WEBVTT - Bloomberg Businessweek Weekend - April 15th, 2022 0:00:01.080 --> 0:00:05.440 This is Bloomberg Business Week inside from the reporters and 0:00:05.600 --> 0:00:09.200 editors who bring you America's most trusted business magazine, plus 0:00:09.240 --> 0:00:13.200 global business, finance and tech news. As it happened, Sloomberg 0:00:13.240 --> 0:00:16.759 Business Week with Carol Messer and Bloomberg Quick Takes. Tim 0:00:16.800 --> 0:00:21.440 Stinovic on Bloomberg Radio. Hi, everyone, Welcome to the weekend 0:00:21.560 --> 0:00:24.920 edition of Bloomberg Business Week. It was a shortened holiday 0:00:24.960 --> 0:00:27.800 trading week chuck full of news on inflation and big 0:00:27.800 --> 0:00:30.680 bank earnings, while the war in Ukraine marked the beginning 0:00:30.760 --> 0:00:33.640 of its eighth week. With that is our backdrop. Coming up, 0:00:33.680 --> 0:00:35.879 we're going to hear from the former finance Minister of 0:00:36.080 --> 0:00:39.440 Ukraine as the Kremlin sees peace talks at a dead end. 0:00:39.640 --> 0:00:42.599 Tim also ahead the CEO of Lamborghini on his company's 0:00:42.600 --> 0:00:45.279 response to that war in Ukraine and the luxury car 0:00:45.280 --> 0:00:47.960 maker's plan to deal with rising prices and supply chain. 0:00:48.040 --> 0:00:50.879 Snacks and speaking of cars, our cover story in this 0:00:50.920 --> 0:00:53.760 week's double issue of Bloomberg Business Week magazine looks at 0:00:53.760 --> 0:00:56.920 Ford's plan to tackle Tesla's dominance when it comes to 0:00:57.000 --> 0:00:59.639 electric vehicles. All of that to come. We begin with 0:00:59.760 --> 0:01:02.920 the ongoing war in Ukraine. Now the Durasco is the 0:01:02.960 --> 0:01:05.480 former Ukraine Minister of Finance. She held that post from 0:01:06.840 --> 0:01:10.959 sixteen during the initial Russian invasion occupation of Ukraine. She 0:01:11.040 --> 0:01:14.240 currently serves as executive director of Puerto Rico's Financial Oversight 0:01:14.280 --> 0:01:16.960 and Management Board. She joined us to discuss the future 0:01:17.000 --> 0:01:19.760 of Ukraine's economy. With Russia reportedly set to ramp up 0:01:19.760 --> 0:01:24.560 attacks on eastern Ukraine, Ukrainians are actually, you know, facing 0:01:24.600 --> 0:01:27.920 this with immense courage, and that courage is leading them 0:01:27.959 --> 0:01:31.000 to start rebuilding. So even in the towns of Ping 0:01:31.120 --> 0:01:35.120 and Buscha that have been destroyed recently, the work has 0:01:35.160 --> 0:01:38.360 begun already to remove debris, to build back the bridge 0:01:38.360 --> 0:01:42.160 that had been blown up, to restore, rebuild electricity, heat 0:01:42.160 --> 0:01:46.240 and water. The government is focused on getting planting started. 0:01:46.400 --> 0:01:49.560 This is the spring planting season for agriculture. As you know, 0:01:49.680 --> 0:01:52.600 Ukraine is one of the largest agricultural exporters in the world, 0:01:53.240 --> 0:01:57.200 and businesses are moving facilities to western Ukraine where the 0:01:57.200 --> 0:02:00.120 war has not had as much of an impact, and 0:02:00.360 --> 0:02:03.560 restarting manufacturing to the extent that they canada. So what 0:02:03.600 --> 0:02:07.840 you're seeing is this kind of response to the horrors 0:02:07.880 --> 0:02:12.520 and the tragedies with even greater courage and intent should 0:02:12.520 --> 0:02:15.080 we build we knew and normalize and so I think 0:02:15.160 --> 0:02:21.200 it's it's it's an amazing combination of of human dignity encourage. 0:02:21.880 --> 0:02:24.120 It's like hard to even get your head around that, right, 0:02:24.760 --> 0:02:26.960 I'm kind of in awe right that they're planning for 0:02:27.000 --> 0:02:30.160 the future and you know, moving forward, um with so 0:02:30.200 --> 0:02:33.520 many questions till yet to be answered. Natalie. I know 0:02:33.639 --> 0:02:38.280 your focus is, you know, economic and financial situations, but 0:02:38.360 --> 0:02:42.560 obviously all of that weaves into politics, military, economy, it's 0:02:42.600 --> 0:02:46.920 all interwoven. Having said that, how do you see this 0:02:47.000 --> 0:02:52.720 situation overall? Is the West at war with Russia already? Well, 0:02:52.760 --> 0:02:55.600 I think the important thing, Carol, is that Putin is 0:02:55.639 --> 0:02:58.799 that war with the West already, and he always has been, 0:02:58.840 --> 0:03:01.120 and he's been very clear about it. And so whether 0:03:01.240 --> 0:03:04.680 or not any of our Western allies believe that they 0:03:04.680 --> 0:03:07.080 are or not, the fact is that Putin believes he is, 0:03:07.120 --> 0:03:09.440 and so we are all in this together. This is 0:03:09.480 --> 0:03:12.959 about his attempt is not only to destroy Ukraine, which 0:03:13.000 --> 0:03:16.359 is clear a genocide of the Ukrainian people, which he's 0:03:16.400 --> 0:03:19.680 had published in articles, but it's also about destroying the 0:03:19.680 --> 0:03:23.280 liberal world order, the democratic world that we all take 0:03:23.320 --> 0:03:26.440 for granted every day and that enables us to live 0:03:26.560 --> 0:03:29.840 in in peace and freedom. And so we are fighting 0:03:29.919 --> 0:03:34.840 an autocrat who wishes to destroy our system. And that's why, 0:03:34.920 --> 0:03:36.720 that's why, you know, in the end, it really is 0:03:36.840 --> 0:03:39.040 up to all of the allies, up to the democratic 0:03:39.120 --> 0:03:42.080 nations of the world, to support Ukraine in this battle, 0:03:42.120 --> 0:03:45.200 because Ukraine has to prevail. If Ukraine does not prevail, 0:03:45.280 --> 0:03:48.360 we as a democratic world do not prevail. At this point, 0:03:48.440 --> 0:03:51.080 Can the Ukrainian president say, yep, I'm willing to give 0:03:51.160 --> 0:03:54.800 up this or if he does, is that a loss 0:03:54.880 --> 0:03:57.200 for the West overall? And and then it just means 0:03:57.560 --> 0:04:00.480 we will probably see President Putin come back in another 0:04:00.480 --> 0:04:04.520 aggressive mood sometime and move in sometime in the future. Well, 0:04:04.520 --> 0:04:07.480 I think that that's exactly what's happened. We all kind 0:04:07.520 --> 0:04:11.040 of said, just sit back. After he invaded an illegally 0:04:11.080 --> 0:04:14.720 annexed Crimea, then he invaded Gunbas. We held them to 0:04:14.800 --> 0:04:17.800 the line for eight years, but the war continued and 0:04:18.000 --> 0:04:23.200 it was not enough. Putin's aims are not territorial. Russia 0:04:23.240 --> 0:04:26.279 is an enormous country. It doesn't require any more territory force, 0:04:26.360 --> 0:04:32.160 population or frizz economy, this is not about territory, and um, 0:04:32.200 --> 0:04:34.479 I think the core thing for Western countries and for 0:04:34.520 --> 0:04:38.280 all of us is to enable Ukraine to prevail. And 0:04:38.279 --> 0:04:40.279 and that you know, that doesn't mean that they shouldn't 0:04:40.279 --> 0:04:42.760 be diplomatic talks, but it means that we should focus 0:04:42.800 --> 0:04:45.159 on giving Ukraine the weapons they need to defeat and 0:04:45.200 --> 0:04:49.800 to prevail in this war, the sanctions to reduce UH, 0:04:49.839 --> 0:04:53.240 the Russian ability to finance the war, getting our businesses 0:04:53.279 --> 0:04:56.440 to boycott the Russian economy and not finance this war 0:04:56.480 --> 0:05:00.640 against Ukraine, and then with that leverage, if in with 0:05:00.839 --> 0:05:04.440 that leverage, when they're prevailing, talks can take place and 0:05:04.600 --> 0:05:07.200 something can be achieved in those diplomatic talks. So be 0:05:07.320 --> 0:05:11.600 it pieces always welcome. But the first thing to focus 0:05:11.640 --> 0:05:14.039 on is not the talks and the outcome of the talks. 0:05:14.040 --> 0:05:16.960 The first thing is to focus on getting Ukraine strong 0:05:17.080 --> 0:05:21.960 enough to prevail with weapons, sanctions and boycott and then 0:05:22.480 --> 0:05:26.520 UH and then hoping that that enables talks to be successful. Okay, Natalie, 0:05:26.600 --> 0:05:31.080 does anybody anymore stand between the world and Vladimir Putin? 0:05:31.279 --> 0:05:33.880 Does anyone standing between I think there are those who 0:05:33.920 --> 0:05:36.800 are trying not to choose, and I think that it's 0:05:36.600 --> 0:05:38.520 it's it's quite sad if you look at a country 0:05:38.520 --> 0:05:42.040 like India, one of the largest greatest democracies in the world. Um, 0:05:42.080 --> 0:05:46.800 they're abstaining on critical Uan votes, and they are continuing 0:05:46.800 --> 0:05:50.520 to trade with Russia. They're continuing to buy Russian oil. 0:05:50.560 --> 0:05:54.240 They're continuing to avoid applying any sanctions. That was Natalie Torresco. 0:05:54.400 --> 0:05:57.120 She's the former Ukraine Minister of Finance. Him. She's got 0:05:57.120 --> 0:05:59.760 a fascinating background story. Yes she does. You know. She 0:05:59.839 --> 0:06:02.520 was born here in the US to Ukrainian parents. She 0:06:02.640 --> 0:06:06.040 was educated here in the US. After college, she worked 0:06:06.040 --> 0:06:08.960 for the US government, but then moved to Ukraine and 0:06:09.040 --> 0:06:11.680 she was working there with a hedge fund for years. 0:06:12.040 --> 0:06:15.320 So her insight on Ukraine is just incredible. Find out 0:06:15.360 --> 0:06:17.560 the latest though on the war in Ukraine. Just head 0:06:17.640 --> 0:06:19.960 to Bloomberg dot com. Coming up next, we're going to 0:06:20.040 --> 0:06:22.440 turn our attention to the world a big tech and 0:06:22.480 --> 0:06:24.719 a big name in the world of Twitter. It's not 0:06:24.960 --> 0:06:26.680 here's a hint. Well, I'm just gonna tell you it's 0:06:26.680 --> 0:06:32.120 not Elon Musk. We're actually talking about Jack Dorsey, remember him, Uh, yeah, 0:06:32.200 --> 0:06:34.280 you know, he and he and Elon Musk starting to 0:06:34.279 --> 0:06:37.719 see eye to eye when it comes to one thing bitcoin. Right, Yeah, 0:06:37.960 --> 0:06:40.120 why the ex social media boss is now trying to 0:06:40.160 --> 0:06:43.800 become bitcoin spiritual leader. You're listening to Bloomberg Business Week. 0:06:44.040 --> 0:06:59.400 This is Bloomberg. This is Bloomberg Business Week with Carol 0:06:59.480 --> 0:07:05.360 Messer and Bloomberg Quick Takes Tim Skinovik from Bloomberg Radio. Alright, 0:07:05.360 --> 0:07:07.640 for all of you have been listening and watching Bloomberg 0:07:07.760 --> 0:07:10.400 and reading stories on the Bloomberg terminal. You know that 0:07:10.400 --> 0:07:13.840 Wall Street investors have complained for years that Jack Dorsey 0:07:13.960 --> 0:07:18.040 has been unfocused and unsuited to managing publicly traded companies. Well, 0:07:18.080 --> 0:07:21.200 Dorsey apparently agrees with some of his critics. The CEO 0:07:21.240 --> 0:07:24.960 of block that's formally known as Square, I follow Square 0:07:24.960 --> 0:07:26.720 a lot. Cal It's hard for me to call meta 0:07:26.880 --> 0:07:30.240 Facebook two or Facebook meta that is, so you can tell. 0:07:30.440 --> 0:07:32.800 And x CEO of Twitter as of late last year, 0:07:32.960 --> 0:07:35.800 he's got no intention of focusing though on his duties 0:07:35.840 --> 0:07:39.840 in the C suite. Instead, he's become obsessed with bitcoins. 0:07:39.920 --> 0:07:42.160 Just a little bit for more and white Elon Musk's 0:07:42.160 --> 0:07:45.000 buddy is gazing into the future with laser eyes. We 0:07:45.120 --> 0:07:48.280 turned to Bloomberg News technology reporter Kurt Wagner, who joined 0:07:48.360 --> 0:07:51.320 us along with Bloomberg business Week editor Jill Weber. He 0:07:51.520 --> 0:07:54.920 is going all in on bitcoin. The artwork and the 0:07:54.960 --> 0:07:57.440 story is amazing. We get the big red leaser rise. 0:07:58.280 --> 0:08:03.160 Uh well you know, maybe not not yet though, Um, 0:08:03.520 --> 0:08:06.920 the implant phase it might still be coming, uh except 0:08:06.960 --> 0:08:09.560 on Twitter. But but Kurt, what is it? What is 0:08:09.560 --> 0:08:12.320 it all about? Like? What led to this transformation? I 0:08:12.360 --> 0:08:16.080 mean obviously he just left Twitter and just not that 0:08:16.160 --> 0:08:20.480 long ago, and in that time he has gone full bitcoin. Yeah. 0:08:20.560 --> 0:08:23.280 I think what started this whole idea was sort of 0:08:23.320 --> 0:08:26.440 looking at, you know, what comes next for this guy? Right? 0:08:26.480 --> 0:08:30.240 I mean, he's he's founded these two really successful companies. Um, 0:08:30.240 --> 0:08:33.040 he's kind of a controversial guy. He's he's sort of Um, 0:08:33.080 --> 0:08:35.720 despite all the that's been written about him and how 0:08:35.800 --> 0:08:38.880 prominent he is publicly, he still feels a little misunderstood. Right. 0:08:38.920 --> 0:08:40.679 And so there was this idea that I was going 0:08:40.679 --> 0:08:44.360 into this like, Okay, what's the next phase of Jack's life? 0:08:44.920 --> 0:08:47.320 And every single person I talked to was just like 0:08:47.400 --> 0:08:52.120 one word bitcoin, right, Like he is just fully invested, Um, 0:08:52.360 --> 0:08:55.720 he's emotionally invested. I got the sense that that was 0:08:55.840 --> 0:08:58.600 maybe even why he left Twitter, was that he was 0:08:58.679 --> 0:09:01.120 just no longer interested kind of dealing with the headache 0:09:01.120 --> 0:09:03.120 of running that company, and he was like, why would 0:09:03.160 --> 0:09:05.040 I do this when I could be doing bitcoin instead? 0:09:05.040 --> 0:09:09.000 And so this whole kind of, um, you know, focus 0:09:09.120 --> 0:09:11.559 on bitcoin started to really materialize. And then as I 0:09:11.600 --> 0:09:13.839 started talking to people about why he was in the 0:09:13.880 --> 0:09:16.160 bitcoin I feel like that's where it all started to 0:09:16.160 --> 0:09:17.880 fit into place. Here. It just fits a lot of 0:09:17.880 --> 0:09:20.960 the things that he truly cares about, um And and 0:09:21.120 --> 0:09:23.440 you know, it's just he's he's become the face of 0:09:23.559 --> 0:09:26.040 this kind of movement, and I just find it really interesting. 0:09:26.559 --> 0:09:31.760 And you we said bitcoin, full bitcoin, but not full crypto, right, 0:09:31.800 --> 0:09:34.719 Why why is he so for for full bitcoin but 0:09:34.840 --> 0:09:37.960 maybe not the rest of the landscape, that's right? Yeah, 0:09:37.960 --> 0:09:41.560 he In fact, he tweeted I don't like cryptocurrencies, which 0:09:41.600 --> 0:09:43.800 is kind of funny, right because he's the face of 0:09:43.880 --> 0:09:48.360 probably the most prominent one. But um, you know, for him, 0:09:48.720 --> 0:09:50.559 one of the things that's so appealing to bitcoin is 0:09:50.600 --> 0:09:54.200 this idea of real decentralization. Right, there is no company 0:09:54.240 --> 0:09:58.480 that controls bitcoin, it's not regulated by the government. These 0:09:58.480 --> 0:10:00.800 are all things that he is believe it or not, 0:10:00.920 --> 0:10:03.560 against even though he was just recently the CEO of 0:10:03.600 --> 0:10:06.319 two publicly traded companies. Is just very against this idea 0:10:06.320 --> 0:10:09.240 of authority and power being controlled by any one person 0:10:09.320 --> 0:10:12.280 or company. And so I think that appeals to him 0:10:12.400 --> 0:10:14.720 with Bitcoin in particular. And I think what he sees 0:10:14.720 --> 0:10:17.480 as a lot of these other cryptos are being backed 0:10:17.520 --> 0:10:20.680 by you know, venture capitalist and recent Horwitz been the 0:10:20.679 --> 0:10:24.160 most famous one, and he sees this idea of like, hey, 0:10:24.240 --> 0:10:27.240 people think these things are decentralized, but really they're being 0:10:27.240 --> 0:10:30.160 controlled by all the same vcs and power brokers that 0:10:30.480 --> 0:10:33.000 kind of control the Internet today, right, And so that's 0:10:33.000 --> 0:10:36.160 why he's so focused on just this bitcoint thing, and 0:10:36.200 --> 0:10:38.160 he kind of feuds with a lot of the people 0:10:38.200 --> 0:10:40.880 who are invested in in type you know, Web three 0:10:41.120 --> 0:10:44.040 type technology. Yeah, I do. I do particularly like the 0:10:44.800 --> 0:10:47.240 you know that that part of the narrative, right, the 0:10:47.280 --> 0:10:50.440 idea that people in Silicon Valley, who you know, from 0:10:50.440 --> 0:10:54.079 an outsider's perspective, would for years be aligned, are disagreeing 0:10:54.120 --> 0:10:57.079 on this point when it comes to Jack Dorsey and 0:10:57.240 --> 0:11:00.360 Square though the company now known as Block, how does 0:11:00.400 --> 0:11:05.400 he make this happen at Block when it comes to Bitcoin, Yeah, 0:11:05.440 --> 0:11:08.560 I mean, bitcoin has kind of been infused into all 0:11:08.600 --> 0:11:11.520 of the different parts of the business, right for everything 0:11:11.640 --> 0:11:14.679 from cash App, which is like the main it's sort 0:11:14.720 --> 0:11:18.040 of like a Venmo competitor where you can send money 0:11:18.040 --> 0:11:19.560 to people, you can also buy stocks, but you can 0:11:19.559 --> 0:11:22.160 also buy bitcoin. And there was over ten billion dollars 0:11:22.200 --> 0:11:25.760 with a bitcoin purchased through cash app and last year alone, 0:11:25.800 --> 0:11:28.160 and so that's kind of the consumer element. And then 0:11:28.200 --> 0:11:30.480 they have these teams internally that are working on all 0:11:30.559 --> 0:11:34.640 kinds of different bitcoin technologies, right, like making it easier 0:11:34.679 --> 0:11:38.240 for someone to convert their fiat currency, their US dollar 0:11:38.720 --> 0:11:41.960 into bitcoin, for example. And so I think when it 0:11:42.040 --> 0:11:44.079 came down to it again, having talked to so many 0:11:44.080 --> 0:11:47.120 people work for him, I think he's sitting here, He's like, Okay, 0:11:47.120 --> 0:11:49.160 here's my passion. Right. Bitcoin is the thing that I 0:11:49.280 --> 0:11:54.000 just truly love. It doesn't really fit into Twitter all 0:11:54.000 --> 0:11:56.840 that much. It's not you know, yes, there are elements 0:11:56.840 --> 0:11:58.880 of it that could eventually move to social media, but 0:11:58.880 --> 0:12:01.920 it doesn't fit naturally in the way that it does 0:12:02.000 --> 0:12:04.840 with block with a financial services company. And so I 0:12:04.880 --> 0:12:07.240 think for him, you know, when it ultimately came down to, 0:12:07.280 --> 0:12:08.880 all right, where do I want to spend my time. 0:12:09.320 --> 0:12:11.840 I think that's one of the reasons Block one out. Kurt. 0:12:11.880 --> 0:12:13.160 I just have to say, first of all, I love 0:12:13.240 --> 0:12:16.520 the pictures of Dorsey two thousand nine vere the beer, 0:12:16.559 --> 0:12:20.359 because it's quite a transformation. Having said that, is bitcoin 0:12:20.760 --> 0:12:25.160 going to be his downfall or you know, a great 0:12:25.160 --> 0:12:27.480 new awakening for him? Because I've got to think, as 0:12:27.520 --> 0:12:29.240 you write about some of the activists, they've just got 0:12:29.240 --> 0:12:33.760 to be watching closely totally. Well. I think he saved 0:12:33.840 --> 0:12:36.559 himself a little bit by leaving Twitter right because it 0:12:36.920 --> 0:12:39.000 became clear that this was we we described in the 0:12:39.040 --> 0:12:42.000 story as his side hustle, and I think it was 0:12:42.040 --> 0:12:45.840 starting to cause problems for people at Twitter, especially because 0:12:46.160 --> 0:12:49.280 there maybe the business wasn't quite as successful, and so 0:12:49.320 --> 0:12:50.679 all of a sudden you look around and say, well, 0:12:50.679 --> 0:12:52.880 why is Jackson and all his time doing this other thing? 0:12:53.600 --> 0:12:56.120 Um that's a problem. Now at block block has been 0:12:56.120 --> 0:12:58.400 doing better. So up until now, you know, he hasn't 0:12:58.440 --> 0:13:01.040 really been forced to choose. And again, because he's incorporating 0:13:01.080 --> 0:13:03.800 bitcoins so much into the business, I wonder if that 0:13:03.800 --> 0:13:05.680 buys him a little bit of wiggle room to really 0:13:05.679 --> 0:13:08.520 focus on this. But I think, you know, long term, 0:13:08.600 --> 0:13:10.920 this is what makes it so fascinating, right, is that 0:13:11.200 --> 0:13:14.000 all the people we spoke to were really like, the 0:13:14.080 --> 0:13:16.959 one thing Jack is great at is predicting the future, right, 0:13:16.960 --> 0:13:20.000 Like he's not really necessarily gonna be a great manager 0:13:20.040 --> 0:13:21.360 on a day to day basis, is not going to 0:13:21.440 --> 0:13:23.600 give you great directives on a day to day basis, 0:13:23.679 --> 0:13:26.400 But he looks five years in the future and he 0:13:26.440 --> 0:13:28.600 can see things that we can't and right now he 0:13:28.679 --> 0:13:34.080 sees bitcoin. So I find that story just so so good. 0:13:34.080 --> 0:13:36.240 Like there's this line that you have having a chief 0:13:36.240 --> 0:13:40.120 executive offer officer who's ambivalent about being chief and not 0:13:40.200 --> 0:13:43.640 crazy about executing comes to a serious trade trade off 0:13:44.600 --> 0:13:47.240 based on you know, you had so many interviews like 0:13:47.280 --> 0:13:50.599 talk to us more about Jack Dorsey as as aloof 0:13:50.679 --> 0:13:55.199 manager and if you can mention the birds, that'd be great. Yeah, well, 0:13:55.440 --> 0:13:57.880 the I'll start with the birds. You know. He part 0:13:57.920 --> 0:14:01.440 of why the uh you know that this took such 0:14:02.240 --> 0:14:04.200 had such so much success that Twitter is that there 0:14:04.240 --> 0:14:06.800 was this perception that Jack wasn't really focused, right, not 0:14:06.840 --> 0:14:09.679 really paying attention to his job and um, and that 0:14:09.760 --> 0:14:11.920 he wanted to work from Africa you may recall for 0:14:11.960 --> 0:14:14.360 six months and that happened right before the pandemic. He 0:14:14.400 --> 0:14:17.439 never got to go because of the pandemic, but he 0:14:17.559 --> 0:14:20.280 still kind of worked remote for the entire pandemic. And 0:14:20.760 --> 0:14:22.520 he was in Hawaii a lot, and there were chickens 0:14:22.520 --> 0:14:24.600 in the background of his video calls. He was on 0:14:24.680 --> 0:14:28.280 a Goldman Sachs call and there were you know, songbirds 0:14:28.360 --> 0:14:31.360 chirping in the background. So like he still gets to 0:14:31.440 --> 0:14:33.800 kind of go and like live this life where he 0:14:33.880 --> 0:14:36.880 wherever he wants to and lead that way. That was 0:14:36.920 --> 0:14:40.360 Bloomberg News Technology reporter Kurt Wagner, along with Bloomberg Business 0:14:40.400 --> 0:14:43.200 Week editor Joel Weber. Still ahead on Bloomberg Business Week, 0:14:43.240 --> 0:14:46.240 how rising interest rates and market volatility are affecting New 0:14:46.280 --> 0:14:49.840 York City's luxury housing market. Find out who's buying and 0:14:49.920 --> 0:14:57.480 how much they're shelling out. This is Bloomberg Broadcasting from 0:14:57.480 --> 0:15:00.560 the financial capital of the world, Bloomberg You Love Them 0:15:00.560 --> 0:15:05.120 Frio in New York to Washington, d C. Bloomberg to Boston, 0:15:05.240 --> 0:15:08.680 Bloomberg one oh six one does San Francisco, Bloomberg nine 0:15:08.720 --> 0:15:11.960 sixty to the Country Sirius xm Chado one nineteen and 0:15:12.040 --> 0:15:15.440 around the globe, the Bloomberg Business app and Bloomberg Radio 0:15:15.560 --> 0:15:19.960 dot com. This is Bloomberg Business Week, all right, So 0:15:19.960 --> 0:15:22.360 a big story and a lot of our conversations focused 0:15:22.360 --> 0:15:24.360 on inflation. What the Fed is going to do? That 0:15:24.480 --> 0:15:26.880 was all this past week. And with the Fed set 0:15:26.920 --> 0:15:29.000 to pick up the pace of interest rate hikes this year, 0:15:29.320 --> 0:15:32.400 home buyers can expect to feel the squeeze. Yet tim 0:15:32.600 --> 0:15:35.360 people stopping for housing in New York City don't seem 0:15:35.400 --> 0:15:39.000 too concerned. Barbara Fox is president of the Fox Residential Group. 0:15:39.280 --> 0:15:42.200 It's a small boutique brokerage firm that specializes in the 0:15:42.240 --> 0:15:47.080 sale of upscale residential properties in Manhattan. And she says, well, business, 0:15:47.080 --> 0:15:50.560 it's pretty darn good. Actually, the market is just on 0:15:50.760 --> 0:15:54.480 fire right now. And as a real estate professional, we 0:15:54.600 --> 0:15:58.760 move fast when the market is so good. It's um, 0:15:58.800 --> 0:16:02.040 it's really amazing. We're having the problem. The biggest problem 0:16:02.040 --> 0:16:05.840 we're having right now is um supply. I mean that 0:16:06.000 --> 0:16:09.560 all of the supply has been absorbed, not all of it, 0:16:09.640 --> 0:16:12.960 but much of it has been absorbed. And um, it's 0:16:13.040 --> 0:16:16.520 just it's pushing the prices higher again. And it's really 0:16:16.560 --> 0:16:20.360 like a crazy market. So who's buying and how are 0:16:20.360 --> 0:16:23.440 they buying? Is it all cash deals? Well, that's the 0:16:23.560 --> 0:16:27.440 interesting thing. You know, Manhattan is its own animal. And 0:16:27.800 --> 0:16:30.200 I think about half of all of our deals are 0:16:30.240 --> 0:16:35.360 all cash deals. So that means that's good news. And 0:16:35.520 --> 0:16:39.040 in in that it the higher interest rates which are 0:16:39.080 --> 0:16:44.400 sure to come will not particularly affect us. And UM. Also, 0:16:44.720 --> 0:16:47.840 I've we found that when the stock market is mushy 0:16:48.000 --> 0:16:52.040 or whatever you called it, UM, the real estate market 0:16:52.480 --> 0:16:57.120 UM tends to be really good. UM, in that people 0:16:57.920 --> 0:17:01.160 use that as an investment vehicle rout than the stock market. 0:17:01.320 --> 0:17:04.119 So right now there are a lot of things pointing 0:17:04.240 --> 0:17:07.359 very positively in the direction of investment in real estate. 0:17:07.520 --> 0:17:09.480 So back to that, who's buying and is it all 0:17:09.520 --> 0:17:16.480 cash deals? Sorry? UM, who's buying? Americans are buying. I 0:17:16.640 --> 0:17:20.879 just UM spent the day showing apartments to somebody from 0:17:21.040 --> 0:17:25.040 Texas and somebody that's moving in from California. And there 0:17:25.040 --> 0:17:27.359 are a lot of Americans around. I'm not seeing a 0:17:27.359 --> 0:17:30.119 lot of foreign investors, UM, even though I think that 0:17:30.200 --> 0:17:32.480 there's gonna be there's gonna be a lot more coming 0:17:32.560 --> 0:17:37.000 forward UM in the future. UM, and they are UM 0:17:37.040 --> 0:17:40.680 by and large, the big ticket items, particularly are all 0:17:40.720 --> 0:17:44.040 cash deals. Hey, Barbara, I mentioned you've been doing this 0:17:44.080 --> 0:17:48.320 for decades. You created Fox Residential Group back in is 0:17:48.320 --> 0:17:50.760 a boutique real estate firm. You've seen a lot of 0:17:50.800 --> 0:17:54.640 cycles when it comes to real estate in New York City, 0:17:54.680 --> 0:17:57.520 and I'm wondering what happens after you start to see 0:17:57.560 --> 0:18:00.160 a market this hot. Are you seeing any warning signs 0:18:00.240 --> 0:18:03.000 right now? What comes next? When does the market cooled down? 0:18:03.280 --> 0:18:06.600 Or is this time different? Well, it's interesting. I don't 0:18:06.600 --> 0:18:09.359 know whether it's different yet, but I'm sure we'll find out. 0:18:09.640 --> 0:18:13.560 But what what happens is that our market has historically 0:18:13.600 --> 0:18:18.320 been very cyclical with regard to the seasons. Spring is 0:18:18.400 --> 0:18:22.240 usually a very hot market, falls a hot market, the 0:18:22.320 --> 0:18:25.840 dead of summer, July and August are pretty slow. But 0:18:25.960 --> 0:18:28.640 in the last last year, for example, one of our 0:18:28.640 --> 0:18:34.840 biggest months the whole year was July. So yeah, it's 0:18:34.920 --> 0:18:39.160 just everything is has sort of you know, topsy turvy 0:18:39.200 --> 0:18:43.320 now and we don't really know where it's going. I UM, 0:18:43.359 --> 0:18:48.560 I think that with the interest rates increasing at this point, um, 0:18:48.640 --> 0:18:51.200 I think that people are going to try to get 0:18:51.240 --> 0:18:54.960 into the market now as as soon as possible because 0:18:55.000 --> 0:18:56.679 they know that they're going to be The people that 0:18:56.720 --> 0:18:59.760 are borrowing are going to want to be able to 0:18:59.760 --> 0:19:03.359 get the lowest interest rate possible and um, and that 0:19:03.440 --> 0:19:05.639 may be a little bit of an impetus for people 0:19:05.680 --> 0:19:08.720 to buy now in the next six months to a year, 0:19:09.200 --> 0:19:12.200 don't you think though, for the deals that aren't all cash, 0:19:12.320 --> 0:19:15.040 the stuff that could be maybe sub three million, sub 0:19:15.080 --> 0:19:17.320 two and a half million, are those going to get 0:19:17.400 --> 0:19:23.879 hit by rising rising interest rates? I think they're ultimately 0:19:23.920 --> 0:19:27.080 they will be hit if the interest rates go up considerably. 0:19:27.160 --> 0:19:30.479 But you know, it's New York is very strange, and 0:19:30.520 --> 0:19:34.040 that we get used to things, and we will get 0:19:34.160 --> 0:19:36.480 used to the higher interest rates. I was in the 0:19:36.560 --> 0:19:39.360 business when the interest rates are eighteen percent and we 0:19:39.359 --> 0:19:43.040 were selling like crazy. So you know, it's that that 0:19:43.560 --> 0:19:48.080 everybody gets accustomed to the rising interest rates and they 0:19:48.200 --> 0:19:51.119 and they adjust to it. And it's just like the 0:19:51.200 --> 0:19:54.159 extra taxes that we have to pay on the sale 0:19:54.160 --> 0:19:57.159 of real estate. Um. You know, it looks terrible in 0:19:57.240 --> 0:20:02.600 their first instituting these these sees, but um, everybody gets 0:20:02.680 --> 0:20:04.720 used to it and they just pay it. What has 0:20:04.800 --> 0:20:08.480 the pandemic? How has the pandemic impacted your market? It's 0:20:08.520 --> 0:20:11.480 had a huge im pack. A lot of people did 0:20:11.600 --> 0:20:15.640 leave the city and a lot of people left the 0:20:15.680 --> 0:20:20.280 city left their old departments and sold their old departments 0:20:20.359 --> 0:20:23.280 and then bought Toyota tears in the city. And I 0:20:23.359 --> 0:20:25.800 see we're seeing a lot of that right now. And 0:20:25.840 --> 0:20:28.800 that was Barbara Fox. She's president of the Fox Residential Group. 0:20:28.960 --> 0:20:31.480 You're listening to Bloomberg Business Week. Coming up next, the 0:20:31.520 --> 0:20:34.400 new president of the New York Stock Exchange on technology 0:20:34.440 --> 0:20:37.679 as a literal hedge against market volatility. Yeah, we've just 0:20:37.720 --> 0:20:41.040 seen a tad amount of volatility this year, to say 0:20:41.080 --> 0:20:45.000 the least. Yeah, wild quarter. Yeah, absolutely, This is Bloomberg. 0:20:52.640 --> 0:20:56.159 You're listening to Bloomberg Business Week with Carol Messer and 0:20:56.240 --> 0:21:01.399 Bloomberg Quick Takes. Tim Stinovik from Bloomberg Radio were the 0:21:01.520 --> 0:21:04.240 three trillion dollars were raised from bond and equity values 0:21:04.240 --> 0:21:06.680 in the first quarter, as the Fiddle Reserve raised interest 0:21:06.760 --> 0:21:10.120 rates for the first time since Tim, it was a lot. Yeah. 0:21:10.160 --> 0:21:11.879 It was a quarter when we saw the NASDAC one 0:21:11.960 --> 0:21:14.399 hundred and the Russell two thousand, each with bear market 0:21:14.440 --> 0:21:19.320 declines of also one in which the portfolio model fell 0:21:19.400 --> 0:21:21.959 for the first time in two years. A lot of investors. 0:21:22.080 --> 0:21:24.120 It was the first time I saw a lot of volatility. 0:21:24.280 --> 0:21:26.879 It was everywhere and that was top of mine at 0:21:26.880 --> 0:21:29.280 the recent Bloomberg Live Wealth Summit, where I caught up 0:21:29.280 --> 0:21:31.400 with the President of the New York Stock Exchange Group, 0:21:31.480 --> 0:21:34.960 Lynn Martin and Katherine Keating, CEO of Investor Solutions and 0:21:34.960 --> 0:21:38.359 Wealth Management at B and Y. Melon. Yeah, So volatility 0:21:38.359 --> 0:21:40.880 obviously is driven by uncertainty, and I think it's fair 0:21:40.920 --> 0:21:45.159 to say that with the worst global health crisis in 0:21:45.160 --> 0:21:48.159 a hundred years, with the first serious ground or in 0:21:48.200 --> 0:21:51.080 Europe in eighty years, with the worst inflation in forty years, 0:21:51.119 --> 0:21:52.919 and the tightest labor market any of us I think 0:21:52.920 --> 0:21:56.200 I've ever seen, there's a lot of uncertainty out there, 0:21:56.800 --> 0:21:58.959 and so you know, you focus on what you think 0:21:59.000 --> 0:22:00.600 will guide you going for word, and so what do 0:22:00.680 --> 0:22:03.480 we really focus on. We focus first and foremost on 0:22:03.520 --> 0:22:06.679 inflation and interest rates. Interest rates are the foundation for 0:22:06.800 --> 0:22:12.159 valuing all financial assets. We focus clearly on geopolitics. We 0:22:12.200 --> 0:22:17.399