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Government Shutdown, Real Estate, and Tesla · Bloomberg Intelligence

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  Speaker 2: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney. Alongside
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  Speaker 3: All right, let's get down.
• 0:56
  Speaker 2: To Washington, DC, only because we have to where it's
• 1:00
  Speaker 2: all happening.
• 1:01
  Speaker 3: Nathan Dean joins us.
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  Speaker 2: He's a senior policy onis with Bloomberg Intelligence, and Jordan
• 1:05
  Speaker 2: Fabian White House reporter with Bloomberg News, Nathan, I just
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  Speaker 2: want to start with you, are you going to shut
• 1:11
  Speaker 2: down our government again?
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  Speaker 3: What's going on down down there?
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  Speaker 4: So you know, I may be a little bit out
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  Speaker 4: of consensus on this, we're still telling folks forty percent
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  Speaker 4: chance of a shutdown unless you have this like temporary
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  Speaker 4: shutdown that bleeds over to the weekend. The reason being
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  Speaker 4: is is that you know, there are so many different
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  Speaker 4: ideas that being thrown around by House Republicans, by the Senate,
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  Speaker 4: by Ukraine and Israel and so forth, and none of
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  Speaker 4: these political cakes are baked. And you know, there's really
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  Speaker 4: no strategy of why you would have a shutdown at
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  Speaker 4: this point other than just we want to shut it down.
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  Speaker 4: And so we Speaker Johnson still and you know what
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  Speaker 4: you would call the the infancy of his speakership. And
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  Speaker 4: obviously he made some statements over the weekend that he's
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  Speaker 4: seeking for more time as he does his letter at
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  Speaker 4: see our idea and so forth. We're telling folks, you know,
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  Speaker 4: he may be able to get that, So don't be
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  Speaker 4: surprised that this goes in the December fifteenth or even
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  Speaker 4: January February. But ultimately what people should know as they
• 2:02
  Speaker 4: approach it from the market perspective is that there really
• 2:05
  Speaker 4: isn't all that impact outside of just trying to just
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  Speaker 4: keep your eye on it. Even the defense contractors aren't
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  Speaker 4: all that exposed. I mean, we really would have to
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  Speaker 4: see a two months shutdown, if not longer, for those
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  Speaker 4: economic impacts to be leading into the market. So unfortunately
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  Speaker 4: for a lot of the folks just watching, it's one
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  Speaker 4: of those political popcorn watch events again.
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  Speaker 1: All right, So the White House has said that Johnson's
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  Speaker 1: plan would only lead to future shutdowns, and President Biden
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  Speaker 1: could issue a formal veto threat today. Jordan Fabian, you
• 2:37
  Speaker 1: cover the White House for us. What do we expect
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  Speaker 1: from President Biden and what's the what are their problems
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  Speaker 1: with this plan?
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  Speaker 5: I think we could see a veto threat today or
• 2:46
  Speaker 5: something a little short of that, which is basically an
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  Speaker 5: advisor's recommendation that he not signed. It's these Washington terms
• 2:53
  Speaker 5: of craft. But we'll be watching closer to see what
• 2:56
  Speaker 5: they say. Look, the White House is frustrated with this
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  Speaker 5: dragged out process that you know, they thought should have
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  Speaker 5: been resolved with the debt ceiling agreement back in the spring,
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  Speaker 5: which sets spending levels. Republicans through that out the window,
• 3:09
  Speaker 5: and so they're frustrated over that and the fact that
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  Speaker 5: there's no Ukraine aid in this package, and the White
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  Speaker 5: House is getting anxious that maybe this is the last
• 3:18
  Speaker 5: bite of the apple, and so they want to exert
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  Speaker 5: whatever leverage they can to try to get that included.
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  Speaker 5: And thus you're seeing these statements that are highly critical
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  Speaker 5: of Speaker Johnson's approach.
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  Speaker 3: But they would be.
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  Speaker 1: I mean, if if Biden veto's it shutting down the government,
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  Speaker 1: then the Democrats get the blame for something that the
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  Speaker 1: whole country is angry with the Republicans for right now.
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  Speaker 1: You know, they're in a great situation because the country
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  Speaker 1: blames all of this on the other party.
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  Speaker 3: Do they risk that?
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  Speaker 6: Yeah?
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  Speaker 5: That's why I think Nathan raises a good point, which
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  Speaker 5: is that you know, I think you may and you
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  Speaker 5: raise valid points too, which is Democrats absolutely don't want
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  Speaker 5: any share of the blame for a government shutdown. So
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  Speaker 5: my suspicion is if a cr were to reach the
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  Speaker 5: President's desk, he would sign it and you know, kick
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  Speaker 5: the can down the road for a couple of months
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  Speaker 5: and try again in January to get his priorities funded.
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  Speaker 5: But it's still an open question of whether this laddered
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  Speaker 5: CR gets through the House. There's still this faction of
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  Speaker 5: hell no fiscal hawk House Republicans who you don't want
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  Speaker 5: to take guess for an answer, and Johnson can only
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  Speaker 5: afford to lose three votes.
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  Speaker 3: That's not a lot.
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  Speaker 5: So we'll be watching closely. There's some test votes coming
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  Speaker 5: up in the next twenty four hours to see what
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  Speaker 5: level of support there is for this package.
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  Speaker 2: So Nathan and I guess in the interim, what legislation
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  Speaker 2: is not getting worked on, it's not getting passed.
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  Speaker 3: What are we missing here?
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  Speaker 4: Well, I mean there's a lot of stuff that are
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  Speaker 4: it's more of the sector level. I mean, obviously we've
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  Speaker 4: talked about pot banking before. You know, there are a
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  Speaker 4: lot of people would love to see that move forward.
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  Speaker 4: There's really no work that's being done on it. Crypto
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  Speaker 4: the NDAA. You know, there's a lot of legislation out
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  Speaker 4: there that needs to get done and you know, we're
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  Speaker 4: just talking about c and so ultimately there's still going
• 5:02
  Speaker 4: to be enough time to get that stuff done. But
• 5:05
  Speaker 4: you know, time's going to run out before we get
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  Speaker 4: into this election cycle where folks are just going to
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  Speaker 4: be more paying attention to their districts. I still think
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  Speaker 4: that a shutdown is coming. I honestly do think that
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  Speaker 4: we're going to have a multi week shutdown. I just
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  Speaker 4: think it's going to be in the beginning of next year,
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  Speaker 4: because there will come a point in which Speaker Johnson
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  Speaker 4: and the Democrats just will not agree and both sides
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  Speaker 4: will say, Okay, I think politically it's best for us
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  Speaker 4: to just you know, have this fight out and let's
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  Speaker 4: let the chips lie. But ultimately, for the Republicans right now,
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  Speaker 4: as you recall, you know, last week, they had a
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  Speaker 4: very bad week in Virginia where I am in Kentucky
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  Speaker 4: and Ohio and so forth like that, they don't want
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  Speaker 4: to have that happen twice in the span of two weeks.
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  Speaker 4: So I think right now that all this uncertainty is
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  Speaker 4: just going to get pushed into January and we'll be
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  Speaker 4: talking about it then.
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  Speaker 3: Jordan.
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  Speaker 1: Let's talk about, you know, the the upcoming election. We're
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  Speaker 1: already seeing ads from the Biden administration trying to convince
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  Speaker 1: Americans that his age isn't a problem, although many people
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  Speaker 1: polled are concerned about his ability to get through another
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  Speaker 1: four years. You know, what's their tactic and what do
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  Speaker 1: they say about I always wonder about Kamala Harris, because
• 6:14
  Speaker 1: if you're really worried about the president's age, you should
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  Speaker 1: be doubly focused on the vice presidential candidate.
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  Speaker 5: Right Well, the Biding campaign has a lot of money
• 6:25
  Speaker 5: right now. They have about ninety one million dollars in
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  Speaker 5: cash in hand, So they're spending some money now to
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  Speaker 5: try and get those concerns alaied and try to lay
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  Speaker 5: the groundwork for a broader and more aggressive pitch later
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  Speaker 5: next year for reelection. So they're trying to address the
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  Speaker 5: age question. They're trying to address the Americans' concerns with
• 6:44
  Speaker 5: the cost of living. So if you look listen to
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  Speaker 5: their messaging, there's ads showing Biden walking through Kiev with
• 6:51
  Speaker 5: the sunglasses on and talking about these things in the
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  Speaker 5: Inflation Reduction Act that we're supposed to lower prices. But look,
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  Speaker 5: it's I think their best hope is not necessarily convincing
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  Speaker 5: Americans that you know, Biden is this spry young man,
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  Speaker 5: but that they're going to be possibly running against Donald Trump,
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  Speaker 5: someone who's very unpopular and someone you know who's also
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  Speaker 5: up there in age and has shown some propensity for
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  Speaker 5: gaffs and the like. So you know, it's like Biden
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  Speaker 5: always says, don't compare me to the almighty, compare me
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  Speaker 5: to the alternative.
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  Speaker 2: Hey, Jordan, it's going to be a big week for
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  Speaker 2: President Biden out in San Francisco, who'll be meeting with
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  Speaker 2: Chinese President Jijiping. What's the White House? What's a kind
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  Speaker 2: of the game plan? Here's what's the goal? What would
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  Speaker 2: be a success?
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  Speaker 3: What are you hearing.
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  Speaker 5: They want to set a floor under this US China relationship.
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  Speaker 5: I don't think you're going to see a bunch of
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  Speaker 5: major deliverables coming out of this meeting, like some sort
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  Speaker 5: of agreement on Taiwan or broader economic rules of the road.
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  Speaker 5: Those are the two obviously main concerns in the relationship.
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  Speaker 5: But you could see things like resumption of military to
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  Speaker 5: military communication, some incremental things on climate, fentanyl trafficking cutting
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  Speaker 5: out of this meeting. And I think that again, the
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  Speaker 5: meaning itself is almost a deliverable for President Biden, who
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  Speaker 5: wants to reset this relationship in a way that puts
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  Speaker 5: up guardrails, make sure that tensions don't escalate out of
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  Speaker 5: control like they did earlier. This year with a spibulin incident.
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  Speaker 2: So perspective of just greater d C, I mean, what's
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  Speaker 2: the concern level here just about US China relations?
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  Speaker 4: Well, I mean, first I want my pandas back. I mean,
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  Speaker 4: obviously we lost our pandas you know, I'm joking there,
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  Speaker 4: but you know, obviously, you know, when it comes to
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  Speaker 4: the US China relations, it comes down to clarity. That's
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  Speaker 4: what investors want, is they want to know what the
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  Speaker 4: clarity is and what's going to happen. I mean there's
• 8:42
  Speaker 4: you know, all these questions with Taiwan and so forth
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  Speaker 4: like that, and so I think anytimes you get this
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  Speaker 4: type of communication between the presidents in the premiere and
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  Speaker 4: so forth like that, that you get this at least
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  Speaker 4: get something that you can work with. So I don't
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  Speaker 4: think Washington in particular, and you know, Jordan can correct
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  Speaker 4: me if I'm wrong. You know, I don't think Washington
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  Speaker 4: in particular has any real hopes for this meeting. But
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  Speaker 4: it's just something that we'd like to see so that
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  Speaker 4: we can see the communication, we can get information, we
• 9:07
  Speaker 4: can get transparency, and at least have a better idea
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  Speaker 4: of what's happening down the road. Because if anytimes they're
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  Speaker 4: not talking, then you just get what's happening. Nobody knows, right, all.
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  Speaker 3: Right, Nathan Hagger, Nathan Dean, thank you so much. We
• 9:18
  Speaker 3: appreciate it.
• 9:18
  Speaker 2: Nathan Dean, He's a senior policy analyst with Bloomberg Intelligence,
• 9:21
  Speaker 2: and Jordan Famian, a White House reporter with Bloomberg News,
• 9:24
  Speaker 2: both of them down in DC.
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• 9:38
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• 9:42
  Speaker 2: Looking at the stock of Boeing up four percent, looks
• 9:45
  Speaker 2: like they sold a bunch of aircraft to the Emirates Airlines.
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  Speaker 3: That sounds like a good deal. Let's break that down
• 9:50
  Speaker 3: in Everything.
• 9:51
  Speaker 2: Aerospace with George Ferguson, senior aerospace, defense and airline analysts
• 9:56
  Speaker 2: for Bloomberg Intelligence. Former militi sorry intelligence officer in the
• 10:01
  Speaker 2: US Army. So we think mister Ferguson for his service here. George,
• 10:05
  Speaker 2: talk us first about this Emirates deal. The number got
• 10:09
  Speaker 2: my attention, like a lot of billions of dollars.
• 10:13
  Speaker 8: Yeah, no, it's a big order, right, So there's about
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  Speaker 8: ninety five airplanes, nine of them Triple sevens. But that
• 10:21
  Speaker 8: triple seven, yeah, they already had the largest order.
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  Speaker 6: In the book for that airplane.
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  Speaker 8: Emirates likes to refresh their fleet sort of every fifteen years.
• 10:30
  Speaker 8: They don't like to go much further than a fifteen
• 10:32
  Speaker 8: year old airplane. They've been waiting for this Triple seven
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  Speaker 8: to show up, so they're adding more to that backlog.
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  Speaker 6: I don't know that that.
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  Speaker 8: Significantly boosts Bowing profit because my guess is that airplane
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  Speaker 8: comes out the door in the mid twenty twenties once
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  Speaker 8: it gets certified at low rates, you know, at threes or.
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  Speaker 6: Fives kind of per month.
• 10:53
  Speaker 8: So I mean, every order is a great order, but
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  Speaker 8: that order probably takes a fair amount of time to fulfill.
• 11:00
  Speaker 8: Seventy eight seven was interesting to see them order as well.
• 11:02
  Speaker 6: They would have five.
• 11:03
  Speaker 8: More, not a lot. They already had an order on
• 11:06
  Speaker 8: the book for some seven eight sevens. They have orders
• 11:09
  Speaker 8: in the books for seventy sevens and eight three fifties,
• 11:12
  Speaker 8: which you know, I see is sort of two competing airplanes,
• 11:16
  Speaker 8: the Boeing and the Airbus version of that smaller long
• 11:19
  Speaker 8: haul airplane. Typically Emirates tries to run a cleaner fleet.
• 11:22
  Speaker 8: They run a fleet of usually two types, so I'm
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  Speaker 8: a little surprised to see them keep that airplane on
• 11:29
  Speaker 8: the order books. I thought they might have placed an
• 11:30
  Speaker 8: order for triple seven and rationalized that because I think
• 11:34
  Speaker 8: that when they're done, they're going to want to go
• 11:36
  Speaker 8: back to again a sort of a two airplane fleet,
• 11:39
  Speaker 8: and I thought it was going to be a three
• 11:40
  Speaker 8: point fifty triple seven. So that was pretty interesting to
• 11:43
  Speaker 8: see them go back for five more seven eight sevens.
• 11:46
  Speaker 8: Not a lot splashy order long period of time before
• 11:50
  Speaker 8: we deliver all those.
• 11:50
  Speaker 1: Airport George walk us through. The difference is, you know,
• 11:53
  Speaker 1: people who don't cover Boeing for a living may not
• 11:56
  Speaker 1: and people don't fly as much as Paul Sweeney might
• 11:58
  Speaker 1: not know what all these aircraft are. We we know
• 12:04
  Speaker 1: the seven three seven and the A three twenties. They're
• 12:06
  Speaker 1: the narrow body single aisle aircraft that really blow to
• 12:12
  Speaker 1: actually be a passenger on because there's no room at all.
• 12:16
  Speaker 1: But is the seven seven seven Is that a bigger airplane?
• 12:23
  Speaker 6: Yeah?
• 12:23
  Speaker 8: So you know, since the pandemic, we saw the eight
• 12:25
  Speaker 8: three eighty and the seven four seven, the big four
• 12:28
  Speaker 8: engine airplanes. We see them, We got to see them
• 12:30
  Speaker 8: taken out of production. And so after those airplanes come
• 12:33
  Speaker 8: out of production, Triple seven will be the largest airplane
• 12:37
  Speaker 8: in the skies. Really, you know, the sizes of that
• 12:40
  Speaker 8: Triple seven are starting to actually not even starting.
• 12:43
  Speaker 6: They're rivaling the seven four to seven.
• 12:45
  Speaker 8: You can get four hundred mid four hundred kind of
• 12:48
  Speaker 8: numbers of people on that airplane, depending on how you
• 12:50
  Speaker 8: can figure it.
• 12:52
  Speaker 3: There is big is the Triple seven?
• 12:53
  Speaker 1: I'm sorry? Is the Triple seven as big as the
• 12:55
  Speaker 1: seven eighty seven? I thought the seven eighty seven, the
• 12:57
  Speaker 1: Dreamliner was like the biggest one.
• 13:00
  Speaker 8: No, sorry, seventy seven is smaller. Seventy seven and A
• 13:03
  Speaker 8: three fifty are both smaller. A three fifty nine hundred
• 13:07
  Speaker 8: are both smaller than Triple seven, and they fit between
• 13:11
  Speaker 8: that narrow body class that you seem to love so much,
• 13:14
  Speaker 8: you know, the three twenty and seven three seven and
• 13:16
  Speaker 8: that Triple seven. Really, those are the most in favor
• 13:19
  Speaker 8: airplanes right now. Right they're at three hundred ish seed
• 13:24
  Speaker 8: you know, kind of twin aisles, and the ranges are great.
• 13:27
  Speaker 8: On the three fifteen to seven eighty seven, they can
• 13:30
  Speaker 8: get you, you know, really far around the world, so
• 13:33
  Speaker 8: you could do a lot of non stops, try to
• 13:35
  Speaker 8: pull in the best kind of firs, you know, fairs
• 13:38
  Speaker 8: possible from those business travelers that don't want to connect anywhere.
• 13:41
  Speaker 8: Triple seven has pretty good range as well, But that's
• 13:44
  Speaker 8: going to be the largest airplane in the sky when
• 13:46
  Speaker 8: seven four seven and eight three eighty are gone.
• 13:49
  Speaker 1: Nice, I want to fly that Triple seven. Where are
• 13:51
  Speaker 1: the routes? Where can I get on one of those things?
• 13:54
  Speaker 6: I think if you go to Dubai, they got a
• 13:56
  Speaker 6: lot of them in the fleet. If you go to
• 13:58
  Speaker 6: kat Tar you find a lot of them too. United
• 14:00
  Speaker 6: flies them.
• 14:01
  Speaker 8: I mean they're really you know, they're a component of
• 14:03
  Speaker 8: most of the major, big full service airlines around the world.
• 14:07
  Speaker 2: All Right, the seven three seven Max, it was so
• 14:09
  Speaker 2: in the news for the bad.
• 14:11
  Speaker 1: Reasons, patches all the time.
• 14:13
  Speaker 3: They fixed that. Now I feel like it's the same
• 14:14
  Speaker 3: as plane on the planet. Sure they did. They fixed it,
• 14:17
  Speaker 3: so just a little software fixed.
• 14:19
  Speaker 2: But the big thing is China. I mean, I got
• 14:21
  Speaker 2: to start selling some of these planes to China.
• 14:24
  Speaker 3: Where are we there?
• 14:26
  Speaker 8: Yeah, so nothing has been shipped into China. We keep
• 14:29
  Speaker 8: waiting eminently to see the Chinese take the airplanes that
• 14:32
  Speaker 8: have already been built for them and you know, are
• 14:36
  Speaker 8: awaiting sort of delivery. Going has been remarketing.
• 14:39
  Speaker 6: Some of those airplanes, So it kind of tells.
• 14:41
  Speaker 8: You that whatever discussions they're happening with the Chinese about
• 14:43
  Speaker 8: taking those airplanes was kind of stalling lately. It feels
• 14:47
  Speaker 8: like there might be a thawing up coming. I think
• 14:50
  Speaker 8: if you're China, China pre pandemic took almost three hundred
• 14:55
  Speaker 8: or about three hundred hour bodies a year, and it
• 14:57
  Speaker 8: was something not one company could do, not just Airbus,
• 15:00
  Speaker 8: not just Boeing. Now post pandemic, as they have reutilized
• 15:05
  Speaker 8: their fleets and such, they just haven't needed deliveries in
• 15:08
  Speaker 8: that of that size.
• 15:09
  Speaker 6: Last year. I think it was about one hundred narrow
• 15:11
  Speaker 6: bodies they took. But if the Chinese look down the
• 15:14
  Speaker 6: road and they think they're a three hundred plus narrow
• 15:18
  Speaker 6: body delivery kind of market in the future and their
• 15:21
  Speaker 6: COMACC nine one nine is not going to be ready
• 15:24
  Speaker 6: to backfill or to supplant some of that Airbus and
• 15:29
  Speaker 6: Boeing deliveries, they need to start thinking about having a
• 15:32
  Speaker 6: better relationship with Boeing because Airbus won't be able to
• 15:36
  Speaker 6: fill all of their needs. Plus, if you're going to
• 15:38
  Speaker 6: negotiate with Airbus and you're not buying Boeing airplanes, you're
• 15:43
  Speaker 6: not really in a very good negotiating space, right, and
• 15:47
  Speaker 6: so I think they need to start to thaw that relationship.
• 15:50
  Speaker 6: We'll see how big an order comes out. These order
• 15:52
  Speaker 6: books are long right now, They're six, seven, eight years long.
• 15:56
  Speaker 6: So they got to start to get in the back
• 15:57
  Speaker 6: of the queue if they want some airplanes.
• 15:59
  Speaker 2: I'm Boeing take to build a triple seven planes start
• 16:03
  Speaker 2: to finish, Like if I put my order in now,
• 16:05
  Speaker 2: when am I getting this plane?
• 16:08
  Speaker 8: Well, I mean the challenge, like I said, is this
• 16:09
  Speaker 8: airplane's not certified yet. We've got to get the FA
• 16:12
  Speaker 8: to certify it. We think it's sort of twenty twenty
• 16:15
  Speaker 8: five ish, right. I think there's two hundred and fifty
• 16:18
  Speaker 8: three hundred ish kind of orders on the books right now,
• 16:22
  Speaker 8: a bunch of them emirates. If they what if they
• 16:24
  Speaker 8: build five a month, you'd be getting sixty out the door,
• 16:28
  Speaker 8: you know, per year. We got five years of backlog.
• 16:31
  Speaker 8: Golling will want to increase that if they see orders
• 16:33
  Speaker 8: build and if you know, if they get enough of
• 16:36
  Speaker 8: a backlog, nobody wants to ramp up production and ramp
• 16:39
  Speaker 8: back down production.
• 16:41
  Speaker 6: So they like to see a couple of years or
• 16:44
  Speaker 6: more before they start thinking about increasing those rates.
• 16:47
  Speaker 8: But you're still talking, you know, four or five years
• 16:50
  Speaker 8: of backlog in the airplane.
• 16:52
  Speaker 2: And then here's my long held opinion, which I express
• 16:54
  Speaker 2: every time we talk about Boeing. They never should have
• 16:56
  Speaker 2: left Seattle. Yeah, lost their engineering chops and the left Seattle.
• 17:00
  Speaker 2: This is my personal opinion.
• 17:01
  Speaker 1: Sure, hurt the culture.
• 17:02
  Speaker 8: Yeah, you could argue though they're now in Virginia. I
• 17:06
  Speaker 8: know they're close to one of their biggest customers.
• 17:08
  Speaker 2: Yeah, I mean people come out to Seattle to see tech.
• 17:11
  Speaker 2: That's a great part of the world. And then go
• 17:13
  Speaker 2: down that highway that takes you back down to Seattle.
• 17:15
  Speaker 2: From the airport. On the left hand side of the highway,
• 17:17
  Speaker 2: it's all Boeing as far as I can see plane
• 17:20
  Speaker 2: stack up.
• 17:21
  Speaker 7: You're listening to the tape Cat's are live program Bloomberg
• 17:24
  Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio, the
• 17:28
  Speaker 7: tune in app, Bloomberg dot Com, and the Bloomberg Business app.
• 17:31
  Speaker 7: You can also listen live on Amazon Alexa from our
• 17:34
  Speaker 7: flagship New York station, Just Say Alexa playing Bloomberg eleven thirty.
• 17:40
  Speaker 2: Let's talk commercial real estate. Where are we in the
• 17:43
  Speaker 2: cycle here? Margaret McKnight joins us here. She's a partner
• 17:47
  Speaker 2: and head of real Estate Portfolio Solutions at Stepstone Group
• 17:50
  Speaker 2: and Nasdak created stock symbil step to put into your
• 17:54
  Speaker 2: Bloomberg terminal. She joins us live here in our New
• 17:57
  Speaker 2: York studio. So, Margaret, this is how I frame out
• 18:00
  Speaker 2: questions about our discussions about commercial real estate. The Lipstick Building,
• 18:05
  Speaker 2: Third Avenue, I'm gonna call it fifty fourth Street or something.
• 18:09
  Speaker 2: I don't know where it is iconic building, but it's
• 18:12
  Speaker 2: third Avenue. It's not Park Avenue, it's not Fifth Avenue.
• 18:16
  Speaker 2: When not Thing Trades, is it going to be a
• 18:19
  Speaker 2: twenty percent discount, a forty percent discount, a sixty percent
• 18:22
  Speaker 2: discount to pre pandemic levels?
• 18:24
  Speaker 3: How bad is it out there for commercial real estate?
• 18:27
  Speaker 9: So the first thing I want to do is say
• 18:29
  Speaker 9: that there's office and all other office is getting hit
• 18:32
  Speaker 9: by a cyclic pullback, especially the tech tenants pulling back
• 18:36
  Speaker 9: and bi secular problems because of work from home, so
• 18:39
  Speaker 9: it is materially worse than any other property type. The
• 18:42
  Speaker 9: other property types, while dealing with the cycle, also have
• 18:45
  Speaker 9: secular lift and we can talk about that, Okay. Right now,
• 18:49
  Speaker 9: office is really struggling and the capital markets have pulled back,
• 18:52
  Speaker 9: and most of what's going on in real estate is
• 18:54
  Speaker 9: a capital market pullback.
• 18:56
  Speaker 1: So but also retail, right, I mean, we've heard a
• 19:01
  Speaker 1: few cases of malls and you're from San Francisco, where
• 19:06
  Speaker 1: you know, the owner just says we're out, We're done,
• 19:09
  Speaker 1: like Westfield did out out at that retail center.
• 19:12
  Speaker 7: Right.
• 19:13
  Speaker 9: So, just like office is getting hit by technology change
• 19:17
  Speaker 9: because zoom and teams let us work from home a
• 19:19
  Speaker 9: ten or fifteen years ago, real estate got hit by
• 19:21
  Speaker 9: e commerce. That was a while ago. Since then, the
• 19:24
  Speaker 9: tenants have figured it out. We've all figured out what
• 19:26
  Speaker 9: formats work and don't work, and the formats that work
• 19:29
  Speaker 9: have repriced and are really interesting to investors. Some of
• 19:33
  Speaker 9: these malls are the ones that don't and are largely
• 19:35
  Speaker 9: pushed out of the institutional portfolios and not really where
• 19:38
  Speaker 9: the focus is. The focus is on things like industrial
• 19:40
  Speaker 9: and multifamily that have a lot of lyft right now
• 19:43
  Speaker 9: that are pretty interesting and you can use this period
• 19:46
  Speaker 9: of turmoil to find good entry points and opportunity.
• 19:49
  Speaker 2: All right, So for the areas are just broadly defined,
• 19:52
  Speaker 2: you know, commercial real estate, given where rates have moved
• 19:55
  Speaker 2: this year, how does that impact your businesses? Like on
• 19:59
  Speaker 2: a residential side, nothing's trading, Nobody wants to sell their house.
• 20:03
  Speaker 2: What's it like on the commercial side.
• 20:04
  Speaker 9: Homes are not trading. That means more people are pushed
• 20:07
  Speaker 9: and capped back in the rental market. So if you
• 20:09
  Speaker 9: own rental properties, it's actually a pretty good time. It's
• 20:13
  Speaker 9: slowing because it's vulnerable to the cycle, but the outlook
• 20:16
  Speaker 9: is good. And similarly for industrial, which is benefiting from
• 20:19
  Speaker 9: e commerce and it's benefiting from globalization. So what we
• 20:22
  Speaker 9: really have is a capital markets correction, so prices are
• 20:25
  Speaker 9: going down, balance sheets are restructuring. People New loans are
• 20:29
  Speaker 9: smaller than old loans, so people need recapitalization money. What
• 20:32
  Speaker 9: we call gp led secondaries is one way to do
• 20:34
  Speaker 9: it to actually keep their assets, and they're desperate for
• 20:37
  Speaker 9: that money because the difference is a goose egg. So
• 20:39
  Speaker 9: there's a really good time to deploy capital into some
• 20:41
  Speaker 9: of these interesting strategies.
• 20:43
  Speaker 1: Really, which puts Stepstone I guess in a good position, right,
• 20:46
  Speaker 1: Or what do you do at Stepstone? You offer private
• 20:51
  Speaker 1: investors access to markets that the public doesn't see or Yes.
• 20:56
  Speaker 9: We design portfolios for institutional, large institutional and high private
• 21:02
  Speaker 9: wealth clients that are designed to improve the odds of
• 21:06
  Speaker 9: meeting their specific portfolio goals. And that's what I focus
• 21:10
  Speaker 9: on particularly. And then that includes taking advantage of market opportunities,
• 21:14
  Speaker 9: and then we also execute we help them find in
• 21:16
  Speaker 9: that transactions.
• 21:17
  Speaker 3: So where are you guys putting capital to work these days?
• 21:20
  Speaker 9: Our favorite strategy right now is this gp LED this
• 21:23
  Speaker 9: recapitalization where you've got an owner who needs to buy
• 21:27
  Speaker 9: down his existing loan and is desperate for money to
• 21:29
  Speaker 9: keep his asset so that they will pay a lot
• 21:33
  Speaker 9: for that transitional money and not everything savable. So over
• 21:37
  Speaker 9: time a lot, there will be motivated sales and distress
• 21:39
  Speaker 9: sales that are also going to be a we're the
• 21:42
  Speaker 9: leading edge. We're definitely seeing in our book transactions that
• 21:46
  Speaker 9: look like the immediate post GFC period which ended up
• 21:49
  Speaker 9: yielding very attractive.
• 21:51
  Speaker 2: So what are some what are properties trading at today? Again,
• 21:54
  Speaker 2: if that lifstick building trades today, what discount do you
• 21:56
  Speaker 2: think that trade's at so Rules State on Third Avenue
• 21:59
  Speaker 2: in Midtown.
• 22:00
  Speaker 9: Every property is different. That's that's the tricky part of
• 22:02
  Speaker 9: commercial real estate. The property pricing indexes are down a
• 22:06
  Speaker 9: little over twenty percent and trading is down about forty percent,
• 22:10
  Speaker 9: so it's a little bit slower and not full price discovery.
• 22:13
  Speaker 9: Office is completely different though. Office is what's really not
• 22:17
  Speaker 9: trading and it's really broken.
• 22:20
  Speaker 1: So you like, where are you finding the distressed what
• 22:24
  Speaker 1: will look like distressed opportunities? I mean you're not looking
• 22:27
  Speaker 1: in office. I'm guessing or do or will you if
• 22:30
  Speaker 1: they say, hey, this is seventy percent off.
• 22:33
  Speaker 9: Right now, we're not seeing that. Pricing is interesting enough
• 22:35
  Speaker 9: because there's too much uncertainty. Employers and employees are in
• 22:39
  Speaker 9: a big experiment on hybrid work and we don't know
• 22:41
  Speaker 9: what that means for demand or for leases yet.
• 22:43
  Speaker 1: So it is so for office, it's just a falling
• 22:46
  Speaker 1: knife that no one almost no one's willing to catch
• 22:48
  Speaker 1: right now.
• 22:49
  Speaker 9: Institutional buyers are not going into office right now in
• 22:51
  Speaker 9: any numbers.
• 22:52
  Speaker 3: I can't wait to see that. At some point it's
• 22:54
  Speaker 3: going to be a just huge haircut. Yeah, But what
• 22:57
  Speaker 3: you're saying is go.
• 22:58
  Speaker 2: By the lipstick building it no idea, what like, at
• 23:01
  Speaker 2: thirty cents on a dollar, it's got to be a
• 23:02
  Speaker 2: great deal, right.
• 23:04
  Speaker 1: Yeah, I mean at some point, but what's that number.
• 23:06
  Speaker 3: That's why I'm not in that business.
• 23:07
  Speaker 1: It's the same as any asset when there are no buyers, right,
• 23:10
  Speaker 1: it's in free fall and you've got to have the
• 23:12
  Speaker 1: I guess, the courage or the stupidity to go in
• 23:15
  Speaker 1: there and try and catch it. But what you're saying,
• 23:18
  Speaker 1: Margaret is that you're there's a shift in capital interest, right,
• 23:22
  Speaker 1: They're more interested in multi family, they're more interested and
• 23:25
  Speaker 1: I'm guessing like server farms.
• 23:27
  Speaker 9: Industrial warehouse is a big part of it because there's
• 23:30
  Speaker 9: a huge shift in how people are using space right now.
• 23:34
  Speaker 9: Instead of working at the office, we're working from home,
• 23:36
  Speaker 9: We're shopping from home, we're playing at home. So that
• 23:38
  Speaker 9: creates more demand on the residential side. And then also
• 23:41
  Speaker 9: the warehouses you know, holds all the goods that come
• 23:44
  Speaker 9: in for the shopping and are really winning on the
• 23:46
  Speaker 9: deglobalization front, which, like you said, server farms, data centers
• 23:49
  Speaker 9: and whatnot are also big. So there's sectors in the
• 23:52
  Speaker 9: market that have really interesting fundamentals and if you could
• 23:54
  Speaker 9: use this moment to buy at a discount it. You know,
• 23:57
  Speaker 9: good opportunities have now.
• 23:59
  Speaker 2: But can I get a Can I get capital to
• 24:01
  Speaker 2: do that? Can I get a loan to do that? Well,
• 24:03
  Speaker 2: banks lend to.
• 24:04
  Speaker 9: Me, so yes, banks are lending to their best customers.
• 24:09
  Speaker 9: You can also restructure your existing loans. And again that's
• 24:12
  Speaker 9: where this recap strategy comes in that we think is
• 24:14
  Speaker 9: so interesting. As I said, trading value is down forty percent,
• 24:18
  Speaker 9: it's not down one hundred percent, and it's way higher
• 24:20
  Speaker 9: than it was during the GFC period. So there is
• 24:22
  Speaker 9: still movement. There is a lot of especially if you're
• 24:26
  Speaker 9: trying to sell office, it needs to be seller finance
• 24:28
  Speaker 9: because there's no debt for office.
• 24:29
  Speaker 3: No debt for office.
• 24:31
  Speaker 1: Wow, seller finance.
• 24:32
  Speaker 3: Yeah, I don't like that. That's scary.
• 24:35
  Speaker 1: You know, I want to sell you this thing so
• 24:37
  Speaker 1: badly that I'm going to lend you the money to
• 24:39
  Speaker 1: buy it from me.
• 24:40
  Speaker 2: Yes, exactly, I've seen that before in other businesses.
• 24:43
  Speaker 3: So again, do you feel like where do you feel
• 24:46
  Speaker 3: like we are just in I.
• 24:47
  Speaker 2: Guess it's really by the asset class, right, I mean,
• 24:50
  Speaker 2: like I was gonna say, are we at the bottom here?
• 24:51
  Speaker 2: But in certain sectors we've already bottom dinner trading higher,
• 24:55
  Speaker 2: but for office maybe not there yet.
• 24:57
  Speaker 9: For non office where at the beginning, and probably a
• 24:59
  Speaker 9: two to three restructuring period that should yield some very interesting,
• 25:02
  Speaker 9: as I said, opportunities to help people restructure as we
• 25:06
  Speaker 9: move through the business cycle and we come out the
• 25:08
  Speaker 9: other side. You know, the motto now is stay alive
• 25:11
  Speaker 9: till twenty five.
• 25:12
  Speaker 3: Stay alive till twenty.
• 25:14
  Speaker 9: That's not true for office. And I think the office
• 25:17
  Speaker 9: is more like I alluded to retail was a ton
• 25:19
  Speaker 9: of fifteen year correction. I think office is more like
• 25:21
  Speaker 9: a ten year because tonants have to figure out their demands.
• 25:24
  Speaker 9: There's long term leases that need to roll off, and
• 25:27
  Speaker 9: it's going to take a while.
• 25:28
  Speaker 7: Wow.
• 25:29
  Speaker 1: Let's talk quickly about San Francisco. That's where you live,
• 25:32
  Speaker 1: Paul and I think both love the city. I think
• 25:34
  Speaker 1: it's beautiful. I love the Humphrey and Slocum ice cream place.
• 25:38
  Speaker 1: I'm a deadhead, so I like to go around hate Ashbury,
• 25:41
  Speaker 1: you know, and check out the scene there. I never
• 25:44
  Speaker 1: really hung out in the industrial commercial center very much,
• 25:47
  Speaker 1: but apparently it's dead. What do you think it is?
• 25:50
  Speaker 1: The you know, are the death stories about San Francisco overblown, overwritten.
• 25:58
  Speaker 9: The Bay area is a center to the Vegas and
• 26:00
  Speaker 9: most important tact ecosystems in the world. I am not
• 26:03
  Speaker 9: going to beat against San Francisco at all. And it's
• 26:06
  Speaker 9: a fabulous place to live.
• 26:07
  Speaker 1: Still, you still enjoy living there.
• 26:09
  Speaker 9: Yes, and remember we don't all live we don't live downtown.
• 26:12
  Speaker 9: That's part of the problem. Office key card use says
• 26:15
  Speaker 9: use office Houston, New York is fifty percent, office US
• 26:18
  Speaker 9: in San Francisco is forty five percent. You just feel
• 26:20
  Speaker 9: it because there's it's more concentrated, and the tourism is
• 26:24
  Speaker 9: not back there, and here you have integrated uses, so
• 26:26
  Speaker 9: it feels lively.
• 26:27
  Speaker 1: Yeap, when I hear tourism isn't back, that makes me
• 26:30
  Speaker 1: want to go to that place.
• 26:31
  Speaker 2: Yes, you know, I love it, and I just I
• 26:34
  Speaker 2: always tell people that are coming from Europe, Hey, I've
• 26:36
  Speaker 2: got I'm gonna be hearing the stage for three or
• 26:37
  Speaker 2: four weeks.
• 26:38
  Speaker 3: Where do I go to say?
• 26:39
  Speaker 2: One stop has to be San Francis. Yeah, do your Vegas,
• 26:42
  Speaker 2: do your New York, but one stop has to be
• 26:44
  Speaker 2: San Francisco. I'm just not sure if you can do
• 26:46
  Speaker 2: that say that anymore. But I still think that's the case,
• 26:48
  Speaker 2: so don't bet against the Bay Area.
• 26:50
  Speaker 3: Thank you very much. Margaret McKnight.
• 26:52
  Speaker 2: She's a partner and head of real estate Portfolio Solutions.
• 26:56
  Speaker 2: The company's name is Stepstone Group. It is a NASTAC
• 26:58
  Speaker 2: traded company.
• 26:59
  Speaker 3: St e EP is the ticker.
• 27:02
  Speaker 7: You're listening to the tape. Cat's are live program Bloomberg
• 27:05
  Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio, the
• 27:09
  Speaker 7: tune in app, Bloomberg dot Com, and the Bloomberg Business App.
• 27:12
  Speaker 7: You can also listen live on Amazon Alexa from our
• 27:15
  Speaker 7: flagship New York station. Just say Alexa play Bloomberg eleven thirty.
• 27:21
  Speaker 2: All right, Matt, I'm taking my year to day gains.
• 27:24
  Speaker 2: I'm going to the two year treasure.
• 27:25
  Speaker 3: I'm giving them my money at the window and we
• 27:27
  Speaker 3: get five point zero four percent. It's not bad.
• 27:29
  Speaker 1: You've got a lot of reinvestment risk ahead.
• 27:32
  Speaker 3: That's not good. Then all right, let's talk to somebodyho
• 27:33
  Speaker 3: does this stuff for a living.
• 27:35
  Speaker 2: Ted Oakley, founder and managing partner at Oxbow Advisors, joining
• 27:38
  Speaker 2: us live in our Bloomberg Interactive Brokers studio.
• 27:41
  Speaker 3: You shoot, you're based where are you based? Down in Texas?
• 27:44
  Speaker 3: Austin Austin. Okay, all right, so.
• 27:46
  Speaker 2: You didn't your school, you're a Texas tech. You didn't
• 27:48
  Speaker 2: fire your coach and guarantee the seventy six million dollars,
• 27:51
  Speaker 2: did you?
• 27:51
  Speaker 10: We did not. We don't have that kind of money.
• 27:54
  Speaker 2: Okay, very good. Want to see what's going on down
• 27:56
  Speaker 2: there in Texas. Everything's bigger in Texas. I know, I
• 27:58
  Speaker 2: get that, all right, Ted here again, I can be
• 28:01
  Speaker 2: just fine. In my two year treasury of five point
• 28:03
  Speaker 2: zero four percent, Matt says, I have reinvestment risk.
• 28:06
  Speaker 3: What do you guys do in these days?
• 28:09
  Speaker 10: Well, we own a lot of that. Actually, we have
• 28:11
  Speaker 10: probably the highest level of treasures we've had since two thousand. Really, yeah,
• 28:15
  Speaker 10: we're very high in the treasuries. We have a lot
• 28:18
  Speaker 10: of the floating rate treasury, which is even shorter. It's
• 28:21
  Speaker 10: based on a ninety day reset every Monday, and it's
• 28:24
  Speaker 10: about five and a half. And then you know, we
• 28:27
  Speaker 10: own some one year or two year and we own
• 28:29
  Speaker 10: some long paper. But right now, that's that's where we
• 28:33
  Speaker 10: have a lot of liquidity stashed.
• 28:35
  Speaker 3: What do do you have?
• 28:37
  Speaker 2: What are you looking for to maybe get more exposure
• 28:40
  Speaker 2: to the equity markets? Is that evaluation thing is that
• 28:43
  Speaker 2: or an earning thing. Is it a federal reserve thing?
• 28:45
  Speaker 2: What is a catalyst that you guys are looking for?
• 28:47
  Speaker 10: You know, most of the companies we look at are
• 28:49
  Speaker 10: guiding somewhat lower, you know, in the in the coming quarters.
• 28:54
  Speaker 10: We don't look at whether they beat or not, because
• 28:56
  Speaker 10: that's a game they all play, but we look at
• 28:58
  Speaker 10: the guidance on it, and the guidance is going down
• 29:01
  Speaker 10: for a lot of companies, and a lot of companies
• 29:03
  Speaker 10: are just not cheap enough for us. We have companies
• 29:05
  Speaker 10: we like, we've been buying some of the consumer staples
• 29:09
  Speaker 10: because they've gone back down to a level that we liked. Okay,
• 29:12
  Speaker 10: but we've been you know, we still own legacy growth companies,
• 29:17
  Speaker 10: but we cut back on them quite a bit.
• 29:19
  Speaker 1: So does that mean you're out of the market for
• 29:22
  Speaker 1: the foreseeable future in terms of equities.
• 29:25
  Speaker 10: No, man, it means that we're about half in. You
• 29:28
  Speaker 10: can look at it that way, I suppose. But you know,
• 29:31
  Speaker 10: we really feel like that we'll have a better spot
• 29:34
  Speaker 10: here in the next two or three quarters than we
• 29:36
  Speaker 10: have right now. We really see weakness coming. We see
• 29:40
  Speaker 10: a lot in a lot of industries across the country.
• 29:43
  Speaker 10: We see transportation, retail, trucking. So many things are starting
• 29:49
  Speaker 10: to weaken now, and so for us, we just don't
• 29:52
  Speaker 10: think it's over yet. So that's why we're a bit cautious.
• 29:55
  Speaker 3: So do you have a recession built into your forecast here? Well,
• 29:59
  Speaker 3: you could.
• 30:00
  Speaker 10: I think it'll go so slow that it will feel
• 30:03
  Speaker 10: like one at least. You know, if you go to
• 30:04
  Speaker 10: zero growth, Paul or one, you know, that will probably
• 30:08
  Speaker 10: feel like a recession to some people because some industries
• 30:11
  Speaker 10: will be very, very slow. And then you have to
• 30:13
  Speaker 10: deal with this debt situation with the Fed too. I
• 30:16
  Speaker 10: think that's a problem.
• 30:17
  Speaker 3: Ah, that's your rid of your belly.
• 30:19
  Speaker 1: Yeah, absolutely, I mean do you see any kind of
• 30:24
  Speaker 1: fiscal discipline coming to this government anytime soon?
• 30:29
  Speaker 10: I don't. I haven't seen it before. Now maybe they
• 30:32
  Speaker 10: come around, but you know, it takes both sides of
• 30:34
  Speaker 10: the of the eyele to do it.
• 30:36
  Speaker 1: And does it matter to you?
• 30:38
  Speaker 6: Do you?
• 30:38
  Speaker 1: Are you concerned when you look at the debts and
• 30:40
  Speaker 1: deficit or some people say we've been doing this since Reagan,
• 30:42
  Speaker 1: we can keep doing it.
• 30:43
  Speaker 10: It matters to me in this respect. If you go
• 30:46
  Speaker 10: back and look at countries where they get to a
• 30:48
  Speaker 10: certain breaking point, and we're about three quarters there. And
• 30:53
  Speaker 10: people don't realize that the average debt that we're paying
• 30:57
  Speaker 10: right now is about two point six percent on all
• 30:59
  Speaker 10: the federal debts. Well, guess what fifty percent of it
• 31:02
  Speaker 10: rolls over in two years. At five you're gonna almost
• 31:06
  Speaker 10: double it. And people, I don't think people realize what
• 31:08
  Speaker 10: happens when you when you get so much debt and
• 31:11
  Speaker 10: then they monitor debation monetary system and I know it
• 31:15
  Speaker 10: hasn't happened in the past, but now it's getting to
• 31:17
  Speaker 10: a breaking point. You can follow it with countries over
• 31:19
  Speaker 10: time and see what happens.
• 31:22
  Speaker 2: On the equity side here, I know you mentioned look
• 31:26
  Speaker 2: looking for income, So oil and gas pipelines.
• 31:28
  Speaker 10: We still have those. We rarely sell the oil and
• 31:32
  Speaker 10: gas pipelines. They're steady producers. They usually increase the income
• 31:37
  Speaker 10: a little bit each year. If you wanted something to
• 31:41
  Speaker 10: compete with your real estate on a private basis, you
• 31:43
  Speaker 10: put on the oil and gas pipeline because half of
• 31:46
  Speaker 10: them file on a K one just like real estate,
• 31:49
  Speaker 10: so you don't have any current income tax on it.
• 31:51
  Speaker 10: And secondly, they all pay between seven and nine so
• 31:55
  Speaker 10: you get a.
• 31:57
  Speaker 3: Yeah, and you're not building pipelines anymore?
• 31:59
  Speaker 10: Are they You hit the nail on the head. It's
• 32:01
  Speaker 10: like it's like I tell people, be like trying to
• 32:04
  Speaker 10: get an easement for a for a railroad track, right,
• 32:06
  Speaker 10: you think about that today you can't do that, and
• 32:09
  Speaker 10: then you have environmental concerns and it's hard to get
• 32:12
  Speaker 10: these days.
• 32:12
  Speaker 2: I tell people, when I was pitching the billboard companies
• 32:14
  Speaker 2: back in the day, I say, they're not making any
• 32:16
  Speaker 2: more billboards.
• 32:17
  Speaker 3: Can't get them up. Yeah, you gotta by the ones
• 32:19
  Speaker 3: that are out.
• 32:20
  Speaker 1: There, and how's that business going?
• 32:22
  Speaker 3: Awesome? Yeah, awesome.
• 32:24
  Speaker 2: You can't You can't click through a billboard ad. You know,
• 32:27
  Speaker 2: that's true, can't block it?
• 32:29
  Speaker 1: That's true. What about other real estate plays? For example,
• 32:34
  Speaker 1: in Texas, I know there are a lot of big
• 32:36
  Speaker 1: data centers, there's a lot of big factory sorry, big
• 32:40
  Speaker 1: warehouse businesses. You got a lot of land down there, right,
• 32:44
  Speaker 1: So there's even green energy is a huge industry in Texas,
• 32:49
  Speaker 1: despite what we may all think about Texans attitudes towards that.
• 32:54
  Speaker 10: Well, that's true. But what we see and I'm I'm
• 32:56
  Speaker 10: involved quite a quite heavily in a community bank, and
• 32:59
  Speaker 10: so I see a lot what's going on on the
• 33:01
  Speaker 10: real estate side. What we're seeing, Matt is really we're
• 33:04
  Speaker 10: starting to see even some industrial properties come up for
• 33:08
  Speaker 10: least because they're not full. And now we're starting to
• 33:11
  Speaker 10: see some commercial buildings actually go back to the banks.
• 33:14
  Speaker 10: I mean they're giving the keys back, and so it's
• 33:17
  Speaker 10: starting to show. It's starting to show it's where and
• 33:19
  Speaker 10: tear there too.
• 33:20
  Speaker 2: So do you guys at the bank you're involved with,
• 33:22
  Speaker 2: you have commercial real estate exposure very very little fortunately, okay,
• 33:25
  Speaker 2: But so are your customers. I mean, what are you
• 33:30
  Speaker 2: seeing at that regional bank level. Is there loan demand
• 33:33
  Speaker 2: there at these interest rates?
• 33:35
  Speaker 10: You know, in most community banks, Paul, the loan aman
• 33:38
  Speaker 10: is about steady. It really is not going up or down.
• 33:42
  Speaker 10: All the banks are fighting to try to get the loans.
• 33:45
  Speaker 10: And so while you've got an eight and a half
• 33:47
  Speaker 10: percent prime, they're having to come in at six and
• 33:50
  Speaker 10: a half or six and three quarters and to get
• 33:52
  Speaker 10: that business. That's what we're seeing. I think they're really
• 33:56
  Speaker 10: the banks are really concerned about it because most of
• 33:58
  Speaker 10: them have a situation where they have bond portfolios that
• 34:01
  Speaker 10: are not all that great. And then the other problem
• 34:04
  Speaker 10: is they can get a lot of new you know
• 34:07
  Speaker 10: see and nine new business loans.
• 34:08
  Speaker 3: That's hard for them.
• 34:10
  Speaker 2: So broadly defined, I mean, Texas is so big you
• 34:12
  Speaker 2: can't talk about the state, But I mean, what are
• 34:15
  Speaker 2: some of the driving forces down there for the economy.
• 34:17
  Speaker 2: Is it still just people or people and businesses are
• 34:20
  Speaker 2: coming into the state because of maybe favorable tax situation,
• 34:24
  Speaker 2: good labor forces.
• 34:25
  Speaker 3: That's still the story there.
• 34:27
  Speaker 10: Well, that's what we see now at Oxbode. We do
• 34:29
  Speaker 10: business in forty states, so we do business all over
• 34:31
  Speaker 10: the country. But in Texas we have a lot of
• 34:34
  Speaker 10: new business that came in just from people that moved
• 34:37
  Speaker 10: from other states at high tax states. They just got
• 34:40
  Speaker 10: tired of what was going on in some of their states.
• 34:43
  Speaker 10: On the business side, portsol and gas is still a
• 34:45
  Speaker 10: big business in Texas, but we have a lot of manufacturing,
• 34:49
  Speaker 10: We have a lot of tech. We have a lot
• 34:50
  Speaker 10: of things that happen in the state. You know, the
• 34:53
  Speaker 10: state's it's still a place where you can go and
• 34:56
  Speaker 10: sort of be a bit of a maverick. And I
• 34:59
  Speaker 10: think why people come there.
• 35:01
  Speaker 3: Yeah, I'm telling you like freedom, I know exactly.
• 35:04
  Speaker 2: It's in short supply some taxes, man, Yeah, can crush here.
• 35:09
  Speaker 3: Tell me about telling you about it all right? So
• 35:11
  Speaker 3: what's your over the next twelve months?
• 35:13
  Speaker 2: Ted, what do you do you think you guys will
• 35:14
  Speaker 2: get more into the equity market, increase your exposure. What
• 35:17
  Speaker 2: do you think you'll be making some changes to your
• 35:19
  Speaker 2: portfolio of the next twelve months.
• 35:20
  Speaker 3: What do you anticipate?
• 35:23
  Speaker 10: It would not surprise me to see us at least
• 35:26
  Speaker 10: get a lot more if we have a break in
• 35:28
  Speaker 10: the market that we feel like things are cheap enough,
• 35:30
  Speaker 10: You'll see, let's get almost fully invested. We'll find companies
• 35:33
  Speaker 10: we usually will. We really run about two hundred hundred
• 35:38
  Speaker 10: and fifty companies that we would want to own that
• 35:40
  Speaker 10: we look at quite a bit. Most of those are
• 35:43
  Speaker 10: not hitting the screens we want to to buy right now.
• 35:46
  Speaker 3: And is that a valuation screen?
• 35:48
  Speaker 10: There's a valuation screen we like companies with. We find
• 35:51
  Speaker 10: in the long run you need own companies that don't
• 35:54
  Speaker 10: have a lot of debt. I mean, you know, debt
• 35:57
  Speaker 10: really for us is not working in the long run
• 36:00
  Speaker 10: for companies, and we just feel like we'll get a
• 36:02
  Speaker 10: shot at better valuations we have right now.
• 36:06
  Speaker 3: What's your latest book? Stay rich with a balance portfolio?
• 36:09
  Speaker 7: Right?
• 36:10
  Speaker 3: So what am I doing there?
• 36:10
  Speaker 2: Am I just rish reward, making sure I don't get
• 36:13
  Speaker 2: too far too skewed one way or the other.
• 36:15
  Speaker 7: You know.
• 36:16
  Speaker 10: One of the things I've noticed really since the pandemic particularly,
• 36:19
  Speaker 10: is that people are really they're all in one or
• 36:24
  Speaker 10: two things, like maybe they go all into crypt currency,
• 36:28
  Speaker 10: all into real estate, all into the Magnificent seven, all
• 36:33
  Speaker 10: in something, you know, and they don't have any balance.
• 36:36
  Speaker 10: And one of the things I've found, and I've really
• 36:38
  Speaker 10: interviewed in my life quite a few billionaires, and one
• 36:42
  Speaker 10: of the things I've noticed about them is they usually
• 36:44
  Speaker 10: have balance. May not think it, but they have quite
• 36:46
  Speaker 10: a bit of balance, have quite a bit of liquidity.
• 36:48
  Speaker 10: And I see people today that are sort of complacent
• 36:52
  Speaker 10: because nothing real bad has happened so far, and so
• 36:56
  Speaker 10: they're all chocked full of one thing. And I just
• 36:59
  Speaker 10: think that's not a good way to go. If you
• 37:00
  Speaker 10: want to, I'll just give you a note. If you
• 37:03
  Speaker 10: take a million dollar person nineteen hundred, they'd be a
• 37:05
  Speaker 10: billion a day.
• 37:06
  Speaker 3: Yep, there you go. I could do that.
• 37:07
  Speaker 2: Man, Ted Oakley, thank you so much for joining us
• 37:09
  Speaker 2: at Ted Oakley. He's a founder and managing partner in
• 37:11
  Speaker 2: Oxbow Advisors. You should get him on the phone, but
• 37:14
  Speaker 2: he's up here in the big Apple today, so we
• 37:15
  Speaker 2: got him in the studio.
• 37:18
  Speaker 1: Thanks for listening to the Bloomberg Markets podcasts. You can
• 37:21
  Speaker 1: subscribe and listen to interviews at Apple Podcasts or whatever
• 37:25
  Speaker 1: podcast platform you prefer. I'm Matt Miller. I'm on Twitter
• 37:29
  Speaker 1: at Matt Miller nineteen seventy three.
• 37:31
  Speaker 3: And I'm fall Sweeney. I'm on Twitter at pt Sweeney.
• 37:34
  Speaker 2: Before the podcast, you can always catch us worldwide at
• 37:36
  Speaker 2: Bloomberg Radio.