, less equity within equities,
Speaker 5: You want to own more staples, healthcare, these defensive sectors,
Speaker 5: and you probably also want to own a bit of
Speaker 5: gold I think that's a true safe haven asset.
Speaker 4: What would you say to folks out there who attempted
Speaker 4: to buy this dip listen.
Speaker 5: I mean, if you're nimble, you can, of course do it,
Speaker 5: But I wouldn't bide with the expectation that stocks have bottomed.
Speaker 5: I think we could get a rally that lasts for
Speaker 5: a few days, perhaps even a few weeks, but ultimately,
Speaker 5: if we end up in recession, and I think that's
Speaker 5: where we're heading, earnings estimates are going to come way
Speaker 5: down and that whole dragstocks down with them. So I
Speaker 5: think it's too early to move to an overweight stance
Speaker 5: on stocks.
Speaker 3: Well, it's like we like to remind everybody, markets don't
Speaker 3: just go up. They don't go in one direction. They
Speaker 3: go up and they go down. Hey, Peter, thank you
Speaker 3: so much. Double duty. We know you spend some time
Speaker 3: with our TV colleagues as well. Glad you could also
Speaker 3: spend some time with us as well. As we said,
Speaker 3: this story by our vil Donna Hirich, it is one
Speaker 3: of the most right stories on the Bloomberg Peter Bears
Speaker 3: and his chief Global Investment Strategies at BCA Research joining
Speaker 3: us from Montreal Canada. Peter, thank you so much.
Speaker 2: You're listening to the Bloomberg Business Weekdaily podcast. Catch us
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Speaker 3: Well shares of everything soored this past Wednesday, including auto stocks.
Speaker 3: After President Trump authorized a ninety day pause on certain tariffs,
Speaker 3: keep in mind auto tariffs of twenty five percent still
Speaker 3: in effect.
Speaker 4: Additionally, a twenty five percent tariff on major components such
Speaker 4: as engines and transmissions is set to take effect note
Speaker 4: later than May third, and could expand beyond those parts.
Speaker 4: Those measures are expected to dramatically increase costs and up
Speaker 4: end the supply chain.
Speaker 3: One of those suppliers affected is Magna International, a Canadian
Speaker 3: based auto parts and auto technology company that creates components
Speaker 3: for some of the biggest car companies in the world
Speaker 3: that includes General Motors, Ford Stilantis. In terms of sales,
Speaker 3: Magna International is the biggest automotive supplier in North America.
Speaker 4: Swami Codaghari is CEO of Magna International.
Speaker 8: You know, we're right really focused on control the controllable,
Speaker 8: and things seem to be changing on every day basis.
Speaker 8: So open the playbooks that we've had during the rotating
Speaker 8: UW strikes or COVID or two thousand and eight financial crisis,
Speaker 8: or the chip crisis, and you put them all together.
Speaker 8: I think that's what we seem to be having right now.
Speaker 4: What a way to put that all. So, the financial
Speaker 4: crisis saw car many some car companies declare bankruptcy.
Speaker 3: Right exactly, you're saying it's as bad as that, and
Speaker 3: then some Yeah.
Speaker 8: I think I think the important part, Carol, here is look.
Speaker 8: Part of it is looking at tartifs of importing vehicles crossborder. Okay,
Speaker 8: the OEMs are the importer of the record. We as suppliers,
Speaker 8: you know, have to still look at any inter company
Speaker 8: perts going across the border, and you have to look
Speaker 8: at the tier end supply chain. But all in all,
Speaker 8: even if we look at what we can do internally,
Speaker 8: all of this is going to lead, I believe, to
Speaker 8: demand destruction, at least in the short term, which is
Speaker 8: why I compared it, you know, to what.
Speaker 6: Happened during the two thousand and eight and two thousand
Speaker 6: and nine.
Speaker 8: Where the volumes went down drastically, right, And that is
Speaker 8: the reason for my comparison to that, As to mention.
Speaker 3: In the introduction, you know your top customers GM, Mercedes, Ford, BMWVW, Stilantis, Nissan,
Speaker 3: are you already seeing tell me like kind of what
Speaker 3: the environment was going into the tariffs, and then how
Speaker 3: it's changed in terms of demand from your customers now
Speaker 3: that the tariffs are here.
Speaker 6: OKL.
Speaker 8: One of the important things in the automotive industry, certainty
Speaker 8: is stability, and what we have today is the complete uncertainty.
Speaker 6: Right.
Speaker 8: It's difficult to plan in an industry such as ours,
Speaker 8: you know, on an everyday basis, right, And that's what
Speaker 8: we're trying to deal with today. That you might have
Speaker 8: seen some of the announcements that have come starting April fourteenth,
Speaker 8: some of them starting you know, last Monday already BMW
Speaker 8: from the Spartenberg facility, or Jeneral Motors from Fort Wayne,
Speaker 8: Stilantis in Telukah, war On truck windsor you know, halted
Speaker 8: productions or changing production schedules and so on and so forth.
Speaker 8: So that's the fact we are starting to see. And obviously,
Speaker 8: you know, it's an industry that you can't flip the
Speaker 8: switch to change things overnight. If there is a policy
Speaker 8: roadmap towards whatever the outcome might be.
Speaker 6: I think that's addressable.
Speaker 8: But today the struggle seems to be addressing what's coming
Speaker 8: at us on a daily or hourly basis.
Speaker 4: So who absorbs the cost here? What's you know, what
Speaker 4: do your shareholders need to know about? Where customers will
Speaker 4: see price increases? Where you will see a head to margins?
Speaker 4: Where the end end user? Right, us people who go
Speaker 4: and buy these cars will see price increases. Where do
Speaker 4: the where do the chips fall?
Speaker 8: Yeah, it's kind of all of the about him, right,
Speaker 8: because you know, from a supply base as well as
Speaker 8: the automotive OEM's perspective, everybody look at whatever that can
Speaker 8: be done. I think that is given. But given the
Speaker 8: industry and the type of margins that are there that's
Speaker 8: out there, you know, everybody knows that nobody can handle
Speaker 8: the magnitude of the impact that we're talking about here.
Speaker 8: So I believe it has to some way, shape or
Speaker 8: form pass on to the consumer. And if you look
Speaker 8: at where the car prices are today in the market,
Speaker 8: they're already you know, stretched quite a bit, right. So
Speaker 8: that's why I talk about demand destruction and the consumers
Speaker 8: ultimately facing, if not all of it, a significant part
Speaker 8: of the impact of the tariffs.
Speaker 4: You know, you said, it's like the playbooks from the
Speaker 4: financial crisis, COVID, the UAW strikes all can But I'm
Speaker 4: wondering if as a result of this, you are making
Speaker 4: any big changes to how you do business where these
Speaker 4: parts are manufactured. Do you plan as a result of
Speaker 4: these tariffs to do more in the United States?
Speaker 8: It's too soon to say that, right, Like I said,
Speaker 8: we are investing or not we as an industry, if
Speaker 8: you're doing investments today, it is typically for starting production
Speaker 8: in twenty seven or twenty eight, So we're talking at
Speaker 8: least two years out right when we start talking about
Speaker 8: what needs to be done. Should we react to what's
Speaker 8: happening today? And where the policy ends up is going
Speaker 8: to be ultimately what everybody's looking at. So from a
Speaker 8: near term perspective, cash conservation and hesitancy or tentativeness to
Speaker 8: say where will it end up? So if there is
Speaker 8: a dollar that I can push out from a perspective
Speaker 8: of investing today versus a month or two months from now,
Speaker 8: I'll pick the later, right because I want to have
Speaker 8: certain and where we are you know, ultimately going to
Speaker 8: invest and get the return. I think going back, everybody
Speaker 8: is now focused on free cash flow, conversion, capital efficiency,
Speaker 8: so there's a little bit of a wait.
Speaker 6: And see approach.
Speaker 8: And you know, in the industry that depends on two
Speaker 8: or three year cycles, that's you know, difficult.
Speaker 3: So the thing I wanted to ask you, and I
Speaker 3: keep going back to this interview that Shineli Basika Bloomberg
Speaker 3: did with Boas Weinstein, and he said, you know, even
Speaker 3: if we get it changed and perhaps the White House
Speaker 3: the president comes out and says forget it, delay of
Speaker 3: ninety days or you know what, let's call it off.
Speaker 3: The problem is that the President's going to be in
Speaker 3: the White House for the next four years, and that
Speaker 3: what he said is the uncertainty genie is out of
Speaker 3: the bottle. I can kind of get away from this.
Speaker 3: That would you feel if the president came out and said, oh,
Speaker 3: change my mind, would you feel confident enough to move
Speaker 3: forward or would you feel like you were constantly a
Speaker 3: little bit off balance, not sure if something might change
Speaker 3: from the White House.
Speaker 8: I think the industry as a whole is going to
Speaker 8: be a little bit more conservative, and think twice we've
Speaker 8: always believed, you know, you have to produce locally, whether
Speaker 8: it's a local for local, and we've always looked at
Speaker 8: the entire North American market as one market. So that
Speaker 8: is being questioned right now. So we have to work
Speaker 8: very closely with the OEMs, not just as saying, I
Speaker 8: think the whole ecosystem has to be pretty much aligned.
Speaker 8: As you think of investments going forward, which segment is
Speaker 8: going to be consumed? Where where do you put the footprint?
Speaker 8: So in short, Carol, I think there is going to
Speaker 8: be a little bit more thought before new investment goes
Speaker 8: into address, you know, especially where parts or vehicles are
Speaker 8: going crossboard.
Speaker 3: Right, So then when we think about the US economy
Speaker 3: or global economy, there are investments that will not happen
Speaker 3: and there will be as we talked, was it a
Speaker 3: little bit of a demas and destruction, Like, there'll be
Speaker 3: some destruction that economic impact we don't get back right
Speaker 3: because of that conservative mode.
Speaker 8: I think it's fair to say there is going to
Speaker 8: be tentativeness in the investment cycle now until people get
Speaker 8: a little bit more clarity. That's one thing, and the
Speaker 8: second thing is short term, I think there is going
Speaker 8: to be you know, reduction in volumes.
Speaker 4: I mentioned you have one hundred and seventy thousand employees
Speaker 4: in countries throughout the world, stock down about twenty five
Speaker 4: percent so far this year. You're going to take a
Speaker 4: hit ostensibly as a result of these Are you going
Speaker 4: to have to start making decisions about who keeps their
Speaker 4: job and who doesn't keep their job.
Speaker 8: And tim Yes, that's the reason why I compared it
Speaker 8: to what happened during the COVID or the uw rotaining strikes. Right,
Speaker 8: you have to constantly react to how the OEMs are
Speaker 8: planning their production schedules, whether it's lines coming down, complete factories,
Speaker 8: assemblies that are stopping, which means we have to react accordingly.
Speaker 8: So obviously there's going to be that impact. But we
Speaker 8: have to as one of our guiding principles is a
Speaker 8: long term strategy to look at our business as a
Speaker 8: long term owner. So whatever decision we make, we have
Speaker 8: to look in terms of today, but making sure that
Speaker 8: it doesn't hurt us in the long term. So that's
Speaker 8: a little bit more challenging today than it was a
Speaker 8: few months ago.
Speaker 3: One of the things I want to ask, are you
Speaker 3: afraid and do you feel like the c suites afraid
Speaker 3: to really speak out against the Trump and mysters. You're
Speaker 3: actually being pretty frank here. CEOs and some surveys are
Speaker 3: calling this the Trump recession. CNBC did a CEO survey,
Speaker 3: yet it seems like most don't want their names attached
Speaker 3: to the criticism of the administration. Is the corporate community
Speaker 3: afraid to speak out?
Speaker 6: Call from our side?
Speaker 8: Look, I think Tim mentioned in the introduction. We are
Speaker 8: in twenty eight different countries, so over the last year
Speaker 8: and a half, nineteen of the countries that were present
Speaker 8: in had elections, right, So policy is something we deal
Speaker 8: with all the time. This is obviously a little bit
Speaker 8: more disruptive than what we have seen elsewhere or seen
Speaker 8: in my career here, but we have to look at
Speaker 8: the industry long term.
Speaker 6: Right.
Speaker 8: Our design cycles four to five years, and maybe with
Speaker 8: the changing industry it's dropped down to two or three years,
Speaker 8: but you got to take a long term approach. So, yes,
Speaker 8: it's disruptive today, but we have dealt with this in
Speaker 8: the past, and we just have to keep our head
Speaker 8: down and hope we look at a policy roadmap rather
Speaker 8: than react to something that's happening today.
Speaker 3: One of the things I do want to ask then,
Speaker 3: and kind of on that in terms of long term strategy,
Speaker 3: what does the auto supply chain look like if the
Speaker 3: Trump tariffs are here to stay. How long does it
Speaker 3: take to realign a point that will mitigate tariff costs?
Speaker 6: I don't know.
Speaker 8: It's mitigation that is definitely going to lead to rationalization
Speaker 8: of the footprint, right, we have to start looking at
Speaker 8: balancing capacity. You know, luckily we have footprint in Mexico,
Speaker 8: US and Canada. So again, like I said, it's not
Speaker 8: going to happen over time. Depending on complexity of the
Speaker 8: part in the system, it could be anywhere from months
Speaker 8: to years. There are some complex systems where just to
Speaker 8: give you an idea of some of our plants are
Speaker 8: a million square feed facilities right with about three four
Speaker 8: hundred million in invested capital. So those kind of plants
Speaker 8: are not easy to transfer overnight.
Speaker 6: Those will take years.
Speaker 8: And it's not just a unilateral decision either, right, this
Speaker 8: has to be done in conjunction with the product cycle
Speaker 8: planning of the OEM. Where is the assembly planted and
Speaker 8: how we be going to work with them. So there's
Speaker 8: a lot of complexity involved here. Some of the more
Speaker 8: complex footprint rationalization might take years to crystallize.
Speaker 4: We talked a little bit about whether you'd move facilities.
Speaker 4: You said, it's two really to say we are already
Speaker 4: starting to see automakers reshoring assembly plants or make announcements.
Speaker 4: Hyundai was one of the ones we saw from the
Speaker 4: White House just in the last month. If we see
Speaker 4: more automakers reshore assembly in the US, will you need
Speaker 4: to move facilities back to the US as well.
Speaker 6: We have a footprint in the US.
Speaker 8: But to your point, Tim, yes, I think look as
Speaker 8: a supply base, we look at the material availability of
Speaker 8: the entire supply chain where it's coming from. We have
Speaker 8: to look at the logistics. We have to be as closed,
Speaker 8: you know, as possible to the assembly based on the
Speaker 8: type of the part and the complexity of the part.
Speaker 8: So considering all of that stuff, if there is a
Speaker 8: significant reshoring, yeah, we have to look at, you know,
Speaker 8: rationalizing the footprint differently.
Speaker 3: Hey, SA mean just to kind of wrap up here,
Speaker 3: you know, you kicked off and both Tim and and
Speaker 3: I were like, a wait, what moment when you said
Speaker 3: that you're thinking about this environment akin to I think
Speaker 3: you said the gfc SE, COVID and Union strikes all together.
Speaker 3: That's today's environment. So is a recession here in the
Speaker 3: United States given? Is maybe perhaps a global recession?
Speaker 7: Given?
Speaker 8: Yeah, I think you know again, hopefully you know, everybody
Speaker 8: comes to the table and has the discussion to avoid that.
Speaker 8: But all indications seem to be, you know, heading in
Speaker 8: that direction that the economy is taking a hit. But
Speaker 8: like I said, this is happening so fast and so quick.
Speaker 8: Part of it is you know who comes to the
Speaker 8: table at what time, and you know how much can
Speaker 8: you recover and how fast can you recover? But that's
Speaker 8: definitely on the cards based on the facts today.
Speaker 3: Well, we really appreciate your honesty and giving us an
Speaker 3: assessment of your world that really plays into all of
Speaker 3: the major auto manufacturers. Swami, thank you so much. Swammi
Speaker 3: Kudigeary's chief executive officer of Magna International, joining us right
Speaker 3: here on Bloomberg BusinessWeek Daily.
Speaker 2: This is so Bloomberg Business Week Daily Podcast. Listen live
Speaker 2: each weekday starting at two pm Eastern on Applecarplay and
Speaker 2: Android Auto with the Bloomberg Business app. You can also
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Speaker 2: station Just Say Alexa played Bloomberg eleven thirty.
Speaker 3: No doubt that the biggest stories this week have been
Speaker 3: the volatility in global markets, the cloud of uncertainty in
Speaker 3: the US economy, really the global economy too, and a
Speaker 3: scorching hot trade war between the US and everyone, and
Speaker 3: especially between the United States and China.
Speaker 4: Someone with a pulse on all of this is Mike Siegel.
Speaker 4: Mike is a partner at Goldman Sachs Asset Management, serving
Speaker 4: as global head of the insurance, asset management and liquidity
Speaker 4: solutions businesses, as well as co head of the Client
Speaker 4: Solutions Group in Asia Pacific. Mike manages over seven hundred
Speaker 4: and seventy billion dollars in money markets and another four
Speaker 4: hundred and sixty billion dollars in insurance assets. He joined
Speaker 4: us alongside a Bloomberg Global Finance correspondent, Shanali Bassek.
Speaker 9: I think that people are clearly on edge and are
Speaker 9: reluctant to make any significant decisions until we get better
Speaker 9: clarity as to where the tariffs are going to end,
Speaker 9: where that situation is going to end. Once we have
Speaker 9: more clarity to that, you can then go back and
Speaker 9: see the markets will react, They'll adjust, the FED will react,
Speaker 9: It will adjust, and so will companies in terms of
Speaker 9: how they're going to invest, including my insurance clients and
Speaker 9: including the liquidity clients.
Speaker 4: We don't know how it's going to end, but I'm
Speaker 4: curious if you've mapped likely scenarios for how they'll end,
Speaker 4: what do you think is going to happen.
Speaker 9: Well, we do map scenarios, and so first I'll stick
Speaker 9: with the insurance industry, which is very well capitalized and
Speaker 9: not levered in the sense that they're not over their skis.
Speaker 9: They don't hold a lot of equities on the balance sheet,
Speaker 9: so the equity market volatility that we've been seeing is
Speaker 9: not creating a capital strain. They are primarily fixed income investors.
Speaker 9: And by the way, we're seeing the intermediate and long
Speaker 9: into the curve rise, we're seeing credit spreads widen, so
Speaker 9: on reinvestment, that's a pretty good situation as long as
Speaker 9: it just doesn't continue to cascade into something much more significant.
Speaker 1: You have insurance clients that are holding long term bonds
Speaker 1: and ten year thirty year notes are really blown out
Speaker 1: at this point. Are they suffering through a lot of
Speaker 1: pain because of it?
Speaker 9: Yeah? So, Soniali, You're absolutely right that on a mark
Speaker 9: to market basis, these bonds have lost value, But most
Speaker 9: of these institutions don't have to report on a mark
Speaker 9: to market basis. They're able to hold their bonds to maturity,
Speaker 9: So really they are more benefiting from the ability to
Speaker 9: reinvest at higher yields than what's been happening to their
Speaker 9: to the current holdings. Not the same thing being true
Speaker 9: for hedge funds, example, or other institutions that are marked
Speaker 9: on a daily basis may have to provide collateral as
Speaker 9: their asset values are dropping, but that's not the case
Speaker 9: for the insurance industry.
Speaker 3: But do they feel that there is a certainty that
Speaker 3: this does get resolved sooner rather than later. I think
Speaker 3: I love your interview you did with Boaz Weinstein, who
Speaker 3: I thought you know is assessing the situation and saying
Speaker 3: the thing is here we have a president who's in
Speaker 3: for just under four years here and that he said,
Speaker 3: the uncertainty genie is out of the bottle. So do
Speaker 3: we continue to in your view, and you've got to
Speaker 3: think about short term, longer term, medium term, that uncertainty
Speaker 3: will be with us throughout this tenure.
Speaker 9: I think uncertainty will be with us, hopefully not at
Speaker 9: the level that we have right now, and again it's
Speaker 9: it's our companies in a position where they're forced to
Speaker 9: actor or not. And to the extent that they're not overlevered,
Speaker 9: they're not forced to act. They could sit watch and
Speaker 9: look for opportunities. I would say, you know, when you
Speaker 9: gain plan out right now, this has primarily been an
Speaker 9: equity market event. Concerns that it becomes a bond market event.
Speaker 9: Rising yields are not that much.
Speaker 10: Of a problem.
Speaker 9: Draining liquidity becomes a problem, and you know, so there's
Speaker 9: there's a concern or watch for that. Also, I would
Speaker 9: say for our insurance clients, they are long term holders
Speaker 9: of corporate debt. How are those corporations going to fare?
Speaker 9: And certainly some corporations are going to be much more
Speaker 9: affected by tariffs, which would we can credit others are
Speaker 9: immune to it. So where we and our clients are
Speaker 9: doing a lot of work right now, going literally bond
Speaker 9: by bond, security by security.
Speaker 10: What is the sensitivity to the tariffs or not?
Speaker 4: Well, on a micro level, some of that uncertainty has
Speaker 4: already led companies on a case by case basis to
Speaker 4: pull guidance CarMax delta earlier this week. You mentioned a
Speaker 4: lot of uncertainty. Are you seeing signs of a recession?
Speaker 10: So let me say this.
Speaker 9: So one of the things we want to talk about
Speaker 9: was the survey, And first I would say, on the
Speaker 9: insurance survey.
Speaker 3: It's at fourteenth annual Global Insurance Survey, four hundred and
Speaker 3: five companies representing over fourteen trillion dollars in balance sheets
Speaker 3: assets combined. That's a lot.
Speaker 10: That's a lot. It's about half the global industry's as base.
Speaker 9: I bring that up because we've One of the questions
Speaker 9: we said is what are you concerned about? And that
Speaker 9: question they got absolutely right. They're concerned about inflation, they're
Speaker 9: concerned about geopolitics. They aren't concerned about tariffs and market volatility.
Speaker 9: What they didn't get right and nobody did, was the
Speaker 9: magnitude of the tariffs and the implications for that. So
Speaker 9: they didn't see recession this year. That view is changing,
Speaker 9: including at Gold and Saxson. Within our clients, they thought
Speaker 9: the equity markets would be well behaved, not riproaring, but
Speaker 9: well behaved. That view is changing quite dramatically. That they
Speaker 9: also thought that rates were had peaked and would be
Speaker 9: coming down slowly. Both at the short end of the
Speaker 9: long end, and I still think that that's the prevailing view.
Speaker 9: So this backup in longer term rates is looking like
Speaker 9: an investing opportunity. None of our clients have been selling
Speaker 9: or directing us to sell on their behalf. They are
Speaker 9: looking for opportunities to get into the market, but they're
Speaker 9: not in a rush, you know, they want to see
Speaker 9: how things settle out. Once they see how things settle out,
Speaker 9: then they'll know where to put capital to work.
Speaker 1: You know, you mentioned that you're looking bond by bond
Speaker 1: right now. And the reason that's so interesting to me
Speaker 1: is because you're already seeing somewhat of a capital market's freeze.
Speaker 1: And if you're worried about corporate debt at all in
Speaker 1: this environment, what does it mean for the way people
Speaker 1: have confidence in investing in corporate debt in the future
Speaker 1: and new issuance for example.
Speaker 9: Yeah, So Sonali, that's really going to be industry by industry,
Speaker 9: case case by case. And that gets back to this
Speaker 9: uncertainty until we know how this unfolds, and it may not,
Speaker 9: it may not unfold to a point where that we
Speaker 9: have definition is that this is the way it's going
Speaker 9: to work. You've elevated the amount of uncertainty, which is
Speaker 9: elevating the amount of risk I need to get paid
Speaker 9: a bigger risk premium to hold any of these instruments.
Speaker 9: And that's why we see credit spreads widening out.
Speaker 1: You know, a lot of people are saying this is
Speaker 1: also a golden opportunity for a while public capital markets
Speaker 1: are freezing to look at private capital because you're seeing
Speaker 1: these private credit giants just float right in as the
Speaker 1: public markets are closed. But are you concerned that there's
Speaker 1: still a lot of pain under the surface in private
Speaker 1: markets given that, you know, they call it the denominator effect.
Speaker 1: These companies are seeing their public portfolios really shrink and
Speaker 1: their private portfolios therefore become a bigger proportion of their holdings.
Speaker 9: So let me take that question into two break that
Speaker 9: into two parts. One is the underlying asset values themselves.
Speaker 10: And so we've.
Speaker 9: Got private equity, we've got real estate, we've got infrastructure,
Speaker 9: we have private credit.
Speaker 10: At the moment, we're.
Speaker 9: Not seeing any of this flow through to the existing
Speaker 9: investments that have been made.
Speaker 10: But we have to see how things unfold, and if
Speaker 10: we end up in a.
Speaker 9: Deeper recession or deeper recession, that's going to weaken the
Speaker 9: underlying asset values. Now, the thing you said about the
Speaker 9: denominator effect is the ability to put new capital to work,
Speaker 9: And there's two components. So that one is I already
Speaker 9: have a private equity portfolio. I was hoping to get
Speaker 9: realizations give me fresh cash to put back to work.
Speaker 9: And if the public markets are closed, particularly the IPO market,
Speaker 9: You're not going to see as many of those realizations.
Speaker 9: So I'm going to keeping more of my capital tied
Speaker 9: up in those assets. And then the second point you're making,
Speaker 9: which is more applicable quite frankly to pension plans and
Speaker 9: sell from wealth funds, is as the public assets, particularly
Speaker 9: the equity assets, decline and value, all of a sudden,
Speaker 9: my exposure on an asset allocation basis to the private
Speaker 9: assets has increased. Again reduces my willingness to invest more.
Speaker 3: This was supposed to be the year, right, that all
Speaker 3: of a sudden we could tap the public markets, sell
Speaker 3: sell some assets, IPO whatever, right or M and A
Speaker 3: and it.
Speaker 10: Well, this was supposed to be the year. It is
Speaker 10: only April.
Speaker 3: Okay, Well, so you are hopeful that it gets better.
Speaker 10: Well, I'm always hopeful, but we shall see.
Speaker 3: I guess I'm just saying in an environment where if
Speaker 3: we expect more uncertainty over the next three and a
Speaker 3: half years, that makes it tricky.
Speaker 10: Right, it makes it tricky.
Speaker 9: I think you know right now the administration is in
Speaker 9: the middle of trying to rebalance trade through tariffs. At
Speaker 9: some point that will settle and then the markets can
Speaker 9: assess what does it all mean, and then I think
Speaker 9: you will.
Speaker 10: See markets open up again. You'll see more flow of capital.
Speaker 1: We're talking about the risky stuff.
Speaker 3: Yeah, I'm also wondering.
Speaker 1: You have one of the biggest money market businesses in
Speaker 1: the world under your purview, So how are those behaving?
Speaker 1: What are they being used for in an environment like this,
Speaker 1: because it's generally safer than a lot of the debt
Speaker 1: markets that we're talking about.
Speaker 9: Yeah, So, Sonali, we manage over seven hundred billion of
Speaker 9: short term liquidity products. We consider that to be the
Speaker 9: canary in the coal mine, so we're always watching what's
Speaker 9: happening with flows there, and at the moment things have
Speaker 9: been very stable. The vast majority of the assets are
Speaker 9: government assets, you know, short term short term treasury bills,
Speaker 9: et cetera. And we don't see flows coming into that market.
Speaker 10: We take that as a good sign.
Speaker 9: Another part of the market, which is called prime, includes
Speaker 9: a lot of commercial paper and other short term debt
Speaker 9: of corporations, and we don't see companies moving out of prime.
Speaker 10: So at the moment, and we watch very closely, things
Speaker 10: feel calm at that end of the market.
Speaker 4: When money leaves your money market funds, where does it go.
Speaker 9: Over the last several crises, if I could say like that,
Speaker 9: it's been actually coming into the money market funds basically,
Speaker 9: you know, the two competing forces would be bank deposits
Speaker 9: and money market funds. And you know, some of the
Speaker 9: crises have called into question, you know, credit worthiness of banks,
Speaker 9: so it comes into the money market funds.
Speaker 10: If people are very nervous, it's going to go into.
Speaker 9: Government money market funds, so primarily T bills and other
Speaker 9: government guaranteed forms of debt.
Speaker 4: Are you calling this a crisis now?
Speaker 11: No?
Speaker 3: Are you seeing money coming into money markets?
Speaker 6: No?
Speaker 12: As I said, we're watching on a daily.
Speaker 9: And a minute by minute basis, and we haven't seen
Speaker 9: any flows come in unusual flows, nor have we seen
Speaker 9: flows moving out of prime into government guys.
Speaker 1: By the way, every single crisis for the last decade
Speaker 1: or so, Mike has been one of my first calls,
Speaker 1: which is exactly, how's it going?
Speaker 7: Really?
Speaker 10: I hope that's not why you call it.
Speaker 3: Is there any money going outside the US? Increasingly?
Speaker 10: So, you know you've seen so.
Speaker 9: Coming into the beginning of the year, it looked like
Speaker 9: the US economy was going to be the fastest outside
Speaker 9: of China, the fastest growing economy in the.
Speaker 3: World, exceptionals might we talked about American exceptional exceptionalism.
Speaker 9: And you also saw the dollar strengthening over a long
Speaker 9: period of time. So if I took foreign money and
Speaker 9: put it into the US market, I had probably a
Speaker 9: underlying market that was going to rally and I.
Speaker 10: Pick up the currency appreciation WAMI.
Speaker 9: Right now, the dollar's weakening and the US markets are
Speaker 9: selling off, so I'm sure that that's putting a damper
Speaker 9: on those flows.
Speaker 4: I want to go to China and specifically the US
Speaker 4: relationship with China. You spent a lot of time in China,
Speaker 4: you live partly in Hong Kong, you're head of the
Speaker 4: you're co head of the Client Solutions group in Asia Pacific.
Speaker 4: Is the relationship between the US and China broken?
Speaker 9: That's really not in my Bailey Wick, But I will
Speaker 9: tell you our relationships with the government entities and the
Speaker 9: companies that are there between our firm and those entities
Speaker 9: is very strong. What's playing out is just playing out
Speaker 9: above everybody's head, and we're leaving it to play out
Speaker 9: at that level.
Speaker 4: But it has significant implications for the way that companies
Speaker 4: do business with one another. If one country has tariffs
Speaker 4: that exceed that's a big deal.
Speaker 9: It's very important for the two countries to have good relationships.
Speaker 9: And then that translates down into the entities that we
Speaker 9: work with and the relationships we have with them.
Speaker 3: Can I ask you one last question. Oak Tree Capital
Speaker 3: Management coind of founder Howard Mark's today that Donald Trump's
Speaker 3: tower of policies have the potential to be the biggest
Speaker 3: economic event of our lifetimes and warned that reversing them
Speaker 3: could still have consequences. Do you agree.
Speaker 9: I don't know if I agree with that statement, but
Speaker 9: I will say this that volatility has a cost, and
Speaker 9: it's undermining people's confidence to invest, whether it's corporations building
Speaker 9: plant and equipment, whether it's investors putting money to work.
Speaker 9: So there is a cost of volatility, and we're seeing
Speaker 9: that by the declines in the market and the widening
Speaker 9: out of spreads.
Speaker 3: So appreciate this. Thank you so much, so much. Mike Siegel,
Speaker 3: partner at Goldman Sach's Asset Management, Global head of the insurance,
Speaker 3: asset management and Liquidity Solutions business, also co head of
Speaker 3: the Client Solutions group in Asia Pacific. Mike, thank you
Speaker 3: very much, really appreciate it. And Janellie thanks for bringing
Speaker 3: us Mike Bloomberg TV Global Finance correspondence. So she calls you,
Speaker 3: you know what it's about. Is this a crisis?
Speaker 4: But he says no, for now. He says for now,
Speaker 4: all right, let us know if that view changes. I
Speaker 4: do appreciate it.
Speaker 2: You're listening to the Bloomberg Business Weekdaily Podcast. Catch us
Speaker 2: live weekday afternoons from two to five pm Eastern Listen
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Speaker 2: or watch us live on YouTube.
Speaker 3: Plenty ahead in our second hour of the weekend edition
Speaker 3: of Bloomberg Business Week, including the founder of fair Trade
Speaker 3: USA on how tariffs affect the people who grow our tea, coffee, chocolate,
Speaker 3: and so much more.
Speaker 4: Plus I know Carol's really excited for this one, and
Speaker 4: I am too.
Speaker 3: Hey, Tim, I get to talk to Kate. I'm excited.
Speaker 4: Plus Chris Rouser is going to be here as well.
Speaker 4: I know our Bloomberg Food editor, Kate Creator. She stops
Speaker 4: by with the winning formula for many of New York's
Speaker 4: trendiest restaurants, making better butter and the top snacks for
Speaker 4: certain CEOs. It's all in Bloomberg pursuits.
Speaker 3: What I love about Kate is it's always all these
Speaker 3: restaurants I want to go to, but I can't get in.
Speaker 3: That's just what it comes out to.
Speaker 2: Hey.
Speaker 3: First up this hour, though, I check on the health
Speaker 3: of an iconic California city that's still trying to recover
Speaker 3: from the pandemic.
Speaker 4: San Francisco is facing a two year budge. What's a
Speaker 4: deficit over eight hundred million dollars. On top of that,
Speaker 4: it's been grappling with a homelessness crisis and damage to
Speaker 4: its reputation as a tech industry hub.
Speaker 3: For more, and what the city is doing to revitalize
Speaker 3: the tech sector and the impact tariffs and a potential
Speaker 3: pullback that federal funding could have on the city. Bloomberg
Speaker 3: Technology co host Ludlow caught up with San Francisco Mayor
Speaker 3: Daniel Lourie.
Speaker 13: I want to get straight to the idea behind San
Speaker 13: Francisco Downtown Development Corporation. It seems like the burden sharing
Speaker 13: initiative is to get private capital to help you with
Speaker 13: a lot of what the city needs.
Speaker 12: That's absolutely right.
Speaker 14: Our business community, our nonprofit me, our arts community, we
Speaker 14: want them to be partners in San Francisco's revitalization. I'm
Speaker 14: really appreciative of the leadership of David Steepleman and that
Speaker 14: board that has formed for taking on the challenge of
Speaker 14: helping all of us bring our city back and lifted
Speaker 14: to new heights.
Speaker 13: Is the scale of the challenge, billions of dollars and
Speaker 13: who are the big names behind it.
Speaker 12: That will give you that money.
Speaker 14: Well, you've seen the board, the list of board members,
Speaker 14: but it's I don't know in terms of what they're
Speaker 14: trying to raise, if it's one hundreds of millions or not,
Speaker 14: but it's going to be private and public dollars. We
Speaker 14: have to invest in small ways in big ways. We
Speaker 14: are seeing momentum starting to build in Union Square. We
Speaker 14: just got news that Zara is launching a new flagship
Speaker 14: store forty thousands feet four stories.
Speaker 12: Nintendo is opening up.
Speaker 14: We just had a great local b petisserie, a bakery
Speaker 14: open up in Union Square. So we're seeing wins happening
Speaker 14: every single day here in San Francisco, and the Downtown
Speaker 14: Development Corporation is going to build on those, on those
Speaker 14: on those wins.
Speaker 13: This is the first time, you know, I've spoken since
Speaker 13: your election and since taking office. Prior to taking office,
Speaker 13: you really put emphasis on partners that were helping you
Speaker 13: right with the transition. Sam Outman was one name. What
Speaker 13: is your relationship like with the technology industry now and
Speaker 13: the biggest figureheads of that industry in this city.
Speaker 14: Well, we launched the Partnership for San Francisco. We have
Speaker 14: twenty eight different business leaders from tech but also from
Speaker 14: you know McKenzie and from Deloitte, and from UCSF and
Speaker 14: from the San Francisco giants. We have the business community
Speaker 14: coming together. I have said to the region, I've said
Speaker 14: to the country, and I've said to the world that
Speaker 14: we are open for business again and San Francisco is
Speaker 14: on the rise. We want a business back and we
Speaker 14: want them to be part of the community, really focused
Speaker 14: on how they can help lift up our arts and culture,
Speaker 14: our public schools and help us keep our streets safe,
Speaker 14: keep them clean, and we have gotten a tremendous response
Speaker 14: in our first ninety or so days and we look
Speaker 14: forward to partnering with them, our nonprofit community, and our
Speaker 14: friends in labor.
Speaker 12: Miss Larry.
Speaker 13: The main question I get for you from our audience
Speaker 13: is how you make San Francisco competitive for the technology
Speaker 13: industry new companies coming here versus Silicon Valley. Why bring
Speaker 13: a headquarters into the city of San Francisco or require
Speaker 13: staff to be in the city of San Francisco versus
Speaker 13: the broader Bay area.
Speaker 14: Well, first off, we're the most beautiful city in the world. Second,
Speaker 14: the horsepower is here, the intellectual horsepower is here. We
Speaker 14: have great universities, including UCSF around here, and young people
Speaker 14: want to be in.
Speaker 12: Urban environments. They want to be in San Francisco.
Speaker 14: That's been proven true throughout history, and we're going to
Speaker 14: prove that again.
Speaker 12: We have great arts and culture institutions.
Speaker 14: We were just named the culinary capital of the country,
Speaker 14: so we have so much to be proud of. And
Speaker 14: we know that workers want to be here. Our CEOs
Speaker 14: who were talking to they know that their employees want
Speaker 14: to be in San Francisco. No offense to my friends
Speaker 14: down in the Peninsula, But people live in San Francisco
Speaker 14: and we want them to work here, and we do
Speaker 14: have to get competitive, but it starts with safe and
Speaker 14: clean streets. Our property crime rates have dropped thirty five percent,
Speaker 14: Our violent crime has dropped fifteen percent. Car break ins
Speaker 14: in February the lowest in twenty two years. This is
Speaker 14: a safe American city and we want everybody coming back
Speaker 14: to work here, to play here, and to live here.
Speaker 13: It's very How is the White House and is Tariff's
Speaker 13: policy going to impact your ability to do what you've
Speaker 13: just outlined, bring more of the technology industry to the city.
Speaker 14: Well, listen, we are all and you all are reporting
Speaker 14: on it minute by minute. The uncertainty is impacting everybody
Speaker 14: around the globe, and so we have to plan for
Speaker 14: that here at city Hall. We're working with our department heads.
Speaker 14: We have a big budget deficit. We inherited one of
Speaker 14: the largest deficits in our city's history. So we're working
Speaker 14: day and night to make sure that we tighten our belts,
Speaker 14: we deliver core services to our taxpayers and to our residents,
Speaker 14: making sure that we focus on public safety, focus on
Speaker 14: the behavioral health crisis, and the drug crisis that is
Speaker 14: causing people to feel the disorder on our streets. But
Speaker 14: that is all starting to improve. And so we can
Speaker 14: only control what we can control here in San Francisco,
Speaker 14: and that's our fifteen point nine billion dollar budget. We
Speaker 14: have a one point one billion dollar budget deficit. Over
Speaker 14: the next two years. We're going to get that under control.
Speaker 12: We're going to.
Speaker 14: Fix our structural budget deficit, and I'm telling you we're
Speaker 14: then going to be off to the races.
Speaker 12: Data Bricks knows it.
Speaker 14: They just secured an office space one hundred and fifty
Speaker 14: thousand square feet open AI just open new headquarters by
Speaker 14: Chase Center. We are on the cusp of lift off
Speaker 14: here in San Francisco, and we want.
Speaker 12: Everybody to come be a part of it.
Speaker 13: The other threat of the administration is to pull federal
Speaker 13: funding from so called sanctuary cities. San Francisco included in
Speaker 13: that threat. Your response, please, may.
Speaker 14: Our policies have kept us safe, and we have once again.
Speaker 14: Our property crime is down, our violent crime is down.
Speaker 14: We are one of the safest American cities going right now,
Speaker 14: and we need to get that out into the world.
Speaker 14: And that's got to be the narrative that people here
Speaker 14: from us, and so I'm focused on making sure we
Speaker 14: keep our citizens safe.
Speaker 12: Every single day.
Speaker 14: We're making sure that we're sending a message to those
Speaker 14: that are coming here to deal drugs. We're no longer
Speaker 14: a city where you can come to deal drugs, or
Speaker 14: to do drugs on our streets, or to sleep on
Speaker 14: our streets. We had a report just that came into
Speaker 14: me this morning. We used to have a couple hundred
Speaker 14: tenths in the tenderline. We're down to seven as of yesterday.
Speaker 14: So we are making sure that our streets are safe
Speaker 14: and clean for our residents and for our taxpayers.
Speaker 12: And that's what I'm going to focus on.
Speaker 13: Trade, immigration, tariffs actions by the federal government one way
Speaker 13: or another. How concerned are you about this sort of
Speaker 13: the reputational damage to San Francisco? In other words, if
Speaker 13: you are a tourist from any other jurisdiction, Asia, Canada,
Speaker 13: Latin America, or you're an entrepreneur, a startup founder, and
Speaker 13: you look at the situation with tariffs, are you worried
Speaker 13: about how that impacts someone's perception about coming to our city.
Speaker 14: Well, I think we have been worried about that and
Speaker 14: we frankly, we lost our way for a handful of
Speaker 14: years and we took our status as a global destination
Speaker 14: for granted. And those days are over. We are focused
Speaker 14: on clean and safe streets. We're focused on winning conferences
Speaker 14: and tourists back.
Speaker 12: We just had the NBA All Star Game weekend.
Speaker 14: We have Super Bowl sixty coming, we have six World
Speaker 14: Cup matches coming. We had the thirty thousand people here
Speaker 14: for the Game Developers Conference. We have so many green
Speaker 14: shoots in San Francisco. I can't wait to welcome more
Speaker 14: people from around the world. We're going to go visit
Speaker 14: different places in Europe and in Asia and invite people
Speaker 14: back to San Francisco because they are starting to hear
Speaker 14: the message from our administration that San Francisco is open
Speaker 14: for tourism, we're open for business, and that we are
Speaker 14: a city on the rise. Those days, that narrative that's
Speaker 14: from a few years ago. We have a whole new
Speaker 14: story here in San Francis and that's one of being
Speaker 14: on the rise. And there's no better place to do
Speaker 14: business or to visit than San Francisco right now.
Speaker 4: That was Bloomberg Technologies Ed Ludlow with San Francisco Mayor
Speaker 4: Daniel Larry.
Speaker 3: You're listening to Bloomberg Business Week. Coming up, the founder
Speaker 3: of fair Trade USA on how tariffs affect the people
Speaker 3: who grow the things we love, you know, tea, coffee, chocolate. Yeah,
Speaker 3: I love chocolate and so much more.
Speaker 4: This is Bloomberg.
Speaker 2: You're listening to the Bloomberg Business Weekdaily Podcast. Catch us
Speaker 2: live weekday afternoons from two to five pm Eastern. Listen
Speaker 2: on Apple CarPlay and Android Auto with the Bloomberg Business app,
Speaker 2: or watch US live on YouTube.
Speaker 4: Well, farmers are worried that Trump's trade war with China
Speaker 4: could cause disastrous consequences for their ability to sell soybeans.
Speaker 4: Even before the current administration took the rains, farmer income
Speaker 4: had been under pressure for a couple of years as
Speaker 4: the cost of seeds, fertilizer, and equipment went up and
Speaker 4: crop prices decline. That's what's going on here in the
Speaker 4: US with this trade war exactly. We want to go
Speaker 4: outside of the US and talk to somebody who spent
Speaker 4: his career thinking about where products, where commodities come from,
Speaker 4: who brings them to us, how they're compensated, and the
Speaker 4: working conditions of those individuals. Paul Rice is the founder
Speaker 4: of fair Trade USA. It's the nonprofit fair trade certifier
Speaker 4: he started nearly thirty years ago. The organization says that
Speaker 4: a product is a fair Trade certified and that means
Speaker 4: that it was quote made according to rigorous standards that
Speaker 4: protect the livelihoods of farmers, fishers, and other producer communities
Speaker 4: and the environment. He's got a new book out. It's
Speaker 4: called Every Purchase Matters How fair Trade farmers, companies, and
Speaker 4: consumers are changing the world. He joins us from Berkeley, California. Paul,
Speaker 4: great to have you. Congratulations on the new book. It's
Speaker 4: perfect to have somebody who understands trade and tariffs. You
Speaker 4: certainly understand these things. What is your view on tariff
Speaker 4: specifically with regard to the world where you've spent the
Speaker 4: last thirty years.
Speaker 7: Well, tariffs are bad. There's no other there's no other
Speaker 7: way to put it. Tariffs are dumb and they're going
Speaker 7: to hurt a lot of people. They're going to hurt
Speaker 7: American consumers as we all know, because the cost of
Speaker 7: things that we buy are going to go up, and
Speaker 7: it's going to hurt American business because there's retaliatory tariffs.
Speaker 7: I recently spoke with a US company that sells about
Speaker 7: forty percent of their roasted coffee into Canada. Retaliatory tariffs
Speaker 7: are going to make it harder for him to do that.
Speaker 7: And finally, tariffs are bad for sustainability.
Speaker 6: Oh interesting.
Speaker 7: The onus is going to be pushed back onto a
Speaker 7: lot of developing world farmers and factory owners to absorb
Speaker 7: some of that extra cost, and it's going to pressure
Speaker 7: a lot of people to cut back on sustainability measures
Speaker 7: that you know, things like installing solar panels or you know,
Speaker 7: providing better housing for workers. So all the way around,
Speaker 7: tariffs are bad.
Speaker 4: One of the reasons we wanted to speak to you
Speaker 4: is because the products that we see the fair trade
Speaker 4: certification on are often products that you can only get
Speaker 4: outside of the United States. And I think it's fair
Speaker 4: to say the reason the President wants to impose these
Speaker 4: tariffs are because he has, in his view, the US
Speaker 4: has been treated unfairly when it comes to trade. He
Speaker 4: wants to see manufacturing specifically and production specifically move back
Speaker 4: to this country. Is there a disconnect in your view
Speaker 4: given that some of the stuff that could see tariffs
Speaker 4: on it, you can't actually produce here in the US. Like,
Speaker 4: help me make sense of that?
Speaker 7: Yeah, a huge disconnect. I mean, seventy percent of Americans
Speaker 7: drink coffee. The US can't grow coffee, right, Coffee comes
Speaker 7: from Latin America and Asia and Africa. And you know, similarly,
Speaker 7: eighty percent of Americans eat bananas. Guess what, we don't
Speaker 7: grow bananas in the US. We import them. So tariffs
Speaker 7: are going to hurt Americans because all of those things
Speaker 7: that we love to drink and eat, like coffee and bananas,
Speaker 7: the price of those are going to go up. But furthermore,
Speaker 7: you know, tariff's are really going to hurt those farmers
Speaker 7: around the world. And so you know what is quite
Speaker 7: possible is that a lot of those businesses are going
Speaker 7: to fail because they cannot absorb the tariff, which means
Speaker 7: more workers out of work. I mean, imagine what happens
Speaker 7: if unemployment goes up in Mexico. What kind of pressure
Speaker 7: that puts on the southern border. There's nothing good about
Speaker 7: this whole tariff policy.
Speaker 3: Now when I think about Paul Supermarket, certainly here in
Speaker 3: the United States, they live on such slim margins, so
Speaker 3: they have no choice but to pass any additional cost
Speaker 3: off to consumers.
Speaker 7: Correct, either they'll pass it on to the consumer or
Speaker 7: they'll push it back onto the producer. And that's what
Speaker 7: I mean by you know, companies in Mexico, for example,
Speaker 7: going belly up or having to lay off workers. If
Speaker 7: you know, if Whole Foods or Costco or Walmart decides
Speaker 7: to push some of that extra cost back on to
Speaker 7: the producer, then we're going to see some severe business
Speaker 7: uh disruption south of the border, which is not going
Speaker 7: to help our our national situation at all. And on
Speaker 7: the you know, similarly, even if it all gets passed
Speaker 7: on to consumers with prices already high, will consumers pay
Speaker 7: more for imported strawberries or tomatoes, or coffee or bananas.
Speaker 7: I don't know, you know, I think it's quite possible
Speaker 7: the demand goes down, which means a ripple effect around
Speaker 7: the world that you know it's going to it's going
Speaker 7: to be a tremendous hardship for a lot of people.
Speaker 3: Well, that brings us to your book, And as we said,
Speaker 3: it's entitled every purchase Matters how fair trade, farmers, companies,
Speaker 3: and consumers are changing the world. Fair trade I think
Speaker 3: it's thrown around. I think we'd like to buy fair
Speaker 3: trade goods, but explain to the world, just remind them
Speaker 3: what fair trade is all.
Speaker 4: And you're talking when you ask the question, Carol, you're
Speaker 4: asking about fair trade like capital F capital T fair trade,
Speaker 4: not the concept of.
Speaker 3: Fair trade, no exactly, which is something the president might use.
Speaker 3: But no, what fair trade?
Speaker 7: Fair trade certified?
Speaker 12: There?
Speaker 10: It is.
Speaker 3: What gets that certification, What has to happen in order
Speaker 3: to get it.
Speaker 7: Yeah, So fair trade is a rigorous two hundred point
Speaker 7: checklist of social, labor and environmental criteria that farms and
Speaker 7: factories meet and get audited against every year in order
Speaker 7: to wear the fair trade certified label. And on this
Speaker 7: side of the market, our you know, two thousand plus
Speaker 7: market partners from Whole Foods to Target to Walmart all
Speaker 7: agree to pay a small premium back to those farmers
Speaker 7: and workers, which they then can invest in healthcare and
Speaker 7: education and better housing. So fair trade, you know, through
Speaker 7: the lens of global development, it's a market based approach
Speaker 7: to global poverty and to protecting the planet for us
Speaker 7: the consumer. Increasingly, consumers want to know that there's no
Speaker 7: child labor in our chocolate bar and that the environment
Speaker 7: wasn't destroyed in the production of our coffee. So fair
Speaker 7: trade is a way that we as consumers can feel
Speaker 7: reassured that the products we're consuming are produced in a
Speaker 7: responsible and sustainable way.
Speaker 4: What are the checks that are in place to make
Speaker 4: sure these sustainable practices are followed when the folks from
Speaker 4: your organization are not watching, when they're not there visiting
Speaker 4: these plants.
Speaker 7: So our one million plus farms and factories are audited
Speaker 7: every year. The auditors talk with the workers, they may
Speaker 7: visit the production sites. They do a rigorous inspection, and
Speaker 7: that happens every year. And in addition, of course, all
Speaker 7: of the brand partners or many of the brand partners
Speaker 7: are visiting those farms and factories every year. So it's
Speaker 7: an incredibly rigorous oversight. And the producers, for their own part,
Speaker 7: tend to be producers that are really bought into the
Speaker 7: notion of greater responsibility and the getting this premium, So
Speaker 7: producers don't want to run the risk of losing the
Speaker 7: annual premium they get. So there's a real alignment of
Speaker 7: incentives where the producer, the farmer, or the factory owners
Speaker 7: get more money, the brands get a more secure and
Speaker 7: reliable supply. Chain, and the consumer gets a product that
Speaker 7: makes us feel good because it's helping lift workers out
Speaker 7: of poverty, it's ensuring fair wages, and it's helping to
Speaker 7: protect the environment.
Speaker 3: I didn't know Driscolls had kind of gone through a
Speaker 3: little bit of a path. Driscals. I think about strawberries
Speaker 3: right like I.
Speaker 4: Mean, every berry, every berry is just close.
Speaker 3: It's the organic, it's the non organic. We are Bloomberg,
Speaker 3: and you know, we think, Tim and I think a
Speaker 3: lot about profitability. Obviously right here we are in earning season,
Speaker 3: but at the same time, the ability to be a
Speaker 3: good company, be a good corporate citizen. Do well, what
Speaker 3: is kind of the financial story of sustainability or fair
Speaker 3: trade practices?
Speaker 7: Yeah, I love I love this question, you know, because
Speaker 7: I spent eleven years working with coffee farmers in the
Speaker 7: mountains of Nicaragua in my twenties and then moved back
Speaker 7: here to start fair trade. And I've always felt that
Speaker 7: fair trade would never work for the farmers if it
Speaker 7: didn't also work for business. So I've spent you know,
Speaker 7: the better part of the last thirty years working directly
Speaker 7: with companies to develop a strong business case for sourcing
Speaker 7: in a more sustainable way, not just because it's the
Speaker 7: right thing to do, but because it creates value for
Speaker 7: the firm, right what Michael Porter at Harvard calls shared value.
Speaker 6: Right.
Speaker 7: So there's value for the farmer, for the worker, for
Speaker 7: the planet, but also there's supply chain resilience for the company,
Speaker 7: there's brand differentiation for the company, and there's you know,
Speaker 7: that emotional gratification as a consumer that we feel when
Speaker 7: we buy something knowing that it did no harm. Give
Speaker 7: you a recent example, Walmart piloted fair trade tomatoes and
Speaker 7: saw their sales go up by three percent when the
Speaker 7: label went on the package. Now, who would have thought
Speaker 7: that a Walmart consumer would care about tomato farm workers
Speaker 7: in the developing world, And in fact they do. And
Speaker 7: so it's just an indication of the business case for
Speaker 7: fair trade right that consumers are moving in this direction.
Speaker 7: They're voting with their dollars, if you will, for the
Speaker 7: kind of world they want to see. They're looking for
Speaker 7: more socially and environmentally responsible products. And quite frankly, this
Speaker 7: macro trend is politics proof. I just wrote a piece
Speaker 7: for a Wall Street Journal and OpEd piece entitled will
Speaker 7: sustainability survive Trump's second term? And the reality is the
Speaker 7: business community is moving in this direction, not just because
Speaker 7: it's the right thing to do, but because it's better business,
Speaker 7: and it is better for business.
Speaker 4: Paul, is there anything that cannot be produced, in your view,
Speaker 4: in a fair trade way right now?
Speaker 3: Can an iPhone? I don't even know that.
Speaker 7: We would love to work with Apple on fair trade iPhones.
Speaker 7: We're not there yet. But over the last twenty six years,
Speaker 7: you know, we started with coffee, and then year after
Speaker 7: year we engaged with lighthouse brands, pioneering brands who wanted
Speaker 7: to take us into their industry. So now we work
Speaker 7: in apparel, we work in cosmetics, we work in you know,
Speaker 7: in furniture with Williams Sonoma Inc. And we're certifying seafood,
Speaker 7: we're certifying dairy. We sort of buy farms and factories
Speaker 7: in the US now, not just abroad. And so you know,
Speaker 7: our vision is fair trade for all, and it's the
Speaker 7: notion that any and all supply chains, domestic or international,
Speaker 7: can be can embrace responsible sourcing practices. And so yeah,
Speaker 7: stay tuned. Maybe next year you'll bring me on when
Speaker 7: we have fair trade iPhones.
Speaker 3: All right, we will do that. We will do that,
Speaker 3: We will hold you to it, Paul, Thank you so much.
Speaker 3: Paul Rice glad we could finally get to you, founder
Speaker 3: of Fairtrade USA. His book Every Purchase Matters How fair
Speaker 3: trade farmers, companies, and consumers are changing the world.
Speaker 2: This is the Bloomberg Business Week Daily Podcast. Listen live
Speaker 2: each weekday starting at two pm Eastern on Apple car
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Speaker 2: New York station, Just Say Alexa play Bloomberg eleven.
Speaker 3: Thirty, a carefully selected playlist, soft golden lighting, old school
Speaker 3: Gotham decor, and waiters with studiously casual attitudes count me in.
Speaker 3: It's just some of the things many New York City
Speaker 3: restaurants are doing just to become the buzziest place in
Speaker 3: the city, and places I probably can't get into.
Speaker 4: I mean, waiters with cool sweaters who you want to
Speaker 4: hang out with. Totally with us on that and more.
Speaker 4: Is the editor of Bloomberg Pursuits, Chris Rouser and Bloomberg
Speaker 4: Pursuits Food editor Kate Crator. She is calling in from London. Kate,
Speaker 4: how do you get a reservation at one of the
Speaker 4: buzziest restaurants in the buzziest city for food in the
Speaker 4: entire we we just cut.
Speaker 3: To the Chase man him.
Speaker 11: You're asking the right question, and I wish I could
Speaker 11: say it's like patience practice, but you know what you do.
Speaker 11: You have to be intrepid. You have to be ready
Speaker 11: to stand on a line at five o'clock at some
Speaker 11: of these places. Because it's not at tree c which
Speaker 11: is an offsit of Carbone, which everybody knows is one
Speaker 11: of the toughest reservations in New York. Treecy is that
Speaker 11: on blasts they have they can have up to seven
Speaker 11: four hundred people on a wait list on any given night,
Speaker 11: so you're you're going to have a lot of company
Speaker 11: when you try to get in.
Speaker 4: Well, it's completely insane. The reason we're talking to Kate
Speaker 4: about getting a reservation at one of the hottest restaurants
Speaker 4: in the hottest city for food right now, which Kate
Speaker 4: argues is actually New York City, which it is is
Speaker 4: because this is the Pursuit's food issue. Chris Rouser is
Speaker 4: the editor of Bloomberg Pursuit. It's when you put together
Speaker 4: something like this, Chris, what do you want to include?
Speaker 15: Kate and I sit down. Let's I want to say
Speaker 15: six months ago, but really it was. And yeah, you know,
Speaker 15: sometimes at Tercy and we talk about coming up with
Speaker 15: a great mix of stories about food, drinks, and restaurants,
Speaker 15: and sometimes there's a bit of cooking. Sometimes there's a
Speaker 15: bit of buying the stuff that you eat your food
Speaker 15: off of. And this year we wanted to open up
Speaker 15: with a story about hot restaurants because New York really
Speaker 15: is having like a hot restaurant moments. It's been a
Speaker 15: long time since we've had so many buzzy restaurants that
Speaker 15: people are killing themselves to get into, because you know,
Speaker 15: since the pandemic, we had a long recovery in terms
Speaker 15: of restaurants in the city and now it's just like
Speaker 15: it has not been this way in decades.
Speaker 3: Okay, that's where I want to go. I remember like
Speaker 3: talking to you just at the start of the pandemic
Speaker 3: and through it and just kind of like your heart
Speaker 3: was broken, because like there was just such a moment
Speaker 3: in New York City in terms of restaurants, like a
Speaker 3: real and the pandemic just kind of killed it.
Speaker 11: You're exactly right, And especially now on the side of
Speaker 11: the pandemic, people are still craving social interaction, and in
Speaker 11: the city like New York where people have microscopic kitchens
Speaker 11: and no places, you know, they entertain in restaurants and
Speaker 11: they want to hang out in restaurants, and that's just
Speaker 11: been put on blast in the past couple of years.
Speaker 11: And right now it's just Simon Kim who has like
Speaker 11: two of New York's tighest restaurants. One's called Koko Doc
Speaker 11: and the other is Coat. It's this really groovy Korean restaurant.
Speaker 11: He said it so well. He said, you can have
Speaker 11: like an MX Black card or whatever's the highest card.
Speaker 11: You could have the most power JP Morgan account, but
Speaker 11: nothing says you have social clout like an eight pm
Speaker 11: reservation of these places. And it's true, It's totally.
Speaker 12: True, so true, Kate.
Speaker 15: One of the things that I loved in the story
Speaker 15: is when you talk to Angie Rito, who is the
Speaker 15: co chef and co owner of Don Angie, and she
Speaker 15: made the point that because of Instagram and TikTok and
Speaker 15: other social media, so many more people have a view
Speaker 15: into these restaurants and feel like they should be able
Speaker 15: to participate in these cool restaurants. So like Don Angie
Speaker 15: has this amazing lasagna where and if you look at it,
Speaker 15: it's these spirals and everyone takes a picture of it,
Speaker 15: and then everyone's like, oh my god, how'd you get in?
Speaker 15: It just has brought the community of people to a
Speaker 15: much bigger level, and then so the competition to get
Speaker 15: in is so much deeper, right.
Speaker 11: Yeah, I know that's an excellent point. It really has broadened.
Speaker 11: TikTok has been its we sort of call it the
Speaker 11: TikTok effect, and you know, you just say it and
Speaker 11: you think social media, but really what that's done is
Speaker 11: created an even bigger ground swell, and you have people
Speaker 11: who are willing to stay online. You know, like maybe
Speaker 11: maybe a lot of finance people want to have that
Speaker 11: eight pm reservation, but you have this whole universe of
Speaker 11: other people who have seen it now, who've seen like
Speaker 11: this food, like those awesome lasagna pin wheels that Chris
Speaker 11: just talked about, and they think I want that, like
Speaker 11: I want to taste it, I want to take a
Speaker 11: picture of it, And that has indeed expanded the all exponentially.
Speaker 4: They are these sort of sort of commonalities that you
Speaker 4: find in these restaurants right now that didn't exist a
Speaker 4: few years ago. I mean, you talk about the idea
Speaker 4: of waiting fifteen minutes to order a drink at a
Speaker 4: restaurant a few years ago. That's not the service that
Speaker 4: you get right now. There's a lot of culling that
Speaker 4: happens right now. What's the environment, what are the commonalities there?
Speaker 11: Yeah, that's another good point these places. It used to
Speaker 11: be like at a place like Balsazar, which is historically
Speaker 11: one of the cities like hot dining rooms and hangouts,
Speaker 11: there would be a huge crowd at the bar. But
Speaker 11: at a place like the Corner Store, which is another
Speaker 11: one of these super hot restaurants, you can't get past
Speaker 11: the matre d. You can't get past the front door
Speaker 11: if you don't have a reservation, because they don't want
Speaker 11: a stacked bar. They want everyone to feel like they're
Speaker 11: having a great time. They don't want them to be jostled,
Speaker 11: but they want them One thing that's also was one
Speaker 11: thing I learned from reporting the story is both rich
Speaker 11: Teresa who has that restaurant Tarsi, and then Eugene Ram
Speaker 11: who has the Corner Store. We're saying they treat every
Speaker 11: night like a play, like a musical, and you're the star.
Speaker 11: You're the customer or the star every night, and so
Speaker 11: it's all really well orchestrated. And if you want it
Speaker 11: to be a fantastic night for people, you don't want
Speaker 11: them to be waiting twenty minutes to get their martini.
Speaker 3: I thought what was interesting too, is that, right, there's
Speaker 3: one thing to kind of have a lot of buzz
Speaker 3: in the beginning, right, and everybody wants to go. But
Speaker 3: the real struggle or the real mission is to kind
Speaker 3: of keep that buzz going. And so these restaurants though,
Speaker 3: have to make sure they cultivate some regulars.
Speaker 11: Right, Yeah, no exactly, And that's one thing. Bridges Downtown
Speaker 11: yet another one of these restaurants, which is right in
Speaker 11: the corner of Chinatown. So it's not like a power
Speaker 11: neighborhood necessarily, although it's become quite cool, but they always
Speaker 11: leave room for walkins because they want to have a
Speaker 11: neighborhood crowd and they know that. They know that. You know,
Speaker 11: if you're shy, if you're like cooking on like a
Speaker 11: white hot flame, at some point that flame it can't last.
Speaker 11: So you want to have like steady heat, and you
Speaker 11: want that just to go on and on. And that's
Speaker 11: what's happened to don Angie. Like it's been around like
Speaker 11: for eight years maybe now, and it's still going strong,
Speaker 11: and it still has like super crowds of people trying
Speaker 11: to get in or who want to get in, and
Speaker 11: it has like very loyal following. And the way you
Speaker 11: do that is by making customers feel special all the
Speaker 11: time every night.
Speaker 15: I recently went to don Angie and the food is incredible. No,
Speaker 15: it's just like it's so good after all this time.
Speaker 15: And a lot of it is the vibes as Kate's describing,
Speaker 15: Like you go in, it's a lovely experience walking in,
Speaker 15: and then the staff is really nice. It's not that
Speaker 15: vibe of a sort of oh, I'm in a really
Speaker 15: fancy French restaurant and like the waiters have accents and
Speaker 15: I don't know what to say and I'm using the
Speaker 15: wrong utensils. Like it's very casual. The lighting is super
Speaker 15: golden and warm. Everyone looks great. The food is often
Speaker 15: comfort food, so like at Corner Store, there are these
Speaker 15: amazing like pizza rolls, which is like the very best
Speaker 15: version of like a Totono's pizza roll in your story
Speaker 15: and it's just and Teresa, is that too? It's that's
Speaker 15: these comfort food things with a twist, and it just
Speaker 15: is such a nice, relaxing, unfussy vibe.
Speaker 3: All Right, I gotta talk about it. We gotta talk
Speaker 3: about butter, because I gotta tell you, one of my
Speaker 3: favorite things is a good glass of red wine, some
Speaker 3: great like fresh warm bread and butter, and I love
Speaker 3: butter with olive oil. What the heck's going on with butter, Kate,
Speaker 3: I can't believe it's butter.
Speaker 11: Yeah, that would have been a good headline for this too.
Speaker 11: Butter butters, butters having a good moment, and boy especially
Speaker 11: is having a good moment. They're called compound butters or
Speaker 11: flavor flavored butters, and chefs are using them a sort
Speaker 11: of a shortcut, a secret weapon. The cheff Laurent Torundel,
Speaker 11: who has Lamico in New York and then also Elsie
Speaker 11: Steak and Seafood down in Miami. It's really popular, like
Speaker 11: hangout on Miami Beach. He uses he makes a cowboy
Speaker 11: butter that's got like all these herbs and some spices
Speaker 11: in it, and he plops it on every steak and
Speaker 11: it's just instead of like worrying about all these sauces,
Speaker 11: it's something you can make ahead. It cuts your kitchen time,
Speaker 11: it probably cuts labor down to and so it's become
Speaker 11: a sort of secret weapon that chefs are doing. At
Speaker 11: this restaurant in La Joya called the Coke, they do
Speaker 11: a chicken skin like they make this like awesome, like
Speaker 11: like fry fry fried chicken skin and then make that
Speaker 11: a butter that they serve with bread. And so you think,
Speaker 11: like bread service is fine as it is, and then
Speaker 11: you get to have this next level butter and you
Speaker 11: think and then that changes everything.
Speaker 15: That's that sounds so incredible.
Speaker 4: Plus you're in La Joya.
Speaker 3: Do you know? That's what's interesting too, is I have
Speaker 3: noticed at restaurants that there's like often a bread meat
Speaker 3: like choice, right, and there's like different butters with it
Speaker 3: or something. It's like become a thing. Hey, just thirty
Speaker 3: seconds the hotel dinner party, what's going on?
Speaker 11: Yeah, I think that's I think that's another really fun trend.
Speaker 11: You know, it used to be that hotels went out
Speaker 11: of their way to keep to keep people separate, you know,
Speaker 11: to not to make sure you didn't have to sit
Speaker 11: with somebody else. But now they're mixing it up and
Speaker 11: they're doing it everywhere, Like in Florence at twenty five
Speaker 11: hours they have a new hotel there or a newishowell there,
Speaker 11: but they they installed that star butcher, Dario Tuccini, and
Speaker 11: they do they have like a big table and they
Speaker 11: have one seating a night, and so you can have
Speaker 11: these sort of like jet lag tourists sitting down with
Speaker 11: locals who think he's the local butcher. And so you
Speaker 11: have all these fun conversations and it fosters, like, you know,
Speaker 11: a sense of authenticity and experience, which is what so
Speaker 11: many people want when they travel. So it's just a
Speaker 11: super added bonus. It's really fun thing to look out
Speaker 11: for now.
Speaker 3: And I gotta say, there's also a section and when
Speaker 3: the boss has a snack attack and it you guys
Speaker 3: talk to some executives and what they like everything from
Speaker 3: Dorita's to nuts.
Speaker 11: And so and so that guy wants peanut butter.
Speaker 15: All these CEOs came back with like gorp and dried magagos.
Speaker 15: And I was like, Kate, find somebody who eats Dorito's.
Speaker 2: It's true, a real person.
Speaker 3: Okay, what's your favorite snack when you get hungry at work?
Speaker 2: You know what?
Speaker 11: That's a funny, Like I was thinking about that when
Speaker 11: Chris said that, because I was like, I think officially,
Speaker 11: like on the record, I would be like, oh I
Speaker 11: reach for some carrots, but you know I would I
Speaker 11: can find I would like look for the best chocolate situation.
Speaker 15: I could find, Chris Browser, mine's the chocolate covered almonds
Speaker 15: that they have upstairs.
Speaker 4: Only, but that only comes out in the afternoon when
Speaker 4: we're on air.
Speaker 6: So yeah, so next.
Speaker 4: Time you will you please delivery? Returning to we're not
Speaker 4: joking Carol Masser, I know it's cheerios for Carol.
Speaker 3: I do love cheerios. And you know what, Tim Tim
Speaker 3: Moore in the studio doing our live show, and he
Speaker 3: like pulls out a sandwich.
Speaker 4: Yeahiled eggs, My snacks are full meals.
Speaker 3: It's like I look at him and he's got this
Speaker 3: whole thing full sandwich. Kate Creator, you have made our day,
Speaker 3: our week, our month.
Speaker 11: He've made my day. Oh my god. Yeah, I'm floating.
Speaker 3: Be well, Be well, kiddo. Our thanks to both of them,
Speaker 3: Dynamic duo. We love talking with Chris Rouser. He's Bloomberg
Speaker 3: Pursuits editor and of course Bloomberg Pursuits Food editor. Kate
Speaker 3: Crator joining us from Lennon. Guys, thank you so much.
Speaker 11: See you in New York restaurant. Bye.
Speaker 10: Hi.
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