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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. You're listening to the

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Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am

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Speaker 1: or watch us live on YouTube.

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Speaker 2: Cliff Cupchin, he's chairman of the Eurasia Group. Cliff, thanks

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Speaker 2: so much for joining us here again to speak with

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Speaker 2: the Ros Mathieson and Bloomberg News.

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Speaker 3: The latest news.

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Speaker 2: President Trump appears to be taking a little bit of

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Speaker 2: a pause here. How do you think this potentially could

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Speaker 2: pay out play out? There's a number of scenarios. I

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Speaker 2: know you've kind of kind of gamed out.

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Speaker 4: Most likely is there's talk for a week, ten days,

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Speaker 4: the Europeans lead the way, Aaron refuses to give up

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Speaker 4: domestic in Richmond, and the US takes out or tries

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Speaker 4: to take out. I think probably can take out the

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Speaker 4: flourido inrichment plant, which would you under a mountain? That

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Speaker 4: would be escalatory, dramatically escalatory, you big spike in oil.

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Speaker 4: There are other scenarios where I don't think you. I

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Speaker 4: don't think Iron would try to close the straight straight

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Speaker 4: of hor moves. We can come back to that other

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Speaker 4: scenarios where this does escalate and in even more in

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Speaker 4: response to the US right on floidoh or on tries

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Speaker 4: to tick out stop shipping through the straight of horm moves.

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Speaker 4: And then there's a small chance, maybe one in five

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Speaker 4: twenty percent, I think, is how game that out these

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Speaker 4: talks actually work. But it's a really kind of a

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Speaker 4: hail Mary, I think by all sides, because there's no

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Speaker 4: no size one escalate. But I think it's a really

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Speaker 4: a really small chance.

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Speaker 5: You know, Cliff, I've seen a lot of sort of

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Speaker 5: guess work and estimates regarding how many missiles that Iran

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Speaker 5: really has left in their stockpile. You know, they've used

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Speaker 5: a lot, a lot have been destroyed by the Israels.

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Speaker 5: Is it a possible scenario that in this two weeks

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Speaker 5: they that stockpile just runs so low that they are

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Speaker 5: unable to keep launching at Israel? And does you know,

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Speaker 5: is that enough to sort of bring the temperature down

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Speaker 5: on all of this?

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Speaker 4: I think the rate of missile salves from Iran is

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Speaker 4: already dropping. They are like any country would, I think,

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Speaker 4: and it keeps some in strategic reserve, and you know, No,

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Speaker 4: I don't know anybody knows, at least the unclassified world

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Speaker 4: exactly how many they have left. But I think they're

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Speaker 4: all already running low. I mean, iron just doesn't have

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Speaker 4: good options right now. We'll see if they you know,

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Speaker 4: hold to the hard line or which I think they will,

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Speaker 4: or if it actually you know, they run out of

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Speaker 4: resolve and they can see cliff.

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Speaker 2: Is regime change a policy or a strategy that Israel

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Speaker 2: end or the US should proceed, or if follow in

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Speaker 2: Iran set even on the table, do you think.

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Speaker 4: I don't think it's you know, verbally on the table.

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Speaker 4: I think that Trump doesn't want it. It's you know,

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Speaker 4: just stepping in too much. I think that Tamiyahu would

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Speaker 4: like it if the Iranian people rose up and it

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Speaker 4: diated what in his view is finishing finishing the job.

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Speaker 4: From a historical perspective, almost every time the US has

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Speaker 4: engaged in regime change, something unexpected happens and it doesn't

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Speaker 4: work out like we thought it would. Iraq is the

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Speaker 4: best example. When we tried to we did take down

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Speaker 4: sam Hussein, and we got we got a failed state.

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Speaker 4: So I don't think it's very good policy. I think

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Speaker 4: it's really risky policy. If you're Israel, you have a

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Speaker 4: chance to take down the dell right now. History's on

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Speaker 4: your side for the first time in decades. And I

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Speaker 4: think for these Raelis this is a period of maximum

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Speaker 4: baby of you know, the wins at our back and

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Speaker 4: this is a generational chance to takedown are you know

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Speaker 4: arch enemy? So tricky policy. I think Israel would like it,

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Speaker 4: may go for it. The US, No, no, it's not

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Speaker 4: what's on the table for drum.

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Speaker 5: You know, Cliff, you mentioned the strait of who is

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Speaker 5: like such an important part of global shipping and a

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Speaker 5: potential bottleneck there, and you said you don't think I.

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Speaker 3: Ran will try to shut that down. Why what makes

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Speaker 3: you think that.

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Speaker 4: It's a lose lose for them? They need to get

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Speaker 4: their oil out tremendously depending on a little revenues one

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Speaker 4: hundred percent chance the US comes into wear in a

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Speaker 4: major way, they probably get the golf armies, French, UK involved.

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Speaker 4: And you know, the writing leadership is smart and I've

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Speaker 4: been there in a while, but I used to go

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Speaker 4: a number of times. They're smart, they get it, and

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Speaker 4: I think they know they couldn't keep the straight open

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Speaker 4: for a long time.

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Speaker 6: They couldn't close it for a long time.

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Speaker 4: The thing I worry about is that when regimes get desperate,

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Speaker 4: they do irrational things. And if the US takes down Florid,

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Speaker 4: though and the nuclear assets Richmond are really blown up

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Speaker 4: across the board, the regime could get desperate and we

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Speaker 4: could see that would be interrational act. They could do that,

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Speaker 4: and that's what I fear the most. That's the scenario

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Speaker 4: that I fear most about, the straight and foremost.

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Speaker 2: Okay, Cliff, thank you so much for that. We appreciate

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Speaker 2: your perspective. Clip Chen, he is chairman e RAS, your

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Speaker 2: group joining us here to give us kind of gaming

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Speaker 2: out some of the options on base case kind of

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Speaker 2: a bad case and then maybe a stand down case

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Speaker 2: everybody just kind of goes back.

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Speaker 3: So lots of options out there.

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Speaker 2: The next seems to be the role that President Trump

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Speaker 2: decides that the US will play, if any, in any

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Speaker 2: future action. So we will have continued reporting on that.

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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on Apple, Coarclay and Android

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Speaker 2: When we talk about commercial real estate, I often make

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Speaker 2: the mistake of just thinking about commercial real estate offices

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Speaker 2: and stuff like that, when it's really it's a lot

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Speaker 2: more than just office. It's industrial, it's retail and multifamily,

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Speaker 2: all that kind of stuff, and each of those sub

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Speaker 2: sectors have different fundamentals driving it. So we'd like to

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Speaker 2: talk to some people who do this stuff.

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Speaker 3: For a living, who are experts.

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Speaker 2: Liz hard Joins is President Leasing North America at New March.

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Speaker 2: She's in Cali at the moment, Liz, in the broader

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Speaker 2: spectrum of commercial real estate, where do you guys see

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Speaker 2: maybe the best value these days?

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Speaker 7: Well, I think what's really interesting right now. I mean

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Speaker 7: the demand is really up, and that's the thing to

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Speaker 7: talk about first, and then we can talk about where

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Speaker 7: the value is created. So demand is up thirty percent

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Speaker 7: year over year on a national basis. That's tenants touring

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Speaker 7: the market and looking to expand. Of those tenants that

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Speaker 7: are touring, two thirds of them are looking for the

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Speaker 7: same or more space. And it's really shifted where in

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Speaker 7: the last quarter it went up by twenty percent. More

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Speaker 7: tenants that are looking to expand, and I think when

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Speaker 7: you see that kind of demand. Going back to your

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Speaker 7: question about value, you want to look at those markets

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Speaker 7: that have been a little bit more distressed but are

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Speaker 7: now starting to see tenants that are touring again, looking

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Speaker 7: for space and willing to commit to a longer term

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Speaker 7: home lis.

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Speaker 3: I wonder what explains that uptick in demand?

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Speaker 6: Is it?

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Speaker 5: You know, My guess is it's that era of the

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Speaker 5: work from home job is over.

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Speaker 3: Is that part of it?

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Speaker 7: That's certainly a part of it. But I think the

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Speaker 7: other part to talk about is the resurgence of the

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Speaker 7: tech sector. So during the you know, last five years,

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Speaker 7: tech went from being a pretty major player in demand

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Speaker 7: to being a little bit weaker. But now tech tenants

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Speaker 7: are back to being twenty percent of the overall demand,

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Speaker 7: just behind financial services as the top at twenty two percent.

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Speaker 7: So you're back to seeing tech back in the market,

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Speaker 7: and you're seeing, particularly out of the San Francisco and

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Speaker 7: New York markets, tech that's taking a lot more space

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Speaker 7: year over year. You're seeing that growth from AI companies,

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Speaker 7: So you know, no one talks about AI having less space,

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Speaker 7: but it's interesting that the AI companies seem to be

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Speaker 7: very committed to the office and being in person talk

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Speaker 7: to us.

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Speaker 3: About San Francisco.

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Speaker 2: That was a market that arguably a poster child for

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Speaker 2: you know, what can really go wrong in the post

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Speaker 2: COVID world on so many different levels.

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Speaker 3: What's your view of that market right now.

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Speaker 7: I'm feeling very good about the San Francisco market right now.

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Speaker 7: I mean it's always been a boombus market. That's something

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Speaker 7: that real estate investors have known for years. But what's

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Speaker 7: really positive again is we're seeing a couple things. First

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Speaker 7: of all, the demand at pre pandemic levels. Keep in mind,

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Speaker 7: right before the pandemic, there were two one million square

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Speaker 7: foot requirements that were there. Do we have those again? No,

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Speaker 7: we're not at a million square feed in big, big tenants.

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Speaker 7: We have some really good one hundred thousand square footers

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Speaker 7: that are out there, and we have a lot of

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Speaker 7: growth from companies that are under twenty thousand square feet

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Speaker 7: and in the tech industry, you know that's just a

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Speaker 7: couple more years until they grow again. So we're seeing

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Speaker 7: a lot of resiliency. We're also seeing great commitment from

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Speaker 7: companies that have been.

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Speaker 6: There for a long time.

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Speaker 7: JP Morgan just renewed their lease. Morgan Lewis just had

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Speaker 7: a big move into the Trans America pyramid. So those

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Speaker 7: are more traditional industries that are also committing to that market,

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Speaker 7: showing the resiliency across more than just the tech sector.

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Speaker 3: How about that retail sector.

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Speaker 5: I mean, it's obviously been under pressure for years now

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Speaker 5: with the shift to e commerce. Has that sort of

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Speaker 5: bottomed out to some degree? Is retail firming up at all?

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Speaker 7: Well? I think what's interesting and might laugh at this,

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Speaker 7: is you know, malls are back class A malls ninety

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Speaker 7: five percent occupied that smaller format high Street performing exceptionally well,

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Speaker 7: So we're excited about what we're seeing on that front

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Speaker 7: as well. I mean, Americans love their brand. The whole

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Speaker 7: world loves their brands right, and we like to go

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Speaker 7: and experience it in person. And the other trend we're

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Speaker 7: seeing is a shift more experiential retail. So when you

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Speaker 7: have that retail format, you are there to shop. You're

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Speaker 7: also there sometimes to do your returns, but you're really

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Speaker 7: there to interact with that brand and amplify your experience

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Speaker 7: with it.

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Speaker 2: What interest rates are one of the reasons that we're

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Speaker 2: not seeing a lot of activity in a residential real estate.

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Speaker 2: How are higher rates impacting commercial real estate.

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Speaker 7: Look, rates are one of the things that impact the

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Speaker 7: overall commercial real estate market. I think the thing that

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Speaker 7: we're looking at a little bit more closely right now

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Speaker 7: is the labor trends and the business formation trends, especially

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Speaker 7: on the leasing side. But you know, I think people

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Speaker 7: are adjusting to the reality that we're living in with

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Speaker 7: higher rates than we were used to traditionally. And at

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Speaker 7: this point, you have to move your business forward, and

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Speaker 7: to do that, you need to have your commercial real estate.

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Speaker 7: You need to have a place for your people to go.

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Speaker 5: You know, Liz, the tariff policies and the sort of

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Speaker 5: austerity policies under the Trump administration have had an effect,

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Speaker 5: a trickle down effect on pretty much every aspect of

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Speaker 5: the economy, or at least people are bracing for that.

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Speaker 5: I'm wondering if there's any knock on effects for cre

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Speaker 5: from everything going on.

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Speaker 7: Yeah, absolutely, I mean I think, look, the terarfs have

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Speaker 7: been a catalyst for some and a constraint for others.

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Speaker 7: Right it's going to be a little bit of a

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Speaker 7: mixed bag. But I think, you know, probably the place

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Speaker 7: you're feeling at the most is the industrial sector, and

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Speaker 7: you will see some contraction in those West coast port cities,

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Speaker 7: you know, just based on the tariffs and what's expected.

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Speaker 7: But what's interesting is you're seeing a couple shifts. As

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Speaker 7: an example, Phoenix, Salt Lake City, places that have great

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Speaker 7: intermodal infrastructure, they're doing exceptionally well right now. Another thing

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Speaker 7: we're seeing that I'm kind of fascinated by is a

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Speaker 7: lot of corporates committing to buy their industrial real estate.

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Speaker 7: So I think that you know, we're seeing more than

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Speaker 7: we've ever seen, and that's just a commitment to having,

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Speaker 7: you know, more stable supply chains within the US.

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Speaker 3: Here in New York.

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Speaker 2: City, Liz, what's the call in this market right now?

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Speaker 2: Mike and I are working in an A plus quality

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Speaker 2: building here at Bloomberg, fully leased.

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Speaker 3: How about the rest of the market.

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Speaker 7: Well, you have one of the best buildings in the

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Speaker 7: entire country. But the good thing about New York is

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Speaker 7: New York demand is also back at pre pandemic levels.

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Speaker 7: It's twenty seven million squre feet. It was twenty million

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Speaker 7: right before the pandemic, So I think it's heading the

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Speaker 7: right direction. Trophy has definitely been one of the more

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Speaker 7: dominant stories in New York, and we think that it

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Speaker 7: will continue to be a dominant story going forward post

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Speaker 7: twenty nineteen. Construction is definitely what a lot of the

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Speaker 7: trophy tenants gravitate to, and we may even see a

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Speaker 7: couple of new buildings pop up, you know, given that demand,

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Speaker 7: right because that part of the market is exceptionally tight.

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Speaker 7: Tech is also coming back in New York City. It's

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Speaker 7: much bigger than it has been before. You know, there's

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Speaker 7: a bigger tech concentration of tech talent in New York

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Speaker 7: than anywhere outside of the Bay Area, so I'd expect

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Speaker 7: to see some booming there too.

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Speaker 2: Liz, thank you so much. Appreciate it as always. Liz Harp,

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Speaker 2: President for Leasing for Newmark. She's out there in California.

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Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android

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Speaker 2: We heard from the FED this week. I would say

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Speaker 2: it kind of came in line with expectations, that.

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Speaker 3: Is that it's not looking to do a whole lot

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Speaker 3: right now.

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Speaker 2: It's going to wait and see, maybe continue to take

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Speaker 2: a look at the data, and that seems to be

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Speaker 2: the play there. Ira Jersey, chief US interest rates strategist

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Speaker 2: to Bloomberg Intelligence. He joins us from the cam down

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Speaker 2: in Princeton, New Jersey. Ira, any takeaway SHM you from

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Speaker 2: President FED Chairman J Powell and maybe his commentary or

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Speaker 2: the reading of the note.

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Speaker 6: Yeah, I think a little bit.

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Speaker 8: You know that the Fed is still neutral right now,

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Speaker 8: but they are I think prepared to cut if they

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Speaker 8: need to. And certainly we learned a little bit more

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Speaker 8: about the reaction function that we might get.

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Speaker 6: But you know, there's still this overhang of what will tariffs.

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Speaker 8: Do to inflation inflation expectations That was brought up again

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Speaker 8: on Wednesday by by Fed chair Powell. So you know,

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Speaker 8: until we wind up with probably two maybe three more

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Speaker 8: kind of inflation prints to see how inflation is kind

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Speaker 8: of adjusting itself because of these tariffs, we probably won't

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Speaker 8: hear much from the FED now importantly, and this is

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Speaker 8: something that he did talk a lot about, was about

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Speaker 8: their policy framework. So it's possible in August or September

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Speaker 8: we'll wind up hearing from about changes to their communications policy.

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Speaker 6: Do they make changes to the DoD plot?

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Speaker 8: Do they make changes to the summary of economic projections,

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Speaker 8: all of those things might come out, and he gave

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Speaker 8: us a lot of information about that, a lot more

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Speaker 8: than we had anyway previously about how those discussions are

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Speaker 8: shaping up.

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Speaker 6: You know.

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Speaker 5: I then this morning we had FED Governor Chris Waller.

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Speaker 5: He was on CNBC sounding very dovish, which I guess

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Speaker 5: is not such a surprise for him. He is considered,

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Speaker 5: you know, one of the sort of uber dubs at

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Speaker 5: the FED. But he mentioned possibly cutting as soon as July.

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Speaker 5: I wonder what you make of that? Is that really

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Speaker 5: a far out there outlier of an opinion. Is he

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Speaker 5: auditioning for President Trump's for the next FED?

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Speaker 6: What do you make of it?

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Speaker 8: So's that he's auditioning for to be the FED chair,

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Speaker 8: you know, And he'd be an interesting choice because he

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Speaker 8: is kind of a Yes, he's on the duvish side,

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Speaker 8: but he's also a mainstream kind of FED thinker in general. Now,

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Speaker 8: the fact that he's dubvish is because of his view

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Speaker 8: of the economy and the outlook. And you know, the

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Speaker 8: thing that Governor Waller has brought up is, look, we

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Speaker 8: need to do things in advance because of you know,

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Speaker 8: the long legs that monetary policy takes to takes to

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Speaker 8: affect things, it winds up being, you know, six months

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Speaker 8: to eighteen months before an interest rate cut. One interest

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Speaker 8: rate cut, much less several actually filter through the overall economy.

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Speaker 6: So I think his view is, hey, the economy is going.

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Speaker 8: To be much weaker this fall than I think most

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Speaker 8: forecasters and his peers think, so therefore we should start

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Speaker 8: cutting in July. Now he's in the minority with that

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Speaker 8: very clearly, but there are these you know, the median

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Speaker 8: suggests that we're going to have fifty basis points of

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Speaker 8: cuts by year end, But there's also this whole other

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Speaker 8: camp that thinks they shouldn't be cutting at all, right,

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Speaker 8: and we can't discount them because that's a large minority

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Speaker 8: of the committee.

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Speaker 6: So Chris Waller, yes, he's on the divers side.

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Speaker 8: But remember there's also these more you know, neutral to

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Speaker 8: hawkish members that are suggesting, hey, we should really wait

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Speaker 8: and see because the economy is not that bad and

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Speaker 8: our outlook isn't terrible yet. So I do think that

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Speaker 8: he's certainly the minority. July is off the table. There's

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Speaker 8: no way that they're going to cut in July.

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Speaker 2: You know, one of the issues obviously facing the FED

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Speaker 2: is inflation, and FED Chairman j Palace said that he

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Speaker 2: believes higher prices are coming as a result of tariffs,

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Speaker 2: but we just haven't seen it in the data yet. Ira,

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Speaker 2: I mean, how do you think the Fed's thinking about

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Speaker 2: tariffs thinking about possible inflation, because again, we just really

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Speaker 2: haven't seen it yet.

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Speaker 8: Well, goods prices in some categories were a little bit

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Speaker 8: higher in the if you look at the May CPI report.

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Speaker 8: But keep in mind there's a couple of things. Part

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Speaker 8: of this is timing, Like we always expect things to

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Speaker 8: happen in a thirty minute sitcom type of situation on

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Speaker 8: TV or now maybe a five minute YouTube video, right, So,

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Speaker 8: but that's not the.

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Speaker 6: Way that the real world works.

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Speaker 8: We're still working through inventories that companies had prior to

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Speaker 8: tariff's being implemented, so and then it takes a month

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Speaker 8: or two for the new goods to come into the

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Speaker 8: country and for those tariffs actually affect the prices of

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Speaker 8: those imported goods. So we're only going to start really

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Speaker 8: seeing that in the June data. So that's why the

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Speaker 8: next two I think inflation reports are going to be

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Speaker 8: key to how much of the tariffs are being passed

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Speaker 8: through to the consumer via you know, via higher prices,

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Speaker 8: how much is being is being absorbed by both wholesalers

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Speaker 8: and retailers in terms of or even manufacturers and in

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Speaker 8: them lowering prices versus the higher tariffs. So all of

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Speaker 8: these things are still question marks that we don't have

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Speaker 8: in any of the macro data. On the other side

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Speaker 8: of that, Paul, you have to remember there were other

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Speaker 8: things like service services and housing that actually saw slower

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Speaker 8: price gains, and that's one of the reasons why you

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Speaker 8: didn't see an aggregate uh CPI spike up at all

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Speaker 8: because of the slightly higher goods prices.

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Speaker 2: All right, it's the summertime, which means I don't have

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Speaker 2: to worry about soccer and all that stuff.

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Speaker 3: But now you got the Club World Cup. What is this?

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Speaker 8: The Club World Cup is a kind of a thing

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Speaker 8: that FIFA made to try to make money and bringing

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Speaker 8: bringing in basically regional champions of from all around the world.

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Speaker 8: It's really not been a particularly good competition because you

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Speaker 8: have you know, European teams are absolutely slaughtering teams from

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Speaker 8: other places around the world.

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Speaker 3: Hey, hey, Miami did beat Porto.

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Speaker 6: That's yeah, that's true.

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Speaker 8: And actually PSG had what was upset as well, so

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Speaker 8: there have been some good games, but I don't know.

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Speaker 6: I'm watching the Gold Cup.

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Speaker 8: The US men's national team beat Sordi Arabia last night,

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Speaker 8: one nail, and you know, because that's that's a warm

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Speaker 8: up to the actual World Cup, the real thing that's

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Speaker 8: going to happen next summer.

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Speaker 6: Here.

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Speaker 2: I just can't there's so many tournaments in their clubs, THEES.

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Speaker 3: I just I can't keep tractors too much stuff. That's

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Speaker 3: why we have Ira Jersey.

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Speaker 2: He does the interest rate thing on the side, but

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Speaker 2: he's really our god to person on all things global soccer.

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Speaker 2: Ira Jersey, Chief US interest rate Strategists for Bloomberg Intelligence.

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