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Speaker 3: Jeffrey Cleveland joints us here.
Speaker 4: He's the chief econosces of Payden and Regal. He's out
Speaker 4: there in La. I have no idea where he is today. Hey, Jeffrey,
Speaker 4: talk to us about inflation. What are you feeling about
Speaker 4: inflation these days? Is it whipped? Is it under controlled?
Speaker 4: Do we have to be concerned about it? What did
Speaker 4: the cpidea to tell you today?
Speaker 5: Well, Hi Paul, first of all, coming to you from London.
Speaker 3: Nice.
Speaker 6: That is the uh pinal name England in the background.
Speaker 6: So yeah, a little bit different than you today. But
Speaker 6: CPI is it dead yet? I don't think inflation is
Speaker 6: dead yet, but we're moving in the right direction. I
Speaker 6: think the key number this morning point three, the month
Speaker 6: to month change in core CPI that rounded up to
Speaker 6: point three, so it was actually unrounded.
Speaker 5: It was like point two eight.
Speaker 6: That implies in our you know, quick math, something like
Speaker 6: a point two reading on the Fed's preferred gauge of inflation,
Speaker 6: the core PCE, which will get later this month.
Speaker 5: So point two percent on core pc is roughly consistent
Speaker 5: with the Fed's inflation target.
Speaker 6: So I think this does keep the FED on track
Speaker 6: to cut again at the December meeting.
Speaker 5: That's the that's the key takeaway from the report for me.
Speaker 7: There's been debate about rate cuts and how they may
Speaker 7: sloan the coming months, possibly to every other meeting pays
Speaker 7: starting in twenty twenty five. We've also had some commentary
Speaker 7: from FED officials this week, like Neil Cashkari talking about
Speaker 7: how high productivity points to higher neutral level. Before they
Speaker 7: were thinking it was around three percent, now could potentially
Speaker 7: be higher than that. Just given that they're way on
Speaker 7: what potential fiscal policy will come out of Washington over
Speaker 7: the next year. Where do you view the pace of
Speaker 7: recuts in the coming months.
Speaker 6: Yeah, we see another one in December, as I said,
Speaker 6: and then I do think they slow the pace of
Speaker 6: cuts in twenty twenty five, so maybe they go to
Speaker 6: once per quarter, so you get four over the balance
Speaker 6: of twenty twenty five. And yeah, I mean as you
Speaker 6: get closer to the range where you think neutral is
Speaker 6: that maybe you can slow down as you approach, as
Speaker 6: you approach the station, something like that. It's really hard
Speaker 6: to say where neutral is. Our guess is somewhere around
Speaker 6: three and a half percent. I think that's a good
Speaker 6: bet at this point, maybe a bit lower.
Speaker 5: We'll have to see.
Speaker 6: That is notably higher than we would have told you
Speaker 6: pre COVID, so we probably would have been around two
Speaker 6: and a half percent at that time. So it's I
Speaker 6: think you can make a good argument that it's a
Speaker 6: little bit higher, But I think you could also argue
Speaker 6: that nobody actually knows with any degree of certainty.
Speaker 5: So we'll have to see.
Speaker 4: Jeffrey, we're going to get retail sales on Friday. A
Speaker 4: what are you looking for there? And B what's your
Speaker 4: sense of the consumer out there?
Speaker 6: I continue to be excited, elated.
Speaker 5: I mean the strength of the consumer. It's holding up
Speaker 5: very nicely.
Speaker 3: Paul.
Speaker 6: Through all the data that we've seen thus far this
Speaker 6: year for US have paid and regal, the most important
Speaker 6: data point is aggregate consumer income.
Speaker 5: I mentioned that probably one hundred times on this program.
Speaker 6: It's still growing, Paul, five percent in nominal terms, five
Speaker 6: percent year on year as of the latest set of data.
Speaker 5: That's important because when the US consumer.
Speaker 6: Has income, they tend to spend and that keeps GDP going,
Speaker 6: and that's what we're seeing we've been seeing, so I
Speaker 6: think you'll see that reflected in retail sales. The only
Speaker 6: caveat that I always give the clients is that retail
Speaker 6: sales is really mostly goods and so it's a subset
Speaker 6: of overall consumer spending, so don't get too fixated on
Speaker 6: any one month of retail sales. We think the US
Speaker 6: consumer is in solid shape.
Speaker 7: Looking at the GDP now model for the fourth quarter,
Speaker 7: I know it can be volatile, but so far it's
Speaker 7: around two and a half percent growth there, and obviously
Speaker 7: we're going to have more earnings that are geared toward
Speaker 7: the consumer next week, including Walmart here when it comes
Speaker 7: to more of the crucial holiday quarter, which usually is
Speaker 7: the gangbuster quarter that powers consumer spending in more than
Speaker 7: two thirds of GDP growth, How are you viewing the
Speaker 7: final months of the year.
Speaker 6: Yeah, I've been pretty upbeat on our US GDB call
Speaker 6: all year relative to consensus. Right now, we think Q
Speaker 6: four to Q four for twenty twenty four, GDP is
Speaker 6: going to be about two point four percent, and if
Speaker 6: the fourth quarter comes in as you say, as that
Speaker 6: now cast implies, there's potentially some upside risk even to
Speaker 6: our optimistic take. So that's very good news, especially if
Speaker 6: you go back to I don't know this time last year,
Speaker 6: a lot of prognosticators, a lot of investors were saying
Speaker 6: that our recession was inevitable, that given the fact that
Speaker 6: the FED had heightd as much as they had that
Speaker 6: with a lag we were going to see a down,
Speaker 6: and we just really have it. The consumers remain resilient
Speaker 6: and GDP growth looks great, So I think, for me,
Speaker 6: what's the moral of the story here? We have a
Speaker 6: situation that we've had maybe five times in the last
Speaker 6: three or four decades, where the FED is cutting rates
Speaker 6: so becoming less restrictive, and the economy is still growing
Speaker 6: at a pretty good clip.
Speaker 5: When those two things are moving in the right.
Speaker 6: Direction, it's good for risk assets, So you know, equities,
Speaker 6: large cap, small cap, whatever you want us equities, but
Speaker 6: also credit sectors in the bond market, and we have
Speaker 6: a very good high yield strategy. I think that will
Speaker 6: continue to do very well given the GDP backdrop and
Speaker 6: the fetter reserves actions.
Speaker 4: All right, Jeffrey, thank you so much for joining us.
Speaker 4: By the way, go to the Royal Arms pub Bank
Speaker 4: Street mentioned my name. They will take good care of you.
Speaker 4: Jeffrey Cleveland, Chief economisce paid in and regal. He's over
Speaker 4: there in London seeing clients and doing the good work there.
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Speaker 3: Backdown to Washington, d C. Lard Davison joins us.
Speaker 4: She's a politics editor for Bloomberg NEWSDWN in Washington.
Speaker 3: Laura, A lot to cover here.
Speaker 4: President elect Trump in Washington speaking to lawmakers earlier today.
Speaker 4: What's the feeling in DC as to We're start getting
Speaker 4: more and more information on some of his cabinet picks,
Speaker 4: on some of the people he's appointing to special positions,
Speaker 4: whether it's Elon Musk or you know, in the Tzar
Speaker 4: type positions.
Speaker 3: What's the feeling in DC this morning?
Speaker 8: So there's certainly been a couple surprises. Late last night,
Speaker 8: there was a pick for the Department of Defense, Peter Hegseth,
Speaker 8: who is a Fox News personality. He does have a
Speaker 8: military background, but this one raised a lot of eyebrows
Speaker 8: around the world of people having to actually google and
Speaker 8: figure out who is this guy.
Speaker 3: So that was one of the surprises.
Speaker 8: We also see some other key loyal going into other
Speaker 8: national security posts, someone like John Ratcliffe, who is the
Speaker 8: Director of National Intelligence. During Trump's first term, he will
Speaker 8: take on.
Speaker 3: To lead the CIA.
Speaker 8: Of course, earlier in the week we saw Christy Nome
Speaker 8: installed at DHS, and also Tom Holman, who will be
Speaker 8: in one of those ZAR positions at the White House
Speaker 8: overseeing immigration and sort of these mass deportations that Trump
Speaker 8: has talked about. So where we've seen these appointments go
Speaker 8: is where you can kind of get a sense of
Speaker 8: what Trump wants to do in his early days. So
Speaker 8: immigration is going to be high on that list national security,
Speaker 8: but also this new what they're calling DOGE or the
Speaker 8: Department of Government Efficiencies. Of course, this is the sort
Speaker 8: of position that Elon Musk has dreamed up for himself.
Speaker 8: The Vekraamaswami will be joining him there. This is not
Speaker 8: an actual cabinet job. This isn't an actual department, sort
Speaker 8: of a presidential commission, which means its powers and.
Speaker 3: Scope will be more limited.
Speaker 8: But we can't expect that we'll see Elon Musk around.
Speaker 8: He's actually today with Trump in Washington, and he was
Speaker 8: at a meeting with House Republicans just a couple hours ago.
Speaker 7: I'm glad you brought up a Vicroamaswami, who's also supposed
Speaker 7: to co lead that new Department of Government Efficiency, because
Speaker 7: he said in a post on X this morning that
Speaker 7: a federal government needs a massive downsizing. What type of
Speaker 7: influence do you think he could wield on the president?
Speaker 8: So far, his influence has been massive. You know, he's
Speaker 8: been at mar A Lago helping make some of these
Speaker 8: key picks. He's been joining phone calls with foreign leaders.
Speaker 8: Musk himself says he thinks he can cut about two
Speaker 8: trillion dollars from the federal budget. It's unclear if he
Speaker 8: wants to do that in one year or spread over
Speaker 8: a longer period, but two trillion dollars is a massive amount.
Speaker 8: That would basically be sort of all of the government spending.
Speaker 8: You know that isn't you know, Medicare, Medicaid, some of
Speaker 8: those entitlement programs, you know, financing the debt, those sorts
Speaker 8: of things. So this is a really big task that
Speaker 8: he wants to do, but he'll probably find it's a
Speaker 8: little bit more difficult than what he did at Twitter,
Speaker 8: for example. You can't just kind of come in and
Speaker 8: start firing people. There are This is the federal government,
Speaker 8: so there are more rules and regulations and guardrails in check.
Speaker 4: Okay, from that big picture topic to another one, deportations.
Speaker 4: Is there any plan coalescing around what the score of
Speaker 4: those might look like, how they might actually get it done?
Speaker 8: So far, not much, but there's a lot of questions
Speaker 8: about logistically what this will look like and who is
Speaker 8: going to pay for this. You know, Trump has said
Speaker 8: he wants to deport somewhere between fifteen and twenty million people.
Speaker 8: You know, there is some money and some things that
Speaker 8: the agencies like Department handle onmeland Security could start doing,
Speaker 8: but it is very likely that they're going to need
Speaker 8: money from Congress to really get this off the ground.
Speaker 8: Of course, Congress is looking like it will be held
Speaker 8: in Republican hands, but still, you know, it's government spending.
Speaker 8: You know, in many cases needs sixty votes in the Senate,
Speaker 8: they might be able to get it by with just fifty,
Speaker 8: meaning they can do it with just Republicans. But spending
Speaker 8: a lot of money, and Trump is said he wants
Speaker 8: to spend as much money as it'll take. That's going
Speaker 8: to be probably one of the first policy fights we
Speaker 8: see play out in Washington Post January twentieth, Lord.
Speaker 4: Davison, thank you so much for joining us, Lord Davison.
Speaker 4: She's a politics editor for Bloomberg News from Washington, DC.
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 4: Jessman, She's sitting in steal outing back Monday, which is
Speaker 4: the good news. Paul Sweeney live here on Bloomberg Interactive
Speaker 4: Broker Studio. We're streaming live on YouTube seever, YouTube dot
Speaker 4: com search Bloomberg Podcast and that's where you will find
Speaker 4: us lots of political discussion this hour. Again, President like
Speaker 4: Trump in Washington, DC, meeting with President Biden in the
Speaker 4: White house. We had a little couple I guess a
Speaker 4: minute or so of some sound from those two great.
Speaker 3: It was brief, brief, but they did do this.
Speaker 4: Being presumably there media behind closed doors and getting things
Speaker 4: done here.
Speaker 3: Henrietta tres joins us.
Speaker 4: She is managing partner and director of Economic Policy at
Speaker 4: Data Partners. Henrietta, what do you make of the last
Speaker 4: I guess eight days from last Tuesday, you know, with
Speaker 4: some perspect to here what happened?
Speaker 1: Well, I think some of the most exciting things to
Speaker 1: happen is coming out from my conversations with folks on
Speaker 1: the Trump transition team as they're trying to staff up,
Speaker 1: really enjoying the sort of parlor game of who's going
Speaker 1: to be nominated in which key positions. I think there
Speaker 1: is a lot of enthusiasm and anticipation around who might
Speaker 1: be the next Treasury Secretary. That's where a lot of
Speaker 1: our clients are focused, a lot of conversation around what
Speaker 1: the role for former Ambassador Lithheiser might be.
Speaker 9: As the new trades.
Speaker 1: Are there's really just sort of this brilliant feel of
Speaker 1: you know, now we get to really put into effect
Speaker 1: all of the things that the Trump campaign hoped they'd
Speaker 1: be able to do. Obviously optimistic and hope or enthusiastic
Speaker 1: about the fact that they got the House at long
Speaker 1: last and declared in their favor.
Speaker 9: So just a lot of enthusiasm and excitement is what.
Speaker 1: I'm getting out of the Trump camp today, Henrietta.
Speaker 7: Of course, there are a lot of questions about tax
Speaker 7: as well as trade policies. When you're speaking with your clients,
Speaker 7: who do they feel like would be best to lead
Speaker 7: the Treasury Department?
Speaker 9: Best is a relative term.
Speaker 1: I think if it came to Bob Lintheiser, for whatever reason,
Speaker 1: he has made pretty clear that he wants that role,
Speaker 1: I think the market would respond very negatively to that.
Speaker 1: He's obviously very supportive of tariffs and extraordinarily competent, as
Speaker 1: we saw from the Section three oh one tariff in
Speaker 1: the trade war with the US and China. That's something
Speaker 1: that they would very much anticipate if he came in
Speaker 1: at Treasury, which is, you know, on the street, the
Speaker 1: most important and powerful position in the entire administration. So
Speaker 1: I think that if Bob Laittheiser were to be Treasury Secretary,
Speaker 1: there would be a lot of trepidation and anxiety on
Speaker 1: the street for Scott Bessett, who has.
Speaker 9: Been making the rounds for months now on Wall.
Speaker 1: Street, there is an understanding that he would prefer sort
Speaker 1: of a gradual approach to tariff's, but it still raises
Speaker 1: a lot of eyebrows when you hear him say directly,
Speaker 1: I think that every month tariff shooting five percent. Those are,
Speaker 1: of course tireffs that are passed directly onto the US consumer.
Speaker 1: So there's there's really a lot of anxiety around tyriffs
Speaker 1: in general. There's also a lot of attention around this
Speaker 1: idea that Elon Musk, with his potential new commission, could
Speaker 1: trim two trillion dollars in federal spending over the next
Speaker 1: four years. That's a non starter. That's not how governing be.
Speaker 1: The appropriations process works. That requires sixty votes in the
Speaker 1: Senate and two hundred and eighteen in the House, neither
Speaker 1: of which are going to be achievable. So there is
Speaker 1: a lot of focus there just on understanding the realm
Speaker 1: of the possible.
Speaker 9: But obviously this is an.
Speaker 1: Ex official committee, and Congress generally doesn't cotton two outside
Speaker 1: committees of out elected officials.
Speaker 4: Henriette with a little bit of hindsight here and Given
Speaker 4: what we know with the House, how much of a
Speaker 4: red wave is this election season.
Speaker 1: Well, the House is definitely a huge problem, especially since,
Speaker 1: as you just mentioned, Trump is taking at least two
Speaker 1: of the House members with him to the White House.
Speaker 1: So based on the numbers that we have right now,
Speaker 1: the majority for the Republicans in the House is going
Speaker 1: to be even smaller than it was this last cycle.
Speaker 1: I think two three four seats is what we're looking
Speaker 1: at this point. So governing is going to be incredibly difficult,
Speaker 1: and they have some really heavy lifts to tackle. One
Speaker 1: of the things that we're focused on a lot right
Speaker 1: now is how much can they do? How much can
Speaker 1: they do on the tariffront in terms of collecting revenue
Speaker 1: in from tariffs and factoring that into the tax bill.
Speaker 1: It's worth remembering that Congress has not legislated on tariffs
Speaker 1: in eighty years, and there's a reason for that.
Speaker 9: It's really difficult.
Speaker 1: It leads to material ramifications and trade wars with not
Speaker 1: just China, but also retaliation from the EU and other
Speaker 1: nations that we impose tariffs on. By actually voting on tariffs,
Speaker 1: that puts House members in particular in a unique position
Speaker 1: to be railed against by their voters in the upcoming
Speaker 1: midtorm election. So there's going to be a really hard
Speaker 1: road ahead to pull a tax together just in general.
Speaker 1: And once you or if you do add terrifts to
Speaker 1: the equation, it becomes even more difficult. With scant majorities
Speaker 1: of two, three four seats, you're really going to struggle
Speaker 1: on that one.
Speaker 7: What about when it comes to the debt ceiling because
Speaker 7: a lot of this won't transition until early next year,
Speaker 7: So when you're coming up against potential deadlines around the holidays,
Speaker 7: how could this shape out?
Speaker 5: Yeah?
Speaker 1: So I think early discussion that I've had with Republican
Speaker 1: Senate staff in particular, is that they would join the
Speaker 1: debt ceiling with the tax bill.
Speaker 9: That has some advantages and some disadvantages.
Speaker 1: The biggest advantage is that it gives you a deadline
Speaker 1: of probably July of next year to pass the tax bill.
Speaker 1: If you combine the two of those issues together, you
Speaker 1: can pass a bil via reconciliation that does not require
Speaker 1: any Democratic votes. So Republicans can forego any negotiations with
Speaker 1: Democrats and pass a debt ceiling bill on their own terms.
Speaker 1: That is, of course something that House Republicans have not
Speaker 1: acted to do in almost two decades. They have perpetually
Speaker 1: relied on majority support for debt seil hikes and appropriations
Speaker 1: bills from the Democratic Conference, even when they're in the minority.
Speaker 1: We've seen that play out repeatedly in the last couple
Speaker 1: of years. So I think the debt ceiling potentially riding
Speaker 1: along with the tax bill has the advantage of making
Speaker 1: the tax bill an urgent must pass thing much earlier
Speaker 1: in the year than otherwise would be achievable July versus December.
Speaker 9: But it is a very heavy political lift.
Speaker 1: And to do the debt ceiling be a reconciliation, you
Speaker 1: must increase an authorization by a specific dollar figure.
Speaker 9: You cannot suspend it through May twenty twenty eight.
Speaker 1: You have to provide a one and a half two
Speaker 1: trillion dollar debt ceiling hikes specifically, and that will equate
Speaker 1: to a debt ceiling of thirty four thirty five trillion dollars,
Speaker 1: which is a very hard vote for, in particular Republican
Speaker 1: members of the House to take.
Speaker 4: Henryetta my civics is a little rusty here. Remind us,
Speaker 4: how do we replace a member of the House or
Speaker 4: the Senate that joins an administration.
Speaker 3: How does that happen.
Speaker 1: It's different for every state. They have different rules around
Speaker 1: when it has to be achieved. Whether there's a special election,
Speaker 1: that depends how close you are to the election, But
Speaker 1: in general, it's up to the state and the local
Speaker 1: governing officials in that state at the governor's level, to
Speaker 1: pick up a replacement in the interim. They will also
Speaker 1: call special elections. That's going to be in each state's
Speaker 1: by laws.
Speaker 7: That's interesting. So as far as what that means moving forward,
Speaker 7: what's the timetable on when those seats would be filled.
Speaker 1: Well, they're going to want to get them filled as
Speaker 1: fast as possible, particularly in states where there's going to
Speaker 1: be a Republican replacement. I think the easiest way to
Speaker 1: look at this is probably from the United States Senate standpoint,
Speaker 1: because so many Senators are likely to go up to
Speaker 1: the administration, not just JD. Vance, who's obviously now the
Speaker 1: Vice president elect, but also a whole host of senators
Speaker 1: like Marco Rubio, potentially Tom Cotton, Bill Haggerty, Marsha Blackburn,
Speaker 1: every one of those state officials who's in a position
Speaker 1: to replace or with a special interim appointment, a senator.
Speaker 9: Is going to be in a position to do that.
Speaker 1: So, whether that's maybe Ron De Santis, the speculation right
Speaker 1: now is that Laura Trump is in the offing to
Speaker 1: replace Rubio, those are going to be things that they
Speaker 1: want to do quickly, because even on the Senate side,
Speaker 1: you only have fifty three seat majority for Republicans. If
Speaker 1: they lose a whole host of members that go probably
Speaker 1: in January and February up to the White House when
Speaker 1: they get confirmed, you're going to need those replacements immediately,
Speaker 1: otherwise you won't have functional majorities. So they're going to
Speaker 1: all do that very quickly on the House side in particular.
Speaker 4: So, Henriette, given what we know about the makeup of
Speaker 4: both houses of Congress, what do you think is on
Speaker 4: the to do list for Congress in twenty twenty five.
Speaker 1: Well, we're going to get through the lame duck session here,
Speaker 1: We're going to do an emergency spending bill for the
Speaker 1: hurricanes Helene and Milton. There's still going to be an NDAA,
Speaker 1: there's still a farm bill component. There's going to be
Speaker 1: efforts to pass a very small focused tax bill providing
Speaker 1: tax and senates for home rebuilding.
Speaker 9: After disasters.
Speaker 1: But into next year, you should expect Congress to do
Speaker 1: really the two things that they have to do, which
Speaker 1: is the debt ceiling and a tax bill, and then
Speaker 1: beyond that very little. It's very much going to be
Speaker 1: focused on the appropriations process, which, as I mentioned, does
Speaker 1: not leave room for cutting federal spending because you're going
Speaker 1: to have to get ten to twenty Democrats in the
Speaker 1: Senate and maybe as many as eighty to one hundred.
Speaker 9: In the House.
Speaker 1: So it's going to be pass the debt ceiling, pass
Speaker 1: a tax bill, and then just work on a bipartisan
Speaker 1: way to keep the government open for the rest of
Speaker 1: the last three years of the Trump term. It's effectively
Speaker 1: a repeat of what we saw from his first term
Speaker 1: tax tax in the first year, and then trade for
Speaker 1: the next three years after that. In this case, I
Speaker 1: think tarriffs will start almost immediately, but that's not going
Speaker 1: to be up to Congress.
Speaker 9: That's going to be up to Ambassador.
Speaker 1: Leithheiser, who will be sort of a trade zar for
Speaker 1: the current conversation. And then Congress will do the backbreaking
Speaker 1: work of passing a budget, passing appropriations bills, hyping the
Speaker 1: debt ceiling. In the tax bill, and I suspect that's
Speaker 1: largely it.
Speaker 4: All right, Henrietta, thank you so much for joining us.
Speaker 4: We've learn so much speaking with you. Henrietta tres Managing partner,
Speaker 4: director of Economic Policy for Beta Partners.
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Speaker 4: Jess meant and sitting in for Alex Steel on Paul
Speaker 4: Sweeney Live here in our Bloomberg Interactive Brokers studio, or
Speaker 4: streaming live on YouTube as well, So head over to
Speaker 4: YouTube dot com search Bloomberg Podcast. All right, Jess, I'm
Speaker 4: looking at the Mortgage Bankers Association thirty year fixed contract
Speaker 4: for mortgages six point.
Speaker 3: Eighty six percent. Dude, we were at six percent recently.
Speaker 3: I thought I was going to refive the mortgage on
Speaker 3: the Jersey Shore.
Speaker 9: You haven't been able to do that.
Speaker 3: Not happening. I don't know what's going on.
Speaker 7: Alex Steel's able to get a great before.
Speaker 3: speA never ever moving we want to talk.
Speaker 4: We love talking real estate here, both commercial real estate
Speaker 4: and residential real estate, and.
Speaker 3: We can do that today with some good, good folks.
Speaker 4: Best Freeman, chief executive officer for Brown, Harris Stevens and
Speaker 4: Abigail do Little, chief market strategists, are correspondent for Bloomberg News,
Speaker 4: both of them joining us here in our Bloomberg Interactive
Speaker 4: Brokers studio. Best talk to us just about Let's start
Speaker 4: with New York City. How's the New York residential real
Speaker 4: estate market these days?
Speaker 10: You know, the New York City market has been challenged lately.
Speaker 10: The last few years, I would say two have been
Speaker 10: slower than usual. Volume is down, and I think inflation
Speaker 10: is a part of that. And obviously rates that you know,
Speaker 10: top nearly eight percent for a thirty year, they have
Speaker 10: asolutely been coming down. Inflation has been coming down, but
Speaker 10: it's you know, all the stuff that's been going on
Speaker 10: and the economy has kind of created this challenged housing market.
Speaker 7: And I know you also are looking at your Connecticut,
Speaker 7: New Jersey as well as Florida. Where do you see
Speaker 7: different divergences between if you're looking more the South versus
Speaker 7: where you're looking in the Northeast.
Speaker 10: You know, the challenge in the South is more one
Speaker 10: of inventory, So we lack inventory there and anything that
Speaker 10: comes on, you know, it moves pretty quickly. And places
Speaker 10: like Connecticut where we have offices, same thing, And people,
Speaker 10: as Paul had said, don't want to put their homes
Speaker 10: on the market because they locked in such a low rate.
Speaker 10: So we're kind of doing the stance with buyers and
Speaker 10: sellers and that's starting to come apart a little bit
Speaker 10: now and we're hoping to get more fluidness as we
Speaker 10: move into twenty twenty five.
Speaker 11: So last week, we of course had a little bit
Speaker 11: of news in this country the election of Donald's Trump.
Speaker 11: And I've been dying to ask different real estate people,
Speaker 11: and you happen to be the first. What do you
Speaker 11: think the impact of his potential administration? Just right now?
Speaker 11: There's so many different asset classes outside of real estate
Speaker 11: that are moving, and then his actual administration, there's this
Speaker 11: expectation of inflation, even though his last administration didn't have
Speaker 11: that inflation. Are you hearing or feeling what might be
Speaker 11: ahead for real estate based on the new administration coming in?
Speaker 10: I mean, the one thing that Trump mentioned was that
Speaker 10: he was going to remove the cap for the salt deduction,
Speaker 10: which he actually put in place in twenty seventeen, So
Speaker 10: that could be a good thing. But I think we're
Speaker 10: open to collaborate and create a good environment. As you
Speaker 10: probably know, there is something passing in city Council today
Speaker 10: that will be deeply damaging, we believe, to the real
Speaker 10: estate industry. So we're hoping to be able to collaborate,
Speaker 10: work together. And I hope that Trump coming into office
Speaker 10: doesn't push this far left agenda further left because that
Speaker 10: would create more problems for us well.
Speaker 11: So talking about what is the vote today, the Fair Act,
Speaker 11: my understanding on it is essentially to eradicate broker fees
Speaker 11: for renters, and the stated purpose is to lower moving
Speaker 11: costs for those renters. You know at some point though
Speaker 11: as somebody who has you know and still am a renter,
Speaker 11: you know, it always gets passed along at some point.
Speaker 11: So what is your view on this. It sounds as
Speaker 11: though you're not necessarily so favorable. But it's not as
Speaker 11: though brokers are gonna not take fees, no, of.
Speaker 10: Course, And what you said, I mean you're not in
Speaker 10: the real estate industry per se, but you get it.
Speaker 10: What's gonna happen is that landlords are gonna have to
Speaker 10: raise rent and there will be unintended consequences to this
Speaker 10: legislation that the city Council just refuses to take into account.
Speaker 10: We've had discussions, we testified there a whole bunch of people, landlords,
Speaker 10: people from the industry. We talk to them. We expected collaboration,
Speaker 10: and instead of that, a few weeks ago, they basically
Speaker 10: jammed this legislation down our throats without any discussion. And
Speaker 10: I think that is creating the challenges because without discussion,
Speaker 10: collaboration and creating responsible legislation, you know you're gonna ostracize
Speaker 10: communities and you're gonna actually hurt the people you're trying
Speaker 10: to protect, which is they're missing the point.
Speaker 7: So I also rent sixty five percent of Yorkers do,
Speaker 7: because that's a big part of the market. I somehow
Speaker 7: I was able to get a rent stabilize a purban.
Speaker 7: So I feel like I'll probably end up dying there
Speaker 7: because I'm not gonna want.
Speaker 3: To give it up.
Speaker 7: But I mean, it's just so expensive to try to
Speaker 7: find other options, especially even when you're trying to rent.
Speaker 7: So when you had so many people leave New York
Speaker 7: right during COVID, but then so many people come back.
Speaker 7: I mean, what do you do with the kind of
Speaker 7: conundrum with it becomes the rent prices.
Speaker 10: I mean that's the challenge. The market sort of sorts
Speaker 10: that out, you know, and real estate professionals work with renters,
Speaker 10: they work with landlords, they work with everybody. So I
Speaker 10: think you want to work with your community. Look, the
Speaker 10: city council doesn't have a monopoly on caring about their community.
Speaker 10: We all care about our community and working together is
Speaker 10: the best way to get things done. So listen, Rental
Speaker 10: prices are a challenge. I get it. It's an expensive city.
Speaker 10: New York is so as Boston. Many places are. But
Speaker 10: that's about the market, and that's how things sort of
Speaker 10: sort themselves out.
Speaker 4: Where do you think thirty year mortgage rates need to
Speaker 4: go to before the marginal seller will come on to
Speaker 4: the market and say, okay, now it's not so bad
Speaker 4: the costs for me to move here.
Speaker 3: What do you think that is it? Low? Six percent?
Speaker 3: Five percent?
Speaker 10: I've been what i've I mean, the below six is
Speaker 10: what we hear is like where people feel comfortable. Again,
Speaker 10: mortgage rates are still historically low. Remember they were in
Speaker 10: before my time in this business or anything, they were
Speaker 10: in the double digits, So a six percent thirty year
Speaker 10: and you know what, you can refinance if rates, you know,
Speaker 10: dip further. So that's what I've heard is that if
Speaker 10: they dip below six, people are getting into the market.
Speaker 7: And so I was watching that.
Speaker 10: It sounds like everybody's watching that because you know, most
Speaker 10: I think sixty percent of people who own homes have mortgages,
Speaker 10: So it has a big impact.
Speaker 3: You know.
Speaker 11: One thought that comes to mind in terms of this
Speaker 11: fair act, if it is passed, I think that the
Speaker 11: average price for a one bedroom doorman apartment here in
Speaker 11: Manhattan is more than four thousand and maybe forty two
Speaker 11: hundred or something like that. So if all of a
Speaker 11: sudden that five to twelve percent fee gets passed along
Speaker 11: through rent, are we going to see the average rent
Speaker 11: in New York a year from now be you know,
Speaker 11: closer to five thousand or something.
Speaker 10: I mean, I think that's what the impact of something
Speaker 10: like this would be. Well, because you know, landlords sometimes
Speaker 10: pay the fee, sometimes they don't. If you look on
Speaker 10: aggregator sites, fifty percent of time roughly they pay the fee,
Speaker 10: and fifty percent of the time, they don't, and so
Speaker 10: this is sort of burdening them with that. And then
Speaker 10: there's a lack of transparency because consumers aren't going to
Speaker 10: know what's available because agents won't be marketing and posting
Speaker 10: the floor plan and the photo, so you're not going
Speaker 10: to know what's out there. It's not a good way
Speaker 10: to go about doing business.
Speaker 3: Yet it's being signed in today.
Speaker 10: It's being signed in today. The mayor has spoken about it.
Speaker 10: He's been vocal. He believes obviously they have good intentions,
Speaker 10: as we all should proceed like that, but he thinks
Speaker 10: it will have negative and negative impact. He's he's been
Speaker 10: encouraging them to reconsider it.
Speaker 3: Best Friedman, thank you so much for joining us. Best Freedman.
Speaker 4: She's the chief executive officer Brown, Harris Stevens and Abel
Speaker 4: the Little chief markets correspondent for Bloomberg News. Joining us
Speaker 4: here in our Bloombergin directed brokers.
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Speaker 4: One of the more fascinating things to come out of
Speaker 4: President like Trump's election is the role of Elon Musk.
Speaker 7: The world's wealthiest individual.
Speaker 4: Apparently he's been with the president ever since the election.
Speaker 4: Joe Matthews just reporting he's in DC todays in mar
Speaker 4: A Lago before Yep, exactly, fascinating, fascinating.
Speaker 3: The story developing.
Speaker 4: So guess what our big take people on top of
Speaker 4: always as always, Max Chaplin joints a senior reporter for
Speaker 4: Bloomberg BusinessWeek. Max, You've got a story out here. Elon
Speaker 4: Musk has a new project to run Donald Trump's government.
Speaker 3: What do we know about his role here?
Speaker 12: Well, yesterday, I mean we learned a little bit more
Speaker 12: just after this story was published. Donald Trump made something
Speaker 12: official that he had teased and that Elon Musk hand
Speaker 12: teased repeatedly on the campaign trail. Elon Musk will be
Speaker 12: the person charged with providing advice on the streamlining of government. Now,
Speaker 12: that could mean any number of things. It could mean,
Speaker 12: I think very little. It could also mean that as
Speaker 12: Donald Trump prepares to enact his you know, very ambitious agenda,
Speaker 12: that Elon Musk will be at his side, and that'll
Speaker 12: be my bad. I mean, I think the job thing
Speaker 12: is probably a distraction. You know, the most important question
Speaker 12: in the Trump White House is who has Trump's ear,
Speaker 12: and right now that's Elon Musk. And I think as
Speaker 12: we put together the story and as I've been thinking
Speaker 12: about this, you know, Elon Musk throws him into these companies,
Speaker 12: and famously he has six different companies, you know, Tesla
Speaker 12: and SpaceX, his car company and rocket company being the
Speaker 12: big ones.
Speaker 3: I think we need to start.
Speaker 12: Thinking about polyt and in particular Elon Musk's role in
Speaker 12: right wing politics, whether it's the Trump the next Trump administration,
Speaker 12: or even beyond that as his other big company, as
Speaker 12: something that he is going to be devoting a lot
Speaker 12: of time to and trying to use it, frankly to
Speaker 12: benefit his other interests.
Speaker 7: We were just chatting with Joe Matthew about this, and
Speaker 7: so we were discussing about how by leading a commission
Speaker 7: specifically outside of government, Elon Musk doesn't have to divest
Speaker 7: his personal and financial holdings when making recommendations to the
Speaker 7: White House on federal spending and regulations that he wants
Speaker 7: to cut. I mean, what sort of precedents do we
Speaker 7: have for something that's created sort of that's supposed to
Speaker 7: be specifically outside government, and what power can he yield
Speaker 7: and not yield? Do we have any indication?
Speaker 12: Sure, I have been lots of presidential commissions. You know,
Speaker 12: this kind of thing is not necessarily anything new.
Speaker 3: It's really just.
Speaker 12: A question of how closely is Donald Trump listening to it?
Speaker 12: And when elon Musk, he suggested all kinds of very
Speaker 12: radical things, things that are likely to be either difficult achieve,
Speaker 12: like practically working within the confines of government, or wildly
Speaker 12: unpopular or both. So you know, he's said he suggested,
Speaker 12: for instance, that he's going to twitter the US government,
Speaker 12: suggesting you know, massive layoffs. Remember he laid off eighty
Speaker 12: percent of the Twitter staff. He is not going to
Speaker 12: lay off eighty percent of the US government. I think
Speaker 12: that would be a very very very surprising thing if
Speaker 12: it were to happen. That said, you know, Trumps has
Speaker 12: is going to try to defund aspects of the government,
Speaker 12: and it really seems like Elon Musk is going to
Speaker 12: play a role in deciding what gets defunded, which is
Speaker 12: of course, is going to raise all sorts of ethical
Speaker 12: concerns and questions. And because because there are ways that
Speaker 12: President Trump, president elect Trump is going to be in
Speaker 12: a position to say, squash investigations into Elon Musk companies,
Speaker 12: or direct funds to Elon musk companies, or slow down
Speaker 12: some of Elon Musk's competitors, and and so you know,
Speaker 12: it's it's going to keep journalists busy. It's gonna I'm
Speaker 12: sure that the left is going to be very focused
Speaker 12: on this over the next couple of years because Elon Musk,
Speaker 12: who's a polarizing guy, is going to be tied to
Speaker 12: this administration very closely.
Speaker 4: I mean, Elon Musk you cited in your article and
Speaker 4: you just mentioned here all the companies he runs, Tesla, Spacexally,
Speaker 4: on and on and on.
Speaker 3: How many hours in a day does this guy have?
Speaker 3: I mean, I mean, I mean.
Speaker 7: You know, when you think about how many companies to.
Speaker 12: Plays a lot of video games, which you know is
Speaker 12: one of the many head scratchers with this extraordinary man.
Speaker 12: Uh I, I think we've seen investors in some of
Speaker 12: these other companies get concerned. And you know, right now
Speaker 12: we're in the middle of this kind of honeymoon phase.
Speaker 3: You know, there's a.
Speaker 12: Mania to the way Elon Musk is talking about this stuff.
Speaker 12: He's he's at the White He's in mar A Lago,
Speaker 12: he's in Washington.
Speaker 3: Now.
Speaker 12: You know, Trump family members are referring to him as
Speaker 12: uncle Elon. You gotta think that this is not.
Speaker 3: Going to last.
Speaker 12: And if it were to last, that there would be
Speaker 12: a bit of a comdown because because, as you say,
Speaker 12: Tesla is a big, complicated company with lots of challenges,
Speaker 12: and right now we're seeing a lot of investors bid
Speaker 12: up the stock, but there isn't a ton of It's
Speaker 12: not like there's a clear rationale for why Tesla is
Speaker 12: suddenly worth like forty percent more than it was before
Speaker 12: the election, except that, hey, maybe Trump's gonna make things better.
Speaker 12: But but you know, there are gonna be challenges and
Speaker 12: the and distraction is going to be something that we're
Speaker 12: gonna be looking at.
Speaker 7: And what about ev policies, because it seemed like they
Speaker 7: were more beneficial toward Tesla maybe under the Biden administration
Speaker 7: rather than the prior Trump administration, So how does this
Speaker 7: sort of shift and you have kind of the Trump
Speaker 7: two point zero coming down.
Speaker 12: And this is one of the things that's so strange
Speaker 12: because Elon Musk became much more conservative during the Biden years,
Speaker 12: but the Biding years were incredibly good to Tesla. Tesla's value,
Speaker 12: you know, shot way up. It went from being kind
Speaker 12: of a niche player to one of the large American
Speaker 12: car companies. And you know, Trump, as you kind of hint,
Speaker 12: was very critical about electric vehicles on the campaign trail. Now, now,
Speaker 12: there are two things here that are probably worth bringing up.
Speaker 3: One is where Tesla is now.
Speaker 12: Is very different than it was four or five years ago.
Speaker 12: And you could make an argument that these electric vehicle
Speaker 12: subsidies actually do more for Tesla's competitors than they do
Speaker 12: for Tesla itself.
Speaker 5: So like, if you were to remove all these.
Speaker 12: Subsidies, yes, it might cost Tesla investors money, but it
Speaker 12: would also sort of help Tesla lock in it's very,
Speaker 12: very dominant position in the market. And the second thing,
Speaker 12: probably the more important thing, is that Elon Musk is
Speaker 12: desperately trying to move beyond the auto business. He wants
Speaker 12: to Tesla to be an AI company. He wants to
Speaker 12: have robotaxis. There is no regulatory regime there, and I
Speaker 12: think what investors are hoping, and again I don't know
Speaker 12: that they have much sort of clear factual basis for
Speaker 12: this hope. But this is the rationale that Trump will
Speaker 12: basically legalize this business, that he will take a very
Speaker 12: dicey regular situation and make it less dicey, and that
Speaker 12: will be worth a lot of money to Tesla and
Speaker 12: ultimately to a shareholders.
Speaker 4: Thirty seconds left, Max, how much time do we think
Speaker 4: Elon Musk is going to allocate to the government stuff?
Speaker 3: Convince Well?
Speaker 12: Right now, it seems like he's, yeah, he's it's a
Speaker 12: full time job, right, I mean, he seems to be
Speaker 12: there quite a lot. I think this is going to
Speaker 12: be something that he's very very focused on, you know,
Speaker 12: probably as long as it lasts, which which maybe that's
Speaker 12: only going to be a couple of months.
Speaker 3: Maybe it's going to be longer.
Speaker 12: You know, he did he has signaled that he wants
Speaker 12: to play in politics beyond this, beyond twenty twenty four,
Speaker 12: but he's talking about the midterms already, so interest you'll see, all.
Speaker 4: Right, very good, Max Chaffkin really appreciated. Max Chefckin, He's
Speaker 4: senior reporter Bloomberg BusinessWeek. In our Bloomberg Interactive Broker Studio's
Speaker 4: got the Big Take story this week, and you can
Speaker 4: read that story on the Bloomberg and at Bloomberg dot Com.
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