1 00:00:01,440 --> 00:00:05,320 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 2 00:00:05,400 --> 00:00:08,480 Speaker 1: weekdays at ten am Eastern on Apple car playing Enroud 3 00:00:08,520 --> 00:00:11,600 Speaker 1: Otto with the Bloomberg Business app. Listen on demand wherever 4 00:00:11,680 --> 00:00:14,800 Speaker 1: you get your podcasts, or watch us live on YouTube. 5 00:00:16,520 --> 00:00:18,560 Speaker 2: So it's bringing on rog Rana. He's a tech analyst 6 00:00:18,560 --> 00:00:23,600 Speaker 2: for Bloomberg Intelligence. You've been following Apple stock for decades here, 7 00:00:25,000 --> 00:00:26,360 Speaker 2: how important is today? 8 00:00:26,600 --> 00:00:27,120 Speaker 3: Anurag? 9 00:00:28,400 --> 00:00:31,479 Speaker 2: I feel like Apple doesn't have the AI juice in 10 00:00:31,520 --> 00:00:32,000 Speaker 2: at stock. 11 00:00:32,320 --> 00:00:33,960 Speaker 3: Is that something they care about? 12 00:00:35,360 --> 00:00:37,479 Speaker 4: No, they have to care about it because that's the 13 00:00:37,520 --> 00:00:40,800 Speaker 4: most important thing investor's mind right now. So there are 14 00:00:40,800 --> 00:00:42,760 Speaker 4: a few things we already kind of know thanks to 15 00:00:42,800 --> 00:00:45,640 Speaker 4: Mark German. Is there's going to be most likely an 16 00:00:45,680 --> 00:00:48,360 Speaker 4: announcement with Open Eyes, some kind of joint agreement with 17 00:00:48,400 --> 00:00:52,120 Speaker 4: them to use their technology into the new operating system. 18 00:00:52,320 --> 00:00:54,400 Speaker 4: So I would say a lot of that is already 19 00:00:54,400 --> 00:00:56,760 Speaker 4: built in. We all know that Apple doesn't have its 20 00:00:56,760 --> 00:01:00,920 Speaker 4: own large language model as good as what's available with 21 00:01:00,960 --> 00:01:04,240 Speaker 4: Opening I or arguably with Google, so but they can 22 00:01:04,240 --> 00:01:06,640 Speaker 4: partner with these two companies. So that's that's the luxury 23 00:01:06,640 --> 00:01:08,840 Speaker 4: Apple has that it does not need to do with 24 00:01:08,959 --> 00:01:11,319 Speaker 4: everything in house and that's what we're going to look 25 00:01:11,360 --> 00:01:14,560 Speaker 4: forward today, is what's the strategy in terms of working 26 00:01:14,600 --> 00:01:17,480 Speaker 4: with partners and then using that technology to fuel the 27 00:01:18,000 --> 00:01:19,000 Speaker 4: operating system. 28 00:01:19,920 --> 00:01:22,000 Speaker 5: It does it? Will it justify their one up in 29 00:01:22,040 --> 00:01:22,400 Speaker 5: the stock? 30 00:01:22,720 --> 00:01:24,800 Speaker 6: How do you make the correlation between the news and 31 00:01:24,840 --> 00:01:26,920 Speaker 6: what we're actually going to get and the actual move 32 00:01:26,959 --> 00:01:28,520 Speaker 6: in the in Apple share price. 33 00:01:29,440 --> 00:01:31,000 Speaker 4: So, Alex, one of the things I would say is 34 00:01:31,000 --> 00:01:32,680 Speaker 4: for the past one and a half to two years, 35 00:01:32,720 --> 00:01:34,959 Speaker 4: there has been nothing but bad news coming for Apple. 36 00:01:35,319 --> 00:01:38,360 Speaker 4: You know, that has been an issue because iPhone growth 37 00:01:38,360 --> 00:01:41,520 Speaker 4: has slowed down, mostly because of China. So I would 38 00:01:41,520 --> 00:01:43,920 Speaker 4: say this is the first liver of good news that 39 00:01:44,040 --> 00:01:47,680 Speaker 4: has the potential to improve iPhone sales next year. It's 40 00:01:47,720 --> 00:01:49,280 Speaker 4: not going to do anything this year. I mean, it's 41 00:01:49,280 --> 00:01:52,440 Speaker 4: it's very difficult to model that out. But if the 42 00:01:52,480 --> 00:01:55,480 Speaker 4: operating system has enough juice for people to figure out 43 00:01:55,520 --> 00:01:58,120 Speaker 4: and say I will go out and change my phone 44 00:01:58,160 --> 00:02:00,920 Speaker 4: next year, I think that's the That is the gas 45 00:02:01,000 --> 00:02:03,440 Speaker 4: that people are looking for, is whether that can go 46 00:02:03,520 --> 00:02:05,280 Speaker 4: back and reignite sales growth. 47 00:02:05,880 --> 00:02:08,680 Speaker 2: And we were talking with Mark Herman earlier this morning 48 00:02:08,680 --> 00:02:10,680 Speaker 2: and he kind of suggested that, you know, it can 49 00:02:10,720 --> 00:02:13,240 Speaker 2: be taken as a little bit of an embarrassment by 50 00:02:13,360 --> 00:02:16,800 Speaker 2: Apple that they do not have, you know, kind of 51 00:02:16,840 --> 00:02:20,320 Speaker 2: their own AI capabilities in house, that they need to 52 00:02:20,400 --> 00:02:23,240 Speaker 2: partner with open Ai. Do you think investors view it 53 00:02:23,240 --> 00:02:25,280 Speaker 2: that way? They're just like, we don't really care how 54 00:02:25,320 --> 00:02:26,760 Speaker 2: you get it, just put it on the device. 55 00:02:27,480 --> 00:02:29,880 Speaker 4: Yeah, but personally I don't care how do you do 56 00:02:30,160 --> 00:02:32,520 Speaker 4: get it on the device? Same thing for search. What 57 00:02:32,600 --> 00:02:34,680 Speaker 4: I really like about that if they partner it is 58 00:02:34,720 --> 00:02:36,720 Speaker 4: then they don't have to spend billions of dollars to 59 00:02:37,040 --> 00:02:39,000 Speaker 4: do it in house. If you look at the capex 60 00:02:39,040 --> 00:02:41,760 Speaker 4: of Apple compared to some of the other companies, it's 61 00:02:41,919 --> 00:02:42,760 Speaker 4: much smaller. 62 00:02:43,120 --> 00:02:44,440 Speaker 7: And you know, I'm. 63 00:02:44,320 --> 00:02:46,360 Speaker 4: Okay with that because it helps out in my free 64 00:02:46,360 --> 00:02:48,760 Speaker 4: cash flow. As long as they can partner with people, 65 00:02:49,000 --> 00:02:50,200 Speaker 4: I'm absolutely fine with it. 66 00:02:51,000 --> 00:02:52,520 Speaker 5: Well, let's go to the idea. 67 00:02:52,919 --> 00:02:54,320 Speaker 6: I mean, you can bring my daughter into this. So 68 00:02:54,840 --> 00:02:56,960 Speaker 6: I'm doing a lot of reading Estrian Apple. I'm taking 69 00:02:57,000 --> 00:02:59,600 Speaker 6: all my notes and doing my homework, and I said, hey, dydn't. 70 00:03:00,040 --> 00:03:01,640 Speaker 6: I was like, you know that Apple's going to have 71 00:03:01,639 --> 00:03:04,360 Speaker 6: this thing tomorrow and they're gonna maybe unveil something that 72 00:03:04,440 --> 00:03:07,160 Speaker 6: will help emojis and you can get better emojis when 73 00:03:07,160 --> 00:03:09,840 Speaker 6: you're typing texts and she's like, that is so cool 74 00:03:10,040 --> 00:03:12,440 Speaker 6: when you need to get the new phone, and I think, anurag, 75 00:03:12,680 --> 00:03:15,960 Speaker 6: that's your point where like people like my daughter are like, 76 00:03:16,040 --> 00:03:18,959 Speaker 6: that's awesome, upgrade your phone now, because I'm like, oh. 77 00:03:18,800 --> 00:03:19,799 Speaker 5: A few years, a few years. 78 00:03:19,840 --> 00:03:21,119 Speaker 6: She's like, no, no, you got to get the phone 79 00:03:21,120 --> 00:03:23,040 Speaker 6: because I need the emojis so I can send texts 80 00:03:23,080 --> 00:03:25,440 Speaker 6: to my friends. That's basically what you're talking about. There's 81 00:03:25,480 --> 00:03:27,920 Speaker 6: a huge install base. You do something that even is 82 00:03:27,960 --> 00:03:30,320 Speaker 6: like semi cool, and that's going to drive sales. 83 00:03:31,200 --> 00:03:33,480 Speaker 4: Yeah, I mean, that's the coolness factor. And frankly speaking, 84 00:03:33,520 --> 00:03:35,800 Speaker 4: one of the things that really caught my attention is 85 00:03:35,840 --> 00:03:39,800 Speaker 4: Mark German reported that the new features would be available 86 00:03:39,800 --> 00:03:43,200 Speaker 4: on iPhone fifteen Pro and the newer one that's coming. 87 00:03:43,360 --> 00:03:46,600 Speaker 4: I mean, that's a big deal because, frankly speaking, if 88 00:03:46,680 --> 00:03:49,240 Speaker 4: that's a very small portion of the total install base, 89 00:03:49,640 --> 00:03:52,040 Speaker 4: even those early adopters, if they go out and rush 90 00:03:52,120 --> 00:03:55,480 Speaker 4: to increase their you know, the refresh the phone in 91 00:03:55,480 --> 00:03:57,680 Speaker 4: a much quicker way, that's going to help out Apple. 92 00:03:58,440 --> 00:04:01,760 Speaker 2: All right, So what else today should we be looking for? 93 00:04:01,760 --> 00:04:02,400 Speaker 3: Anna Raga? 94 00:04:02,480 --> 00:04:03,960 Speaker 2: I mean, is there going to be a new watch 95 00:04:04,000 --> 00:04:06,560 Speaker 2: and do anything or is it just getting everybody to 96 00:04:06,600 --> 00:04:07,280 Speaker 2: focused on AI. 97 00:04:07,520 --> 00:04:09,560 Speaker 4: Yeah, it's all going to be AI. And I think 98 00:04:09,560 --> 00:04:11,400 Speaker 4: one of the things I really like what I've seen 99 00:04:11,440 --> 00:04:13,560 Speaker 4: from Apple in the last six months is now they 100 00:04:13,560 --> 00:04:16,080 Speaker 4: are all focused on this product because one of the things, 101 00:04:16,080 --> 00:04:18,000 Speaker 4: again Mark said that, you know, they shut down the 102 00:04:18,040 --> 00:04:20,640 Speaker 4: cards project, which has been around for you know, so 103 00:04:20,720 --> 00:04:25,240 Speaker 4: many years, taking out massive amount of investments, and then 104 00:04:25,240 --> 00:04:27,839 Speaker 4: they you could say that they diverted that attention and 105 00:04:27,960 --> 00:04:31,280 Speaker 4: not focused on AI completely. But right now the entire 106 00:04:31,320 --> 00:04:34,560 Speaker 4: company is focused on AI, embedding it every product, every 107 00:04:34,640 --> 00:04:38,680 Speaker 4: operating system, every feature. And I think, and you know, 108 00:04:38,720 --> 00:04:40,800 Speaker 4: one of the things we've heard even in China is 109 00:04:40,920 --> 00:04:44,000 Speaker 4: consumers don't like that Apple has been behind in this 110 00:04:44,040 --> 00:04:47,000 Speaker 4: particular one and that has been a reason for them 111 00:04:47,040 --> 00:04:49,560 Speaker 4: not to upgrade their phone. So I think Apple's taking 112 00:04:49,600 --> 00:04:51,920 Speaker 4: this a lot more seriously. I think other tech companies 113 00:04:51,920 --> 00:04:54,160 Speaker 4: are taking it a lot more seriously. Who have been 114 00:04:54,320 --> 00:04:57,359 Speaker 4: you know, I would say, taking their dominant position in 115 00:04:57,400 --> 00:05:00,839 Speaker 4: their respective markets for granted over the last few years. 116 00:05:01,400 --> 00:05:03,560 Speaker 4: And that's what I think open ai has done for 117 00:05:03,760 --> 00:05:05,240 Speaker 4: the rest of the ecosystem. 118 00:05:05,279 --> 00:05:08,839 Speaker 6: Also, honour more of the derivative plays from this. When 119 00:05:08,880 --> 00:05:12,840 Speaker 6: we're hearing the announcements from Apple in your world of software, 120 00:05:13,200 --> 00:05:14,560 Speaker 6: where should we be paying attention to? 121 00:05:15,800 --> 00:05:18,400 Speaker 4: I think see what we think is going to happen 122 00:05:18,520 --> 00:05:21,400 Speaker 4: is over the next one to two years, every software 123 00:05:21,440 --> 00:05:24,680 Speaker 4: company is going to embed more AI features into their 124 00:05:24,720 --> 00:05:27,560 Speaker 4: core software product. Now, the question is some of them 125 00:05:27,640 --> 00:05:30,719 Speaker 4: will have the ability to up charge for that, which 126 00:05:30,720 --> 00:05:32,880 Speaker 4: means they will have a pro model or a premium 127 00:05:32,880 --> 00:05:36,360 Speaker 4: model or a ProPlus model where the average revenue per 128 00:05:36,440 --> 00:05:38,680 Speaker 4: user can go up. This way, they don't have to 129 00:05:38,720 --> 00:05:40,880 Speaker 4: go out and look for a brand new user to 130 00:05:40,920 --> 00:05:44,080 Speaker 4: sell that software. They just have to convince the buyer 131 00:05:44,400 --> 00:05:47,360 Speaker 4: that it is worth your while to upgrade that software 132 00:05:47,640 --> 00:05:50,200 Speaker 4: into the one that has AI features. I think that 133 00:05:50,320 --> 00:05:53,320 Speaker 4: is where bulk of the investments are going to In 134 00:05:53,400 --> 00:05:56,360 Speaker 4: terms of the software industry, we think every major company 135 00:05:56,400 --> 00:05:58,680 Speaker 4: will play a role in it. The ones that we 136 00:05:58,720 --> 00:06:01,600 Speaker 4: have seen so far is that's coming out from Microsoft, 137 00:06:01,800 --> 00:06:04,520 Speaker 4: whether it's in the Office Suite or the one that 138 00:06:04,600 --> 00:06:07,479 Speaker 4: we like quite a bit. Is there coding software where 139 00:06:07,720 --> 00:06:11,120 Speaker 4: you could the software developers can actually do automated coding 140 00:06:11,320 --> 00:06:13,400 Speaker 4: in a much faster way. I think that will have 141 00:06:13,440 --> 00:06:17,600 Speaker 4: a massive upsell rate because the benefits of productivity are 142 00:06:17,640 --> 00:06:18,679 Speaker 4: way too high over there. 143 00:06:19,000 --> 00:06:21,680 Speaker 2: All right, on thirty seconds question of the day, I 144 00:06:21,720 --> 00:06:23,960 Speaker 2: have an iPhone eleven toy upgrade now or wait. 145 00:06:25,640 --> 00:06:27,640 Speaker 4: This winter when the next one comes in, which is 146 00:06:27,680 --> 00:06:30,320 Speaker 4: the iPhone sixteen or so. I think you will be 147 00:06:30,400 --> 00:06:32,159 Speaker 4: very happy with that particular. 148 00:06:31,680 --> 00:06:34,800 Speaker 5: One I found. Did it work? Like can you run stuff? 149 00:06:35,040 --> 00:06:35,400 Speaker 8: Yeah? 150 00:06:35,480 --> 00:06:38,040 Speaker 6: But at some point, like the apps just don't update 151 00:06:38,080 --> 00:06:39,919 Speaker 6: and the software doesn't update, and like you have to 152 00:06:40,279 --> 00:06:40,719 Speaker 6: turn it in. 153 00:06:40,839 --> 00:06:42,880 Speaker 2: Well, the big thing that what always prompts me to 154 00:06:43,160 --> 00:06:46,880 Speaker 2: upgrade is the battery. When a battery starts, that's that's 155 00:06:47,000 --> 00:06:49,280 Speaker 2: the message. All right, Honak, thanks so much for joining us. 156 00:06:49,400 --> 00:06:51,360 Speaker 2: A rag ronnie. He saved me a couple of dollars today. 157 00:06:51,360 --> 00:06:53,240 Speaker 2: I'm not gonna go out and buy a new iPhone. 158 00:06:53,440 --> 00:06:56,799 Speaker 2: He's a senior technologyanels for Bloomberg Intelligence. Yeah, it's always 159 00:06:56,800 --> 00:06:57,839 Speaker 2: the battery that kind of gets me. 160 00:06:58,000 --> 00:07:00,159 Speaker 6: The battery is rough, Yeah, but I do my thing 161 00:07:00,200 --> 00:07:02,919 Speaker 6: on like low battery all day, like you don't do 162 00:07:03,320 --> 00:07:03,640 Speaker 6: they do? 163 00:07:03,760 --> 00:07:04,560 Speaker 5: Yeah, which is fine. 164 00:07:04,560 --> 00:07:06,720 Speaker 6: It just means it instead of like staying up and 165 00:07:06,760 --> 00:07:08,920 Speaker 6: connected for a long time, it just goes to sleep 166 00:07:08,920 --> 00:07:09,920 Speaker 6: and I just have to wake it up. 167 00:07:10,120 --> 00:07:12,680 Speaker 2: Really yeah, but a last like anybody that you're the 168 00:07:12,680 --> 00:07:13,400 Speaker 2: first person that. 169 00:07:13,960 --> 00:07:16,800 Speaker 6: Business track for me, though I don't know, I feel 170 00:07:16,800 --> 00:07:19,960 Speaker 6: like this all makes some cheap sense. Anyway, We're definitely 171 00:07:20,000 --> 00:07:23,640 Speaker 6: watching Apple and looking forward to that announcement coming there 172 00:07:23,800 --> 00:07:25,120 Speaker 6: has a really big run up. 173 00:07:26,640 --> 00:07:30,559 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 174 00:07:30,640 --> 00:07:33,680 Speaker 1: weekdays at ten am Eastern on Apple car Play and 175 00:07:33,680 --> 00:07:36,600 Speaker 1: Android Auto with the Bloomberg Business app. You can also 176 00:07:36,680 --> 00:07:39,840 Speaker 1: listen live on Amazon Alexa from our flagship New York 177 00:07:39,920 --> 00:07:44,280 Speaker 1: station just Say Alexa playing Bloomberg eleven thirty. 178 00:07:45,160 --> 00:07:47,440 Speaker 6: This is Bloomberg Intelligence Radio, where we cover all the 179 00:07:47,480 --> 00:07:49,040 Speaker 6: news and business and finance through our. 180 00:07:49,040 --> 00:07:50,880 Speaker 5: Lens of our Bloomberg Intelligence analysts. 181 00:07:51,040 --> 00:07:52,960 Speaker 6: They cover two thousand companies and one hundred and thirty 182 00:07:52,960 --> 00:07:56,400 Speaker 6: industries worldwide. We also like to tap our guys over 183 00:07:56,480 --> 00:07:59,720 Speaker 6: Bloomberg Economics, amazing men and women who do the economic 184 00:07:59,800 --> 00:08:03,040 Speaker 6: side of the entire world. David Powell is senior Euro 185 00:08:03,120 --> 00:08:05,880 Speaker 6: Area economist for Bloomberg Economics and he joins us now 186 00:08:06,600 --> 00:08:10,360 Speaker 6: David BTP bund spread right, you have the France versus 187 00:08:10,360 --> 00:08:12,520 Speaker 6: German ten year spread fifty five basis points. 188 00:08:12,520 --> 00:08:14,320 Speaker 5: We haven't seen that all year. 189 00:08:14,640 --> 00:08:17,120 Speaker 6: You have a huge, huge sell off in the bond 190 00:08:17,120 --> 00:08:19,200 Speaker 6: market some of the main countries, even in Italy and 191 00:08:19,200 --> 00:08:23,320 Speaker 6: Spain and Portugal, equities are getting hit. What do you 192 00:08:23,320 --> 00:08:26,280 Speaker 6: make of what unfolded over the last twenty four hours 193 00:08:26,560 --> 00:08:28,400 Speaker 6: in France and the European Parliament. 194 00:08:29,920 --> 00:08:33,720 Speaker 9: Well, the far right parties of Europe had very large 195 00:08:33,760 --> 00:08:37,199 Speaker 9: gains in the European elections. These are the elections for 196 00:08:36,800 --> 00:08:41,240 Speaker 9: the European Parliament, and that wasn't so much of a 197 00:08:41,360 --> 00:08:44,880 Speaker 9: surprise in itself, because Poles were showing that was likely 198 00:08:44,960 --> 00:08:47,520 Speaker 9: to happen. But the big surprise is what's happened in 199 00:08:47,559 --> 00:08:50,800 Speaker 9: France is the reaction of the French President, Emmanuel Marcon 200 00:08:50,960 --> 00:08:55,360 Speaker 9: to the outcome, and he announced a snap parliamentary elections. 201 00:08:55,800 --> 00:08:58,920 Speaker 9: This won't affect his role as president because that's a 202 00:08:59,120 --> 00:09:02,839 Speaker 9: separate election, But soon the French will be going to 203 00:09:03,000 --> 00:09:07,320 Speaker 9: polls to be voting for new members of parliament and 204 00:09:07,360 --> 00:09:10,560 Speaker 9: for American listeners that's similar to the members of the 205 00:09:10,559 --> 00:09:14,440 Speaker 9: House of Representatives, and then the composition of that lower 206 00:09:14,480 --> 00:09:19,079 Speaker 9: house may change, and in fact polls suggest it will 207 00:09:19,679 --> 00:09:23,240 Speaker 9: more in favor of the of the party that just 208 00:09:23,800 --> 00:09:26,199 Speaker 9: won such a such a large number of seats in 209 00:09:26,240 --> 00:09:27,280 Speaker 9: the European Parliament. 210 00:09:28,000 --> 00:09:30,760 Speaker 2: So David in the European Parliament, what were some of 211 00:09:30,760 --> 00:09:34,040 Speaker 2: the contributing factors to that strong performance by the far right. 212 00:09:35,559 --> 00:09:39,920 Speaker 9: Well, Uh, discontent with with the with the way things 213 00:09:39,920 --> 00:09:43,319 Speaker 9: are going. Of course that's not unique to Europe and America. 214 00:09:43,400 --> 00:09:46,720 Speaker 9: A lot of voters of their concerns about inflation, what 215 00:09:46,800 --> 00:09:49,680 Speaker 9: that means for their spending power, and that has the 216 00:09:49,920 --> 00:09:54,120 Speaker 9: that that's that's had a similar impact on the on 217 00:09:54,200 --> 00:09:57,880 Speaker 9: the electorate in Europe where people are upset about these 218 00:09:57,920 --> 00:10:02,160 Speaker 9: high prices. Uh, the the the cost of living crisis 219 00:10:02,880 --> 00:10:05,960 Speaker 9: as they refer to it. But in addition to those 220 00:10:06,600 --> 00:10:09,959 Speaker 9: to those developments in France, but they've also had recently 221 00:10:10,200 --> 00:10:13,880 Speaker 9: is a change to the pension system in order to 222 00:10:13,880 --> 00:10:16,760 Speaker 9: make it more affordable. So they've lifted the retirement age 223 00:10:17,280 --> 00:10:19,400 Speaker 9: and that was done by the French president and it 224 00:10:19,440 --> 00:10:21,440 Speaker 9: was not a popular move as you can imagine. No 225 00:10:21,480 --> 00:10:23,280 Speaker 9: one wants to be told that they have to work 226 00:10:23,320 --> 00:10:26,400 Speaker 9: for longer in order to receive the same benefits, and 227 00:10:26,800 --> 00:10:30,200 Speaker 9: that has been a source of support for this for 228 00:10:30,240 --> 00:10:33,280 Speaker 9: the far right, which has come out which came out 229 00:10:33,280 --> 00:10:35,800 Speaker 9: at the time opposing that that's done. They've also come 230 00:10:35,840 --> 00:10:40,680 Speaker 9: out opposing recent changes that are being discussed to the 231 00:10:40,720 --> 00:10:45,080 Speaker 9: system of unemployment benefits. So it is now a debate 232 00:10:45,160 --> 00:10:50,160 Speaker 9: about shortening the duration of unemployment benefits that the government 233 00:10:50,240 --> 00:10:50,760 Speaker 9: is leading. 234 00:10:51,280 --> 00:10:53,599 Speaker 6: So what I find interesting, David is the idea and 235 00:10:53,600 --> 00:10:55,040 Speaker 6: the more I read about it, the more it's like 236 00:10:55,080 --> 00:10:58,200 Speaker 6: Mattcrol's calling the far right bluff and it's like, all right, 237 00:10:58,400 --> 00:11:00,560 Speaker 6: you guys want those policies, Let's see how much you 238 00:11:00,600 --> 00:11:04,080 Speaker 6: want those policies that What is your assessment as to 239 00:11:04,160 --> 00:11:07,840 Speaker 6: how risky or not that strategy is and the effect 240 00:11:07,880 --> 00:11:09,040 Speaker 6: you could have on the economy. 241 00:11:10,200 --> 00:11:13,560 Speaker 9: Well, some of the things that Macwall's pushed through, like 242 00:11:13,679 --> 00:11:16,959 Speaker 9: raising the retirement age and this debate about shortening the 243 00:11:17,040 --> 00:11:20,480 Speaker 9: duration of employment benefits, Obviously they're not popular, but they're 244 00:11:20,520 --> 00:11:23,480 Speaker 9: necessary because France is a huge budget deficit there under 245 00:11:23,520 --> 00:11:26,360 Speaker 9: a lot of pressure from the European Commission to reduce 246 00:11:26,440 --> 00:11:29,680 Speaker 9: the size of it. Their debt isn't growing increasingly large, 247 00:11:30,280 --> 00:11:34,840 Speaker 9: and these reforms will reduce the amount that the government 248 00:11:34,880 --> 00:11:37,000 Speaker 9: is to pay out to pensioners and the unemployed, and 249 00:11:37,000 --> 00:11:40,760 Speaker 9: they'll also boost the potential size of the economy. So 250 00:11:40,800 --> 00:11:43,600 Speaker 9: it's kind of a win win situation from an economic 251 00:11:43,679 --> 00:11:49,520 Speaker 9: point of view. And even though these aren't popular, macalls saying, 252 00:11:49,520 --> 00:11:51,760 Speaker 9: these are necessary steps in order to get the public 253 00:11:51,800 --> 00:11:55,840 Speaker 9: finances in order. And the far right has been opposed 254 00:11:55,840 --> 00:11:57,839 Speaker 9: to many of these moves, but they haven't they haven't 255 00:11:57,880 --> 00:12:02,720 Speaker 9: proposed other solutions. So I think one of the things 256 00:12:02,760 --> 00:12:04,920 Speaker 9: Macwoll's kind of doing here is saying is you know, 257 00:12:05,080 --> 00:12:06,720 Speaker 9: you like to be opposed to what I'm doing, but 258 00:12:06,720 --> 00:12:10,040 Speaker 9: you're not putting forth any solutions yourself. And while you're 259 00:12:10,080 --> 00:12:13,120 Speaker 9: in opposition, I guess that's your job to oppose the government. 260 00:12:13,800 --> 00:12:16,400 Speaker 9: But let's see if you can put together some policies 261 00:12:16,400 --> 00:12:19,280 Speaker 9: yourselves that would solve the problems instead of just complaining 262 00:12:19,320 --> 00:12:21,280 Speaker 9: about what he has proposed as solutions. 263 00:12:21,520 --> 00:12:23,280 Speaker 2: David, can you give us a kind of an overview 264 00:12:23,360 --> 00:12:27,120 Speaker 2: just maybe how the economic the economies of Europe are 265 00:12:27,120 --> 00:12:30,319 Speaker 2: behaving generally speaking, How are they in terms of growth, 266 00:12:30,320 --> 00:12:32,000 Speaker 2: how are they in terms of inflation these days? 267 00:12:32,080 --> 00:12:32,800 Speaker 3: What are the trends? 268 00:12:33,559 --> 00:12:37,160 Speaker 9: Well, Europe, like the United States, has had an inflation 269 00:12:37,320 --> 00:12:40,080 Speaker 9: problem of the last couple of years, and in Europe 270 00:12:40,120 --> 00:12:44,400 Speaker 9: it was made even worse by the extreme rise and 271 00:12:44,440 --> 00:12:48,480 Speaker 9: commodity prices that resulted after Russia's invasion in Ukraine. They 272 00:12:48,520 --> 00:12:52,960 Speaker 9: have that inflation issue that's causing a cost of living crisis, 273 00:12:53,240 --> 00:12:58,080 Speaker 9: And like the Federal Reserve, the European Central Bank very 274 00:12:58,160 --> 00:13:02,040 Speaker 9: drastically raised interest rates, although unlike the United States, it 275 00:13:02,080 --> 00:13:05,040 Speaker 9: had a major impact on the economy. So when we 276 00:13:05,240 --> 00:13:08,320 Speaker 9: look back to twenty twenty three, I think the US 277 00:13:08,360 --> 00:13:11,000 Speaker 9: economy grew something like three percent and the r Area 278 00:13:11,000 --> 00:13:14,400 Speaker 9: economy did not grow at all. So there's been a 279 00:13:14,480 --> 00:13:18,960 Speaker 9: much weaker economic performance as a result of the monetary 280 00:13:19,000 --> 00:13:20,360 Speaker 9: tightening that's taken place. 281 00:13:21,040 --> 00:13:23,520 Speaker 6: Yes, we got the ECB that did cut rates, we 282 00:13:23,559 --> 00:13:25,520 Speaker 6: don't know when the next one's going to be. And 283 00:13:25,559 --> 00:13:28,400 Speaker 6: then we get this violent move in bonn yields, and 284 00:13:28,400 --> 00:13:31,280 Speaker 6: I appreciate compared the sovereign deck crisis, it's like peanuts, 285 00:13:31,320 --> 00:13:36,040 Speaker 6: But nonetheless it's significant. At what point do bond yields 286 00:13:36,080 --> 00:13:39,800 Speaker 6: effect everything else start to affect the economy, Like how high? 287 00:13:39,840 --> 00:13:41,600 Speaker 6: How long do they have to stay for that to 288 00:13:41,640 --> 00:13:44,079 Speaker 6: feel to that to be implemented into the economy. 289 00:13:45,360 --> 00:13:50,839 Speaker 9: Yeah, I mean higher financing costs for the government. We'll 290 00:13:50,880 --> 00:13:55,680 Speaker 9: have implications for the budget deficit and implications for lots 291 00:13:55,720 --> 00:13:59,120 Speaker 9: of other things that are used as trademark interest rates 292 00:13:59,120 --> 00:14:02,160 Speaker 9: in the economy in many places. However, as you said, 293 00:14:02,160 --> 00:14:04,280 Speaker 9: these are small compared to what you're dealt with in 294 00:14:04,320 --> 00:14:07,560 Speaker 9: the past in terms of the area debt crisis, and 295 00:14:07,760 --> 00:14:11,720 Speaker 9: there's very unlikely to be any intervention from the ECB 296 00:14:11,880 --> 00:14:15,120 Speaker 9: or anything like that, only because not only the movements small, 297 00:14:15,480 --> 00:14:18,120 Speaker 9: but during a period of high inflation it's much more 298 00:14:18,120 --> 00:14:22,160 Speaker 9: difficult for a central bank to intervene and to justify 299 00:14:22,240 --> 00:14:25,760 Speaker 9: those moves than it is during a period of low inflation, 300 00:14:25,840 --> 00:14:29,400 Speaker 9: because of course those interventions require just essentially printing money 301 00:14:29,960 --> 00:14:33,640 Speaker 9: and using that money to buy those bonds. So we 302 00:14:33,720 --> 00:14:36,560 Speaker 9: have had some movement in financial markets, but nothing that's 303 00:14:36,560 --> 00:14:40,000 Speaker 9: screaming crisis, nothing that is screaming for the ECB to 304 00:14:40,080 --> 00:14:41,600 Speaker 9: jump in and come the situation. 305 00:14:42,720 --> 00:14:44,640 Speaker 3: All right, David, thank you so much. We appreciate that. 306 00:14:44,720 --> 00:14:47,400 Speaker 2: David Palm, he's a senior your Area of Congress for 307 00:14:47,400 --> 00:14:51,880 Speaker 2: Bloomberg Economics joining us from London the HQ for Bloomberg 308 00:14:51,920 --> 00:14:55,120 Speaker 2: at Queen Victoria Street via that zoom thing. So again, 309 00:14:55,320 --> 00:14:58,400 Speaker 2: some big moves, as Alex was pointing out earlier, of 310 00:14:58,440 --> 00:15:00,240 Speaker 2: the euro off about a half of one percent sent 311 00:15:00,280 --> 00:15:03,320 Speaker 2: one spot zero seven on the euro. You had the 312 00:15:03,440 --> 00:15:07,920 Speaker 2: CAC fall off pretty substantially as well the French index. 313 00:15:08,520 --> 00:15:11,680 Speaker 2: They're off about one point eight percent in terms of 314 00:15:11,680 --> 00:15:14,000 Speaker 2: the stock market over there on the news of these 315 00:15:14,160 --> 00:15:15,040 Speaker 2: snap elections. 316 00:15:15,120 --> 00:15:17,120 Speaker 6: So my question is, then do we learn anything about 317 00:15:17,160 --> 00:15:19,280 Speaker 6: how other elections will be treated like here in the 318 00:15:19,400 --> 00:15:22,720 Speaker 6: US or not. We know hedging doesn't work with these things, 319 00:15:23,240 --> 00:15:25,240 Speaker 6: as we learn, say with Brexit, so it's going to 320 00:15:25,280 --> 00:15:28,280 Speaker 6: be very interesting to see how long these moves actually last, 321 00:15:28,320 --> 00:15:30,920 Speaker 6: which might give us some insight into when they had 322 00:15:31,000 --> 00:15:33,360 Speaker 6: the elections in July, when the UK has their election 323 00:15:33,800 --> 00:15:35,960 Speaker 6: in July, and when we have our election as well 324 00:15:36,000 --> 00:15:36,720 Speaker 6: in November. 325 00:15:38,160 --> 00:15:42,040 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 326 00:15:42,120 --> 00:15:45,240 Speaker 1: weekdays at ten am Eastern on fo CarPlay and enroud 327 00:15:45,240 --> 00:15:48,360 Speaker 1: Otto with the Bloomberg Business App. Listen on demand wherever 328 00:15:48,400 --> 00:15:54,360 Speaker 1: you get your podcasts, or watch us live on YouTube. 329 00:15:53,280 --> 00:15:55,680 Speaker 6: And Alex Steel alongside Paul's We Need This a Bloomberg 330 00:15:55,720 --> 00:15:58,680 Speaker 6: Intelligence Radio. We're broadcasting to you live from the Interactive 331 00:15:58,680 --> 00:16:02,840 Speaker 6: Broker studio right here and quarters in a beautiful midtown Manhattan. 332 00:16:02,920 --> 00:16:04,680 Speaker 5: Lisa was just giving you a check on the market. 333 00:16:04,720 --> 00:16:06,640 Speaker 6: Also, Apple is down a touch, but it has a 334 00:16:06,720 --> 00:16:09,280 Speaker 6: huge run up since the end of April, and Video 335 00:16:09,360 --> 00:16:11,120 Speaker 6: is also down on that stock split. So we want 336 00:16:11,120 --> 00:16:13,080 Speaker 6: to dig a little deeper here with Carol Pepper, founder 337 00:16:13,120 --> 00:16:16,760 Speaker 6: and CEO of Pepper International. She joins us, Hey, Carol, 338 00:16:17,040 --> 00:16:19,280 Speaker 6: do you want to buy Apple into today? Like, do 339 00:16:19,280 --> 00:16:21,360 Speaker 6: you want to buy in Video on the stock split? 340 00:16:22,880 --> 00:16:26,000 Speaker 10: Definitely buying Video on the stocksplit. I think that that's 341 00:16:26,120 --> 00:16:28,000 Speaker 10: just a great sign. And in Video is going to 342 00:16:28,120 --> 00:16:30,440 Speaker 10: run right back up to over a thousand bucks a share. 343 00:16:31,280 --> 00:16:32,600 Speaker 11: It is the engine right now. 344 00:16:32,640 --> 00:16:35,000 Speaker 10: So I would definitely buy it and tuck it away 345 00:16:35,160 --> 00:16:37,560 Speaker 10: and not look at it, just leave it there on fear. 346 00:16:37,440 --> 00:16:39,200 Speaker 11: Days and I'll go down. So on a fear day, 347 00:16:39,200 --> 00:16:39,880 Speaker 11: buy the stock. 348 00:16:40,640 --> 00:16:44,200 Speaker 2: So can we broad that out Carol to say, continue 349 00:16:44,200 --> 00:16:46,920 Speaker 2: to buy some of these large cap growth stories across 350 00:16:46,920 --> 00:16:47,320 Speaker 2: the border. 351 00:16:47,960 --> 00:16:49,640 Speaker 3: Where do we try to find some value out there? 352 00:16:50,600 --> 00:16:54,480 Speaker 10: No, I definitely feel like the value is long large 353 00:16:54,480 --> 00:16:57,800 Speaker 10: cap growth. Frankly, the leaders and the bigger stocks are 354 00:16:57,800 --> 00:17:00,560 Speaker 10: getting bigger. They're in a position with all the cash 355 00:17:00,600 --> 00:17:02,800 Speaker 10: on their ballad sheet to be very muscular to make 356 00:17:02,840 --> 00:17:05,840 Speaker 10: the innovative deals, to make long term investments where other 357 00:17:05,880 --> 00:17:09,480 Speaker 10: companies are struggling. So in tech, at least, bigger is 358 00:17:09,560 --> 00:17:12,880 Speaker 10: much better and that's where you need to stay. And again, 359 00:17:13,040 --> 00:17:16,440 Speaker 10: if you haven't fully filled out your tech allocation, it's 360 00:17:16,480 --> 00:17:19,000 Speaker 10: something to take a hard look at. In general, I 361 00:17:19,040 --> 00:17:22,280 Speaker 10: think growth continue to outperform value. It has for over 362 00:17:22,359 --> 00:17:25,880 Speaker 10: ten years, and I don't see that trend ending anytime soon. 363 00:17:25,960 --> 00:17:28,480 Speaker 10: Although it's still very prutent to own the entire SMP, 364 00:17:29,000 --> 00:17:31,720 Speaker 10: the US stock market is going to continue to outperform 365 00:17:31,760 --> 00:17:34,320 Speaker 10: the rest of the world, certainly for the foreseeable future. 366 00:17:34,960 --> 00:17:39,240 Speaker 6: You, Carol, you didn't mention Apple. You know you're talking 367 00:17:39,240 --> 00:17:42,000 Speaker 6: about large cap growth. We're talking about tech. I asked 368 00:17:42,000 --> 00:17:44,080 Speaker 6: an Apple you didn't talk about. It makes me think 369 00:17:44,119 --> 00:17:46,400 Speaker 6: that that's not in this thesis you have. 370 00:17:47,200 --> 00:17:49,119 Speaker 10: Well, I mean the problem that I've always had with 371 00:17:49,160 --> 00:17:51,320 Speaker 10: Apple is I feel like their product set is not 372 00:17:51,480 --> 00:17:52,639 Speaker 10: that broad. 373 00:17:52,880 --> 00:17:54,120 Speaker 11: I mean, Okay, how. 374 00:17:53,920 --> 00:17:56,920 Speaker 10: Many iPhones do people really need? Yes, you might upgrade 375 00:17:56,920 --> 00:17:58,359 Speaker 10: the phone that you have, that, are you really going 376 00:17:58,440 --> 00:17:59,400 Speaker 10: to penetrate. 377 00:17:59,080 --> 00:18:01,159 Speaker 11: Larger groups of new users. 378 00:18:01,200 --> 00:18:03,960 Speaker 10: I'm not so sure about that. They're very expensive. We're 379 00:18:04,000 --> 00:18:05,480 Speaker 10: in a high inflation market. 380 00:18:05,760 --> 00:18:06,560 Speaker 11: I'm not as. 381 00:18:06,480 --> 00:18:09,359 Speaker 10: Excited about Apple as I am about the other big 382 00:18:09,359 --> 00:18:13,240 Speaker 10: tech companies like Amazon, certainly Microsoft, in Nvidia. 383 00:18:13,080 --> 00:18:17,040 Speaker 11: We've got Google, even Facebook. You've got companies. 384 00:18:16,600 --> 00:18:20,560 Speaker 10: That are branching out into more areas of growth and expansion. 385 00:18:20,560 --> 00:18:23,600 Speaker 10: And to me, Apple's fairly focused. The car thing was 386 00:18:23,640 --> 00:18:25,680 Speaker 10: a mistake and now they have to backtrack on that. 387 00:18:26,440 --> 00:18:27,959 Speaker 10: I mean, they're still always going to be in the 388 00:18:27,960 --> 00:18:30,600 Speaker 10: top five. Don't get me wrong, you can own them. 389 00:18:30,400 --> 00:18:33,440 Speaker 10: I'm just not in love with them. As let's say 390 00:18:33,440 --> 00:18:34,800 Speaker 10: the leading story. 391 00:18:34,880 --> 00:18:36,960 Speaker 3: So are you in love with Microsoft and Amazon? 392 00:18:38,240 --> 00:18:40,960 Speaker 10: Yes, I've always been in love with Amazon since the beginning, 393 00:18:41,000 --> 00:18:43,800 Speaker 10: since they went public. Microsoft, I think is very very 394 00:18:43,880 --> 00:18:46,000 Speaker 10: strong and will continue to be. So they have a 395 00:18:46,119 --> 00:18:48,760 Speaker 10: much stronger focus on, i think, the corporate side of 396 00:18:48,760 --> 00:18:50,840 Speaker 10: the business, and that's very smart because all of this 397 00:18:50,960 --> 00:18:55,520 Speaker 10: AI innovation will start affecting corporate America and Microsoft will 398 00:18:55,560 --> 00:18:58,160 Speaker 10: most likely be one of the main delivery mechanisms because 399 00:18:58,160 --> 00:19:01,679 Speaker 10: they're embedded in so many corporate systems and so many 400 00:19:01,800 --> 00:19:05,359 Speaker 10: you know, Outlook systems and all the cloud storage that 401 00:19:05,359 --> 00:19:05,800 Speaker 10: they're doing. 402 00:19:06,000 --> 00:19:07,919 Speaker 11: I don't think that that's going to change. 403 00:19:08,359 --> 00:19:10,320 Speaker 6: So there was a great piece on Bloomberg that talked 404 00:19:10,320 --> 00:19:12,880 Speaker 6: about how big text profit growth is going to slow. 405 00:19:13,119 --> 00:19:14,560 Speaker 6: It's not going to go negative or anything. It's just 406 00:19:14,640 --> 00:19:16,680 Speaker 6: going to slow from the kind of growth that we've seen. 407 00:19:17,000 --> 00:19:20,159 Speaker 6: But that other areas like industrials, materials and healthcare can 408 00:19:20,200 --> 00:19:22,560 Speaker 6: see roughly twenty five percent profit growth by the fourth 409 00:19:22,640 --> 00:19:24,960 Speaker 6: quarter after a contraction twenty percent or more in the 410 00:19:25,000 --> 00:19:27,520 Speaker 6: first quarter. So I'm wondering, are you in love with 411 00:19:27,600 --> 00:19:30,200 Speaker 6: stuff outside of tech and maybe in those sectors. 412 00:19:31,440 --> 00:19:34,840 Speaker 10: Well, I certainly think those sectors have room to move, 413 00:19:34,880 --> 00:19:39,679 Speaker 10: which is fantastic. Certainly, you know, the GFLP one story 414 00:19:39,720 --> 00:19:42,040 Speaker 10: is going to continue and expand we're going to see 415 00:19:42,119 --> 00:19:45,639 Speaker 10: new drugs coming on and that is a blockbuster category. 416 00:19:45,680 --> 00:19:48,200 Speaker 10: But I also see that AI is doing tremendous work 417 00:19:48,240 --> 00:19:51,080 Speaker 10: in things like cancer research and coming up with real 418 00:19:51,240 --> 00:19:54,520 Speaker 10: cures in the health tech space. So I think healthcare 419 00:19:54,560 --> 00:19:56,560 Speaker 10: will also always be a good core holding. 420 00:19:57,080 --> 00:19:58,560 Speaker 11: But if you were to say what weight. 421 00:19:58,359 --> 00:20:00,600 Speaker 10: To put it out, I would overweight tack more than 422 00:20:00,640 --> 00:20:01,760 Speaker 10: I would overweight healthcare. 423 00:20:01,840 --> 00:20:02,000 Speaker 1: Though. 424 00:20:02,040 --> 00:20:05,480 Speaker 11: Of course, to me, healthcare is a continued growth story. 425 00:20:05,200 --> 00:20:07,400 Speaker 10: Because we have a lot of aging populations all over 426 00:20:07,440 --> 00:20:10,440 Speaker 10: the world and they just simply need more healthcare. So yes, 427 00:20:10,520 --> 00:20:13,560 Speaker 10: I mean healthcare is always a good sector. Anything growthy 428 00:20:13,760 --> 00:20:16,560 Speaker 10: is your friend. It doesn't mean the other sectors won't 429 00:20:16,600 --> 00:20:19,919 Speaker 10: touch up eventually, because a rising tide will lift all boats. 430 00:20:20,280 --> 00:20:22,640 Speaker 11: Especially when the rates start to go down. That's where 431 00:20:22,640 --> 00:20:24,879 Speaker 11: I think you'll see value start to move some more. 432 00:20:25,320 --> 00:20:27,960 Speaker 10: Because with value, you know, you just have very much 433 00:20:28,000 --> 00:20:29,199 Speaker 10: smaller margins to play with. 434 00:20:29,280 --> 00:20:30,640 Speaker 11: So when you have high interest. 435 00:20:30,400 --> 00:20:32,800 Speaker 10: Rates, you're more squeezed, and it's very hard to get 436 00:20:32,840 --> 00:20:35,080 Speaker 10: out of that squeeze any particular way if you're not 437 00:20:35,119 --> 00:20:36,440 Speaker 10: in a sector that's growing. 438 00:20:37,520 --> 00:20:39,639 Speaker 2: Hey, Carol, one of the themes coming out of the 439 00:20:39,640 --> 00:20:44,720 Speaker 2: pandemic was on shoring and friends shoring, and a lot 440 00:20:44,760 --> 00:20:46,960 Speaker 2: of folks are saying, take a look at Mexico. 441 00:20:47,280 --> 00:20:49,480 Speaker 3: Is that a theme you like? And so how do 442 00:20:49,520 --> 00:20:49,919 Speaker 3: you play that? 443 00:20:50,920 --> 00:20:51,200 Speaker 11: Yeah? 444 00:20:51,240 --> 00:20:53,959 Speaker 10: Absolutely well, As you guys know, I manage money for 445 00:20:54,200 --> 00:20:58,440 Speaker 10: ultra wealthy families with over one hundred million dollars family offices. 446 00:20:58,320 --> 00:21:00,000 Speaker 11: And they're very much looking at Mexico. 447 00:21:00,200 --> 00:21:03,360 Speaker 10: There's a huge real estate play going on now between 448 00:21:03,359 --> 00:21:06,960 Speaker 10: Mexico and the United States because many many businesses are 449 00:21:06,960 --> 00:21:10,879 Speaker 10: relocating their operations out of Asia to Mexico so that 450 00:21:10,920 --> 00:21:13,840 Speaker 10: they can just drive goods right across the border. Into 451 00:21:13,880 --> 00:21:15,879 Speaker 10: the US if they have to, So they're preparing for 452 00:21:15,920 --> 00:21:20,120 Speaker 10: the next pandemic. Frankly, Mexican they had a huge election. 453 00:21:20,280 --> 00:21:22,880 Speaker 10: The election went left. Of course, the wealthy families over 454 00:21:22,920 --> 00:21:26,880 Speaker 10: there are quite nervous, but the incoming president has really 455 00:21:26,880 --> 00:21:29,720 Speaker 10: pledged to not mess with the economy, and so far, 456 00:21:29,800 --> 00:21:30,240 Speaker 10: so good. 457 00:21:30,240 --> 00:21:30,960 Speaker 11: I don't think she. 458 00:21:31,000 --> 00:21:34,920 Speaker 10: Will question becomes how much will the outgoing president pass 459 00:21:35,000 --> 00:21:38,159 Speaker 10: his agenda before he leaves. But having said that, I 460 00:21:38,160 --> 00:21:40,320 Speaker 10: think they're all very happy with the way the economy 461 00:21:40,359 --> 00:21:43,160 Speaker 10: has been growing over there. So yes, Mexico will continue 462 00:21:43,160 --> 00:21:46,879 Speaker 10: to grow. It's only actually just getting started, and there's 463 00:21:47,000 --> 00:21:49,919 Speaker 10: a lot of activity in the real estate section the section. 464 00:21:50,200 --> 00:21:51,400 Speaker 11: There's a lot of joint. 465 00:21:51,240 --> 00:21:55,560 Speaker 10: Venturing between US and Mexican family offices going on, So 466 00:21:55,840 --> 00:21:59,760 Speaker 10: keep your eye on Mexico. It's also a fantastic retirement 467 00:22:00,320 --> 00:22:03,480 Speaker 10: nation for Americans who can't afford to stay here with 468 00:22:03,640 --> 00:22:05,879 Speaker 10: the current retirement I mean, you can live on your 469 00:22:05,880 --> 00:22:08,639 Speaker 10: Social Security beautifully in Mexico and you can't do that 470 00:22:08,720 --> 00:22:12,400 Speaker 10: in the US in retirement. So they were already massive 471 00:22:12,800 --> 00:22:16,000 Speaker 10: communities of retired Americans living across the border. And again 472 00:22:16,080 --> 00:22:18,560 Speaker 10: it's easy for them to get home if they prefer 473 00:22:18,600 --> 00:22:19,920 Speaker 10: to have health care in the US. 474 00:22:20,000 --> 00:22:22,640 Speaker 11: But it's a big trend. It's going to continue to grow. 475 00:22:23,080 --> 00:22:25,960 Speaker 6: Well, my best friend's pushing Costa Rica like that's her thing, 476 00:22:26,200 --> 00:22:28,280 Speaker 6: Like they're going to move her family for a year anyway. 477 00:22:28,400 --> 00:22:30,960 Speaker 6: So yes, that is a trend, Carrol, for sure, just 478 00:22:31,000 --> 00:22:32,720 Speaker 6: a headline that's crossing here. I feel like this is 479 00:22:32,760 --> 00:22:34,960 Speaker 6: for Paul because he'll get into it. BTP boom spread 480 00:22:35,640 --> 00:22:38,320 Speaker 6: ten year gap rises to fifty five basis points, the 481 00:22:38,400 --> 00:22:40,720 Speaker 6: highest in a year, and that's the difference between what 482 00:22:40,800 --> 00:22:43,399 Speaker 6: the ten yere yield in France versus Germany is yielding. 483 00:22:43,440 --> 00:22:45,440 Speaker 6: And since Germany tends to be looked at as the 484 00:22:45,520 --> 00:22:47,800 Speaker 6: risk free rate over in Europe, it's a sign of 485 00:22:47,840 --> 00:22:51,520 Speaker 6: where the stress is. Before the sovereign dead crisis, France 486 00:22:51,840 --> 00:22:54,720 Speaker 6: was really thought of his stable along with Germany, and 487 00:22:54,760 --> 00:22:59,840 Speaker 6: the dead crisis kind of avoid miss that got rid 488 00:22:59,840 --> 00:23:01,080 Speaker 6: of the got rid of that a little bit, and 489 00:23:01,080 --> 00:23:03,159 Speaker 6: there was more political risk over in France. Also, the 490 00:23:03,160 --> 00:23:06,800 Speaker 6: equity market is getting crushed. Did we learn anything, Carol, Like, 491 00:23:06,840 --> 00:23:09,160 Speaker 6: I know you're a US person, but did we learn 492 00:23:09,200 --> 00:23:12,320 Speaker 6: anything about what happened in the European Parliament and Macron's 493 00:23:12,760 --> 00:23:16,760 Speaker 6: choice to call these elections for the lower house in 494 00:23:16,800 --> 00:23:19,400 Speaker 6: relation to how we can trade and expect things here 495 00:23:19,440 --> 00:23:20,639 Speaker 6: in the US in November. 496 00:23:21,760 --> 00:23:23,679 Speaker 11: Oh, that's a really interesting question. 497 00:23:23,760 --> 00:23:26,320 Speaker 10: Well, I would say that, in my opinion, the vote 498 00:23:26,320 --> 00:23:28,320 Speaker 10: in the EU is a one issue vote. It was 499 00:23:28,359 --> 00:23:32,800 Speaker 10: an immigration vote because literally they're intignated. Almost every country 500 00:23:32,840 --> 00:23:35,680 Speaker 10: has massive numbers of people arriving on their shores by 501 00:23:35,760 --> 00:23:39,200 Speaker 10: vote because very close to get to Europe from other countries. 502 00:23:39,680 --> 00:23:42,040 Speaker 11: So you know, the Europeans are sick. 503 00:23:41,920 --> 00:23:45,399 Speaker 10: Of the immigration crisis, and I think his decision to 504 00:23:45,400 --> 00:23:48,600 Speaker 10: call snap elections is worrisome because he may lose even 505 00:23:48,680 --> 00:23:50,720 Speaker 10: more and that's what people don't want to see. 506 00:23:51,520 --> 00:23:52,880 Speaker 11: There is a fear of. 507 00:23:52,760 --> 00:23:55,320 Speaker 10: A return to a World War two kind of fascism 508 00:23:55,400 --> 00:23:57,879 Speaker 10: in Europe in reaction to immigration. 509 00:23:58,119 --> 00:23:58,520 Speaker 11: That's what. 510 00:23:58,680 --> 00:24:02,160 Speaker 10: But having said that, the souter parties still hold the majority, 511 00:24:02,720 --> 00:24:05,720 Speaker 10: so I think for the EU itself, we're still set 512 00:24:05,760 --> 00:24:08,520 Speaker 10: for this for this next cycle. But it's certainly a 513 00:24:08,520 --> 00:24:12,240 Speaker 10: commentary on they're way more enthusiastic on climate change and 514 00:24:12,280 --> 00:24:17,360 Speaker 10: they're way more aggressive on trying to somehow stop all 515 00:24:17,400 --> 00:24:20,800 Speaker 10: of this incoming immigration into the your EU block. 516 00:24:20,920 --> 00:24:23,600 Speaker 11: So I think those two factors are really. 517 00:24:23,440 --> 00:24:27,120 Speaker 10: Driving that vote, because average people are not happy with 518 00:24:27,160 --> 00:24:30,359 Speaker 10: what's happening in Europe. So having said that, when you 519 00:24:30,400 --> 00:24:32,880 Speaker 10: come to the United States, you're definitely seeing a. 520 00:24:32,920 --> 00:24:35,360 Speaker 11: Number of voters very unhappy about immigration. 521 00:24:35,560 --> 00:24:37,879 Speaker 10: And it's something that has to be dealt with in 522 00:24:37,920 --> 00:24:41,479 Speaker 10: this country as well. We just have to have a 523 00:24:41,520 --> 00:24:44,840 Speaker 10: better system that functions better. So it is a big 524 00:24:44,880 --> 00:24:47,240 Speaker 10: election issue. Both sides are trying to grab it. I 525 00:24:47,280 --> 00:24:50,080 Speaker 10: don't know what the outcome will be. It's a split 526 00:24:50,160 --> 00:24:52,840 Speaker 10: decision right now in this country. But I do think 527 00:24:52,880 --> 00:24:56,439 Speaker 10: here people are worried about fascism as well. Fascism is 528 00:24:56,480 --> 00:24:59,720 Speaker 10: a scary rise throughout the developed world right now, and 529 00:24:59,800 --> 00:25:01,400 Speaker 10: I I do think in America we have a real 530 00:25:01,880 --> 00:25:04,840 Speaker 10: allergy to fascism, and when it comes to the voting polls, 531 00:25:04,840 --> 00:25:07,680 Speaker 10: I don't think people are going to tolerate fascist talk 532 00:25:07,760 --> 00:25:08,760 Speaker 10: in the United States. 533 00:25:08,800 --> 00:25:11,560 Speaker 11: That's just my opinion, all right. 534 00:25:11,600 --> 00:25:13,159 Speaker 3: Keerl, thank you so much for joining us. 535 00:25:13,200 --> 00:25:15,919 Speaker 2: Kyle Pepper, founder and CEO of Pepper International, joining us 536 00:25:15,960 --> 00:25:17,639 Speaker 2: New York City via zoom. 537 00:25:17,680 --> 00:25:23,000 Speaker 1: Here you're listening to the Bloomberg Intelligence podcast. Catch us 538 00:25:23,040 --> 00:25:26,440 Speaker 1: live weekdays at ten am Eastern on applecar Play and 539 00:25:26,440 --> 00:25:29,720 Speaker 1: Android Auto with the Bloomberg Business. You can also listen 540 00:25:29,800 --> 00:25:32,920 Speaker 1: live on Amazon Alexa from our flagship New York station, 541 00:25:33,280 --> 00:25:37,040 Speaker 1: Just say Alexa playing Bloomberg eleven thirty. 542 00:25:37,920 --> 00:25:40,720 Speaker 2: Well, you know, we love these big take stories here 543 00:25:40,760 --> 00:25:41,480 Speaker 2: at Bloomberg News. 544 00:25:41,480 --> 00:25:43,879 Speaker 3: That's where our reporters a Bloomberg. 545 00:25:43,520 --> 00:25:46,719 Speaker 2: News they do some really awesome deep dives and on 546 00:25:46,760 --> 00:25:47,959 Speaker 2: some really interesting stories. 547 00:25:48,000 --> 00:25:48,959 Speaker 3: Today is no different. 548 00:25:49,359 --> 00:25:52,880 Speaker 2: How about this one talent exit at Williams New York 549 00:25:52,920 --> 00:25:56,359 Speaker 2: Fed stokes concern on its way. Alex Harris joins is 550 00:25:56,560 --> 00:25:59,920 Speaker 2: Bloomberg short Term interest rate reporter here. So Alex, thanks 551 00:26:00,080 --> 00:26:02,239 Speaker 2: much for joining us here in our studio. The New 552 00:26:02,320 --> 00:26:05,959 Speaker 2: York Federal Reserve Bank, that's a big one. And so 553 00:26:06,000 --> 00:26:08,160 Speaker 2: what's happening with our friends at the New York Fed 554 00:26:08,200 --> 00:26:09,879 Speaker 2: because we need to pay attention to this. 555 00:26:10,240 --> 00:26:12,120 Speaker 8: Yeah, So what's kind of happened over the last couple 556 00:26:12,160 --> 00:26:16,840 Speaker 8: of years is you've seen an exodus of basically senior management. 557 00:26:16,840 --> 00:26:18,680 Speaker 8: These are people who have been with the bank for 558 00:26:18,760 --> 00:26:22,760 Speaker 8: decades just deciding to exit, either that they retire or 559 00:26:22,800 --> 00:26:25,560 Speaker 8: that they you know, find another opportunity on Wall Street 560 00:26:25,680 --> 00:26:29,000 Speaker 8: or just really but what's ultimately driving it is the 561 00:26:29,119 --> 00:26:32,800 Speaker 8: environment is just not they have found just not conducive 562 00:26:32,960 --> 00:26:35,520 Speaker 8: either that you know, there's been changes in the banks, 563 00:26:35,880 --> 00:26:39,560 Speaker 8: in the bank under the leadership of John Williams that 564 00:26:39,920 --> 00:26:43,800 Speaker 8: they have found, you know, doesn't necessarily work for them anymore. 565 00:26:44,240 --> 00:26:47,080 Speaker 8: And as a result, they're leaving. And what people are 566 00:26:47,080 --> 00:26:50,120 Speaker 8: worried about is the so called brain drain. It leaves 567 00:26:50,160 --> 00:26:53,480 Speaker 8: a vacuum of people who are experienced at fighting crises 568 00:26:54,080 --> 00:26:55,920 Speaker 8: because remember a lot of these people have been there. 569 00:26:56,080 --> 00:26:58,040 Speaker 8: They were there for the financial crisis, they were there 570 00:26:58,080 --> 00:26:59,679 Speaker 8: for the repo market blow up, they were there in 571 00:26:59,720 --> 00:27:03,880 Speaker 8: twenty like, they have crisis fighting experience, and so you're 572 00:27:03,960 --> 00:27:06,440 Speaker 8: leaving a lot of that knowledge is leaving the bank. 573 00:27:06,680 --> 00:27:09,760 Speaker 8: But then also just their ability and the question of 574 00:27:10,200 --> 00:27:13,600 Speaker 8: are they ready for whatever's next, And that's what people 575 00:27:13,600 --> 00:27:16,879 Speaker 8: are really concerned is they're feeling like something must is 576 00:27:16,960 --> 00:27:21,840 Speaker 8: severely lacking in the under the leadership of John Williams. 577 00:27:21,840 --> 00:27:23,440 Speaker 5: Why I love that you wrote this because Alex is 578 00:27:23,480 --> 00:27:25,000 Speaker 5: usually the person that has those. 579 00:27:24,840 --> 00:27:28,239 Speaker 6: Really nerdy rebo market articles where you're like, I know 580 00:27:28,320 --> 00:27:30,240 Speaker 6: this is important. I know I'm going to read it 581 00:27:30,280 --> 00:27:32,480 Speaker 6: three times and I'm still going to understand twenty percent 582 00:27:32,480 --> 00:27:34,119 Speaker 6: of it and I have to email Alex Harris, so 583 00:27:34,160 --> 00:27:34,520 Speaker 6: thank you. 584 00:27:34,440 --> 00:27:37,480 Speaker 5: For writing an article that I understood right off the bat. 585 00:27:37,680 --> 00:27:38,720 Speaker 5: What did they do about that? 586 00:27:38,760 --> 00:27:38,960 Speaker 9: Then? 587 00:27:39,119 --> 00:27:41,000 Speaker 6: I mean, is it as easy as like, hey, we're 588 00:27:41,000 --> 00:27:42,440 Speaker 6: going to offer more work from home? 589 00:27:42,680 --> 00:27:45,400 Speaker 5: Is it not that at all? Is it something very different? 590 00:27:45,920 --> 00:27:47,240 Speaker 8: I think it's very different. 591 00:27:47,359 --> 00:27:49,640 Speaker 5: I think really what. 592 00:27:49,680 --> 00:27:51,720 Speaker 8: People are going to have to start looking at is 593 00:27:51,760 --> 00:27:54,159 Speaker 8: taking a really serious look at the role of the 594 00:27:54,200 --> 00:27:57,840 Speaker 8: New York FED. You know, for some people, they've said, look, 595 00:27:57,920 --> 00:28:01,879 Speaker 8: Lourie William excuse me, got elevated out of the New 596 00:28:01,920 --> 00:28:04,720 Speaker 8: York FED to running the Dallas FED. And she's taken 597 00:28:04,760 --> 00:28:06,879 Speaker 8: a lot of that staff with her. She has this 598 00:28:06,960 --> 00:28:09,439 Speaker 8: experience on the balance sheet. People really trust her. So 599 00:28:09,560 --> 00:28:12,080 Speaker 8: now people are wondering, well, it doesn't necessarily have to 600 00:28:12,080 --> 00:28:14,600 Speaker 8: be New York that carries out, you know, the implementation 601 00:28:14,760 --> 00:28:17,680 Speaker 8: of the Fed's policies when it comes to their balance sheet, 602 00:28:17,760 --> 00:28:21,080 Speaker 8: like this could shift to Dallas. So people are starting 603 00:28:21,080 --> 00:28:23,760 Speaker 8: to ask that question or pose that question. At the 604 00:28:23,800 --> 00:28:26,760 Speaker 8: same time, though, you know, people are pushing back and saying, no, no, no, 605 00:28:27,080 --> 00:28:28,840 Speaker 8: this has to be in New York. We need to 606 00:28:28,920 --> 00:28:30,960 Speaker 8: fix what is happening in New York. We need to 607 00:28:31,000 --> 00:28:33,720 Speaker 8: retain talent in New York because the banks are here, 608 00:28:33,760 --> 00:28:36,040 Speaker 8: and if something happens with the banking system, it's much 609 00:28:36,040 --> 00:28:39,200 Speaker 8: easier to call everyone down to Liberty Street and say, hey, 610 00:28:39,400 --> 00:28:41,520 Speaker 8: get in here, we got to figure this out than 611 00:28:41,520 --> 00:28:43,920 Speaker 8: trying to call people all the way down to Dallas 612 00:28:43,960 --> 00:28:45,440 Speaker 8: and say, hey, we got to figure this out. 613 00:28:45,680 --> 00:28:48,960 Speaker 2: So historically, the New York Fed has been the branch 614 00:28:49,080 --> 00:28:54,480 Speaker 2: that manages the Treasury's balance sheet, correct buying and selling bonds, well. 615 00:28:54,280 --> 00:28:56,560 Speaker 8: The Fed's balance sheet, so there are whole things of 616 00:28:56,600 --> 00:28:58,840 Speaker 8: treasuries and mbs and such. 617 00:28:59,000 --> 00:29:01,560 Speaker 2: So it's been done. And again they have traders there 618 00:29:01,600 --> 00:29:02,920 Speaker 2: and stuff that do this. I mean, this is where 619 00:29:02,920 --> 00:29:03,800 Speaker 2: it happens in New York. 620 00:29:04,120 --> 00:29:07,320 Speaker 8: Well, and you have other like Chicago still has you know, 621 00:29:07,600 --> 00:29:10,840 Speaker 8: market analysis people. They still have all these things coming 622 00:29:10,880 --> 00:29:13,040 Speaker 8: out of the other banks. But it is primarily a 623 00:29:13,080 --> 00:29:15,840 Speaker 8: function of the New York Fed. Their tasked with managing 624 00:29:15,840 --> 00:29:19,320 Speaker 8: their Fed's portfolio. Roberto Pearly is the SOMA manager, so 625 00:29:19,360 --> 00:29:23,120 Speaker 8: he manages the FED securities portfolio. You know, so these things, 626 00:29:23,520 --> 00:29:26,440 Speaker 8: and so the New York Fed really post financial crisis, 627 00:29:26,520 --> 00:29:29,160 Speaker 8: has just taken on such a larger role. They've essentially 628 00:29:29,240 --> 00:29:33,400 Speaker 8: become like a giant broker dealer just given the size 629 00:29:33,440 --> 00:29:36,160 Speaker 8: and the sheer size of their balance sheet. And that's 630 00:29:36,400 --> 00:29:38,959 Speaker 8: you know, someone like Christopher Whalen is making the argument 631 00:29:39,120 --> 00:29:41,760 Speaker 8: that you don't need an academic We don't, you know. 632 00:29:41,840 --> 00:29:44,920 Speaker 8: It's you don't need an academic running the New York Fed. 633 00:29:45,080 --> 00:29:47,800 Speaker 8: You need someone who's comfortable with operations, with the nuts 634 00:29:47,840 --> 00:29:49,880 Speaker 8: and bolts, and can kind of see it from a 635 00:29:49,880 --> 00:29:54,000 Speaker 8: more markets oriented perspective than an academic one. 636 00:29:54,240 --> 00:29:55,320 Speaker 5: So how do they pitch that? 637 00:29:55,600 --> 00:29:58,960 Speaker 6: Because who's going to give up a job at Goldman 638 00:29:59,120 --> 00:30:01,480 Speaker 6: that pays a nice tongue of change. Actually have no 639 00:30:01,480 --> 00:30:02,880 Speaker 6: idea how much the New York Fed does, but I 640 00:30:02,920 --> 00:30:03,840 Speaker 6: have to assume it's less. 641 00:30:04,080 --> 00:30:04,880 Speaker 5: How do I do it? 642 00:30:04,880 --> 00:30:07,120 Speaker 8: It's like I think, when I last look at the 643 00:30:07,240 --> 00:30:09,040 Speaker 8: annual report from twenty twenty three, I think it's like 644 00:30:09,160 --> 00:30:11,360 Speaker 8: a little over half a million dollars that the president 645 00:30:11,400 --> 00:30:14,440 Speaker 8: of the New York Fed makes. But I mean, look, Beth Hammock, 646 00:30:14,680 --> 00:30:17,640 Speaker 8: who ran funding, who ran the Goldman sex fundings? 647 00:30:17,680 --> 00:30:19,040 Speaker 5: Are she's elevated. 648 00:30:19,080 --> 00:30:22,600 Speaker 8: She's taking the role as the Cleveland Fed president. You know, 649 00:30:23,000 --> 00:30:26,280 Speaker 8: Lorie Logan could always you know, people are speculating that 650 00:30:26,320 --> 00:30:28,040 Speaker 8: she could come back to New York and run it. 651 00:30:28,200 --> 00:30:30,120 Speaker 8: You know, these are the kinds of people I think 652 00:30:30,160 --> 00:30:33,040 Speaker 8: that they envision when they're thinking about the role, and 653 00:30:33,280 --> 00:30:37,000 Speaker 8: who could who can you know, possibly you know, helm 654 00:30:37,040 --> 00:30:39,520 Speaker 8: the New York Fed after John Williams, who decides to 655 00:30:39,520 --> 00:30:40,520 Speaker 8: retire a step down. 656 00:30:41,160 --> 00:30:43,280 Speaker 3: Do we have a problem with John Williams. 657 00:30:43,880 --> 00:30:46,600 Speaker 2: Is that a people placing the blame on these departures 658 00:30:46,640 --> 00:30:47,720 Speaker 2: on John Williams and his. 659 00:30:47,680 --> 00:30:51,040 Speaker 8: Style, or you know, I think it's a I think 660 00:30:51,080 --> 00:30:51,960 Speaker 8: it's a bit of both. 661 00:30:52,200 --> 00:30:54,840 Speaker 5: I think, you know, again, you know, when we. 662 00:30:54,840 --> 00:30:58,120 Speaker 8: Spoke to people, the message was always he is a 663 00:30:58,160 --> 00:31:02,000 Speaker 8: brilliant macro economist, but just ill suited for the role. 664 00:31:02,160 --> 00:31:05,320 Speaker 8: I also think culturally, the other sense I got from 665 00:31:05,320 --> 00:31:09,440 Speaker 8: people is that, you know, culturally it's very different than 666 00:31:09,440 --> 00:31:11,400 Speaker 8: the San Francisco Fed, which is what he was running 667 00:31:11,400 --> 00:31:14,040 Speaker 8: for seven years before he came and took the role 668 00:31:14,080 --> 00:31:16,480 Speaker 8: in New York. It's just very different. And you know, 669 00:31:16,600 --> 00:31:21,120 Speaker 8: sometimes culturally people don't fit and that's okay, and so 670 00:31:21,200 --> 00:31:24,960 Speaker 8: that's something to also think about. And so I think 671 00:31:25,000 --> 00:31:27,640 Speaker 8: it's a bit of both. I think it is somewhat 672 00:31:27,680 --> 00:31:32,400 Speaker 8: of the culture and just sort of not meshing you know, 673 00:31:32,440 --> 00:31:34,520 Speaker 8: they were just sort of ill suited for each other. 674 00:31:34,920 --> 00:31:36,560 Speaker 5: Right, We'll keep an eye on good stuff. 675 00:31:36,680 --> 00:31:38,600 Speaker 3: Yeah, Alex Harris, thank you so much for We appreciate it. 676 00:31:38,640 --> 00:31:41,800 Speaker 3: Alex Harrish. She's a short term interest rate reporter working. 677 00:31:41,560 --> 00:31:45,120 Speaker 2: On the big Take story here today, Talent Exit at Williams, 678 00:31:45,120 --> 00:31:49,520 Speaker 2: New York stokes concern on its sway in the marketplace 679 00:31:49,520 --> 00:31:52,400 Speaker 2: about the New York Federal Reserve. And you can catch 680 00:31:52,440 --> 00:31:55,240 Speaker 2: those big take stories Bloomberg dot Com Slash Big Take 681 00:31:55,320 --> 00:31:57,840 Speaker 2: or go on the Bloomberg terminal NI Space Big Take. 682 00:31:58,160 --> 00:31:59,800 Speaker 3: Another good one today. 683 00:31:59,800 --> 00:32:05,280 Speaker 1: Here you're listening to the Bloomberg Intelligence Podcast. Catch us 684 00:32:05,320 --> 00:32:08,720 Speaker 1: live weekdays at ten am Eastern on applecard Play and 685 00:32:08,720 --> 00:32:11,640 Speaker 1: Android Auto with the Bloomberg Business app. You can also 686 00:32:11,720 --> 00:32:15,200 Speaker 1: listen live on Amazon Alexa from our flagship New York station, 687 00:32:15,600 --> 00:32:20,600 Speaker 1: Just Say Alexa Play Bloomberg eleven thirty. 688 00:32:20,000 --> 00:32:21,240 Speaker 3: Alex Steel and Paul Sweeney. 689 00:32:21,280 --> 00:32:23,720 Speaker 2: We're live here in our Bloomberg Interactive Broker studio in 690 00:32:23,800 --> 00:32:27,840 Speaker 2: Midtown Manhattan, what I'm going to call an A plus building. 691 00:32:27,880 --> 00:32:30,680 Speaker 2: We're also streaming live on YouTube as well, as you 692 00:32:30,680 --> 00:32:33,160 Speaker 2: can head over to YouTube and search Bloomberg Podcast talking 693 00:32:33,200 --> 00:32:36,280 Speaker 2: about real estate on the commercial side. It is a 694 00:32:36,440 --> 00:32:38,480 Speaker 2: hot topic for a lot of folks, particularly those in 695 00:32:39,200 --> 00:32:41,200 Speaker 2: larger markets, where you're really trying to figure out how 696 00:32:41,200 --> 00:32:43,880 Speaker 2: this commercial real estate, particularly the office real estate market 697 00:32:43,960 --> 00:32:45,840 Speaker 2: is going to shake out here and what the impacts 698 00:32:45,840 --> 00:32:48,000 Speaker 2: that will have across the economy. We have an expert 699 00:32:48,000 --> 00:32:49,800 Speaker 2: with us today, Ken Fisher, joins us. He's a partner 700 00:32:49,840 --> 00:32:52,920 Speaker 2: at Fisher Brothers. Joins us here on our Bloomberg Interactive 701 00:32:52,920 --> 00:32:54,840 Speaker 2: Broker studio. Ken, thanks so much for. 702 00:32:54,840 --> 00:32:55,440 Speaker 3: Joining us here. 703 00:32:55,560 --> 00:32:58,160 Speaker 2: Let's just start right here in New York City office 704 00:32:58,200 --> 00:32:58,800 Speaker 2: real estate. 705 00:33:00,000 --> 00:33:03,640 Speaker 12: That's your view, Well, we're looking at a really a 706 00:33:03,800 --> 00:33:08,600 Speaker 12: bifurcated market. There's the class A trophy market, and there's 707 00:33:08,720 --> 00:33:12,920 Speaker 12: just about everything else. What we've seen in our portfolio 708 00:33:13,360 --> 00:33:18,920 Speaker 12: is a lot of activity. Tours are still fairly robust, 709 00:33:19,200 --> 00:33:22,959 Speaker 12: and we have we've made some very very big deals, 710 00:33:22,960 --> 00:33:24,680 Speaker 12: some of the biggest deals in the country over the 711 00:33:24,760 --> 00:33:25,920 Speaker 12: last year, year and a half. 712 00:33:26,840 --> 00:33:29,080 Speaker 6: Yeah, let's get to some of Yeah, let's get to 713 00:33:29,080 --> 00:33:31,760 Speaker 6: some of that, just to get perspective to the listeners. 714 00:33:31,920 --> 00:33:34,480 Speaker 6: Fisher Brothers has a core commercial portfolio in New York 715 00:33:34,480 --> 00:33:36,680 Speaker 6: City right that includes thirteen forty five Avenue of the 716 00:33:36,680 --> 00:33:39,520 Speaker 6: America's twenty two hundred and ninety nine Park Avenue and 717 00:33:39,560 --> 00:33:44,000 Speaker 6: Park Avenue Plaza like these are like big, huge centers 718 00:33:44,040 --> 00:33:47,480 Speaker 6: that are really iconic in the financial industry. Talk to 719 00:33:47,560 --> 00:33:49,880 Speaker 6: us about the kind of leases that you were signing, 720 00:33:49,960 --> 00:33:52,360 Speaker 6: say last year, and what kind of leases are you 721 00:33:52,400 --> 00:33:53,160 Speaker 6: signing this year. 722 00:33:53,560 --> 00:33:59,440 Speaker 12: Well, that's been fairly consistent. The rents themselves have been 723 00:33:59,480 --> 00:34:00,920 Speaker 12: fairly stag that they've been. 724 00:34:01,280 --> 00:34:02,320 Speaker 7: They haven't moved much. 725 00:34:02,840 --> 00:34:05,960 Speaker 12: What has moved is then effective rents, the rents after 726 00:34:06,000 --> 00:34:10,200 Speaker 12: you factor in tenant improvement allowances and brokerage commissions and 727 00:34:10,239 --> 00:34:14,040 Speaker 12: free rent, that number has gotten hit substantially. The amount 728 00:34:14,040 --> 00:34:17,360 Speaker 12: of landlord worked has also increased. So as part of 729 00:34:17,400 --> 00:34:20,680 Speaker 12: making the deal there's tenant improvement allowance. There's also the 730 00:34:20,719 --> 00:34:23,000 Speaker 12: work that the landlord has to do in terms of 731 00:34:23,080 --> 00:34:25,520 Speaker 12: capital expenditures to make the buildings leasable. 732 00:34:26,360 --> 00:34:30,680 Speaker 2: So take for example, at thirteen forty five Avenue of America's, 733 00:34:30,719 --> 00:34:32,200 Speaker 2: which those of us who have been here for more 734 00:34:32,239 --> 00:34:37,080 Speaker 2: than fifteen minutes called sixth Avenue. Paul Weiss, big New 735 00:34:37,160 --> 00:34:40,520 Speaker 2: York City law firm, just took I guess fifteen year 736 00:34:40,520 --> 00:34:46,160 Speaker 2: one hundred and forty three thousand, square foot lease. So 737 00:34:46,320 --> 00:34:49,640 Speaker 2: is that new space? Are they just kind of repositioning space? 738 00:34:49,920 --> 00:34:50,960 Speaker 2: And what did you have to do? You have to 739 00:34:50,960 --> 00:34:53,080 Speaker 2: put in pool tables and ping pong tables, all that 740 00:34:53,160 --> 00:34:53,600 Speaker 2: kind of selling. 741 00:34:53,719 --> 00:34:56,719 Speaker 12: I wish it was that simple. First it was seven 742 00:34:56,800 --> 00:34:59,200 Speaker 12: hundred and sixty five thousands. Okay, we had a million 743 00:34:59,239 --> 00:35:03,680 Speaker 12: square foot vacant see facing us in twenty twenty five 744 00:35:03,760 --> 00:35:08,120 Speaker 12: with Alliance Bernstein moving out to Nashville, and so, you know, 745 00:35:08,400 --> 00:35:12,560 Speaker 12: year before the pandemic, we actually looked inside the portfolio 746 00:35:13,440 --> 00:35:15,719 Speaker 12: because we knew that we were competing now not only 747 00:35:15,760 --> 00:35:18,239 Speaker 12: with our comp set, but also with new construction. We'd 748 00:35:18,280 --> 00:35:21,440 Speaker 12: seen millions and millions of square feet of new construction 749 00:35:21,520 --> 00:35:24,440 Speaker 12: that we hadn't seen since the sixties. Wow, And so 750 00:35:24,760 --> 00:35:27,920 Speaker 12: we knew we had to invest and reposition the portfolio, 751 00:35:28,520 --> 00:35:30,759 Speaker 12: and so we did so. And then of course the 752 00:35:30,760 --> 00:35:35,439 Speaker 12: pandemic hit. And so in the middle of repositioning these 753 00:35:35,480 --> 00:35:39,440 Speaker 12: assets with you know, massive amenities like we see here 754 00:35:39,480 --> 00:35:42,880 Speaker 12: in this building, we also had to modify our stance 755 00:35:42,960 --> 00:35:43,880 Speaker 12: and start. 756 00:35:43,760 --> 00:35:45,120 Speaker 7: COVID proofing the buildings. 757 00:35:45,200 --> 00:35:50,920 Speaker 12: So we did HVAC work, a touchless experience, bluetooth technology, 758 00:35:51,000 --> 00:35:53,759 Speaker 12: all of that stuff that we hear about we incorporated 759 00:35:53,800 --> 00:35:58,319 Speaker 12: into our portfolio, and the result was, you know, while 760 00:35:58,320 --> 00:36:01,480 Speaker 12: again we said that rents were fairly stable, it was 761 00:36:01,520 --> 00:36:02,520 Speaker 12: the amount of work that it. 762 00:36:02,480 --> 00:36:03,879 Speaker 7: Took to get Paul Weise in. 763 00:36:04,480 --> 00:36:06,960 Speaker 12: So it was not just what we saw in the 764 00:36:06,960 --> 00:36:09,640 Speaker 12: deal itself, but what we had to do the repositioned 765 00:36:09,680 --> 00:36:11,080 Speaker 12: ability to get Paul Weiss. 766 00:36:10,800 --> 00:36:11,400 Speaker 7: To look at it. 767 00:36:12,040 --> 00:36:15,759 Speaker 5: So, was that a healthy commercial real estate market? Is 768 00:36:15,760 --> 00:36:17,240 Speaker 5: that an investment cycle? 769 00:36:17,320 --> 00:36:17,400 Speaker 11: Like? 770 00:36:17,440 --> 00:36:19,600 Speaker 5: How would you then describe it? 771 00:36:21,360 --> 00:36:24,520 Speaker 12: Well, you know, again we're looking at a bifurcated market, 772 00:36:24,719 --> 00:36:30,320 Speaker 12: so you know, we're competing with other Class A assets 773 00:36:31,120 --> 00:36:35,200 Speaker 12: and so we long before the pandemic hit, we just 774 00:36:35,280 --> 00:36:37,640 Speaker 12: knew what we were going to have to do. There 775 00:36:37,680 --> 00:36:40,880 Speaker 12: was a stat that came out years ago that almost 776 00:36:40,880 --> 00:36:44,359 Speaker 12: sixty percent of the market was over sixty years or earther, 777 00:36:44,960 --> 00:36:46,960 Speaker 12: and so we fell into that concept. 778 00:36:47,000 --> 00:36:49,080 Speaker 7: We fell into that grouping, and so. 779 00:36:49,160 --> 00:36:52,319 Speaker 12: It became very very important for us to reinvest in 780 00:36:52,360 --> 00:36:55,080 Speaker 12: the portfolio. And I think we will see that those 781 00:36:55,120 --> 00:36:59,319 Speaker 12: who have reinvested and spent the capital expenditures necessary to 782 00:36:59,360 --> 00:37:03,280 Speaker 12: reposition buildings have had some activity, and those who haven't 783 00:37:03,320 --> 00:37:03,600 Speaker 12: have not. 784 00:37:04,400 --> 00:37:06,319 Speaker 2: One of my first Wall Street interviews was in Park 785 00:37:06,360 --> 00:37:09,919 Speaker 2: Avenue Plaza, the old First Boston Corporation back in. 786 00:37:09,840 --> 00:37:11,319 Speaker 3: The day, and I was like, oh, this. 787 00:37:11,320 --> 00:37:12,640 Speaker 7: Is really real place. 788 00:37:13,160 --> 00:37:15,680 Speaker 3: Yes it does, Yes it does for many reasons. What 789 00:37:15,840 --> 00:37:16,480 Speaker 3: percentage of. 790 00:37:16,440 --> 00:37:20,120 Speaker 2: New York City is a type of quality? 791 00:37:22,040 --> 00:37:25,799 Speaker 7: Oh gee, that's tought. I mean it's it's a It's 792 00:37:25,840 --> 00:37:27,799 Speaker 7: not fifty No, it's not. 793 00:37:28,600 --> 00:37:31,120 Speaker 2: So it's less than that. So I'm just getting to 794 00:37:31,160 --> 00:37:35,960 Speaker 2: the question. Bloomberg News I referenced this article many times. 795 00:37:36,080 --> 00:37:38,080 Speaker 2: A year and a half ago. Two years ago, Bloomberg 796 00:37:38,120 --> 00:37:42,759 Speaker 2: News wrote a story about Third Avenue Times Square to write, 797 00:37:42,760 --> 00:37:46,879 Speaker 2: where we are at Bloomberg's headquarters here fifty eighth Street, what. 798 00:37:46,800 --> 00:37:47,960 Speaker 7: Do you do with that inventory? 799 00:37:48,080 --> 00:37:50,240 Speaker 3: Because that's not a inventory for most of the most. 800 00:37:50,080 --> 00:37:52,319 Speaker 12: Work, it's not if you look at if you look 801 00:37:52,360 --> 00:37:54,480 Speaker 12: at the sub markets, you can you can kind of 802 00:37:54,520 --> 00:37:57,400 Speaker 12: look at it from that. From that perspective, Park Avenue, 803 00:37:57,440 --> 00:37:58,640 Speaker 12: sixth Avenue, these. 804 00:37:58,440 --> 00:37:59,320 Speaker 7: Are the hot market. 805 00:37:59,400 --> 00:38:02,120 Speaker 12: These are the hot places that a lot of deals 806 00:38:02,120 --> 00:38:04,360 Speaker 12: are going because of the flight to quality that exists 807 00:38:04,760 --> 00:38:07,520 Speaker 12: when market conditions take a you know, take a little 808 00:38:07,520 --> 00:38:10,360 Speaker 12: bit of a stump. What we've seen is we have 809 00:38:10,440 --> 00:38:12,719 Speaker 12: a building at six oh five Third Avenue, which straddles 810 00:38:12,760 --> 00:38:16,600 Speaker 12: to sub markets, and so you know, look, it puts 811 00:38:16,680 --> 00:38:20,719 Speaker 12: everything on the table. We've even examined the possibility of 812 00:38:21,280 --> 00:38:26,439 Speaker 12: conversion to residential, which you know, again takes a lot 813 00:38:26,480 --> 00:38:30,000 Speaker 12: of resources to do, so that's something that we've discussed. 814 00:38:30,080 --> 00:38:31,560 Speaker 12: I don't think it's going to be relevant to six 815 00:38:31,719 --> 00:38:34,680 Speaker 12: oh five, but again, you know, it's it's looking at 816 00:38:34,680 --> 00:38:37,520 Speaker 12: this at the market in the form of sub markets 817 00:38:37,560 --> 00:38:40,040 Speaker 12: and what is happening, and you can see the data. 818 00:38:40,800 --> 00:38:43,160 Speaker 12: You know where most of these deals are happening are 819 00:38:43,200 --> 00:38:43,840 Speaker 12: along those. 820 00:38:43,760 --> 00:38:44,600 Speaker 7: To those markets. 821 00:38:45,120 --> 00:38:47,319 Speaker 5: You're sorry, go ahead, but I. 822 00:38:47,239 --> 00:38:49,600 Speaker 2: Guess my question is just pick a building out of 823 00:38:49,680 --> 00:38:52,239 Speaker 2: thin air on Third Avenue, the Lipstick Building, because maybe 824 00:38:52,239 --> 00:38:54,520 Speaker 2: some people are out of town can think about that building. 825 00:38:54,520 --> 00:38:55,320 Speaker 3: That's what we're talking about. 826 00:38:55,480 --> 00:39:01,200 Speaker 2: If that were to trade hands today, discount from pre pandemic. 827 00:39:01,400 --> 00:39:03,240 Speaker 7: Just about it, I would say, wow, pretty close. 828 00:39:03,360 --> 00:39:06,520 Speaker 3: That is amazing. That's to me. We haven't seen that 829 00:39:06,719 --> 00:39:08,200 Speaker 3: market clear, have we No? 830 00:39:08,440 --> 00:39:12,120 Speaker 5: But does it have to I have to, like someone 831 00:39:12,160 --> 00:39:13,280 Speaker 5: going to sell the building tomorrow. 832 00:39:13,280 --> 00:39:15,239 Speaker 2: Loans are coming up to be refinanced, and they have 833 00:39:15,239 --> 00:39:17,400 Speaker 2: to do with a higher interest rate environment, so a 834 00:39:17,400 --> 00:39:18,840 Speaker 2: lot of hands are going to be forced in the 835 00:39:18,840 --> 00:39:20,000 Speaker 2: next couple of years, don't you think. 836 00:39:20,080 --> 00:39:22,960 Speaker 12: I think yeah, I think you're more likely to see 837 00:39:23,080 --> 00:39:26,600 Speaker 12: in a lot of cases, you know, workouts where there 838 00:39:26,600 --> 00:39:30,120 Speaker 12: will be more equity required, you know, be invested back in. 839 00:39:30,680 --> 00:39:35,880 Speaker 12: There'll be stricter covenants, more leasing reserves and reserves in general. 840 00:39:36,760 --> 00:39:40,239 Speaker 12: I think you'll see that rather than the keys being 841 00:39:40,239 --> 00:39:43,000 Speaker 12: handed back, And if it's a B or a C market, 842 00:39:43,040 --> 00:39:48,640 Speaker 12: you might see residential conversions be discussed. I think you know, 843 00:39:48,680 --> 00:39:51,239 Speaker 12: it's going to depend you know, in relation to that, 844 00:39:51,360 --> 00:39:53,520 Speaker 12: it's going to depend a lot on when the loan 845 00:39:53,600 --> 00:39:57,120 Speaker 12: matures as it relates to lease explorations. 846 00:39:57,200 --> 00:39:59,759 Speaker 6: Yeah, in terms of your reinvestment in the equity you 847 00:39:59,800 --> 00:40:01,720 Speaker 6: have to put in, are you done in that cycle 848 00:40:01,800 --> 00:40:03,400 Speaker 6: or are you still putting in a bunch of cash 849 00:40:03,560 --> 00:40:04,640 Speaker 6: to update all your stuff? 850 00:40:04,719 --> 00:40:09,960 Speaker 12: No, we have repositioned our portfolio and I can still eat. 851 00:40:10,080 --> 00:40:11,440 Speaker 7: So that's why he. 852 00:40:11,560 --> 00:40:13,280 Speaker 5: Laughed at himself. When are you talking about it? 853 00:40:13,400 --> 00:40:16,759 Speaker 12: We have we have made a substantial reinvestment and the 854 00:40:16,840 --> 00:40:18,759 Speaker 12: results are that we have you know. 855 00:40:18,760 --> 00:40:21,400 Speaker 5: We have leased, but that cycle's done for us? 856 00:40:21,480 --> 00:40:21,680 Speaker 7: Yes? 857 00:40:21,840 --> 00:40:22,480 Speaker 5: Yes, okay? 858 00:40:22,680 --> 00:40:24,880 Speaker 6: Do you feel like others are really are they also 859 00:40:24,960 --> 00:40:27,279 Speaker 6: starting to do it now? Or do you feel like 860 00:40:27,480 --> 00:40:29,800 Speaker 6: for everyone that cycle is is done. 861 00:40:30,239 --> 00:40:30,319 Speaker 9: No. 862 00:40:30,480 --> 00:40:32,920 Speaker 12: I think I think you'll. It depends again on the 863 00:40:32,960 --> 00:40:34,839 Speaker 12: asset and the sub market. You've got to be very 864 00:40:34,880 --> 00:40:36,880 Speaker 12: careful about the amount of money you have to do 865 00:40:36,920 --> 00:40:40,319 Speaker 12: it surgically. You can't invest the same amount of money 866 00:40:40,360 --> 00:40:42,440 Speaker 12: that you would put into thirteen forty five, say it's 867 00:40:42,440 --> 00:40:45,400 Speaker 12: six oh five as an example. So I think there'll 868 00:40:45,400 --> 00:40:48,520 Speaker 12: be some, you know, some buildings yet to be repositioned, 869 00:40:48,560 --> 00:40:49,920 Speaker 12: and there'll be some buildings that. 870 00:40:50,120 --> 00:40:51,440 Speaker 7: Have gone through the cycle. 871 00:40:51,800 --> 00:40:54,120 Speaker 2: Would you I don't know if you have a speculative 872 00:40:54,440 --> 00:40:57,080 Speaker 2: part of your company that says, I'm going to go 873 00:40:57,280 --> 00:40:59,680 Speaker 2: bid thirty cents on the dollar for this building on 874 00:40:59,680 --> 00:41:02,920 Speaker 2: Third Avenue because I think at that valuation, even if 875 00:41:02,920 --> 00:41:04,560 Speaker 2: I have to put money into that building, I can 876 00:41:04,600 --> 00:41:07,200 Speaker 2: make a good return. Are you guys thinking about that 877 00:41:07,320 --> 00:41:08,920 Speaker 2: or you just kind of focus on your core portfolio? 878 00:41:09,000 --> 00:41:11,240 Speaker 7: No, I think we have enough to focus on right now. 879 00:41:11,400 --> 00:41:14,919 Speaker 12: We've actually developed over the last couple of years about 880 00:41:14,960 --> 00:41:18,560 Speaker 12: twelve hundred multifamily with three hundred yet to come down 881 00:41:18,600 --> 00:41:23,439 Speaker 12: and Winwood in Miami. We're developing that right now. And 882 00:41:24,440 --> 00:41:27,040 Speaker 12: you know, I think as far as we are concerned. 883 00:41:27,080 --> 00:41:32,040 Speaker 12: We also have a major immersive retail experiential development in 884 00:41:32,120 --> 00:41:35,439 Speaker 12: Las Vegas. That's plenty for us right now. 885 00:41:35,640 --> 00:41:39,640 Speaker 2: Okay, Ken Fisher for joining us. Really appreciated, Ken Fisher. 886 00:41:40,040 --> 00:41:42,160 Speaker 2: He's a partner of Fisher Brothers. For those of you 887 00:41:42,160 --> 00:41:44,400 Speaker 2: who don't know it, I mean, particularly I think what 888 00:41:44,480 --> 00:41:47,440 Speaker 2: I've learned about commercial real estate, it is oftentimes a 889 00:41:47,480 --> 00:41:49,520 Speaker 2: family business. And there's a handful of New York real 890 00:41:49,600 --> 00:41:53,400 Speaker 2: estate families, including the Fishers. But you think about the 891 00:41:53,520 --> 00:41:55,799 Speaker 2: Dursts and the Tishman's and the Rudens and all that, 892 00:41:55,840 --> 00:41:57,920 Speaker 2: and the Fishers are right there, and it's kind of 893 00:41:57,960 --> 00:42:00,440 Speaker 2: a family business for a lot of these pies, with 894 00:42:00,719 --> 00:42:03,400 Speaker 2: substantial Wall Street support, of course in terms of financing. 895 00:42:03,480 --> 00:42:05,640 Speaker 2: But you go around New York City and other major 896 00:42:05,640 --> 00:42:07,600 Speaker 2: markets and you see the same names time and time 897 00:42:07,640 --> 00:42:11,280 Speaker 2: again in terms of it. Fourth generation now, yeah, fourth generation, 898 00:42:11,400 --> 00:42:14,759 Speaker 2: just family business. Great stuff, Ken Fisher, Thank you very much. 899 00:42:15,040 --> 00:42:19,560 Speaker 1: This is the Bloomberg Intelligence Podcast, available on Apples, Spotify, 900 00:42:19,760 --> 00:42:22,960 Speaker 1: and anywhere else you'll get your podcasts. Listen live each 901 00:42:22,960 --> 00:42:26,360 Speaker 1: weekday ten am to noon Eastern on Bloomberg dot Com, 902 00:42:26,440 --> 00:42:29,880 Speaker 1: the iHeartRadio app Tune In, and the Bloomberg Business app. 903 00:42:29,960 --> 00:42:33,000 Speaker 1: You can also watch us live every weekday on YouTube 904 00:42:33,200 --> 00:42:35,040 Speaker 1: and always on the Bloomberg Terminal