WEBVTT - Western Asset Sifting For Opportunities Amid Credit Rubble 0:00:02.640 --> 0:00:05.360 Welcome to the Bloomberg Penl podcast on Paul Swing You. 0:00:05.360 --> 0:00:07.680 Along with my co host Lisa Brahma Waits, each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.320 --> 0:00:12.520 you and your money, whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg Penl podcast on Apple 0:00:15.520 --> 0:00:17.959 podcast or wherever you listen to podcasts, as well as 0:00:18.000 --> 0:00:21.240 at Bloomberg dot com. There's been a lot of focus 0:00:21.400 --> 0:00:23.720 on credit markets of late, due to some of the 0:00:23.760 --> 0:00:25.960 big disruptions that we saw in pricing, and then the 0:00:25.960 --> 0:00:29.000 Federal Reserve coming in and saying that for the first 0:00:29.080 --> 0:00:32.400 time ever, it would buy corporate bonds through a separate 0:00:32.479 --> 0:00:37.040 entity financed by the Treasury Department managed by black Rock, 0:00:37.360 --> 0:00:40.360 giving a floor to a market that at one point 0:00:40.520 --> 0:00:43.120 was in free fall. Joining us now to talk about 0:00:43.120 --> 0:00:46.600 where the opportunities or potential future pitfalls continue to be 0:00:46.640 --> 0:00:49.479 as Mike Buchanan, he's deputy Chief investment Officer at Western 0:00:49.840 --> 0:00:52.720 Asset Management with more than four hundred billion dollars of 0:00:52.760 --> 0:00:55.160 assets under management. Mike, I'm so glad we're gonna get 0:00:55.160 --> 0:00:56.720 a chance to talk with you. Can you give us 0:00:56.720 --> 0:00:58.600 a sense of a lay of the land, in other words, 0:00:58.960 --> 0:01:01.720 how effective how as a federal reserve been in back 0:01:01.760 --> 0:01:07.440 stopping the highest rated companies from facing default going forward. 0:01:09.120 --> 0:01:12.200 Thanks LEAs and thanks for thanks for having me on UM. 0:01:12.240 --> 0:01:15.679 You know, I think just the announcement alone UM that 0:01:15.720 --> 0:01:17.840 they would be for the first time ever, as you said, 0:01:17.880 --> 0:01:21.760 buying credit UM in one to five years investment grade 0:01:21.800 --> 0:01:25.639 credit UM. The action itself that hasn't even really taken 0:01:25.680 --> 0:01:29.240 place yet, but just the announcement of that has gone 0:01:29.640 --> 0:01:32.959 a long way to restoring stability in the market, restoring 0:01:33.120 --> 0:01:37.120 order in the market. You've seen a bounce from you 0:01:37.160 --> 0:01:39.319 know where we were a couple of weeks ago, but 0:01:39.600 --> 0:01:43.000 make you know, no, no, no confusion here that March 0:01:43.160 --> 0:01:47.000 was a brutal, brutal month UM second worst month ever 0:01:47.040 --> 0:01:50.800 for the high yield market UM, worst month ever for 0:01:50.960 --> 0:01:54.920 investment grade corporate credit. So we've had a bounce UM. 0:01:54.960 --> 0:01:57.960 But when you look at valuations where they are UM, 0:01:58.320 --> 0:02:00.320 you know, still look at least on a history oracle 0:02:00.400 --> 0:02:04.600 basis quite cheap UM. And I think the actions, not 0:02:04.680 --> 0:02:07.200 only that the fed of of buying corporates, but the 0:02:07.280 --> 0:02:14.680 Care Act, the accessibility for corporates to access two loans UM, 0:02:14.720 --> 0:02:17.880 as well as just the the overall stimulus and relief package. 0:02:17.880 --> 0:02:20.280 I think all those things have gone a long way 0:02:20.600 --> 0:02:24.360 to bridging a gap to hopefully what will prove to 0:02:24.400 --> 0:02:28.560 be a turning point in this in this horrible virus. So, Mike, 0:02:28.960 --> 0:02:30.959 how do you guys just you know, take a look 0:02:31.000 --> 0:02:32.600 at the market here. I mean, I know you guys 0:02:32.880 --> 0:02:34.760 have been in a fixing come business a long time. 0:02:34.880 --> 0:02:37.040 I mean are you do you tend to to step 0:02:37.080 --> 0:02:39.440 back and and let the market play or you try 0:02:39.440 --> 0:02:42.239 to go in here and try to find some opportunities. Yeah, 0:02:42.280 --> 0:02:45.280 I mean, you know, we're we're always looking for opportunity, 0:02:45.440 --> 0:02:48.840 and in markets like this, UM, even if you're not 0:02:49.040 --> 0:02:53.160 outright adding risk because of all the dislocations, there's always 0:02:53.240 --> 0:02:56.919 relative value trades that you could be doing. There's always, uh, 0:02:56.960 --> 0:02:59.519 you know, one company issue where you could sell to 0:02:59.600 --> 0:03:01.880 fund the purchase of another one that perhaps you have 0:03:01.960 --> 0:03:04.720 a higher level of conviction and you think that offers 0:03:04.800 --> 0:03:09.919 better risk adjusted returns UM. So you know these dislocations, UM, 0:03:10.000 --> 0:03:14.800 you actually have seen volume trading volume increase UM. So 0:03:14.880 --> 0:03:17.840 you hear a lot about illiquidity and markets have become 0:03:18.080 --> 0:03:21.840 less liquid. However, the amount of inquiry, the amount of 0:03:21.840 --> 0:03:25.600 desired trading is up substantially, um, and we're trying to 0:03:25.639 --> 0:03:27.919 take advantage of that. We're you know, looking all over 0:03:28.080 --> 0:03:30.840 both in high yield and investment grade credit and as 0:03:30.840 --> 0:03:35.240 well as other spread sectors just to find the best opportunities. UM. 0:03:35.240 --> 0:03:37.160 But I think all this, you know, you have to 0:03:37.200 --> 0:03:40.080 start with that high level of you know what, what 0:03:40.200 --> 0:03:42.320 is your view on the path of the virus, because 0:03:42.360 --> 0:03:45.600 we know that's going to dictate how we emerge from 0:03:45.600 --> 0:03:50.880 this this quarantine and shelter in place economy, and by association, 0:03:51.000 --> 0:03:54.960 just how rich or cheap risk assets currently are. Let's 0:03:55.040 --> 0:03:58.080 let's stick with the concept of market liquidity for a 0:03:58.160 --> 0:03:59.960 second and pack a little bit of what you just say. 0:04:00.640 --> 0:04:03.680 There is a lot of concern around the trillions of 0:04:03.720 --> 0:04:08.000 dollars of triple B rated debts investment grade rated debt, 0:04:08.000 --> 0:04:10.120 but at the lowest here the potential for it to 0:04:10.160 --> 0:04:14.640 get downgraded to junk, thus igniting forced selling on the 0:04:14.720 --> 0:04:17.599 part of investment grade bond managers. We have seen some 0:04:17.640 --> 0:04:21.840 fallied angels, pretty sizable ones recently. How concerned are you 0:04:22.400 --> 0:04:25.960 about that pressure creating some fire sales, creating a lot 0:04:26.000 --> 0:04:29.320 of downward pressure on prices in the investment grade space, 0:04:29.400 --> 0:04:32.440 and frankly also in the high yield spaces, those names 0:04:32.440 --> 0:04:36.080 try to get absorbed into the pool of debt that's existent. Yeah, 0:04:36.080 --> 0:04:39.440 I mean, it's it's a great question. And UM, you know, 0:04:39.520 --> 0:04:42.800 we we we're seeing firsthand the early phases of that 0:04:43.080 --> 0:04:45.640 with UM. You know, with certain issuers that are very 0:04:45.680 --> 0:04:48.800 you know, almost a hundred billion that's going from investment 0:04:48.880 --> 0:04:52.400 grade credit into high yield credit UH in April alone, 0:04:52.880 --> 0:04:56.280 UM and what UM you typically see and this isn't 0:04:56.320 --> 0:04:58.359 always the case, and I think this time, you know, 0:04:58.440 --> 0:05:02.600 could certainly play out different it, but investment grade holders 0:05:02.680 --> 0:05:05.800 are are proactive. They don't just simply wait for the 0:05:05.839 --> 0:05:10.000 event of the downgrade or index inclusion. They are always 0:05:10.040 --> 0:05:12.240 looking at UM, Okay, what do we need to do 0:05:12.360 --> 0:05:13.919 over the next two weeks, what do we need to 0:05:13.920 --> 0:05:17.640 do over the next month. So oftentimes you see UH 0:05:18.080 --> 0:05:23.000 selling that actually occurs prior to these issuers going into 0:05:23.000 --> 0:05:26.479 the benchmark. So with what we saw over the past 0:05:26.480 --> 0:05:29.520 couple of weeks is some of those fallen angels that 0:05:29.560 --> 0:05:32.039 we're going in this month actually hit their loads a 0:05:32.040 --> 0:05:34.680 couple of weeks ago, and you started to see some 0:05:34.800 --> 0:05:39.200 high yield buying UM I think it's really important for UH, 0:05:39.440 --> 0:05:43.040 for investors to be looking at relative value. So, you know, 0:05:43.200 --> 0:05:46.719 Western asset, we have two different teams, investment grade credit 0:05:46.720 --> 0:05:49.679 and high yield credit, but they're very cohesive. They work together. 0:05:50.080 --> 0:05:53.600 And the idea of comparing relative value for a fallen 0:05:53.640 --> 0:05:56.559 angel and looking at it relative to what we see 0:05:56.600 --> 0:05:59.840 perhaps in the high yield market, that could give us 0:05:59.839 --> 0:06:02.799 a good UH template to work with in terms of Okay, 0:06:02.800 --> 0:06:05.000 do we want to buy now do we want to 0:06:05.000 --> 0:06:08.080 wait until it goes into the index? UM. So there's 0:06:08.120 --> 0:06:10.640 there's a lot of dynamics that work there. But again, 0:06:10.680 --> 0:06:13.919 I think that risk that you highlighted is very real, 0:06:14.240 --> 0:06:17.000 and it's not just for corporate credit. UM. The longer 0:06:17.360 --> 0:06:21.000 we're in this type of shutdown economy, UM, you know, 0:06:21.040 --> 0:06:25.640 that has real ramifications for for municipal credit, UM, for 0:06:25.720 --> 0:06:29.039 sovereign credit. So there's a lot of ways to look 0:06:29.040 --> 0:06:30.920 at this. There's a lot of things to think about. 0:06:31.200 --> 0:06:33.960 And again it goes back to what we talked about earlier. 0:06:34.120 --> 0:06:36.760 It's how long are we going to be in this 0:06:36.800 --> 0:06:39.599 type of economy and when will we start to see 0:06:39.640 --> 0:06:43.320 some improvement in the path of the virus. So, Mike, 0:06:43.440 --> 0:06:45.320 let's just kind of go there to that backdrop. A 0:06:45.360 --> 0:06:47.600 lot of Wall Street firms out with some very dire 0:06:47.680 --> 0:06:51.000 GDP numbers quarterly this year, with the second quarter being 0:06:51.200 --> 0:06:53.800 particularly ugly, but then some have kind of bouncing back 0:06:53.800 --> 0:06:56.960 in what might be called a v shape recovery in 0:06:57.040 --> 0:06:59.760 three and four. What's kind of the backdrop that's the 0:07:00.000 --> 0:07:03.040 of pends your out look there at Western Yeah, I 0:07:03.120 --> 0:07:06.160 think we would agree. I mean it's you're seeing everyone 0:07:06.240 --> 0:07:10.360 trip over themselves to downgrade growth forecast for you know, 0:07:10.440 --> 0:07:13.840 for the for the second quarter. UM, it's going to 0:07:13.920 --> 0:07:16.880 be ugly. We all know that. UM. You've you've seen 0:07:16.920 --> 0:07:20.960 a virtual uh you know, halter drop in demand almost 0:07:21.040 --> 0:07:25.520 nothing in certain industries. So the second quarter numbers, you know, 0:07:25.560 --> 0:07:28.400 early third quarter, um, you know, are going to look 0:07:28.440 --> 0:07:33.000 pretty brutal, and first quarters as well. UM. I think 0:07:33.000 --> 0:07:35.840 the Fed and the Treasury have gone a long ways 0:07:35.960 --> 0:07:39.800 to bridging the gap. I think they've bought time, UM, 0:07:39.880 --> 0:07:42.200 and that's really important. I think the way that the 0:07:42.240 --> 0:07:45.640 markets priced right now, UM, there is probably I would 0:07:45.640 --> 0:07:48.880 say it's hard to really gauge, you know, what consensus 0:07:48.960 --> 0:07:52.360 view is, but I think it's generally that um, you know, 0:07:52.360 --> 0:07:55.360 the virus is brought under control by late second quarter, 0:07:55.720 --> 0:07:59.440 perhaps early third quarter, UM called third quarter maybe a 0:07:59.480 --> 0:08:02.800 transition and quarters people start going back to work. And 0:08:02.840 --> 0:08:05.560 then by the fourth quarter, UM, you're you're starting to 0:08:05.560 --> 0:08:08.600 get some of that bounce from pent up demand. So 0:08:09.120 --> 0:08:11.800 we know that the time between now and then is 0:08:11.800 --> 0:08:14.760 going to be pretty ugly. And I think you know, again, 0:08:14.800 --> 0:08:17.960 the Fed and the Treasury, they they've done policy in general, 0:08:17.960 --> 0:08:20.920 has done a great job of bridging that gap, right, 0:08:20.920 --> 0:08:23.000 Mike Bichannan, thanks so much for joining us. We appreciate 0:08:23.000 --> 0:08:25.920 your thoughts as always. Mike Bichannon's a deputy Chief investment 0:08:25.960 --> 0:08:29.640 officer for Western Asset Management, a four and sixty billion 0:08:29.640 --> 0:08:32.280 dollars under management, mostly in the fixed income side. They're 0:08:32.320 --> 0:08:35.760 based in Pasadena, so I think, but Mike was suggesting 0:08:35.800 --> 0:08:37.920 least a little bit more of a U type recovery, 0:08:37.920 --> 0:08:39.400 and I think that's kind of maybe where the markets 0:08:39.480 --> 0:08:43.000 evolving from a V to you hopefully not to an L. I. 0:08:43.120 --> 0:08:47.319 I can't keep track. Are we in a W exactly? 0:08:47.400 --> 0:08:50.240 So we'll see, but interesting, but that's clearly people trying 0:08:50.240 --> 0:08:52.600 to just get a handle kind of on the path 0:08:52.640 --> 0:08:56.000 of the coronavirus and the timing associated with it, because 0:08:56.040 --> 0:08:59.000 that will obviously drive where the kind of how the 0:08:59.040 --> 0:09:03.520 economy is able to open up again. On the other side, 0:09:04.640 --> 0:09:08.240 given all the uncertainty that we have and certainty as 0:09:08.240 --> 0:09:10.640 it relates to timing of this virus any impact on 0:09:10.640 --> 0:09:13.679 the global economy, we welcome Peter Kenny, founder of Strategic 0:09:13.720 --> 0:09:17.360 Board Solutions. Peter, thanks so much for joining us. UM. 0:09:17.400 --> 0:09:19.040 You know, give us a sense of kind of how 0:09:19.160 --> 0:09:24.120 you're viewing markets here from a thirty foot view level. Yeah, Paul, 0:09:24.160 --> 0:09:27.520 good morning UM. You know, first of all, interestingly, UM 0:09:27.760 --> 0:09:33.079 first day at Q two UM smps down two UM 0:09:33.120 --> 0:09:36.320 and it seems to be holding the level, which I 0:09:36.320 --> 0:09:41.880 think is extremely interesting because given all of the negative 0:09:41.920 --> 0:09:45.400 news and given the negative breath of the market, to 0:09:45.480 --> 0:09:48.160 be holding at UH what could end up being a 0:09:48.280 --> 0:09:52.560 very important technical level is significant. Of course, the Dow, 0:09:53.280 --> 0:09:56.120 the NaSTA, CAN, Positi sp are all lower, and global 0:09:56.160 --> 0:09:59.400 markets are lower, and clearly Q two is shaping up 0:09:59.440 --> 0:10:01.880 to be a very very tough quarter at least for 0:10:01.960 --> 0:10:06.160 April UM. But so far the markets are doing better 0:10:06.200 --> 0:10:09.520 than frankly I was expecting this morning, Peter, I think 0:10:09.559 --> 0:10:11.839 a lot of people are thinking that Howard marks his 0:10:11.960 --> 0:10:15.439 latest memo kind of outlined how there's still a lot 0:10:15.440 --> 0:10:18.920 of optimism baked into current valuations and equities if you 0:10:18.960 --> 0:10:21.720 just look at, for example, the multiples that are baked 0:10:21.720 --> 0:10:24.520 in here. I'm wondering there seems to be a push 0:10:24.559 --> 0:10:27.360 pull here of the money being pumped into the system 0:10:27.400 --> 0:10:31.120 by central banks globally and frankly by government's globally, mixed 0:10:31.160 --> 0:10:34.439 with the idea that we have a complete global shutdown 0:10:34.440 --> 0:10:39.760 and production and activity in an unprecedented way. Can government 0:10:39.840 --> 0:10:44.200 money overwhelmed that and be the predominant driver here? Well, 0:10:44.400 --> 0:10:46.640 that that at the end of the day, that that's it. 0:10:47.080 --> 0:10:50.000 You just put your finger on on the real The 0:10:50.040 --> 0:10:55.040 conversation is government money, government liquidity, whether it comes in 0:10:55.080 --> 0:10:58.720 the form of fiscal or monetary policy, is it up 0:10:58.720 --> 0:11:01.720 to the task of really addressing in an efficient manner 0:11:02.520 --> 0:11:05.160 the risks inherent in the market that is in the 0:11:05.240 --> 0:11:09.240 stage is early stages of a global shutdown. So I mean, investors, markets, 0:11:09.280 --> 0:11:12.719 the global economy are all being held hostage by this 0:11:13.000 --> 0:11:17.920 COVID nineteen pandemic, and the federal governments, not just in 0:11:17.920 --> 0:11:20.600 the United States, and as you accurately point out, globally, 0:11:20.640 --> 0:11:25.120 are doing everything conceivable to address this shutdown, this this 0:11:25.240 --> 0:11:30.920 tightening up of credit. Um, there really is no other option. Um, 0:11:30.960 --> 0:11:34.840 that's all we can do. And hope that in time 0:11:35.160 --> 0:11:39.840 that what is being thrown at this finds traction with investors, 0:11:39.880 --> 0:11:43.680 investors find opportunity in that and begin to once again 0:11:43.800 --> 0:11:46.840 take that it, you know, take on that sense of 0:11:46.960 --> 0:11:49.920 there's a risk worth taking in the market. I think 0:11:49.920 --> 0:11:53.640 we'll find that. And oddly, and in a very counterintuitive 0:11:53.920 --> 0:11:56.079 sense of things, this morning, the fact that the SMP 0:11:56.200 --> 0:11:59.360 has remained at in spite of the fact that it's 0:11:59.679 --> 0:12:04.240 trade fractionally lower on an all morning is significant because 0:12:04.280 --> 0:12:07.120 it's saying it's telling us that there there is a 0:12:07.160 --> 0:12:11.559 bit of a risk appetite in the market, as counterintuitive 0:12:11.559 --> 0:12:14.520 as that may seem. Well, Peter, this is sort of 0:12:14.559 --> 0:12:17.800 the theoretical idea I've been struggling with for a couple 0:12:17.840 --> 0:12:20.160 of days now, this idea that you have governments around 0:12:20.200 --> 0:12:23.679 the world printing cash, printing money as quickly as they 0:12:23.760 --> 0:12:26.440 can through their central banks and through their government spending, 0:12:26.960 --> 0:12:30.480 and yet inflation expectations are coming down. In the past, 0:12:30.559 --> 0:12:34.280 this has been consistent, however, asset inflation has been real, 0:12:34.640 --> 0:12:36.839 and I'm wondering at what point this will trickle into, 0:12:36.920 --> 0:12:43.000 at the very least asset price inflation. Yet again, yes, right, well, frankly, 0:12:43.200 --> 0:12:47.160 I think that policymakers on both sides of that equation, 0:12:47.240 --> 0:12:52.480 fiscal and monetary, are looking for inflation, whether it be 0:12:52.600 --> 0:12:56.800 an asset inflation or otherwise. Any inflation would be welcomed 0:12:57.559 --> 0:13:04.120 frankly and expected given every form of economic modeling. This 0:13:04.280 --> 0:13:09.520 level of cash generation and liquidity being forced through the 0:13:09.600 --> 0:13:15.760 system should absolutely should provide for some sort of inflationary 0:13:15.880 --> 0:13:19.880 lift two markets. That's the idea. Do we get it? 0:13:20.040 --> 0:13:23.000 I think we do get it, Lisa, I think we 0:13:23.080 --> 0:13:26.680 do get it. But there is a drag. There's a 0:13:26.760 --> 0:13:32.000 lag between fiscal monetary policy and accelerated liquidity being pumped 0:13:32.000 --> 0:13:37.280 through the system and markets and investors willing to step 0:13:37.720 --> 0:13:40.800 out of the risk offen into the risk on and 0:13:40.840 --> 0:13:44.079 start taking advantage of that opportunity, because it is an opportunity, 0:13:44.520 --> 0:13:46.360 all right. So, Peter, if you are willing to look 0:13:46.400 --> 0:13:49.000 past to the other side, where do you think investors 0:13:49.000 --> 0:13:53.600 should tread first? Okay? So I think there are two 0:13:53.640 --> 0:13:57.360 basic DCCs which you have to sort of get your 0:13:57.400 --> 0:14:00.480 head around looking past this. For first of all, is 0:14:00.520 --> 0:14:03.200 it a V shape or is it a U shape? Um. 0:14:03.240 --> 0:14:06.400 I think it's something in between. But I don't think 0:14:06.679 --> 0:14:10.840 that this lasts longer than three quarters in terms of 0:14:10.880 --> 0:14:16.520 the ability of the economy to find real sustainable even 0:14:16.559 --> 0:14:21.560 if it's marginal but sustainable economic expansion. So I'm actually optimistic. 0:14:21.600 --> 0:14:23.880 On the other side of this, I think there's two 0:14:24.080 --> 0:14:26.640 basic themes that you can go with. One is growth 0:14:27.880 --> 0:14:32.280 and the other is a less growth centric and more 0:14:32.360 --> 0:14:37.720 of a given in centric, very very low beta sort 0:14:37.760 --> 0:14:42.160 of portfolio. I like both. I tend to be on 0:14:42.240 --> 0:14:45.760 the on the former rather than the ladder in terms 0:14:45.800 --> 0:14:47.240 of I tend to be a more of a growth 0:14:47.280 --> 0:14:51.760 of investor, and I think there's huge opportunity UM in cloud, 0:14:52.200 --> 0:14:57.800 huge opportunity in cloud, huge opportunity in in retail online, 0:14:58.040 --> 0:15:00.840 and I have remained very, very convinced. So that's a 0:15:00.920 --> 0:15:04.440 big part of the future for investors. Peter Kenny of 0:15:04.720 --> 0:15:08.720 the Strategic Board Solutions founder joining us from New Jersey 0:15:08.880 --> 0:15:11.640 really insightful. A lot of push pull cross currents at 0:15:11.640 --> 0:15:13.480 a time, and a lot of people are flying blind. 0:15:13.640 --> 0:15:20.880 This is bloomberg well. As the coronavirus continues to spread 0:15:21.000 --> 0:15:23.920 and shuts down large parts of the economy. One of 0:15:23.920 --> 0:15:26.120 the questions is what's going on in the world of 0:15:26.200 --> 0:15:28.720 real estate. To answer that, we welcome Best Friedman Cheese 0:15:28.760 --> 0:15:32.280 as CEO of Brown Harris Stevens, based in New York City. Best, 0:15:32.280 --> 0:15:34.960 thanks so much for joining us. So what is going 0:15:35.000 --> 0:15:37.200 on in the world of real estate? Has that completely 0:15:37.200 --> 0:15:41.240 shut down as well? Yeah? Hi, good morning, Hi, Parhi Lisa, 0:15:41.280 --> 0:15:43.840 how are you? Um, you know, it has I mean, 0:15:43.920 --> 0:15:47.360 we we had a really we closed March, and the 0:15:47.480 --> 0:15:50.080 numbers were very good for March, but that was business 0:15:50.160 --> 0:15:53.440 from a different market. And now because you know, agents 0:15:53.480 --> 0:15:57.000 cannot show properties. Um, well, you know, the market has 0:15:57.000 --> 0:16:01.240 completely slowed, has been completely hated because we're still able 0:16:01.280 --> 0:16:04.240 to do some closings and we're still you know, agents 0:16:04.240 --> 0:16:07.680 are still getting calls from you know, consumers, but it 0:16:07.720 --> 0:16:11.480 has slowed down incredibly, Yes, and we expected to slow 0:16:11.560 --> 0:16:15.080 further into April. Bus heading into this the New York 0:16:15.120 --> 0:16:17.720 City a real estate market was already slowing. We saw 0:16:17.840 --> 0:16:21.240 declines and prices pretty much across the board, particularly the 0:16:21.320 --> 0:16:24.800 luxury sector and the larger apartments. And I'm just wondering 0:16:24.840 --> 0:16:29.200 how much this is going to just accelerate those declines. Yeah, 0:16:29.280 --> 0:16:33.480 I think this is definitely accelerating those declines. Uh, you know, 0:16:33.800 --> 0:16:36.480 for speaking about new developments, I mean all of those, 0:16:36.520 --> 0:16:40.720 every project is stopped, they can't continue work, they can't 0:16:40.720 --> 0:16:44.400 do you know, showing the sites are closed. Um. So 0:16:44.440 --> 0:16:46.960 I think that it's going to take a little while 0:16:47.080 --> 0:16:49.960 for it to pop back. Um. But I think that's 0:16:50.080 --> 0:16:55.000 just being aggravated by all of this. So best given word, 0:16:55.080 --> 0:16:58.280 I mean, interest rates are historically low. Um. But the 0:16:58.360 --> 0:17:00.080 reality is, I mean this is are you can or 0:17:00.240 --> 0:17:02.800 that this calls into question New York as a real 0:17:02.880 --> 0:17:06.919 attractive place to own real estate, to live in, that 0:17:06.960 --> 0:17:10.359 type of thing, given that we are one of the epicenters. No, 0:17:10.520 --> 0:17:13.719 I mean, listen, this is not permanent. Remember the virus 0:17:13.920 --> 0:17:17.359 is hopefully a temporary saying. The question is when is 0:17:17.560 --> 0:17:20.320 the peak which people experts are saying, and I'm listening 0:17:20.359 --> 0:17:22.719 to the experts that we have another week or two 0:17:22.800 --> 0:17:25.080 until we hit the peak, and then once we get 0:17:25.080 --> 0:17:28.520 this under control, the uncertainty goes away and we're back 0:17:28.560 --> 0:17:31.320 to business. I mean, this is not forever and ever. 0:17:31.480 --> 0:17:34.360 I mean, this is a virus that needs to be uh. 0:17:34.440 --> 0:17:37.879 We hopefully will have some sort of cure, vaccinations, something 0:17:37.920 --> 0:17:40.879 that helps, but right now people are concerned for their lives, 0:17:40.920 --> 0:17:43.520 and until we get that under control, you know, you're 0:17:43.520 --> 0:17:46.800 not going to have calmness. And consumer morale is low 0:17:46.920 --> 0:17:48.919 right now, but it should be. If people wanted to 0:17:48.960 --> 0:17:51.480 go out there and shop, I'd be worried. You know, 0:17:51.840 --> 0:17:54.960 it's not go ahead. I'm sorry, No, it's fine. I 0:17:54.960 --> 0:17:57.240 mean best if you take a step back. I've talked 0:17:57.280 --> 0:18:00.040 to a number of people who are wondering about a 0:18:00.040 --> 0:18:02.600 flight from the City's basically saying, look, if we're gonna 0:18:02.640 --> 0:18:05.359 get pandemics, if this is gonna happen again, why do 0:18:05.400 --> 0:18:07.840 we want to be in a concentrated area with lots 0:18:07.840 --> 0:18:09.800 of people who are breathing all over each other. Why 0:18:09.800 --> 0:18:11.600 not go somewhere where there's a lot of open space. 0:18:11.640 --> 0:18:13.760 You got a yard, you can get away from people, 0:18:13.840 --> 0:18:16.880 social distance all you want. And I'm just wondering, I mean, 0:18:17.320 --> 0:18:19.760 do you expect that kind of flight away from New 0:18:19.840 --> 0:18:22.240 York City in response to this a sort of an 0:18:22.240 --> 0:18:25.800 existential threat. I mean, listen, you were you guys lived 0:18:25.800 --> 0:18:28.080 through nine eleven. I was here as well, and there 0:18:28.119 --> 0:18:31.080 was for a few months after that people were afraid. 0:18:31.080 --> 0:18:33.359 They're like, should we leave New York City. I'm afraid 0:18:33.359 --> 0:18:35.680 there's gonna be another bombing. We're gonna you know, we're 0:18:35.720 --> 0:18:39.800 a target. And what happened is came January, the market 0:18:39.840 --> 0:18:42.720 went crazy. People believed in this city and they still 0:18:42.760 --> 0:18:45.200 believe in this city today. We are the most resilient 0:18:45.280 --> 0:18:47.600 city in the world. And I don't believe people are 0:18:47.600 --> 0:18:49.679 going to want to just move to the suburbs because 0:18:49.720 --> 0:18:52.560 of this. We love to be together, we need each other. 0:18:52.840 --> 0:18:54.800 We just need to get it under control. So I 0:18:54.880 --> 0:18:56.960 don't think that that's going to be the result of 0:18:57.000 --> 0:18:59.359 this at all. We love to be we love to 0:18:59.359 --> 0:19:02.600 be together. Just Paul, don't breathe on me. That's right exactly. 0:19:03.000 --> 0:19:05.120 So that's what do we do. What do you think 0:19:05.160 --> 0:19:07.080 is going to happen from the international buyer that's been 0:19:07.160 --> 0:19:10.560 such a big supporter of the luxury market, particularly in 0:19:10.560 --> 0:19:13.560 New York City, You know, I think that has that 0:19:13.640 --> 0:19:17.720 had slowed down anyway, as Lisa had indicated, UM, but 0:19:17.880 --> 0:19:21.600 I think, you know, I'm hoping that morale will come 0:19:21.640 --> 0:19:24.040 back over the summer. But you know, that has been 0:19:24.080 --> 0:19:26.640 a big question mark for everyone because we have seen 0:19:26.680 --> 0:19:29.160 a flow down of that for over a year now, 0:19:29.440 --> 0:19:32.040 and um, it's been more domestic that's been buying the 0:19:32.119 --> 0:19:35.760 high end luxury stuff, and so you know, I I 0:19:35.800 --> 0:19:38.840 don't know. I mean, that's for me, it's anybody's gas 0:19:38.880 --> 0:19:41.639 at this point, I don't know. There's also a question 0:19:41.720 --> 0:19:44.800 how quickly the New York City housing market will recover. 0:19:44.920 --> 0:19:46.119 Do you have a sense of that? I mean, I 0:19:46.200 --> 0:19:48.760 understand we have to wait and see what the virus 0:19:48.840 --> 0:19:51.800 brings in terms of just the virology of it. But 0:19:51.880 --> 0:19:55.080 do we have a sense of, once we have that 0:19:55.240 --> 0:19:58.160 kind of under wraps or there's some kind of solution, 0:19:58.280 --> 0:20:02.040 how quickly it'll take. Yeah. I mean, I think second 0:20:02.080 --> 0:20:05.080 quarter is going to be very challenging for all of 0:20:05.200 --> 0:20:08.520 us because all the you know, businesses slowed and people 0:20:08.520 --> 0:20:12.040 aren't gonna be writing much new business. And then hopefully 0:20:12.160 --> 0:20:14.360 third quarter is when we start to see I think 0:20:14.359 --> 0:20:17.679 economists have been talking about this sort of v shaped recovery, 0:20:18.160 --> 0:20:20.440 you know where things kind of jump, you know, drop 0:20:20.480 --> 0:20:23.439 off a cliff and then pop back up. I'm hoping 0:20:23.440 --> 0:20:25.399 that we're going to see something like that because we 0:20:25.440 --> 0:20:28.080 had a lot of pent up demands and I'm hoping 0:20:28.119 --> 0:20:32.119 that we pop back up come let's say September, after 0:20:32.160 --> 0:20:35.640 the summer that the market gets back to its regular business. 0:20:36.600 --> 0:20:38.440 Best give us a sense of how things are in 0:20:38.520 --> 0:20:41.720 the mortgage market. We've seen some real stress in the 0:20:41.720 --> 0:20:45.200 mortgage market over the last couple of weeks. Yeah, they. 0:20:45.280 --> 0:20:49.720 I spoke to a colleague at Wells recently and he 0:20:50.200 --> 0:20:53.680 told me that that environment is also very challenged. He's 0:20:53.720 --> 0:20:57.959 not really originating many loans. You know, people are slowed 0:20:57.960 --> 0:21:01.960 down incredibly. Um he's giving advice to people because rates 0:21:01.960 --> 0:21:04.560 are really low and people are doing some refives. I mean, 0:21:04.560 --> 0:21:06.439 now it's a good time to do a refinance if 0:21:06.440 --> 0:21:09.159 you'd like, but to originate a new loan for a 0:21:09.160 --> 0:21:12.400 new purchase has really slowed down, and I think that's 0:21:12.400 --> 0:21:14.679 going to be challenging for a lot of people in 0:21:14.720 --> 0:21:18.280 the mortgage industry. Definitely. The one plus is that the 0:21:18.320 --> 0:21:21.879 Hampton's um at least I had mentioned. I mean, because 0:21:22.119 --> 0:21:24.040 people do want to get out of the city because 0:21:24.040 --> 0:21:25.640 of the density and they don't want to be close 0:21:25.680 --> 0:21:29.120 to each other. You know. That rental market, Our environment 0:21:29.200 --> 0:21:31.359 there has been crazy. We can't keep anything on the 0:21:31.359 --> 0:21:35.439 market there. People. Everything has been rented. So that's one plus, 0:21:35.480 --> 0:21:38.600 I guess in this environment. Yeah, Actually, I've been hearing 0:21:38.600 --> 0:21:40.840 anecdotes of people who try to rent a house out there, 0:21:40.840 --> 0:21:43.080 and it's just the rates are absolutely outrageous and I'm 0:21:43.119 --> 0:21:44.960 just trying to figure out is that going to have 0:21:45.040 --> 0:21:47.400 lasting power? Is this also just sort of a temporary, 0:21:47.440 --> 0:21:49.119 da jerk, get me out of here for the moment 0:21:49.160 --> 0:21:52.080 kind of thing that will fade as time goes on. Yeah, 0:21:52.119 --> 0:21:54.400 I think it's you're seeing a knee jerk, Like everybody 0:21:54.520 --> 0:21:56.239 is trying to get out of the city, and if 0:21:56.280 --> 0:21:58.840 they don't have a place, you know, upstate, they want 0:21:58.840 --> 0:22:00.639 to go to the Hampton's or if they have a 0:22:00.640 --> 0:22:03.320 house there, they're going there. So I think people are 0:22:03.320 --> 0:22:05.359