WEBVTT - Ed Goldberg and Alex Wayne Discuss Bannon Losing NSC Role 0:00:04.760 --> 0:00:07.720 Welcome to the Bloomberg P and L Podcast. I'm Pim 0:00:07.800 --> 0:00:11.080 Fox along with my co host Lisa Abramowitz. Each day 0:00:11.119 --> 0:00:14.360 we bring you the most important, noteworthy, and useful interviews 0:00:14.400 --> 0:00:16.560 for you and your money, whether at the grocery store 0:00:16.800 --> 0:00:19.960 or the trading floor. Find the Bloomberg P L Podcast 0:00:20.000 --> 0:00:28.520 on iTunes, SoundCloud and at Bloomberg dot com. We want 0:00:28.520 --> 0:00:32.199 to discuss more about the breaking news of President Trump 0:00:32.320 --> 0:00:36.600 reorganizing his National Security Council, including removing his chief strategist. 0:00:36.880 --> 0:00:41.760 Stephen Bannon from this committee at Goldberg is an adjunct 0:00:41.800 --> 0:00:44.320 faculty member at n y U Center for Global Affairs. 0:00:44.520 --> 0:00:47.479 He is also an adject professor at Brooke College and 0:00:47.560 --> 0:00:49.960 joins us here in our Bloomberg eleven three oh studio 0:00:50.080 --> 0:00:53.440 and uh ed we were going to talk initially about 0:00:53.760 --> 0:00:58.960 President Trump's meeting with President Jan Ping of China today 0:00:59.080 --> 0:01:02.440 and it's interesting at Steve Bannon was among the people 0:01:02.480 --> 0:01:05.280 who are supposed to be there, right, Yes, he was. 0:01:05.440 --> 0:01:08.120 He was one of the people with Secretary of Tragedy 0:01:08.400 --> 0:01:15.319 Uh Munchen and and Um Kohn and Um and Jared 0:01:15.560 --> 0:01:17.360 Um who are all going to be at the meeting. 0:01:17.480 --> 0:01:19.679 So who knows what's going to happen. Now, So what 0:01:19.720 --> 0:01:22.440 are you expecting to come out of this meeting with 0:01:22.600 --> 0:01:27.480 president from China? Well, it's it's look, the goal basically 0:01:27.480 --> 0:01:31.039 would be stability. I mean, this is what China would like. Um. 0:01:31.800 --> 0:01:36.319 The problem is, of course, the President Trump campaigned using 0:01:36.840 --> 0:01:40.360 China as a whipping boy, and with in with Presidents 0:01:40.360 --> 0:01:44.080 Trump truly weak political standing at the moment. Does he 0:01:44.160 --> 0:01:50.160 need to bluster? Uh? Surely the Chinese UM know enough 0:01:50.240 --> 0:01:54.320 about President trump senist personality. And we also have to 0:01:54.360 --> 0:01:58.080 assume that the Chinese intelligence knows exactly much much more 0:01:58.160 --> 0:02:01.400 than the Senate intelligence can about what went on with 0:02:01.520 --> 0:02:03.840 Russians in the election. To the Chinese have a little 0:02:03.880 --> 0:02:07.520 bit of the UM upper hand here, but they they 0:02:07.640 --> 0:02:10.560 really need to keep things calm. So one has to 0:02:10.600 --> 0:02:14.720 assume they're gonna offer some UM cameras to Trump. So 0:02:14.720 --> 0:02:17.800 I could use to say that something was accomplished, but 0:02:18.160 --> 0:02:20.600 it's a difficult meeting. Well, I want to bring in 0:02:20.680 --> 0:02:24.920 right now, Wayne Alex Wayne he is our politics editor 0:02:25.000 --> 0:02:29.000 for Bloomberg, about this breaking story of President Donald Trump 0:02:29.080 --> 0:02:32.640 and the reorganization of the National Security Council. Alex, maybe 0:02:32.639 --> 0:02:36.880 you could just tell us the details. Sure, Um, this 0:02:37.040 --> 0:02:40.080 comes as a bit of a surprise the the administration 0:02:40.160 --> 0:02:44.800 filed a document with the Federal Register this morning outlining 0:02:44.919 --> 0:02:48.839 some organizational changes to the National Security Council, which advises 0:02:49.400 --> 0:02:54.600 UH Donald Trump on foreign policy matters. Um. Broadly, the 0:02:54.680 --> 0:02:59.480 changes place his National Security Advisor hr McMaster UH in 0:02:59.680 --> 0:03:02.400 firm control of everything that the that the National Security 0:03:02.400 --> 0:03:05.760 Council does, and also everything that the Homeland Security Council does. 0:03:05.840 --> 0:03:08.880 That's like, that's a domestic group that that focuses on 0:03:08.880 --> 0:03:12.480 on internal security and border security and that kind of thing, um. 0:03:12.520 --> 0:03:16.440 But also of of of high interest to people in Washington. UH. 0:03:16.480 --> 0:03:19.480 Steve Bannon, the chief strategist, is no longer a member 0:03:19.520 --> 0:03:23.280 of what's called the Principles Committee of the National Security Council. 0:03:23.560 --> 0:03:27.519 And from a policy perspective, how does this change in 0:03:27.560 --> 0:03:32.200 the composition of President Trump's Security Council affect or potentially 0:03:32.280 --> 0:03:36.640 affect policy going forward. Well, it seems to give hr 0:03:36.760 --> 0:03:40.520 McMaster a much stronger voice in the administration. UH. He 0:03:40.800 --> 0:03:46.360 is regarded as a pretty sober minded guy, um, and 0:03:46.560 --> 0:03:51.200 probably a positive influence on the on the on the president. UM. 0:03:51.440 --> 0:03:53.880 The thought to say that the Bannon is is not 0:03:53.960 --> 0:03:56.480 I'm not making a judgment here, but there is the 0:03:56.600 --> 0:04:00.200 Bannon is definitely a more controversial figure in Washington. So 0:04:00.320 --> 0:04:04.800 I am sure that that this change will be applauded 0:04:04.840 --> 0:04:07.680 by the president's critics. Ed. What about you, Yeah, I 0:04:07.720 --> 0:04:12.480 think it. It sounds like it. It's things a foreign 0:04:12.520 --> 0:04:17.840 policy direction, much more to an even hand, much more rational, um, 0:04:18.120 --> 0:04:22.320 much less American first instead of America and the world. 0:04:22.560 --> 0:04:25.159 But this is all re means to be seen as 0:04:25.200 --> 0:04:29.360 far as policy goes, alex Wayne, is there any noted 0:04:29.520 --> 0:04:33.479 change in policy because Steve Bannon would be leaving the 0:04:33.520 --> 0:04:38.240 Security Council? You know, it was never really evident what 0:04:38.400 --> 0:04:42.680 Steve Bannon's influence was. Um. He was put in charge 0:04:42.680 --> 0:04:45.599 of the council when when Michael around started not put 0:04:45.640 --> 0:04:46.720 in charge of the council, he was put in the 0:04:46.720 --> 0:04:50.520 Principles plinny when Michael Flynn was in charge of the council. Uh. 0:04:50.680 --> 0:04:55.000 Michael Flynn was a much more controversial figure than hr 0:04:55.080 --> 0:05:00.799 McMaster um, more of a let's say, erratic figure. Um. 0:05:00.880 --> 0:05:03.800 So it's possible that Bannon was on the Council the 0:05:03.800 --> 0:05:07.839 Principle's clanning at that time just so that the President 0:05:07.839 --> 0:05:10.120 would have a close awry on what Michael Phon was doing. 0:05:12.160 --> 0:05:14.559 The President may have more confidence in hr mc master 0:05:14.680 --> 0:05:17.479 quite honestly, Well, you know, talking about policy, and I 0:05:17.520 --> 0:05:19.840 just want to get your quick thoughts on how North 0:05:19.920 --> 0:05:23.080 Korea and the launch of yet another missile affects the 0:05:23.120 --> 0:05:26.880 conversation today that President gy and President Treup have. Oh 0:05:27.320 --> 0:05:30.919 it just it just makes it even more complicated. Look, 0:05:31.560 --> 0:05:39.080 China basically has been been both the protector and um 0:05:39.279 --> 0:05:43.400 the pusher to make North Korean more sane for the 0:05:43.480 --> 0:05:48.000 last um, you know, fifteen twenty years. They really from 0:05:48.040 --> 0:05:51.200 the Chinese perspective, they realize they have a problem. They 0:05:51.240 --> 0:05:53.839 really don't know how to handle it. I think, on 0:05:53.880 --> 0:05:57.039 the other hand, that they don't want to upset the 0:05:57.960 --> 0:06:00.479 Apple car too much. They don't want, you know, the 0:06:00.560 --> 0:06:05.400 problem of having no Yeah, well, I guess the upsetting 0:06:05.440 --> 0:06:06.920 the Apple car too much just sort of goes back 0:06:07.040 --> 0:06:08.960 ed to your to your comment earlier about trying to 0:06:09.279 --> 0:06:11.600 maintain stability and that that's the goal at Goldberg. Thank 0:06:11.640 --> 0:06:14.280 you so much for joining us at Goldberg's adjug faculty 0:06:14.400 --> 0:06:16.400 and hy U Suenter for Global Affairs, also the author 0:06:16.440 --> 0:06:19.040 of the Joint Ventured Nation, Why America needs a new 0:06:19.080 --> 0:06:21.279 Foreign policy, and of course or thanks to Alex Wayne, 0:06:21.279 --> 0:06:37.560 Politics editor for Bloomberg, Well, there is a revolution underway 0:06:37.680 --> 0:06:41.200 in bond markets. The e t F industry has taken 0:06:41.400 --> 0:06:43.720 over with a storm, and to find out just how 0:06:43.800 --> 0:06:46.919 much it has transformed the way of doing business, we 0:06:46.920 --> 0:06:49.440 want to bring in Bloomberg's Rachel Evans, a corporate financial 0:06:49.480 --> 0:06:51.960 reporter who wrote a tremendous piece on it uh in 0:06:51.960 --> 0:06:55.640 Bloomberg's Markets magazine, as well as Eric Beltunas, senior et 0:06:55.760 --> 0:06:59.240 F analyst for Bloomberg Intelligence, who is the guru when 0:06:59.240 --> 0:07:01.480 it comes to things e t F s At Rachel, 0:07:01.480 --> 0:07:03.400 I want to start with you just to get some 0:07:03.440 --> 0:07:08.080 perspective on how much bond ETFs have been transforming the 0:07:08.160 --> 0:07:10.560 debt markets in the US. So this has been going 0:07:10.560 --> 0:07:13.400 on over the last kind of five to ten years really, 0:07:13.440 --> 0:07:16.160 and it's really a product of changes we saw after 0:07:16.200 --> 0:07:21.000 the financial crisis. We saw bond bond traders who typically 0:07:21.000 --> 0:07:23.400 would have been kind of making the market really back away. 0:07:23.480 --> 0:07:26.280 The infantries went down and as a result, investors have 0:07:26.320 --> 0:07:29.560 had to find new ways to actually buy and sell bonds. Now. 0:07:29.600 --> 0:07:31.280 The e t F at the same time was kind 0:07:31.320 --> 0:07:34.040 of climbing as a financial instrument that people could get 0:07:34.080 --> 0:07:36.680 into and out of very very quickly, and that's now 0:07:36.720 --> 0:07:38.960 something that people look to and when they're trying to 0:07:39.000 --> 0:07:40.920 get into or out of bonds as kind of a 0:07:41.000 --> 0:07:44.000 vehicle by which they might do that. Well, Eric Baltunas, 0:07:44.040 --> 0:07:45.920 maybe you could come in on this. My question has 0:07:45.960 --> 0:07:48.920 to do with the fact that if you're a bond trader, 0:07:49.080 --> 0:07:51.800 does that make you different than a bond investor? Are 0:07:51.800 --> 0:07:55.040 the days of buy and hold over? I think you know, 0:07:55.080 --> 0:07:57.560 if you look at the turnover in these different bond 0:07:57.600 --> 0:08:01.200 etf you look at the Vanguard uh B n D 0:08:01.840 --> 0:08:04.720 that's saying barely turns over. People are going in there 0:08:05.320 --> 0:08:08.320 and they like the fact that it's under ten basis points. 0:08:08.960 --> 0:08:10.920 You get a diverse group of bonds. I think there's 0:08:11.200 --> 0:08:15.240 eight thousand bonds in that fund um and look, that 0:08:15.320 --> 0:08:17.200 would be one that people buy and hold. Then you 0:08:17.240 --> 0:08:19.320 have something like h y G, which I refer to 0:08:19.360 --> 0:08:22.160 as a hotel. People are checking in and checking out 0:08:22.160 --> 0:08:24.560 of that saying all the time. The turnover is much higher, 0:08:24.840 --> 0:08:26.720 and I think that's a sort of parallel with the 0:08:26.720 --> 0:08:30.080 whole E T F universe. It's serving many different investors. 0:08:30.080 --> 0:08:32.520 But I think this bond movement. The number I like 0:08:32.600 --> 0:08:34.280 to throw out is if you look at h y G, 0:08:35.160 --> 0:08:38.920 it's only represents one to two percent of the assets 0:08:39.400 --> 0:08:41.840 in the high yield market, but it accounts for about 0:08:42.360 --> 0:08:45.000 of the trading, so they become really a big part 0:08:45.000 --> 0:08:49.040 of the trading, but still relatively small asset wise. Well, 0:08:49.040 --> 0:08:52.600 and there wouldn't be a revolution without a good degree 0:08:52.640 --> 0:08:54.440 of worry that comes along with it, And there are 0:08:54.520 --> 0:08:57.120 some people who are worried that, uh, the sort of 0:08:57.200 --> 0:08:59.880 framework of an e t F, which is bundling a 0:09:00.000 --> 0:09:04.440 group of securities and having that portfolio and then selling 0:09:04.480 --> 0:09:08.280 shares that trade on a daily basis, could be problematic, 0:09:08.320 --> 0:09:11.120 particularly in the dead industry. At Rachel, do you want 0:09:11.160 --> 0:09:13.400 to explain what some of those concerns are sure, I mean, 0:09:13.440 --> 0:09:16.960 this really kind of relates to the liquidity mismatch, as 0:09:17.000 --> 0:09:20.400 people put it, between having something that is exchange traded 0:09:20.800 --> 0:09:22.640 and can be traded at any point in the day 0:09:22.800 --> 0:09:26.080 and some of the underlying instruments that maybe there's a 0:09:26.120 --> 0:09:29.360 market for them once a week or once a day perhaps. 0:09:29.760 --> 0:09:32.200 Um So, I mean we've seen through the financial crisis 0:09:32.320 --> 0:09:35.000 that when you know, we we were in the depths 0:09:35.000 --> 0:09:37.160 of two thousand and eight that sometimes the net asset 0:09:37.320 --> 0:09:40.080 value of these funds, that the value of the underlying 0:09:40.080 --> 0:09:43.280 holdings I've verged significantly from the price. Now the question 0:09:43.320 --> 0:09:46.319 really is is kind of what actually represents the kind 0:09:46.360 --> 0:09:49.200 of fair value of the fund? Is? Is the net 0:09:49.280 --> 0:09:51.520 value a better representation or is it the price? And 0:09:51.559 --> 0:09:54.240 often we've seen the price of the underlying securities catch 0:09:54.320 --> 0:09:56.800 up with the t F. Eric, I want to I 0:09:56.840 --> 0:09:58.120 want to get you away in on this because I 0:09:58.160 --> 0:10:00.760 know you and I have talked extensively a out this issue. 0:10:01.440 --> 0:10:03.880 Is it fair to say that e t s, particularly 0:10:03.960 --> 0:10:06.880 fixed income ETFs, particularly high bond e t s, which 0:10:06.880 --> 0:10:08.800 we referred to with h y G, is it Is 0:10:08.800 --> 0:10:10.520 it fair to say they have not been tested by 0:10:10.520 --> 0:10:14.839 a major crisis? So yes, and no, Uh look h 0:10:15.000 --> 0:10:17.079 y G was around in two thousand and eight. People 0:10:17.080 --> 0:10:19.840 forget that, but it was tiny. Come on, let's be honest. 0:10:20.320 --> 0:10:22.480 Yeah it was. It was smaller back then, right. So, 0:10:22.559 --> 0:10:25.800 and what Rachel was referring to as the discount, I 0:10:25.840 --> 0:10:29.480 referred to that as the arbitrage band. It's essentially the price. 0:10:29.520 --> 0:10:31.240 The price has to go down below the n A 0:10:31.320 --> 0:10:33.280 V before somebody thinks it's worth it to buy the 0:10:33.320 --> 0:10:35.760 bond and sell the E T S and so the 0:10:35.840 --> 0:10:39.160 arbitrage band over the last ten years has shrunken incredibly. 0:10:39.160 --> 0:10:41.040 So you have two things I think is consider when 0:10:41.040 --> 0:10:44.200 you think of this I called the Jurassic part concern um. 0:10:44.400 --> 0:10:47.880 When you look when when you are looking at the 0:10:47.920 --> 0:10:50.079 fact that if you were trying to sell high yield 0:10:50.080 --> 0:10:53.840 debt on a bad day, you'd probably have is tough time, 0:10:53.920 --> 0:10:57.280 if not tougher than selling shares of the E T F. 0:10:57.360 --> 0:10:59.080 So I think, you know, look, the E T S 0:10:59.120 --> 0:11:01.600 is a convenient way to do it, but it's not 0:11:01.679 --> 0:11:03.679 without risk, and I think there is probably some bit 0:11:03.720 --> 0:11:06.440 of cost that you will have to pay if you 0:11:06.440 --> 0:11:08.160 wanted to get out on those bad days, in the 0:11:08.200 --> 0:11:11.360 form of just the middlemen. They're in there making markets, 0:11:11.360 --> 0:11:14.400 but there's so many more people with their eyes on 0:11:14.800 --> 0:11:17.000 the trading, especially the big ones like h y G, 0:11:17.440 --> 0:11:20.360 that you do see more liquidity in the secondary market 0:11:20.400 --> 0:11:23.200 for them. Rachel, I wonder if you could just tell 0:11:23.280 --> 0:11:27.199 us about a gentleman named Layton Chance, because he figures 0:11:27.200 --> 0:11:30.160 in your article and I thought it explained an interesting 0:11:30.520 --> 0:11:36.040 process by which bond investors are investigating exchange traded funds. Right. 0:11:36.120 --> 0:11:38.200 So Layson was really kind of one of the first 0:11:38.600 --> 0:11:42.040 um to to to really use this process and with ETFs. 0:11:42.120 --> 0:11:45.040 Basically what he did is he utilized one of the 0:11:45.640 --> 0:11:48.120 interesting feat and he was at the Lockheed Martin investment 0:11:48.120 --> 0:11:50.960 management company, right, and also he did Tennessee's retirements right 0:11:51.000 --> 0:11:53.640 and now he's now he's in Texas with the Employees 0:11:53.640 --> 0:11:56.559 Retirement System of Texas. UM Yes, So basically, I mean 0:11:56.640 --> 0:11:59.320 he utilized kind of this this function of ETFs whereby 0:11:59.440 --> 0:12:01.280 you can buy the shares in the e t F 0:12:01.360 --> 0:12:04.200 either with cash or what's called in kind. Now, in 0:12:04.320 --> 0:12:07.920 kind creation basically means that you deliver a portfolio of 0:12:07.960 --> 0:12:10.080 bonds to the e t F provider and in return 0:12:10.120 --> 0:12:13.760 they give you some e t F shares for those bonds. Now, 0:12:13.760 --> 0:12:15.680 of course, you can either keep those e t F 0:12:15.720 --> 0:12:17.880 shares in your book and that that's a very liquid 0:12:17.880 --> 0:12:20.240 thing that you can buy more of or sell, or 0:12:20.280 --> 0:12:22.000 you can sell them and use that kind of cash 0:12:22.080 --> 0:12:24.040 you free up to to change your portfolio. So he 0:12:24.160 --> 0:12:25.680 used this as a kind of a novel way to 0:12:25.679 --> 0:12:28.520 to change his portfolio from investment grade debt to high 0:12:28.600 --> 0:12:31.599 yield and treasuries. For more information, just check out the 0:12:31.600 --> 0:12:35.720 Bloomberg Market story by Rachel Evans, Bloomberg's corporate finance reporter. 0:12:36.000 --> 0:12:39.200 R thanks also Eric baltunas Senior E T F Analyst 0:12:39.280 --> 0:12:55.680 for Bloomberg Intelligence. Well Wall streets bet against empty malls 0:12:55.720 --> 0:12:58.560 in the United States is getting too crowded. This, according 0:12:58.600 --> 0:13:03.840 to a report from Group, instead recommend wagering against individual 0:13:03.960 --> 0:13:07.200 retailers as the next big short. Well here to tell 0:13:07.280 --> 0:13:10.720 us about malls and commercial real estate is Paul Adernato. 0:13:10.840 --> 0:13:13.880 He is the senior reats analyst and Managing director of 0:13:14.000 --> 0:13:17.240 BEMO Capital Markets, and he joins us here in the studio. Paul, 0:13:17.280 --> 0:13:20.320 always a pleasure, Thanks for being with us. Let's talk 0:13:20.360 --> 0:13:24.160 about the death of the mall? Is it the overrated? 0:13:24.280 --> 0:13:26.360 I mean, have we always been talking about the death 0:13:26.400 --> 0:13:29.560 of retail and the death of the mall? Him, It's 0:13:29.559 --> 0:13:32.520 been It's been an ongoing story for for years and years. 0:13:32.559 --> 0:13:34.480 You know, first it was going to be bird flu, 0:13:34.600 --> 0:13:37.800 then it was terrorism. Uh, then it was of course 0:13:37.840 --> 0:13:40.640 that e commerce years ago. And so the mall has 0:13:40.679 --> 0:13:47.240 always evolved to to to bring consumers different experiences. Uh 0:13:47.400 --> 0:13:51.960 that would be more like restaurants, movie theaters, etcetera. So, uh, 0:13:52.480 --> 0:13:55.200 the malls have always been just a place for people 0:13:55.240 --> 0:13:58.760 to meet and a place of commerce. And so if 0:13:58.800 --> 0:14:02.240 we just think more general early about those places, uh, 0:14:02.440 --> 0:14:05.559 they'll probably survive in some form or another. They've been 0:14:05.679 --> 0:14:09.400 very very good at evolving in the past. Well, Paul, 0:14:09.520 --> 0:14:12.560 do you think there are specific reads real estate investment 0:14:12.600 --> 0:14:15.800 trusts that have been oversold as a result of the 0:14:15.880 --> 0:14:19.280 growing pessimism about the retail sector in general? Alright, A 0:14:19.400 --> 0:14:22.040 very good points. So if we were to separate the 0:14:22.520 --> 0:14:26.000 U S. Mall industry into the most productive malls, those 0:14:26.000 --> 0:14:31.200 would be companies like UH, Simon Property Group SPG, mase 0:14:31.320 --> 0:14:34.720 Rich and a C and g g P Inc. That's 0:14:34.760 --> 0:14:37.320 a symbol, g g P. Those would be considered the 0:14:37.360 --> 0:14:41.240 top tier operators in the US. And UM and this 0:14:41.320 --> 0:14:45.240 group I think, uh, you know, has been oversold to 0:14:45.320 --> 0:14:48.160 some extent. The reason I say that is that if 0:14:48.160 --> 0:14:51.360 we look at the implied cap rate and so really 0:14:51.400 --> 0:14:54.880 that's just looking at the um the value of the 0:14:54.960 --> 0:15:00.200 underlying real estate, it's trading much much cheaper than the 0:15:00.320 --> 0:15:05.040 private market value of of real estate, uh, substantially cheaper. 0:15:05.400 --> 0:15:08.840 So you know, are the malls are the malls stocks cheap? 0:15:09.000 --> 0:15:12.080 Very much? So? UM what will be the catalyst to 0:15:12.120 --> 0:15:15.040 get them going. Um, that's a little more of a 0:15:15.080 --> 0:15:18.760 tricky question. I'm not quite sure that we will ever have, 0:15:19.280 --> 0:15:23.280 you know, evidence until this whole you know, UH department 0:15:23.320 --> 0:15:28.600 store anchor and and you know, small shop retail uh 0:15:29.040 --> 0:15:33.080 evolution has has really played out. What about the payoffs 0:15:33.280 --> 0:15:36.200 from these real estate investment trusts? So many people look 0:15:36.280 --> 0:15:39.880 to those as a source of income. Are those payouts 0:15:39.880 --> 0:15:43.440 covered by the current operations of these companies? Yes, so 0:15:43.680 --> 0:15:46.320 all of the three companies that I just mentioned have 0:15:46.520 --> 0:15:49.520 very strong balance sheets. Uh. The dividends, I would say, 0:15:49.520 --> 0:15:53.240 are not at risk uh at all. You know, we 0:15:53.320 --> 0:15:56.680 talk about malls and we talk about the carnage that 0:15:56.720 --> 0:15:59.920 we've seen in among retailers, and often we conflate the 0:16:00.040 --> 0:16:03.000 too because we think so goes the fate of retailers 0:16:03.280 --> 0:16:08.400 goes the fate of malls. Is this true? Um, there's 0:16:08.440 --> 0:16:12.280 a very, very big disconnect between the fortunes of retailers 0:16:12.320 --> 0:16:17.120 and the fortunes of the mall owners, for instance, the anchors. 0:16:17.560 --> 0:16:20.120 Many people don't realize that the anchors pay little or 0:16:20.160 --> 0:16:24.160 no rent to the mall owner. Historically, they were given 0:16:24.520 --> 0:16:26.960 the space for free or for a very very low 0:16:27.000 --> 0:16:30.880 rent in order to generate traffic for the mall. Now 0:16:31.040 --> 0:16:33.040 they haven't really done that for a long time, and 0:16:33.360 --> 0:16:36.320 now it's it's finally playing out that the anchors are 0:16:36.440 --> 0:16:39.680 are disappearing or shrinking. But that's just, you know, kind 0:16:39.720 --> 0:16:44.600 of one example of how the retailers don't necessarily directly 0:16:45.000 --> 0:16:48.160 impact the fortunes of the mall owners. Right although, in 0:16:48.520 --> 0:16:51.160 evaluating the value of a mall, you have to look 0:16:51.160 --> 0:16:53.640 at the traffic, the foot traffic of the stores that 0:16:53.720 --> 0:16:57.520 currently are there. And based on those analyzes, do you 0:16:57.600 --> 0:17:02.480 believe that there is still more pain to be had 0:17:02.520 --> 0:17:06.720 in the retailers specifically? So, so, there's definitely more pain 0:17:06.800 --> 0:17:09.560 to be had. I mean that we're we're probably still 0:17:09.600 --> 0:17:12.320 only in the in the third or fourth inning of 0:17:12.400 --> 0:17:16.359 the whole e commerce impact on on the retail space. 0:17:16.720 --> 0:17:18.840 So so I do think that there's a lot more 0:17:19.200 --> 0:17:23.400 transformation that has to occur in terms of the mall traffic. 0:17:23.840 --> 0:17:26.640 It's interesting, but the mall owners claim that they don't 0:17:26.640 --> 0:17:28.720 really track it. Now they have now they're starting to. 0:17:29.240 --> 0:17:33.800 But you know, this is this is what we're we're 0:17:33.840 --> 0:17:36.159 we're hearing, and so they say, look at things like 0:17:36.240 --> 0:17:38.840 gift cards but they you know, they should be able 0:17:38.880 --> 0:17:41.719 to count cars in the parking lot, etcetera. But um 0:17:42.000 --> 0:17:44.840 but anyway, I guess the point is is that the 0:17:45.240 --> 0:17:48.959 way that people shop in malls is changing. Right, so 0:17:49.040 --> 0:17:51.600 you're probably going to do some research online before you 0:17:51.640 --> 0:17:54.960 go to a store, Whereas you know, twenty years ago, 0:17:55.280 --> 0:17:57.120 you might have started at one end of the mall 0:17:57.160 --> 0:17:58.960 and just you know, made your way all the way 0:17:58.960 --> 0:18:01.440 down to the other end. Uh And that's the way 0:18:01.760 --> 0:18:05.760 people used to shop. Uh so so so habits are changing, 0:18:05.840 --> 0:18:10.720 behaviors are changing, uh so so traffic. While it's it's 0:18:10.760 --> 0:18:13.960 critically important to know that, um, you know, we have 0:18:14.040 --> 0:18:18.560 to consider the bigger picture as well. Consider Acadia Realty Trust. 0:18:18.640 --> 0:18:22.280 This is an interesting company. A k R is the symbol. 0:18:22.320 --> 0:18:27.600 They've got properties in Brooklyn, Chicago, Washington, San Francisco, Boston's 0:18:27.600 --> 0:18:31.160 Newberry Street, for example, as well as Milwaukee, uh and 0:18:31.160 --> 0:18:35.240 and Chicago. Tell us about Akadia? Why is it different? Sure? So, 0:18:35.280 --> 0:18:39.520 Acadia does not own any mall real estate. In terms 0:18:39.600 --> 0:18:42.600 of the regional malls. They have a few community shopping 0:18:42.640 --> 0:18:46.000 centers that are grocery anchored, but none of the of 0:18:46.040 --> 0:18:49.359 the malls that are currently under under scrutiny. UM so 0:18:49.520 --> 0:18:53.560 years ago, Acadia, you know saw what was coming, as 0:18:53.560 --> 0:18:56.359 did as did many folks, but they actually acted on 0:18:56.400 --> 0:18:58.879 it and built a company around it. And that is 0:18:59.240 --> 0:19:03.560 the thought that UM dense urban areas, this live, work, 0:19:03.680 --> 0:19:07.399 play environment is going to be the place that UH 0:19:07.560 --> 0:19:10.680 people want to want to be UH and where commerce 0:19:10.720 --> 0:19:17.280 will will occur and also where brand awareness can be established. 0:19:17.640 --> 0:19:21.160 And so if you talk to retailers today, UH, those 0:19:21.240 --> 0:19:25.320 that are either UH doing very well online or those 0:19:25.400 --> 0:19:29.160 that want a better online presence, they will tell you 0:19:29.200 --> 0:19:33.200 that they you know, first you need to have brand awareness. 0:19:33.280 --> 0:19:37.720 And so brand awareness generally occurs at flagship locations. These 0:19:37.720 --> 0:19:43.080 are the very large stores that really really convey the 0:19:43.119 --> 0:19:46.600 experience of the brand when when you go in these 0:19:46.680 --> 0:19:50.159 take these UH stores are located generally, UH in the 0:19:50.600 --> 0:19:55.159 metro areas that you that you just mentioned. Paul at NATO, 0:19:55.320 --> 0:19:57.760 Thank you so much for being with us. Truly, this 0:19:57.840 --> 0:20:00.440 is the story of the moment. Is definitely, at least 0:20:00.480 --> 0:20:03.320 in the debt world and in the real estate world, 0:20:03.400 --> 0:20:05.639 is what is going to happen among retailers and with 0:20:05.800 --> 0:20:10.240 commercial real estate, real estate investment trusts and all of 0:20:10.280 --> 0:20:14.200 the other related instruments. Paul are Donato, senior reads analyst 0:20:14.280 --> 0:20:17.520 Managing director at BMO Capital Markets, and he was with 0:20:17.600 --> 0:20:31.399 us in our Bloomberg eleven three oh studio. The minutes 0:20:31.560 --> 0:20:34.920 to the March fourteenth and fifteen f o MC meeting 0:20:34.960 --> 0:20:37.840 will be released today at two pm Wall Street time. 0:20:38.160 --> 0:20:40.960 We will of course be bringing that to you, but 0:20:41.359 --> 0:20:44.639 we know that Federal Reserve officials have been well less 0:20:44.640 --> 0:20:48.439 than transparent in telling us all about what adjustments to 0:20:48.480 --> 0:20:50.720 the balance sheet of the Federal Reserve they might Mike, 0:20:50.880 --> 0:20:53.280 let's bring in John Augustine. He is the chief investment 0:20:53.320 --> 0:20:57.120 Officer of Huntington National Bank, helping to manage approximately seventeen 0:20:57.160 --> 0:21:01.320 and a half billion dollars. Based in Columbus, Ohio, John 0:21:01.359 --> 0:21:05.520 can be followed on Twitter at John Underscore Augustine, John, 0:21:05.560 --> 0:21:07.920 thanks very much for being here. As I mentioned, we'll 0:21:07.920 --> 0:21:11.400 get those meeting minutes at two pm Wall Street time. 0:21:12.040 --> 0:21:14.680 Do you expect to hear anything or learn anything about 0:21:14.720 --> 0:21:17.880 adjustments to the Federal Reserves balance sheet? We don't think so. 0:21:17.960 --> 0:21:20.199 We know that debates obviously picking up to that for 0:21:20.280 --> 0:21:22.560 an a half trillion dollar balance sheet, and when they 0:21:22.640 --> 0:21:28.520 may quit renewing purchases from matured securities there, but we 0:21:28.840 --> 0:21:31.760 don't suspect it. It would be rather surprised, we think 0:21:31.800 --> 0:21:34.760 the markets if that showed up in meetings or excuse me, 0:21:34.800 --> 0:21:38.359 in meeting minutes this afternoon, but we'll see you never know. Well, yeah, John, 0:21:38.400 --> 0:21:40.040 you know this is my big question right now because 0:21:40.119 --> 0:21:44.199 Dan Trullo today uh FED chair in Uh just who 0:21:44.320 --> 0:21:46.720 is about to resign? So in fairness, he's not necessarily 0:21:46.760 --> 0:21:48.920 going to be relevant to this discussion, but he said 0:21:48.920 --> 0:21:51.920 on a CNBC interview today that he thinks it makes 0:21:51.920 --> 0:21:57.160 sense to start talking about possibly unwinding the balance sheet. 0:21:57.200 --> 0:21:59.360 This follows a lot of FED talks saying the same thing. 0:21:59.400 --> 0:22:02.320 Markets have not responded. Are they just saying we don't 0:22:02.320 --> 0:22:06.239 believe you. We're gonna call your bluff potentially? You know 0:22:06.280 --> 0:22:08.440 that the surprise to us today and market so far 0:22:08.600 --> 0:22:10.840 is the fact that bond yields have gone nowhere today 0:22:11.240 --> 0:22:13.560 and as a matter of fact, that they're slightly lower 0:22:13.640 --> 0:22:16.399 now on the tenure as we sit and speak this morning. 0:22:16.400 --> 0:22:19.080 So the bond market is not buying it um, that's 0:22:19.080 --> 0:22:21.400 for sure, and they're not buying the economic recovery either. 0:22:21.760 --> 0:22:25.080 There's two big sets of buyers in the bond market 0:22:25.160 --> 0:22:28.560 individual investors through mutual funds, and then the TICK data 0:22:28.640 --> 0:22:32.520 shows foreign investors. Now that's data that's January, the last 0:22:32.520 --> 0:22:37.880 report Treasury Treasury international flows. So yes, sorry, but anyways, 0:22:37.920 --> 0:22:40.760 there's there's still big buyers prevalent in the bond market, 0:22:40.840 --> 0:22:44.120 and it's it's a it's a surprise to us at 0:22:44.119 --> 0:22:47.480 our shop at Huntington this year to see yield this 0:22:47.600 --> 0:22:52.000 low and now having negative real rates. Is it possible 0:22:52.040 --> 0:22:54.840 that we're getting a demographic shift in the investor base 0:22:54.960 --> 0:22:57.879 that as people age, the baby boomers age, that they 0:22:57.880 --> 0:23:00.520 will be getting out of stocks and moving into treasuries 0:23:00.560 --> 0:23:04.680 because they want the security and the consistency of return. Potentially, 0:23:04.920 --> 0:23:07.280 but we think, at least at our shop, as we 0:23:07.280 --> 0:23:09.959 look out for our customers again, you know, I'd rather 0:23:10.000 --> 0:23:12.680