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Broadcom Soars, New French PM · Bloomberg Intelligence

• 0:02
  Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
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  Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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  Speaker 2: weekdays at ten am Eastern on Apple, Cardplay and Android
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  Speaker 2: outo with the Bloomberg Business App. Listen on demand wherever
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  Speaker 2: you get your podcasts, or watch us live on YouTube.
• 0:22
  Speaker 3: I'm going to go back to the stock market and
• 0:24
  Speaker 3: look at shares of Broadcom up a whopping nineteen percent.
• 0:27
  Speaker 3: I want to get more with kushon so Bonnie and
• 0:29
  Speaker 3: Bloomberg Intelligence senior semi analyst, so we know the story.
• 0:32
  Speaker 3: The numbers for its AI revenue were super high. Their
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  Speaker 3: outlook looked really good. Is it justified in a one
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  Speaker 3: trillion dollar valuation right now?
• 0:42
  Speaker 4: Look going into the earnings, the top concerns where how
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  Speaker 4: is AI going to do next quarter? What are the
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  Speaker 4: numbers looking like for twenty twenty five and sort of
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  Speaker 4: no visibility beyond that. So can this rarey sustain those
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  Speaker 4: numbers that are driving the stock?
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  Speaker 5: Really gives investors three to three to.
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  Speaker 4: Four years quantifiable target and milestone to look at and
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  Speaker 4: now just track the execution.
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  Speaker 5: And those numbers are pretty huge.
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  Speaker 4: I mean you're talking about three to four x fold
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  Speaker 4: growth in just the Sam just from his three customers,
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  Speaker 4: not even including the additional two that they're working on.
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  Speaker 6: So Kulj help us think about Broadcom now in comparison
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  Speaker 6: to Nvidia and maybe even some of the other players.
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  Speaker 6: How's this industry as it relates to AI? How is
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  Speaker 6: it shaking out here?
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  Speaker 5: Yeah?
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  Speaker 4: I mean when you look at Broadcom just barely six
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  Speaker 4: months or a year ago, people didn't even think of
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  Speaker 4: it as an AI company, right. It was primarily the
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  Speaker 4: investor base. It was really loved for his free cash flow,
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  Speaker 4: generating ability, highly profitable, sustainable, slow, mid to high, high
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  Speaker 4: single digit grower. Now suddenly AI is going to become
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  Speaker 4: a huge chunk of its semi connective revenues. And in combination,
• 1:54
  Speaker 4: you still have the software revenues at high margin generating
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  Speaker 4: significant amount of cash. So you have this really growing
• 2:00
  Speaker 4: and media type or even growing faster in certain areas
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  Speaker 4: going forward than in AI story. Along with all the
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  Speaker 4: goodness of what do you want from a large gap
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  Speaker 4: which is high profitability, high operating margin, high free cash
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  Speaker 4: flow for the.
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  Speaker 3: Non AI stuff like the chips that go into like
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  Speaker 3: phones and cars and all that kind of stuff, How
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  Speaker 3: is that part of the business doing? Because it hasn't
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  Speaker 3: been doing very well. We've were waiting for their cycle
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  Speaker 3: globe recovery to kind of kick up.
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  Speaker 7: Where do Broadcom land on this.
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  Speaker 4: Yeah, I mean they are aligned very well to what
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  Speaker 4: rest of the cyclical semis are doing. I mean, look,
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  Speaker 4: twenty four was the bottom for.
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  Speaker 5: Most of its business.
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  Speaker 4: We do expect recovery starting early next year, but it's
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  Speaker 4: going to be really slow turning corners, so we don't
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  Speaker 4: expect any sort of fireworks there. But the good news
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  Speaker 4: is the way AI is expected to grow, that portion
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  Speaker 4: of the business is going to shrink and become a
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  Speaker 4: significantly smaller part of the chip business.
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  Speaker 6: All right, So as you step back from the semispace
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  Speaker 6: these days, Kunjan, what are the conversations you're having about
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  Speaker 6: the space in general? Is it in Vidia all the time?
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  Speaker 6: Do I want to own a basket of these things?
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  Speaker 6: What are some of the conversations you're having with your
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  Speaker 6: investor clients.
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  Speaker 4: Yeah, the top question is sort of searching for the
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  Speaker 4: next in media, trying to add more and more AI
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  Speaker 4: exposed names and who else in the semi sector and
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  Speaker 4: the peripheral sectors, whether it's foundries, whether it's memory, whether
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  Speaker 4: it's semiconductor equipment providers can benefit from this broadening AI boom.
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  Speaker 4: You know, the first beneficiary, almost entire.
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  Speaker 5: Beneficiary, was just one name in media. So that's a
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  Speaker 5: conversion we have and we have been actually.
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  Speaker 4: Calling out Broadcom and Marvell for quite a while now
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  Speaker 4: that these are going to be sort of the next
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  Speaker 4: set of beneficiaries from the coverage that we cover.
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  Speaker 3: When we take a look at Broadcom though, and the
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  Speaker 3: stock reaction in the near term, are we borrowing faith
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  Speaker 3: from like twenty twenty five or twenty twenty six, or
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  Speaker 3: is this like legit comp number rally?
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  Speaker 4: I mean, there is definitely a huge weightage given on
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  Speaker 4: their ability to execute to that large sam that they
• 4:03
  Speaker 4: have laid out. You know, investors have been who have
• 4:07
  Speaker 4: been following Hawk for many years, don't take what he
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  Speaker 4: says lightly.
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  Speaker 5: There's a big degree.
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  Speaker 4: Of conviction in what Hawks is and can deliver. So
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  Speaker 4: there's definitely a huge reliance in what you see in
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  Speaker 4: the stock movement that they will be able to sort
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  Speaker 4: of meet or execute on those numbers.
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  Speaker 6: So is the when we see like a big number
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  Speaker 6: coming out of the likes of Broadcom, does that give
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  Speaker 6: you pause for the NVIDIAs story that maybe there's a
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  Speaker 6: market share shift going along, that maybe the competition is
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  Speaker 6: starting to step up here.
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  Speaker 5: Not in the near term.
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  Speaker 4: Look, the merchant silicon GPU that and media sells versus
• 4:46
  Speaker 4: the custom that Broadcom does right now are being used
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  Speaker 4: for two different use cases, and both of those use
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  Speaker 4: cases that demand is booming, right, so it's a win
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  Speaker 4: win for everyone right now. Eventually, in theory, if this
• 5:00
  Speaker 4: demand rarely does normalize and there is some kind of digestion, Look,
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  Speaker 4: there's only so much these hyperscalers will spend, right, So
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  Speaker 4: eventually down the road we will come to a point
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  Speaker 4: where they will have to decide do they want to
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  Speaker 4: spend more in their custom and the GPU and what
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  Speaker 4: are people demanding for. At that point there will be
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  Speaker 4: wallet share competitiveness, but not at this given point, just
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  Speaker 4: because the use cases and applications are very different.
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  Speaker 3: They get the majority of their revenue really from Apple
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  Speaker 3: and WT Microelectronics. Right then it comes sort to Alphabet
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  Speaker 3: and Meta with about six to eight percent of its revenue.
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  Speaker 7: Thank you so much. Supply chain analysis function on the terminal.
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  Speaker 3: Are they trying to diversify that in a meaningful way
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  Speaker 3: or are they comfortable with that sort of waiting.
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  Speaker 4: I think it's just organically going to get diversified.
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  Speaker 2: Right.
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  Speaker 4: The wireless from Apple is not a fast growing business.
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  Speaker 4: It's a sort of mid single digit at best. Right, So,
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  Speaker 4: and there are some concerns around that it's too mature
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  Speaker 4: to talk about it. But even if you assume that
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  Speaker 4: business continues, and like the speed at which the AI
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  Speaker 4: business is.
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  Speaker 5: Going to increase, the speed at which Google.
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  Speaker 4: Meta and these other hyperskillers are become going to become
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  Speaker 4: a larger portion of broadcom, it is organically going to
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  Speaker 4: diversify away from the top two customers that you pointed out.
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  Speaker 1: All right, John, thanks so much for joining us.
• 6:14
  Speaker 5: KU.
• 6:14
  Speaker 6: John Sobani, senior analyst on semiconductors. He's over there Bloomberg Intelligence,
• 6:19
  Speaker 6: based in our San Francisco office right there in Silicon Valley,
• 6:23
  Speaker 6: close to all those big tech companies that he covers.
• 6:26
  Speaker 6: So that's a real advantage for us, Sir John Cobani
• 6:29
  Speaker 6: Sobani joining us there.
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  Speaker 1: That's a heck of a move for a company, you know, one.
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  Speaker 6: Trillion dollar market cap stock to move twenty percent. I've
• 6:37
  Speaker 6: said it when I was seeing some of the moves
• 6:39
  Speaker 6: from Nvidia, when they were moving ten twenty thirty percent
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  Speaker 6: a day. This is huge amounts of shareholder wealth being
• 6:46
  Speaker 6: created in this space. It just the absolute dollars are
• 6:50
  Speaker 6: kind of stunning for to take a look at it.
• 6:52
  Speaker 6: So this isn't any penny stock at there.
• 6:55
  Speaker 2: So you you're listening to the Bloomberg Intelligence Podcast. Catch
• 7:00
  Speaker 2: us live weekdays at ten am Eastern on applecar Play
• 7:04
  Speaker 2: and Android Otto with a Bloomberg Business Act. You can
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• 7:10
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• 7:15
  Speaker 7: All right, let's get two overseas.
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  Speaker 3: We're going to France President Manuel Maulcrant appointing Francois be
• 7:21
  Speaker 3: Roux as France's new prime minister to navigate a fractured
• 7:25
  Speaker 3: I feel like that's a nice way of saying a
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  Speaker 3: political landscape and there's a to do list that's very difficult.
• 7:30
  Speaker 3: Alan Katz's Bloomberg Paris bureau chief joins us. Now, Alan,
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  Speaker 3: does he have to get like approved or voted for
• 7:36
  Speaker 3: or is he just in power and then he's going
• 7:38
  Speaker 3: to make it work.
• 7:41
  Speaker 8: So the latter, he's just in power and he has
• 7:43
  Speaker 8: to make it work in France. The president gets to
• 7:45
  Speaker 8: nominate where he wants as prime minister. So great, so
• 7:49
  Speaker 8: now you've got corns by who. But he has to
• 7:52
  Speaker 8: get a few things done, most importantly as a twenty
• 7:54
  Speaker 8: twenty five budget, and that's what caused his predecessor got
• 7:57
  Speaker 8: nay Michel Bannier to get booted out in an confidence
• 8:00
  Speaker 8: vote last week.
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  Speaker 1: So that's going to be his first order.
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  Speaker 8: Well, his first order of business really is getting a
• 8:04
  Speaker 8: cabinet together, getting in government together, and then it's going
• 8:07
  Speaker 8: to be trying to get a twenty twenty five budget passed.
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  Speaker 8: So that's really the first things he's got to start
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  Speaker 8: to do, and it's not going to be easy.
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  Speaker 6: So alan, is there any reason to believe that this
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  Speaker 6: new prime minister will have any better luck with the
• 8:21
  Speaker 6: right and the left which caused the demise of the predecessor.
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  Speaker 8: So that's a good question. I guess the best answer
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  Speaker 8: is maybe he is. He's a centrist, right, so he
• 8:35
  Speaker 8: he has been known to do. I mean, originally sort
• 8:38
  Speaker 8: of his party was more aligned with the sort of
• 8:40
  Speaker 8: the center right back in the in the eighties and
• 8:42
  Speaker 8: the and the nineties, but then he famously voted for
• 8:46
  Speaker 8: a socialist for president in two thousand and seven rather
• 8:49
  Speaker 8: than the conservative guy, so he sort of he's reached
• 8:52
  Speaker 8: out to both sides over time. He also was very
• 8:54
  Speaker 8: famous for having supported malheinm le Penn's right to run
• 8:58
  Speaker 8: for president in two thousand and two and Francis to
• 9:00
  Speaker 8: get five hundred signatures and local officials to be able
• 9:02
  Speaker 8: to run for presidents, and he said, well, she's very popular.
• 9:05
  Speaker 8: We can't not have her run. That would be really
• 9:07
  Speaker 8: bad for democracy. I don't support her personally, but I
• 9:09
  Speaker 8: supported right to run, and the far right remembers that.
• 9:11
  Speaker 8: So he's got sort of possibilities. But then really getting
• 9:15
  Speaker 8: people onside is going to be much more difficult. Michelle
• 9:18
  Speaker 8: Baarnier the guy again who just got ousted. He sort
• 9:21
  Speaker 8: of had the far right on side for a while
• 9:23
  Speaker 8: also until they weren't. So far everyone today has been giving,
• 9:29
  Speaker 8: I guess, sort of mildly positive comments. They're going to
• 9:32
  Speaker 8: say we'll wait and see or what depends on what
• 9:33
  Speaker 8: he presents, but it's really not clear that he's necessarily
• 9:36
  Speaker 8: going to have any better luck than Michelle Banier did.
• 9:40
  Speaker 3: What does The far right and the far left want.
• 9:46
  Speaker 8: Very different things, but mostly what they want is someone
• 9:51
  Speaker 8: who's going to allow them to look good to their
• 9:54
  Speaker 8: voters as they get toward the twenty twenty seven presidential election.
• 9:59
  Speaker 8: That's one of the problems that we have in France
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  Speaker 8: right now, which is that you have this big block
• 10:03
  Speaker 8: on the left and a big block on the right.
• 10:05
  Speaker 8: On the right is led by a woman in Marine
• 10:06
  Speaker 8: Le penn and there's the most popular politician in many
• 10:09
  Speaker 8: polls in France, and certainly the person who leads polls
• 10:13
  Speaker 8: if the next presidential election was to happen today, the
• 10:16
  Speaker 8: person who's frequently number two, or if not number two,
• 10:18
  Speaker 8: number three is the guy on the far left, Nam
• 10:19
  Speaker 8: Jean Luke Bentent Chanp and the two of them are
• 10:22
  Speaker 8: definitely looking to the next presidential election. So all of
• 10:26
  Speaker 8: their decisions in the short term, in terms of what
• 10:28
  Speaker 8: happens in parliament, passing a budget or any other laws,
• 10:31
  Speaker 8: is all about what does this mean for how voters
• 10:33
  Speaker 8: are going to perceive me in twenty twenty seven, And
• 10:35
  Speaker 8: that makes for a very difficult relationship because sometimes there
• 10:39
  Speaker 8: are things that you might say, well, that's obvious, sure
• 10:41
  Speaker 8: they should like this, but then they don't. In the
• 10:44
  Speaker 8: case of Michaud Valgniert, he basically gave in to most
• 10:46
  Speaker 8: of the far rights demands, basically three out of four
• 10:49
  Speaker 8: main ones that they had, and they voted, you know,
• 10:51
  Speaker 8: they voted for emotion of no confidence anyway, because they
• 10:54
  Speaker 8: decided it was in their interest, in their longer term
• 10:57
  Speaker 8: interest to do so. So that makes it really quite difficult.
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  Speaker 6: Alan, thank you so much, appreciate your reporting. Alan Katz,
• 11:03
  Speaker 6: Paris bureau chief for Bloombergers. How cool is it that
• 11:06
  Speaker 6: we get people on the ground, really smart voices pretty
• 11:10
  Speaker 6: much everywhere around the world, and they come on the
• 11:12
  Speaker 6: air with us.
• 11:13
  Speaker 7: Very cool.
• 11:14
  Speaker 6: That is such a great and they really know what
• 11:15
  Speaker 6: they're doing advantage and they know exactly what they're talking.
• 11:17
  Speaker 6: I want to ask that next next time we talk
• 11:18
  Speaker 6: to Alan, how big of a story is it in
• 11:21
  Speaker 6: Paris and France the reopening of the Notre Dame, Because
• 11:24
  Speaker 6: I when you saw the damage from that fire five
• 11:26
  Speaker 6: years I'm like, they're never going to fix that stuff.
• 11:29
  Speaker 1: I mean, how do you fix that?
• 11:31
  Speaker 3: I mean we went to Paris last summer and it
• 11:33
  Speaker 3: was like, that's it's never gonna You're gonna be so behind,
• 11:36
  Speaker 3: And then they did it. I would think the culturally, yeah,
• 11:39
  Speaker 3: and the message it sounds is pretty It's pretty spectacular.
• 11:41
  Speaker 6: I mean I give my Corona pat on the back
• 11:43
  Speaker 6: and the French people pat on the back because that
• 11:45
  Speaker 6: was awesome.
• 11:46
  Speaker 1: I want to go prices and fuel prices, prices and
• 11:49
  Speaker 1: fuel prices. I get it. So we'll have more on
• 11:51
  Speaker 1: that coming up.
• 11:53
  Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
• 11:57
  Speaker 2: weekdays at ten am Eastern on Apple, card playing and
• 12:00
  Speaker 2: out with the Bloomberg Business app. Listen on demand wherever
• 12:03
  Speaker 2: you get your podcasts, or watch us live on YouTube.
• 12:08
  Speaker 3: All right, so we get the Fed on Wednesday, highly
• 12:10
  Speaker 3: expect to cut rates in December. The question then becomes
• 12:13
  Speaker 3: what happens in twenty twenty five if that neutral rays
• 12:15
  Speaker 3: moving up, as Bill Dudley, a former FED governor, was
• 12:18
  Speaker 3: talking about on surveillance, If he thinks the neutral rate
• 12:20
  Speaker 3: is three point five are a little bit higher, what
• 12:22
  Speaker 3: does that mean then for the trajectory of cuts, And
• 12:24
  Speaker 3: then what does it mean for sectors that are really
• 12:26
  Speaker 3: waiting for those cuts to kick in, like real estate,
• 12:30
  Speaker 3: maybe private markets, private equity. We want to deb a
• 12:32
  Speaker 3: little bit deeper into this with Miguel Sosa, head of
• 12:36
  Speaker 3: market research and strategy over Blue Rock. He joins us
• 12:39
  Speaker 3: now from Dallas, Texas. Before we get to the nitty
• 12:42
  Speaker 3: gritty of say, private credit and real estate, just give
• 12:44
  Speaker 3: us your broad views on twenty twenty five.
• 12:49
  Speaker 9: Yes, thank you, Alex. So we're excited about twenty twenty five.
• 12:53
  Speaker 9: We think that the markets are poised to perform well.
• 12:56
  Speaker 9: We've seen strong performance for twenty twenty four with a
• 13:00
  Speaker 9: change in administration. We think that the administration is very
• 13:03
  Speaker 9: business friendly, so that should provide an additional tailwind in
• 13:07
  Speaker 9: addition to having the high interest rate environment behind us.
• 13:11
  Speaker 9: And so what we're seeing is gradually moderating interest rates,
• 13:15
  Speaker 9: a predictable and shallow decrease in that interest rate curve
• 13:22
  Speaker 9: on the short end, stable in the ten year side
• 13:25
  Speaker 9: of the interest rate curve of the yield curve. And
• 13:27
  Speaker 9: so we think that twenty twenty five will be a
• 13:30
  Speaker 9: positive year for all asset classes.
• 13:32
  Speaker 1: All right, let's talk real estate here.
• 13:35
  Speaker 6: Where do you see opportunities in real estate?
• 13:38
  Speaker 1: Here?
• 13:38
  Speaker 6: We've got the Fed cutting rates. I would think that's
• 13:40
  Speaker 6: good for that asset class. Where are you guys seeing
• 13:44
  Speaker 6: the most opportunities?
• 13:46
  Speaker 10: Yes, sess correct.
• 13:47
  Speaker 9: So reducing the short end of the curve, the Fed
• 13:51
  Speaker 9: funds rate is beneficial indirectly for real estate because naturally
• 13:55
  Speaker 9: it moderates the cost of capital. We're seeing opportunities in
• 13:59
  Speaker 9: the indust space, in the multifamily space, and really in
• 14:02
  Speaker 9: the specialty space as well, and so these are all
• 14:06
  Speaker 9: sectors that are seeing low vacancy rates, and so that
• 14:10
  Speaker 9: helps to drive lease rates up because there is much
• 14:15
  Speaker 9: more demand relative to the supply that's available. And if
• 14:18
  Speaker 9: lease rates go up, the net operating income goes up.
• 14:22
  Speaker 9: ANDI for short, is a key driver of value. So
• 14:27
  Speaker 9: what we've seen recently in the last two years is
• 14:30
  Speaker 9: the capital values have come down significantly, but NI has
• 14:35
  Speaker 9: gone up significantly. So in other words, you can buy
• 14:38
  Speaker 9: more real estate at a discount, and that real estate
• 14:41
  Speaker 9: is generating more income and so that will hopefully drive
• 14:45
  Speaker 9: returns in the future.
• 14:48
  Speaker 3: How much of this is predicated on rates being cut
• 14:51
  Speaker 3: from the FED and how much of it is just
• 14:53
  Speaker 3: sort of the economic cycle.
• 14:57
  Speaker 9: I would say the majority is driven by the economic cycle.
• 15:01
  Speaker 9: The change in interest rate environment really inflated cap rates,
• 15:06
  Speaker 9: which was the main driver why prices were down. But
• 15:10
  Speaker 9: unlike the global financial crisis, which was the last big
• 15:13
  Speaker 9: drawdown for real estate, there's very strong fundamentals that are
• 15:18
  Speaker 9: driving real estate. Currently, like I said, vacancy rates are low,
• 15:23
  Speaker 9: and it's much harder to construct new developments new property
• 15:27
  Speaker 9: developments today versus fifteen years ago because of inflation, construction
• 15:32
  Speaker 9: costs are up. The other factor, for example, specifically for
• 15:36
  Speaker 9: the industrial space, is that we're all buying more products
• 15:40
  Speaker 9: online and we want them shipped to our houses faster,
• 15:44
  Speaker 9: and so that causes demand for warehouses that are closer
• 15:48
  Speaker 9: to city centers so they can get to our homes faster.
• 15:51
  Speaker 9: But nobody wants warehouses in city centers or close to cities,
• 15:55
  Speaker 9: and there's no vacant plots available for those warehouses. So
• 15:58
  Speaker 9: there's that inbound as well. And we have examples across
• 16:02
  Speaker 9: the board. Data centers for example, another great example, because
• 16:06
  Speaker 9: everybody is consuming more and more information constantly every year,
• 16:11
  Speaker 9: so that drives significant demand for data centers.
• 16:14
  Speaker 6: And tay all those warehouses for servicing New York City
• 16:17
  Speaker 6: and Philadelphia. The right in my backyard, in John Tucker's
• 16:20
  Speaker 6: backyard in Central Jersey, access to the New Jersey Turnpike, Garden,
• 16:23
  Speaker 6: State Parkway, all that kind of stuff to eighty seven.
• 16:26
  Speaker 6: You can serve both Philadelphia and New York.
• 16:28
  Speaker 7: Maybe that's why the UFOs are there. Maybe, yeah, exactly,
• 16:31
  Speaker 7: I mean we can make that length exactly.
• 16:33
  Speaker 6: Hey, hey, Miguel, let's say I want to go out
• 16:35
  Speaker 6: and buy some commercial real estate. Is my bank going
• 16:39
  Speaker 6: to lend me money? Where do we get the debt
• 16:41
  Speaker 6: financing these days?
• 16:44
  Speaker 2: Yes?
• 16:44
  Speaker 9: So typically commercial developers will go to specialty lenders, and
• 16:49
  Speaker 9: depending on what type of property one is buying. If
• 16:53
  Speaker 9: it's a fully developed and occupied building it's stabilized, as
• 16:57
  Speaker 9: they say, because the occupancy rate is high, then lenders
• 17:03
  Speaker 9: are much more willing to provide capital for that and
• 17:06
  Speaker 9: increase the loan to value on that property. But if
• 17:09
  Speaker 9: it's a empty plot of land and it's a development project,
• 17:13
  Speaker 9: then those are typically construction loans, and so there's a
• 17:17
  Speaker 9: wide variety of sources for capital. Banks have typically been reluctant,
• 17:23
  Speaker 9: especially recently, to provide capital for sectors that are struggling
• 17:27
  Speaker 9: from the office space, but there's certainly a broad variety
• 17:32
  Speaker 9: of sources of capital, starting from banks all the way
• 17:35
  Speaker 9: to individual investors who are happy to provide some of
• 17:39
  Speaker 9: those short term construction loans.
• 17:41
  Speaker 3: Before I let you go for say, private credit. Where
• 17:45
  Speaker 3: are the opportunities they are going into twenty twenty five.
• 17:49
  Speaker 9: Yes, private credit is one of our favorite sectors specifically because,
• 17:54
  Speaker 9: as I mentioned, the interest rate is in this goldilocks
• 17:57
  Speaker 9: phase where we aren't in twenty three year twenty four,
• 18:01
  Speaker 9: where we don't have that visibility or uncertainty of how
• 18:04
  Speaker 9: long and how far interest rates will climb. And so
• 18:07
  Speaker 9: interest rates are at a point where the peak is
• 18:11
  Speaker 9: behind us, but they're not at zero either, and so
• 18:15
  Speaker 9: that favors the lenders versus the borrowers. Now you can,
• 18:20
  Speaker 9: especially in private credit and alternative private credit, you can
• 18:24
  Speaker 9: receive nine percent, ten percent even interest rate on loans
• 18:30
  Speaker 9: to corporations that are established, they're mature, they're cash flowing,
• 18:34
  Speaker 9: and that are going to pay through that debt until maturity.
• 18:38
  Speaker 1: Begail, thanks so much for joining us.
• 18:40
  Speaker 6: Migel Sosa, head of market research and Strategy at Blue Rock,
• 18:44
  Speaker 6: joining Ustart talking about the commercial real estate business, and
• 18:46
  Speaker 6: of course a commercial real estate business, as is residential
• 18:50
  Speaker 6: real estate really dependent upon interest rates.
• 18:53
  Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
• 18:57
  Speaker 2: weekdays at ten am Eastern on applecar Play and royd
• 19:00
  Speaker 2: Otto with a Bloomberg Business. You can also listen live
• 19:04
  Speaker 2: on Amazon Alexa from our flagship New York station just
• 19:07
  Speaker 2: say Alexa play Bloomberg eleven thirty.
• 19:10
  Speaker 3: Here was a headline that was interesting. Well, I mean,
• 19:13
  Speaker 3: I think for anyone listening it was interesting. Is the
• 19:14
  Speaker 3: Trump advisors are considering raising salt right off limit from
• 19:18
  Speaker 3: ten thousand to twenty thousand.
• 19:21
  Speaker 7: Why not forty thousands?
• 19:22
  Speaker 1: Exactly?
• 19:23
  Speaker 7: Why justinate it twenty just you know, move it up there.
• 19:26
  Speaker 1: I'm sure your property taxes.
• 19:29
  Speaker 7: It's a good question. If can you multiply third fourteen thousand?
• 19:34
  Speaker 7: I think, well, okay, is that about?
• 19:37
  Speaker 1: That's about around these parts?
• 19:39
  Speaker 7: Is it a wow?
• 19:39
  Speaker 5: Nothing?
• 19:40
  Speaker 7: Is it a wow?
• 19:41
  Speaker 10: That's pans.
• 19:42
  Speaker 1: You go north of New York City into Westchester and
• 19:44
  Speaker 1: that's really low. It's like in the twenties for just
• 19:47
  Speaker 1: a regular house.
• 19:48
  Speaker 3: I live in an apartment building. Yeah, like a fourteen
• 19:51
  Speaker 3: hundred square put apartment building. And every year I feel
• 19:54
  Speaker 3: like the property taxes goes up. That's when I knew
• 19:56
  Speaker 3: I was an adult.
• 19:56
  Speaker 1: But you're here in Brooklyn.
• 19:58
  Speaker 3: I'm in park Slow Parks is like the non post
• 20:01
  Speaker 3: places where people go to head babies and dogs.
• 20:04
  Speaker 7: Anyway.
• 20:04
  Speaker 3: Henry Andaturs is managing partner and director of Economic Policy
• 20:07
  Speaker 3: of Beta Partners. And she joins us, how real can
• 20:09
  Speaker 3: we take this salt tease?
• 20:13
  Speaker 11: Very seriously? So good news for you, for sure. I
• 20:16
  Speaker 11: commiserate with folks who want it larger. This is the
• 20:20
  Speaker 11: minimum I think they have to have for a tax
• 20:24
  Speaker 11: bill to pass next year the salt caucus. And indeed,
• 20:26
  Speaker 11: a lot of the Republican gains in the House of
• 20:28
  Speaker 11: Representatives have come from new voters that they're finding in
• 20:32
  Speaker 11: New York, Connecticut, New Jersey, California, states where these salt
• 20:36
  Speaker 11: caps are extraordinarily painful, and the members are being very
• 20:41
  Speaker 11: clear and vocal.
• 20:41
  Speaker 10: They've gotten more and more.
• 20:43
  Speaker 11: Adamant and united over the last seven years since this
• 20:46
  Speaker 11: tack built passed that they have to see a change
• 20:49
  Speaker 11: to salt if there is any tax title in any
• 20:51
  Speaker 11: legislation going forward. So they'll try to get it in
• 20:54
  Speaker 11: the first reconciliation bill. If there's a second, they'll try
• 20:56
  Speaker 11: to get it into that, and they will threaten their votes,
• 20:59
  Speaker 11: which with the zero of a margin in the House,
• 21:01
  Speaker 11: means that you have to cater to their requests.
• 21:04
  Speaker 6: Henrietta, can you give us the latest on the expectations
• 21:08
  Speaker 6: for confirmations of some of President Elect Trump's more contentious
• 21:13
  Speaker 6: nominees for cabinet positions.
• 21:15
  Speaker 1: Have we seen any movement one way or the other.
• 21:18
  Speaker 11: I think we have a long way to go here,
• 21:20
  Speaker 11: and you can see the various factions coming out behind
• 21:23
  Speaker 11: the scenes trying to sink or lift various candidates. One
• 21:27
  Speaker 11: of the things that would make me expect those stories
• 21:30
  Speaker 11: to continue negatively, for example his nominee hexas or for
• 21:35
  Speaker 11: Tulsi Gabbard, is that there are other folks waiting in
• 21:37
  Speaker 11: the wings who know that in the event that their
• 21:39
  Speaker 11: nominations fail, they could be the ones to gain.
• 21:42
  Speaker 10: So there's a lot of.
• 21:43
  Speaker 11: Negativity that you see sort of in the behind the
• 21:46
  Speaker 11: scenes work, specifically on Tulsi Gabbard.
• 21:49
  Speaker 10: I would say that.
• 21:50
  Speaker 11: Is going to continue to eat into the next month
• 21:54
  Speaker 11: of the conversation, until the negotiations really start in the
• 21:57
  Speaker 11: confirmation hearing start and they get these folks up for
• 22:00
  Speaker 11: a vote in late January.
• 22:02
  Speaker 10: So there's a long way to go.
• 22:04
  Speaker 11: I think Chelsea Gabert in particular is pretty empowerlled right now.
• 22:08
  Speaker 3: Other news that struck me overnight was the Wall Street
• 22:10
  Speaker 3: Journal reporting that potentially Trump could get rid of the
• 22:12
  Speaker 3: FDIC and put deposit insurance in hands of Treasury now,
• 22:16
  Speaker 3: abolishing a whole unit of the government like that would
• 22:19
  Speaker 3: be very rare.
• 22:20
  Speaker 7: Can you walk me through it? You think of that potential.
• 22:23
  Speaker 11: I don't take those claims particularly seriously. One of the
• 22:26
  Speaker 11: things that we should just keep is our base case
• 22:28
  Speaker 11: is understanding that Congress has the power of verse, and
• 22:31
  Speaker 11: that is something that the Supreme Court has stress tested.
• 22:34
  Speaker 11: In nineteen seventy four and in other iterations. Bill Clinton
• 22:37
  Speaker 11: famously tried a line at him Vito where he tried
• 22:39
  Speaker 11: to just cancel out entire lines of funding that the federal.
• 22:43
  Speaker 10: Government or Congress had authorized. It's just not legal.
• 22:46
  Speaker 11: It is unconstitutional and runs a foul of so many
• 22:49
  Speaker 11: different things.
• 22:50
  Speaker 10: Plus you have a lot of members who.
• 22:51
  Speaker 11: Get really uncomfortable moving agencies into other auspices. Another example
• 22:56
  Speaker 11: to pile on the FDIC thing would be the USTR.
• 23:00
  Speaker 11: Electron has said that he's going to put US Trade
• 23:02
  Speaker 11: Representative and that office underneath the Department of Commerce, and
• 23:06
  Speaker 11: immediately you see members come out of the woodwork and say, Hey,
• 23:08
  Speaker 11: that's not what we're into, that's not.
• 23:10
  Speaker 10: What it's supposed to be. Keep these two things separate.
• 23:12
  Speaker 11: That was very similar to what we saw on Trump's
• 23:15
  Speaker 11: first term and Ultimately those did not come to pass.
• 23:18
  Speaker 1: Elon Musk DOGE.
• 23:21
  Speaker 6: It's been a week or so of I guess no
• 23:24
  Speaker 6: news on kind of that front. Is that whole cost
• 23:27
  Speaker 6: cutting aspect, How should we think about that and how
• 23:30
  Speaker 6: might that play out in the first one hundred days.
• 23:33
  Speaker 11: Yeah, I mean we can talk about DOJ, they can
• 23:36
  Speaker 11: have committee hearings, they can form caucuses in the House
• 23:39
  Speaker 11: and the Senate y'or even bipartisan now in the House.
• 23:42
  Speaker 10: But let's look at what's really happening.
• 23:44
  Speaker 11: They just voted on in the House a National Defense
• 23:47
  Speaker 11: Authorization Act that increases defense spending by one percent. Next week,
• 23:51
  Speaker 11: starting on Sunday, they will roll all out a continuing
• 23:53
  Speaker 11: resolution that provides one hundred billion dollars in additional funding
• 23:57
  Speaker 11: for hurricanes and typhoons. There is additional a to Ukraine,
• 24:01
  Speaker 11: there's additional aid to of all host of factors, and
• 24:04
  Speaker 11: federal spending next year will continue to rise.
• 24:07
  Speaker 10: Whether DOGE exists.
• 24:08
  Speaker 11: In holds meetings or not, federal spending is.
• 24:10
  Speaker 10: Going to rise into next year.
• 24:12
  Speaker 11: They'll vote on it as soon as Thursday of next week,
• 24:14
  Speaker 11: and you can take that to the bank.
• 24:16
  Speaker 7: What else are you paying attention to?
• 24:18
  Speaker 3: As we head out of twenty twenty four into twenty
• 24:20
  Speaker 3: twenty five as well, not only from President like Trump
• 24:24
  Speaker 3: but also President Biden.
• 24:26
  Speaker 11: The most important thing for me is watching the Senate
• 24:28
  Speaker 11: and the House budget committees. I know it sounds fluky,
• 24:31
  Speaker 11: but this is the single most important thing to watch
• 24:33
  Speaker 11: going into next year. What we've already seen from Senate
• 24:36
  Speaker 11: Republican leadership and new leader Fune is that they are
• 24:40
  Speaker 11: appreciating and expecting for the tax bill to take all
• 24:44
  Speaker 11: year to write. We started off with the Salt Caucus conversation.
• 24:46
  Speaker 11: It's because of that one point two trillion dollars revenue
• 24:49
  Speaker 11: raiser being completely unpalatable to eighteen members of the House
• 24:53
  Speaker 11: that they're going to have to negotiate all year on
• 24:55
  Speaker 11: a tax bill. So what that first tells me is
• 24:57
  Speaker 11: that the deficit appetite for the tax bill is going
• 25:00
  Speaker 11: to be very controversial. It's very problematic, and they want
• 25:03
  Speaker 11: to take that voat much later in the year. They'd
• 25:04
  Speaker 11: like to score some smaller sort of red meat wins
• 25:08
  Speaker 11: on immigration, increasing border spending, increasing energy and oil and
• 25:13
  Speaker 11: gas permitting that kind of legislation, and that strategy is
• 25:17
  Speaker 11: going to come out on January fourth, when House Republican
• 25:20
  Speaker 11: leadership has a meeting with the full Republican Conference to
• 25:24
  Speaker 11: see if they can tolerate a two reconciliation bill strategy
• 25:27
  Speaker 11: or just one.
• 25:28
  Speaker 10: So the conversations behind.
• 25:29
  Speaker 11: The scenes are already taking place there. Invessors should be
• 25:32
  Speaker 11: very much following that right now.
• 25:34
  Speaker 10: It has huge.
• 25:34
  Speaker 11: Implications for tax policy, for immigration, defense spending, deficit spending, bonds,
• 25:40
  Speaker 11: everything happening now Henrietta.
• 25:43
  Speaker 6: To what extent, if at all, the folks really the
• 25:46
  Speaker 6: folks inside the beltwagh that people that are there year
• 25:49
  Speaker 6: in year out, do they view President Electrump as a
• 25:52
  Speaker 6: lame duck president.
• 25:56
  Speaker 11: I think there's two ways of looking at that. One
• 25:59
  Speaker 11: that you have and impetus to actmediately, So that's really
• 26:02
  Speaker 11: relevant for them. On the trade front, it takes forever
• 26:05
  Speaker 11: to negotiate with foreign nations. We've seen that from twenty seventeen.
• 26:08
  Speaker 11: In twenty eighteen, we still do not have a trade
• 26:10
  Speaker 11: agreement with the EU, We do not have a trade
• 26:12
  Speaker 11: agreement with Canada, with China. So I think the trade
• 26:16
  Speaker 11: agencies are going to kick off much earlier in the
• 26:20
  Speaker 11: second truck term than they did in twenty seventeen. That
• 26:23
  Speaker 11: year we had to wait the full year for the
• 26:25
  Speaker 11: tax builder you're written, and then we could get into
• 26:27
  Speaker 11: the trade universe. This time, I expect the tax agency,
• 26:30
  Speaker 11: excuse me, the tariff agencies USTR, Commerce BIS to come
• 26:34
  Speaker 11: out guns blazing immediately. So that's acknowledgment that you only
• 26:38
  Speaker 11: have four years to operate, and it takes forever just
• 26:41
  Speaker 11: to hold a meeting with China to pick out what
• 26:43
  Speaker 11: location you're going to be meeting in, if they'll even
• 26:46
  Speaker 11: come to the table and negotiate with you in the
• 26:47
  Speaker 11: first place. So I think Lame Duck has a sense
• 26:50
  Speaker 11: of nothing will happen on the trade front. I think
• 26:52
  Speaker 11: it means everything needs to happen immediately so that you
• 26:55
  Speaker 11: have and are taking advantage of the limited four years
• 26:58
  Speaker 11: that you do have.
• 26:58
  Speaker 3: Which I love how you brought that up, because then
• 27:00
  Speaker 3: it's a sequencing conversation, right, If you have taxes, you
• 27:03
  Speaker 3: have immigration, and you have tariffs, and you what's the
• 27:06
  Speaker 3: sequencing of all of that.
• 27:08
  Speaker 11: Yeah, this sequencing is critical. So the tax bill is
• 27:11
  Speaker 11: not going to be written until the end of the year.
• 27:12
  Speaker 10: The deadline is not till the summer thirty first, They.
• 27:14
  Speaker 11: Will not do it until your end Immediately, then you're
• 27:17
  Speaker 11: going to have tariffs, and the tariffs are a massive
• 27:20
  Speaker 11: hit on American consumers one point four billion dollars in
• 27:24
  Speaker 11: real income per month hit from just the existing tariffs.
• 27:28
  Speaker 10: So when we double them.
• 27:29
  Speaker 11: And put them at thirty five percent or higher sixty percent,
• 27:34
  Speaker 11: as President life Trump has advocated, that's going to be
• 27:36
  Speaker 11: a substantial hit to the US consumer in advance of
• 27:39
  Speaker 11: any certainty about tax policy that will come.
• 27:42
  Speaker 10: At the end of the year.
• 27:43
  Speaker 11: The immigration component also will happen immediately. You're seeing that
• 27:46
  Speaker 11: in both Canada and Mexico now as those two nations
• 27:49
  Speaker 11: try to accommodate Trump before he comes into office uses
• 27:52
  Speaker 11: the IEPA authority to impose tariffs.
• 27:54
  Speaker 10: And limits immigration that way.
• 27:56
  Speaker 11: So you're going to see the hit to immigration and
• 27:58
  Speaker 11: the tariffs earlier than you're going to see any certainty
• 28:02
  Speaker 11: around the straight line extension of the existing tax rates.
• 28:05
  Speaker 11: I think it's important to note that we're not talking
• 28:07
  Speaker 11: about additional tax cuts to offset maybe the negatives of
• 28:11
  Speaker 11: these tariffs. You're talking about a four point six trillion
• 28:13
  Speaker 11: dollar cost of just keeping tax cuts.
• 28:15
  Speaker 10: At their current rate, tax rates at their current rate.
• 28:18
  Speaker 1: All right, this one we're doing, Alex.
• 28:19
  Speaker 6: We're sending Henriette to Washington to just fix things, just
• 28:22
  Speaker 6: get stuff done.
• 28:23
  Speaker 1: That's how good she is.
• 28:24
  Speaker 6: Henrietta Tres, Manager partner and director of Economic Policy at
• 28:27
  Speaker 6: Vita Partners.
• 28:28
  Speaker 1: I'd send her at Washington tomorrow to get stuff done.
• 28:31
  Speaker 1: She knows what she's talking about there.
• 28:32
  Speaker 2: This is the Bloomberg Intelligence Podcast, available on Apples, Spotify,
• 28:37
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• 28:40
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• 28:44
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• 28:51
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