1 00:00:00,840 --> 00:00:04,000 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 2 00:00:04,040 --> 00:00:05,280 Speaker 1: my co host Matt Miller. 3 00:00:05,640 --> 00:00:09,600 Speaker 2: Every business day we bring you interviews from CEOs, market pros, 4 00:00:09,720 --> 00:00:13,600 Speaker 2: and Bloomberg experts, along with essential market moven news. 5 00:00:14,160 --> 00:00:17,279 Speaker 1: I'm the Bloomberg Markets Podcast on Apple Podcasts or wherever 6 00:00:17,400 --> 00:00:20,480 Speaker 1: you listen to podcasts, and at Bloomberg dot com Slash podcast. 7 00:00:20,600 --> 00:00:22,840 Speaker 1: It's Matt Nolla Paul Sweeney here in a Bloomberg Interactive 8 00:00:22,880 --> 00:00:23,760 Speaker 1: Brokers studio. 9 00:00:24,800 --> 00:00:26,080 Speaker 3: It's not every. 10 00:00:25,880 --> 00:00:29,440 Speaker 1: Day that a ninety nine year old company coast bankrupt, 11 00:00:29,480 --> 00:00:31,800 Speaker 1: but that's what happened in the trucking business, Yellow corpor 12 00:00:31,840 --> 00:00:34,080 Speaker 1: I'm going to use Yellow Freight. That's how I know 13 00:00:34,159 --> 00:00:36,800 Speaker 1: this company used to cover the stock back in the eighties, 14 00:00:36,800 --> 00:00:38,519 Speaker 1: back in the day when I was a pain weber 15 00:00:38,960 --> 00:00:41,880 Speaker 1: Y E l L is your ticker. Our good friends 16 00:00:41,920 --> 00:00:45,959 Speaker 1: at yellowfrate tough going at it. Lee Klaskal joins is here. 17 00:00:46,040 --> 00:00:47,880 Speaker 1: Is he's a sector head in senior analyst. He cares 18 00:00:47,960 --> 00:00:51,600 Speaker 1: all the freight transportation, all the logistics that supply chain. 19 00:00:51,640 --> 00:00:53,720 Speaker 1: We blamed it on him in the last couple of years. 20 00:00:54,120 --> 00:00:56,000 Speaker 1: He's with Bloomberg Intelligence. He joins us here on our 21 00:00:56,000 --> 00:00:59,120 Speaker 1: Bloomberg Interactive Broker studio. So Lee Yellow Frate's been out 22 00:00:59,120 --> 00:01:01,280 Speaker 1: there for literally ninety nine years. 23 00:01:01,320 --> 00:01:01,960 Speaker 3: What happened? 24 00:01:02,200 --> 00:01:05,280 Speaker 4: Yeah, well, this bankruptcy is decades in the making, at 25 00:01:05,360 --> 00:01:08,720 Speaker 4: least twenty five years when they acquired my time, when 26 00:01:08,760 --> 00:01:11,640 Speaker 4: they acquired Roadway, I think it was back in two 27 00:01:11,680 --> 00:01:14,800 Speaker 4: thousand and three, and since then, you know, they just 28 00:01:14,880 --> 00:01:18,040 Speaker 4: really haven't been able to integrate all these networks that 29 00:01:18,080 --> 00:01:20,479 Speaker 4: they've acquired. You know, usually when you do an acquisition, 30 00:01:20,560 --> 00:01:23,640 Speaker 4: one plus one should at least equal three. This was 31 00:01:23,720 --> 00:01:25,720 Speaker 4: one plus one equal maybe. 32 00:01:25,440 --> 00:01:28,119 Speaker 5: One and a half. And a lot of that had 33 00:01:28,160 --> 00:01:29,479 Speaker 5: to do with, you know. 34 00:01:29,440 --> 00:01:34,479 Speaker 4: The fact that the company is a Teamster unionized employer, so. 35 00:01:34,400 --> 00:01:36,679 Speaker 3: They was that unusual in a trucking business. 36 00:01:36,360 --> 00:01:39,160 Speaker 4: Today it is, ok, it's even more unusual now that 37 00:01:39,360 --> 00:01:41,440 Speaker 4: one of the largest ones is going under. You know, 38 00:01:41,560 --> 00:01:44,880 Speaker 4: UPS was a Teamster LTL player and they sold their 39 00:01:44,880 --> 00:01:48,240 Speaker 4: business to TFI. It was a very highly unprofitable business 40 00:01:48,240 --> 00:01:52,320 Speaker 4: of very thin margins, and you know, they're they're competing 41 00:01:52,480 --> 00:01:56,840 Speaker 4: against companies that don't have work rules, stringent work rules 42 00:01:56,920 --> 00:01:59,440 Speaker 4: like some unions do, and so they're just able to 43 00:01:59,440 --> 00:02:02,400 Speaker 4: be more flexile, more nimble, you know, it's not to 44 00:02:02,400 --> 00:02:06,200 Speaker 4: say that it couldn't become a better trucking company. And 45 00:02:06,240 --> 00:02:09,880 Speaker 4: again there's blame to be spread across the board, whether 46 00:02:10,000 --> 00:02:14,440 Speaker 4: it's management early in two thousand and three, or you know, 47 00:02:14,520 --> 00:02:17,520 Speaker 4: maybe you know the fact that some of the things 48 00:02:17,520 --> 00:02:20,680 Speaker 4: that the union did recently, like threatening to go on strike, 49 00:02:20,840 --> 00:02:24,720 Speaker 4: kind of accelerated this bankruptcy again, like you know, twenty 50 00:02:24,720 --> 00:02:25,720 Speaker 4: plus years in the making. 51 00:02:26,040 --> 00:02:29,520 Speaker 2: So is this the case of a union putting itself 52 00:02:29,560 --> 00:02:30,320 Speaker 2: out of a job. 53 00:02:30,760 --> 00:02:32,400 Speaker 4: You know, I don't want to put the blame squarely 54 00:02:32,440 --> 00:02:34,200 Speaker 4: on union. I think like I said, I think there's 55 00:02:34,240 --> 00:02:38,520 Speaker 4: there's there's there's a blame to go around. But you know, 56 00:02:38,639 --> 00:02:41,760 Speaker 4: they the company said that they were going to hold 57 00:02:41,800 --> 00:02:45,680 Speaker 4: off on a fifty million dollar pension payment, and the 58 00:02:45,800 --> 00:02:47,760 Speaker 4: union said, well, if you do that, you know we're 59 00:02:47,800 --> 00:02:50,799 Speaker 4: going to strike. And then the problem is with an LTL, 60 00:02:50,840 --> 00:02:52,280 Speaker 4: a lesson truckload carrier, it's. 61 00:02:52,240 --> 00:02:53,360 Speaker 5: Kind of like a run on the bank. 62 00:02:53,600 --> 00:02:57,280 Speaker 4: Shippers will move away from you, and then once that happens, 63 00:02:57,280 --> 00:02:59,240 Speaker 4: you have a de leveraging effect of your network. That 64 00:02:59,320 --> 00:03:02,240 Speaker 4: means your business becomes less and less profitable. And then 65 00:03:02,280 --> 00:03:04,720 Speaker 4: as more people move away because they're scared that their 66 00:03:04,760 --> 00:03:07,079 Speaker 4: freight might be stuck in your system. 67 00:03:07,320 --> 00:03:09,600 Speaker 5: It just it just becomes a snowballing effect. 68 00:03:10,120 --> 00:03:12,080 Speaker 4: And that's why usually when there's a bankruptcy in the 69 00:03:12,200 --> 00:03:16,480 Speaker 4: LTL industry, it's always always a liquidation, never restructuring. 70 00:03:16,520 --> 00:03:18,560 Speaker 2: I was going to ask, so there's no ongoing concern. 71 00:03:18,600 --> 00:03:21,080 Speaker 2: It's not like these truckers are going to still have jobs. 72 00:03:21,400 --> 00:03:24,200 Speaker 2: Just have you know, an executor running the company. 73 00:03:24,400 --> 00:03:27,200 Speaker 4: Now there's obviously you know, there's I guess there's some 74 00:03:27,240 --> 00:03:30,240 Speaker 4: good news. Some of these folks are obviously going to rebound. 75 00:03:30,240 --> 00:03:34,079 Speaker 4: You know, XBO is hiring, FedEx Freight is hiring. There's 76 00:03:34,080 --> 00:03:35,560 Speaker 4: a lot of other companies that are going to be 77 00:03:35,600 --> 00:03:37,160 Speaker 4: hiring and looking for people. 78 00:03:37,040 --> 00:03:40,000 Speaker 2: But not giving them union jobs and benefits. 79 00:03:40,400 --> 00:03:40,480 Speaker 1: No. 80 00:03:40,760 --> 00:03:44,360 Speaker 4: But the interesting thing the the yellow employees actually make 81 00:03:44,480 --> 00:03:49,400 Speaker 4: less than the non union companies just because of the market. Yeah, 82 00:03:49,680 --> 00:03:51,600 Speaker 4: from a from a pay standpoint, maybe not from an 83 00:03:51,600 --> 00:03:52,880 Speaker 4: olden benefit standpoint. 84 00:03:52,920 --> 00:03:55,480 Speaker 2: From a pay standpoint, so that make a little less, 85 00:03:55,480 --> 00:03:57,680 Speaker 2: but maybe they have higher benefits and air conditioning in 86 00:03:57,720 --> 00:03:58,080 Speaker 2: the cab. 87 00:03:58,240 --> 00:03:58,400 Speaker 6: Right. 88 00:03:58,680 --> 00:04:00,320 Speaker 2: That was one of the shocking things to me about 89 00:04:00,320 --> 00:04:02,640 Speaker 2: the ups and I ever since never do it ever 90 00:04:02,680 --> 00:04:04,960 Speaker 2: since then I've been looking at ups delivery guys all 91 00:04:04,960 --> 00:04:07,280 Speaker 2: over the place and they are sweating bullets. 92 00:04:07,360 --> 00:04:09,400 Speaker 3: Yeah, it's a hot job. They work hard. 93 00:04:09,680 --> 00:04:11,360 Speaker 1: All right, Let's step back and take a look at 94 00:04:11,440 --> 00:04:12,840 Speaker 1: the trucking business in the United States. 95 00:04:12,920 --> 00:04:15,720 Speaker 3: Kind of where are we these days? Again? We came 96 00:04:15,760 --> 00:04:16,400 Speaker 3: through the pandemic. 97 00:04:16,400 --> 00:04:18,880 Speaker 1: There were definitely some supply chain issues that just went 98 00:04:18,960 --> 00:04:21,120 Speaker 1: all the way back, you know it from the ships 99 00:04:21,200 --> 00:04:23,359 Speaker 1: until it gets to the to the warehouse. You know 100 00:04:23,400 --> 00:04:25,560 Speaker 1: how that works. Talk to us about how the trucking 101 00:04:25,560 --> 00:04:26,520 Speaker 1: industry is these days. 102 00:04:26,680 --> 00:04:28,760 Speaker 4: Yeah, So there's there's two types of trucking that I 103 00:04:28,800 --> 00:04:30,880 Speaker 4: look at. I look at the truckload industry, and those 104 00:04:30,880 --> 00:04:33,719 Speaker 4: are companies like night Swift, Schneider. You probably see all 105 00:04:33,720 --> 00:04:36,320 Speaker 4: those trucks on the road. Then you have the LTL carriers, 106 00:04:36,680 --> 00:04:40,040 Speaker 4: the Yellow xbo, Saya, FedEx. 107 00:04:39,680 --> 00:04:42,080 Speaker 2: Freight our best LTL by the way, just started it 108 00:04:42,080 --> 00:04:44,000 Speaker 2: interrupt because I don't know as much about this as 109 00:04:43,640 --> 00:04:46,960 Speaker 2: you guys do. LTL just means they're gonna go and 110 00:04:47,000 --> 00:04:50,559 Speaker 2: pick up your load and ship only truck only your load, 111 00:04:50,680 --> 00:04:53,080 Speaker 2: even if it doesn't fill up their hauler. 112 00:04:53,200 --> 00:04:53,400 Speaker 7: Right. 113 00:04:53,520 --> 00:04:56,080 Speaker 4: It's usually, I mean, how most of the LTL carriers 114 00:04:56,160 --> 00:04:58,840 Speaker 4: like it, which is less than truckloads, less than truckl sorry, yes, 115 00:04:58,960 --> 00:04:59,760 Speaker 4: less than truckload. 116 00:05:00,200 --> 00:05:00,320 Speaker 8: Uh. 117 00:05:00,640 --> 00:05:02,400 Speaker 4: They like it on pallets, so you can get a 118 00:05:02,440 --> 00:05:06,280 Speaker 4: forklift in, pull it out, and then go across the dock, 119 00:05:06,320 --> 00:05:08,280 Speaker 4: put it in another truck, and then keep on doing 120 00:05:08,320 --> 00:05:11,880 Speaker 4: that in the olden days. You know, I actually, a long, long, 121 00:05:11,920 --> 00:05:14,560 Speaker 4: long time ago, I worked at an LTL carrier unloading 122 00:05:14,560 --> 00:05:17,960 Speaker 4: and loading trucks in the summer graveyard shift. Hardest job 123 00:05:17,960 --> 00:05:20,320 Speaker 4: I ever had in my life. These jobs a little easier, 124 00:05:21,120 --> 00:05:22,320 Speaker 4: and that was very hot. 125 00:05:22,160 --> 00:05:24,640 Speaker 5: As well, and nothing was palatized. 126 00:05:24,680 --> 00:05:28,000 Speaker 4: You had to take everything off the truck, some of 127 00:05:28,120 --> 00:05:30,040 Speaker 4: yellow stuff, a lot of the yellow freight. I mean 128 00:05:30,040 --> 00:05:32,120 Speaker 4: not to keep on going back to yellow because like 129 00:05:32,200 --> 00:05:33,760 Speaker 4: you know, a lot of the carriers that are going 130 00:05:33,800 --> 00:05:35,800 Speaker 4: to be left, they're going to be going after. 131 00:05:35,600 --> 00:05:37,440 Speaker 5: Some of this business. But not all of this business 132 00:05:37,520 --> 00:05:38,119 Speaker 5: is good freight. 133 00:05:38,200 --> 00:05:40,600 Speaker 4: Some of it is not palatized, so it's more expensive 134 00:05:40,640 --> 00:05:43,920 Speaker 4: to move. A lot of it might have high cargo claim, 135 00:05:44,040 --> 00:05:47,280 Speaker 4: so it could be glass, it could be TVs, things 136 00:05:47,279 --> 00:05:50,160 Speaker 4: that tend to break when you move them around. So 137 00:05:50,360 --> 00:05:52,719 Speaker 4: you know, they have about six point eight percent of 138 00:05:52,760 --> 00:05:57,120 Speaker 4: the shipments in the us XPO FedEx freight the other ones. 139 00:05:57,160 --> 00:05:59,320 Speaker 4: They're not going to want all six point eight percent 140 00:05:59,360 --> 00:06:01,479 Speaker 4: of that, So it's going to be interesting to see 141 00:06:01,520 --> 00:06:04,640 Speaker 4: where that kind of the not so great freight ends 142 00:06:04,720 --> 00:06:08,120 Speaker 4: up going. But it'll be a real great opportunity for 143 00:06:08,240 --> 00:06:10,960 Speaker 4: the carriers that are left because they're going to probably 144 00:06:11,000 --> 00:06:14,560 Speaker 4: have good freight at good rates, at good margin, and 145 00:06:14,600 --> 00:06:19,159 Speaker 4: it should be really good incremental margins for the LTL carriers. 146 00:06:18,720 --> 00:06:22,440 Speaker 3: And trucker LINGO, could you explain to Matt what reefer means? 147 00:06:23,640 --> 00:06:24,720 Speaker 3: I know what means. 148 00:06:25,680 --> 00:06:28,880 Speaker 6: No, for the trucking industry has a specific. 149 00:06:28,560 --> 00:06:32,960 Speaker 4: Different it's temperature controlled, so food pharmacutic. 150 00:06:34,839 --> 00:06:36,680 Speaker 3: I wanted to get that out trucks. 151 00:06:36,760 --> 00:06:39,599 Speaker 2: Yes, all right, So Lee, your company is not the 152 00:06:39,640 --> 00:06:42,120 Speaker 2: same as the one in Cheech and chong up and smoke. 153 00:06:42,360 --> 00:06:44,279 Speaker 1: Or at the fish show that you fish that you 154 00:06:44,360 --> 00:06:47,400 Speaker 1: tend to go to. So all right, Lee, your companies, 155 00:06:47,440 --> 00:06:53,599 Speaker 1: the truckers, the railroads, the global ocean shippers. I can't 156 00:06:53,600 --> 00:06:54,960 Speaker 1: think of an industry it's got a better look on 157 00:06:55,000 --> 00:06:57,479 Speaker 1: the economy than those types of companies. What are those 158 00:06:57,480 --> 00:07:00,280 Speaker 1: companies saying about their economic out look? 159 00:07:00,640 --> 00:07:00,919 Speaker 9: Yeah? 160 00:07:00,960 --> 00:07:03,000 Speaker 4: So I think you know, we actually just spoke to 161 00:07:03,000 --> 00:07:05,960 Speaker 4: one of our companies this morning. We spoke with DHL 162 00:07:06,040 --> 00:07:07,680 Speaker 4: and then they were telling us that, you know, they're 163 00:07:07,720 --> 00:07:10,880 Speaker 4: not expecting much of a peak season this year really, 164 00:07:11,080 --> 00:07:12,840 Speaker 4: and if they do see it, they'll probably see it 165 00:07:13,080 --> 00:07:15,800 Speaker 4: in the air freight on their forwarding business versus their 166 00:07:15,800 --> 00:07:18,840 Speaker 4: ocean business. A lot of the other carriers like night Swift, 167 00:07:18,880 --> 00:07:21,400 Speaker 4: you know, they're all talking about your seeing the d 168 00:07:21,560 --> 00:07:22,440 Speaker 4: stocking happen. 169 00:07:22,840 --> 00:07:25,920 Speaker 3: So d stocking that's just retailers just bringing down their. 170 00:07:25,760 --> 00:07:29,600 Speaker 4: Inventory exactly, and they're not seeing the restocking where they're 171 00:07:29,640 --> 00:07:32,960 Speaker 4: filling up the inventories. So we're at a situation where 172 00:07:33,000 --> 00:07:36,520 Speaker 4: a the consumer is obviously pretty resilient, but we're just 173 00:07:36,600 --> 00:07:39,080 Speaker 4: not seeing the normal seasonal patterns. 174 00:07:39,120 --> 00:07:39,400 Speaker 6: Yet. 175 00:07:39,680 --> 00:07:42,160 Speaker 4: We're pretty optimistic, where I guess we're probably a little 176 00:07:42,200 --> 00:07:44,760 Speaker 4: more bullish. You know, we think we're going to see 177 00:07:45,120 --> 00:07:47,160 Speaker 4: not a peak peak season, but we are going to 178 00:07:47,200 --> 00:07:51,080 Speaker 4: see an incremental increase in demand and that's going to 179 00:07:51,200 --> 00:07:55,440 Speaker 4: have a really positive impact on the truckload industry. We've 180 00:07:55,480 --> 00:07:58,280 Speaker 4: been calling a bottom for that industry for quite some 181 00:07:58,400 --> 00:08:00,480 Speaker 4: time on the rate side, and so far has. 182 00:08:00,400 --> 00:08:01,200 Speaker 5: Been playing out. 183 00:08:01,760 --> 00:08:03,800 Speaker 4: We think that as we go into the fourth quarter, 184 00:08:04,000 --> 00:08:06,880 Speaker 4: they're going to slowly increase. Now, a lot of the 185 00:08:06,920 --> 00:08:09,000 Speaker 4: trucking companies that we cover, they don't play in the 186 00:08:09,000 --> 00:08:12,000 Speaker 4: spot market, but it's kind of like this. It tells 187 00:08:12,000 --> 00:08:14,200 Speaker 4: you where contract rates are going to be six to 188 00:08:14,320 --> 00:08:16,880 Speaker 4: nine months out. And so what we're looking closely at 189 00:08:16,880 --> 00:08:19,040 Speaker 4: the spot market. We look at it every week, try 190 00:08:19,040 --> 00:08:21,520 Speaker 4: to figure out where it's going. You know, we think 191 00:08:21,560 --> 00:08:23,560 Speaker 4: that's going to set up next year a pretty good 192 00:08:23,800 --> 00:08:27,600 Speaker 4: for the truckload industry for contracts. This year, contract rates 193 00:08:27,600 --> 00:08:31,960 Speaker 4: are down anywhere between mid to high single digits. Some 194 00:08:32,080 --> 00:08:35,679 Speaker 4: companies are even seeing them down low double digits. But 195 00:08:35,720 --> 00:08:37,960 Speaker 4: you know they can't come down much more because they've 196 00:08:38,000 --> 00:08:40,600 Speaker 4: had all the inflationary pressures that every other company has. 197 00:08:40,600 --> 00:08:43,560 Speaker 4: You know, they're paying their people more, equipment costs more, 198 00:08:43,600 --> 00:08:48,280 Speaker 4: insurance costs more. So you know, eventually people are the 199 00:08:48,400 --> 00:08:50,680 Speaker 4: larger companies we're just going to say, you know, we'd 200 00:08:50,760 --> 00:08:52,679 Speaker 4: rather not take your freight because it just doesn't make 201 00:08:52,720 --> 00:08:53,400 Speaker 4: sense for us. 202 00:08:53,960 --> 00:08:55,680 Speaker 1: How about if I own a truck and it's parked 203 00:08:55,679 --> 00:08:58,400 Speaker 1: in my backyard, a big, you know, eighteen wheeler. Can 204 00:08:58,440 --> 00:09:00,720 Speaker 1: I get business anytime I want? Can I work anytime 205 00:09:00,720 --> 00:09:03,040 Speaker 1: I want? You can't you can't. 206 00:09:03,080 --> 00:09:06,640 Speaker 4: You can because there's an app for that. I mean, 207 00:09:06,679 --> 00:09:09,040 Speaker 4: everyone and their mother has an app. Every large trucking 208 00:09:09,080 --> 00:09:11,280 Speaker 4: company has an app. You have the Uber Freights of 209 00:09:11,320 --> 00:09:13,560 Speaker 4: the world. You have load boards like truck Stop or 210 00:09:13,640 --> 00:09:16,400 Speaker 4: dat so alls you need is a smartphone and a 211 00:09:16,440 --> 00:09:19,080 Speaker 4: truck and a CDL and you can move freight. The 212 00:09:19,160 --> 00:09:21,320 Speaker 4: problem is you might be moving freight at a loss. 213 00:09:21,520 --> 00:09:23,600 Speaker 4: And that's what a lot of truckers are dealing with now. 214 00:09:23,960 --> 00:09:27,560 Speaker 4: So as time goes on, some of the truckers, we'll 215 00:09:27,559 --> 00:09:30,880 Speaker 4: call them high high, high cost truckers that are that 216 00:09:31,080 --> 00:09:33,080 Speaker 4: kind of came into the market at the peak and 217 00:09:33,160 --> 00:09:36,319 Speaker 4: their equipment's more expensive and their insurance is more expensive, 218 00:09:36,480 --> 00:09:38,120 Speaker 4: and they thought they were going to get these great 219 00:09:38,200 --> 00:09:40,480 Speaker 4: rates that they were getting during the pandemic. Now that 220 00:09:40,600 --> 00:09:43,280 Speaker 4: rates are down considerably, you know, twenty some percent from 221 00:09:43,360 --> 00:09:45,800 Speaker 4: last year. You know, they're not making money and eventually 222 00:09:46,480 --> 00:09:48,640 Speaker 4: you can only operate for cash flow for so long 223 00:09:48,760 --> 00:09:50,760 Speaker 4: until you're just like, I'm going to go do something else. 224 00:09:51,040 --> 00:09:53,440 Speaker 4: And a lot of truckers, you know, the owner operators, come. 225 00:09:53,320 --> 00:09:54,480 Speaker 5: In and out of this business. 226 00:09:54,679 --> 00:09:56,840 Speaker 4: You know, they might work, they might they might drive 227 00:09:56,880 --> 00:09:58,920 Speaker 4: their truck as a long haul trucker, or they might 228 00:09:58,960 --> 00:10:01,000 Speaker 4: do construction, or they might work in warehousing. 229 00:10:01,920 --> 00:10:04,079 Speaker 1: So it's my neighbor in North Carolina had his eighteen 230 00:10:04,120 --> 00:10:07,280 Speaker 1: Miller Park Beautiful truck parked next to his little house 231 00:10:07,320 --> 00:10:09,280 Speaker 1: in Durham Nor, North Carolina. He's like, I feel like 232 00:10:09,320 --> 00:10:10,760 Speaker 1: working for the next three or four weeks, and he 233 00:10:10,920 --> 00:10:12,040 Speaker 1: just go out and do it. 234 00:10:12,080 --> 00:10:14,160 Speaker 3: So I don't know sal work. That's my dream, as 235 00:10:14,200 --> 00:10:14,880 Speaker 3: you know exactly. 236 00:10:15,000 --> 00:10:17,120 Speaker 1: All right, Lee Clasical, thanks so much for joining us. 237 00:10:17,200 --> 00:10:20,079 Speaker 1: Lee does all the transportation stuff. 238 00:10:20,120 --> 00:10:23,520 Speaker 6: You're listening to the teenth Ken's Are Live program Bloomberg 239 00:10:23,559 --> 00:10:26,920 Speaker 6: Markets weekdays at ten am Eastern on Bloomberg dot Com, 240 00:10:27,000 --> 00:10:30,160 Speaker 6: the iHeartRadio app, and the Bloomberg Business App, or listen 241 00:10:30,240 --> 00:10:32,360 Speaker 6: on demand wherever you get your podcasts. 242 00:10:34,880 --> 00:10:38,640 Speaker 1: Matt Miller, Paul Sweeney here in the Bloomberg Interactive Brokers studio. 243 00:10:38,679 --> 00:10:40,120 Speaker 3: All right, we got the s and p up. 244 00:10:40,240 --> 00:10:43,760 Speaker 1: Let's call it eighteen percent. Year to date, the tech 245 00:10:43,800 --> 00:10:48,480 Speaker 1: heavy Nasdaq is up over thirty percent. I mean, you know, 246 00:10:48,520 --> 00:10:50,440 Speaker 1: the back half of August and September some of the 247 00:10:50,440 --> 00:10:52,520 Speaker 1: best times of the Jersey Shore. I think I'm just 248 00:10:52,600 --> 00:10:54,400 Speaker 1: packing it in. I'm done, and I'm just gonna go 249 00:10:54,400 --> 00:10:56,480 Speaker 1: down to short because I've got a great first half. 250 00:10:56,559 --> 00:10:58,800 Speaker 1: I don't need to do anymore. But let's see what 251 00:10:58,840 --> 00:11:01,760 Speaker 1: the professionals are out there doing. David cast, president and 252 00:11:01,840 --> 00:11:07,880 Speaker 1: CIO at Matrix Asset Management or Advisors Matrix Asset Advisors. David, 253 00:11:08,240 --> 00:11:10,480 Speaker 1: I mean, boy, that's a heck of a first seven 254 00:11:10,520 --> 00:11:12,800 Speaker 1: months here in this market. Is there anything left in 255 00:11:12,800 --> 00:11:13,360 Speaker 1: this market? 256 00:11:14,720 --> 00:11:17,920 Speaker 10: We do think there's still a batch more left book. 257 00:11:18,000 --> 00:11:19,960 Speaker 11: We think that it's going to come from different places. 258 00:11:19,960 --> 00:11:21,920 Speaker 10: If you look at the first five months of the year, 259 00:11:22,360 --> 00:11:26,320 Speaker 10: the largest seven technology companies were up over sixty five percent. 260 00:11:26,640 --> 00:11:29,400 Speaker 10: The rest of the market was flat. Since that time, 261 00:11:29,480 --> 00:11:31,679 Speaker 10: the broader market's been doing better. There's been a lot 262 00:11:31,720 --> 00:11:33,280 Speaker 10: of catch up. We think when you look for the 263 00:11:33,320 --> 00:11:35,520 Speaker 10: balance of the year, you're going to continue to have 264 00:11:35,600 --> 00:11:37,640 Speaker 10: catch up with things that have not done as well 265 00:11:37,880 --> 00:11:39,559 Speaker 10: in the first seven months of the year. We think 266 00:11:39,559 --> 00:11:41,760 Speaker 10: they will start to rally, and we think the things 267 00:11:41,800 --> 00:11:44,760 Speaker 10: that did great can still do okay. But we would 268 00:11:44,800 --> 00:11:46,480 Speaker 10: agree with you there there's not going to be a 269 00:11:46,520 --> 00:11:47,160 Speaker 10: repeat of that. 270 00:11:47,720 --> 00:11:50,240 Speaker 2: So are you not concerned that we're going to have 271 00:11:50,280 --> 00:11:52,840 Speaker 2: her recession? We just talked to Bloomberg Economics Anna Wong. 272 00:11:53,000 --> 00:11:57,200 Speaker 2: She says October is now her prediction for the beginning, 273 00:11:57,280 --> 00:11:58,960 Speaker 2: and she says it's going to start slow and then 274 00:11:59,000 --> 00:11:59,800 Speaker 2: get really steep. 275 00:12:01,280 --> 00:12:03,080 Speaker 11: But we don't think it's going to be steep. We 276 00:12:03,120 --> 00:12:05,000 Speaker 11: think that it's even money. 277 00:12:04,760 --> 00:12:08,760 Speaker 10: Whether we have a short, shallow, modest recession, or a 278 00:12:08,800 --> 00:12:13,280 Speaker 10: soft landing. We think the economy has been unbelievably resilient, 279 00:12:13,480 --> 00:12:15,160 Speaker 10: but you have to upset that with the fact that 280 00:12:15,160 --> 00:12:16,680 Speaker 10: the BET has been increasing rates. 281 00:12:16,440 --> 00:12:18,880 Speaker 11: For the last year and a half. We think that 282 00:12:18,920 --> 00:12:19,880 Speaker 11: the FED is close to. 283 00:12:19,840 --> 00:12:21,640 Speaker 10: An end, but a lot of the things that they 284 00:12:21,679 --> 00:12:23,800 Speaker 10: did have lagging impact. So we think you could have 285 00:12:23,800 --> 00:12:26,800 Speaker 10: a modest recession, but we think a modest recession or 286 00:12:26,800 --> 00:12:29,720 Speaker 10: a soft landing would be bullish for stocks. Deep recession, 287 00:12:29,760 --> 00:12:32,680 Speaker 10: which we don't expect, would be bearish for stocks. 288 00:12:32,960 --> 00:12:36,160 Speaker 1: All Right, So I'm just looking at some of your 289 00:12:36,200 --> 00:12:39,640 Speaker 1: picks because interesting because again we've talked about it before, 290 00:12:39,800 --> 00:12:43,080 Speaker 1: a lot of the big cap tech names have really 291 00:12:43,120 --> 00:12:43,959 Speaker 1: led the market. 292 00:12:44,000 --> 00:12:44,120 Speaker 9: Here. 293 00:12:44,120 --> 00:12:46,760 Speaker 1: If I wanted to broaden it out, Metronic is one 294 00:12:46,800 --> 00:12:49,959 Speaker 1: of your names. You know, a healthcare device company. Talk 295 00:12:50,000 --> 00:12:50,840 Speaker 1: to U about Metronic. 296 00:12:52,000 --> 00:12:54,800 Speaker 10: So healthcare did very well on a relative basis in 297 00:12:54,840 --> 00:12:58,600 Speaker 10: twenty twenty two and has been miserable in twenty twenty three. Again, 298 00:12:58,640 --> 00:13:00,680 Speaker 10: we think there's going to be a rotation in terms 299 00:13:00,720 --> 00:13:05,880 Speaker 10: of Metronic. The procedures for cardiovascular are finally starting to 300 00:13:05,920 --> 00:13:06,640 Speaker 10: get better. 301 00:13:06,920 --> 00:13:07,920 Speaker 11: You had United. 302 00:13:07,600 --> 00:13:09,880 Speaker 10: Healthcare say that more people are going to the hospitals 303 00:13:09,920 --> 00:13:10,800 Speaker 10: for these procedures. 304 00:13:11,120 --> 00:13:13,560 Speaker 11: Metronic has had a number of disappointing quarters. They set 305 00:13:13,559 --> 00:13:15,240 Speaker 11: the bar particularly low this year. 306 00:13:15,520 --> 00:13:17,719 Speaker 10: We think this quarter, for the first time in the 307 00:13:17,800 --> 00:13:20,680 Speaker 10: last four to six they're going to have good numbers 308 00:13:20,720 --> 00:13:23,160 Speaker 10: and there's a reasonable chance that they beat and can 309 00:13:23,240 --> 00:13:26,600 Speaker 10: raise expectations. You're getting it at a pretty reasonable price 310 00:13:26,640 --> 00:13:28,760 Speaker 10: and a very nice dividend deal. We think you have 311 00:13:28,800 --> 00:13:31,800 Speaker 10: a twelve month time horizon. You easily have twenty to 312 00:13:31,840 --> 00:13:33,439 Speaker 10: twenty five percent of the upside. 313 00:13:35,120 --> 00:13:37,360 Speaker 2: Why do you think these stocks haven't done better though? 314 00:13:38,880 --> 00:13:39,160 Speaker 11: Well? 315 00:13:39,160 --> 00:13:41,400 Speaker 10: Again, certain stocks did well last year and there was 316 00:13:41,440 --> 00:13:43,440 Speaker 10: a rotation. The things that did well last year have 317 00:13:43,520 --> 00:13:47,240 Speaker 10: slowed down this year, and vice versa. Financials also did 318 00:13:47,280 --> 00:13:50,240 Speaker 10: particularly poorly this year. The drug companies had been doing 319 00:13:50,280 --> 00:13:52,439 Speaker 10: poorly up to last week, and then you had companies 320 00:13:52,720 --> 00:13:56,040 Speaker 10: like abd Amgen that had very good numbers and the 321 00:13:56,080 --> 00:13:58,280 Speaker 10: stock really spiked on that, so we think it's going 322 00:13:58,360 --> 00:14:00,400 Speaker 10: to spread out. So we don't I think that you 323 00:14:00,400 --> 00:14:03,120 Speaker 10: want to question that they haven't done well in terms of, hey, 324 00:14:03,160 --> 00:14:04,920 Speaker 10: I'm not going to buy them. They haven't done well, 325 00:14:05,040 --> 00:14:06,439 Speaker 10: and we think you want to look at them as 326 00:14:06,679 --> 00:14:08,440 Speaker 10: what's going to be the next thing that rallies. And 327 00:14:08,480 --> 00:14:10,800 Speaker 10: we think a lot of those drug companies and medtech 328 00:14:10,880 --> 00:14:13,720 Speaker 10: companies are going to start to do better because their 329 00:14:13,720 --> 00:14:14,800 Speaker 10: fundamentals are strong. 330 00:14:15,000 --> 00:14:16,680 Speaker 11: But the stock prices haven't moved yet. 331 00:14:16,880 --> 00:14:19,120 Speaker 1: Hey, David, I want to I can't remember the last 332 00:14:19,160 --> 00:14:21,520 Speaker 1: time on this show we ever talked about it. An 333 00:14:21,760 --> 00:14:25,680 Speaker 1: electric power company utility company. But you've got American Electric 334 00:14:25,920 --> 00:14:31,520 Speaker 1: Power AEP based in Columbus, Ohio that's on your list. 335 00:14:32,160 --> 00:14:34,200 Speaker 3: What's the play on the electric business? 336 00:14:34,200 --> 00:14:35,920 Speaker 2: Socks down fourteen percent year to date. 337 00:14:35,840 --> 00:14:39,760 Speaker 11: YEP, So that's exactly it. So they're a very well 338 00:14:39,840 --> 00:14:40,520 Speaker 11: run company. 339 00:14:40,520 --> 00:14:43,000 Speaker 10: We like management. They're going to grow the earnings from 340 00:14:43,120 --> 00:14:45,080 Speaker 10: five to seven eight percent. They're going to grow the 341 00:14:45,080 --> 00:14:47,760 Speaker 10: dividend from five to seven eight percent. It's a fifteen 342 00:14:47,760 --> 00:14:49,840 Speaker 10: and a half times earnings, so it's at the lower 343 00:14:49,960 --> 00:14:52,800 Speaker 10: end of its valuation range. The yield is four percent, 344 00:14:53,000 --> 00:14:54,480 Speaker 10: So if you go back to your last guest that 345 00:14:54,600 --> 00:14:57,480 Speaker 10: was looking for a recession. These are the type that's 346 00:14:57,520 --> 00:14:59,120 Speaker 10: the type of business you want to own in an 347 00:14:59,120 --> 00:15:02,000 Speaker 10: economic slowdown or recession. And we just think you want 348 00:15:02,000 --> 00:15:04,560 Speaker 10: to balance your portfolio. We think the economy is going 349 00:15:04,600 --> 00:15:06,800 Speaker 10: to be okay, but if it's not, AEP is going 350 00:15:06,840 --> 00:15:07,000 Speaker 10: to be. 351 00:15:07,000 --> 00:15:09,560 Speaker 11: A very good place to be. We think that they 352 00:15:09,600 --> 00:15:10,480 Speaker 11: haven't done anything. 353 00:15:10,520 --> 00:15:13,240 Speaker 10: The stocks down it shouldn't be, so we're not looking 354 00:15:13,280 --> 00:15:14,840 Speaker 10: for a home run here. But you could get a 355 00:15:14,840 --> 00:15:17,920 Speaker 10: four percent yield and a fifteen to twenty percent. 356 00:15:17,640 --> 00:15:18,920 Speaker 11: Gain over the next twelve months. 357 00:15:18,960 --> 00:15:24,320 Speaker 10: So again conservative place, balance out your portfolio. 358 00:15:22,040 --> 00:15:25,280 Speaker 3: And in a great place. Yeah, you need to do 359 00:15:25,400 --> 00:15:26,000 Speaker 3: channel checks. 360 00:15:26,040 --> 00:15:26,720 Speaker 11: I'm your man. 361 00:15:27,600 --> 00:15:30,800 Speaker 3: In terms of screening, I see air products and chemicals 362 00:15:30,800 --> 00:15:31,120 Speaker 3: as well. 363 00:15:31,160 --> 00:15:36,160 Speaker 2: So they sell oxygen, which we need, nitrogen, argon, helium, 364 00:15:36,200 --> 00:15:39,720 Speaker 2: stuff like that. How do you pick these companies, David? 365 00:15:39,720 --> 00:15:40,720 Speaker 3: How do you screen for those? 366 00:15:41,760 --> 00:15:44,080 Speaker 10: So we have eight valuation models that look at the 367 00:15:44,120 --> 00:15:46,880 Speaker 10: companies earnings and dividends and return inequity, and we try 368 00:15:46,880 --> 00:15:49,080 Speaker 10: to value what the business is worth and then buy 369 00:15:49,080 --> 00:15:52,240 Speaker 10: it at a discount. We also focus on dividends, sustainability 370 00:15:52,280 --> 00:15:54,560 Speaker 10: of dividends, and in terms of air products, they are 371 00:15:54,640 --> 00:15:58,240 Speaker 10: really consistent earnings for over time. They've grown the dividend 372 00:15:58,280 --> 00:16:01,320 Speaker 10: at North in ten to twelve percent. The expectation is 373 00:16:01,360 --> 00:16:04,480 Speaker 10: that that's going to continue. The stock did well last year, 374 00:16:04,720 --> 00:16:06,760 Speaker 10: has not done a whole lot this year. But I 375 00:16:06,800 --> 00:16:10,480 Speaker 10: think what's very interesting here is it's a green energy play, 376 00:16:11,080 --> 00:16:12,760 Speaker 10: but you're not paying too much for you and you're 377 00:16:12,760 --> 00:16:14,360 Speaker 10: getting a good yield while you're waiting. 378 00:16:15,600 --> 00:16:17,800 Speaker 3: David, how concerned are you about this Federal Reserve? 379 00:16:17,800 --> 00:16:20,640 Speaker 1: We're going to get a bunch of economic data this week, 380 00:16:20,680 --> 00:16:23,200 Speaker 1: and if the market seems to be saying maybe one 381 00:16:23,240 --> 00:16:27,480 Speaker 1: more rate increase or maybe even just hold steady, how 382 00:16:27,600 --> 00:16:29,320 Speaker 1: concerned are you a bet our federal reserve? 383 00:16:30,640 --> 00:16:33,400 Speaker 10: Well, we think the Federal Reserve has overshot in terms 384 00:16:33,400 --> 00:16:35,400 Speaker 10: of raising rates, so we're a little bit fearful that 385 00:16:35,440 --> 00:16:37,600 Speaker 10: they continue to do that. You did have one Fed 386 00:16:37,640 --> 00:16:41,600 Speaker 10: governor say that she thinks there could be additional multiple 387 00:16:41,720 --> 00:16:44,200 Speaker 10: raises this year, So that's a worry. We don't think 388 00:16:44,280 --> 00:16:47,320 Speaker 10: they have to. We think inflation is definitely breaking lower. 389 00:16:47,800 --> 00:16:51,080 Speaker 10: Your last guests just talked about inflation going lower. If 390 00:16:51,080 --> 00:16:53,760 Speaker 10: you look at this quarter's earning season, we agree most 391 00:16:53,760 --> 00:16:57,240 Speaker 10: companies are talking about not having issues with supply anymore, 392 00:16:57,640 --> 00:17:01,560 Speaker 10: logistics shipping, all prices coming down. So we think the 393 00:17:01,720 --> 00:17:03,840 Speaker 10: Federal Reserve doesn't have to increase more. 394 00:17:04,400 --> 00:17:06,760 Speaker 11: They could do one. It's either one or done or 395 00:17:06,840 --> 00:17:07,680 Speaker 11: none and done. 396 00:17:08,480 --> 00:17:11,960 Speaker 10: And if that's the case and the economy holds in Okay, 397 00:17:11,960 --> 00:17:14,000 Speaker 10: which we think it will, stock should be a pretty 398 00:17:14,000 --> 00:17:16,000 Speaker 10: good place to be. If we're wrong and the Federal 399 00:17:16,000 --> 00:17:18,800 Speaker 10: Reserve raises four more times, that's problematic. 400 00:17:18,880 --> 00:17:20,280 Speaker 11: We don't think that app that's. 401 00:17:20,119 --> 00:17:22,400 Speaker 3: A problem for a lot of people there. All right, David, 402 00:17:22,440 --> 00:17:23,000 Speaker 3: thank you so much. 403 00:17:23,040 --> 00:17:25,760 Speaker 1: We appreciate it as always, David Katz, He's a president 404 00:17:25,880 --> 00:17:30,960 Speaker 1: and chief investment officer Matrix Asset Advisors. Still bullish on 405 00:17:31,040 --> 00:17:33,600 Speaker 1: this market, even after the run we've had in the 406 00:17:33,760 --> 00:17:36,760 Speaker 1: S and P in particularly in the Nasdaq and Nasdaq 407 00:17:36,800 --> 00:17:37,320 Speaker 1: one hundred. 408 00:17:37,600 --> 00:17:40,679 Speaker 6: You're listening to the tape Cat's are live program Bloomberg 409 00:17:40,760 --> 00:17:44,359 Speaker 6: Markets weekdays at ten am Eastern on Bloomberg Radio, the 410 00:17:44,400 --> 00:17:47,640 Speaker 6: tune in app, Bloomberg dot Com, and the Bloomberg Business app. 411 00:17:47,680 --> 00:17:50,479 Speaker 6: You can also listen live on Amazon Alexa from our 412 00:17:50,480 --> 00:17:55,639 Speaker 6: flagship New York station, Just say Alexa Play Bloomberg eleven thirty. 413 00:17:57,320 --> 00:17:59,480 Speaker 3: I want to talk Goldvin Sachs. 414 00:17:59,520 --> 00:17:59,760 Speaker 6: Jeff. 415 00:18:00,480 --> 00:18:02,720 Speaker 3: Do we have shri? I mean he's a year round 416 00:18:02,760 --> 00:18:03,560 Speaker 3: I mean got it. 417 00:18:04,080 --> 00:18:06,040 Speaker 1: I heard he was going to be in studio And 418 00:18:06,080 --> 00:18:07,680 Speaker 1: the reason we like to talk to this guy because 419 00:18:07,680 --> 00:18:10,679 Speaker 1: he is all over the Goldman Sachs beat. So two 420 00:18:10,800 --> 00:18:13,240 Speaker 1: questions about Jeff Curry. He's only one person. He's a 421 00:18:13,240 --> 00:18:16,280 Speaker 1: commodity strategist. Okay, he's not a key man risk in 422 00:18:16,280 --> 00:18:18,960 Speaker 1: my opinion, but high profile guy. I like to know 423 00:18:19,040 --> 00:18:20,879 Speaker 1: two things, neither which I think we know. 424 00:18:21,359 --> 00:18:23,600 Speaker 3: A why did he leave? And B where's he going? 425 00:18:24,520 --> 00:18:27,040 Speaker 8: So, yes, you're right, he's not key man risk. But 426 00:18:28,000 --> 00:18:30,760 Speaker 8: Jeff Curry is the name that the Bloomberg listeners, the 427 00:18:30,800 --> 00:18:34,399 Speaker 8: Bloomberg readers certainly know really well. He has been the 428 00:18:34,440 --> 00:18:38,440 Speaker 8: face of commodities research at Goldman Sachs for nearly thirty 429 00:18:38,600 --> 00:18:42,359 Speaker 8: years now, and he truly has craft a brand for 430 00:18:42,480 --> 00:18:46,800 Speaker 8: himself as one of the most recognizable commodities analysts out there. 431 00:18:46,840 --> 00:18:51,600 Speaker 8: He makes bold calls, he describes it in an entertaining 432 00:18:51,640 --> 00:18:54,440 Speaker 8: in a very easy to understand manner, and he has 433 00:18:54,480 --> 00:18:56,880 Speaker 8: won his followers. He may not always have been right. 434 00:18:57,080 --> 00:19:00,800 Speaker 8: Remember right now he's called for another super cycling that 435 00:19:00,840 --> 00:19:05,280 Speaker 8: has not quite panned out. But agree with him or not, 436 00:19:05,760 --> 00:19:07,960 Speaker 8: everyone in the market will tell you that he is 437 00:19:08,000 --> 00:19:11,159 Speaker 8: someone you must at least pay attention to. That's Jeff Curry. 438 00:19:11,320 --> 00:19:13,879 Speaker 8: Of course, there is the broader Goldman Sachs then that 439 00:19:13,920 --> 00:19:19,080 Speaker 8: we always wonder about, another very recognizable name brand leaving 440 00:19:19,080 --> 00:19:21,760 Speaker 8: Goldman Sachs the sixth partner in the last couple of weeks. 441 00:19:21,960 --> 00:19:25,439 Speaker 8: I would argue that it's a little different from the 442 00:19:25,480 --> 00:19:27,960 Speaker 8: sort of tug of war you've seen in the other 443 00:19:28,000 --> 00:19:31,600 Speaker 8: parts of Goldman, where there are bigger issues over strategy 444 00:19:31,680 --> 00:19:34,400 Speaker 8: and some of the reorganizations that they've done that has 445 00:19:34,480 --> 00:19:37,760 Speaker 8: led to a flow of talent. I can't really attribute 446 00:19:37,800 --> 00:19:40,120 Speaker 8: that being the chief reason for Jeff Curry in any 447 00:19:40,160 --> 00:19:42,280 Speaker 8: way that we understand. And look, it doesn't look like 448 00:19:42,320 --> 00:19:44,760 Speaker 8: he's looking to take any other job immediately. He's going 449 00:19:44,800 --> 00:19:46,800 Speaker 8: to spend some time with family. He has two young kids. 450 00:19:46,880 --> 00:19:48,359 Speaker 3: He's only fifty six years old. 451 00:19:48,400 --> 00:19:50,879 Speaker 8: I was about to say that, but he's still only 452 00:19:50,920 --> 00:19:53,399 Speaker 8: fifty six years old, so it would be hard to 453 00:19:53,480 --> 00:19:55,360 Speaker 8: bet against a second act. 454 00:19:55,480 --> 00:19:58,960 Speaker 1: Here's a quote I like, and is this Yeah, it's 455 00:19:58,960 --> 00:20:01,480 Speaker 1: in your story, Stree, you got it. From Colleen Foster 456 00:20:01,600 --> 00:20:03,440 Speaker 1: is like a senior salesperson in commodities. 457 00:20:03,440 --> 00:20:06,680 Speaker 3: And this is like the best anybody could say about 458 00:20:06,680 --> 00:20:07,680 Speaker 3: an analyst. 459 00:20:07,760 --> 00:20:09,679 Speaker 1: There's never a time I couldn't get a meeting with 460 00:20:09,720 --> 00:20:13,360 Speaker 1: a CEO, an oil minister, or a hedge fund founder 461 00:20:13,760 --> 00:20:15,080 Speaker 1: if Jeff Curry was with me. 462 00:20:15,560 --> 00:20:17,239 Speaker 3: That's the sway this guy had it. 463 00:20:17,240 --> 00:20:18,919 Speaker 2: He gets you in the door. I actually had a 464 00:20:18,920 --> 00:20:22,400 Speaker 2: prominent dream about Jeff Curry. Remember last year. 465 00:20:23,680 --> 00:20:23,760 Speaker 9: Now. 466 00:20:23,840 --> 00:20:25,760 Speaker 2: We were sitting at a diner and he was selling 467 00:20:25,840 --> 00:20:28,280 Speaker 2: me on the commodity supercycle and he was like, listen, 468 00:20:28,320 --> 00:20:30,159 Speaker 2: Europe hasn't gone into the recession that we thought it 469 00:20:30,200 --> 00:20:33,280 Speaker 2: was going to. China's about to come roaring back, you know, 470 00:20:33,359 --> 00:20:35,560 Speaker 2: and a US driving season is going to kick. 471 00:20:35,400 --> 00:20:36,240 Speaker 3: A lot of that stuff. 472 00:20:37,160 --> 00:20:40,720 Speaker 2: Europe doesn't look great anymore. China hasn't come roaring back, 473 00:20:41,000 --> 00:20:43,480 Speaker 2: and the US we're just not using as much gas. 474 00:20:43,520 --> 00:20:44,640 Speaker 3: There's not as much demand as they. 475 00:20:44,680 --> 00:20:47,840 Speaker 8: Okay, let's not leave Matt hanging here. Yes, you knew 476 00:20:47,920 --> 00:20:50,520 Speaker 8: Jeff Curry for his commodities research, and maybe that was 477 00:20:50,560 --> 00:20:52,600 Speaker 8: something he did on the side, But what was he 478 00:20:52,640 --> 00:20:56,720 Speaker 8: more famous for? Matt He helped co produce a documentary 479 00:20:56,840 --> 00:20:59,640 Speaker 8: on the British drug band the Kings, trying to bring 480 00:20:59,680 --> 00:21:00,560 Speaker 8: them back together. 481 00:21:01,200 --> 00:21:02,320 Speaker 5: That is pretty cool. 482 00:21:02,520 --> 00:21:05,160 Speaker 1: Hey, just stepping away from Goldman, I don't think there's 483 00:21:05,200 --> 00:21:08,000 Speaker 1: any to me, any turnover that we're seeing in Goldman 484 00:21:08,080 --> 00:21:10,119 Speaker 1: or anywhere else on the street is any different than 485 00:21:10,160 --> 00:21:10,919 Speaker 1: any past. 486 00:21:11,000 --> 00:21:13,040 Speaker 3: Cycles to me. Do you sense that there's anything. 487 00:21:12,840 --> 00:21:16,320 Speaker 1: Unusual going on in turnover or it's just business as usual? 488 00:21:16,480 --> 00:21:19,359 Speaker 8: No, I mean there's certainly a different story at Goldman Sachs. Yes, 489 00:21:19,440 --> 00:21:21,720 Speaker 8: maybe there's not much in terms of the quantity in 490 00:21:21,760 --> 00:21:23,280 Speaker 8: terms of the number of people who are leaving, but 491 00:21:23,359 --> 00:21:24,920 Speaker 8: the type of people who are leaving. Some of these 492 00:21:24,920 --> 00:21:27,440 Speaker 8: people who were handpicked for a bigger and greater role 493 00:21:27,480 --> 00:21:29,760 Speaker 8: at Goldman sacks for them to be leaving so soon 494 00:21:29,800 --> 00:21:32,280 Speaker 8: after they've been on the up and you know, Goldman's 495 00:21:32,280 --> 00:21:34,679 Speaker 8: always had an upper out culture. But but the but 496 00:21:34,800 --> 00:21:37,080 Speaker 8: the weird part is some of these people were on 497 00:21:37,119 --> 00:21:40,040 Speaker 8: the up, you know, either they were kneecapped or they 498 00:21:40,040 --> 00:21:41,720 Speaker 8: didn't sort of fit in the new plans. They have 499 00:21:41,760 --> 00:21:44,119 Speaker 8: been getting frustrated and leaving. So it's the type of 500 00:21:44,240 --> 00:21:46,359 Speaker 8: names that are leaving the building that have caught our 501 00:21:46,359 --> 00:21:49,080 Speaker 8: attention more than the number of people leaving two hundred 502 00:21:49,040 --> 00:21:50,360 Speaker 8: Wes Street, So. 503 00:21:50,720 --> 00:21:53,639 Speaker 2: We have no idea what Curry's going to do then later, 504 00:21:53,800 --> 00:21:57,000 Speaker 2: is anyone speculating, like. 505 00:21:56,920 --> 00:21:59,120 Speaker 8: I said, I mean, if he seems to have told 506 00:21:59,119 --> 00:22:01,679 Speaker 8: confidence that for the moment he wants to spend some 507 00:22:01,760 --> 00:22:04,199 Speaker 8: time with family. But again, if you've been in the 508 00:22:04,240 --> 00:22:06,400 Speaker 8: game for so long, the itch to get back there 509 00:22:06,840 --> 00:22:10,160 Speaker 8: will overcome your desire to just relax on the beat. 510 00:22:10,280 --> 00:22:12,520 Speaker 8: So I will be very surprised if a year later 511 00:22:12,560 --> 00:22:15,159 Speaker 8: you don't see Jeff Curry pop up somewhere else again. 512 00:22:15,400 --> 00:22:19,840 Speaker 1: David Solomon just characterize kind of the feeling on the 513 00:22:19,840 --> 00:22:22,800 Speaker 1: street about David Solomon these days. I mean, I would 514 00:22:22,920 --> 00:22:27,560 Speaker 1: argue that Goldman's doing well, and I would also argue 515 00:22:27,600 --> 00:22:30,720 Speaker 1: that the foray into commercial banking wasn't his call. 516 00:22:31,200 --> 00:22:32,360 Speaker 3: That's a blank fine call. 517 00:22:32,480 --> 00:22:36,080 Speaker 2: He inherited, he committed hard though blank Fine dated Consumer Bank, 518 00:22:36,240 --> 00:22:39,240 Speaker 2: the consumer business, and Solomon married it. 519 00:22:39,640 --> 00:22:42,199 Speaker 3: Is that is that accurate? That is accurate? Okay? So 520 00:22:42,280 --> 00:22:44,280 Speaker 3: he does in fact bear Look. 521 00:22:44,119 --> 00:22:46,360 Speaker 8: They had a banking charter after two thousand and eight, 522 00:22:46,400 --> 00:22:48,280 Speaker 8: so it made sense for them to do something as 523 00:22:48,320 --> 00:22:50,240 Speaker 8: basic as what they were doing off of some deposits 524 00:22:50,240 --> 00:22:52,560 Speaker 8: make out some loans. But then there was this desire 525 00:22:52,600 --> 00:22:54,840 Speaker 8: to push in and make something bigger. And they will 526 00:22:54,880 --> 00:22:56,800 Speaker 8: always tell you such a big deal has been made 527 00:22:56,800 --> 00:22:59,320 Speaker 8: about consumer It was just three percent of revenues. Yes, 528 00:22:59,359 --> 00:23:01,439 Speaker 8: it was three percent of revenues. But you racked up 529 00:23:01,480 --> 00:23:04,000 Speaker 8: losses at a time when you really don't didn't want 530 00:23:04,040 --> 00:23:07,040 Speaker 8: those losses, right when the cycle was turning, right, when 531 00:23:07,080 --> 00:23:09,480 Speaker 8: your engines of investment, banking and trading were slowing down, 532 00:23:09,760 --> 00:23:13,280 Speaker 8: you had this. Add that to all of the disagreements 533 00:23:13,320 --> 00:23:15,880 Speaker 8: people have with his leadership style and how he goes 534 00:23:15,920 --> 00:23:20,359 Speaker 8: about his business, you create a little bit of environment 535 00:23:20,600 --> 00:23:24,000 Speaker 8: that feels like there is this air of dissatisfaction that 536 00:23:24,080 --> 00:23:25,560 Speaker 8: is settled in on Goldman Saxe. 537 00:23:25,600 --> 00:23:28,240 Speaker 1: Is that is that accurate? Because I hear that, Do 538 00:23:28,240 --> 00:23:29,640 Speaker 1: you think that's fair? I mean, you're right. 539 00:23:29,800 --> 00:23:31,960 Speaker 3: I would trust you more than anyone else. You're right. 540 00:23:32,040 --> 00:23:33,679 Speaker 1: And the thing I'm just wondering, you know, because it 541 00:23:33,720 --> 00:23:36,960 Speaker 1: seems like Goldman Sacks and I can have competed against 542 00:23:36,960 --> 00:23:40,800 Speaker 1: them for thirty plus years, they just win every single year. 543 00:23:40,920 --> 00:23:43,240 Speaker 8: And let's get this right. I think when you look 544 00:23:43,280 --> 00:23:46,320 Speaker 8: at the broader dynamics and global banking, you know, the 545 00:23:46,840 --> 00:23:49,760 Speaker 8: retreat of European banks, what is happening with credit SWAICE 546 00:23:49,800 --> 00:23:52,440 Speaker 8: and all of that. What that ultimately does is leave 547 00:23:52,480 --> 00:23:55,719 Speaker 8: a few very strong players who continue to benefit. And 548 00:23:55,760 --> 00:23:58,520 Speaker 8: the three biggies that we have JP Morgan, Morgan Stanley, 549 00:23:58,520 --> 00:24:02,879 Speaker 8: Goldman Sacks, they have a big, large, growing, deep competitive 550 00:24:02,960 --> 00:24:06,000 Speaker 8: mode that ensures that they continue to do better in 551 00:24:06,040 --> 00:24:08,760 Speaker 8: stuff that they're really good at, banking and trading for 552 00:24:09,400 --> 00:24:13,520 Speaker 8: Goldman Sachs, the investment bank sites for JP Morgan and 553 00:24:13,960 --> 00:24:16,560 Speaker 8: Morgan Sandy as well, but also the consumer side, the 554 00:24:16,560 --> 00:24:20,160 Speaker 8: wealth management side at Morgan Sandy, they are certainly benefiting there. 555 00:24:20,800 --> 00:24:23,480 Speaker 8: There is this palace Insriegan, there is this issue with 556 00:24:23,520 --> 00:24:25,960 Speaker 8: the CU and there is this sort of growing noise 557 00:24:26,000 --> 00:24:28,200 Speaker 8: that you hear out of Goldman Sax and one does 558 00:24:28,240 --> 00:24:30,280 Speaker 8: feel that there's no way that's going to turn around 559 00:24:30,480 --> 00:24:32,800 Speaker 8: in a minute, even if business recovers. So you don't 560 00:24:32,800 --> 00:24:33,560 Speaker 8: have to find a solution. 561 00:24:33,640 --> 00:24:35,800 Speaker 1: I'm just looking at the stocks Goldman Sacks. You're to 562 00:24:35,880 --> 00:24:38,879 Speaker 1: date stocks up three point six percent, Morgan Stanley up 563 00:24:38,920 --> 00:24:41,960 Speaker 1: five percent trailing twelve months, Goldman Sacks up nine percent, 564 00:24:42,119 --> 00:24:43,320 Speaker 1: Morgan Stanley up eight percent. 565 00:24:43,680 --> 00:24:46,080 Speaker 2: So here I always pull up my five year comp 566 00:24:46,160 --> 00:24:48,879 Speaker 2: chart I know you do. And Goldman Sachs over the 567 00:24:48,960 --> 00:24:52,840 Speaker 2: last five years, they're the second best bank of the 568 00:24:53,000 --> 00:24:56,920 Speaker 2: Big six, right only Morgan Stanley has done better over 569 00:24:56,960 --> 00:25:00,520 Speaker 2: the last five years because they compete big time, right now, 570 00:25:00,640 --> 00:25:00,880 Speaker 2: you know. 571 00:25:00,960 --> 00:25:02,960 Speaker 8: That that hurts a lot. But also remember when we 572 00:25:02,960 --> 00:25:04,879 Speaker 8: think about the Big six, we think about Wells Fargo 573 00:25:04,920 --> 00:25:07,160 Speaker 8: as the sixth name in that list, right, but they're 574 00:25:07,200 --> 00:25:09,480 Speaker 8: not a true, true comp Goldman Sack. So I always 575 00:25:09,480 --> 00:25:11,520 Speaker 8: like to also throwing someone like a Jeffries into the mix. 576 00:25:11,640 --> 00:25:13,919 Speaker 8: Okay and Jeffries, which is a pure play in Masson 577 00:25:13,920 --> 00:25:16,960 Speaker 8: Bank yep, at least right now, it's done extraordinarily well 578 00:25:16,960 --> 00:25:18,439 Speaker 8: in the same time period. So if you add them 579 00:25:18,440 --> 00:25:20,879 Speaker 8: to the list, they are three in the number seven. 580 00:25:21,200 --> 00:25:22,600 Speaker 5: Not bad, not great. 581 00:25:22,720 --> 00:25:25,159 Speaker 8: If you're inside Goldman Sacks, you don't like listening to 582 00:25:25,200 --> 00:25:27,720 Speaker 8: the fact that you're behind Morgan Stanley. But they're getting 583 00:25:27,760 --> 00:25:31,159 Speaker 8: around to the idea of a praising their rival, praising 584 00:25:31,160 --> 00:25:34,280 Speaker 8: their competitor, and be hoping to recover that lost crownd. 585 00:25:34,040 --> 00:25:36,240 Speaker 3: All Right, Tree, thanks so much, we appreciate it. As always. 586 00:25:36,240 --> 00:25:41,480 Speaker 6: Three in Niagen, you're listening to the teenth Can't Live 587 00:25:41,560 --> 00:25:45,480 Speaker 6: program Bloomberg Markets Weekdays at ten am Eastern on Bloomberg 588 00:25:45,520 --> 00:25:48,840 Speaker 6: dot Com, the iHeartRadio app and the Bloomberg Business App, 589 00:25:49,000 --> 00:25:51,520 Speaker 6: or listen on demand wherever you get your podcasts. 590 00:25:53,880 --> 00:25:56,480 Speaker 1: Matt Noer, Paulsweeni here in the Bloomberg Interactive Broker Studio, 591 00:25:56,520 --> 00:25:57,879 Speaker 1: I want to bring in our next guest, because he 592 00:25:57,920 --> 00:26:00,280 Speaker 1: traveled all the way from Newport Pach, California. David and 593 00:26:00,359 --> 00:26:04,280 Speaker 1: Cio of the Bonson Group. All right, So David, I 594 00:26:04,320 --> 00:26:06,560 Speaker 1: got the S and p up. I don't know, seventeen 595 00:26:06,640 --> 00:26:09,760 Speaker 1: eighteen percent. I got NASDAK up thirty two, thirty three percent, 596 00:26:10,000 --> 00:26:13,800 Speaker 1: I got the Nasdaq one hundred up darn near forty percent. 597 00:26:14,440 --> 00:26:18,280 Speaker 3: Are we called a tech bubble here? Well, yes, AI bubble. Maybe, 598 00:26:18,280 --> 00:26:18,639 Speaker 3: I don't know. 599 00:26:18,760 --> 00:26:20,800 Speaker 7: Most certainly we're in a tech bubble if you were 600 00:26:20,840 --> 00:26:24,960 Speaker 7: looking at valuations relative to history, okay, and that premium 601 00:26:25,119 --> 00:26:30,359 Speaker 7: to historical valuation calls for a mean reversion, and I 602 00:26:30,400 --> 00:26:33,120 Speaker 7: think that that's inevitably going to happen right now. It's 603 00:26:33,160 --> 00:26:35,919 Speaker 7: interesting you have Apple and Microsoft below their fifty day 604 00:26:36,000 --> 00:26:39,040 Speaker 7: moving average, and there are more energy names as a 605 00:26:39,080 --> 00:26:41,880 Speaker 7: percentage of the index above their two under. 606 00:26:41,760 --> 00:26:44,000 Speaker 3: Day than there are tech names. 607 00:26:44,440 --> 00:26:46,640 Speaker 1: Interesting, Well, we got w tach crude oilly eighty two 608 00:26:46,640 --> 00:26:48,880 Speaker 1: dollars has had a nice runoff of that sixty seven 609 00:26:48,960 --> 00:26:50,680 Speaker 1: low from four or five weeks ago. 610 00:26:50,720 --> 00:26:52,399 Speaker 3: So where should where you looking at? 611 00:26:52,480 --> 00:26:54,600 Speaker 1: Where are you talking to your clients about where they 612 00:26:54,600 --> 00:26:56,159 Speaker 1: should be looking for some opportunities here? 613 00:26:56,240 --> 00:26:57,680 Speaker 7: Well, it's funny, is I was listening to guys talking 614 00:26:57,680 --> 00:27:00,399 Speaker 7: about McDonald's. I was thinking not about the quarter pounder 615 00:27:00,520 --> 00:27:05,040 Speaker 7: or the calories, but the sixty seven thousand percent return 616 00:27:05,480 --> 00:27:08,080 Speaker 7: it has had since nineteen sixty seven. And it's a 617 00:27:08,119 --> 00:27:12,520 Speaker 7: real number compounded reinvesting those dividends. MacDonald's is the best 618 00:27:12,560 --> 00:27:15,040 Speaker 7: real estate company that happens to such. 619 00:27:15,119 --> 00:27:16,920 Speaker 3: I didn't know that, so I watched the movie. Now 620 00:27:16,960 --> 00:27:17,479 Speaker 3: I got it. 621 00:27:18,119 --> 00:27:20,360 Speaker 7: We've owned it for many, many years, and it's interesting. 622 00:27:20,400 --> 00:27:22,640 Speaker 7: We bought at the financial crisis at fifty it's now 623 00:27:22,640 --> 00:27:26,360 Speaker 7: at three hundred. Wow, and the dividend is increased six times, 624 00:27:26,400 --> 00:27:28,240 Speaker 7: just as the stock has gone up six times. 625 00:27:28,280 --> 00:27:29,359 Speaker 3: How important dividends do you? 626 00:27:29,520 --> 00:27:29,600 Speaker 9: Just? 627 00:27:29,600 --> 00:27:31,439 Speaker 7: In general, it's what we do, what you do, And 628 00:27:31,800 --> 00:27:34,480 Speaker 7: it's not just dividends, it's the growth of dividends. So 629 00:27:34,520 --> 00:27:37,360 Speaker 7: that's why I use MacDonald's example. But I can't think 630 00:27:37,400 --> 00:27:39,639 Speaker 7: of a better environment than the one room right now, 631 00:27:40,119 --> 00:27:43,240 Speaker 7: where the growth of the income is more important, while 632 00:27:43,280 --> 00:27:47,639 Speaker 7: you also get better stabilized business models. People too dependent 633 00:27:48,240 --> 00:27:52,399 Speaker 7: on AI, too dependent on momentum, two dependent on multiple expansion. 634 00:27:52,760 --> 00:27:55,320 Speaker 3: They're the most vulnerable right now. So it's interesting. 635 00:27:55,359 --> 00:27:58,440 Speaker 2: I was talking to somebody, an investor yesterday, large cap 636 00:27:58,480 --> 00:28:01,760 Speaker 2: growth guy, and he said we were talking about Goldman 637 00:28:01,800 --> 00:28:04,879 Speaker 2: Sachs and the other big public investment banks. He doesn't 638 00:28:04,880 --> 00:28:07,919 Speaker 2: want to buy them because they still pay their people 639 00:28:08,000 --> 00:28:08,480 Speaker 2: as if. 640 00:28:08,320 --> 00:28:09,359 Speaker 3: They were a partnership. 641 00:28:09,440 --> 00:28:12,320 Speaker 2: Right. Every time they have a bad year, they say, 642 00:28:12,320 --> 00:28:14,719 Speaker 2: we got to pay these guys because they're the talent 643 00:28:14,800 --> 00:28:16,520 Speaker 2: and it's the most important thing. When they have a 644 00:28:16,520 --> 00:28:18,080 Speaker 2: good year, they're like, we have to pay these guys 645 00:28:18,080 --> 00:28:18,760 Speaker 2: because they're the talent. 646 00:28:18,760 --> 00:28:19,680 Speaker 3: That's the most important thing. 647 00:28:19,960 --> 00:28:22,159 Speaker 2: And they never give money back to the shareholders, or 648 00:28:22,200 --> 00:28:24,200 Speaker 2: not as much as they should for a public company. 649 00:28:24,200 --> 00:28:24,800 Speaker 3: Do you agree. 650 00:28:25,000 --> 00:28:26,679 Speaker 7: Well, see, I have a name for him that is 651 00:28:26,720 --> 00:28:29,840 Speaker 7: the exact same business, but a totally different outcome. It's 652 00:28:29,840 --> 00:28:33,480 Speaker 7: a little investment bank called Molus and Tickers MC, where 653 00:28:33,480 --> 00:28:36,080 Speaker 7: all they do is an is Ken Mollis was old 654 00:28:36,119 --> 00:28:38,760 Speaker 7: vice share at UBS started this investment bank. They give 655 00:28:38,760 --> 00:28:40,960 Speaker 7: our deal j back in the day, one hundred percent 656 00:28:41,120 --> 00:28:44,000 Speaker 7: of free cash flow goes back to shareholders as dividends. 657 00:28:44,480 --> 00:28:46,360 Speaker 7: And that's all they are is a deal company. I'm 658 00:28:46,400 --> 00:28:48,760 Speaker 7: like Goldman Sachs, which is a balance sheet company to 659 00:28:48,840 --> 00:28:52,160 Speaker 7: some degree. They have to maintain capital for especially at 660 00:28:52,160 --> 00:28:55,960 Speaker 7: fixed income trading mols more pure advisories. So that's what 661 00:28:56,040 --> 00:28:58,800 Speaker 7: we're really going to do. Look, we own Blackstone and Apollo. 662 00:28:59,160 --> 00:29:00,760 Speaker 3: All we are is get a piece of. 663 00:29:00,760 --> 00:29:04,200 Speaker 7: The management fees that they're charging, and clients don't seem 664 00:29:04,200 --> 00:29:06,840 Speaker 7: to mind paying it. The results haven't done anything to 665 00:29:06,920 --> 00:29:09,080 Speaker 7: keep people from paying it. And so when you own 666 00:29:09,080 --> 00:29:12,200 Speaker 7: those companies, it's not balance sheet risk. Yes, they pay 667 00:29:12,240 --> 00:29:15,320 Speaker 7: their people well, but it's very performance driven. I think 668 00:29:15,480 --> 00:29:18,000 Speaker 7: Wall Street's one of the few meritocratic areas left, to 669 00:29:18,040 --> 00:29:19,360 Speaker 7: be honest, I see that as a good thing. 670 00:29:19,560 --> 00:29:21,720 Speaker 2: Well, one of the things that Goldman Sacks that David 671 00:29:21,760 --> 00:29:24,200 Speaker 2: Soloman is doing right now. He's selling, you know, their 672 00:29:24,200 --> 00:29:26,800 Speaker 2: big balance sheet business the investments they've made in real 673 00:29:26,920 --> 00:29:29,840 Speaker 2: estate over years because the returns have been volatile. But 674 00:29:29,880 --> 00:29:31,600 Speaker 2: I was just talking to Shrie Nata Rojin about this. 675 00:29:31,920 --> 00:29:35,120 Speaker 2: He said, one year they'll make six billion on those investments. 676 00:29:35,240 --> 00:29:37,040 Speaker 2: Next year they'll lose a billion, the next year they'll 677 00:29:37,080 --> 00:29:39,480 Speaker 2: lose lose two, but then they'll make six again. So 678 00:29:39,520 --> 00:29:43,080 Speaker 2: over four years, you know they've made net positive nine 679 00:29:43,120 --> 00:29:46,640 Speaker 2: billion dollars. But since investors are so worried about quarterly 680 00:29:46,840 --> 00:29:50,920 Speaker 2: or annual reports, they don't care about the longer term picture. 681 00:29:51,400 --> 00:29:54,880 Speaker 7: Well, I am a good investor then, because I couldn't 682 00:29:54,880 --> 00:29:58,240 Speaker 7: care less about quarterly smoothness of those things. But with 683 00:29:58,320 --> 00:30:00,680 Speaker 7: balance sheet businesses, it's not just that it's going to 684 00:30:00,720 --> 00:30:03,600 Speaker 7: be voll at all. You're going to evaporate capital at times, 685 00:30:03,680 --> 00:30:06,280 Speaker 7: you're going to take on big losses. Dodd Frank took 686 00:30:06,280 --> 00:30:08,640 Speaker 7: away their ability to do much of that. But see, 687 00:30:08,640 --> 00:30:09,560 Speaker 7: that's not just a good thing. 688 00:30:09,680 --> 00:30:11,360 Speaker 3: Is there's less risk. It's a bad thing. Is there's 689 00:30:11,400 --> 00:30:12,200 Speaker 3: less upside. 690 00:30:12,320 --> 00:30:14,720 Speaker 7: Morgan Stanley remedied it by becoming more of a fee 691 00:30:14,760 --> 00:30:19,800 Speaker 7: based wealth management business. But we believe that these Blackstones, Apollos, 692 00:30:19,920 --> 00:30:23,960 Speaker 7: al Rock, they're able to take huge fees around being 693 00:30:23,960 --> 00:30:26,640 Speaker 7: an asset manager in a space that has huge growth 694 00:30:26,680 --> 00:30:27,200 Speaker 7: in front of it. 695 00:30:27,680 --> 00:30:30,640 Speaker 1: So, David, the importance of dividends to you when your 696 00:30:30,680 --> 00:30:31,800 Speaker 1: firm and your investment outlook. 697 00:30:31,800 --> 00:30:33,480 Speaker 3: If I got you in a room with Tim Cook 698 00:30:33,480 --> 00:30:36,240 Speaker 3: at Apple, what would you say to him? 699 00:30:36,360 --> 00:30:38,280 Speaker 7: I would be very respectful, because how could you not 700 00:30:38,360 --> 00:30:40,800 Speaker 7: be with someone who's created that kind of wealth. And 701 00:30:40,800 --> 00:30:43,400 Speaker 7: then I would simply point out that the day and 702 00:30:43,480 --> 00:30:45,640 Speaker 7: age of them saying we can do better with your 703 00:30:45,680 --> 00:30:49,680 Speaker 7: money is long gone, that there must be a greater 704 00:30:49,760 --> 00:30:53,320 Speaker 7: return of capital shareholders. That they have proven that for 705 00:30:53,480 --> 00:30:56,360 Speaker 7: years by holding on to hundreds of billions of dollars. 706 00:30:57,440 --> 00:31:00,280 Speaker 7: If they had found better opportunities to deploy it, would 707 00:31:00,320 --> 00:31:03,280 Speaker 7: have deployed it. And so by keeping a yield somewhere 708 00:31:03,280 --> 00:31:06,840 Speaker 7: around half of a percentage point, I think it is 709 00:31:06,880 --> 00:31:10,640 Speaker 7: a very very good opportunity for them to increase return 710 00:31:10,640 --> 00:31:13,840 Speaker 7: on equity by paying more back to shareholders. In the meantime, 711 00:31:13,880 --> 00:31:17,320 Speaker 7: they have abundant resources to still go do R and 712 00:31:17,400 --> 00:31:20,160 Speaker 7: D and consumer product expansion. 713 00:31:21,920 --> 00:31:24,040 Speaker 2: The great thing to do is fine stocks that are 714 00:31:24,040 --> 00:31:25,360 Speaker 2: misunderstood by the market. 715 00:31:25,440 --> 00:31:25,640 Speaker 6: Right. 716 00:31:25,720 --> 00:31:28,960 Speaker 2: And Simon, Property Group is one you like. When I 717 00:31:29,000 --> 00:31:32,360 Speaker 2: looked at that, my instant, you know, my brain's at oops. 718 00:31:32,680 --> 00:31:35,800 Speaker 2: You know, commercial real estate. That must be a bad thing. 719 00:31:36,560 --> 00:31:38,080 Speaker 2: You think a lot of people make that mistake. 720 00:31:38,200 --> 00:31:40,080 Speaker 7: I think a lot of people do. And Simon Property 721 00:31:40,160 --> 00:31:42,960 Speaker 7: is a great example. It was at fifty dollars during COVID, 722 00:31:42,960 --> 00:31:44,640 Speaker 7: people said, no one's ever going in the mall again. 723 00:31:44,960 --> 00:31:46,840 Speaker 7: Now it's at one hundred and twenty five dollars, and 724 00:31:46,880 --> 00:31:51,000 Speaker 7: people don't realize they have a higher occupancy rate now 725 00:31:51,040 --> 00:31:52,960 Speaker 7: than they've ever had in the history of the company. 726 00:31:53,360 --> 00:31:55,000 Speaker 3: Basically, about ninety five. 727 00:31:54,840 --> 00:31:57,320 Speaker 7: Percent of their square footage across two hundred and eighty 728 00:31:57,360 --> 00:32:01,520 Speaker 7: seven high end malls is occupied. They bought Jcpenny basically 729 00:32:01,560 --> 00:32:04,560 Speaker 7: for free and are now selling the old jcpenny buildings. 730 00:32:05,120 --> 00:32:06,040 Speaker 3: You know, I forgot about that. 731 00:32:06,400 --> 00:32:08,840 Speaker 7: I mean, they paid something like five hundred thousand dollars 732 00:32:08,840 --> 00:32:11,240 Speaker 7: a box when they were selling for twenty million a box, 733 00:32:11,720 --> 00:32:14,600 Speaker 7: and they are selling them to Amazon to be fulfillment warehouses. 734 00:32:14,640 --> 00:32:19,400 Speaker 7: They're repurposing them into hotels and more entertainment oriented malls. 735 00:32:19,960 --> 00:32:22,760 Speaker 7: Cymon Property has a ton of unleashed value that will 736 00:32:22,760 --> 00:32:25,520 Speaker 7: get developed over time. And while you wait, you're getting 737 00:32:25,520 --> 00:32:28,280 Speaker 7: a six to seven percent dividend yield that's coming straight 738 00:32:28,280 --> 00:32:30,920 Speaker 7: from net operating income. And they just have a very 739 00:32:30,920 --> 00:32:34,680 Speaker 7: well run balance sheet, about forty seven percent debt to value. 740 00:32:34,760 --> 00:32:37,680 Speaker 7: It's really low. And to the extent they've had about 741 00:32:37,680 --> 00:32:39,840 Speaker 7: five malls that have done poorly. Out of two hundred 742 00:32:39,840 --> 00:32:42,080 Speaker 7: and eighty seven, those were non recourse. They gave them 743 00:32:42,080 --> 00:32:44,960 Speaker 7: back and the CMBs people had to fight over the assets. 744 00:32:46,280 --> 00:32:49,200 Speaker 2: I wonder what I see one of your books, or 745 00:32:49,200 --> 00:32:51,600 Speaker 2: your most recent book. I guess There's no Free Lunch 746 00:32:51,640 --> 00:32:54,480 Speaker 2: two hundred and fifty Economic Truths. I love the title. I 747 00:32:54,520 --> 00:32:56,120 Speaker 2: was hanging out with Gary Shilling as I was telling 748 00:32:56,120 --> 00:32:58,640 Speaker 2: these guys yesterday, and he said, that's his one main takeaway, 749 00:32:58,680 --> 00:33:01,000 Speaker 2: there's no free lunch. What do you think about these 750 00:33:01,040 --> 00:33:05,200 Speaker 2: trillion dollar deficits that we're running? You know, what do 751 00:33:05,200 --> 00:33:08,560 Speaker 2: you think about the magic money tree that everybody seems 752 00:33:08,600 --> 00:33:09,880 Speaker 2: to have bought into in government? 753 00:33:09,920 --> 00:33:11,360 Speaker 3: Does that ever catch up to us? 754 00:33:11,760 --> 00:33:13,959 Speaker 7: Well, it does, and the question is how it catches up. 755 00:33:14,000 --> 00:33:16,320 Speaker 7: And so Japan's been about two hundred and thirty percent 756 00:33:16,400 --> 00:33:20,080 Speaker 7: debt to GDP, and what it's done there is basically 757 00:33:20,120 --> 00:33:23,160 Speaker 7: thirty years of no economic growth. So we're now at 758 00:33:23,160 --> 00:33:26,680 Speaker 7: fifteen years of one point six economic growth. We had 759 00:33:26,680 --> 00:33:30,600 Speaker 7: had seventy years of over three percent economic growth before that. 760 00:33:31,040 --> 00:33:33,640 Speaker 7: So the cost so far seems to be a downward 761 00:33:33,720 --> 00:33:37,400 Speaker 7: trend on growth, a kind of stagnation in the economy. 762 00:33:37,800 --> 00:33:39,800 Speaker 7: But do I think that there's a moment in which 763 00:33:39,800 --> 00:33:42,720 Speaker 7: the apocalypse comes. It's very difficult to predict that. My 764 00:33:43,120 --> 00:33:45,400 Speaker 7: real quick comment though on the trillion dollar deficits is 765 00:33:45,640 --> 00:33:48,160 Speaker 7: I don't like it when we spend five trillion during COVID. 766 00:33:48,360 --> 00:33:50,920 Speaker 7: I don't like it when there's two trillion of spending 767 00:33:50,920 --> 00:33:52,680 Speaker 7: in the aftermath of financial crisis. 768 00:33:52,800 --> 00:33:53,320 Speaker 3: But I do. 769 00:33:53,280 --> 00:33:57,200 Speaker 7: Understand there's a Keynesian school of thought that believes it's necessary. 770 00:33:57,440 --> 00:34:00,360 Speaker 7: My problem is during peace time and during i'm an 771 00:34:00,440 --> 00:34:03,920 Speaker 7: expansion time, when we're running one to two trillion dollar deficits, 772 00:34:04,120 --> 00:34:06,920 Speaker 7: and that seems to be accepted by both sides of 773 00:34:06,920 --> 00:34:09,680 Speaker 7: the aisle. And the only time anyone fights against it 774 00:34:09,719 --> 00:34:11,280 Speaker 7: is when the other guy is the president. 775 00:34:12,400 --> 00:34:14,080 Speaker 3: That brings it home. That brings it home. 776 00:34:14,160 --> 00:34:16,040 Speaker 1: David, thanks so much for joining us. You can get 777 00:34:16,040 --> 00:34:19,080 Speaker 1: back to Newport Beach. You know they can't be doing 778 00:34:19,160 --> 00:34:22,000 Speaker 1: work out there Pinco people. I think it's all smoking mirror. 779 00:34:22,080 --> 00:34:25,280 Speaker 2: I don't know, because maybe it's just too warm outside 780 00:34:25,320 --> 00:34:27,320 Speaker 2: and you have to spend time in your air conditioned office. 781 00:34:27,320 --> 00:34:30,200 Speaker 3: Perfect outside, seventy five degrees there all the time. All 782 00:34:30,239 --> 00:34:33,680 Speaker 3: that's like that, and that sounds perfect to me all right, David. 783 00:34:33,480 --> 00:34:36,000 Speaker 1: Say Cio at the Boxing Group, we always appreciate getting 784 00:34:36,000 --> 00:34:37,879 Speaker 1: a few minutes of his time. I was a saint 785 00:34:37,920 --> 00:34:40,920 Speaker 1: to our producer, a unique view on investing. 786 00:34:41,360 --> 00:34:44,480 Speaker 6: You're listening to the tape Cat's are Live program Bloomberg 787 00:34:44,520 --> 00:34:48,120 Speaker 6: Markets weekdays at ten am Eastern on Bloomberg Radio, the 788 00:34:48,160 --> 00:34:51,399 Speaker 6: tune in app, Bloomberg dot Com, and the Bloomberg Business App. 789 00:34:51,440 --> 00:34:54,279 Speaker 6: You can also listen live on Amazon Alexa from our 790 00:34:54,280 --> 00:34:58,680 Speaker 6: flagship New York station, Just Say Alexa play Bloomberg eleven thirty. 791 00:35:00,160 --> 00:35:03,120 Speaker 1: Natalie want Joints is real estate reporter with Bloomberg News. 792 00:35:03,719 --> 00:35:05,960 Speaker 1: Natalie talk to us about kind of that commercial real 793 00:35:06,040 --> 00:35:09,040 Speaker 1: estate market. I mean, if I'm a bank and I 794 00:35:09,160 --> 00:35:12,239 Speaker 1: try to sell off some of these commercial real estate 795 00:35:12,280 --> 00:35:14,279 Speaker 1: loans I have in my books, am I finding any 796 00:35:14,280 --> 00:35:15,040 Speaker 1: buyers out there? 797 00:35:15,280 --> 00:35:17,520 Speaker 9: Thanks for having me. It's really hard for banks these 798 00:35:17,600 --> 00:35:20,480 Speaker 9: days to find buyers out there, not because there aren't 799 00:35:20,480 --> 00:35:23,640 Speaker 9: buyers that might want to snatch up heavily discounted loans, 800 00:35:23,640 --> 00:35:26,560 Speaker 9: but because the pricing isn't there yet. Right, There's a 801 00:35:26,600 --> 00:35:29,360 Speaker 9: lot of liquidity out there, a lot of dry powder 802 00:35:29,440 --> 00:35:32,560 Speaker 9: out there for opportunistic buyers and funds that are raised 803 00:35:32,600 --> 00:35:36,520 Speaker 9: to specifically target distressed opportunities. But the problem is banks 804 00:35:36,520 --> 00:35:39,360 Speaker 9: aren't ready to meet them at the price that they 805 00:35:39,440 --> 00:35:43,239 Speaker 9: want to pay. Yet the prices haven't necessarily fallen down 806 00:35:43,560 --> 00:35:46,200 Speaker 9: far enough, although it is starting to. And this is 807 00:35:46,239 --> 00:35:48,120 Speaker 9: what the story kind of talks about, which is there's 808 00:35:48,160 --> 00:35:50,600 Speaker 9: been so much pressure building on the commercial real estate 809 00:35:50,640 --> 00:35:53,279 Speaker 9: market and on the debt market for so long, and 810 00:35:53,360 --> 00:35:56,359 Speaker 9: finally we're starting to see that banks are under more 811 00:35:56,440 --> 00:36:00,160 Speaker 9: pressure to try to sell their loans, to try to 812 00:36:00,200 --> 00:36:02,879 Speaker 9: add a bit more discount to their deals and find 813 00:36:02,920 --> 00:36:04,960 Speaker 9: buyers so they can reduce their exposure to some of 814 00:36:04,960 --> 00:36:06,120 Speaker 9: the riskier properties. 815 00:36:06,160 --> 00:36:09,440 Speaker 2: We've heard a similar story with residential with existing homes, 816 00:36:09,480 --> 00:36:13,440 Speaker 2: right Natalie, The people who own them aren't willing to 817 00:36:13,480 --> 00:36:16,439 Speaker 2: sell them at the discounted price that buyers are looking 818 00:36:16,480 --> 00:36:19,600 Speaker 2: to pay in that case, because buyers are having to 819 00:36:19,600 --> 00:36:23,200 Speaker 2: take a higher mortgage in the in the in the 820 00:36:23,480 --> 00:36:26,160 Speaker 2: retail market or in the residential market. 821 00:36:26,239 --> 00:36:27,000 Speaker 3: We call this the. 822 00:36:26,960 --> 00:36:30,480 Speaker 2: Great reset, That's what they'll call it when it actually happens. 823 00:36:31,200 --> 00:36:34,480 Speaker 2: What is needed for the great reset to happen in 824 00:36:34,920 --> 00:36:38,040 Speaker 2: commercial property, It's going. 825 00:36:38,000 --> 00:36:40,640 Speaker 9: To be a year's long process. I mean sources that 826 00:36:40,680 --> 00:36:43,680 Speaker 9: we've spoken to, brokers investors all say this is kind 827 00:36:43,680 --> 00:36:47,160 Speaker 9: of like what happened with the malls. And I'm specifically 828 00:36:47,160 --> 00:36:50,120 Speaker 9: talking about offices because that is the one sector where 829 00:36:50,120 --> 00:36:53,279 Speaker 9: it's getting hit by boring rates and also the fundamental 830 00:36:53,360 --> 00:36:56,839 Speaker 9: values are falling. It's kind of similar to malls where 831 00:36:56,840 --> 00:36:59,200 Speaker 9: we've seen that unfold for the past decade, right, and 832 00:36:59,200 --> 00:37:02,560 Speaker 9: we're still seeing that some of the better retail properties 833 00:37:02,640 --> 00:37:05,759 Speaker 9: are under high demand. They're selling for good prices, but 834 00:37:05,800 --> 00:37:07,560 Speaker 9: you have a lot of dead malls in places that 835 00:37:08,200 --> 00:37:11,160 Speaker 9: still sit empty, and it'll be a process that could 836 00:37:11,200 --> 00:37:14,000 Speaker 9: be you know, anywhere from five to ten years, but 837 00:37:14,040 --> 00:37:18,320 Speaker 9: we're starting to see that it's happening now, and in 838 00:37:18,440 --> 00:37:21,280 Speaker 9: talking to brokers, they think that maybe heading into the third, 839 00:37:21,360 --> 00:37:23,479 Speaker 9: the fourth quarter and next year, we're going to start 840 00:37:23,480 --> 00:37:26,920 Speaker 9: to see more banks put up loans for sale and 841 00:37:27,400 --> 00:37:31,080 Speaker 9: you know, acquiess to better discounts for potential buyers out there. 842 00:37:31,320 --> 00:37:33,839 Speaker 1: So, Natalie, I guess you know, one of the challenges 843 00:37:34,080 --> 00:37:36,640 Speaker 1: for both sides of a trade is I don't really 844 00:37:36,640 --> 00:37:39,279 Speaker 1: know what the underlying value is of commercial real estate 845 00:37:39,440 --> 00:37:42,640 Speaker 1: in New York. Have we seen any big transactions that 846 00:37:42,680 --> 00:37:44,520 Speaker 1: we can use to kind of mark the market. Have 847 00:37:44,600 --> 00:37:46,480 Speaker 1: we seen anything really come to market in New York 848 00:37:46,520 --> 00:37:47,040 Speaker 1: for example. 849 00:37:48,080 --> 00:37:51,120 Speaker 9: That's the problem is we haven't necessarily seen a lot 850 00:37:51,120 --> 00:37:53,920 Speaker 9: of asset sales yet, so it's really hard for people 851 00:37:53,960 --> 00:37:57,160 Speaker 9: to figure out where the values of certain properties stand 852 00:37:57,200 --> 00:38:00,400 Speaker 9: right now. We've seen some cases of distress sales, but 853 00:38:00,440 --> 00:38:03,719 Speaker 9: these are one off cases. One example that people are 854 00:38:03,760 --> 00:38:07,600 Speaker 9: really looking at right now is you know the Signature 855 00:38:07,680 --> 00:38:10,440 Speaker 9: Bank loans. The FDIC is selling a big chunk of 856 00:38:10,480 --> 00:38:12,640 Speaker 9: commercial real estate loans. Many of them are in New 857 00:38:12,719 --> 00:38:16,799 Speaker 9: York apartments, some offices, and a lot of stakeholders are 858 00:38:16,800 --> 00:38:19,040 Speaker 9: looking at that to see what the market to market 859 00:38:19,320 --> 00:38:22,440 Speaker 9: might be. But the problem is, especially again for offices, 860 00:38:23,160 --> 00:38:26,479 Speaker 9: people don't necessarily know where office demand and remote work, 861 00:38:26,520 --> 00:38:28,239 Speaker 9: how that's going to shake out. Right We're starting to 862 00:38:28,239 --> 00:38:30,480 Speaker 9: see some of the finance firms bring people back to 863 00:38:30,560 --> 00:38:32,560 Speaker 9: the office four days a week, five days a week, 864 00:38:32,760 --> 00:38:35,080 Speaker 9: but at the end of the day, there's still disagreements 865 00:38:35,120 --> 00:38:37,000 Speaker 9: as to how that's going to shake out and what 866 00:38:37,040 --> 00:38:40,960 Speaker 9: the overall demand will be a few years from now. 867 00:38:41,040 --> 00:38:43,719 Speaker 9: And that is how people write down the income for 868 00:38:43,800 --> 00:38:45,759 Speaker 9: those types of loans and those types of deals. So 869 00:38:46,040 --> 00:38:47,919 Speaker 9: if you don't know how that's going to shake out. 870 00:38:48,120 --> 00:38:50,920 Speaker 9: It's really hard to value what those loans will be 871 00:38:51,080 --> 00:38:52,239 Speaker 9: several years out from now. 872 00:38:52,520 --> 00:38:55,680 Speaker 2: What are you seeing, Natalie, in terms of defaults, you know, 873 00:38:55,719 --> 00:39:00,960 Speaker 2: because a lot of these a lot of these lenders 874 00:39:01,040 --> 00:39:04,040 Speaker 2: are going to be facing that situation, and some of 875 00:39:04,080 --> 00:39:07,440 Speaker 2: them are some of the borrowers are defaulting just to 876 00:39:07,440 --> 00:39:08,480 Speaker 2: try and renegotiate. 877 00:39:10,719 --> 00:39:13,279 Speaker 9: We've seen that defaults have really picked up over the 878 00:39:13,320 --> 00:39:16,600 Speaker 9: past i'd say, you know, starting this year, and that's 879 00:39:16,680 --> 00:39:18,160 Speaker 9: kind of been the next two to drop in this 880 00:39:18,200 --> 00:39:21,360 Speaker 9: whole commercial real estate saga is that owners, you know, 881 00:39:21,480 --> 00:39:24,040 Speaker 9: people that are our sponsors of this debt are just 882 00:39:24,160 --> 00:39:26,759 Speaker 9: looking at their property and looking at, you know, whether 883 00:39:26,840 --> 00:39:28,880 Speaker 9: or not it's even worth trying to throw money in 884 00:39:29,040 --> 00:39:33,120 Speaker 9: to renovate it or to invest in a long term. 885 00:39:33,160 --> 00:39:37,279 Speaker 9: And we've seen even the biggest sponsors and owners like Brookfield, 886 00:39:37,440 --> 00:39:40,680 Speaker 9: like Pimpo, like Blackstone just walk away from their properties, 887 00:39:40,719 --> 00:39:44,359 Speaker 9: hand back the keys. And if the biggest investors are 888 00:39:44,360 --> 00:39:46,959 Speaker 9: doing this, the smaller guys are looking at them and saying, Okay, 889 00:39:46,960 --> 00:39:48,759 Speaker 9: it's appropriate for us to do this right now. We 890 00:39:48,840 --> 00:39:51,120 Speaker 9: just don't have the money. And that's a big concern 891 00:39:51,200 --> 00:39:54,400 Speaker 9: for the lenders and the banks, because they didn't write 892 00:39:54,400 --> 00:39:57,759 Speaker 9: down these loans with the expectation that they're going to 893 00:39:57,840 --> 00:40:00,440 Speaker 9: take it over and become managers and landlord cards. Right, 894 00:40:00,719 --> 00:40:02,719 Speaker 9: So for a lot of these guys, they probably want 895 00:40:02,760 --> 00:40:07,360 Speaker 9: to get ahead of any potential default, any potential loan maturities, 896 00:40:07,600 --> 00:40:10,120 Speaker 9: and maybe sell off the loans at a slight discount 897 00:40:10,160 --> 00:40:12,920 Speaker 9: instead of having to foreclose and end up having to 898 00:40:12,960 --> 00:40:15,800 Speaker 9: sell the asset for distress values down the line. 899 00:40:16,120 --> 00:40:18,160 Speaker 3: And that's what really surprised me. 900 00:40:18,200 --> 00:40:21,400 Speaker 1: Shocked me actually to see a company affirm of the 901 00:40:21,560 --> 00:40:25,160 Speaker 1: quality and the size of Brookfield walk away from something. 902 00:40:25,440 --> 00:40:27,759 Speaker 1: I mean, I didn't even think that was even possible. 903 00:40:27,920 --> 00:40:29,560 Speaker 1: I mean, you know from a like how do I 904 00:40:29,560 --> 00:40:32,280 Speaker 1: walk away from JP Morgan Chase? Why I've got a 905 00:40:32,320 --> 00:40:34,960 Speaker 1: good jillions of dollars where the deals I'm doing with 906 00:40:35,000 --> 00:40:36,040 Speaker 1: these guys every year. 907 00:40:36,600 --> 00:40:37,480 Speaker 3: But that's what happened. 908 00:40:38,520 --> 00:40:40,360 Speaker 9: Yeah, I mean, it's simple economics for a lot of 909 00:40:40,360 --> 00:40:43,960 Speaker 9: these bigger folks. You know, they have distressed funds. Actually 910 00:40:43,960 --> 00:40:48,319 Speaker 9: they've raised distress funds to target opportunities across real estate 911 00:40:48,360 --> 00:40:50,799 Speaker 9: as well for this particular cycle. And you know, for them, 912 00:40:50,840 --> 00:40:53,439 Speaker 9: it's a lot of these loans are non recourse, meaning 913 00:40:53,440 --> 00:40:55,919 Speaker 9: they can walk away from it and the lender can't 914 00:40:55,920 --> 00:40:57,960 Speaker 9: go after their other properties. So it's easy for them 915 00:40:58,000 --> 00:41:00,799 Speaker 9: to just look at the economics of the building. They 916 00:41:00,840 --> 00:41:02,719 Speaker 9: think that the demand might not come back, or it 917 00:41:02,760 --> 00:41:05,240 Speaker 9: might cost more than it's worth, and it's just simpler 918 00:41:05,239 --> 00:41:07,800 Speaker 9: to hand the keys back and to refocus their money 919 00:41:08,120 --> 00:41:09,880 Speaker 9: on something that's a bit more valuable. 920 00:41:10,280 --> 00:41:13,719 Speaker 2: Can they repurpose the buildings that they've got. I mean, 921 00:41:13,800 --> 00:41:18,680 Speaker 2: offices seem to be the real problem here, right, but 922 00:41:19,440 --> 00:41:22,120 Speaker 2: you're not having you're not seeing nearly as much of 923 00:41:22,120 --> 00:41:24,920 Speaker 2: a problem in malls. Surprisingly, We're just talking to an 924 00:41:24,960 --> 00:41:30,840 Speaker 2: investor who likes Simon properties and they've done pretty well. 925 00:41:30,920 --> 00:41:31,120 Speaker 6: Right. 926 00:41:31,239 --> 00:41:35,080 Speaker 9: Offices are the worst performing properties right now. Malls already 927 00:41:35,080 --> 00:41:37,360 Speaker 9: bottomed up out a couple of years ago, so the 928 00:41:37,440 --> 00:41:41,839 Speaker 9: values have already fallen. Hotels have stayed relatively flat, and 929 00:41:42,200 --> 00:41:46,320 Speaker 9: we've seen some stress happening in apartments, but that's mostly 930 00:41:46,400 --> 00:41:50,040 Speaker 9: due to a function of the interest rates, not so 931 00:41:50,160 --> 00:41:51,560 Speaker 9: much that there's no demand there. 932 00:41:51,640 --> 00:41:51,799 Speaker 3: Right. 933 00:41:51,800 --> 00:41:54,040 Speaker 9: There's a shortage of housing demand across the country. But 934 00:41:54,080 --> 00:41:56,480 Speaker 9: with offices, that's really where the glood is, that's really 935 00:41:56,480 --> 00:41:59,600 Speaker 9: where values have fallen twenty seven percent across the US 936 00:41:59,640 --> 00:42:01,920 Speaker 9: just in the last year and set to fall more. 937 00:42:03,280 --> 00:42:04,719 Speaker 9: And you know, a lot of people are looking at 938 00:42:04,760 --> 00:42:07,799 Speaker 9: potential ways to convert properties. But the problem today in 939 00:42:07,840 --> 00:42:11,640 Speaker 9: the US is that, you know, the regulation isn't there 940 00:42:11,800 --> 00:42:15,080 Speaker 9: necessarily to allow for zoning in many cities, and it's 941 00:42:15,120 --> 00:42:19,719 Speaker 9: extremely costly to repurpose a building into residential if you're 942 00:42:19,760 --> 00:42:23,279 Speaker 9: able to do it, due to the structural you know, 943 00:42:23,600 --> 00:42:26,040 Speaker 9: standards of the building and whether or not's even able 944 00:42:26,080 --> 00:42:26,640 Speaker 9: to convert it. 945 00:42:26,680 --> 00:42:29,840 Speaker 2: I mean, I'd always thought about a residential conversion as well, Natalie, 946 00:42:29,920 --> 00:42:32,600 Speaker 2: especially you know, the Third Avenue corridor here in New 947 00:42:32,719 --> 00:42:36,360 Speaker 2: York has a lot of office buildings that nobody wants 948 00:42:36,719 --> 00:42:40,040 Speaker 2: and are impossible to convert into residential unless people all 949 00:42:40,040 --> 00:42:43,239 Speaker 2: of a sudden are demanding apartments with no windows. I 950 00:42:43,520 --> 00:42:46,160 Speaker 2: just I had never thought about converting the self storage. 951 00:42:46,200 --> 00:42:48,480 Speaker 2: That might be a great idea for some of these buildings. Yes, 952 00:42:48,560 --> 00:42:51,480 Speaker 2: and they haven't faired as poorly either, self storage spaces. 953 00:42:52,680 --> 00:42:55,920 Speaker 9: Some people are exploring that, but that's definitely not happening, 954 00:42:57,200 --> 00:42:59,680 Speaker 9: you know, on the masses at all, because again of 955 00:42:59,760 --> 00:43:02,760 Speaker 9: zone right. New York City in particular has very specific 956 00:43:02,840 --> 00:43:06,360 Speaker 9: zoning about what buildings can be designateds for certain uses. 957 00:43:06,600 --> 00:43:09,360 Speaker 9: And again, self storage is the very particular type of 958 00:43:09,400 --> 00:43:14,400 Speaker 9: properties that many of these midtown nineteen sixties to nineteen 959 00:43:14,440 --> 00:43:17,200 Speaker 9: eighties buildings just might not work out for. 960 00:43:17,640 --> 00:43:19,759 Speaker 1: Hey, the nineteen sixties to the nineteen eighties was a 961 00:43:19,760 --> 00:43:21,800 Speaker 1: pretty good ear for me, So I'm just going to 962 00:43:21,920 --> 00:43:24,040 Speaker 1: leave it to that. Natalie, thanks so much for joining us. 963 00:43:24,120 --> 00:43:27,480 Speaker 1: Natalie Wong, real estate reporter for Bloomberg News. Yeah, that's 964 00:43:27,480 --> 00:43:28,839 Speaker 1: gonna be a tough conversion there. 965 00:43:29,000 --> 00:43:32,080 Speaker 2: Thanks for listening to the Bloomberg Markets podcasts. You can 966 00:43:32,120 --> 00:43:35,920 Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever 967 00:43:36,000 --> 00:43:39,720 Speaker 2: podcast platform you prefer. I'm Matt Miller. I'm on Twitter 968 00:43:39,920 --> 00:43:42,560 Speaker 2: at Matt Miller nineteen seventy three and on. 969 00:43:42,640 --> 00:43:45,719 Speaker 1: Fall Sweeney I'm on Twitter at pt Sweeney. Before the podcast. 970 00:43:45,760 --> 00:43:49,240 Speaker 1: You can always catch us worldwide at Bloomberg Radio.