WEBVTT - World’s Mega-Rich Bet on US Renters 0:00:01.360 --> 0:00:05.680 This is Bloomberg Business Wait inside from the reporters and 0:00:05.880 --> 0:00:09.440 editors who bring you America's most trusted business magazine, plus 0:00:09.520 --> 0:00:13.680 global business, finance and tech news. The Bloomberg Business Week 0:00:13.720 --> 0:00:19.000 Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio. 0:00:20.360 --> 0:00:23.120 Well, this story definite caught our attention reading in this morning. 0:00:23.239 --> 0:00:25.280 It is among the most read on the Bloomberg. It's 0:00:25.280 --> 0:00:28.240 about the world's mega rich betting on US rentors to 0:00:28.320 --> 0:00:29.480 grow their billions. 0:00:29.640 --> 0:00:29.880 Yeah. 0:00:29.880 --> 0:00:33.400 More specifically, however, the past decade, ultra wealthy individuals and 0:00:33.440 --> 0:00:36.000 their firms have more than double their investments and apartments, 0:00:36.080 --> 0:00:38.600 largely in the sector known in the US as multi 0:00:38.600 --> 0:00:42.320 family housing. This according Carroll to the research firm Night Frank. 0:00:42.080 --> 0:00:44.040 All right, let's break it all down and get to 0:00:44.120 --> 0:00:46.760 these findings with us Bloomberg News US commercial real estate 0:00:46.760 --> 0:00:48.960 reporter Natalie Wan joining us on zoom in New York City, 0:00:49.040 --> 0:00:52.120 Natalie Providence, who knew, We'll get to that in just 0:00:52.159 --> 0:00:54.360 a moment. First of all, tell us what's going on 0:00:54.440 --> 0:00:56.800 exactly right, Thanks. 0:00:56.520 --> 0:00:59.240 For having me on. So it's this really interesting trend 0:00:59.400 --> 0:01:03.440 of period when everyone's shying away from commercial real estate, 0:01:03.480 --> 0:01:07.720 whether it's the massive institutions like Blackstone or the big 0:01:07.760 --> 0:01:10.000 bank banks who are trying to reduce their exposure. And 0:01:10.040 --> 0:01:13.680 in the meantime, you have these ultra wealthy billionaires that 0:01:13.760 --> 0:01:17.440 are snatching up properties. You know, I think for them 0:01:17.480 --> 0:01:20.120 it's really a diversification play, and they are trying to 0:01:20.200 --> 0:01:23.760 increase the allocation of their holdings to properties. And in 0:01:23.800 --> 0:01:27.520 the past, whereas it used to be for offices, clearly 0:01:27.600 --> 0:01:30.560 with the glut and drop in values of offices, today 0:01:30.680 --> 0:01:32.960 apartments seem like a much better bet for them. 0:01:33.240 --> 0:01:36.319 Is this also a bet on just the fact that 0:01:36.480 --> 0:01:40.160 so many Americans with housing prices at a record in 0:01:40.200 --> 0:01:43.679 many parts of the country, mortgage rates high, that many 0:01:43.720 --> 0:01:45.280 people aren't going to be able to buy a home. 0:01:47.120 --> 0:01:49.120 Yeah, that's a big part of it. We clearly see 0:01:49.160 --> 0:01:52.680 that there's been a shortage in affordable housing for people. 0:01:52.720 --> 0:01:55.120 That's pushed a lot of people into the rental market. 0:01:55.360 --> 0:01:59.080 There's a lack of housing even across the rental space 0:01:59.120 --> 0:02:03.080 across and that's why we've seen rents continue to rise 0:02:03.840 --> 0:02:06.640 even over the past year. You know, I think that 0:02:07.120 --> 0:02:09.040 for these folks, they're kind of looking at this from 0:02:09.040 --> 0:02:12.560 an extremely long term play. They're less exposed to the 0:02:12.680 --> 0:02:15.440 fluctuations in the debt market, and they can often pay 0:02:15.520 --> 0:02:20.040 with cash or they have special strong financing relationships with 0:02:20.080 --> 0:02:22.400 banks that are willing to fund them and for them. 0:02:22.440 --> 0:02:24.839 They're looking at this as kind of a stable, long 0:02:24.919 --> 0:02:27.840 term play and a bet really on the growth of 0:02:27.919 --> 0:02:31.040 major cities like New York or Chicago that you know, 0:02:31.160 --> 0:02:35.639 even if the property market continues to struggle across commercial 0:02:35.680 --> 0:02:39.160 real estate for the foreseeable future, some of the best 0:02:39.200 --> 0:02:44.000 properties will probably still continue to produce income for these folks. 0:02:44.080 --> 0:02:46.040 I kidd it at the top Providence, who knew, but 0:02:46.080 --> 0:02:49.080 we're talking about rent growth over the past six months, 0:02:49.120 --> 0:02:53.680 and Providence Rhode Island right up about eight percent. So 0:02:53.720 --> 0:02:55.800 that's kind of a top the list, even more so 0:02:55.880 --> 0:02:58.280 than New York City, right. 0:02:58.120 --> 0:03:00.799 That's topping the list. We're seeing brand raps also top 0:03:00.880 --> 0:03:03.520 the list. I think Hartford is in that list as well. 0:03:04.760 --> 0:03:06.720 And you know, I think it really goes to the 0:03:06.760 --> 0:03:10.680 boom across maybe cities that you know aren't like New 0:03:10.760 --> 0:03:13.359 York or Chicago. But with the pandemic, we've seen that 0:03:13.880 --> 0:03:16.240 people might not have to work in the office, they 0:03:16.320 --> 0:03:18.800 might not necessarily need to do their shopping in retail, 0:03:18.800 --> 0:03:21.160 but they do need homes, and so we've seen kind 0:03:21.160 --> 0:03:24.360 of a boom across some of these secondary cities, some 0:03:24.400 --> 0:03:26.720 of the more suburban areas, and I think that we're 0:03:26.760 --> 0:03:30.480 seeing these billionaires ultra wealthy folk try to get in 0:03:30.520 --> 0:03:32.959 at a time when there's less competition in the space, 0:03:33.520 --> 0:03:36.760 and also the returns look for more attractive than compared 0:03:36.800 --> 0:03:39.760 to say, two years ago, when we saw double digit 0:03:39.800 --> 0:03:42.720 rent growth across many of these cities and everyone trying 0:03:42.720 --> 0:03:44.960 to bid for properties. There's been a step back in 0:03:44.960 --> 0:03:47.520 today's market and that kind of provides a perfect buying 0:03:47.560 --> 0:03:51.720 opportunity for long term investors that have access to capital today. 0:03:51.800 --> 0:03:53.920 Well, speaking of access to capital, Natalie, do we know 0:03:53.960 --> 0:03:58.640 how these billionaires are financing these these purchases. Are they 0:03:58.680 --> 0:04:00.800 just paying cash? Are they actually financing them? I mean, 0:04:00.840 --> 0:04:02.520 rates are very very high right now. 0:04:03.320 --> 0:04:06.440 They're extremely high, and a lot of cases they're putting 0:04:06.440 --> 0:04:09.120 in a lot of cash. I think in some situations 0:04:09.520 --> 0:04:12.640 banks it's not like they don't have liquidity, they're just 0:04:12.720 --> 0:04:15.280 being a lot more cautious as to what they're lending 0:04:15.320 --> 0:04:17.640 on and who they're lending to. Because you know, we've 0:04:17.640 --> 0:04:19.560 seen even some of the biggest folks to fault on 0:04:19.600 --> 0:04:22.200 their loans. But I think for these billionaires, I mean, 0:04:22.279 --> 0:04:25.680 relationships between a lender and their borrowers one of the 0:04:25.680 --> 0:04:28.320 most important things for these types of institutions. And I 0:04:28.360 --> 0:04:30.760 think if you're a billionaire, like is there a founder 0:04:31.000 --> 0:04:36.320 Amansia Ortega, you might have less hurdles to across if 0:04:36.400 --> 0:04:38.680 you're looking for a lender for a deal like this. 0:04:39.000 --> 0:04:40.720 I wonder, I don't know if you've kind of looked 0:04:40.760 --> 0:04:42.120 into this side of too. I think about what it 0:04:42.160 --> 0:04:45.520 means though for the renters and stuff with investors getting involved, 0:04:45.560 --> 0:04:47.760 does that mean is it problematic? I mean, I mean 0:04:47.800 --> 0:04:50.880 rent is often set by you know, the market, right 0:04:51.000 --> 0:04:53.279 or the geography, if you will. But I do wonder 0:04:53.320 --> 0:04:56.160 if this is going to mean higher rental cost potentially 0:04:56.760 --> 0:04:57.440 for renters. 0:04:59.160 --> 0:05:01.919 Yeah. I think some of the specific deals that we 0:05:02.000 --> 0:05:05.120 quoted in the story, you know, we're Taga buying that 0:05:05.160 --> 0:05:08.479 two hundred and thirty two million dollar luxury apartment building 0:05:08.520 --> 0:05:12.000 in Chicago, and then another billionaire buying a Manhattan Grammarcy apartment. 0:05:12.360 --> 0:05:16.360 Those are kind of already luxury apartment buildings where I 0:05:16.400 --> 0:05:19.400 think the clients hele for those buildings are used to 0:05:19.440 --> 0:05:22.680 paying top notch rents. I don't necessarily see a flood 0:05:22.720 --> 0:05:27.400 of interest in rent stabilized or rent controlled properties. Investors 0:05:27.440 --> 0:05:30.600 are definitely shying away from that right now. We're seeing 0:05:30.640 --> 0:05:32.560 a lot of talk about that, even with the Signature 0:05:32.600 --> 0:05:34.840 Bank portfolio, where there is a significant chunk of rent 0:05:34.880 --> 0:05:37.360 stabilized properties, and sort of the question as to who 0:05:37.360 --> 0:05:39.520 wants to take on that risk that's interesting, I think, 0:05:39.960 --> 0:05:43.080 A yeah, I think these folks are largely targeting some 0:05:43.160 --> 0:05:45.640 of the higher end apartments, which you know there's always 0:05:45.640 --> 0:05:47.320 going to be demand for at this time. 0:05:48.320 --> 0:05:50.560 Do we know, you know, not necessarily average rents, but 0:05:50.640 --> 0:05:52.560 when you stay higher end, give us some context for 0:05:52.960 --> 0:05:55.160 our listeners and viewers around the world, like, you know, 0:05:55.360 --> 0:05:58.480 three thousand bucks a month for a one bedroomyah. 0:05:58.560 --> 0:06:01.200 I think in Manhattan. I haven't looked at the most 0:06:01.200 --> 0:06:03.599 recent numbers, but I think we're topping near like four 0:06:03.600 --> 0:06:06.560 thousand on average for an apartment, right Natalie. 0:06:06.600 --> 0:06:08.200 This is a fascinating story, and I also thought it 0:06:08.200 --> 0:06:10.599 was interesting how that before the pandemic you had the 0:06:10.600 --> 0:06:13.120 world's rich really focused on office properties. But we know 0:06:13.160 --> 0:06:17.640 what's going on there, so they've shifted uh into rental 0:06:17.640 --> 0:06:21.479 properties and residential So really interesting story in terms of 0:06:21.560 --> 0:06:24.599 what's going on today. Bloomberg News US commercial real estate 0:06:24.600 --> 0:06:26.960 reporter Natalie, thank you so much. Netlie Wan joining us 0:06:26.960 --> 0:06:28.760 on zoom in New York City. This is Bloomberg. 0:06:29.320 --> 0:06:32.839 You're listening to the Bloomberg Business Week podcast. Catch us 0:06:32.920 --> 0:06:36.280 live weekday afternoons from three to six Eastern Listen on 0:06:36.320 --> 0:06:40.359 Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business app, 0:06:40.640 --> 0:06:55.000 or watch us live on YouTube. 0:06:52.720 --> 0:06:57.760 World. All right, yeah, you know, we are waiting really 0:06:58.360 --> 0:07:01.240 for this war in Ukraine to be over. I think 0:07:01.279 --> 0:07:05.119 about Ukrainian President Vladimir Zelinsky in town last week speaking 0:07:05.120 --> 0:07:07.640 before the UN General Assembly, making his case for pressing 0:07:07.640 --> 0:07:10.040 on with the war effort. Yet President Biden coming out 0:07:10.400 --> 0:07:12.440 calling out world leaders to stand by Ukraine, and it 0:07:12.520 --> 0:07:15.360 struggled to eject Russian troops even as Kiev's all I 0:07:15.440 --> 0:07:17.080 say that they now expect the war to last for 0:07:17.840 --> 0:07:21.280 years to come. I was watching coverage and people are saying, Okay, 0:07:21.480 --> 0:07:23.160 we're getting ready for year number three. 0:07:23.240 --> 0:07:25.600 Yeah, it's unbelievable to think that that we're there, especially 0:07:25.640 --> 0:07:28.640 given what we thought when Russia first invaded Ukraine almost 0:07:28.880 --> 0:07:30.800 two years ago. Carol with more on the war and 0:07:30.880 --> 0:07:32.920 other global risks. It's really great to have back with 0:07:33.000 --> 0:07:36.040 us in our Bloomberg Interactive Brokers studio. Ed Price Principal 0:07:36.120 --> 0:07:39.560 for Geopolitical Forecasting at Ergo, a global intelligence consulting and 0:07:39.600 --> 0:07:42.840 forecasting firm. At also a former British trade official, representing 0:07:42.840 --> 0:07:45.760 His Majesty's government to Wall Street and the US official 0:07:45.800 --> 0:07:48.800 sector from twenty seventeen to twenty twenty one. He's advised 0:07:48.800 --> 0:07:51.520 a number of European and British parliaments, Carol, and worked 0:07:51.560 --> 0:07:52.880 also in the city of London. 0:07:52.920 --> 0:07:54.200 It just knows a lot and I seeing a lot. 0:07:54.400 --> 0:07:55.280 He also traveled a. 0:07:55.200 --> 0:07:57.880 Lot, and he's just back from Ukraine. Good to have 0:07:57.960 --> 0:07:58.320 you back. 0:07:58.480 --> 0:07:59.360 Thank you very much, Carole. 0:07:59.360 --> 0:07:59.680 How are you? 0:08:00.000 --> 0:08:01.760 But do it okay? Trying to keep up with it 0:08:01.800 --> 0:08:03.760 all and try to make sense of it all. You 0:08:03.800 --> 0:08:06.400 are just back from Ukraine. How did you make sense 0:08:06.400 --> 0:08:07.120 of what you saw? 0:08:08.320 --> 0:08:12.560 Well? I think the word evil crept into my mind 0:08:12.680 --> 0:08:14.640 a lot, so there was a sort of theological reaction 0:08:14.680 --> 0:08:17.200 at the end of the day. I suppose. I otherwise 0:08:17.200 --> 0:08:19.080 tried to make sense of it by putting it into 0:08:19.120 --> 0:08:22.400 the economics bucket and the military bucket. The economics bucket 0:08:22.440 --> 0:08:24.760 is of course that the Ukrainians are really trying to 0:08:24.840 --> 0:08:27.920 make their economy work. They're trying to just go to 0:08:27.960 --> 0:08:30.760 the shops, drink coffees and go out as much as 0:08:30.800 --> 0:08:32.960 they can, which is to be welcomed. And of course, 0:08:33.000 --> 0:08:36.959 on the other hand, the somewhat disappointing counter offensive. I 0:08:37.000 --> 0:08:40.600 went just before the offensive itself, and I think that's 0:08:40.600 --> 0:08:42.079 probably one thing that we're probably going to have to 0:08:42.120 --> 0:08:43.440 talk about today. 0:08:43.960 --> 0:08:44.920 Oh go ahead, Cairl. 0:08:44.960 --> 0:08:46.319 Well, one thing I wanted to say, and I was 0:08:46.360 --> 0:08:48.440 talking to our team about this. There was sixty minutes 0:08:48.480 --> 0:08:50.400 at a piece and it was talking about the American Aid, 0:08:50.480 --> 0:08:53.480 the USA, and one component I wasn't aware of was 0:08:53.520 --> 0:08:56.400 how much was going into the country to support small 0:08:56.440 --> 0:08:58.640 businesses and the whole idea of you've got to have 0:08:58.679 --> 0:09:03.959 some economy to back to after this is resolved. Otherwise, 0:09:04.280 --> 0:09:06.600 you know, you have a taxpayer base. Then people are 0:09:06.640 --> 0:09:08.640 you know, kicking money into the economy, otherwise you have 0:09:08.640 --> 0:09:10.920 everybody leave. So I thought that was an interesting part 0:09:10.920 --> 0:09:12.319 of the aid that I wasn't aware of. I was 0:09:12.320 --> 0:09:14.480 aware of all the military, but it's an important part. 0:09:14.600 --> 0:09:17.000 It's hugely important. And let's not also forget that the 0:09:17.080 --> 0:09:19.880 Ukrainians are still trying to transition out of a Soviet 0:09:20.040 --> 0:09:23.240 economic model. They have a structural deficit essentially, that's a 0:09:23.320 --> 0:09:25.719 social welfare model. They can't really get rid of it. 0:09:26.320 --> 0:09:29.480 By their own admission that the older generation is somewhat corrupt, 0:09:29.600 --> 0:09:30.760 you know, they look at governments of. 0:09:30.760 --> 0:09:32.760 Scuba and another thing I didn't now, yeah. 0:09:32.760 --> 0:09:35.120 I mean, I didn't really understand that until I spent 0:09:35.200 --> 0:09:38.240 some time there. But it's a war on two fronts, right, 0:09:38.280 --> 0:09:40.480 It's the military war, as I say, and they're also 0:09:40.520 --> 0:09:43.480 trying to keep the democratic and market institutions not only 0:09:43.520 --> 0:09:46.800 alive but developing as best they can. And so of 0:09:46.840 --> 0:09:48.920 course the aid that we're sending has to do both. 0:09:49.160 --> 0:09:50.480 You know, there are a great number of people in 0:09:50.480 --> 0:09:52.480 this country who don't want to send aid to the 0:09:52.559 --> 0:09:57.360 Ukrainian government. What would you say, after being there and 0:09:57.400 --> 0:09:59.040 seeing with your own eyes what's going on on the 0:09:59.040 --> 0:10:01.240 ground in Ukraine to folks here in the US who 0:10:01.240 --> 0:10:03.720 are telling their representatives, and some representatis are indeed very 0:10:03.800 --> 0:10:06.320 vocal about it, especially on the Republican side, that they 0:10:06.360 --> 0:10:08.000 do not want to send a to Ukraine. What's your 0:10:08.000 --> 0:10:08.680 message to them? 0:10:09.280 --> 0:10:11.360 My message, very respectfully, would be Where do you want 0:10:11.360 --> 0:10:16.200 to fight Pewtin, the Ukraine, Poland Berlin, Paris. Well it's 0:10:16.200 --> 0:10:19.320 that simple, I think. And the small amount of money 0:10:19.360 --> 0:10:21.959 relative to our overall military budget that we have spent 0:10:22.559 --> 0:10:25.880 in Ukraine, it's about say five percent, that has degraded 0:10:26.120 --> 0:10:29.480 the Russian military capacity in a way that I didn't 0:10:29.520 --> 0:10:32.199 think I would see in my lifetime. Honestly, they will 0:10:32.280 --> 0:10:35.600 previously say five days away from a serious attack on NATO. 0:10:35.679 --> 0:10:38.640 They must be five years away now given the damage 0:10:38.640 --> 0:10:40.720 we've done to them. So you know, what do you 0:10:40.720 --> 0:10:43.720 want for five percent of your military budget? More trucks, 0:10:44.320 --> 0:10:47.760 more uniforms. I would suggest that killing bad guys for 0:10:47.800 --> 0:10:50.360 pennies on the dollar is probably a good ROI if 0:10:50.400 --> 0:10:51.199 we don't. 0:10:51.000 --> 0:10:55.320 Do it, if countries pull back their support, if the 0:10:55.440 --> 0:10:59.120 US pulls back its support, then what potentially? 0:11:00.559 --> 0:11:03.560 I think that Putin and the Russians are trying to 0:11:03.679 --> 0:11:07.600 overhaul the Second World Wars settlement. I think they're trying 0:11:07.600 --> 0:11:10.880 to undo a global order. I don't think that they 0:11:10.920 --> 0:11:12.760 want to live in a world of rules. And if 0:11:12.840 --> 0:11:15.520 Ukraine goes down, and you know, all bets are off. 0:11:15.840 --> 0:11:18.960 I say that in part because the if a new 0:11:19.520 --> 0:11:24.040 US administration leaves NATO, then we've got a bit of 0:11:24.080 --> 0:11:25.680 a problem on our hands because I don't think that 0:11:25.720 --> 0:11:31.080 the Germans are ready themselves to back Europe's independent deterrent yet. 0:11:31.880 --> 0:11:33.280 So what happens is carnage. 0:11:34.679 --> 0:11:35.600 It's like terrifying. 0:11:35.960 --> 0:11:38.320 It is terrifying. I'm wondering, should the US be pushing 0:11:38.320 --> 0:11:41.600 for a cease fire? Should our allies be pushing for 0:11:41.640 --> 0:11:44.839 a ceasefire here? Should that be what they're pushing for 0:11:44.880 --> 0:11:46.120 in terms of an end to this war? 0:11:46.440 --> 0:11:48.280 I think what we should be pushing for is removing 0:11:48.360 --> 0:11:51.400 Russians from every last inch of Ukrainian territory. That's a 0:11:51.440 --> 0:11:54.640 maximalist position. There are people in my world who disagree 0:11:54.679 --> 0:11:57.080 with that, and so it's too dangerous. But if we 0:11:58.080 --> 0:12:03.400 award aggression with any sort of negotiation or peace agreement, 0:12:04.760 --> 0:12:07.480 we're bucking the number one lesson from world history. 0:12:07.520 --> 0:12:08.480 But he's got nukes. 0:12:09.360 --> 0:12:11.320 Well, he's got nukes, and so have we. And I 0:12:11.320 --> 0:12:13.560 think we talked about this before, like if we get 0:12:13.559 --> 0:12:16.120 to that stage, yeah, who you know who has a 0:12:16.160 --> 0:12:18.400 greater faith in the Almighty? I think it's probably us. 0:12:18.880 --> 0:12:21.640 But before that stage, and if he is indeed bluffing, 0:12:21.679 --> 0:12:23.240 which I would suggest to he is so far we've 0:12:23.240 --> 0:12:26.800 crossed every single redline. This is a case of facing 0:12:26.880 --> 0:12:29.439 down military aggression the same way we should have done 0:12:29.480 --> 0:12:30.920 in the nineteen thirties with Hitler. 0:12:31.960 --> 0:12:34.120 So you have a lot to talk about at an 0:12:34.160 --> 0:12:35.959 event you have coming up on Thursday, and I want 0:12:35.960 --> 0:12:37.320 to get into that a little bit. The London Stock 0:12:37.360 --> 0:12:39.920 Exchange Group in the NYU Center for Global Affairs hosting 0:12:39.960 --> 0:12:42.080 a discussion of your political risk with you, which you 0:12:42.160 --> 0:12:44.640 kindly invited us to. And if I still ended earlier, 0:12:44.720 --> 0:12:47.720 I could make it any right, it's Ukraine with love. 0:12:48.559 --> 0:12:51.200 Tell us about what you want to emphasize there. 0:12:51.280 --> 0:12:53.560 Yeah, that's really coind it's essentially the same message, right. 0:12:53.559 --> 0:12:55.840 I don't want to come in here and repeat myself, 0:12:55.880 --> 0:13:00.160 but I'm really trying to push as an analyst for 0:13:00.280 --> 0:13:03.400 the case that the aid that we're sending Ukraine must 0:13:03.440 --> 0:13:07.600 be in place, probably should increase. I think it's rather 0:13:07.640 --> 0:13:09.439 strange that we haven't offered them more in the way 0:13:09.440 --> 0:13:12.080 of air power while suggesting that they can conduct combined 0:13:12.160 --> 0:13:16.400 arms operations and the essentially they are fighting for our 0:13:16.440 --> 0:13:19.080 freedom as well. It's that simple, it's that emotive. So 0:13:19.480 --> 0:13:23.520 I'm trying to get some powerful, interesting people together, remind 0:13:23.559 --> 0:13:26.120 them of that, tell them a few stories from Ukraine, 0:13:26.640 --> 0:13:28.520 because the alternative is pretty. 0:13:28.160 --> 0:13:32.720 Grim based on your analysis, ad what you've seen over 0:13:32.720 --> 0:13:36.319 the last two years, the world's response. How does this end? 0:13:36.960 --> 0:13:37.720 How does the war end? 0:13:37.880 --> 0:13:38.080 Yeah? 0:13:39.320 --> 0:13:41.360 I think probably the central case right now is that 0:13:41.440 --> 0:13:44.439 Russia gets to keep a big old chunk of Ukraine. 0:13:44.800 --> 0:13:48.319 It's embedded itself. You've seen the defensive lines, and at 0:13:48.320 --> 0:13:51.080 that point, all bets are offers to what happens the 0:13:51.080 --> 0:13:54.280 decade after that, if they're rewarded. I'm afraid that's the 0:13:54.280 --> 0:13:57.040 central case right now. I don't think we've given them enough. 0:13:57.640 --> 0:13:59.800 To push the can that be prevented it yet? 0:14:01.120 --> 0:14:01.320 Well? 0:14:01.320 --> 0:14:03.040 I mean, I mean, look at this, This is all 0:14:03.080 --> 0:14:05.320 a function of how load you want to go, right, Like, 0:14:05.360 --> 0:14:07.959 do you want do you really want to push the 0:14:08.040 --> 0:14:11.240 Russians out with conventional power? And we're creeping towards that. 0:14:11.280 --> 0:14:14.160 I mean, you'll notice that there is a deep contradiction 0:14:14.240 --> 0:14:16.439 in American thinking because on the one hand, we say, 0:14:16.720 --> 0:14:18.880 as I just said, he probably won't use them, don't worry, 0:14:19.000 --> 0:14:20.920 so keep on. On the other hand, of course, we 0:14:20.960 --> 0:14:23.240 haven't sent everything we could have, because that in the 0:14:23.240 --> 0:14:24.920 back of your mind you're thinking, well, maybe he might, 0:14:26.480 --> 0:14:28.720 but it's not going to end well unless there's there's 0:14:28.760 --> 0:14:30.240 more military intermention. 0:14:30.440 --> 0:14:33.440 And this isn't a European thing, this is a global 0:14:33.480 --> 0:14:34.640 concern has. 0:14:34.520 --> 0:14:37.840 To be I would say, so, Carol, I mean. 0:14:36.840 --> 0:14:38.840 I mean, I'm asking kind of the obvious, but I 0:14:38.840 --> 0:14:41.280 do feel like there are people like that's Europe's problems. 0:14:41.600 --> 0:14:44.240 Yes, and I think that's wildly dangerous because you know, 0:14:44.320 --> 0:14:47.920 Pewtin and Shijenpin do not have the relationship that they claim. 0:14:48.280 --> 0:14:51.320 Pewtin is the junior partner. But just imagine if Peutin 0:14:51.360 --> 0:14:53.840 made a feint at the Baltics or you know, at 0:14:53.920 --> 0:15:00.480 NATO in conjunction with increased Chinese harassment of Taiwan. These 0:15:00.480 --> 0:15:03.160 guys are smart. They can figure out a way to 0:15:03.200 --> 0:15:07.120 spread our resources more thinly. So for my money, I say, 0:15:07.240 --> 0:15:10.560 the more work that we do in Ukraine to hold 0:15:10.600 --> 0:15:13.280 down this autocratic aggressive power, the better. 0:15:13.160 --> 0:15:15.040 Does that relationship between China and Russia. 0:15:15.080 --> 0:15:15.520 Where are you? 0:15:16.200 --> 0:15:18.880 It worries me deeply. Yes, I'm yeah, I'm up at 0:15:18.920 --> 0:15:19.720 night thinking about that one. 0:15:19.720 --> 0:15:21.720 We're running out of time, But like it's I think 0:15:21.760 --> 0:15:24.440 about that a lot in terms of that relationship and 0:15:24.480 --> 0:15:25.800 it just do you feel like what we got off 0:15:25.800 --> 0:15:28.760 of the un last week? Do you feel like there 0:15:28.920 --> 0:15:32.320 was the right support and just got about fifteen seconds? 0:15:32.440 --> 0:15:34.160 Absolutely not, No, there needs to be more. 0:15:34.320 --> 0:15:37.440 Yeah, it felt like people were getting tired at the situation, 0:15:37.480 --> 0:15:40.280 which was unfortunate. Good luck with your event Thursday at 0:15:40.280 --> 0:15:40.680 what time? 0:15:40.960 --> 0:15:44.320 Six pm? I'll say London Suck Exchange Group. If you'd 0:15:44.360 --> 0:15:45.040 like to come, let me. 0:15:45.000 --> 0:15:47.120 Know, ad Price. Thank you. As always, this is Bloomberg. 0:15:49.240 --> 0:15:52.800 You're listening to the Bloomberg Business Week podcast. Catch us 0:15:52.840 --> 0:15:56.840 live weekday afternoons from three to six Easter on Bloomberg Radio, 0:15:57.040 --> 0:16:00.200 the Bloomberg Business App, and YouTube. You can also us 0:16:00.440 --> 0:16:03.520 live on Amazon Alexa from our flagship New York station. 0:16:03.960 --> 0:16:06.760 Just say Alexa play Bloomberg eleven thirty. 0:16:08.960 --> 0:16:10.920 A lot going on in the auto world. Continues to 0:16:10.960 --> 0:16:13.960 be President Biden on the picket line telling striking autoworkers 0:16:14.000 --> 0:16:18.520 to stick with it. And then you had Ford being 0:16:18.520 --> 0:16:22.040 blasted by its largest labor union for halting construction on 0:16:22.080 --> 0:16:24.200 that three and a half billion dollar battery plant in Michigan, 0:16:24.240 --> 0:16:27.440 amid scrutiny of its ties to a Chinese battery maker 0:16:27.760 --> 0:16:29.800 by Republican lawmakers lock going on. 0:16:30.000 --> 0:16:30.200 Yeah. 0:16:30.200 --> 0:16:32.280 In today's edition of Bloomberg Plugged In, we're looking at 0:16:32.320 --> 0:16:34.640 the world of evs with us. We got a Bloomberg 0:16:34.680 --> 0:16:38.680 Intelligence senior autos analyst, Kevin Tynan from Bloomberg Intelligence headquarters 0:16:38.720 --> 0:16:41.320 in Princeton, Jersey. Also very pleased to have back with us. 0:16:41.360 --> 0:16:44.440 Diana Lee, co founder and CEO at Constellation. She's with 0:16:44.520 --> 0:16:47.640 us in our Bloomberg Interactive Brokers studio. Constellation a marketing 0:16:47.680 --> 0:16:50.440 platform for the automotive industry. It helps car dealerships reach 0:16:50.440 --> 0:16:52.680 out to customers. Kevin, I want to start with you 0:16:52.720 --> 0:16:54.360 and just just lay it all out there for us 0:16:54.400 --> 0:16:56.920 in terms of historical context here and what it means 0:16:56.920 --> 0:16:59.360 to have a sitting president actually join a picket line today. 0:17:00.360 --> 0:17:04.080 Yeah, very interesting. You know, it's been a little bit 0:17:04.160 --> 0:17:07.560 since Friday, since the expansion of the of the walkouts, 0:17:08.240 --> 0:17:10.000 it's been a little bit quiet. So I think there's 0:17:10.000 --> 0:17:13.440 real work going on. There's photo ops, you know today 0:17:13.560 --> 0:17:15.840 with the President being on the picket line, But you know, 0:17:15.840 --> 0:17:19.399 I think real work is getting done. You know, and 0:17:20.080 --> 0:17:22.080 I've said this all along. I think really for the 0:17:22.119 --> 0:17:28.760 manufacturers it's about flexibility to rationalize capacity, and headcount going forward, 0:17:29.160 --> 0:17:32.200 And for the Union, it's about sharing and the the 0:17:32.840 --> 0:17:36.520 profitability that the automakers have had over the past ten years. 0:17:36.920 --> 0:17:41.160 Forty percent increase in pay, Kevin President says, yes, I'm 0:17:41.200 --> 0:17:43.439 not sure that many Americans can relate to it, that 0:17:43.480 --> 0:17:46.240 forty percent increase in pay. So walk us through the 0:17:46.359 --> 0:17:49.639 changing balance sheets potentially for the big three US automakers 0:17:49.680 --> 0:17:52.680 as we transition to that ev world. I mean, does 0:17:52.720 --> 0:17:55.880 it that balance sheet change the cost the gains? 0:17:56.840 --> 0:17:59.280 Yeah, Look, and I think if it's if it's the 0:17:59.800 --> 0:18:03.400 labor component of cost of goods, it's a little bit 0:18:03.400 --> 0:18:06.680 easier to absorb. Right. So if you look at even 0:18:06.800 --> 0:18:10.280 just transaction prices over the life of the last contract, 0:18:10.359 --> 0:18:13.399 you know, up significantly. So even if there's you know, 0:18:13.480 --> 0:18:15.720 eight percent a year over the next four years, which 0:18:15.760 --> 0:18:18.399 comes out to be that thirty six percent, you know, 0:18:18.480 --> 0:18:23.200 prices have actually risen faster than that during the last contract. Now, 0:18:23.560 --> 0:18:26.679 a lot of the automakers forward, specifically are all truck 0:18:26.800 --> 0:18:29.960 in the US, so there's very little additional mix upside 0:18:29.960 --> 0:18:34.040 for companies like that. Electrification isn't quite there yet, so 0:18:34.040 --> 0:18:36.600 it's probably going to be something like software and in 0:18:36.680 --> 0:18:40.240 vehicle content that helps offset some of those costs, But 0:18:40.359 --> 0:18:42.960 where it would really hurt and impact the balance sheet 0:18:43.000 --> 0:18:46.159 would be in you know, a change in sort of 0:18:46.160 --> 0:18:51.200 the pension, the healthcare some of those long term legacy costs, 0:18:51.400 --> 0:18:56.399 or being tied into a specific headcount and capacity level 0:18:56.840 --> 0:19:02.160 that just isn't sustainable as volume declines and continues decline 0:19:02.240 --> 0:19:02.920 going forward. 0:19:03.160 --> 0:19:05.199 Dana, we talked with you on Friday, so thank you 0:19:05.240 --> 0:19:07.920 for coming back. You are closely with the dealerships. Remind 0:19:08.160 --> 0:19:10.960 our audience what you are hearing from them and how 0:19:11.240 --> 0:19:14.400 you are thinking about this in regards to them. 0:19:15.000 --> 0:19:18.000 Yeah, I think that there's a lot of confusion that's 0:19:18.040 --> 0:19:21.040 going on, and I think the worries that if you 0:19:21.119 --> 0:19:25.840 are a GM Ford or Stilantis dealership right now, you're 0:19:25.880 --> 0:19:28.000 not sure where your parts are coming from, and you 0:19:28.040 --> 0:19:30.160