WEBVTT - The World is Awash with Capital, Ailman Says 0:00:00.080 --> 0:00:13.040 Ye, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane 0:00:13.480 --> 0:00:17.560 Jai Ley. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:33.960 Bloomberg dot Com, and of course on the Bloomberg. Katie 0:00:33.960 --> 0:00:36.880 stuck enjoins us. She is with fair lead where she 0:00:36.960 --> 0:00:40.360 does technical analysis. Fair lead is very appropriate because right 0:00:40.400 --> 0:00:42.040 now France and the coast trying to get the role 0:00:42.080 --> 0:00:45.519 model London can't do it. So the Royal Navy's coming in. 0:00:45.560 --> 0:00:48.000 They're gonna try her to put her through Gibraltar and around, 0:00:48.320 --> 0:00:51.520 take a long way around and on that Royal Navy 0:00:51.560 --> 0:00:55.280 boat will be a fair lead. Right. What's a fair lead? 0:00:55.520 --> 0:00:57.880 It keeps the lines on the boat from getting tangled. 0:00:58.040 --> 0:01:01.240 And it seems, you know, Mark get timing is so important, 0:01:01.320 --> 0:01:03.560 right and we want to keep a clearer perspective and 0:01:03.640 --> 0:01:06.440 obviously have a fair lead as we approached the market. 0:01:06.480 --> 0:01:09.080 Are the moving averages of the equity markets giving you 0:01:09.120 --> 0:01:12.200 a fair lead right now? I think so, but probably 0:01:12.280 --> 0:01:14.640 less so than last year. The moving averages are really 0:01:14.640 --> 0:01:17.640 relevant in a trending tape, and I would argue that 0:01:17.680 --> 0:01:20.280 this year is more likely less of a trending tape, 0:01:20.360 --> 0:01:23.720 something that is characterized by more swings to the upside 0:01:23.760 --> 0:01:26.120 and downside, and for that reason we'll be forced to 0:01:26.120 --> 0:01:28.039 be a bit more short term in our focus. How 0:01:28.040 --> 0:01:30.800 do you gauge what's been happening with the SMP five, say, 0:01:30.800 --> 0:01:33.240 when we've had that sharp draw down, then this aggressive 0:01:33.280 --> 0:01:36.520 snap back as well. Does that provide you with some nerves? 0:01:37.120 --> 0:01:40.520 It does. In the corrective phase, which was very short lived, 0:01:40.560 --> 0:01:43.120 of course, we saw a sentiment which was the biggest 0:01:43.200 --> 0:01:46.160 risk to the market from a technical perspective, in my opinion, 0:01:46.480 --> 0:01:50.160 go from extremely bullish, which is a contrarian negative, to 0:01:50.360 --> 0:01:54.280 extremely bearished in the matter of days. Really, so that 0:01:54.440 --> 0:01:59.160 swift decline in sentiment was indicative of a treatable low. 0:02:00.240 --> 0:02:02.520 The SMP five hundred tests that it's two hundred day 0:02:02.520 --> 0:02:04.960 moving average. Now, the snap back that we've seen is 0:02:05.000 --> 0:02:09.120 not uncommon, obviously fast and furious in and of itself, 0:02:09.440 --> 0:02:12.640 but now seems to be losing short term momentum, which 0:02:12.720 --> 0:02:15.600 puts the market in store for possible retest, and by 0:02:15.600 --> 0:02:18.280 retest I mean a return to support. Well casey, where 0:02:18.320 --> 0:02:21.120 is that support? The two day moving average still for 0:02:21.120 --> 0:02:24.240 the SMP five hundred can be considered initial support. It 0:02:24.280 --> 0:02:27.040 may be a bit aggressive as a downside target for 0:02:27.400 --> 0:02:31.080 this retest, and nevertheless, the long term up trend is 0:02:31.080 --> 0:02:34.040 still very much intact. You've mentioned sentiment. How important is 0:02:34.080 --> 0:02:37.360 sentiments still? And more importantly perhaps for our listeners, Katie, 0:02:37.360 --> 0:02:40.600 how do you gauge west sentiment actually is? Well? I 0:02:40.639 --> 0:02:43.200 think it's really paramount because it is a driving force 0:02:43.280 --> 0:02:46.400 behind the markets, especially in markets that are so momentum 0:02:46.480 --> 0:02:50.040 driven and really top down oriented, right, really paying attention 0:02:50.080 --> 0:02:52.880 to the macro data. So I think it's very important. 0:02:52.919 --> 0:02:55.840 The way I'd like to gauge it is using transactual measures. 0:02:55.880 --> 0:02:59.240 So instead of adhering to the investor polls where they're 0:02:59.360 --> 0:03:02.560 asking how do you feel about the marketplace, but rather 0:03:02.639 --> 0:03:05.000 looking at how investors are positioning. You can do that 0:03:05.120 --> 0:03:08.120 via the vix via to put call ratios. There's a 0:03:08.560 --> 0:03:10.480 fear and greed index out there that we use quite 0:03:10.520 --> 0:03:13.840 a bit. I don't follow volume, and I know you 0:03:13.919 --> 0:03:18.360 pay attention to it. When Luisiamnta talks about distribution, that's 0:03:18.400 --> 0:03:20.919 the back and fourth of what's going on right now? 0:03:21.120 --> 0:03:24.040 What's the back and forth show? You? You know, the volumes. 0:03:24.080 --> 0:03:26.160 I don't give it a whole lot of weight either. 0:03:26.520 --> 0:03:29.000 Um when I do pay attention is when volume spikes, 0:03:29.040 --> 0:03:34.000 because that's indicative, isn't It really didn't write well. It 0:03:34.040 --> 0:03:37.160 did spike into the tradea below, so that was important. 0:03:37.240 --> 0:03:40.960 It was somewhat climactic, but it has certainly spiked higher 0:03:40.960 --> 0:03:44.120 than that. It can be indicative of inflection points, but 0:03:44.200 --> 0:03:46.360 volume as a whole has really lost its value in 0:03:46.360 --> 0:03:50.280 my opinion as a an indicator trend, so distribution would 0:03:50.280 --> 0:03:52.480 be a little bit less relevant as it pertains to volume. 0:03:52.960 --> 0:03:55.080 Katie Stockton, thank you so much with Fairley, and she 0:03:55.160 --> 0:03:59.560 will return for a longer bit. But news news overcomes 0:03:59.600 --> 0:04:02.360 all those morning Katie stocked and thank you so much. 0:04:02.480 --> 0:04:08.040 Constructive view on the markets wrapped around the standard reports. 0:04:20.520 --> 0:04:23.280 Much to talk about today, but we're gonna digress here 0:04:23.400 --> 0:04:28.240 right now, and really important issues for all Americans. Out 0:04:28.279 --> 0:04:33.039 of the various California pension plans right now. Chris Allman 0:04:33.120 --> 0:04:38.479 joins us, and he is not with Kelpers p. He 0:04:38.760 --> 0:04:44.479 is with Kelsters. S Good morning, sir. What is the 0:04:44.600 --> 0:04:50.400 difference between Kelsters and Kelpers In a nutshell, we cover 0:04:50.480 --> 0:04:54.600 the teachers, they cover state employees and municipal employees city 0:04:55.120 --> 0:04:58.400 towns in that I've read in the last couple of 0:04:58.520 --> 0:05:02.919 days of real chick oallenges within not your shop, but 0:05:03.320 --> 0:05:08.600 their shops over different accounting and their relationship with their clients, 0:05:08.920 --> 0:05:12.600 who are towns and villages to begin with. Does Kelsters 0:05:12.640 --> 0:05:16.200 have the same challenges that Kelpers has not to the 0:05:16.279 --> 0:05:20.400 extent that they do, because it's all about liability management? 0:05:20.520 --> 0:05:23.480 You know, I think when everybody talks about pension and 0:05:23.640 --> 0:05:26.840 unfunded liabilities, they always focus on the investment side. But 0:05:26.880 --> 0:05:29.440 the realities, you've got to pay attention to the liability 0:05:29.520 --> 0:05:34.080 side and the contributions. They've got more municipalities that set 0:05:34.160 --> 0:05:37.880 different benefit levels. In our case, it's one statewide benefit 0:05:37.960 --> 0:05:41.599 to all the simpler shop. Your mathematics is simpler. That 0:05:41.720 --> 0:05:45.000 is correct. There. There's a lot of people are saying 0:05:45.000 --> 0:05:48.640 what's going on in California is a crucible for Illinois, 0:05:48.800 --> 0:05:52.159 for Dallas and Frankly coast to coast the rest of America. 0:05:52.360 --> 0:05:55.120 Are you guys simply ahead of a debate? It's gonna 0:05:55.160 --> 0:05:57.000 be five or ten years down the road for the 0:05:57.040 --> 0:06:01.080 rest of unfunded America. UM, I don't think I think 0:06:01.080 --> 0:06:02.880 we're ahead of the debate. But I don't think that 0:06:03.000 --> 0:06:05.960 were the crucible or the center. I think that you're 0:06:05.960 --> 0:06:09.239 going to see other states and as you said, municipalities 0:06:09.480 --> 0:06:12.040 where they didn't do a good job of managing the liabilities. 0:06:12.080 --> 0:06:15.040 They didn't pay attention to the benefits, and most importantly, 0:06:15.080 --> 0:06:18.920 they didn't consistently pay the mortgage. They skipped payments, they 0:06:18.920 --> 0:06:24.040 had payment holiday the mortgage. For your readers or your listeners, 0:06:24.040 --> 0:06:27.359 they understand they're not paying the actually real assumed interest 0:06:27.440 --> 0:06:30.039 rate every year. There's a required rate that you've got 0:06:30.040 --> 0:06:32.680 to pay in. You've got to contribute. The town has 0:06:32.720 --> 0:06:35.000 to pay to kelpers, of the teachers have to pay 0:06:35.040 --> 0:06:39.000 to kelsters. That is correct. Best example picture of four 0:06:39.040 --> 0:06:41.960 oh one k If you don't invest in your four 0:06:41.960 --> 0:06:43.960 oh one k oh for a couple of years when 0:06:43.960 --> 0:06:46.200 you're twenty, a couple of years when you're thirty, of 0:06:46.200 --> 0:06:48.480 a sudden, you get to fifty and you're not gonna 0:06:48.480 --> 0:06:51.560 have enough money because you didn't invest and contribute regularly 0:06:52.000 --> 0:06:54.480 to the contributions. That are the focus and John that 0:06:54.520 --> 0:06:57.440 defines about three quarters of America. It's a very very 0:06:57.480 --> 0:06:59.920 important issue. But on the other side, something that you 0:07:00.000 --> 0:07:02.640 you have to try and manage Chris, is the return assumptions? 0:07:02.640 --> 0:07:04.599 What are the basic assumptions for returns now and how 0:07:04.720 --> 0:07:07.520 they shifted over the last ten years. Yeah, they've come 0:07:07.560 --> 0:07:09.680 down over the last ten years. There have been lots 0:07:09.680 --> 0:07:12.600 of critics that they haven't come down enough. But remember, 0:07:12.600 --> 0:07:15.320 we're trying to make a forecast for the next thirty years. 0:07:15.640 --> 0:07:19.040 What's the reasonable rate of return that a diversified portfolio 0:07:19.080 --> 0:07:22.160 could earn over the next thirty years. And don't just 0:07:22.200 --> 0:07:24.840 look at today's environment where interest rates are. I think 0:07:24.840 --> 0:07:27.160 about the innovation that's coming. Think about the growth of 0:07:27.600 --> 0:07:30.400 the rest of the world, the emerging markets. So for us, yeah, 0:07:30.520 --> 0:07:34.360 answer and simple number is seven percent. Warren Buffett would 0:07:34.360 --> 0:07:36.120 say that's too high, but I would say if you 0:07:36.160 --> 0:07:39.520 look at over thirty years, with a little bit of inflation, 0:07:39.760 --> 0:07:41.840 I think we can achieve seven percent. We have in 0:07:41.880 --> 0:07:44.280 the past thirty years. We have turned eight percent in 0:07:44.280 --> 0:07:46.440 the last thirty years. How difficult would it be to 0:07:46.480 --> 0:07:50.840 actually capture those growth assumptions in public markets when so 0:07:50.880 --> 0:07:54.800 many of these growth opportunities aren't going public, they're staying private. 0:07:54.800 --> 0:07:58.280 And I'm talking obviously specifically about equities, and very much 0:07:58.320 --> 0:08:01.440 more so about one specific text sector in technology. Do 0:08:01.560 --> 0:08:04.520 you see that shift that more growth opportunities will remain 0:08:05.000 --> 0:08:07.560 in private hands and they won't be available as a 0:08:07.600 --> 0:08:10.520 public opportunity. I'd answer your question in two ways. If 0:08:10.520 --> 0:08:12.880 you're a four oh one K four oh three B investor, 0:08:13.200 --> 0:08:15.560 it's gonna be hard for you to match our return 0:08:15.600 --> 0:08:18.120 at seven percent because we can gain access to that 0:08:18.240 --> 0:08:22.760 private capital market. We had met with the Jay Clayton 0:08:22.800 --> 0:08:25.920 from SEC yesterday and one of his observations was that 0:08:26.000 --> 0:08:29.200 there's only about forty one hundred publicly traded companies in 0:08:29.200 --> 0:08:32.560 America today. When I started this business thirty years ago, 0:08:32.920 --> 0:08:36.040 there were over seven thousand, So over half of the 0:08:36.080 --> 0:08:39.839 company's basically have gone and stayed private or not going 0:08:39.920 --> 0:08:42.400 public because there's a cost to it. That's a huge 0:08:42.440 --> 0:08:45.320 investment opportunity we can take advantage of. And there's growth 0:08:45.320 --> 0:08:47.480 in that private and it's growth in the private sector, 0:08:47.520 --> 0:08:50.840 and it's actually a huge amount of investment opportunity there. 0:08:50.920 --> 0:08:53.800 They can access all the capital they want. The stories 0:08:53.840 --> 0:08:55.600 changed so much because they used to have to go 0:08:55.720 --> 0:08:58.760 public to access the capital, and now PE is just 0:08:58.880 --> 0:09:01.240 opening up funds of people throwing money at them. Do 0:09:01.280 --> 0:09:04.720 we need to improve the opportunity set for retail to 0:09:04.760 --> 0:09:07.680 get access to private markets, the opportunities that used to 0:09:07.679 --> 0:09:09.760 be public and now remain private. Do we need to 0:09:09.800 --> 0:09:12.520 open that up a little bit more? Chris Um. I 0:09:12.559 --> 0:09:15.559 think that the private equity firms are always trying to 0:09:15.600 --> 0:09:17.840 figure out how to do that. That's been on people's 0:09:17.880 --> 0:09:20.000 mind of how do you daily value or how do 0:09:20.040 --> 0:09:22.120 you take private equity and fitted into a four O 0:09:22.200 --> 0:09:25.120 wind k option. I'm not really sure that they should 0:09:25.200 --> 0:09:28.199 because that's a very sophisticated market, a lot of volatility. 0:09:28.559 --> 0:09:31.280 You just use the expression that pe is throwing money 0:09:31.280 --> 0:09:33.760 at companies. That's not a good environment. You don't want 0:09:33.800 --> 0:09:36.079 to throw money at p A to do something that 0:09:36.200 --> 0:09:38.800 all sitting on record cash piles. There's no question the 0:09:38.840 --> 0:09:42.040 world is a wash with capital. Never in Tom Keene's 0:09:42.080 --> 0:09:44.920 life have you seen this much money around the world 0:09:45.000 --> 0:09:47.280 that's able for long term investment. Just think of the 0:09:47.280 --> 0:09:49.280 sovereign wealth funds that are out there. There there ten 0:09:49.320 --> 0:09:52.079 times are I go with that? But after the Napoleonic 0:09:52.080 --> 0:09:55.080 Wars it was a little richest. Well, that's true. Equity 0:09:55.120 --> 0:10:00.880 markets have a multiple on them, that is, are you 0:10:01.040 --> 0:10:05.880 able to go down assets size and go from comfortable 0:10:06.559 --> 0:10:10.040 big caps down to mid cap and small cap or 0:10:10.080 --> 0:10:12.120 do you have such a massive money just as it 0:10:12.200 --> 0:10:14.600 worth buying mid caps and small caps. No, we are 0:10:14.720 --> 0:10:20.920 diverside portfolio, Tom. We're into mid caps and indexes, yes, indexes, 0:10:20.960 --> 0:10:23.480 and then direct active management. That's the one place we 0:10:23.520 --> 0:10:25.880 think the markets a little bit less efficient, so we'll 0:10:26.040 --> 0:10:29.640 use active managers despite the cost. But I think an opportunities, 0:10:29.640 --> 0:10:32.440 particularly in emerging markets around the world, not even just 0:10:32.559 --> 0:10:35.160 large cap and mid cap and emerging markets, we can 0:10:35.200 --> 0:10:37.679 take advantage of that. So you were the French teacher 0:10:37.840 --> 0:10:40.600 in San Jose, and she says, what did you do 0:10:40.720 --> 0:10:43.200 last year? What? What's your What was your total return 0:10:43.280 --> 0:10:46.760 last year to your your shareholders last year? Are total 0:10:46.760 --> 0:10:50.640 return um was? I'm gonna say fourteen percent. Actually, I'm 0:10:50.640 --> 0:10:53.480 still past two thousand seventeen, and i operate on a 0:10:53.520 --> 0:10:56.360 fiscal year basis, so I'm really focused at June thirties 0:10:56.480 --> 0:10:59.839 and and where do we perform. We're doing well. We're 0:11:00.040 --> 0:11:03.280 like a lot of hedge funds. You captured a lot 0:11:03.600 --> 0:11:07.120 of the up SPX. Absolutely, because over half of my 0:11:07.200 --> 0:11:10.160 portfolio has a beta exposure to the global equity markets. 0:11:10.200 --> 0:11:12.640 So I'm in US and in non U S stocks, 0:11:12.640 --> 0:11:15.560 and I'm going to move with those markets. But over 0:11:15.600 --> 0:11:17.640 the long term, we think we're going to do quite well. 0:11:17.679 --> 0:11:21.520 What's your R squared to SP something? How tight do 0:11:21.559 --> 0:11:26.600 you manage the benchmark indexes within the equity portfolio? Very tight? 0:11:26.640 --> 0:11:29.720 Our tracking error is actually pretty darn tight because we 0:11:29.760 --> 0:11:33.560 don't use a lot of active management. We're seventy passive 0:11:33.600 --> 0:11:37.160 in the USA, fifty percent passive in the non US market, 0:11:37.280 --> 0:11:40.800 so very tight passive. That's fascinating. We have that big 0:11:40.840 --> 0:11:44.040 conversation without Warren Buffett, and they beat against protege pond 0:11:44.080 --> 0:11:46.400 as you saying that's the best way to position over 0:11:46.400 --> 0:11:49.880 a period of time that could be multiple decades. We 0:11:50.040 --> 0:11:52.800 think that if you're going to invest billions of dollars, 0:11:52.840 --> 0:11:55.480 the most efficient and cost effective way to do it 0:11:55.559 --> 0:11:58.760 is is to own the US market as one whole group, 0:11:58.800 --> 0:12:01.600 as one basket of stock. Yeah, there aren't a lot 0:12:01.600 --> 0:12:04.360 of Warren Buffets out there. It would be great if 0:12:04.400 --> 0:12:06.840 we had quite a few options, but there's only one 0:12:06.880 --> 0:12:10.120 oracle of Omaha. Chris. Final question, we have a limited time. 0:12:10.160 --> 0:12:11.319 I just want to ask you how much is that 0:12:11.360 --> 0:12:14.880 equity position increased as a percentage of the overall investment portfolio. 0:12:14.920 --> 0:12:17.520 Over the last couple of years, it's actually decreased interesting 0:12:17.840 --> 0:12:20.400 profits well, as this equity market was hitting all time 0:12:20.440 --> 0:12:23.520 new eyes US and non US, we were taking profits 0:12:23.520 --> 0:12:26.320 away and diversifying into other areas. We want to take 0:12:26.320 --> 0:12:30.080 it down below of the portfolio. Okay, well, thank you 0:12:30.120 --> 0:12:33.160 so much, Craig, Chris Elman, excuse me, Chris Ellman, thank 0:12:33.200 --> 0:12:48.520 you so much. With Kelster's this morning and now joining 0:12:48.600 --> 0:12:51.400 us for all of us, the most important interview of 0:12:51.440 --> 0:12:54.760 the day, without question, on your real estate, on John 0:12:54.800 --> 0:12:59.240 Farrell's real estate. Jonathan Miller joins us with Miller, Samuel John, 0:12:59.520 --> 0:13:04.160 nobody keep statistics like you, Miami, New York and really nationwide. 0:13:04.240 --> 0:13:12.000 What's the trend right now into John Pharaoh's spring season. Well, 0:13:12.200 --> 0:13:15.160 we have two things happening. One, if you look at 0:13:15.559 --> 0:13:21.160 the residential side, so far, very little change in attitude 0:13:21.320 --> 0:13:24.800 from what was expected to be a pretty serious drag 0:13:24.920 --> 0:13:32.040 on housing, uh regarding the tax reform. On the retail side, 0:13:33.440 --> 0:13:38.360 we're delving further into the retail apocalypse, where we're having 0:13:38.400 --> 0:13:43.120 a significant number of retail outlets running into trouble and 0:13:43.160 --> 0:13:47.800 trying to renegotiate with landlords. UM, it's sort of a 0:13:47.800 --> 0:13:51.840 an after effect of the financial crisis combined with massively 0:13:51.960 --> 0:13:56.520 over building retail across the US. It's price adjusting for 0:13:56.559 --> 0:14:01.360 the retail apocalypse. Is that happening quick enough? Oh no, Uh, 0:14:01.880 --> 0:14:05.280 just like we we have talked about before in Bloomberg 0:14:05.360 --> 0:14:11.080 with UH the development boom. UH, it takes UH landlords 0:14:11.160 --> 0:14:14.720 or property owners two to three years to really adjust 0:14:14.760 --> 0:14:18.160 to current market conditions. And we're just really something that 0:14:18.200 --> 0:14:20.320 began two or three years ago. We're just starting to 0:14:20.360 --> 0:14:25.800 see retailers or landlords begin to adjust and they need to. Okay, 0:14:26.120 --> 0:14:29.120 the big complaint I get John Miller is Michael Dell 0:14:29.240 --> 0:14:31.640 takes a place in a big, shining tower and everybody 0:14:31.680 --> 0:14:34.480 goes mental. That's not the real world. And we say 0:14:34.520 --> 0:14:37.200 good morning to Mr Dell, who's been very supportive of 0:14:37.200 --> 0:14:40.320 our work, UM, John Miller. If you go down the 0:14:40.400 --> 0:14:44.240 income food chain, the number one complaint I hear from 0:14:44.280 --> 0:14:49.640 everybody are the income qualifications Given a high rents in 0:14:49.720 --> 0:14:54.840 many cities around the nation, is that pressure still there? Oh? Yes, 0:14:55.160 --> 0:15:01.920 Credit conditions UH in multi family housing, UH, specifically residential 0:15:01.960 --> 0:15:07.120 rental remained very high. That there's a strong risk aversion UH, 0:15:07.360 --> 0:15:12.960 despite growing um uh need for the use of concession. 0:15:13.040 --> 0:15:18.400 So for example, in New York, UH the at least 0:15:18.440 --> 0:15:23.520 fifty of all rental activity has some form of landlord concession. 0:15:24.080 --> 0:15:27.800 And when you talk about new development, all the product 0:15:27.840 --> 0:15:30.520 that I'm built over the five or six years, it's 0:15:30.640 --> 0:15:35.560 anywhere from have some form of concession. So what we're 0:15:35.600 --> 0:15:41.360 seeing is an oversupply, whether we're talking about luxury residential 0:15:41.440 --> 0:15:44.560 or we're talking about retail. And but the the issue, 0:15:44.640 --> 0:15:47.200 John and Blueberg has an agreement, folks. I can't live 0:15:47.200 --> 0:15:49.280 too close to John Ferrell because in case there was 0:15:49.280 --> 0:15:52.480 an accident, we need to be apart. But but if 0:15:52.520 --> 0:15:55.400 I was to move up by John Farrow, the fact 0:15:55.520 --> 0:15:59.120 is where he lives is so fancy. There's nothing for rent. 0:16:00.120 --> 0:16:03.480 Explain what you just said, John Miller for ten minutes, 0:16:03.760 --> 0:16:06.080 and the fact is there's nothing for rent. How can 0:16:06.120 --> 0:16:09.640 you have both worlds? Well, So what you have is 0:16:09.760 --> 0:16:14.600 you have a massively polarized market. So most of the 0:16:14.680 --> 0:16:17.640 supply that has come in on the residential side has 0:16:17.680 --> 0:16:22.880 been skewed the luxury and so that essentially the remainder 0:16:22.920 --> 0:16:26.680 of it. I want to say, if Tom King wants 0:16:26.680 --> 0:16:28.800 to trade views out of the front window. We're not 0:16:28.840 --> 0:16:31.520 going to talk about where we live. Um. Jonathan made 0:16:31.560 --> 0:16:33.920 a question and serious question hap me out here and 0:16:33.920 --> 0:16:36.080 in my app some of our listeners as well. The 0:16:36.160 --> 0:16:39.200 landlord wants to put up my rent in the new renewal. 0:16:39.240 --> 0:16:41.840 I'm a captive audience. I'm a sitting tenant. Now, if 0:16:41.840 --> 0:16:44.240 I go to another building, they're offering two months free 0:16:44.280 --> 0:16:47.240 rent on fourteen month deals. It keeps happening again and again. 0:16:47.240 --> 0:16:49.840 But when I'm a sitting tenant, they're just throwing a 0:16:49.880 --> 0:16:54.320 rent increase at me. What's my best response? So the 0:16:54.360 --> 0:16:59.920 best response is to act as if the market is softening, 0:17:00.360 --> 0:17:03.440 um and if you you see a rent increase. Actually, 0:17:03.560 --> 0:17:08.360 landlords are are really being much more uh flexible than 0:17:08.440 --> 0:17:12.000 they have been because otherwise your option with all the 0:17:12.800 --> 0:17:16.880 um all your other options are to to move. And 0:17:16.960 --> 0:17:21.360 so we're seeing massive use of concessions uh to keep 0:17:21.440 --> 0:17:24.760 you in there because it's it's less expensive to bringing 0:17:24.800 --> 0:17:27.760 in and then bringing a new tenant. Does San Francisco 0:17:27.920 --> 0:17:33.680 break like New York? Oh yeah, uh yeah, that market, 0:17:34.520 --> 0:17:37.320 you know that market. It's it's odd because we always 0:17:37.320 --> 0:17:40.200 think of New York is the most expensive in the country, 0:17:40.240 --> 0:17:44.080 but that market is feeling much more pain and stress 0:17:44.119 --> 0:17:47.600 on affordability, and they're having the same problem that there 0:17:47.640 --> 0:17:52.920 just isn't supply, uh for as we would say, Mere mortals, 0:17:52.440 --> 0:17:56.000 mortals to rent. Well, thank you, Jim Miller greatly appreciate 0:17:56.560 --> 0:17:59.320 he's with the real estate agency Mere Mortals. We greatly 0:17:59.359 --> 0:18:03.240 appreciate his attendance today. John Miller Folcus is with Miller, 0:18:03.320 --> 0:18:07.840 Samuel and Douglas Eleman and does the best. He passes 0:18:07.960 --> 0:18:11.400 John Burrow to Bureau and Borrow to Borrow and down 0:18:11.400 --> 0:18:15.240 in Miami as well in Boston. It's amazing the narrowness 0:18:15.280 --> 0:18:30.600 he gets. This is a joy. George Friedman is one 0:18:30.640 --> 0:18:35.960 of our most astute analysts of the military dimension of 0:18:36.000 --> 0:18:41.520 our international politics. Chapter five of the Next hundred Years 0:18:42.040 --> 0:18:46.959 is China two thousand and twenty Paper Tiger. George Freedman 0:18:47.040 --> 0:18:51.400 joins us now author and with of course, with geopolitical futures. George, 0:18:51.440 --> 0:18:53.480 do you have to rip up the next hundred years? 0:18:53.560 --> 0:18:57.120 And you have to rip up chapter five Paper Tiger? 0:18:57.560 --> 0:19:02.720 After this momentous announcement of President g I don't think 0:19:02.760 --> 0:19:06.720 I have to rip up anything. Uh. Look, the Chinese 0:19:06.840 --> 0:19:09.879 have a fundamental interest in controlling the South China. See 0:19:10.480 --> 0:19:14.119 in ten years of pursuing this that got nowhere. No 0:19:14.160 --> 0:19:17.440 one is impressed. Not even the Filipinos h New York 0:19:17.480 --> 0:19:20.760 Times is impressed. So you know, they can be as 0:19:21.080 --> 0:19:23.960 loud and as aggressive as they want, but the fact 0:19:23.960 --> 0:19:26.119 of the matter is they don't have force. How do 0:19:26.160 --> 0:19:30.520 you respond to the comparisons of this historic announcement from 0:19:30.600 --> 0:19:33.680 President g and I guess the Communist Party with what 0:19:33.720 --> 0:19:37.360 we observe from Mr Putin today in Russia is lengthy 0:19:37.440 --> 0:19:42.640 speech to uh an acclaimed room. Well, these are two 0:19:43.160 --> 0:19:48.119 basically constrained military pours trying to posture on the world 0:19:48.160 --> 0:19:52.600 strage as if they were much more powerful. Look, the 0:19:52.680 --> 0:19:56.119 Russians claimed that they're spending only four of their GDP 0:19:56.680 --> 0:19:59.320 on defense. If you take a look at all the 0:19:59.400 --> 0:20:04.120 projects they've laid out, some of them extraordinarily advanced, they're 0:20:04.119 --> 0:20:06.600 spent it way way more at a time when oil 0:20:06.640 --> 0:20:10.240 prices are down. So if he is serious that he's 0:20:10.280 --> 0:20:14.160 actually done this, he's repeating what so the Union got 0:20:14.160 --> 0:20:18.880 crushed by star Wars competition. On the one side, low 0:20:18.920 --> 0:20:22.719 oil prices. It is one thing to make a political speech, 0:20:23.359 --> 0:20:25.840 it's another thing to believe it, and we have to 0:20:25.840 --> 0:20:30.480 be very careful, Mr Friedman. During this speech, a President 0:20:30.680 --> 0:20:38.760 Putin talked about two specific nuclear weapon delivery systems. I'm 0:20:38.760 --> 0:20:41.359 wondering if you could offer your thoughts about whether they 0:20:41.359 --> 0:20:46.080 are credible and what do you believe that indicates. Well, 0:20:46.119 --> 0:20:48.479 the most important one he spoke about is that he 0:20:48.640 --> 0:20:53.520 had a cruise missile back in travel at mock times 0:20:53.600 --> 0:20:58.240 his speed of sound and deliver in nuclear weapon anywhere 0:20:58.280 --> 0:21:01.000 in the world. The only question is, why do you 0:21:01.000 --> 0:21:03.600 want a weapon like that to deliver nuclear weapons? You've 0:21:03.600 --> 0:21:06.520 got I C B M. S um. They're not easy 0:21:06.560 --> 0:21:09.119 to defend against. Noblan claims they can defend against it. 0:21:09.160 --> 0:21:13.000 Why develop a weapon of this sort at this incredible 0:21:13.040 --> 0:21:16.879 expense Because you've got to develop materials, fuels, other things 0:21:16.920 --> 0:21:21.240 like that in order to do a nuclear attack, a 0:21:21.240 --> 0:21:24.360 lot of other ways to do it. I think they're 0:21:24.400 --> 0:21:26.520 working on it. I think a lot of countries, including 0:21:26.560 --> 0:21:29.679 the United States, are working on this. But his claim 0:21:29.760 --> 0:21:33.440 that they've got it, as like much of the speech 0:21:33.640 --> 0:21:37.320 he made, it was great campaign rhetoric, it was a 0:21:37.359 --> 0:21:40.280 good State of the Union message, but when you drill 0:21:40.359 --> 0:21:44.119 down into it, he's claiming to be developing weapons he 0:21:44.240 --> 0:21:49.280 doesn't even need in that context. The elections, as you indicate, 0:21:49.320 --> 0:21:52.680 they are coming up, what in about seventeen days, will 0:21:52.760 --> 0:21:55.480 there be any change after the election in the way 0:21:55.560 --> 0:22:00.000 Russia is governed? Well, the Russians are really trapped, as 0:22:00.119 --> 0:22:03.800 most nations are there, trapped by an economy that never 0:22:03.840 --> 0:22:06.560 evolved that depends on the price of oil, and they 0:22:06.560 --> 0:22:09.720 can't They can't control the price of oil, and it's 0:22:09.760 --> 0:22:11.840 not going back to eight or hundred, at least not 0:22:12.080 --> 0:22:15.280 in the near future. So they have got this problem 0:22:15.280 --> 0:22:18.320 that limits what they can do. They also want to 0:22:18.359 --> 0:22:20.879 appear for their own public and for the world as 0:22:20.920 --> 0:22:25.639 if they were major global powers. They're not, but they 0:22:25.640 --> 0:22:28.840 can make a speech that makes them sound really frightening, 0:22:29.720 --> 0:22:32.320 and that's what we did. George, you're asconsed in the 0:22:32.359 --> 0:22:37.040 People's Republic of Austin. The territory around you maybe ought 0:22:37.040 --> 0:22:41.280 to be the most likable territory for President Trump. How 0:22:41.280 --> 0:22:45.800 do you gauge the American public support of the president's 0:22:46.000 --> 0:22:50.720 foreign policy and the budget announcements of a build up 0:22:50.720 --> 0:22:54.800 of the military. How do you engage that? Well, I 0:22:54.800 --> 0:22:59.359 haven't live outside of Austin, in the Red Country, and 0:22:59.440 --> 0:23:02.520 the general view out here is they're not really interested 0:23:02.520 --> 0:23:07.080 in foreign policy nearly as much. There's trade issues and 0:23:07.160 --> 0:23:09.840 things like that, and they don't quite understand it. But 0:23:09.880 --> 0:23:13.399 they want to military build up, right, they do. But 0:23:13.440 --> 0:23:15.480 it's not a it's not a burning issue. I mean, 0:23:15.520 --> 0:23:19.680 this is not something that they're really they're really caught 0:23:19.760 --> 0:23:22.840 up on social issues. As to the people inside of Austin. 0:23:23.200 --> 0:23:25.720 They hate anything he does if he does it. So 0:23:25.760 --> 0:23:28.000 what you really have the social reality is you've got 0:23:28.000 --> 0:23:31.280 two groups, none of them are particularly coherent in terms 0:23:31.280 --> 0:23:35.520 of policy, but each have one basic belief that the 0:23:35.600 --> 0:23:40.600 other group really is vile. And you try to figure 0:23:40.640 --> 0:23:43.280 out what it is that each wants, it gets really 0:23:43.359 --> 0:23:46.399 murky really fast. Okay, Well, let's sake something like the 0:23:46.520 --> 0:23:49.960 F thirty five, of which I have almost zero knowledge. 0:23:50.680 --> 0:23:55.000 The if we throw more money at the Pentagon, which 0:23:55.040 --> 0:23:58.000 I believe is what we're gonna do. Does George Friedman 0:23:58.040 --> 0:24:03.280 have a confidence we're gonna build the better F. Well, 0:24:03.320 --> 0:24:05.280 you've caught me on a bad subject because I think 0:24:05.280 --> 0:24:07.840 that thirty five are really bad idea. Well, that's how 0:24:07.840 --> 0:24:14.520