WEBVTT - Broadcom Soars, New French PM 0:00:02.400 --> 0:00:06.760 Bloomberg Audio Studios, podcasts, radio news. 0:00:08.240 --> 0:00:12.119 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:00:12.200 --> 0:00:15.280 weekdays at ten am Eastern on Apple, Cardplay and Android 0:00:15.320 --> 0:00:18.400 outo with the Bloomberg Business App. Listen on demand wherever 0:00:18.440 --> 0:00:22.280 you get your podcasts, or watch us live on YouTube. 0:00:22.840 --> 0:00:24.200 I'm going to go back to the stock market and 0:00:24.239 --> 0:00:27.280 look at shares of Broadcom up a whopping nineteen percent. 0:00:27.600 --> 0:00:29.120 I want to get more with kushon so Bonnie and 0:00:29.120 --> 0:00:32.040 Bloomberg Intelligence senior semi analyst, so we know the story. 0:00:32.440 --> 0:00:36.080 The numbers for its AI revenue were super high. Their 0:00:36.120 --> 0:00:38.879 outlook looked really good. Is it justified in a one 0:00:38.920 --> 0:00:40.520 trillion dollar valuation right now? 0:00:42.159 --> 0:00:45.000 Look going into the earnings, the top concerns where how 0:00:45.080 --> 0:00:47.760 is AI going to do next quarter? What are the 0:00:47.840 --> 0:00:50.879 numbers looking like for twenty twenty five and sort of 0:00:50.920 --> 0:00:54.800 no visibility beyond that. So can this rarey sustain those 0:00:54.880 --> 0:00:56.600 numbers that are driving the stock? 0:00:56.880 --> 0:01:00.240 Really gives investors three to three to. 0:01:00.280 --> 0:01:03.880 Four years quantifiable target and milestone to look at and 0:01:03.920 --> 0:01:05.080 now just track the execution. 0:01:05.200 --> 0:01:06.640 And those numbers are pretty huge. 0:01:06.680 --> 0:01:09.360 I mean you're talking about three to four x fold 0:01:09.560 --> 0:01:12.800 growth in just the Sam just from his three customers, 0:01:12.800 --> 0:01:15.120 not even including the additional two that they're working on. 0:01:15.880 --> 0:01:21.399 So Kulj help us think about Broadcom now in comparison 0:01:21.480 --> 0:01:24.160 to Nvidia and maybe even some of the other players. 0:01:24.200 --> 0:01:27.000 How's this industry as it relates to AI? How is 0:01:27.040 --> 0:01:27.880 it shaking out here? 0:01:29.200 --> 0:01:29.400 Yeah? 0:01:29.400 --> 0:01:32.200 I mean when you look at Broadcom just barely six 0:01:32.319 --> 0:01:34.920 months or a year ago, people didn't even think of 0:01:34.959 --> 0:01:37.720 it as an AI company, right. It was primarily the 0:01:37.720 --> 0:01:40.919 investor base. It was really loved for his free cash flow, 0:01:41.240 --> 0:01:46.760 generating ability, highly profitable, sustainable, slow, mid to high, high 0:01:46.800 --> 0:01:50.360 single digit grower. Now suddenly AI is going to become 0:01:50.400 --> 0:01:54.520 a huge chunk of its semi connective revenues. And in combination, 0:01:54.600 --> 0:01:57.280 you still have the software revenues at high margin generating 0:01:57.320 --> 0:02:00.639 significant amount of cash. So you have this really growing 0:02:00.720 --> 0:02:03.840 and media type or even growing faster in certain areas 0:02:03.880 --> 0:02:07.200 going forward than in AI story. Along with all the 0:02:07.240 --> 0:02:09.040 goodness of what do you want from a large gap 0:02:09.080 --> 0:02:11.839 which is high profitability, high operating margin, high free cash 0:02:11.840 --> 0:02:12.799 flow for the. 0:02:12.880 --> 0:02:15.640 Non AI stuff like the chips that go into like 0:02:15.680 --> 0:02:18.040 phones and cars and all that kind of stuff, How 0:02:18.120 --> 0:02:20.440 is that part of the business doing? Because it hasn't 0:02:20.440 --> 0:02:22.480 been doing very well. We've were waiting for their cycle 0:02:22.520 --> 0:02:24.160 globe recovery to kind of kick up. 0:02:24.520 --> 0:02:26.160 Where do Broadcom land on this. 0:02:27.120 --> 0:02:29.280 Yeah, I mean they are aligned very well to what 0:02:29.440 --> 0:02:31.880 rest of the cyclical semis are doing. I mean, look, 0:02:31.880 --> 0:02:33.680 twenty four was the bottom for. 0:02:33.680 --> 0:02:34.760 Most of its business. 0:02:35.800 --> 0:02:39.359 We do expect recovery starting early next year, but it's 0:02:39.400 --> 0:02:41.720 going to be really slow turning corners, so we don't 0:02:41.760 --> 0:02:44.960 expect any sort of fireworks there. But the good news 0:02:45.040 --> 0:02:47.800 is the way AI is expected to grow, that portion 0:02:47.880 --> 0:02:50.240 of the business is going to shrink and become a 0:02:50.280 --> 0:02:52.680 significantly smaller part of the chip business. 0:02:53.520 --> 0:02:56.519 All right, So as you step back from the semispace 0:02:56.600 --> 0:02:59.440 these days, Kunjan, what are the conversations you're having about 0:02:59.440 --> 0:03:02.600 the space in general? Is it in Vidia all the time? 0:03:02.800 --> 0:03:05.160 Do I want to own a basket of these things? 0:03:05.280 --> 0:03:07.120 What are some of the conversations you're having with your 0:03:07.320 --> 0:03:08.600 investor clients. 0:03:09.200 --> 0:03:11.920 Yeah, the top question is sort of searching for the 0:03:11.960 --> 0:03:15.760 next in media, trying to add more and more AI 0:03:15.840 --> 0:03:19.000 exposed names and who else in the semi sector and 0:03:19.040 --> 0:03:22.200 the peripheral sectors, whether it's foundries, whether it's memory, whether 0:03:22.240 --> 0:03:27.400 it's semiconductor equipment providers can benefit from this broadening AI boom. 0:03:27.440 --> 0:03:29.760 You know, the first beneficiary, almost entire. 0:03:29.639 --> 0:03:32.200 Beneficiary, was just one name in media. So that's a 0:03:32.240 --> 0:03:34.520 conversion we have and we have been actually. 0:03:34.200 --> 0:03:37.360 Calling out Broadcom and Marvell for quite a while now 0:03:37.400 --> 0:03:39.960 that these are going to be sort of the next 0:03:40.000 --> 0:03:42.240 set of beneficiaries from the coverage that we cover. 0:03:43.280 --> 0:03:46.240 When we take a look at Broadcom though, and the 0:03:46.280 --> 0:03:49.480 stock reaction in the near term, are we borrowing faith 0:03:49.600 --> 0:03:52.000 from like twenty twenty five or twenty twenty six, or 0:03:52.080 --> 0:03:54.560 is this like legit comp number rally? 0:03:56.080 --> 0:04:00.640 I mean, there is definitely a huge weightage given on 0:04:00.760 --> 0:04:03.760 their ability to execute to that large sam that they 0:04:03.800 --> 0:04:07.200 have laid out. You know, investors have been who have 0:04:07.200 --> 0:04:10.000 been following Hawk for many years, don't take what he 0:04:10.040 --> 0:04:10.760 says lightly. 0:04:11.120 --> 0:04:13.440 There's a big degree. 0:04:13.040 --> 0:04:15.880 Of conviction in what Hawks is and can deliver. So 0:04:15.920 --> 0:04:19.080 there's definitely a huge reliance in what you see in 0:04:19.120 --> 0:04:21.479 the stock movement that they will be able to sort 0:04:21.520 --> 0:04:23.479 of meet or execute on those numbers. 0:04:24.720 --> 0:04:29.080 So is the when we see like a big number 0:04:29.080 --> 0:04:32.280 coming out of the likes of Broadcom, does that give 0:04:32.360 --> 0:04:35.000 you pause for the NVIDIAs story that maybe there's a 0:04:35.120 --> 0:04:38.880 market share shift going along, that maybe the competition is 0:04:38.880 --> 0:04:40.320 starting to step up here. 0:04:41.600 --> 0:04:42.680 Not in the near term. 0:04:42.839 --> 0:04:46.920 Look, the merchant silicon GPU that and media sells versus 0:04:46.920 --> 0:04:50.839 the custom that Broadcom does right now are being used 0:04:50.880 --> 0:04:53.640 for two different use cases, and both of those use 0:04:53.680 --> 0:04:56.440 cases that demand is booming, right, so it's a win 0:04:56.520 --> 0:05:00.240 win for everyone right now. Eventually, in theory, if this 0:05:00.440 --> 0:05:04.920 demand rarely does normalize and there is some kind of digestion, Look, 0:05:04.920 --> 0:05:07.760 there's only so much these hyperscalers will spend, right, So 0:05:08.000 --> 0:05:10.240 eventually down the road we will come to a point 0:05:10.279 --> 0:05:12.360 where they will have to decide do they want to 0:05:12.360 --> 0:05:14.960 spend more in their custom and the GPU and what 0:05:15.000 --> 0:05:17.640 are people demanding for. At that point there will be 0:05:17.800 --> 0:05:21.880 wallet share competitiveness, but not at this given point, just 0:05:21.920 --> 0:05:24.320 because the use cases and applications are very different. 0:05:24.800 --> 0:05:27.279 They get the majority of their revenue really from Apple 0:05:27.320 --> 0:05:30.919 and WT Microelectronics. Right then it comes sort to Alphabet 0:05:30.960 --> 0:05:34.239 and Meta with about six to eight percent of its revenue. 0:05:34.240 --> 0:05:36.839 Thank you so much. Supply chain analysis function on the terminal. 0:05:37.240 --> 0:05:39.520 Are they trying to diversify that in a meaningful way 0:05:39.560 --> 0:05:41.240 or are they comfortable with that sort of waiting. 0:05:42.360 --> 0:05:45.120 I think it's just organically going to get diversified. 0:05:45.200 --> 0:05:45.360 Right. 0:05:45.520 --> 0:05:48.520 The wireless from Apple is not a fast growing business. 0:05:48.560 --> 0:05:51.760 It's a sort of mid single digit at best. Right, So, 0:05:52.120 --> 0:05:54.839 and there are some concerns around that it's too mature 0:05:54.880 --> 0:05:56.719 to talk about it. But even if you assume that 0:05:56.800 --> 0:06:00.640 business continues, and like the speed at which the AI 0:06:00.680 --> 0:06:01.280 business is. 0:06:01.200 --> 0:06:03.720 Going to increase, the speed at which Google. 0:06:03.480 --> 0:06:06.240 Meta and these other hyperskillers are become going to become 0:06:06.240 --> 0:06:09.800 a larger portion of broadcom, it is organically going to 0:06:09.880 --> 0:06:12.880 diversify away from the top two customers that you pointed out. 0:06:13.120 --> 0:06:14.640 All right, John, thanks so much for joining us. 0:06:14.680 --> 0:06:14.760 KU. 0:06:14.839 --> 0:06:19.520 John Sobani, senior analyst on semiconductors. He's over there Bloomberg Intelligence, 0:06:19.560 --> 0:06:22.839 based in our San Francisco office right there in Silicon Valley, 0:06:23.160 --> 0:06:26.400 close to all those big tech companies that he covers. 0:06:26.400 --> 0:06:28.920 So that's a real advantage for us, Sir John Cobani 0:06:29.279 --> 0:06:30.800 Sobani joining us there. 0:06:31.200 --> 0:06:34.520 That's a heck of a move for a company, you know, one. 0:06:34.760 --> 0:06:37.400 Trillion dollar market cap stock to move twenty percent. I've 0:06:37.440 --> 0:06:39.000 said it when I was seeing some of the moves 0:06:39.000 --> 0:06:41.720 from Nvidia, when they were moving ten twenty thirty percent 0:06:41.800 --> 0:06:46.680 a day. This is huge amounts of shareholder wealth being 0:06:46.760 --> 0:06:50.400 created in this space. It just the absolute dollars are 0:06:50.480 --> 0:06:52.880 kind of stunning for to take a look at it. 0:06:52.920 --> 0:06:55.039 So this isn't any penny stock at there. 0:06:55.080 --> 0:07:00.840 So you you're listening to the Bloomberg Intelligence Podcast. Catch 0:07:00.880 --> 0:07:04.239 us live weekdays at ten am Eastern on applecar Play 0:07:04.279 --> 0:07:07.120 and Android Otto with a Bloomberg Business Act. You can 0:07:07.160 --> 0:07:10.400 also listen live on Amazon Alexa from our flagship New 0:07:10.480 --> 0:07:14.120 York station, Just say Alexa play Bloomberg eleven thirty. 0:07:15.440 --> 0:07:18.120 All right, let's get two overseas. 0:07:18.160 --> 0:07:21.400 We're going to France President Manuel Maulcrant appointing Francois be 0:07:21.560 --> 0:07:25.520 Roux as France's new prime minister to navigate a fractured 0:07:25.560 --> 0:07:27.040 I feel like that's a nice way of saying a 0:07:27.080 --> 0:07:29.960 political landscape and there's a to do list that's very difficult. 0:07:30.040 --> 0:07:33.760 Alan Katz's Bloomberg Paris bureau chief joins us. Now, Alan, 0:07:33.800 --> 0:07:36.560 does he have to get like approved or voted for 0:07:36.760 --> 0:07:38.320 or is he just in power and then he's going 0:07:38.400 --> 0:07:38.960 to make it work. 0:07:41.320 --> 0:07:43.480 So the latter, he's just in power and he has 0:07:43.480 --> 0:07:45.800 to make it work in France. The president gets to 0:07:45.840 --> 0:07:49.120 nominate where he wants as prime minister. So great, so 0:07:49.160 --> 0:07:52.040 now you've got corns by who. But he has to 0:07:52.200 --> 0:07:54.560 get a few things done, most importantly as a twenty 0:07:54.560 --> 0:07:57.720 twenty five budget, and that's what caused his predecessor got 0:07:57.800 --> 0:08:00.560 nay Michel Bannier to get booted out in an confidence 0:08:00.600 --> 0:08:01.440 vote last week. 0:08:01.480 --> 0:08:02.720 So that's going to be his first order. 0:08:02.720 --> 0:08:04.560 Well, his first order of business really is getting a 0:08:04.560 --> 0:08:07.440 cabinet together, getting in government together, and then it's going 0:08:07.520 --> 0:08:10.040 to be trying to get a twenty twenty five budget passed. 0:08:10.120 --> 0:08:11.920 So that's really the first things he's got to start 0:08:11.960 --> 0:08:14.119 to do, and it's not going to be easy. 0:08:14.720 --> 0:08:17.280 So alan, is there any reason to believe that this 0:08:17.960 --> 0:08:20.200 new prime minister will have any better luck with the 0:08:21.000 --> 0:08:25.160 right and the left which caused the demise of the predecessor. 0:08:27.960 --> 0:08:30.680 So that's a good question. I guess the best answer 0:08:30.720 --> 0:08:34.839 is maybe he is. He's a centrist, right, so he 0:08:35.360 --> 0:08:38.240 he has been known to do. I mean, originally sort 0:08:38.280 --> 0:08:40.439 of his party was more aligned with the sort of 0:08:40.480 --> 0:08:42.839 the center right back in the in the eighties and 0:08:42.960 --> 0:08:46.400 the and the nineties, but then he famously voted for 0:08:46.440 --> 0:08:49.120 a socialist for president in two thousand and seven rather 0:08:49.160 --> 0:08:52.040 than the conservative guy, so he sort of he's reached 0:08:52.040 --> 0:08:54.439 out to both sides over time. He also was very 0:08:54.440 --> 0:08:58.320 famous for having supported malheinm le Penn's right to run 0:08:58.320 --> 0:09:00.160 for president in two thousand and two and Francis to 0:09:00.160 --> 0:09:02.240 get five hundred signatures and local officials to be able 0:09:02.280 --> 0:09:05.320 to run for presidents, and he said, well, she's very popular. 0:09:05.400 --> 0:09:07.000 We can't not have her run. That would be really 0:09:07.000 --> 0:09:09.280 bad for democracy. I don't support her personally, but I 0:09:09.280 --> 0:09:11.760 supported right to run, and the far right remembers that. 0:09:11.800 --> 0:09:15.920 So he's got sort of possibilities. But then really getting 0:09:15.920 --> 0:09:18.520 people onside is going to be much more difficult. Michelle 0:09:18.520 --> 0:09:21.120 Baarnier the guy again who just got ousted. He sort 0:09:21.120 --> 0:09:23.400 of had the far right on side for a while 0:09:23.600 --> 0:09:29.120 also until they weren't. So far everyone today has been giving, 0:09:29.280 --> 0:09:32.120 I guess, sort of mildly positive comments. They're going to 0:09:32.160 --> 0:09:33.760 say we'll wait and see or what depends on what 0:09:33.880 --> 0:09:36.920 he presents, but it's really not clear that he's necessarily 0:09:36.960 --> 0:09:39.920 going to have any better luck than Michelle Banier did. 0:09:40.520 --> 0:09:46.040 What does The far right and the far left want. 0:09:46.120 --> 0:09:51.680 Very different things, but mostly what they want is someone 0:09:51.720 --> 0:09:54.600 who's going to allow them to look good to their 0:09:54.679 --> 0:09:59.040 voters as they get toward the twenty twenty seven presidential election. 0:09:59.120 --> 0:10:01.040 That's one of the problems that we have in France 0:10:01.120 --> 0:10:02.960 right now, which is that you have this big block 0:10:03.000 --> 0:10:04.680 on the left and a big block on the right. 0:10:05.120 --> 0:10:06.840 On the right is led by a woman in Marine 0:10:06.920 --> 0:10:09.400 Le penn and there's the most popular politician in many 0:10:09.400 --> 0:10:12.920 polls in France, and certainly the person who leads polls 0:10:13.000 --> 0:10:16.360 if the next presidential election was to happen today, the 0:10:16.400 --> 0:10:18.400 person who's frequently number two, or if not number two, 0:10:18.440 --> 0:10:19.880 number three is the guy on the far left, Nam 0:10:19.920 --> 0:10:22.760 Jean Luke Bentent Chanp and the two of them are 0:10:22.800 --> 0:10:26.040 definitely looking to the next presidential election. So all of 0:10:26.080 --> 0:10:28.680 their decisions in the short term, in terms of what 0:10:28.720 --> 0:10:31.240 happens in parliament, passing a budget or any other laws, 0:10:31.480 --> 0:10:33.760 is all about what does this mean for how voters 0:10:33.760 --> 0:10:35.800 are going to perceive me in twenty twenty seven, And 0:10:35.840 --> 0:10:39.480 that makes for a very difficult relationship because sometimes there 0:10:39.480 --> 0:10:41.400 are things that you might say, well, that's obvious, sure 0:10:41.440 --> 0:10:44.079 they should like this, but then they don't. In the 0:10:44.120 --> 0:10:46.400 case of Michaud Valgniert, he basically gave in to most 0:10:46.440 --> 0:10:49.120 of the far rights demands, basically three out of four 0:10:49.160 --> 0:10:51.640 main ones that they had, and they voted, you know, 0:10:51.640 --> 0:10:54.679 they voted for emotion of no confidence anyway, because they 0:10:54.720 --> 0:10:57.040 decided it was in their interest, in their longer term 0:10:57.120 --> 0:10:59.959 interest to do so. So that makes it really quite difficult. 0:11:00.520 --> 0:11:03.040 Alan, thank you so much, appreciate your reporting. Alan Katz, 0:11:03.240 --> 0:11:06.760 Paris bureau chief for Bloombergers. How cool is it that 0:11:06.840 --> 0:11:10.520 we get people on the ground, really smart voices pretty 0:11:10.559 --> 0:11:12.800 much everywhere around the world, and they come on the 0:11:12.800 --> 0:11:13.559 air with us. 0:11:13.679 --> 0:11:14.120 Very cool. 0:11:14.160 --> 0:11:15.400 That is such a great and they really know what 0:11:15.440 --> 0:11:17.160 they're doing advantage and they know exactly what they're talking. 0:11:17.360 --> 0:11:18.720 I want to ask that next next time we talk 0:11:18.760 --> 0:11:20.599 to Alan, how big of a story is it in 0:11:21.120 --> 0:11:24.000 Paris and France the reopening of the Notre Dame, Because 0:11:24.080 --> 0:11:26.760 I when you saw the damage from that fire five 0:11:26.800 --> 0:11:29.760 years I'm like, they're never going to fix that stuff. 0:11:29.920 --> 0:11:30.880 I mean, how do you fix that? 0:11:31.200 --> 0:11:33.400 I mean we went to Paris last summer and it 0:11:33.480 --> 0:11:36.679 was like, that's it's never gonna You're gonna be so behind, 0:11:36.679 --> 0:11:39.080 And then they did it. I would think the culturally, yeah, 0:11:39.080 --> 0:11:41.760 and the message it sounds is pretty It's pretty spectacular. 0:11:41.840 --> 0:11:43.640 I mean I give my Corona pat on the back 0:11:43.640 --> 0:11:45.200 and the French people pat on the back because that 0:11:45.280 --> 0:11:45.960 was awesome. 0:11:46.960 --> 0:11:49.360 I want to go prices and fuel prices, prices and 0:11:49.360 --> 0:11:51.320 fuel prices. I get it. So we'll have more on 0:11:51.320 --> 0:11:51.840 that coming up. 0:11:53.120 --> 0:11:57.000 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:11:57.080 --> 0:11:59.800 weekdays at ten am Eastern on Apple, card playing and 0:12:00.200 --> 0:12:03.320 out with the Bloomberg Business app. Listen on demand wherever 0:12:03.360 --> 0:12:07.199 you get your podcasts, or watch us live on YouTube. 0:12:08.320 --> 0:12:10.400 All right, so we get the Fed on Wednesday, highly 0:12:10.400 --> 0:12:13.040 expect to cut rates in December. The question then becomes 0:12:13.080 --> 0:12:15.480 what happens in twenty twenty five if that neutral rays 0:12:15.559 --> 0:12:18.000 moving up, as Bill Dudley, a former FED governor, was 0:12:18.000 --> 0:12:20.240 talking about on surveillance, If he thinks the neutral rate 0:12:20.320 --> 0:12:22.520 is three point five are a little bit higher, what 0:12:22.559 --> 0:12:24.839 does that mean then for the trajectory of cuts, And 0:12:24.840 --> 0:12:26.880 then what does it mean for sectors that are really 0:12:26.960 --> 0:12:30.200 waiting for those cuts to kick in, like real estate, 0:12:30.240 --> 0:12:32.839 maybe private markets, private equity. We want to deb a 0:12:32.880 --> 0:12:36.200 little bit deeper into this with Miguel Sosa, head of 0:12:36.240 --> 0:12:39.560 market research and strategy over Blue Rock. He joins us 0:12:39.600 --> 0:12:42.080 now from Dallas, Texas. Before we get to the nitty 0:12:42.080 --> 0:12:44.800 gritty of say, private credit and real estate, just give 0:12:44.880 --> 0:12:47.400 us your broad views on twenty twenty five. 0:12:49.480 --> 0:12:52.600 Yes, thank you, Alex. So we're excited about twenty twenty five. 0:12:53.040 --> 0:12:56.600 We think that the markets are poised to perform well. 0:12:56.720 --> 0:13:00.319 We've seen strong performance for twenty twenty four with a 0:13:00.440 --> 0:13:03.679 change in administration. We think that the administration is very 0:13:03.679 --> 0:13:07.520 business friendly, so that should provide an additional tailwind in 0:13:07.559 --> 0:13:11.880 addition to having the high interest rate environment behind us. 0:13:11.880 --> 0:13:14.959 And so what we're seeing is gradually moderating interest rates, 0:13:15.360 --> 0:13:21.920 a predictable and shallow decrease in that interest rate curve 0:13:22.040 --> 0:13:25.280 on the short end, stable in the ten year side 0:13:25.440 --> 0:13:27.800 of the interest rate curve of the yield curve. And 0:13:27.880 --> 0:13:30.440 so we think that twenty twenty five will be a 0:13:30.520 --> 0:13:32.640 positive year for all asset classes. 0:13:32.800 --> 0:13:34.720 All right, let's talk real estate here. 0:13:35.360 --> 0:13:38.520 Where do you see opportunities in real estate? 0:13:38.520 --> 0:13:38.679 Here? 0:13:38.720 --> 0:13:40.800 We've got the Fed cutting rates. I would think that's 0:13:40.880 --> 0:13:44.280 good for that asset class. Where are you guys seeing 0:13:44.280 --> 0:13:45.199 the most opportunities? 0:13:46.600 --> 0:13:47.480 Yes, sess correct. 0:13:47.520 --> 0:13:50.960 So reducing the short end of the curve, the Fed 0:13:51.000 --> 0:13:55.000 funds rate is beneficial indirectly for real estate because naturally 0:13:55.040 --> 0:13:59.280 it moderates the cost of capital. We're seeing opportunities in 0:13:59.440 --> 0:14:02.880 the indust space, in the multifamily space, and really in 0:14:02.920 --> 0:14:06.480 the specialty space as well, and so these are all 0:14:06.520 --> 0:14:10.240 sectors that are seeing low vacancy rates, and so that 0:14:10.760 --> 0:14:15.440 helps to drive lease rates up because there is much 0:14:15.480 --> 0:14:18.760 more demand relative to the supply that's available. And if 0:14:18.880 --> 0:14:22.080 lease rates go up, the net operating income goes up. 0:14:22.160 --> 0:14:27.400 ANDI for short, is a key driver of value. So 0:14:27.440 --> 0:14:30.800 what we've seen recently in the last two years is 0:14:30.960 --> 0:14:34.920 the capital values have come down significantly, but NI has 0:14:35.000 --> 0:14:38.160 gone up significantly. So in other words, you can buy 0:14:38.520 --> 0:14:41.560 more real estate at a discount, and that real estate 0:14:41.640 --> 0:14:45.360 is generating more income and so that will hopefully drive 0:14:45.720 --> 0:14:46.680 returns in the future. 0:14:48.200 --> 0:14:51.720 How much of this is predicated on rates being cut 0:14:51.760 --> 0:14:53.520 from the FED and how much of it is just 0:14:53.560 --> 0:14:55.320 sort of the economic cycle. 0:14:57.320 --> 0:15:00.520 I would say the majority is driven by the economic cycle. 0:15:01.080 --> 0:15:06.400 The change in interest rate environment really inflated cap rates, 0:15:06.480 --> 0:15:10.600 which was the main driver why prices were down. But 0:15:10.880 --> 0:15:13.760 unlike the global financial crisis, which was the last big 0:15:13.840 --> 0:15:18.480 drawdown for real estate, there's very strong fundamentals that are 0:15:18.600 --> 0:15:22.640 driving real estate. Currently, like I said, vacancy rates are low, 0:15:23.000 --> 0:15:27.400 and it's much harder to construct new developments new property 0:15:27.640 --> 0:15:31.960 developments today versus fifteen years ago because of inflation, construction 0:15:32.080 --> 0:15:35.600 costs are up. The other factor, for example, specifically for 0:15:36.040 --> 0:15:40.200 the industrial space, is that we're all buying more products 0:15:40.840 --> 0:15:44.240 online and we want them shipped to our houses faster, 0:15:44.800 --> 0:15:48.480 and so that causes demand for warehouses that are closer 0:15:48.520 --> 0:15:51.240 to city centers so they can get to our homes faster. 0:15:51.400 --> 0:15:55.160 But nobody wants warehouses in city centers or close to cities, 0:15:55.440 --> 0:15:58.720 and there's no vacant plots available for those warehouses. So 0:15:58.760 --> 0:16:02.160 there's that inbound as well. And we have examples across 0:16:02.200 --> 0:16:05.520 the board. Data centers for example, another great example, because 0:16:06.560 --> 0:16:11.320 everybody is consuming more and more information constantly every year, 0:16:11.480 --> 0:16:14.479 so that drives significant demand for data centers. 0:16:14.360 --> 0:16:17.160 And tay all those warehouses for servicing New York City 0:16:17.200 --> 0:16:20.040 and Philadelphia. The right in my backyard, in John Tucker's 0:16:20.040 --> 0:16:23.720 backyard in Central Jersey, access to the New Jersey Turnpike, Garden, 0:16:23.720 --> 0:16:26.280 State Parkway, all that kind of stuff to eighty seven. 0:16:26.640 --> 0:16:28.680 You can serve both Philadelphia and New York. 0:16:28.760 --> 0:16:31.400 Maybe that's why the UFOs are there. Maybe, yeah, exactly, 0:16:31.400 --> 0:16:33.320 I mean we can make that length exactly. 0:16:33.800 --> 0:16:35.560 Hey, hey, Miguel, let's say I want to go out 0:16:35.640 --> 0:16:39.320 and buy some commercial real estate. Is my bank going 0:16:39.360 --> 0:16:41.240 to lend me money? Where do we get the debt 0:16:41.440 --> 0:16:42.360 financing these days? 0:16:44.400 --> 0:16:44.600 Yes? 0:16:44.760 --> 0:16:49.040 So typically commercial developers will go to specialty lenders, and 0:16:49.440 --> 0:16:53.040 depending on what type of property one is buying. If 0:16:53.080 --> 0:16:57.680 it's a fully developed and occupied building it's stabilized, as 0:16:57.720 --> 0:17:02.960 they say, because the occupancy rate is high, then lenders 0:17:03.000 --> 0:17:06.080 are much more willing to provide capital for that and 0:17:06.359 --> 0:17:09.359 increase the loan to value on that property. But if 0:17:09.359 --> 0:17:13.080 it's a empty plot of land and it's a development project, 0:17:13.240 --> 0:17:17.600 then those are typically construction loans, and so there's a 0:17:17.720 --> 0:17:23.640 wide variety of sources for capital. Banks have typically been reluctant, 0:17:23.760 --> 0:17:27.960 especially recently, to provide capital for sectors that are struggling 0:17:27.960 --> 0:17:32.240 from the office space, but there's certainly a broad variety 0:17:32.240 --> 0:17:35.680 of sources of capital, starting from banks all the way 0:17:35.720 --> 0:17:39.119 to individual investors who are happy to provide some of 0:17:39.160 --> 0:17:41.120 those short term construction loans. 0:17:41.320 --> 0:17:45.120 Before I let you go for say, private credit. Where 0:17:45.160 --> 0:17:47.520 are the opportunities they are going into twenty twenty five. 0:17:49.040 --> 0:17:53.080 Yes, private credit is one of our favorite sectors specifically because, 0:17:54.200 --> 0:17:57.159 as I mentioned, the interest rate is in this goldilocks 0:17:57.160 --> 0:18:00.960 phase where we aren't in twenty three year twenty four, 0:18:01.000 --> 0:18:04.720 where we don't have that visibility or uncertainty of how 0:18:04.840 --> 0:18:07.720 long and how far interest rates will climb. And so 0:18:07.880 --> 0:18:11.399 interest rates are at a point where the peak is 0:18:11.480 --> 0:18:14.560 behind us, but they're not at zero either, and so 0:18:15.040 --> 0:18:19.880 that favors the lenders versus the borrowers. Now you can, 0:18:20.800 --> 0:18:24.120 especially in private credit and alternative private credit, you can 0:18:24.160 --> 0:18:30.080 receive nine percent, ten percent even interest rate on loans 0:18:30.080 --> 0:18:34.159 to corporations that are established, they're mature, they're cash flowing, 0:18:34.480 --> 0:18:38.200 and that are going to pay through that debt until maturity. 0:18:38.920 --> 0:18:40.239 Begail, thanks so much for joining us. 0:18:40.240 --> 0:18:43.480 Migel Sosa, head of market research and Strategy at Blue Rock, 0:18:44.119 --> 0:18:46.439 joining Ustart talking about the commercial real estate business, and 0:18:46.480 --> 0:18:49.960 of course a commercial real estate business, as is residential 0:18:50.000 --> 0:18:51.760 real estate really dependent upon interest rates. 0:18:53.240 --> 0:18:57.119 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:18:57.200 --> 0:19:00.720 weekdays at ten am Eastern on applecar Play and royd 0:19:00.760 --> 0:19:03.920 Otto with a Bloomberg Business. You can also listen live 0:19:04.000 --> 0:19:07.199 on Amazon Alexa from our flagship New York station just 0:19:07.240 --> 0:19:09.879 say Alexa play Bloomberg eleven thirty. 0:19:10.640 --> 0:19:13.159 Here was a headline that was interesting. Well, I mean, 0:19:13.160 --> 0:19:14.840 I think for anyone listening it was interesting. Is the 0:19:14.840 --> 0:19:18.400 Trump advisors are considering raising salt right off limit from 0:19:18.400 --> 0:19:20.600 ten thousand to twenty thousand. 0:19:21.280 --> 0:19:22.480 Why not forty thousands? 0:19:22.560 --> 0:19:23.000 Exactly? 0:19:23.040 --> 0:19:26.440 Why justinate it twenty just you know, move it up there. 0:19:26.520 --> 0:19:28.120 I'm sure your property taxes. 0:19:29.960 --> 0:19:34.800 It's a good question. If can you multiply third fourteen thousand? 0:19:34.920 --> 0:19:37.119 I think, well, okay, is that about? 0:19:37.359 --> 0:19:39.119 That's about around these parts? 0:19:39.240 --> 0:19:39.680 Is it a wow? 0:19:39.800 --> 0:19:40.080 Nothing? 0:19:40.200 --> 0:19:41.000 Is it a wow? 0:19:41.040 --> 0:19:42.160 That's pans. 0:19:42.280 --> 0:19:44.760 You go north of New York City into Westchester and 0:19:44.800 --> 0:19:47.560 that's really low. It's like in the twenties for just 0:19:47.600 --> 0:19:48.480 a regular house. 0:19:48.760 --> 0:19:51.480 I live in an apartment building. Yeah, like a fourteen 0:19:51.560 --> 0:19:54.280 hundred square put apartment building. And every year I feel 0:19:54.320 --> 0:19:56.320 like the property taxes goes up. That's when I knew 0:19:56.320 --> 0:19:56.919 I was an adult. 0:19:56.920 --> 0:19:58.480 But you're here in Brooklyn. 0:19:58.680 --> 0:20:01.600 I'm in park Slow Parks is like the non post 0:20:01.760 --> 0:20:03.760