Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
Speaker 2: weekdays at ten am Eastern on Affo, Cardplay and Android
Speaker 2: Auto with the Bloomberg Business App. Listen on demand wherever
Speaker 2: you get your podcasts, or watch us live on YouTube.
Speaker 3: Get back to the markets here.
Speaker 4: The big economic news of the day was the retail sales,
Speaker 4: and they generally came out I think across the board
Speaker 4: stronger than expected. The headline zero point four percent, consensus
Speaker 4: was zero point three for growth and zero point one
Speaker 4: percent last period, so big pick up there. When you
Speaker 4: look at the control group, perhaps even more impressive zero
Speaker 4: point seven percent gain versus zero point three percent forecast
Speaker 4: and last month was zero point three percent, So again
Speaker 4: pretty strong across the board. Let's see what it means
Speaker 4: to some of the folks who really follow the retail
Speaker 4: business closely, as does our next guest, Mary Shore, Senior
Speaker 4: Equity anams A Columbia thread Needle, joining us from Boston
Speaker 4: via Zoom. So, Mary, just to my untrained eye, these
Speaker 4: retail sales numbers look pretty good. What do you think
Speaker 4: and what are you seeing in the retail space these days?
Speaker 5: Yes?
Speaker 6: Thanks, for having me back. I think you're right.
Speaker 7: The strong September retail sales print confirms that the consumer
Speaker 7: is in good shape amidst a relatively strong jobs and
Speaker 7: income backdrop. To your point, there may have been some
Speaker 7: benefit this month from pre hurricane stock up behavior, but
Speaker 7: overall the growth remains very healthy, as we've been talking
Speaker 7: about for some time now.
Speaker 6: However, when you.
Speaker 7: Dig deeper, you continue to see pockets of strength and weakness.
Speaker 6: So areas of strength.
Speaker 7: That I would highlight would be food, health and wellness,
Speaker 7: clothing and value, which I think is really incorporated in
Speaker 7: that general merchandise category. And then some areas of weakness
Speaker 7: to call out would be autos and some of the
Speaker 7: bigger ticket categories that we're strong during the pandemic, like
Speaker 7: furniture and electronics. So when I look at the data,
Speaker 7: I think it shows the consumers in good shape, and
Speaker 7: it really is a continuation of a lot of the
Speaker 7: trends that we've discussed in prior episodes.
Speaker 8: It's interesting. I mean, obviously this data does show that
Speaker 8: the consumer is in a good spot, but of course
Speaker 8: people are still complaining of this intensely high inflation. How
Speaker 8: do you think that this really fits into the broader
Speaker 8: economy and as we think about things moving forward, well,
Speaker 8: I think.
Speaker 7: It's exactly what we're seeing in the data. We're very
Speaker 7: high level, we see low single digit growth, But then again,
Speaker 7: when you dig a little deeper, you see services growing
Speaker 7: faster than goods, and within goods, you see needs growing
Speaker 7: faster than once. And so to your point, the inflation
Speaker 7: that we've seen in food and housing in particular really
Speaker 7: continues to weigh on consumer discretionary spend on goods, and
Speaker 7: I think that is a real key reason for some
Speaker 7: of the continued weakness in some of those bigger ticket
Speaker 7: categories that I just highlighted.
Speaker 3: Mary, what are the retailers that you cover?
Speaker 4: What are they saying about the holiday Christmas season coming
Speaker 4: up such a big part of their annual sales?
Speaker 7: Yes, I think you know, as always they're cautiously optimistic.
Speaker 7: You know, they're optimistic by nature, but given the macro backdrop,
Speaker 7: I think everyone is planning their business very conservatively. They
Speaker 7: were being disciplined on inventory. I expect promotions to be
Speaker 7: very well controlled for that reason. But overall, I do
Speaker 7: think it will be a strong holiday. What we've seen
Speaker 7: this year is that during key events, the consumer does
Speaker 7: come out and shop, so I think, you know, we
Speaker 7: will see real strength over Black Friday and the week
Speaker 7: before Christmas, and probably a lull in between those two
Speaker 7: shopping periods as we've seen in the past. So overall,
Speaker 7: I would expect a strong season, but still a little
Speaker 7: lumpy when you're looking week by week.
Speaker 8: So Mary, talk to me about the sentiment as we're
Speaker 8: thinking about things heading into this election. Of course, we're
Speaker 8: less than a month away. How are consumers thinking about
Speaker 8: this and businesses as well?
Speaker 7: Right well, I think whether it's the election or the
Speaker 7: direction of gas prices, what most of the companies that
Speaker 7: I talk to say is it's really the uncertainty which
Speaker 7: is more paralyzing for the consumer. So I would definitely
Speaker 7: expect some noise, you know, right heading into the election.
Speaker 7: But either way, I think that the results of the
Speaker 7: election will provide that certainty to the consumer and probably
Speaker 7: boost consumer sentiment going forward. I think what it means
Speaker 7: for the companies could be more mixed, Like if Trump
Speaker 7: does continue talking about his tariff policy, then you know,
Speaker 7: that could be an overhang on some of the retailers
Speaker 7: that import from overseas.
Speaker 6: But I think overall, just the results of the election.
Speaker 7: In gaining that uncertainty will be a positive thing for
Speaker 7: consumer sentiment going forward.
Speaker 4: All right, this Christmas shopping season, how promotional will the
Speaker 4: retailers be? I know that goes right to their profit margin,
Speaker 4: but how do you think that's going to shake out?
Speaker 7: Yeah, you know, we talk a lot about promotions versus markdowns.
Speaker 7: You know, the retailers know they have to be promotional
Speaker 7: to drive traffic, and so I think you should expect
Speaker 7: to see controlled promotions. So what I mean by that is,
Speaker 7: you know, promotions more in say the thirty percent range,
Speaker 7: and given that inventory is well controlled, I think the
Speaker 7: retailers will try to stick to that plan for as
Speaker 7: long as possible. I would not expect to see promotions
Speaker 7: in like the seventy percent range and markdowns, and that's
Speaker 7: typically what you see when the sales are a lot
Speaker 7: weaker than planned or the inventory is a lot heavier
Speaker 7: than planned. And I don't really expect either of those
Speaker 7: things this holiday. So you'll still see those headline promotions,
Speaker 7: but you have to remember that the retailers have planned
Speaker 7: for those they bought into them, and so there's really
Speaker 7: no negative margin implication from some of those headlines.
Speaker 8: Well, we think historically and then moving into this year,
Speaker 8: how do consumers really think about the holidays when we're
Speaker 8: thinking in this season, is it everyone's just going to
Speaker 8: throw everything on their credit card because we have the
Speaker 8: holiday cheer? Or do you think they're really going to
Speaker 8: be targeting those companies that are those stores that are
Speaker 8: offering promotions specifically.
Speaker 6: It's a great question.
Speaker 7: I mean, I think we do see the consumer come
Speaker 7: out and spend around key events, and you know, especially
Speaker 7: in a year that could be tough, you're feeling the
Speaker 7: pinch of inflation, every consumer wants to bring a little
Speaker 7: cheer around the holidays. So I do expect that they
Speaker 7: will be out in the market. Having said that, I
Speaker 7: think they're still going to be very discerning, very focused
Speaker 7: on value, and I would expect a lot of the
Speaker 7: value players, as I mentioned in that general merchandise category
Speaker 7: to be the key beneficiary.
Speaker 3: All Right, Mari, thank you so much for joining us.
Speaker 4: Mary Sure Senior ecuadanams a Columbia Thread Needle Investments up
Speaker 4: in Boston, always helping us out talking about retail sales.
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
Speaker 2: weekdays at ten am Eastern on Applecar Play and Android
Speaker 2: Otto with the Bloomberg Business. You can also listen live
Speaker 2: on Amazon Alexa from our flagship New York station. Just
Speaker 2: say Alexa play Bloomberg eleven thirty.
Speaker 3: Let's switch gears.
Speaker 4: Let's get back to the markets here technology in the
Speaker 4: play here yesterday, I think it was me who said
Speaker 4: I think I've seen the top of AI.
Speaker 3: I think some of these chip.
Speaker 4: Companies are going to roll over and blah blah blah blah.
Speaker 4: Well then Taiwan Semiconductor comes out with a better than
Speaker 4: forecasted outlook. So once again I was proven wrong, particularly
Speaker 4: it relates to technology.
Speaker 3: I don't know what's going on.
Speaker 4: How do you feel about that? How do I feel
Speaker 4: about that? It lasted all of like twenty four hours?
Speaker 4: My great call there, Man Deep Sing he's the extra,
Speaker 4: He's the one we go to. Man Deep Sying, he's
Speaker 4: the tech ANAMST for Bloomberg Intelligence. So Mandy talks about
Speaker 4: Taiwan Semi Contector. A lot of our listeners, a lot
Speaker 4: of reviewers not really familiar with it. Tell us about
Speaker 4: what this company does and kind of what they announced recently.
Speaker 9: I mean, basically, they are the manufacturing factory for all
Speaker 9: your AI chips, all the chips that go into smartphones,
Speaker 9: and basically they are at the leading edge of manufacturing.
Speaker 9: When people talk about you know chips, the most powerful
Speaker 9: AI chips with the most transistors, they are the ones
Speaker 9: who are manufacturing it. And look, I think it was
Speaker 9: quite a contrast between the ASML print and the TSMC print,
Speaker 9: and what it shows you is the AI side continues
Speaker 9: to be strong. In fact, they called out smartphones being
Speaker 9: as strong in market as well uh in the print.
Speaker 9: So clearly the top two segments for them are working
Speaker 9: quite well and they have more demand than they can manufacture.
Speaker 9: These chips for Nvidia and Apple, those are their you know,
Speaker 9: top customers, and they're raising their capex guide. So one
Speaker 9: of the concerns was will TSMC raise their capex guide
Speaker 9: given what we heard from a SML, Well, guess what,
Speaker 9: they are raising their capex guide. So a SML's woes
Speaker 9: were really driven by Intel pairing back and Samsung pairing back.
Speaker 9: But when it comes to TSMC, they continue to be strong,
Speaker 9: all right.
Speaker 4: So Taimewan Semiconductor does a trade in US or eighty
Speaker 4: rs in US.
Speaker 3: The ADRs are the ADRs trade in.
Speaker 4: US t SM as your tickle put InChI. Bloomberg Terminal
Speaker 4: stock is up eleven percent today, up one hundred percent
Speaker 4: year to date. This isn't a penny stock. This has
Speaker 4: a market cap of over one trillion dollars. My ignorance
Speaker 4: level on this is out of control. I mean, I
Speaker 4: just didn't know they were that big.
Speaker 8: I know, when we're compute, the number's two big.
Speaker 3: No, it's too big.
Speaker 4: That's why we need man deep sink. So anyway, big
Speaker 4: company folks. Giving a positive outlook on the chip business
Speaker 4: really important for overall tech discussion about AI.
Speaker 8: So talk to us about the outlook right now? What
Speaker 8: are expectations when we think about the tech sector more broadly?
Speaker 8: I know earnings people have a pretty low bar, so
Speaker 8: if companies are doing well, it'll be a really great,
Speaker 8: you know, great news coming out of that. How is
Speaker 8: the tech sector when we're looking at AI specifically, what
Speaker 8: are expectations right now? I know the bar tends to
Speaker 8: be relatively high.
Speaker 9: I mean, I don't know if the bar is low
Speaker 9: at this point, given what we saw with THEML ASML
Speaker 9: was the case of expectations being too high and they
Speaker 9: guide it to that. And now they come out, you know,
Speaker 9: this quarter and say we are taking down bookings by
Speaker 9: fifty percent. So clearly expectations were high. It was the
Speaker 9: management who said it, and now they took back their guide.
Speaker 9: In the case of if I think in Video or
Speaker 9: some of the other bellveather for AI, look, we've been
Speaker 9: hearing that the demand for their latest chip continues to
Speaker 9: be strong. The TSMC print is another validation that you know,
Speaker 9: they are ramping up the AI side. It's almost mid
Speaker 9: teens of their revenue. This was almost a zero billion,
Speaker 9: a zero a dollar revenue for TSMC a few quarters back.
Speaker 9: So in just the span of three four quarters, it's
Speaker 9: mid teens of their revenue. That just goes to show
Speaker 9: along with the margin expansion, the gross margin growing to
Speaker 9: fifty eight percent. I mean, all this is positive for
Speaker 9: AI and you know for bell Weathers like Nvidia at
Speaker 9: the same time, this will drive up the expectations even further.
Speaker 9: So you know, the bar keeps getting higher, and at
Speaker 9: some point I think you will have missus like what
Speaker 9: we saw with the SML, but probably not that soon
Speaker 9: for the likes of Invidia.
Speaker 4: So thirty secondsleft, who are the top two or three
Speaker 4: or four buyers of these chips. Is it the Microsoft's
Speaker 4: and the Googles of the world.
Speaker 9: I mean, in the case of TSMC, the top buyer
Speaker 9: is still Apple. Okay, so that validates that smartphone to
Speaker 9: refresh that everyone is waiting for that segment. Did well.
Speaker 9: The inventory is building up, and then Nvidia and and
Speaker 9: Nvidia continues to become a bigger buyer of tsmcs. And
Speaker 9: then you have got AMD and some others. But pretty
Speaker 9: much every fabulous design company, whether it's AMD, Qualcomm and VideA,
Speaker 9: goes to TSMC for you know, manufacturing their chips because
Speaker 9: they have a leading node monopoly. I mean, everyone else
Speaker 9: is way behind when it comes to.
Speaker 4: Son Go to Taiwan and see Taiwan and see them
Speaker 4: make chips.
Speaker 9: Yeah, you should visit one of their factories, the one
Speaker 9: in Arizona though.
Speaker 3: Yeah, they're gonna do one in Arizona. Yeah, okay, that's
Speaker 3: cool too. All right, Mandy, thank you very much again.
Speaker 4: As always, he is our absolute goat to persons for
Speaker 4: all things technology. Senior Technology aannels. He runs all of
Speaker 4: our tech practice at Bloomberg Intelligence, and we appreciate getting
Speaker 4: his time because he's only a floor away.
Speaker 3: It's not like a big ass. We love that, and
Speaker 3: you walk.
Speaker 4: Up the stairs and talk to us on Bloomberg Radio,
Speaker 4: man Deep singing.
Speaker 2: There, you're listening to the Bloomberg Intelligence Podcast. Catch us
Speaker 2: live weekdays at ten am Eastern on Apple car Playing
Speaker 2: and broud Otto with the Bloomberg Business app. Listen on
Speaker 2: demand wherever you get your podcasts, or watch us live
Speaker 2: on YouTube.
Speaker 4: I don't know, did retail sales today nor better than expected?
Speaker 4: Maybe maybe the FED doesn't have to cut in November.
Speaker 4: And if they don't, is that okay? I don't know
Speaker 4: the markets are creating car here. It looks like it's
Speaker 4: kind of okay. Let's talk to somebody who's actually has
Speaker 4: a professional here on this whole thing.
Speaker 3: David Kodluck. He's a founder, he's a chief executive officer.
Speaker 4: And he's a chief investment strategist. I think that means
Speaker 4: he's the boss.
Speaker 8: It sounds like it.
Speaker 4: That's right, mainstay a capital management from one of my
Speaker 4: favorite little towns out there in the Midwest, Troy, Michigan.
Speaker 3: I've been to Troy, Michigan. Cool little town, David.
Speaker 4: So you get a retail sales number today that's better
Speaker 4: and expected, you get some still a pretty strong labor market.
Speaker 4: Is this a FED that has to cut and if
Speaker 4: they don't have to cut in November.
Speaker 3: Is that okay?
Speaker 10: Good morning, Paul and Nora. I think it's a FED
Speaker 10: that will continue to cut. They'll continue to ease because
Speaker 10: monetary policy is more restrictive than it needs to be.
Speaker 11: Inflation has come down there.
Speaker 10: I know there's fears that we could see a resurgence
Speaker 10: of inflation here yet this year into next year, but
Speaker 10: inflation has come down and is drifting towards target. Certainly
Speaker 10: it is in Europe the ECB cut last night. The
Speaker 10: key here is that when we look at the economy
Speaker 10: and say, I think it's you know, what's interesting is
Speaker 10: do they need to cut for a recession? No, those
Speaker 10: that have been calling for a recession for the last
Speaker 10: two years have been dead.
Speaker 11: We're wrong.
Speaker 10: We've kind of mocked this by my phrase the recession
Speaker 10: is always six months away. That have actually been saying
Speaker 10: for two and a half years now. And yeah, retail
Speaker 10: sales came in above expectations, four tenths a month over
Speaker 10: month versus three tenths.
Speaker 11: We've got strong.
Speaker 10: GDP Atlanta gb GDP now forecast above three percent, uh,
Speaker 10: labors hanging in there, and so we've I always I
Speaker 10: always am careful to use the word goldilocks economy, but
Speaker 10: we sure, you know, if there's if there's such a
Speaker 10: thing as a Goldilocks economy, we're sure close to it
Speaker 10: right now. And the Fed does have the ability to
Speaker 10: continue to ease as other central banks are around the world,
Speaker 10: just because you know, we we don't uh, we're in
Speaker 10: that sweet spot where they can make monetary policy a
Speaker 10: little less restrictive.
Speaker 8: So tell me, David, which economic data is most paramount
Speaker 8: right now. I know we've always had our eyes on inflation,
Speaker 8: but it seems as though attention is really shifting toward
Speaker 8: employment data as being more important right now. What's your
Speaker 8: look your out look on that?
Speaker 11: Yeah, that, Nora and I agree.
Speaker 10: It's really it's this, when we look at employment or
Speaker 10: labor versus inflation. You know, where are we and we
Speaker 10: see inflation drifting down? We think that's becoming a more
Speaker 10: non existent problem. We keep getting mixed data on labor.
Speaker 10: You know, there was some screwy numbers in the back
Speaker 10: months that had to be revised. But you know, if
Speaker 10: we if we we want to keep an eye on labor.
Speaker 10: We want to keep an eye on the consumer being
Speaker 10: two thirds of our economy, so we need labor to
Speaker 10: stay strong enough but not too strong and not get
Speaker 10: weak enough that they're cutting, you know, for the reasons
Speaker 10: we don't want, which is the fear of a recession.
Speaker 10: And we think the you know that the fears of
Speaker 10: a recession, you know, they're just there's anecdotal data there.
Speaker 10: You know, what's happening with car loan delinquencies, personal debt,
Speaker 10: credit card debt.
Speaker 11: There's that anecdotal data.
Speaker 10: But when we look at GDP, we look at labor,
Speaker 10: we look at inflation, we look at retail salesman. You know,
Speaker 10: we've we've got when we look at the macro numbers,
Speaker 10: we've got an economy that keeps chugging along, and correspondingly,
Speaker 10: a stock market that keeps chugging along.
Speaker 11: Again.
Speaker 10: The people that have called for a bear market anytime
Speaker 10: over the last two years, they weren't early. They were
Speaker 10: just wrong, dead wrong. And you know, we're still constructive
Speaker 10: on stocks. It always looks prudent, right, It always looks
Speaker 10: prudent or smart to say a recession is right around
Speaker 10: the corner, or bear markets right around the corner. But
Speaker 10: it's key to these people that have been saying this
Speaker 10: for so long they're dead just been wrong.
Speaker 8: So David, how are you advising your clients now versus
Speaker 8: maybe this time last year?
Speaker 10: We're you know, all that said, we're always concerned about
Speaker 10: when when the next shoe will drop or you know,
Speaker 10: when when the first shoe will drop or the next
Speaker 10: shoe will drop.
Speaker 11: We are concerned about that.
Speaker 10: So that's why we're keeping an eye on the data
Speaker 10: that were talking about here on does it is inflation
Speaker 10: on a glide path down to the.
Speaker 11: Fence target we believe it is.
Speaker 10: Is you know, uh, do we still have though a
Speaker 10: robust economy or we headed towards recession?
Speaker 11: We don't think so. So Uh.
Speaker 10: We continue to be very constructive on the markets. We're
Speaker 10: over overweight equities. We've changed our term structure on our
Speaker 10: bond holding somewhat. We were last year in the first
Speaker 10: part of this year on the shortest end of the curve,
Speaker 10: just capturing yield, uh, rather than any kind of interest
Speaker 10: rate player anything else. Because duration has worked against you, uh,
Speaker 10: we think there's an opportunity over the next year that
Speaker 10: duration will help you. You can get that capital appreciation
Speaker 10: combined with the yield on your stocks, clip the coupon
Speaker 10: and enjoy some capital appreciation. But I think my strongest
Speaker 10: recommendation is, uh, you know, these all the naysayers, all
Speaker 10: the doomsayers, the pundits that are you know, collapses eminet. Look,
Speaker 10: they've been wrong, and so we're very constructive on the markets.
Speaker 10: We're bullish on the market's near term. We have an
Speaker 10: election coming that we'll get out of the way, so
Speaker 10: that removes some uncertainty. And we're heading into the seasonal
Speaker 10: period that's strong for stocks from November through April. So
Speaker 10: you know, there's a lot of economic seasonality and other
Speaker 10: factors that are good tailwinds for equities right now.
Speaker 4: David, you mentioned the election nineteen days I think coming
Speaker 4: up or very close here.
Speaker 3: What do you tell your clients about it?
Speaker 4: I mean, is there any way to election proof of
Speaker 4: portfolio or don't worry about it?
Speaker 10: Well, unfortunately, and not our clients, because we educate our
Speaker 10: clients about this a lot every election cycle. Don't election
Speaker 10: proof it by going to cash. That's the worst mistake
Speaker 10: that investors make because look at this, look at this
Speaker 10: election like others, how polarizing, you know, between the two candidates.
Speaker 10: You know, if so and so gets elected, we're going
Speaker 10: to heck in a handbasket in the same thing for
Speaker 10: the other candidate.
Speaker 11: And there's all this.
Speaker 10: The reality of it is is the biggest factor for
Speaker 10: the market is uncertainty. Markets had uncertainty that will be
Speaker 10: determined here in three weeks. So the key is don't
Speaker 10: go to cash, stay invested in the market and as
Speaker 10: we see who it looks like will be what administration
Speaker 10: will be in office here in a few months, that's
Speaker 10: where that's where we want to be tactically moving our
Speaker 10: portfolios to worst mistake is to go to cash. And look,
Speaker 10: this year is a perfect example. We have the best
Speaker 10: election year through today for the markets that we've had
Speaker 10: since the nineteen thirties. That's how good this year is.
Speaker 10: It is not the time to be to go to cash,
Speaker 10: to wait on the sidelines until you see how it
Speaker 10: comes out. Right, So it's looking at where what do
Speaker 10: you expect with the candidate that will win, tactically allocating
Speaker 10: your portfolio.
Speaker 11: For that and stay invested.
Speaker 4: Yep, excellent stuff as always David Coodley, he's a founder,
Speaker 4: chief executive officer in Chief Investment strategist at Mainstay Capital Management,
Speaker 4: and David and his team are ranked in the top
Speaker 4: ten on Baron's Top one hundred Independent Financial Advisors in
Speaker 4: twenty twenty four. So we appreciate getting a few minutes
Speaker 4: at this time.
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
Speaker 2: weekdays at ten am Eastern on applecar Play and Android
Speaker 2: Auto with the Bloomberg Business App. You can also listen
Speaker 2: live on Amazon Alexa from our flagship New York station,
Speaker 2: Just Say Alexa playing Bloomberg eleven thirty.
Speaker 3: Let's go to a really good story I today. I
Speaker 3: mean Blackstone.
Speaker 4: You know they got like aa jillion dollars under management
Speaker 4: to Stock. They put up some good numbers recently, just today,
Speaker 4: stock up five percent today, up twenty eight percent.
Speaker 3: Year to date, fifty two week high.
Speaker 4: Some phenomenal performance coming out of the good folks at Blackstone.
Speaker 4: I want to break it down, and we do that
Speaker 4: with Paul Goldberg. He's Bloomberg Intelligence senior equity analyst. Paul,
Speaker 4: what is Blackstone and why and how are they executing
Speaker 4: so well? Just tell us what Blackstone is in your mind,
Speaker 4: and then what are they doing so well? Hi?
Speaker 3: Paul?
Speaker 12: Thank you for having me. Blackstone called themselves a juggernaut
Speaker 12: this morning, and they called in a press release themselves
Speaker 12: as sort of being a benchmark for the alternatives industry.
Speaker 12: They are in private equity, private credit, really one of
Speaker 12: the big private real estate investors. So all these businesses are,
Speaker 12: some of them doing really well, some of them are
Speaker 12: recovering from the kind of a lull in the last
Speaker 12: two years, and it's growing. They reached to one point
Speaker 12: one trillion dollars. So that's the largest alternative manager out there.
Speaker 8: Let's talk a bit of real estate. Of course, I
Speaker 8: view them as a bell whether I'm actually a US
Speaker 8: real estate stocks reporter, I'm curious how are people viewing
Speaker 8: Blackstone and a lot of its deals recently. Are we
Speaker 8: seeing more activity happening in that sector specifically?
Speaker 12: There it is, and they very specifically alluded to it.
Speaker 12: They made a few very large ten billion plus deals
Speaker 12: this year. They see in the bottom and the real
Speaker 12: estate cycle. They also, I've seen private is being a
Speaker 12: bit more aeriosyncratic than the public markets. So it doesn't
Speaker 12: move necessarily in tend them. But as long as they
Speaker 12: see the bottom, as long as they are seeing a
Speaker 12: lower interest rate, trajectory that should be supportive in the
Speaker 12: real estate space. The other thing is their real estate
Speaker 12: is quite unique, right, So when we talk about real
Speaker 12: estate and especially commercial, a lot of people think about
Speaker 12: offices and these kinds of things. For them, it's mostly
Speaker 12: data centers, infrastructure kind of real estate, multifamily, so different business.
Speaker 12: And in the data centers they have over seventy billion
Speaker 12: dollars of their one point one trillion just sitting in
Speaker 12: those data centers.
Speaker 4: And I like to just take a look when I
Speaker 4: look at Blackstone. Stephen Schwartzman, the just the total Wall
Speaker 4: Street mobilis seventy seven years of age, co founder of Blackstone.
Speaker 4: He's got a net worth today fifty one point eight
Speaker 4: billion dollars.
Speaker 11: That's puts them on.
Speaker 4: Number twenty four in the Bloomberg's Rich List. Credit to
Speaker 4: talk to us about the credit business. Private credit business
Speaker 4: got about thirty seconds in upon.
Speaker 12: Us all about the credit. This quarter was led by
Speaker 12: credit forty billion of inflows, twenty of them going into
Speaker 12: the credit. All the upside in fees and performance it
Speaker 12: was going through the credit and the growth of expectations
Speaker 12: a lot of it just in the credit as well,
Speaker 12: So very consistent with what we're hearing throughout the year
Speaker 12: and other managers as well.
Speaker 3: Paul, great stuff, Thank you so much for joining us.
Speaker 4: Paul Goldberg, Senior equityannas Bloomberg Intelligence giving us the latest
Speaker 4: on Blackstone.
Speaker 3: B X is the ticker symbol, folks, so check it out.
Speaker 3: Check out that chart. Just amazing.
Speaker 4: Bloomberg News is out the reporting here. Blackstone's credit arm
Speaker 4: is now its top business fueling profits.
Speaker 3: They're in private equity, private credit, real estate.
Speaker 4: So as Paul Goldberg was just saying, they are the
Speaker 4: biggest alternative asset manager out there. Just extraordinary. That's Blackstone
Speaker 4: and then there's black Rock. I mean, if these two
Speaker 4: were together like they were back in the day, I
Speaker 4: mean extraordinary. So just amazing. The private equity business continues,
Speaker 4: an alternative asset management business continues to be just one of,
Speaker 4: if not the best business on global Wall Street, and
Speaker 4: the Black Zone folks are at the top of that.
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
Speaker 2: weekdays at ten am Eastern on applecar Play and Android
Speaker 2: Auto with the Bloomberg Business app. You can also listen
Speaker 2: live on Amazon Alexa from our flagship New York station.
Speaker 2: Just say, Alexa playing Bloomberg eleven thirty.
Speaker 4: Bloma Limits sitting and for Alex steel on Paul Swiney
Speaker 4: live here in our Bloomberg Interrectied Brooker Studio, and we're
Speaker 4: streaming the video thing live on YouTube YouTube dot Com
Speaker 4: search Bloomberg Podcast. One of the topics that Alex and
Speaker 4: I and the folks here a Bloomberg intelligence like to
Speaker 4: really keep a close eye on is commercial real estate
Speaker 4: and its recovery from the pandemic. And our good friend
Speaker 4: Abigail Duottle, she's been very good at helping us hook
Speaker 4: up with some really smart people industry. Abigail doo Little
Speaker 4: joints us here today, chief market correspondent for Bloomberg News,
Speaker 4: and today she brings us Josh Ziegan, managing Princil, co
Speaker 4: founder at Madison Realty Capital. They're on BLO and Briginner
Speaker 4: Act the Broker Studio. Josh, we appreciate you coming in here. Abigail,
Speaker 4: Thanks once again, Josh.
Speaker 3: Commercial real estate.
Speaker 4: I think what I've learned is I don't ask the
Speaker 4: dumb question which I usually do, which hey, how's commercial
Speaker 4: real estate doing? Because there are so many different pieces
Speaker 4: of it. Where do you guys at Madison Real team
Speaker 4: focus and then how's your business?
Speaker 5: So we're focused on the real estate credit space. We
Speaker 5: started the company about twenty years ago. We've about twenty
Speaker 5: one billion of AUM and all ends of real estate credit.
Speaker 5: A lot of our business is focused on where the
Speaker 5: banks have not focused and we're dislocated post global financial
Speaker 5: crisis and even more so today post banking crisis that
Speaker 5: happened in twenty twenty three. So we've been providing capital,
Speaker 5: whether it's construction lending, transitional lending. We buy performing non
Speaker 5: performing loans, and today the market is a lot better
Speaker 5: than when I was on in the spring. There's definitely
Speaker 5: a sense of the want to do deals. The investment
Speaker 5: sales market has picked up given the rate drop that
Speaker 5: happened in September. A lot we're waiting on the sidelines
Speaker 5: just to see that happen. So mentally, there's this sense
Speaker 5: that things are starting to improve and capital markets are
Speaker 5: in a better place, albeit the banking sector has not
Speaker 5: come back in a big way.
Speaker 13: So you joined us in May, and at that time,
Speaker 13: I would say were one of the more bearish commercial
Speaker 13: real estate. I guess that we've been fortunate enough to
Speaker 13: interview and I view you relative to some of the
Speaker 13: other folks as really close to the banks or really
Speaker 13: close to the money. You were talking a lot about
Speaker 13: the banks and you said that we were in the
Speaker 13: early innings of this thing working out. How much has
Speaker 13: it changed since then with the FED cutting by fifty
Speaker 13: basis points.
Speaker 5: Well, I think what we've seen is in the spring,
Speaker 5: there was very very little activity investment sale market, and
Speaker 5: one of the problems was money was not going back
Speaker 5: to investors through that because no transactions were happening. So
Speaker 5: with rates dropping, I think what happened was that created
Speaker 5: some solutions for barwers who needed to delever, and that
Speaker 5: is in the form of preferred equities, some structured equity
Speaker 5: coming into deals. Today there's not only that solution available,
Speaker 5: but there's also commonect equity and you're starting to see
Speaker 5: more sales. Albeit the office sector is really struggling still.
Speaker 5: There's no liquidity in the office sector, and when you
Speaker 5: are seeing transaction that happen, capital is just tied up
Speaker 5: in the system because a lot of the sellers are
Speaker 5: holding financing banks are rolling over their debt. It's not
Speaker 5: just money back to investors, so that's tying up a
Speaker 5: lot of capital in the system.
Speaker 8: I cover US real estate from the equity side, A
Speaker 8: cover homebuilders and then also commercial real estate. I'm curious
Speaker 8: you mentioned office. I was recently working on a story
Speaker 8: that spoke about how we're seeing a bit of an
Speaker 8: uptake on Park Avenue. It's not as bad as it
Speaker 8: once was. As we think about vacancies, what areas are
Speaker 8: you seeing flourishing or doing better than they were before
Speaker 8: In the office space.
Speaker 5: Well, I think you're seeing sort of the haves and
Speaker 5: have nots in office. It's the best in a class
Speaker 5: office and then there's everyone else. And unfortunately, that best
Speaker 5: of a class office is very limited in New York City. Yeah,
Speaker 5: there's more buildings than a place like Austin, Texas or
Speaker 5: some other places, but it's limited. What I have seen
Speaker 5: in the office sector is much more leasing demand. So
Speaker 5: while the leasing demand and absorption is happening a much
Speaker 5: greater way, it still is challenging from a cap rate perspective.
Speaker 5: So you may have a one hundred percent office, one
Speaker 5: hundred percent lease office building, or ninety percent lease office building,
Speaker 5: but that cap rate as compared to twenty twenty one
Speaker 5: is very, very different, and so that's a change in
Speaker 5: valuation that investors are not able to stomach and in
Speaker 5: many cases can't get out of these deals today.
Speaker 4: Hey, Josh, just kind of before the pandemic. In mike
Speaker 4: Town in Jersey, they constructed a multi very nice, high end,
Speaker 4: multi multi unit residential thing and a big sign out front,
Speaker 4: financed by the local bank. If I go to build
Speaker 4: that same property today, is that look a bank going
Speaker 4: to be there for me?
Speaker 5: So it's a good question. So that bank generally is
Speaker 5: not there, and why because banks have a liquidity mismatch.
Speaker 5: They were committing long for a construction loan like that
Speaker 5: and borrowing short with deposits. So banks have been scrutinized
Speaker 5: even more so today from a regulatory standpoint. And so
Speaker 5: it was really bad post global financial crisis and became
Speaker 5: even greater from a regulatory standpoint post March twenty twenty three.
Speaker 5: So we're filling that void. We are doing a lot
Speaker 5: of construction lending, which is today a lot lower from
Speaker 5: a loan to cost standpoint than we had to provide
Speaker 5: in twenty twenty one before this banking crisis. So we're
Speaker 5: providing whole loans to that same Jersey developer to build
Speaker 5: a multifamily, and the good news for multifamily as specific
Speaker 5: in New Jersey and across the country is we have
Speaker 5: seen cap rates titan since the spring when I was
Speaker 5: on the show, by fifty to one hundred basis points,
Speaker 5: and a lot of that's a function of debt. I mean,
Speaker 5: when you look at debt with rates down today, long
Speaker 5: term rates are down and short term rates are down
Speaker 5: to some extent. One of the problems with construction lending
Speaker 5: and higher value add lending is you're borrowing short and
Speaker 5: so that's an issue. There still is not necessarily the
Speaker 5: appetite to build because of the cost of short term debt.
Speaker 9: You know.
Speaker 13: So picking up on Paul's question and picking up on
Speaker 13: what you just talked about with regulation, some of my
Speaker 13: sources have said that because it's an election, you're the
Speaker 13: regulators have actually been relatively lax and trust what you
Speaker 13: just said. But the idea, I guess my question is
Speaker 13: do you think that the regulation could even become tighter
Speaker 13: next year? And then at that point are we going
Speaker 13: to see more svbs? In other words, are we going
Speaker 13: to see some of these regional banks? Is they are
Speaker 13: more pain there in terms of blowing up our consolidation.
Speaker 5: I think it's a more politically oriented question in terms
Speaker 5: of the election, really who wins here, But no matter what,
Speaker 5: I so there's.
Speaker 13: A difference who wins.
Speaker 5: I think directionally you will see more consolidation, and a
Speaker 5: lot of that has to do with banks are upside
Speaker 5: down in terms of having long term loans that are
Speaker 5: at very low rates, and those aren't rolling off so
Speaker 5: quick and they're matched with liquidity that the bank has
Speaker 5: to pay the positor a lot more than they did
Speaker 5: in twenty twenty one when the loans were made. So
Speaker 5: I think you will see more consolidation in the banking sector.
Speaker 5: And oh so, I think you will see more consolidation.
Speaker 5: You start to see more of that already in this year,
Speaker 5: but you'll see more in years to come.
Speaker 13: Well, I just really want to pick up on that
Speaker 13: election thing though, because I haven't heard anybody say that
Speaker 13: it matters who wins. So were you making the point
Speaker 13: that if the former president Donald Trump wins, or if
Speaker 13: for or the current VP Harris if she wins, there's
Speaker 13: going to be a difference in regulation. And if there is,
Speaker 13: what does it look like.
Speaker 5: I mean, I can't speak to specifics, but there's a
Speaker 5: view that will be well, there'll be more regulatory pressure
Speaker 5: from regulators in a democratic significantly more can't comment really,
Speaker 5: you know, I don't know, but more you'll be more,
Speaker 5: all right, Josh, thanks so much for journey.
Speaker 3: Us really appreciate it.
Speaker 4: Jos Ziegen, Managing Principle, A co founder and Madison Realty
Speaker 4: Capital in Abco Dolittle, Chief Markets correspondent for Bloomberg News
Speaker 4: in our Bloomberg and aarct approp Pro studio, just kind
Speaker 4: of get the laid down on the real estate business.
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
Speaker 2: weekdays at ten am Eastern on applecar Play and Androyd
Speaker 2: Auto with the Bloomberg Business at You can also listen
Speaker 2: live on Amazon Alexa from our flagship New York station
Speaker 2: Just Say Alexa playing Bloomberg eleven thirty.
Speaker 4: Normal, Linda sitting in front Alex deal on Paul Sweeney.
Speaker 4: You're live here in our Bloomberg and an Actor Broker
Speaker 4: studio or streaming live on YouTube as well, So go
Speaker 4: check us out there. Just got back from a little
Speaker 4: one day corporate travel gig. Alex and I went down
Speaker 4: to the Hilton Head Island or down to Kiwa for
Speaker 4: a client event.
Speaker 3: Travel one. Fine, that's great.
Speaker 8: You were in United, right, what's you were on United?
Speaker 3: Down on Delta back on United? So both good?
Speaker 2: Oh?
Speaker 11: Good?
Speaker 3: Packed?
Speaker 4: I don't know the place was packed. I think people
Speaker 4: are back out there traveling again. Here and my thing
Speaker 4: on travel, I only travel. Somebody pays me to travel
Speaker 4: as you should.
Speaker 3: I'm just like I like that philosophy.
Speaker 4: Exist anyway, I've been pretty much everywhere you need to go.
Speaker 4: I think James Thornton joins us. He's a CEO of
Speaker 4: Intrepid Travel, joining us from London via Zoom. James talk
Speaker 4: to us about I love to get your perspective, just
Speaker 4: kind of as you look at maybe business travel. What
Speaker 4: are most companies doing in terms of business travel these
Speaker 4: days versus pre pandemic?
Speaker 3: Are we back to those levels? Will we get back
Speaker 3: to those levels? Where are we?
Speaker 1: Yeah, we're definitely back to the levels, Paul. I think
Speaker 1: there was a misconception during the pandemic that the business
Speaker 1: travel environment wouldn't recover and we'd all be stuck on
Speaker 1: zoom and be meeting remotely. But we're seeing that airplanes
Speaker 1: are full. Business travel, corporate travel clients are up.
Speaker 2: Year on year.
Speaker 1: Nothing beats being together face to face. So yeah, business
Speaker 1: travel is back and people are flying around a meeting again.
Speaker 8: So of course everyone likes to keep in mind the
Speaker 8: idea of limiting our carbon footprint. I'm curious, how are
Speaker 8: business companies, How are they thinking about this when we
Speaker 8: think about business travel, our companies being mindful or is
Speaker 8: ESG a buzzword that's been left in the past. How
Speaker 8: are we thinking about that now in twenty twenty four.
Speaker 1: Yeah, look, I think companies are becoming increasingly mindful about
Speaker 1: their carbon outputs, particularly when it comes to their staff travel,
Speaker 1: but also in the sense of the way in which
Speaker 1: customers are thinking about their right in theies too. At
Speaker 1: Intrepid Travel, we've reached launched carbon and labeled carbon labeling
Speaker 1: program on five hundred of our itineries around the world,
Speaker 1: and we display a number about the CO two emissions
Speaker 1: that come from our trips. Is a bit like a
Speaker 1: food label if you like, so customers can calculate how
Speaker 1: much carbon emissions per traveler come from their trip applications.
Speaker 1: So customer things be more interested in the carbon outputs
Speaker 1: of their traveling experiences.
Speaker 4: You know you mentioned I just completed I did a
Speaker 4: one on a tour of Ireland. Fantastic by the way,
Speaker 4: and the Irish love me of course being from there.
Speaker 4: But on the questionnaire afterwards, like how is the trip?
Speaker 4: And it was awesome, off the charts, and then they
Speaker 4: asked about the carbon footprint and I said, I could
Speaker 4: not care less. Can you please just let me have
Speaker 4: a vacation and just enjoy myself. But James, I think
Speaker 4: I'm into my minority. I think travelers more and more
Speaker 4: are thinking about the carbon footprint of the plane they take,
Speaker 4: the cruise ship they take. How does the industry adapt
Speaker 4: to that?
Speaker 5: Yeah?
Speaker 1: Absolutely, Paul. Look, I think there's two really important points here. One,
Speaker 1: it's critically important that people have great holiday experiences. You know,
Speaker 1: it's vitally important. We all go on holiday to relax,
Speaker 1: to enjoy ourselves, to have fun, to try the local
Speaker 1: food and enjoy a well aired break. But at the
Speaker 1: same point, we also want, as much as possible make
Speaker 1: sure that we're having a lighter impact upon the environment,
Speaker 1: and we're trying to benefit local communities as much as
Speaker 1: we possibly can. And that's why business is like in
Speaker 1: Prepid are putting carbon labeling onto our itineries so that
Speaker 1: customers can make more informed decision making choices. Absolutely, they
Speaker 1: want to have a great trip, but they also want
Speaker 1: to be aware about limiting the impact on the environment.
Speaker 8: And how are we thinking about this on an international scale.
Speaker 8: I'm thinking about Paul talking about this trip to Ireland,
Speaker 8: and I wonder if the US are we behind in
Speaker 8: some of these efforts to really limit that carbon footprint.
Speaker 8: How are you seeing this internationally?
Speaker 1: Yeah, look, I think Europe is certainly leading the way,
Speaker 1: both from a legislate but also consumer points of view,
Speaker 1: But I would say that the US is all stay
Speaker 1: catching up, and we're certainly seeing demand from customers that
Speaker 1: want to travel in a more sustainable, immersive way. Of course,
Speaker 1: they want to get out and they want to see
Speaker 1: the iconic sites, but they also want to try and
Speaker 1: make sure that their tourism dollars are staying within the
Speaker 1: local communities. And that's why we're seeing a real desire
Speaker 1: for people to travel on intrepid style of sustainable experience
Speaker 1: rich travel using different types of local transport, you staying
Speaker 1: in different types of local accommodation and really getting under
Speaker 1: the skin of a destination and hopefully having some amazing
Speaker 1: holiday experiences.
Speaker 3: So what are we seeing.
Speaker 4: Here, James about some of those experiential trips as you mentioned,
Speaker 4: and we saw that coming out of the pandemic. People,
Speaker 4: I guess during the pandemic they buy stuff and goods,
Speaker 4: but coming out of it, they wanted experiences. So they're
Speaker 4: not just going to the typical like what I would
Speaker 4: do is.
Speaker 3: Just go to a golf resort or beach resort.
Speaker 4: They're doing different things. What are some of the more
Speaker 4: popular tours that you guys do.
Speaker 5: Yeah.
Speaker 1: Absolutely, I think we're living in the experiences of economy. Well,
Speaker 1: people are desperate to get out, having been caught up
Speaker 1: at home during the course of the pandemic and travel
Speaker 1: being taken away as a right for people. They want
Speaker 1: to give back out and they want to see the
Speaker 1: iconic destinations. So we're seeing really big demand for destinations
Speaker 1: like a Japan for example. You know, great immersive destination
Speaker 1: where you can get out and you can have great
Speaker 1: food experiences, but it's a bit more challenging to travel
Speaker 1: around independently by yourself, and that's why using reliable tour
Speaker 1: operators like Intrepid is a great way to get out
Speaker 1: and see a destination. We're seeing Europe boom, particularly in
Speaker 1: the shoulder seasons, getting out of that kind of peak
Speaker 1: travel period of July and August when it's hot and
Speaker 1: it's stuffy and it's crowded. Seeing a lot of demand
Speaker 1: into Europe, particularly around those shoulder seasons of April May
Speaker 1: and also September October. It's a little bit cooler and
Speaker 1: the crowds are a little.
Speaker 8: Bit less, So James. From a legislative perspective, how are
Speaker 8: companies being held accountable? Of course there's a lot of
Speaker 8: business travel. We may fly out for one day and
Speaker 8: come back. There's a lot of things that are going
Speaker 8: on in that making that decision. All are businesses being
Speaker 8: held accountable for this?
Speaker 1: Yeah, at the moment they're not, Nora, I think businesses
Speaker 1: are they going to start to be held accountable for
Speaker 1: what they say. What we're not seeing quite yet is
Speaker 1: businesses being accountable for what they do. And so we're
Speaker 1: certainly seeing, particularly driven out of Europe legislation to ensure
Speaker 1: that companies are not greenwashing and they're advertising, and we
Speaker 1: think companies being picked up when they are making big,
Speaker 1: bold claims around being good for the environment, but people
Speaker 1: are jumping on planes. So not only is it about
Speaker 1: what people say in their advertising. Soon, we're going to
Speaker 1: see legislation come in terms of the actual actions of
Speaker 1: which companies are taking. And that's why I think it's
Speaker 1: important that all companies are trying to take proactive steps
Speaker 1: in terms of measuring their emissions, ideally offsetting their emissions,
Speaker 1: but ultimately moving towards trying to decarbonize their activities, no
Speaker 1: matter what industry they might be in.
Speaker 3: James, thanks so much for joining us.
Speaker 4: I really appreciate getting some of your thoughts there. James
Speaker 4: Thornton needs the CEO of Intrepid Travel, joining us via
Speaker 4: that zoom thing from London. Yeah, it took this my
Speaker 4: first when I went to Ireland. There's so many things
Speaker 4: you want to see. I've never taken like a tour before.
Speaker 4: Maybe I'm getting to an age or that's kind of
Speaker 4: what you do. I don't know, but there's so many
Speaker 4: things you want to see in like a place like
Speaker 4: Ireland that you have to do it that way, and
Speaker 4: we did. We saw everything, so I feel good about
Speaker 4: it and I'd recommend it.
Speaker 8: I was in Dublin back in April. Okay, first I'm
Speaker 8: going to Ireland. Didn't get to do the massive tour
Speaker 8: that I would have loved to do, but it's such
Speaker 8: a beautiful place it is.
Speaker 3: It was good.
Speaker 4: So we did, like Dublin up the Belfast over to
Speaker 4: darry so got the Northern Ireland experience too, and it
Speaker 4: is different from the Republic of Ireland still today. Then
Speaker 4: you come back down back into the Republic of Ireland
Speaker 4: into Westport and then Limericks so very cool. So hold
Speaker 4: the north half of the island. We'll do the southern
Speaker 4: half and again saw a couple of Sweeney as a
Speaker 4: matter of fact, went the mass at our family church
Speaker 4: in Belfast back from back in the day.
Speaker 3: So that was pretty cool. Ireland, good, good times.
Speaker 2: This is the Bloomberg Intelligence Podcast bull on Apples, Spotify
Speaker 2: and anywhere else you get your podcasts. Listen live each
Speaker 2: weekday ten am tonoon Eastern on Bloomberg dot Com, the
Speaker 2: iHeartRadio app, tune In, and the Bloomberg Business app. You
Speaker 2: can also watch us live every weekday on YouTube and
Speaker 2: always on the Bloomberg terminal.