WEBVTT - Barbara Corcoran: NYC Already Coming Back 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.560 --> 0:00:15.560 with essential market moving news. Find the Bloomberg Markets podcast 0:00:15.560 --> 0:00:18.479 called Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:23.239 at Bloomberg dot com slash podcast. Now we have uh 0:00:23.400 --> 0:00:26.160 kind of a special guest right now. Barbara Corkrane joins 0:00:26.320 --> 0:00:30.240 us from the Corkan Group. Made her famous, of course 0:00:30.480 --> 0:00:33.839 and wealthy and she sold it. Now she is a 0:00:33.960 --> 0:00:37.159 judge of Shark on ABC Shark Tank I believing executive 0:00:37.200 --> 0:00:41.480 producer of that program as well, and she's also got 0:00:41.479 --> 0:00:44.720 a webinar coming out with a T and T um 0:00:44.760 --> 0:00:49.479 to help small businesses I guess do better. Barbara, always 0:00:49.479 --> 0:00:51.479 a pleasure having on the program. Thank you so much 0:00:51.520 --> 0:00:54.200 for joining us. Talk to me first about this webinar. 0:00:54.280 --> 0:00:55.600 What are you doing? What are you doing with a 0:00:55.640 --> 0:00:59.160 T and T today? It's actually a webinar series and 0:00:59.280 --> 0:01:01.760 we started a good seven eight months ago. I guess 0:01:01.840 --> 0:01:05.040 it's called Business Unusual. Its presented by a T and 0:01:05.120 --> 0:01:07.840 T business and it's intended to help the small business 0:01:07.880 --> 0:01:11.520 person just succeed more with what they're doing nine to 0:01:11.600 --> 0:01:14.840 five or small business really nine to nine every day 0:01:14.840 --> 0:01:17.720 of the week. And so we covered topics that we 0:01:17.920 --> 0:01:21.720 hear are most in demand, that people are most confused about, 0:01:22.120 --> 0:01:24.440 and we feel very proud that together we've been able 0:01:24.480 --> 0:01:26.360 to really push a lot of businesses ahead and give 0:01:26.400 --> 0:01:29.160 them a lot of support. So, Barbara, you know, it's 0:01:29.160 --> 0:01:32.679 been obviously such an incredibly difficult time for all businesses, 0:01:32.800 --> 0:01:35.480 particularly small businesses, over the past eighteen months. What do 0:01:35.480 --> 0:01:39.280 you think right now is the key challenges that the 0:01:39.319 --> 0:01:46.200 delta variant? Is it getting labor? What's the primary focus now? Well, 0:01:46.600 --> 0:01:49.360 let me let me frame by saying, no, matter what 0:01:49.480 --> 0:01:51.520 the focus is now, and I think that there's three 0:01:51.560 --> 0:01:54.760 pieces that are may be equally important. Of the one 0:01:54.840 --> 0:01:57.440 thing that strikes me more than any of the detail 0:01:57.640 --> 0:02:00.760 is that most business owners feel the worst is behind them. 0:02:01.120 --> 0:02:03.120 And that sounds kind of odd with all the talk 0:02:03.160 --> 0:02:06.320 about the delta variant, but the attitude of the Delta 0:02:06.400 --> 0:02:10.800 variant is so different. Initially with the pandemic. With the pandemic, nobody, 0:02:10.919 --> 0:02:13.560 no one had confidence. They didn't know what was ahead, 0:02:13.600 --> 0:02:15.040 they didn't know what it was around the corner and 0:02:15.040 --> 0:02:18.360 they're scared to death and unable to make changes. But 0:02:18.520 --> 0:02:21.680 now every one of those entrepreneurs that survived and came 0:02:21.760 --> 0:02:25.160 through talk about the delta variant is we'll find a way. 0:02:25.240 --> 0:02:27.919 We'll find a way. And then on top of that, 0:02:27.960 --> 0:02:30.560 what is terrific now is that a lot of the 0:02:30.600 --> 0:02:34.560 regulations are being mandated by townships, by states one on one. 0:02:34.840 --> 0:02:37.359 But at least business people know what's expected of them, 0:02:37.360 --> 0:02:39.760 their rules to be played by, and that gives them 0:02:39.840 --> 0:02:43.000 great peace of mind. But the biggest problem you named 0:02:43.000 --> 0:02:44.880 it on your list and I had to choose only 0:02:44.919 --> 0:02:49.040 one is finding the right employees. Everybody's competing for employees, 0:02:49.440 --> 0:02:51.680 and I don't think there's a single industry that doesn't 0:02:51.680 --> 0:02:53.680 complain about that day in and day out. But there 0:02:53.720 --> 0:02:55.720 is a way to skin that cat. And some of 0:02:55.760 --> 0:02:58.520 the best businesses are having no problem at all hiring people. 0:02:59.040 --> 0:03:01.000 So what is the way? I mean, you just have 0:03:01.080 --> 0:03:04.120 to pay more or are you looking the wrong way? 0:03:04.120 --> 0:03:08.000 What's what's the answer? I think I think the number 0:03:08.040 --> 0:03:11.560 one thing is, uh, they're not People who are not 0:03:11.639 --> 0:03:15.320 winning in this regard are not creative. The creative people 0:03:15.360 --> 0:03:18.959 are thinking of lures. Creative wars, whether it be additional pay, 0:03:19.000 --> 0:03:21.440 which is not that common. Frankly, from what I could see, 0:03:21.760 --> 0:03:24.160 I think it's overplayed in the media as to how 0:03:24.280 --> 0:03:27.800 much more businesses are willing to pay. But they're helping 0:03:27.840 --> 0:03:31.440 to pay for education, for night courses, and more important 0:03:31.440 --> 0:03:34.560 than that, they're giving flexibility to workers. I'm telling you, 0:03:34.560 --> 0:03:37.040 when I look at my top performing business is making 0:03:37.120 --> 0:03:39.920 the most money, their attitude for their employees is that 0:03:39.960 --> 0:03:42.520 they're working for the employee. That's not a bad place 0:03:42.560 --> 0:03:45.240 to start if they None of those guys or girls 0:03:45.280 --> 0:03:48.080 feel like bosses at all. They're trying to figure out 0:03:48.120 --> 0:03:50.120 what could I make you? What could I do for 0:03:50.160 --> 0:03:52.880 you to make you happier today? And the number one 0:03:53.080 --> 0:03:55.160 charm that can charm people to come work for you 0:03:55.200 --> 0:03:58.760 and stay put is to give people flexibility. Because people 0:03:58.760 --> 0:04:01.160 have been spoiled, they need to be at home for 0:04:01.200 --> 0:04:03.520 a lot of reasons. They don't want to commit to 0:04:03.560 --> 0:04:07.400 commuting anymore. The attitude has changed, and the employer that's 0:04:07.440 --> 0:04:10.200 smart enough to give them exactly what they're looking for 0:04:10.240 --> 0:04:13.120 there is cleaning up. It's every It's true of every 0:04:13.120 --> 0:04:15.480 one of my top performing businesses. By the way, you 0:04:15.520 --> 0:04:18.640 mentioned commuting, um and I know you're I guess you're 0:04:18.800 --> 0:04:20.359 you're born in the Garden's date. But I think of 0:04:20.400 --> 0:04:23.520 you as a quintessential New Yorker. What do you make 0:04:23.760 --> 0:04:26.760 of Manhattan right now? I was there last month walking 0:04:26.839 --> 0:04:28.880 up and down Lexington Avenue when I was shocked at 0:04:28.920 --> 0:04:32.520 how many of the really big box businesses have closed 0:04:32.520 --> 0:04:37.479 and are emptied out. Um, is Manhattan? Is this it? 0:04:37.640 --> 0:04:39.400 I mean, are people saying, you know, I've had enough 0:04:39.480 --> 0:04:42.960 of the big city and I'm out. You know, I've 0:04:43.000 --> 0:04:45.960 lived in Manhattan long enough to never go for that, 0:04:46.120 --> 0:04:48.560 because I've never seen it happen. I've seen the claims 0:04:48.600 --> 0:04:50.799 along the way, O, this is it, this is it''re 0:04:50.839 --> 0:04:53.240 going to happen. This ain't gonna happen. But one thing 0:04:53.240 --> 0:04:55.359 I've learned about the city of New York City, it 0:04:55.440 --> 0:04:58.240 always comes back. It's just a question of when it's 0:04:58.279 --> 0:05:01.120 coming back and how strong it's coming back. And when 0:05:01.200 --> 0:05:03.360 it comes back, I'll tell you I learned another thing. 0:05:03.400 --> 0:05:05.640 It always comes back like three to one in time, 0:05:05.720 --> 0:05:07.919 bang bang bang bang bang, and you go, WHOA, what happened? 0:05:08.200 --> 0:05:10.960 The city is already coming back when you walk down 0:05:11.000 --> 0:05:14.360 Madison Avenue. I'm sure I'm sure you saw, which I see. 0:05:14.480 --> 0:05:18.200 Roughly fifty percent of the stores are empty black windows. 0:05:18.200 --> 0:05:21.719 It's depressing, But I'm also seeing construction inside most of 0:05:21.720 --> 0:05:25.720 those stores from new entrepreneurs, less impressive stores that are 0:05:25.800 --> 0:05:27.960 making a go of it and getting their rent at 0:05:28.000 --> 0:05:31.159 half price. And that's what regurgitates the city, that's what 0:05:31.279 --> 0:05:33.480 gets it back on its feet. Because if there's one 0:05:33.480 --> 0:05:35.440 thing that New York City does better than any of 0:05:35.480 --> 0:05:38.279 the city in the world, that reinvents itself, it has to. 0:05:38.400 --> 0:05:40.919 It's been forced to over the years, and it always 0:05:41.040 --> 0:05:43.720 rises to the price. So I don't see Manhattan as 0:05:43.760 --> 0:05:46.160 a problem everybody thinks it is. I think it's just 0:05:46.240 --> 0:05:48.640 like every other problem we had that was going to 0:05:48.760 --> 0:05:51.960 put away New York City that never really happened. I 0:05:52.000 --> 0:05:54.719 think it's just a matter of short time before everyone 0:05:54.760 --> 0:05:58.400 acknowledges it. And in fact, even apartment prices are up. 0:05:58.440 --> 0:06:01.360 No one expected that even six months ago. Rental prices 0:06:01.360 --> 0:06:03.320 are Everybody said, you could get a deal, and you 0:06:03.360 --> 0:06:07.280 could you get off. Right now, it's about more expensive 0:06:07.320 --> 0:06:10.840 to live here already. Look how fast our city rebounds. 0:06:10.839 --> 0:06:13.960 It is the nature of the town. Yeah, So it's interesting, Barbara. 0:06:14.000 --> 0:06:15.600 One of the things that I guess a lot of 0:06:16.000 --> 0:06:19.520 businesses big and small learned during the pandemic is the 0:06:19.520 --> 0:06:24.000 ability to really have a really viable digital presence, you know, 0:06:24.080 --> 0:06:26.600 whether it's ordering online or picking up at the store, 0:06:26.680 --> 0:06:29.920 that type of thing. For the small business operator, are 0:06:29.960 --> 0:06:34.640 they making the necessary investments? Do you think I'm gonna 0:06:34.680 --> 0:06:38.039 tell you something that might surprise you. The necessary investments 0:06:38.080 --> 0:06:42.600 that small businesses have to make today to be vibrant 0:06:43.000 --> 0:06:45.800 in the on the digital platform are next to nothing. 0:06:46.240 --> 0:06:49.640 The costs of these improvements have come down so dramatically. 0:06:49.960 --> 0:06:53.000 There's so many options, there's so much competition in that 0:06:53.040 --> 0:06:57.080 space that they've actually been empowered to make changes very 0:06:57.160 --> 0:07:00.000 radically and quickly, simply because there are so many options 0:07:00.080 --> 0:07:02.320 is out there. One of the best things I have 0:07:02.480 --> 0:07:06.440 personally learned because I don't ever think of technology is 0:07:06.520 --> 0:07:08.840 my strong suit. I think of people is what I 0:07:08.880 --> 0:07:12.160 do well with right, But from running all these business 0:07:12.200 --> 0:07:15.120 Unusual webinar series presented by a T and T business, 0:07:15.160 --> 0:07:18.120 I have learned that the name of the game is technology. 0:07:18.120 --> 0:07:20.440 It used to be an extra You've got to be 0:07:20.480 --> 0:07:22.679 on the digital space, no matter what kind of space 0:07:22.680 --> 0:07:25.960 you're Now, no, I feel very differently it starts with digital. 0:07:26.240 --> 0:07:28.600 And when I see all the new businesses opening, and 0:07:28.600 --> 0:07:30.640 in fact, when I'm on Shark Tank, what I'm listening 0:07:30.720 --> 0:07:32.760 to the pitch is the only thing I'm investing is 0:07:32.800 --> 0:07:35.280 the people that understand the digital space. I really have 0:07:35.400 --> 0:07:39.600 changed my whole attitude because only covid itself could have 0:07:39.640 --> 0:07:42.800 brought about the radical speed that we've encountered lately. It 0:07:42.840 --> 0:07:45.040 should have taken five years, but it took us dime month. 0:07:45.240 --> 0:07:48.360 That's it. It's changed. Is all about digital. It's all 0:07:48.400 --> 0:07:51.040 about digital. It's absolutely been compressed and we hear that 0:07:51.080 --> 0:07:53.800 from a lot of guests as well. Barbara, great having 0:07:53.800 --> 0:07:56.360 you on the program. Thank you so much for joining us. 0:07:56.360 --> 0:07:59.000 Barbara Corkran as she was saying, she's got a webinar 0:07:59.080 --> 0:08:02.679 series of a T and T business. Unusual with Barbara Corkran, 0:08:02.760 --> 0:08:07.800 it's geared towards um well small businesses, stores, marketplaces, restaurants, 0:08:07.840 --> 0:08:10.360 online merchants. I guess online is everything now and you 0:08:10.400 --> 0:08:15.400 can watch it online. Her website is eight eight eight 0:08:15.640 --> 0:08:20.400 Barbara dot com, Triple eight Barbara dot Com. Always great 0:08:20.440 --> 0:08:23.440 to talk to, the founder of the Corkoran Group. This 0:08:24.320 --> 0:08:32.360 is Bloomberg. Well, we've got some big spending bills winding 0:08:32.480 --> 0:08:37.200 their way through Congress. Financial markets certainly paying attention. They're 0:08:37.280 --> 0:08:41.120 including UH, especially the fixed income markets in municipal bond 0:08:41.120 --> 0:08:44.880 markets as well. Michael Jesus, chief US public policy and 0:08:44.960 --> 0:08:48.160 municipal strategist at Morgan Stanley joins us. Michael, thanks so 0:08:48.240 --> 0:08:50.680 much for taking the time here. Again, a lot of 0:08:50.720 --> 0:08:55.119 spending bills getting through Congress looks like they're making some progress, 0:08:55.160 --> 0:08:57.400 at least in the House and on the Democratic side 0:08:57.920 --> 0:09:01.120 from your perspective, UM, as a public policy I mean, 0:09:01.320 --> 0:09:06.640 municipal strategists, what are the issues you're focusing on. Yeah, 0:09:06.840 --> 0:09:09.480 first and foremost, it is going to be the depths 0:09:09.520 --> 0:09:11.439 of impact, because that's what we think is going to 0:09:11.480 --> 0:09:14.680 be the mean feed through to the economic outlook and 0:09:14.760 --> 0:09:18.240 to the level of treasury yield. UH. In our view, 0:09:18.440 --> 0:09:21.880 this is tracking towards a total spending number spread over 0:09:21.960 --> 0:09:26.520 ten years that is approaching four trillion dollars. But then 0:09:26.559 --> 0:09:29.319 the next question, I think this becomes particularly important given 0:09:29.360 --> 0:09:32.200 that some procedural hurdles were just clear. The next question 0:09:32.280 --> 0:09:35.880 is what types of taxes or Democrats gonna raise to 0:09:35.960 --> 0:09:39.360 offset that spending? And then what's the remaining deficit. Our 0:09:39.440 --> 0:09:41.360 view is that could probably get to two to two 0:09:41.400 --> 0:09:44.120 and a half trillion dollars of new revenue to offset this. 0:09:44.520 --> 0:09:46.120 That still means you're looking at a trillion and a 0:09:46.120 --> 0:09:48.840 half over ten years of new deficits, and it's probably 0:09:48.840 --> 0:09:52.440 going to be pretty front loaded given how these spending 0:09:52.440 --> 0:09:53.959 bills have worked out in the past. So maybe it 0:09:54.000 --> 0:09:57.080 does much as a trillion dollars over five years. All 0:09:57.120 --> 0:09:59.920 of that, when you mix it in with our expect 0:10:00.000 --> 0:10:03.079 station that the Fed is gonna start talking taper here, UM, 0:10:03.440 --> 0:10:06.480 is enough to push yield higher into your end and 0:10:06.520 --> 0:10:08.520 that's probably gonna matter a lot more than you That's 0:10:08.520 --> 0:10:14.040 a that's a big statement considering what we've seen thus far. UM, 0:10:14.280 --> 0:10:16.880 there's been a lot that's enough to push yield higher 0:10:16.880 --> 0:10:21.440 and it still hasn't done it yet. Yeah, I think 0:10:21.440 --> 0:10:24.400 that's fair. I think that's fair. Um. But we've got 0:10:24.400 --> 0:10:26.760 a confluence of events here that we see coming together. 0:10:26.880 --> 0:10:31.440 There's this legislative package, Uh, there's the FED taper. Also, 0:10:31.480 --> 0:10:34.800 I think there's improvement in the trajectory of the delta 0:10:34.880 --> 0:10:37.640 Varan covid Are. Our biotech team which is modeling this 0:10:37.880 --> 0:10:41.319 for us UM thinks that we're basically at a plateau there. 0:10:41.679 --> 0:10:44.480 You've also got boosters coming out over the course of 0:10:44.520 --> 0:10:48.160 the fall, uh, and so all of that should continue 0:10:48.200 --> 0:10:52.280 to allow consumption, activity, travel activity, etcetera. To pick up 0:10:52.480 --> 0:10:54.760 that confluence of events to us can be pretty powerful 0:10:54.760 --> 0:10:59.040 to push field higher, Michael. As we think about funding 0:10:59.240 --> 0:11:00.880 all these pro rams, are we going to see a 0:11:00.920 --> 0:11:07.480 revival of the Build America bonds uh that we had before? Yeah, 0:11:07.520 --> 0:11:09.880 we think so. There's obviously another important interaction with the 0:11:09.960 --> 0:11:14.080 muni market. UH. This is a program that obviously state 0:11:14.480 --> 0:11:19.960 governments generally wants, and the Democrats in Congress have supported, 0:11:20.000 --> 0:11:23.000 in particular Democrats in the House Ways Means Committee. Now, 0:11:23.240 --> 0:11:26.439 originally a revival of this program was supposed to be 0:11:26.480 --> 0:11:30.160 in the bipartisan bill. It seems to have been left 0:11:30.200 --> 0:11:32.000 out of that bill. But this three and a half 0:11:32.080 --> 0:11:34.839 trillion dollar budget reconciliation bill, we think we'll have plenty 0:11:34.840 --> 0:11:39.080 of space to include that. UM. That's important because what 0:11:39.200 --> 0:11:41.360 it does for the muni market over time is will 0:11:41.360 --> 0:11:44.360 probably shift more of the issuance from tax exempt the 0:11:44.480 --> 0:11:48.000 taxable market. That's probably good news for investors over the 0:11:48.080 --> 0:11:50.880 long run because it creates some scarcity value. But we 0:11:51.040 --> 0:11:53.840 probably take a long time before that market fully developed. 0:11:55.240 --> 0:11:59.800 Do you see any what's the multiplier when when the 0:12:00.000 --> 0:12:04.640 general government spends um, you know, a hundred dollars, how 0:12:04.720 --> 0:12:10.360 much does that boost growth in terms of GDP? Yeah, Well, 0:12:10.400 --> 0:12:14.880 obviously depends on how they're spending that hundred dollars um 0:12:15.040 --> 0:12:18.760 our economists, and I think the consensus amongst economists is 0:12:18.800 --> 0:12:22.200 that hard infrastructure dollar spending tends to have the highest 0:12:22.280 --> 0:12:24.920 multiplier effect over the long run. It creates the most 0:12:25.240 --> 0:12:29.200 potential GDP. Uh, you're sort of your next biggest bang 0:12:29.240 --> 0:12:31.200 for your bucket is if you are taking dollars and 0:12:31.240 --> 0:12:36.240 giving them to higher marginal propensity to consume cohorts. Right, 0:12:36.400 --> 0:12:39.000 So a lot of the spending in this bill is 0:12:39.040 --> 0:12:43.200 directed uh in ways that will impact middle and lower 0:12:43.200 --> 0:12:47.559 income households UM. And then the taxes are also skewed 0:12:47.600 --> 0:12:53.280 towards higher income individuals and corporations, which, given their current 0:12:53.320 --> 0:12:56.280 wealth status, probably is a lower marginal inpency to consume. 0:12:56.720 --> 0:12:58.800 And so the net effect here plus the depths to 0:12:58.840 --> 0:13:03.480 affect our economists will probably view very favorably. Hey, Michael, 0:13:03.480 --> 0:13:05.520 appy got you here. I love to get your thoughts 0:13:05.520 --> 0:13:08.920 on the taxable municipal bond market has been really a 0:13:08.920 --> 0:13:14.560 fast growing market and a good performing market as well. Yeah, 0:13:14.640 --> 0:13:19.320 so there is in the intaxable markets generally, right, so 0:13:19.400 --> 0:13:21.760 not just the muni market, but the corporate bond market. 0:13:22.040 --> 0:13:24.640 There one pocket of the market that doesn't have a 0:13:24.679 --> 0:13:29.400 lot of supply is highly rated long duration taper, something 0:13:29.400 --> 0:13:33.240 that insurance companies need, banks, me etcetera. And muni bond 0:13:33.280 --> 0:13:38.840 market can easily fill that demand, and it has been 0:13:38.880 --> 0:13:42.360 increasingly over the past couple of years because that demand 0:13:42.400 --> 0:13:44.800 pocket is there, so you brought to build America bond 0:13:44.840 --> 0:13:47.200 program earlier. This is one of the reasons that this 0:13:47.240 --> 0:13:51.520 type of program could create a relatively attractive source of 0:13:51.559 --> 0:13:55.920 capital for municipalities because they can meet that demand that's 0:13:55.960 --> 0:13:59.000 currently not being met by the corporate bond market by 0:13:59.000 --> 0:14:02.120 and large. All Right, Michael, always great to get some 0:14:02.160 --> 0:14:04.680 time with you. Thanks so much for joining us. Michael 0:14:04.800 --> 0:14:09.000 zesus their chief US public policy and muni strategist at 0:14:09.040 --> 0:14:13.760 Morgan Stanley UM. And this is, you know, a particularly 0:14:13.800 --> 0:14:18.600 important issue to discuss as we saw and Anti Pelosi 0:14:18.679 --> 0:14:23.840 getting getting the the Reconciliation bill UM or at least 0:14:23.880 --> 0:14:26.080 plans for it through the House yesterday. Now that has 0:14:26.120 --> 0:14:27.400 to go to the Senate and back to the House. 0:14:27.440 --> 0:14:30.720 Plus we have to deal with the fifty slash one 0:14:30.720 --> 0:14:32.720 point two trillion dollar bill. In any case, we could 0:14:32.760 --> 0:14:35.600 be looking at four to five trillion dollars of spending 0:14:35.600 --> 0:14:39.160 from the federal government. I guess about four trillion in 0:14:39.160 --> 0:14:43.920 additional spending. Matt. You know, when I was a sell 0:14:43.960 --> 0:14:46.480 side analystson going out to see clients on the West Coast, 0:14:46.920 --> 0:14:48.840 my boss wouldn't even pay for a ticket unless I 0:14:48.880 --> 0:14:51.600 got a meeting with TCW and Capitol Group. Those were 0:14:51.600 --> 0:14:55.080 the lockdown meetings in Los Angeles. Uh, important folks to 0:14:55.160 --> 0:14:57.360 chat with. Stephen Kane, He's a group managing director and 0:14:57.400 --> 0:15:00.280 portfolio manager at t c W. Steve, thanks so much 0:15:00.320 --> 0:15:04.240 for joining us here. We've got um jackson Hole coming 0:15:04.360 --> 0:15:07.920 up here. I guess really on Fridays, the big day, 0:15:07.960 --> 0:15:10.360 what are you looking for? What do you expect? What 0:15:10.440 --> 0:15:14.760 do you hope not to hear? Well? Uh, good morning 0:15:14.800 --> 0:15:17.480 and uh and thanks for having me. Um. Yeah. In 0:15:17.560 --> 0:15:20.480 terms of Jackson Hole, I really wish I could give 0:15:20.560 --> 0:15:25.000 you and the listeners some exciting prognostication or some off 0:15:25.320 --> 0:15:29.200 consensus view. But I really think the consensus, which is 0:15:29.240 --> 0:15:32.720 a fairly benign one UH is probably right, which is 0:15:32.760 --> 0:15:35.720 that we're not going to get much from Chairman Powell. 0:15:35.760 --> 0:15:39.360 He's he's likely to recognize that there's been some improvement 0:15:39.360 --> 0:15:41.840 in the labor market, and he's probably going to balance 0:15:41.880 --> 0:15:45.520 that with some negative concerns about the delta virus and 0:15:45.800 --> 0:15:49.560 downside risks. UM. But the bottom line is he's most 0:15:49.600 --> 0:15:53.080 likely going to stay away from any specifics on taper um, 0:15:53.120 --> 0:15:56.120 and that's mainly because he wants to maintain flexibility and 0:15:56.160 --> 0:15:58.280 really not to front run the f O m C, 0:15:58.480 --> 0:16:00.840 which is really the standard process US by which they 0:16:01.720 --> 0:16:05.320 make formal pronouncements on on on paper and that type 0:16:05.320 --> 0:16:07.760 of thing. So as much as we'd like to hear 0:16:07.840 --> 0:16:11.120 him get into the details of what substantial further progress 0:16:11.200 --> 0:16:14.280 might mean or something along those lines, I think those 0:16:14.320 --> 0:16:18.120 types of uh uh evolutions in the in the FED 0:16:18.240 --> 0:16:21.080 will will occur at the September meeting most likely. What 0:16:21.320 --> 0:16:24.000 you know, it's I don't see how they can ignore 0:16:24.240 --> 0:16:29.720 what's going on in the housing market. It's just unbelievable, um, 0:16:29.960 --> 0:16:34.440 especially for younger you know, first time homebuyers, good luck. 0:16:34.880 --> 0:16:37.160 Unless you have the cash on hand, you're just not 0:16:37.200 --> 0:16:40.600 going to get it. Um. How does the FED contribute 0:16:40.680 --> 0:16:45.680 to that with its merches, with its mortgage bond purchases. Yeah, 0:16:45.720 --> 0:16:49.040 I don't think the Fed is all that concerned, although 0:16:49.120 --> 0:16:52.160 they arguably should be about the conditions in the housing 0:16:52.200 --> 0:16:55.720 market actually the housing you know, their goal is to 0:16:55.800 --> 0:17:00.440 provide affordable credit UM and assist in that way through 0:17:00.560 --> 0:17:04.520 the UH purchase of agency mortgages, which are doing to 0:17:04.600 --> 0:17:07.680 the tune of forty billion a month, so with UH 0:17:08.160 --> 0:17:12.440 you know, thirty year mortgage rates below three um uh, 0:17:12.640 --> 0:17:16.320 even though housing prices are high. I think they view 0:17:16.480 --> 0:17:18.639 their job is controlling the price of credit and not 0:17:18.800 --> 0:17:22.359 not necessarily the price of the asset UM. So it's 0:17:22.400 --> 0:17:24.760 a little bit beyond their control, at least that's probably 0:17:24.760 --> 0:17:27.720 how they're viewing it, all right, Stephen, Looking at the 0:17:28.080 --> 0:17:31.000 Bloomberg terminal, here, I see the tenure at yielding one 0:17:31.000 --> 0:17:33.400 point three. It's it's higher than it had been over 0:17:33.400 --> 0:17:35.760 the last week or so, but still in that range 0:17:35.880 --> 0:17:37.680 that we've seen for such a long time. Here Where 0:17:37.680 --> 0:17:41.800 don't you and the good folks at TCW look for yield, 0:17:42.000 --> 0:17:46.320 look for total return in this kind of market, it's 0:17:46.359 --> 0:17:51.160 a challenge, but it bluntly we're we're a value investor here, 0:17:51.240 --> 0:17:53.959 which means we tend to buy things as they get cheaper, 0:17:54.560 --> 0:17:56.720 and there's not a whole lot that is cheap right now. 0:17:56.800 --> 0:17:59.240 You've got, as you've just pointed, a very low treasury 0:17:59.320 --> 0:18:03.040 yields um, and beyond that it's even worse as you 0:18:03.080 --> 0:18:06.679 look to the UH, the risk markets, the corporate market, 0:18:06.720 --> 0:18:10.159 in the high yeld market, emerging market, UH spreads and 0:18:10.240 --> 0:18:13.840 risk premium are near all time tight. So the general 0:18:13.880 --> 0:18:17.399 theme for us is to to begin, or we've already 0:18:17.560 --> 0:18:21.000 been doing it, to rain in risk budgets. And what 0:18:21.160 --> 0:18:24.240 that means is carry our durations or interest rate risk 0:18:24.560 --> 0:18:28.119 short of benchmarks or carry um short um with the 0:18:28.160 --> 0:18:31.199 expectations rates are going to rise, pull back on our 0:18:31.240 --> 0:18:35.680 credit beta, which means we've been trimming UH corporate exposure, 0:18:35.680 --> 0:18:40.679 although we do see idiosyncratically some some opportunities and specific 0:18:42.080 --> 0:18:45.159 credits that are improving and deleveraging, but generally speaking we 0:18:45.200 --> 0:18:47.679 have less exposure than the market. Some of the areas 0:18:47.680 --> 0:18:50.040 we actually find a little bit of value in is 0:18:50.119 --> 0:18:54.000 the agency mortgage back securities market. That's the Ginny Fanny 0:18:54.040 --> 0:18:58.199 Freddie market that the FED is actively supporting through UH 0:18:58.720 --> 0:19:02.720 asset purchases and that those purchases are creating a bit 0:19:02.800 --> 0:19:05.359 of a distortion in the t b A or forward 0:19:05.920 --> 0:19:10.159 delivery market that is giving additional carry to those securities 0:19:10.160 --> 0:19:12.040 in the market. So you're getting spreads beyond what you 0:19:12.080 --> 0:19:16.120 get in corporate bonds for a zero credit risk asset 0:19:16.440 --> 0:19:18.480 and one that has very good liquidity. So I would 0:19:18.560 --> 0:19:22.720 highlight that it's hard to get super excited about something 0:19:22.800 --> 0:19:25.639 yielding you know, about one and a half percent, but 0:19:25.680 --> 0:19:28.600 nonetheless it's still fairly attractive on a risk adjusted basis. 0:19:29.000 --> 0:19:32.040 And then I would say, beyond that, the high quality 0:19:32.080 --> 0:19:35.919 area of the securitized market, um, non agency mortgages, some 0:19:36.080 --> 0:19:40.000 areas of the commercial mortgage backed securities market clos are 0:19:40.040 --> 0:19:42.800 actually an area of the market, uh, particularly that kind 0:19:42.800 --> 0:19:46.680 of triple A double A area that look reasonably appealing 0:19:46.720 --> 0:19:50.840 when compared to un secure corporate credit. Just got like 0:19:50.880 --> 0:19:53.920 twenty seconds left. But um, you agree then that rates 0:19:53.960 --> 0:19:58.679 are going to rise when and how high? Yeah, I 0:19:58.720 --> 0:20:02.200 think our view is the market probably has it right 0:20:02.280 --> 0:20:05.040 at the front end of the curve, meaning you know, 0:20:05.080 --> 0:20:07.800 when you look at two years at a at a 0:20:07.800 --> 0:20:10.199 whopping twenty four basis points, or even the five year 0:20:10.240 --> 0:20:13.320 at a basis points that implies a very slow gradual 0:20:13.880 --> 0:20:18.200 pace of of FED hikes starting maybe late next year. 0:20:18.480 --> 0:20:20.399 Where we think the risk is out the curve that 0:20:20.480 --> 0:20:24.040 one thirty ten year or sub two thirty year. We 0:20:24.119 --> 0:20:27.359 think it's the FED tapers, and as the market begins 0:20:27.440 --> 0:20:32.199 to anticipate uh normalization of short term rates, you're going 0:20:32.240 --> 0:20:34.679 to get higher rates out the curve. So we do 0:20:34.720 --> 0:20:38.200 think you'll get tenure rates above two percent in the future. Hey, Steven, 0:20:38.240 --> 0:20:40.040 thanks so much for joining us. We really appreciate your 0:20:40.040 --> 0:20:43.280 thoughts on insight. Stephen Kane, Group Managing Director, Pultorlio manager 0:20:43.320 --> 0:20:47.960 at TCW, Let's bring in Steve quick right now. He 0:20:48.160 --> 0:20:50.800 is the CEO of Unit Space to talk to us 0:20:50.920 --> 0:20:56.879 about UM, the future of work, how the office may change, 0:20:56.920 --> 0:21:00.119 how the delta variant is impacting UM. The r t 0:21:00.320 --> 0:21:04.080 O plans to use the popular new acronym for return 0:21:04.160 --> 0:21:08.320 to Office. Steve, thanks very much for joining us UM. 0:21:08.359 --> 0:21:11.640 Everything seems to be there's a lot of deja vou 0:21:11.760 --> 0:21:13.879 going on right now compared to what we had at 0:21:13.880 --> 0:21:16.800 the end of last summer. Is this the final year 0:21:16.880 --> 0:21:21.760 you think? I certainly hope, So thanks for having me. 0:21:21.800 --> 0:21:25.040 First of all, Yeah, I here's what I think it's 0:21:25.080 --> 0:21:27.239 going to happen as it relates. I think it is 0:21:27.560 --> 0:21:30.760 uh the final year. I think realistically, you know, we 0:21:30.800 --> 0:21:33.680 could be seeing you know, and I'm no epidemiologists, but 0:21:33.760 --> 0:21:35.280 we could be you know, we could be seeing some 0:21:35.480 --> 0:21:39.200 rolling COVID variants you know, over the next several years. 0:21:39.280 --> 0:21:41.680 But I think we've we've got the mechanisms is to 0:21:42.280 --> 0:21:45.960 adapt to that hopefully alright. So you know, I think 0:21:47.200 --> 0:21:50.520 it's interesting Steve. You know, back in September you said 0:21:50.560 --> 0:21:54.040 that the office space would not die per se, maybe 0:21:54.040 --> 0:21:57.200 just be smaller. I think you said maybe smaller. It's 0:21:57.240 --> 0:21:59.320 been almost a year. Is that still kind of where 0:21:59.320 --> 0:22:01.880 you think things are going to go here in US? Yeah, 0:22:01.880 --> 0:22:04.199 it's it's exactly what we're seeing. I guess. We just 0:22:04.240 --> 0:22:06.840 finished a survey with more of a hundred of Hunter 0:22:06.880 --> 0:22:10.720 Global companies and it still looks like about is sort 0:22:10.760 --> 0:22:13.800