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Speaker 2: Beige Book is at published day times the year, fifty
Speaker 2: one pages, just crossing the Bloomberg terminal, and it's all
Speaker 2: about anecdotal information on the current economic condition. So let's
Speaker 2: get to it deeper analysis with our own Stuart paul
Speaker 2: Us and Canada economists for Bloomberg Economics use here in
Speaker 2: our Bloomberg studio. All right, so what jumps out at you, Stuart?
Speaker 3: All told, this Beige Book released just today is overall
Speaker 3: more negative than everything that we saw in July. Most
Speaker 3: of the twelve federal reserve districts reported little or no
Speaker 3: change in economic activity overall, most notably, real wage growth
Speaker 3: seems to be dismal, and it's weighing on consumer spending
Speaker 3: and consumer activity, focusing on those wages and the labor
Speaker 3: market that's producing those wages. Eleven of the twelve Federal
Speaker 3: Reserve districts describe little or no net change in overall
Speaker 3: employment levels, corroborating basically what we've seen in the payrolls
Speaker 3: over the last several months. Looking at prices a little
Speaker 3: bit more inflationary than everything we saw in July. Ten
Speaker 3: of the twelve districts characterize price growth as moderate or modest.
Speaker 3: The other two districts strong input price growth that's outpacing
Speaker 3: moderate or moderate or moderate or modest selling prices, and
Speaker 3: that's going to be the thing that we're going to
Speaker 3: be thinking about with the inflation landscape going forward. There
Speaker 3: are some tariff price pressures that are going into the pipeline,
Speaker 3: and the question is just how much can consumers allow
Speaker 3: those prices to rise before demand retrenches. And the Beige
Speaker 3: Book right now is showing that demand is retrenching because
Speaker 3: of weakening real wages.
Speaker 4: On that Stewart reading from the Beige Book, it says
Speaker 4: QUOTE contacts frequently cited economic uncertainty and tariffs as negative factors.
Speaker 5: New York reported that Quote.
Speaker 4: Consumers were being squeezed by rising costs of insurance, utilities,
Speaker 4: and other expensive expenses. The Beige book, also noting that
Speaker 4: contacts reported flat to declining consumer spending because from many households,
Speaker 4: wages were failing to keep up with rising prices. What
Speaker 4: does all of this mean for the FED meeting later
Speaker 4: this month and that twenty five basis point cut that
Speaker 4: pretty much everyone out there is expecting.
Speaker 3: Everyone's expecting it. But what this really ends up coming
Speaker 3: down to is counting the votes on the FOMC, on
Speaker 3: that Monetary policy making committee. So one of the things
Speaker 3: that's nice about the page book we get to look
Speaker 3: at activity in each of the Federal Reserve districts. I
Speaker 3: think for September, the most important district is Kansas City.
Speaker 3: Jeffrey schmid Of voter president of the Federal Reserve Bank
Speaker 3: of Kansas City. Right now, we're seeing that economic activity
Speaker 3: was generally flat, employment declined modestly, wage pressures remains subdued.
Speaker 3: All of those factors might mean that one of the
Speaker 3: most hawkish voters on the committee could be a little
Speaker 3: bit more open to the idea of voting for a cut.
Speaker 3: You could see that true coalition building around exactly what
Speaker 3: Governor Waller wants. What San Francisco Fed President Daily has
Speaker 3: said she's wide open to and that's a cut at
Speaker 3: this upcoming US.
Speaker 2: Are you saying because he's been so hawkish and then
Speaker 2: he's seeing moderate activity, that that's why this is an
Speaker 2: interesting Fed governor to focus on.
Speaker 3: That's exactly right. He's one of the he is, by
Speaker 3: our natural language processing tools, the most hawkish member of
Speaker 3: the committee. He is a voter, and conditions locally are weak,
Speaker 3: conditions locally likely warrants a cut in his eyes.
Speaker 4: Do conditions locally inform the way that voting members of
Speaker 4: the federal who represents certain districts will vote is that
Speaker 4: their responsibility is that their job to represent their districts.
Speaker 3: It's not specifically enumerated in the Federal Reserve Act that
Speaker 3: they must set policy according to conditions locally. But the
Speaker 3: reason why the districts are divided up the way they
Speaker 3: are so that everybody around the country has someone who
Speaker 3: is representing their interest. And similarly, there are requirements on
Speaker 3: the Board of Governors that the composition of the governors
Speaker 3: are supposed to represent conditions around the country. So these
Speaker 3: are important qualitative aspects of local conditions that feed into
Speaker 3: the decision making process. Do we know for certain how
Speaker 3: any one person is going to vote no. Certainly not.
Speaker 3: But when we see conditions cooling in a district that
Speaker 3: is presided over by one of the more hawkish members,
Speaker 3: you would think they might start pivoting a little bit
Speaker 3: more dubbish. And we can see that coalition building around
Speaker 3: the cuts.
Speaker 2: Let's not forget we get some inflation prints before the
Speaker 2: next ved decision, we get the monthly jobs on FREDA.
Speaker 2: There's a lot that still could come to the Fed
Speaker 2: that could impact their decision. The other thing, though, and
Speaker 2: let me just roll this into it, Stewart, this possible
Speaker 2: legal rollback of tariffs, which could be this is a
Speaker 2: major uncertainty. I know the President said yesterday some urgency
Speaker 2: to make this decision, like, let's figure this out sooner
Speaker 2: rather than later. Is the FED going to err on
Speaker 2: the side of holding off on any kind of move
Speaker 2: because there is still some uncertainty? Are there enough evidence,
Speaker 2: are a growing number of evidence that the economy is
Speaker 2: slowing that it does make sense to cut rates of
Speaker 2: some sort.
Speaker 3: I think that there is enough evidence that it's been
Speaker 3: accumulated when you look across the broad swath of indicators,
Speaker 3: whether it's real wage growth, whether it's the pace of hiring,
Speaker 3: whether it's some of the anecdotal data that we're getting
Speaker 3: just today that a cut is warrant to the question
Speaker 3: is whether they want to do it in September or
Speaker 3: whether they want to do it a little bit further
Speaker 3: down the line. From an economic perspective, it doesn't matter
Speaker 3: that much. They could wait until December if they wanted to,
Speaker 3: They could wait until twenty sixteen if they want to.
Speaker 5: Two.
Speaker 3: But it looks like the coalition probably is there based
Speaker 3: on the data that we're seeing, based on the anecdotes
Speaker 3: that we're seeing, to deliver a cut in September.
Speaker 2: Steven Maron right, we've got hearing tomorrow. President Trump is
Speaker 2: very eager to get him in place on the FED board.
Speaker 2: How might that change some of the composition and change
Speaker 2: all of the discussions that happen around the table at
Speaker 2: the FED.
Speaker 3: You know that you'd get another voice that's advocating for
Speaker 3: a cut, and I expect that he will be confirmed
Speaker 3: in time to vote on the seventeenth. And again, it's
Speaker 3: just part of that coalition that's building.
Speaker 2: All right, We're going to leave it there. So appreciated
Speaker 2: our own Stuart paul Us and candidate economist at Bloomberg
Speaker 2: Economics right here in our studio.
Speaker 5: Stay with us.
Speaker 4: More from Bloomberg Business Week Daily coming up after this.
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Speaker 4: It's a crypto because there is lots of news happening
Speaker 4: in the world of crypto. Michael Novogratz's Galaxy Digital is
Speaker 4: offering a version of its Nasdaq list and shares that
Speaker 4: can be traded on the Salona blockchain, aiming to spur
Speaker 4: similar tokenization efforts, and an update on the WLFI token.
Speaker 4: We talked about this a lot yesterday on Bloomberg. Crypto
Speaker 4: promoted by the President's Family, which launched with ambitions of
Speaker 4: serving as the backbone of a new digital ecosystem, It
Speaker 4: became mired in turbulence and instability within an hour, so
Speaker 4: that's something we're watching closely. For more on crypto, we
Speaker 4: are joined by Jamie Leverton, CEO of Reserve One. Jamie
Speaker 4: joins us here in the Bloomberg Interactive Broker's studio. Jamie
Speaker 4: Reserve one calls itself quote an equity vehicle offering institutional
Speaker 4: great access without the complexity of direct crypto ownership.
Speaker 5: Unpack that for us.
Speaker 6: Yeah, So, I think one of the guiding principles when
Speaker 6: we thought about how to how to build the company
Speaker 6: and really offer something to investors that they can't access
Speaker 6: today in an equity vehicle. So we thought about the
Speaker 6: company and built it so that it gives almost one
Speaker 6: stop shop, if you will, to crypto exposure, but in
Speaker 6: a traditional equity So we're expecting to be eighty percent
Speaker 6: Bitcoin and then twenty percent in alternative assets that are
Speaker 6: really inspired by the digital asset stockpile and what we
Speaker 6: expect to see in that stock.
Speaker 5: What are some of those alternatives.
Speaker 6: So expecting Ethereum, Solana, Ada, and XRP. Those of those
Speaker 6: have been the tokens that have been named so far.
Speaker 6: We do expect other tokens to be added to the
Speaker 6: stockpile as that gets refined over the coming months.
Speaker 4: What determines whether or not a digital currency is added
Speaker 4: to the stockpile.
Speaker 7: That's a great question.
Speaker 6: We aren't aware of the methodology that they're that they're using,
Speaker 6: or how they're thinking about what is going to be
Speaker 6: maintained in the stockpile. But the way we think about it,
Speaker 6: it's inspired by the digital asset stockpile, but we put
Speaker 6: our own mechanism and how we weight the assets that
Speaker 6: we hold.
Speaker 4: Kind of makes sense because you're tracking something that you know,
Speaker 4: there's always been like insider buy strategies or and now
Speaker 4: with politicians there's like the you know, follow the what
Speaker 4: the politicians are buying. There's those ETFs, so as we're
Speaker 4: reminded all the time, there is an ETF for everything.
Speaker 2: Well, so you know, then we have to ask you
Speaker 2: the WLFI token, the presidential token, will that be added?
Speaker 6: We are not hearing any rumblings that it's expected to
Speaker 6: be added to the stockpile. Certainly, the tokens that have
Speaker 6: been mentioned are the ones that have been been around
Speaker 6: a long time. They've got they're in the top twenty
Speaker 6: of tokens worldwide, they have significant free flow market cap,
Speaker 6: So unlikely that those newer tokens would be added to
Speaker 6: the stockpile at this point in time, although you.
Speaker 4: Never know how far are you from the target of
Speaker 4: a billion dollar raise.
Speaker 6: So we announced in combination with our business combination agreement
Speaker 6: back in July that we seven hundred and fifty million
Speaker 6: dollars in a pipe and then in this BAC trust
Speaker 6: there's two hundred and eighty seven point five million. So
Speaker 6: we are going to go through the process with the
Speaker 6: SEC to get to get final approval and then hopefully
Speaker 6: we'll be trading under our new ticker by by the
Speaker 6: end of the year. How much of that is cash,
Speaker 6: so the funding happens at close it initially it'll it'll
Speaker 6: all be cash and then it gets converted right away.
Speaker 6: I put in air quotes into into digital assets. It
Speaker 6: won't be instantaneous, of course.
Speaker 2: How do you make sense between the tokens that you
Speaker 2: think have legs and longevity or something. I don't know
Speaker 2: if that might.
Speaker 6: Not so, I mean meme coins were kind of all
Speaker 6: the rage the last the past year. When we when
Speaker 6: we think about it, it's really what is the utility
Speaker 6: of the token, what's the ecosystem of developers that are
Speaker 6: building on chain, what's the what does the free float
Speaker 6: market cap look like? What's the ability to generate returns
Speaker 6: on those tokens? Because we will be looking to generate
Speaker 6: revenue from the assets that we hold on our balance sheet,
Speaker 6: which is which is unique from from some of the
Speaker 6: other players in the space.
Speaker 4: What's the profile of investors thus far, the mostly cryptonative funds.
Speaker 7: That came into the pie.
Speaker 6: Yeah, a mix of a mix of strategic, high networth
Speaker 6: cryptonative people that we commonly see in the space. As
Speaker 6: I think you guys know, I was the CEO of
Speaker 6: HT eight for a number of years.
Speaker 7: It's a lot of a lot.
Speaker 6: Of familiar faces around around the digital asset treasury.
Speaker 5: Space that we should be aware of, so we did.
Speaker 6: We did name a number of our strategic partners in
Speaker 6: the press release when we announced you might you mentioned
Speaker 6: Mike Novagrats Galaxy Digital key partner of ours. Yes, well,
Speaker 6: Mike was spent a lot of time on the Canadian
Speaker 6: Exchange and actually used used to be on the board
Speaker 6: of HUT eight prior to to my taking over as CEO.
Speaker 6: So lots of connective tissue. We worked with Galaxy when
Speaker 6: I was at HUT.
Speaker 7: For for yield generation on bitcoin.
Speaker 6: There are there are a great longtime partner and certainly
Speaker 6: a friend of the firm for sure.
Speaker 2: Jimmy talk to us about the White House and the
Speaker 2: government and the government's plan to buy bitcoin or expectations
Speaker 2: that they would. How do you think do you think
Speaker 2: that's going to actually happen? How will they fund it? Like,
Speaker 2: how do you see that kind of rolling out?
Speaker 6: Yeah, I mean they've been pretty clear that they want
Speaker 6: to find a way to do it in a in
Speaker 6: a budget neutral way. So far the bitcoin that they
Speaker 6: hold is through confiscation. I think we're not going to
Speaker 6: really get more clarity on their intentions around the strategic
Speaker 6: point bitcoin Reserve or the digital Asset stockpile until we
Speaker 6: get clarity through I think the focus really within the
Speaker 6: space and within Washingtonton is to get the Clarity Act passed,
Speaker 6: which really gives us the regulatory framework we need for
Speaker 6: the for the alternative tokens. It's it's been clear for
Speaker 6: a while the bitcoin's treated as a commodity ethereum likely
Speaker 6: is as well, but for the rest of the space,
Speaker 6: we really need that Clarity Act to finalize the regulatority
Speaker 6: clarity for the space, for the space that Genius gave
Speaker 6: us for stable coins.
Speaker 2: Which I with Jamie Leverton, she's CEO of Reserve one
Speaker 2: here in our Bloomberg Interactive Broker studio. Do you think
Speaker 2: we're in a moment in time because of this administration,
Speaker 2: and that another administration in three and a half years
Speaker 2: could change the environment for crypto.
Speaker 6: Three and a half years in crypto is a very
Speaker 6: very long period of time. I was here during Genzo's regime.
Speaker 6: It was certainly a much much different environment, really really
Speaker 6: difficult for those of us operating in the space in
Speaker 6: the public markets to get things through the SEC. I
Speaker 6: think certainly a very very welcome turn of events for
Speaker 6: the industry with the progress that we're seeing at the
Speaker 6: federal level as well as across the regulatory space.
Speaker 2: So are you saying that it could change or you
Speaker 2: think like the train has left the station in terms
Speaker 2: of crypto or could be in three and a half years,
Speaker 2: depending on who's in the White House and the composition
Speaker 2: of Congress, could things.
Speaker 6: It's possible, But Genius went through properly bipartisan right Seventeen
Speaker 6: Democrats joined Republicans to get together Genius through. I think
Speaker 6: as an industry we've been very very careful to keep
Speaker 6: it by partisan and I think more and more Democrats
Speaker 6: are getting on board with just what this could really
Speaker 6: mean for the future of innovation for the United States,
Speaker 6: and and I hope it stays that way.
Speaker 7: I hope the horse has has indeed left the barn.
Speaker 4: Well on politics in DC, Wilbe Ross, the former Secretary
Speaker 4: of Commerce, is vice chair of the company, vice chairman
Speaker 4: of Reserve one. What is his involvement, what is his input?
Speaker 7: Yeah, Wilbert.
Speaker 6: Wilbert has been absolutely great. He's the anticipated vice chair. Obviously,
Speaker 6: nothing's official until until we get through approvals. He was
Speaker 6: formerly a skeptic of crypto and really I think seeing
Speaker 6: the regulatory framework change, getting getting clear clear UH policies,
Speaker 6: and then understanding of how this how this space can really.
Speaker 7: Evolve in a way that's more more grown up.
Speaker 6: And I think we've assembled a team that is UH
Speaker 6: that is unique in this space, a ton of public
Speaker 6: public company experience, Washington experience, Wall Street experience. We're probably
Speaker 6: one of the more seasoned management teams and board of directors.
Speaker 6: And I think that gave him comfort. He was really
Speaker 6: curious and wanted to learn and dive into the space
Speaker 6: and thought what we were building was was really really unique,
Speaker 6: and he was ready to join and go on the
Speaker 6: journey with us. He's been incredibly incredibly supportive. We're very
Speaker 6: lucky to have him.
Speaker 2: Is he owning more crypto as a result.
Speaker 7: I'm certain that is the case.
Speaker 2: So lay out the next six months, twelve months in
Speaker 2: this space. What are you kind of watching out for.
Speaker 6: Yeah, I think I think we're all watching Washington really
Speaker 6: really carefully hopeful as an ecosystem that clarity gets done
Speaker 6: by the end of the year, and then I think
Speaker 6: we'll see the alternative digital assets have.
Speaker 7: Their moment in the sun.
Speaker 6: Really waiting for that, for that regulatory clarity, I think
Speaker 6: it'll bring a halo to that, to that segment of
Speaker 6: digital assets. And lots of lots of treasury companies have
Speaker 6: come out similar to Reserve one where the funding doesn't
Speaker 6: come to close and then we have to we have
Speaker 6: to buy the assets at that time. So a lot
Speaker 6: of pent up demands still in the crypto ecosystem that
Speaker 6: should prove favorable over the next three to six months.
Speaker 4: One of the most read stories on the Bloomberg terminal
Speaker 4: is about Eric Trump's wealth soaring on a six hundred
Speaker 4: million dollar American bitcoin steak. We are going to hear
Speaker 4: from Eric Trump on Bloomberg TV in a few minutes.
Speaker 4: The article says that the company will says it will
Speaker 4: accumulate bitcoin using machinery in New York, Alberta, and Texas
Speaker 4: provided by another crypto company called HUT eight.
Speaker 7: That is correct. Yeah, so HUT eight spun out.
Speaker 6: They are big proprietary bitcoin mining operations to form what
Speaker 6: is now and officially trading today American bitcoin money.
Speaker 4: When they say they're accumulating bitcoin that way, that means
Speaker 4: they're technically mining it.
Speaker 6: Yeah, they're mining and hobbling, just like we were doing
Speaker 6: it HUT back in twenty twenty one.
Speaker 4: How much of an opportunity is left there though, versus
Speaker 4: just going out and buying it on the open market.
Speaker 6: Well, certainly when you have when you're a low cost
Speaker 6: operator like HUT eight are now American bitcoin mining, you're
Speaker 6: able to put bitcoin in balance, you will below the
Speaker 6: cost of acquiring and.
Speaker 2: You're on tract Republic.
Speaker 6: So we are pending SEC approval and then we would
Speaker 6: list on the NASDAC through the dsback process.
Speaker 2: And that expecting still to happen in the fourth quarter
Speaker 2: of this Shit's right, Yeah right, good stuff. Stay in touch,
Speaker 2: Thank you, Yeah, always good to be here. Really appreciate
Speaker 2: it and thanks. Jamie Leverton, she's CEO of Reserved One,
Speaker 2: joining us here in our Bloomberg Interactive Brokers Studio.
Speaker 5: Stay with us.
Speaker 4: More from Bloomberg Business Week Daily coming up after this.
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Speaker 7: Folks.
Speaker 2: We're going to kind of stay with our major backdrop
Speaker 2: and go kind of from the economy to what this
Speaker 2: all means for the financial market backdrop. We've got a
Speaker 2: great guest. We want to get into how the data,
Speaker 2: the White House, the geopolitics continue to shape the investment environment,
Speaker 2: and we do have a good voice on that. Jason
Speaker 2: Granite is with us Chief Investment Officer b and Y
Speaker 2: here in studio. Great to be with you.
Speaker 8: How are you, Oh, Great to be with you since
Speaker 8: last time I saw you. Hope you enjoyed your summer.
Speaker 2: I've had good summer. I can't believe it's September. I'm
Speaker 2: kind of bracing for what September might bring.
Speaker 8: Yeah, back to school has kind of hit me over
Speaker 8: the head as well.
Speaker 2: Exactly for the first time, I don't have somebody going
Speaker 2: back to school in a while. Tell me how you're thinking,
Speaker 2: because I go back to when we were together in
Speaker 2: June at Inside b and Y Inside twenty twenty five.
Speaker 2: You and I spoke up on the stage after Kelly
Speaker 2: and Conway's senior counselor to the President, and we talked
Speaker 2: a lot about presidential policies and what it means for
Speaker 2: the investment environment. What's changed in you know, since early
Speaker 2: June to now in terms of the investment environment and
Speaker 2: how presidential policies backing it, has it gotten more certain
Speaker 2: less uncertain?
Speaker 8: So, first of all, a lot has changed and nothing
Speaker 8: has changed all at the same time. Right, we still
Speaker 8: have a very fast paced, fluid policy environment where it
Speaker 8: feels like every day or every few hours, there's some
Speaker 8: other news to digest and process and what that means
Speaker 8: for markets. On the flip side, we have a lot
Speaker 8: more certainty because a lot of tales and a lot
Speaker 8: of weird outcomes have been taken out off the table.
Speaker 8: And so one thing that's amazing to me is the
Speaker 8: twenty weeks leading up to right before Labor Day was
Speaker 8: the single biggest drop in the Vicks ever over twenty
Speaker 8: week period. So you go back twenty weeks from the
Speaker 8: early spring through the end of the summer, and to
Speaker 8: think about all the things that happened to have the
Speaker 8: greatest drop in volatility over that period is kind of amazing.
Speaker 2: That's an amazing good amazing bank completely always makes me
Speaker 2: a little nervous.
Speaker 8: Yes, but we've also seen rec at highs in assets.
Speaker 8: You've seen some other things. Now, one big trend has
Speaker 8: taken hold on the curve, and that's the curve's gotten
Speaker 8: much steeper in the month of August alone, two ten's
Speaker 8: we went from forty to sixty. You know, that's a
Speaker 8: pretty that's a proper move over the course of a month,
Speaker 8: and so you have steeple curves. I heard you just
Speaker 8: discussing with your economist here, obviously because we're expecting he's
Speaker 8: in cycled to start here in the US. I think,
Speaker 8: to me, it's more about pace of what's going to
Speaker 8: happen than if it will happen. But that's been those
Speaker 8: have been some of the biggest changes in the operating
Speaker 8: environment from the beginning of the summer.
Speaker 4: I was surprised that you didn't say the so called
Speaker 4: Big Beautiful Bill being signed into law, because that was
Speaker 4: a question in June that a lot of people had
Speaker 4: whether or not the President would get that past the
Speaker 4: finish line, and he did, signing into law in the
Speaker 4: early part of July. Does that remove uncertainty from the
Speaker 4: investing environment.
Speaker 8: Well, it definitely removed uncertainty because it took some of
Speaker 8: the debt ceiling and some of the treasury market kind
Speaker 8: of tails off the table. But actually, quite frankly, when
Speaker 8: the when the one Big Beautiful Bill was signed, there
Speaker 8: were lots of compromises made. If you know, it feels
Speaker 8: like ages ago now, but some compromises made over the
Speaker 8: last few weeks, and actually there's more. It looked more
Speaker 8: like the ecosystem before than after. So while the uncertainty
Speaker 8: of if will it get done, what will happen was cleared,
Speaker 8: you know, and we took some debt ceiling things off
Speaker 8: the table. And I think that's definitely one of the
Speaker 8: things that's contributed to this broader drop in volatility, is
Speaker 8: that these things have just been cleared from the environment.
Speaker 2: Do you see a slowdown in the economy, do you
Speaker 2: see weakness and growth? Do you see weakness in labor.
Speaker 8: So I don't see a lot of it. So for example,
Speaker 8: GDP second quarters revised up. You know three point three
Speaker 8: is not something that my economics features would tell me
Speaker 8: to get nervous about. The labor market. Clearly, Chair Pal
Speaker 8: communicated some uncertainty there. But you know, as I, as
Speaker 8: I joke with the team, if you were in an
Speaker 8: alien studying economics and landed and looked at the data
Speaker 8: and what it looked like, you wouldn't necessarily see a
Speaker 8: lot of weakness. Today's Jolts figures from this morning showed
Speaker 8: a small but that's a noisy time series. You know,
Speaker 8: that's not exactly the most linear time series to look
Speaker 8: at over the course of time. So you know, while
Speaker 8: we might be starting to see some of it, you know,
Speaker 8: to say I see weakness would not be you know
Speaker 8: where I'm at.
Speaker 2: So what struck me in early June speaking with Kelly
Speaker 2: and Conway first and then talking with you, But it
Speaker 2: seemed overwhelming to me that the audience was like, it's
Speaker 2: time for a rate cut, and I remember even kind
Speaker 2: of I feel like cheering when it was mentioned. But
Speaker 2: from what you're saying that things are strong enough that
Speaker 2: maybe we don't need a rate cut. What's what's your
Speaker 2: you know, informed view on what the FED needs to
Speaker 2: do right now?
Speaker 9: I appreciate being informed.
Speaker 5: Fuck, so a few things.
Speaker 8: One is I have sympathy with the view that Paulson
Speaker 8: more maybe tight than not. And so if you want
Speaker 8: to look at it from a perspective of all right,
Speaker 8: we can take some rates out to get closer to
Speaker 8: or more neutral stance, I like, I'm neither here nor there.
Speaker 9: Like I have.
Speaker 8: Sympathy with that view. Look, we still have inflation that
Speaker 8: is on the stickier side. I think the trend has
Speaker 8: started to trend up, not continue the trend down. Core
Speaker 8: is still pushing three not two, which are our friends
Speaker 8: at the FED would prefer. You know, the unemployment story
Speaker 8: and the labor story. Headline seems to be holding up fine.
Speaker 8: As I mentioned, three point three percent growth is not
Speaker 8: a story, but you know so to me, I wouldn't
Speaker 8: be in the most rush to take rates down so fast.
Speaker 8: And by the way, sorry, Tim, the market here is
Speaker 8: telling you that we're not going to get to that
Speaker 8: different of a place one year. One year is still
Speaker 8: around three percent. It's been this two ninety to three ten.
Speaker 8: Even with all these gyrations and moves where we're going
Speaker 8: to land has not really changed out on the horizon,
Speaker 8: and so I think that makes sense.
Speaker 4: Jason on the labor market, I want to hone in
Speaker 4: on this and talk a little bit about immigration and
Speaker 4: immigration policy and the actual effects of immigration policy, the
Speaker 4: crackdown on illegal immigration and in your view, what that
Speaker 4: is or could do to the economy, and also the
Speaker 4: crackdown on necessarily legal immigration. But a decline and interest
Speaker 4: of people who are not in the United States coming
Speaker 4: to work in the United States, as we've seen over
Speaker 4: the last few months.
Speaker 5: What does that do to the economy.
Speaker 8: It's two things I'm thinking about from that perspective. Number One,
Speaker 8: because you're changing the denominator here, maybe the amount of
Speaker 8: monthly job ads is lower than previously expected.
Speaker 5: We've we've heard this a lot from.
Speaker 8: Yeah, and so if people are expecting over one hundred k,
Speaker 8: if we get something closer to what's expected here this Friday,
Speaker 8: sixty k, that might not be a degradation in the
Speaker 8: labor as much as kind of the hiss your old
Speaker 8: time series might tell you should look at. That's number one.
Speaker 8: The second is that the expectation of this would flow
Speaker 8: through somewhere on wage pressure, and so you know, with
Speaker 8: that show up in the inflation story we're seeing, you know,
Speaker 8: I don't know if it would show up so much
Speaker 8: in services, which which was a little bit higher this time.
Speaker 8: But you know, the inflation story is still like I said, sticky,
Speaker 8: but this is more on the core side, not necessarily
Speaker 8: on the labor side. But that's where I would watch
Speaker 8: to see if it really shows up.
Speaker 2: You guys are such an important firm. You see so
Speaker 2: much in terms of money flows, investment flows. I don't
Speaker 2: know what is that. What is that telling you about
Speaker 2: kind of where we are, because I do think there's
Speaker 2: still some questions about what happens from here.
Speaker 8: Yeah, So look, there's been there's been two themes that
Speaker 8: have been very obvious.
Speaker 5: You know.
Speaker 9: One you've seen in the markets.
Speaker 8: You saw you know, the dollars down what ten percent?
Speaker 8: That's a line from the upper left of your paper
Speaker 8: to the bottom right of your paper, and that's been
Speaker 8: somewhat consistent, and the steeper curve has been somewhat consistent.
Speaker 8: Those are been two constant drumbeats, no matter what the
Speaker 8: headlines things are, over the many many months. Those two
Speaker 8: things have been in place. You know, one of the
Speaker 8: things that we have seen in our data. People got
Speaker 8: very excited about the flows around the world in a
Speaker 8: but if you go back a year to last summer
Speaker 8: over a year, so we have an eyeflow product that
Speaker 8: the team there is wonderful. They do amazing analysis across
Speaker 8: the data to see what happens. And what we saw
Speaker 8: was actually there were some our scored flows showed out
Speaker 8: from dollar assets going back to last summer and kind
Speaker 8: of you know, obviously ups and downs, but the trend
Speaker 8: and I'd say it's leveled off more recently and that
Speaker 8: now aligns with what we see in the TIC data
Speaker 8: that you're not seeing the big infos. So while we
Speaker 8: saw that trend.
Speaker 2: Where's the money that we're coming back?
Speaker 8: Not necessarily, but it's not flowing out. And I think
Speaker 8: that's that's what's showing up in markets.
Speaker 2: I have to squeeze my producers getting made. But are
Speaker 2: you concerned about the independence of the feed? It was
Speaker 2: something that we talked about in early June. We talked
Speaker 2: about with Kelly and Conway just got about twenty five seconds.
Speaker 8: Yeah, so look, I look at this about how the
Speaker 8: markets pricing and the market seeing that we're getting to
Speaker 8: three percent either before or after any of these things.
Speaker 8: So the market's saying we're going to get to a
Speaker 8: fair neutral or our star or neutral rate over a
Speaker 8: period of time. It might come faster or slower, but
Speaker 8: that's where we're headed. And you know, I think the
Speaker 8: market will tell you if there's more concern.
Speaker 2: Okay, So good to see you guys, to see Yeah,
Speaker 2: Happy September Jason granted, Chief investment Officer b and Y.
Speaker 5: Stay with us.
Speaker 4: More from Bloomberg Business Week Daily coming up after this.
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Speaker 2: Well, earlier, we got to read on the US economy
Speaker 2: courtesy of the Fed Beige Book. In keeping with that,
Speaker 2: we have a guest who has a very informed view
Speaker 2: on what's going on in the US economy. His firm
Speaker 2: is over two and a half million square feet apart
Speaker 2: property assets all owned and operated by CARUSO, all capital
Speaker 2: coming from within. The assets include upscale retail, resort, office,
Speaker 2: and residential properties across southern California. He and his firm
Speaker 2: have been investing in and developing property since nineteen eighty seven.
Speaker 2: He's a philanthropist, also the president of the LA Police Commission,
Speaker 2: was part of the board of Water end Power Commissioners
Speaker 2: out in LA and has been involved in politics, notably
Speaker 2: running as a candidate for LA mayor in twenty twenty two.
Speaker 2: That's not all. He leads a nonprofit aimed at accelerating
Speaker 2: private sector involvement in the LA area's massive rebuilding effort
Speaker 2: after those wildfires earlier this year, is known as Steadfast
Speaker 2: to LA. A lot to get to with. Rick Caruso.
Speaker 2: He's founder and executive chairman of Caruso, as we said,
Speaker 2: the privately held real estate company. He joins us from LA.
Speaker 2: How are you.
Speaker 9: I'm doing great. Thanks for having me on. How are you?
Speaker 2: We're doing okay. Try to take in all the information
Speaker 2: that seems to come at us on NonStop. I'd love
Speaker 2: to if we may, Rick, start big and broad with you.
Speaker 2: The US economy. You have a great vantage point. How
Speaker 2: would you describe it right now?
Speaker 9: I think it's still very robust.
Speaker 10: To be honest, now, the data that I look at
Speaker 10: is obviously off of our properties and our properties are
Speaker 10: growing in terms of attendance on a double digit basis
Speaker 10: year over years, so that's very strong. Our sales per
Speaker 10: square foot are continuing to grow at a very strong pace,
Speaker 10: and we have a lot of demand for retail space.
Speaker 10: So retailers, the best in class retailers are growing. You
Speaker 10: take a look at a broader picture, I think there's
Speaker 10: a little bit of softness out there in some of
Speaker 10: the categories. Luxury is not growing as much as it has.
Speaker 10: There's some luxury retailers that are suffering a bit. But
Speaker 10: I'm still pretty bullish on the consumer in the United States.
Speaker 4: We should remind everybody the properties and the developments that
Speaker 4: you've done have really served at the higher end of
Speaker 4: the consumer. People even outside of the Los Angeles area
Speaker 4: would be familiar with the Grow for example, or perhaps
Speaker 4: Miramar in Moncito, just around Santa barb Uh, but the
Speaker 4: vast majority in the Southern California area. What about Southern
Speaker 4: California's economy, that economy that you focus on. What have
Speaker 4: you noticed in terms of changes in the last couple
Speaker 4: of years. As we've heard the steady drumbeat of information
Speaker 4: about people leaving the region because of the regulatory environment,
Speaker 4: the cost pressures, what have you.
Speaker 10: Well, I think you're right, and I think it's a challenge.
Speaker 10: So when you take a look at La City in
Speaker 10: particular La County, you do have a very over regulated,
Speaker 10: tough business environment, and it's very tough, especially on middle
Speaker 10: or small businesses to operate in the city because of
Speaker 10: the cost of operation. So you do have businesses leaving,
Speaker 10: and that's troubling because the backbone of our economy in
Speaker 10: Southern California are the small businesses.
Speaker 9: So you know, one of the.
Speaker 10: Things that we push for, I push for as just
Speaker 10: a business person and a member of this community, is
Speaker 10: to be more business friendly and to start deregulating so
Speaker 10: we can grow businesses in the Los Angeles region.
Speaker 9: And I think as a state, we have a problem
Speaker 9: with that.
Speaker 10: We have businesses leaving the state of California going to
Speaker 10: regions that are more business friendly, have less red tape,
Speaker 10: allow businesses to thrive on a much easier basis. So
Speaker 10: you know, hopefully the tide will change on that, but
Speaker 10: it's certainly an issue in Southern California and I think
Speaker 10: California in general.
Speaker 4: Yet you remain rick, you have not moved to Arizona
Speaker 4: you have not moved businesses to Arizona, to Texas, to Florida,
Speaker 4: these areas of the country where people from California have
Speaker 4: been going as a result of regulatory easing. One could say,
Speaker 4: you will you stay in California.
Speaker 10: Well, I'm bullish on California. I'm gonna stay in California.
Speaker 10: I believe in it. I think we should be leading
Speaker 10: the nation in California. I think we should be leading
Speaker 10: the nation in Los Angeles. And I also have a
Speaker 10: practical problem. You can't pick up large projects and move them.
Speaker 10: I can't pick up move it. So I have to
Speaker 10: remain engage, bullish, and hope we change the trajectory.
Speaker 9: And I think we will. I really do.
Speaker 10: I think people are at a point, certainly in the
Speaker 10: Los Angeles area, that they've realized that the path we're
Speaker 10: going down is not sustainable. We've got a budget in
Speaker 10: LA City that's a billion dollars out of budget. We
Speaker 10: have revenue decreases in La City because businesses have pulled
Speaker 10: back and left, and we don't have new capital and
Speaker 10: investment coming into La like we should. They're going into
Speaker 10: other regions. Even immediately outside of Los Angeles. You have
Speaker 10: cities that are doing incredibly good jobs. The City of Glendale,
Speaker 10: the city of Culver City that are more business friendly,
Speaker 10: are safer, cleaner, more supportive of great neighborhoods, and they're
Speaker 10: attracting the business at the cost of LA City. So
Speaker 10: we've got to change that. But I remain optimistic the
Speaker 10: change is coming soon.
Speaker 2: How are politics getting in the way of all of this?
Speaker 2: And I ask it, Rick, You've got Caliphnia, Governor Newsom
Speaker 2: and President Trump really of high stakes feuds over a
Speaker 2: bunch of issues, whether it's California's universities, their environment, redistricting
Speaker 2: excuse me, and other issues. I mean, talk to me
Speaker 2: about that. And whose side are you on in all
Speaker 2: of this?
Speaker 10: Well, I'm on the honestly, I'm on the side of
Speaker 10: the people of LA and the people of California. Here's
Speaker 10: the problem that I have with the battle that's going on.
Speaker 10: We've got some really serious problems that need to be
Speaker 10: dealt with, crime, shortage of housing, homelessness, et cetera, the
Speaker 10: cost of living in California. Having an argument between the
Speaker 10: governor and the president, between the mayor and the president,
Speaker 10: a lot of name calling going on doesn't advance anybody's
Speaker 10: cause to solving these problems. So what I hope is
Speaker 10: that we get past the rhetoric, figure out a way
Speaker 10: to sit down, find some common ground, and work together.
Speaker 10: Here in Los Angeles, we have three hundred thousand acres
Speaker 10: in Pacific Palisades, Malibu, and then also at an Alta
Speaker 10: Dina that was burned to the ground the size of
Speaker 10: two Manhattans. To put it in perspective for New Yorkers,
Speaker 10: we need federal help, we need federal funding, and we're
Speaker 10: getting none of that. And I don't think as the
Speaker 10: bickering is going on and the name calling is going on,
Speaker 10: that serves any purpose in advancing the negotiations, of the
Speaker 10: discussions and getting federal help.
Speaker 4: In Los Angeles, we're speaking with Rick Caruso, founder and
Speaker 4: executive chairman of Caruso, the privately held real estate company,
Speaker 4: on the federal aid, on the federal funding. Have you
Speaker 4: had conversations with President Trump or members of the Trump
Speaker 4: administration expressing the need in your view, for federal help
Speaker 4: for California in the wake of these disasters.
Speaker 10: I've had those discussions now with the President directly, but
Speaker 10: I've had those discussions with intermediaries. I've certainly had that
Speaker 10: discussion with our governor, and we need to find a
Speaker 10: way to get those discussions at a higher level and
Speaker 10: more productive. I know there's some talk Governor Scott or
Speaker 10: Senator Scott was out here in Los Angeles and talking
Speaker 10: about it, but it really is critical path because you
Speaker 10: have hundreds of thousands of people that have been displaced,
Speaker 10: You've got jobs that have been lost, you have a massive,
Speaker 10: massive rebuilding effort that's going to take tens and tens
Speaker 10: of billions of dollars in infrastructure.
Speaker 9: So we need the federal help. It just has to happen.
Speaker 9: Well I should Yeah, No.
Speaker 2: I hear you, and you've since the fires. I know, Tim,
Speaker 2: and I just kind of preparing for this. Listen to
Speaker 2: a lot of conversations you've had with various individuals about
Speaker 2: this in terms of what needs to be done. You
Speaker 2: know what's interesting is need more federal help in terms
Speaker 2: of the rebuilding efforts. So then, how do you feel
Speaker 2: when President Trump illegally used federal troops in LA I mean,
Speaker 2: if you were mayor there, how would you respond to
Speaker 2: President Trump and his threats and use of troops like
Speaker 2: that's going on when obviously, as you say, there are
Speaker 2: efforts needed to do the re out.
Speaker 9: Well, I've been very clear the federal troops coming into.
Speaker 10: LA were wrong. Uh, and I don't I don't think
Speaker 10: it should have ever happened. I would have gone to
Speaker 10: court immediately did They finally did go to court.
Speaker 9: As you know, the court ruled that.
Speaker 10: It was an illegal use of those troops to come
Speaker 10: into the city of Los Angeles in this region. So
Speaker 10: it's not right to be doing that, and we don't
Speaker 10: need to be doing that. I mean that just this
Speaker 10: this power grab that's going on does not advance the
Speaker 10: cause for any It just doesn't. And the division between
Speaker 10: the politics is harmful to the residents of Los Angeles.
Speaker 10: We've got to find some common ground. We've got to
Speaker 10: act like grown ups. We've got to put our differences
Speaker 10: aside as elected officials and figure out how to work together.
Speaker 9: And so I.
Speaker 10: Would hope that our elected officials find a way to
Speaker 10: drop the name calling, maybe get on a plane and
Speaker 10: get over to Washington and see if we can find
Speaker 10: and common ground to work together. We also have the
Speaker 10: Olympics coming here, so Los Angeles is going to be
Speaker 10: the world stage for the United States, and we need
Speaker 10: to be putting our best foot forward, and we're going
Speaker 10: to need to be making a lot of investments in
Speaker 10: order to do that, and again we need to have
Speaker 10: the help of the federal government to do that.
Speaker 2: So Rick, I'm kind of waiting for the flood of
Speaker 2: my emails to come into my Bloomberg because I thin
Speaker 2: people are listening with saying, well, this is the kind
Speaker 2: of folk you know, individual you do want in politics.
Speaker 2: So what's your latest thinking on maybe running again for
Speaker 2: mayor or possibly governor of the state of California.
Speaker 10: Well, I'm seriously looking at it, and I've got a
Speaker 10: team of people that are working on it, and I'll
Speaker 10: make a decision soon on that. And I'm looking at
Speaker 10: both paths and there's good opportunities in both paths. But
Speaker 10: now I'm just remaining focus on what we're doing at steadfast,
Speaker 10: making sure we're getting people back in their communities as
Speaker 10: quick as possible. Yesterday I spent the afternoon in Altadena.
Speaker 10: We were giving out grants for small bits businesses to
Speaker 10: get reopened in Altadena. We're doing the same in Palisades
Speaker 10: and in Malibu. So those kind of efforts are incredibly
Speaker 10: important to me, because again, small businesses are critically important
Speaker 10: for jobs, and we're giving out about a million dollars
Speaker 10: in grants over the next couple of weeks. So that's
Speaker 10: what I'm going to stay focused on for now. Politics
Speaker 10: will come down the road fairly soon.
Speaker 2: All right, we want to talk about some of those
Speaker 2: efforts you're doing in terms of the rebuild. I got
Speaker 2: to ask you, though, if you do run or make
Speaker 2: a decision, would it be for mayor or for governor.
Speaker 9: I don't know yet. We're fine, We're going to find out.
Speaker 9: I'll let you know.
Speaker 2: Okay, I'm going to hold you to it. I'm going
Speaker 2: to hold you to it.
Speaker 4: Hey, Rick, I'm curious about just fire resilience in California,
Speaker 4: especially in the wake of Palace States. I'm from the
Speaker 4: Central Coast. I was glued to watch duty because of
Speaker 4: the Gifford fire just a couple of weeks ago. I mean,
Speaker 4: I spent you know, ten days just refreshing that thing,
Speaker 4: watching the.
Speaker 5: Progress of that fire.
Speaker 4: What is the right way for California onions to be
Speaker 4: ready for what has become just a part of daily
Speaker 4: life for a big portion of the year.
Speaker 10: Well, we have to have very smart brush management, you know.
Speaker 10: One of the problems in the Palisades, we had forty
Speaker 10: years of brush that were not maintained by the state,
Speaker 10: the county or the city that was rocket fuel.
Speaker 9: We have to have water.
Speaker 10: I mean, it was an unbelievable circumstance that we had
Speaker 10: reservoirs that are empty. So the competency level at the
Speaker 10: government and being prepared is critically important. La City was
Speaker 10: not prepared for this fire. This fire, in my opinion,
Speaker 10: and I think in most people's opinion that have seen
Speaker 10: the facts, as this fire could have been prevented certainly
Speaker 10: significantly mitigated in terms of the damage.
Speaker 9: And then we have.
Speaker 10: To be encouraging people to build with non combustible materials. Unfortunately,
Speaker 10: the village that we built survived it, but it survived
Speaker 10: it because we were prepared to fight the fire. But
Speaker 10: equally important, we built it with non comb stable materials
Speaker 10: and so it was able to stain the fire around us.
Speaker 10: And we had a lot of smart people doing some things.
Speaker 10: So we can build better and smarter. But we also
Speaker 10: have to have better infrastructure. You know, the fire hydrants
Speaker 10: need to work. They were not working in Los Angeles.
Speaker 10: The reservoirs need to be full, and this is an
Speaker 10: opportunity right now to rebuild Malibu, Pasadena, Alta, Dina and
Speaker 10: Palisades in a way for the next hundred years and
Speaker 10: to get the right infrastructure put in. It's an incredible
Speaker 10: opportunity to create these communities for the future. And that's
Speaker 10: why we need to work with the federal government, get
Speaker 10: the right federal funding and get some smart leadership locally
Speaker 10: that builds it back properly so that we can with
Speaker 10: stain fires and other natural disasters in the future can
Speaker 10: be done.
Speaker 2: The nonprofit you are leading, as we said, called Steadfast LA.
Speaker 2: You've got comp such as Netflix, Amazon, JP Morgan, Cha,
Speaker 2: CBRE Group, so many who are working to restore these communities.
Speaker 2: But you guys are looking at everything you're using AI.
Speaker 2: How long do you think it's going to take for
Speaker 2: the rebuild and ultimately are we talking about kind of
Speaker 2: the cities of the future in terms of the materials
Speaker 2: used and how it's done.
Speaker 9: You know, I think it's going to take. There's going
Speaker 9: to be phases. I look at it.
Speaker 10: What's going to be happening one year from now, three
Speaker 10: years from now, five years from now, one year from now.
Speaker 10: For example, the little downtown of the Palisades is going
Speaker 10: to get reopen. We're going to rebuild the park. Steadfast
Speaker 10: is leading the park rebuilding. Schools are getting back reopen
Speaker 10: and we're involved in supporting the school systems and getting reopen.
Speaker 10: Same and Altadena, Sam and Malibu. I think in three
Speaker 10: years you're going to see a lot of the homes
Speaker 10: back and running. We have some really encouraging programs with
Speaker 10: an alliance of builders who are coming together to buy
Speaker 10: in bulk, be able to build less expensive, and so
Speaker 10: that's really important to do. And I think in five
Speaker 10: years we're going to be in pretty good shape getting
Speaker 10: these communities back on its feet. The biggest challenge we have,
Speaker 10: honestly is the lack of diligence, the lack of urgency
Speaker 10: from the local governments to get permits issued. And we've
Speaker 10: got to speed that up in the red tape, both
Speaker 10: in the county and in La City so people can rebuild.
Speaker 4: Hey, Rick, before we let you go, I want to
Speaker 4: talk a little bit about your family foundation that's been
Speaker 4: involved at this point for more than thirty years in Watts,
Speaker 4: the Crusoe Family Foundation, and it serves organizations a slew
Speaker 4: of organizations in the area and I'm just wondering. You know,
Speaker 4: the focus is in healthcare, it's on education at risk kids.
Speaker 4: I'm wondering why we need organizations to step in and
Speaker 4: fill the gap that isn't necessarily provided by other organizations.
Speaker 4: Why do we need the Crusoe Family Foundation to do this?
Speaker 4: When will your work be done and you won't have
Speaker 4: to help bridge that gap.
Speaker 10: Well, I don't think our work is ever going to
Speaker 10: be done, but I have to tell you something. It's
Speaker 10: one of the most rewarding parts of my life, and
Speaker 10: my wife's life, and my family's life that we can
Speaker 10: help kids that are at risk, living at or below
Speaker 10: the poverty line, and you bring opportunities to them and
Speaker 10: the right education and the right support. We have kids
Speaker 10: that are living in some of the worst and toughest
Speaker 10: conditions in LA and they're now at Harvard, MIT, Georgetown, USC,
Speaker 10: UCLA and they're just excelling and doing it on their
Speaker 10: own because they have the right ecosystem around them and
Speaker 10: the right start and the right support. And a government
Speaker 10: alone can't do everything. It never has been able to.
Speaker 10: You have to have philanthropy, and people need to give
Speaker 10: back and lean in and support churches and schools, and
Speaker 10: all these great organizations that we have out there, And
Speaker 10: what I would argue for is we need more people
Speaker 10: to be leaning in. We need more foundations to be
Speaker 10: giving back because the reward and the payoff is so
Speaker 10: great and huge, and it really does change these communities
Speaker 10: because these kids are coming back and helping others. I
Speaker 10: just find it one of the greatest parts of my
Speaker 10: life is being involved in being able to see these
Speaker 10: kids just take off and do great things.
Speaker 2: Well, we're going to end it on that optimistic note
Speaker 2: that makes us, I think all feel really super good. Rick,
Speaker 2: thank you so much, really appreciate your time and efforts,
Speaker 2: and we're going to mark our calendars to check back
Speaker 2: with you about maybe that political decision you may make
Speaker 2: very very soon. Rick Caruso, thank you so much. Be
Speaker 2: while founder executive chairman of Caruso joining us from LA.
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