WEBVTT - BofA Shares Rise After Beat on Net Interest Income 0:00:02.960 --> 0:00:10.720 Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Business 0:00:10.760 --> 0:00:13.960 Wait inside from the reporters and editors who bring you 0:00:14.040 --> 0:00:18.400 America's most trusted business magazine, plus global business, finance and 0:00:18.440 --> 0:00:22.840 tech news. The Bloomberg Business Week Podcast with Carol Messer 0:00:23.040 --> 0:00:25.840 and Tim Stenebek from Bloomberg Radio. 0:00:27.400 --> 0:00:30.040 Let's get into it with big bank earnings. Carol Master, 0:00:30.160 --> 0:00:32.120 we got another big batch of earnings from the Wall 0:00:32.120 --> 0:00:34.360 Street banks from Bank of America, City Group in Goldman, 0:00:34.479 --> 0:00:37.400 Sachs all rallying at their highest today, Bava holding onto 0:00:37.400 --> 0:00:39.280 some of it, will City is selling off a little. 0:00:39.400 --> 0:00:41.919 Yeah, it's definitely been bouncing around here with a look 0:00:41.920 --> 0:00:44.280 at the quarter outlooks and the comps. Back with us 0:00:44.280 --> 0:00:47.800 as Cheryl Pate, She's senior portfolio manager at angel Oak 0:00:48.000 --> 0:00:51.480 Capitol Advisor. She joins us from Atlanta on this bank 0:00:51.520 --> 0:00:54.840 earnings Tuesday. Cheryl, good to have you back with us, 0:00:54.840 --> 0:00:58.160 so simon initial enthusiasm and even earlier in the trade. 0:00:58.160 --> 0:01:01.120 When it comes to the big three reporting today, it's 0:01:01.160 --> 0:01:03.960 playing out differently. Goldman just up about a quarter of 0:01:04.000 --> 0:01:06.160 a percent. It was up three point four percent earlier 0:01:06.200 --> 0:01:09.240 in the session. City was up nearly two percent at 0:01:09.280 --> 0:01:12.360 it TIES Today it's now down almost five percent b 0:01:12.520 --> 0:01:13.960 of a mean time was up about three and a 0:01:14.000 --> 0:01:16.120 half percent at of TIES, still holding on to a 0:01:16.120 --> 0:01:19.360 gain of about one point two percent. Walk us through 0:01:20.280 --> 0:01:23.399 the earnings from these big three, what it says to 0:01:23.480 --> 0:01:25.199 you and how you think they did. 0:01:26.560 --> 0:01:29.959 Yeah, absolutely, and I'm happy to be back on And 0:01:30.040 --> 0:01:32.520 I think the stock action today would line up with 0:01:32.840 --> 0:01:35.240 how we think the earnings really came out. I think 0:01:35.240 --> 0:01:38.399 we did have a preference for Bank of America into earnings, 0:01:38.440 --> 0:01:41.400 and I think we got a lot of what we wanted. 0:01:41.880 --> 0:01:45.040 There are certainly finds that the operating environment is becoming 0:01:45.080 --> 0:01:49.040 more positive. They highlighted that they think they're at the 0:01:49.040 --> 0:01:52.080 inflection point on NIM and that I think has been 0:01:52.640 --> 0:01:55.120 the key focus for a lot of investors when we 0:01:55.240 --> 0:01:59.320 hit that inflection point. Other than that, we also were 0:01:59.360 --> 0:02:02.320 positively encouraged by what we saw in consumer credit. The 0:02:02.400 --> 0:02:06.040 consumer continues to hold in well. We saw good trends 0:02:06.120 --> 0:02:10.320 on credit cards in terms of some of the charge 0:02:10.360 --> 0:02:13.640 of data improving from the prior quarter. That lines up 0:02:13.680 --> 0:02:16.840 with what we've been seeing in the monthly data as well. 0:02:17.480 --> 0:02:20.960 And then capital markets are strong too. If we loop 0:02:21.040 --> 0:02:25.320 that back to City. I think it's still a longer tailed, 0:02:25.320 --> 0:02:29.000 more of a self help restructuring story to go there, 0:02:29.000 --> 0:02:31.840 but a lot of the similar trends played out. I 0:02:31.840 --> 0:02:35.000 would say they were more cautious on the NIM guidance 0:02:35.120 --> 0:02:38.799 and guiding to flat, although that's probably a little bit 0:02:38.840 --> 0:02:43.600 better than what investors and analysts were expecting. And to 0:02:43.720 --> 0:02:45.840 round it out with Goldman, I think, you know, it 0:02:45.880 --> 0:02:49.639 was a very strong quarter capital markets across the board. 0:02:50.000 --> 0:02:51.959 I think there's still a little bit of question on 0:02:52.280 --> 0:02:55.600 the consumer division there, but all in all, I think 0:02:55.600 --> 0:02:57.920 it's been a good start to earning season. 0:02:58.520 --> 0:03:01.040 Cheryl, big picture you mentioned then a few times there. 0:03:01.080 --> 0:03:03.680 But if we take these three banks at what they 0:03:03.760 --> 0:03:06.960 said today, what's the picture of the American consumer they painted? 0:03:07.160 --> 0:03:10.480 And I know it's not monolithic. There's certainly some commentary 0:03:10.520 --> 0:03:14.160 from Bank of America about lower income consumers that differ 0:03:14.240 --> 0:03:17.639 from middle class and higher income consumers. But how would 0:03:17.639 --> 0:03:19.040 you characterize it taken together? 0:03:20.400 --> 0:03:23.360 Yeah, when we look at the consumer broadly, I do agree. 0:03:23.440 --> 0:03:27.280 I think we've seen really no weakness in terms of 0:03:27.320 --> 0:03:31.760 retail spending, particularly on the higher end, but still some 0:03:31.919 --> 0:03:35.360 pressures on a lower end. Lower FICO type consumer and 0:03:35.400 --> 0:03:40.280 that'll hit different banks and consumer finance companies differently based 0:03:40.280 --> 0:03:43.400 on their portfolios. But I think what we can see 0:03:44.160 --> 0:03:49.040 it is some credit normalization happening, but at a decelerating pace. 0:03:49.120 --> 0:03:52.960 So if we're moving into a rate cut environment and 0:03:53.520 --> 0:03:59.720 achieva soft landing, we feel pretty good about the consumer here, 0:03:59.840 --> 0:04:02.440 and you know, keeping eyes on the lower end, but 0:04:03.560 --> 0:04:06.839 some of the positive tailwinds should be helpful there. 0:04:06.960 --> 0:04:09.320 Hey, Cheryl, when you look at the big banks overall, 0:04:09.360 --> 0:04:12.360 of course, JP Morgan kicking off the earning season on Friday, 0:04:12.800 --> 0:04:16.279 and when you look at the group and the comps, 0:04:17.000 --> 0:04:19.599 who is best in class? Is it JP Morgan? In 0:04:19.640 --> 0:04:20.080 your view? 0:04:21.800 --> 0:04:24.680 I do agree with that. I think you do see that, 0:04:25.800 --> 0:04:28.720 you know, there is a valuation premium that comes along 0:04:28.720 --> 0:04:30.960 with JP Morgan, and I do think it is deserved. 0:04:31.839 --> 0:04:34.720 They've proven time and time again that you know that 0:04:34.839 --> 0:04:38.200 there really is this concept of the fortress balance sheet 0:04:38.279 --> 0:04:41.960 that has been talked about for years. But also they 0:04:42.000 --> 0:04:45.680 continue to deliver on sort of firing on all cylinders, 0:04:45.720 --> 0:04:52.000 so consistency and strength continues to play through there, and 0:04:52.040 --> 0:04:55.480 we do think that the premium valuation is deserving. 0:04:55.880 --> 0:04:58.159 Were you buying what have you been buying or selling. 0:04:58.200 --> 0:05:01.159 I am curious coming off of earnings, are heading into earnings, 0:05:01.160 --> 0:05:03.560 they're heading out of earnings yep. 0:05:03.880 --> 0:05:07.720 I would say we have been. We've been finding opportunities. 0:05:07.760 --> 0:05:09.800 I would say on the debt side of a lot 0:05:09.839 --> 0:05:13.240 of the money center banks, we have been adding to 0:05:13.400 --> 0:05:16.560 positions in names like JP Morgan and Bank of America, 0:05:17.480 --> 0:05:22.440 and we remain more cautious on the regional banks. Rate 0:05:22.520 --> 0:05:26.040 cuts could help the narrative there, but at this point 0:05:26.080 --> 0:05:28.080 in the cycle, we have a preference for the large 0:05:28.120 --> 0:05:32.520 cap given diversification of the business model, upside from capital 0:05:32.560 --> 0:05:35.039 markets and consumer exposure. 0:05:35.120 --> 0:05:36.880 We should put out JP Morgan Chase, the first of 0:05:36.920 --> 0:05:39.400 Wall Streets six biggest banks to tap the US investment 0:05:39.440 --> 0:05:42.839 grade bond market after reporting earnings, really setting the stage 0:05:42.880 --> 0:05:46.279 for a potential flood of issuance from the banking group overall. 0:05:47.120 --> 0:05:49.679 JP Morgan selling the bonds and as many as four parts, 0:05:49.680 --> 0:05:52.600 according to person with knowledge of the matter. So that 0:05:52.720 --> 0:05:54.840 talks about some of the debt, Cheryl, that you are 0:05:54.880 --> 0:05:57.200 suggesting and that may be interesting, Hey. 0:05:57.040 --> 0:06:01.039 Cheryl, any commentary or insight into dealing for the final 0:06:01.120 --> 0:06:04.279 quarter of the year and into next year. What m 0:06:04.320 --> 0:06:07.440 and A will look like, what IPOs will look like, 0:06:07.760 --> 0:06:09.640 and of course the fees associated with those for some 0:06:09.720 --> 0:06:10.320 of these banks. 0:06:11.480 --> 0:06:13.920 Yeah, I do think we are in sort of the 0:06:13.960 --> 0:06:17.040 early stages of the capital markets recovery, so we do 0:06:17.160 --> 0:06:21.480 expect continued strength coming out of both investment banking and 0:06:21.760 --> 0:06:25.039 the trading businesses in the fourth quarter and certainly into 0:06:25.040 --> 0:06:27.680 twenty twenty five as well. I think a little bit 0:06:27.800 --> 0:06:31.720 of relief on the rate side helps. We're hearing that 0:06:32.000 --> 0:06:36.240 pipelines are strong, and then even if we think about 0:06:36.360 --> 0:06:40.000 M and A within the banking sector specifically, we think 0:06:40.040 --> 0:06:43.200 there's a lot of reasons why that will increase over 0:06:43.200 --> 0:06:47.520 the next year or so, as efficiency gains and cost 0:06:47.560 --> 0:06:51.039 saves remain a key focus for the sector. 0:06:52.240 --> 0:06:55.960 In terms of City Group, which we know has been 0:06:56.160 --> 0:06:59.159 kind of changing in terms of strategy, and Jane Fraser 0:06:59.200 --> 0:07:01.000 making a lot of moods, you know, one of our 0:07:01.040 --> 0:07:05.320 stories that's on the Bloomberg talks about how she has 0:07:05.400 --> 0:07:07.800 had to deny that the bank had a secret regulatory 0:07:07.839 --> 0:07:11.480 straight jacket and took repeated questions by analysts for her 0:07:11.600 --> 0:07:14.320 to be clear that US regulators have not placed City 0:07:14.400 --> 0:07:16.040 under an acid cap, which has been one of the 0:07:16.080 --> 0:07:19.320 most feared and prohibitive penalties that we know regulators can 0:07:19.360 --> 0:07:22.440 place on us lenders. She's said, let me be crystal clear, 0:07:22.480 --> 0:07:25.239 we do not have an acid cap. We're not expecting any. 0:07:26.200 --> 0:07:28.280 But what does that say that she had to say 0:07:28.320 --> 0:07:31.160 that so many times and the concerns about you know, 0:07:31.200 --> 0:07:32.239 where city is going. 0:07:33.720 --> 0:07:36.640 Yeah, I think there is still some uncertainty as to 0:07:37.600 --> 0:07:40.240 the restructuring it and what city looks like when when 0:07:40.280 --> 0:07:43.160 we come through the other end of this. I think 0:07:43.200 --> 0:07:45.920 the first answer on the analyst call was was a 0:07:45.920 --> 0:07:48.520 little evasive and and you know, really was what was 0:07:48.600 --> 0:07:52.840 driving the need to be clear about that later. But 0:07:52.840 --> 0:07:54.960 but to me that signals there's there's still a lot 0:07:54.960 --> 0:07:58.680 of work to do in terms of execution on the strategy, 0:07:59.680 --> 0:08:02.640 and I think going to take some time for investors 0:08:02.880 --> 0:08:03.840 to buy into it. 0:08:04.960 --> 0:08:07.520 Kay, Cheryl, you mentioned that JP Morgan kind of stands 0:08:07.520 --> 0:08:09.640 out as a leader at least thus far when it 0:08:09.680 --> 0:08:12.760 comes to rounding out the earning season. Give us an 0:08:12.840 --> 0:08:15.600 update your view on who's at the other end of 0:08:15.600 --> 0:08:18.120 the pack right now, which which bank or which stock 0:08:18.360 --> 0:08:19.400 is lagging. 0:08:21.120 --> 0:08:23.560 If we're sort of looking at who's come out thus 0:08:23.640 --> 0:08:27.320 far in sort of the larger cap world. You know, 0:08:27.400 --> 0:08:32.559 I think I would say, you know, both City and Wells. 0:08:31.720 --> 0:08:32.640 On the lower end. 0:08:32.679 --> 0:08:35.440 Now, there's a lot of you know, sort of regulatory 0:08:35.600 --> 0:08:40.440 self help type narrative around both of those names. But 0:08:40.520 --> 0:08:43.960 I think also in terms of you know, forward guidance 0:08:44.080 --> 0:08:46.640 was a little less optimistic than what we're seeing at 0:08:46.720 --> 0:08:51.280 some of the other banks and just you know, maybe 0:08:51.640 --> 0:08:56.040 some more room in terms of improving confidence and driving 0:08:56.120 --> 0:08:59.400 valuations hired. It's a little bit of a longer tail, 0:09:00.040 --> 0:09:03.480 and there's some messiness around the numbers that that, you know, 0:09:03.640 --> 0:09:07.959 cause cause some uh, you know, varying views. 0:09:08.200 --> 0:09:10.400 Any indications in terms of the big bank earnings, what 0:09:10.480 --> 0:09:12.480 it tells you about kind of the US economic outlook 0:09:12.559 --> 0:09:14.880 or even the global economy since these are global banks. 0:09:16.600 --> 0:09:19.920 Yeah, I think most of the commentary, I would say, 0:09:20.320 --> 0:09:24.440 generally focused on on sort of domestic conditions, and I 0:09:24.440 --> 0:09:27.240 think it was a little bit more optimistic tone than 0:09:27.320 --> 0:09:31.960 last quarter. I think, you know, capital markets rebound is 0:09:32.000 --> 0:09:34.560 helping a lot here. But also we got the rate 0:09:34.600 --> 0:09:38.640 cut pretty late in the third third quarter, so there's 0:09:38.760 --> 0:09:41.440 you know, been some benefit that's played through in terms 0:09:41.440 --> 0:09:45.000 of AOCI and capital levels. But I don't think we 0:09:45.040 --> 0:09:48.520 saw the full benefit really in the numbers yet, and 0:09:48.760 --> 0:09:52.520 that's sort of to come in terms of the operating environment, 0:09:53.920 --> 0:09:58.240 and it seemed like a more optimistic tone generally speaking. 0:09:58.360 --> 0:10:06.280 I think Jamie Diamond was probably the more not not 0:10:06.400 --> 0:10:08.480 to say negative, but more cautious on sort of the 0:10:08.480 --> 0:10:13.000 more global environment, and that could play into some of 0:10:13.040 --> 0:10:16.320 the more international business lines, but that still tends to 0:10:16.320 --> 0:10:19.480 be a smaller piece that the next year or so 0:10:19.640 --> 0:10:22.240 is really I think going to be driven off sort 0:10:22.240 --> 0:10:25.319 of the fundamentals of key banking businesses. 0:10:25.640 --> 0:10:28.800 Hey, Cheryl, election less than three weeks away at this point, 0:10:28.800 --> 0:10:32.000 three weeks away exactly certainly top of mind for us. 0:10:32.760 --> 0:10:35.079 Our editor in chief here at Bloomberg News, John Mickaelthwaite, 0:10:35.120 --> 0:10:38.800 just wrapping up an interview with former President Donald Trump 0:10:38.840 --> 0:10:45.160 at the Economic Club of Chicago. I'm thinking, in your seat, 0:10:45.320 --> 0:10:49.120 how are you thinking about the way that Harris administration 0:10:49.240 --> 0:10:52.600 or another Trump administration would affect these big banks. 0:10:54.200 --> 0:10:57.679 Yeah, I think when we sort of think about potential 0:10:57.720 --> 0:11:01.560 outcomes from the election, you know, the view, the view 0:11:01.559 --> 0:11:06.240 from my seat would really be, you know, a democratic win, 0:11:06.480 --> 0:11:09.640 I think is status quo in terms of where we 0:11:09.720 --> 0:11:14.280 are in terms of capital levels. There's you know, perhaps 0:11:14.360 --> 0:11:17.960 a faster path to getting the final details on Basil 0:11:18.000 --> 0:11:23.520 three end game, and a Republican win I think would 0:11:24.280 --> 0:11:27.120 really maybe help advance some of the M and A 0:11:27.280 --> 0:11:30.400 I was speaking about and sort of loosening some of 0:11:30.440 --> 0:11:36.600 the regulations around around combinations, but also speeding up the 0:11:36.640 --> 0:11:39.280 time of approvals, which has been a bit of a 0:11:41.040 --> 0:11:43.560 you know, a lengthening process over the last few years. 0:11:43.600 --> 0:11:47.079 So sort of status quo to positive. 0:11:47.280 --> 0:11:50.880 You know, sol real quickly though, Donald Trump did tell 0:11:50.960 --> 0:11:53.680 John mcil thwaite when it comes to the FED, I 0:11:53.720 --> 0:11:56.520 think that if you're oh, he said, he thinks it's 0:11:56.559 --> 0:11:58.080 a fair game for president till the head of the 0:11:58.080 --> 0:12:01.360 Central Bank, how he thinks interest rates she change. If 0:12:01.559 --> 0:12:04.800 there is a second White House with Donald Trump in 0:12:04.840 --> 0:12:07.720 it and he plays around with the FED, that's a problem, right, 0:12:07.760 --> 0:12:09.600 real quickly, just got fifteen seconds. 0:12:10.400 --> 0:12:13.080 Yeah, now I would agree. I think the independence of 0:12:13.120 --> 0:12:14.400 the FED is critical. 0:12:14.480 --> 0:12:16.960 All right, Gonna leave it there. Cheryl Pate, Senior portfolio 0:12:17.000 --> 0:12:20.080 manager at angel Okappal Advisors. You're listening and watching Bloomberg 0:12:20.160 --> 0:12:23.559 Business Week on TV, radio, YouTube and Blueberg originals. 0:12:24.760 --> 0:12:28.280 You're listening to the Bloomberg Business Week podcast. Catch us 0:12:28.320 --> 0:12:31.559 live weekday afternoons from two to five pm. Easter Listen 0:12:31.600 --> 0:12:33.760 on Apple card Play and then Bright Auto with a 0:12:33.800 --> 0:12:36.840 Bloomberg Business app, or watch us live on YouTube. 0:12:38.320 --> 0:12:41.000 Well, the property market, it has started to stir again, 0:12:41.080 --> 0:12:44.480 bolsted in part by the Federal reserves first interest rate 0:12:44.520 --> 0:12:47.240 cut in more than four years. It's not, though, necessarily 0:12:47.280 --> 0:12:50.760 full steam ahead. As Bloomberg's Abigail Dolittle reported recently with 0:12:50.840 --> 0:12:54.120 Natalie Wong, many parts of the commercial property market have 0:12:54.240 --> 0:12:57.319 started to hit a bottom, but offices remain an outline. 0:12:57.320 --> 0:13:00.720 This is according to one specific real estate investment from BGO, 0:13:00.840 --> 0:13:03.880 which oversees him more than eighty three billion dollars. 0:13:04.160 --> 0:13:06.680 Here to talk more about that is Amy Price, president 0:13:06.720 --> 0:13:09.720 at the private commercial real estate firm Bgo, along with 0:13:09.720 --> 0:13:12.960 the Bloomberg News Markets correspondent Abagail Doolittle, who follows and 0:13:13.000 --> 0:13:15.559 reports on the real estate space as well. They both 0:13:15.640 --> 0:13:19.040 join us here in the studio. Amy, I want to 0:13:19.040 --> 0:13:21.120 start with you and just get this idea from you, 0:13:21.559 --> 0:13:24.600 that the property market has started to stir again. Is 0:13:24.960 --> 0:13:28.719 when we hear that, when we see that, what is 0:13:28.760 --> 0:13:31.199 the time period that's referring to, is that referring to 0:13:31.280 --> 0:13:34.240 when we knew rates would get cut or when rates 0:13:34.240 --> 0:13:35.000 were actually cut. 0:13:35.440 --> 0:13:37.680 Yeah, it's a good place to start. I would say 0:13:37.720 --> 0:13:40.000 we will look back and see the latter half of 0:13:40.040 --> 0:13:43.920 twenty four as that churning point for commercial real estate broadly. Now, 0:13:43.960 --> 0:13:45.800 as you pointed out, office is a bit of an 0:13:45.800 --> 0:13:48.560 exception to that, and I think we started to see 0:13:48.559 --> 0:13:51.440 that even in anticipation of that first rate cut, we 0:13:51.480 --> 0:13:54.760 saw more liquidity in the market. We saw more activity 0:13:54.960 --> 0:13:57.520 both on the credit side and on the equity side. 0:13:58.000 --> 0:14:01.000 But we're also seeing it now to the fourth quarter 0:14:01.200 --> 0:14:05.679 of this year. So yes, i'd say with the anticipation 0:14:06.000 --> 0:14:10.280 of rates having peaked, with the anticipation of you know, 0:14:10.400 --> 0:14:14.640 values having found their bottom and starting to increase again, 0:14:14.840 --> 0:14:18.400 Office a little bit different liquidity is returning to the market, 0:14:18.400 --> 0:14:19.080 and that's healthy. 0:14:19.200 --> 0:14:22.240 I want to ask you, in anticipation of rates going lower, 0:14:22.720 --> 0:14:25.880 I'm curious, how important is it that rates actually continue 0:14:25.920 --> 0:14:29.520 to go lower a lot to have a dramatic difference 0:14:29.600 --> 0:14:32.960 and impact on real estate, Like how sensitive and in 0:14:33.040 --> 0:14:34.280 terms of what the FED does. 0:14:34.160 --> 0:14:37.080 Yeah, real estate from an income and yield perspective, it's 0:14:37.160 --> 0:14:41.640 quite sensitive, right, And so I think certainly where interest 0:14:41.680 --> 0:14:44.640 rates level out and where they get to is very important. 0:14:44.800 --> 0:14:48.320 I would say the pace is less critical. You know, 0:14:48.400 --> 0:14:50.560 as an investor in real estate, we are generally long 0:14:50.680 --> 0:14:54.280 term investors, so we're really looking for yield an opportunity now, 0:14:54.640 --> 0:14:59.360 but we're measuring that also aligned with just the demand 0:14:59.480 --> 0:15:01.840 drivers the or longer term and that are kind of 0:15:01.920 --> 0:15:05.320 acycle goal. So we're looking for both. And so from 0:15:05.360 --> 0:15:09.200 an investor's perspective, you know, certainly how quickly rate suggests 0:15:09.520 --> 0:15:12.360 will drive velocity in the market, but longer term it 0:15:12.400 --> 0:15:12.920 has less of. 0:15:13.000 --> 0:15:15.920 How much lower would you like to see it go though, well, 0:15:15.960 --> 0:15:18.640 we'd like to see it go, but realistically to really 0:15:18.720 --> 0:15:19.600 kind of get a. 0:15:19.640 --> 0:15:24.320 Jolt, well, you know, listen, I think the jolt is 0:15:24.360 --> 0:15:27.280 probably you know, more than fifty basis points, okay, right, 0:15:27.360 --> 0:15:32.200 another twenty five to fifty is probably expected. More ordinary course. Again, 0:15:32.280 --> 0:15:35.360 question is the timing going beneath that we'll start to 0:15:35.360 --> 0:15:37.600 see more of a jolt from what's already been baked 0:15:37.600 --> 0:15:38.480 into the market today. 0:15:38.760 --> 0:15:41.480 So that's a pretty bold call. Amy on the idea 0:15:41.720 --> 0:15:44.280 that this last half of twenty twenty four could be 0:15:44.320 --> 0:15:47.480 the bottom and what's been a pretty painful cycle. So 0:15:47.520 --> 0:15:49.080 many people saying that it's going to take a long 0:15:49.120 --> 0:15:51.680 time to work out work it out. But one piece, 0:15:51.680 --> 0:15:54.160 as you were mentioning office that's still in pain. I 0:15:54.200 --> 0:15:56.840 was talking to one of the top private credit guys 0:15:57.360 --> 0:15:59.720 recently and he was saying that while the rest of 0:15:59.760 --> 0:16:02.400 them are it may be starting to recover that office 0:16:02.440 --> 0:16:05.120 is so painful. It's almost acting like this big weight 0:16:05.320 --> 0:16:07.720 around the leg of real estate. Are you seeing that 0:16:07.800 --> 0:16:10.400 at all? And to what degree could it remain a 0:16:10.400 --> 0:16:13.400 problem into twenty twenty five? Understanding that the bottom may 0:16:13.440 --> 0:16:14.360 be made right. 0:16:14.760 --> 0:16:19.040 So office is idiosyncratic this cycle, for sure. We're seeing 0:16:19.400 --> 0:16:23.480 the headwinds from return to office, you know, start to 0:16:23.560 --> 0:16:26.440 normalize the pendulum to kind of find it's I think 0:16:26.440 --> 0:16:30.040 it's equilibrium. But there's questions on the horizon about what 0:16:30.120 --> 0:16:33.040 does AI do for the future of office jobs, et cetera. 0:16:33.400 --> 0:16:36.160 So if you look forward in office, there's just you know, 0:16:36.200 --> 0:16:39.760 a much murkier picture ahead, and that is a bit 0:16:39.800 --> 0:16:43.880 of a weight against a diversified pool or diversified strategy. 0:16:44.320 --> 0:16:46.400 So I think that's part of why we're seeing more 0:16:46.520 --> 0:16:49.120 interest in you know, sometimes people refer them as a 0:16:49.200 --> 0:16:53.120 niche sectors, but specific strategies where you say, okay, I 0:16:53.160 --> 0:16:57.360 can invest into You know, some of these sectors that 0:16:57.360 --> 0:17:01.560 that are countercyclical, right, don't have the same headwinds's office. 0:17:01.600 --> 0:17:04.000 Does it eat into the dry powder though, of say 0:17:04.000 --> 0:17:05.879 some of the big sovereign funds that are in office 0:17:05.880 --> 0:17:07.679 that they can't get out of it, so they just 0:17:07.760 --> 0:17:10.119 don't have the money to allocate to these other sectors 0:17:10.119 --> 0:17:10.879 you're talking about. 0:17:11.200 --> 0:17:13.760 There is definitely capital tied up in office that would 0:17:13.840 --> 0:17:17.200 like to be out of office, but at the same time, 0:17:19.320 --> 0:17:22.440 probably more than you would think. At the same time, 0:17:22.880 --> 0:17:28.320 there's also what matters is the overall allocations to real 0:17:28.400 --> 0:17:30.679 estate as well, and what we are seeing now with 0:17:30.880 --> 0:17:35.520 rates normalizing hopefully beginning to decline, a renewed interest in 0:17:35.600 --> 0:17:39.359 real estate outside of office as an alternative for credit 0:17:39.400 --> 0:17:42.199 and yield strategies. So we're seeing some of that capital 0:17:42.280 --> 0:17:45.960 come back in to compliment the holdings in office. 0:17:46.240 --> 0:17:49.640 You operating twenty seven cities around the world, where exactly 0:17:49.680 --> 0:17:52.160 are you seeing strength and where are you seeing weakness 0:17:52.280 --> 0:17:53.840 in the US and outside the US. 0:17:54.520 --> 0:17:57.080 So one combin I make globally is that we see 0:17:57.280 --> 0:18:01.679 strength in Asia. I don't invest heavily into China, but 0:18:01.760 --> 0:18:04.960 we do in other markets Japan in particular, and so 0:18:05.000 --> 0:18:06.800 some of the what we've been talking about in office, 0:18:06.800 --> 0:18:09.320 for example, this conversation is not relevant the same way 0:18:09.400 --> 0:18:13.720 in Japan and in Asia. So we see opportunity and 0:18:13.760 --> 0:18:17.119 momentum there. And then i'd say in North America and 0:18:17.200 --> 0:18:19.840 in the US in particular, there are some markets. What 0:18:19.880 --> 0:18:21.560 we try to do is just obviously you're trying to 0:18:21.560 --> 0:18:24.240 be predictive. Where do we expect population growth to be, 0:18:24.280 --> 0:18:26.560 where do we expect job growth to be. So we 0:18:26.640 --> 0:18:29.800 are looking at markets that are both the anchors in 0:18:29.920 --> 0:18:32.800 New York absolutely a market that we are figuring out 0:18:32.800 --> 0:18:34.560 how to you know, we want to invest into at 0:18:34.560 --> 0:18:36.920 this point in the cycle, and then complementing that with 0:18:37.160 --> 0:18:39.640 growth markets. So some of the markets we think are 0:18:39.640 --> 0:18:45.080 compelling for industrial, for residential markets like Atlanta, you know, 0:18:45.080 --> 0:18:48.560 the Virginia market, Charlotte, they're they're seeing a lot of 0:18:48.600 --> 0:18:51.920 anything spand well not too far well, but yes, can 0:18:51.960 --> 0:18:52.360 I ask you. 0:18:52.320 --> 0:18:55.440 Something though, when you talk about office properties and concerns 0:18:55.640 --> 0:18:58.320 class A too, Our is class A still okay? Because 0:18:58.359 --> 0:19:00.600 we keep hearing that from everybody like class fine, it's 0:19:00.640 --> 0:19:01.000 the other. 0:19:00.920 --> 0:19:05.159 Step, yes, excellent point. It is absolutely the winners and 0:19:05.200 --> 0:19:08.600 the losers. So even beyond Class A, what I'd say 0:19:08.680 --> 0:19:13.840 is the highest quality, the best amendatized office, very strong demand. 0:19:14.520 --> 0:19:17.080 And if you one statistic I'll share is that if 0:19:17.119 --> 0:19:19.240 you look at buildings that have been built just in 0:19:19.280 --> 0:19:22.880 the last ten years as one metric of quality, there's 0:19:23.000 --> 0:19:25.919 positive net absorption i e. More demand for that space 0:19:26.080 --> 0:19:28.640 in the last three or four years. Now everything else 0:19:28.680 --> 0:19:32.520 built before that negative net absorption by multiple So you 0:19:32.600 --> 0:19:34.800 really see that in what tenants are looking for in 0:19:34.880 --> 0:19:37.199 terms of making occupancy decisions today. 0:19:37.880 --> 0:19:40.680 So that reminds me of industrial actually because one of 0:19:40.720 --> 0:19:43.560 the niche sectors that BGO likes is industrial and in 0:19:43.600 --> 0:19:46.240 part because seventy percent of it just does not really 0:19:46.320 --> 0:19:49.080 fit our lifestyle anymore. Talk to us about building that 0:19:49.200 --> 0:19:51.359 up and those investments that you're making in that space 0:19:51.400 --> 0:19:51.959 that you favor. 0:19:52.040 --> 0:19:53.360 And we have about a minute. 0:19:53.200 --> 0:19:57.639 Left, okay, So industrial, and more specifically, I'll touch on 0:19:57.680 --> 0:20:00.679 cold storage as one component of an indul austrial strategy 0:20:00.720 --> 0:20:01.720 because it exemplifies this. 0:20:01.920 --> 0:20:02.200 Well. 0:20:02.560 --> 0:20:05.199 What we look for is one where are there those 0:20:05.280 --> 0:20:06.119 secular shifts? 0:20:06.160 --> 0:20:06.320 Right? 0:20:06.400 --> 0:20:12.760 So e commerce, technology, robotics, automation, This is transforming the way, 0:20:12.960 --> 0:20:15.720 real estate is a critical piece of the supply chain 0:20:15.920 --> 0:20:18.119 and the delivery of those goods. So what are we 0:20:18.200 --> 0:20:20.840 looking for. We're looking for the barriers to entry, if 0:20:20.840 --> 0:20:24.880 you will, right, and the opportunity to kind of develop 0:20:25.359 --> 0:20:28.720 a high quality building, a modern building that's distinct from 0:20:28.760 --> 0:20:31.320 what was built, you know, twenty years ago and is 0:20:31.359 --> 0:20:36.199 really not meeting the millions of tenants today. So for example, 0:20:36.280 --> 0:20:39.800 sealing heights. You know, there's physical characteristics that you can't 0:20:41.280 --> 0:20:42.679 you know, renovate, you have to build. 0:20:42.880 --> 0:20:46.040 Come back, both of you. I'd love to continue this conversation. 0:20:46.280 --> 0:20:49.680 Really cool insight. Amy Price, President of BGO, and of 0:20:49.680 --> 0:20:52.840 course our Abigail Doolittle, markets correspondent. Here at Bloomberg News. 0:20:54.160 --> 0:20:58.040 You're listening to the Bloomberg Business Week podcast. Listen live 0:20:58.119 --> 0:21:01.320 each weekday starting at two Pme's sure to applecar Play 0:21:01.359 --> 0:21:04.199 and Android Auto with the Bloomberg Business Ad. You can 0:21:04.240 --> 0:21:07.479 also listen live on Amazon Alexa from our flagship New 0:21:07.560 --> 0:21:11.200 York station just say Alexa playing Bloomberg eleven thirty. 0:21:12.600 --> 0:21:14.359 Got to get to one of the big market stories today, 0:21:14.359 --> 0:21:15.399 and that is a semi space. 0:21:15.480 --> 0:21:17.440 Yeah, taking a look at the socks right now, it's 0:21:17.880 --> 0:21:22.000 down more than five percent. A cloud hanging over the 0:21:22.000 --> 0:21:25.800 industry got ASML shares plunging the most in more than 0:21:25.800 --> 0:21:28.160 twenty five years. It booked only half the order's analysts 0:21:28.160 --> 0:21:30.840 expected in the third quarter at lowered guidance for twenty 0:21:30.880 --> 0:21:34.560 twenty five, and Nvidia shares also following today after reaching 0:21:34.560 --> 0:21:38.400