1 00:00:05,800 --> 00:00:08,720 Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm pim Fox. 2 00:00:08,760 --> 00:00:11,520 Speaker 1: Along with my co host Lisa Bramowitz. Each day we 3 00:00:11,640 --> 00:00:15,120 Speaker 1: bring you the most important, noteworthy, and useful interviews for 4 00:00:15,200 --> 00:00:17,840 Speaker 1: you and your money, whether you're at the grocery store 5 00:00:17,960 --> 00:00:20,720 Speaker 1: or the trading floor. Find the Bloomberg P M L 6 00:00:20,840 --> 00:00:29,880 Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. There's 7 00:00:29,880 --> 00:00:33,360 Speaker 1: been a lot of concern about the three trillion dollar 8 00:00:33,720 --> 00:00:37,640 Speaker 1: one trillion dollar junk bond market in the US for 9 00:00:37,640 --> 00:00:40,000 Speaker 1: a number of years. This year, however, it has been 10 00:00:40,080 --> 00:00:43,080 Speaker 1: out performing. Our next guest joins us to talk about that, 11 00:00:43,200 --> 00:00:47,559 Speaker 1: John McClean, portfolio manager at Diamond Hill. John, I want 12 00:00:47,600 --> 00:00:49,760 Speaker 1: to start with that because there's been a lot of 13 00:00:49,760 --> 00:00:53,800 Speaker 1: concern about riskier assets this year, certainly volatility picking up, 14 00:00:54,120 --> 00:00:58,040 Speaker 1: and yet the high old market has been significantly outperforming 15 00:00:58,280 --> 00:01:00,959 Speaker 1: higher rated debt. What do you make of that? Well, 16 00:01:01,000 --> 00:01:03,200 Speaker 1: I think it's uh, the credit spread that you have 17 00:01:03,360 --> 00:01:07,959 Speaker 1: in in high yield is uh still reasonably attractive for 18 00:01:08,200 --> 00:01:13,959 Speaker 1: the default rate expectations going forward. Uh, So you have 19 00:01:14,480 --> 00:01:17,080 Speaker 1: UM you know with this case, you also have less 20 00:01:17,120 --> 00:01:20,520 Speaker 1: interest rate sensitivity UM with with high yield, and so 21 00:01:20,920 --> 00:01:23,800 Speaker 1: I think if people are worried about the markets, I'd 22 00:01:23,840 --> 00:01:26,160 Speaker 1: first be a little bit more worried about equities as 23 00:01:26,280 --> 00:01:28,839 Speaker 1: as opposed to high yield. When we talk about high yield, 24 00:01:28,840 --> 00:01:30,800 Speaker 1: should we get specific and talk about some of the 25 00:01:30,920 --> 00:01:35,320 Speaker 1: energy areas like oil, natural gas? I mean, because weren't 26 00:01:35,360 --> 00:01:38,920 Speaker 1: they really the big focus of high you lending? Uh? Yeah, 27 00:01:38,920 --> 00:01:42,680 Speaker 1: I mean that was definitely the story in sixteen. Um, 28 00:01:42,720 --> 00:01:46,280 Speaker 1: I think the market has sharpened its pencil and understands 29 00:01:46,360 --> 00:01:50,400 Speaker 1: where good assets are and where weaker assets are. And uh, 30 00:01:50,600 --> 00:01:53,080 Speaker 1: from our viewpoint, you want to be concentrated in the 31 00:01:53,080 --> 00:01:57,720 Speaker 1: Permian basin. And uh, you know, at this point, companies 32 00:01:57,760 --> 00:02:00,400 Speaker 1: have right size their balance sheets. Uh. You know, I 33 00:02:00,400 --> 00:02:02,880 Speaker 1: think we've seen all the distress kind of moved through. 34 00:02:03,640 --> 00:02:06,960 Speaker 1: And uh, with the commodity environment where it is, particularly 35 00:02:06,960 --> 00:02:10,480 Speaker 1: in oil, uh you know, around sixty bocks. Uh, that's 36 00:02:10,520 --> 00:02:13,079 Speaker 1: pretty constructive for for a lot of the high yield 37 00:02:13,120 --> 00:02:15,000 Speaker 1: issuers right now, all right, I want to talk a 38 00:02:15,040 --> 00:02:17,080 Speaker 1: little bit about some of the sinkholes that we're seeing. 39 00:02:17,120 --> 00:02:20,959 Speaker 1: For example, Community Health. Uh, yesterday it was rumored that 40 00:02:21,160 --> 00:02:25,400 Speaker 1: it is going to hire advisors to restructure its debt 41 00:02:25,680 --> 00:02:28,760 Speaker 1: and its bonds sunk. This sort of feeds on an 42 00:02:28,760 --> 00:02:32,960 Speaker 1: ongoing slump in healthcare related junk bonds. Is this scenario 43 00:02:33,000 --> 00:02:36,080 Speaker 1: where you see opportunity or that you want to avoid 44 00:02:36,120 --> 00:02:39,119 Speaker 1: like a plague? Yeah, I'd probably see the latter. Uh. 45 00:02:40,120 --> 00:02:44,680 Speaker 1: We are certainly underweight healthcare in general, and UH community 46 00:02:44,760 --> 00:02:49,520 Speaker 1: specifically has a very tough path on a go forward basis. 47 00:02:49,520 --> 00:02:51,840 Speaker 1: We don't really like the assets and we think that 48 00:02:51,919 --> 00:02:55,720 Speaker 1: it has an untenable debt load. So I do believe 49 00:02:55,720 --> 00:02:59,360 Speaker 1: a restructuring could occur U and could occur it seemingly 50 00:02:59,480 --> 00:03:03,080 Speaker 1: faster than and the market has anticipated. Another name that 51 00:03:03,160 --> 00:03:06,720 Speaker 1: caught my eye Valiant. This is a company with twenty 52 00:03:06,760 --> 00:03:09,960 Speaker 1: seven billion dollars of debt. It just sold more bonds 53 00:03:10,000 --> 00:03:12,919 Speaker 1: and there were plenty of buyers. Evidently were you among them? 54 00:03:13,000 --> 00:03:15,880 Speaker 1: And do you view this as a sign that the 55 00:03:16,000 --> 00:03:19,959 Speaker 1: pendulum has swung back to issuers in the high bond market. Well, 56 00:03:20,400 --> 00:03:22,919 Speaker 1: we were not. And the coupon that they had to 57 00:03:22,960 --> 00:03:25,440 Speaker 1: pay at nine and a quarter was pretty expensive relative 58 00:03:25,520 --> 00:03:28,320 Speaker 1: to the market, yielding a little north of six percent. 59 00:03:28,480 --> 00:03:30,960 Speaker 1: So uh, you know, they're in a position right now 60 00:03:31,000 --> 00:03:33,720 Speaker 1: again with a with a very weakend. Uh, they have 61 00:03:33,800 --> 00:03:35,480 Speaker 1: to continue to kick the can down the road and 62 00:03:35,480 --> 00:03:38,560 Speaker 1: their interest costs continue to move higher. I don't think 63 00:03:38,560 --> 00:03:43,120 Speaker 1: a deal is traded particularly well. Um, So you know, 64 00:03:43,240 --> 00:03:46,920 Speaker 1: I think that one is certainly a wait and see story. 65 00:03:47,200 --> 00:03:50,560 Speaker 1: Tell me about Sprint and they're going back to the 66 00:03:50,600 --> 00:03:54,560 Speaker 1: market for more money and they using spectrum as collateral. 67 00:03:54,600 --> 00:03:57,320 Speaker 1: You're kind of laughing a little bit here. Why we 68 00:03:57,480 --> 00:03:59,240 Speaker 1: kind of put that in the too hard pile. It's 69 00:03:59,320 --> 00:04:02,080 Speaker 1: it's very hard to you know, set a set a 70 00:04:02,080 --> 00:04:05,760 Speaker 1: true valuation around what that spectrum is worth. So if 71 00:04:05,800 --> 00:04:07,960 Speaker 1: we can't analyze and understand it, we're not going to 72 00:04:08,040 --> 00:04:11,200 Speaker 1: commit capital to it. What about the e t F 73 00:04:11,440 --> 00:04:14,400 Speaker 1: involvement in the high old bond market, there has been 74 00:04:14,400 --> 00:04:18,160 Speaker 1: a sort of bifurcation between bonds that are included in 75 00:04:18,279 --> 00:04:20,200 Speaker 1: the high yield bond e t f s and those 76 00:04:20,240 --> 00:04:22,599 Speaker 1: that have not. How much do you sort of play 77 00:04:22,680 --> 00:04:25,440 Speaker 1: that space and try to focus on bonds that are 78 00:04:25,480 --> 00:04:28,159 Speaker 1: either in the e t F s or out of them. Yeah, 79 00:04:28,200 --> 00:04:29,839 Speaker 1: I mean the e t f s are favorite trading 80 00:04:29,880 --> 00:04:33,320 Speaker 1: counterparty Lisa UM. What does that mean? You have a 81 00:04:33,320 --> 00:04:37,960 Speaker 1: technical buyer or seller, and they're typically buyers into strengthen 82 00:04:38,040 --> 00:04:41,680 Speaker 1: sellers into weakness. UM. So for us, that is certainly 83 00:04:41,680 --> 00:04:45,200 Speaker 1: an opportunity that we can exploit in the market, um 84 00:04:45,360 --> 00:04:49,520 Speaker 1: by providing them the liquidity that they provide to their customers. 85 00:04:49,800 --> 00:04:51,280 Speaker 1: So I think the E t f s and high 86 00:04:51,320 --> 00:04:54,040 Speaker 1: yield are kind of a victim of their own success. Uh. 87 00:04:54,080 --> 00:04:57,920 Speaker 1: They've been sold as liquidity, not as alpha. And uh, 88 00:04:58,000 --> 00:05:00,839 Speaker 1: you know, I would say that if you look at 89 00:05:00,880 --> 00:05:04,480 Speaker 1: their performance over any reasonable period of time, their bottom 90 00:05:04,520 --> 00:05:08,400 Speaker 1: quartile performers. And uh. You know, with equity markets, you 91 00:05:08,440 --> 00:05:11,800 Speaker 1: have cheap beta, and if you look at the expense 92 00:05:12,160 --> 00:05:15,200 Speaker 1: ratios on the on these relative to true active management, 93 00:05:15,520 --> 00:05:19,000 Speaker 1: you're not really getting a big break there. Tell me 94 00:05:19,040 --> 00:05:21,520 Speaker 1: about private equity companies in their role in buying up 95 00:05:21,560 --> 00:05:24,320 Speaker 1: how yield debt? What have you seen right now? Ah, 96 00:05:24,400 --> 00:05:27,000 Speaker 1: there continues to be a swath of capital in in 97 00:05:27,120 --> 00:05:29,880 Speaker 1: private equity, So uh, you know, I would continue to 98 00:05:30,200 --> 00:05:34,120 Speaker 1: think that we will see more on the LBO front. Um. 99 00:05:34,240 --> 00:05:36,440 Speaker 1: It's just how much leverage you can put on companies. 100 00:05:36,880 --> 00:05:39,799 Speaker 1: So I'm wondering you said initially you expect the default 101 00:05:39,880 --> 00:05:43,039 Speaker 1: rate to remain low, John, what are you looking at 102 00:05:43,080 --> 00:05:46,640 Speaker 1: in particular to signal that the tide is turning? Because 103 00:05:46,680 --> 00:05:49,000 Speaker 1: this is sort of the key question that everybody turns 104 00:05:49,040 --> 00:05:51,239 Speaker 1: to when they talk about strength and risk your assets. 105 00:05:52,760 --> 00:05:57,000 Speaker 1: I mean, we're looking at underlying economic data and growth 106 00:05:57,040 --> 00:06:00,640 Speaker 1: seems to be here. Unemployment rates continue to be very low. 107 00:06:01,080 --> 00:06:03,920 Speaker 1: You know, it is a strong labor force right now. 108 00:06:04,080 --> 00:06:07,640 Speaker 1: So uh, you know, again, we we remained pretty constructive 109 00:06:07,680 --> 00:06:11,800 Speaker 1: on the fundamentals of the US economy and with high yield, 110 00:06:12,040 --> 00:06:18,320 Speaker 1: roughly of revenues are generated domestically. Netflix interested in buying 111 00:06:18,360 --> 00:06:20,640 Speaker 1: Netflix debt? They've certainly got a lot of it at 112 00:06:20,640 --> 00:06:23,800 Speaker 1: a certain price, absolutely a price. Uh you know, I 113 00:06:23,839 --> 00:06:26,960 Speaker 1: would say with Netflix, Um, you know, we would look 114 00:06:27,040 --> 00:06:31,080 Speaker 1: to where they were issuing that several years ago. Um, 115 00:06:31,120 --> 00:06:33,200 Speaker 1: you know, if you could get a high fives uh 116 00:06:33,240 --> 00:06:36,080 Speaker 1: six percent kind of coupon on a name, I think 117 00:06:36,120 --> 00:06:38,120 Speaker 1: that would be very attractive. Now, what will we see that? 118 00:06:38,480 --> 00:06:41,680 Speaker 1: I don't believe so. Um, but you look at the 119 00:06:42,000 --> 00:06:45,240 Speaker 1: content library itself covers the debt there, so it's a 120 00:06:45,279 --> 00:06:49,640 Speaker 1: company you can believe in the equity market capitalization. That's 121 00:06:49,640 --> 00:06:52,200 Speaker 1: a that's a huge margin of safety for US. Which 122 00:06:52,240 --> 00:06:55,599 Speaker 1: companies in this sort of triple B sphere, the lowest 123 00:06:55,720 --> 00:07:03,680 Speaker 1: rated investment grade tier are you watching for a potential downgrade? Uh? Yeah, 124 00:07:03,720 --> 00:07:06,840 Speaker 1: that's a difficult one right now. It's not a particular 125 00:07:06,920 --> 00:07:10,280 Speaker 1: area of the market that that we're really focused on. Um, 126 00:07:10,320 --> 00:07:13,320 Speaker 1: you know, I think we'll we'll continue to see uh 127 00:07:13,360 --> 00:07:16,880 Speaker 1: you know some fallen angels like a Teva um you know, 128 00:07:16,920 --> 00:07:19,800 Speaker 1: where you have large scale M and A that doesn't 129 00:07:19,840 --> 00:07:23,000 Speaker 1: work out. But there's nobody particularly on my radar right now, 130 00:07:23,480 --> 00:07:26,280 Speaker 1: toys r Us tell me about any Were you involved 131 00:07:26,280 --> 00:07:29,440 Speaker 1: with any of that? No, that was the train wreck 132 00:07:29,560 --> 00:07:33,720 Speaker 1: we saw coming a mile away. What what what gave 133 00:07:33,760 --> 00:07:35,760 Speaker 1: you that? I mean a lot of people obviously didn't 134 00:07:35,840 --> 00:07:37,320 Speaker 1: see that train. They thought it was light at the 135 00:07:37,360 --> 00:07:39,640 Speaker 1: end of the tunnel. When's the last time you've been 136 00:07:39,640 --> 00:07:41,960 Speaker 1: to a Toys r Us? Basically, Like it was basically 137 00:07:42,120 --> 00:07:44,200 Speaker 1: something as basic as that you run it. You talk 138 00:07:44,240 --> 00:07:46,720 Speaker 1: amongst yourselves at the at the firm, say, we don't 139 00:07:46,720 --> 00:07:49,440 Speaker 1: even do this ourselves. Yeah, that's certainly a part of it. 140 00:07:49,560 --> 00:07:52,680 Speaker 1: And uh, you know they are, they were saddled with 141 00:07:52,720 --> 00:07:55,720 Speaker 1: too much debt and uh you know, their competitors were 142 00:07:55,760 --> 00:07:58,240 Speaker 1: taking market share for a long period of time. So 143 00:07:58,320 --> 00:08:00,480 Speaker 1: it was something that uh, you know, we felt like 144 00:08:00,520 --> 00:08:02,640 Speaker 1: we could see well in advance. I want to thank 145 00:08:02,640 --> 00:08:05,240 Speaker 1: you very much for being with us. John McClean is 146 00:08:05,320 --> 00:08:09,160 Speaker 1: portfolio manager for Diamond Hill Investment Group, helping to manage 147 00:08:09,320 --> 00:08:13,640 Speaker 1: more than twenty two billion dollars based in Columbus, Ohio. 148 00:08:13,720 --> 00:08:24,920 Speaker 1: Although Mr McClean hills from the great state of Kentucky, 149 00:08:28,600 --> 00:08:32,240 Speaker 1: factory work and the industrialization of the world. It has 150 00:08:32,280 --> 00:08:36,840 Speaker 1: attracted political pundits, but it also has now attracted a 151 00:08:36,840 --> 00:08:40,320 Speaker 1: analysis by Joshua Freeman. He is a distinguished Professor of 152 00:08:40,360 --> 00:08:43,760 Speaker 1: history at Queen's College and the Graduate Center of the 153 00:08:43,840 --> 00:08:46,720 Speaker 1: City University of New York of Cuney, and his book 154 00:08:46,880 --> 00:08:50,160 Speaker 1: is entitled Behemoth, a History of the Factory and the 155 00:08:50,280 --> 00:08:53,240 Speaker 1: Making of the Modern World. And he joins us here 156 00:08:53,240 --> 00:08:55,880 Speaker 1: in our eleven three oh studios. Professor Freeman, thank you 157 00:08:55,960 --> 00:08:58,240 Speaker 1: very much for being here. First, tell us why did 158 00:08:58,280 --> 00:09:01,320 Speaker 1: you decide to write this book? Well, you know, I 159 00:09:01,360 --> 00:09:04,160 Speaker 1: was what caught my attention was in two thousand and 160 00:09:04,240 --> 00:09:07,320 Speaker 1: ten when there was a sudden bursts of attention to 161 00:09:07,400 --> 00:09:11,000 Speaker 1: Fox con because there was some suicides of its workers 162 00:09:11,040 --> 00:09:13,920 Speaker 1: jumping off the roofs. And this this got, you know, attention, 163 00:09:13,960 --> 00:09:17,079 Speaker 1: and what que my make maker of iPhone products, maker 164 00:09:17,120 --> 00:09:19,760 Speaker 1: of iPhone you know, and biggest and not just iPhone, 165 00:09:19,800 --> 00:09:23,040 Speaker 1: but Samsung and many, many different things. And what caught 166 00:09:23,080 --> 00:09:24,800 Speaker 1: my eye was the size of the factory. It had 167 00:09:24,800 --> 00:09:27,520 Speaker 1: two hundred and fifty thou workers and as in a story, 168 00:09:27,559 --> 00:09:29,920 Speaker 1: and this was mind blowing. This company I had barely 169 00:09:29,920 --> 00:09:32,960 Speaker 1: ever heard of. And I started thinking, you know, are 170 00:09:33,000 --> 00:09:38,560 Speaker 1: their precedence for this kind of outsized establishment? And you know, 171 00:09:38,600 --> 00:09:40,559 Speaker 1: I thought, well, yeah, they kind of are, and that 172 00:09:40,679 --> 00:09:43,960 Speaker 1: in each era for three hundred years now they have 173 00:09:44,040 --> 00:09:47,320 Speaker 1: been kind of cunning edge establishments that have been the 174 00:09:47,360 --> 00:09:52,040 Speaker 1: templates for the future and have captured public attention, you know, 175 00:09:52,320 --> 00:09:56,160 Speaker 1: because they've become carriers for debates about, you know, what 176 00:09:56,240 --> 00:09:59,640 Speaker 1: our future should look like, you know, what system should 177 00:09:59,679 --> 00:10:02,800 Speaker 1: we have. So that's what it got me into this book. 178 00:10:02,840 --> 00:10:05,720 Speaker 1: I thought, let me do some case studies that start 179 00:10:05,800 --> 00:10:08,719 Speaker 1: with the earliest English factories and in with Fox coun 180 00:10:09,120 --> 00:10:12,440 Speaker 1: One of the brilliant things about the way you framed 181 00:10:12,480 --> 00:10:17,000 Speaker 1: this was looking at factories as disruptors, not sort of 182 00:10:17,480 --> 00:10:21,000 Speaker 1: moments of nostalgia that people want to get back to. 183 00:10:21,280 --> 00:10:23,360 Speaker 1: Can you give us a sense of kind of how 184 00:10:23,400 --> 00:10:25,560 Speaker 1: you did that, what you were thinking, Well, you know, 185 00:10:25,640 --> 00:10:28,480 Speaker 1: I think in the States right now, we look at 186 00:10:28,520 --> 00:10:31,079 Speaker 1: decline and abandonment so much. But you know, I want 187 00:10:31,120 --> 00:10:34,319 Speaker 1: to tell the story when these things were sources of wonderment, 188 00:10:34,679 --> 00:10:37,040 Speaker 1: when these were new things under the sun, that they 189 00:10:37,120 --> 00:10:42,000 Speaker 1: represented these great breakthroughs in human ingenuity and capacity and 190 00:10:42,040 --> 00:10:44,600 Speaker 1: also frankly, human misery at the same time. You know, 191 00:10:44,600 --> 00:10:48,120 Speaker 1: they're all linked together. Um. And what I found over 192 00:10:48,160 --> 00:10:51,960 Speaker 1: and over again was the observers saw them this way 193 00:10:52,000 --> 00:10:55,079 Speaker 1: almost immediately, whether it was in in eighteenth century England, 194 00:10:55,520 --> 00:10:58,520 Speaker 1: or the people that flooded into tour the Ford Factory 195 00:10:59,080 --> 00:11:03,120 Speaker 1: in the nineteenth nineteen twenties, UM, or the photographers who 196 00:11:03,200 --> 00:11:06,880 Speaker 1: celebrateed Soviet factories, that there's a great sense that this 197 00:11:07,080 --> 00:11:10,760 Speaker 1: was some vision of what the new society was going 198 00:11:10,800 --> 00:11:14,959 Speaker 1: to be like. Maybe described for listeners what it would 199 00:11:15,040 --> 00:11:18,720 Speaker 1: be like if you were to enter a factory that, 200 00:11:19,200 --> 00:11:21,800 Speaker 1: let's say, operated in the United States, a textile mill, 201 00:11:21,880 --> 00:11:25,640 Speaker 1: for example, around the turn of the previous century. Well, 202 00:11:26,360 --> 00:11:29,240 Speaker 1: you know, if you were going into a textile mill 203 00:11:29,440 --> 00:11:33,360 Speaker 1: in the early days of textile manufacturing, uh, probably you 204 00:11:33,400 --> 00:11:36,400 Speaker 1: were coming from the country or rural life. And first 205 00:11:36,400 --> 00:11:38,439 Speaker 1: of all, you've probably rarely ever seen so many people 206 00:11:38,480 --> 00:11:40,880 Speaker 1: in one place or such a large building. You know, 207 00:11:40,960 --> 00:11:43,200 Speaker 1: even just going in a five story building was a 208 00:11:43,200 --> 00:11:46,560 Speaker 1: new thing. Then it was loud. You know, there's all 209 00:11:46,640 --> 00:11:49,800 Speaker 1: this machinery, weaving machinery you know has has you know, 210 00:11:49,880 --> 00:11:52,360 Speaker 1: throws back and forth the shell sixty times a second. 211 00:11:52,520 --> 00:11:56,040 Speaker 1: You couldn't hear anything. It's stunk because you know, they 212 00:11:56,040 --> 00:11:58,760 Speaker 1: were this before oil. They were using whale oil and 213 00:11:58,840 --> 00:12:01,800 Speaker 1: animal grease. UM. And there were all these workers, and 214 00:12:01,880 --> 00:12:05,080 Speaker 1: yet it was all being coordinated. It was all in 215 00:12:05,240 --> 00:12:07,440 Speaker 1: one with them, the whole thing, the people in the 216 00:12:07,520 --> 00:12:11,640 Speaker 1: machinery was one enterprise. UM. In the best of the factors, 217 00:12:11,679 --> 00:12:14,840 Speaker 1: you might see pretty nice looking young women mostly you know, 218 00:12:14,880 --> 00:12:18,040 Speaker 1: we came from New England farms. Uh. In the worst 219 00:12:18,080 --> 00:12:21,440 Speaker 1: of the factories, you'd see child labor looking pretty darning, 220 00:12:21,520 --> 00:12:25,200 Speaker 1: miserable and starved. So, Josh, let's connect this to now, 221 00:12:25,400 --> 00:12:28,880 Speaker 1: because we hear a lot about bringing manufacturing back to 222 00:12:28,960 --> 00:12:32,680 Speaker 1: the US, keeping uh some of these assembly line and 223 00:12:32,760 --> 00:12:37,720 Speaker 1: production jobs in America. And I'm wondering, what moment in 224 00:12:37,920 --> 00:12:42,600 Speaker 1: time are politicians talking about this looking at what which 225 00:12:42,679 --> 00:12:45,600 Speaker 1: which era of manufacturing do they want to bring back? 226 00:12:45,600 --> 00:12:49,160 Speaker 1: And what's that tell us about our moment right now? Uh? 227 00:12:49,480 --> 00:12:52,240 Speaker 1: In humanity? Well, I think the nostalgia, if you want 228 00:12:52,280 --> 00:12:56,480 Speaker 1: to call that, uh, the the the make America great again. 229 00:12:56,559 --> 00:12:58,520 Speaker 1: I think people are thinking really about the fifties and 230 00:12:58,559 --> 00:13:01,080 Speaker 1: the sixties. Uh. And this was an era when you 231 00:13:01,120 --> 00:13:05,680 Speaker 1: had the height of American manufacturing industry and unionization, which 232 00:13:05,760 --> 00:13:10,600 Speaker 1: meant that the the tremendous uh productivity lead to profits 233 00:13:10,679 --> 00:13:13,960 Speaker 1: that were widely shared. So it's sustained a way of 234 00:13:14,040 --> 00:13:16,680 Speaker 1: life of upward mobility for people who came out of 235 00:13:16,760 --> 00:13:19,760 Speaker 1: high school, got a job in the local plant, did 236 00:13:19,800 --> 00:13:22,120 Speaker 1: better than their parents, and knew the kids were going 237 00:13:22,200 --> 00:13:24,240 Speaker 1: to do better than them. And I think that's the 238 00:13:24,280 --> 00:13:28,520 Speaker 1: moment people look back to. You know, I'm not so 239 00:13:28,640 --> 00:13:32,440 Speaker 1: sure of bringing a fox con plant as they operate 240 00:13:32,480 --> 00:13:35,400 Speaker 1: in modern China is going to sustain that way of life. 241 00:13:35,840 --> 00:13:38,760 Speaker 1: You know, Wisconsin just uh said it would spend three 242 00:13:38,760 --> 00:13:40,760 Speaker 1: billion dollars to do that. It will be interesting to 243 00:13:40,800 --> 00:13:47,319 Speaker 1: see what actually happens. You were not only uh analyzing 244 00:13:47,679 --> 00:13:52,520 Speaker 1: historical precedent, but as Lisa brought up, current factories, factories 245 00:13:52,600 --> 00:13:55,760 Speaker 1: in China, just give us a sense of the scale. Uh. 246 00:13:55,800 --> 00:13:58,560 Speaker 1: And and there again, if we can draw us a 247 00:13:58,600 --> 00:14:02,120 Speaker 1: picture their mind box, they're absolutely mindboggling you know fox 248 00:14:02,200 --> 00:14:04,920 Speaker 1: KNT City, which was their big ascendion center, which is 249 00:14:04,920 --> 00:14:07,600 Speaker 1: still operating, although there are many other plants. Uh. It 250 00:14:07,679 --> 00:14:11,200 Speaker 1: takes an hour to walk across the complex. Um there 251 00:14:11,200 --> 00:14:13,800 Speaker 1: are you know, something like two hundred three hundred thousand 252 00:14:13,800 --> 00:14:17,120 Speaker 1: people there. Uh, seventy or eighty thousand of them live 253 00:14:17,160 --> 00:14:20,360 Speaker 1: in dormitories. These are young Chinese people, mostly coming from 254 00:14:20,360 --> 00:14:25,600 Speaker 1: the rural areas. Um. There's the factories themselves, which combine 255 00:14:25,720 --> 00:14:29,880 Speaker 1: both very sophisticated production techniques and just very old fashioned 256 00:14:30,240 --> 00:14:35,040 Speaker 1: assembly with people doing very fine putting together of small 257 00:14:35,080 --> 00:14:36,920 Speaker 1: things to go into your phone or the mother boarder 258 00:14:36,920 --> 00:14:40,280 Speaker 1: of your laptop. But it's surrounded by whole world. You know, 259 00:14:40,360 --> 00:14:44,480 Speaker 1: there's everything from soccer fields to cyber cafes to wedding 260 00:14:44,600 --> 00:14:47,400 Speaker 1: dress shops. You know. Uh. I think for a lot 261 00:14:47,440 --> 00:14:51,080 Speaker 1: of young Chinese people this who are leaving behind, you know, 262 00:14:51,400 --> 00:14:55,080 Speaker 1: less developed rural areas, this is an interlude that that 263 00:14:55,200 --> 00:14:59,040 Speaker 1: that's difficult. The work itself is tough and boring, but 264 00:14:59,200 --> 00:15:02,960 Speaker 1: also it was a glimpse into a more urban, cosmopolitan 265 00:15:02,960 --> 00:15:05,520 Speaker 1: world before they go back to where they came from, 266 00:15:05,560 --> 00:15:08,000 Speaker 1: which is what happens with most of these workers. What 267 00:15:08,080 --> 00:15:11,600 Speaker 1: about pay well, it depends on what you measure it by. 268 00:15:11,720 --> 00:15:14,040 Speaker 1: By U s stands, of course, it's very low. But 269 00:15:14,200 --> 00:15:16,320 Speaker 1: pay in Southern china's gone up. There's been actually a 270 00:15:16,320 --> 00:15:18,720 Speaker 1: big wave of strikes, which doesn't get much publicity in 271 00:15:18,720 --> 00:15:22,560 Speaker 1: this country. That's pushed up wages and in fact, UH 272 00:15:22,600 --> 00:15:25,560 Speaker 1: some companies, like there's a company that makes UH shoes 273 00:15:25,640 --> 00:15:29,520 Speaker 1: for of Anka Trump's line, have begun building factors in 274 00:15:29,560 --> 00:15:32,680 Speaker 1: Africa because pay rates in Southern China are now going 275 00:15:32,720 --> 00:15:36,960 Speaker 1: up pretty quickly. So um, you know, UH, it's a 276 00:15:37,080 --> 00:15:40,360 Speaker 1: very fluid situation and the cycle that we saw in 277 00:15:40,400 --> 00:15:43,400 Speaker 1: the United States and elsewhere of you know, you build 278 00:15:43,400 --> 00:15:46,360 Speaker 1: a new factory, it's innovative, but but at some point 279 00:15:46,360 --> 00:15:48,960 Speaker 1: it gets eclipsed by by the newer version of it, 280 00:15:49,040 --> 00:15:52,880 Speaker 1: and labor course another course go up, and then it closes. 281 00:15:53,120 --> 00:15:56,320 Speaker 1: That cycle seems to be happening ever faster. It's it's 282 00:15:56,360 --> 00:15:58,920 Speaker 1: just a fascinating issue. Thank you so much for joining us, 283 00:15:59,200 --> 00:16:02,880 Speaker 1: really truly pleasure. Josh Freeman Distinguished Professor of History and 284 00:16:03,040 --> 00:16:06,640 Speaker 1: author of Behemoth, History of the Factory and the Making 285 00:16:06,760 --> 00:16:09,040 Speaker 1: of the Modern World. He is at Queen's College and 286 00:16:09,080 --> 00:16:12,280 Speaker 1: the Graduate Center of the City University of New York, 287 00:16:12,560 --> 00:16:14,920 Speaker 1: And it raises this question of, you know, can you 288 00:16:14,920 --> 00:16:18,560 Speaker 1: ever focus on just recreating that one moment where it 289 00:16:18,600 --> 00:16:21,320 Speaker 1: all works together and wages are rising and the jobs 290 00:16:21,360 --> 00:16:44,160 Speaker 1: are still innovative going forward. The United Kingdom's Prime Minister, 291 00:16:44,240 --> 00:16:48,760 Speaker 1: Theresa May expelling twenty three Russian diplomats to talk about 292 00:16:48,800 --> 00:16:53,560 Speaker 1: this and other possible points of contention between the European Union, 293 00:16:53,640 --> 00:16:56,520 Speaker 1: the UK, the United States and Russia. We want to 294 00:16:56,560 --> 00:16:59,960 Speaker 1: bring in Toby Harshall, Bloomberg U national Security Editor. Tobe 295 00:17:00,200 --> 00:17:03,320 Speaker 1: how much of a big deal is this? Um, It's 296 00:17:03,360 --> 00:17:05,880 Speaker 1: both a big deal and not a big deal. UM. 297 00:17:06,240 --> 00:17:08,800 Speaker 1: It's going to depend on exactly who the diplomats are. 298 00:17:08,880 --> 00:17:11,280 Speaker 1: I think Theresa May is in front of Parliament right now. 299 00:17:12,000 --> 00:17:13,639 Speaker 1: It may or may not come up. She's going to 300 00:17:13,680 --> 00:17:16,040 Speaker 1: give a statement later in the day sort of with 301 00:17:16,160 --> 00:17:19,040 Speaker 1: more details. I mean, this is this is all part 302 00:17:19,040 --> 00:17:21,960 Speaker 1: of the game that they play. Um. We suspended, you know, 303 00:17:22,400 --> 00:17:25,800 Speaker 1: under the Obama administration, we suspended Russian diplomats and we 304 00:17:25,840 --> 00:17:31,040 Speaker 1: took over their their lovely shore house in Maryland. UM. 305 00:17:31,200 --> 00:17:34,280 Speaker 1: And I don't think anyone truly it's more of a 306 00:17:34,320 --> 00:17:39,320 Speaker 1: statement than it is actually messing up their their their embassy. Okay, 307 00:17:39,440 --> 00:17:43,360 Speaker 1: so there was this nerve agent attack of a former 308 00:17:43,520 --> 00:17:48,640 Speaker 1: Russian citizen. He was killed in the UK. Interest, Yes, 309 00:17:49,960 --> 00:17:53,320 Speaker 1: hanging on, but they're hanging on. But they're both hanging on. Okay, 310 00:17:53,359 --> 00:17:58,399 Speaker 1: great died overnight. But okay, um, Okay. How important is 311 00:17:58,440 --> 00:18:01,800 Speaker 1: it that President Trump respond to this in support of 312 00:18:02,000 --> 00:18:06,720 Speaker 1: the United Kingdom? Um? It's only important because it's President Trump. Um, 313 00:18:06,800 --> 00:18:09,720 Speaker 1: because of you know, his statements during the campaign that 314 00:18:09,800 --> 00:18:11,240 Speaker 1: led a lot of people to think he was going 315 00:18:11,280 --> 00:18:15,320 Speaker 1: to be squishy on Russia. Um. He actually hasn't been. Um. 316 00:18:15,400 --> 00:18:19,320 Speaker 1: They've been pretty tough on on Putin. Um since they have, 317 00:18:19,720 --> 00:18:23,760 Speaker 1: since they've taken office, they upped sanctions, they've they're rhetoric 318 00:18:23,800 --> 00:18:26,159 Speaker 1: has been pretty good. Um. But yeah, it would be 319 00:18:26,240 --> 00:18:30,119 Speaker 1: nice to see him just add moral support. Toby, is 320 00:18:30,560 --> 00:18:34,679 Speaker 1: this more about the optics and the headlines? Because I 321 00:18:34,720 --> 00:18:37,600 Speaker 1: can't imagine, as horrible as it is, that this is 322 00:18:37,640 --> 00:18:41,280 Speaker 1: a security threat to let's say, either the United Kingdom 323 00:18:41,840 --> 00:18:45,480 Speaker 1: or to the United States. And I'm wondering whether this 324 00:18:45,560 --> 00:18:49,200 Speaker 1: is in a sense of diversion of attention away from 325 00:18:49,400 --> 00:18:52,840 Speaker 1: issues having to do with challenging air power in the 326 00:18:52,880 --> 00:18:57,320 Speaker 1: Baltic sale of military hardware to Turkey and perhaps even 327 00:18:57,400 --> 00:19:02,400 Speaker 1: undermining NATO. That's always a possibility. I'm gonna I'm gonna 328 00:19:02,400 --> 00:19:04,160 Speaker 1: be the skunk at the garden party for a moment, 329 00:19:04,760 --> 00:19:08,320 Speaker 1: for we don't actually have proof that Rushes behind this. UM. 330 00:19:08,359 --> 00:19:11,280 Speaker 1: We strongly suspect for good reason that they were, so 331 00:19:11,359 --> 00:19:14,280 Speaker 1: I don't want to get into their motivations behind it. UM. 332 00:19:14,880 --> 00:19:18,359 Speaker 1: I don't think that anyone would would think this is 333 00:19:18,400 --> 00:19:20,640 Speaker 1: gonna going to keep the attention off of their other 334 00:19:20,720 --> 00:19:23,240 Speaker 1: nefarious doings for very long. In fact, I think it'll 335 00:19:23,240 --> 00:19:26,960 Speaker 1: only add to the image of of of the Russians 336 00:19:27,000 --> 00:19:30,400 Speaker 1: as as you know, being a huge problem. Okay, so 337 00:19:30,640 --> 00:19:33,800 Speaker 1: let's say, okay, it hasn't been proven. Both individuals who 338 00:19:33,800 --> 00:19:36,080 Speaker 1: are attacked with a nerve agent are are still hanging on, 339 00:19:36,119 --> 00:19:40,080 Speaker 1: although they are critically ill. Uh. At the same time, 340 00:19:40,119 --> 00:19:44,000 Speaker 1: Rex Tillerson came out in strong support the now former 341 00:19:44,280 --> 00:19:46,760 Speaker 1: Secretary of State for the U S came out in 342 00:19:46,800 --> 00:19:50,240 Speaker 1: strong support of Theresa May and the United Kingdom in 343 00:19:50,320 --> 00:19:53,479 Speaker 1: their efforts to go after this. Whereas yesterday we heard 344 00:19:53,520 --> 00:19:56,080 Speaker 1: President Trump waffle on the issue, saying, you know, well, 345 00:19:56,440 --> 00:19:58,879 Speaker 1: we'll see what happens whether it's Russia or whoever else. 346 00:19:59,240 --> 00:20:02,719 Speaker 1: I mean, this seems symbolically important. Are we reading too 347 00:20:02,800 --> 00:20:06,159 Speaker 1: much into that? Um? I think in the US we 348 00:20:06,240 --> 00:20:09,520 Speaker 1: maybe are. I mean, for the Brits to react like 349 00:20:09,560 --> 00:20:11,320 Speaker 1: this is very much called for. I mean, this is 350 00:20:11,359 --> 00:20:15,000 Speaker 1: an attack on their on their sovereign territory. Um. It's 351 00:20:15,040 --> 00:20:18,200 Speaker 1: also you know, if Russians were behind it. Remember that 352 00:20:18,400 --> 00:20:21,440 Speaker 1: some he was part of a prisoner swap. So this 353 00:20:21,520 --> 00:20:24,320 Speaker 1: is breaking all the rules of the Cold War. Um. 354 00:20:24,520 --> 00:20:27,159 Speaker 1: Once you're part of a prisoner swap, you're supposed to 355 00:20:27,200 --> 00:20:29,800 Speaker 1: be clear. I mean, we're not going to go after 356 00:20:29,840 --> 00:20:31,800 Speaker 1: the people that he was traded for and try and 357 00:20:31,920 --> 00:20:35,520 Speaker 1: kill them. Um. It it's therefore, it's different than the 358 00:20:35,560 --> 00:20:39,280 Speaker 1: previous poisoning case, UM, where the person was a defect, 359 00:20:39,320 --> 00:20:42,600 Speaker 1: not a defector anymore, but had fled the Soviet Union 360 00:20:42,640 --> 00:20:46,080 Speaker 1: and was living, you know, in quasi hiding. UM. It's 361 00:20:46,080 --> 00:20:49,399 Speaker 1: no better to attack people with with nerve agents, UM, 362 00:20:49,480 --> 00:20:54,639 Speaker 1: no matter their status. UM. But this is it's really strange, Toby. 363 00:20:54,920 --> 00:20:57,120 Speaker 1: Let's just shift to the US and our own defense 364 00:20:57,480 --> 00:21:00,399 Speaker 1: budget right now. What's the most important issue that should 365 00:21:00,440 --> 00:21:03,800 Speaker 1: be before people's attention when it comes to spending over 366 00:21:03,840 --> 00:21:07,880 Speaker 1: seven hundred and what sixty billion a year. I hate 367 00:21:07,880 --> 00:21:12,080 Speaker 1: to say it, but it's actually UM pension and healthcare 368 00:21:12,119 --> 00:21:15,000 Speaker 1: reform for for veterans. I don't think we can do 369 00:21:15,119 --> 00:21:18,840 Speaker 1: much about that. For UM the current retirees. I mean, 370 00:21:18,880 --> 00:21:21,000 Speaker 1: we made a promise to them. They put their lives 371 00:21:21,040 --> 00:21:23,919 Speaker 1: on the line. UM. But I think we have to 372 00:21:23,920 --> 00:21:27,240 Speaker 1: be much much tougher on UM. The people in the 373 00:21:27,280 --> 00:21:30,600 Speaker 1: service and particularly new recruits and with disaffect things like 374 00:21:30,640 --> 00:21:36,680 Speaker 1: the Veterans Administration. Yeah, that's a separate budget technically, UM, 375 00:21:36,680 --> 00:21:38,240 Speaker 1: but I think there are a lot of savings to 376 00:21:38,240 --> 00:21:42,399 Speaker 1: be done there. UM. The disability UM program in the 377 00:21:42,480 --> 00:21:45,520 Speaker 1: v A is an absolute disaster. In fact, when they 378 00:21:45,560 --> 00:21:48,160 Speaker 1: had the huge scandal about the waiting times a few 379 00:21:48,280 --> 00:21:51,240 Speaker 1: years ago, UM, almost all of those people were not 380 00:21:51,359 --> 00:21:55,720 Speaker 1: waiting to be admitted to a hospital. They were UM 381 00:21:55,760 --> 00:22:00,480 Speaker 1: looking to have their disability claims reviewed and a larger 382 00:22:00,560 --> 00:22:04,680 Speaker 1: monthly checks. So it wasn't it wasn't as horrible as 383 00:22:04,680 --> 00:22:07,160 Speaker 1: it seemed. It was bad that there was this huge backlog, 384 00:22:07,400 --> 00:22:11,520 Speaker 1: But the real problem is UM the people get you know, 385 00:22:12,720 --> 00:22:15,640 Speaker 1: they're great, they were in the military, they're they're strong 386 00:22:15,880 --> 00:22:19,240 Speaker 1: and capable people, and they get sort of sucked into 387 00:22:19,320 --> 00:22:23,080 Speaker 1: this this this disability trap um, where there's not a 388 00:22:23,119 --> 00:22:25,800 Speaker 1: good system to get them back in the workforce and 389 00:22:25,920 --> 00:22:28,879 Speaker 1: it's sort of a subsistence living. Toby harsh thank you 390 00:22:28,880 --> 00:22:30,639 Speaker 1: so much for being with us. As always, we love 391 00:22:30,680 --> 00:22:34,760 Speaker 1: having you on. Toby Harshot Bloomberview, National Security editor, talking 392 00:22:34,840 --> 00:22:39,199 Speaker 1: about the move the Teresa May announced today expelling twenty 393 00:22:39,240 --> 00:23:05,879 Speaker 1: three Russian diplomats. Where are we in the real estate market? 394 00:23:06,119 --> 00:23:09,120 Speaker 1: Cycle here to answer that question so that you can 395 00:23:09,160 --> 00:23:12,160 Speaker 1: rest easy, as Scott Lawler, founder and chief executive officer 396 00:23:12,200 --> 00:23:15,320 Speaker 1: of Waypoint Residential based in Connecticut, but here in our 397 00:23:15,359 --> 00:23:18,119 Speaker 1: eleven three oh studios today in New York, Scott, I 398 00:23:18,119 --> 00:23:21,400 Speaker 1: want to start with that question. But before we get 399 00:23:21,440 --> 00:23:25,120 Speaker 1: into the answer, has the market in the US ever 400 00:23:25,200 --> 00:23:29,679 Speaker 1: been more bifurcated between cities that have seen an explosion 401 00:23:29,800 --> 00:23:34,080 Speaker 1: of growth and price increases and the sort of smaller 402 00:23:34,080 --> 00:23:37,640 Speaker 1: and mid tier communities that kind of had been left 403 00:23:37,640 --> 00:23:41,680 Speaker 1: behind until recently. Um, well, it's hard to say where 404 00:23:41,760 --> 00:23:44,480 Speaker 1: whether it's ever been more bifurcated, but it certainly is 405 00:23:44,520 --> 00:23:47,920 Speaker 1: now right and so what we're experiencing is, um, there's 406 00:23:47,960 --> 00:23:52,600 Speaker 1: a tremendous influx of capital into major coastal markets, institutional capital, 407 00:23:52,640 --> 00:23:55,560 Speaker 1: foreign capital and so on. And one of the reasons 408 00:23:55,600 --> 00:23:58,680 Speaker 1: we try and um playing a little bit different playing 409 00:23:58,680 --> 00:24:02,520 Speaker 1: field is because of that. So it's the case that 410 00:24:03,040 --> 00:24:05,639 Speaker 1: capital has now flowed further out, and we used to 411 00:24:05,720 --> 00:24:07,359 Speaker 1: be a little bit ahead of the packer. So we 412 00:24:07,480 --> 00:24:10,760 Speaker 1: hoped and felt um playing in secondary tertiary markets even 413 00:24:10,800 --> 00:24:12,439 Speaker 1: as recently as three or four years ago. We talk 414 00:24:12,520 --> 00:24:18,360 Speaker 1: secondary tertiary, we're talking perhaps Baltimore, uh, Pittsburgh, New York. 415 00:24:18,400 --> 00:24:21,199 Speaker 1: As view of the world is different, but you know, 416 00:24:21,280 --> 00:24:23,760 Speaker 1: markets as small as half a million million people and 417 00:24:23,760 --> 00:24:26,760 Speaker 1: so on. UM, there's a point in time when we 418 00:24:26,800 --> 00:24:28,840 Speaker 1: felt we were you know, we didn't have as many 419 00:24:28,840 --> 00:24:31,639 Speaker 1: friends pursuing deals in those markets. And what's going on 420 00:24:31,760 --> 00:24:33,640 Speaker 1: is because of what we talked about a minute ago, 421 00:24:33,680 --> 00:24:36,560 Speaker 1: and the tremendous influx of capital into the major coastal 422 00:24:36,600 --> 00:24:39,600 Speaker 1: markets driving down yells, um capitals spread out in search 423 00:24:39,680 --> 00:24:42,560 Speaker 1: of yield. So the markets are absolutely bifurcated, but we're 424 00:24:42,600 --> 00:24:45,679 Speaker 1: seeing a dynamic where the smaller markets are becoming more 425 00:24:45,680 --> 00:24:48,720 Speaker 1: competitive as well. Tell us about the time, I think 426 00:24:48,720 --> 00:24:51,240 Speaker 1: it was recently that you broke ground on a new 427 00:24:51,280 --> 00:24:56,240 Speaker 1: development in Georgia. This is a senior living facility and 428 00:24:56,440 --> 00:24:58,679 Speaker 1: it combines a couple of different things. It's what they 429 00:24:58,720 --> 00:25:01,800 Speaker 1: call memory care community. And maybe just use that as 430 00:25:02,000 --> 00:25:05,360 Speaker 1: an example of the kinds of new things that you're 431 00:25:05,480 --> 00:25:09,679 Speaker 1: doing and the demand that you see demographically for this 432 00:25:09,760 --> 00:25:12,800 Speaker 1: kind of real estate. Yeah, so senior housing, Uh, it's 433 00:25:12,800 --> 00:25:15,359 Speaker 1: a sector we're very excited about. Um. We've got into 434 00:25:15,440 --> 00:25:17,520 Speaker 1: it about a year ago. That was our first investment, 435 00:25:17,920 --> 00:25:21,720 Speaker 1: and it's it's a good thirty to forty minutes outside Atlanta, okay, 436 00:25:22,040 --> 00:25:24,480 Speaker 1: um a little bit more than a hundred units noon 437 00:25:24,480 --> 00:25:27,359 Speaker 1: and Georgia. That's right. And relative to what I was 438 00:25:27,359 --> 00:25:30,639 Speaker 1: talking about a minute ago, you know, Atlanta, depending how 439 00:25:30,680 --> 00:25:33,360 Speaker 1: you look at some would consider a major market, tremendous 440 00:25:33,400 --> 00:25:35,280 Speaker 1: capital inflow and so on. So we have to be 441 00:25:35,320 --> 00:25:38,680 Speaker 1: thoughtful about where we play from a geographic perspective as 442 00:25:38,720 --> 00:25:41,040 Speaker 1: it relates to the product type. So this is a 443 00:25:41,080 --> 00:25:43,920 Speaker 1: mix of independent living, assisted living in memory care, which 444 00:25:43,960 --> 00:25:47,840 Speaker 1: is typically how we like to do it, UM and 445 00:25:47,840 --> 00:25:50,680 Speaker 1: and show it's ground up development and and the idea 446 00:25:50,720 --> 00:25:53,879 Speaker 1: here is really um like everyone, I should say like everyone, 447 00:25:53,920 --> 00:25:56,080 Speaker 1: but senior has become much more competitive in a response 448 00:25:56,160 --> 00:25:58,840 Speaker 1: to sort of you know, the demographic tidal wave that's coming, 449 00:25:58,880 --> 00:26:00,719 Speaker 1: and we understand that, and for actually many of our 450 00:26:00,760 --> 00:26:04,200 Speaker 1: friends do too, and so this space has become more competitive, 451 00:26:04,240 --> 00:26:06,200 Speaker 1: and so we bring to bear the same philosophy and 452 00:26:06,480 --> 00:26:09,840 Speaker 1: trying to be thoughtful about how we play geographically, so 453 00:26:09,840 --> 00:26:12,080 Speaker 1: we get the benefit of that demographic tidal wave, but 454 00:26:12,119 --> 00:26:14,600 Speaker 1: not necessarily compete with all our best friends when we're 455 00:26:14,600 --> 00:26:17,879 Speaker 1: pursuing opportunities. And this was a joint venture with Watercrest 456 00:26:17,960 --> 00:26:21,920 Speaker 1: Senior Living, right, that's okay. Use that as an example 457 00:26:22,000 --> 00:26:25,600 Speaker 1: to sort of explain how you survived the two tho 458 00:26:25,920 --> 00:26:28,520 Speaker 1: eight downturn to then be able to do something like 459 00:26:28,560 --> 00:26:31,080 Speaker 1: this because you were at Broadway Partners and boy, you 460 00:26:31,160 --> 00:26:35,080 Speaker 1: probably have the scars to prove it. Yes, I was, UM, 461 00:26:35,119 --> 00:26:38,560 Speaker 1: and I do and so UM, look what we're doing 462 00:26:38,600 --> 00:26:41,840 Speaker 1: now is a very different business plan. UM for a 463 00:26:41,840 --> 00:26:45,000 Speaker 1: couple of reasons, UM were big believers in the apartment sector. 464 00:26:45,040 --> 00:26:46,639 Speaker 1: There are all sorts of things driving the sector and 465 00:26:46,640 --> 00:26:48,159 Speaker 1: I'm sure you've had other folks talked about it and 466 00:26:48,200 --> 00:26:50,320 Speaker 1: all that kind of stuff. And this sector has performed 467 00:26:50,400 --> 00:26:54,560 Speaker 1: very well in this UM cycle, and importantly performed on 468 00:26:54,600 --> 00:26:58,760 Speaker 1: a comparative basis during that crash, okay, um better than 469 00:26:58,800 --> 00:27:01,360 Speaker 1: other commercial property types. It's basically a less volatile, lower 470 00:27:01,440 --> 00:27:05,640 Speaker 1: beta sector. So whereas office buildings, UM, shopping centers, hotels 471 00:27:05,920 --> 00:27:08,520 Speaker 1: experienced certain fluctuations and rents and values and so on, 472 00:27:08,680 --> 00:27:12,159 Speaker 1: the market blows up, apartments experiences cycle, but at too 473 00:27:12,240 --> 00:27:14,720 Speaker 1: much lesser degree. Coming out of what you refer to 474 00:27:14,880 --> 00:27:17,680 Speaker 1: that that sounded pretty cool to me. So, Um, part 475 00:27:17,680 --> 00:27:20,160 Speaker 1: of what we're doing is to take advantage of tremendous 476 00:27:20,320 --> 00:27:23,359 Speaker 1: macro drivers that are behind the apartment sector. And part 477 00:27:23,400 --> 00:27:25,600 Speaker 1: of it is, you know, as you point out, Um, 478 00:27:25,720 --> 00:27:28,000 Speaker 1: we're coming out of that cycle. The way we did 479 00:27:28,440 --> 00:27:30,600 Speaker 1: something with a little bit less volatility felt pretty good. 480 00:27:30,640 --> 00:27:32,160 Speaker 1: So what we did is, you know, we went through 481 00:27:32,200 --> 00:27:36,000 Speaker 1: the cycle of Broadway. We had a lot of difficulty, Um, 482 00:27:36,240 --> 00:27:38,240 Speaker 1: kind of experienced a little bit of everything and contending 483 00:27:38,240 --> 00:27:40,320 Speaker 1: with lenders and investors and so on. But we came 484 00:27:40,320 --> 00:27:41,720 Speaker 1: out of it, I think a lot better than a 485 00:27:41,800 --> 00:27:43,919 Speaker 1: lot of people thought we were gonna And when it 486 00:27:44,000 --> 00:27:46,240 Speaker 1: was time to start investing again, we said, you know, 487 00:27:46,359 --> 00:27:47,800 Speaker 1: it's been a few years since we've done a deal. 488 00:27:47,880 --> 00:27:49,600 Speaker 1: Let's take a look around, decide what we think makes 489 00:27:49,600 --> 00:27:51,640 Speaker 1: the most sense. I had assumed all along I would 490 00:27:51,640 --> 00:27:53,679 Speaker 1: just get back in the office business. But when we 491 00:27:53,720 --> 00:27:55,480 Speaker 1: looked around, we decided there was a lot to like 492 00:27:55,520 --> 00:27:58,080 Speaker 1: about the apartment business, and we started by dipping our 493 00:27:58,119 --> 00:27:59,560 Speaker 1: toe in the water. We did a couple of deals 494 00:27:59,560 --> 00:28:02,000 Speaker 1: with some part to check it out. Decided we were 495 00:28:02,040 --> 00:28:04,000 Speaker 1: big fans, and decided to kind of go full speed 496 00:28:04,280 --> 00:28:07,239 Speaker 1: real quick. Given the scars that you have, what are 497 00:28:07,240 --> 00:28:10,520 Speaker 1: you looking for to indicate that another downturn in the 498 00:28:10,520 --> 00:28:16,040 Speaker 1: housing market is UH is coming. Well, let me respond 499 00:28:16,080 --> 00:28:17,800 Speaker 1: to the question a little differently. As far as another 500 00:28:17,840 --> 00:28:20,720 Speaker 1: downturn coming, here's how we structure our business. Okay, And 501 00:28:20,760 --> 00:28:23,280 Speaker 1: that's what I spend the most time thinking about. It's 502 00:28:24,400 --> 00:28:27,000 Speaker 1: not trying to forecast when the downturn is coming, but 503 00:28:27,080 --> 00:28:29,639 Speaker 1: making sure we're positioned to contend with it. So we 504 00:28:29,800 --> 00:28:34,520 Speaker 1: do extreme downside sensitivity analysis. Okay, we look at the numbers. Basically, 505 00:28:34,720 --> 00:28:37,720 Speaker 1: we look at every acquisition as if two thousand and 506 00:28:37,760 --> 00:28:40,080 Speaker 1: it was happening the next day. And more than that, 507 00:28:40,160 --> 00:28:43,120 Speaker 1: we we show those numbers to our investors. And I 508 00:28:43,160 --> 00:28:44,720 Speaker 1: get asked that question all the time. I call it 509 00:28:44,800 --> 00:28:46,720 Speaker 1: the ending question, Scott, what inning or in fact, I 510 00:28:46,720 --> 00:28:48,680 Speaker 1: think you opened the segment that way, and my answer 511 00:28:48,720 --> 00:28:50,560 Speaker 1: is always I don't know, but he let me tell 512 00:28:50,600 --> 00:28:53,200 Speaker 1: you what's going to happen when, And I say, if 513 00:28:53,240 --> 00:28:56,479 Speaker 1: this acquisition experiences two thousand and two tho nine, here 514 00:28:56,520 --> 00:28:58,120 Speaker 1: is arithmetic, and the way you get there is with 515 00:28:58,240 --> 00:29:01,120 Speaker 1: very conservative use of leverage and playing in a relatively 516 00:29:01,160 --> 00:29:03,320 Speaker 1: low beta sector like I described. And when you bring 517 00:29:03,360 --> 00:29:06,240 Speaker 1: those two things together, you're able to very confidently say 518 00:29:07,240 --> 00:29:09,600 Speaker 1: there's going to be a cycle. Here's the information, right. 519 00:29:09,640 --> 00:29:11,360 Speaker 1: I don't know when, why, and how bad, but I 520 00:29:11,360 --> 00:29:13,640 Speaker 1: know we're okay when it happens. And being a good 521 00:29:13,640 --> 00:29:15,800 Speaker 1: steward of capital, I think is much more about being 522 00:29:15,800 --> 00:29:18,080 Speaker 1: able to answer the question that way than saying we're 523 00:29:18,080 --> 00:29:19,560 Speaker 1: in the seventh or eighth or ninth or whatever the 524 00:29:19,560 --> 00:29:22,080 Speaker 1: case may be. Much appreciate it. Comeback spend more time 525 00:29:22,080 --> 00:29:23,960 Speaker 1: with us. Scott Lawler as the founder and the chief 526 00:29:24,000 --> 00:29:28,120 Speaker 1: executive of Waypoint Residential, giving us his views on the 527 00:29:28,160 --> 00:29:34,120 Speaker 1: real estate industry. Thanks for listening to the Bloomberg P 528 00:29:34,240 --> 00:29:37,200 Speaker 1: and L podcast. You can subscribe and listen to interviews 529 00:29:37,240 --> 00:29:41,280 Speaker 1: at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. 530 00:29:41,720 --> 00:29:45,280 Speaker 1: I'm pim Fox I'm on Twitter at pim Fox. I'm 531 00:29:45,280 --> 00:29:48,600 Speaker 1: on Twitter at Lisa Abramo wits one Before the podcast, 532 00:29:48,640 --> 00:29:51,240 Speaker 1: you can always catch us worldwide on Bloomberg Radio