1 00:00:04,760 --> 00:00:08,080 Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim Fox. 2 00:00:08,119 --> 00:00:11,200 Speaker 1: Along with my co host Lisa Abramowitz. Each day we 3 00:00:11,280 --> 00:00:14,480 Speaker 1: bring you the most important, noteworthy, and useful interviews for 4 00:00:14,520 --> 00:00:16,880 Speaker 1: you and your money, whether at the grocery store or 5 00:00:16,920 --> 00:00:20,680 Speaker 1: the trading floor. Find the Bloomberg P L Podcast on iTunes, 6 00:00:20,840 --> 00:00:29,360 Speaker 1: SoundCloud and at Bloomberg dot com. Well, we talk a 7 00:00:29,360 --> 00:00:32,680 Speaker 1: lot about healthcare these days and how it may change 8 00:00:32,880 --> 00:00:37,400 Speaker 1: due to UH new congressional efforts. But here someone is 9 00:00:37,760 --> 00:00:39,720 Speaker 1: living with it and is in our studio right now. 10 00:00:39,760 --> 00:00:43,839 Speaker 1: Alan Miller, chief executive officer of Universal Health Services, which 11 00:00:43,920 --> 00:00:46,400 Speaker 1: is based in King of Prussia, Pennsylvania. But he is 12 00:00:46,479 --> 00:00:48,879 Speaker 1: here with us in our Bloomberg eleven three oh studio. 13 00:00:48,960 --> 00:00:51,879 Speaker 1: Thank you so much for joining us, Allen. Um. I 14 00:00:51,920 --> 00:00:56,160 Speaker 1: want to start with your company, Universal Health. It shares 15 00:00:56,200 --> 00:01:00,320 Speaker 1: her up almost eight so far this year. This doesn't 16 00:01:00,320 --> 00:01:02,680 Speaker 1: really jibe with a lot of what we hear about 17 00:01:02,680 --> 00:01:04,920 Speaker 1: the health care sector and how depressed it's been. What 18 00:01:05,040 --> 00:01:07,160 Speaker 1: is your company doing? That has sort of led to 19 00:01:07,160 --> 00:01:09,360 Speaker 1: these Well, we're not. We've been in business for thirty 20 00:01:09,400 --> 00:01:15,080 Speaker 1: eight years. UM, we've grown every year. UM. We UM 21 00:01:15,400 --> 00:01:20,760 Speaker 1: are diversified, we are in acute care. We're in behavioral health. 22 00:01:21,240 --> 00:01:24,120 Speaker 1: We're a leader in the nation and behavioral health, and 23 00:01:24,200 --> 00:01:28,720 Speaker 1: we are international in the UK. We've been growing there, 24 00:01:29,160 --> 00:01:35,679 Speaker 1: so it's a nice diversified mix. We've done well financially. UM. 25 00:01:35,760 --> 00:01:39,640 Speaker 1: We are in fast growing markets. That's our strategy. UH. 26 00:01:39,680 --> 00:01:44,080 Speaker 1: And we're reliable. People know the company. UM. We are conservative. 27 00:01:44,480 --> 00:01:49,360 Speaker 1: UM Our debt is less than FI many others are 28 00:01:49,600 --> 00:01:53,360 Speaker 1: much much more leverage. So we've been doing this for 29 00:01:53,400 --> 00:01:57,160 Speaker 1: a long time and I think people have become aware 30 00:01:57,200 --> 00:01:59,720 Speaker 1: of us and they're comfortable that we're going to continue. 31 00:02:00,040 --> 00:02:03,120 Speaker 1: Know we're gonna get to the political side of this 32 00:02:03,240 --> 00:02:05,640 Speaker 1: in a minute, but I want to just touch on 33 00:02:05,840 --> 00:02:10,120 Speaker 1: the situation for hospitals in general, acute care hospitals across 34 00:02:10,120 --> 00:02:13,800 Speaker 1: the country. We've heard a lot about, UH, the vacancy 35 00:02:13,919 --> 00:02:18,240 Speaker 1: rates in beds, the fact that reimbursements from medicated Medicare 36 00:02:18,280 --> 00:02:22,040 Speaker 1: have been challenging. UH. And I'm wondering, would you buy 37 00:02:22,440 --> 00:02:25,440 Speaker 1: an acute care hospital right now? We do. We just 38 00:02:25,480 --> 00:02:29,800 Speaker 1: built one. Yeah, we we just opened Henderson in Las Vegas. 39 00:02:30,280 --> 00:02:35,400 Speaker 1: It is our sixth acute care hospital in Las Vegas. UM. 40 00:02:35,400 --> 00:02:38,679 Speaker 1: It is doing very well. We opened two years ago 41 00:02:38,760 --> 00:02:43,359 Speaker 1: we opened into Mecuela in southern California. It's doing very well. 42 00:02:43,440 --> 00:02:46,680 Speaker 1: Oh yes, we we buy hospitals and we build hospitals. 43 00:02:46,680 --> 00:02:48,640 Speaker 1: So what's this you here? Why do we hear so 44 00:02:48,720 --> 00:02:53,120 Speaker 1: much talk about the decline in hospitals. I don't understand 45 00:02:53,200 --> 00:02:57,800 Speaker 1: that UM other than UM people are reflecting the fact 46 00:02:58,280 --> 00:03:05,440 Speaker 1: that perhaps I'm sure UM Obamacare UM ensured twenty to 47 00:03:06,520 --> 00:03:11,040 Speaker 1: million people who did not have insurance before, and so 48 00:03:11,160 --> 00:03:15,399 Speaker 1: that has been very good for the hospitals because obviously 49 00:03:15,440 --> 00:03:18,440 Speaker 1: when these people present themselves at a hospital, they have 50 00:03:18,560 --> 00:03:21,200 Speaker 1: some sort of ability to pay where they may have 51 00:03:21,320 --> 00:03:24,120 Speaker 1: not been able to do that in the past. So 52 00:03:24,160 --> 00:03:28,919 Speaker 1: that's certainly very positive if your patients can pay. And 53 00:03:29,200 --> 00:03:35,720 Speaker 1: UM now with Obamacare in question because of the Republican 54 00:03:35,800 --> 00:03:40,320 Speaker 1: parties saying that they would replace it, UH and their 55 00:03:40,360 --> 00:03:44,480 Speaker 1: efforts have not been successful. At the first crack and 56 00:03:45,200 --> 00:03:48,360 Speaker 1: UM without going through all of it, which I am 57 00:03:48,440 --> 00:03:53,680 Speaker 1: very familiar with, UM, it did it did tend. It's complicated, 58 00:03:53,680 --> 00:03:59,560 Speaker 1: it did tend to UM reduce coverage. That's what the 59 00:03:59,560 --> 00:04:03,160 Speaker 1: big A back was, and a lot of people, including 60 00:04:03,520 --> 00:04:08,640 Speaker 1: many Republicans in Congress, said we can't stop coverage or 61 00:04:08,680 --> 00:04:13,680 Speaker 1: withdraw coverage, um from all these people that needed everyone 62 00:04:13,680 --> 00:04:17,240 Speaker 1: should have coverage. Have any Republican leaders reached out to 63 00:04:17,400 --> 00:04:20,520 Speaker 1: you to ask you advice on how to reshape or 64 00:04:20,839 --> 00:04:23,920 Speaker 1: fine tune? Well, yes, Um, I wrote a book a 65 00:04:24,000 --> 00:04:26,680 Speaker 1: number of years ago, and a number of those things, 66 00:04:27,000 --> 00:04:29,559 Speaker 1: um or a number of the suggestions in the book 67 00:04:30,279 --> 00:04:34,120 Speaker 1: are still applicable. One of them is selling across state lines. 68 00:04:34,160 --> 00:04:37,359 Speaker 1: And you see that now, because that would get the 69 00:04:37,360 --> 00:04:41,159 Speaker 1: insurance companies more competitive and they more of them would 70 00:04:41,200 --> 00:04:44,880 Speaker 1: come into every market. So that makes a lot of sense. Um. 71 00:04:44,920 --> 00:04:49,760 Speaker 1: I've always been very keen on tort reform because trial 72 00:04:49,880 --> 00:04:55,640 Speaker 1: lawyers should not be uh involved in premiums of insurance 73 00:04:56,120 --> 00:04:59,520 Speaker 1: and then needs to be a tort reform um on 74 00:04:59,560 --> 00:05:02,400 Speaker 1: a nationtional basis, state by state. It's happened, Just to 75 00:05:02,440 --> 00:05:06,480 Speaker 1: be clear, this is in order to cap potential medical practice. 76 00:05:06,680 --> 00:05:11,560 Speaker 1: Laws of them give some sense of the premiums for say, 77 00:05:11,960 --> 00:05:14,159 Speaker 1: you know a neurosurgeon, it's something like a hundred thousand 78 00:05:14,240 --> 00:05:16,760 Speaker 1: dollars a year or something to ensure yourself, right, it's something, 79 00:05:16,839 --> 00:05:20,760 Speaker 1: it's something pretty pretty tremendous. It's it's it's it's outrageous 80 00:05:20,800 --> 00:05:28,760 Speaker 1: only because of the trial lawyers and UM situations where 81 00:05:28,800 --> 00:05:32,640 Speaker 1: there's no cap on pain and suffering. We're not talking 82 00:05:32,680 --> 00:05:38,599 Speaker 1: about UM people being reimbursed for care. We're talking about 83 00:05:39,279 --> 00:05:45,560 Speaker 1: UM an outrageous situation in most cases where UM trial 84 00:05:45,640 --> 00:05:49,400 Speaker 1: lawyers are are driving up insurance premiums. What about drug prices? 85 00:05:49,440 --> 00:05:52,440 Speaker 1: There's been so much discussion about how high the cost 86 00:05:52,560 --> 00:05:55,800 Speaker 1: is for pharmaceuticals. Do you feel like this issue is 87 00:05:55,839 --> 00:06:00,000 Speaker 1: something that is overblown. Do you think that there are 88 00:06:00,040 --> 00:06:03,000 Speaker 1: many savings that could come from some kind of agreement? 89 00:06:03,240 --> 00:06:06,520 Speaker 1: I think what should happen, Well, what could happen is 90 00:06:06,880 --> 00:06:11,799 Speaker 1: let the federal government UM and negotiate with the farmer 91 00:06:11,880 --> 00:06:16,600 Speaker 1: industry UM. We buy out of a cooperative and so 92 00:06:16,680 --> 00:06:21,560 Speaker 1: we do negotiate UM on an industry wide basis UM 93 00:06:21,600 --> 00:06:25,120 Speaker 1: based on volume. Other than that, I'm not an expert. 94 00:06:25,160 --> 00:06:28,040 Speaker 1: On hold on a second, what what kind of cooperative 95 00:06:28,120 --> 00:06:33,080 Speaker 1: is this? It's called Premier and we buy through it. Yeah. Absolutely, 96 00:06:33,440 --> 00:06:36,359 Speaker 1: And a number of hospitals are involved. And it's just 97 00:06:36,400 --> 00:06:40,120 Speaker 1: a question of volume, which is basic business. If you 98 00:06:40,240 --> 00:06:42,719 Speaker 1: have a lot of volume, the sellers are very interested 99 00:06:42,760 --> 00:06:45,920 Speaker 1: in dealing with you. So how optimistic are you that 100 00:06:45,960 --> 00:06:50,320 Speaker 1: there will be good changes? Made to Obamacare or a 101 00:06:50,320 --> 00:06:53,880 Speaker 1: potential replacement to it. Well, I think that UM, the 102 00:06:54,000 --> 00:06:56,480 Speaker 1: things I started to mention I did mention to you 103 00:06:57,200 --> 00:07:03,640 Speaker 1: UM would be helpful. And the big thing is UM 104 00:07:03,800 --> 00:07:08,880 Speaker 1: getting younger people to have insurance. UM. This enables the 105 00:07:08,920 --> 00:07:14,120 Speaker 1: insurance companies their actuaries to not only be looking at 106 00:07:14,280 --> 00:07:18,240 Speaker 1: older people who are sicker, but having younger people in 107 00:07:18,320 --> 00:07:22,000 Speaker 1: the mix makes the insurance more affordable. And they have 108 00:07:22,160 --> 00:07:27,720 Speaker 1: not been able to UM the mandates were too small 109 00:07:28,080 --> 00:07:33,000 Speaker 1: to push these people to have insurance. We must have 110 00:07:33,240 --> 00:07:36,320 Speaker 1: the younger people insured in order to make the whole 111 00:07:36,360 --> 00:07:40,520 Speaker 1: insurance thing work. Allen Miller, thank you so much for 112 00:07:40,600 --> 00:07:43,400 Speaker 1: joining us. Really is a wonderful to have you. Allen 113 00:07:43,480 --> 00:07:47,000 Speaker 1: Miller is chief executive officer of Universal Health Services. It 114 00:07:47,080 --> 00:07:50,840 Speaker 1: is based in King of Prussia, Pennsylvania, and it's a 115 00:07:51,000 --> 00:07:56,360 Speaker 1: broad based, multifaceted company that owns behavioral health facilities, acute 116 00:07:56,360 --> 00:07:59,640 Speaker 1: care hospitals, and ambulatory centers throughout the US, the UK, 117 00:07:59,760 --> 00:08:16,040 Speaker 1: put RICO, and the Virgin Islands. Leverage in US stocks 118 00:08:16,240 --> 00:08:20,600 Speaker 1: has risen to the highest level on record. How concerned 119 00:08:20,720 --> 00:08:23,560 Speaker 1: our investors about this. I am honored to bring in 120 00:08:23,640 --> 00:08:27,520 Speaker 1: David Lebovits global market strategist for JP Morgan, who's here 121 00:08:27,560 --> 00:08:30,160 Speaker 1: with us in our Bloomberg eleven three oh studio and 122 00:08:30,440 --> 00:08:33,640 Speaker 1: David we were just chatting about how much UH margin 123 00:08:33,720 --> 00:08:38,160 Speaker 1: debt has increased in US stocks. This to me indicates 124 00:08:38,200 --> 00:08:41,640 Speaker 1: an incredible amount of complacency, just that people are willing 125 00:08:41,640 --> 00:08:43,680 Speaker 1: to double down on their bets. How are you taking this? 126 00:08:43,800 --> 00:08:45,599 Speaker 1: And does this sort of a raise some kind of 127 00:08:45,640 --> 00:08:48,480 Speaker 1: alarm to you? You know, I think that the biggest 128 00:08:48,520 --> 00:08:50,920 Speaker 1: concern is what this means and what it tells us 129 00:08:51,280 --> 00:08:55,120 Speaker 1: about investor sentiment. You know, our investors so excited about 130 00:08:55,120 --> 00:08:57,760 Speaker 1: equities that they're willing to borrow money to pump even 131 00:08:57,840 --> 00:08:59,920 Speaker 1: more into the stock market. And I think that it's 132 00:09:00,040 --> 00:09:02,440 Speaker 1: it's it's reasonable to look at this and see the 133 00:09:02,520 --> 00:09:04,440 Speaker 1: rate of change and see the levels that we're currently 134 00:09:04,440 --> 00:09:06,960 Speaker 1: sitting at from a margin debt standpoint, and say, you know, 135 00:09:07,000 --> 00:09:10,200 Speaker 1: has this market come too far too fast? And we 136 00:09:10,280 --> 00:09:12,360 Speaker 1: have And that's the and that's the question. You know, 137 00:09:12,400 --> 00:09:15,000 Speaker 1: we have seen we have seen quite a rally here, 138 00:09:15,040 --> 00:09:18,960 Speaker 1: but it's our view that the underlying economic fundamentals actually 139 00:09:19,040 --> 00:09:22,800 Speaker 1: look pretty good. You know, this rally really began um 140 00:09:22,920 --> 00:09:24,920 Speaker 1: or at least we started to see yields rise and 141 00:09:24,920 --> 00:09:27,520 Speaker 1: and give some more confidence to the equity market, you know, 142 00:09:27,880 --> 00:09:30,520 Speaker 1: back in the late summer of two thousands sixteen. So 143 00:09:30,559 --> 00:09:32,640 Speaker 1: the economic data has been getting better for a while. 144 00:09:33,000 --> 00:09:34,960 Speaker 1: You know, I think that the pullback we've seen here 145 00:09:34,960 --> 00:09:37,160 Speaker 1: in the market is probably justified. It's a little bit 146 00:09:37,160 --> 00:09:39,880 Speaker 1: more of a backfill um as opposed to the beginning 147 00:09:39,880 --> 00:09:42,360 Speaker 1: of something bigger. But what we're focused on is the 148 00:09:42,440 --> 00:09:45,079 Speaker 1: upcoming earning season. You know. The question to our mind 149 00:09:45,240 --> 00:09:47,760 Speaker 1: is are these companies making money? If the cash flows 150 00:09:47,760 --> 00:09:49,840 Speaker 1: are there, if the earnings are there, I think stock 151 00:09:49,880 --> 00:09:52,440 Speaker 1: prices can keep moving higher. If we see some weakness 152 00:09:52,440 --> 00:09:54,600 Speaker 1: and earnings. I think that this thing is like margin debt, 153 00:09:54,679 --> 00:09:56,840 Speaker 1: maybe maybe worth keeping an eye on. Well. I mean, 154 00:09:56,880 --> 00:09:58,800 Speaker 1: we are seeing some other cracks. I mean, because we 155 00:09:58,800 --> 00:10:00,520 Speaker 1: were just talking about how that seems to be the 156 00:10:00,520 --> 00:10:02,840 Speaker 1: consensus right now that the economy is in fairly good 157 00:10:02,840 --> 00:10:06,440 Speaker 1: shape that you know, despite some clouds around the edges. 158 00:10:06,440 --> 00:10:09,080 Speaker 1: In general, things are chugging along. But we did see 159 00:10:09,120 --> 00:10:13,640 Speaker 1: a pretty substantial decline in commercial and industrial loans on 160 00:10:13,920 --> 00:10:17,559 Speaker 1: US bank balance sheets in a recent survey, and this 161 00:10:17,679 --> 00:10:21,280 Speaker 1: raised some alarms that either banks were tightening up their 162 00:10:21,400 --> 00:10:24,800 Speaker 1: lending criteria to such a degree that they're not allowing 163 00:10:25,120 --> 00:10:27,920 Speaker 1: companies to get credit, or that there just isn't the demand, 164 00:10:27,960 --> 00:10:30,320 Speaker 1: which suggests that the economy isn't growing that fast. How 165 00:10:30,320 --> 00:10:32,480 Speaker 1: do you interpret this? You know, we think that it's 166 00:10:32,520 --> 00:10:35,040 Speaker 1: not as much a bank issue. UM. Lending standards have 167 00:10:35,120 --> 00:10:38,280 Speaker 1: been pretty tight, and you know, the quality of borrowers 168 00:10:38,280 --> 00:10:40,400 Speaker 1: the banks of looking for has been pretty elevated for 169 00:10:40,440 --> 00:10:43,000 Speaker 1: the better part of this business cycle. UM. Actually, one 170 00:10:43,040 --> 00:10:46,120 Speaker 1: thing that we've found is that when you look at 171 00:10:46,360 --> 00:10:49,640 Speaker 1: capital expenditures and you look at CNI loans UM, the 172 00:10:49,720 --> 00:10:53,920 Speaker 1: capital expenditure data actually tends to lead some of the CNIDADA. 173 00:10:54,240 --> 00:10:56,120 Speaker 1: So actually, what I think is going on here in 174 00:10:56,200 --> 00:10:58,599 Speaker 1: terms of the decline in the lending data is and 175 00:10:58,720 --> 00:11:01,079 Speaker 1: we went through this period from a two thousand fourteen 176 00:11:01,120 --> 00:11:04,400 Speaker 1: to mid two thousand sixteen where manufacturing was under a 177 00:11:04,440 --> 00:11:07,800 Speaker 1: tremendous amount of pressure because of lower commodity prices and 178 00:11:07,840 --> 00:11:10,040 Speaker 1: a stronger dollar. I think we're just seeing some lagged 179 00:11:10,040 --> 00:11:12,720 Speaker 1: effects of that and some of the pullback in investment 180 00:11:12,720 --> 00:11:15,880 Speaker 1: that companies went through, and that's why we're seeing c 181 00:11:16,000 --> 00:11:17,880 Speaker 1: ANY loans cool off a little bit here. We don't 182 00:11:17,960 --> 00:11:21,440 Speaker 1: necessarily think again, it's the beginning of something bigger. More, 183 00:11:21,480 --> 00:11:23,480 Speaker 1: we think it's a reflection of what's actually happened in 184 00:11:23,480 --> 00:11:25,680 Speaker 1: the past. You know, given the fact that what you're 185 00:11:25,720 --> 00:11:29,400 Speaker 1: saying is so coherent with when and jibs so directly 186 00:11:29,400 --> 00:11:30,800 Speaker 1: with what a lot of other people are saying, which 187 00:11:30,840 --> 00:11:33,040 Speaker 1: is the economy is doing fairly well. Some of these 188 00:11:33,040 --> 00:11:35,439 Speaker 1: warning signs are a little concerning, but they're not anything 189 00:11:35,480 --> 00:11:38,480 Speaker 1: that big. Uh. It seems like people are sort of 190 00:11:38,520 --> 00:11:41,959 Speaker 1: pricing in the same scenario, which is sort of chugging 191 00:11:42,000 --> 00:11:44,680 Speaker 1: along growth. Does this mean a that returns are going 192 00:11:44,720 --> 00:11:46,920 Speaker 1: to be a lot lower because everybody is piling into 193 00:11:46,960 --> 00:11:48,640 Speaker 1: the same trades and there isn't a lot of value 194 00:11:48,640 --> 00:11:51,560 Speaker 1: to be found, or B that everybody's missing something and 195 00:11:51,600 --> 00:11:54,800 Speaker 1: that the chance of of a substantial hiccup is getting greater. 196 00:11:55,240 --> 00:11:57,520 Speaker 1: You know, I think that it's more the former than 197 00:11:57,600 --> 00:12:01,160 Speaker 1: the ladder. I think that return expectations for US assets 198 00:12:01,160 --> 00:12:03,680 Speaker 1: in general, both stocks and bonds, have certainly come down 199 00:12:03,720 --> 00:12:07,400 Speaker 1: here the couple of years. So our view is that 200 00:12:07,480 --> 00:12:10,079 Speaker 1: over the next ten to fifteen years, US equities should 201 00:12:10,080 --> 00:12:12,679 Speaker 1: return you about five and a half percent a year um, 202 00:12:12,720 --> 00:12:15,480 Speaker 1: which is, you know, a couple percent below the the 203 00:12:15,559 --> 00:12:18,319 Speaker 1: seven and eight percent bogies that have been thrown around previously. 204 00:12:18,440 --> 00:12:21,200 Speaker 1: But what I would say is just because there's not 205 00:12:21,360 --> 00:12:25,280 Speaker 1: dwindling opportunity, perhaps less opportunity from a return standpoint in 206 00:12:25,320 --> 00:12:29,720 Speaker 1: the US, we're thinking much more seriously about opportunities in Europe, 207 00:12:29,880 --> 00:12:33,640 Speaker 1: opportunities and emerging markets, places outside of the US where 208 00:12:33,679 --> 00:12:35,920 Speaker 1: the potential for elevated return seems to be a little 209 00:12:35,960 --> 00:12:38,400 Speaker 1: bit greater than here in the States. So where are 210 00:12:38,400 --> 00:12:41,640 Speaker 1: you looking in particular, So within emerging markets, we like 211 00:12:41,840 --> 00:12:44,840 Speaker 1: the Asian economies more than the Latin American economies. We 212 00:12:44,880 --> 00:12:48,600 Speaker 1: like the manufacturers more than the commodity exporters. And then 213 00:12:48,679 --> 00:12:52,160 Speaker 1: within Europe, you know, we're really focusing on the domestic 214 00:12:52,200 --> 00:12:54,800 Speaker 1: recovery that's going on there. You have an unemployment rate 215 00:12:55,000 --> 00:12:56,880 Speaker 1: which is backed down at the level where it was 216 00:12:56,960 --> 00:12:59,559 Speaker 1: before the double dip back in two thousand twelve. You've 217 00:12:59,640 --> 00:13:02,560 Speaker 1: capath city utilization which is up around its long term average. 218 00:13:02,600 --> 00:13:04,880 Speaker 1: The p m I data, It is a survey, but 219 00:13:04,920 --> 00:13:06,920 Speaker 1: the p m I data has been pretty solid there. 220 00:13:07,520 --> 00:13:10,240 Speaker 1: So we think that playing this domestic recovery, thinking about 221 00:13:10,280 --> 00:13:12,719 Speaker 1: some of the consumer companies in Europe is a good 222 00:13:12,720 --> 00:13:14,760 Speaker 1: way of going about that. How hard is it to 223 00:13:14,800 --> 00:13:19,160 Speaker 1: invest in Asia given the questions around the quality of 224 00:13:19,200 --> 00:13:21,160 Speaker 1: some of the economic data that you get out of there, 225 00:13:21,760 --> 00:13:25,079 Speaker 1: It's it's difficult. You know. China in particular is kind 226 00:13:25,080 --> 00:13:26,840 Speaker 1: of a kind of a black box. They say we 227 00:13:26,920 --> 00:13:28,960 Speaker 1: have the six and a half percent growth target, and 228 00:13:28,960 --> 00:13:31,280 Speaker 1: magically they seem to come very close to six and 229 00:13:31,360 --> 00:13:33,520 Speaker 1: a half. Well, did you read the art. I think 230 00:13:33,520 --> 00:13:37,600 Speaker 1: it was black Rock using drones to look at factories 231 00:13:37,640 --> 00:13:40,400 Speaker 1: in China to sort of assess growth in their own way. 232 00:13:40,600 --> 00:13:43,000 Speaker 1: I have heard about the satellite images where people are 233 00:13:43,040 --> 00:13:45,000 Speaker 1: counting the cars in the parking lot. You know, some 234 00:13:45,040 --> 00:13:46,640 Speaker 1: of the things that we do is we look at, 235 00:13:46,679 --> 00:13:50,480 Speaker 1: for example, the Taiwan import data from China rather than 236 00:13:50,480 --> 00:13:52,760 Speaker 1: the China export data to Taiwan. So we try to 237 00:13:52,800 --> 00:13:54,920 Speaker 1: square that circle in a couple of different ways. But 238 00:13:55,200 --> 00:13:58,240 Speaker 1: you know the benefit for investors is they're getting access 239 00:13:58,280 --> 00:14:01,560 Speaker 1: to more information. They're finding themselves with new and different 240 00:14:01,600 --> 00:14:04,559 Speaker 1: ways of building a picture around what's going on in 241 00:14:04,640 --> 00:14:07,439 Speaker 1: emerging markets. So the data has been an issue. The 242 00:14:07,520 --> 00:14:09,360 Speaker 1: data will continue to be somewhat of an issue, but 243 00:14:09,400 --> 00:14:11,120 Speaker 1: I think we're moving in the right direction, and I 244 00:14:11,160 --> 00:14:13,480 Speaker 1: think that investors are able to get a better sense 245 00:14:14,000 --> 00:14:16,320 Speaker 1: of the profitability of some of these companies. What's the 246 00:14:16,320 --> 00:14:19,600 Speaker 1: biggest risk area right now in markets? So I think 247 00:14:19,640 --> 00:14:22,240 Speaker 1: that there are a couple of risks right now. To me, 248 00:14:22,440 --> 00:14:25,480 Speaker 1: the markets are standing on kind of two pillars. One 249 00:14:25,520 --> 00:14:28,400 Speaker 1: of them is a political pillar and one of them 250 00:14:28,520 --> 00:14:31,600 Speaker 1: is a nominal growth pillar. Now, the political pillar, you know, 251 00:14:31,680 --> 00:14:34,200 Speaker 1: both in the US and abroad, is looking a little 252 00:14:34,200 --> 00:14:36,800 Speaker 1: bit wobbly. We saw the UK, you know, begin their 253 00:14:36,800 --> 00:14:40,400 Speaker 1: Brexit negotiations the other day. Um, we've had some disappointments 254 00:14:40,400 --> 00:14:42,880 Speaker 1: here in the US in terms of the pace of 255 00:14:42,880 --> 00:14:45,840 Speaker 1: of policy reform relative to what some people were expecting. 256 00:14:46,640 --> 00:14:49,680 Speaker 1: But the nominal growth pillars still looks okay. So I 257 00:14:49,680 --> 00:14:52,040 Speaker 1: think one of the biggest risks is that the nominal data, 258 00:14:52,080 --> 00:14:55,000 Speaker 1: that the activity data, starts to deteriorate. Because you know, 259 00:14:55,040 --> 00:14:57,680 Speaker 1: we're we're investors, right We're trying to follow the cash flows. 260 00:14:57,680 --> 00:15:00,560 Speaker 1: We're trying to find the companies that are generating earnings, 261 00:15:00,920 --> 00:15:04,560 Speaker 1: and if the economic data starts to deteriorate, that's a 262 00:15:04,600 --> 00:15:06,480 Speaker 1: signal that it's going to be more difficult for these 263 00:15:06,520 --> 00:15:08,840 Speaker 1: companies to generate profits going forward, and if we think 264 00:15:08,840 --> 00:15:11,360 Speaker 1: back to the last time that happened again from mid 265 00:15:11,360 --> 00:15:14,120 Speaker 1: fourteen to mid six team, right, the stock market didn't 266 00:15:14,160 --> 00:15:16,200 Speaker 1: go anywhere. People always say to me, David, why didn't 267 00:15:16,200 --> 00:15:18,880 Speaker 1: the stock market go anywhere from June fourteen until the 268 00:15:18,920 --> 00:15:21,320 Speaker 1: middle of two thousand and sixteen. And my answer is, well, 269 00:15:21,360 --> 00:15:24,680 Speaker 1: because earnings weren't growing. So the biggest risk in my view, 270 00:15:24,760 --> 00:15:27,320 Speaker 1: is that the activity data rolls over and that passes 271 00:15:27,360 --> 00:15:30,360 Speaker 1: through and hinder's corporate profitability. All right, thank you so 272 00:15:30,440 --> 00:15:32,200 Speaker 1: much for joining us. Really, what I'm speaking with you 273 00:15:32,280 --> 00:15:35,920 Speaker 1: David Lebovitz. He is the global market strategist for JP 274 00:15:36,120 --> 00:15:38,680 Speaker 1: Morgan Investment Management, and he joins us here in our 275 00:15:38,680 --> 00:15:54,520 Speaker 1: Bloomberg eleven three oh studio. Right now, I want to 276 00:15:54,560 --> 00:15:58,080 Speaker 1: talk about a three day gathering that's happening in May 277 00:15:58,680 --> 00:16:01,760 Speaker 1: that's going to be host it by Amazon and attended 278 00:16:01,840 --> 00:16:06,040 Speaker 1: by executives from General Mills and Montalis, among others. Craig Giomana, 279 00:16:06,160 --> 00:16:08,960 Speaker 1: who wrote this fantastic story, is here with us in 280 00:16:08,960 --> 00:16:12,680 Speaker 1: our Bloomberg eleven three oh studio. Craig um this is 281 00:16:12,720 --> 00:16:16,040 Speaker 1: a tremendously interesting story because it really highlights how Amazon 282 00:16:16,160 --> 00:16:18,560 Speaker 1: is trying to take over the entire retailing sector. Can 283 00:16:18,600 --> 00:16:21,000 Speaker 1: you tell us a little bit about this three day meeting? Yes, So, 284 00:16:21,080 --> 00:16:23,280 Speaker 1: I mean you're right, the Amazon is trying to take 285 00:16:23,320 --> 00:16:25,640 Speaker 1: over everything. They're the everything store and kind of the 286 00:16:25,680 --> 00:16:28,680 Speaker 1: one area that they haven't really cracked is food. You know, 287 00:16:28,720 --> 00:16:31,440 Speaker 1: they only e commerce for groceries is only like one 288 00:16:31,480 --> 00:16:34,440 Speaker 1: point five percent of the market. Amazon has taken over 289 00:16:34,480 --> 00:16:36,240 Speaker 1: everything else, and they're kind of looking at this really 290 00:16:36,280 --> 00:16:39,040 Speaker 1: hard and comes We've come to find out that in 291 00:16:39,120 --> 00:16:42,360 Speaker 1: May they're bringing you know, big companies sort of from 292 00:16:42,400 --> 00:16:45,200 Speaker 1: the CpG world consumer package goods and household products out 293 00:16:45,240 --> 00:16:48,680 Speaker 1: to Seattle to talk about logistics and supply chain stuff. 294 00:16:48,720 --> 00:16:51,880 Speaker 1: And they're basically trying to get General Mills and Montolis 295 00:16:51,920 --> 00:16:54,040 Speaker 1: and these companies that make our food to think about 296 00:16:54,040 --> 00:16:57,040 Speaker 1: a world where e commerce is primary, So put it 297 00:16:57,080 --> 00:16:59,240 Speaker 1: in different boxes and package it in a way that 298 00:16:59,280 --> 00:17:00,800 Speaker 1: we can ship it to actly to people. So this 299 00:17:00,840 --> 00:17:04,119 Speaker 1: is Amazon really muscling in more to the grocery stores, 300 00:17:04,160 --> 00:17:07,600 Speaker 1: turf and just to be clear, right now, food goes 301 00:17:07,680 --> 00:17:11,360 Speaker 1: largely through Walmart, Target or Costco and then it could 302 00:17:11,400 --> 00:17:14,639 Speaker 1: potentially be ordered on Amazon. Right, There's there's plenty of 303 00:17:14,640 --> 00:17:16,440 Speaker 1: delivery services that have popped up. I mean, I think 304 00:17:16,440 --> 00:17:18,119 Speaker 1: in New York City that stuff is popular. But you 305 00:17:18,160 --> 00:17:20,239 Speaker 1: gotta remember it's a big country out there, and like 306 00:17:20,240 --> 00:17:22,960 Speaker 1: I said, one point five percent of the grocery market 307 00:17:23,000 --> 00:17:26,959 Speaker 1: is online, So really we're talking about people still going 308 00:17:26,960 --> 00:17:30,440 Speaker 1: to Kroger Albertson's safe way to shop for groceries. People 309 00:17:30,480 --> 00:17:34,480 Speaker 1: don't buy food online at this point, but it's growing 310 00:17:34,680 --> 00:17:37,359 Speaker 1: and it's clearly has gotten the attention of the general 311 00:17:37,359 --> 00:17:39,000 Speaker 1: mills is of the world. These guys are struggling for 312 00:17:39,040 --> 00:17:42,280 Speaker 1: sales growth and they really can't ignore Amazon, and they're 313 00:17:42,280 --> 00:17:45,240 Speaker 1: trying to figure out, you know, a world where, like 314 00:17:45,240 --> 00:17:46,800 Speaker 1: everything else, people used to say, we're never going to 315 00:17:46,840 --> 00:17:48,880 Speaker 1: buy shoes online, we have to try them on, or 316 00:17:49,000 --> 00:17:50,760 Speaker 1: we're not going to buy books online. But that's where 317 00:17:50,760 --> 00:17:52,479 Speaker 1: we are with food. It's kind of the last frontier. Well, 318 00:17:52,520 --> 00:17:54,080 Speaker 1: but to get a sense, I mean, because to your 319 00:17:54,119 --> 00:17:56,480 Speaker 1: point you were saying, in this city it's pretty popular 320 00:17:56,560 --> 00:17:59,320 Speaker 1: with Fresh Direct or even just other delivery services from 321 00:17:59,320 --> 00:18:02,320 Speaker 1: grocery stores. It's more popular because people don't have cars. 322 00:18:02,359 --> 00:18:05,920 Speaker 1: But in other places, I mean, what's the challenge for 323 00:18:06,160 --> 00:18:10,440 Speaker 1: Amazon just with respected distribution of shipping fresh food, and 324 00:18:10,560 --> 00:18:13,960 Speaker 1: and you know some organization like fresh Direct, how much 325 00:18:13,960 --> 00:18:16,880 Speaker 1: penetration have they gotten outside of cities. But the shortager 326 00:18:16,960 --> 00:18:19,240 Speaker 1: is not much. Fresh Direct does well in New York City. 327 00:18:19,280 --> 00:18:21,919 Speaker 1: There's something called Pepod, which is owned by the company 328 00:18:21,920 --> 00:18:24,880 Speaker 1: that owns Stop and Shop. They've done okay, but it's 329 00:18:24,880 --> 00:18:28,600 Speaker 1: called the last mile. Basically, it's just incredibly expensive to 330 00:18:28,680 --> 00:18:31,119 Speaker 1: run those trucks and to do it economically when you 331 00:18:31,160 --> 00:18:33,480 Speaker 1: have one house on a block in the suburbs, to 332 00:18:33,560 --> 00:18:36,280 Speaker 1: run a refrigerated truck out there, make sure the ice 333 00:18:36,280 --> 00:18:38,920 Speaker 1: cream is cold, all the produce looks how the people wanted. 334 00:18:39,040 --> 00:18:41,480 Speaker 1: The steak is what they want. Amazon has been trying 335 00:18:41,480 --> 00:18:44,080 Speaker 1: this for years. Amazon has been going after fresh food 336 00:18:44,080 --> 00:18:46,080 Speaker 1: for you know, a decade at least, and it just 337 00:18:46,160 --> 00:18:48,960 Speaker 1: hasn't worked. So now they're really stepping up those efforts. 338 00:18:48,960 --> 00:18:50,960 Speaker 1: So is this do you expect that at this three 339 00:18:51,040 --> 00:18:55,080 Speaker 1: day meeting part of the discussion will be how they 340 00:18:55,080 --> 00:19:00,160 Speaker 1: can more efficiently transport these goods to people's houses other 341 00:19:00,200 --> 00:19:02,199 Speaker 1: than to the stores. Yes, I mean, I think what 342 00:19:02,240 --> 00:19:04,920 Speaker 1: we know about it is it's Amazon saying to these 343 00:19:04,960 --> 00:19:07,480 Speaker 1: big companies, hey, let's come out and let's talk about 344 00:19:07,560 --> 00:19:11,080 Speaker 1: a world where you're thinking not necessarily about the store first, 345 00:19:11,160 --> 00:19:14,639 Speaker 1: but about selling stuff direct to consumers online. So the 346 00:19:14,760 --> 00:19:17,399 Speaker 1: Cheerios box, think about that, that's set up to catch 347 00:19:17,440 --> 00:19:20,280 Speaker 1: your eye in a store. You know, years and years 348 00:19:20,359 --> 00:19:23,199 Speaker 1: decades of people grocery shopping that way. That's how the 349 00:19:23,280 --> 00:19:25,720 Speaker 1: box is designed. So Amazon is going to say, let's 350 00:19:25,760 --> 00:19:28,119 Speaker 1: think about, we don't need this box like this necessarily, 351 00:19:28,200 --> 00:19:29,800 Speaker 1: Let's put it in a box that we can take 352 00:19:29,880 --> 00:19:33,119 Speaker 1: real quick and ship it out. So it's just them getting, 353 00:19:33,359 --> 00:19:35,080 Speaker 1: you know, trying to get these companies to change their 354 00:19:35,080 --> 00:19:37,760 Speaker 1: mindset a bit. So the Walmart targets and Costcoats of 355 00:19:37,760 --> 00:19:41,200 Speaker 1: the world, they must be fighting back. They are right, 356 00:19:41,200 --> 00:19:44,000 Speaker 1: So Walmart. The big thing for Walmart is something called 357 00:19:44,080 --> 00:19:47,240 Speaker 1: click and collect, where basically you're going to go online, 358 00:19:47,440 --> 00:19:50,160 Speaker 1: order order your food, you drive up to the curb 359 00:19:50,320 --> 00:19:52,560 Speaker 1: and they have it ready for you. Because Walmart wants 360 00:19:52,560 --> 00:19:54,119 Speaker 1: to live in a world where you're still maybe going 361 00:19:54,160 --> 00:19:56,040 Speaker 1: to go into that store. Plus, in a big part 362 00:19:56,040 --> 00:19:57,800 Speaker 1: of the country, people are out on the weekends in 363 00:19:57,800 --> 00:19:59,440 Speaker 1: their cars. Again, this is a bit of a sort 364 00:19:59,480 --> 00:20:01,840 Speaker 1: of New York City San Francisco versus the rest of 365 00:20:01,880 --> 00:20:04,320 Speaker 1: the country thing. It's still convenient for people to pick 366 00:20:04,400 --> 00:20:06,640 Speaker 1: up those groceries in their cars. So you know, Walmart 367 00:20:06,680 --> 00:20:08,480 Speaker 1: is just desperate to get you into the store where 368 00:20:08,520 --> 00:20:10,920 Speaker 1: you start grabbing other stuff. That's how they make their margins. 369 00:20:11,040 --> 00:20:13,280 Speaker 1: Is this the first time Amazon has held a meeting 370 00:20:13,320 --> 00:20:16,040 Speaker 1: like this that we know of? That we know of? 371 00:20:16,280 --> 00:20:19,320 Speaker 1: And I mean again, it's very very small part of 372 00:20:19,320 --> 00:20:22,359 Speaker 1: the business, and you know, grocery stores aren't going away 373 00:20:22,400 --> 00:20:24,760 Speaker 1: anytime soon. But I think why this is so interesting 374 00:20:24,760 --> 00:20:27,080 Speaker 1: to everyone is that food is like the last thing 375 00:20:27,160 --> 00:20:31,959 Speaker 1: that Amazon hasn't cracked. They've taken over electronics, clothes, books, 376 00:20:32,000 --> 00:20:34,600 Speaker 1: all these other things, and now here they are coming 377 00:20:34,680 --> 00:20:37,639 Speaker 1: hard for the food business and they've been unsuccessful to 378 00:20:37,680 --> 00:20:40,600 Speaker 1: this point, but are clearly going after it. Craig Jamanna, 379 00:20:40,640 --> 00:20:42,359 Speaker 1: thank you so much for coming in and talking with us. 380 00:20:42,359 --> 00:20:45,280 Speaker 1: Thank It's really a fascinating story. The last frontier for 381 00:20:45,359 --> 00:20:48,320 Speaker 1: Amazon and maybe the last frontier for some of these 382 00:20:48,359 --> 00:20:50,919 Speaker 1: big retailers that want to keep a corner on this market. 383 00:20:50,920 --> 00:21:07,359 Speaker 1: Craig is a consumer reporter here at Bloomberg News, fresh 384 00:21:07,440 --> 00:21:10,840 Speaker 1: off the plane from Hong Kong. Mark Gabay, CEO of 385 00:21:10,880 --> 00:21:13,960 Speaker 1: Asia Pacific LaSalle Investment Management, is here with US in 386 00:21:13,960 --> 00:21:16,080 Speaker 1: our Bloomberg eleven three oh studio, and I am so 387 00:21:16,119 --> 00:21:19,359 Speaker 1: excited to speak with you Mark about what the flows 388 00:21:19,400 --> 00:21:22,360 Speaker 1: are doing right now from Asia to the US with 389 00:21:22,400 --> 00:21:25,359 Speaker 1: respect to real estate. Uh. First, I want to start 390 00:21:25,400 --> 00:21:27,760 Speaker 1: with these images that I'm sure a lot of people 391 00:21:27,800 --> 00:21:31,000 Speaker 1: have seen, of these empty buildings that have been built 392 00:21:31,000 --> 00:21:34,399 Speaker 1: in China with not enough people to fill them. Uh. 393 00:21:34,680 --> 00:21:37,399 Speaker 1: This raises a lot of fear and expectation that the 394 00:21:37,400 --> 00:21:40,399 Speaker 1: housing market in China is going to collapse. What do 395 00:21:40,480 --> 00:21:42,600 Speaker 1: you tell your your clients in the U S who 396 00:21:42,600 --> 00:21:46,280 Speaker 1: are looking to invest in China and how concerned are they? Right? So, 397 00:21:46,480 --> 00:21:49,199 Speaker 1: first of all, it's true there are a lot of 398 00:21:49,200 --> 00:21:52,639 Speaker 1: empty buildings and mostly the secondary cities in China, not 399 00:21:52,680 --> 00:21:55,359 Speaker 1: so much the primary cities like a Shanghai or Beijing, 400 00:21:55,520 --> 00:21:57,920 Speaker 1: but some of the other secondary city So it is 401 00:21:57,960 --> 00:22:00,920 Speaker 1: a concern. But overall, we tell people they have to 402 00:22:00,960 --> 00:22:04,119 Speaker 1: understand in China that is a store of wealth for 403 00:22:04,280 --> 00:22:06,440 Speaker 1: the retail market. So there's not a lot of options 404 00:22:06,440 --> 00:22:09,000 Speaker 1: for retail investors where to put their money in China. 405 00:22:09,080 --> 00:22:12,159 Speaker 1: Bank deposit rates are low, they tend to put it 406 00:22:12,200 --> 00:22:14,640 Speaker 1: in real estate and so when they buy these units, 407 00:22:15,040 --> 00:22:17,160 Speaker 1: they're not really looking to rent them out, so they're 408 00:22:17,200 --> 00:22:20,920 Speaker 1: actually quite comfortable leaving them empty, which is a typical 409 00:22:21,040 --> 00:22:23,679 Speaker 1: compared to the US, but typical for their But how 410 00:22:23,760 --> 00:22:27,560 Speaker 1: much of these purchases are being financed with leverage. It's 411 00:22:27,600 --> 00:22:29,560 Speaker 1: not as highly levered as as the U S. So 412 00:22:29,720 --> 00:22:32,000 Speaker 1: usually we would say mortgagees there in the fifty to 413 00:22:32,080 --> 00:22:35,959 Speaker 1: sixty percent range, maybe sev tops. So in Asia you 414 00:22:35,960 --> 00:22:39,200 Speaker 1: tend to have a bank market for retail where more 415 00:22:39,240 --> 00:22:41,800 Speaker 1: money is put down, so we don't believe it's leveraged, 416 00:22:42,160 --> 00:22:44,159 Speaker 1: but we would say is it a good thing for 417 00:22:44,240 --> 00:22:46,440 Speaker 1: the overall real estate market? No, it's not good because 418 00:22:46,440 --> 00:22:48,200 Speaker 1: if if someone try to sell some of those units 419 00:22:48,240 --> 00:22:50,439 Speaker 1: would be much harder to sell them on the secondary market. 420 00:22:50,800 --> 00:22:54,679 Speaker 1: So where are U S investors flanning opportunities within Asian 421 00:22:54,680 --> 00:22:57,080 Speaker 1: real estate right now? Well, that really depends on your 422 00:22:57,160 --> 00:22:59,119 Speaker 1: risk profile. If you're a high risk investor or a 423 00:22:59,119 --> 00:23:02,000 Speaker 1: low risk investor. If you're a higher risk investor, then 424 00:23:02,040 --> 00:23:04,080 Speaker 1: you are generally looking at the gateway cities and you're 425 00:23:04,359 --> 00:23:07,920 Speaker 1: looking at commercial buildings that have good income profiles because 426 00:23:07,920 --> 00:23:11,879 Speaker 1: fundamentally borrowing rates are quite low in the region and 427 00:23:11,880 --> 00:23:14,360 Speaker 1: you can still generate good cap rates on your buildings 428 00:23:14,359 --> 00:23:19,320 Speaker 1: and that's creating nice cash flow. So Tokyo, Sydney, soul um. 429 00:23:19,359 --> 00:23:21,560 Speaker 1: And you know, one thing that we were also talking 430 00:23:21,560 --> 00:23:24,800 Speaker 1: about is is a flip side so UH. For a 431 00:23:24,840 --> 00:23:27,800 Speaker 1: long time, China's Chinese investors are Since two thousand, Chinese 432 00:23:27,800 --> 00:23:31,040 Speaker 1: investors have been studily increasing their investment UH in the 433 00:23:31,160 --> 00:23:33,560 Speaker 1: US and in some of the big cities. And there's 434 00:23:33,600 --> 00:23:35,639 Speaker 1: been a big question about whether we're gonna start seeing 435 00:23:35,640 --> 00:23:39,119 Speaker 1: a pullback of that money and those investments due to 436 00:23:39,280 --> 00:23:43,320 Speaker 1: capital controls UH in China as well as a less 437 00:23:43,840 --> 00:23:48,480 Speaker 1: uh benevolent environment for them in the US. UM. What 438 00:23:48,760 --> 00:23:51,640 Speaker 1: have you seen? It will edb and flow. I don't 439 00:23:51,640 --> 00:23:54,560 Speaker 1: think that will change, but I think the overall trend 440 00:23:54,640 --> 00:23:57,000 Speaker 1: will be the same. They will continue to flow out 441 00:23:57,040 --> 00:23:59,679 Speaker 1: and look to diversify its holdings. And there's just so 442 00:23:59,760 --> 00:24:03,240 Speaker 1: much capital saved up in China across the board UH, 443 00:24:03,240 --> 00:24:05,920 Speaker 1: and it is trying to get out for purposes of diversification. 444 00:24:05,960 --> 00:24:08,560 Speaker 1: And real estate tends to be an asset class of 445 00:24:08,640 --> 00:24:11,720 Speaker 1: the Chinese like to use again to hold you know, 446 00:24:11,760 --> 00:24:13,639 Speaker 1: to store wealth, so they don't really look at it 447 00:24:13,680 --> 00:24:15,760 Speaker 1: so much as a cash flow asset. They look at 448 00:24:15,800 --> 00:24:18,399 Speaker 1: it as as a way to to to save money 449 00:24:18,680 --> 00:24:20,920 Speaker 1: and hold an asset over time. Although we have seen 450 00:24:21,000 --> 00:24:24,920 Speaker 1: reports about a slowdown in Chinese investors or Asian investors 451 00:24:24,960 --> 00:24:28,960 Speaker 1: generally in US property, there's a slowdown, but I think 452 00:24:28,960 --> 00:24:31,679 Speaker 1: there's a lot of capital that's already outside of it, 453 00:24:31,720 --> 00:24:34,800 Speaker 1: what we would characterize as Chinese capital that's already outside 454 00:24:34,800 --> 00:24:36,840 Speaker 1: of China, and whether it's in Hong Kong or in 455 00:24:36,920 --> 00:24:39,399 Speaker 1: Singapore and other cities, there's a fair amount of capital 456 00:24:39,480 --> 00:24:42,520 Speaker 1: that's out out there. So if there's a slowdown, I'd 457 00:24:42,520 --> 00:24:45,879 Speaker 1: say it's temporary. UM. It's just the Chinese government trying 458 00:24:45,920 --> 00:24:48,639 Speaker 1: to make sure the currency store stays in balance, and 459 00:24:48,680 --> 00:24:51,760 Speaker 1: there's not dramatic capital flight, but that trends not going away. Well, 460 00:24:51,760 --> 00:24:54,119 Speaker 1: I'd expect we'd see more Chinese capital coming out. So 461 00:24:54,320 --> 00:24:58,320 Speaker 1: LESL Investment Management overseas about seven billion dollars real estate? 462 00:24:58,600 --> 00:25:00,919 Speaker 1: Is that all in Asia? That the seven We are 463 00:25:01,000 --> 00:25:04,840 Speaker 1: sixty billion globally with about twelve billion in securities and 464 00:25:04,920 --> 00:25:07,760 Speaker 1: forty eight billion in private. Of the forty eight billion 465 00:25:07,800 --> 00:25:11,359 Speaker 1: of private, seven billion of it is in Asia. Okay, 466 00:25:11,400 --> 00:25:14,840 Speaker 1: And so what have you invested in UM? Recently? We've 467 00:25:14,840 --> 00:25:18,119 Speaker 1: been UM by quite a bit of office and UM 468 00:25:18,200 --> 00:25:21,840 Speaker 1: logistics in in Tokyo. That's a favorite sector for US. 469 00:25:21,880 --> 00:25:25,160 Speaker 1: Logistics in China is a favorite sector for US. Retail 470 00:25:25,200 --> 00:25:28,840 Speaker 1: in Australia. What places have you been avoiding or sort 471 00:25:28,840 --> 00:25:31,680 Speaker 1: of pulling back from? For US? Not really playing back, 472 00:25:31,720 --> 00:25:34,520 Speaker 1: but i'd say avoiding. We're not really an emerging market investors, 473 00:25:34,560 --> 00:25:37,000 Speaker 1: so you don't see US investing in India. We don't 474 00:25:37,040 --> 00:25:40,160 Speaker 1: invest in Vietnam, Philippines, Thailand. So we tend to stay 475 00:25:40,160 --> 00:25:42,280 Speaker 1: in the developed markets because we think the risk return 476 00:25:42,320 --> 00:25:45,159 Speaker 1: there is quite favorable. Do you think fears about China's 477 00:25:45,160 --> 00:25:49,520 Speaker 1: economy exploding are overblown right now? We do you think 478 00:25:49,520 --> 00:25:53,160 Speaker 1: it's overblown? I think the Chinese have demonstrated, uh, they're 479 00:25:53,440 --> 00:25:56,840 Speaker 1: a command economy, which means they can control UM a 480 00:25:56,840 --> 00:25:59,320 Speaker 1: lot of what can be deemed as panic. I think 481 00:25:59,320 --> 00:26:01,680 Speaker 1: they've done in a job controlling that in the last 482 00:26:01,680 --> 00:26:03,480 Speaker 1: couple of years, and we expect they're going to continue 483 00:26:03,520 --> 00:26:05,320 Speaker 1: to do it. So we don't think the hard landing 484 00:26:05,359 --> 00:26:08,960 Speaker 1: scenario is really um the main scenario. There's still potential 485 00:26:08,960 --> 00:26:11,320 Speaker 1: of that, but it's not We're not worried about it. 486 00:26:11,480 --> 00:26:13,480 Speaker 1: Given that. Have you seen an increase in US investors 487 00:26:13,520 --> 00:26:16,120 Speaker 1: looking to invest in Asia. Uh, definitely. We would say 488 00:26:16,119 --> 00:26:17,960 Speaker 1: over the last couple of years that trend line has 489 00:26:17,960 --> 00:26:21,920 Speaker 1: probably been increasing ten to fifteen percent year a year 490 00:26:22,080 --> 00:26:24,080 Speaker 1: over year years. So a couple of years ago, we 491 00:26:24,080 --> 00:26:27,000 Speaker 1: would say that's about a twenty billion dollar kind of 492 00:26:27,359 --> 00:26:31,080 Speaker 1: market in terms of investors come into to UH Asia. 493 00:26:31,240 --> 00:26:34,760 Speaker 1: Now it's it's in that billion dollar range, and recently 494 00:26:34,760 --> 00:26:38,160 Speaker 1: we'd say there's much more European and US money coming 495 00:26:38,200 --> 00:26:41,920 Speaker 1: into Asia, and I think it's about diversification fundamentally, and 496 00:26:42,040 --> 00:26:44,240 Speaker 1: as far as Asian investors coming in, you're just saying 497 00:26:44,240 --> 00:26:45,919 Speaker 1: real quick kind of similar to that. I mean, it's 498 00:26:45,960 --> 00:26:48,600 Speaker 1: also a double digit growth rate. It's getting to be bigger, 499 00:26:48,600 --> 00:26:50,359 Speaker 1: but as you pointed out, it's going to EBB and 500 00:26:50,400 --> 00:26:53,520 Speaker 1: flow a little bit. But it's been a consistent uptake 501 00:26:53,640 --> 00:26:56,080 Speaker 1: year year over year. So I think what's happening is 502 00:26:56,320 --> 00:26:58,400 Speaker 1: there's so much money saved in the world and it's 503 00:26:58,400 --> 00:27:00,840 Speaker 1: looking to put it find a home someplace in real 504 00:27:00,960 --> 00:27:04,120 Speaker 1: estates natural that big ball of money just rolling around 505 00:27:04,119 --> 00:27:06,240 Speaker 1: the world. Thank you so much for joining us. Mark Goobey, 506 00:27:06,359 --> 00:27:10,720 Speaker 1: CEO of Asia Pacific at LaSalle Investment Management, overseeing about 507 00:27:10,720 --> 00:27:19,320 Speaker 1: seven billion dollars of assets real estate assets in Asia. 508 00:27:20,000 --> 00:27:22,480 Speaker 1: Thanks for listening to the Bloomberg P and L podcast. 509 00:27:22,800 --> 00:27:26,600 Speaker 1: You can subscribe and listen to interviews at iTunes, SoundCloud, 510 00:27:26,840 --> 00:27:31,000 Speaker 1: or whatever podcast platform you prefer. I'm Pim Fox. I'm 511 00:27:31,040 --> 00:27:33,959 Speaker 1: out there on Twitter at pim Fox. I'm out there 512 00:27:33,960 --> 00:27:37,280 Speaker 1: on Twitter at Lisa Abramo. It's one before the podcast. 513 00:27:37,320 --> 00:27:40,040 Speaker 1: You can always catch us worldwide on Bloomberg Radio