Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Paul Sweeney along
Speaker 2: with Tom Keene. Join us each day for insight from
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Speaker 2: anywhere else you listen, and as always on Bloomberg Radio,
Speaker 2: the Bloomberg Terminal, and the Bloomberg Business app. Neil Grossman,
Speaker 2: co founder at former CIO founder TKNG Capital, joins us
Speaker 2: here in studio. He's also owns a vineyard. Where's your vineyard, Neil?
Speaker 3: It's in the Milbrook area, up state New York.
Speaker 2: State, in ther beautiful names. He always comes in bearing
Speaker 2: a bottle wine. We appreciate that. It's yes, that's yeh.
Speaker 2: Now you know Carol, you know Carol Master and Tim Senovik.
Speaker 2: Occasionally in there after in Bloomberg Business Weeks, I'll see
Speaker 2: bottles open Data studio. That that's how they play, that's
Speaker 2: how they.
Speaker 3: It adds a clarity to the way it does.
Speaker 2: It does. Hey, we had a bunch of economic data.
Speaker 2: We just got through an earning season. What's your view
Speaker 2: of the world here. I mean, we've got a market
Speaker 2: selling off a little bit today, but I mean we've
Speaker 2: got a market that's S and P five hundred up,
Speaker 2: double digits, yields coming in. What do you make of
Speaker 2: this world we're in?
Speaker 3: I'm more on the this but feels bubbleish a little bit.
Speaker 3: I mean, let's take a look at Apple. I mean,
Speaker 3: wonderful company, don't get me wrong, but somebody added three
Speaker 3: to four hundred billion dollars in value on an announcement
Speaker 3: that they're going into something. I mean, it's pretty staggering
Speaker 3: when you think about it. I think when you watch
Speaker 3: the internals a little bit, the size of the moves
Speaker 3: of stocks based on a little miss, a little hit,
Speaker 3: or a little expectation. I don't remember stuff like this
Speaker 3: very much in the forty years I've been doing this.
Speaker 4: Paul referring to the the FED meeting this week, and
Speaker 4: I wonder how you were processing what we heard from
Speaker 4: the FED, share what we saw in the dot plot
Speaker 4: and the SEP. How are you navigating those data points,
Speaker 4: and how's that sort of shaping your perpective.
Speaker 3: I'm a little lighter than normal right now. I would
Speaker 3: say there was one thing I actually heard in powell statement,
Speaker 3: which you know, is something I think we have even
Speaker 3: talked about. He made the comment that the annualization of
Speaker 3: inflation data is going to be very hard to continue
Speaker 3: to see improvement. I think we're in a range of
Speaker 3: let's say, three and a quarter to four and a
Speaker 3: half percent number one, number two inflation. Wow, I'm looking.
Speaker 3: I use CPI, the PCE, and some of the other
Speaker 3: stuff the FED uses to me is a slice. And
Speaker 3: I understand somewhat why they like to eliminate a little
Speaker 3: bit of volatility of things. But I think the discussions
Speaker 3: in the large of why people don't feel good is
Speaker 3: it's the bigger numbers that affect them. And there are
Speaker 3: a lot of really interesting things. I mean, the cost
Speaker 3: of ensuring things, as you know, the cost of buying cars,
Speaker 3: some of the food costs, they're pretty staggering. And for
Speaker 3: the average person, airfares hotels are off the charts, and
Speaker 3: so you know the concept that maybe you're getting a
Speaker 3: little bit of a slowing in the rate of growth
Speaker 3: inflation if inflation, remember we're not we're still at three
Speaker 3: to four five percent wherever it is three six I
Speaker 3: think people are feeling it still, and I think that's
Speaker 3: one of the issues. I did want to mention something
Speaker 3: which I've been thinking about. I mean, there's been a
Speaker 3: lot of talk for the last two years basically about
Speaker 3: the inverted yield curve and why it has not indic
Speaker 3: you know, lived up to the expectations as an indicator
Speaker 3: of bad things to come. And I've been spending a
Speaker 3: lot of time thinking about this. The idea may well
Speaker 3: be that the inverted yield curve, given the structure of
Speaker 3: the economy now, is actually stimulative more than not. There
Speaker 3: are areas of the economy, obviously, like real estate, where hurts,
Speaker 3: but if you think about it, long term meals are
Speaker 3: still relatively low. In corporate America, if it wants to
Speaker 3: borrow using a four percent base with very tight spreads,
Speaker 3: long term borring costs so lower, So that's not a negative.
Speaker 3: Short term money money for the average investor is throwing
Speaker 3: off tons of yields. But on the other side, the
Speaker 3: real cost of money, the large borrowing is coming out
Speaker 3: of the government of the United States. So they're borrowing
Speaker 3: staggering quantities, they're short funding it, and then they're taking
Speaker 3: that money and it's running through the economy. So I
Speaker 3: think there is some interesting dynamics which have helped us
Speaker 3: support the economy a bit. We'll see as it goes
Speaker 3: right now, but.
Speaker 2: A lot of folks, Neil are saying that this FED
Speaker 2: is already behind the curve that they should be cutting.
Speaker 2: Now are you in that camp?
Speaker 5: You know?
Speaker 3: Look number one, they again there's an asymmetry to what
Speaker 3: they do. One piece of data that looks good, and
Speaker 3: they training the markets to go crazy. Six months. I
Speaker 3: mean we're six months or a year from where we were.
Speaker 3: The economy hasn't slowed, this argument. I know, you have
Speaker 3: built Bill Dudley on who's an old friend of mine,
Speaker 3: talking about about the neutral rate of interest rates and yeah,
Speaker 3: wherever that falls. And again, I think this goes back
Speaker 3: to some of the other questions. You know, central bankers,
Speaker 3: and as you know, I was one for a while,
Speaker 3: tend to look at the liability side of the economy.
Speaker 3: They've never really, in my view, fully incorporated the asset side.
Speaker 3: And I think we are in an asset positive environment
Speaker 3: so you know, and every time that Fred opens its mouth,
Speaker 3: of the market seems to get that it's, you know,
Speaker 3: it's expectations up. What happens yields have hard yields fall
Speaker 3: in the last couple of days, where one hundred basis
Speaker 3: points lower and long term meals over a year, the
Speaker 3: dollar starts to weaken. Stocks are throwing off value, and
Speaker 3: so every time you liquefy it works against the idea
Speaker 3: that you're going to get this sort of significant improvement
Speaker 3: and inflation. So I think we're going to be waiting.
Speaker 3: The last point is and I don't I know everyone's
Speaker 3: talking about September. I think Powell went off on a
Speaker 3: tangent last year because he was hoping he could get
Speaker 3: something done before the election. I do not know unless
Speaker 3: you get a significant downgrading in this economy how and
Speaker 3: or a staggering drop in the prices, which I don't see.
Speaker 3: I don't know how in front of this election, given
Speaker 3: the polarization that that the FED really and I know
Speaker 3: that this is not a political argument per se, but
Speaker 3: the meeting immediately before a major, maybe one of the
Speaker 3: most important elections for them to be doing that, I
Speaker 3: think is going to be a very difficult thing, all.
Speaker 2: Right, Neil, thanks so much for joining us in studio.
Speaker 2: Neil Grossman, he is a co founder of former CIO
Speaker 2: of t k n G Capital. Give him some thoughts
Speaker 2: on these markets on this federal reserve. He is a
Speaker 2: fed hawk. Let's just be clean and simple here. I
Speaker 2: try to tee him up to kind of soften it
Speaker 2: up a little bit, and nothing happening. Tech stocks continue
Speaker 2: to be the story. I mean, I love when my
Speaker 2: tech stocks are leading the market. I feel like that's
Speaker 2: all we've known for the last this is it. I'm
Speaker 2: all in, but I get a little nervous when like
Speaker 2: that's kind of it. You know, there's not that breath
Speaker 2: you like to see in the market. Let's talk to
Speaker 2: a person kind of an expert in this stuff. Melissa Auto,
Speaker 2: head of TMT research at Visible Alpha. Melissa, what's your
Speaker 2: tech call these days? Are you comfortable with where these
Speaker 2: companies are, with where their multiples are, with where their
Speaker 2: earnings are? How do you think about it?
Speaker 1: Thank you. I mean it's a really interesting time right
Speaker 1: now for the tech stocks. I think what we're seeing
Speaker 1: is that essentially garb is kind of worked growth.
Speaker 2: At a reasonable price. Those of us old enough to remember.
Speaker 4: That taking out my pencil.
Speaker 1: Yes, right, So I mean stocks that are trading at
Speaker 1: say twenty to thirty times are actually generating decent growth.
Speaker 1: So when you think about the multiple that they're they're
Speaker 1: generating or the ratio from that, it looks pretty reasonable,
Speaker 1: So it doesn't seem like it's out of proportion. And
Speaker 1: I mean, just coming out of the WWDC this week,
Speaker 1: I mean Apple trades at a range of twenty seven
Speaker 1: to say thirty two times based on forelooking estimates, you know,
Speaker 1: And I think what we've observed is that, you know,
Speaker 1: based on visible alpha consensus, there is a trajectory getting
Speaker 1: essentially built into the market that is looking like there
Speaker 1: could be a really compelling replacement cycle, which I think
Speaker 1: you know, essentially took Apple up this week. So I
Speaker 1: think when you think about what where the growth trajectory
Speaker 1: is going and where AI is potentially taking it, the
Speaker 1: landscape looks really interesting.
Speaker 2: That's where I.
Speaker 4: Want to go. So you mentioned that Apple Worldwide Developers
Speaker 4: Conference and the deal that it broke with open ai,
Speaker 4: and we talk a lot about open AI, we talk
Speaker 4: a lot about in video as well. So these are
Speaker 4: the two kind of marquee names. I'm curious sort of
Speaker 4: how you see that landscape shifting and evening out. So
Speaker 4: there's so much obvious promise and faith in in video,
Speaker 4: for instance, when do we begin to see that sort
Speaker 4: of trickle down and sort of what does it look
Speaker 4: like when mile beneath in video?
Speaker 5: I mean in videos, definitely a loadstar. I mean a
Speaker 5: holy back roll. I mean they just I mean, based
Speaker 5: on visible Aphican census we see in the data. This year,
Speaker 5: the data center revenues are expected to generate over one
Speaker 5: hundred billion dollars, but looking forward several years, it's.
Speaker 1: Going to over two hundred. One hundred billion dollars in revenue.
Speaker 1: Growth for one segment is expected in the market. That
Speaker 1: is astonishing growth. And so you know, I think when
Speaker 1: we look at that, it just tells us, Wow, there's
Speaker 1: something interesting coming down the pike, right, And so I think,
Speaker 1: you know, for Apple, you know, they're sort of the
Speaker 1: consumer end of that, they're the end user of that.
Speaker 1: What Nvidia does is they're essentially building the infrastructure that's
Speaker 1: enabling all of this generative AI to even happen, you know,
Speaker 1: to make it so that you know, users like you
Speaker 1: and I and organizations can actually have the compute power
Speaker 1: to do the generative AI things that are so productive
Speaker 1: and interesting.
Speaker 2: So in Vidia obviously, I think for most lay people
Speaker 2: that is their AI play, even though there's a lot
Speaker 2: more on the software side. I hear Microsoft mentioned as
Speaker 2: a way if you want exposure to kind of the
Speaker 2: next wave of technology, whether it's AI, whatever you like.
Speaker 2: I call it a big data two years ago and
Speaker 2: now now it's AI. Microsoft is a story. How do
Speaker 2: you think about that?
Speaker 1: I mean, Microsoft is another monster. I'm based on visible
Speaker 1: African census there Azure cloud business is expected to go
Speaker 1: from seventy five billion dollars and then over the next
Speaker 1: couple of years to one hundred and fifty billion. I mean,
Speaker 1: so between in Video and Microsoft together, you're talking about
Speaker 1: one hundred and seventy five billion dollars in expected new
Speaker 1: revenue growth. That's incredible.
Speaker 4: We had this news this week Bloomberg reporting that two
Speaker 4: regulators are looking into Microsoft and Video when it comes
Speaker 4: to AI, and I wonder stif what that tells you,
Speaker 4: not necessarily about those cases as they might be unfolding,
Speaker 4: but about where we are in this cycle. Again, we
Speaker 4: talk about the promise of AI. It things are moving
Speaker 4: so quickly. You talk about doubling revenue rents Quint saying
Speaker 4: like the in the s few that you're talking about.
Speaker 4: But you know, then you have news like this and
Speaker 4: you wonder sort of what what are the things that
Speaker 4: might slow this down or might bring this to a
Speaker 4: more normal pace. Is that even likely to happen?
Speaker 6: Do you think?
Speaker 1: I mean, it's a question that keeps me up at night.
Speaker 1: I'm like, what what happens if the consumer just doesn't adopt?
Speaker 2: If it doesn't click generative aidea.
Speaker 1: It doesn't click? Because I really remember covering Apple back
Speaker 1: in the day, pre iPhone, and I remember a lot
Speaker 1: of us in the investment community debating, oh is this
Speaker 1: thing going to take off? Or people going to like
Speaker 1: these touch screens or like there's no keyp head, you
Speaker 1: know what about the flip phone? Remember those days? And
Speaker 1: I remember there were two really distinct moments when I thought, Okay,
Speaker 1: this thing is going to be huge. The first was
Speaker 1: when I saw my one year old child taking her
Speaker 1: finger on an iPad and very engaging with this. Couldn't
Speaker 1: walk or talk really, but can engage with an iPad.
Speaker 1: I was like, Wow, this is really interesting. Wow, this
Speaker 1: could create a whole generation of users that are not
Speaker 1: really baked into expectations. And the second was my mom,
Speaker 1: widow and retiree saying, you know, I think I want to,
Speaker 1: you know, convert from a flip phone to an iPhone.
Speaker 1: What do you think should I do it? And then
Speaker 1: it really revolutionizing her life things like GPS takes her
Speaker 1: the way she engages with us and her friends, really
Speaker 1: making her life a lot more fun and easy. And
Speaker 1: so if generative AI is able to do that, I
Speaker 1: think it could be really interesting.
Speaker 2: Melissa thirty seconds left Amazon. What's your takeaway from Amazon?
Speaker 1: Amazon is in a really interesting position right now. We
Speaker 1: just I was just actually at the Amazon AWS Financial
Speaker 1: Services Symposium. There was a lot of discussion around how
Speaker 1: generative AI is being brought into organizations, and I think
Speaker 1: the big takeaway from that is that, you know, it's
Speaker 1: really going to move more to the cloud and companies
Speaker 1: are really feeling that FOMO trade. And so when I
Speaker 1: look at the Amazon expectations for the AWS business, we
Speaker 1: have seen the visible AFRIC consensus numbers for AWS margin
Speaker 1: go up one hundred and twenty basis points into Q two.
Speaker 1: So I think there's some interesting momentum coming in there.
Speaker 2: Melissa, thank you so much for joining us, Melissa Otto,
Speaker 2: she said of TMT research at Visible Alpha. Getting a
Speaker 2: little tech discussion this morning. David, you're a worldly guy.
Speaker 2: Let's talk US sanctions, Let's talk US industrial policy, US protectionism,
Speaker 2: US monetary policy. Are these good? Are they bad? Are
Speaker 2: they working? Or are they not working? I have no idea.
Speaker 2: I did pay attention when I was a duke to
Speaker 2: some of my economics classes, but I just don't know.
Speaker 2: Steve Hanke knows. He's professor at Johns Hopkins University. You know, Steve,
Speaker 2: thanks much for joining us here. This is an election year.
Speaker 2: I'm starting to hear a lot more discussion about global
Speaker 2: industrial policy, US industrial policy. Let's just start with you know, tariffs.
Speaker 2: Are tariffs good? Are tariffs protectionism? Are they good? Are
Speaker 2: they needed? Safe for the electrical v vehicle market? What
Speaker 2: do you think?
Speaker 6: I think they're terrible?
Speaker 2: Nobody.
Speaker 7: And we just keep getting getting all the major political
Speaker 7: players in the game, doubling down and proposing even more nutty,
Speaker 7: terrify ideas with each passing day. You know, we we
Speaker 7: had Trump yesterday. He's got some idea. He's he's going
Speaker 7: to replace the income tax with revenues from terrorists.
Speaker 2: Do we get we don't get revenues from tariffs, do we?
Speaker 4: Well?
Speaker 7: We we we we do get revenues from tariffs, but
Speaker 7: the revenues there are actually a tax that come out
Speaker 7: of the height of American consumers and businesses.
Speaker 6: So that's that.
Speaker 7: The terriffs thing is is really unbelievable because it's part
Speaker 7: of a larger picture. And sanctions are actually a form
Speaker 7: of protectionism. This is all really David under the umbrella
Speaker 7: of protectionism. So you have sanctions, and since two thousand,
Speaker 7: the United States has increased the number of sanctions that
Speaker 7: we've put on various individuals and countries by nine hundred percent.
Speaker 6: But it's amazing.
Speaker 7: Because the scholarly literature shows us that these things don't work.
Speaker 7: They always end up backfiring, creating a lot of unintended consequences,
Speaker 7: and the sanctioned countries and individuals always find workarounds one
Speaker 7: way or another to get out of them. But in
Speaker 7: the end, when I say they don't work, they usually
Speaker 7: create what's called a rally around the flag effect that
Speaker 7: keeps the targeted leaders or elites in countries in the
Speaker 7: Saddle Valley Naessa, one of my colleagues at Johns Hopkins
Speaker 7: and experienced diplomat Iranian of origin, just did a big
Speaker 7: study with three other colleagues on Iran and basically the
Speaker 7: sanctions we put on Iran have really created this rally
Speaker 7: around the flag effect because the idea was the US thought, well,
Speaker 7: we'll put the sanctions on that will put a lot
Speaker 7: of pressure on the middle class, and the middle class
Speaker 7: in Iran will come to our side. Well, no, the
Speaker 7: middle class either went to the sidelines or went on
Speaker 7: the side of the regime because they view those who
Speaker 7: imposed sanctions on as enemies.
Speaker 4: Steve, let me ask you a little bit more about that.
Speaker 4: And I think it's a rare day when I don't
Speaker 4: see in my inbox and message from the Treasury Department
Speaker 4: about a new sanction, particularly with regard to to Russia's
Speaker 4: invasion of Ukraine. And so we have the G Seven
Speaker 4: meetings unfolding now in Italy and the Treasury or Jennet
Speaker 4: Yellen announcing a new raft of sanctions against Russia I
Speaker 4: think tied to semiconductors. But you're gonna get something I
Speaker 4: wanted to ask you about, and that is this kind
Speaker 4: of recent history of the weaponization of sanctions, the Treasury Department,
Speaker 4: the administration, this and previous ones really relying on them
Speaker 4: as a tool. I mean, Jennet Yellen not shy about
Speaker 4: saying she thinks these are effective. You talk about hern
Speaker 4: as we pivot to Russia. Are they any more effective
Speaker 4: when there is an actual military war, when you see
Speaker 4: the kind of ratcheting up that we've seen here in
Speaker 4: recent years.
Speaker 6: The answer is no.
Speaker 7: If you read all of the scholarly literature tells exactly
Speaker 7: the same story, starting in World War One, and that's all.
Speaker 7: These almost never achieve their desired objectives. And let me
Speaker 7: give you, let me give you one. Let's go back
Speaker 7: to the nineteen seventies. You know when the Soviets invaded
Speaker 7: Afghanistan and nineteen seventy nine, Jimmy Carter was in the
Speaker 7: White House, of course, in Brazinski was a National Security advisor,
Speaker 7: and they put a ban on agricultural exports from the
Speaker 7: US to the Soviet Union. And what happened is what
Speaker 7: Bob Mandel called the Afghan effect, and that is the
Speaker 7: Soviets went.
Speaker 6: To Argentina right away and cut a deal for grain.
Speaker 7: US farmers, of course, were prohibited from sending an exporting
Speaker 7: grain to the Soviet Union, so that Argentines made out
Speaker 7: like bandits.
Speaker 6: The Soviets weren't hurt at all.
Speaker 7: And ironically, who was in power in Argentina at the time, well,
Speaker 7: Hunt was in power.
Speaker 6: They were supposedly the bad guys.
Speaker 7: So this is law, the kind of law of unintended consequences,
Speaker 7: this Afghan kind of effect.
Speaker 4: I guess we're seeing that now with with China. You
Speaker 4: see that that relationship between Russian and China has grown
Speaker 4: in warmth, shall we say, since the start of that.
Speaker 7: Well, yeah, this is absolutely they are blocked at the hip,
Speaker 7: and then it's because of these sanctions. And now we
Speaker 7: put even further batchel of sanctions on as you indicated
Speaker 7: with the G seven.
Speaker 6: So it's just.
Speaker 7: Something that doesn't work. But the problem is it's part
Speaker 7: of this protectionist thing. We the public thinks somehow they work,
Speaker 7: They have the impression that they work, they and they
Speaker 7: become familiar with, they think sanctions and comfortable with sisms.
Speaker 7: So if we're sanctioning somebody, why not put a quota
Speaker 7: on them or a terrif on them, so you get
Speaker 7: in out into the broader sphere of other kinds of
Speaker 7: government intervention.
Speaker 2: And Dan Steve David brought up China. I'd love to
Speaker 2: get your here because I think there's a founded concern
Speaker 2: on many Americans view about China, whether it's a technology
Speaker 2: cold war between China and the West. We're concerned about,
Speaker 2: you know, TikTok being so pervasive here in the US.
Speaker 2: What do you think the US policy should be about
Speaker 2: China in terms of trade and just overall relations there,
Speaker 2: because there are some significant, I would say meaningful concerns.
Speaker 7: Well, we have a lot of the S and B
Speaker 7: five hundred companies that are very involved in China and
Speaker 7: deriving considerable profits from China, And as far as I'm concerned,
Speaker 7: that's a good, good idea. Trade is always good. Once
Speaker 7: you start cutting trade off, you increase the chance that
Speaker 7: you're going to get into a hot war of some sort.
Speaker 7: And with the current administration, and this started of course
Speaker 7: with Trump and the former administration, we've essentially continued to escalate.
Speaker 7: Really what is an open commercial trade war with China,
Speaker 7: which I think is a very bad policy.
Speaker 4: Steeve, you mentioned Argentina moment ago. Maybe I can ask
Speaker 4: you about what's been going on there. Lastly, so we
Speaker 4: were talking about Argentina in the seventies, how about Argentina today?
Speaker 4: And you have President me like pushing really hard for
Speaker 4: this legislation that would make pretty radical changes and cuts
Speaker 4: to the Argentine economy, as he, i think, is going
Speaker 4: to Italy to meet with the IMF to try to
Speaker 4: renegotiate some of that country's debt once again. But we've
Speaker 4: seen the protests in the street. At the same time,
Speaker 4: we've seen Parliament in Argentina pass a kind of lighter
Speaker 4: version of that omnibus build that was designed to kind
Speaker 4: of rework the economy there. What's your read on that
Speaker 4: as you look to that part of the world. Do
Speaker 4: you see him as making progress despite it all? What's
Speaker 4: your sense of what Pemula is doing in Argentina.
Speaker 7: The passage two days of that omnibus bill was a
Speaker 7: big win for Malay.
Speaker 6: It was a squeaker he barely got passed, but it's that.
Speaker 7: That's a good policy move and a good thing for Malay.
Speaker 7: His problem is, and his achilles heel, is that he
Speaker 7: hasn't delivered on dollarization and getting rid of the Central Bank.
Speaker 7: And he campaigned on that promise. He hasn't done it,
Speaker 7: and as a result, they're really not getting inflation under control,
Speaker 7: and and and the pace that just keeps sliding. And
Speaker 7: I think this will essense will make him extremely vulnerable
Speaker 7: as time passes.
Speaker 6: He's quite popular right now.
Speaker 7: There's he's if you look at the polls, he's doing
Speaker 7: pretty well. In the passage of this bill by the
Speaker 7: Senate two days ago.
Speaker 6: Certain it was a help.
Speaker 7: But I think I think that without dollarization, I think
Speaker 7: the story is going to be pretty much over in Argentina.
Speaker 7: All right, Steve, they have they have a long history
Speaker 7: of just not being able to do it as long
Speaker 7: as they have that central bank there. It's it's like
Speaker 7: a recovering alcoholic with a bottle of whiskey in.
Speaker 6: Front of it.
Speaker 2: Right, all right, Hey, Steve, thanks so much for joording us.
Speaker 2: Always appreciate getting your informed thought. Steve Hankey, Professor of
Speaker 2: Johns Hopkins University and of course a proud graduate of
Speaker 2: the University of Colorado. With Boulder the Buffs scope Buffs.
Speaker 3: How about that.
Speaker 2: I used to live in North Jersey and right across
Speaker 2: the street was the Short Hills Mall, which is Jabled
Speaker 2: famous Babled. It is just it was packed. It's packed
Speaker 2: all the time. I mean, and people were talking about
Speaker 2: the death of malls. I'm like, not where I look.
Speaker 2: I mean, I don't I would never set foot in there,
Speaker 2: but everybody else was going to stay does. But I mean,
Speaker 2: I don't know how to think about this, the whole
Speaker 2: retail business now everybody's kind of shopping online. I don't
Speaker 2: know how this whole thing works. Angelae Slank, she knows
Speaker 2: how this stuff works. National Director of Retail Services for
Speaker 2: the US for Colliers and give us a stay here
Speaker 2: another where, you know, on the thankfully on the backside
Speaker 2: of this pandemic, and maybe consumers are getting back to
Speaker 2: normal behavior if you will talk to us about how,
Speaker 2: you know, the balance between you know, having the bricks
Speaker 2: and mortar store kind of works with the e commerce
Speaker 2: side of the retail equation. How are retailers making that
Speaker 2: balance these days?
Speaker 8: Oh, it's a great question, and thanks for having me. Honestly,
Speaker 8: it's really working well. They're really both integrated. So retailers
Speaker 8: right now have invested quite a bit of money over
Speaker 8: the past call it ten years, as it relates to
Speaker 8: the infrastructure for online So they really are harmonious. We're
Speaker 8: seeing you know, online sales from most retailers, roughly around
Speaker 8: eighteen to twenty percent is online, whereas in store still
Speaker 8: is the dominant place to sell. People still want to touch, feel, smell,
Speaker 8: so we're and be educated. So I think, you know,
Speaker 8: brick and mortar is far from being completely forgotten.
Speaker 4: When you look at how retail is navigating this macroeconomic moment,
Speaker 4: what are companies prioritized. I know there was this push
Speaker 4: for expansion. Has that been scaled back? So how are
Speaker 4: they thinking about growing that footprint in the way that
Speaker 4: you're describing, both with brick and mortar and online as well.
Speaker 8: Definitely, you know, there is definitely still a high demand
Speaker 8: as it relates to you know, site expansion and growth.
Speaker 8: As you look at the very mature brands that are
Speaker 8: out there that have been quite successful year over year,
Speaker 8: they're continuing to look at the US as a great
Speaker 8: opportunity for more sites. And you know, in speaking to
Speaker 8: a lot of these brands looking at not just fifty locations,
Speaker 8: some are looking at one hundred per year. And so
Speaker 8: when we're seeing that and most of those segments are
Speaker 8: going to be your junior boxes, your big box type tenants,
Speaker 8: your grocery those are call it more mainstay stable, you know,
Speaker 8: sectors within our industry, and therefore we're really going to
Speaker 8: continue to see that. What the challenge is is that
Speaker 8: we have a lack of supply. The lack of supply
Speaker 8: is really what's hurting us because there hasn't been call it,
Speaker 8: new construction and a growth in new construction throughout the US.
Speaker 2: So I guess on the other side of the question,
Speaker 2: how was the retailer or how is the consumer doing?
Speaker 2: What are the retailers telling you about what the consumers buying,
Speaker 2: how they're buying, how much promotion they need to buy?
Speaker 2: What are you seeing out there these days?
Speaker 8: Yeah, it's been a really interesting kind of a little
Speaker 8: bit of a mixed bag. You know, we are seeing
Speaker 8: a bit of a gradual slowing. We anticipate that when
Speaker 8: we forecast for the end of the year that will
Speaker 8: still be slightly up compared to last year. However, we
Speaker 8: are going to see a gradual slow down. Now the
Speaker 8: areas that we're going to see a slow down, we're
Speaker 8: going to see some slow down. Of course, in high
Speaker 8: luxury spend. We are still continuing to see a good
Speaker 8: spend in the discount category, but people are really paying
Speaker 8: attention to where they're placing their dollars. So even though
Speaker 8: we're seeing you know, spend occur in you know, the
Speaker 8: health and personal care, we're still we're starting to see
Speaker 8: a bit of a slow down and call it beverage
Speaker 8: spend FMB spend. Prices have increase in that sector purely
Speaker 8: because wages have increased. I think the overall wage increase
Speaker 8: has been roughly what about four percent, So people still
Speaker 8: are making a healthy, decent amount of money, but they
Speaker 8: are being very cautious on where and how. We are
Speaker 8: seeing One interesting thing, and that is in the entertainment sector.
Speaker 8: So people still want to have that joy and that experience.
Speaker 8: So when we stop and think about, you know, the concert.
Speaker 8: You know, there's been plenty of concerts that have been
Speaker 8: going on, but the cost of a concert versus the
Speaker 8: cost of going to either whether it's just going out
Speaker 8: for a small dinner with friends or to see a movie.
Speaker 8: Even though the movie industry, you know, is the cinema
Speaker 8: industry is still you know, you know, you know, softly
Speaker 8: kind of treading here, people still want to have this
Speaker 8: call it entertainment experience.
Speaker 4: I want to ask you about where you're seeing growth
Speaker 4: and I'll confess I read a few of your notes
Speaker 4: before coming in here today and Paul at least having
Speaker 4: some fun talking about Brooklyn. But you you highlight the
Speaker 4: fact that Fifth Avenue in my neighborhood in Parkslope, Brooklyn, Well,
Speaker 4: the great retail stretch is now in the country, which
Speaker 4: like makes me so happy. And part of that are
Speaker 4: these kind of boba te shops that are set up
Speaker 4: and constantly packed with young people, my daughter. I mean,
Speaker 4: it's like this is a big deal now, So talk
Speaker 4: a bit about like you know, have to talk about
Speaker 4: that stretch in my neighborhood. But where we're seeing growth
Speaker 4: in retail, both in terms of geography U and also
Speaker 4: sort of where there's opportunity in food in beverage that's
Speaker 4: a little different from what we've seen before.
Speaker 8: Yeah, it's been really fascinating on the beverage side. So
Speaker 8: I think, you know what people are starting to realize,
Speaker 8: and of course it's the younger generation that you know,
Speaker 8: alcohol doesn't have to be the beverage of choice, and
Speaker 8: so we're starting to see these very diverse type uses
Speaker 8: start to expand throughout the US, and it's it's you know,
Speaker 8: it's very interesting to see kind of that culture around it.
Speaker 8: So Boba t is one you know, we actually we're
Speaker 8: working with a group called Swig. And if you look
Speaker 8: at Swig and I think one of you know, there
Speaker 8: is a tagline, you know, dirty sodas well, you stop
Speaker 8: and think about it's really a soda mixed with whether
Speaker 8: it's lemonade or a different type of juice or different
Speaker 8: types of you know, add ons. And it's really become
Speaker 8: a great way of kind of you know, in introducing
Speaker 8: something unique and different, but enjoying it with your friends
Speaker 8: and socializing about it. So the trends that we're seeing
Speaker 8: in the beverage side have been you know, really embraced
Speaker 8: by by the younger generation and I don't see a
Speaker 8: slow down. So whether you know, I mean, Starbucks is
Speaker 8: selling boats now and it's been one of their stronger
Speaker 8: segments within the product business. So is it a is
Speaker 8: it a fad? Is it a trend? I think it's
Speaker 8: probably going to stay if we continue to see this
Speaker 8: cultural diversity. So we're going to see more of that,
Speaker 8: So stay tuned. I'm really interested to see what's happening there.
Speaker 3: And Gie.
Speaker 2: The next question is for Lisa Mitteo how is luxury doing.
Speaker 8: Yes, you know, it's so fascinating. I'm going to bring
Speaker 8: it right back to New York for a moment. But
Speaker 8: I mean, look LVMH. You know they're going to take
Speaker 8: down their their building on fifty seventh and rebuild. You know,
Speaker 8: there's there's there's definitely you know, a gradual slow down
Speaker 8: in terms of spend. But you have to kind of
Speaker 8: look at that number based on they had such a
Speaker 8: significant uptick you know, during the pandemic and shortly thereafter.
Speaker 8: So when we say, you know, gradual slow down in luxury,
Speaker 8: they're still you know, still up compared to pre COVID numbers.
Speaker 8: And you know, look luxury still they're expanding their buying
Speaker 8: buildings or you know, their own real estate. They want
Speaker 8: to own their kind of longevity and where they're going
Speaker 8: to be for you know, the next call it thirty
Speaker 8: years versus trying to negotiate and renew right, they just
Speaker 8: have to negotiate with themselves. So we're going to continue
Speaker 8: to see you know, that market be strategic in placement
Speaker 8: and where they expand.
Speaker 2: All right, Aunjie, thank you so much for joining us.
Speaker 2: Always appreciate getting your perspectives there on all things on
Speaker 2: the retail space. There Anjie Slanki, National director of Retail
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