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Speaker 2: Cliff Cupchin, he's chairman of the Eurasia Group. Cliff, thanks
Speaker 2: so much for joining us here again to speak with
Speaker 2: the Ros Mathieson and Bloomberg News.
Speaker 3: The latest news.
Speaker 2: President Trump appears to be taking a little bit of
Speaker 2: a pause here. How do you think this potentially could
Speaker 2: pay out play out? There's a number of scenarios. I
Speaker 2: know you've kind of kind of gamed out.
Speaker 4: Most likely is there's talk for a week, ten days,
Speaker 4: the Europeans lead the way, Aaron refuses to give up
Speaker 4: domestic in Richmond, and the US takes out or tries
Speaker 4: to take out. I think probably can take out the
Speaker 4: flourido inrichment plant, which would you under a mountain? That
Speaker 4: would be escalatory, dramatically escalatory, you big spike in oil.
Speaker 4: There are other scenarios where I don't think you. I
Speaker 4: don't think Iron would try to close the straight straight
Speaker 4: of hor moves. We can come back to that other
Speaker 4: scenarios where this does escalate and in even more in
Speaker 4: response to the US right on floidoh or on tries
Speaker 4: to tick out stop shipping through the straight of horm moves.
Speaker 4: And then there's a small chance, maybe one in five
Speaker 4: twenty percent, I think, is how game that out these
Speaker 4: talks actually work. But it's a really kind of a
Speaker 4: hail Mary, I think by all sides, because there's no
Speaker 4: no size one escalate. But I think it's a really
Speaker 4: a really small chance.
Speaker 5: You know, Cliff, I've seen a lot of sort of
Speaker 5: guess work and estimates regarding how many missiles that Iran
Speaker 5: really has left in their stockpile. You know, they've used
Speaker 5: a lot, a lot have been destroyed by the Israels.
Speaker 5: Is it a possible scenario that in this two weeks
Speaker 5: they that stockpile just runs so low that they are
Speaker 5: unable to keep launching at Israel? And does you know,
Speaker 5: is that enough to sort of bring the temperature down
Speaker 5: on all of this?
Speaker 4: I think the rate of missile salves from Iran is
Speaker 4: already dropping. They are like any country would, I think,
Speaker 4: and it keeps some in strategic reserve, and you know, No,
Speaker 4: I don't know anybody knows, at least the unclassified world
Speaker 4: exactly how many they have left. But I think they're
Speaker 4: all already running low. I mean, iron just doesn't have
Speaker 4: good options right now. We'll see if they you know,
Speaker 4: hold to the hard line or which I think they will,
Speaker 4: or if it actually you know, they run out of
Speaker 4: resolve and they can see cliff.
Speaker 2: Is regime change a policy or a strategy that Israel
Speaker 2: end or the US should proceed, or if follow in
Speaker 2: Iran set even on the table, do you think.
Speaker 4: I don't think it's you know, verbally on the table.
Speaker 4: I think that Trump doesn't want it. It's you know,
Speaker 4: just stepping in too much. I think that Tamiyahu would
Speaker 4: like it if the Iranian people rose up and it
Speaker 4: diated what in his view is finishing finishing the job.
Speaker 4: From a historical perspective, almost every time the US has
Speaker 4: engaged in regime change, something unexpected happens and it doesn't
Speaker 4: work out like we thought it would. Iraq is the
Speaker 4: best example. When we tried to we did take down
Speaker 4: sam Hussein, and we got we got a failed state.
Speaker 4: So I don't think it's very good policy. I think
Speaker 4: it's really risky policy. If you're Israel, you have a
Speaker 4: chance to take down the dell right now. History's on
Speaker 4: your side for the first time in decades. And I
Speaker 4: think for these Raelis this is a period of maximum
Speaker 4: baby of you know, the wins at our back and
Speaker 4: this is a generational chance to takedown are you know
Speaker 4: arch enemy? So tricky policy. I think Israel would like it,
Speaker 4: may go for it. The US, No, no, it's not
Speaker 4: what's on the table for drum.
Speaker 5: You know, Cliff, you mentioned the strait of who is
Speaker 5: like such an important part of global shipping and a
Speaker 5: potential bottleneck there, and you said you don't think I.
Speaker 3: Ran will try to shut that down. Why what makes
Speaker 3: you think that.
Speaker 4: It's a lose lose for them? They need to get
Speaker 4: their oil out tremendously depending on a little revenues one
Speaker 4: hundred percent chance the US comes into wear in a
Speaker 4: major way, they probably get the golf armies, French, UK involved.
Speaker 4: And you know, the writing leadership is smart and I've
Speaker 4: been there in a while, but I used to go
Speaker 4: a number of times. They're smart, they get it, and
Speaker 4: I think they know they couldn't keep the straight open
Speaker 4: for a long time.
Speaker 6: They couldn't close it for a long time.
Speaker 4: The thing I worry about is that when regimes get desperate,
Speaker 4: they do irrational things. And if the US takes down Florid,
Speaker 4: though and the nuclear assets Richmond are really blown up
Speaker 4: across the board, the regime could get desperate and we
Speaker 4: could see that would be interrational act. They could do that,
Speaker 4: and that's what I fear the most. That's the scenario
Speaker 4: that I fear most about, the straight and foremost.
Speaker 2: Okay, Cliff, thank you so much for that. We appreciate
Speaker 2: your perspective. Clip Chen, he is chairman e RAS, your
Speaker 2: group joining us here to give us kind of gaming
Speaker 2: out some of the options on base case kind of
Speaker 2: a bad case and then maybe a stand down case
Speaker 2: everybody just kind of goes back.
Speaker 3: So lots of options out there.
Speaker 2: The next seems to be the role that President Trump
Speaker 2: decides that the US will play, if any, in any
Speaker 2: future action. So we will have continued reporting on that.
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Speaker 2: When we talk about commercial real estate, I often make
Speaker 2: the mistake of just thinking about commercial real estate offices
Speaker 2: and stuff like that, when it's really it's a lot
Speaker 2: more than just office. It's industrial, it's retail and multifamily,
Speaker 2: all that kind of stuff, and each of those sub
Speaker 2: sectors have different fundamentals driving it. So we'd like to
Speaker 2: talk to some people who do this stuff.
Speaker 3: For a living, who are experts.
Speaker 2: Liz hard Joins is President Leasing North America at New March.
Speaker 2: She's in Cali at the moment, Liz, in the broader
Speaker 2: spectrum of commercial real estate, where do you guys see
Speaker 2: maybe the best value these days?
Speaker 7: Well, I think what's really interesting right now. I mean
Speaker 7: the demand is really up, and that's the thing to
Speaker 7: talk about first, and then we can talk about where
Speaker 7: the value is created. So demand is up thirty percent
Speaker 7: year over year on a national basis. That's tenants touring
Speaker 7: the market and looking to expand. Of those tenants that
Speaker 7: are touring, two thirds of them are looking for the
Speaker 7: same or more space. And it's really shifted where in
Speaker 7: the last quarter it went up by twenty percent. More
Speaker 7: tenants that are looking to expand, and I think when
Speaker 7: you see that kind of demand. Going back to your
Speaker 7: question about value, you want to look at those markets
Speaker 7: that have been a little bit more distressed but are
Speaker 7: now starting to see tenants that are touring again, looking
Speaker 7: for space and willing to commit to a longer term
Speaker 7: home lis.
Speaker 3: I wonder what explains that uptick in demand?
Speaker 6: Is it?
Speaker 5: You know, My guess is it's that era of the
Speaker 5: work from home job is over.
Speaker 3: Is that part of it?
Speaker 7: That's certainly a part of it. But I think the
Speaker 7: other part to talk about is the resurgence of the
Speaker 7: tech sector. So during the you know, last five years,
Speaker 7: tech went from being a pretty major player in demand
Speaker 7: to being a little bit weaker. But now tech tenants
Speaker 7: are back to being twenty percent of the overall demand,
Speaker 7: just behind financial services as the top at twenty two percent.
Speaker 7: So you're back to seeing tech back in the market,
Speaker 7: and you're seeing, particularly out of the San Francisco and
Speaker 7: New York markets, tech that's taking a lot more space
Speaker 7: year over year. You're seeing that growth from AI companies,
Speaker 7: So you know, no one talks about AI having less space,
Speaker 7: but it's interesting that the AI companies seem to be
Speaker 7: very committed to the office and being in person talk
Speaker 7: to us.
Speaker 3: About San Francisco.
Speaker 2: That was a market that arguably a poster child for
Speaker 2: you know, what can really go wrong in the post
Speaker 2: COVID world on so many different levels.
Speaker 3: What's your view of that market right now.
Speaker 7: I'm feeling very good about the San Francisco market right now.
Speaker 7: I mean it's always been a boombus market. That's something
Speaker 7: that real estate investors have known for years. But what's
Speaker 7: really positive again is we're seeing a couple things. First
Speaker 7: of all, the demand at pre pandemic levels. Keep in mind,
Speaker 7: right before the pandemic, there were two one million square
Speaker 7: foot requirements that were there. Do we have those again? No,
Speaker 7: we're not at a million square feed in big, big tenants.
Speaker 7: We have some really good one hundred thousand square footers
Speaker 7: that are out there, and we have a lot of
Speaker 7: growth from companies that are under twenty thousand square feet
Speaker 7: and in the tech industry, you know that's just a
Speaker 7: couple more years until they grow again. So we're seeing
Speaker 7: a lot of resiliency. We're also seeing great commitment from
Speaker 7: companies that have been.
Speaker 6: There for a long time.
Speaker 7: JP Morgan just renewed their lease. Morgan Lewis just had
Speaker 7: a big move into the Trans America pyramid. So those
Speaker 7: are more traditional industries that are also committing to that market,
Speaker 7: showing the resiliency across more than just the tech sector.
Speaker 3: How about that retail sector.
Speaker 5: I mean, it's obviously been under pressure for years now
Speaker 5: with the shift to e commerce. Has that sort of
Speaker 5: bottomed out to some degree? Is retail firming up at all?
Speaker 7: Well? I think what's interesting and might laugh at this,
Speaker 7: is you know, malls are back class A malls ninety
Speaker 7: five percent occupied that smaller format high Street performing exceptionally well,
Speaker 7: So we're excited about what we're seeing on that front
Speaker 7: as well. I mean, Americans love their brand. The whole
Speaker 7: world loves their brands right, and we like to go
Speaker 7: and experience it in person. And the other trend we're
Speaker 7: seeing is a shift more experiential retail. So when you
Speaker 7: have that retail format, you are there to shop. You're
Speaker 7: also there sometimes to do your returns, but you're really
Speaker 7: there to interact with that brand and amplify your experience
Speaker 7: with it.
Speaker 2: What interest rates are one of the reasons that we're
Speaker 2: not seeing a lot of activity in a residential real estate.
Speaker 2: How are higher rates impacting commercial real estate.
Speaker 7: Look, rates are one of the things that impact the
Speaker 7: overall commercial real estate market. I think the thing that
Speaker 7: we're looking at a little bit more closely right now
Speaker 7: is the labor trends and the business formation trends, especially
Speaker 7: on the leasing side. But you know, I think people
Speaker 7: are adjusting to the reality that we're living in with
Speaker 7: higher rates than we were used to traditionally. And at
Speaker 7: this point, you have to move your business forward, and
Speaker 7: to do that, you need to have your commercial real estate.
Speaker 7: You need to have a place for your people to go.
Speaker 5: You know, Liz, the tariff policies and the sort of
Speaker 5: austerity policies under the Trump administration have had an effect,
Speaker 5: a trickle down effect on pretty much every aspect of
Speaker 5: the economy, or at least people are bracing for that.
Speaker 5: I'm wondering if there's any knock on effects for cre
Speaker 5: from everything going on.
Speaker 7: Yeah, absolutely, I mean I think, look, the terarfs have
Speaker 7: been a catalyst for some and a constraint for others.
Speaker 7: Right it's going to be a little bit of a
Speaker 7: mixed bag. But I think, you know, probably the place
Speaker 7: you're feeling at the most is the industrial sector, and
Speaker 7: you will see some contraction in those West coast port cities,
Speaker 7: you know, just based on the tariffs and what's expected.
Speaker 7: But what's interesting is you're seeing a couple shifts. As
Speaker 7: an example, Phoenix, Salt Lake City, places that have great
Speaker 7: intermodal infrastructure, they're doing exceptionally well right now. Another thing
Speaker 7: we're seeing that I'm kind of fascinated by is a
Speaker 7: lot of corporates committing to buy their industrial real estate.
Speaker 7: So I think that you know, we're seeing more than
Speaker 7: we've ever seen, and that's just a commitment to having,
Speaker 7: you know, more stable supply chains within the US.
Speaker 3: Here in New York.
Speaker 2: City, Liz, what's the call in this market right now?
Speaker 2: Mike and I are working in an A plus quality
Speaker 2: building here at Bloomberg, fully leased.
Speaker 3: How about the rest of the market.
Speaker 7: Well, you have one of the best buildings in the
Speaker 7: entire country. But the good thing about New York is
Speaker 7: New York demand is also back at pre pandemic levels.
Speaker 7: It's twenty seven million squre feet. It was twenty million
Speaker 7: right before the pandemic, So I think it's heading the
Speaker 7: right direction. Trophy has definitely been one of the more
Speaker 7: dominant stories in New York, and we think that it
Speaker 7: will continue to be a dominant story going forward post
Speaker 7: twenty nineteen. Construction is definitely what a lot of the
Speaker 7: trophy tenants gravitate to, and we may even see a
Speaker 7: couple of new buildings pop up, you know, given that demand,
Speaker 7: right because that part of the market is exceptionally tight.
Speaker 7: Tech is also coming back in New York City. It's
Speaker 7: much bigger than it has been before. You know, there's
Speaker 7: a bigger tech concentration of tech talent in New York
Speaker 7: than anywhere outside of the Bay Area, so I'd expect
Speaker 7: to see some booming there too.
Speaker 2: Liz, thank you so much. Appreciate it as always. Liz Harp,
Speaker 2: President for Leasing for Newmark. She's out there in California.
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Speaker 2: We heard from the FED this week. I would say
Speaker 2: it kind of came in line with expectations, that.
Speaker 3: Is that it's not looking to do a whole lot
Speaker 3: right now.
Speaker 2: It's going to wait and see, maybe continue to take
Speaker 2: a look at the data, and that seems to be
Speaker 2: the play there. Ira Jersey, chief US interest rates strategist
Speaker 2: to Bloomberg Intelligence. He joins us from the cam down
Speaker 2: in Princeton, New Jersey. Ira, any takeaway SHM you from
Speaker 2: President FED Chairman J Powell and maybe his commentary or
Speaker 2: the reading of the note.
Speaker 6: Yeah, I think a little bit.
Speaker 8: You know that the Fed is still neutral right now,
Speaker 8: but they are I think prepared to cut if they
Speaker 8: need to. And certainly we learned a little bit more
Speaker 8: about the reaction function that we might get.
Speaker 6: But you know, there's still this overhang of what will tariffs.
Speaker 8: Do to inflation inflation expectations That was brought up again
Speaker 8: on Wednesday by by Fed chair Powell. So you know,
Speaker 8: until we wind up with probably two maybe three more
Speaker 8: kind of inflation prints to see how inflation is kind
Speaker 8: of adjusting itself because of these tariffs, we probably won't
Speaker 8: hear much from the FED now importantly, and this is
Speaker 8: something that he did talk a lot about, was about
Speaker 8: their policy framework. So it's possible in August or September
Speaker 8: we'll wind up hearing from about changes to their communications policy.
Speaker 6: Do they make changes to the DoD plot?
Speaker 8: Do they make changes to the summary of economic projections,
Speaker 8: all of those things might come out, and he gave
Speaker 8: us a lot of information about that, a lot more
Speaker 8: than we had anyway previously about how those discussions are
Speaker 8: shaping up.
Speaker 6: You know.
Speaker 5: I then this morning we had FED Governor Chris Waller.
Speaker 5: He was on CNBC sounding very dovish, which I guess
Speaker 5: is not such a surprise for him. He is considered,
Speaker 5: you know, one of the sort of uber dubs at
Speaker 5: the FED. But he mentioned possibly cutting as soon as July.
Speaker 5: I wonder what you make of that? Is that really
Speaker 5: a far out there outlier of an opinion. Is he
Speaker 5: auditioning for President Trump's for the next FED?
Speaker 6: What do you make of it?
Speaker 8: So's that he's auditioning for to be the FED chair,
Speaker 8: you know, And he'd be an interesting choice because he
Speaker 8: is kind of a Yes, he's on the duvish side,
Speaker 8: but he's also a mainstream kind of FED thinker in general. Now,
Speaker 8: the fact that he's dubvish is because of his view
Speaker 8: of the economy and the outlook. And you know, the
Speaker 8: thing that Governor Waller has brought up is, look, we
Speaker 8: need to do things in advance because of you know,
Speaker 8: the long legs that monetary policy takes to takes to
Speaker 8: affect things, it winds up being, you know, six months
Speaker 8: to eighteen months before an interest rate cut. One interest
Speaker 8: rate cut, much less several actually filter through the overall economy.
Speaker 6: So I think his view is, hey, the economy is going.
Speaker 8: To be much weaker this fall than I think most
Speaker 8: forecasters and his peers think, so therefore we should start
Speaker 8: cutting in July. Now he's in the minority with that
Speaker 8: very clearly, but there are these you know, the median
Speaker 8: suggests that we're going to have fifty basis points of
Speaker 8: cuts by year end, But there's also this whole other
Speaker 8: camp that thinks they shouldn't be cutting at all, right,
Speaker 8: and we can't discount them because that's a large minority
Speaker 8: of the committee.
Speaker 6: So Chris Waller, yes, he's on the divers side.
Speaker 8: But remember there's also these more you know, neutral to
Speaker 8: hawkish members that are suggesting, hey, we should really wait
Speaker 8: and see because the economy is not that bad and
Speaker 8: our outlook isn't terrible yet. So I do think that
Speaker 8: he's certainly the minority. July is off the table. There's
Speaker 8: no way that they're going to cut in July.
Speaker 2: You know, one of the issues obviously facing the FED
Speaker 2: is inflation, and FED Chairman j Palace said that he
Speaker 2: believes higher prices are coming as a result of tariffs,
Speaker 2: but we just haven't seen it in the data yet. Ira,
Speaker 2: I mean, how do you think the Fed's thinking about
Speaker 2: tariffs thinking about possible inflation, because again, we just really
Speaker 2: haven't seen it yet.
Speaker 8: Well, goods prices in some categories were a little bit
Speaker 8: higher in the if you look at the May CPI report.
Speaker 8: But keep in mind there's a couple of things. Part
Speaker 8: of this is timing, Like we always expect things to
Speaker 8: happen in a thirty minute sitcom type of situation on
Speaker 8: TV or now maybe a five minute YouTube video, right, So,
Speaker 8: but that's not the.
Speaker 6: Way that the real world works.
Speaker 8: We're still working through inventories that companies had prior to
Speaker 8: tariff's being implemented, so and then it takes a month
Speaker 8: or two for the new goods to come into the
Speaker 8: country and for those tariffs actually affect the prices of
Speaker 8: those imported goods. So we're only going to start really
Speaker 8: seeing that in the June data. So that's why the
Speaker 8: next two I think inflation reports are going to be
Speaker 8: key to how much of the tariffs are being passed
Speaker 8: through to the consumer via you know, via higher prices,
Speaker 8: how much is being is being absorbed by both wholesalers
Speaker 8: and retailers in terms of or even manufacturers and in
Speaker 8: them lowering prices versus the higher tariffs. So all of
Speaker 8: these things are still question marks that we don't have
Speaker 8: in any of the macro data. On the other side
Speaker 8: of that, Paul, you have to remember there were other
Speaker 8: things like service services and housing that actually saw slower
Speaker 8: price gains, and that's one of the reasons why you
Speaker 8: didn't see an aggregate uh CPI spike up at all
Speaker 8: because of the slightly higher goods prices.
Speaker 2: All right, it's the summertime, which means I don't have
Speaker 2: to worry about soccer and all that stuff.
Speaker 3: But now you got the Club World Cup. What is this?
Speaker 8: The Club World Cup is a kind of a thing
Speaker 8: that FIFA made to try to make money and bringing
Speaker 8: bringing in basically regional champions of from all around the world.
Speaker 8: It's really not been a particularly good competition because you
Speaker 8: have you know, European teams are absolutely slaughtering teams from
Speaker 8: other places around the world.
Speaker 3: Hey, hey, Miami did beat Porto.
Speaker 6: That's yeah, that's true.
Speaker 8: And actually PSG had what was upset as well, so
Speaker 8: there have been some good games, but I don't know.
Speaker 6: I'm watching the Gold Cup.
Speaker 8: The US men's national team beat Sordi Arabia last night,
Speaker 8: one nail, and you know, because that's that's a warm
Speaker 8: up to the actual World Cup, the real thing that's
Speaker 8: going to happen next summer.
Speaker 6: Here.
Speaker 2: I just can't there's so many tournaments in their clubs, THEES.
Speaker 3: I just I can't keep tractors too much stuff. That's
Speaker 3: why we have Ira Jersey.
Speaker 2: He does the interest rate thing on the side, but
Speaker 2: he's really our god to person on all things global soccer.
Speaker 2: Ira Jersey, Chief US interest rate Strategists for Bloomberg Intelligence.
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