1 00:00:00,840 --> 00:00:04,000 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 2 00:00:04,040 --> 00:00:05,240 Speaker 1: my co host Matt Miller. 3 00:00:05,640 --> 00:00:09,600 Speaker 2: Every business day we bring you interviews from CEOs, market pros, 4 00:00:09,720 --> 00:00:13,640 Speaker 2: and Bloomberg experts, along with essential market moving news. 5 00:00:14,160 --> 00:00:17,279 Speaker 1: Find the Bloomberg Markets Podcast on Apple Podcasts or wherever 6 00:00:17,400 --> 00:00:21,360 Speaker 1: you listen to podcasts, and at Bloomberg dot com slash podcast. Well, 7 00:00:21,400 --> 00:00:25,080 Speaker 1: central banks around the world are just you know, they're 8 00:00:25,079 --> 00:00:27,639 Speaker 1: making no bones about it. They are remain in a 9 00:00:27,840 --> 00:00:30,960 Speaker 1: very hawkish stance here and that includes are good friends 10 00:00:31,000 --> 00:00:33,760 Speaker 1: over in the UK, the Bank of England earlier this week, 11 00:00:33,840 --> 00:00:37,280 Speaker 1: you know, raising their benchmark RAAK fifty basis points. I 12 00:00:37,280 --> 00:00:40,480 Speaker 1: mean they are focused very much on higher inflation. Wanted 13 00:00:40,479 --> 00:00:44,360 Speaker 1: to check out with Marcus Ashworth, Bloomberg Opinion calumnists. Marcus, 14 00:00:44,520 --> 00:00:48,200 Speaker 1: you know, talk to us about inflation in the UK. 15 00:00:49,080 --> 00:00:51,440 Speaker 1: Where do people see it, where do they feel it 16 00:00:51,760 --> 00:00:52,839 Speaker 1: and how pervasive is it? 17 00:00:53,400 --> 00:00:56,800 Speaker 3: What inflation it's in the spine of it head. 18 00:00:56,800 --> 00:00:59,920 Speaker 4: I dont believe the price we have what's done in 19 00:01:00,240 --> 00:01:03,800 Speaker 4: is second round effects coming through. We've yet to have 20 00:01:04,160 --> 00:01:09,040 Speaker 4: our goods inflation, particularly energy and food price inflation really 21 00:01:09,120 --> 00:01:11,720 Speaker 4: show up in the way that has in the States 22 00:01:11,720 --> 00:01:14,319 Speaker 4: and in Europe, where it's fallen off quite sharply. We 23 00:01:14,480 --> 00:01:17,400 Speaker 4: are seeing producer prices falling. We've start to see food 24 00:01:17,680 --> 00:01:20,440 Speaker 4: just about start rolling over, and we know again in 25 00:01:20,520 --> 00:01:23,399 Speaker 4: July and then in October we'll get further fall offs 26 00:01:23,440 --> 00:01:26,160 Speaker 4: in the energy price. We have this string system where 27 00:01:26,160 --> 00:01:28,680 Speaker 4: we capped it and then it didn't show up in 28 00:01:28,720 --> 00:01:29,720 Speaker 4: our official stats. 29 00:01:29,720 --> 00:01:32,920 Speaker 3: So it's inflation in the UK is just. 30 00:01:33,319 --> 00:01:35,479 Speaker 4: Definitely calculated the rest of the world at the moment, 31 00:01:35,600 --> 00:01:39,319 Speaker 4: and we should read too much into it. However, the 32 00:01:39,440 --> 00:01:44,959 Speaker 4: core inflation and indeed the service sector inflation is accelerating still, 33 00:01:45,319 --> 00:01:47,319 Speaker 4: and that means the Bank of Angel was forced to 34 00:01:47,920 --> 00:01:51,160 Speaker 4: having slowed down a bit, like Canada and a couple 35 00:01:51,240 --> 00:01:54,880 Speaker 4: other places, they've had to reaccelerate, and having gone from 36 00:01:54,920 --> 00:01:57,040 Speaker 4: fifty down to twenty five and twenty five, they're back 37 00:01:57,080 --> 00:01:59,760 Speaker 4: up to fifty bass one hikes and now at five 38 00:02:00,120 --> 00:02:03,000 Speaker 4: sent they've caught back up with the FED. Having started 39 00:02:03,040 --> 00:02:05,800 Speaker 4: first they let the FED overtake them, and now they're 40 00:02:05,840 --> 00:02:08,400 Speaker 4: having forced to possibly even go above. 41 00:02:08,120 --> 00:02:10,520 Speaker 3: The FED at some point. 42 00:02:11,080 --> 00:02:13,520 Speaker 4: It's just showed you the perils of doing too little, 43 00:02:13,520 --> 00:02:17,920 Speaker 4: too late, and dilly dallying and we have got ourselves. 44 00:02:17,480 --> 00:02:18,720 Speaker 3: In a bit of a mess. 45 00:02:19,680 --> 00:02:23,720 Speaker 4: However, you know, sterling has not risen on this surprise 46 00:02:23,800 --> 00:02:27,359 Speaker 4: fifty based one hight. The yield cuve is inverted now 47 00:02:27,480 --> 00:02:29,200 Speaker 4: much more than it was for It's nearly one hundred 48 00:02:29,200 --> 00:02:31,880 Speaker 4: basis points inverted, so not to similar to the pictures 49 00:02:31,880 --> 00:02:32,640 Speaker 4: seeing in the US. 50 00:02:33,400 --> 00:02:36,280 Speaker 3: And what happened is that long end anything. 51 00:02:36,000 --> 00:02:38,760 Speaker 4: I'm beyond two you is really yields have fallen in 52 00:02:38,800 --> 00:02:41,720 Speaker 4: the last day, not risen as you would expect. That's 53 00:02:41,720 --> 00:02:43,800 Speaker 4: because some bad numbers out of Europe and also some 54 00:02:43,919 --> 00:02:47,760 Speaker 4: scene signs that we might get recession fears again back 55 00:02:47,840 --> 00:02:48,959 Speaker 4: in the UK by the end of the year. 56 00:02:49,440 --> 00:02:53,400 Speaker 5: I mean, this is really tough for UK households and consumers. Right, 57 00:02:53,480 --> 00:02:57,360 Speaker 5: what would you say is the percentage chance of the 58 00:02:57,480 --> 00:03:00,680 Speaker 5: UK being able to experience a soft landing without a 59 00:03:00,720 --> 00:03:02,639 Speaker 5: ton more paying for consumers. 60 00:03:03,680 --> 00:03:05,519 Speaker 4: I think there's a reasonable chance of the Bank of 61 00:03:05,560 --> 00:03:08,679 Speaker 4: England realize it's looking a lot of backward inflation, a 62 00:03:08,720 --> 00:03:11,760 Speaker 4: lot a lot of our stats on showing up things 63 00:03:11,760 --> 00:03:14,720 Speaker 4: that they had either modeled or are now complete surprise, 64 00:03:14,760 --> 00:03:16,720 Speaker 4: and I see it. We have a lot of people 65 00:03:16,760 --> 00:03:19,679 Speaker 4: out of work. It's confusing the statistician. They don't know 66 00:03:19,720 --> 00:03:21,959 Speaker 4: how many people are in the country. They don't know 67 00:03:22,000 --> 00:03:24,280 Speaker 4: why so many people are out of work or on benefits, 68 00:03:24,919 --> 00:03:27,960 Speaker 4: and yet we have quite a large amount of immigration. 69 00:03:28,120 --> 00:03:29,840 Speaker 3: So a lot of these things aren't making sense. 70 00:03:30,000 --> 00:03:32,600 Speaker 4: I think the Bank of England is looking at its 71 00:03:32,600 --> 00:03:34,480 Speaker 4: stats and its models and wondering why you know, it 72 00:03:34,560 --> 00:03:37,160 Speaker 4: keeps on tapping a box and giving up boot, why 73 00:03:37,160 --> 00:03:40,960 Speaker 4: would it work? So in some senses, I think we 74 00:03:41,040 --> 00:03:47,160 Speaker 4: have a big quarterly Monetary Policy Report review in August third, 75 00:03:47,560 --> 00:03:49,520 Speaker 4: the next meeting, I think they may have a chance 76 00:03:49,560 --> 00:03:51,800 Speaker 4: to see whether, really where there are these food prices, 77 00:03:51,960 --> 00:03:54,640 Speaker 4: energy prices and a number of other things are coming off. 78 00:03:54,840 --> 00:03:57,080 Speaker 3: Maybe the labor market finally shows some weakness. 79 00:03:57,080 --> 00:04:00,320 Speaker 4: We've got very unemployment here, but like the US, down 80 00:04:00,360 --> 00:04:01,400 Speaker 4: at three point eight percent. 81 00:04:02,000 --> 00:04:04,360 Speaker 3: Wage rise is the real reason why we're not having 82 00:04:04,680 --> 00:04:05,080 Speaker 3: perhaps the. 83 00:04:05,080 --> 00:04:07,480 Speaker 4: Feg through We've got seven point six percent wage growth 84 00:04:07,480 --> 00:04:10,200 Speaker 4: here that is making the you know, the so called 85 00:04:10,200 --> 00:04:12,600 Speaker 4: cost of living crisis isn't really being felt as bad 86 00:04:12,680 --> 00:04:16,440 Speaker 4: as you might think. It's wages, particularly in the service 87 00:04:16,480 --> 00:04:19,160 Speaker 4: sector and lawyers and financial services, all these sort of 88 00:04:19,160 --> 00:04:20,200 Speaker 4: things are doing very well. 89 00:04:20,520 --> 00:04:22,279 Speaker 3: We have had a rise in the minimum wage. 90 00:04:22,960 --> 00:04:25,799 Speaker 4: But you know, there are some signs that things aren't 91 00:04:25,880 --> 00:04:28,440 Speaker 4: getting or getting a little bit better. But unfortunately, with 92 00:04:28,480 --> 00:04:31,040 Speaker 4: mortgages going up very mind only one in three or 93 00:04:31,120 --> 00:04:33,920 Speaker 4: less than one in three households in the UK actually 94 00:04:33,960 --> 00:04:36,160 Speaker 4: has a mortgage, and a lot of those people are 95 00:04:36,160 --> 00:04:38,600 Speaker 4: only talking about it. Again, a relatively small percent of 96 00:04:38,640 --> 00:04:40,880 Speaker 4: the people with a mortgage that are going to be 97 00:04:40,880 --> 00:04:43,520 Speaker 4: feeling the pain this year. But nonetheless it's going to 98 00:04:43,560 --> 00:04:46,520 Speaker 4: be very painful for those who feel it. For the 99 00:04:46,560 --> 00:04:49,640 Speaker 4: rest of the country, it's it's not great, but it's survivable, 100 00:04:50,440 --> 00:04:50,800 Speaker 4: all right. 101 00:04:50,920 --> 00:04:55,400 Speaker 1: So Marcus Queen, Victoria Street, Bloomberg European Headquarters, I go 102 00:04:55,480 --> 00:04:58,480 Speaker 1: out for a pint at my favorite bidder or logger. 103 00:04:58,680 --> 00:05:02,039 Speaker 1: What's that cost me today? Maybe? What was that a 104 00:05:02,080 --> 00:05:02,800 Speaker 1: few years ago? 105 00:05:03,760 --> 00:05:06,960 Speaker 3: What a question? Well, I thankfully I've done some research 106 00:05:07,000 --> 00:05:09,520 Speaker 3: for you. I've a very poor part of my job. 107 00:05:10,960 --> 00:05:15,360 Speaker 4: About six pounds, six to seven pounds something like that. 108 00:05:16,120 --> 00:05:19,240 Speaker 4: Call that not quite ten dollars, but certainly you can 109 00:05:19,360 --> 00:05:21,520 Speaker 4: go to some places, the smarter places, it will be 110 00:05:21,640 --> 00:05:24,919 Speaker 4: ten dollars and indeed more. I mean, I think you 111 00:05:25,040 --> 00:05:28,200 Speaker 4: see reports of eight or nine pounds a pint. Some 112 00:05:28,360 --> 00:05:31,240 Speaker 4: prices in language ten bucks. 113 00:05:31,000 --> 00:05:34,000 Speaker 3: That's that's just too much, okay. 114 00:05:34,040 --> 00:05:36,119 Speaker 5: Well, also this reminds me that we have a story 115 00:05:36,120 --> 00:05:39,320 Speaker 5: on the terminal this week about how the traditional English 116 00:05:39,360 --> 00:05:43,280 Speaker 5: breakfast has never been more expensive. The price is five 117 00:05:43,279 --> 00:05:45,640 Speaker 5: pounds higher than it was in May of last year. 118 00:05:45,960 --> 00:05:46,680 Speaker 6: And I know you're. 119 00:05:46,640 --> 00:05:49,760 Speaker 5: Saying that the data is not necessarily great in the UK, 120 00:05:49,880 --> 00:05:52,000 Speaker 5: but you can't argue with this chart about the price 121 00:05:52,000 --> 00:05:52,839 Speaker 5: of the English word. 122 00:05:53,360 --> 00:05:56,039 Speaker 3: I just think it's an outrage. They have tomatoes in it. 123 00:05:56,080 --> 00:05:59,120 Speaker 4: Who had a grilled tomato on it and they're just 124 00:05:59,120 --> 00:06:00,000 Speaker 4: saving straight away. 125 00:06:00,720 --> 00:06:03,960 Speaker 5: So your beef is with the tomato, not necessarily the 126 00:06:04,000 --> 00:06:06,839 Speaker 5: price of the plate with the tomato. 127 00:06:07,200 --> 00:06:11,719 Speaker 4: So yeah, it's very much something which, yeah, we've seen 128 00:06:11,839 --> 00:06:14,640 Speaker 4: a lot of the reason why food prices in the 129 00:06:14,760 --> 00:06:19,040 Speaker 4: UK are higher. We have incredibly competitive supermarket sector. In fact, 130 00:06:19,080 --> 00:06:21,719 Speaker 4: we have very true food, probably too cheap food in 131 00:06:21,760 --> 00:06:24,200 Speaker 4: the UK, and we have a lot of imports on 132 00:06:24,200 --> 00:06:26,800 Speaker 4: a lot of fixed contracts. Those are the ones that 133 00:06:26,839 --> 00:06:30,120 Speaker 4: are still still too high. They will drop off, It's 134 00:06:30,160 --> 00:06:32,279 Speaker 4: going to take a few months before they feed through into. 135 00:06:32,120 --> 00:06:33,160 Speaker 3: The inflation data. 136 00:06:33,320 --> 00:06:35,920 Speaker 4: So optically it looks like food prices are still very high. 137 00:06:35,920 --> 00:06:38,479 Speaker 3: In the UK they are, but they will be coming 138 00:06:38,480 --> 00:06:40,279 Speaker 3: off and they'll all start feed. 139 00:06:40,080 --> 00:06:42,080 Speaker 4: Through perhaps by the back end of this year, and 140 00:06:42,120 --> 00:06:44,919 Speaker 4: I think we'll see inflation fall very sharp in the UK. 141 00:06:45,400 --> 00:06:47,520 Speaker 4: It's just a good six months after and people had 142 00:06:47,640 --> 00:06:49,760 Speaker 4: hoped it would it would really start moving, and that's 143 00:06:49,760 --> 00:06:53,279 Speaker 4: why we look like we're lagging behind US and particularly 144 00:06:53,279 --> 00:06:54,280 Speaker 4: and also in Europe. 145 00:06:54,760 --> 00:06:57,400 Speaker 1: All right, Marcus, I'm just in shock over the cost 146 00:06:57,440 --> 00:06:59,640 Speaker 1: of a pint. I used to remember they put one 147 00:06:59,680 --> 00:07:02,160 Speaker 1: of those pound coins on the bar and get a 148 00:07:02,279 --> 00:07:04,920 Speaker 1: pint for those days are long gone, Marcus Ashtra, Thank 149 00:07:04,920 --> 00:07:07,840 Speaker 1: you so much. Marcus covers all the economics Bloomberg Opinion. 150 00:07:09,480 --> 00:07:12,920 Speaker 7: You're listening to the team Ken's are Live program Bloomberg 151 00:07:12,960 --> 00:07:16,320 Speaker 7: Markets weekdays at ten am Eastern on Bloomberg dot Com, 152 00:07:16,400 --> 00:07:19,560 Speaker 7: the iHeartRadio app and the Bloomberg Business App, or listen 153 00:07:19,600 --> 00:07:21,880 Speaker 7: on demand wherever you get your podcasts. 154 00:07:23,560 --> 00:07:26,440 Speaker 1: Madison Mills Paul Sween here in a Bloomberg Interactive Broker Studio. 155 00:07:26,480 --> 00:07:28,960 Speaker 1: I love, love, love the big take stories that we 156 00:07:29,000 --> 00:07:32,360 Speaker 1: get out of Bloomberg News every day. Great great stories. 157 00:07:32,400 --> 00:07:35,400 Speaker 1: They focus on some big issues, They do some serious 158 00:07:35,480 --> 00:07:38,280 Speaker 1: in depth reporting and the one I really love. This 159 00:07:38,320 --> 00:07:41,800 Speaker 1: week was about commercial real estate. The world's empty office 160 00:07:41,800 --> 00:07:45,240 Speaker 1: buildings become a debt time bomb. That gets your attention. 161 00:07:45,320 --> 00:07:47,320 Speaker 1: Natalie Wong joins us here. She's a real estate reporter 162 00:07:47,400 --> 00:07:49,560 Speaker 1: for Bloomberg News. She also joins us here in our 163 00:07:49,560 --> 00:07:52,280 Speaker 1: Bloomberg Interactive Brokers studios, so she gets a gold star 164 00:07:52,760 --> 00:07:54,600 Speaker 1: for being in the office. Natalie, thanks so much for 165 00:07:54,640 --> 00:07:57,560 Speaker 1: joining us here. All right, I'm just thinking Midtown Manhattan, 166 00:07:57,720 --> 00:07:59,960 Speaker 1: and this speaks to a lot of major cities around 167 00:08:00,120 --> 00:08:03,440 Speaker 1: the world. But Midtown Manhattan, fortieth Street to sixtieth Street, 168 00:08:03,480 --> 00:08:06,720 Speaker 1: you walk across the island, there's a lot of empty 169 00:08:07,000 --> 00:08:10,520 Speaker 1: office space. How bad is this going to get for 170 00:08:11,000 --> 00:08:13,440 Speaker 1: the people who own the buildings, people who finance the buildings, 171 00:08:13,560 --> 00:08:15,680 Speaker 1: the people who have space least in the building. Talk 172 00:08:15,720 --> 00:08:17,960 Speaker 1: to us about what you found, right, I. 173 00:08:17,880 --> 00:08:21,160 Speaker 8: Mean, just zooming into Midtown Manhattan alone, it's a great example. 174 00:08:21,240 --> 00:08:23,880 Speaker 8: The biggest office market in the world. You have only 175 00:08:23,960 --> 00:08:27,680 Speaker 8: roughly fifty percent of workers back at their desks. And 176 00:08:27,720 --> 00:08:31,080 Speaker 8: that's on average, so that's largely Tuesday, so Thursdays usually 177 00:08:31,080 --> 00:08:33,839 Speaker 8: on Fridays. I mean, buildings are empty and it's looking 178 00:08:33,880 --> 00:08:36,200 Speaker 8: bad because this is a situation that's played out for 179 00:08:36,240 --> 00:08:38,680 Speaker 8: more than three years. People have been waiting for it 180 00:08:38,720 --> 00:08:40,959 Speaker 8: to get better. They thought it was initially just a 181 00:08:40,960 --> 00:08:45,559 Speaker 8: health scare COVID thing. Clearly behaviors have changed. Clearly companies 182 00:08:45,600 --> 00:08:47,640 Speaker 8: are pivoting, and they're at a time where they had 183 00:08:47,679 --> 00:08:48,439 Speaker 8: to cut costs. 184 00:08:48,760 --> 00:08:50,240 Speaker 6: So you have even the biggest tech. 185 00:08:50,040 --> 00:08:52,960 Speaker 8: Companies that were driving growth in the market, like Meta, 186 00:08:53,240 --> 00:08:56,440 Speaker 8: like Amazon, like Microsoft, all pulling back and scaling back 187 00:08:56,800 --> 00:08:59,160 Speaker 8: or putting their space up for subleas, which adds even 188 00:08:59,200 --> 00:09:01,320 Speaker 8: more space on the market for landlords. 189 00:09:00,840 --> 00:09:01,480 Speaker 6: To compete with. 190 00:09:01,800 --> 00:09:03,880 Speaker 8: So it's a bad look for landlords who now have 191 00:09:03,960 --> 00:09:07,559 Speaker 8: to deal with less income coming in from rents and demand, 192 00:09:08,120 --> 00:09:12,319 Speaker 8: and higher costs from increased boring weights, debt costs, and 193 00:09:13,120 --> 00:09:14,400 Speaker 8: pressure from the lenders. 194 00:09:14,679 --> 00:09:16,880 Speaker 5: Yeah, and we heard from j Powell yesterday. He said 195 00:09:16,920 --> 00:09:19,480 Speaker 5: what he always says, that commercial real estate is a concern. 196 00:09:21,080 --> 00:09:24,679 Speaker 5: To what extent do your sources talk about the potential 197 00:09:24,720 --> 00:09:28,480 Speaker 5: contagion of the commercial real estate space into our overall economy. 198 00:09:28,760 --> 00:09:29,560 Speaker 6: It's a bit concern. 199 00:09:29,600 --> 00:09:32,199 Speaker 8: I mean, you know, like over the past fifteen years, 200 00:09:32,240 --> 00:09:35,720 Speaker 8: with near zero interest rates, people have been pouring money 201 00:09:35,720 --> 00:09:38,920 Speaker 8: into real estate as sort of a safe environment that 202 00:09:38,960 --> 00:09:42,560 Speaker 8: would yield relatively stable returns and they could get good debt, 203 00:09:42,600 --> 00:09:45,520 Speaker 8: good leverage on it. And so you have major banks 204 00:09:45,600 --> 00:09:48,520 Speaker 8: that have huge amounts of loans out that are backed 205 00:09:48,520 --> 00:09:50,520 Speaker 8: by these real estate You have some of the biggest 206 00:09:50,520 --> 00:09:52,760 Speaker 8: institutions that have giant. 207 00:09:52,600 --> 00:09:53,760 Speaker 6: Real estate portfolios. 208 00:09:54,000 --> 00:09:56,679 Speaker 8: A lot of it was concentrated in offices because that 209 00:09:56,720 --> 00:09:59,720 Speaker 8: was led that was viewed as relatively stable prior to 210 00:10:00,640 --> 00:10:03,840 Speaker 8: the pandemic and prior to remote work. And so now 211 00:10:04,080 --> 00:10:07,679 Speaker 8: you have one point four trillion dollars of commercial real 212 00:10:07,800 --> 00:10:10,160 Speaker 8: estate loans that are set to expire this year and 213 00:10:10,240 --> 00:10:12,840 Speaker 8: the next. A lot of it is being backed by offices, 214 00:10:13,040 --> 00:10:15,000 Speaker 8: a lot of it is being backed by expensive debt 215 00:10:15,000 --> 00:10:16,760 Speaker 8: that people can no longer afford to pay, and some 216 00:10:16,840 --> 00:10:18,600 Speaker 8: are even just thinking it might not even be worth 217 00:10:18,640 --> 00:10:20,600 Speaker 8: it to try to negotiate or put in more money 218 00:10:20,640 --> 00:10:21,480 Speaker 8: into this property. 219 00:10:21,720 --> 00:10:23,480 Speaker 6: So they're cutting their losses and that can have. 220 00:10:23,800 --> 00:10:28,480 Speaker 8: Rippling effects for property owners, investors, lenders, the major banks, 221 00:10:28,800 --> 00:10:33,240 Speaker 8: and then cities, you know, retailers, city revenues, taxes. 222 00:10:33,880 --> 00:10:37,439 Speaker 1: Talk to us about San Francisco because that's probably, pound 223 00:10:37,480 --> 00:10:41,120 Speaker 1: for pound, the hardest hit city certainly in the United States. 224 00:10:41,480 --> 00:10:42,480 Speaker 1: How bad is it there? 225 00:10:42,840 --> 00:10:44,760 Speaker 8: It's pretty bad there. I mean, the office market is 226 00:10:44,800 --> 00:10:46,920 Speaker 8: doing the worst in San Francisco. It really saw the 227 00:10:46,960 --> 00:10:49,520 Speaker 8: major boom that followed from the growth of these tech 228 00:10:49,520 --> 00:10:53,400 Speaker 8: companies over the past decade. And you've seen that these 229 00:10:53,440 --> 00:10:56,760 Speaker 8: tech companies really led the remote work environment, and a 230 00:10:56,760 --> 00:10:58,800 Speaker 8: lot of people living in San Francisco they have to 231 00:10:58,800 --> 00:11:02,600 Speaker 8: commute the farthest community back to downtown. They're dealing with 232 00:11:02,840 --> 00:11:07,080 Speaker 8: a crisis in downtown where people are, you know, feel 233 00:11:07,160 --> 00:11:09,720 Speaker 8: unsafe going into the city. And then you also have 234 00:11:09,920 --> 00:11:13,080 Speaker 8: a lot of major landlords that are just giving back 235 00:11:13,120 --> 00:11:17,360 Speaker 8: the keys on office buildings, hotels, and even apartments there 236 00:11:17,400 --> 00:11:19,520 Speaker 8: because it's all kind of fuel about this tech ecosystem 237 00:11:19,520 --> 00:11:20,760 Speaker 8: which is being pulled back. 238 00:11:21,440 --> 00:11:24,760 Speaker 5: So even the apartments then, because I always hope and 239 00:11:24,960 --> 00:11:27,040 Speaker 5: Eric Adams in New York is pushing for the return 240 00:11:27,080 --> 00:11:30,000 Speaker 5: to office still, but selfishly, I always hope that these 241 00:11:30,040 --> 00:11:33,040 Speaker 5: buildings can just get converted into apartments overnight so that 242 00:11:33,200 --> 00:11:36,160 Speaker 5: I can afford an apartment in New York City. But 243 00:11:36,240 --> 00:11:40,520 Speaker 5: that sounds like that's not going to happen, and everyone yeah, yeah, yeah. 244 00:11:40,280 --> 00:11:43,520 Speaker 8: I mean, you know, apartments are a different issue from offices. Obviously, 245 00:11:43,559 --> 00:11:48,440 Speaker 8: offices are suffering from a complete fundamental, you know, return 246 00:11:48,520 --> 00:11:52,240 Speaker 8: to work crisis. But apartments are also suffering from the 247 00:11:52,280 --> 00:11:55,480 Speaker 8: pullback of these companies. And especially in San Francisco, you 248 00:11:55,520 --> 00:11:57,880 Speaker 8: have a major local landlord that defaults it on a 249 00:11:57,960 --> 00:12:00,720 Speaker 8: debt portfolio. Apartments that were valued more than a billion 250 00:12:00,800 --> 00:12:04,720 Speaker 8: dollars just three years ago. And you're seeing in New York, 251 00:12:04,800 --> 00:12:07,520 Speaker 8: you know, a lot of people are pitching conversions of 252 00:12:07,520 --> 00:12:10,560 Speaker 8: offices into apartments. It's just not that easy, right, even 253 00:12:10,600 --> 00:12:13,880 Speaker 8: around Midtown Manhattan, a lot of buildings are big floor plates, 254 00:12:13,920 --> 00:12:16,480 Speaker 8: they're dark in the interior, and it costs a lot 255 00:12:16,520 --> 00:12:18,920 Speaker 8: of money. Even if you even if everything works at 256 00:12:18,960 --> 00:12:22,400 Speaker 8: engineering and architecture wise, to convert an office building, it 257 00:12:22,440 --> 00:12:25,319 Speaker 8: costs a lot of money and it requires financing, which 258 00:12:25,400 --> 00:12:27,520 Speaker 8: there is no availability today. 259 00:12:27,640 --> 00:12:29,760 Speaker 1: Wow, all right, So is there when you talk to 260 00:12:29,800 --> 00:12:33,000 Speaker 1: the folks in the real estate business, is there any solution? 261 00:12:33,080 --> 00:12:34,520 Speaker 1: I mean, I'm looking at a chart you got you 262 00:12:34,559 --> 00:12:37,160 Speaker 1: having your story here. We're talking about office availability rate 263 00:12:37,160 --> 00:12:40,120 Speaker 1: and select the US downtowns. I mean San Francisco thirty 264 00:12:40,160 --> 00:12:43,079 Speaker 1: two point seven percent office of I mean it's Houston 265 00:12:43,120 --> 00:12:45,520 Speaker 1: thirty two percent, and land To thirty one percent, LA 266 00:12:45,679 --> 00:12:48,160 Speaker 1: thirty percent. I mean, is there when you talk to 267 00:12:48,160 --> 00:12:51,440 Speaker 1: the real estate people, is there any solution here or 268 00:12:51,600 --> 00:12:55,240 Speaker 1: do you just wait it out and hope for a turnback, 269 00:12:55,880 --> 00:12:58,560 Speaker 1: because it seems like some of the work from home 270 00:12:58,840 --> 00:13:02,000 Speaker 1: hybrid is here to say, yeah. 271 00:13:01,240 --> 00:13:03,839 Speaker 8: I mean, I think the big I think people have 272 00:13:03,920 --> 00:13:06,320 Speaker 8: been waiting for three years, and some of them have 273 00:13:06,400 --> 00:13:09,160 Speaker 8: been extending their loans, and I think the environment today 274 00:13:09,200 --> 00:13:12,600 Speaker 8: that's different from previous crisis was that not only are 275 00:13:12,640 --> 00:13:17,319 Speaker 8: we dealing with this existential crisis of work habits changing, 276 00:13:17,600 --> 00:13:22,679 Speaker 8: you're also dealing with all the fastest interest rate increases 277 00:13:23,000 --> 00:13:26,520 Speaker 8: in a long time, and so they really can't extend 278 00:13:26,520 --> 00:13:28,400 Speaker 8: for that much longer, and so you're starting to have 279 00:13:28,600 --> 00:13:31,880 Speaker 8: people cut their losses. You have the black Stones, a 280 00:13:31,920 --> 00:13:34,040 Speaker 8: brook Fields. So these are some of the biggest institutions 281 00:13:34,040 --> 00:13:36,839 Speaker 8: that are walking away from their portfolios, walking away from 282 00:13:36,960 --> 00:13:39,480 Speaker 8: hundreds and millions dollars of investments, and that sets a 283 00:13:39,520 --> 00:13:41,360 Speaker 8: signal for the rest of the market. Right If that's 284 00:13:41,360 --> 00:13:44,200 Speaker 8: a signal to say, if even the most well capitalized 285 00:13:44,360 --> 00:13:47,720 Speaker 8: institutions are just giving up on these nice office buildings 286 00:13:47,720 --> 00:13:51,600 Speaker 8: that have financial and tech tenants inside them, then how 287 00:13:51,600 --> 00:13:52,720 Speaker 8: does that fare for the rest of them? 288 00:13:52,720 --> 00:13:52,960 Speaker 6: Market. 289 00:13:53,000 --> 00:13:54,960 Speaker 8: How does that fear for the older buildings that like 290 00:13:55,000 --> 00:13:57,160 Speaker 8: nobody even wants to be in. And so I think 291 00:13:57,240 --> 00:14:02,800 Speaker 8: people are my sources, are really waiting for this to 292 00:14:02,960 --> 00:14:06,520 Speaker 8: unravel over the next maybe six to ten years, just 293 00:14:06,559 --> 00:14:12,120 Speaker 8: as you're seeing with shopping malls, that's something that evolved 294 00:14:12,160 --> 00:14:13,880 Speaker 8: more than a decade ago, and it's still evolving. You 295 00:14:13,920 --> 00:14:17,040 Speaker 8: still have dead zombie malls that are kind of sitting empty. 296 00:14:17,040 --> 00:14:18,840 Speaker 8: People don't know what to do with them, and they're 297 00:14:18,880 --> 00:14:21,640 Speaker 8: kind of just limping along until someone's willing to come 298 00:14:21,640 --> 00:14:22,960 Speaker 8: in and take it. 299 00:14:22,880 --> 00:14:24,080 Speaker 6: For less and dirt value. 300 00:14:24,480 --> 00:14:27,280 Speaker 5: Who are the winners then, of the downfall of commercial 301 00:14:27,360 --> 00:14:27,880 Speaker 5: real estate? 302 00:14:28,440 --> 00:14:30,560 Speaker 8: I think the winners are people that have a lot 303 00:14:30,600 --> 00:14:32,720 Speaker 8: of cash on hand, have the flexibility to move, and 304 00:14:32,760 --> 00:14:36,960 Speaker 8: maybe have the expertise to be able to make some 305 00:14:37,000 --> 00:14:41,400 Speaker 8: of these investments work. You know, we're talking with some 306 00:14:42,040 --> 00:14:45,200 Speaker 8: buyers out there. I mean I did a previous story 307 00:14:45,320 --> 00:14:48,280 Speaker 8: on New York wealthy buyers that was interested in looking 308 00:14:48,280 --> 00:14:51,640 Speaker 8: at offices, and you have these family offices. These really 309 00:14:51,640 --> 00:14:54,600 Speaker 8: wealthy individuals that see a really good opportunity to snatch 310 00:14:54,680 --> 00:14:59,240 Speaker 8: up offices at a major discount from some they wouldn't 311 00:14:59,240 --> 00:15:00,239 Speaker 8: have been able to access. 312 00:15:00,280 --> 00:15:02,720 Speaker 1: You know, yeah, have we seen, like I'm just saying 313 00:15:02,840 --> 00:15:05,200 Speaker 1: here in New York City, have we seen any major 314 00:15:05,200 --> 00:15:08,000 Speaker 1: transactions in terms of a building being bought or sold 315 00:15:08,040 --> 00:15:10,840 Speaker 1: that you could get a sense of, Oh boy, the 316 00:15:10,880 --> 00:15:15,240 Speaker 1: market is off ten percent, fifty percent from pre pandemic levels. 317 00:15:15,320 --> 00:15:17,160 Speaker 1: Do we have a feel for even what the market 318 00:15:17,240 --> 00:15:20,200 Speaker 1: is now for office space in the city. 319 00:15:20,640 --> 00:15:23,800 Speaker 8: That's the biggest question is people don't know where values 320 00:15:23,800 --> 00:15:26,200 Speaker 8: are at, which is why there's so few transactions. I mean, essentially, 321 00:15:26,200 --> 00:15:27,760 Speaker 8: if you don't have to sell a building right now, 322 00:15:27,840 --> 00:15:30,120 Speaker 8: you shouldn't be selling it because people are waiting for 323 00:15:30,160 --> 00:15:32,600 Speaker 8: big discounts. But one example we have in our story 324 00:15:32,680 --> 00:15:36,440 Speaker 8: is Wells Fargo recently sold a pretty trophy tower in 325 00:15:36,480 --> 00:15:40,440 Speaker 8: the middle of you know, downtown San Francisco for two 326 00:15:40,560 --> 00:15:43,920 Speaker 8: hundred dollars per square foot, which is down from the 327 00:15:43,960 --> 00:15:47,160 Speaker 8: market peak justin twenty nineteen, right before the pandemic, of 328 00:15:47,320 --> 00:15:49,239 Speaker 8: more than one thousand dollars wowwarefoot. 329 00:15:49,440 --> 00:15:51,160 Speaker 6: Okay, so that's a big discount. 330 00:15:51,480 --> 00:15:54,640 Speaker 8: Right in New York you're not necessarily seeing those massive 331 00:15:54,680 --> 00:15:57,960 Speaker 8: deals yet, but people are waiting for it. I mean, 332 00:15:57,960 --> 00:16:01,600 Speaker 8: some of the smaller one off office buildings that we've 333 00:16:01,640 --> 00:16:05,160 Speaker 8: covered took like maybe a forty percent discount from previous prices, 334 00:16:05,240 --> 00:16:06,800 Speaker 8: maybe one hundred million dollars. 335 00:16:06,560 --> 00:16:08,240 Speaker 6: Less than a decade ago. 336 00:16:09,120 --> 00:16:13,240 Speaker 8: But it's not looking crave, especially for the older office buildings, 337 00:16:13,600 --> 00:16:15,640 Speaker 8: especially that aren't getting attention. 338 00:16:15,840 --> 00:16:17,440 Speaker 1: Yeah, I agree. I think one of my takeaways from 339 00:16:17,480 --> 00:16:19,280 Speaker 1: your story is this is going to be a multime 340 00:16:19,400 --> 00:16:23,480 Speaker 1: multi multi year story playing out over the deterioration and 341 00:16:23,520 --> 00:16:25,720 Speaker 1: the value of commercial real estate and a lot of 342 00:16:25,760 --> 00:16:28,600 Speaker 1: major markets at Natalie Wog she's a real estate reporter 343 00:16:28,640 --> 00:16:31,200 Speaker 1: for Bloomberg News, joining us here in the Bloomberg Interactive 344 00:16:31,200 --> 00:16:34,640 Speaker 1: Broker Studio with her Big Take story World's empty office 345 00:16:34,640 --> 00:16:38,480 Speaker 1: buildings become debt time bomb. You can find those big 346 00:16:38,520 --> 00:16:42,040 Speaker 1: take stories and they're absolutely worth the reads across the 347 00:16:42,080 --> 00:16:44,400 Speaker 1: board at Bloomberg dot Com, Slash Big Take can go 348 00:16:44,440 --> 00:16:47,800 Speaker 1: on the Bloomberg terminal, NI Space Big Take will get 349 00:16:47,840 --> 00:16:50,480 Speaker 1: you to those stories. You appreciate getting some time from 350 00:16:50,680 --> 00:16:51,360 Speaker 1: Natalie Wang. 351 00:16:51,720 --> 00:16:54,840 Speaker 7: You're listening to the tape cans Are Live program Bloomberg 352 00:16:54,920 --> 00:16:58,800 Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio. Tune 353 00:16:58,840 --> 00:17:01,800 Speaker 7: in up Bloomberg dot Com and the Bloomberg Business app. 354 00:17:01,840 --> 00:17:04,639 Speaker 7: You can also listen live on Amazon Alexa from our 355 00:17:04,680 --> 00:17:09,080 Speaker 7: flagship New York station, Just say Alexa playing Bloomberg eleven thirty. 356 00:17:10,640 --> 00:17:13,600 Speaker 1: Artificial intelligence it seems to be on the tip of 357 00:17:13,600 --> 00:17:17,600 Speaker 1: the tongue of every CEO out there as a you know, 358 00:17:17,640 --> 00:17:19,760 Speaker 1: kind of something that will really impact their business and 359 00:17:19,800 --> 00:17:23,320 Speaker 1: maybe efficiency, operational efficiency. We want to talk to somebody 360 00:17:23,320 --> 00:17:26,560 Speaker 1: who's kind of actually in that business. Matt Calkins joins us. 361 00:17:26,600 --> 00:17:29,240 Speaker 1: He's a CEO and founder of Apian. It is a 362 00:17:29,280 --> 00:17:34,359 Speaker 1: publicly traded application software company. Appn is a ticker to 363 00:17:34,440 --> 00:17:37,719 Speaker 1: load into your Bloomberg professional service. The stock is up 364 00:17:37,800 --> 00:17:40,600 Speaker 1: forty six percent year today. It's got a market cap 365 00:17:40,640 --> 00:17:43,080 Speaker 1: about three point five billion dollars. Matt, thanks so much 366 00:17:43,119 --> 00:17:45,600 Speaker 1: for joining us here. First of all, tell us what 367 00:17:45,800 --> 00:17:48,760 Speaker 1: you guys that do at Apien. How do you fit 368 00:17:48,800 --> 00:17:50,480 Speaker 1: into the tech stack? 369 00:17:54,560 --> 00:17:57,359 Speaker 9: Yeah, well, it's great to be here. We're a platform 370 00:17:57,480 --> 00:18:01,240 Speaker 9: for building and running new processes and we've been selling 371 00:18:01,320 --> 00:18:05,560 Speaker 9: AI as part of those processes for years to major corporations. 372 00:18:06,480 --> 00:18:10,439 Speaker 1: So in particular processes. So just you know, what are 373 00:18:10,480 --> 00:18:13,080 Speaker 1: the products, what are the services that you guys offer 374 00:18:13,119 --> 00:18:13,640 Speaker 1: your clients. 375 00:18:18,040 --> 00:18:20,240 Speaker 9: Yeah, process is like a workflow, it's a series of 376 00:18:20,280 --> 00:18:23,120 Speaker 9: logical actions that a corporation does in order to execute 377 00:18:23,119 --> 00:18:26,639 Speaker 9: its own identity or its relationship with customers, and often 378 00:18:26,680 --> 00:18:29,640 Speaker 9: that means delegating some of that work to digital workers 379 00:18:29,680 --> 00:18:32,720 Speaker 9: like AI or business rules or robotic process automation. And 380 00:18:32,960 --> 00:18:36,240 Speaker 9: Appian ships with a full suite of digital workers, including 381 00:18:36,520 --> 00:18:37,800 Speaker 9: many different forms of AI. 382 00:18:38,720 --> 00:18:41,760 Speaker 5: So talk to me then about what your deals are 383 00:18:41,800 --> 00:18:44,640 Speaker 5: looking like these days and how that's changed, if at all, 384 00:18:44,840 --> 00:18:49,280 Speaker 5: since this AI boom began, or are you getting different calls 385 00:18:49,320 --> 00:18:50,680 Speaker 5: now than you got previously. 386 00:18:55,400 --> 00:18:57,600 Speaker 9: This AI boom has been great for us. Let me 387 00:18:57,600 --> 00:19:00,400 Speaker 9: say that Appian is a scrappy innovator in an industry 388 00:19:00,400 --> 00:19:04,240 Speaker 9: otherwise dominated by giant tech firms, and so when a 389 00:19:04,359 --> 00:19:07,600 Speaker 9: change comes along, we know that's our advantage. And so 390 00:19:08,080 --> 00:19:10,600 Speaker 9: the prominence of AI is a very good thing for us. 391 00:19:10,600 --> 00:19:13,119 Speaker 9: And it's absolutely getting us a higher profile because we 392 00:19:14,040 --> 00:19:16,840 Speaker 9: try to be a step ahead, and so we've maybe 393 00:19:16,840 --> 00:19:19,280 Speaker 9: got some insights into where AI is going and our 394 00:19:19,320 --> 00:19:20,600 Speaker 9: customers count on us for that. 395 00:19:21,119 --> 00:19:23,360 Speaker 1: So one of the things I think, you know, when 396 00:19:23,359 --> 00:19:26,399 Speaker 1: people talk about AI AI in the business context, they 397 00:19:26,480 --> 00:19:30,959 Speaker 1: think it will lead to efficiencies. Do you see that, 398 00:19:31,080 --> 00:19:35,160 Speaker 1: and if so, kind of whereabouts. 399 00:19:38,200 --> 00:19:40,600 Speaker 9: Absolutely, AI is going to lead to efficiency. It's not 400 00:19:40,600 --> 00:19:43,960 Speaker 9: going to replace people. It's going to accelerate people. We're 401 00:19:44,000 --> 00:19:45,960 Speaker 9: all going to become more productive as a result of 402 00:19:46,040 --> 00:19:48,840 Speaker 9: working side by side with AI. And the main change 403 00:19:48,880 --> 00:19:50,760 Speaker 9: over the next few years is how we all come 404 00:19:50,800 --> 00:19:55,600 Speaker 9: to accommodate having AI as a partner in our work. 405 00:19:56,000 --> 00:19:57,960 Speaker 9: It's going to enable us to do more things, to 406 00:19:58,400 --> 00:20:02,120 Speaker 9: skip ahead on the the dull parts, the repetitive parts, 407 00:20:02,359 --> 00:20:06,080 Speaker 9: to emphasize the use of our judgment and let the 408 00:20:06,119 --> 00:20:08,080 Speaker 9: machine do the rest. I think AI is going to 409 00:20:08,119 --> 00:20:12,560 Speaker 9: be an exceptionally empowering technology, a partner rather than a 410 00:20:12,600 --> 00:20:13,760 Speaker 9: replacement for workers. 411 00:20:14,680 --> 00:20:17,080 Speaker 5: And Matt just to say apologies to our audience, we've 412 00:20:17,080 --> 00:20:18,720 Speaker 5: got a little bit of a delay with you on 413 00:20:18,800 --> 00:20:21,000 Speaker 5: the line with us, But I do want to talk 414 00:20:21,040 --> 00:20:23,040 Speaker 5: about the clients that you work with a little bit more. 415 00:20:23,080 --> 00:20:26,359 Speaker 5: Because you advertise an eight week timeline to fulfill the 416 00:20:26,359 --> 00:20:29,040 Speaker 5: needs of the clients that come to you. How do 417 00:20:29,080 --> 00:20:33,560 Speaker 5: you accomplish that within kind of the different industries and 418 00:20:33,600 --> 00:20:35,640 Speaker 5: different clients that are coming your way? 419 00:20:35,640 --> 00:20:37,359 Speaker 6: How do you get that speed? Every time? 420 00:20:42,119 --> 00:20:45,560 Speaker 9: Happy and differentiates itself by being quick to implement a 421 00:20:45,720 --> 00:20:49,280 Speaker 9: working and value add product. We've always done that, and 422 00:20:49,280 --> 00:20:55,120 Speaker 9: it differentiates us because we're focused on the return on investment. 423 00:20:55,440 --> 00:20:58,280 Speaker 9: In a year like this, return on investment is doubly important. 424 00:20:58,320 --> 00:21:01,080 Speaker 9: Every company out there is trying to do more with less, 425 00:21:01,320 --> 00:21:02,760 Speaker 9: and so for us to be able to say that, 426 00:21:02,840 --> 00:21:05,960 Speaker 9: not only can we get you the value of artificial intelligence, 427 00:21:06,000 --> 00:21:07,879 Speaker 9: we can do it within eight weeks. We could do 428 00:21:07,920 --> 00:21:10,440 Speaker 9: it in a short period and you will see the benefit. 429 00:21:10,480 --> 00:21:12,600 Speaker 9: You're going to see it before the end of this year, 430 00:21:12,640 --> 00:21:14,399 Speaker 9: and it will be paying off by the end of 431 00:21:14,440 --> 00:21:17,120 Speaker 9: the year. That's a really essential pitch in a moment 432 00:21:17,200 --> 00:21:21,040 Speaker 9: of economic uncertainty. We've been making that pitch for years 433 00:21:21,080 --> 00:21:23,320 Speaker 9: and coming through on it, but I think it's never 434 00:21:23,359 --> 00:21:24,840 Speaker 9: been more important than it is today. 435 00:21:25,760 --> 00:21:28,800 Speaker 1: So, Matt, your stock's up forty six percent year today. 436 00:21:28,800 --> 00:21:29,719 Speaker 1: What is a market like? 437 00:21:34,359 --> 00:21:36,320 Speaker 9: Well, you know, the market bounces around a lot. I 438 00:21:36,359 --> 00:21:39,320 Speaker 9: tend not to take it too seriously. To be honest, 439 00:21:39,480 --> 00:21:42,840 Speaker 9: I don't watch the market. I watch our value add 440 00:21:42,840 --> 00:21:45,440 Speaker 9: I watch what we're doing for customers, and I watch 441 00:21:45,480 --> 00:21:48,359 Speaker 9: whether we're making investments that are going to pay big, 442 00:21:48,480 --> 00:21:52,480 Speaker 9: big benefits in the next year or the year after that. 443 00:21:53,080 --> 00:21:55,520 Speaker 9: A lot of what we're doing today, the customers we're serving, 444 00:21:55,600 --> 00:21:57,760 Speaker 9: the features we're writing, you won't see that in the 445 00:21:57,760 --> 00:22:00,160 Speaker 9: stock price, for better or worse, for a long time. 446 00:22:00,240 --> 00:22:02,639 Speaker 9: So I try not to get too caught up in it. 447 00:22:03,560 --> 00:22:06,840 Speaker 5: Okay, fair enough, but you got to look at it 448 00:22:06,880 --> 00:22:08,440 Speaker 5: a little bit here to be fair. 449 00:22:08,600 --> 00:22:08,840 Speaker 10: Right. 450 00:22:09,080 --> 00:22:11,840 Speaker 5: And you know, I'm sure that you, among many others 451 00:22:11,880 --> 00:22:15,960 Speaker 5: of your peers have benefited from this AI rally. What 452 00:22:16,000 --> 00:22:18,520 Speaker 5: would you say to the skeptics that say, hey, you 453 00:22:18,560 --> 00:22:20,959 Speaker 5: got to look at the fundamentals. Don't get too excited 454 00:22:21,000 --> 00:22:23,320 Speaker 5: about this AI rally. Don't just go in on any 455 00:22:23,359 --> 00:22:26,880 Speaker 5: company that mentions the word AI in their description. 456 00:22:27,800 --> 00:22:29,840 Speaker 9: Oh yeah, there's a lot of hype around AI. You're 457 00:22:29,920 --> 00:22:32,200 Speaker 9: right about that, But there's also going to be substance. 458 00:22:32,480 --> 00:22:34,760 Speaker 9: There will be real value, and you'll see it this year. 459 00:22:34,800 --> 00:22:38,119 Speaker 9: There'll be case studies publicly. I mean, that's the next 460 00:22:38,160 --> 00:22:41,080 Speaker 9: wave in the AI storyline. You're going to start seeing 461 00:22:41,119 --> 00:22:44,040 Speaker 9: a lot of case studies in which that organizations are 462 00:22:44,080 --> 00:22:49,320 Speaker 9: benefiting from using AI. Right now, for example, we're we're 463 00:22:49,760 --> 00:22:53,320 Speaker 9: working to take thirty percent off the time that it 464 00:22:52,760 --> 00:22:57,480 Speaker 9: takes to run a critical visa process, for example, thirty 465 00:22:57,480 --> 00:23:01,160 Speaker 9: percent just by introducing AI. It's extraordinary much productivity gain 466 00:23:01,600 --> 00:23:06,160 Speaker 9: we can implement and realize in a short period using 467 00:23:06,200 --> 00:23:09,200 Speaker 9: AI technology. So yes, it's hype, but it's also substance, 468 00:23:09,480 --> 00:23:12,880 Speaker 9: and the substance will will be clear this year. 469 00:23:13,880 --> 00:23:16,040 Speaker 1: Matt, when does your company become profitable? 470 00:23:18,200 --> 00:23:21,280 Speaker 9: Well, you know, we stated in our last quarterly announcement 471 00:23:21,400 --> 00:23:25,200 Speaker 9: that it was our expectation that we would break the 472 00:23:25,800 --> 00:23:28,960 Speaker 9: even barrier next year and that we would be profitable 473 00:23:29,200 --> 00:23:32,679 Speaker 9: in twenty twenty five, and that is my intention today. 474 00:23:33,240 --> 00:23:34,880 Speaker 1: All right, Matt, thanks so much for joining us. Really 475 00:23:34,920 --> 00:23:38,119 Speaker 1: appreciate getting a little bit of your time. Matt Calkins, 476 00:23:38,359 --> 00:23:40,480 Speaker 1: CEO and founder of Apien. 477 00:23:42,119 --> 00:23:45,520 Speaker 7: You're listening to the team Ken's are Live program Bloomberg 478 00:23:45,600 --> 00:23:49,000 Speaker 7: Markets weekdays at ten am Eastern on Bloomberg dot com, 479 00:23:49,040 --> 00:23:52,200 Speaker 7: the iHeartRadio app and the Bloomberg Business app, or listen 480 00:23:52,240 --> 00:23:54,360 Speaker 7: on demand wherever you get your podcasts. 481 00:23:56,480 --> 00:23:58,720 Speaker 1: Now, I'm paying attention to the more fact securities market 482 00:23:58,760 --> 00:24:01,760 Speaker 1: because my lender owned my mortgage for like fifteen seconds, 483 00:24:01,920 --> 00:24:03,680 Speaker 1: oh wow, and then I got to notice that it's 484 00:24:03,680 --> 00:24:06,280 Speaker 1: some bank on the West coast, and then I have 485 00:24:06,320 --> 00:24:08,119 Speaker 1: no idea where it is now, but I pay my 486 00:24:08,119 --> 00:24:10,560 Speaker 1: mortgage every month so it's a good MBS. So let's 487 00:24:10,560 --> 00:24:13,439 Speaker 1: talk about the mortgage backed securities market. Erica Adelberg. She 488 00:24:13,560 --> 00:24:15,400 Speaker 1: does this for a living. She's made a career out 489 00:24:15,400 --> 00:24:18,480 Speaker 1: of it. Somehow people do that stuff. Erica Aidlberg, NBS Strategist, 490 00:24:18,480 --> 00:24:20,960 Speaker 1: Bloomberg Intelligence. She joins us live here in our Bloomberg 491 00:24:21,280 --> 00:24:24,240 Speaker 1: Interactive Broker studio because she's a player. She doesn't phone 492 00:24:24,240 --> 00:24:26,440 Speaker 1: it in, she doesn't mail it in. She comes into 493 00:24:26,440 --> 00:24:30,960 Speaker 1: the studio. Erica, what's your market looking like? With rising 494 00:24:31,040 --> 00:24:34,320 Speaker 1: interest rates, with a federal Reserve that's talking about one, 495 00:24:34,480 --> 00:24:36,440 Speaker 1: maybe two more hikes this year, what's that due to 496 00:24:36,480 --> 00:24:37,000 Speaker 1: your market? 497 00:24:38,119 --> 00:24:41,680 Speaker 10: Very interesting environment right now for the mortgage market because 498 00:24:42,040 --> 00:24:46,560 Speaker 10: as high as mortgage rates seemed to the homeowner, mortgage 499 00:24:46,640 --> 00:24:50,960 Speaker 10: yields on secondary mortgages are actually below Fed funds right now. 500 00:24:51,400 --> 00:24:52,159 Speaker 1: Why would that be? 501 00:24:53,160 --> 00:24:56,040 Speaker 10: Well, for one thing, unlike you, unfortunately, most people did 502 00:24:56,040 --> 00:24:59,480 Speaker 10: take out mortgages in twenty and twenty twenty one, and 503 00:24:59,560 --> 00:25:02,040 Speaker 10: so they have coupons, you know, closer to two to 504 00:25:02,080 --> 00:25:05,880 Speaker 10: four percent that for being the high end, and while 505 00:25:05,920 --> 00:25:08,200 Speaker 10: you know, prices do adjust to that. At the same time, 506 00:25:08,280 --> 00:25:11,040 Speaker 10: in theory, there's a lot less risk to investors in 507 00:25:11,080 --> 00:25:13,959 Speaker 10: that lower coupon stuff because it's nobody's going to prepaid, 508 00:25:13,960 --> 00:25:16,920 Speaker 10: you know, it's basically it's a known quantity at this point. 509 00:25:17,040 --> 00:25:20,879 Speaker 10: So the yields are actually around for seventy or something 510 00:25:21,000 --> 00:25:22,880 Speaker 10: for the four seventy seven I think for the mortgage 511 00:25:22,880 --> 00:25:24,920 Speaker 10: index as a whole, which is really skewed towards as 512 00:25:24,920 --> 00:25:27,359 Speaker 10: lower coupons, and then you have you know, so for 513 00:25:27,400 --> 00:25:29,920 Speaker 10: at five or five, you have FED funds up abound 514 00:25:29,920 --> 00:25:33,200 Speaker 10: at five twenty five, really interesting time. So it means 515 00:25:33,200 --> 00:25:35,960 Speaker 10: you're actually earning less yield on your mortgage backed security 516 00:25:36,080 --> 00:25:38,600 Speaker 10: for most people than you are for most investors than 517 00:25:38,640 --> 00:25:41,960 Speaker 10: you are in the funding market. And the other interesting 518 00:25:42,000 --> 00:25:44,919 Speaker 10: fact mortgages trade kind of current month forward month. It's 519 00:25:44,960 --> 00:25:49,600 Speaker 10: an interesting technical market. Mortgages actually are more expensive and 520 00:25:49,640 --> 00:25:52,520 Speaker 10: forward months now because effectively you're in container your your 521 00:25:52,560 --> 00:25:54,680 Speaker 10: storage costs are high for mortgages right. 522 00:25:54,600 --> 00:25:56,960 Speaker 11: Now, which is a really unusual situation. 523 00:25:57,640 --> 00:26:01,840 Speaker 5: So how does the potential FED hike in July impact. 524 00:26:01,520 --> 00:26:04,359 Speaker 10: That, Well, it depends on what goes on with mortgage 525 00:26:04,359 --> 00:26:07,960 Speaker 10: spreads and mortgage yields, but it could put even more 526 00:26:08,600 --> 00:26:11,560 Speaker 10: negative carry into the mortgage market. You know, from an 527 00:26:11,560 --> 00:26:14,480 Speaker 10: investment standpoint, right now, we're at five to twenty five overbound, 528 00:26:14,520 --> 00:26:17,119 Speaker 10: if we're five to seventy five overbound, depending on how 529 00:26:17,200 --> 00:26:20,960 Speaker 10: much mortgages mortgage yields go up in tandem, which you 530 00:26:21,000 --> 00:26:24,320 Speaker 10: know right now with the curve inversion, what's happening is 531 00:26:24,320 --> 00:26:26,520 Speaker 10: the long end is actually staying fairly pinned in the 532 00:26:26,520 --> 00:26:29,480 Speaker 10: short end's going up a lot. So as a result, 533 00:26:30,040 --> 00:26:32,639 Speaker 10: could make an even more negative carry for some investors 534 00:26:32,640 --> 00:26:34,240 Speaker 10: to hold mortgage backed securities. 535 00:26:34,640 --> 00:26:37,080 Speaker 1: So does anybody do institutional investors even pick up your 536 00:26:37,080 --> 00:26:38,960 Speaker 1: phone call Erica? I mean, do they want to talk 537 00:26:38,960 --> 00:26:41,320 Speaker 1: to you about the mortgage back securities market? Or is 538 00:26:41,320 --> 00:26:43,679 Speaker 1: this just something I've got other places I can go. 539 00:26:44,119 --> 00:26:48,040 Speaker 10: Well, we had our mortgage agency summit this week with 540 00:26:48,200 --> 00:26:50,600 Speaker 10: a lot of institutional investors. 541 00:26:50,200 --> 00:26:51,919 Speaker 1: And so you have people showed up. 542 00:26:51,960 --> 00:26:54,840 Speaker 11: It was sold out, really okay, standing room only. 543 00:26:55,160 --> 00:26:57,480 Speaker 1: Nice, all right, So what were some of the big 544 00:26:57,480 --> 00:26:58,200 Speaker 1: topics there? 545 00:26:58,720 --> 00:27:02,440 Speaker 10: You know, some of the big topics concerns around bank regulations, 546 00:27:02,840 --> 00:27:04,960 Speaker 10: because you know what that's going to do in terms 547 00:27:04,960 --> 00:27:06,800 Speaker 10: of whether or not. So some people feel like increased 548 00:27:06,840 --> 00:27:10,520 Speaker 10: bank regulations could actually help mortgage backed securities because they 549 00:27:10,560 --> 00:27:12,879 Speaker 10: may have to own more liquid assets. But at the 550 00:27:12,920 --> 00:27:16,639 Speaker 10: same time, and mortgages are considered liquid, there's a question 551 00:27:16,760 --> 00:27:20,200 Speaker 10: mark about what really should be considered liquid now because 552 00:27:20,400 --> 00:27:23,320 Speaker 10: SVB Bank, for instance, the problem was, yeah, mortgage back 553 00:27:23,359 --> 00:27:25,479 Speaker 10: securities are liquid, but you don't want to sell them 554 00:27:25,480 --> 00:27:27,800 Speaker 10: wherein they're at eighty cents on the dollar and you're 555 00:27:27,840 --> 00:27:30,040 Speaker 10: going to take a twenty point loss besides which they 556 00:27:30,040 --> 00:27:32,920 Speaker 10: held them in their health maturity accounts. So you know, 557 00:27:32,960 --> 00:27:35,240 Speaker 10: a lot of discussions about whether or not the banks 558 00:27:35,640 --> 00:27:37,760 Speaker 10: can get back involved, and that's really one of the 559 00:27:37,760 --> 00:27:39,040 Speaker 10: reasons that mortgages. 560 00:27:38,640 --> 00:27:39,840 Speaker 11: Are widened as much as they have. 561 00:27:40,800 --> 00:27:42,960 Speaker 10: But in general, a lot of discussion also just about 562 00:27:43,040 --> 00:27:45,480 Speaker 10: how wide mortgage spreads have gotten. At one hundred and 563 00:27:45,520 --> 00:27:48,040 Speaker 10: ninety basis points for the current coupon in the end 564 00:27:48,040 --> 00:27:50,000 Speaker 10: of May, that was the widest we've been since the 565 00:27:50,000 --> 00:27:53,600 Speaker 10: financial crisis. So a lot of institutional vesters, including a 566 00:27:53,600 --> 00:27:55,560 Speaker 10: lot of our panelists, you know, really felt like that 567 00:27:55,640 --> 00:27:57,800 Speaker 10: was a great time to buy. We've tightened twenty five 568 00:27:57,800 --> 00:27:59,320 Speaker 10: basis points thirty basis. 569 00:27:59,040 --> 00:27:59,680 Speaker 11: Points since then. 570 00:28:00,080 --> 00:28:02,520 Speaker 10: You know, maybe time for some people to reassess where 571 00:28:02,520 --> 00:28:05,159 Speaker 10: we are now relative to risks. But you know, general 572 00:28:05,200 --> 00:28:08,240 Speaker 10: consensus that spreads in general offer a lot of. 573 00:28:08,280 --> 00:28:09,560 Speaker 11: Value for triple A assets. 574 00:28:10,240 --> 00:28:15,439 Speaker 5: Is that spread an indication of an upcoming recession or 575 00:28:15,520 --> 00:28:18,040 Speaker 5: is it the opposite. 576 00:28:18,800 --> 00:28:21,439 Speaker 11: No, I think it's an indication of a few risks. 577 00:28:21,480 --> 00:28:22,960 Speaker 10: One is the debt ceiling, and that's one of the 578 00:28:23,000 --> 00:28:25,320 Speaker 10: reasons the fiasco. That's one of the reasons that spreads 579 00:28:25,320 --> 00:28:26,760 Speaker 10: did come in as much as they did. 580 00:28:27,800 --> 00:28:28,000 Speaker 4: You know. 581 00:28:28,080 --> 00:28:31,560 Speaker 10: Another risk is the possibility of a recession. But on 582 00:28:31,600 --> 00:28:33,480 Speaker 10: the flip side, I think there's you know, kind of 583 00:28:33,480 --> 00:28:37,040 Speaker 10: consensus along among a lot of investors and fixing of 584 00:28:37,080 --> 00:28:40,520 Speaker 10: investors that corporate spreads would do worse. But you know, 585 00:28:40,600 --> 00:28:43,320 Speaker 10: from my perspective, as I wrote in my outlook this week, 586 00:28:43,400 --> 00:28:46,160 Speaker 10: I think it also just makes volatility probably rises a 587 00:28:46,200 --> 00:28:49,240 Speaker 10: little bit, and mortgage is a very sensitive to volatility 588 00:28:49,320 --> 00:28:51,120 Speaker 10: because they have a lot of interest rate risk. 589 00:28:51,640 --> 00:28:54,800 Speaker 1: All right, the big take story out of Bloomberg News today, 590 00:28:54,960 --> 00:28:58,959 Speaker 1: world's empty office buildings become debt time bomb. A tipping 591 00:28:58,960 --> 00:29:02,880 Speaker 1: point is coming. In the US alone, about one point 592 00:29:02,920 --> 00:29:05,600 Speaker 1: four trillion dollars of commercial real estate loans are due 593 00:29:05,600 --> 00:29:08,680 Speaker 1: this year and next. That's according to the Mortgage Bankers Association. 594 00:29:09,160 --> 00:29:10,360 Speaker 1: What does that mean for your business? 595 00:29:11,360 --> 00:29:13,800 Speaker 10: I mean you know I tend to focus a little 596 00:29:13,800 --> 00:29:17,160 Speaker 10: more on residential mortgage backed securities. But at the same time, 597 00:29:17,360 --> 00:29:20,480 Speaker 10: I think that means that I, well, let me take 598 00:29:20,520 --> 00:29:25,040 Speaker 10: one step back. Green sput fed Powell god, I am 599 00:29:25,040 --> 00:29:28,840 Speaker 10: old fed fed. Powell mentioned this week that he thinks 600 00:29:28,640 --> 00:29:32,120 Speaker 10: housing prices may be put in a bottom, and there 601 00:29:32,160 --> 00:29:34,640 Speaker 10: are a lot of indications that in residential mortgages we 602 00:29:34,720 --> 00:29:38,240 Speaker 10: may be averting a real housing recession. Another note actually 603 00:29:38,280 --> 00:29:42,720 Speaker 10: article on Bloomberg today. But you know, while residential mortgages 604 00:29:42,800 --> 00:29:45,880 Speaker 10: and mortgage market may not bring down the economy this time, 605 00:29:46,000 --> 00:29:47,840 Speaker 10: I think there's a lot of risks in the commercial 606 00:29:47,840 --> 00:29:51,520 Speaker 10: real estate sector. You know, it's ironic because one of 607 00:29:51,520 --> 00:29:53,240 Speaker 10: the things that has helped the housing market is that 608 00:29:53,240 --> 00:29:55,640 Speaker 10: a lot of people are working from home. The opposite 609 00:29:55,800 --> 00:29:58,560 Speaker 10: for commercial real estate and office buildings in particular. 610 00:29:58,880 --> 00:30:01,280 Speaker 5: Would you agree with Power that we've already had the 611 00:30:01,280 --> 00:30:05,080 Speaker 5: bottom bottom might be an overstatement. 612 00:30:05,120 --> 00:30:08,040 Speaker 10: I think we never expected prices to fall dramatically. There's 613 00:30:08,040 --> 00:30:12,200 Speaker 10: a lot of seasonality to prices, but it does seem 614 00:30:12,280 --> 00:30:15,080 Speaker 10: like there's a lot of demand for homes even at 615 00:30:15,120 --> 00:30:19,000 Speaker 10: these mortgage rates, even give the fordability concerns, I think 616 00:30:19,080 --> 00:30:21,080 Speaker 10: new home prices may not have hit a bottom, but 617 00:30:21,120 --> 00:30:23,000 Speaker 10: the sales are doing great, and they had a lot 618 00:30:23,000 --> 00:30:27,040 Speaker 10: of margin there existing home prices. There is so little inventory, 619 00:30:27,480 --> 00:30:29,360 Speaker 10: so I think if you just look on a year 620 00:30:29,400 --> 00:30:31,800 Speaker 10: over year basis, you know, we may not be that 621 00:30:31,960 --> 00:30:35,160 Speaker 10: far from the worst year over year numbers that we've seen, 622 00:30:35,240 --> 00:30:38,600 Speaker 10: you know, maybe another couple percent. But it does seem 623 00:30:38,720 --> 00:30:41,040 Speaker 10: like nobody's going to have to walk away from their homes, 624 00:30:41,480 --> 00:30:45,800 Speaker 10: especially the people with two percent mortgages, as long as 625 00:30:45,800 --> 00:30:49,520 Speaker 10: they're employed. So barring a big recession, which I think 626 00:30:49,600 --> 00:30:52,600 Speaker 10: isn't most people's base case where a lot of people 627 00:30:52,640 --> 00:30:55,000 Speaker 10: lose jobs, I don't think the housing market itself is 628 00:30:55,160 --> 00:30:59,040 Speaker 10: a risk. And such small inventories available is going to 629 00:30:59,120 --> 00:31:01,120 Speaker 10: keep housing markets fairly firm. 630 00:31:01,480 --> 00:31:03,320 Speaker 1: All right, A year from now? Where am I going 631 00:31:03,360 --> 00:31:05,640 Speaker 1: to refinance my mortgage? 632 00:31:06,240 --> 00:31:08,120 Speaker 11: A year from now? So I only think it's six 633 00:31:08,200 --> 00:31:08,800 Speaker 11: months infrom it. 634 00:31:09,240 --> 00:31:11,760 Speaker 10: Six months, Yeah, I don't think you're going to see 635 00:31:11,760 --> 00:31:13,160 Speaker 10: your four percent mortgage rate. 636 00:31:13,840 --> 00:31:15,880 Speaker 11: IRA is calling for. 637 00:31:15,720 --> 00:31:19,200 Speaker 1: The that would be Ira Jersey Strategy, Brillian guy. 638 00:31:19,840 --> 00:31:23,680 Speaker 10: He's calling for end of year ten year rates right 639 00:31:23,680 --> 00:31:26,360 Speaker 10: now at about three percent. Let's say we add you know, 640 00:31:26,960 --> 00:31:32,160 Speaker 10: one hundred and fifty basis points onto that for well, 641 00:31:32,160 --> 00:31:34,160 Speaker 10: you ad about three hundred base points for primary rates, 642 00:31:34,160 --> 00:31:35,920 Speaker 10: that's the thing. So one hundred and fifty basis points 643 00:31:35,960 --> 00:31:38,080 Speaker 10: the secondary and then another one hundred and fifty basis 644 00:31:38,080 --> 00:31:41,880 Speaker 10: points between where lenders get. So that puts us still 645 00:31:41,880 --> 00:31:44,680 Speaker 10: close to five and a half six percent mortgages at 646 00:31:44,720 --> 00:31:49,080 Speaker 10: the end of the year. You know, may But on 647 00:31:49,120 --> 00:31:51,400 Speaker 10: the other hand, he also says, one of the things 648 00:31:51,400 --> 00:31:55,760 Speaker 10: that we agree on is that basically the FED is 649 00:31:55,800 --> 00:31:58,760 Speaker 10: being very cautious about raising rates further at this point. 650 00:31:58,960 --> 00:31:59,920 Speaker 11: But if we do begin to. 651 00:32:00,240 --> 00:32:03,600 Speaker 10: Recession, I think they prefer to have you know, if 652 00:32:03,600 --> 00:32:05,800 Speaker 10: we're close to two percent inflation, I think they prefer 653 00:32:05,840 --> 00:32:07,880 Speaker 10: to have FED funds quite a bit lower. 654 00:32:08,000 --> 00:32:11,320 Speaker 11: So escalator up, elevator down. 655 00:32:11,800 --> 00:32:15,360 Speaker 1: Right, But the housing market is still pretty is it strong? 656 00:32:15,400 --> 00:32:17,720 Speaker 1: What is the status of the housing market today? 657 00:32:17,800 --> 00:32:20,880 Speaker 11: I mean, like housing sales are very weak and existing, very. 658 00:32:20,800 --> 00:32:23,640 Speaker 1: Week existing because nobody's because nobody's. 659 00:32:23,400 --> 00:32:26,680 Speaker 10: Selling, right, nobody's selling. That's that's the thing. So it's 660 00:32:26,760 --> 00:32:29,440 Speaker 10: the supply demand and balance that's still pretty out of 661 00:32:29,480 --> 00:32:33,240 Speaker 10: whack because there's still just not enough supply even for 662 00:32:33,280 --> 00:32:35,960 Speaker 10: the amount of demand. Demand is diminished but there's not 663 00:32:36,080 --> 00:32:40,400 Speaker 10: enough supply. New home builders are jumping into that void, 664 00:32:40,760 --> 00:32:42,560 Speaker 10: and they're actually filling it pretty well. One of the 665 00:32:42,560 --> 00:32:44,400 Speaker 10: reasons they're able to do that is they're able to 666 00:32:44,440 --> 00:32:47,080 Speaker 10: buy down the mortgage rate for a lot of investors. 667 00:32:47,840 --> 00:32:50,120 Speaker 10: So some of these investors aren't paying anything near six 668 00:32:50,160 --> 00:32:51,280 Speaker 10: percent of the new homes. 669 00:32:51,320 --> 00:32:53,840 Speaker 1: Why did I pay six six and a half percent. 670 00:32:54,160 --> 00:32:55,720 Speaker 1: I don't know. I didn't do a very good job there. 671 00:32:55,760 --> 00:32:57,640 Speaker 1: I'm not good on that whole debt. 672 00:32:59,040 --> 00:33:00,959 Speaker 11: And that's the I can afford it. 673 00:33:01,000 --> 00:33:02,959 Speaker 10: That's the other part of the equation is, you know 674 00:33:03,080 --> 00:33:05,040 Speaker 10: a lot of people say that maybe it's not very PC, 675 00:33:05,240 --> 00:33:08,479 Speaker 10: but they say, marry the house, date the rate because 676 00:33:08,520 --> 00:33:12,720 Speaker 10: it's a you can you can probably refy that rate. 677 00:33:12,840 --> 00:33:15,120 Speaker 10: But if you love the house, don't give up an opportunity. 678 00:33:15,320 --> 00:33:17,680 Speaker 10: Not everybody's in a position where they can afford to. 679 00:33:17,640 --> 00:33:19,360 Speaker 11: Do that, right those that can. 680 00:33:19,600 --> 00:33:21,160 Speaker 10: That's one of the things that's keeping some of the 681 00:33:21,200 --> 00:33:22,960 Speaker 10: housing some segments of the housing markets strong. 682 00:33:23,040 --> 00:33:25,360 Speaker 1: Yeah, they're not making any more of the New Jersey sure, 683 00:33:25,640 --> 00:33:27,760 Speaker 1: so I'm happy where I am. Erica Adelberg, thank you 684 00:33:27,840 --> 00:33:29,560 Speaker 1: so much for joining us. Erica Aidelberg. She is a 685 00:33:30,200 --> 00:33:34,080 Speaker 1: mortgage backed security strategist for Bloomberg Intelligence, joining us live 686 00:33:34,120 --> 00:33:35,720 Speaker 1: here on Bloomberg Interactive Broker Studio. 687 00:33:35,960 --> 00:33:39,000 Speaker 7: You're listening to the tape. Cans are live program Bloomberg 688 00:33:39,120 --> 00:33:42,720 Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio, the 689 00:33:42,760 --> 00:33:46,000 Speaker 7: tune in app, Bloomberg dot Com, and the Bloomberg Business App. 690 00:33:46,040 --> 00:33:48,840 Speaker 7: You can also listen live on Amazon Alexa from our 691 00:33:48,880 --> 00:33:53,280 Speaker 7: flagship New York station, Just say Alexa play Bloomberg eleven thirty. 692 00:33:54,720 --> 00:33:57,520 Speaker 1: Madison Mills, Paul Sweeney here in the Bloomberg Interactive Brokers 693 00:33:57,560 --> 00:34:00,640 Speaker 1: Studio looking at these markets definitely awaits the tape here. 694 00:34:00,640 --> 00:34:04,120 Speaker 1: We had FED Chairman jpal front and center this week, 695 00:34:04,200 --> 00:34:07,520 Speaker 1: Madison first at the House Wednesday, then the Senate yesterday, 696 00:34:07,520 --> 00:34:09,439 Speaker 1: and then I guess if you're could use one word 697 00:34:09,480 --> 00:34:13,279 Speaker 1: to characterize his testimony consistent. I mean they've been talking 698 00:34:13,280 --> 00:34:16,480 Speaker 1: about fighting inflation and raising rates and being aggressive, and 699 00:34:16,719 --> 00:34:19,600 Speaker 1: they certainly have been, and that continues to be the message. 700 00:34:19,640 --> 00:34:21,840 Speaker 1: The market not so sure if they're buying off on it, 701 00:34:21,880 --> 00:34:26,120 Speaker 1: but it's tough to go against the fedire Alfonso Peccatiello 702 00:34:26,239 --> 00:34:30,719 Speaker 1: joins us. He's the founder of the Macro accompass. Alfonso, 703 00:34:30,760 --> 00:34:32,279 Speaker 1: thank you so much for joining us here. What did 704 00:34:32,320 --> 00:34:35,200 Speaker 1: you take away from what we heard from FED Chairman 705 00:34:35,320 --> 00:34:37,400 Speaker 1: jpal this week in his testimony. 706 00:34:39,160 --> 00:34:41,879 Speaker 12: Well, I think it was relatively clear that the majority 707 00:34:41,960 --> 00:34:46,240 Speaker 12: of the FOMC Committee members want to see higher rates 708 00:34:46,320 --> 00:34:49,080 Speaker 12: between now any ear end. But if you ask me 709 00:34:49,280 --> 00:34:53,480 Speaker 12: what the FED wants right now, it's relatively irrelevant for 710 00:34:53,680 --> 00:34:56,880 Speaker 12: market pricing because the Federal Reserve and other central banks 711 00:34:56,880 --> 00:34:59,560 Speaker 12: will be able to control the very very short end 712 00:34:59,600 --> 00:35:02,399 Speaker 12: of the curve, but the back end of the bond 713 00:35:02,480 --> 00:35:05,960 Speaker 12: curve is instead rather influenced by other factors. So it's 714 00:35:06,080 --> 00:35:10,120 Speaker 12: actual growth and actual inflation that matter, and we're getting 715 00:35:10,320 --> 00:35:14,520 Speaker 12: more evident signs if you ask me that nominal growth 716 00:35:14,680 --> 00:35:17,440 Speaker 12: is trending now. We are in a disinflationary wave that 717 00:35:17,520 --> 00:35:20,279 Speaker 12: has started slowly but surely a few months ago. It 718 00:35:20,320 --> 00:35:23,120 Speaker 12: now seems to be even accelerating a bit on the downside. 719 00:35:23,520 --> 00:35:26,840 Speaker 12: And the PMIS for instance, released this morning, where another 720 00:35:26,960 --> 00:35:29,760 Speaker 12: sign that the US economy is weakening under the hood. 721 00:35:30,600 --> 00:35:33,000 Speaker 5: So how do you square that though with some of 722 00:35:33,000 --> 00:35:35,399 Speaker 5: the other data, right, I know, with the data that's 723 00:35:35,440 --> 00:35:37,239 Speaker 5: kind of pick your poison. You can find the data 724 00:35:37,280 --> 00:35:39,360 Speaker 5: that tells the story you want it to. But we 725 00:35:39,480 --> 00:35:43,120 Speaker 5: still have seen consumer strength, particularly in the jobs market 726 00:35:43,200 --> 00:35:46,040 Speaker 5: and with wages as well. So how do you square 727 00:35:46,120 --> 00:35:49,280 Speaker 5: that with a narrative that we are seeing a slowdown. 728 00:35:51,120 --> 00:35:53,640 Speaker 12: Well, I think one of the things that eluded most 729 00:35:53,640 --> 00:35:57,160 Speaker 12: analysts has been that the size of the fiscal stimulus 730 00:35:57,200 --> 00:36:00,160 Speaker 12: the US has done, even if two years ago now, 731 00:36:00,239 --> 00:36:03,680 Speaker 12: has been so large that to work through that stimulus 732 00:36:03,719 --> 00:36:06,960 Speaker 12: it sometimes take quite a lot of time. So monetary 733 00:36:07,040 --> 00:36:11,000 Speaker 12: and physical policy tightening works with lugs through the real economy, 734 00:36:11,239 --> 00:36:14,360 Speaker 12: and we're seeing let's say, the most sensitive parts of 735 00:36:14,400 --> 00:36:16,560 Speaker 12: the economy already showing some of the weakness. So the 736 00:36:16,600 --> 00:36:21,239 Speaker 12: housing market, although lightly rebounding, remains still pretty fragile, and 737 00:36:21,280 --> 00:36:24,920 Speaker 12: that's a highly sensitive sector. But if you move towards 738 00:36:25,160 --> 00:36:27,520 Speaker 12: the consumer side, so let's say, the part of the 739 00:36:27,520 --> 00:36:30,840 Speaker 12: economy that has received the direct benefits from fiscal stimulus, 740 00:36:31,239 --> 00:36:33,680 Speaker 12: it is understandable that it's going to take a little 741 00:36:33,719 --> 00:36:37,759 Speaker 12: bit longer for the lugs to reach these sectors. So 742 00:36:38,719 --> 00:36:41,480 Speaker 12: I think it's just literally a matter of time until 743 00:36:41,520 --> 00:36:44,440 Speaker 12: we see broader weakness, and even in Europe, just to 744 00:36:44,520 --> 00:36:47,080 Speaker 12: change a bit the picture, the pmis today reveal that 745 00:36:47,120 --> 00:36:50,960 Speaker 12: the manufacturing weakness is slowly but surely spreading into weakness 746 00:36:51,040 --> 00:36:53,759 Speaker 12: in services. In my opinion, it's just a matter of 747 00:36:53,760 --> 00:36:56,359 Speaker 12: time and respecting the lugs in the macrocycle. 748 00:36:58,400 --> 00:37:01,520 Speaker 1: So I foundswered, is that Does that suggest that you 749 00:37:01,560 --> 00:37:04,200 Speaker 1: prefer that or you would suggest that disped just wait 750 00:37:04,280 --> 00:37:06,280 Speaker 1: here and not raise rates further. 751 00:37:07,560 --> 00:37:11,680 Speaker 12: Yes, I think the risk management decision here from the 752 00:37:11,680 --> 00:37:15,440 Speaker 12: FED should be to weight rather than to keep tightening. 753 00:37:16,040 --> 00:37:18,680 Speaker 12: If again, I can move back to other central banks 754 00:37:18,680 --> 00:37:20,760 Speaker 12: that have been a bit more aggressive with their oakish 755 00:37:20,840 --> 00:37:25,120 Speaker 12: stands recently. So take Canada or take the ECB for insistance. 756 00:37:25,760 --> 00:37:28,000 Speaker 12: Back in July two thousand and eight or in July 757 00:37:28,080 --> 00:37:31,440 Speaker 12: twenty and eleven, the European Central Bank proceeded. 758 00:37:31,040 --> 00:37:31,880 Speaker 1: To high rates. 759 00:37:32,520 --> 00:37:35,160 Speaker 12: It hyped rates because they were looking at the wrong 760 00:37:35,360 --> 00:37:39,280 Speaker 12: set of coincident indicators rather than focusing or leading indicators, 761 00:37:39,600 --> 00:37:42,480 Speaker 12: and they were worried about certain things, might it be 762 00:37:42,560 --> 00:37:46,120 Speaker 12: inflationary pressures or wages or the labor market. They ended 763 00:37:46,160 --> 00:37:49,040 Speaker 12: up hiking and then in summer two thousand and eight 764 00:37:49,200 --> 00:37:52,440 Speaker 12: and later on in twenty twelve that revealed to be 765 00:37:52,480 --> 00:37:55,000 Speaker 12: a policy mistake. And I think right now, just from 766 00:37:55,000 --> 00:37:58,200 Speaker 12: a risk management perspective. Now, after you have had one 767 00:37:58,239 --> 00:38:01,800 Speaker 12: of the fastest hiking cycle ever in the United States, 768 00:38:02,040 --> 00:38:04,239 Speaker 12: it is fair enough for you to wait and take 769 00:38:04,280 --> 00:38:07,120 Speaker 12: a pause and assess our data comes in a past 770 00:38:07,160 --> 00:38:10,920 Speaker 12: should last minimum three months. So this stop and go strategy, 771 00:38:10,920 --> 00:38:13,400 Speaker 12: I think is not the correct risk management policy by 772 00:38:13,440 --> 00:38:14,240 Speaker 12: the Federal Reserve. 773 00:38:14,600 --> 00:38:16,480 Speaker 5: So you think July is live or. 774 00:38:16,440 --> 00:38:21,440 Speaker 12: No July is live. Doesn't matter what I want. It's 775 00:38:21,560 --> 00:38:23,680 Speaker 12: up to what the Central Bank will do, right. I mean, 776 00:38:23,719 --> 00:38:26,239 Speaker 12: we're all investors here, so one of the things I 777 00:38:26,320 --> 00:38:29,000 Speaker 12: learned managing money is it doesn't matter what you want, 778 00:38:29,120 --> 00:38:31,279 Speaker 12: is what the federalser will do in the end. So 779 00:38:31,320 --> 00:38:33,360 Speaker 12: I think we are live. But I also see the 780 00:38:33,440 --> 00:38:36,120 Speaker 12: jobless claims I've finally started to pick up. If you 781 00:38:36,160 --> 00:38:40,240 Speaker 12: look at continuing claims, we're eight percent up from the lows, 782 00:38:40,280 --> 00:38:42,640 Speaker 12: and generally when you are ten twelve percent up from 783 00:38:42,680 --> 00:38:46,080 Speaker 12: the lows, you are getting more recessionary signals from the 784 00:38:46,160 --> 00:38:48,920 Speaker 12: labor market. So I think if you get a couple 785 00:38:48,920 --> 00:38:52,120 Speaker 12: of weak data, especially when it comes to the labor market, 786 00:38:52,120 --> 00:38:55,160 Speaker 12: the FED might reflect once or twice, but it's definitely live. 787 00:38:56,280 --> 00:39:00,319 Speaker 1: So I find So where do you think inflation is 788 00:39:00,480 --> 00:39:02,040 Speaker 1: likely to settle out. I mean, we hear from the 789 00:39:02,080 --> 00:39:05,080 Speaker 1: Federal Reserve this two percent number, and quite frankly, I'm 790 00:39:05,120 --> 00:39:08,279 Speaker 1: not really sure where that came from. Why it's so important, 791 00:39:09,120 --> 00:39:12,160 Speaker 1: but where where do you think inflation is likely to 792 00:39:12,239 --> 00:39:14,480 Speaker 1: kind of settle out here in the next you know, 793 00:39:14,600 --> 00:39:16,200 Speaker 1: one to two years kind of time frame. 794 00:39:17,600 --> 00:39:20,960 Speaker 12: Look, I can try and answer the two percent question. 795 00:39:22,080 --> 00:39:24,439 Speaker 12: I had the opportunity in my previous job to talk 796 00:39:24,480 --> 00:39:27,359 Speaker 12: to a couple of central bankers and policymakers, and Look, 797 00:39:27,360 --> 00:39:30,200 Speaker 12: the reality is the two percent target really comes from 798 00:39:30,719 --> 00:39:33,960 Speaker 12: wanting to be a safely enough far away from deflation 799 00:39:34,080 --> 00:39:37,120 Speaker 12: as possible. I mean, we're in that base system, and 800 00:39:37,200 --> 00:39:40,440 Speaker 12: deflation is the enemy of a leverage system, right, But 801 00:39:40,640 --> 00:39:43,719 Speaker 12: also you want to have an acceptable and controllable level 802 00:39:43,719 --> 00:39:46,520 Speaker 12: of inflation. It's pretty arbitrary, but two percent sets you 803 00:39:46,560 --> 00:39:51,360 Speaker 12: at least reasonably far from the deflationary territory. Will inflation 804 00:39:52,200 --> 00:39:56,120 Speaker 12: settle at two percent? Look, I think people confuse cycles 805 00:39:56,239 --> 00:40:00,319 Speaker 12: with trends, and in this this inflationary cycle, as I factor, 806 00:40:00,400 --> 00:40:04,279 Speaker 12: recession still to hit in the US. Every recession has 807 00:40:04,320 --> 00:40:08,200 Speaker 12: caused inflation to come down pretty viciously, and it will 808 00:40:08,239 --> 00:40:10,919 Speaker 12: come down. In my opinion pretty viciously, and not only 809 00:40:10,920 --> 00:40:13,120 Speaker 12: to two percent, but even below that if you actually 810 00:40:13,120 --> 00:40:15,880 Speaker 12: get a recession, that is not to be confused with 811 00:40:16,080 --> 00:40:20,120 Speaker 12: structural inflation drivers. So for a long term trend, if 812 00:40:20,120 --> 00:40:22,080 Speaker 12: you look at the de globalization, if you look at 813 00:40:22,160 --> 00:40:28,239 Speaker 12: the offshoring change of heart from any CEOs, if you 814 00:40:28,239 --> 00:40:30,680 Speaker 12: look at the demographics changes for instance that they're about 815 00:40:30,680 --> 00:40:33,760 Speaker 12: to become, might you might want to make a case 816 00:40:33,840 --> 00:40:37,000 Speaker 12: that structurally inflation will settle maybe a three or four percent. 817 00:40:37,239 --> 00:40:40,200 Speaker 12: That doesn't mean in this cycle, especially if you get 818 00:40:40,200 --> 00:40:43,360 Speaker 12: a recession, you can't actually get inflation back to two percent. 819 00:40:43,520 --> 00:40:46,720 Speaker 12: You will get inflation back there if you get a recession. 820 00:40:46,960 --> 00:40:49,239 Speaker 1: Yep, got it, I fand so thanks so much for 821 00:40:49,320 --> 00:40:52,360 Speaker 1: joining us, as I always appreciated. Afonso Pecatiello. He's a 822 00:40:52,360 --> 00:40:57,200 Speaker 1: founder of the Macro Compass. He's a good buddy. Recommendation 823 00:40:57,239 --> 00:41:00,520 Speaker 1: from Danielle de Martino Booth and that's a good one, excellent. 824 00:41:01,160 --> 00:41:02,800 Speaker 1: You know, we love Danielle. So when she has a 825 00:41:02,800 --> 00:41:05,040 Speaker 1: recommendation for some of us, for somebody for us to 826 00:41:05,320 --> 00:41:07,440 Speaker 1: chat with and maybe get a little bit smarter, we 827 00:41:07,520 --> 00:41:10,160 Speaker 1: will take her up on that. Afonsi Pectillo, founder of 828 00:41:10,200 --> 00:41:13,200 Speaker 1: the Macrocamp compas joining us here on Bloomberg. 829 00:41:13,440 --> 00:41:16,480 Speaker 7: You're listening to the tape Can's are Live program Bloomberg 830 00:41:16,600 --> 00:41:20,200 Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio, the 831 00:41:20,239 --> 00:41:23,479 Speaker 7: tune in app, Bloomberg dot Com, and the Bloomberg Business App. 832 00:41:23,520 --> 00:41:26,319 Speaker 7: You can also listen live on Amazon Alexa from our 833 00:41:26,360 --> 00:41:32,520 Speaker 7: flagship New York station. Just say Alexa play Bloomberg eleven thirty, one. 834 00:41:32,440 --> 00:41:34,799 Speaker 1: Of our stories out on the Bloomberg terminal that's been 835 00:41:34,840 --> 00:41:37,880 Speaker 1: getting a lot of reads. Today. A city group to 836 00:41:38,040 --> 00:41:42,800 Speaker 1: reprimand staff for flouting return to office rules. I wonder 837 00:41:42,800 --> 00:41:45,400 Speaker 1: what the kind of the legal issues are there. So 838 00:41:45,440 --> 00:41:48,000 Speaker 1: when I wondered that, our producer says, I've got a 839 00:41:48,000 --> 00:41:50,279 Speaker 1: guest that can answer that for you, Rania said. Home, 840 00:41:50,400 --> 00:41:52,839 Speaker 1: managing partner for Set Home Long Group joins us live 841 00:41:52,880 --> 00:41:56,200 Speaker 1: in the Bloomberg Interactive Brokers studio. We appreciate her coming in. 842 00:41:56,239 --> 00:41:59,440 Speaker 1: You get a gold star for that, Rania. So I mean, 843 00:41:59,480 --> 00:42:01,239 Speaker 1: if they want in three days a week, I go 844 00:42:01,280 --> 00:42:02,799 Speaker 1: to my boss. You know what, I can do this 845 00:42:02,840 --> 00:42:06,080 Speaker 1: from home? What are you gonna do? What is kind 846 00:42:06,080 --> 00:42:09,080 Speaker 1: of the legal ramifications for this? You can come in 847 00:42:09,080 --> 00:42:10,560 Speaker 1: some days you don't have to come in every day. 848 00:42:11,200 --> 00:42:13,120 Speaker 1: I mean, what are the legal ramifications. 849 00:42:14,640 --> 00:42:17,880 Speaker 13: Well, there are different legal ramifications for the employer and employee. 850 00:42:17,920 --> 00:42:21,320 Speaker 13: From the employer's side, there's a lot of administrative burdens 851 00:42:21,360 --> 00:42:25,000 Speaker 13: that come along with allowing people to work either hybrid 852 00:42:25,080 --> 00:42:29,399 Speaker 13: or remotely, particularly if those individuals are living in two 853 00:42:29,520 --> 00:42:33,640 Speaker 13: different states. It becomes an issue for unemployment benefits and 854 00:42:34,160 --> 00:42:37,040 Speaker 13: a slew of other things for the employee. You know, 855 00:42:37,160 --> 00:42:41,279 Speaker 13: policies are policies, and even though you know it's an 856 00:42:41,280 --> 00:42:45,319 Speaker 13: outwill state and many states are. Most employers don't just 857 00:42:45,400 --> 00:42:48,320 Speaker 13: fire people on a whim. They tend to fire people 858 00:42:48,320 --> 00:42:51,319 Speaker 13: because they've done something wrong. And this is just one 859 00:42:51,360 --> 00:42:54,000 Speaker 13: box that they can check off. They said, you refuse 860 00:42:54,080 --> 00:42:57,680 Speaker 13: to adhere to our policy, which is reasonable, sound, and 861 00:42:58,000 --> 00:42:59,000 Speaker 13: non discriminatory. 862 00:43:00,120 --> 00:43:05,799 Speaker 5: On that, have the circumstances that employees can cite to 863 00:43:06,120 --> 00:43:09,520 Speaker 5: allow themselves to work from home more frequently changed at all? 864 00:43:10,080 --> 00:43:12,320 Speaker 5: And how does that play out from a legal perspective? 865 00:43:12,320 --> 00:43:14,839 Speaker 5: For example, if an employee is saying that they're experiencing 866 00:43:15,239 --> 00:43:19,560 Speaker 5: a disability they can't fulfill the work in office requirement, 867 00:43:19,840 --> 00:43:23,160 Speaker 5: how is that looking now compared with pre COVID I. 868 00:43:23,040 --> 00:43:26,800 Speaker 13: Think the ADA hasn't Americans with Disabilities Act, it hasn't 869 00:43:26,840 --> 00:43:30,120 Speaker 13: changed much. And certainly, if a reasonable accommodation is to 870 00:43:30,160 --> 00:43:33,040 Speaker 13: allow someone to work from home, there's an obligation to 871 00:43:33,120 --> 00:43:34,359 Speaker 13: allow that person. 872 00:43:34,520 --> 00:43:35,319 Speaker 6: To do just that. 873 00:43:35,880 --> 00:43:39,880 Speaker 13: But it may be temporary. It depends on the nature 874 00:43:40,040 --> 00:43:42,600 Speaker 13: of the disability. Right, it has to be something that's 875 00:43:42,719 --> 00:43:48,040 Speaker 13: supposed to last at least one year, not necessarily perpetually. 876 00:43:48,360 --> 00:43:50,040 Speaker 1: Right, you know, I think what a lot of what 877 00:43:50,120 --> 00:43:52,520 Speaker 1: I hear from a lot of people is Listen, it's 878 00:43:52,560 --> 00:43:56,120 Speaker 1: been proven I can do my job as effectively from 879 00:43:56,200 --> 00:44:01,279 Speaker 1: home as I can in the office. Why do I 880 00:44:01,320 --> 00:44:03,480 Speaker 1: have to come in but they don't. That's fine from 881 00:44:03,520 --> 00:44:07,360 Speaker 1: a business perspective, But from a legal perspective, has anything changed, 882 00:44:07,640 --> 00:44:10,000 Speaker 1: Like if the employer doesn't like how you're performing, including 883 00:44:10,080 --> 00:44:14,480 Speaker 1: not coming to the office, they can fire you, right, sure. 884 00:44:14,239 --> 00:44:19,640 Speaker 13: They certainly can. There has been some talk about individuals 885 00:44:19,719 --> 00:44:23,040 Speaker 13: we're working from home still accomplishing the goals of the job, 886 00:44:23,080 --> 00:44:26,640 Speaker 13: but maybe not on a timely basis. So for example, 887 00:44:26,680 --> 00:44:28,799 Speaker 13: if you're in the office from nine to five, ten 888 00:44:28,840 --> 00:44:32,120 Speaker 13: to six, whatever the hours are, the employer sees you 889 00:44:32,160 --> 00:44:36,200 Speaker 13: there and you are supposedly doing the work for the company. 890 00:44:36,440 --> 00:44:39,399 Speaker 13: If you're home, you may take a two to three 891 00:44:39,520 --> 00:44:42,840 Speaker 13: hour break midday to do something unrelated to the job. 892 00:44:43,239 --> 00:44:46,880 Speaker 13: And so some employers now are talking to me about 893 00:44:47,360 --> 00:44:53,240 Speaker 13: why they are having problems with timely performance as opposed 894 00:44:53,280 --> 00:44:56,200 Speaker 13: to performance overall. 895 00:44:56,280 --> 00:45:00,319 Speaker 5: Well, that's interesting, but that's something that again would be 896 00:45:00,440 --> 00:45:03,400 Speaker 5: used as kind of part of a performance review. 897 00:45:03,680 --> 00:45:06,400 Speaker 13: Right, yes, correct, it would be part of a performance review. 898 00:45:06,440 --> 00:45:09,759 Speaker 13: It may affect someone's ability to get a raise for 899 00:45:09,800 --> 00:45:12,880 Speaker 13: the next year, or perhaps it'll affect their bonus. 900 00:45:13,080 --> 00:45:16,000 Speaker 1: All right, Let's say I took a job before the 901 00:45:16,000 --> 00:45:19,080 Speaker 1: pandemic based in New York City, and then the pandemic 902 00:45:19,160 --> 00:45:22,720 Speaker 1: hits and I relocate to I don't know, like sheboygan, Okay, 903 00:45:22,880 --> 00:45:26,719 Speaker 1: lower cost of living, but I keep Yeah, lower cost 904 00:45:26,760 --> 00:45:31,080 Speaker 1: of link, but I keep my New York you know, salary. 905 00:45:31,280 --> 00:45:33,759 Speaker 1: Can employer come back and say, you know what, like 906 00:45:33,800 --> 00:45:35,759 Speaker 1: I even heard some of tech companies like Facebook in 907 00:45:35,760 --> 00:45:38,200 Speaker 1: the beginning of the pandemic say yeah, you can work remotely, 908 00:45:38,200 --> 00:45:39,640 Speaker 1: but we're gonna cut your pay. Can they do that? 909 00:45:40,840 --> 00:45:44,759 Speaker 13: That's a very gray area. It's a tough question. There 910 00:45:44,920 --> 00:45:49,080 Speaker 13: is something in the law that states that you're constructively 911 00:45:49,160 --> 00:45:53,480 Speaker 13: discharged if your pay is affected negatively by twenty percent 912 00:45:53,640 --> 00:45:56,520 Speaker 13: or more. That being said, if the company has a 913 00:45:56,560 --> 00:46:00,560 Speaker 13: policy that pay changes according with the cost of living 914 00:46:01,360 --> 00:46:04,600 Speaker 13: if you move, then that's a different story. 915 00:46:05,880 --> 00:46:08,399 Speaker 5: What are the not that I know anyone who's ever 916 00:46:08,480 --> 00:46:11,400 Speaker 5: done this, but what are the legal ramifications of an employee, 917 00:46:12,200 --> 00:46:14,600 Speaker 5: you know, move into Hawaii and not saying anything. 918 00:46:15,080 --> 00:46:18,120 Speaker 13: Oh, actually, I experienced this with one of my clients, 919 00:46:18,160 --> 00:46:21,160 Speaker 13: not to do not to Hawaii, but to other places. 920 00:46:21,760 --> 00:46:24,640 Speaker 13: What happened to my client was they received a nasty 921 00:46:24,719 --> 00:46:29,080 Speaker 13: letter from the state where the employee had moved, telling them, 922 00:46:29,200 --> 00:46:32,719 Speaker 13: you did not register to do business here, you don't 923 00:46:32,719 --> 00:46:36,160 Speaker 13: have unemployment insurance, which is mandatory. You don't have workers' 924 00:46:36,160 --> 00:46:39,600 Speaker 13: comp insurance, which is mandatory. And so we scrambled and 925 00:46:39,640 --> 00:46:44,160 Speaker 13: obtained the insurance. And now we have a rule in 926 00:46:44,200 --> 00:46:46,960 Speaker 13: this company that number one, if you move, you have 927 00:46:47,040 --> 00:46:50,040 Speaker 13: to let us know. I think that's pretty reasonable, thirty 928 00:46:50,120 --> 00:46:53,279 Speaker 13: days advanced notice, and you can only move out of 929 00:46:53,320 --> 00:46:58,680 Speaker 13: the state once per year. They haven't yet said you 930 00:46:58,760 --> 00:47:01,280 Speaker 13: have to move to a state where they're already doing business. 931 00:47:01,360 --> 00:47:04,200 Speaker 13: But some companies, you know, may want to have a 932 00:47:04,280 --> 00:47:06,160 Speaker 13: rule like that to protect themselves. 933 00:47:06,800 --> 00:47:09,920 Speaker 1: All right, another issue kind of employee employer I kind 934 00:47:09,920 --> 00:47:14,600 Speaker 1: of think that's always got my attention. Non competes, Yes, 935 00:47:15,120 --> 00:47:17,560 Speaker 1: are they? I mean, like I worked on Wall Street 936 00:47:17,600 --> 00:47:20,000 Speaker 1: my entire career, we had this still think called garden leave, 937 00:47:20,719 --> 00:47:24,000 Speaker 1: which is a scam. But talk to us about the 938 00:47:24,000 --> 00:47:26,040 Speaker 1: world of non competes. Is that still a thing and 939 00:47:26,120 --> 00:47:27,279 Speaker 1: how enforceable are they? 940 00:47:28,160 --> 00:47:30,319 Speaker 13: It is still a thing. It does vary from state 941 00:47:30,360 --> 00:47:33,440 Speaker 13: to state. In New York, the non compete has to 942 00:47:33,440 --> 00:47:36,440 Speaker 13: be reasonable. That's in quotes. You know, lawyers love arguing 943 00:47:36,480 --> 00:47:39,560 Speaker 13: about what's reasonable and what's not reasonable. There are some 944 00:47:39,920 --> 00:47:42,640 Speaker 13: bright line rules that you can adhere to. The first 945 00:47:42,640 --> 00:47:47,000 Speaker 13: one is time right. Six months is considered reasonable unless 946 00:47:47,040 --> 00:47:50,200 Speaker 13: you're paying somebody to be on garden leave, which is 947 00:47:50,320 --> 00:47:54,279 Speaker 13: essentially do nothing and we'll pay you. That you know 948 00:47:54,600 --> 00:47:56,799 Speaker 13: is as reasonable as the two parties want because you're 949 00:47:56,800 --> 00:48:00,839 Speaker 13: getting paid. The other one is a geographical boundary. Right, 950 00:48:00,960 --> 00:48:03,640 Speaker 13: where is it that you're prohibited from working? That will 951 00:48:03,719 --> 00:48:07,440 Speaker 13: change depending on the nature of your job. Some people, 952 00:48:07,640 --> 00:48:12,000 Speaker 13: rather than have radius restrictions, will just delineate two, three, 953 00:48:12,480 --> 00:48:16,160 Speaker 13: five companies that they consider their top competitors and just 954 00:48:16,239 --> 00:48:19,600 Speaker 13: tell you you can't work with those five it has 955 00:48:19,719 --> 00:48:24,280 Speaker 13: to be reasonable in New York. Some states disallow them altogether. 956 00:48:24,800 --> 00:48:27,959 Speaker 13: But as we were speaking very briefly, there's a bill 957 00:48:28,080 --> 00:48:32,560 Speaker 13: right now awaiting local signature that may prohibit non competes 958 00:48:32,600 --> 00:48:34,120 Speaker 13: in New York entirely, so. 959 00:48:34,120 --> 00:48:36,719 Speaker 5: There would be no scenario where non compete. 960 00:48:36,840 --> 00:48:40,920 Speaker 13: Well, it's too early to know. There is the power 961 00:48:40,960 --> 00:48:43,880 Speaker 13: of the pen, and she may use it to strike 962 00:48:43,920 --> 00:48:47,440 Speaker 13: some of the language or modify it, but as currently written, 963 00:48:47,600 --> 00:48:48,600 Speaker 13: there is no exception. 964 00:48:48,680 --> 00:48:50,920 Speaker 1: Because I think about some of the big employers in 965 00:48:51,040 --> 00:48:53,799 Speaker 1: York City, law firms, investment banks, things like that, who 966 00:48:53,800 --> 00:48:58,560 Speaker 1: do use non competes. I would think they'd be able televisions. 967 00:48:58,640 --> 00:49:01,000 Speaker 1: I would think there would be some some pushback on 968 00:49:01,080 --> 00:49:02,320 Speaker 1: that from the business community. 969 00:49:03,320 --> 00:49:05,760 Speaker 13: I don't think the business community will be very happy, 970 00:49:05,920 --> 00:49:10,400 Speaker 13: and without an exception, it'll really hinder a lot of 971 00:49:10,680 --> 00:49:15,280 Speaker 13: deal making because technically I can sell you my business 972 00:49:15,360 --> 00:49:19,240 Speaker 13: if there's no non compete and then start another company 973 00:49:19,280 --> 00:49:22,359 Speaker 13: the next day. So we have to wait and see, 974 00:49:22,360 --> 00:49:24,759 Speaker 13: hopefully there's a penhandy. 975 00:49:24,760 --> 00:49:29,319 Speaker 5: Okay, really quickly here. I always like to monitor the 976 00:49:29,640 --> 00:49:33,080 Speaker 5: New York requirements when it comes to posting salaries next 977 00:49:33,120 --> 00:49:36,719 Speaker 5: to job offers. How would you rate how that's been going. 978 00:49:36,800 --> 00:49:40,879 Speaker 5: It was a rough initial turnout, yes, and now we've 979 00:49:40,920 --> 00:49:42,759 Speaker 5: had some time. How do you feel about it now? 980 00:49:43,280 --> 00:49:46,000 Speaker 13: I think that some of the job advertisements that I 981 00:49:46,040 --> 00:49:50,200 Speaker 13: see are comical when it gets to compensation. 982 00:49:49,760 --> 00:49:52,080 Speaker 11: Because the range is hilarious. 983 00:49:52,080 --> 00:49:55,280 Speaker 13: It is so vast, right, So I'll say a director 984 00:49:55,320 --> 00:49:59,000 Speaker 13: of something needed salary fifty to five hundred thousand, Wow, 985 00:49:59,120 --> 00:50:03,120 Speaker 13: thank you so much. That clarifies everything I'm that does 986 00:50:03,280 --> 00:50:06,319 Speaker 13: technically abide by the rules as written. I don't think 987 00:50:06,360 --> 00:50:09,200 Speaker 13: it's in the spirit of how the rules were intended, 988 00:50:09,719 --> 00:50:13,800 Speaker 13: and I think more time is needed to really iron 989 00:50:13,880 --> 00:50:17,160 Speaker 13: things out and figure out what should and shouldn't be included. 990 00:50:17,200 --> 00:50:20,919 Speaker 1: Employers. Are they allowed to ask a perspective candidate what 991 00:50:21,040 --> 00:50:23,680 Speaker 1: they want to make in this rule what they. 992 00:50:23,600 --> 00:50:24,200 Speaker 11: Want to make? 993 00:50:24,400 --> 00:50:26,719 Speaker 13: Yes? In New York you cannot ask what are you 994 00:50:26,800 --> 00:50:31,040 Speaker 13: currently making? But you can certainly ask what are your salaries? 995 00:50:31,840 --> 00:50:34,520 Speaker 1: What are you making? And then that'll give you some leverage. 996 00:50:34,840 --> 00:50:37,320 Speaker 13: Not in New York, not in New York, other states 997 00:50:37,400 --> 00:50:39,480 Speaker 13: is permitted, but you have to be careful because if 998 00:50:39,480 --> 00:50:44,040 Speaker 13: you're doing a zoom or telephone interview, you don't know 999 00:50:44,040 --> 00:50:46,120 Speaker 13: where that person necessarily is. 1000 00:50:46,120 --> 00:50:46,520 Speaker 1: And. 1001 00:50:47,920 --> 00:50:51,440 Speaker 13: You should just don't ask that question. Instead tell them 1002 00:50:51,480 --> 00:50:54,719 Speaker 13: how much you want to pay or ask them what 1003 00:50:55,040 --> 00:50:55,719 Speaker 13: they want to make. 1004 00:50:55,880 --> 00:50:58,200 Speaker 1: Okay, all right, learn something every day and it's changing 1005 00:50:58,320 --> 00:51:02,080 Speaker 1: the the I Guess Hybrid world. Ronnie set Home joins 1006 00:51:02,120 --> 00:51:04,160 Speaker 1: us here in a Bloomberg Interactive Broker studio. She's a 1007 00:51:04,160 --> 00:51:06,239 Speaker 1: managing partner in set Home Lall Group. Just kind of 1008 00:51:06,239 --> 00:51:10,719 Speaker 1: get us some clarification on the employer employee relationship ever 1009 00:51:10,920 --> 00:51:13,080 Speaker 1: evolving and evolving in different ways. 1010 00:51:15,160 --> 00:51:18,279 Speaker 2: Thanks for listening to the Bloomberg Markets podcasts. You can 1011 00:51:18,320 --> 00:51:22,080 Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever 1012 00:51:22,160 --> 00:51:25,880 Speaker 2: podcast platform you prefer. I'm Matt Miller. I'm on Twitter 1013 00:51:26,080 --> 00:51:28,160 Speaker 2: at Matt Miller nineteen seventy three. 1014 00:51:28,440 --> 00:51:30,840 Speaker 1: And I'm Paul Sweeney. I'm on Twitter at pt Sweeney. 1015 00:51:30,960 --> 00:51:33,600 Speaker 1: Before the podcast, you can always catch us worldwide at 1016 00:51:33,640 --> 00:51:34,440 Speaker 1: Bloomberg Radio to