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Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.

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Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Paul Sweeney along

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Speaker 2: with Tom Keene. Join us each day for insight from

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Speaker 2: the best in economics, geopolitics, finance, and investment. You can

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Speaker 2: also watch the show live on YouTube. Visit the Bloomberg

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Speaker 2: Podcast channel on YouTube to see the show weekday mornings

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Speaker 2: from seven to ten Eastern Remarked Global headquarters in New

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Speaker 2: York City. Subscribe to the podcast on Apple, Spotify, or

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Speaker 2: anywhere else you listen, and as always on Bloomberg Radio,

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Speaker 2: the Bloomberg Terminal, and the Bloomberg Business app. Neil Grossman,

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Speaker 2: co founder at former CIO founder TKNG Capital, joins us

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Speaker 2: here in studio. He's also owns a vineyard. Where's your vineyard, Neil?

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Speaker 3: It's in the Milbrook area, up state New York.

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Speaker 2: State, in ther beautiful names. He always comes in bearing

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Speaker 2: a bottle wine. We appreciate that. It's yes, that's yeh.

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Speaker 2: Now you know Carol, you know Carol Master and Tim Senovik.

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Speaker 2: Occasionally in there after in Bloomberg Business Weeks, I'll see

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Speaker 2: bottles open Data studio. That that's how they play, that's

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Speaker 2: how they.

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Speaker 3: It adds a clarity to the way it does.

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Speaker 2: It does. Hey, we had a bunch of economic data.

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Speaker 2: We just got through an earning season. What's your view

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Speaker 2: of the world here. I mean, we've got a market

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Speaker 2: selling off a little bit today, but I mean we've

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Speaker 2: got a market that's S and P five hundred up,

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Speaker 2: double digits, yields coming in. What do you make of

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Speaker 2: this world we're in?

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Speaker 3: I'm more on the this but feels bubbleish a little bit.

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Speaker 3: I mean, let's take a look at Apple. I mean,

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Speaker 3: wonderful company, don't get me wrong, but somebody added three

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Speaker 3: to four hundred billion dollars in value on an announcement

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Speaker 3: that they're going into something. I mean, it's pretty staggering

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Speaker 3: when you think about it. I think when you watch

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Speaker 3: the internals a little bit, the size of the moves

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Speaker 3: of stocks based on a little miss, a little hit,

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Speaker 3: or a little expectation. I don't remember stuff like this

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Speaker 3: very much in the forty years I've been doing this.

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Speaker 4: Paul referring to the the FED meeting this week, and

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Speaker 4: I wonder how you were processing what we heard from

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Speaker 4: the FED, share what we saw in the dot plot

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Speaker 4: and the SEP. How are you navigating those data points,

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Speaker 4: and how's that sort of shaping your perpective.

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Speaker 3: I'm a little lighter than normal right now. I would

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Speaker 3: say there was one thing I actually heard in powell statement,

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Speaker 3: which you know, is something I think we have even

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Speaker 3: talked about. He made the comment that the annualization of

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Speaker 3: inflation data is going to be very hard to continue

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Speaker 3: to see improvement. I think we're in a range of

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Speaker 3: let's say, three and a quarter to four and a

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Speaker 3: half percent number one, number two inflation. Wow, I'm looking.

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Speaker 3: I use CPI, the PCE, and some of the other

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Speaker 3: stuff the FED uses to me is a slice. And

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Speaker 3: I understand somewhat why they like to eliminate a little

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Speaker 3: bit of volatility of things. But I think the discussions

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Speaker 3: in the large of why people don't feel good is

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Speaker 3: it's the bigger numbers that affect them. And there are

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Speaker 3: a lot of really interesting things. I mean, the cost

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Speaker 3: of ensuring things, as you know, the cost of buying cars,

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Speaker 3: some of the food costs, they're pretty staggering. And for

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Speaker 3: the average person, airfares hotels are off the charts, and

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Speaker 3: so you know the concept that maybe you're getting a

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Speaker 3: little bit of a slowing in the rate of growth

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Speaker 3: inflation if inflation, remember we're not we're still at three

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Speaker 3: to four five percent wherever it is three six I

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Speaker 3: think people are feeling it still, and I think that's

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Speaker 3: one of the issues. I did want to mention something

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Speaker 3: which I've been thinking about. I mean, there's been a

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Speaker 3: lot of talk for the last two years basically about

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Speaker 3: the inverted yield curve and why it has not indic

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Speaker 3: you know, lived up to the expectations as an indicator

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Speaker 3: of bad things to come. And I've been spending a

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Speaker 3: lot of time thinking about this. The idea may well

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Speaker 3: be that the inverted yield curve, given the structure of

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Speaker 3: the economy now, is actually stimulative more than not. There

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Speaker 3: are areas of the economy, obviously, like real estate, where hurts,

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Speaker 3: but if you think about it, long term meals are

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Speaker 3: still relatively low. In corporate America, if it wants to

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Speaker 3: borrow using a four percent base with very tight spreads,

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Speaker 3: long term borring costs so lower, So that's not a negative.

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Speaker 3: Short term money money for the average investor is throwing

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Speaker 3: off tons of yields. But on the other side, the

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Speaker 3: real cost of money, the large borrowing is coming out

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Speaker 3: of the government of the United States. So they're borrowing

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Speaker 3: staggering quantities, they're short funding it, and then they're taking

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Speaker 3: that money and it's running through the economy. So I

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Speaker 3: think there is some interesting dynamics which have helped us

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Speaker 3: support the economy a bit. We'll see as it goes

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Speaker 3: right now, but.

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Speaker 2: A lot of folks, Neil are saying that this FED

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Speaker 2: is already behind the curve that they should be cutting.

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Speaker 2: Now are you in that camp?

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Speaker 5: You know?

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Speaker 3: Look number one, they again there's an asymmetry to what

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Speaker 3: they do. One piece of data that looks good, and

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Speaker 3: they training the markets to go crazy. Six months. I

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Speaker 3: mean we're six months or a year from where we were.

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Speaker 3: The economy hasn't slowed, this argument. I know, you have

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Speaker 3: built Bill Dudley on who's an old friend of mine,

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Speaker 3: talking about about the neutral rate of interest rates and yeah,

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Speaker 3: wherever that falls. And again, I think this goes back

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Speaker 3: to some of the other questions. You know, central bankers,

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Speaker 3: and as you know, I was one for a while,

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Speaker 3: tend to look at the liability side of the economy.

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Speaker 3: They've never really, in my view, fully incorporated the asset side.

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Speaker 3: And I think we are in an asset positive environment

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Speaker 3: so you know, and every time that Fred opens its mouth,

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Speaker 3: of the market seems to get that it's, you know,

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Speaker 3: it's expectations up. What happens yields have hard yields fall

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Speaker 3: in the last couple of days, where one hundred basis

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Speaker 3: points lower and long term meals over a year, the

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Speaker 3: dollar starts to weaken. Stocks are throwing off value, and

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Speaker 3: so every time you liquefy it works against the idea

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Speaker 3: that you're going to get this sort of significant improvement

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Speaker 3: and inflation. So I think we're going to be waiting.

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Speaker 3: The last point is and I don't I know everyone's

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Speaker 3: talking about September. I think Powell went off on a

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Speaker 3: tangent last year because he was hoping he could get

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Speaker 3: something done before the election. I do not know unless

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Speaker 3: you get a significant downgrading in this economy how and

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Speaker 3: or a staggering drop in the prices, which I don't see.

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Speaker 3: I don't know how in front of this election, given

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Speaker 3: the polarization that that the FED really and I know

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Speaker 3: that this is not a political argument per se, but

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Speaker 3: the meeting immediately before a major, maybe one of the

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Speaker 3: most important elections for them to be doing that, I

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Speaker 3: think is going to be a very difficult thing, all.

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Speaker 2: Right, Neil, thanks so much for joining us in studio.

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Speaker 2: Neil Grossman, he is a co founder of former CIO

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Speaker 2: of t k n G Capital. Give him some thoughts

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Speaker 2: on these markets on this federal reserve. He is a

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Speaker 2: fed hawk. Let's just be clean and simple here. I

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Speaker 2: try to tee him up to kind of soften it

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Speaker 2: up a little bit, and nothing happening. Tech stocks continue

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Speaker 2: to be the story. I mean, I love when my

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Speaker 2: tech stocks are leading the market. I feel like that's

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Speaker 2: all we've known for the last this is it. I'm

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Speaker 2: all in, but I get a little nervous when like

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Speaker 2: that's kind of it. You know, there's not that breath

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Speaker 2: you like to see in the market. Let's talk to

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Speaker 2: a person kind of an expert in this stuff. Melissa Auto,

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Speaker 2: head of TMT research at Visible Alpha. Melissa, what's your

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Speaker 2: tech call these days? Are you comfortable with where these

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Speaker 2: companies are, with where their multiples are, with where their

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Speaker 2: earnings are? How do you think about it?

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Speaker 1: Thank you. I mean it's a really interesting time right

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Speaker 1: now for the tech stocks. I think what we're seeing

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Speaker 1: is that essentially garb is kind of worked growth.

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Speaker 2: At a reasonable price. Those of us old enough to remember.

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Speaker 4: That taking out my pencil.

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Speaker 1: Yes, right, So I mean stocks that are trading at

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Speaker 1: say twenty to thirty times are actually generating decent growth.

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Speaker 1: So when you think about the multiple that they're they're

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Speaker 1: generating or the ratio from that, it looks pretty reasonable,

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Speaker 1: So it doesn't seem like it's out of proportion. And

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Speaker 1: I mean, just coming out of the WWDC this week,

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Speaker 1: I mean Apple trades at a range of twenty seven

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Speaker 1: to say thirty two times based on forelooking estimates, you know,

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Speaker 1: And I think what we've observed is that, you know,

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Speaker 1: based on visible alpha consensus, there is a trajectory getting

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Speaker 1: essentially built into the market that is looking like there

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Speaker 1: could be a really compelling replacement cycle, which I think

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Speaker 1: you know, essentially took Apple up this week. So I

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Speaker 1: think when you think about what where the growth trajectory

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Speaker 1: is going and where AI is potentially taking it, the

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Speaker 1: landscape looks really interesting.

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Speaker 2: That's where I.

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Speaker 4: Want to go. So you mentioned that Apple Worldwide Developers

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Speaker 4: Conference and the deal that it broke with open ai,

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Speaker 4: and we talk a lot about open AI, we talk

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Speaker 4: a lot about in video as well. So these are

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Speaker 4: the two kind of marquee names. I'm curious sort of

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Speaker 4: how you see that landscape shifting and evening out. So

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Speaker 4: there's so much obvious promise and faith in in video,

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Speaker 4: for instance, when do we begin to see that sort

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Speaker 4: of trickle down and sort of what does it look

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Speaker 4: like when mile beneath in video?

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Speaker 5: I mean in videos, definitely a loadstar. I mean a

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Speaker 5: holy back roll. I mean they just I mean, based

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Speaker 5: on visible Aphican census we see in the data. This year,

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Speaker 5: the data center revenues are expected to generate over one

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Speaker 5: hundred billion dollars, but looking forward several years, it's.

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Speaker 1: Going to over two hundred. One hundred billion dollars in revenue.

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Speaker 1: Growth for one segment is expected in the market. That

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Speaker 1: is astonishing growth. And so you know, I think when

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Speaker 1: we look at that, it just tells us, Wow, there's

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Speaker 1: something interesting coming down the pike, right, And so I think,

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Speaker 1: you know, for Apple, you know, they're sort of the

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Speaker 1: consumer end of that, they're the end user of that.

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Speaker 1: What Nvidia does is they're essentially building the infrastructure that's

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Speaker 1: enabling all of this generative AI to even happen, you know,

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Speaker 1: to make it so that you know, users like you

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Speaker 1: and I and organizations can actually have the compute power

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Speaker 1: to do the generative AI things that are so productive

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Speaker 1: and interesting.

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Speaker 2: So in Vidia obviously, I think for most lay people

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Speaker 2: that is their AI play, even though there's a lot

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Speaker 2: more on the software side. I hear Microsoft mentioned as

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Speaker 2: a way if you want exposure to kind of the

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Speaker 2: next wave of technology, whether it's AI, whatever you like.

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Speaker 2: I call it a big data two years ago and

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Speaker 2: now now it's AI. Microsoft is a story. How do

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Speaker 2: you think about that?

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Speaker 1: I mean, Microsoft is another monster. I'm based on visible

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Speaker 1: African census there Azure cloud business is expected to go

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Speaker 1: from seventy five billion dollars and then over the next

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Speaker 1: couple of years to one hundred and fifty billion. I mean,

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Speaker 1: so between in Video and Microsoft together, you're talking about

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Speaker 1: one hundred and seventy five billion dollars in expected new

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Speaker 1: revenue growth. That's incredible.

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Speaker 4: We had this news this week Bloomberg reporting that two

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Speaker 4: regulators are looking into Microsoft and Video when it comes

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Speaker 4: to AI, and I wonder stif what that tells you,

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Speaker 4: not necessarily about those cases as they might be unfolding,

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Speaker 4: but about where we are in this cycle. Again, we

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Speaker 4: talk about the promise of AI. It things are moving

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Speaker 4: so quickly. You talk about doubling revenue rents Quint saying

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Speaker 4: like the in the s few that you're talking about.

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Speaker 4: But you know, then you have news like this and

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Speaker 4: you wonder sort of what what are the things that

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Speaker 4: might slow this down or might bring this to a

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Speaker 4: more normal pace. Is that even likely to happen?

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Speaker 6: Do you think?

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Speaker 1: I mean, it's a question that keeps me up at night.

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Speaker 1: I'm like, what what happens if the consumer just doesn't adopt?

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Speaker 2: If it doesn't click generative aidea.

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Speaker 1: It doesn't click? Because I really remember covering Apple back

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Speaker 1: in the day, pre iPhone, and I remember a lot

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Speaker 1: of us in the investment community debating, oh is this

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Speaker 1: thing going to take off? Or people going to like

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Speaker 1: these touch screens or like there's no keyp head, you

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Speaker 1: know what about the flip phone? Remember those days? And

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Speaker 1: I remember there were two really distinct moments when I thought, Okay,

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Speaker 1: this thing is going to be huge. The first was

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Speaker 1: when I saw my one year old child taking her

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Speaker 1: finger on an iPad and very engaging with this. Couldn't

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Speaker 1: walk or talk really, but can engage with an iPad.

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Speaker 1: I was like, Wow, this is really interesting. Wow, this

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Speaker 1: could create a whole generation of users that are not

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Speaker 1: really baked into expectations. And the second was my mom,

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Speaker 1: widow and retiree saying, you know, I think I want to,

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Speaker 1: you know, convert from a flip phone to an iPhone.

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Speaker 1: What do you think should I do it? And then

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Speaker 1: it really revolutionizing her life things like GPS takes her

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Speaker 1: the way she engages with us and her friends, really

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Speaker 1: making her life a lot more fun and easy. And

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Speaker 1: so if generative AI is able to do that, I

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Speaker 1: think it could be really interesting.

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Speaker 2: Melissa thirty seconds left Amazon. What's your takeaway from Amazon?

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Speaker 1: Amazon is in a really interesting position right now. We

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Speaker 1: just I was just actually at the Amazon AWS Financial

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Speaker 1: Services Symposium. There was a lot of discussion around how

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Speaker 1: generative AI is being brought into organizations, and I think

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Speaker 1: the big takeaway from that is that, you know, it's

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Speaker 1: really going to move more to the cloud and companies

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Speaker 1: are really feeling that FOMO trade. And so when I

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Speaker 1: look at the Amazon expectations for the AWS business, we

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Speaker 1: have seen the visible AFRIC consensus numbers for AWS margin

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Speaker 1: go up one hundred and twenty basis points into Q two.

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Speaker 1: So I think there's some interesting momentum coming in there.

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Speaker 2: Melissa, thank you so much for joining us, Melissa Otto,

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Speaker 2: she said of TMT research at Visible Alpha. Getting a

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Speaker 2: little tech discussion this morning. David, you're a worldly guy.

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Speaker 2: Let's talk US sanctions, Let's talk US industrial policy, US protectionism,

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Speaker 2: US monetary policy. Are these good? Are they bad? Are

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Speaker 2: they working? Or are they not working? I have no idea.

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Speaker 2: I did pay attention when I was a duke to

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Speaker 2: some of my economics classes, but I just don't know.

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Speaker 2: Steve Hanke knows. He's professor at Johns Hopkins University. You know, Steve,

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Speaker 2: thanks much for joining us here. This is an election year.

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Speaker 2: I'm starting to hear a lot more discussion about global

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Speaker 2: industrial policy, US industrial policy. Let's just start with you know, tariffs.

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Speaker 2: Are tariffs good? Are tariffs protectionism? Are they good? Are

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Speaker 2: they needed? Safe for the electrical v vehicle market? What

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Speaker 2: do you think?

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Speaker 6: I think they're terrible?

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Speaker 2: Nobody.

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Speaker 7: And we just keep getting getting all the major political

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Speaker 7: players in the game, doubling down and proposing even more nutty,

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Speaker 7: terrify ideas with each passing day. You know, we we

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Speaker 7: had Trump yesterday. He's got some idea. He's he's going

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Speaker 7: to replace the income tax with revenues from terrorists.

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Speaker 2: Do we get we don't get revenues from tariffs, do we?

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Speaker 4: Well?

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Speaker 7: We we we we do get revenues from tariffs, but

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Speaker 7: the revenues there are actually a tax that come out

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Speaker 7: of the height of American consumers and businesses.

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Speaker 6: So that's that.

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Speaker 7: The terriffs thing is is really unbelievable because it's part

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Speaker 7: of a larger picture. And sanctions are actually a form

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Speaker 7: of protectionism. This is all really David under the umbrella

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Speaker 7: of protectionism. So you have sanctions, and since two thousand,

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Speaker 7: the United States has increased the number of sanctions that

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Speaker 7: we've put on various individuals and countries by nine hundred percent.

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Speaker 6: But it's amazing.

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Speaker 7: Because the scholarly literature shows us that these things don't work.

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Speaker 7: They always end up backfiring, creating a lot of unintended consequences,

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Speaker 7: and the sanctioned countries and individuals always find workarounds one

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Speaker 7: way or another to get out of them. But in

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Speaker 7: the end, when I say they don't work, they usually

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Speaker 7: create what's called a rally around the flag effect that

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Speaker 7: keeps the targeted leaders or elites in countries in the

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Speaker 7: Saddle Valley Naessa, one of my colleagues at Johns Hopkins

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Speaker 7: and experienced diplomat Iranian of origin, just did a big

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Speaker 7: study with three other colleagues on Iran and basically the

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Speaker 7: sanctions we put on Iran have really created this rally

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Speaker 7: around the flag effect because the idea was the US thought, well,

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Speaker 7: we'll put the sanctions on that will put a lot

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Speaker 7: of pressure on the middle class, and the middle class

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Speaker 7: in Iran will come to our side. Well, no, the

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Speaker 7: middle class either went to the sidelines or went on

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Speaker 7: the side of the regime because they view those who

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Speaker 7: imposed sanctions on as enemies.

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Speaker 4: Steve, let me ask you a little bit more about that.

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Speaker 4: And I think it's a rare day when I don't

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Speaker 4: see in my inbox and message from the Treasury Department

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Speaker 4: about a new sanction, particularly with regard to to Russia's

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Speaker 4: invasion of Ukraine. And so we have the G Seven

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Speaker 4: meetings unfolding now in Italy and the Treasury or Jennet

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Speaker 4: Yellen announcing a new raft of sanctions against Russia I

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Speaker 4: think tied to semiconductors. But you're gonna get something I

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Speaker 4: wanted to ask you about, and that is this kind

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Speaker 4: of recent history of the weaponization of sanctions, the Treasury Department,

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Speaker 4: the administration, this and previous ones really relying on them

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Speaker 4: as a tool. I mean, Jennet Yellen not shy about

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Speaker 4: saying she thinks these are effective. You talk about hern

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Speaker 4: as we pivot to Russia. Are they any more effective

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Speaker 4: when there is an actual military war, when you see

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Speaker 4: the kind of ratcheting up that we've seen here in

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Speaker 4: recent years.

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Speaker 6: The answer is no.

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Speaker 7: If you read all of the scholarly literature tells exactly

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Speaker 7: the same story, starting in World War One, and that's all.

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Speaker 7: These almost never achieve their desired objectives. And let me

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Speaker 7: give you, let me give you one. Let's go back

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Speaker 7: to the nineteen seventies. You know when the Soviets invaded

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Speaker 7: Afghanistan and nineteen seventy nine, Jimmy Carter was in the

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Speaker 7: White House, of course, in Brazinski was a National Security advisor,

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Speaker 7: and they put a ban on agricultural exports from the

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Speaker 7: US to the Soviet Union. And what happened is what

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Speaker 7: Bob Mandel called the Afghan effect, and that is the

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Speaker 7: Soviets went.

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Speaker 6: To Argentina right away and cut a deal for grain.

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Speaker 7: US farmers, of course, were prohibited from sending an exporting

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Speaker 7: grain to the Soviet Union, so that Argentines made out

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Speaker 7: like bandits.

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Speaker 6: The Soviets weren't hurt at all.

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Speaker 7: And ironically, who was in power in Argentina at the time, well,

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Speaker 7: Hunt was in power.

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Speaker 6: They were supposedly the bad guys.

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Speaker 7: So this is law, the kind of law of unintended consequences,

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Speaker 7: this Afghan kind of effect.

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Speaker 4: I guess we're seeing that now with with China. You

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Speaker 4: see that that relationship between Russian and China has grown

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Speaker 4: in warmth, shall we say, since the start of that.

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Speaker 7: Well, yeah, this is absolutely they are blocked at the hip,

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Speaker 7: and then it's because of these sanctions. And now we

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Speaker 7: put even further batchel of sanctions on as you indicated

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Speaker 7: with the G seven.

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Speaker 6: So it's just.

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Speaker 7: Something that doesn't work. But the problem is it's part

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Speaker 7: of this protectionist thing. We the public thinks somehow they work,

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Speaker 7: They have the impression that they work, they and they

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Speaker 7: become familiar with, they think sanctions and comfortable with sisms.

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Speaker 7: So if we're sanctioning somebody, why not put a quota

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Speaker 7: on them or a terrif on them, so you get

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Speaker 7: in out into the broader sphere of other kinds of

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Speaker 7: government intervention.

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Speaker 2: And Dan Steve David brought up China. I'd love to

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Speaker 2: get your here because I think there's a founded concern

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Speaker 2: on many Americans view about China, whether it's a technology

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Speaker 2: cold war between China and the West. We're concerned about,

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Speaker 2: you know, TikTok being so pervasive here in the US.

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Speaker 2: What do you think the US policy should be about

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Speaker 2: China in terms of trade and just overall relations there,

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Speaker 2: because there are some significant, I would say meaningful concerns.

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Speaker 7: Well, we have a lot of the S and B

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Speaker 7: five hundred companies that are very involved in China and

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Speaker 7: deriving considerable profits from China, And as far as I'm concerned,

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Speaker 7: that's a good, good idea. Trade is always good. Once

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Speaker 7: you start cutting trade off, you increase the chance that

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Speaker 7: you're going to get into a hot war of some sort.

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Speaker 7: And with the current administration, and this started of course

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Speaker 7: with Trump and the former administration, we've essentially continued to escalate.

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Speaker 7: Really what is an open commercial trade war with China,

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Speaker 7: which I think is a very bad policy.

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Speaker 4: Steeve, you mentioned Argentina moment ago. Maybe I can ask

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Speaker 4: you about what's been going on there. Lastly, so we

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Speaker 4: were talking about Argentina in the seventies, how about Argentina today?

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Speaker 4: And you have President me like pushing really hard for

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Speaker 4: this legislation that would make pretty radical changes and cuts

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Speaker 4: to the Argentine economy, as he, i think, is going

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Speaker 4: to Italy to meet with the IMF to try to

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Speaker 4: renegotiate some of that country's debt once again. But we've

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Speaker 4: seen the protests in the street. At the same time,

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Speaker 4: we've seen Parliament in Argentina pass a kind of lighter

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Speaker 4: version of that omnibus build that was designed to kind

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Speaker 4: of rework the economy there. What's your read on that

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Speaker 4: as you look to that part of the world. Do

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Speaker 4: you see him as making progress despite it all? What's

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Speaker 4: your sense of what Pemula is doing in Argentina.

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Speaker 7: The passage two days of that omnibus bill was a

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Speaker 7: big win for Malay.

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Speaker 6: It was a squeaker he barely got passed, but it's that.

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Speaker 7: That's a good policy move and a good thing for Malay.

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Speaker 7: His problem is, and his achilles heel, is that he

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Speaker 7: hasn't delivered on dollarization and getting rid of the Central Bank.

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Speaker 7: And he campaigned on that promise. He hasn't done it,

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Speaker 7: and as a result, they're really not getting inflation under control,

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Speaker 7: and and and the pace that just keeps sliding. And

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Speaker 7: I think this will essense will make him extremely vulnerable

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Speaker 7: as time passes.

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Speaker 6: He's quite popular right now.

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Speaker 7: There's he's if you look at the polls, he's doing

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Speaker 7: pretty well. In the passage of this bill by the

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Speaker 7: Senate two days ago.

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Speaker 6: Certain it was a help.

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Speaker 7: But I think I think that without dollarization, I think

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Speaker 7: the story is going to be pretty much over in Argentina.

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Speaker 7: All right, Steve, they have they have a long history

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Speaker 7: of just not being able to do it as long

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Speaker 7: as they have that central bank there. It's it's like

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Speaker 7: a recovering alcoholic with a bottle of whiskey in.

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Speaker 6: Front of it.

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Speaker 2: Right, all right, Hey, Steve, thanks so much for joording us.

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Speaker 2: Always appreciate getting your informed thought. Steve Hankey, Professor of

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Speaker 2: Johns Hopkins University and of course a proud graduate of

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Speaker 2: the University of Colorado. With Boulder the Buffs scope Buffs.

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Speaker 3: How about that.

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Speaker 2: I used to live in North Jersey and right across

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Speaker 2: the street was the Short Hills Mall, which is Jabled

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Speaker 2: famous Babled. It is just it was packed. It's packed

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Speaker 2: all the time. I mean, and people were talking about

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Speaker 2: the death of malls. I'm like, not where I look.

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Speaker 2: I mean, I don't I would never set foot in there,

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Speaker 2: but everybody else was going to stay does. But I mean,

436
00:25:04,640 --> 00:25:06,240
Speaker 2: I don't know how to think about this, the whole

437
00:25:06,280 --> 00:25:09,320
Speaker 2: retail business now everybody's kind of shopping online. I don't

438
00:25:09,359 --> 00:25:11,720
Speaker 2: know how this whole thing works. Angelae Slank, she knows

439
00:25:11,760 --> 00:25:14,240
Speaker 2: how this stuff works. National Director of Retail Services for

440
00:25:14,359 --> 00:25:18,280
Speaker 2: the US for Colliers and give us a stay here

441
00:25:18,320 --> 00:25:21,280
Speaker 2: another where, you know, on the thankfully on the backside

442
00:25:21,280 --> 00:25:24,199
Speaker 2: of this pandemic, and maybe consumers are getting back to

443
00:25:24,240 --> 00:25:27,280
Speaker 2: normal behavior if you will talk to us about how,

444
00:25:27,600 --> 00:25:30,600
Speaker 2: you know, the balance between you know, having the bricks

445
00:25:30,600 --> 00:25:33,680
Speaker 2: and mortar store kind of works with the e commerce

446
00:25:33,880 --> 00:25:37,280
Speaker 2: side of the retail equation. How are retailers making that

447
00:25:37,320 --> 00:25:38,160
Speaker 2: balance these days?

448
00:25:39,160 --> 00:25:42,160
Speaker 8: Oh, it's a great question, and thanks for having me. Honestly,

449
00:25:42,200 --> 00:25:46,720
Speaker 8: it's really working well. They're really both integrated. So retailers

450
00:25:46,760 --> 00:25:49,040
Speaker 8: right now have invested quite a bit of money over

451
00:25:49,040 --> 00:25:51,280
Speaker 8: the past call it ten years, as it relates to

452
00:25:51,280 --> 00:25:55,640
Speaker 8: the infrastructure for online So they really are harmonious. We're

453
00:25:55,680 --> 00:26:00,840
Speaker 8: seeing you know, online sales from most retailers, roughly around

454
00:26:00,880 --> 00:26:05,600
Speaker 8: eighteen to twenty percent is online, whereas in store still

455
00:26:05,680 --> 00:26:10,200
Speaker 8: is the dominant place to sell. People still want to touch, feel, smell,

456
00:26:10,600 --> 00:26:12,959
Speaker 8: so we're and be educated. So I think, you know,

457
00:26:13,160 --> 00:26:17,840
Speaker 8: brick and mortar is far from being completely forgotten.

458
00:26:18,200 --> 00:26:22,840
Speaker 4: When you look at how retail is navigating this macroeconomic moment,

459
00:26:24,000 --> 00:26:26,359
Speaker 4: what are companies prioritized. I know there was this push

460
00:26:26,359 --> 00:26:28,560
Speaker 4: for expansion. Has that been scaled back? So how are

461
00:26:28,560 --> 00:26:31,080
Speaker 4: they thinking about growing that footprint in the way that

462
00:26:31,119 --> 00:26:33,960
Speaker 4: you're describing, both with brick and mortar and online as well.

463
00:26:35,119 --> 00:26:38,400
Speaker 8: Definitely, you know, there is definitely still a high demand

464
00:26:38,880 --> 00:26:43,400
Speaker 8: as it relates to you know, site expansion and growth.

465
00:26:44,040 --> 00:26:47,520
Speaker 8: As you look at the very mature brands that are

466
00:26:47,560 --> 00:26:51,240
Speaker 8: out there that have been quite successful year over year,

467
00:26:51,640 --> 00:26:55,480
Speaker 8: they're continuing to look at the US as a great

468
00:26:55,520 --> 00:26:58,720
Speaker 8: opportunity for more sites. And you know, in speaking to

469
00:26:58,800 --> 00:27:02,160
Speaker 8: a lot of these brands looking at not just fifty locations,

470
00:27:02,440 --> 00:27:05,400
Speaker 8: some are looking at one hundred per year. And so

471
00:27:05,520 --> 00:27:07,840
Speaker 8: when we're seeing that and most of those segments are

472
00:27:07,920 --> 00:27:11,880
Speaker 8: going to be your junior boxes, your big box type tenants,

473
00:27:12,160 --> 00:27:17,239
Speaker 8: your grocery those are call it more mainstay stable, you know,

474
00:27:17,359 --> 00:27:20,480
Speaker 8: sectors within our industry, and therefore we're really going to

475
00:27:20,480 --> 00:27:23,360
Speaker 8: continue to see that. What the challenge is is that

476
00:27:23,400 --> 00:27:26,399
Speaker 8: we have a lack of supply. The lack of supply

477
00:27:26,480 --> 00:27:29,240
Speaker 8: is really what's hurting us because there hasn't been call it,

478
00:27:29,359 --> 00:27:34,280
Speaker 8: new construction and a growth in new construction throughout the US.

479
00:27:35,400 --> 00:27:38,080
Speaker 2: So I guess on the other side of the question,

480
00:27:38,160 --> 00:27:40,320
Speaker 2: how was the retailer or how is the consumer doing?

481
00:27:40,320 --> 00:27:43,480
Speaker 2: What are the retailers telling you about what the consumers buying,

482
00:27:44,080 --> 00:27:46,200
Speaker 2: how they're buying, how much promotion they need to buy?

483
00:27:46,480 --> 00:27:48,000
Speaker 2: What are you seeing out there these days?

484
00:27:48,560 --> 00:27:50,920
Speaker 8: Yeah, it's been a really interesting kind of a little

485
00:27:50,920 --> 00:27:53,240
Speaker 8: bit of a mixed bag. You know, we are seeing

486
00:27:53,320 --> 00:27:56,560
Speaker 8: a bit of a gradual slowing. We anticipate that when

487
00:27:56,600 --> 00:27:59,080
Speaker 8: we forecast for the end of the year that will

488
00:27:59,080 --> 00:28:03,080
Speaker 8: still be slightly up compared to last year. However, we

489
00:28:03,160 --> 00:28:05,919
Speaker 8: are going to see a gradual slow down. Now the

490
00:28:06,000 --> 00:28:08,160
Speaker 8: areas that we're going to see a slow down, we're

491
00:28:08,160 --> 00:28:10,520
Speaker 8: going to see some slow down. Of course, in high

492
00:28:10,640 --> 00:28:14,440
Speaker 8: luxury spend. We are still continuing to see a good

493
00:28:14,560 --> 00:28:17,920
Speaker 8: spend in the discount category, but people are really paying

494
00:28:17,960 --> 00:28:21,840
Speaker 8: attention to where they're placing their dollars. So even though

495
00:28:21,880 --> 00:28:25,680
Speaker 8: we're seeing you know, spend occur in you know, the

496
00:28:26,520 --> 00:28:29,200
Speaker 8: health and personal care, we're still we're starting to see

497
00:28:29,240 --> 00:28:31,520
Speaker 8: a bit of a slow down and call it beverage

498
00:28:31,560 --> 00:28:36,720
Speaker 8: spend FMB spend. Prices have increase in that sector purely

499
00:28:36,760 --> 00:28:39,760
Speaker 8: because wages have increased. I think the overall wage increase

500
00:28:39,800 --> 00:28:43,560
Speaker 8: has been roughly what about four percent, So people still

501
00:28:43,560 --> 00:28:47,560
Speaker 8: are making a healthy, decent amount of money, but they

502
00:28:47,560 --> 00:28:50,360
Speaker 8: are being very cautious on where and how. We are

503
00:28:50,400 --> 00:28:54,320
Speaker 8: seeing One interesting thing, and that is in the entertainment sector.

504
00:28:54,640 --> 00:28:58,400
Speaker 8: So people still want to have that joy and that experience.

505
00:28:58,560 --> 00:29:01,840
Speaker 8: So when we stop and think about, you know, the concert.

506
00:29:02,720 --> 00:29:04,880
Speaker 8: You know, there's been plenty of concerts that have been

507
00:29:04,880 --> 00:29:07,680
Speaker 8: going on, but the cost of a concert versus the

508
00:29:07,720 --> 00:29:11,240
Speaker 8: cost of going to either whether it's just going out

509
00:29:11,280 --> 00:29:14,520
Speaker 8: for a small dinner with friends or to see a movie.

510
00:29:14,600 --> 00:29:17,360
Speaker 8: Even though the movie industry, you know, is the cinema

511
00:29:17,400 --> 00:29:20,960
Speaker 8: industry is still you know, you know, you know, softly

512
00:29:21,120 --> 00:29:24,240
Speaker 8: kind of treading here, people still want to have this

513
00:29:24,320 --> 00:29:26,560
Speaker 8: call it entertainment experience.

514
00:29:27,440 --> 00:29:29,880
Speaker 4: I want to ask you about where you're seeing growth

515
00:29:29,920 --> 00:29:31,960
Speaker 4: and I'll confess I read a few of your notes

516
00:29:32,000 --> 00:29:34,680
Speaker 4: before coming in here today and Paul at least having

517
00:29:34,760 --> 00:29:37,160
Speaker 4: some fun talking about Brooklyn. But you you highlight the

518
00:29:37,160 --> 00:29:40,200
Speaker 4: fact that Fifth Avenue in my neighborhood in Parkslope, Brooklyn, Well,

519
00:29:40,240 --> 00:29:42,640
Speaker 4: the great retail stretch is now in the country, which

520
00:29:42,760 --> 00:29:45,640
Speaker 4: like makes me so happy. And part of that are

521
00:29:45,640 --> 00:29:47,400
Speaker 4: these kind of boba te shops that are set up

522
00:29:47,440 --> 00:29:50,840
Speaker 4: and constantly packed with young people, my daughter. I mean,

523
00:29:50,840 --> 00:29:53,440
Speaker 4: it's like this is a big deal now, So talk

524
00:29:53,480 --> 00:29:55,040
Speaker 4: a bit about like you know, have to talk about

525
00:29:55,040 --> 00:29:57,000
Speaker 4: that stretch in my neighborhood. But where we're seeing growth

526
00:29:57,040 --> 00:30:00,400
Speaker 4: in retail, both in terms of geography U and also

527
00:30:00,400 --> 00:30:03,280
Speaker 4: sort of where there's opportunity in food in beverage that's

528
00:30:03,280 --> 00:30:04,680
Speaker 4: a little different from what we've seen before.

529
00:30:05,680 --> 00:30:08,360
Speaker 8: Yeah, it's been really fascinating on the beverage side. So

530
00:30:08,400 --> 00:30:10,760
Speaker 8: I think, you know what people are starting to realize,

531
00:30:10,760 --> 00:30:13,320
Speaker 8: and of course it's the younger generation that you know,

532
00:30:13,880 --> 00:30:17,200
Speaker 8: alcohol doesn't have to be the beverage of choice, and

533
00:30:17,240 --> 00:30:21,320
Speaker 8: so we're starting to see these very diverse type uses

534
00:30:21,440 --> 00:30:25,880
Speaker 8: start to expand throughout the US, and it's it's you know,

535
00:30:26,600 --> 00:30:29,800
Speaker 8: it's very interesting to see kind of that culture around it.

536
00:30:30,040 --> 00:30:34,160
Speaker 8: So Boba t is one you know, we actually we're

537
00:30:34,280 --> 00:30:37,280
Speaker 8: working with a group called Swig. And if you look

538
00:30:37,280 --> 00:30:39,360
Speaker 8: at Swig and I think one of you know, there

539
00:30:39,440 --> 00:30:42,400
Speaker 8: is a tagline, you know, dirty sodas well, you stop

540
00:30:42,440 --> 00:30:45,720
Speaker 8: and think about it's really a soda mixed with whether

541
00:30:45,760 --> 00:30:49,640
Speaker 8: it's lemonade or a different type of juice or different

542
00:30:49,680 --> 00:30:53,480
Speaker 8: types of you know, add ons. And it's really become

543
00:30:53,600 --> 00:30:56,760
Speaker 8: a great way of kind of you know, in introducing

544
00:30:56,800 --> 00:30:59,880
Speaker 8: something unique and different, but enjoying it with your friends

545
00:31:00,080 --> 00:31:03,719
Speaker 8: and socializing about it. So the trends that we're seeing

546
00:31:03,760 --> 00:31:08,680
Speaker 8: in the beverage side have been you know, really embraced

547
00:31:08,760 --> 00:31:11,240
Speaker 8: by by the younger generation and I don't see a

548
00:31:11,320 --> 00:31:14,080
Speaker 8: slow down. So whether you know, I mean, Starbucks is

549
00:31:14,120 --> 00:31:17,040
Speaker 8: selling boats now and it's been one of their stronger

550
00:31:17,520 --> 00:31:21,080
Speaker 8: segments within the product business. So is it a is

551
00:31:21,080 --> 00:31:22,880
Speaker 8: it a fad? Is it a trend? I think it's

552
00:31:22,920 --> 00:31:26,760
Speaker 8: probably going to stay if we continue to see this

553
00:31:26,960 --> 00:31:30,680
Speaker 8: cultural diversity. So we're going to see more of that,

554
00:31:30,840 --> 00:31:34,160
Speaker 8: So stay tuned. I'm really interested to see what's happening there.

555
00:31:34,520 --> 00:31:34,880
Speaker 3: And Gie.

556
00:31:34,880 --> 00:31:38,440
Speaker 2: The next question is for Lisa Mitteo how is luxury doing.

557
00:31:40,960 --> 00:31:43,440
Speaker 8: Yes, you know, it's so fascinating. I'm going to bring

558
00:31:43,480 --> 00:31:45,840
Speaker 8: it right back to New York for a moment. But

559
00:31:46,320 --> 00:31:49,280
Speaker 8: I mean, look LVMH. You know they're going to take

560
00:31:49,400 --> 00:31:53,960
Speaker 8: down their their building on fifty seventh and rebuild. You know,

561
00:31:54,040 --> 00:31:58,120
Speaker 8: there's there's there's definitely you know, a gradual slow down

562
00:31:58,160 --> 00:32:01,040
Speaker 8: in terms of spend. But you have to kind of

563
00:32:01,080 --> 00:32:04,000
Speaker 8: look at that number based on they had such a

564
00:32:04,160 --> 00:32:09,120
Speaker 8: significant uptick you know, during the pandemic and shortly thereafter.

565
00:32:09,320 --> 00:32:13,320
Speaker 8: So when we say, you know, gradual slow down in luxury,

566
00:32:13,600 --> 00:32:19,760
Speaker 8: they're still you know, still up compared to pre COVID numbers.

567
00:32:19,840 --> 00:32:23,800
Speaker 8: And you know, look luxury still they're expanding their buying

568
00:32:23,840 --> 00:32:26,040
Speaker 8: buildings or you know, their own real estate. They want

569
00:32:26,080 --> 00:32:29,440
Speaker 8: to own their kind of longevity and where they're going

570
00:32:29,480 --> 00:32:31,960
Speaker 8: to be for you know, the next call it thirty

571
00:32:32,040 --> 00:32:35,360
Speaker 8: years versus trying to negotiate and renew right, they just

572
00:32:35,400 --> 00:32:38,600
Speaker 8: have to negotiate with themselves. So we're going to continue

573
00:32:38,600 --> 00:32:42,600
Speaker 8: to see you know, that market be strategic in placement

574
00:32:42,680 --> 00:32:43,680
Speaker 8: and where they expand.

575
00:32:43,760 --> 00:32:45,640
Speaker 2: All right, Aunjie, thank you so much for joining us.

576
00:32:45,680 --> 00:32:48,719
Speaker 2: Always appreciate getting your perspectives there on all things on

577
00:32:48,760 --> 00:32:52,720
Speaker 2: the retail space. There Anjie Slanki, National director of Retail

578
00:32:52,760 --> 00:32:56,400
Speaker 2: Services for the US Firmers Colliers. This is the Bloomberg

579
00:32:56,440 --> 00:33:00,680
Speaker 2: Surveillance Podcast, bringing you the best economics, geopolitics, finance and investment.

580
00:33:00,840 --> 00:33:04,120
Speaker 2: You can also watch the show live on YouTube. Visit

581
00:33:04,160 --> 00:33:06,880
Speaker 2: the Bloomberg Podcast channel on YouTube to see the show

582
00:33:07,200 --> 00:33:09,920
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583
00:33:09,920 --> 00:33:13,640
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584
00:33:13,800 --> 00:33:17,000
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585
00:33:17,080 --> 00:33:19,280
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