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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside

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Speaker 1: my co host Matt Miller.

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Speaker 2: Every business day, we bring you interviews from CEOs, market pros,

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Speaker 2: and Bloomberg experts, along with essential market moving news.

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Speaker 1: Find the Bloomberg Markets Podcast on Apple Podcasts or wherever

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Speaker 1: you listen to podcasts, and at Bloomberg dot com slash

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Speaker 1: podcast map. We're down here at the broadcasting live from

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Speaker 1: Commonwealth's twenty twenty three National Financial Advisors Conference, or at

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Speaker 1: the Gaylord Rockies Resort in Aurora, Colorado, literally right next

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Speaker 1: door to the airport. I mean, you've plans of flying over,

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Speaker 1: flying out's and for somebody likes planes, it's a great

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Speaker 1: place to be here. We're joined here at the conference

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Speaker 1: down here by Trap Cloman, COO and President of Commonwealth. Trap,

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Speaker 1: thanks so much for joining us. Thanks for having us

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Speaker 1: down out here in Denver. Talk to us about Commonwealth.

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Speaker 1: You guys have got it's like two thousand financial advisors.

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Speaker 1: What do they need from you guys? Because these markets

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Speaker 1: are very either they're very difficult to navigate, equities, fixed income, alternatives.

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Speaker 1: How do you try to help your rias out there?

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Speaker 3: Yeah, it's it's a fascinating and endlessly challenging opportunity for

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Speaker 3: us because so much is continuously changing, both in the

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Speaker 3: financial markets. Frankly, technology has become such a big part

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Speaker 3: of any business, but especially for financial advisors. And then

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Speaker 3: of course you overlay regulation. So as you think about

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Speaker 3: the opportunities we have, it's to be a great business

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Speaker 3: partner for these rias and duly registered advisors who really

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Speaker 3: you know, their greatest opportunity, the greatest value, is their

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Speaker 3: relationship with their clients. So if we think about our

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Speaker 3: role in the ecosystem, how can we maximize their time

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Speaker 3: their opportunities to spend time with their clients. Uh So, yeah,

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Speaker 3: we look through our research team to take on as

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Speaker 3: much of that work as possible, and especially in these

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Speaker 3: markets and you know volatile global political events, bringing our

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Speaker 3: economists to bear to help them help navigate that, you know,

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Speaker 3: really build a lot more portfolios, bring more takeechnology so

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Speaker 3: they can do research faster, trade faster, and then white

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Speaker 3: label and communicate it out to their clients so they

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Speaker 3: can really present themselves rightfully. Is subject matter experts and

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Speaker 3: really you know, tying personal needs on an individual level

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Speaker 3: to you know, the marketplace and I just think that's

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Speaker 3: a fantastic service that they do, you know, for over

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Speaker 3: five hundred households in America, and you know, we're very

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Speaker 3: proud to be a part of that.

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Speaker 1: So when I talk to some of the rias around

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Speaker 1: here this year and other years, they say, Man, the

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Speaker 1: back office stuff is really consuming more and more of

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Speaker 1: my time. That's where I need some leverage so I

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Speaker 1: can talk to my clients. So I can you know,

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Speaker 1: really provide some value out of advice. How do you

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Speaker 1: guys try to address that?

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Speaker 3: Yeah, that's exactly it, and it's only growing if you

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Speaker 3: look at some of the rule proposals right now about

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Speaker 3: protection of consumer data, which we fully agree with, but

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Speaker 3: the difficulty in navigating that and managing the technology. So

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Speaker 3: one of the values of having scale and being in

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Speaker 3: the business that we're in we can focus on the

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Speaker 3: complexity of trading, of compliance, of technology and you know

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Speaker 3: ri I as. You know, if you look at the history,

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Speaker 3: it really started upstream with large institutional rias. And what's

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Speaker 3: great about what's going on in the industry is that's

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Speaker 3: been moving downstream because it goes downstream to you know, smaller,

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Speaker 3: more retail focused uh RIA shops, there's greater need to

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Speaker 3: outsource more of those capabilities to subject matter experts, and

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Speaker 3: we have the size and the scale to get incredible technologists,

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Speaker 3: incredible INFOSEC people, you know, great people again in our

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Speaker 3: research teams, if you will. So we really look to

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Speaker 3: surround them on every way possible and then you know,

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Speaker 3: be there to meet them in their needs. Because every

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Speaker 3: advisor is also different. We don't take a cookie cookie

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Speaker 3: cutter approach.

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Speaker 4: They're all different.

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Speaker 2: But you know, what's the average size of the of

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Speaker 2: the I R I A that you guys are supporting

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Speaker 2: And is it easier now for them to compete with

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Speaker 2: the big banks than it would have been, say ten

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Speaker 2: years ago.

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Speaker 3: Yeah. Absolutely.

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Speaker 5: So.

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Speaker 3: We we have over twenty two hundred advisors, but they're

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Speaker 3: in about nine hundred offices together, and so we tend

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Speaker 3: to measure productivity across those offices and it's about two

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Speaker 3: hundred and forty you know, two hundred and fifty depending

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Speaker 3: on the market's million on average per office. And so

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Speaker 3: outside of the wirehouse landscape, you know, we have the

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Speaker 3: largest producers in the industry. When you start to look

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Speaker 3: at the regionals and independence and some of the insurance

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Speaker 3: and bank place and one of the reasons we have

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Speaker 3: been so successful, I love the question, is because a

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Speaker 3: lot of the capabilities that used to only be accessible

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Speaker 3: in that bank, you know, the wirehouse, the large bank environment,

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Speaker 3: are now available much more broadly and individual rias you know,

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Speaker 3: can't necessarily access that on their own, and so there

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Speaker 3: are more and more business partners who are bringing more

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Speaker 3: alternative investments, banking capabilities, more sophisticated trust solutions, high net

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Speaker 3: worth absolutely, and having you know, a monopoly on internal

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Speaker 3: product and a fiduciary world isn't an advantage anymore. So

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Speaker 3: I've really like kind of the democratization of what's going

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Speaker 3: on in the industry, and it's really given advisors a

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Speaker 3: lot more choice and flexibility and how they do their business,

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Speaker 3: which is obviously great.

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Speaker 4: Why does and I read about this.

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Speaker 1: I've been on Wall Street for over thirty five years,

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Speaker 1: and it's been a constant trend advisors leaving some of

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Speaker 1: the big wirehouses and going out independent, and it kind of,

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Speaker 1: I guess it ebbs and flows in terms of the

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Speaker 1: of the pace. What's the general reason why an advisor

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Speaker 1: would leave a Merrill Lynch, a Smith Barney and kind

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Speaker 1: of go out on his or her own.

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Speaker 6: Yeah.

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Speaker 3: The reasons have you know, changed and involved and fluctuated

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Speaker 3: over the years, but one of the constants has been

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Speaker 3: ultimately you are now an entrepreneur, you own your business.

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Speaker 3: And one of the fascinated trends, one of the great

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Speaker 3: trends going on in the industry is the value of

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Speaker 3: those businesses is going up significantly. So I expect to

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Speaker 3: see that trend rise because when you're as an employee, uh,

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Speaker 3: you know, you're obviously you paid your salary hopefully you know,

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Speaker 3: they treat you well on the way out, But ultimately

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Speaker 3: it's the bank's book. It's the bank's clients that they're

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Speaker 3: going to you know, push it back out to all

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Speaker 3: of their other employees. When you've broken to independence and

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Speaker 3: you own your own shop, you can you know monetize

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Speaker 3: that business, uh for great value. And so if you

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Speaker 3: think about your own financial planning, you're getting a higher

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Speaker 3: payout and you can sell your business at the end financially,

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Speaker 3: it just makes a world of sense. And then you know, uh,

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Speaker 3: the other big trend as advisors really like having the

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Speaker 3: autonomy and the flexibility to make their own decisions and

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Speaker 3: put their clients first and not to say that isn't

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Speaker 3: necessarily happening in the employee model per se. But there's

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Speaker 3: a lot of competing, uh, you know, priorities in that

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Speaker 3: type of environment. When when you're an employee, and also

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Speaker 3: especially of public companies. Uh, when when you have the

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Speaker 3: opportunity to go independent, you're your own boss and we're

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Speaker 3: a partner for you. You don't work for commonwealth, we

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Speaker 3: support you.

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Speaker 1: What's the what's the typical kind of I guess asset

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Speaker 1: allocation for one of your rias? Is it you know,

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Speaker 1: stocks and bonds or is it also alternatives? I guess

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Speaker 1: how sophisticated did they get? How how far away did

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Speaker 1: they get away from that sixty forty portfolio?

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Speaker 3: Yeah, the sixty to forty portfolio is definitely evolving, but

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Speaker 3: it's more in the construct of it. So I think

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Speaker 3: the end result is greater diversification. But you're obviously seeing

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Speaker 3: much more use of ETFs than mutual funds for you know,

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Speaker 3: greater tax efficiency, much more demand for SMA solutions with

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Speaker 3: something separately manage the council where you can have you know,

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Speaker 3: individual holdings within a portfolio, a managed portfolio and an index,

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Speaker 3: but then you can self select a little bit. So

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Speaker 3: if you have some preferences that align with your goals

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Speaker 3: or beliefs, or you have some holdings that you know

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Speaker 3: you don't want to part with because of tax consequences,

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Speaker 3: but you want to jump into a model, You're not

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Speaker 3: forced to sell out of your position just to adhere

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Speaker 3: to a model. So it gives our team and our

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Speaker 3: advisors the ability to really make many more investments much

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Speaker 3: more individual, uh, you know, customize for their investor. And

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Speaker 3: so yeah, at the end of the day, we're seeing

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Speaker 3: steady growth in SMAs and you know which ultimately hold

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Speaker 3: mute funds, ETF stocks, fixed income, but also you know,

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Speaker 3: greater growth in alts. You know, I mentioned a minute

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Speaker 3: ago how the democratization RIA is moving downstream. The same

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Speaker 3: with the investment product. The massive flin American has now

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Speaker 3: far greater access to alternative investments and you know funds

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Speaker 3: of funds with private equity and hedge funds. So we're

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Speaker 3: seeing for you know, greater demand there and opportunity, which

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Speaker 3: is great.

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Speaker 2: So what's your view on the economy given your position there?

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Speaker 3: Trap I far smarter people than myself who spend a

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Speaker 3: lot more time on the economy. In short, the way I,

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Speaker 3: you know, I try and think about it is if

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Speaker 3: you are chasing whether it's the markets, interest rates, or

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Speaker 3: the economy, and trying to run your business solely in

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Speaker 3: that moment, you're often going to be left behind. What

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Speaker 3: what how we like to manage commonwealth and work with

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Speaker 3: our advisors is see through the economic uh, you know,

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Speaker 3: variables in the market fluctuations and the interest rate volatility.

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Speaker 7: Uh.

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Speaker 3: Plan long term as as best you can. And of

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Speaker 3: course you have both businesses and clients who have immediate

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Speaker 3: short term needs. And then again, the people are far

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Speaker 3: smarter than myself come to bear and can really help

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Speaker 3: out in those situations.

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Speaker 1: TRAP undergrad from the University of Virginia. I'm a big

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Speaker 1: fan of the WA Who's one and five in football?

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Speaker 3: Yeah hopefully not the football team, Yes, yeah, I go

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Speaker 3: Who's But yeah, it's it's it's real hard these days,

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Speaker 3: and it's been hard for a long time. My daughter

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Speaker 3: just went to Syracuse though, so I was all ready

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Speaker 3: to follow Syracuse as well, but that they're struggling too,

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Speaker 3: So I guess I have to wait next year.

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Speaker 1: Yeah exactly, But you always have a basketball season as well.

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Speaker 1: Let's at the Paul Truder Jones Arena.

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Speaker 3: John Paul Jones, John Paul Jones.

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Speaker 4: Yeah, okay, awesome, very good stuff, all r beautiful place. Yeah,

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Speaker 4: it is all right. Trep.

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Speaker 1: Plumbing, thanks so much for joining us. Trap is the

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Speaker 1: COO and president of Commonwealth. They're sponsoring this conference here

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Speaker 1: in Denver, Colorado. Just outside of Denver in Aurora, Colorado.

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Speaker 1: Some good stuff out here.

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Speaker 6: You're listening to the team Ken's are live program Bloomberg

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Speaker 6: Markets weekdays at ten am Eastern.

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Speaker 8: On Bloomberg dot Com, the iHeartRadio.

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Speaker 6: App, and the Bloomberg Business App, or listen on demand

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Speaker 6: wherever you get your podcasts.

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Speaker 1: Matt Miller, he's in that Bloomberg Interactor Broker studio in

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Speaker 1: New York City. I am here live from the Commonwealths

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Speaker 1: twenty twenty three National Financial Advisors Conference. We're at the

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Speaker 1: Gaylord Rockies Resort in Aurora, Colorado, and Matt I can

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Speaker 1: report that the sausage biscuits are to die for here.

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Speaker 4: Awesome.

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Speaker 1: Fire you right up, get you set for the rest

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Speaker 1: of the day. All right, let's talk to our next guest,

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Speaker 1: your Advance Bars. He's a wealth strategist and founder at

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Speaker 1: your Dedicated Fiduciary YDF. Vance, thanks so much for joining

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Speaker 1: us here. Tell us what you guys do at y DF.

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Speaker 9: WHYDF is a family office style fiduciary financial planning firm

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Speaker 9: that discretionarily manages assets for our sixty seven families which

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Speaker 9: are all around the country, and our focus really is

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Speaker 9: in the advanced planning area. Prior to founding my firm

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Speaker 9: eight years ago, I spent a decade traveling the country

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Speaker 9: full time, specifically consulting and teaching private wealth managers on

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Speaker 9: how to invest for their high net worth clients. And

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Speaker 9: I realized that much of the industry, unfortunately doesn't focus

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Speaker 9: on advanced planning, and that is why I started our firm.

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Speaker 1: Hey, Matt Vance, he's part of that financial mafia there,

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Speaker 1: Danielle Di Martino Booth, David Kotok, all those folks Camp

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Speaker 1: Kotok know, so he goes to Camp camp Kotok. Absolutely,

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Speaker 1: Hey Vance, I'd love to just kind of get here.

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Speaker 1: We love talking to Danielle and mister Kotok and kind

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Speaker 1: of like to get their views. So when you go

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Speaker 1: up there and you chat with those really smart folks

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Speaker 1: about the markets, if you had to go up there today,

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Speaker 1: what would your call be?

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Speaker 4: Right now just in terms of the markets, the economy,

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Speaker 4: how are you looking at things?

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Speaker 9: It would be the same call that I had a

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Speaker 9: couple months ago when I was at Danny Camp Kotok,

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Speaker 9: which was amazing because I have read and corresponded, you know,

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Speaker 9: with these folks, and then to be a peer among

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Speaker 9: them is just truly amazing. I'm in the higher for

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Speaker 9: longer camp, which is an unpopular view.

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Speaker 4: Higher inflation, higher rates kind of yes, okay.

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Speaker 7: Yeah, very much so, and there's there's rationale to that.

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Speaker 9: My view is that the economy changed during COVID, and

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Speaker 9: there's this collective palpable belief not only among our clients

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Speaker 9: but also the investing public that because of the interest

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Speaker 9: rate raises visa Viva FED starting in March of twenty

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Speaker 9: twenty two, that unemployment is going to spike and that

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Speaker 9: we're going to have this recession and it's going to

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Speaker 9: be horrible, and if the FED is going to cut

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Speaker 9: rates back to zero, launch the printing press again. And

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Speaker 9: I fundamentally disagree with that. During COVID, people age fifty

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Speaker 9: five and older were able to retire largely. Hey, you

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Speaker 9: know what, it's a pleasure to be here, right, I'll

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Speaker 9: get there someday.

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Speaker 8: I hope.

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Speaker 7: I'm in no rush, by the way, But in any event,

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Speaker 7: they were able to.

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Speaker 9: Retire because of the large s of their nest eggs,

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Speaker 9: which was a product of the thirteen year quantitative using

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Speaker 9: zero interest rate policy era that we had. People thirty

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Speaker 9: years of age and younger were able to move back

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Speaker 9: in with mom and dad and go back to school.

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Speaker 9: So how human beings behave has materially changed, and because

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Speaker 9: of that we have a different economy, if you will.

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Speaker 9: If the Fed were to come out and cut rates now,

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Speaker 9: my view is that it would reignite inflation and we

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Speaker 9: would be in this sort of vicious cycle. So if

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Speaker 9: we look at the real rate, which is interest rates

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Speaker 9: minus inflation, were at about two and a half over

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Speaker 9: the last five decades, what has it been about two

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Speaker 9: and a half, So we believe that we're not going

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Speaker 9: to see a precipitous drop in that. Because of that,

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Speaker 9: the investment landscape has in fact changed, But there's opportunity there.

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Speaker 2: What do you think about you know, Paul's been asking

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Speaker 2: this allocation question. I heard top I heard the surveillance

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Speaker 2: team talking about it this morning as well. Forty sixty

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Speaker 2: we're supposed to see a comeback, and it seems like

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Speaker 2: bonds and stocks are moving the same direction every day.

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Speaker 2: How do you solve that? Solve that problem.

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Speaker 9: Interestingly, cash is no longer trash because of the interest

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Speaker 9: rate and environment that we are currently in. Clients have

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Speaker 9: come out and pointed out the fact that we can

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Speaker 9: really have a great return stream in money markets and

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Speaker 9: or tea bills. This is this funny term tea bill

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Speaker 9: and chill. And we were an early adopter to the

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Speaker 9: tea bill trade, having largely blown out of bond mutual

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Speaker 9: funds in December of twenty twenty one. So if you

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Speaker 9: rewind back the Fed, the House, the Treasury, we're all

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Speaker 9: saying inflation is transitory. Inflation is transitory. Inflation is transitory.

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Speaker 9: When you hear that messaging consistently over multiple months, yet

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Speaker 9: the inflation data keep increasing, Maybe just maybe it's not transitory.

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Speaker 9: And we all know the rest of that story. When

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Speaker 9: we look at the correlation between equities and fixed income,

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Speaker 9: it is important to diversify, but we have to go

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Speaker 9: back to the pre COVID era playbook and understand how

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Speaker 9: to deploy across equities and fixed income and real estate

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Speaker 9: and so forth. So given the interest rate and environment,

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Speaker 9: we think we're pretty close to the FED largely being done.

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Speaker 9: That creates an opportunity for getting back into specific types

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Speaker 9: of duration, whether it's individual issues or some bond funds

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Speaker 9: or even potentially ETFs. Regardless, we're going to be long

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Speaker 9: duration here in the next three to six months, depending

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Speaker 9: on how it plays out.

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Speaker 1: All Right, So we sit back here and we've got

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Speaker 1: a FED that I guess we're high.

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Speaker 4: I'm in the Campta.

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Speaker 1: It is just kind of high for longer, and I

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Speaker 1: think I think eventually they're gonna cut because I need

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Speaker 1: to refinance my mortgage I just took out. When you

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Speaker 1: talk to clients, one of the things I hear a

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Speaker 1: lot when I'm talking to private wealth is family offices

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Speaker 1: and kind of just tax planning and estate planning. I mean,

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Speaker 1: do people get that right yet? I mean, do people

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Speaker 1: you talk to are they are they savvy enough to

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Speaker 1: kind of deal with that?

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Speaker 9: No, And having spent thousands of hours inside of wealth

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Speaker 9: management firms and with financial advisors for a decade, that

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Speaker 9: was my largest observation. There's a huge generational shift in

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Speaker 9: terms of asset transfer that's going to happen from the

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Speaker 9: boomers to largely Gen X, but also millennials. And people

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Speaker 9: like to make jokes about millennials, but let me tell

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Speaker 9: you they're a very purpose driven cohort. They're really smart.

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Speaker 9: They grew up with technology. They really don't need to

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Speaker 9: have help selecting ets. The real alpha, if you will,

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Speaker 9: is in the advice idiosyncratic to the family. And my

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Speaker 9: cry to the wealth management industry is to bring maximum

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Speaker 9: value by way of incorporating true tax planning. For example,

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Speaker 9: a financial advisor cannot bring maximum value to a family

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Speaker 9: unless they are literally looking through and analyzing the tax returns.

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Speaker 7: I'd liken it to this. If a client has ever been.

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Speaker 9: To a medical specialist, what's the first thing they ask

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Speaker 9: for the general health history from the GP, Well, I

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Speaker 9: need that. I need the equivalent of that, which is

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Speaker 9: the last three to five years of tax returns, so

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Speaker 9: that I can look for different planning opportunities. Big planning

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Speaker 9: cliff coming up, which is the sun setting of the

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Speaker 9: Tax Cuts and Jobs Act, and that will happen December

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Speaker 9: thirty first of twenty twenty five. We're going to blink,

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Speaker 9: it's going to be here, but the current estate tax

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Speaker 9: threshold will be cut in half. So the largest underserved

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Speaker 9: cohort in the wealth management industry is that million to

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Speaker 9: twenty five million.

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Speaker 8: Dollar liquid profile.

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Speaker 9: Why because many of the retail financial advisors and I'm

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Speaker 9: talking old guard retail financial advisors don't have the advanced

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Speaker 9: planning technical expertise and acumen to understand certain things like

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Speaker 9: idgits and islets and grots and different types of grand

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Speaker 9: tour trusts and so forth.

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Speaker 7: And if you're.

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Speaker 9: One with a really high level money problem, which is

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Speaker 9: having twenty five million liquid a lot of the private

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Speaker 9: wealth firms don't focus on you because their minimum is

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Speaker 9: fifty million.

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Speaker 7: And above me.

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Speaker 9: And these are big numbers, right, But there's a huge opportunity.

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Speaker 9: And one of the great things about Commonwealth is that

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Speaker 9: there's a big push for the advanced planning area with

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Speaker 9: respect to bringing maximum value.

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Speaker 1: All right, So I gotta go to this because this

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Speaker 1: is a theme I've been going on.

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Speaker 4: University of Maryland.

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Speaker 1: The worst conference decision of all time for you guys

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Speaker 1: to leave the ACC and it's set off twenty five

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Speaker 1: years of disaster in college sports. Twenty five years later,

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Speaker 1: what did the Terps feel about their.

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Speaker 4: Moved leaving for the Big ten?

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Speaker 9: I'm really sorry to disappoint you. So I love San Diego,

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Speaker 9: California very much, and I grew up in Maryland. Right

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Speaker 9: native of Maryland or not crabby, I might add. But

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Speaker 9: I had moved to San Diego at nineteen and realized

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Speaker 9: that if I stayed, I probably would never go back

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Speaker 9: to school. So I went back to Maryland, to the

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Speaker 9: University of Maryland because they have a great neuroscience program. Yep,

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Speaker 9: seldom do I use my undergrad degree at neuroscience. But

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Speaker 9: then again, i'd use it every day when looking at

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Speaker 9: portfolios and estate planning and tax planning and so forth.

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Speaker 9: But I couldn't tell you the first thing about the terps.

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Speaker 9: As soon as I graduated, I went right back to

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Speaker 9: San Diego. Smart move life had a different plan, and

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Speaker 9: I ended up in institutional investing and then here.

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Speaker 4: Good awesome stuff. Vince, thanks so much for joining us. Vance.

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Speaker 1: Barci's a strategist, a founder at YDF. That's your dedicated fiduciary.

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Speaker 1: I working with a lot of the folks here at Common,

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Speaker 1: with a lot of the rias at Common.

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Speaker 4: Author.

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Speaker 6: You're listening to the tape Catcher Live program Bloomberg Markets

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Speaker 6: weekdays at tenn Eastern on Bloomberg Radio, the tune in app,

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Speaker 6: Bloomberg dot Com, and.

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Speaker 8: The Bloomberg Business App.

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Speaker 6: You can also listen live on Amazon Alexa from our

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Speaker 6: flagship New York station, Just say Alexa, play Bloomberg eleven thirty.

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Speaker 2: Fuck now about politics, though, because yesterday the GOP chose

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Speaker 2: a Speaker of the House candidate, it's not been brought

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Speaker 2: to a vote on the House floor yet and may

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Speaker 2: not be brought to a House a vote on the

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Speaker 2: House floor this week. Wendy Schiller joins us professor over

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Speaker 2: at Brown University. Wendy, this is obviously a gigantic mess.

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Speaker 2: And I noticed today that there's a few never scalezers,

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Speaker 2: which I think that term is meaningless because of course

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Speaker 2: they'll vote for scalize if they get what they want.

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Speaker 2: But one of them is George Santos. So we're in

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Speaker 2: a position where the Republicans have to bargain with George

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Speaker 2: Santos to get their candidate elected as House Speaker of

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Speaker 2: the House.

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Speaker 10: But you're raising a really interesting point because also any

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Speaker 10: measure to expel, because the House can expel its own members.

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Speaker 10: They can censure, but it can also expel, and so

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Speaker 10: any measure to expel George Santos requires that there'd be

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Speaker 10: a governance structure of the House, that there'll be a

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Speaker 10: speaker in place. Now the interim Speaker, Patrick McHenry of

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Speaker 10: North Carolina, he can do that. He can be in

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Speaker 10: the House that way, So they could actually try to

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Speaker 10: kick George Sandos out before they have repeated votes on

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Speaker 10: the speakership.

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Speaker 5: This is an absolute to.

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Speaker 10: Me, a crisis for the Congressional Republican Party, but not

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Speaker 10: necessarily for Donald Trump or Ronda Santis or Nikki Haley

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Speaker 10: or Tim Scott or any of the other contenders for

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Speaker 10: the presidential nomination. So there are you know, there's pressure

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Speaker 10: on the Republicans, but it's really how do you keep

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Speaker 10: the House? And are the voters of California New York

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Speaker 10: who really gave the Republicans the majority with additional seats

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Speaker 10: and flip seats in twenty twenty two, are they going

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Speaker 10: to be happy with this and put up with this

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Speaker 10: or will the Democrats manage to put a moderate up

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Speaker 10: in those races and take those seats back.

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Speaker 2: One of the other things I noticed, Wendy, you know,

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Speaker 2: we all talk about the fact that maybe the Senate

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Speaker 2: needs to come down here and like put an adult

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Speaker 2: in the room, right, But even when you know, Kevin

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Speaker 2: McCarthy does a bipartisan deal, and of course he's punished

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Speaker 2: by being thrown out of that position. But even then,

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Speaker 2: what they're, what the adult in the room is allowing

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Speaker 2: them to do, is spend recklessly like children. So it's

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Speaker 2: like there's no good solution, right, either they're shut down

438
00:22:32,200 --> 00:22:35,640
Speaker 2: and not governing, or they're governing but spending like there's

439
00:22:35,680 --> 00:22:36,440
Speaker 2: no tomorrow.

440
00:22:37,520 --> 00:22:38,320
Speaker 4: What's going to happen.

441
00:22:39,680 --> 00:22:41,879
Speaker 10: Well, when you say spending, I goes, there's no tomorrow.

442
00:22:41,920 --> 00:22:43,600
Speaker 10: There was a debt ceiling deal.

443
00:22:44,160 --> 00:22:46,399
Speaker 2: And I'm saying, if you keep running one and a

444
00:22:46,440 --> 00:22:49,560
Speaker 2: half trillion dollar deficits and we have thirty three trillion

445
00:22:49,640 --> 00:22:52,520
Speaker 2: dollars in debt, that's not the way you should run

446
00:22:52,560 --> 00:22:53,360
Speaker 2: your finances.

447
00:22:54,440 --> 00:22:57,800
Speaker 5: So what's interesting to me, though, is that the choices.

448
00:22:57,400 --> 00:23:00,400
Speaker 10: That are framed, I think are a false dichotomy for us,

449
00:23:00,480 --> 00:23:02,000
Speaker 10: for the American people, for everybody.

450
00:23:02,040 --> 00:23:04,080
Speaker 5: Right, you say yourself, oh, well, you know you have.

451
00:23:04,040 --> 00:23:06,040
Speaker 10: To cut this kind of spending, but we still want

452
00:23:06,040 --> 00:23:07,960
Speaker 10: to have tax cuts and give money back to the

453
00:23:08,000 --> 00:23:11,040
Speaker 10: American people. But the American people also need a national defense,

454
00:23:11,040 --> 00:23:13,280
Speaker 10: they need roads, that aren't going to destroy their cars.

455
00:23:13,440 --> 00:23:15,760
Speaker 10: They're going to need some sort of mass transportation. They're

456
00:23:15,760 --> 00:23:18,280
Speaker 10: going to need climate help to adjust the climate change,

457
00:23:18,320 --> 00:23:19,399
Speaker 10: they need disaster relief.

458
00:23:19,560 --> 00:23:21,920
Speaker 5: How do you pay for all that? You can't cut

459
00:23:22,000 --> 00:23:22,920
Speaker 5: all the revenue and.

460
00:23:23,000 --> 00:23:25,119
Speaker 10: Still pay for all these things that Americans are used to,

461
00:23:25,240 --> 00:23:27,600
Speaker 10: not to mention the big entitlements, which as you well know,

462
00:23:27,960 --> 00:23:31,480
Speaker 10: are about thirty to forty percent now of the federal budget,

463
00:23:31,640 --> 00:23:34,119
Speaker 10: which are just you can't touch them, right, So.

464
00:23:34,160 --> 00:23:36,480
Speaker 2: Why why can't we touch them? And how much longer

465
00:23:36,520 --> 00:23:40,040
Speaker 2: do we have enough money to pay Social Security without borrowing?

466
00:23:41,080 --> 00:23:42,600
Speaker 5: Well, I don't know. I'm old enough to remember.

467
00:23:42,760 --> 00:23:44,560
Speaker 10: You know, the last two times SO Security was in

468
00:23:44,600 --> 00:23:45,639
Speaker 10: crisis and.

469
00:23:45,520 --> 00:23:46,520
Speaker 5: They came to terms.

470
00:23:46,560 --> 00:23:48,840
Speaker 10: They raised the age, they raised how much money they

471
00:23:48,880 --> 00:23:50,720
Speaker 10: have to pay. You know, one of the good things

472
00:23:50,880 --> 00:23:53,919
Speaker 10: I think is that income levels are now adjusted for inflation.

473
00:23:54,000 --> 00:23:55,719
Speaker 10: They go up in terms of how you know what

474
00:23:55,760 --> 00:23:58,119
Speaker 10: income level is the cap I'm paying So Security. You

475
00:23:58,119 --> 00:24:00,800
Speaker 10: can raise that cap quite a bit more and still

476
00:24:00,840 --> 00:24:03,720
Speaker 10: generate money. People are living longer. We want great healthcare

477
00:24:03,760 --> 00:24:06,000
Speaker 10: in America. Therefore, if we want everybody to have it,

478
00:24:06,240 --> 00:24:08,480
Speaker 10: I don't disagree with you that cuts need to be made,

479
00:24:08,560 --> 00:24:11,720
Speaker 10: and in particular, the Democrats have a problem because they

480
00:24:11,720 --> 00:24:14,200
Speaker 10: want everything from the federal side. But in fact it's

481
00:24:14,240 --> 00:24:16,880
Speaker 10: easier to hold things accountable sometimes at the state level.

482
00:24:16,880 --> 00:24:20,480
Speaker 5: It's closer to home. Theoretically, I'm a tiny state, Rhode Island.

483
00:24:20,560 --> 00:24:22,520
Speaker 5: We have a huge budget. We can't keep track of

484
00:24:22,520 --> 00:24:23,080
Speaker 5: all the money.

485
00:24:23,280 --> 00:24:27,640
Speaker 10: So government itself is you can argue unmanageable and inefficient,

486
00:24:28,000 --> 00:24:31,480
Speaker 10: but targeting programs that actually affect that, you know, the

487
00:24:31,560 --> 00:24:33,840
Speaker 10: people who need the money most, it's probably not the

488
00:24:33,920 --> 00:24:36,200
Speaker 10: smartest way to make government work better.

489
00:24:36,359 --> 00:24:38,760
Speaker 5: And they're just so polarized they can't see straight. But

490
00:24:38,800 --> 00:24:41,400
Speaker 5: I don't see any of the people, including.

491
00:24:41,000 --> 00:24:44,240
Speaker 10: The eight people who are blocking the speaker, turning down

492
00:24:44,359 --> 00:24:45,080
Speaker 10: federal money.

493
00:24:45,240 --> 00:24:46,800
Speaker 5: Some states are trying.

494
00:24:46,560 --> 00:24:49,040
Speaker 10: To do that because they don't want implement policies that's

495
00:24:49,080 --> 00:24:51,400
Speaker 10: you know, the state government. But those federal commerce people

496
00:24:51,440 --> 00:24:53,679
Speaker 10: are not saying no to the Highway AID, they're not

497
00:24:53,680 --> 00:24:56,040
Speaker 10: saying no to the Day After AID, They're not saying

498
00:24:56,040 --> 00:24:58,280
Speaker 10: no to the fundamental things that the federal government funds.

499
00:24:58,600 --> 00:25:00,679
Speaker 10: So there's also a fair bit of a hipocracy that

500
00:25:00,760 --> 00:25:03,560
Speaker 10: runs rampant, not just the Republican side, but the Democratic

501
00:25:03,600 --> 00:25:04,560
Speaker 10: side as well.

502
00:25:06,080 --> 00:25:08,520
Speaker 1: Hey, Wendy, let's switch gears a little bit of focus

503
00:25:08,560 --> 00:25:10,399
Speaker 1: on Israel that it was quite the past two or

504
00:25:10,400 --> 00:25:15,760
Speaker 1: three days for President Biden. The administration Secretary Defense Lincoln

505
00:25:15,880 --> 00:25:18,880
Speaker 1: is in Israel as we speak. How do you kind

506
00:25:18,880 --> 00:25:23,040
Speaker 1: of view the Biden and the Biden administration response so far.

507
00:25:24,440 --> 00:25:28,240
Speaker 10: Well, there's the national security element of course, anti terrorism,

508
00:25:28,440 --> 00:25:32,080
Speaker 10: and I think many people have equated the sentiment.

509
00:25:31,680 --> 00:25:33,959
Speaker 5: In Israel to the one that we experienced after nine

510
00:25:34,000 --> 00:25:34,879
Speaker 5: to eleven, So.

511
00:25:35,040 --> 00:25:38,520
Speaker 10: The shock, the destruction, the loss of life, but there's

512
00:25:38,520 --> 00:25:41,400
Speaker 10: also a tremendous amount of loss of life now in Gaza,

513
00:25:42,000 --> 00:25:46,280
Speaker 10: militarily people, but also Amas, but also civilians, many, many civilians.

514
00:25:46,560 --> 00:25:49,399
Speaker 10: This is a really difficult time for the Democratic Party

515
00:25:49,440 --> 00:25:52,600
Speaker 10: politically because the very left wing of the Democrat Party,

516
00:25:52,600 --> 00:25:55,000
Speaker 10: as we saw in New York last week, has been

517
00:25:55,080 --> 00:25:59,760
Speaker 10: advocate at very vocal in their support for Palestine, and

518
00:26:00,040 --> 00:26:02,840
Speaker 10: you know, not as willing to criticize Hamas sometimes as

519
00:26:02,880 --> 00:26:06,640
Speaker 10: other people. This is very delicate for the Democrats who

520
00:26:06,680 --> 00:26:09,919
Speaker 10: need every single vote possible a year from now. And

521
00:26:10,000 --> 00:26:13,040
Speaker 10: how do you actually perceive a strong coort for Israel

522
00:26:13,320 --> 00:26:19,120
Speaker 10: if Israel continues to defend itself but the casualties civilian

523
00:26:19,119 --> 00:26:24,240
Speaker 10: wise in Gaza increase, that becomes a problem for the Democrats,

524
00:26:24,560 --> 00:26:28,160
Speaker 10: and you know, that's a very hard balance for the president.

525
00:26:28,400 --> 00:26:31,439
Speaker 10: The sentiment in America is generally pro Israel to defend

526
00:26:31,480 --> 00:26:35,480
Speaker 10: itself against the terrorist attack. How long that lasts depends

527
00:26:35,480 --> 00:26:38,760
Speaker 10: on how much involvement Biden approves in terms of the

528
00:26:38,840 --> 00:26:39,480
Speaker 10: United States.

529
00:26:39,680 --> 00:26:42,640
Speaker 5: No boots on the ground. I think there's no support

530
00:26:42,680 --> 00:26:45,280
Speaker 5: for that in America. But what do you do?

531
00:26:45,400 --> 00:26:48,879
Speaker 10: How do you give military support but stay within the boundaries.

532
00:26:49,400 --> 00:26:52,000
Speaker 10: Biden has a lot of experience, and one thing Americans

533
00:26:52,080 --> 00:26:54,119
Speaker 10: might want to think about is when you are electing

534
00:26:54,160 --> 00:26:55,880
Speaker 10: the next president, how much.

535
00:26:55,680 --> 00:26:56,880
Speaker 5: Experience do they have.

536
00:26:56,880 --> 00:27:00,000
Speaker 10: Dealing with these kinds of crises versus having no experience

537
00:27:00,160 --> 00:27:02,440
Speaker 10: with them. I think that's going to affect our presidential

538
00:27:02,480 --> 00:27:03,440
Speaker 10: considerations as well.

539
00:27:04,400 --> 00:27:08,240
Speaker 2: I wonder if they can tie aid for Ukraine to

540
00:27:08,359 --> 00:27:11,359
Speaker 2: aid to Israel, because a lot I'm sure of these,

541
00:27:11,640 --> 00:27:16,200
Speaker 2: especially right wing Republicans, who don't want to help Ukraine

542
00:27:16,200 --> 00:27:21,119
Speaker 2: defend itself against a Russian invasion definitely do want to

543
00:27:21,160 --> 00:27:23,840
Speaker 2: help Israel. Do you think they tie those things together

544
00:27:23,960 --> 00:27:26,480
Speaker 2: or is it insulting to do that?

545
00:27:28,240 --> 00:27:28,359
Speaker 8: No?

546
00:27:28,440 --> 00:27:31,359
Speaker 10: I mean I mean the Democrats putting those two things together.

547
00:27:31,920 --> 00:27:37,640
Speaker 10: I think strategically fighting against incursion and invasion.

548
00:27:37,280 --> 00:27:38,240
Speaker 5: Might be a theme.

549
00:27:39,240 --> 00:27:43,440
Speaker 10: And certainly Russia has been accused of atrocity and Ukrainian

550
00:27:43,440 --> 00:27:46,560
Speaker 10: soldiers have also been accused of atrocity, so I think.

551
00:27:46,480 --> 00:27:48,840
Speaker 5: It gets very tricky to do that.

552
00:27:49,280 --> 00:27:53,480
Speaker 10: But it also limits the capacity for Republicans to be isolationists.

553
00:27:53,520 --> 00:27:56,280
Speaker 10: Now right, you can't say we don't want to get involved,

554
00:27:56,320 --> 00:27:58,760
Speaker 10: but we want to help Israel. That's just really hard

555
00:27:58,760 --> 00:28:01,600
Speaker 10: to do an independents and districts won't really put up

556
00:28:01,640 --> 00:28:03,919
Speaker 10: with that, I don't think. So it puts the Republicans

557
00:28:03,920 --> 00:28:06,439
Speaker 10: in a tough mind to say yes to Israel but

558
00:28:06,520 --> 00:28:07,400
Speaker 10: no to Ukraine.

559
00:28:08,280 --> 00:28:11,120
Speaker 5: And I think you're right, but I think to actively tie.

560
00:28:11,080 --> 00:28:14,680
Speaker 10: Together in a package has risks for the Democrats as well.

561
00:28:14,720 --> 00:28:17,480
Speaker 10: But the pressure is on the Republicans to decide whether

562
00:28:17,520 --> 00:28:19,120
Speaker 10: they want to sort of say no to in being

563
00:28:19,160 --> 00:28:21,919
Speaker 10: involved in anything, but then get credit for supporting a

564
00:28:22,000 --> 00:28:23,480
Speaker 10: response against Hamas.

565
00:28:23,600 --> 00:28:24,960
Speaker 5: So I think it puts pressure.

566
00:28:24,960 --> 00:28:27,080
Speaker 10: And since there is no leader really of the Republican

567
00:28:27,080 --> 00:28:29,560
Speaker 10: Party in the House right now, you know, the spokesperson's

568
00:28:29,600 --> 00:28:31,520
Speaker 10: Mitch McConnell on the Senate sign and we know that

569
00:28:31,560 --> 00:28:33,600
Speaker 10: he's been having health difficulties.

570
00:28:33,240 --> 00:28:37,399
Speaker 4: But he has experienced. He doesn't you're a fan of experience.

571
00:28:37,520 --> 00:28:38,160
Speaker 4: Mitch has it.

572
00:28:40,040 --> 00:28:41,920
Speaker 10: Mitch has it, but there's a fair number of other

573
00:28:42,000 --> 00:28:44,040
Speaker 10: Republicans in the Senate right now that that do. And

574
00:28:44,080 --> 00:28:46,600
Speaker 10: it's it's it's interesting to me how we you know,

575
00:28:46,680 --> 00:28:49,520
Speaker 10: one year it's the Senate's fault. They're filibustering, Ted Cruise

576
00:28:49,560 --> 00:28:50,600
Speaker 10: is shutting everything down.

577
00:28:50,880 --> 00:28:53,160
Speaker 5: They're horrible. Let's get rid of the philibuscher, Let's make

578
00:28:53,160 --> 00:28:53,600
Speaker 5: it more.

579
00:28:53,480 --> 00:28:54,000
Speaker 7: Like the House.

580
00:28:54,280 --> 00:28:56,200
Speaker 5: And then the House falls apart and we look to

581
00:28:56,240 --> 00:28:57,960
Speaker 5: the Senate and say, oh, can't they save the day.

582
00:28:58,280 --> 00:29:00,840
Speaker 10: So I think we have a christ the leadership on

583
00:29:00,920 --> 00:29:04,400
Speaker 10: all sides, more so right now in the Republican Party.

584
00:29:04,680 --> 00:29:05,200
Speaker 5: Than the den.

585
00:29:06,840 --> 00:29:08,280
Speaker 1: All Right, Wendy, thank you so much for that. We

586
00:29:08,320 --> 00:29:11,840
Speaker 1: really appreciate getting your thoughts there. Wendy Schilder, she's a

587
00:29:11,880 --> 00:29:13,840
Speaker 1: professor at Brown University.

588
00:29:15,120 --> 00:29:19,000
Speaker 6: You're listening to the Team ken'shar Live program Bloomberg Markets

589
00:29:19,000 --> 00:29:22,120
Speaker 6: weekdays at ten am Eastern on Bloomberg dot Com, the

590
00:29:22,200 --> 00:29:25,320
Speaker 6: iHeartRadio app, and the Bloomberg Business App, or listen on

591
00:29:25,400 --> 00:29:27,360
Speaker 6: demand wherever you get your podcasts.

592
00:29:29,120 --> 00:29:32,120
Speaker 2: Well, we have Asam Naji here in the studio. I'm

593
00:29:32,160 --> 00:29:35,320
Speaker 2: pleased to say he's the president CEO of Marcus and

594
00:29:35,440 --> 00:29:37,280
Speaker 2: Milla chap and we're going to talk a little bit

595
00:29:37,320 --> 00:29:40,160
Speaker 2: of real estate with him in the face of, you know,

596
00:29:40,320 --> 00:29:41,920
Speaker 2: rates that just continue to arise.

597
00:29:42,320 --> 00:29:43,120
Speaker 7: Paul Hassan.

598
00:29:43,200 --> 00:29:45,680
Speaker 2: Paul the other day was quoting, I think the bank

599
00:29:45,760 --> 00:29:51,600
Speaker 2: rate thirty year mortgage out to eight percent, which has

600
00:29:51,680 --> 00:29:55,200
Speaker 2: got to put real pressure on a market where affordability

601
00:29:55,320 --> 00:29:57,840
Speaker 2: is already off the charts. What does this mean for

602
00:29:57,880 --> 00:29:58,440
Speaker 2: real estate?

603
00:30:01,040 --> 00:30:01,560
Speaker 8: Back with you.

604
00:30:02,640 --> 00:30:06,640
Speaker 11: The answer to that question, Matt, is a severe disruption

605
00:30:06,920 --> 00:30:11,240
Speaker 11: in trading activity, in investors' ability to value real estate,

606
00:30:11,280 --> 00:30:14,160
Speaker 11: and a lot of uncertainty out there. On the housing front.

607
00:30:14,760 --> 00:30:17,920
Speaker 11: We're seeing anyone who has a low interest rate already

608
00:30:18,840 --> 00:30:22,760
Speaker 11: declined to bring inventory to market or stay put, which

609
00:30:22,840 --> 00:30:27,080
Speaker 11: is really reducing sales velocity there As a buyer. The

610
00:30:27,120 --> 00:30:30,200
Speaker 11: affordability has gone so out of control that people are

611
00:30:30,240 --> 00:30:34,680
Speaker 11: renting apartments longer, they're staying in their apartments much longer

612
00:30:34,680 --> 00:30:38,120
Speaker 11: than anticipated, and the renewal rates of apartments are actually

613
00:30:38,200 --> 00:30:41,720
Speaker 11: showing really good rent growth. On the commercial side, it's

614
00:30:41,760 --> 00:30:43,720
Speaker 11: not just the price to this location. It's the fact

615
00:30:43,760 --> 00:30:46,320
Speaker 11: that banks have pulled out of the market by pricing

616
00:30:46,320 --> 00:30:49,120
Speaker 11: themselves out of the market, and other lenders have not

617
00:30:49,240 --> 00:30:51,600
Speaker 11: been able to step in to make up for what

618
00:30:51,680 --> 00:30:55,480
Speaker 11: banks normally do in financing commercial real estate. So there's

619
00:30:55,480 --> 00:30:58,160
Speaker 11: a real log jam in the marketplace as we speak.

620
00:30:58,240 --> 00:31:02,040
Speaker 2: So on the housing side and the residential side, there's

621
00:31:02,080 --> 00:31:06,080
Speaker 2: just not any preowned houses trading hands. Right on the

622
00:31:06,120 --> 00:31:10,880
Speaker 2: commercial real estate side, what you're saying is people can't

623
00:31:10,920 --> 00:31:14,200
Speaker 2: get refinancing that they need, and so what are they

624
00:31:14,240 --> 00:31:15,160
Speaker 2: forced to sell.

625
00:31:16,000 --> 00:31:19,080
Speaker 11: Well, the refinancing issue in and of itself is a

626
00:31:19,120 --> 00:31:22,280
Speaker 11: serious one because the loans that are maturing today were

627
00:31:22,280 --> 00:31:25,240
Speaker 11: issued five to seven years ago. Thankfully, a lot of

628
00:31:25,280 --> 00:31:27,280
Speaker 11: equity has been built up, a lot of rank growth

629
00:31:27,280 --> 00:31:31,600
Speaker 11: has been basically achieved, So not every maturing loan is

630
00:31:31,600 --> 00:31:34,760
Speaker 11: in trouble, but there is a pretty good chunk of

631
00:31:34,800 --> 00:31:37,880
Speaker 11: the maturing loans, especially in office not really so much

632
00:31:37,920 --> 00:31:40,800
Speaker 11: any other property type that is having to either be

633
00:31:40,880 --> 00:31:44,320
Speaker 11: sold as distressed or having to get a workout between

634
00:31:44,320 --> 00:31:46,840
Speaker 11: the lender and the borrower. The Treasury and the Fed

635
00:31:47,000 --> 00:31:50,080
Speaker 11: have really pushed lenders to work with the borrowers to

636
00:31:50,200 --> 00:31:52,920
Speaker 11: avoid a fire sale if you will. So we're not

637
00:31:52,960 --> 00:31:56,600
Speaker 11: expecting a huge wave of fire sale and even in

638
00:31:56,640 --> 00:31:59,040
Speaker 11: the office sector, but you're already starting to see some

639
00:31:59,120 --> 00:32:02,960
Speaker 11: distress sales in older office product. Newer office product is

640
00:32:02,960 --> 00:32:06,120
Speaker 11: actually performing better than most people realize.

641
00:32:07,360 --> 00:32:09,560
Speaker 1: All right, haseam, I am a huge bear when it

642
00:32:09,600 --> 00:32:11,920
Speaker 1: comes to commercial real estate in you know, particularly the

643
00:32:12,000 --> 00:32:14,280
Speaker 1: office space. I just think we have a doom loop

644
00:32:14,480 --> 00:32:18,160
Speaker 1: kind of building here where you know, and you know

645
00:32:18,520 --> 00:32:21,400
Speaker 1: the values of these real estates are nowhere near enough

646
00:32:21,440 --> 00:32:24,560
Speaker 1: to support their debt. And it's going to become really

647
00:32:24,600 --> 00:32:27,520
Speaker 1: apparent when we see some transactions across the market and

648
00:32:27,600 --> 00:32:30,440
Speaker 1: reset the market. So I'm wondering, have we ever have

649
00:32:30,480 --> 00:32:34,400
Speaker 1: we seen anything in like New York, Chicago, San Francisco, La. Like,

650
00:32:34,640 --> 00:32:36,640
Speaker 1: I haven't really seen any big, big property in New

651
00:32:36,720 --> 00:32:39,800
Speaker 1: York trade. And when it does trade, I'm afraid it's

652
00:32:39,800 --> 00:32:42,520
Speaker 1: gonna be at thirty forty fifty percent discount.

653
00:32:43,240 --> 00:32:44,320
Speaker 4: How are you thinking about that?

654
00:32:45,080 --> 00:32:47,520
Speaker 11: It really depends on the asset. Some of the assets

655
00:32:47,560 --> 00:32:50,880
Speaker 11: that are going to trade will phone the exact description

656
00:32:51,000 --> 00:32:55,320
Speaker 11: that you're sharing right now. Older office product has vacancy

657
00:32:55,400 --> 00:32:58,240
Speaker 11: rates in the twenty to twenty five percent or higher

658
00:32:58,680 --> 00:33:01,680
Speaker 11: newer office product on average, meaning the build in the

659
00:33:01,760 --> 00:33:07,120
Speaker 11: last fifteen years or earlier, is half that about eleven percent.

660
00:33:07,400 --> 00:33:10,960
Speaker 11: So there is a huge dichotomy and the obsolescence of

661
00:33:11,040 --> 00:33:15,000
Speaker 11: older office buildings. Unlike obsolescence of shopping centers, where you

662
00:33:15,000 --> 00:33:18,280
Speaker 11: could knock down a shopping center or an old warehouse

663
00:33:18,440 --> 00:33:21,680
Speaker 11: that is obsolete and have a reuse or reimagination, it's

664
00:33:21,800 --> 00:33:25,280
Speaker 11: much harder to do that with older office product. So

665
00:33:25,360 --> 00:33:29,600
Speaker 11: the reuse is one rescue channel. Another is just a

666
00:33:29,680 --> 00:33:32,720
Speaker 11: pure discounting of the asset to what the fair market

667
00:33:32,800 --> 00:33:34,960
Speaker 11: value would be. Believe it or not, there is a

668
00:33:35,000 --> 00:33:39,360
Speaker 11: lot of entrepreneurial buyers of that product. We're actually helping

669
00:33:39,520 --> 00:33:42,240
Speaker 11: a number of them either go directly to the lenders

670
00:33:42,440 --> 00:33:45,200
Speaker 11: or wait for product to come to market, but the

671
00:33:45,240 --> 00:33:48,840
Speaker 11: cycle will be pretty ugly for that older office stock

672
00:33:49,000 --> 00:33:50,320
Speaker 11: that you're describing, Paul.

673
00:33:50,240 --> 00:33:52,920
Speaker 2: Yeah, what's going to happen to you know? Bloomberg Business

674
00:33:52,960 --> 00:33:55,840
Speaker 2: Week did a cool piece last year about the Third

675
00:33:55,880 --> 00:33:58,680
Speaker 2: Avenue Corridor, which has a lot of that office space

676
00:34:00,480 --> 00:34:03,600
Speaker 2: with the problem that you're talking about. It's just unconvertible.

677
00:34:03,640 --> 00:34:06,280
Speaker 2: There's no way to make it into apartments, and nobody

678
00:34:06,320 --> 00:34:07,160
Speaker 2: wants to use.

679
00:34:07,040 --> 00:34:08,120
Speaker 4: It as office space.

680
00:34:08,600 --> 00:34:10,719
Speaker 2: What happens do We just have a ton of storage

681
00:34:10,760 --> 00:34:13,200
Speaker 2: space buildings all the way down Third Avenue and in

682
00:34:13,239 --> 00:34:15,440
Speaker 2: the middle of Manhattan, some of the most expensive real

683
00:34:15,520 --> 00:34:16,280
Speaker 2: estate in the world.

684
00:34:16,400 --> 00:34:19,960
Speaker 11: Here's what I predict. I predict opportunistic buyers will come

685
00:34:20,000 --> 00:34:22,200
Speaker 11: and buy it, as Paul was saying, thirty forty cents

686
00:34:22,200 --> 00:34:26,839
Speaker 11: on the dollar. They'll upgrade it, do a value add

687
00:34:26,920 --> 00:34:29,799
Speaker 11: and wait for the return to office to improve. It's

688
00:34:29,800 --> 00:34:31,840
Speaker 11: never going to go back to pre pandemic. But I

689
00:34:31,880 --> 00:34:34,960
Speaker 11: also think we've come off the lows of people's resistance

690
00:34:35,000 --> 00:34:37,600
Speaker 11: to come back into the office. Urban America is not

691
00:34:37,760 --> 00:34:40,960
Speaker 11: dead forever. It's hit really hard right now. But those

692
00:34:41,000 --> 00:34:44,320
Speaker 11: opportunistic investors, because of the basis points they're going to

693
00:34:44,520 --> 00:34:48,520
Speaker 11: basically come in on acquiring those assets or the price

694
00:34:48,560 --> 00:34:53,120
Speaker 11: point versus replacement cost, have a much longer kind of

695
00:34:53,160 --> 00:34:55,920
Speaker 11: a viewpoint on it and a time horizon than a

696
00:34:55,920 --> 00:34:56,799
Speaker 11: two or three year hold.

697
00:34:56,840 --> 00:35:00,239
Speaker 2: So there's just a repricing then of assets. That's your

698
00:35:00,320 --> 00:35:02,680
Speaker 2: view then, and this gets big, this is like thirty

699
00:35:02,680 --> 00:35:06,560
Speaker 2: five thousand feet, But what's your view on the cities

700
00:35:06,719 --> 00:35:07,480
Speaker 2: of America?

701
00:35:08,280 --> 00:35:11,279
Speaker 11: Well, Urban America is taking it on the Chin, no

702
00:35:11,360 --> 00:35:14,719
Speaker 11: question about it, whether it's Chicago or San Francisco or

703
00:35:14,760 --> 00:35:18,000
Speaker 11: Seattle or anywhere else. Now, if you look at Miami,

704
00:35:18,200 --> 00:35:20,760
Speaker 11: if you look at even the comeback we were seeing

705
00:35:20,800 --> 00:35:24,719
Speaker 11: in somewhere like Seattle versus San Francisco, Chicago, or New York,

706
00:35:25,760 --> 00:35:29,080
Speaker 11: you can see that the comeback can be affected in

707
00:35:29,120 --> 00:35:31,640
Speaker 11: those other markets. It's just going to take a lot

708
00:35:31,640 --> 00:35:33,960
Speaker 11: of time. New York, adding one hundred thousand jobs in

709
00:35:34,000 --> 00:35:36,279
Speaker 11: the last twelve months is actually much better off than

710
00:35:36,320 --> 00:35:38,680
Speaker 11: other urban areas because we are creating those jobs and

711
00:35:38,719 --> 00:35:40,200
Speaker 11: a lot of young people want to live here.

712
00:35:40,560 --> 00:35:43,640
Speaker 2: Yeah, that's pretty well. We haven't got the congestion charge yet,

713
00:35:43,719 --> 00:35:44,480
Speaker 2: so just wait for that.

714
00:35:45,520 --> 00:35:46,279
Speaker 4: And John Tucker is.

715
00:35:46,280 --> 00:35:48,400
Speaker 2: Going to be staying home and doing all of his

716
00:35:49,120 --> 00:35:50,480
Speaker 2: broadcasting from the shore.

717
00:35:50,840 --> 00:35:52,600
Speaker 11: But Matt, you know, one thing to add is there

718
00:35:52,640 --> 00:35:55,640
Speaker 11: is such a judge the book by the cover. Everyone's

719
00:35:55,640 --> 00:35:58,760
Speaker 11: talking about commercial real estate as though the whole industry

720
00:35:58,840 --> 00:36:02,080
Speaker 11: is older office build and older office buildings are an

721
00:36:02,080 --> 00:36:04,440
Speaker 11: important segment. But office, as I pointed out last time

722
00:36:04,440 --> 00:36:06,640
Speaker 11: I was on the air with you guys, makes up

723
00:36:06,680 --> 00:36:10,239
Speaker 11: fifteen percent of the total outstanding commercial loans. And if

724
00:36:10,239 --> 00:36:13,319
Speaker 11: you look at the entire commercial real set industry. It

725
00:36:13,400 --> 00:36:16,759
Speaker 11: makes up twenty four percent of the total bank loans outstanding,

726
00:36:16,960 --> 00:36:21,120
Speaker 11: so it's a much smaller percentage of risk than people realize.

727
00:36:21,600 --> 00:36:24,719
Speaker 11: And we're concerned that this perception of older office is

728
00:36:24,760 --> 00:36:27,600
Speaker 11: going to affect financing for self storage units or shopping

729
00:36:27,600 --> 00:36:29,719
Speaker 11: centers even or apartments that are doing much better.

730
00:36:29,880 --> 00:36:31,880
Speaker 2: So I was going to ask, then, looking at the

731
00:36:31,920 --> 00:36:35,520
Speaker 2: whole pie of commercial real estate, and office space, as

732
00:36:35,520 --> 00:36:39,040
Speaker 2: you're pointing out, is just a fairly small piece.

733
00:36:39,600 --> 00:36:41,880
Speaker 4: What are the parts of the pie that you like?

734
00:36:42,440 --> 00:36:45,239
Speaker 11: Well, fifty percent of the outstanding commercial loans held by

735
00:36:45,239 --> 00:36:49,359
Speaker 11: banks is in multifamily, ninety five percent occupancies RENK growth

736
00:36:49,400 --> 00:36:52,000
Speaker 11: has flattened out after jumping almost thirty percent in the

737
00:36:52,080 --> 00:36:53,759
Speaker 11: last three years, so it's taking a little bit of

738
00:36:53,800 --> 00:36:56,359
Speaker 11: a breather. And within multi family, we have a lot

739
00:36:56,360 --> 00:36:59,560
Speaker 11: of assets that were financed on short term financing with

740
00:36:59,600 --> 00:37:02,240
Speaker 11: debt fund in the last three years that are already

741
00:37:02,239 --> 00:37:05,319
Speaker 11: coming due. They're having some problems refining as well, but

742
00:37:05,480 --> 00:37:06,840
Speaker 11: nothing like the office market.

743
00:37:07,200 --> 00:37:11,800
Speaker 2: But do you see opportunity there then? I mean, in multifamily,

744
00:37:11,960 --> 00:37:15,600
Speaker 2: if you get a good deal a low valuation, do

745
00:37:15,640 --> 00:37:16,560
Speaker 2: you go and snap it.

746
00:37:16,560 --> 00:37:20,000
Speaker 11: Up absolutely for any property that on an equal to

747
00:37:20,040 --> 00:37:23,080
Speaker 11: equal basis is coming to market fifteen to twenty percent

748
00:37:23,120 --> 00:37:25,560
Speaker 11: below peak pricing as of March of twenty twenty two,

749
00:37:25,680 --> 00:37:29,200
Speaker 11: we have multiple bits, multiple offers for those assets.

750
00:37:29,480 --> 00:37:31,799
Speaker 2: All right, fascinating stuff, Sam, Thanks so much for coming in.

751
00:37:32,000 --> 00:37:35,279
Speaker 2: I always appreciate you stopping by. Asam Naji is the

752
00:37:35,320 --> 00:37:38,000
Speaker 2: president and CEO of Marcus and Millichapter.

753
00:37:38,239 --> 00:37:41,800
Speaker 6: You're listening to the tape KENSUR Live program Bloomberg Markets

754
00:37:41,880 --> 00:37:45,239
Speaker 6: weekdays at ten am Eastern on Bloomberg Radio, the tune

755
00:37:45,320 --> 00:37:47,120
Speaker 6: in app, Bloomberg dot Com.

756
00:37:46,840 --> 00:37:48,279
Speaker 8: And the Bloomberg Business App.

757
00:37:48,320 --> 00:37:51,120
Speaker 6: You can also listen live on Amazon Alexa from our

758
00:37:51,160 --> 00:37:56,200
Speaker 6: flagship New York station. Just say Alexa play Bloomberg eleven thirty.

759
00:37:56,920 --> 00:37:59,960
Speaker 1: We're broadcasting live from Commonwealth twenty twenty three and National

760
00:38:00,040 --> 00:38:02,720
Speaker 1: Financial Advisors Conference. We're here at the Gaylord Rockies Resort

761
00:38:03,120 --> 00:38:08,200
Speaker 1: in Aurora, Colorado. Joined next by Shelbyquino. She's a certified

762
00:38:08,200 --> 00:38:11,279
Speaker 1: financial planner at Independent Wealth Management. She joins me here

763
00:38:11,360 --> 00:38:16,160
Speaker 1: at the conference here in Colorado. Shelby, so we'll talk

764
00:38:16,160 --> 00:38:17,960
Speaker 1: about the markets and stuff like that. But what I

765
00:38:18,040 --> 00:38:21,040
Speaker 1: find interesting about your background. You've been into business a

766
00:38:21,080 --> 00:38:24,400
Speaker 1: long time, but you lead an all women team of

767
00:38:24,440 --> 00:38:28,000
Speaker 1: financial advisors. Now, I do see in the mixture a

768
00:38:28,000 --> 00:38:31,160
Speaker 1: lot of women here, But tell me what's the percentage

769
00:38:31,160 --> 00:38:33,080
Speaker 1: of women in kind of like the in your line

770
00:38:33,120 --> 00:38:35,000
Speaker 1: of the business, financial advisory business.

771
00:38:35,400 --> 00:38:39,839
Speaker 12: Yeah, thank you, Paul, good morning. Right now, the statistics

772
00:38:39,840 --> 00:38:45,400
Speaker 12: are still under twenty percent women financial advisors in our industry.

773
00:38:46,000 --> 00:38:48,240
Speaker 12: We haven't grown the way we'd like to have grown,

774
00:38:49,040 --> 00:38:52,440
Speaker 12: certainly in the last ten years, so we're working on that.

775
00:38:53,200 --> 00:38:56,239
Speaker 1: So I guess the issue here is for a lot

776
00:38:56,239 --> 00:38:59,960
Speaker 1: of folks is let me get people into these financial services.

777
00:39:00,000 --> 00:39:02,600
Speaker 4: I've had a lot of experience in recruiting. At the

778
00:39:02,800 --> 00:39:03,239
Speaker 4: entry level.

779
00:39:03,280 --> 00:39:04,960
Speaker 1: You get a lot of diversity because it's easy to

780
00:39:04,960 --> 00:39:07,280
Speaker 1: go onto a campus or something and find a diverse

781
00:39:07,320 --> 00:39:10,440
Speaker 1: incoming class. But then four, five, six, seven years later,

782
00:39:10,440 --> 00:39:13,040
Speaker 1: when it's time to do for the promotion for leadership positions,

783
00:39:13,880 --> 00:39:16,560
Speaker 1: it's not so diverse anymore. Do you find that in

784
00:39:16,600 --> 00:39:17,480
Speaker 1: your experience as well?

785
00:39:18,200 --> 00:39:21,799
Speaker 12: Yes, we do, and we're trying to change that. I'm

786
00:39:21,880 --> 00:39:27,880
Speaker 12: not sure we know exactly why that is. Certainly there's

787
00:39:27,960 --> 00:39:33,760
Speaker 12: some extra pressure to you know, run a financial planning

788
00:39:33,920 --> 00:39:38,560
Speaker 12: practice investment firm along with everything else you want to

789
00:39:38,560 --> 00:39:39,280
Speaker 12: do personally.

790
00:39:39,440 --> 00:39:42,200
Speaker 1: So yep, all right, So let's get to your business here.

791
00:39:42,280 --> 00:39:44,719
Speaker 1: Talk to us about just what you're telling your clients

792
00:39:44,840 --> 00:39:47,840
Speaker 1: these days about these markets. You know, last year was

793
00:39:47,880 --> 00:39:50,279
Speaker 1: a tough, tough year, whether in your equities or you're

794
00:39:50,320 --> 00:39:52,359
Speaker 1: in fixed income. This year is a little bit better,

795
00:39:52,960 --> 00:39:54,879
Speaker 1: certainly the equity side, if you're in the right names.

796
00:39:54,920 --> 00:39:57,000
Speaker 1: I guess what are you telling your clients these days?

797
00:39:57,560 --> 00:40:01,120
Speaker 12: Yeah, you know, this has been historic. Celebrate forty years

798
00:40:01,120 --> 00:40:04,120
Speaker 12: in the business next year. And I think that twenty

799
00:40:04,160 --> 00:40:08,840
Speaker 12: two having the combination of the stock and the bond

800
00:40:08,920 --> 00:40:14,560
Speaker 12: market in negative territory, the average balance fund sixteen down

801
00:40:14,640 --> 00:40:17,840
Speaker 12: sixteen to eighteen percent. It tested the best of the best.

802
00:40:18,480 --> 00:40:22,640
Speaker 12: We do our best to assess where a risk temperament

803
00:40:22,760 --> 00:40:27,719
Speaker 12: is with our clients and run through the respective you know,

804
00:40:28,120 --> 00:40:31,920
Speaker 12: tests on that. But this past year we found out

805
00:40:31,960 --> 00:40:37,520
Speaker 12: where the risk temperament really was. So we're telling them it's,

806
00:40:37,800 --> 00:40:39,640
Speaker 12: you know, we got to take a deep breath. With us.

807
00:40:40,480 --> 00:40:46,000
Speaker 12: We're huge proponents of having emergency cash set aside so

808
00:40:46,040 --> 00:40:50,080
Speaker 12: that we can actually allocate a portfolio of quality investment

809
00:40:50,120 --> 00:40:54,319
Speaker 12: holdings to see them through on their short term, medium term,

810
00:40:54,640 --> 00:40:58,520
Speaker 12: long term goals. But this has been such a balancing

811
00:40:58,560 --> 00:41:02,120
Speaker 12: act between the technicality of this market and the emotional

812
00:41:02,160 --> 00:41:06,720
Speaker 12: wherewithal So it's it's been a it's been a heavy lift.

813
00:41:07,400 --> 00:41:11,120
Speaker 2: So do you still how do you diversify a portfolio

814
00:41:11,239 --> 00:41:14,360
Speaker 2: now or how do you protect against correlations?

815
00:41:16,640 --> 00:41:22,040
Speaker 12: Yeah, you know, that's that has been an interesting challenge

816
00:41:22,080 --> 00:41:26,200
Speaker 12: obviously last year, where we've historically relied on the bond

817
00:41:26,280 --> 00:41:31,680
Speaker 12: market to stabilize the portfolio and create that income stream,

818
00:41:31,880 --> 00:41:36,120
Speaker 12: we couldn't go there, and so there was heavier cash positions.

819
00:41:36,920 --> 00:41:40,080
Speaker 12: I you know, we look out in every sector of

820
00:41:40,120 --> 00:41:45,680
Speaker 12: the market to determine you know, that risk reward temperament,

821
00:41:46,120 --> 00:41:50,640
Speaker 12: and it's been you know, a combination. So there's some

822
00:41:51,040 --> 00:41:54,600
Speaker 12: you know, solid dividend paying stocks in there, We've got

823
00:41:54,600 --> 00:41:58,920
Speaker 12: some commodity exposure. We've tried to keep it simple. I

824
00:41:59,400 --> 00:42:05,000
Speaker 12: you know, historically have used some of the more advanced

825
00:42:05,520 --> 00:42:09,279
Speaker 12: instruments and not always been rewarded for the ex or

826
00:42:09,360 --> 00:42:10,759
Speaker 12: expense we pay. Internally.

827
00:42:11,719 --> 00:42:13,120
Speaker 1: Well, I mean, you could go I mean I've been

828
00:42:13,120 --> 00:42:16,000
Speaker 1: telling people after twenty twenty two, where there's no place

829
00:42:16,000 --> 00:42:18,959
Speaker 1: to highe equities down double digits, even most fixed income

830
00:42:18,960 --> 00:42:22,440
Speaker 1: classes down double digits, which had never happened before. I

831
00:42:22,440 --> 00:42:24,319
Speaker 1: can sit here at until your treasury at five point

832
00:42:24,400 --> 00:42:26,640
Speaker 1: zero seven percent. Even my twenty seven year old daughter

833
00:42:26,640 --> 00:42:28,359
Speaker 1: called me and says, I'm gonna go put some money

834
00:42:28,360 --> 00:42:31,880
Speaker 1: into a Hi savings account for Marcus. So she's already

835
00:42:32,000 --> 00:42:34,200
Speaker 1: playing the markets and she's in the music business.

836
00:42:35,040 --> 00:42:35,880
Speaker 4: So I can sit there in.

837
00:42:35,880 --> 00:42:38,720
Speaker 1: Some of these relatively secure places and get a decent return.

838
00:42:38,960 --> 00:42:42,239
Speaker 12: Yeah, so you know what, And Marcus has been a

839
00:42:42,320 --> 00:42:47,600
Speaker 12: solid place for short term money and emergency funds. That's

840
00:42:47,640 --> 00:42:53,760
Speaker 12: an easy call. So for maybe short term emergency funds, great,

841
00:42:54,320 --> 00:42:56,520
Speaker 12: but we got you know, it's time.

842
00:42:57,239 --> 00:42:58,560
Speaker 4: To dip your toe in yep.

843
00:42:59,120 --> 00:43:02,400
Speaker 12: And I think perspective in this environment is the most

844
00:43:02,440 --> 00:43:05,879
Speaker 12: important thing. And with all the noise that we've got

845
00:43:05,880 --> 00:43:08,239
Speaker 12: going on out there, that's really hard to do.

846
00:43:09,200 --> 00:43:10,560
Speaker 1: All right, So what are some of So if I

847
00:43:10,600 --> 00:43:11,800
Speaker 1: want to come to you, if I came to and

848
00:43:11,880 --> 00:43:14,480
Speaker 1: I said that, you know, sixty forty portfolio, it sounds

849
00:43:14,480 --> 00:43:17,680
Speaker 1: reasonable to me. What's what stocks would you look at?

850
00:43:17,719 --> 00:43:19,360
Speaker 1: What sectors would you look at? Or how would you

851
00:43:19,360 --> 00:43:20,759
Speaker 1: think about that five set out? You know, I've got

852
00:43:20,800 --> 00:43:22,360
Speaker 1: my five and ten yere horizon.

853
00:43:22,560 --> 00:43:27,839
Speaker 12: Yeah, you know, Paul, I think it's actually we we

854
00:43:27,920 --> 00:43:32,480
Speaker 12: love growth. I mean, this Ai, it's real. But I

855
00:43:32,520 --> 00:43:34,239
Speaker 12: think at the end of the day, you have to

856
00:43:34,280 --> 00:43:38,400
Speaker 12: be balanced the heavy you know, we've we've relied on

857
00:43:38,480 --> 00:43:42,120
Speaker 12: the large cap space for the bulk of the returns,

858
00:43:42,280 --> 00:43:45,279
Speaker 12: and I think it's time to make sure you've got

859
00:43:45,280 --> 00:43:47,840
Speaker 12: the mid cap and the small cap exposure for the

860
00:43:47,880 --> 00:43:51,600
Speaker 12: next wave. You know, we look at that one hundred

861
00:43:51,680 --> 00:43:55,480
Speaker 12: year chart of this market. We've been through really difficult times.

862
00:43:55,520 --> 00:43:58,360
Speaker 12: Before we're going to get through this, you've got to

863
00:43:58,400 --> 00:44:01,719
Speaker 12: be positioned to be able to take advantage of it.

864
00:44:01,760 --> 00:44:04,719
Speaker 2: Is I mean, you guys, and I'm sure everybody in

865
00:44:04,719 --> 00:44:08,000
Speaker 2: Colorado is in fantastic shape, but the rest of America

866
00:44:08,120 --> 00:44:10,799
Speaker 2: needs a little help. You mentioned AI, and it makes

867
00:44:10,840 --> 00:44:14,040
Speaker 2: me think of what I've come to dub Ai Junior,

868
00:44:14,080 --> 00:44:16,120
Speaker 2: and that's the GLP one drugs.

869
00:44:16,280 --> 00:44:17,239
Speaker 7: What do you think about that?

870
00:44:17,400 --> 00:44:23,000
Speaker 2: Is it really like a strategy changing development or is

871
00:44:23,000 --> 00:44:24,719
Speaker 2: it just fun for us to talk about in a

872
00:44:24,719 --> 00:44:25,760
Speaker 2: few stocks.

873
00:44:27,520 --> 00:44:29,680
Speaker 12: No, you know what, from the sounds of it and

874
00:44:29,760 --> 00:44:32,680
Speaker 12: everything I've read, it sounds like it is a real thing.

875
00:44:33,080 --> 00:44:36,560
Speaker 12: And I think, you know, the innovation that we're seeing

876
00:44:36,600 --> 00:44:41,239
Speaker 12: in the healthcare space and also in the automotive industry

877
00:44:41,600 --> 00:44:47,000
Speaker 12: is pretty mind bending. So, you know, used properly, I

878
00:44:47,000 --> 00:44:50,040
Speaker 12: think AI could be enormously impactful.

879
00:44:51,000 --> 00:44:53,640
Speaker 1: Hey Shelby, thank you so much for joining us. Trancano

880
00:44:54,040 --> 00:44:59,040
Speaker 1: Certified Financial Planner or Independent Wealth Management, Independent Wealth Strategies

881
00:44:59,360 --> 00:45:02,319
Speaker 1: joining us here at the conference in Aurora, Colorado.

882
00:45:02,640 --> 00:45:05,759
Speaker 6: You're listening to the tape cancer our live program Bloomberg

883
00:45:05,800 --> 00:45:09,400
Speaker 6: Markets weekdays at ten am Eastern on Bloomberg Radio, the

884
00:45:09,440 --> 00:45:11,600
Speaker 6: tune in app, Bloomberg dot Com, and the.

885
00:45:11,480 --> 00:45:12,680
Speaker 8: Bloomberg Business App.

886
00:45:12,719 --> 00:45:15,560
Speaker 6: You can also listen live on Amazon Alexa from our

887
00:45:15,560 --> 00:45:20,520
Speaker 6: flagship New York station, Just say Alexa play Bloomberg eleven thirty.

888
00:45:20,960 --> 00:45:23,200
Speaker 1: I'm bringing Peter Essel. He is a senior vice president

889
00:45:23,280 --> 00:45:27,320
Speaker 1: of Investment management and Research at Commonwealth, and Peter I

890
00:45:27,400 --> 00:45:29,920
Speaker 1: spent a long part of my career in equity and

891
00:45:29,960 --> 00:45:30,680
Speaker 1: investment research.

892
00:45:30,680 --> 00:45:32,960
Speaker 4: Tell me how you guys do it at Commonwealth?

893
00:45:33,080 --> 00:45:36,440
Speaker 13: Sure, absolutely, thanks for having me so. Our role is

894
00:45:36,440 --> 00:45:40,399
Speaker 13: in support of roughly twenty five hundred independent advisors, where

895
00:45:40,440 --> 00:45:44,120
Speaker 13: we cover everything from individual equities to mutual fund research

896
00:45:44,200 --> 00:45:48,239
Speaker 13: to credit analysis on the fixed income side, and what

897
00:45:48,239 --> 00:45:50,360
Speaker 13: we've seen as of late is that there's been a

898
00:45:50,920 --> 00:45:55,480
Speaker 13: strong interest in creating model based solutions. So we've really

899
00:45:55,520 --> 00:45:58,560
Speaker 13: partnered with a lot of our advisors acting more so

900
00:45:58,680 --> 00:46:02,319
Speaker 13: as like an outsourced CIO capacity, where we support them

901
00:46:02,320 --> 00:46:06,040
Speaker 13: in their model construction efforts, monitoring, and so forth. In

902
00:46:06,080 --> 00:46:09,200
Speaker 13: addition to that, there are a number of advisors who

903
00:46:09,239 --> 00:46:12,600
Speaker 13: have elected to outsource investment management to us, and so

904
00:46:12,640 --> 00:46:18,120
Speaker 13: we directly advise over twelve billion in assets and then

905
00:46:18,320 --> 00:46:20,960
Speaker 13: advise on another about one hundred and fifty billion or so.

906
00:46:21,120 --> 00:46:21,400
Speaker 8: Wow.

907
00:46:21,520 --> 00:46:25,800
Speaker 1: Okay, So what's a typical I guess what's a typical

908
00:46:25,880 --> 00:46:29,359
Speaker 1: ask from an RAA from you guys from your organizations

909
00:46:29,520 --> 00:46:33,560
Speaker 1: to say, hey, should I buy Apple? Or are you

910
00:46:33,600 --> 00:46:36,600
Speaker 1: know is this AI thing for real? What kind of

911
00:46:36,600 --> 00:46:39,520
Speaker 1: request do you typically get? Absolutely, honestly, it's anything under

912
00:46:39,560 --> 00:46:42,239
Speaker 1: the sun at this point, everything from AI stocks to

913
00:46:42,320 --> 00:46:45,399
Speaker 1: the latest and greatest to going back a few years

914
00:46:45,400 --> 00:46:50,800
Speaker 1: ago looking at cannabis stocks. And what we've seen recently

915
00:46:50,920 --> 00:46:54,520
Speaker 1: is a lot of advisors looking for a red flag analysis.

916
00:46:54,560 --> 00:46:58,960
Speaker 1: So that is everything from taking a deep dive into

917
00:46:59,080 --> 00:47:03,640
Speaker 1: a client's perspective of portfolio that comes over looking at

918
00:47:03,640 --> 00:47:08,200
Speaker 1: structured products individual equities like you talked about. In addition

919
00:47:08,320 --> 00:47:11,960
Speaker 1: to just general outlook and commentary around the direction of

920
00:47:12,000 --> 00:47:18,200
Speaker 1: the economy. So obviously with inflationary concerns persisting pretty heavily

921
00:47:18,280 --> 00:47:22,040
Speaker 1: as of late, they want our views on interest rates

922
00:47:22,040 --> 00:47:24,480
Speaker 1: and what that outlook looks like and how that should

923
00:47:24,480 --> 00:47:29,160
Speaker 1: be reflected in their portfolio positioning related to duration and

924
00:47:29,200 --> 00:47:33,160
Speaker 1: so forth. So honestly, it runs the gamut from individual

925
00:47:33,239 --> 00:47:35,719
Speaker 1: security analysis all the way out to views on the

926
00:47:36,040 --> 00:47:37,080
Speaker 1: markets and the economy.

927
00:47:37,200 --> 00:47:38,400
Speaker 2: So what's a red flag I mean?

928
00:47:38,480 --> 00:47:38,960
Speaker 4: Is that.

929
00:47:40,560 --> 00:47:44,520
Speaker 2: Is that like if I think two years ago, weedstocks

930
00:47:44,520 --> 00:47:50,400
Speaker 2: are definitely screaming by because I see that, you know,

931
00:47:50,520 --> 00:47:53,000
Speaker 2: revenues are picking up in the states where they're legal,

932
00:47:53,120 --> 00:47:54,719
Speaker 2: and I feel like it's time to get in. But

933
00:47:55,120 --> 00:47:57,799
Speaker 2: you come back and say, well, they're not federally legal

934
00:47:57,880 --> 00:48:00,080
Speaker 2: yet and they can't do any banking, so and this

935
00:48:00,160 --> 00:48:01,240
Speaker 2: would be a very bad idea.

936
00:48:01,520 --> 00:48:02,760
Speaker 4: This would be a very bad idea.

937
00:48:04,360 --> 00:48:08,160
Speaker 13: It can come in that form. It generally involves a

938
00:48:08,239 --> 00:48:11,640
Speaker 13: look into a security as it relates to a client's

939
00:48:11,719 --> 00:48:16,120
Speaker 13: investment risk tolerance. So, for instance, if there's a high

940
00:48:16,120 --> 00:48:21,560
Speaker 13: concentration in distressed debt for an eighty year old investor

941
00:48:21,640 --> 00:48:26,359
Speaker 13: who has very little assets and as a conservatively positioned

942
00:48:27,320 --> 00:48:31,360
Speaker 13: risk tolerance that would be a major red flag for US, obviously,

943
00:48:32,280 --> 00:48:36,920
Speaker 13: But there are instances where, yes, on a security specific basis,

944
00:48:37,000 --> 00:48:39,920
Speaker 13: where you have sort of these thematic plays that are

945
00:48:40,080 --> 00:48:44,360
Speaker 13: very binary in nature, where they can either sort of

946
00:48:44,360 --> 00:48:48,399
Speaker 13: the clouds or basically turn out into pennies. That would

947
00:48:48,400 --> 00:48:52,320
Speaker 13: be a red flag for US as well. But generally

948
00:48:52,320 --> 00:48:54,320
Speaker 13: it relates to the client's risk tolerance.

949
00:48:54,680 --> 00:48:57,120
Speaker 1: So what are you telling your clients these days about,

950
00:48:58,000 --> 00:48:59,520
Speaker 1: I don't know, just kind of you have like a

951
00:48:59,560 --> 00:49:02,520
Speaker 1: market here that you guys are pretty constructive on the

952
00:49:02,520 --> 00:49:04,000
Speaker 1: ECUADEM markets are not, So how do you how do

953
00:49:04,040 --> 00:49:05,040
Speaker 1: you kind of frame it out for them?

954
00:49:05,280 --> 00:49:08,720
Speaker 13: Yeah, generally we try to deploy a twelve to twenty

955
00:49:08,719 --> 00:49:12,600
Speaker 13: four month outlook and we often try to sift through

956
00:49:12,600 --> 00:49:14,480
Speaker 13: the noise. And a perfect example of that would be

957
00:49:14,560 --> 00:49:17,640
Speaker 13: March of twenty twenty, where obviously there was a lot

958
00:49:17,680 --> 00:49:20,400
Speaker 13: going on. Markets were down. I believe the SMP was

959
00:49:20,400 --> 00:49:22,480
Speaker 13: down over thirty percent in the course of a month,

960
00:49:23,440 --> 00:49:25,680
Speaker 13: and that's an environment where we tend to get a

961
00:49:25,680 --> 00:49:28,600
Speaker 13: little bit more optimistic and like to add risk into

962
00:49:28,600 --> 00:49:31,719
Speaker 13: our portfolios, and we did so on In fact, it

963
00:49:31,760 --> 00:49:34,000
Speaker 13: was on March twenty third twenty twenty where we added

964
00:49:34,000 --> 00:49:37,200
Speaker 13: equity exposure roughly eight hundred basis points for a sixty

965
00:49:37,280 --> 00:49:41,200
Speaker 13: forty portfolio. So we like to look for those opportunities

966
00:49:41,280 --> 00:49:44,800
Speaker 13: of volatility when when investors are rushing for the exits,

967
00:49:44,800 --> 00:49:47,839
Speaker 13: we're generally rushing in. But as far as as our

968
00:49:47,880 --> 00:49:50,480
Speaker 13: outlook at this point, you know, there's clearly a lot

969
00:49:50,520 --> 00:49:53,799
Speaker 13: going on on the geopolitical side of things. Again, we

970
00:49:53,960 --> 00:49:58,720
Speaker 13: like to look through that noise and you know, deploy

971
00:49:58,800 --> 00:50:02,000
Speaker 13: that twelve to twenty four outlook, and we are still optimistic.

972
00:50:02,040 --> 00:50:05,080
Speaker 13: Heading into this year, there was a lot there were

973
00:50:05,120 --> 00:50:06,920
Speaker 13: a lot of economists out on the streets saying that

974
00:50:06,960 --> 00:50:09,160
Speaker 13: this was the year of the recession. This is probably

975
00:50:09,200 --> 00:50:13,399
Speaker 13: the most anticipated recession in my career, and we sort

976
00:50:13,400 --> 00:50:15,400
Speaker 13: of take the opposite or took the opposite of you

977
00:50:15,719 --> 00:50:18,840
Speaker 13: to that where we saw more of the goldilocks economy scenario,

978
00:50:18,960 --> 00:50:22,680
Speaker 13: which thankfully has played out year to date. And we're

979
00:50:22,800 --> 00:50:25,520
Speaker 13: somewhat concerned at this point because it seems like a

980
00:50:25,560 --> 00:50:28,640
Speaker 13: majority of those economists have now shifted more in line

981
00:50:29,160 --> 00:50:32,840
Speaker 13: with what our outlook is, where we continue to see

982
00:50:33,160 --> 00:50:37,080
Speaker 13: modest wage growth. We do believe inflation is going to

983
00:50:37,080 --> 00:50:40,240
Speaker 13: to reach the Fed's mandate by Q four of twenty

984
00:50:40,280 --> 00:50:43,040
Speaker 13: twenty four, And as such, we don't think that there's

985
00:50:43,080 --> 00:50:45,440
Speaker 13: going to be a significant rise on the long end

986
00:50:45,440 --> 00:50:49,000
Speaker 13: of the curve, and we're mentioning to our clients and

987
00:50:49,600 --> 00:50:52,960
Speaker 13: advisors that they think that they should think about redeploying

988
00:50:53,000 --> 00:50:55,000
Speaker 13: some of that cash that they'd stock potted. Peter does

989
00:50:55,280 --> 00:50:56,760
Speaker 13: pass six to twelve months.

990
00:50:57,920 --> 00:51:00,920
Speaker 2: Does the spending of the US government not concern you?

991
00:51:01,120 --> 00:51:04,360
Speaker 2: I mean, we, you know, post COVID are still running

992
00:51:05,600 --> 00:51:10,319
Speaker 2: trillion dollar plus plus plus deficits every year, and you

993
00:51:10,360 --> 00:51:13,560
Speaker 2: know we've already amassed such a huge debt it's towering

994
00:51:13,640 --> 00:51:16,279
Speaker 2: over our GDP. That's the kind of thing that would

995
00:51:16,320 --> 00:51:20,160
Speaker 2: make me, as an investor, want to join the bond

996
00:51:20,200 --> 00:51:22,359
Speaker 2: vigilantes and drive those long term rates up.

997
00:51:22,520 --> 00:51:23,920
Speaker 4: Drive those long term rates.

998
00:51:23,760 --> 00:51:26,400
Speaker 13: Up right, I hear what you're saying. I mean, certainly

999
00:51:26,440 --> 00:51:28,680
Speaker 13: next year the politicians will be throwing stones ahead of

1000
00:51:28,719 --> 00:51:32,960
Speaker 13: the election, and there's going to be some volatility as

1001
00:51:33,000 --> 00:51:37,279
Speaker 13: it relates to the fiscal deficit. But still at the

1002
00:51:37,400 --> 00:51:40,200
Speaker 13: DA I mean, the US Treasury is the benchmark yield,

1003
00:51:40,719 --> 00:51:44,160
Speaker 13: the benchmark asset around the world. So even if there

1004
00:51:44,200 --> 00:51:47,800
Speaker 13: are concerns over our fiscal issues, there's going to be

1005
00:51:47,840 --> 00:51:51,799
Speaker 13: a significant amount of demand from foreign governance, from large

1006
00:51:51,800 --> 00:51:55,560
Speaker 13: pension plans that will help keep yields at a reasonable level.

1007
00:51:56,280 --> 00:51:58,840
Speaker 13: What are you saying about the fixed income space again,

1008
00:51:58,880 --> 00:52:01,279
Speaker 13: I'm kind of a scaredy after what happened in twenty

1009
00:52:01,320 --> 00:52:03,480
Speaker 13: twenty two, where there's no place left the high equities

1010
00:52:03,560 --> 00:52:05,000
Speaker 13: or fixing come and I feel like, if I can

1011
00:52:05,000 --> 00:52:07,560
Speaker 13: get five percent for giving my money to Uncle Sam

1012
00:52:07,600 --> 00:52:09,120
Speaker 13: for a couple of years, that's not a bad thing.

1013
00:52:09,320 --> 00:52:12,120
Speaker 13: That's that's absolutely how we're looking at it. So if

1014
00:52:12,160 --> 00:52:14,520
Speaker 13: you can get four and a half four point seventy

1015
00:52:14,560 --> 00:52:16,680
Speaker 13: five on a ten year treasury locked in and clip

1016
00:52:16,719 --> 00:52:19,439
Speaker 13: that coupon over the next ten years, we feel that's

1017
00:52:19,440 --> 00:52:22,120
Speaker 13: a much more attractive option than placing all your assets

1018
00:52:22,120 --> 00:52:24,640
Speaker 13: into a cash like exposure that perhaps is giving you

1019
00:52:24,680 --> 00:52:26,279
Speaker 13: a little bit more. You're getting five to five and

1020
00:52:26,320 --> 00:52:28,919
Speaker 13: a quarter, but will that be five and a quarter

1021
00:52:29,000 --> 00:52:31,520
Speaker 13: for the next decade. We don't necessarily think so. So

1022
00:52:31,560 --> 00:52:34,520
Speaker 13: that's why we've been advising our advisors to think about

1023
00:52:34,760 --> 00:52:37,879
Speaker 13: inching out in duration and locking in some of those

1024
00:52:37,960 --> 00:52:40,080
Speaker 13: higher yields for the next ten years.

1025
00:52:40,680 --> 00:52:43,399
Speaker 1: How much you use ETFs or how much do your

1026
00:52:43,560 --> 00:52:46,280
Speaker 1: rias use ETFs? Because when I came to the business,

1027
00:52:46,280 --> 00:52:48,560
Speaker 1: there weren't any ETFs, it was mutual funds. Now now

1028
00:52:48,600 --> 00:52:50,560
Speaker 1: the ETFs are taking all the market share.

1029
00:52:50,680 --> 00:52:53,520
Speaker 13: Yep, they certainly are, I believe asset wise it's split

1030
00:52:53,600 --> 00:52:55,320
Speaker 13: fifty to fifty at this point, with maybe just a

1031
00:52:55,360 --> 00:53:00,080
Speaker 13: little bit more in ETFs. We are seeing them, and

1032
00:53:00,160 --> 00:53:03,000
Speaker 13: we've seen a lot of core satellite type portfolios which

1033
00:53:03,160 --> 00:53:07,120
Speaker 13: the core, the base is allocated to either index mutual

1034
00:53:07,120 --> 00:53:09,600
Speaker 13: funds or ETFs, and then advisors are rounding out that

1035
00:53:09,680 --> 00:53:15,960
Speaker 13: exposure with higher active share, higher concentration active mutual fund managers.

1036
00:53:16,480 --> 00:53:18,640
Speaker 13: But certainly over the next few years, with the evolution

1037
00:53:18,719 --> 00:53:23,239
Speaker 13: of ets in the active space, we're really going to

1038
00:53:23,239 --> 00:53:26,000
Speaker 13: become product agnostic, where if there's a viable solution on

1039
00:53:26,000 --> 00:53:29,399
Speaker 13: the ATF side, if it's active, we can allocate to that.

1040
00:53:30,000 --> 00:53:32,600
Speaker 13: We'll take a look at active mutual funds, passive ETFs,

1041
00:53:32,600 --> 00:53:34,839
Speaker 13: et cetera. Alternatives.

1042
00:53:36,040 --> 00:53:38,080
Speaker 4: Do your clients ask you about alternatives?

1043
00:53:38,239 --> 00:53:40,399
Speaker 1: We do get private equity or private credit or other

1044
00:53:40,440 --> 00:53:40,920
Speaker 1: kind of stuff.

1045
00:53:40,960 --> 00:53:43,839
Speaker 13: Oh, absolutely, both on the private and the liquid side,

1046
00:53:43,840 --> 00:53:47,520
Speaker 13: and the way we generally approach alternatives is that it's

1047
00:53:48,120 --> 00:53:50,920
Speaker 13: it's when it get we get asked, well should I

1048
00:53:50,960 --> 00:53:52,919
Speaker 13: allocate to alternatives? It's kind of like saying, well should

1049
00:53:52,960 --> 00:53:55,960
Speaker 13: I I'm hungry, I should eat food? Right, There's many

1050
00:53:56,040 --> 00:53:59,280
Speaker 13: different types of alternatives out there, as you mentioned, private equity,

1051
00:53:59,320 --> 00:54:03,560
Speaker 13: private credit, there's managed futures, et cetera. So it really

1052
00:54:03,680 --> 00:54:06,680
Speaker 13: comes down to the type of exposure that you're looking for,

1053
00:54:06,719 --> 00:54:10,200
Speaker 13: the type of factor you're looking for in a portfolio.

1054
00:54:11,040 --> 00:54:15,240
Speaker 13: But certainly for higher net worth clients, we are seeing

1055
00:54:15,280 --> 00:54:19,040
Speaker 13: a greater interest as of late on the private credit

1056
00:54:19,120 --> 00:54:20,040
Speaker 13: side of things.

1057
00:54:19,760 --> 00:54:21,600
Speaker 1: And that's where all the money's going. It seems like

1058
00:54:21,600 --> 00:54:23,600
Speaker 1: private right, all right, Peter, thanks so much for joining us.

1059
00:54:23,600 --> 00:54:26,440
Speaker 1: Peter sla He's our senior VP of Investment Management and

1060
00:54:26,520 --> 00:54:28,160
Speaker 1: Research at Commonwealth.

1061
00:54:29,239 --> 00:54:32,319
Speaker 2: Thanks for listening to the Bloomberg Markets podcast. You can

1062
00:54:32,360 --> 00:54:36,120
Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever

1063
00:54:36,200 --> 00:54:39,920
Speaker 2: podcast platform you prefer. I'm Matt Miller. I'm on Twitter

1064
00:54:40,120 --> 00:54:42,000
Speaker 2: at Matt Miller nineteen seventy three.

1065
00:54:42,520 --> 00:54:44,880
Speaker 4: And I'm fall Sweeney. I'm on Twitter at pt Sweeney.

1066
00:54:45,000 --> 00:54:47,680
Speaker 1: Before the podcast, you can always catch us worldwide at

1067
00:54:47,680 --> 00:54:49,439
Speaker 1: Bloomberg Radio