WEBVTT - Bloomberg Businessweek Weekend - October 15th, 2022 0:00:01.040 --> 0:00:05.400 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 Messier 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 --> 0:00:24.079 edition of Bloomberg Business Week. Well, this past week we 0:00:24.200 --> 0:00:27.720 got too hot inflation prints. We're talking about CPI and 0:00:27.760 --> 0:00:29.680 pp I as well as the latest minutes from the 0:00:29.760 --> 0:00:32.120 f O m C, and all signs point to the 0:00:32.159 --> 0:00:36.599 Fed staying hawkish for the foreseeable future. Better reserve officials 0:00:36.600 --> 0:00:39.680 committed to raising interest rates to quote restrictive level in 0:00:39.720 --> 0:00:41.839 the near term and holding them there to curb inflation. 0:00:42.080 --> 0:00:43.880 We're going to talk about the policy and the risks 0:00:43.920 --> 0:00:46.080 involved throughout the next hour because it just hits and 0:00:46.200 --> 0:00:49.520 impacts everyone in every business. Meantime, it looks like Elon 0:00:49.600 --> 0:00:52.400 Musk's four billion dollar deal for Twitter. It is on 0:00:52.600 --> 0:00:55.560 track and the social media giant could be in for 0:00:55.640 --> 0:00:58.160 a rough fraud once it's official. That's the subject of 0:00:58.160 --> 0:01:00.320 the cover story in our special double issue. You a 0:01:00.320 --> 0:01:02.600 Bloomberg Business Week all that to come. We begin with 0:01:02.640 --> 0:01:06.320 the Remarks section of Bloomberg business Week. Bloomberg Markets magazine 0:01:06.400 --> 0:01:10.160 editor Christine Harper writes about Paul Vulker's inflation fight during 0:01:10.160 --> 0:01:12.680 the nineteen eighties and how it hints at what lies 0:01:12.720 --> 0:01:15.600 ahead for Jerome Powell. Bloomberg business Week editor Joel Webber 0:01:15.600 --> 0:01:18.600 and Christine are here to break it down. Christine also 0:01:18.680 --> 0:01:21.400 co wrote Keeping at It, The Quest for Sound Money 0:01:21.400 --> 0:01:24.039 and Good Government with the late former Fed Chair. Well. 0:01:24.080 --> 0:01:25.920 I can tell you when he was writing his memoir 0:01:25.959 --> 0:01:30.280 back in eighteen nobody was paying attention to inflation. In fact, 0:01:30.360 --> 0:01:32.600 if they were at all, it was in an effort 0:01:32.600 --> 0:01:35.920 to get more inflation right, So he was quite concerned 0:01:36.000 --> 0:01:38.880 that people were underestimating the risks, and so part of 0:01:39.040 --> 0:01:41.760 the mission of the book was to remind people of 0:01:41.760 --> 0:01:44.399 how important the central bank's role is in in keeping 0:01:44.440 --> 0:01:48.320 inflation down and maintaining that credibility that he fought so 0:01:48.400 --> 0:01:51.360 hard to maintain. I mean, he had been involved in 0:01:51.400 --> 0:01:54.640 getting the dollar off the gold standard, and after that 0:01:54.600 --> 0:01:57.280 the dollar was not it was not connected to any 0:01:57.320 --> 0:02:01.600 actual value, and so when inflation took root, he had 0:02:01.640 --> 0:02:05.840 to drive interest rates up to unprecedented levels. Caused all 0:02:05.920 --> 0:02:10.960 kinds of pain for people financial institutions, and the result 0:02:11.120 --> 0:02:14.320 was there was more credibility in the dollar. Some people 0:02:14.320 --> 0:02:16.760 talked about it when on the Vulcar standard from the 0:02:16.760 --> 0:02:20.600 gold standard, but you know, that's something you can't squander 0:02:20.680 --> 0:02:22.840 because he fought so hard. So it's kind of like 0:02:22.919 --> 0:02:25.560 having gone toward, you know, to win a battle and 0:02:25.600 --> 0:02:29.760 then discover that your future, you know, commanders are allowing 0:02:29.800 --> 0:02:32.520 you to give up the territory again. So he he 0:02:32.560 --> 0:02:35.160 would have been very upset that inflation was allowed to 0:02:35.160 --> 0:02:37.120 get to where it was. You got to know Mr 0:02:37.160 --> 0:02:40.840 Vocal very well. I'm curious what you think, if anything, 0:02:41.200 --> 0:02:44.120 Powell might have learned from him, and if not him 0:02:44.160 --> 0:02:46.600 directly than the book. Oh yeah, well, I mean, you know, 0:02:46.760 --> 0:02:48.720 as you and I have discussed, I mean, one of 0:02:48.760 --> 0:02:52.120 the things that's so interesting is how often FED Chairman 0:02:52.200 --> 0:02:56.799 Powell invokes not only Volker himself, who he says he's 0:02:56.800 --> 0:02:59.440 a great admirer of, but but the book. I mean, 0:02:59.480 --> 0:03:01.600 he's talks of out everybody should read it. And he 0:03:01.840 --> 0:03:04.280 has used this phrase keep at it, which people see 0:03:04.320 --> 0:03:07.440 as an echo of the title keeping at it. And 0:03:07.600 --> 0:03:11.160 you know, I mean one thing that Vulgar made clear 0:03:11.360 --> 0:03:13.799 was when I was speaking to him, was how much 0:03:13.840 --> 0:03:16.560 he supported Powell as FED chairman, because he liked the 0:03:16.600 --> 0:03:19.680 fact that Powell had this similar to Vulgar had this 0:03:19.760 --> 0:03:22.160 experience of having worked in the finance in a private 0:03:22.160 --> 0:03:25.400 financial institution and also working at the Treasury Department. So 0:03:25.480 --> 0:03:29.239 understanding markets, understanding the government is really important to being 0:03:29.280 --> 0:03:32.920 practical in the job and not just being an academic theorist. Christine, 0:03:33.000 --> 0:03:36.560 how tough was it for Vulcar to hike rates? Like 0:03:36.600 --> 0:03:38.440 what were some of the conversations that you all had 0:03:38.440 --> 0:03:41.560 about that? Which was going against what everybody wanted, but 0:03:41.600 --> 0:03:44.160 it was necessary in order to write the situation well 0:03:44.200 --> 0:03:46.400 to that point. I mean, he he said that when 0:03:46.440 --> 0:03:48.760 he came into the role, it was clear. I mean, 0:03:48.760 --> 0:03:50.920 the reason he he was brought in really was to 0:03:50.960 --> 0:03:54.040 do something about inflation that his predecessors hadn't really succeeded 0:03:54.080 --> 0:03:57.720 in bringing down. Even so at that point, the economist 0:03:57.760 --> 0:04:00.600 at the FED were forecasting recession, so he had to 0:04:00.600 --> 0:04:04.000 sort of ignore that and just say we're gonna raise rates. 0:04:04.000 --> 0:04:06.200 There was a split on the on the Federal Reserve 0:04:06.440 --> 0:04:09.680 Board on the second time they voted, and so the 0:04:09.720 --> 0:04:12.600 markets didn't believe there would be any stronger action. They 0:04:12.640 --> 0:04:15.560 thought the FED was going to lose their spine, and 0:04:15.600 --> 0:04:18.360 so he turned to this monitorist approach of just targeting 0:04:18.360 --> 0:04:22.000 the money supply, and that essentially told people, we're tying 0:04:22.040 --> 0:04:24.080 our hands and we're gonna let interest rates go where 0:04:24.120 --> 0:04:25.440 they have to go. And they went up to like 0:04:25.560 --> 0:04:30.839 what pent Okay, So I gotta ask a question because 0:04:30.839 --> 0:04:33.679 this this book almost had a different title. Oh yes, 0:04:33.800 --> 0:04:35.600 and we got to talk about that, because it's just 0:04:35.640 --> 0:04:38.040 this little easter egg. Can you talk to us about 0:04:38.040 --> 0:04:40.600 thet sure? Of course. Um. So he opened the book 0:04:40.600 --> 0:04:43.640 with this very funny joke about a wise parrot who's 0:04:43.640 --> 0:04:46.040 known as the Chairman. He went so far as saying 0:04:46.080 --> 0:04:48.800 he wanted to title the book the wise old Parrot 0:04:48.920 --> 0:04:53.280 Speaks Now. The marketing Department and I all agree that 0:04:53.320 --> 0:04:55.680 was not a great title for this book. So we 0:04:55.760 --> 0:04:58.240 spent weeks trying to offer him other ideas, all of 0:04:58.240 --> 0:05:00.800 which he rejected. So we were really going back and forth. 0:05:00.839 --> 0:05:02.719 It was very It was one of the most difficult 0:05:02.720 --> 0:05:04.679 things of working with him because he was so stubborn 0:05:04.800 --> 0:05:06.800 on this. And so finally one day I was going 0:05:06.800 --> 0:05:09.200 through this long list of titles I'd come up with. 0:05:09.360 --> 0:05:12.560 You know, I found a phrase from the FED sustained commitment, 0:05:12.880 --> 0:05:16.760 and he looked and he stopped and he said, keeping 0:05:16.800 --> 0:05:19.719 at it. And it was great because that really was him. 0:05:19.800 --> 0:05:23.240 You know, he believed in speaking plainly and uh, you know, 0:05:23.440 --> 0:05:27.320 so he took the kind of jargony phrase and translated it. Hey, Christine, 0:05:27.400 --> 0:05:28.839 I just want to talk a little bit, a little 0:05:28.839 --> 0:05:31.320 bit about his legacy. Given what we know about the 0:05:31.400 --> 0:05:34.640 nineteen eighties and what markets did and what inflation did 0:05:34.680 --> 0:05:38.400 after he raised rates so significantly, what's in stored this 0:05:38.480 --> 0:05:42.160 time around. I think everybody is seeing that interest rates 0:05:42.200 --> 0:05:44.360 are going to go up. Policymakers are making it very 0:05:44.360 --> 0:05:46.640 clear they're not going to back down on this um 0:05:46.800 --> 0:05:49.880 if they show any signs of, you know, weakness. I 0:05:49.880 --> 0:05:52.279 think people understand what will happen is kind of what 0:05:52.360 --> 0:05:55.200 happened to Paul Wolker's predecessor. So I think that is 0:05:55.200 --> 0:05:58.000 an example of where Powell sees he has to be steadfast. 0:05:58.200 --> 0:06:01.720 But the chapters that follow the inflation fight are a 0:06:01.760 --> 0:06:05.720 series of financial crises that m. Paul Wolkers FED had 0:06:05.760 --> 0:06:08.680 to deal with in the wake of the interest rate increases, 0:06:08.800 --> 0:06:11.640 and so you know, when you hear these experts talking 0:06:11.680 --> 0:06:14.560 about something might break, I think, you know, what we 0:06:14.600 --> 0:06:16.880 saw back in the eighties was a lot of things broke, 0:06:16.920 --> 0:06:19.000 A lot of risks were built up, everything from the 0:06:19.080 --> 0:06:23.800 Hunt Brothers speculation on silver to Continental Illinois Savings and loans, 0:06:23.839 --> 0:06:26.200 all these different banks that when when belly up. The 0:06:26.320 --> 0:06:30.880 ultimate one was the Latin American debt crisis, and that 0:06:31.000 --> 0:06:32.720 was so bad that in a D two, I think 0:06:32.800 --> 0:06:35.480 that was really what caused Volker to say, Okay, we've 0:06:35.520 --> 0:06:38.039 got it, back off and and stop the inflation fight. 0:06:38.160 --> 0:06:41.599 So ultimately, it is often that something breaks, that there's 0:06:41.640 --> 0:06:45.400 a financial crisis. That was Bloomberg Markets editor Christine Harbor, 0:06:45.440 --> 0:06:48.200 along with Business Week editor Joel Weber. Coming up, we'll 0:06:48.240 --> 0:06:51.880 look at a sector highly influenced by monetary policy, real estate. 0:06:52.160 --> 0:06:54.680 How the world's largest donor of commercial real estate is 0:06:54.720 --> 0:06:57.919 adapting to higher rates. The cohead of Blackstone real Estate 0:06:57.960 --> 0:07:00.760 is up next. You're listening to Bloomberg Business Week. This 0:07:01.120 --> 0:07:11.720 is Bloomberg. This is Bloomberg Business Week with Carol Masser 0:07:11.920 --> 0:07:17.200 and Bloomberg Quick Takes Tim Stenovik from Bloomberg Radio. This 0:07:17.240 --> 0:07:20.560 past week, Bloomberg Live hosted invest It's an annual gathering 0:07:20.560 --> 0:07:23.240 of the leading names covering areas from crypto to credit 0:07:23.280 --> 0:07:27.640 markets and everything in between, anything that's investable. And it 0:07:27.680 --> 0:07:29.960 was in person for the first time since the pandemic. 0:07:30.120 --> 0:07:33.560 It's a time of market volatility and uncertain Yeah, I 0:07:33.560 --> 0:07:35.920 mean you can say that again, right, This is global 0:07:35.960 --> 0:07:38.280 central banks continue to raise interest rates in an effort 0:07:38.320 --> 0:07:41.040 to bring down inflation. One area of the market we're 0:07:41.040 --> 0:07:44.280 watching closely as these conditions evolve as real estate. And Carol, 0:07:44.320 --> 0:07:46.280 you caught up with an executive from the largest owner 0:07:46.280 --> 0:07:48.840 of commercial real estate globally. That's right, Tim, we're talking 0:07:48.880 --> 0:07:52.160 about Blackstone. Kathleen McCarthy is the global co head of 0:07:52.160 --> 0:07:55.320 Blackstone real Estate, which has a five hundred seventy seven 0:07:55.320 --> 0:07:58.880 billion dollar portfolio and three hundred twenty billion dollars in 0:07:58.960 --> 0:08:02.640 investor capital under management. I began though, with asking her 0:08:03.000 --> 0:08:06.840 how things are going against all these macro concerns. It 0:08:06.960 --> 0:08:09.600 is an exciting and interesting time because, as you can see, 0:08:09.600 --> 0:08:11.960 there's different signals coming through, and I think we are 0:08:12.040 --> 0:08:15.040 better positioned than anyone to know what's really happening. We 0:08:15.080 --> 0:08:17.560 have six billion dollars of real estate. We're in thirty 0:08:17.600 --> 0:08:22.240 seven different countries portfolio, though that's highly concentrated into four 0:08:22.320 --> 0:08:25.480 key themes. Eight percent of our capital is in warehouses, 0:08:25.600 --> 0:08:30.240 rental housing, lab office and hospitality investments. And what I'd 0:08:30.240 --> 0:08:34.800 say we're seeing is actually very strong fundamentals in those sectors. 0:08:34.800 --> 0:08:38.160 So when you talk about property performance, particularly for rental housing, 0:08:38.520 --> 0:08:41.320 that continues to be strong, partly because of the pressures 0:08:41.360 --> 0:08:45.160 on the for sale market with rising interest rates, logistics demands. 0:08:45.240 --> 0:08:48.800 So warehouses in the US today we are at record 0:08:48.840 --> 0:08:52.440 low vacancies, less than three percent vacancies in the markets 0:08:52.480 --> 0:08:55.280 we operate in, which are the densest, most urban kind 0:08:55.280 --> 0:08:58.720 of areas. And we're also seeing very strong rent growth. 0:08:58.720 --> 0:09:00.200 And so I think when we're thinking about the real 0:09:00.280 --> 0:09:02.600 estate market, we continue to see a lot of strength. 0:09:02.679 --> 0:09:06.960 Notwithstanding there are pressures around us in terms of interest 0:09:07.040 --> 0:09:10.720 rates and persistent inflation, but we feel really well positioned 0:09:10.760 --> 0:09:13.360 for that. And i'd also highlight that I think this 0:09:13.640 --> 0:09:16.320 moment in real estate, this cycle is quite different than 0:09:16.360 --> 0:09:19.199 others we've been different. That's a good different, I mean 0:09:19.240 --> 0:09:21.880 good different. When you think about what kind of lad 0:09:21.920 --> 0:09:24.480 to real estate downturns in the past, they're really two 0:09:24.559 --> 0:09:27.680 primary factors It was too much capital, generally in the 0:09:27.679 --> 0:09:32.120 form of debt, creating greater leverage, fueling new speculative development, 0:09:32.360 --> 0:09:35.560 and it was too many cranes, too much development. And really, 0:09:35.600 --> 0:09:37.640 when you think about what happened in the years following 0:09:37.640 --> 0:09:40.640 the financial crisis and leading up into COVID, we really 0:09:40.760 --> 0:09:43.800 never saw those excesses come into our market. And so 0:09:44.120 --> 0:09:46.880 as we head into um, you know, period where there 0:09:46.880 --> 0:09:49.240 may be more economic headwinds, real estate actually is really 0:09:49.240 --> 0:09:52.440 well positioned from a fundamental standpoint. Economic headwinds are recession. 0:09:52.600 --> 0:09:55.199 It's very hard to call, and I'm not so hard 0:09:55.240 --> 0:09:56.680 I think, you know, I think part of it is 0:09:56.720 --> 0:09:59.000 what we're seeing and and some of the things that 0:09:59.040 --> 0:10:01.840 I think the central governm us are trying to combat, 0:10:01.960 --> 0:10:05.160 which is just this continued strength that they see low unemployment, 0:10:05.480 --> 0:10:07.920 strong rent growth, and that is part of what the 0:10:07.960 --> 0:10:10.000 big challenges ahead. So I don't know if we're gonna 0:10:10.000 --> 0:10:11.720 have a recession. I'm not an economist, but I would 0:10:11.720 --> 0:10:14.120 say we've been planning for a long time, and and 0:10:14.280 --> 0:10:17.400 this comes through in the portfolio we've constructed for an 0:10:17.520 --> 0:10:19.840 environment that might have been like this in terms of 0:10:19.920 --> 0:10:23.560 higher interest rates, higher inflation, and so we really focused 0:10:23.600 --> 0:10:25.720 on trying it to be in those high cash flow 0:10:25.760 --> 0:10:29.080 growth assets. And again i'd say today we're still seeing 0:10:29.080 --> 0:10:33.040 those stronger than inflationary cash flows in our portfolio, but 0:10:33.240 --> 0:10:36.360 certainly we are always trying to position for environments that change. 0:10:36.400 --> 0:10:38.480 We've been doing this for thirty years. We've seen a 0:10:38.520 --> 0:10:41.559 lot of different environments. We thought we had seen it 0:10:41.640 --> 0:10:45.760 all and then COVID hit and hotel revenues went to zero. 0:10:45.840 --> 0:10:48.000 I'm telling you, no one underwrote that where we had 0:10:48.040 --> 0:10:50.680 a pandemic. But the great news is our portfolios are 0:10:50.720 --> 0:10:53.040 built really to try to withstand any kind of environment, 0:10:53.480 --> 0:10:57.400 and the higher than anticipated rent growth we've experienced again 0:10:57.559 --> 0:11:00.839 may kind of come down modestly, but we're we feel 0:11:00.840 --> 0:11:03.320 really well positioned for that and distressed for you guys 0:11:03.320 --> 0:11:05.520 can be opportunity big time. We saw that after the 0:11:05.520 --> 0:11:08.360 financial crisis in terms of housing. I would say, uh, 0:11:08.840 --> 0:11:13.120 environments with distress, with volatility, with a pullback in capital 0:11:13.120 --> 0:11:16.000 markets activity, and you know we're seeing in particular much 0:11:16.000 --> 0:11:19.160 more constrained capital markets today. That tends to be a 0:11:19.200 --> 0:11:22.000 great environment for us and really for any investor who 0:11:22.080 --> 0:11:25.800 is well capitalized and who has real strengths to lean on. 0:11:25.880 --> 0:11:28.800 So we have a data advantage. Our portfolio gives us 0:11:28.800 --> 0:11:31.679 more information on what's really happening. And then I'd say 0:11:31.720 --> 0:11:34.840 the combination of deep experience from a large team and 0:11:34.920 --> 0:11:39.120 capital makes us well positioned to really support situations where 0:11:39.480 --> 0:11:42.079 others may be needing to sell assets, others might need liquidity, 0:11:42.120 --> 0:11:43.440 and we were able to then get in and buy 0:11:43.480 --> 0:11:45.320 high quality real estate. I want to ask you this 0:11:45.320 --> 0:11:48.960 week on Bloomberg Grende Economic Form, sam Zel commenting retail 0:11:49.040 --> 0:11:51.600 is still very much a falling knife and that the 0:11:51.640 --> 0:11:54.160 office market will see a lot of downward repricing. And 0:11:54.160 --> 0:11:56.480 then you had Verry stern Lit at the robin Hood 0:11:56.520 --> 0:11:59.839 Investors Conference, Um of star Wood. Of course Capital in 0:12:00.040 --> 0:12:04.160 Usters says he sees incredible opportunities to find distressed investments 0:12:04.160 --> 0:12:06.880 in the real estate market. First, retail falling knife? Do 0:12:06.920 --> 0:12:09.600 you agree? I think retail has been under pressure for 0:12:09.640 --> 0:12:11.880 a long time, and that's a big part of why 0:12:12.040 --> 0:12:14.160 we have not bought a shopping mall in the US 0:12:14.880 --> 0:12:17.600 in over a decade. There are pockets that are showing 0:12:17.640 --> 0:12:21.120 greater strengths, so grossery anchor shopping centers in dense urban areas, 0:12:21.280 --> 0:12:23.679 but I'd say overall it's one of the asset classes 0:12:23.720 --> 0:12:26.360 can more under pressure. And you know, in our business 0:12:26.520 --> 0:12:29.840 we played the counterpoint of that, which was warehouse investing, 0:12:29.880 --> 0:12:33.560 so retail brick and mortar, the movement of goods online 0:12:33.720 --> 0:12:36.360 is really what started that challenge was against a backdrop 0:12:36.400 --> 0:12:39.680 of over supply and a lot of places and so being. 0:12:39.800 --> 0:12:42.200 But there's always kind of other opportunities and for us, 0:12:42.200 --> 0:12:44.280 it was, okay, how do we invest in the warehouses 0:12:44.280 --> 0:12:47.000 that are benefiting from the retail activity moving to a 0:12:47.000 --> 0:12:50.920 different format. But I'd say yea continuing continuing to see 0:12:50.920 --> 0:12:53.040 pressure in an area where we are more cautious. But 0:12:53.120 --> 0:12:57.079 like India, retails a different story because you guys are global, 0:12:57.520 --> 0:13:00.880 remember that, and I'd say there's overall been a consistency 0:13:00.880 --> 0:13:03.280 in the themes where we invest in globally. I think 0:13:03.480 --> 0:13:06.760 a market like India is a differentiated story though. So 0:13:06.880 --> 0:13:10.360 in India, we're now one of the largest owners of 0:13:10.520 --> 0:13:13.440 shopping malls in the country, but there are i'd say overall, 0:13:13.440 --> 0:13:16.120 relative to a population that has one point four billion people, 0:13:16.280 --> 0:13:18.920 there are very few of them, and so um it's 0:13:18.920 --> 0:13:20.920 a very different story. It's a country where the growing 0:13:20.960 --> 0:13:25.160 middle class, greater consumption, people looking to more toward organized 0:13:25.200 --> 0:13:27.280 retail as a place they want to go not only 0:13:27.360 --> 0:13:31.200 to shop, but eat out and have experiences and and 0:13:31.200 --> 0:13:33.720 and again not so dissimilar to what are the formats 0:13:33.720 --> 0:13:35.439 of retail that are going to thrive anywhere in the world. 0:13:35.480 --> 0:13:38.400 It's something offering more more than just a place to 0:13:38.400 --> 0:13:41.080 go buy something. UM. It's got to offer that kind 0:13:41.080 --> 0:13:45.000 of you know, experience, community, UM and and you know, 0:13:45.040 --> 0:13:47.200 a whole variety of things that will attract people to 0:13:47.240 --> 0:13:50.600 those stores. So our our investment in India has been 0:13:50.720 --> 0:13:53.600 very successful. UM. We've made it I think at a 0:13:53.640 --> 0:13:55.480 great time also where there was a lot of change 0:13:55.520 --> 0:13:59.120 happening in the retail sector. More international retailers were able 0:13:59.160 --> 0:14:01.559 to access that more market UM. And that really led 0:14:01.600 --> 0:14:04.240 to a lot of strong leasing velocity for the assets 0:14:04.240 --> 0:14:06.960 we were in. So a little bit different UM. And 0:14:07.000 --> 0:14:09.000 that's one of the great things that's so fun about 0:14:09.000 --> 0:14:12.520 our business is we have teams all over the globe 0:14:12.600 --> 0:14:15.679 and while certainly there as a classes like retail where 0:14:15.360 --> 0:14:19.000 we we have a more cautious posture, we have the 0:14:19.040 --> 0:14:22.760 opportunity to dig in and understand what's happening, regardless of 0:14:22.760 --> 0:14:24.320 whether we know at the time it's going to be 0:14:24.400 --> 0:14:26.240 kind of an area to really dig into and do more. 0:14:26.600 --> 0:14:28.760 That was an example where the team kept at it, 0:14:28.840 --> 0:14:30.840 kept thinking about standing the problem and the challenge and 0:14:30.840 --> 0:14:32.400 the opportunity on its head and said, you know, this 0:14:32.480 --> 0:14:34.680 is a very different market and I feel really proud 0:14:34.720 --> 0:14:37.160 that we have an investment committee that keeps an open 0:14:37.160 --> 0:14:39.200 mind to that and says we know where we kind 0:14:39.200 --> 0:14:41.360 of want to go, but where the other opportunities present 0:14:41.400 --> 0:14:43.120 themselves and we can invest in scale, we're going to 0:14:43.160 --> 0:14:45.880 activate that. That was Kathleen McCarthy, she's the global co 0:14:46.040 --> 0:14:48.920 head of Blackstone real Estate. Still ahead on Bloomberg Business 0:14:48.920 --> 0:14:51.960 Week while the Russia induced energy crisis and the inflationary 0:14:52.000 --> 0:14:54.920 fallout is putting the White House in a high stakes 0:14:54.960 --> 0:14:57.800 catch twenty two. For this president, it's really a matter 0:14:57.880 --> 0:15:02.520 of balancing these geopolitical concerns a very real domestic economic concerns, 0:15:02.600 --> 0:15:06.320 the growing wave of so called resource nationalism. Explained. This 0:15:06.560 --> 0:15:14.000 is Bloomberg broadcasting from the financial capital of the World 0:15:14.080 --> 0:15:17.560 Bloomberg eleven Frio in New York to Washington, d C. 0:15:17.760 --> 0:15:21.840 Bloomberg to Boston, Bloomberg one oh six one does San 0:15:21.920 --> 0:15:25.760 Francisco Bloomberg nine six to the country, Sirius XM Chado 0:15:25.840 --> 0:15:28.760 one nine team, and around the globe, the Bloomberg Business 0:15:28.760 --> 0:15:33.600 app and Bloomberg Radio dot Com. This is Bloomberg Business Week. 0:15:34.520 --> 0:15:37.800 High energy prices are stoking inflationary pressures around the world, 0:15:37.840 --> 0:15:40.200 you know that. And here in the US they are 0:15:40.240 --> 0:15:43.800 putting the Body administration in a really difficult position. This 0:15:43.840 --> 0:15:46.320 story in the Economic section of the new double issue 0:15:46.320 --> 0:15:48.880 of Bloomberg Business Week that explains why the president is 0:15:48.920 --> 0:15:51.400 now walking a tightrope as the world hungers for US 0:15:51.440 --> 0:15:54.400 oil and gas while American consumers fret over sticker shock 0:15:54.480 --> 0:15:57.120 at the pump. For more, we turned to Bloomberg News 0:15:57.200 --> 0:16:00.680 Energy and environmental policy reporter Jennifer de Loewe. Well, really, 0:16:00.760 --> 0:16:03.920 we're seeing this kind of resource nationalism across the world 0:16:04.000 --> 0:16:06.800 as countries look to meet the needs of their own 0:16:06.840 --> 0:16:12.240 consumers UH and amid UH inflationary pressures and then also 0:16:12.320 --> 0:16:15.560 take care of other geopolitical concerns. In the case of 0:16:15.560 --> 0:16:18.760 the US and the Biden administration, really, UH, the concern 0:16:18.880 --> 0:16:23.000 is around energy. UH. The President is feeling tremendous pressure 0:16:23.080 --> 0:16:27.600 to help European allies UH deal with energy needs, especially 0:16:27.640 --> 0:16:30.120 ahead of this winter and next year. Because of the 0:16:30.240 --> 0:16:34.680 Ukraine crisis and energy concerns that have been exacerbated by 0:16:34.760 --> 0:16:37.680 that situation. But at the same time, he's also trying 0:16:37.720 --> 0:16:41.920 to deal with domestic needs and concerns by American consumers 0:16:41.920 --> 0:16:44.560 that the price of food and energy is going up. 0:16:44.600 --> 0:16:47.200 Of course, they're dealing with, you know, gasoline prices that 0:16:47.240 --> 0:16:49.920 are increasing, and in the Northeast US there are concerns 0:16:49.920 --> 0:16:52.520 about home heating oil this winter. So you know, for 0:16:52.560 --> 0:16:55.560 this president, it's really a matter of balancing these geopolitical 0:16:55.560 --> 0:16:59.840 concerns with very real domestic economic concerns. It's a you 0:17:00.000 --> 0:17:02.280 a story, but it's also a global story. I think 0:17:02.280 --> 0:17:06.439 about India bands and exports of wheat, you know, citing 0:17:06.440 --> 0:17:08.159 a risk to its food security, partly due to the 0:17:08.160 --> 0:17:10.080 war in Ukraine because it was earlier this year. I mean, 0:17:10.440 --> 0:17:14.200 this is commodity is or fossil fuel. People who remind 0:17:14.280 --> 0:17:16.360 us it's a fixed amount, right, at some point we're 0:17:16.359 --> 0:17:18.240 all going to be competing for the same stuff unless 0:17:18.280 --> 0:17:21.919 we shift to alternative modes. Right, That's absolutely true. You know, 0:17:21.960 --> 0:17:25.520 other examples palm oil Indonesia, you know, beans in Mexico. 0:17:26.080 --> 0:17:28.639 It's far bigger than just energy, energy, just happens to 0:17:28.680 --> 0:17:31.040 be in America and the United States, that happens to 0:17:31.040 --> 0:17:34.080 be just such a big political and economic pressure point, 0:17:34.080 --> 0:17:36.760 a big contributor to inflation. And of course, you know, 0:17:36.800 --> 0:17:40.680 America is an energy superpower. We are a large supplier 0:17:40.760 --> 0:17:43.640 of oil and gas to the world, and right now, 0:17:43.720 --> 0:17:47.280 that puts the President in a really unique spot. Interestingly, 0:17:47.480 --> 0:17:50.760 some of the bid to control the exports and the 0:17:50.800 --> 0:17:54.480 outflows of these products might not necessarily have the economic 0:17:54.520 --> 0:17:57.240 impact that American consumers want. But that's part of the 0:17:57.240 --> 0:17:59.479 calculus that the White House is weighing right now. Can 0:17:59.480 --> 0:18:00.879 you talk a little at bit about that, like what 0:18:00.920 --> 0:18:03.399 difference it would actually make if they were to curb 0:18:03.480 --> 0:18:07.360 some of these exports, right So the consideration is curbing 0:18:07.480 --> 0:18:11.480 really petroleum product exports gasoline or diesel, not actually crude oil, 0:18:11.800 --> 0:18:15.160 And that's that's a live discussion right now within the administration. 0:18:15.520 --> 0:18:17.840 It would have a mixed impact and it would not 0:18:18.000 --> 0:18:21.359 necessarily reduce prices across across the country. In fact, some 0:18:21.440 --> 0:18:25.840 areas of the country would see gasoline and diesel price increases. So, uh, 0:18:25.960 --> 0:18:28.800 the Gulf Coast and the Midwest, which is flushed with 0:18:28.800 --> 0:18:31.600 with priani rees, would end up being flushed with product. UH, 0:18:31.600 --> 0:18:34.119 So gasoline prices would likely decrease if you were to 0:18:34.119 --> 0:18:37.720 clamp down on exports of that product. But some areas 0:18:37.720 --> 0:18:40.400 of the country that are really restricted and and don't 0:18:40.440 --> 0:18:44.960 have enough domestic supply coming in, who are reliant on 0:18:45.160 --> 0:18:48.600 imports to meet their needs, which includes New England as 0:18:48.640 --> 0:18:51.080 well as the West Coast, those areas would likely see 0:18:51.080 --> 0:18:54.600 price increases. That's something that we're hearing universally from analysts 0:18:54.600 --> 0:18:58.240 and UH and energy experts. So, you know, this might 0:18:58.359 --> 0:19:01.159 look good, it might be a positive UH moved to 0:19:01.560 --> 0:19:05.240 some constituents, but the economic realities just don't seem to 0:19:05.240 --> 0:19:09.040 support it. All right, So what's likely because this is tricky, right, UH. 0:19:09.080 --> 0:19:11.040 Certainly the United States when it comes to energy, has 0:19:11.040 --> 0:19:13.600 to think about its own citizens, but it's also got 0:19:13.680 --> 0:19:16.960 some allies out there that are very important. What's the 0:19:17.040 --> 0:19:19.959 strategy that the US is likely to pursue. Well, we 0:19:20.080 --> 0:19:22.400 know that the administration is going to continue to turn 0:19:22.440 --> 0:19:26.240 to the Strategic Petroleum Reserve, UH, where they have already 0:19:26.280 --> 0:19:29.480 tapped you know, US stockpiles of crude in a bid 0:19:29.520 --> 0:19:32.800 to keep the market imbalance and to keep prices down. 0:19:33.280 --> 0:19:37.080 The Biden administration started unleash an unprecedented release of those 0:19:37.119 --> 0:19:39.720 crude reserves in spring of this year, and still has 0:19:39.760 --> 0:19:42.600 some latitude to draw down barrels and release those onto 0:19:42.600 --> 0:19:45.119 the market. So that's something we're gonna keep seeing. UH. 0:19:45.200 --> 0:19:47.800 And they're gonna keep exploring some of these other creative options, 0:19:47.800 --> 0:19:52.320 whether it's limiting exports or perhaps we're crying requiring refineries 0:19:52.359 --> 0:19:55.960 to hold more stockpiles in the US, and that's really 0:19:56.000 --> 0:19:58.320 a bid to UH to deal with not just the 0:19:58.359 --> 0:20:02.600 price concern, but also very real concern about stockpiles of 0:20:02.880 --> 0:20:06.680 domestic stockpiles of fuel being at incredibly low levels heading 0:20:06.680 --> 0:20:09.840 into winter UM and and particularly in New England where 0:20:10.280 --> 0:20:13.600 home heating oil and diesel supplies are at historic lows. 0:20:13.640 --> 0:20:16.679 In the meantime, we see gas prices right now at 0:20:16.800 --> 0:20:20.800 three dollars and cents on average. That's coming from the 0:20:20.840 --> 0:20:24.560 Automobile Association of America triple A UH, still though higher 0:20:24.600 --> 0:20:27.160 by more than six percent from the lows and earlier 0:20:27.200 --> 0:20:29.879 this month than or I'm wondering about these continuing to 0:20:29.880 --> 0:20:32.920 climb higher just before the midterm season. Yeah, the huge 0:20:32.960 --> 0:20:36.000 political concern and headache for the administration. UH. You know, 0:20:36.040 --> 0:20:38.280 prices hit their high in June. But but the fact 0:20:38.280 --> 0:20:40.440