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Speaker 2: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
Speaker 2: my co host Matt Miller.
Speaker 1: Every business day we bring you interviews from CEOs, market pros,
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Speaker 2: We want to bring in Bloomberg TV's David Weston for
Speaker 2: a conversation on the life and legacy of Henry Kischinger. First,
Speaker 2: I want to bring you part of David's discussion with
Speaker 2: Bloomberg opinion commist Neil Ferguson, who wrote a book on
Speaker 2: the life of Henry Kischinger and spent extensive time with him.
Speaker 2: Here's part of their discussion on the role of Kissinger
Speaker 2: played in the Yamkipoor War.
Speaker 3: For Kissinger, the moral imperative in the Cold War was
Speaker 3: to avoid World War three, and that was one of
Speaker 3: the reasons that he pursued a policy of deton of
Speaker 3: understanding of improving relations with the Soviet Union, because I
Speaker 3: think reasonably he thought the worst possible outcome for the
Speaker 3: world would be a hot war between two nuclear armed superpars,
Speaker 3: and so in practice, when he entered the realm of
Speaker 3: power as Richard Nixon's national security advisor, I think he
Speaker 3: remained an idealist, but an idealist who was having to
Speaker 3: deal with some extremely difficult choices between, as I've said,
Speaker 3: greater and lesser evils. So I don't think the idealism
Speaker 3: was ever entirely eradicated. Certainly, working with Richard Nixon, you
Speaker 3: were working with somebody who saw himself as a very
Speaker 3: tough realist who wasn't afraid to do very difficult and
Speaker 3: even nasty things. So I think there was an element
Speaker 3: of compromise just in accepting a job with Nixon. But
Speaker 3: once Nixon has gone, it's very interesting to see Kissinger
Speaker 3: under Ford shift in a much more idealistic direction, and
Speaker 3: a lot of Kissinger's later career, about which one hears
Speaker 3: much much less, owed a lot more to his earlier
Speaker 3: roots in German idealism.
Speaker 2: It was Bloomberg Television's David Weston speaking with Bloomberg Opinion
Speaker 2: Calmnesst Neil Fergus. I want to bring in David western
Speaker 2: right now. David, thanks so much for joining us here
Speaker 2: in our Bloomberg studio here.
Speaker 4: What a life. It's been your life, my life.
Speaker 2: That has been US diplomacy, whether it's official or nonofficial,
Speaker 2: it's been Henry Kissinger.
Speaker 5: Yeah, he's been the only diplomat i'd ever heard of. Frankly,
Speaker 5: I mean when you first pointed, I was in high school.
Speaker 5: Actually I'm old enough to remember that when Richard Nixon
Speaker 5: appointed him. But and as Ray Dalio actually just posted
Speaker 5: something saying this, you can't think of it who studied
Speaker 5: history as deeply as Henry Kissinger did as an academic
Speaker 5: at Harvard. He would have had a distinguished career in
Speaker 5: that and then lived the diploma say was responsible for it,
Speaker 5: and then got to know pretty much every world leader
Speaker 5: and didn't just know them. They hung on his every word.
Speaker 5: And that's China, that's Soviet Union, that's anwar, Sadat and
Speaker 5: Egypt around the world. I mean, it's quite strang If
Speaker 5: you read his book on leadership, he goes through the
Speaker 5: six leaders that he had respect for. He starts with
Speaker 5: Charles de Gaulle, who we knew personally, and he goes
Speaker 5: on to Conrad Adenauer, whom he knew personally, and Maggie
Speaker 5: Thatcher thinks it's really extraordinary life wow.
Speaker 6: And David, you knew him personally as well. So maybe
Speaker 6: if you could tell us a little bit about some
Speaker 6: of your memories with Henry Kissinger and what you'll think
Speaker 6: of him most.
Speaker 5: Yeah, I would say, I'm not sure Henry would say
Speaker 5: this if he were here, But he sort of adopted
Speaker 5: me when I came to New York in the mid nineties.
Speaker 5: I think he took pity on me and took me
Speaker 5: under and he used to invite me to breakfast that
Speaker 5: he had with like twenty people or so at a
Speaker 5: club where he'd have visiting dignitaries in people he'd known
Speaker 5: through the years where we'd have an off the record
Speaker 5: discussion about what was going on in Asia, in Europe
Speaker 5: and the Middle East, and it was wonderful. It was
Speaker 5: one of his experiences. And so he really and I
Speaker 5: had lunches with him where he would He was a
Speaker 5: teacher forever and he wanted to teach you, and he
Speaker 5: had an amazing mind. You could agree with them, you
Speaker 5: could disagree with them, but he had thought it all
Speaker 5: through many times, and he could explain to you how
Speaker 5: everything was connected to everything else. He was already fastening.
Speaker 5: Last thing. He was a huge dog person.
Speaker 4: Really.
Speaker 5: He and Nancy loved dogs. I mean, I can't believe
Speaker 5: they always were with a dog constantly. And he was
Speaker 5: a charming, actually very warm man in many ways.
Speaker 2: It's amazing what did he think of what's happened, not
Speaker 2: just the United States over the last five six, seven years,
Speaker 2: in terms of the nationalism America first in the US,
Speaker 2: with Brexit in the UK and the elections. It seems
Speaker 2: like internationalism, which I think you and I kind of
Speaker 2: grew up with post World War Two, is not necessarily
Speaker 2: the leading role or the leading thought here in international
Speaker 2: relations these days.
Speaker 5: Well, these are my words, not his, but I think
Speaker 5: he would say it's dangerous. We have to remember he
Speaker 5: came out of Nazi Germany, fleeing it in nineteen thirty
Speaker 5: eight with his family as a Jew, and he studied.
Speaker 5: In his work. He started with the post Napoleonic Wars,
Speaker 5: putting it together Europe and talking about the balance of powers,
Speaker 5: people like Metternik that he really valued as a way
Speaker 5: to avoid war. He wanted to avoid conflict at all costs.
Speaker 5: And I think he would say, if we were here today,
Speaker 5: there are real dangers in everybody going to their respective
Speaker 5: corners and fighting with whether people get hurt that way.
Speaker 5: And in fact, he talked about this just last month
Speaker 5: was the last time I saw him. He appeared live
Speaker 5: at the Al Smith dinner here in New York, and
Speaker 5: he gave a speech on this very subject, warning people
Speaker 5: about the dangers here that we have in front of
Speaker 5: us if we keep going this way.
Speaker 6: Well, one of the bigger parts of his legacy was,
Speaker 6: of course brokering the peace in the Middle East, and
Speaker 6: certain hearkens now to what we're seeing between the Born
Speaker 6: Israel and with Hamas. So did you speak to him
Speaker 6: more recently to know what he was thinking as far
Speaker 6: as the conflict now, or what you might imagine he
Speaker 6: would have to say thinking about this current conflict.
Speaker 5: Yeah, I don't want to be so presumptuous as to
Speaker 5: speak with him for him, but I think he would
Speaker 5: definitely say it's very different in many respects. The attack
Speaker 5: was different hamas terrorists going in and slaughtering children was
Speaker 5: different from a surprise attack from Egypt. In Syria and
Speaker 5: Israel at the same time, there are some parallels because
Speaker 5: what happened there if you remember, is Henry Kissinger with
Speaker 5: President Nixon, came in strong on the side of Israel
Speaker 5: and shift them a lot of weapons and material and
Speaker 5: support in the early stage. But then there was a
Speaker 5: pivot where they started saying, Israel, you've got to back off.
Speaker 5: You can't go too hard against Egypt. And in fact,
Speaker 5: at one point he really interviewed very forcefully because he
Speaker 5: was concerned that if Israel tried to destroy one of
Speaker 5: the armies of Egypt, which they could have done, the
Speaker 5: Soviet Union would come in and there'd be a shooting war,
Speaker 5: and we ended up with US against the Soviet Union.
Speaker 5: So he actually played a key role in saying to
Speaker 5: Israel you've got it back down, and he had some real,
Speaker 5: real conflicts of gold in my ear at the time.
Speaker 6: And of course Israel he's getting different pressure now to
Speaker 6: back down, not for fear of Russia coming into the conflict,
Speaker 6: but kind of similar to what we're seeing now in
Speaker 6: that sense.
Speaker 2: David, some of the criticism of mister Kishinger maybe as
Speaker 2: a release to human rights.
Speaker 4: And his pursuit of global diplomacy.
Speaker 2: What he would say, what I've read, would I'm making
Speaker 2: some hard choices here, and some of the hard choices
Speaker 2: might result in some human rights being violated in.
Speaker 4: Various places around the world. How did he deal with
Speaker 4: that or how did he talk about that?
Speaker 5: Well, he did talk about it, and I would say
Speaker 5: he would deny this. I would say he was a
Speaker 5: bit defensive particular things like Cambodia. But you can't talk
Speaker 5: about the legacy of Andrew Kitchen without talking about so
Speaker 5: of the countries, with Cambodia and the so called Secret War,
Speaker 5: with what happened in Chile, with the coup, what happened
Speaker 5: in Argentina, and even what happened in Pakistan. But I think,
Speaker 5: I think and Walter Isaacson also wrote a book about
Speaker 5: Henry Kustinger quotes Henry quoting a version of Gerta that
Speaker 5: basically said, if you make me choose between injustice and
Speaker 5: order and justice and disorder, I will take injustice and order,
Speaker 5: I think, which comes partly from his background, because he
Speaker 5: saw what disorder in World War two in Europe could do,
Speaker 5: and so he did make some tough decisions. I'm sure
Speaker 5: he would say the session and he would say, look,
Speaker 5: I can't say I was right. I just tell me
Speaker 5: would have been better? Give me what the better alternati
Speaker 5: would have been at the time that was the one
Speaker 5: that would preserve the most order that we could have.
Speaker 6: When we're thinking back now to the war that we're
Speaker 6: seeing in the Middle East, and you know, current Secretary
Speaker 6: of State Anthony Blincoln, he's gone out to Israel to
Speaker 6: you know, to speak with the officials over there. Do
Speaker 6: you think that there would like, you know, speaking onto
Speaker 6: How you think that the current Secretary of State and
Speaker 6: really what their role is in this conflict, and how
Speaker 6: it's different from Kissinger's roll back at the Camp David Accords.
Speaker 5: Ironic, isn't it that we're seeing shuttle diplomacy even as
Speaker 5: we speak right now with Tony blinkin over there in
Speaker 5: Israel and going to Romala, going to the West Bank
Speaker 5: and trying to keep things under control as much as
Speaker 5: they can. It's ironic, it's very difficult because, I mean,
Speaker 5: for those of us who are around, Henry Kinsinger was
Speaker 5: larger than life. I mean, he dated superstar models and
Speaker 5: things like that, and he was on the front pages
Speaker 5: of paper all the time, and he had such a
Speaker 5: powerful position in Nixon. I'm not sure there are figures
Speaker 5: anywhere right now that are loom Is large. But I
Speaker 5: think what we're seeing from Secretary of State Blincoln and
Speaker 5: from President Biden right now is a version of what
Speaker 5: Henry Kinsinger tried to pursue, which is basically, let's talk
Speaker 5: to all the parties, figure out where the interests are,
Speaker 5: find the right balance, and keep things under control. Even
Speaker 5: if we can't come to an overall solution of the problem,
Speaker 5: let's manage the problem and try to minimize the damage
Speaker 5: and yes, the loss of human life.
Speaker 2: David mister Kissinger was one of the architects of Dayton
Speaker 2: with the Soviet Union. What were some of his thoughts
Speaker 2: about the rise of Vladimir Putin kind of what we're
Speaker 2: seeing from Russian activities over the last decade or so.
Speaker 5: Well, he obviously, I suppose, thought that that was very
Speaker 5: dangerous and very risky and a much different situation to
Speaker 5: what we had before, in part because actually Russia today
Speaker 5: is not as powerful as the Soviet Union was then.
Speaker 5: I mean, if we think back to that Cold War,
Speaker 5: I mean, there were two superpowers they're scaring up. If
Speaker 5: there are two superpowers today, it's China and the United States,
Speaker 5: and Russia is a smaller player, which in some ways
Speaker 5: makes it more dangerous because they feel they have less
Speaker 5: to lose and they feel that they have more to gain.
Speaker 5: And certainly, if you read what Vladimir Putin says, he
Speaker 5: feels he was really done wrong. Russia was done wrong
Speaker 5: with the fall of Wall, and he's got to resume
Speaker 5: restore that prestige, which makes it more dangerous.
Speaker 2: China, I mean, that's the new thing that I mean,
Speaker 2: I can't imagine he's very happy with what's kind of
Speaker 2: chilled over relationship over the last four or five six
Speaker 2: years between US and China.
Speaker 5: Well, perhaps his last international trip was to Beijing, very good,
Speaker 5: where he got to meet with President gi personally, when
Speaker 5: else nobody else in the United it could meet with
Speaker 5: President G. G you wanted to do with him, And
Speaker 5: you can underestimate the reverence point that the Chinese leadership
Speaker 5: has and has had for generations for Henry Kissinger. Now,
Speaker 5: part of that is part of the culture. They really
Speaker 5: revere the elderly people who have a lot of experience.
Speaker 5: I mean, it reminds me actually of Charlie Munger right now,
Speaker 5: where Charlie Munger said, boy, you get a good executive,
Speaker 5: you keep him there forever. You don't turn them over
Speaker 5: five or six years. But the Chinese really revered that.
Speaker 5: But also if you think of from China's point of view,
Speaker 5: imagine where China was when he went there first and
Speaker 5: where it is now and would it have gotten there.
Speaker 5: I'm not sure it would have gotten as far or
Speaker 5: as fast without Henry Kissinger and Richard Nixon, because it
Speaker 5: was Richard Nixon's idea. Henry Kinsinger implemented it, but it
Speaker 5: was actually Richard Nixon's strategy.
Speaker 2: David, thank you so much for joining us. David Weston,
Speaker 2: he is the host of Wall Street Week, which is
Speaker 2: one of my favorite brands ever on Wall Street. Wall
Speaker 2: Street Week bearing both on radio and television with his thoughts,
Speaker 2: his perspectives on the extraordinary life of Henry Kissinger, passed
Speaker 2: away at the AI.
Speaker 7: You're listening to the Team Ken's are Live program Bloomberg
Speaker 7: Markets weekdays at ten am Eastern on Bloomberg dot Com,
Speaker 7: the iHeartRadio app and the Bloomberg Business App, or listen
Speaker 7: on demand wherever you get your podcasts.
Speaker 2: I don't know if the uh the cyber truck thing
Speaker 2: Majiggi's got Apple Play, but we'll check in with our next guest.
Speaker 8: Dan.
Speaker 4: I've held everything about this stuff.
Speaker 2: Dan Ives is a managing director senior equity analyst web
Speaker 2: Bush Securities UH and a Penn State Rabbit fan of
Speaker 2: note there. All right, Dan, I'm seeing the video of
Speaker 2: the cyber truck. I just don't get it. Dude, I
Speaker 2: don't see It's not a truck man. I can't throw
Speaker 2: a ball of hay in the back of the truck.
Speaker 4: More importantly, why are you carrying builds of hay?
Speaker 2: Well, because I'm gonna get I'm a rancher. Maybe I'm
Speaker 2: gonna get a ranch, you know, thinking about that. I
Speaker 2: watch I watch Yellowstone. So Dan, talk to us about
Speaker 2: this cyber truck. What's it mean for Tesla.
Speaker 9: This is important. I call it a historical event for
Speaker 9: Tesla and Mosque in terms of this new category four
Speaker 9: years in the making. I mean you got two million reservations,
Speaker 9: even if forty percent of those convert base in our
Speaker 9: estimates eight hundred thousand, I mean, this is gonna be
Speaker 9: a new growth vehicle, obviously on the edge the mad
Speaker 9: Max design. But I think this is gonna be successful,
Speaker 9: and I think book people like Miller they're gonna be
Speaker 9: driving us around New York.
Speaker 6: Wow, Matt, I hope you're listening in to hear that one.
Speaker 4: He's not gonna get his way to sign off on this.
Speaker 2: He's got the challenger with the scat pack.
Speaker 4: That's enough.
Speaker 10: One.
Speaker 6: Well, we're gonna have to see if it can strap
Speaker 6: in a baby counter in the back, so that would
Speaker 6: be the most important for him. Right now, Dan, tell
Speaker 6: us of what you're so you think this is gonna
Speaker 6: be successful. I'll tell us a little bit about some
Speaker 6: of the projections you've run and just how you know
Speaker 6: breaks down the numbers for us in terms of how
Speaker 6: this is going to play out for Tesla.
Speaker 9: Look, the important thing today is about pricing, because that's
Speaker 9: that's really the unknown we think pricing is probably sweet
Speaker 9: spot sixty to seventy K, and that's important. You'll also
Speaker 9: get tax credit there at that level at scale two
Speaker 9: to two and five two thousand per year. As we
Speaker 9: get into twenty twenty five. In terms of units now
Speaker 9: coming out, this is gonna be complex to build. It's
Speaker 9: all gonna be built out of Austin. That's where the
Speaker 9: launch will be today. But this is important because it
Speaker 9: goes back to you know, something we've talked about in
Speaker 9: the show. Lout is a refresh. There's just more categories.
Speaker 9: It's part of the Hello effect. Contrast at GM four
Speaker 9: pulling back a little on evs, yet test A Musk
Speaker 9: actually doubled down.
Speaker 2: So I think Elon himself has even said Dan that
Speaker 2: this kind of thing is, I guess in his opinion,
Speaker 2: kind of a profitability disaster production disaster. It's so hard.
Speaker 2: Can you make any money on this truck? Is there
Speaker 2: any profitability in this truck?
Speaker 9: Yeah, Paul, first twelve to eighteen months, no, I mean
Speaker 9: they'll essentially lose money, will be cash on negative. But
Speaker 9: as you get into twenty twenty five, it actually could
Speaker 9: be pretty significant in terms of the accretive level. As
Speaker 9: it all plays out at scale now two thousand units.
Speaker 9: We think that's pily max twenty twenty four, probably about
Speaker 9: forty thousand in terms of what they ultimately deliver. But
Speaker 9: this is all about next two to three years. It's
Speaker 9: given them their other growth vehicle, and I think this
Speaker 9: is really the start of just the next fees of
Speaker 9: the Tesla growth story. This is four years in the making.
Speaker 9: In terms of today's launch, Dan tell.
Speaker 6: Us a little bit more about the competition that the
Speaker 6: cyber truck is going to be stacked up against. You think,
Speaker 6: you know the Ford, you know F series, particularly the
Speaker 6: F one fifty or that's the best side truck in America,
Speaker 6: is a little bit fifty lightning. Yeah, so the electric
Speaker 6: one there, sure, and then you've got the Ram, the Shelvy,
Speaker 6: the Chevy Silverado. I mean, how is this. How's the
Speaker 6: cyber truck you think going to stack up against those?
Speaker 9: Well, F one fifty, I mean, that's that's the target
Speaker 9: on the back. I mean, they're really trying to go
Speaker 9: for some sort of churn there. You look what Rithan's done.
Speaker 9: The success now, they've had a lot of difficulty in
Speaker 9: terms of building it out. In terms of success from
Speaker 9: a demand perspective, you look at that opportunity, you look
Speaker 9: at what received coming at a GM. Look, this is
Speaker 9: really creating a new category. But it's par the hello fact.
Speaker 9: And I think the difference today four or five years ago,
Speaker 9: everyone kind of viewed it as Okay, Tesla, they're not
Speaker 9: gonna be successful. Today there's not an auto manufacturer executive
Speaker 9: around the world that won't be watching the event because
Speaker 9: you can no longer just say that it's not gonna
Speaker 9: be relevant. It's actually the opposite in terms of their
Speaker 9: leading in terms of really innovation technology.
Speaker 2: Hey, Dan, when when you speak with the folks at Tesla,
Speaker 2: when you also speak to the other auto manufacturers, what
Speaker 2: are they what's the thinking today about maybe the ultimate
Speaker 2: demand curve for evs over the next five years. It
Speaker 2: seems to have lost a little enthusiasm out there.
Speaker 9: Yeah, I mean, look, I think it's no secret you've
Speaker 9: definitely seen a moderation. But I think the view among
Speaker 9: many in the industry is, Okay, let's say it doesn't
Speaker 9: go to fifty to sixty percent penetration. Let's say it
Speaker 9: goes to thirty forty percent penetration next five six years.
Speaker 9: That's two trillion in terms of the amount of ultimately
Speaker 9: opportunity out there in terms of electric vehicles, So you
Speaker 9: continue to see aggressive push towards this. I think the
Speaker 9: big thing it's price discovery. You're not gonna have eighty
Speaker 9: ninety thousand. You need to be in that sweet spot
Speaker 9: forty to fifty k. And that's what we're seeing in
Speaker 9: terms of that price war that's played out well known
Speaker 9: in terms of what's happening in China. It's really price discovery.
Speaker 9: But finally we're seeing some sort of supply demand equilibrium.
Speaker 9: But I don't really see a pulling back GM four
Speaker 9: that's essentially UAW that really forced that hand to pull
Speaker 9: back a little in terms of spending.
Speaker 6: So speaking of the economics of this, this is a
Speaker 6: tough time right now to be buying a car and
Speaker 6: to be you know, persuaded and consumers that this is
Speaker 6: the time to be getting really excited about that when
Speaker 6: you have auto loan rates as high as they are.
Speaker 6: I mean, certainly the holidays, you know, big time to
Speaker 6: roll out a lot of incentives on price and maybe
Speaker 6: rates if you can. But what exactly is the pitch
Speaker 6: right now to like financially that people might be getting
Speaker 6: excited about this.
Speaker 9: Well, the big thing too is tax credit. Tonight' expect
Speaker 9: some more tax credit incentives as we go into twenty
Speaker 9: four from Biden administration, because that's a key point. If
Speaker 9: you go back historically what's called seventy eighty thousand, Now
Speaker 9: you're getting some of these ed vehicles, especially for Tessa
Speaker 9: Why and others thirty five forty thousand. When it's all
Speaker 9: said and done here, you're going to have incentives. But
Speaker 9: no doubt because what we've seen from a rising rate
Speaker 9: environment that's been a huge headwind that does start to
Speaker 9: reverse in twenty four. That's why the comms get easier
Speaker 9: in twenty four. And I do believe we are still
Speaker 9: going into what I view as a golden age pro
Speaker 9: electric vehicle and I think that's why it's important today
Speaker 9: for this event pricing. It's really gonna be a flext
Speaker 9: muscles event from Musk and Tesla.
Speaker 4: Uh Dan.
Speaker 2: The stock Tesla's up ninety seven percent year to date,
Speaker 2: clawing its way back to its all time high that
Speaker 2: had a couple of years ago. You've been I would argue,
Speaker 2: one of the biggest bulls on Tesla, on EV's in general,
Speaker 2: and then by extension Elon Musk. How frustrating is it
Speaker 2: for you to see yesterday, for example, another situation where
Speaker 2: Elon Musk really comes into the news in not necessarily
Speaker 2: a good way on a company that's not even related
Speaker 2: to Tesla. How do you how do you and investors
Speaker 2: kind of deal with the Elon Musk risk factor?
Speaker 9: Yeah, it's part of that spider web. I mean, even
Speaker 9: what we saw over AX and obviously you know he
Speaker 9: went to Israel in terms of the trip, and then
Speaker 9: if you look at the interview yesterday, I mean clearly
Speaker 9: there's no gonna be no champagne dinner between Musk and
Speaker 9: Eiger anytime soon. I do think relative to Tesla it
Speaker 9: is a bit contained relative to any sort of like
Speaker 9: brand teroration. But as we talked about, I mean, Musk
Speaker 9: is Musk. He's gonna go to the beat of a
Speaker 9: different drum. That's that's why you have the loyalist. But
Speaker 9: then of course the heaters as well, and that's just
Speaker 9: I think it's more accepted to some extent from a
Speaker 9: Tessa perspective, But no doubt it's a fine balance between
Speaker 9: from a brand issue or any short of deterioration. Right now,
Speaker 9: it's contained, but it's not what you want to see yesterday. Ultimately,
Speaker 9: as a as a Tesla holder.
Speaker 2: All right, Dan, thanks so much for joining us as
Speaker 2: always really appreciated. Dan Ives, Managing Director, Senior Equity Analyst
Speaker 2: at Wedbush Securities. A rabid Penn State nitle Lion fan.
Speaker 2: We're waiting to see which Bowl game the Penn State
Speaker 2: will go to.
Speaker 7: You're listening to the tape Can's a line program Bloomberg
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Speaker 2: Let's get to our next guest, Commercial real estate. Let's
Speaker 2: talk to Scott Kelly, founder and CEO of ATOS Capital
Speaker 2: or real Estate. He joins his life here in our
Speaker 2: Bloomberg Interactive Broker studio. Scott, thanks and welcome to Bloomberg.
Speaker 2: Talk to us about commercial real estate. It is on
Speaker 2: everybody's mind, from anybody who thinks about real estate, commercial
Speaker 2: real estate, to invest in banks that have finance commercial
Speaker 2: real estate, to everybody else involved.
Speaker 4: An ecosystem. It is ugly out there.
Speaker 2: Is it time to dip your toe in there and
Speaker 2: start maybe buying some of these properties?
Speaker 10: Well, I think I think it's uglier than even the
Speaker 10: headline news would tell you because there's a confluence of
Speaker 10: events which has really never happened before. First of all,
Speaker 10: the level of commercial mortgage maturities over the next couple
Speaker 10: of years is extraordinary.
Speaker 8: It's like one point.
Speaker 10: Five trillion dollars over the next couple of years. Second,
Speaker 10: it's a sequical business. And whether it's a hard landing
Speaker 10: or a soft landing, it's a landing. We're not in
Speaker 10: a great part of the economic cycle. There are secular
Speaker 10: trends that are really powerful, whether it's work from home,
Speaker 10: shop from home, stay in an airbnb, move out of
Speaker 10: big cities in the Northeast to the Sunbelt. I mean,
Speaker 10: there are powerful secular trends which are influencing the performance
Speaker 10: of different properties. And this interest rate spike has got
Speaker 10: an enormous impact on what's essentially a leveraged business because
Speaker 10: you want to leverage out a lot of the return
Speaker 10: for the real estate to drive equities. And then then
Speaker 10: I would say, lastly, the regulatory environment has changed. You know,
Speaker 10: the for a long time during COVID, it was sort
Speaker 10: of hands off, nobody foreclosed on anything. There was a
Speaker 10: lot of leeway given to bar where. It's just because
Speaker 10: that was the economic reality of things. That's changing as well.
Speaker 10: So all those things put together on.
Speaker 4: Anywhere near this space.
Speaker 10: Well but but but there are going to be winners
Speaker 10: and losers, you know, and and and I do think
Speaker 10: it creates, like like every disaster, it creates great investment opportunities.
Speaker 10: And you know, there are iconic buildings here in New
Speaker 10: York that are just going to be fine. You know,
Speaker 10: they're not gonna you don't want to seem going through
Speaker 10: the roof, but they're going to be fine. And you
Speaker 10: look at what office owners, as an example, have done.
Speaker 10: We're over at the GM building a couple of weeks ago,
Speaker 10: they put in the Savoy Club. You know, is really
Speaker 10: an amenity to tenants. If you go to one Vanderbilt,
Speaker 10: they've got you know, terrific restaurants and a Centurion club.
Speaker 10: I mean, all of a sudden, you know, the owners
Speaker 10: I think of these iconic buildings are able to put
Speaker 10: things into keep tenants. The disaster I think is going
Speaker 10: to be for the kind of B and C quality
Speaker 10: properties which are going to have a very hard time
Speaker 10: retaining tenants.
Speaker 2: And this is an a property by the way, I
Speaker 2: don't care who's talking about this is.
Speaker 9: This is.
Speaker 6: Will that right now would not be a HQ, not
Speaker 6: going anywhere.
Speaker 8: An AOK part of this scale.
Speaker 11: So relative to those B and C properties, we had
Speaker 11: Igle Namdar, president of non Dar Realty in not so
Speaker 11: long ago, and of course his firm, he's best known
Speaker 11: for being a big buyer of zombie malls and going
Speaker 11: in at their the lowest price. He's sort of doing
Speaker 11: the same playbook here in New York relative to the
Speaker 11: office properties. Because of exactly what you're talking about now,
Speaker 11: he was willing to put a value on the non
Speaker 11: trophy properties, and he said, so, if you go to
Speaker 11: a random building out here in Third Avenue, depending whether
Speaker 11: it's in the middle of the block or a corner,
Speaker 11: he said that it could go anywhere for twenty five
Speaker 11: cents on the dollar or seventy five cents on the
Speaker 11: dollar as for where it was before. Does that sound
Speaker 11: extreme to you or does that match up to what
Speaker 11: you're seeing as well?
Speaker 10: No, it does not sound extreme to me at all.
Speaker 10: I would say twenty five cents is more likely because
Speaker 10: you have to understand what the property taxes that and
Speaker 10: the and the operating expenses, particularly of you know, these
Speaker 10: buildings in New York. You know, when rental rates drop,
Speaker 10: you can have buildings that can't make any money. And
Speaker 10: I think that's a realistic prospect for some of these
Speaker 10: really bad buildings. So the question is how low is low?
Speaker 8: You know?
Speaker 6: And so you know, something I've talked to a lot
Speaker 6: on this show here, Scott is I've been on this
Speaker 6: journey to buy an apartment in New York, provided for
Speaker 6: great newsworthy content for the show, as well as some
Speaker 6: stress in my own personal life. But something that has
Speaker 6: come up in this latest apartment that I'm looking at
Speaker 6: is that the commercial properties that are on the street
Speaker 6: level are right now perhaps not renewing the leases. And
Speaker 6: what that means then for the residential building above that
Speaker 6: owns this whole building and the income that they rely
Speaker 6: upon from these commercial tenants. So is that some thing
Speaker 6: that you're seeing as well, that like this distress in
Speaker 6: the commercial sector perhaps could have bigger implications for the
Speaker 6: real the residential side, which of course has a number
Speaker 6: of problems of its own right now.
Speaker 10: Right, well, yes, And I think the issue is the
Speaker 10: whole ecosystem has to work. Right if if there aren't
Speaker 10: people in the office buildings, the guys selling sandwiches on
Speaker 10: the first floor are going out of business. You know,
Speaker 10: if the tenants aren't in residential you know, buildings, it's
Speaker 10: very difficult for the for the ground floor tenants to
Speaker 10: be a dry cleaner, be a you know, whatever that
Speaker 10: services the tenants.
Speaker 8: I think the big issue.
Speaker 10: That that people don't talk enough about, which has to
Speaker 10: be confronted, is it's going to take a long time
Speaker 10: to work this out, and it's got to be a
Speaker 10: cooperation between government and the property owners and because people
Speaker 10: are going to need a break on property taxes, on
Speaker 10: you know, on zoning regulations and all that sort of thing.
Speaker 10: And you know, unfortunately, good public policy which would say
Speaker 10: get these buildings up and running tend to be bad
Speaker 10: politics because you're, you know, kind of giving money to
Speaker 10: people that are viewed as being wealthy and don't need it.
Speaker 8: That's not the case.
Speaker 10: I mean the cities, I think in New York's one example,
Speaker 10: but I think you can talk about it in San
Speaker 10: Francisco and Chicago and in place South. If you don't
Speaker 10: have a vibrant real estate market, the tax base is
Speaker 10: just going to erode in the cities, and so it's
Speaker 10: going to take a thoughtful, you know, public policy approach
Speaker 10: to moving some of this office space to residential and
Speaker 10: other things, you know. And that's New York's big problem,
Speaker 10: right It's there's way too much office and there's too
Speaker 10: little residential, and so it's.
Speaker 8: Incredibly expected to resone it.
Speaker 10: Well and resonte You've got to rezone it. You've got
Speaker 10: to give incentives to make those changes. And frankly, a
Speaker 10: lot of those kind of seventies style office buildings are
Speaker 10: not you know, particularly able to be renovated into residential.
Speaker 10: We did, the company that we're partnered with for our
Speaker 10: domestic effort here did a redevelopment of an office building
Speaker 10: in Washington into residential and it's worked out beautifully. But
Speaker 10: those opportunities are it takes a lot of expertise and
Speaker 10: a lot of you know, help with the government and
Speaker 10: patience to get it done.
Speaker 11: So switching gears just a little bit, Scott. You know,
Speaker 11: we've been talking to about this epic opportunity in office
Speaker 11: distressed office here in the US but your real wheelhouse
Speaker 11: over the last twenty years, although I should add you
Speaker 11: were one of the big mds at Morgan Stanley back
Speaker 11: in the day, so your wheelhouse is real estate period.
Speaker 11: You have just such a broad base of knowledge. But
Speaker 11: you've done a tremendous amount of investing in China and
Speaker 11: in Asia. You were in China, I believe, in September,
Speaker 11: and you told me privately that it's worse, similar to
Speaker 11: what you're saying about the US, that it's worse than
Speaker 11: what's being reported. So talk to us a little bit
Speaker 11: about China and does that seep into the global economy?
Speaker 11: Does that seep into the US? And when do we
Speaker 11: hear those headlines more so?
Speaker 10: Again, well, I think you're starting to see them now.
Speaker 10: I mean the Chinese property companies. And again, we ran
Speaker 10: a series of private equity funds. Most of our investing
Speaker 10: in Asia, we've been at it for twenty two years.
Speaker 10: Most has been in Japan, but we did put six
Speaker 10: hundred million of equity into China in a variety of
Speaker 10: basically joint ventures. Residents are joint ventures to build condominiums
Speaker 10: to sell, and we all remember the lines around the
Speaker 10: block of people wanting to buy these things. There are
Speaker 10: no lines there today. But the issue with these you know,
Speaker 10: this capitalism stuff's a little bit tricky, and these Chinese
Speaker 10: property companies have gotten themselves run aground with terrible capital structures.
Speaker 10: And when I say that they've got they've got like
Speaker 10: five different branches of creditors. First are people that were
Speaker 10: buying condominiums that weren't delivered. Second were the construction lenders.
Speaker 10: When that dried up, they then borrowed money from sort
Speaker 10: of private funds that were raised in China. Then they
Speaker 10: went public in Hong Kong, and then they did high
Speaker 10: yield you know, bonds in Hong Kong. So I mean,
Speaker 10: it's a big, big problem, and the Chinese government can
Speaker 10: fix it. It's gonna take a lot of money, and
Speaker 10: it's gonna take a lot of expertise. You know, there's
Speaker 10: no Hank Paulson over there to say, give me a bazukah.
Speaker 8: I don't necessarily need to use it.
Speaker 11: But she is pretty much indicated that he's not willing
Speaker 11: or he's not interested in saving. So what would what
Speaker 11: would force his hand in putting in terms of putting
Speaker 11: that money into the market.
Speaker 10: I think it's a I think it's a guns and
Speaker 10: butter issue. You know what, there's only so much money.
Speaker 10: What are you going to do?
Speaker 8: You know, what are you going to do with it?
Speaker 10: And I think civil unrest is the thing that they're
Speaker 10: really worried about.
Speaker 11: And we've seen some pictures of that.
Speaker 2: Hey, Scott, thanks so much for joining us. Really appreciate
Speaker 2: you coming into our studio. Scott Kelly, founder and CEO
Speaker 2: of Atos Capital Real Estate, historically has been investing, as
Speaker 2: Scott mentioned, in Asia, mostly Japan, but also maybe take
Speaker 2: a look here at the US. And to me, it's
Speaker 2: the lipstick building on Third Avenue. When I see something
Speaker 2: like that trade, I can't wait to see what the
Speaker 2: evaluation is. It could be a big, big haircut.
Speaker 7: You're listening to the tape Cansur Live program Bloomberg Markets
Speaker 7: weekdays at ten am Eastern on Bloomberg Radio, the tune
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Speaker 7: You can also listen live on Amazon Alexa from our
Speaker 7: flagship New York station Just Say Alexa, playing Bloomberg eleven
Speaker 7: thirty sub Topa.
Speaker 4: Marty joins us. She's a Chief Technology Officer Whipro.
Speaker 2: Whipro's a publicly traded company New York Stock Exchange w
Speaker 2: IT is the ticker twenty five point two billion dollar
Speaker 2: market cap stocks a year to date up about three
Speaker 2: point eight percent, So that's good news there. So, but
Speaker 2: thanks so much for joining us here. Software Company Artificial Intelligence.
Speaker 2: Ge tell us kind of where your company fits in
Speaker 2: the tech stack.
Speaker 4: What do you guys do it? Whippro So, we are.
Speaker 12: A technology services provider and we serve fourteen hundred customers
Speaker 12: across twenty five plus verticals across the globe. We are
Speaker 12: anywhere from managing cloud and infrastructure migrations to managing full
Speaker 12: cloud stack, to application development, to tech support, to consulting
Speaker 12: and strategy consulting. So we are a full service firm
Speaker 12: and I'm really excited to talk a little bit more
Speaker 12: about what we're doing on Jenny I on the.
Speaker 13: Show with you.
Speaker 6: Yeah, tell us about that. I think you know, this
Speaker 6: year it seemed like the biggest historian AI was well
Speaker 6: Chat GPT, and now it's going on with open AI
Speaker 6: and sam Almon. A bit of a different development there.
Speaker 6: But tell us as far as far as investment opportunities
Speaker 6: for AI, what we can expect to see in the
Speaker 6: new year.
Speaker 13: You know I see GENEI impacting.
Speaker 12: It is going to impact every business and every vertical
Speaker 12: and every technology stack.
Speaker 13: And we know this already.
Speaker 12: What is interesting is the categories.
Speaker 13: That are emerging.
Speaker 12: I would specifically put GENEI impact in four specific categories.
Speaker 12: The first one is the entire SDLC process from software
Speaker 12: development life cycle. Internally, we have we have been experimenting
Speaker 12: with this technology for the last ten months and we
Speaker 12: see twenty five to thirty percent productivity gains, you know,
Speaker 12: from requirements to you know, testing to everything in between.
Speaker 12: The second area which is emerging is around content generation.
Speaker 12: I mean the idea that you're able to reduce how
Speaker 12: much it takes, how much time it takes to create
Speaker 12: content generate content is is quite fascinating and that's where
Speaker 12: we see significant improvement in productivity gains.
Speaker 13: The third area we see emerging.
Speaker 12: Is this entire RPA two DOT or the entire idea
Speaker 12: that in the past it was around automation, but now
Speaker 12: it is mostly the new avatar or the reinvention of
Speaker 12: business process optimizations through generative AI. And the last category,
Speaker 12: the way I see it is right now, most of
Speaker 12: us have experienced generative AI through large language models applying
Speaker 12: the same architecture to other modalities other data's structured data,
Speaker 12: which will then start to impact these various layers in
Speaker 12: stack that I just referred to. I think becomes quite fascinating.
Speaker 12: These are kind of the four trends I'm seeing beginning
Speaker 12: to at least I'm seeing emerging, and the application of
Speaker 12: these four areas will be fascinating and we'll see what
Speaker 12: plays out in the next year, which will be very interesting.
Speaker 2: So we've heard some numbers from a various technologists about
Speaker 2: the spending associated on artificial intelligence on AI across the
Speaker 2: whole range of industry. From your perspective, how much of
Speaker 2: that spending, that AI specific spending is new incremental tech
Speaker 2: spending or they simply maybe taking their spending from another
Speaker 2: period period of their place in their tech budget.
Speaker 12: See, most of our technologists, we don't get a lot
Speaker 12: of budget. When I say that, I say that because
Speaker 12: we are we are very much tied. Technology is tied
Speaker 12: to have business outcomes. You know, it's top line growth
Speaker 12: and bottom line optimizations and growth for us. I mostly
Speaker 12: what we tend to do is start the RGB and
Speaker 12: create the headroom, so to speak, and invest in new
Speaker 12: areas and new technologies. The idea here is productivity gains.
Speaker 12: The idea here is how can I run the business smarter,
Speaker 12: more efficiently with better predictability so that I can generate
Speaker 12: those business outcomes. And when I look at it from
Speaker 12: that lens, it is quite quite interesting the question, because
Speaker 12: the question self is an.
Speaker 13: Answer, right.
Speaker 12: I mean, you won't get you always have the same pie.
Speaker 12: You'll just have to debat up in ways that that
Speaker 12: that will add generate value for business.
Speaker 6: When we're looking about AI, this is obviously such a
Speaker 6: rapidly evolving space. I would love to hear suba some
Speaker 6: of the biggest lessons and takeaways that you had from
Speaker 6: twenty twenty three and how you're going to bring that
Speaker 6: into the new year.
Speaker 13: Specifically around Jenny I.
Speaker 12: Our biggest learning has been that and it's been a
Speaker 12: good learning, which is experiment fast and move fast. This
Speaker 12: space is evolving rapidly. The number of technology startups that
Speaker 12: we are investing at Whippro. We have venure arm and
Speaker 12: we also do significant amount of work with startups because
Speaker 12: that is how we create this robust ecosystem that will
Speaker 12: then offer the right solutions for our customer problems. We
Speaker 12: are we were very very rapid in terms of investments.
Speaker 12: We announced a billion dollar investment for our firm in summer.
Speaker 13: And the idea here.
Speaker 12: Is you invest fast, fail fast, learn from it. And
Speaker 12: what is fascinating to us is because of our investments
Speaker 12: early on, patterns are beginning to emerge. We understand that middleware,
Speaker 12: as an example, in this space, is going to be
Speaker 12: an explosive opportunity in twenty four and twenty five.
Speaker 13: It is a very evolving space. How what does a stack?
Speaker 12: How what kind of stack would emerge out of gen
Speaker 12: AIH the middle tier, middlewars are It's going to be fascinating.
Speaker 12: There will be new startups and new companies born out
Speaker 12: of it with rapid adoption. And those patterns have to
Speaker 12: be recognized early on. And the only way you can
Speaker 12: do that is by experimenting and failing fast and making
Speaker 12: sure that you're able to invest at the right time.
Speaker 2: So, but talk to us about the risk here associated
Speaker 2: with AI. You know, whether it's just data security, privacy,
Speaker 2: all those issues.
Speaker 4: How do you guys think about that?
Speaker 3: Now?
Speaker 12: We are a very responsible company. In fact, the very
Speaker 12: first tenant when we announce this investment is responsiblely I
Speaker 12: framework and I see this as two sides of two
Speaker 12: sort of a coin responsible and and innovation. I think
Speaker 12: it's going to be interesting in the next few months
Speaker 12: and years. And obviously we all heard about what the
Speaker 12: US come and sign in terms of responsibili framework and
Speaker 12: in terms of privacy and other other implications. I think
Speaker 12: more regulations will emerge, but we specifically here we are
Speaker 12: taking a proactive action, sort of proactive decision in terms
Speaker 12: of how we want to develop, adopt, and productionalize, operationalize
Speaker 12: GENEI based applications. I think this is going to be
Speaker 12: more regulated into the future because it is I could
Speaker 12: on data and privacy, for instance, what kind of data
Speaker 12: sets was the model trained on? How what is water marking,
Speaker 12: you know, how does it manifest itself? How do you
Speaker 12: ensure that the output from gender to AI when water marked?
Speaker 12: What are the commercial commercial ways of monetizing or sorry, basically,
Speaker 12: how do you monetize? So all these patterns will begin
Speaker 12: to emerge in the next three to six months, and
Speaker 12: I feel that regulation is catching up in this case.
Speaker 12: This is the first time I've seen regulation catching up
Speaker 12: somewhat faster than in the past in other technologies, and
Speaker 12: I think I think it'll it'll be interesting to see
Speaker 12: how the industry then shifts to accommodate those regulations and.
Speaker 13: Policy changes.
Speaker 6: So last one here real quickly, Suba, so whippro really
Speaker 6: big company. You guys have got two hundred and forty
Speaker 6: five thousand employees based out of India. Tell us what
Speaker 6: the AI adoption is like over there.
Speaker 13: We are in AI first company.
Speaker 12: We are bound to be air plus company because we
Speaker 12: play in the technology space. You're right, two one ff
Speaker 12: three thousand employees primarily based out of India, but also worldwide.
Speaker 13: We are a global company and the very first.
Speaker 12: Thing we ended up doing was to make sure that
Speaker 12: we build our own internal Genera to AI platform from
Speaker 12: various use cases.
Speaker 13: We are slated to have all our two and fifty.
Speaker 12: Thousand employees on the platform in the next couple of
Speaker 12: months as we roll out various use cases. We're also
Speaker 12: again very very acted in Genera DVII training, so we
Speaker 12: have we are in the process of training all the
Speaker 12: two and fifty thousand employees into in general and responsible AI.
Speaker 4: Yes, all right, so, but thank you so much for
Speaker 4: joining us. Really appreciate you taking the time.
Speaker 2: Fascinating story, they're fascinating discussions subaut Tatavardi, chief technology officer
Speaker 2: for whippro.
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