WEBVTT - Trump Widens Trade Fight, Meta Robot Investment 0:00:00.280 --> 0:00:10.560 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.560 --> 0:00:14.480 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:14.560 --> 0:00:18.479 Eastern on Applecarplay and Android Auto with the Bloomberg Business App. 0:00:18.600 --> 0:00:21.799 Listen on demand wherever you get your podcasts, or watch 0:00:21.920 --> 0:00:23.560 us live on YouTube. 0:00:23.760 --> 0:00:25.959 I want to switch back to what kind of stay 0:00:25.960 --> 0:00:26.840 with global trade? 0:00:26.880 --> 0:00:30.160 Here? Shawn donad Joints is here, Bloomberg News senior economics writer. 0:00:30.800 --> 0:00:34.480 As President Trump widens the trade fight to include global 0:00:34.720 --> 0:00:38.960 taxes and regulation, Sean, thanks so much for joining us here. 0:00:39.200 --> 0:00:42.560 What is the latest from this administration as it relates 0:00:42.600 --> 0:00:45.320 to global trade, taxes, regulation. 0:00:45.680 --> 0:00:47.839 It's a wide mix of topics. 0:00:48.760 --> 0:00:50.839 It's a wide mix of topics. It's also a fast 0:00:50.880 --> 0:00:55.080 moving topic, as you can appreciate, and your previous guest 0:00:55.960 --> 0:01:00.600 was talking about. Look, yesterday President Trump announced a plan 0:01:00.840 --> 0:01:05.399 to come up with what he calls reciprocal tariffs, and 0:01:05.760 --> 0:01:09.200 that will apply to any country in the world. They're 0:01:09.200 --> 0:01:12.679 going to start by focusing on countries with which the 0:01:12.840 --> 0:01:17.640 US has a large trade deficit or economies. So they're 0:01:17.680 --> 0:01:22.080 looking hard at the European Union, for example. But what 0:01:22.280 --> 0:01:24.800 was interesting about yesterday in a real departure from what 0:01:24.840 --> 0:01:27.480 the US has done for decades is that they're going 0:01:27.560 --> 0:01:30.800 to try and calculate these reciprocal tariffs by looking not 0:01:30.959 --> 0:01:34.640 just at the tariffs that those other countries charge US goods, 0:01:35.000 --> 0:01:40.360 but also at taxes, at what they call non tariff barriers, 0:01:40.360 --> 0:01:44.080 which gets into things like regulation, and as they say 0:01:44.319 --> 0:01:47.880 in the order that President Trump signed yesterday, any policy 0:01:48.120 --> 0:01:52.280 that offers any kind of barrier to a US good. 0:01:52.280 --> 0:01:55.080 As someone I was talking to yesterday pointed out, that 0:01:55.120 --> 0:01:58.360 could even mean taking on the metric system if you're 0:01:58.400 --> 0:02:02.840 talking about the EEA, trying costs there. Uh So, it's 0:02:02.840 --> 0:02:07.520 a real broadening out of what Trump has has had 0:02:07.520 --> 0:02:10.400 as its kind of central grievances on trade in the past. 0:02:11.280 --> 0:02:15.519 One big target is the European Union's use of a 0:02:15.639 --> 0:02:19.760 value added tax, which is effectively a sales tax that 0:02:19.960 --> 0:02:24.920 all of its member countries operate. That's very different from 0:02:25.080 --> 0:02:26.920 what we have here in the US. We obviously don't 0:02:26.960 --> 0:02:29.240 have a national sales tax. We only have state level 0:02:29.240 --> 0:02:31.440 sales taxes, and so. 0:02:31.760 --> 0:02:33.960 None are as high as the v A T. So 0:02:34.240 --> 0:02:36.799 I mean, none are as high as as. 0:02:36.320 --> 0:02:39.000 The VAT and the real right from from from the 0:02:39.000 --> 0:02:43.560 Trump administration is that European exporders get to clim back 0:02:44.040 --> 0:02:49.239 v a T when goods leave the European Union, and 0:02:49.320 --> 0:02:52.440 that US exporters to the EU have to pay v 0:02:52.560 --> 0:02:56.959 a T when they arrive there. Now, tax experts say 0:02:57.000 --> 0:02:59.720 that's kind of a misreading of how how things works. 0:02:59.800 --> 0:03:04.600 VA T, much as a sales tax in Maine or 0:03:04.760 --> 0:03:08.680 Maryland would be U is a tax on something that 0:03:08.760 --> 0:03:11.959 you buy in that in that place. And those US 0:03:12.000 --> 0:03:14.560 goods that have to pay a v a T in 0:03:14.760 --> 0:03:17.120 or those US companies have to pay a VAT when 0:03:17.120 --> 0:03:21.919 they sell in France, say, are selling alongside French goods 0:03:21.919 --> 0:03:24.639 that also have to pay a VAT. Anyone has to 0:03:24.680 --> 0:03:28.160 pay VAT in Europe, so it's not quite the competitive disadvantage. 0:03:28.160 --> 0:03:29.880 It's a little different. I mean, if I order something 0:03:29.919 --> 0:03:32.400 from Maine, I don't pay main taxes on it, right, but. 0:03:34.080 --> 0:03:35.240 Right unless you buy it in May. 0:03:35.400 --> 0:03:38.120 I feel like this was a concept of a plan 0:03:39.000 --> 0:03:42.480 Sean more than really a plan, and I thought we 0:03:42.480 --> 0:03:44.720 were going to get it. He tweeted that it was 0:03:44.760 --> 0:03:47.640 a big day, the big This is the big day, right, 0:03:48.080 --> 0:03:50.400 and then he said, well, a good one to a plan. 0:03:50.680 --> 0:03:54.480 And also we're not going to know until April first, 0:03:54.560 --> 0:03:56.480 like they still have to do studies. Didn't they study 0:03:56.560 --> 0:04:00.560 during the campaign? I mean, I know which countries have 0:04:00.640 --> 0:04:03.440 higher tariffs than we do on goods. All he has 0:04:03.480 --> 0:04:06.200 to do is get chat GPT right or a Bloomberg 0:04:06.520 --> 0:04:08.680 and he would get the numbers. Why does he need 0:04:08.720 --> 0:04:13.080 to study until April first? Is he serious about this? 0:04:14.800 --> 0:04:17.520 Well, because that's the business the government, right, There's a 0:04:17.560 --> 0:04:19.760 process here, and if he's going to invoke some of 0:04:19.760 --> 0:04:24.560 the authorities that he wants to invoke to apply these tariffs, 0:04:24.839 --> 0:04:27.520 and they are going to defend it against potential lawsuits 0:04:27.839 --> 0:04:32.159 from companies and defend it to the public, they have 0:04:32.279 --> 0:04:35.680 to at least go through a process of doing an 0:04:35.680 --> 0:04:37.080 official study. You should point out that. 0:04:37.160 --> 0:04:39.479 What was the point of twenty twenty five? Didn't they 0:04:39.480 --> 0:04:40.440 already do these studies? 0:04:40.680 --> 0:04:43.040 The twenty twenty five wasn't his thing. And we should 0:04:43.080 --> 0:04:46.280 also point out that his main economic officials, his main 0:04:46.320 --> 0:04:49.000 trade officials, although they were in the Oval Office yesterday, 0:04:49.240 --> 0:04:52.520 haven't actually been confirmed by the US Senate yet, and 0:04:52.560 --> 0:04:56.400 that rights Howard lot Make, the Commerce Secretary and incoming 0:04:56.440 --> 0:05:00.040 Commerce Secretary, and Jason Greer his US Trade. 0:05:00.480 --> 0:05:02.359 All right, all right, Sean we'll stay on top of this. 0:05:02.440 --> 0:05:05.559 I know you will as well. Here Sean Dinham, Senior 0:05:05.600 --> 0:05:08.920 economics writer, Bloomberg News. He's down there in Washington, DC. 0:05:10.680 --> 0:05:14.360 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:05:14.440 --> 0:05:17.839 weekdays at ten am Eastern on Applecarplay and Android Auto 0:05:17.960 --> 0:05:21.000 with the Bloomberg Business app. Listen on demand wherever you 0:05:21.040 --> 0:05:24.440 get your podcasts, or watch us live on YouTube. 0:05:25.000 --> 0:05:27.080 A couple of the big topics that get people's attention. 0:05:27.120 --> 0:05:30.400 If you're writing a story, put meta and AI into 0:05:30.440 --> 0:05:30.960 the headline. 0:05:31.120 --> 0:05:33.279 Oh yeah, you're going to get some reader ship. 0:05:33.920 --> 0:05:37.800 Did you know that ai in Chinese means love? 0:05:38.279 --> 0:05:38.640 I did not. 0:05:39.080 --> 0:05:43.440 Yeah, I guess the word for love in Chinese is AI. 0:05:43.600 --> 0:05:45.400 I don't know how you pronounce it. But where did 0:05:45.400 --> 0:05:46.679 you come across this piece of information? 0:05:47.360 --> 0:05:49.120 David English wrote about it on the Bloomberg terminal. 0:05:49.400 --> 0:05:52.120 Then it's got to be true. So let's check in here. 0:05:52.839 --> 0:05:53.480 Man Deep Singh. 0:05:53.480 --> 0:05:57.239 He's a senior technology analyst at Bloomberg Intelligence. Man Deep, 0:05:57.520 --> 0:06:00.600 you got a big name, a big company, a leader 0:06:01.040 --> 0:06:06.160 with deep pockets in meta talking about AI powered humanoid robots. 0:06:06.960 --> 0:06:07.960 What's your takeaway here? 0:06:09.560 --> 0:06:12.839 I mean, right now, it looks like everyone thinks that 0:06:13.240 --> 0:06:17.039 is the next big hardware opportunity, whether it's Apple and 0:06:17.200 --> 0:06:21.039 now Meta, they seem to be looking at that form factor. 0:06:21.120 --> 0:06:26.600 And actually Nvidia dropped in that hint back in January 0:06:26.680 --> 0:06:31.280 when they talked about a new chip or humanoid robots. 0:06:31.360 --> 0:06:35.040 They released the new chip at CEES and they actually 0:06:35.120 --> 0:06:39.240 released their own large anguid model for the humanoid form factor. 0:06:39.320 --> 0:06:42.919 So it's not a surprise that everyone else is also 0:06:43.000 --> 0:06:46.120 looking at that opportunity. And obviously you have Tessa who 0:06:46.160 --> 0:06:50.320 already has Optimus as a product and has talked about 0:06:50.360 --> 0:06:55.200 it almost on all their earnings calls, you know, recently, they. 0:06:55.160 --> 0:06:57.480 Seem a little late to the party to me, frankly, 0:06:58.720 --> 0:07:02.280 I think has so much money. You know, they go 0:07:02.320 --> 0:07:07.280 after Twitter with threads, they go after open Ai with 0:07:07.640 --> 0:07:09.920 whatever Meta's AI product is called. 0:07:10.040 --> 0:07:12.720 They go after Tesla with well appleshow you don't have 0:07:12.760 --> 0:07:14.400 to at first, you just have to be you know, 0:07:14.600 --> 0:07:16.600 cool and good and all that kind of stuff. True. 0:07:16.800 --> 0:07:20.440 So, Mandeep, is this something that the street's going to 0:07:20.680 --> 0:07:23.360 like because it's AI? Or is this something the street's 0:07:23.400 --> 0:07:25.280 going to say, you know, is this kind of like 0:07:25.360 --> 0:07:28.280 the metaverse, which we didn't really like house. Do you 0:07:28.280 --> 0:07:29.400 think the street's going to react to this. 0:07:30.680 --> 0:07:33.320 Yeah, I think in the case of Meta, I mean, 0:07:33.440 --> 0:07:38.000 there are question marks on their ability to design a good, 0:07:38.680 --> 0:07:44.480 compelling hardware and look reband Meta glasses have been successful, 0:07:44.840 --> 0:07:47.680 but when you look at the overall margin profile for 0:07:47.720 --> 0:07:50.400 a company like Meta, I mean, ADS is such a 0:07:50.480 --> 0:07:54.200 high margin business that hardware continues to be a drag 0:07:54.320 --> 0:07:57.320 on their overall margins. And the fact that they're losing 0:07:57.360 --> 0:08:01.480 almost twenty billion dollars every year on reality labs makes 0:08:01.480 --> 0:08:04.200 you wonder if they add more hardware in the form 0:08:04.240 --> 0:08:08.520 of humanoids, it could have mean bigger losses in that segment. 0:08:08.640 --> 0:08:12.160 So I'm not sure if that's the right strategy for Meta. 0:08:12.280 --> 0:08:15.200 Given they've had so much success, you know, with their apps, 0:08:15.240 --> 0:08:18.360 family of apps, and how good they have been in 0:08:18.440 --> 0:08:21.720 deploying AI across their apps, why would you want to 0:08:21.760 --> 0:08:24.480 spend too much time on hardware. But I think Mark 0:08:24.560 --> 0:08:27.160 Zuckerberg's view has always been he wants to control the 0:08:27.200 --> 0:08:30.680 ecosystem from the hardware. I have that vertical integration, and 0:08:30.680 --> 0:08:31.880 that's why they're doing it well. 0:08:31.920 --> 0:08:33.920 MetaStock, just to give you a sense, up one percent 0:08:33.960 --> 0:08:36.280 today a twenty five percent year to date in a 0:08:36.400 --> 0:08:38.520 fifty five percent on a trailing twelve month basis. 0:08:38.559 --> 0:08:41.959 So the market likes what's happening at Metal. Yeah, they're 0:08:42.040 --> 0:08:42.679 killing it, but. 0:08:44.640 --> 0:08:48.240 They don't control the ecosystem, right, I mean, where does 0:08:48.400 --> 0:08:54.280 Facebook have any hardware other than that virtual reality glasses 0:08:54.320 --> 0:08:56.400 thing that I don't think anyone bought. 0:08:57.440 --> 0:09:00.160 Well, okay, I think it just goes to show that 0:09:01.000 --> 0:09:06.360 Meta obviously is dependent on these app stores for their 0:09:06.520 --> 0:09:10.040 apps to be successful, and they are. You know, they 0:09:10.080 --> 0:09:13.319 have three of the most popular apps on both Android 0:09:13.360 --> 0:09:18.720 and iOS app stores. So anytime Apple or Google makes 0:09:18.720 --> 0:09:21.719 a change, that is where they got impacted with the 0:09:21.760 --> 0:09:25.280 IDFA changes, and look, that's what they want to avoid 0:09:25.600 --> 0:09:29.880 the next time it happens. Given every you know of 0:09:29.920 --> 0:09:34.160 the software vendors is trying to infuse AI lllms at 0:09:34.200 --> 0:09:37.560 the operating system level. So what does that mean for 0:09:37.600 --> 0:09:41.000 a company like Meta, which has its own LLM and 0:09:41.080 --> 0:09:44.480 wants to deploy it across more places. So owning the 0:09:44.520 --> 0:09:47.400 hardware does have some potential over there. 0:09:47.960 --> 0:09:51.679 I've upgraded to the pro model of chat GPT. 0:09:51.920 --> 0:09:53.880 Now, oh yeah, that's not working. Were hanging for it? 0:09:54.440 --> 0:09:57.079 Well, I kept getting cut off because I was asking 0:09:57.120 --> 0:10:01.520 too many questions, but I use it locked Really how 0:10:01.600 --> 0:10:04.640 much you pay twenty dollars a month? Sure, yeah, and 0:10:04.679 --> 0:10:09.160 it's pretty pretty sweet, But I wonder if it costs 0:10:09.240 --> 0:10:13.240 less to develop and run a large language model than 0:10:13.280 --> 0:10:13.760 we thought. 0:10:14.360 --> 0:10:14.800 I haven't. 0:10:14.880 --> 0:10:16.760 I realized it's a couple of days old the story, 0:10:16.880 --> 0:10:19.120 or a couple of weeks. But I haven't got your take, man, 0:10:19.200 --> 0:10:22.240 deep is deep Seek full of it? I mean? Were 0:10:22.240 --> 0:10:28.120 they just using illegally procured you know, Hopper chips or 0:10:28.160 --> 0:10:31.120 Blackwell chips, or did they really like make an LLM 0:10:31.200 --> 0:10:32.400 with six million bucks? 0:10:33.920 --> 0:10:37.640 Look, that was their last training round. That wasn't inclusive 0:10:37.720 --> 0:10:40.280 of all their training costs. But the bigger thing here 0:10:40.400 --> 0:10:44.160 is Apple, you know, partnering with Ali Baba to deploy 0:10:44.960 --> 0:10:48.880 LLLAM on their phone, and that's part of Apple intelligence. 0:10:48.920 --> 0:10:52.240 So to me, you know, it's not just deep Seek anymore. 0:10:52.720 --> 0:10:56.320 All the other companies over there in China, whether it's 0:10:56.360 --> 0:11:00.319 Ali Baba or you know, the other ones I do, 0:11:00.520 --> 0:11:03.280 et cetera, they all have their llms. They may not 0:11:03.400 --> 0:11:06.440 be as capable as deep Seat, but this thing is 0:11:06.480 --> 0:11:10.840 getting commoditized in my view, given every LLLM provider is 0:11:10.880 --> 0:11:14.640 improving their reasoning capabilities and now Apple partnering. I think 0:11:14.640 --> 0:11:18.400 that's a big step in terms of deploying their technology 0:11:18.440 --> 0:11:20.920 and Apple I think did note at their last Drugs 0:11:20.960 --> 0:11:25.320 call that Apple Intelligence was a big driver of refresh 0:11:25.360 --> 0:11:27.319 refreshers wherever it was available. 0:11:27.520 --> 0:11:28.520 All right, well, I'll like bob. 0:11:28.600 --> 0:11:31.400 It's up three percent today, it's hitting a fifty two 0:11:31.520 --> 0:11:34.280 week high, still below it's all time high from back 0:11:34.320 --> 0:11:36.400 in twenty twenty, but it's up sixty eight percent over 0:11:36.400 --> 0:11:38.400 the trailing twelve months. So certainly getting some love there. 0:11:38.400 --> 0:11:40.160 Min deep Sink, thanks so much for joining us. Man 0:11:40.200 --> 0:11:41.480 deep Sink, he's a senior. 0:11:41.200 --> 0:11:44.360 Technology analyst for Bloomberg Intelligence. 0:11:46.120 --> 0:11:49.800 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:11:49.880 --> 0:11:52.960 weekdays at ten am Eastern on Apple Coarplay and Android 0:11:53.000 --> 0:11:56.280 Auto with the Bloomberg Business App. Listen on demand wherever 0:11:56.360 --> 0:11:59.480 you get your podcasts, or watch us live on YouTube. 0:12:00.160 --> 0:12:02.520 Isabelle's sitting in for Alex Steel on Paul Sweeney. 0:12:02.920 --> 0:12:05.800 We are live in the Bloomberg Interactive Brooker Studio in 0:12:05.840 --> 0:12:08.360 New York City, streaming live on YouTube's ahead of to 0:12:08.440 --> 0:12:11.960 YouTube dot com. That's the internet thing. Search Bloomberg Podcast now, 0:12:12.000 --> 0:12:13.880 and that's where you will find us, all right. I've 0:12:13.920 --> 0:12:16.360 been in this business since nineteen eighty six, and since then, 0:12:17.120 --> 0:12:20.400 in my mind, Morgan Stanley has been the dominant franchise 0:12:20.480 --> 0:12:23.079 when it comes to all things real estate, real estate finance, 0:12:23.480 --> 0:12:25.600 and they still are today. Everywhere you go in the 0:12:25.600 --> 0:12:28.360 supply chain in terms of real estate financing to find 0:12:28.600 --> 0:12:29.839 ex Morgan Stanley people. 0:12:29.880 --> 0:12:31.120 So we're really. 0:12:30.960 --> 0:12:33.400 Appreciative to have our next guest, Lauren Hockfelder. She's the 0:12:33.400 --> 0:12:36.000 co CEO of Morgan Stanley Real Estate Investment. She joins 0:12:36.040 --> 0:12:38.920 us here in her Bloomberg Interactive Brooker studio. When I 0:12:38.960 --> 0:12:40.840 talk about commercial real estate, I think the first lesson 0:12:40.880 --> 0:12:43.280 I learned is don't just think about office space because 0:12:43.280 --> 0:12:45.840 there's so much other stuff out there. Where are you 0:12:45.840 --> 0:12:49.000 guys at Morgan Stanley seeing the best opportunities today? 0:12:49.280 --> 0:12:52.440 Yeah, So we start with what's driving demand, and so 0:12:52.480 --> 0:12:56.360 we invest behind long term mega trends. Trends we're focused 0:12:56.360 --> 0:13:01.439 on today are e commerce, the supply chain, realignment, aging, demographics. 0:13:01.760 --> 0:13:03.960 So where does that bring us? That brings us to 0:13:04.640 --> 0:13:10.360 industrial warehouses, that brings us to senior living places that 0:13:10.440 --> 0:13:13.240 are really going to be propelled not by cyclical up 0:13:13.240 --> 0:13:16.840 and downs, but by these long term trends, which. 0:13:16.720 --> 0:13:19.320 Do you see as leading right now? Because we've seen 0:13:19.360 --> 0:13:22.360 a huge shift in commercial real estate, some people have 0:13:22.480 --> 0:13:25.680 said it's bottom, but what are your views on that? 0:13:26.240 --> 0:13:30.240 Well, Look, commercial real estate or private real estate values 0:13:30.240 --> 0:13:32.960 in the US are down what twenty five plus percent 0:13:33.160 --> 0:13:35.680 over the last two and a half years, while the 0:13:35.720 --> 0:13:39.040 equity markets are up sixty plus percent over the same period. 0:13:39.360 --> 0:13:42.160 We feel really good about the entry part point to 0:13:42.440 --> 0:13:45.320 a lot of real estate today. We think that, you know, 0:13:45.360 --> 0:13:51.000 we've seen a bottom start to form. Liquidity increasing, transaction volume, 0:13:51.040 --> 0:13:55.640 increasing costic capital really coming in, spreads compressing. So we 0:13:55.720 --> 0:13:59.280 really feel like twenty four was about moderation. Twenty five 0:13:59.360 --> 0:14:02.080 twenty six, we may see the transition into an up cycle. 0:14:02.600 --> 0:14:05.800 All right, what we got here, let's get an informed opinion. 0:14:06.920 --> 0:14:12.200 Commercial office, real estate, New York, San Francisco, Chicago, Boston. 0:14:13.200 --> 0:14:16.160 Have we seen the bottom that I can't remember seeing 0:14:16.160 --> 0:14:18.640 too many transactions out there that would suggest we've seen 0:14:18.679 --> 0:14:19.000 the bottom. 0:14:19.040 --> 0:14:19.440 I don't know. 0:14:21.160 --> 0:14:24.000 Divergence, So I think for the best of the best, 0:14:24.160 --> 0:14:25.080 we've probably. 0:14:24.760 --> 0:14:26.320 Seven thirty one lection to avenue best. 0:14:26.400 --> 0:14:30.640 I mean absolutely, for the best of the best, you 0:14:30.720 --> 0:14:35.160 are seeing not just resilience from some of the headwinds, 0:14:35.480 --> 0:14:38.560 but actually the best of the best assets are benefiting 0:14:38.840 --> 0:14:42.200 from what's going on right now, massive consolidation into these 0:14:42.240 --> 0:14:45.600 top tier buildings. They've become like an oasis in the 0:14:45.600 --> 0:14:48.600 office desert. Everyone only wants to be in these assets. 0:14:48.920 --> 0:14:52.200 And so yes, you're seeing leasing pickup in our San 0:14:52.240 --> 0:14:56.720 Francisco office assets. We are commanding all time high rents, 0:14:57.040 --> 0:15:00.720 signing long term, high quality leases at way abou pre COVID. 0:15:01.000 --> 0:15:03.880 That's stunning when the market's almost forty percent vacant. 0:15:04.680 --> 0:15:07.640 So what happens to that forty percent is it just 0:15:07.680 --> 0:15:09.640 have to find the bottom somewhere. 0:15:10.480 --> 0:15:14.240 So look, I think yes, you're going to have some 0:15:14.280 --> 0:15:19.360 conversions to alternative uses. There are major complexities with that, 0:15:19.640 --> 0:15:24.160 both sort of zoning wise and physical construction wise. Some 0:15:24.240 --> 0:15:26.960 of it will get converted, a lot of it's just 0:15:27.000 --> 0:15:30.200 going to be cost prohibitive to really release in a 0:15:30.240 --> 0:15:36.640 meaningful way. You have to retrofit for sustainability conditions and amenitization. 0:15:37.680 --> 0:15:39.400 Demand has changed what it wants. 0:15:40.560 --> 0:15:43.760 Apart from the example you gave, uncertain things they lingers. 0:15:43.840 --> 0:15:46.720 We have investors, they'll cautious about jumping in. What do 0:15:46.760 --> 0:15:49.200 you tell them or how do you convince them? 0:15:49.560 --> 0:15:52.680 Look, it depends where there are certainly areas I would 0:15:52.680 --> 0:15:55.840 not jump in. But when you look across the globe, 0:15:55.960 --> 0:15:58.200 for example, we find the US to be the most 0:15:58.280 --> 0:16:01.280 interesting market in which to invest today. The US is 0:16:01.360 --> 0:16:05.160 always fifho right, first in, first out, it's correct to 0:16:05.240 --> 0:16:08.040 the sharpest. It tends to rebound the quickest. So this 0:16:08.120 --> 0:16:10.960 is a market for the right sectors, for things like 0:16:11.080 --> 0:16:16.520 senior housing, industrial, certain other spaces. We find it really compelling. 0:16:17.120 --> 0:16:19.480 There are other parts of the world, and frankly other 0:16:19.560 --> 0:16:22.080 sectors that we don't think have bottomed yet. For those 0:16:22.120 --> 0:16:25.520 lower quality assets, you still have a wall of maturities 0:16:25.520 --> 0:16:30.680 that's coming. And don't mistake delaying with fixing the problem. 0:16:30.720 --> 0:16:32.280 There's still some pain to come there. 0:16:32.520 --> 0:16:35.160 Talk to us about the capital markets, the financing for 0:16:35.320 --> 0:16:38.320 real estate. If you want to go buy a building, 0:16:39.240 --> 0:16:41.640 do whatever you want to do in your real estate portfolio, 0:16:42.000 --> 0:16:43.040 where do you get the capital? 0:16:43.880 --> 0:16:47.960 So debt capital is absolutely coming back. So we saw 0:16:48.000 --> 0:16:50.640 a period of time where there was just total illiquidity. 0:16:51.560 --> 0:16:55.680 We've seen CMBs picked up very materially so, and we've 0:16:55.680 --> 0:16:59.120 seen spreads compress very materially so. Of course, base rates 0:16:59.120 --> 0:17:01.560 are moving around, maybe more than we'd all like, but 0:17:01.640 --> 0:17:05.280 spreads have compressed, so you're seeing a return to some 0:17:05.320 --> 0:17:07.840 of the from some of the balance sheet lenders, you're 0:17:07.880 --> 0:17:11.439 seeing CMBs, and you're seeing really this massive rise in 0:17:11.560 --> 0:17:16.359 non bank lenders. So these alternative asset management, private credit, 0:17:16.440 --> 0:17:18.800 private credit, private real estate credit. 0:17:19.200 --> 0:17:21.960 Interesting you mentioned that twenty twenty five or twenty twenty 0:17:22.040 --> 0:17:23.360 six maybe the year of reckoning. 0:17:23.400 --> 0:17:25.280 There was a big Bloomberg piece late. 0:17:25.160 --> 0:17:28.600 Last year around November quoting a lot of people saying that, yes, 0:17:28.760 --> 0:17:31.360 twenty twenty five will be our year. But then hindsight 0:17:31.440 --> 0:17:33.920 that may look like wishful thinking, especially with the rates 0:17:33.960 --> 0:17:36.840 they'll elevated. How are you squaring your thoughts on that? 0:17:37.080 --> 0:17:40.560 Absolutely well, Look, we think this cycle is not going 0:17:40.640 --> 0:17:44.600 to be about rate compression. So coming out of the GFC, 0:17:44.840 --> 0:17:47.199 one of the ways we all did very well is 0:17:47.640 --> 0:17:50.200 you know, rates fell, you had cheap debt, you had 0:17:50.200 --> 0:17:53.320 cap rate compression. That was how a lot of appreciation 0:17:53.480 --> 0:17:56.479 was created. We think this cycle is different, so we 0:17:56.520 --> 0:18:00.199 do expect to see moderation and rates. Perhaps it's a 0:18:00.200 --> 0:18:04.400 bumpy road down, but ultimately that's not what we're betting on. 0:18:04.720 --> 0:18:07.920 We think this cycle is much more about cash flow growth, 0:18:08.320 --> 0:18:11.000 and so what that means is you need to be 0:18:11.040 --> 0:18:14.600 in those sectors that have those mega trends driving demand 0:18:15.040 --> 0:18:17.640 and in those sectors where supply has just fallen off 0:18:17.640 --> 0:18:20.880 a cliff. That's how you get cash flow growth and frankly, 0:18:21.400 --> 0:18:25.239 owning assets that you can really improve. So not just 0:18:25.359 --> 0:18:27.400 buy and hold, but buy and change. 0:18:28.320 --> 0:18:31.280 If you had the chance to buy a B level 0:18:31.280 --> 0:18:34.200 building on Third Avenue on forty eighth Street at fifty 0:18:34.200 --> 0:18:36.720 cents on the dollar, would you buy it? 0:18:36.720 --> 0:18:40.479 It really depends. So I think what people sort of 0:18:40.840 --> 0:18:44.120 people tend to homogenize real estate, and I think there's 0:18:44.160 --> 0:18:46.960 a big difference between a forty thousand square foot floorplate 0:18:46.960 --> 0:18:49.120 and a twenty thousand square foot floor plate in terms 0:18:49.160 --> 0:18:52.600 of what it wants to be and what it's sort 0:18:52.600 --> 0:18:56.600 of highest and best use is. So it's just you 0:18:56.640 --> 0:19:01.000 need to think about how that specific asset. It's not 0:19:01.080 --> 0:19:01.800 bs B as B. 0:19:02.200 --> 0:19:04.840 Okay, how about right across the street, can you lease 0:19:04.840 --> 0:19:06.760 out some of that commercial space because it hasn't been 0:19:06.840 --> 0:19:08.440 leased since the pandemic. 0:19:08.480 --> 0:19:10.320 I don't know what's going on there, so we need. 0:19:10.320 --> 0:19:13.000 That's commercial real estate. I don't know across the street 0:19:13.000 --> 0:19:15.320 from us. Still after the pandemic, it was. 0:19:15.359 --> 0:19:17.240 The victorious secret across. 0:19:16.920 --> 0:19:18.480 This Not that I don't know what's going on there, 0:19:18.480 --> 0:19:20.680 but Lauren, thank you so much for joining us. Lauren Hotfelder, 0:19:21.000 --> 0:19:23.639 she's the co CEO of Morgan Stanley Real Estate Investing, 0:19:23.720 --> 0:19:25.919 joining us live here in our Bloomberg Inactive Broker studio. 0:19:27.600 --> 0:19:31.320 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:19:31.400 --> 0:19:34.439 weekdays at ten am Eastern on Apple, Coarclay, and Android 0:19:34.480 --> 0:19:37.800 Auto with the Bloomberg Business App. Listen on demand wherever 0:19:37.840 --> 0:19:41.400 you get your podcasts, or watch us live on YouTube. 0:19:41.840 --> 0:19:44.920 A lot of towers talk around the fireplace these days. 0:19:44.920 --> 0:19:48.200 It seems to be the economic policy of choice for 0:19:48.359 --> 0:19:51.800 President Trump and his administration, so industries around the world 0:19:51.840 --> 0:19:53.919 are trying to figure out what impact it will have 0:19:54.000 --> 0:19:54.439 on their. 0:19:54.320 --> 0:19:56.040 Business, and that includes the luxury business. 0:19:56.520 --> 0:19:59.240 Ronnie set Home joins and she's managing partner at set 0:19:59.240 --> 0:20:00.639 hom Lag Group. 0:20:01.280 --> 0:20:03.000 Ronnie, when you think about. 0:20:02.800 --> 0:20:07.240 The luxury business, high priced items, by and large, different 0:20:07.280 --> 0:20:10.200 price points, different types of consumers. But again, if they're 0:20:10.240 --> 0:20:12.400 going to be subject to terraces, whether it's from Mexico 0:20:12.480 --> 0:20:13.840 or China or anywhere. 0:20:14.960 --> 0:20:16.840 How does that play out in the luxury business. 0:20:18.680 --> 0:20:20.840 I'm not sure it's going to vote very well for 0:20:21.040 --> 0:20:24.840 the luxury business. I mean, there is some stagnation already 0:20:25.280 --> 0:20:29.120 with consumers purchasing luxury for the top one percent, none 0:20:29.119 --> 0:20:31.160 of these tariffs will really have an effect on their 0:20:31.600 --> 0:20:34.080 purchasing power. But there are a lot of Henry's out 0:20:34.119 --> 0:20:38.640 there which are high earners, not rich yet, and they 0:20:38.680 --> 0:20:41.320 may pause if they have to spend an extra ten 0:20:41.359 --> 0:20:44.680 to twenty five percent on the same item Henry's. 0:20:44.760 --> 0:20:46.360 I had to explain that to my parents. 0:20:46.680 --> 0:20:47.800 I just heard it for the first time. 0:20:47.840 --> 0:20:48.040 Here. 0:20:48.240 --> 0:20:50.880 It's a thing, all right, high earners but not rich yet. 0:20:50.960 --> 0:20:52.800 Okay, so yes, it is a thing. 0:20:53.600 --> 0:20:56.680 Which industry in the luxury sector will be hardest hit, though. 0:20:58.920 --> 0:21:02.560 I think the fast fashion will be the hardest hit. 0:21:03.160 --> 0:21:06.000 I mean, right now, the tariffs that are going to 0:21:06.320 --> 0:21:10.400 be imposed on China are not just a regular ten 0:21:10.440 --> 0:21:15.520 percent tariff, but there's also a loophole which currently allows 0:21:15.880 --> 0:21:19.120 fast fashion retailers from China like She and that probably 0:21:19.200 --> 0:21:22.199 is one of the top ones that come to mind, 0:21:22.359 --> 0:21:27.159 allows them to ship products to the United States tax 0:21:27.240 --> 0:21:30.359 free if the total sale is less than eight hundred 0:21:30.400 --> 0:21:35.120 dollars and if that goes away, I'm sure that that 0:21:35.200 --> 0:21:36.920 industr will be hit very hard. 0:21:38.119 --> 0:21:41.520 So I think a lot of retailers Ronnie are trying 0:21:41.520 --> 0:21:43.680 to think about their strategy about to what extent can 0:21:43.680 --> 0:21:47.760 they pass increased tariff costs along to their consumers or 0:21:48.440 --> 0:21:51.399 how that gets absorbed within the supply chain. What are 0:21:51.440 --> 0:21:54.120