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Speaker 2: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside

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Speaker 2: my co host Matt Miller.

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Speaker 1: Every business day we bring you interviews from CEOs, market pros,

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Speaker 1: and Bloomberg experts, along with essential market moven News.

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Speaker 2: I'm the Bloomberg Markets podcast called Apple Podcasts or wherever

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Speaker 2: you listen to podcasts, and at Bloomberg dot com slash podcast.

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Speaker 2: Let's check in with Ed Harrison. He's the senior editor

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Speaker 2: of Bloomberg News. Get his thoughts on these markets. Thanks

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Speaker 2: so much for joining us via zoom here. What do

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Speaker 2: you make of what we heard from fed chairman Pal

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Speaker 2: yesterday and then maybe the market's reaction to it.

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Speaker 3: Yeah.

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Speaker 4: I think there are two things there, Matt. One is

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Speaker 4: that there was no pushback from the FED, and I

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Speaker 4: think that's the most significant of the two things. The second,

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Speaker 4: obviously is the dot plot, which was relatively dubbished. But

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Speaker 4: when you add those two together, particularly the one with

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Speaker 4: the lack of pushback, it says that markets have room

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Speaker 4: to rip from here. And this is exactly the opposite

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Speaker 4: of what I was thinking ahead of the meeting. I

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Speaker 4: was writing that the FED would at least do a

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Speaker 4: perfunctory pushback. But that's not what we got. When you

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Speaker 4: look at the transcript of what Powell when he was

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Speaker 4: asked questions Nick Timmeros or the Wall Street Journal, he

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Speaker 4: asked him, look, you know, we've gotten a lot of

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Speaker 4: easing and policy on your behalf. I anticipating a funds

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Speaker 4: rate next year that's a full percentage point lower in

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Speaker 4: September and missed, and Jerome Powell said and respond he said, look,

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Speaker 4: you know, we're just going to do what we have

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Speaker 4: to do. We're not going to think about the market.

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Speaker 4: They're going to do what they need to do, and

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Speaker 4: we'll meet somewhere in the future in some place, and

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Speaker 4: that was enough for the market to say, Okay, look,

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Speaker 4: we have no pushback here. We're definitely just.

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Speaker 5: Gonna let it go.

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Speaker 6: And it's interesting, ed because when you think back to

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Speaker 6: the November meeting, that was really when Powell had pushed

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Speaker 6: back on all of the uh you know, or really

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Speaker 6: more that paid more attention, i should say, to financial conditions,

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Speaker 6: and that was a time when treasury yields were really

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Speaker 6: going higher and you always like, oh, well, this is

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Speaker 6: maybe kind of nice, you know, they're doing a bit

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Speaker 6: of the work for us, Like, we'll take that. And

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Speaker 6: now there's been so much easing just built in in

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Speaker 6: the treasury market for people thinking that this pivot was coming.

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Speaker 6: Of course, on the now the decision has come, stocks

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Speaker 6: and treasuries just ripping further. So is there really does

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Speaker 6: Powell still care about the you know, financial conditions at

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Speaker 6: this point or he's kind of just willing to let

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Speaker 6: them go as they please.

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Speaker 4: Yeah, I think that he's given up. Looking at it, it

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Speaker 4: makes a lot of sense in terms of thinking about

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Speaker 4: where we are in terms of the easing cycle or

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Speaker 4: the tightening cycle. We're basically by giving up on trying

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Speaker 4: to get financial conditions in order. He's moving to a

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Speaker 4: full on, you know, data dependent mode. That means that

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Speaker 4: we're not giving you any guidance except for what you

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Speaker 4: get in the SCP and as the data come in,

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Speaker 4: we're going to do what we need to do, and

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Speaker 4: you guys do what you do. So in terms of

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Speaker 4: going until the end of the year, you know, we

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Speaker 4: got the retail sales that you guys were just talking about,

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Speaker 4: which were bullish, as well as the initial and continuing claims,

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Speaker 4: and the market's just completely disregarded that. You know, you

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Speaker 4: look at the treasury markets at a minimum and they

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Speaker 4: continue to go be below four percent on the ten year,

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Speaker 4: and so what that says is that you you know,

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Speaker 4: the path of lest resistance until the end of the

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Speaker 4: year is towards lower yields. And then we'll have to

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Speaker 4: see what the day to show. And when the data

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Speaker 4: come out, we're gonna see some volatility because there's no

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Speaker 4: guidance as to what the Fed's reaction function will be.

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Speaker 4: Everyone's now thinking March for the first cuts. But if

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Speaker 4: if we see those retail sales numbers again and again

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Speaker 4: and again like that we saw today, then people are

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Speaker 4: gonna have to push back those those expectations.

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Speaker 7: You know.

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Speaker 2: It's I think one of the risks here, as I

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Speaker 2: just kind of look at the market reaction yesterday and today,

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Speaker 2: is that, you know, FED Chairman Powell may have lost

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Speaker 2: the ability to rain in this market if the data

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Speaker 2: does in fact go.

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Speaker 5: The other way.

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Speaker 2: I mean, it's just he seems to have, you know,

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Speaker 2: kind of unleashed the wild spirits, if you will, of

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Speaker 2: this market. I'm not sure how he ever gets back

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Speaker 2: to any kind of cautious narrative here. I'm wondering if

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Speaker 2: he's I'm gonna say, misplayed yesterday, but maybe it was

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Speaker 2: misinterpreted by the market, or it just seems like it's

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Speaker 2: tough to close the barn door now.

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Speaker 4: Yeah, you know, I think that that is a worry.

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Speaker 4: My My worry is, and I've said this before, is

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Speaker 4: nineteen ninety nine. You know, when I talked to you

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Speaker 4: two times ago, I think we were talking about partying

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Speaker 4: like it's nineteen ninety nine. He's allowing that to happen,

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Speaker 4: And obviously if that happens, then what you see is

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Speaker 4: a harder landing down the line. It's very difficult to

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Speaker 4: see a scenario in which you have unemployment at three

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Speaker 4: point seven percent for an extended period of time without

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Speaker 4: the Fed having to continually be at the ready to

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Speaker 4: tighten financial conditions. And that's where we're headed into twenty

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Speaker 4: twenty four. And with markets increasing the price earnings ratios,

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Speaker 4: increasing their bets on cuts of interest rates, it sets

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Speaker 4: up a very nasty headache down the line potentially.

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Speaker 6: Yeah, I mean, let's just roll it back just a

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Speaker 6: little bit here for some perspectives. So we had that

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Speaker 6: awesome jobs report on Friday of last week, you know,

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Speaker 6: great payrolls number, unemployment rate down, and wages were up.

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Speaker 6: Fast forward to this week the CPI report. You know,

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Speaker 6: obviously you know a bit of concerning. I would think

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Speaker 6: for Fed officials there that that service sector inflation is

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Speaker 6: still very much powering ahead, so not much of a

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Speaker 6: dent there. And then of course they didn't get to

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Speaker 6: see today before they met the retail sales and jobs

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Speaker 6: claims data, but you would think all of that would

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Speaker 6: be supporting higher rates at this point and not be

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Speaker 6: talking about cuts.

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Speaker 4: Well, you know, I'd be interested to see what Michelle

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Speaker 4: Bowman has to say, because I know that pale he

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Speaker 4: flicked at her a little bit so as to not

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Speaker 4: leave her dangling in the wind. She's one of the

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Speaker 4: few people who thinks that rates should be higher.

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Speaker 3: He said that we could.

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Speaker 4: Go either way, but really it was a very perfunctory,

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Speaker 4: very lip service type of comment on his part. I

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Speaker 4: think that you know, the wind is blowing towards easing,

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Speaker 4: and to the degree that we see those numbers that

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Speaker 4: you were talking about, Jess go down, then we are

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Speaker 4: going to get the easy that people expect. Perhaps not

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Speaker 4: as quickly as they expect, but you know, the FED

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Speaker 4: is primed in that direction, and I think that that's

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Speaker 4: the path of least resistance at this point in time.

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Speaker 2: So, Ed, I mean, what's your view of inflation here?

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Speaker 2: I mean, I guess the FED feels like it's on

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Speaker 2: the right path, which it arguably is, but I guess

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Speaker 2: it's just a question of timing to when we get

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Speaker 2: to the inflation level that the FED really looks at.

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Speaker 2: What's your view?

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Speaker 4: My view is that we're in an interesting paradigm that

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Speaker 4: we haven't seen over the say, the last twenty years.

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Speaker 4: You know, where you have the deglobalization, you also have

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Speaker 4: a dearth of workers as the baby boomers leave the

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Speaker 4: working population so there are some structural changes that create

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Speaker 4: upward pressure on inflation in the US in particular. And

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Speaker 4: so you know, with core PCEE inflation at three point

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Speaker 4: five percent, that's almost double the FED mandate. Really, you

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Speaker 4: could get down to something in the two say like

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Speaker 4: two to nine in the FED could start to ease,

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Speaker 4: but beyond that it's going to be very difficult. And

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Speaker 4: so I think that there's gonna be a lot of

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Speaker 4: pressure on the FED going forward to continually be at

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Speaker 4: the ready to tighten financial conditions because inflation is likely

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Speaker 4: to continually be sticky given those headwinds.

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Speaker 6: Twenty seconds here, Ed, when's that first cut coming?

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Speaker 4: I would say the first cut is going to come June.

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Speaker 4: That's that's what I would say. Okay, and so we're

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Speaker 4: going to see some some steepening as a result of that,

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Speaker 4: and then it's going to be a rapid cut because

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Speaker 4: by that time it will be clear that the economy

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Speaker 4: has deteriorated.

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Speaker 2: And thanks so much for joining us. Really appreciate it.

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Speaker 2: Ed Harrison, Senior editor for Bloomberg News. We certainly recommend

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Speaker 2: as every thing risk a column, good stuff, goodreads all

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Speaker 2: the time, and we appreciate in a few minutes of

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Speaker 2: his time.

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Speaker 8: You're listening to the team. Can's are live program Bloomberg

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Speaker 8: Markets weekdays at ten am Eastern on Bloomberg dot Com,

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Speaker 8: the iHeartRadio app and the Bloomberg Business app, or listen

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Speaker 8: on demand wherever you get your podcasts.

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Speaker 2: People certainly liked what they heard from the FED yesterday.

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Speaker 2: Let's bring in Jay Haffield. He's a CEO, founder and

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Speaker 2: portfolio manager at Infrastructure Capital Advisors. He joins us live

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Speaker 2: here in the Bloomberg Interactor Broker studio like he always does,

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Speaker 2: never mails it in, never phones it in. The kids

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Speaker 2: could learn something from that, Jay. I don't know what

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Speaker 2: did you take yesterday. It's certainly surprised. I think the

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Speaker 2: market with FED Chairman j Pals I guess tone of comments,

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Speaker 2: maybe even the dot pots as well. What did you

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Speaker 2: take away from it?

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Speaker 7: Thanks, Paul and Mollie, Well, we were surprised, like the market,

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Speaker 7: we had thought that the FED was only going to

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Speaker 7: have two cuts priced into the dot plot. It's a

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Speaker 7: welcome relief. But I think that you've had some new participants.

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Speaker 7: They've come on to the FED, like Austin Goldsby, and

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Speaker 7: they're looking at what they should look at which is

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Speaker 7: more mosaic of data instead of myopically focusing on this

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Speaker 7: PC core. We think that's a disaster and makes the

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Speaker 7: FED fundamental disaster, really total disaster. Yeah, the problem is

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Speaker 7: you have to look. If you watch core PC, then

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Speaker 7: you'll end up being incompetent Federal Reserve and you'll call

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Speaker 7: inflation transitory when it's skyrocketing. So what you should do

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Speaker 7: is look at PPI, look at CPI dash R that's

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Speaker 7: R index or in other words, adjust the horrible shelter

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Speaker 7: component of BLS and then use something called judgment instead

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Speaker 7: of a rule that Greenspan used to use. Who was

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Speaker 7: the real star of monetary policy? And so it seems

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Speaker 7: like they've taken the leap, and are you using judgment

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Speaker 7: instead of just focusing on this one measure that's massively flawed?

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Speaker 6: So which ones are?

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Speaker 3: I mean?

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Speaker 6: Will you just rattle off a couple of metrics there?

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Speaker 6: I mean, which one do you think right now has

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Speaker 6: the most of a signal right now for inflation that

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Speaker 6: you're really paying attention to.

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Speaker 7: Well, the reason that we've kind of nailed this cycle

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Speaker 7: since the pandemic is that, unlike the FED, we look

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Speaker 7: at monetary policy which drives housing market. And then we're

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Speaker 7: lucky because they're energy investors. We have a pipeline fund.

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Speaker 7: I founded a pipeline company, So if I would argue,

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Speaker 7: if you have those two inputs, you can ignore monetary policy.

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Speaker 7: Just look at the housing sector and energy prices and

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Speaker 7: you will be a good forecaster. So right now, you know,

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Speaker 7: housing prices did come way down. They have ticked up

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Speaker 7: we talked about the last time, so that's a little

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Speaker 7: bit of risk. But rents are low, so we might

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Speaker 7: have to have yet another index that has just rents.

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Speaker 6: Yeah, like you said, you would not know that looking

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Speaker 6: at the CPI index.

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Speaker 7: Shelter or even our CPI dosh Our is ticked up

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Speaker 7: because case Shiller went up. Rents are down again. This

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Speaker 7: is the mosaic you have to look at. So we

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Speaker 7: do think that inflation is contained, and we are pleasantly

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Speaker 7: surprised that the Fed agree seems to agree with us.

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Speaker 5: Right now, All.

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Speaker 2: Right, Jay, and make sure our headline writers are ready here.

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Speaker 2: What have you done to your s and P five

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Speaker 2: hundred price target?

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Speaker 7: And why so we raised it this morning And the

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Speaker 7: best way to summarize why is a terminal command MI IPR,

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Speaker 7: which I would recommend everybody boots up. We sort of

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Speaker 7: sadly only figured this out about two weeks ago.

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Speaker 6: That's market implied policy rates for everyone tuning in yees.

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Speaker 7: So if you look at one of the columns, it's

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Speaker 7: a sea of red, but that's good red. So those

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Speaker 7: are all the rate cuts that are priced in to

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Speaker 7: all the major bond markets in the world. And so

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Speaker 7: it's kind of obvious this data should exist because we

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Speaker 7: have it in the US right because there's always theres

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Speaker 7: a futures market in every country. And so what's wildly

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Speaker 7: bullish about this is that we were on two or

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Speaker 7: three months ago and we had this non consensus call

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Speaker 7: that the euro economy was terrible and that the Eurozone

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Speaker 7: would be forced to cut or ECB would be forced

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Speaker 7: to cut. But the good news is you don't even

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Speaker 7: need to listen to our rationale because that's what market

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Speaker 7: participants believe now. So I guess they're avid listeners of

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Speaker 7: Bloomberg Radio. And also, if you hover over the Eurozone chart,

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Speaker 7: you can chick you can put up a GPO chart

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Speaker 7: and you can see that it did plummet over the

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Speaker 7: last two or three months. So this is the heart

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Speaker 7: of the Bowld case. But it's even better because the

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Speaker 7: ECB was very recalcitrant today and has what we think

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Speaker 7: is kind of a crazy forecast of plus point eight

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Speaker 7: percent for GDP next year to strongly disagree with. But

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Speaker 7: the good news is you don't we need to agree

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Speaker 7: with our variant view on their economy because market participants

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Speaker 7: in the Eurozone who trade Eurozone futures agree with us.

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Speaker 7: That number tick down a little bit. It was one

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Speaker 7: forty four as the negative the cuts price ten next year.

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Speaker 7: After the Guard's speech, that ticked down six bases points.

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Speaker 7: So that was a pretty hot as speech.

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Speaker 2: All right, So let me just summarize what the good

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Speaker 2: folks at your firm, Infrastructural Capital Visors did this morning.

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Speaker 2: They raised your price targraphy the S and P five

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Speaker 2: hundred to fifty five hundred from fifty one to fifty.

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Speaker 2: That's based on a twenty one and a half multiple

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Speaker 2: on S and P consensus earnings for two seventy So

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Speaker 2: that's your twenty twenty four year in target.

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Speaker 6: Correct and perspective. We're right now at forty seven to

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Speaker 6: twenty five correct.

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Speaker 3: So that's great.

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Speaker 2: Yeah, what's the risk to your outlook here, is it

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Speaker 2: earnings risk, is it macro risk? What are some of the.

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Speaker 7: Well, that's what a lot of people don't appreciate is

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Speaker 7: the multip on the market is ninety percent driven by

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Speaker 7: long term interest rates. So the reason we upgraded it

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Speaker 7: is that we have this non consensus call that rates

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Speaker 7: are going to drop from five but that looked a

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Speaker 7: little bit problematic, so we're pretty conservative conservative about tenure.

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Speaker 7: So but at a three fifty that implies a twenty

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Speaker 7: one times multiple on EPs on smpeps and the consensus

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Speaker 7: is two seventy. And by the way, we did this

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Speaker 7: methodology last year and came up at our forty five

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Speaker 7: hundred target. So it's just a very straightforward. If you

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Speaker 7: don't like, as you're pointing out, don't like one of

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Speaker 7: our metrics, you can just plug in your own. We're

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Speaker 7: using three point five percent, which implies twenty one and

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Speaker 7: a half actually, and to seventy on earnings. And we

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Speaker 7: are bullish about earnings, and we think most people miss

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Speaker 7: the dynamic that earnings normally go up by ten percent.

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Speaker 7: You don't need margin expansion, you don't need a very

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Speaker 7: strong economy because companies are retaining earnings about seventy percent

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Speaker 7: invest about at fifteen percent after tax. That implies ten

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Speaker 7: and a half percent growth. So the earnings estimates are normal,

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Speaker 7: not crazy. And we don't think you need to debate

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Speaker 7: that and wring your hands about it, because it's the

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Speaker 7: companies reinvesting their cash flow primarily driving earnings.

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Speaker 6: So you had a start off by telling us that

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Speaker 6: the FED and the APPOT yesterday indicated three rate cuts.

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Speaker 6: You think that there's only going to be two. The

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Speaker 6: dot plot though there was a pretty wide range in there.

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Speaker 6: You know, that's just the median with three cuts, but

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Speaker 6: there are eight participants who saw fewer reductions, five expect

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Speaker 6: deeper cuts. Who do you I mean, we obviously don't

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Speaker 6: know whose dot really belongs to you, but you could

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Speaker 6: take a reasonably educated guess who do you think is

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Speaker 6: really the voice that you're following the most right now?

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Speaker 7: Well, we think that the thought leader initially was really Goolsby,

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Speaker 7: that he came in and sort of said, the emperor

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Speaker 7: has no clothes, that the labor market is not the

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Speaker 7: key driver of inflation, and so and there are I

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Speaker 7: think that you got to the heart of the matter

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Speaker 7: is that pal was probably forced to come off his

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Speaker 7: tone because he had a number of participants saying that

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Speaker 7: inflation is actually plummeting that the economy is at risk.

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Speaker 7: We think it's fine, but it is at risk if

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Speaker 7: they keep rates because keep in mind, if inflation really

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Speaker 7: is going down, then real rates or skyrocketing if you

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Speaker 7: keep them flat. So it is encouraging that there apparently

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Speaker 7: has been a little bit of a palace coup and

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Speaker 7: the hawks have been moved more to the center or

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Speaker 7: even dubbish.

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Speaker 2: Off top of question. You see, Davis is where you

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Speaker 2: graduated from. I'm a huge fan of the University California system.

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Speaker 2: It's just amazing what they've done over generations, haven't they.

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Speaker 5: Yeah.

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Speaker 7: So the advantage too, that particularly those northern California schools have,

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Speaker 7: like UC Davis, is that if you look at a map,

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Speaker 7: if not from California, it's extraordinarily close to Silicon Valley.

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Speaker 5: Yep.

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Speaker 7: So those are great training schools. You don't learn like

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Speaker 7: my kids Latin and all these other things, but you

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Speaker 7: learn I was trained in business, economics, medical, so just

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Speaker 7: the real professional school. It's practical, it's meant for public

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Speaker 7: you know, kids as top ten percent students. So probably

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Speaker 7: the model of the future. Although these are great schools

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Speaker 7: we have in the Northeast.

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Speaker 2: Yeah, but it's just I mean Professor Galloway from NYUS.

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Speaker 2: I'm a big fan of his. He's a huge proponent

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Speaker 2: of the UC system and what it did for him

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Speaker 2: and what it does for generations of kids in California

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Speaker 2: to bring them to the next level. And that's powered

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Speaker 2: a lot of the economy in the great economy for California.

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Speaker 2: The lext one hundred plus year so Ja Halfield and

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Speaker 2: then you got your MBA from some place in Philadelphia.

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Speaker 2: I don't know Jay Haffield. He's the CEO, founder and

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Speaker 2: portfolio manager at Infrastructure Capital Advisors, raising the price target

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Speaker 2: big time.

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Speaker 8: You're listening to the tape Kent's are live program Bloomberg

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Speaker 8: Markets weekdays at ten am Eastern on Bloomberg Radio, the

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Speaker 8: tune in app, Bloomberg dot Com, and the Bloomberg Business App.

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Speaker 8: flagship New York station. Just say Alexa play Bloomberg eleven thirty.

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Speaker 2: Again. Movements in the markets here, we had a fed

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Speaker 2: that I think, I mean, you look at the market

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Speaker 2: reaction took the market by surprise.

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Speaker 6: With its cheerleaders everywhere. It is a good day.

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Speaker 2: Just ripping here Neil Grossman. He doesn't strike me as

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Speaker 2: a cheerleader, but Neil Grossman's here, CEO TNKG Capital Joints

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Speaker 2: here on our Bloomberg Interactive Broker studio. Neil, what did

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Speaker 2: you make of yesterday and the reaction to the marketplace stuff?

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Speaker 5: Good morning and happy holidays? I think that was Christmas

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Speaker 5: A couple of things. I guess. Number one I think

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Speaker 5: I well, I took away. Number one is under the hood.

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Speaker 5: Mister Powell may have just told everybody he's changing the

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Speaker 5: definition of what inflation measures they're looking for, raising the target,

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Speaker 5: because I was amazed. The thing that really was most

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Speaker 5: amazing to me was the fact that he said, we

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Speaker 5: can't wait till we get to two percent to start

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Speaker 5: removing or providing more liquidity, because that would be too restrictive.

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Speaker 2: So is that a different message there?

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Speaker 5: Well, that means you're two percent no longer really your target.

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Speaker 5: And not only that. I know we've talked about the

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Speaker 5: fact that we're now going to have close to five

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Speaker 5: four years or so of high inflation on an average basis,

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Speaker 5: But he's now I think, what's happened is raised the

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Speaker 5: probability that getting to two percent is dropping, and the

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Speaker 5: potential for reacceleration is a problem. Look, this whole rally started,

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Speaker 5: I guess five six weeks ago when he made the

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Speaker 5: comment that the market's doing the work for them. Ten

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Speaker 5: year notes were about five percent, give or take, and

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Speaker 5: interest rates have dropped a full hundred basis points. Basically,

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Speaker 5: the stock market's up something like twenty percent as of

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Speaker 5: at least as of yesterday. The dollar had been weakening,

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Speaker 5: you had a drop in commodity prices, so everything was

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Speaker 5: since then has functionally said we were providing a lot

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Speaker 5: more liquidity in the market. Unemployment or the employment structure

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Speaker 5: has although yes it's weakened, this is a very interesting thing.

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Speaker 5: In a minute, it's still remarkably strong. So here's an

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Speaker 5: interesting question. After the last employment number, the twelve month

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Speaker 5: trailing average job at creation was still a two hundred

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Speaker 5: and thirty five thousand jobs, pretty high. When was the

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Speaker 5: last time that happened?

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Speaker 6: Would I say pre COVID.

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Speaker 5: Twenty fifteen for short period before that and before that

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Speaker 5: two thousand, so to add two hundred and thirty five

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Speaker 5: thousand jobs a month as an extraordinary rate of job

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Speaker 5: creation in the absence of the fact that it's coming

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Speaker 5: down from what were much much higher levels. So the

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Speaker 5: relative strength of the economy, because if you look at

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Speaker 5: a five hundred thousand a year before, there's a slowing there,

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Speaker 5: but our job creation rate is still extraordinary at a

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Speaker 5: time when more or less maintaining the status quo of

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Speaker 5: unemployments give or take about one hundred thousand a month.

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Speaker 6: Let's just come back for a second to one thing

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Speaker 6: that you had just said, so and correct me if

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Speaker 6: I'm wrong here. But I don't think the expectation was

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Speaker 6: ever that the FED was going to wait for inflation

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Speaker 6: to get to two percent before they started cutting.

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Speaker 5: I don't think that they'd ever made any comment they

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Speaker 5: had a two percent target think.

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Speaker 6: And they still do it.

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Speaker 5: I don't believe that. Why not, because I don't think

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Speaker 5: they're going to get to two percent, And even if

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Speaker 5: they do get close to it, the type of liquidity

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Speaker 5: provisions that will already be in the pipeline are going

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Speaker 5: to be raising the probability that they're not getting there.

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Speaker 5: That's why. Right, So if the market, if the Fed's

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Speaker 5: now talking about three cuts next year, the market's got

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Speaker 5: I don't know, is it six or seven over the

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Speaker 5: next If you're liquifying through the stock the equity market,

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Speaker 5: if you're liquifying through rate cuts, you're you're already lowering

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Speaker 5: number one, the price or raising the probability the prices

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Speaker 5: are not going to fall as far fast number two,

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Speaker 5: which is good, Which is sort of he didn't want

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Speaker 5: to talk about yestidy. I guess we've had a lot

437
00:22:39,480 --> 00:22:43,240
Speaker 5: of wage settlements in the in the private sector, but

438
00:22:43,320 --> 00:22:46,280
Speaker 5: also in the in the you know, the the coal

439
00:22:46,359 --> 00:22:48,760
Speaker 5: adjustments for retirees. By the way, I'm one now, so

440
00:22:48,800 --> 00:22:51,920
Speaker 5: I'm gonna be getting a lot more. But there was

441
00:22:51,960 --> 00:22:55,480
Speaker 5: an eight point seven percent increase this year. Every government employee,

442
00:22:55,520 --> 00:22:59,879
Speaker 5: I believe, and many public quasi public people are also

443
00:23:00,000 --> 00:23:04,520
Speaker 5: inflation adjusted. So those types of wage increases with inflation

444
00:23:04,640 --> 00:23:08,320
Speaker 5: following means there's a lot more you know, potential upward

445
00:23:08,400 --> 00:23:11,600
Speaker 5: pressure that can be consumption driven through a large part

446
00:23:11,640 --> 00:23:13,400
Speaker 5: of the economy, and they're.

447
00:23:13,240 --> 00:23:16,680
Speaker 6: Not seeing like in general though, like inflation adjusted earnings

448
00:23:16,800 --> 00:23:20,240
Speaker 6: as a whole, you know, ripping that much higher. I mean,

449
00:23:20,280 --> 00:23:23,040
Speaker 6: it's now been positive for what like the last six months,

450
00:23:23,080 --> 00:23:25,119
Speaker 6: but we're negative for two years.

451
00:23:25,320 --> 00:23:28,200
Speaker 5: Well, I'm not sure how negative they were. I guess

452
00:23:28,480 --> 00:23:31,480
Speaker 5: first of all, you had what might be negative in

453
00:23:31,520 --> 00:23:33,959
Speaker 5: a direct payment, but you have to add in the

454
00:23:34,000 --> 00:23:36,480
Speaker 5: type of money the government was giving to people in

455
00:23:36,520 --> 00:23:40,600
Speaker 5: the alternative and also for example, which is on the

456
00:23:40,680 --> 00:23:42,520
Speaker 5: other side now, but telling people they don't have to

457
00:23:42,520 --> 00:23:45,680
Speaker 5: pay their mortgages. I mean, there was a lot of loans,

458
00:23:45,840 --> 00:23:50,120
Speaker 5: student loans, structural issues that made relative income look far

459
00:23:50,440 --> 00:23:55,480
Speaker 5: better maybe than the straight measure of the payments themselves.

460
00:23:56,040 --> 00:23:58,480
Speaker 5: And I think what you're going to find, I mean,

461
00:23:58,520 --> 00:24:00,240
Speaker 5: we'll see, but I think it's gonna be ver very

462
00:24:00,240 --> 00:24:04,320
Speaker 5: hard for every any business that's got unionized employees and

463
00:24:04,359 --> 00:24:08,280
Speaker 5: the government itself when it comes time to renegotiate, to

464
00:24:08,600 --> 00:24:10,720
Speaker 5: sit there when they're employees say that's what they got,

465
00:24:11,040 --> 00:24:13,720
Speaker 5: we get the same thing, which means there's an enormous

466
00:24:13,760 --> 00:24:17,120
Speaker 5: amount of risk that that in fact, we have much

467
00:24:17,160 --> 00:24:19,840
Speaker 5: more wage inflation in the pipeline or wage risk in

468
00:24:19,880 --> 00:24:21,399
Speaker 5: the pipeline than anyone wants to accept.

469
00:24:21,520 --> 00:24:23,840
Speaker 6: Not a whole lot of unions left though, really did

470
00:24:24,160 --> 00:24:24,800
Speaker 6: drive that for it.

471
00:24:24,960 --> 00:24:27,520
Speaker 5: Well, there are twenty million government employees in this country.

472
00:24:28,160 --> 00:24:29,480
Speaker 6: They have a good barning power.

473
00:24:29,760 --> 00:24:31,560
Speaker 5: They still have pretty good but I've never seen a

474
00:24:31,600 --> 00:24:34,439
Speaker 5: government employee fired. I've never seen them be asked to

475
00:24:34,480 --> 00:24:36,960
Speaker 5: take a wage cut, so etc.

476
00:24:37,400 --> 00:24:39,840
Speaker 2: Do you think in hindsight now, just seeing what the

477
00:24:39,880 --> 00:24:43,240
Speaker 2: markets have done yesterday afternoon this morning don't fit Schuerman

478
00:24:43,320 --> 00:24:45,919
Speaker 2: j Pal says, Oh, that's not necessarily the message I

479
00:24:45,920 --> 00:24:46,440
Speaker 2: wanted to give.

480
00:24:47,880 --> 00:24:50,280
Speaker 5: I think he knew exactly what he was doing. I mean,

481
00:24:51,200 --> 00:24:56,359
Speaker 5: he had an opportunity to couch this slightly differently as

482
00:24:56,400 --> 00:24:58,800
Speaker 5: I said. I think that, to me, the single most

483
00:24:58,840 --> 00:25:02,480
Speaker 5: important comment was a that if we're waiting until we

484
00:25:02,520 --> 00:25:05,320
Speaker 5: get to two percent, we've waited too long. We see

485
00:25:05,359 --> 00:25:09,639
Speaker 5: prices coming down. He ignored he didn't use the same

486
00:25:09,720 --> 00:25:12,120
Speaker 5: statement he'd made six weeks ago. He should have said

487
00:25:12,160 --> 00:25:15,480
Speaker 5: the market is now providing the type of liquidity we need.

488
00:25:15,680 --> 00:25:17,520
Speaker 5: We don't need to do as much because of this,

489
00:25:17,960 --> 00:25:20,680
Speaker 5: but he didn't do it. So I think embedded in

490
00:25:20,760 --> 00:25:23,959
Speaker 5: this message for the moment is the risk that they

491
00:25:24,200 --> 00:25:28,600
Speaker 5: they've now accepted a higher level of inflation as parcel

492
00:25:28,640 --> 00:25:30,600
Speaker 5: of their policy, which I of course think is a

493
00:25:30,680 --> 00:25:32,200
Speaker 5: terrible outcome.

494
00:25:32,280 --> 00:25:34,760
Speaker 6: But a lot of people have been calling for that though,

495
00:25:34,840 --> 00:25:36,600
Speaker 6: you know, saying like look like you know, we've got

496
00:25:36,600 --> 00:25:40,320
Speaker 6: a structurally different economy that maybe, so an inflation target

497
00:25:40,359 --> 00:25:42,760
Speaker 6: more around two and a half to three percent is

498
00:25:42,800 --> 00:25:45,760
Speaker 6: more reasonable for like the world that we're living in now. Well,

499
00:25:45,800 --> 00:25:47,800
Speaker 6: does that not sound like legit to you?

500
00:25:47,840 --> 00:25:48,199
Speaker 5: No?

501
00:25:48,440 --> 00:25:48,720
Speaker 3: Why not?

502
00:25:48,960 --> 00:25:50,919
Speaker 5: Because it has none of us, none of us have

503
00:25:51,000 --> 00:25:54,720
Speaker 5: the privilege of my from my perspective, who set the

504
00:25:54,760 --> 00:25:55,600
Speaker 5: FEDS mandate?

505
00:25:56,080 --> 00:25:56,600
Speaker 6: Congress?

506
00:25:56,960 --> 00:25:59,440
Speaker 5: Congress? What is the FEDS mandate.

507
00:25:59,240 --> 00:26:02,080
Speaker 6: To to maintain price stability and maximum imployment?

508
00:26:02,280 --> 00:26:06,000
Speaker 5: And what is price stability? Zero inflation? So is it?

509
00:26:06,000 --> 00:26:08,720
Speaker 5: It is by definition? Now that the fact is the

510
00:26:08,760 --> 00:26:11,000
Speaker 5: FED was an unusual institution because it had a duel

511
00:26:11,040 --> 00:26:13,359
Speaker 5: mandate and it's actually there's a lurking third one about

512
00:26:13,359 --> 00:26:16,119
Speaker 5: long probably stable long trombons. But the bottom line is

513
00:26:16,119 --> 00:26:20,720
Speaker 5: they have a two factor optimization which allowed them to

514
00:26:21,400 --> 00:26:24,040
Speaker 5: functionally play with both. I think it was the Swedish

515
00:26:24,240 --> 00:26:27,320
Speaker 5: Central Bank who motivated this move to two percent, but

516
00:26:27,840 --> 00:26:30,800
Speaker 5: two percent is still not their theoretical mandate. And in fact,

517
00:26:30,880 --> 00:26:33,119
Speaker 5: what was really sort of said to me they had

518
00:26:33,280 --> 00:26:35,800
Speaker 5: inflation at about one quarter to one a half and

519
00:26:35,840 --> 00:26:38,439
Speaker 5: full employment about a decade and a half ago, and

520
00:26:38,480 --> 00:26:40,480
Speaker 5: they said, well, that's that's no good. We don't like

521
00:26:40,600 --> 00:26:44,440
Speaker 5: inflation below a level, and then they all the modifications

522
00:26:44,480 --> 00:26:48,000
Speaker 5: in how we define inflation and all these other measures.

523
00:26:48,280 --> 00:26:51,199
Speaker 5: The answer is, if it's not a good thing, the

524
00:26:51,240 --> 00:26:54,320
Speaker 5: FED should be going to Congress. And by the way,

525
00:26:54,480 --> 00:26:58,120
Speaker 5: just to go off track, Leena Khan and the FTC

526
00:26:58,280 --> 00:27:02,520
Speaker 5: to mere the same issue. She is a regulator, an administrator.

527
00:27:02,560 --> 00:27:05,600
Speaker 5: She's not a legislator. She is trying to functionally change

528
00:27:05,640 --> 00:27:09,719
Speaker 5: the definitions and the practices in the anti trust world.

529
00:27:10,320 --> 00:27:13,399
Speaker 5: She should have gone to Congress. She's lost every case, basically,

530
00:27:13,760 --> 00:27:17,520
Speaker 5: and it's costing American businesses hundreds of millions, if not

531
00:27:17,800 --> 00:27:20,480
Speaker 5: tens of billions of dollars in business and legal costs.

532
00:27:20,680 --> 00:27:22,760
Speaker 5: Shouldn't be FED. She should be in front of Congress

533
00:27:22,800 --> 00:27:26,240
Speaker 5: saying times have changed, things have changed. Please, we need

534
00:27:26,280 --> 00:27:29,200
Speaker 5: to revisit this. And so my point to your question

535
00:27:29,280 --> 00:27:32,439
Speaker 5: is all of us, you know, we can all decide

536
00:27:32,480 --> 00:27:34,639
Speaker 5: what we want, but we live in theoretically, and I

537
00:27:34,720 --> 00:27:36,760
Speaker 5: think the FETE is telling you that doesn't make it difference.

538
00:27:36,760 --> 00:27:40,440
Speaker 5: We live in a system where authority is granted from

539
00:27:40,520 --> 00:27:44,320
Speaker 5: Congress to agencies to apply what they said, not to

540
00:27:44,359 --> 00:27:47,400
Speaker 5: simply say I don't really care what what Congress said

541
00:27:47,760 --> 00:27:48,440
Speaker 5: We'll do what we.

542
00:27:48,359 --> 00:27:51,199
Speaker 2: Want, right, Neil, great stuff. Well, you can do this

543
00:27:51,240 --> 00:27:51,880
Speaker 2: all day, right.

544
00:27:51,840 --> 00:27:52,240
Speaker 8: Oh man.

545
00:27:52,359 --> 00:27:54,320
Speaker 6: I feel like Neil and I could probably talk for

546
00:27:54,320 --> 00:27:56,359
Speaker 6: the next three hours on this show, but we're gonna

547
00:27:56,359 --> 00:27:58,119
Speaker 6: have to keep it there for today. Thank you for

548
00:27:58,200 --> 00:27:59,240
Speaker 6: joining us, all right.

549
00:27:59,119 --> 00:28:02,600
Speaker 2: Neil Grossman, co founder, former CIO TKNG Capital.

550
00:28:03,400 --> 00:28:06,520
Speaker 8: You're listening to the tape. Ken's are live program Bloomberg

551
00:28:06,600 --> 00:28:10,199
Speaker 8: Markets weekdays at ten am Eastern on Bloomberg Radio, the

552
00:28:10,240 --> 00:28:13,480
Speaker 8: tune in app, Bloomberg dot Com, and the Bloomberg Business App.

553
00:28:13,520 --> 00:28:16,320
Speaker 8: You can also listen live on Amazon Alexa from our

554
00:28:16,359 --> 00:28:22,200
Speaker 8: flagship New York station just say Alexa playing Bloomberg eleven thirty.

555
00:28:22,240 --> 00:28:23,800
Speaker 2: We want to get great to our next guest because

556
00:28:23,800 --> 00:28:26,080
Speaker 2: we don't talk commercial real estate because I've got some

557
00:28:26,280 --> 00:28:29,639
Speaker 2: big time opinions. I have known nothing about real estate.

558
00:28:29,880 --> 00:28:31,840
Speaker 2: I know nothing about it, but i have some opinions.

559
00:28:31,920 --> 00:28:34,120
Speaker 2: Our next guest really does know stuff about that. Mickey

560
00:28:34,200 --> 00:28:38,760
Speaker 2: Enough Holly joins us CEO and chairman of Enough Holly Group. Mickey,

561
00:28:38,800 --> 00:28:40,719
Speaker 2: thanks so much for joining us here in our studio.

562
00:28:41,640 --> 00:28:44,040
Speaker 2: I'm a huge fan of New York City. I'm a

563
00:28:44,080 --> 00:28:45,040
Speaker 2: huge fan of New York City.

564
00:28:45,080 --> 00:28:45,560
Speaker 5: Real estate.

565
00:28:45,960 --> 00:28:48,960
Speaker 2: But man, I'm hearing some dire stuff. People aren't coming

566
00:28:48,960 --> 00:28:51,000
Speaker 2: back to the office. I'm looking down Third Avenue. I

567
00:28:51,040 --> 00:28:54,120
Speaker 2: see lots of empty space there. What's your call on

568
00:28:54,280 --> 00:28:55,560
Speaker 2: just I don't know how you want to go with

569
00:28:55,600 --> 00:28:57,920
Speaker 2: this New York or just big cities, or how you're

570
00:28:57,920 --> 00:28:58,520
Speaker 2: thinking about it.

571
00:28:58,800 --> 00:28:59,640
Speaker 3: Thank you for having me.

572
00:28:59,760 --> 00:29:03,320
Speaker 9: So, first of all, I don't I don't believe in

573
00:29:03,360 --> 00:29:06,800
Speaker 9: the office sector of real estate, so I I invest

574
00:29:06,840 --> 00:29:12,360
Speaker 9: mainly in the residential sector. People, Yeah, exactly, exactly, So

575
00:29:12,440 --> 00:29:15,240
Speaker 9: this is the thing. You really, we really followed the demand.

576
00:29:15,480 --> 00:29:16,640
Speaker 2: So you just go to Florida.

577
00:29:16,680 --> 00:29:20,640
Speaker 3: Then well no, but let's let's talk about New York.

578
00:29:20,720 --> 00:29:24,720
Speaker 9: So you know, in the past, I actually converted many

579
00:29:24,960 --> 00:29:28,760
Speaker 9: office buildings to to residential and then there was the

580
00:29:29,080 --> 00:29:33,200
Speaker 9: period of time of you know, great office buildings and

581
00:29:33,520 --> 00:29:37,840
Speaker 9: even office buildings and in the neighborhoods such as at

582
00:29:37,960 --> 00:29:41,480
Speaker 9: Chelsea and the Flat Iron that were taken by the

583
00:29:42,120 --> 00:29:46,080
Speaker 9: high tech kind of companies and and going converting back

584
00:29:46,120 --> 00:29:50,360
Speaker 9: to to office. But my view of the office space

585
00:29:50,520 --> 00:29:56,400
Speaker 9: is not great. And unless you have a truly class

586
00:29:56,520 --> 00:30:00,240
Speaker 9: a brand new office space like this one, like this

587
00:30:00,320 --> 00:30:04,120
Speaker 9: one for example, right with all the dimenities that you

588
00:30:04,160 --> 00:30:06,640
Speaker 9: have here, which is great, You're not doing well.

589
00:30:07,040 --> 00:30:09,280
Speaker 3: Residential is a completely different story.

590
00:30:09,680 --> 00:30:12,520
Speaker 10: Let's talk about that residential. So New York City we

591
00:30:12,560 --> 00:30:15,240
Speaker 10: were talking earlier. We both agree that it's not dead.

592
00:30:15,240 --> 00:30:16,960
Speaker 10: But in twenty twenty, there were a lot of people,

593
00:30:17,000 --> 00:30:20,400
Speaker 10: including myself, where it felt you know, I actually I

594
00:30:20,440 --> 00:30:21,040
Speaker 10: was sharing with you.

595
00:30:21,080 --> 00:30:22,320
Speaker 6: I loved how quiet it was.

596
00:30:23,120 --> 00:30:25,719
Speaker 10: But you did what a lot of people said couldn't

597
00:30:25,720 --> 00:30:29,360
Speaker 10: be done, which you essentially sold out a beautiful residential

598
00:30:29,400 --> 00:30:32,640
Speaker 10: building on seventy ninth and Madison Smack in twenty twenty

599
00:30:32,680 --> 00:30:34,280
Speaker 10: into twenty twenty one. How did you do that and

600
00:30:34,320 --> 00:30:36,960
Speaker 10: talk to us about how you're what was behind that?

601
00:30:37,240 --> 00:30:40,840
Speaker 9: So, yeah, going back to twenty twenty, once COVID did,

602
00:30:40,880 --> 00:30:44,000
Speaker 9: I said, you know, around the March, we started to

603
00:30:44,080 --> 00:30:47,520
Speaker 9: hear on a daily basis, New York City is dead.

604
00:30:47,600 --> 00:30:48,560
Speaker 3: New York City is dead.

605
00:30:48,640 --> 00:30:51,480
Speaker 10: Now did you have butterflies in your store und that time.

606
00:30:51,280 --> 00:30:53,600
Speaker 3: Just for a little bit or were I was already

607
00:30:53,600 --> 00:30:57,120
Speaker 3: in and I had to. I had a few projects.

608
00:30:57,160 --> 00:31:01,800
Speaker 9: One of them was three years in the making. I

609
00:31:01,880 --> 00:31:06,520
Speaker 9: bought multiple walk up buildings on Medsone Avenue, and I was.

610
00:31:08,200 --> 00:31:11,560
Speaker 3: I designed, and I started to build the first.

611
00:31:12,800 --> 00:31:17,680
Speaker 9: Res high end residential building anywhere between Park and Fifth

612
00:31:17,680 --> 00:31:20,040
Speaker 9: Avenue in twenty five years, right.

613
00:31:19,920 --> 00:31:21,160
Speaker 3: So think about it.

614
00:31:21,240 --> 00:31:24,400
Speaker 9: For twenty five years, the only option for anyone that

615
00:31:24,560 --> 00:31:27,760
Speaker 9: wanted to live between Park and Fifth Avenue, and I

616
00:31:27,760 --> 00:31:31,920
Speaker 9: would say high sixties to meet the eighties is either

617
00:31:32,000 --> 00:31:34,960
Speaker 9: one of the core buildings. Some of them are very famous,

618
00:31:35,120 --> 00:31:41,560
Speaker 9: but old, small, small windows, old elevators, old mechanical systems,

619
00:31:41,960 --> 00:31:45,000
Speaker 9: and no amenities. Right, so for twenty five years, no

620
00:31:45,040 --> 00:31:47,440
Speaker 9: one could really figure out how to build a new building.

621
00:31:47,760 --> 00:31:51,480
Speaker 9: So anyway, we were already coming out with the superstructure

622
00:31:51,520 --> 00:31:53,600
Speaker 9: on Medicine Avenues between seventy.

623
00:31:53,360 --> 00:31:56,160
Speaker 3: And nine and eighty, and I was planning.

624
00:31:55,800 --> 00:31:59,719
Speaker 9: To open the sales office originally in April of twenty twenty.

625
00:32:00,280 --> 00:32:04,160
Speaker 3: I said, let's stop, right, let's see what is going on.

626
00:32:05,240 --> 00:32:10,520
Speaker 9: Well exactly, but then when the superstructure, we kind of

627
00:32:10,560 --> 00:32:13,040
Speaker 9: stopped for about two weeks construction in New York, and

628
00:32:13,080 --> 00:32:15,920
Speaker 9: then we continue and we're coming up on the ground

629
00:32:16,200 --> 00:32:21,400
Speaker 9: and the superstructure was almost topping off, and we started

630
00:32:21,440 --> 00:32:25,920
Speaker 9: to get phone calls from brokers and direct from buyers

631
00:32:26,200 --> 00:32:28,480
Speaker 9: calling our office. Now we didn't have any sign on

632
00:32:29,000 --> 00:32:33,240
Speaker 9: the site except our name, our company name. So people

633
00:32:33,280 --> 00:32:36,440
Speaker 9: google whatever and they found our phone number and they

634
00:32:36,440 --> 00:32:37,080
Speaker 9: called us.

635
00:32:37,240 --> 00:32:39,880
Speaker 3: So I said, oh, very interesting. So there is a demand.

636
00:32:40,320 --> 00:32:43,920
Speaker 3: People are really they're really curious. They want to buy.

637
00:32:44,360 --> 00:32:48,520
Speaker 9: So September of twenty twenty, I dectarted to open the

638
00:32:48,560 --> 00:32:49,120
Speaker 9: sales office.

639
00:32:50,040 --> 00:32:51,560
Speaker 3: The space was ready to open.

640
00:32:52,000 --> 00:32:54,680
Speaker 9: I didn't open it right September twenty twenty, I opened

641
00:32:54,680 --> 00:33:00,000
Speaker 9: the sales office and between September and December of twenty twenty,

642
00:33:00,720 --> 00:33:01,400
Speaker 9: I sold out.

643
00:33:01,600 --> 00:33:04,680
Speaker 10: That's amazing, that's just incredible because having been here in the.

644
00:33:04,640 --> 00:33:10,360
Speaker 9: City, the demand is here in good days and bad days.

645
00:33:10,400 --> 00:33:13,280
Speaker 9: Of course, there is a slowdown. Of course, by the

646
00:33:13,400 --> 00:33:15,000
Speaker 9: end of the day. If you have, by the way,

647
00:33:15,120 --> 00:33:19,040
Speaker 9: not only real estate, if you have a product that

648
00:33:19,320 --> 00:33:23,400
Speaker 9: is well there is a real demand for it, you're

649
00:33:23,440 --> 00:33:26,760
Speaker 9: going to do well. It's all about the inventory and demand, right.

650
00:33:27,040 --> 00:33:31,000
Speaker 9: So there was zero inventory and there was a demand, right,

651
00:33:31,080 --> 00:33:33,640
Speaker 9: So that's why we were I mean, that was the

652
00:33:33,680 --> 00:33:37,120
Speaker 9: first of three projects that since then sold out. We

653
00:33:37,160 --> 00:33:39,680
Speaker 9: did sold out on the Upper east Side. All of

654
00:33:39,720 --> 00:33:41,320
Speaker 9: them were doing extremely well.

655
00:33:41,440 --> 00:33:44,680
Speaker 10: And I mean, you know, I'm now here in certain place,

656
00:33:44,680 --> 00:33:46,440
Speaker 10: but I had been on the Upper Eastside. I saw

657
00:33:46,800 --> 00:33:48,959
Speaker 10: day by day the one on eighty third go up.

658
00:33:49,040 --> 00:33:51,560
Speaker 10: I mean just absolutely very distinct, and I think it's

659
00:33:51,600 --> 00:33:55,840
Speaker 10: at the limestone. But the amenities, yeah, it's really pretty incredible.

660
00:33:56,040 --> 00:33:58,600
Speaker 6: So I want to ask you, you know, selfishly, I

661
00:33:58,680 --> 00:34:04,680
Speaker 6: just put in a payment for very exciting I just

662
00:34:04,720 --> 00:34:07,640
Speaker 6: put in a down payment for an apartment on sixty

663
00:34:07,680 --> 00:34:11,880
Speaker 6: seventh and third so in Lenox. Thank you, But of

664
00:34:11,920 --> 00:34:13,440
Speaker 6: course I want to hear you know if you think

665
00:34:13,480 --> 00:34:15,319
Speaker 6: the value is going to go up, but it's you know,

666
00:34:15,360 --> 00:34:17,360
Speaker 6: it's a build. But you know you've been talking about

667
00:34:17,360 --> 00:34:20,840
Speaker 6: these luxury buildings, all the amenities. Is there still value

668
00:34:20,840 --> 00:34:23,320
Speaker 6: though for some of these buildings that are a bit simpler,

669
00:34:23,360 --> 00:34:27,520
Speaker 6: you know maybe just like good location, doorman, elevator, laundry

670
00:34:27,560 --> 00:34:32,720
Speaker 6: in uniting and a terrorist but like maybe you don't

671
00:34:32,719 --> 00:34:35,520
Speaker 6: have the big gym and all these other amazing common spaces.

672
00:34:35,680 --> 00:34:38,400
Speaker 9: So so I would say I don't know if the

673
00:34:38,480 --> 00:34:42,439
Speaker 9: value will go up because think about where we are

674
00:34:42,560 --> 00:34:47,680
Speaker 9: in all luxury product, the way we live today, most

675
00:34:47,719 --> 00:34:51,920
Speaker 9: of us, right, compared to our parents or definitely our grandparents,

676
00:34:52,960 --> 00:34:57,160
Speaker 9: different quality, right, the different huge different, right, So there

677
00:34:57,239 --> 00:35:00,879
Speaker 9: is a demand for quality. Also, most of us are

678
00:35:01,040 --> 00:35:05,320
Speaker 9: much busier than our parents and definitely grandparents. So we

679
00:35:05,719 --> 00:35:08,840
Speaker 9: are looking for every moment that we have. We're looking

680
00:35:08,840 --> 00:35:13,160
Speaker 9: for the lifestyle that everything will be very, very accessible

681
00:35:13,200 --> 00:35:16,719
Speaker 9: and close to us. Imanities are very important. It's part

682
00:35:16,760 --> 00:35:19,600
Speaker 9: of the lifestyle that we all or not all most

683
00:35:19,640 --> 00:35:21,880
Speaker 9: of us that can afford are looking forward.

684
00:35:21,880 --> 00:35:22,760
Speaker 3: So I would tell.

685
00:35:22,600 --> 00:35:26,080
Speaker 9: You that there is no question in my mind that

686
00:35:26,440 --> 00:35:30,000
Speaker 9: the appreciation of value is much higher for a really

687
00:35:30,040 --> 00:35:34,799
Speaker 9: really good product and not as much for let's call

688
00:35:34,840 --> 00:35:37,960
Speaker 9: it and all the product. Having said that, location is

689
00:35:38,360 --> 00:35:41,120
Speaker 9: as always very important. So if you're in the right location,

690
00:35:41,640 --> 00:35:44,720
Speaker 9: and you have the right bones, and you upgrade your unit,

691
00:35:45,280 --> 00:35:46,560
Speaker 9: you will do well.

692
00:35:46,600 --> 00:35:50,840
Speaker 2: I hear that, how would you describe a South Florida

693
00:35:50,920 --> 00:35:52,400
Speaker 2: right now? Because we have the story here. As you

694
00:35:52,480 --> 00:35:56,320
Speaker 2: well know, seems like everybody in York City left for Miami.

695
00:35:56,880 --> 00:35:59,560
Speaker 2: South Florida in general, give us your extens Is it

696
00:36:00,200 --> 00:36:02,120
Speaker 2: much too fast down there or is that? Or can

697
00:36:02,160 --> 00:36:04,680
Speaker 2: this market really? I guess drive.

698
00:36:05,239 --> 00:36:07,160
Speaker 3: So it's actually very interesting.

699
00:36:07,239 --> 00:36:11,120
Speaker 9: I have two what I call megaprojects in South Florida.

700
00:36:11,640 --> 00:36:15,480
Speaker 9: I'm building a seventy story one point five million square

701
00:36:15,520 --> 00:36:19,960
Speaker 9: feet in Miami in downtown Miami, in a neighborhood in

702
00:36:20,360 --> 00:36:24,560
Speaker 9: Miami World Center, which is a new neighborhood in downtown Miami.

703
00:36:24,680 --> 00:36:26,000
Speaker 3: And I'm building a very.

704
00:36:25,800 --> 00:36:30,759
Speaker 9: Similar size tween fifty story towers in Fort Lauderdale in

705
00:36:30,840 --> 00:36:31,880
Speaker 9: Flegler Village.

706
00:36:32,200 --> 00:36:37,080
Speaker 3: So here what sooth? Miami and Fort laudell are different.

707
00:36:37,160 --> 00:36:41,520
Speaker 9: But here's the thing. For us, Okay, it's all about demand.

708
00:36:42,480 --> 00:36:46,480
Speaker 9: We think that we are quite we are quite good

709
00:36:46,560 --> 00:36:51,040
Speaker 9: in designing and creating a really good product, but we're

710
00:36:51,080 --> 00:36:53,520
Speaker 9: not good enough to create a demand. So we really

711
00:36:53,560 --> 00:36:56,600
Speaker 9: follow the demand. We look at where the demand is

712
00:36:56,719 --> 00:37:01,120
Speaker 9: and that's where we go. Specifically about Miami, Miami matured

713
00:37:01,200 --> 00:37:04,760
Speaker 9: to a point in my opinion of no return. Miami

714
00:37:04,880 --> 00:37:08,440
Speaker 9: is Miami can offer not not everything that you can

715
00:37:08,480 --> 00:37:11,760
Speaker 9: get in New York City, but almost everything between culture

716
00:37:11,840 --> 00:37:15,920
Speaker 9: and restaurants and you name it, and sports and everything

717
00:37:16,000 --> 00:37:18,759
Speaker 9: is there. And of course many months of the of

718
00:37:18,840 --> 00:37:21,640
Speaker 9: the year, beautiful weather and the beaches and all of that. Right,

719
00:37:22,080 --> 00:37:25,319
Speaker 9: So you know this is this is for us. This

720
00:37:25,480 --> 00:37:29,920
Speaker 9: is a really important market and also a market that

721
00:37:30,000 --> 00:37:34,439
Speaker 9: attracts quite a lot of Latin American buyers that either

722
00:37:34,560 --> 00:37:37,719
Speaker 9: want to park money in the US or they as

723
00:37:37,840 --> 00:37:43,160
Speaker 9: investment or they just use their apartments X amount of weeks,

724
00:37:43,960 --> 00:37:46,359
Speaker 9: you know, a year. So I think I think it's

725
00:37:46,360 --> 00:37:49,880
Speaker 9: a strong market. I just opened a sales office for

726
00:37:50,080 --> 00:37:53,759
Speaker 9: the Miami Miami Project four weeks ago. We are we

727
00:37:53,800 --> 00:37:56,680
Speaker 9: are doing well, So we think it's a strong market.

728
00:37:56,800 --> 00:37:58,680
Speaker 6: Yeah, and that there's somewhere upside to it.

729
00:37:59,680 --> 00:38:01,200
Speaker 3: Yes, because here's the thing.

730
00:38:01,560 --> 00:38:04,000
Speaker 9: Remember, we are still in an environment or we are

731
00:38:04,040 --> 00:38:06,680
Speaker 9: in an environment of high mortgage rates.

732
00:38:06,960 --> 00:38:10,200
Speaker 6: Right, so just drapleo seven percent today, but yeah, keep

733
00:38:10,239 --> 00:38:11,800
Speaker 6: it yeah.

734
00:38:11,400 --> 00:38:14,520
Speaker 9: Correct, So going forward, thinking about going twenty four to

735
00:38:14,719 --> 00:38:17,200
Speaker 9: twenty five, we believe and I'm sure that you believe

736
00:38:17,239 --> 00:38:20,120
Speaker 9: that mortgage rate will start to go down, that there

737
00:38:20,120 --> 00:38:23,319
Speaker 9: are still buyers that's sitting on the on the just

738
00:38:23,400 --> 00:38:27,279
Speaker 9: on the fence and waiting right and waiting now long

739
00:38:27,400 --> 00:38:30,160
Speaker 9: term projects, projects that are going to be complete in

740
00:38:30,680 --> 00:38:34,120
Speaker 9: three four years anyway, they don't need to commit to

741
00:38:34,200 --> 00:38:37,239
Speaker 9: take mortgages right now. So it's all about deposit and

742
00:38:37,280 --> 00:38:41,000
Speaker 9: taking a position in a market that eventually there will

743
00:38:41,040 --> 00:38:42,560
Speaker 9: be appreciation in price.

744
00:38:43,360 --> 00:38:47,480
Speaker 10: You know, on this topic, just yesterday the Fed indicated

745
00:38:47,520 --> 00:38:49,439
Speaker 10: that they are going to be lower and rates next year.

746
00:38:49,520 --> 00:38:51,799
Speaker 10: So it supports everything that you're talking about. In terms

747
00:38:51,840 --> 00:38:54,080
Speaker 10: of being below seven percent, the idea that rates will

748
00:38:54,080 --> 00:38:57,000
Speaker 10: go lower. Is there a point where the housing market

749
00:38:57,000 --> 00:38:59,920
Speaker 10: could overheat too much? Because I grew up in Upstate.

750
00:39:00,120 --> 00:39:03,120
Speaker 10: My family member yesterday was just sharing a picture of

751
00:39:03,160 --> 00:39:05,920
Speaker 10: a I think a fifteen hundred square foothouse going for

752
00:39:06,000 --> 00:39:09,640
Speaker 10: one point one million dollars. That same house five ten,

753
00:39:09,719 --> 00:39:11,640
Speaker 10: twenty years ago literally would have been one hundred and

754
00:39:11,640 --> 00:39:14,640
Speaker 10: fifty thousand dollars. And so I'm just thinking, if more

755
00:39:14,760 --> 00:39:17,400
Speaker 10: fires put onto the market, it may be good. It

756
00:39:17,440 --> 00:39:19,120
Speaker 10: will be good for somebody like you for a while,

757
00:39:19,160 --> 00:39:21,400
Speaker 10: but at some point is that going to create issues?

758
00:39:21,800 --> 00:39:26,000
Speaker 9: So it's all about it's all about supply. It's all

759
00:39:26,040 --> 00:39:30,600
Speaker 9: about the inventory, right and in the main you know,

760
00:39:30,640 --> 00:39:33,360
Speaker 9: in the main cities there is, by by and large,

761
00:39:33,520 --> 00:39:36,480
Speaker 9: there is lack of supply right now, think about it.

762
00:39:36,480 --> 00:39:40,480
Speaker 9: It's not only the mortgage rates. There are only few

763
00:39:40,560 --> 00:39:45,920
Speaker 9: developers that can build today. We were either lucky enough

764
00:39:46,120 --> 00:39:48,840
Speaker 9: or qualified enough to close.

765
00:39:49,719 --> 00:39:52,080
Speaker 2: Sorry now it's just run out of time, But we'll

766
00:39:52,080 --> 00:39:53,759
Speaker 2: get you back the next time. Sounds like you're in

767
00:39:53,760 --> 00:39:55,760
Speaker 2: New York a lot, so we'll get you back. From Banana,

768
00:39:55,800 --> 00:39:58,080
Speaker 2: South Florida, making a timely CEO and chairman of that

769
00:39:58,200 --> 00:40:01,719
Speaker 2: Naftali group. We're gonna have more coming up. This is Bloomberg.

770
00:40:02,120 --> 00:40:05,200
Speaker 1: Thanks for listening to the Bloomberg Markets podcasts. You can

771
00:40:05,239 --> 00:40:09,000
Speaker 1: subscribe and listen to interviews at Apple Podcasts or whatever

772
00:40:09,120 --> 00:40:12,840
Speaker 1: podcast platform you prefer. I'm Matt Miller. I'm on Twitter

773
00:40:13,040 --> 00:40:14,959
Speaker 1: at Matt Miller nineteen seventy three.

774
00:40:15,400 --> 00:40:17,760
Speaker 2: And I'm Faull Sweeney. I'm on Twitter at pt Sweeney.

775
00:40:17,920 --> 00:40:20,560
Speaker 2: Before the podcast, you can always catch us worldwide at

776
00:40:20,600 --> 00:40:22,319
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