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Amazon's Erstwhile NYC Site Will Lure In New Money · Bloomberg Intelligence

• 0:02
  Speaker 1: Welcome to the Bloomberg Penl Podcast. I'm Paul Sweene. You,
• 0:05
  Speaker 1: along with my co host Lisa Brahma wits each day
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  Speaker 1: podcast or wherever you listen to podcasts, as well as
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  Speaker 1: at Bloomberg dot com. Let's go back to the Amazon story.
• 0:23
  Speaker 1: I'm sure there was a real estate investors and speculators
• 0:26
  Speaker 1: and Queens were screaming into their pillows last night as
• 0:29
  Speaker 1: they were trying to process the news that Amazon will
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  Speaker 1: not be coming to Long Island City. To get a
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  Speaker 1: sense of what that means for the local real estate
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  Speaker 1: market over in Queens, let's bring on Ken Weissenberg. Ken
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  Speaker 1: is a partner in charge of the real estate services
• 0:43
  Speaker 1: group at Eisner amper Uh. He is in New York City.
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  Speaker 1: So Ken, you know what does it really mean short
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  Speaker 1: term and long term for the Queen's and nyc um
• 0:54
  Speaker 1: real estate market. On a short term basis, the speculation
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  Speaker 1: that was going on in the Long Island City area
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  Speaker 1: in terms of people buying up the condos that were
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  Speaker 1: available is going to pretty much stop for the time being. Um.
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  Speaker 1: I think the contracts that were into the two will
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  Speaker 1: go through and be completed, but a lot of the
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  Speaker 1: other transactions that work that were happening were probably going
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  Speaker 1: to slow down or stop for the time being. The
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  Speaker 1: overall market in the Long Island City area is continuing
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  Speaker 1: to show, you know, significant progress and growth. Uh. If
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  Speaker 1: you look at the site that Amazon was going to pick,
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  Speaker 1: it's in an opportunity zone. There's huge interest in the
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  Speaker 1: real estate community and developing an opportunity zones. The site
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  Speaker 1: happens to be basically on the water on the East River. Um,
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  Speaker 1: it's a prime for development. I think you'll see a
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  Speaker 1: project happen there, whether Amazon, it's Amazon or someone else.
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  Speaker 1: In other words, do you think it's not that big
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  Speaker 1: of a deal. I think it's a big deal. I mean,
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  Speaker 1: I think the political ramifications are a big deal to
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  Speaker 1: two sides within the Democratic Party have to kind of
• 1:54
  Speaker 1: work things out. But Umland City is going to continue
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  Speaker 1: to grow. New York City is going to continue to grow.
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  Speaker 1: When you look at the number of jobs in New
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  Speaker 1: York City, Yes, another twenty five thousand jobs would have
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  Speaker 1: been great um, the construction jobs, you know, to build
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  Speaker 1: that that project would have been great, But other things
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  Speaker 1: will be built, other jobs will come in. New York
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  Speaker 1: is out out growing San Francisco as a tech center.
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  Speaker 1: UM in Long Island City is seven minutes from Midtown
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  Speaker 1: by subway. So, Ken, are you concerned, however, that what
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  Speaker 1: happened here with Amazon in the city, in a state
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  Speaker 1: of New York perhaps might send a signal to other
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  Speaker 1: corporations considering New York City, New York City that maybe
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  Speaker 1: New York is not open for business. I don't think so.
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  Speaker 1: I think this was a UM targeted political campaign UM
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  Speaker 1: that ended Amazon. Amazon didn't want to have any controversy
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  Speaker 1: around this UM with open arms. And then you know,
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  Speaker 1: there was a lot of a lot of a lot
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  Speaker 1: of pushback from local politicians. But honestly, Ken, I gotta wonder,
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  Speaker 1: if Amazon didn't want local pushback, why didn't they do
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  Speaker 1: more groundwork ahead of this. I mean, it seems kind
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  Speaker 1: of strange that everybody was shocked by this decision on
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  Speaker 1: the ground, uh, and that Amazon didn't realize that this
• 3:12
  Speaker 1: would be waiting for them. That is kind of strange.
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  Speaker 1: I would have thought that the political politicians would have
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  Speaker 1: been lined up, you know, either for against way beforehand. Yeah.
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  Speaker 1: So here's my question for you, Ken, Um. Focused on
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  Speaker 1: the real estate sector, you're saying that you don't think
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  Speaker 1: it's going to have a material effect that there, that
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  Speaker 1: the area will continue to grow. But we'll put a
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  Speaker 1: long term, I mean a short term. It's going to
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  Speaker 1: be a shock to the system, because this was a
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  Speaker 1: real impetus to grow that that particular section of Long
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  Speaker 1: Island City could prices decline unreal estate there um from
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  Speaker 1: the speculative prices that hit recently. Yes, in a long term,
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  Speaker 1: I think they'll come back. I think they'll be just
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  Speaker 1: as strong and the growth we will continue. So, Ken,
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  Speaker 1: does this call into question at all the use of
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  Speaker 1: incentive to corporations. Let's just focus on New York City
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  Speaker 1: that seemed to be one of the areas that received
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  Speaker 1: a lot of pushback. Um. Do you think the city
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  Speaker 1: and the state will rethink some of the incentives it
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  Speaker 1: offers for corporations. Well, this this was quite a prize
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  Speaker 1: for whoever got the headquarters UM, and we were in
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  Speaker 1: competition with almost every major metropolitan area in the country
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  Speaker 1: for the H two q UM for h Q two
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  Speaker 1: rather UM so I think I think they had to
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  Speaker 1: put together sweeteners to make make the deal happen. But
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  Speaker 1: that's been going on so you know decades where they
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  Speaker 1: have been enticing large corporations to move headquarters with with sweeteners.
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  Speaker 1: I think that will continue. UM. Maybe you know, maybe
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  Speaker 1: the package was too sweet under the current economic climate,
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  Speaker 1: UM and political climate. But you know, even without the
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  Speaker 1: packages that they put together, there was you know, large
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  Speaker 1: incentives under under existing law that they could have benefited from.
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  Speaker 1: One thing that I'm wondering is how much of a
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  Speaker 1: pressure the subway system in New York affected this. In
• 5:05
  Speaker 1: other words, that train line that went to Long Island
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  Speaker 1: City is already very crowded that if Amazon was going
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  Speaker 1: to come, it would strain the infrastructure more than it
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  Speaker 1: would help it in the short term, and in the
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  Speaker 1: long term that could make the city less appealing. What
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  Speaker 1: do you say to that and sort of what will
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  Speaker 1: this do to efforts to upgrade the subway system. When
• 5:26
  Speaker 1: you look at the overall infrastructure for New York, the
• 5:29
  Speaker 1: infrastructure has been in place probably longer than any other
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  Speaker 1: major major metropolitan area in the United States, UM, and
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  Speaker 1: it does need refresh and continue rebuild. The first major
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  Speaker 1: project in the subway system in fifty years was the
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  Speaker 1: Second Avenue subway line, and that's been going on for
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  Speaker 1: thirty years and not finished yet. Uh. They do need
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  Speaker 1: to put significant investment into the infrastructure of New York
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  Speaker 1: City and the major metropolitan areas around the country. That's
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  Speaker 1: more of a federal UM and say combined program, and
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  Speaker 1: I'd like to see that happen. UM. A lot of
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  Speaker 1: it will be done with private partner you know, public
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  Speaker 1: private partnerships, like what's going on at the airport's right now.
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  Speaker 1: So can as New York City in particular continues to
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  Speaker 1: try to attract a new corporate citizens and they've had
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  Speaker 1: some tremendous success with technology companies, with Google having a
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  Speaker 1: big presence in Lower Manhattan, Facebook as well. UM. Talk
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  Speaker 1: to me about how the city positions its cost of
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  Speaker 1: living challenges to some of these corporations and how that
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  Speaker 1: gets balanced, because you know, that has to be a
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  Speaker 1: big challenge for New York cities that attracts corporations. Our
• 6:37
  Speaker 1: rent is cheaper than San Francisco, not by much, but
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  Speaker 1: it's a little cheaper than San Francisco. UM. I think
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  Speaker 1: the city is is and and state have to address.
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  Speaker 1: You know that the housing need for affordable housing for
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  Speaker 1: the workforce. Workforce meaning UM policeman, teachers, UM office workers,
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  Speaker 1: UM young lawyers and accountants. The prices of Manhattan are
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  Speaker 1: basically pushing people out. UM. You're seeing development happening in
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  Speaker 1: the outer boroughs. Brooklyn and Queens are seeing a tremendous
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  Speaker 1: amount of development interests. The Bronx is atreading to see
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  Speaker 1: significant development interests and certain companies are developing in the
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  Speaker 1: transit hubs in the suburbs. So that's going to take
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  Speaker 1: some sub of the pressure off New York City. But
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  Speaker 1: that also requires infrastructure because people have to be on
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  Speaker 1: on accessible and clean, safe transit. Ken Weisenberg, thank you
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  Speaker 1: so much for being with us. Ken Weisenberg, partner in
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  Speaker 1: charge of the real estate services group at Eisner Amper
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  Speaker 1: in New York. Talking about the potential ramifications of Amazon
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  Speaker 1: withdrawing from the Long Island City site for its headquarters
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  Speaker 1: to project a HQ two UH seems to be a
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  Speaker 1: growing feeling that in the short run it might have
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  Speaker 1: an issue, it might have an impact on prices over
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  Speaker 1: the long term, a little bit more optimism New York
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  Speaker 1: and in terms of its tech growth yeah, we've we've
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  Speaker 1: already seen a lot of tech coming as I mentioned before.
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  Speaker 1: You know, Facebook and Alphabet is here, and of course
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  Speaker 1: Cornell has their big tech center UH in the city
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  Speaker 1: as well, so up and we've seen news reports about
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  Speaker 1: how you know, New York is adding more tech jobs
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  Speaker 1: than than San Francisco. So it certainly has a strong
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  Speaker 1: foundation there. But you have to wonder about the political
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  Speaker 1: support of you know, making tech even a bigger part
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  Speaker 1: of the New York City corporate scene. When you think
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  Speaker 1: about the twenty seven billion dollars of economic value added
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  Speaker 1: over or created over twenty five year period by this Walmart,
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  Speaker 1: I mean by the Amazon move against the three billion
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  Speaker 1: dollars in subsidies. That seems like favorable economics. Yet that
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  Speaker 1: perhaps wasn't enough. Let's find out a little bit more
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  Speaker 1: about what is expected to come from this declaration of
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  Speaker 1: an emergency. And Edgar Tennis joining us now congressional reporter
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  Speaker 1: for Bloomberg News, joining us from One Studios in Washington,
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  Speaker 1: d c uh and thank you so much for being
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  Speaker 1: with us. So talk about what the precedent is for
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  Speaker 1: declaring a state of emergency, a national emergency to divert
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  Speaker 1: funds away from other projects towards something that the president
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  Speaker 1: would like to see. Well, that's that's an interesting question.
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  Speaker 1: It's kind of two different questions because declaring a national
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  Speaker 1: emergency is not unheard of. Barack Obama declared a national
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  Speaker 1: emergency to combat the swine flu. George George W. Bush
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  Speaker 1: declared and a national emergency after nine eleven, So declaring
• 9:40
  Speaker 1: a national emergency happens from time to time. But yours
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  Speaker 1: the second part of your question, to shift funds from
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  Speaker 1: one part of the budget to another part is unprecedented.
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  Speaker 1: And that's where we're going to run into a real
• 9:52
  Speaker 1: constitutional challenge because according to Article one of the Constitution,
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  Speaker 1: it's Congress that has the power of the purse, and
• 9:59
  Speaker 1: there's an appropriation process that goes through Congress. And what
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  Speaker 1: the president is trying to do with this declaration is
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  Speaker 1: divert taxpayer money to his priority outside the regular appropriation process,
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  Speaker 1: and that's gonna be challenged on constitutional grounds, clearly, um
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  Speaker 1: I think, Lisa. The issue here is we know his
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  Speaker 1: intention is to uh continue to fund the board of Wall.
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  Speaker 1: The question is what type of uh I think? Uh
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  Speaker 1: I think challenge will he received various members of Congress
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  Speaker 1: and over what time frame. Well, I will say this,
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  Speaker 1: it's interesting to see how he's going to try to
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  Speaker 1: cast this as a win, and it will be interesting
• 10:35
  Speaker 1: to see President Trump's tone. I was interested in the
• 10:37
  Speaker 1: Wall Street Journal opinion article that came out today from
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  Speaker 1: the editorial board talking about how signing declaring a national
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  Speaker 1: emergency is a problem and is actually basically how he
• 10:51
  Speaker 1: painted himself into a corner. Kind of interesting the Wall
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  Speaker 1: Street Journal editorial page, usually a conservative place with his
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  Speaker 1: conservative opinions, but really highlighting this fissure in the Republican
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  Speaker 1: party over declaring a national emergency? Will this give a
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  Speaker 1: precedent to the Democrats to do the same if there
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  Speaker 1: is a Democratic president? Also trying to figure out what
• 11:13
  Speaker 1: kinds of lawsuits this exposes the Trump administration to not
• 11:16
  Speaker 1: only from opponents of some of these funding read diversions,
• 11:21
  Speaker 1: but also frankly, the residents that would have to exit
• 11:24
  Speaker 1: their homes due to eminent domain in order to allow
• 11:27
  Speaker 1: this wall to be built. So a lot of issues here.
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  Speaker 1: This is going to get tied up in the courts
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  Speaker 1: for a while. Uh. Also a question of where the
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  Speaker 1: money is going to come from, and you know what
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  Speaker 1: projects will have to be jeopardized as a result of that.
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  Speaker 1: But that said, there still is a core of President
• 11:44
  Speaker 1: Trump supporters who would like to see the wall. He
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  Speaker 1: has made this a campaign speech issue, he has made
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  Speaker 1: this one of the hallmarks of his tenure, and he
• 11:53
  Speaker 1: doesn't want to go down without this victory, even if
• 11:55
  Speaker 1: it's just on paper. Yeah, it could be a puperic victory,
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  Speaker 1: but clearly looks President Trump and the administration is going
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  Speaker 1: to fight very hard for this. We do have Anna
• 12:03
  Speaker 1: Edgerton back Coggression, reporter for Bloomberg News, calling from our
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  Speaker 1: Bloomberg ninety nine one studio in Washington, d C. Anna,
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  Speaker 1: thanks for coming back up. I guess the question here
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  Speaker 1: now is just kind of next steps. How does this
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  Speaker 1: play out in your opinion there? So, there are two
• 12:16
  Speaker 1: things that we're looking for from the democratically led House
• 12:19
  Speaker 1: to Representatives. The first is a legal challenge. I spoke
• 12:22
  Speaker 1: with Jerry Nadler, he's the Democrat in charge of the
• 12:25
  Speaker 1: Judiciary Committee, and he said that the House Council will
• 12:29
  Speaker 1: pursue legal challenges to this. The other avenue to challenge
• 12:33
  Speaker 1: this is a joint resolution that would start in the
• 12:37
  Speaker 1: House of Representatives. So, uh, Nadler has already said that
• 12:40
  Speaker 1: he is going to put question this, this National Emergency
• 12:44
  Speaker 1: declaration in a resolution now that's privileged, so that means
• 12:48
  Speaker 1: it will go through the Judiciary Committee, it will go
• 12:51
  Speaker 1: put on the floor of the House. It will probably
• 12:53
  Speaker 1: pass a Democratic House, and within fifteen days it has
• 12:56
  Speaker 1: to be voted in the Senate. So it's not up
• 12:59
  Speaker 1: to Mitch McConnell, the Senate majority leader, whether or not
• 13:01
  Speaker 1: to put it on the floor. So it's gonna be
• 13:03
  Speaker 1: really interesting to see if all Democrats vote against this
• 13:07
  Speaker 1: National Emergency declaration and some Republicans who have kind of
• 13:11
  Speaker 1: constitutional qualms with this um, it could pass because it
• 13:15
  Speaker 1: only needs to be one votes. If it's privilege, it
• 13:17
  Speaker 1: doesn't have to get past the filibuster. I think it's
• 13:20
  Speaker 1: interesting though, Mitch McConnell supports declaration of a national emergency,
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  Speaker 1: and we've seen this, uh, just the leadership of the
• 13:30
  Speaker 1: Republicans seems to be behind President Trump. What can you
• 13:32
  Speaker 1: draw from that? That was a really interesting development, and
• 13:36
  Speaker 1: he almost kind of used that as a way to
• 13:40
  Speaker 1: encourage some of his hesitant members to vote for the
• 13:44
  Speaker 1: spending bill yesterday, to say, you know, there will be
• 13:47
  Speaker 1: wall money coming from elsewhere, the President will declare a
• 13:49
  Speaker 1: national emergency. I think this is a political calculation from
• 13:52
  Speaker 1: Mitch McConnell. He knows that this is a very strong
• 13:55
  Speaker 1: campaign promise from the President and in order to kind
• 13:59
  Speaker 1: of keep that core base with them, they need to
• 14:01
  Speaker 1: do more than they were allowed to do under the
• 14:05
  Speaker 1: normal appropriations process and divided government. So it definitely looks
• 14:08
  Speaker 1: like a kind of a a political move the McConnell
• 14:12
  Speaker 1: might not like, but kind of weighing what's at stake,
• 14:15
  Speaker 1: it felt like he had to so, and what's the
• 14:18
  Speaker 1: sense of where the rank and file Republican Party, particularly
• 14:22
  Speaker 1: in the in the Senate, where are they falling down
• 14:25
  Speaker 1: on this issue? Are they really willing to go uh
• 14:28
  Speaker 1: and stand behind the president on this. It's pretty divided
• 14:32
  Speaker 1: right now and senators yesterday we're a little wary to
• 14:35
  Speaker 1: kind of get ahead of their skis before the national
• 14:37
  Speaker 1: declaration is the emergency declaration is actually declared, and also
• 14:41
  Speaker 1: to see which pots of money will be tapped for this.
• 14:44
  Speaker 1: But with there was one really interesting response from Mike
• 14:48
  Speaker 1: Simpson that I wanted to highlight. He said that he
• 14:52
  Speaker 1: does think the president has pretty broad legal authority to
• 14:55
  Speaker 1: do this the way that the National Emergency Statute is written.
• 14:58
  Speaker 1: But he does worry about the precedent, and he said,
• 15:02
  Speaker 1: you know, I do think the president has legal to
• 15:04
  Speaker 1: do this. Maybe it's the best course of action since
• 15:09
  Speaker 1: he couldn't get Wall money any other way. But the
• 15:12
  Speaker 1: next time we have a democratic president, we could have
• 15:14
  Speaker 1: a healthcare national emergency that gets us Medicare for all.
• 15:17
  Speaker 1: We could have a climate emergency that gets us the
• 15:20
  Speaker 1: Green New Deal. So, you know, kind of opening this
• 15:24
  Speaker 1: up as an acceptable practice really kind of changes the
• 15:28
  Speaker 1: way to two bridges of government interact. We're speaking with
• 15:31
  Speaker 1: Anna Edgerton, uh congressional reporter for Bloomberg News as we
• 15:35
  Speaker 1: await President Trump to make comments after his expected signing
• 15:39
  Speaker 1: of the bill to stave off another government shutdown, as
• 15:43
  Speaker 1: well as a declaration of a national emergency, which he's
• 15:46
  Speaker 1: also expected to do. And I'd love to get your sense,
• 15:49
  Speaker 1: just going forward, where would the money actually come from.
• 15:52
  Speaker 1: Can you give us a sense of the projects that
• 15:55
  Speaker 1: could get delayed, postponed, not happen as a result of
• 15:59
  Speaker 1: money diverted to the Wall. Should this happen? Yeah, My
• 16:03
  Speaker 1: colleague Margaret's talent reported yesterday that the president has identified
• 16:07
  Speaker 1: eight billion dollars, almost eight billion dollars that could be
• 16:11
  Speaker 1: directed for this purpose, and the kind of pots of
• 16:14
  Speaker 1: money we're looking at our unobligated funds that could come
• 16:18
  Speaker 1: from military accounts, although speaking with Jerry Nadler, a Democratic
• 16:22
  Speaker 1: chair of the Judiciary Committee yesterday, he said, you can't
• 16:24
  Speaker 1: use military money for this purpose because military money can
• 16:28
  Speaker 1: only be directed to military uses, and by law, the
• 16:32
  Speaker 1: military can't enforce domestic law, so that could be one snag.
• 16:36
  Speaker 1: We could also see money being moved from UH funds
• 16:40
  Speaker 1: to rebuild an air base in Florida that was damaged
• 16:44
  Speaker 1: by the hurricane, and also in Campbell June in North
• 16:47
  Speaker 1: Carolina that was damaged by the floods. So there are
• 16:50
  Speaker 1: a few different things that the president's looking at, but um,
• 16:53
  Speaker 1: we expect that to be clear pretty much before the
• 16:56
  Speaker 1: beginning of next week. So Anna, Obviously, this border wall
• 17:01
  Speaker 1: is a arguably the foundational element of the Trump presidency,
• 17:06
  Speaker 1: at least to this point. But is there any sense
• 17:08
  Speaker 1: that you know, fatigue as setting in within the administration
• 17:12
  Speaker 1: that maybe it's just not worth it. Too many roadblocks
• 17:15
  Speaker 1: here and it doesn't seem to be a clear path
• 17:18
  Speaker 1: to get this funding. I don't know if there's I mean,
• 17:22
  Speaker 1: I think there's a kind of a constant fatigue in
• 17:24
  Speaker 1: the administration just because it's just, you know, kind of happens.
• 17:27
  Speaker 1: It's such a high frequency. But there's certainly as a
• 17:31
  Speaker 1: kind of political concern that the more the president kind
• 17:35
  Speaker 1: of sacrifices or puts himselves out there to pursue this
• 17:40
  Speaker 1: one priority, the more damage she could be doing in
• 17:43
  Speaker 1: other areas. Like for example, the government shut down, you know,
• 17:47
  Speaker 1: was supported by those who really really want to build
• 17:51
  Speaker 1: a border wall, but it really made the president's approval
• 17:55
  Speaker 1: ratings take a hit, and you kind of see him
• 17:57
  Speaker 1: compensating for that a little bit. There was an really
• 17:59
  Speaker 1: interesting peace in political last week kind of highlighting the
• 18:03
  Speaker 1: overt embrace of pro life priorities and kind of really
• 18:08
  Speaker 1: attacking the state laws that have been in the news
• 18:11
  Speaker 1: recently about abortion. And that's the president trying to shore
• 18:14
  Speaker 1: up his evangelical basis. So even as he pursues the
• 18:18
  Speaker 1: wall and does everything he can, maybe even you know,
• 18:21
  Speaker 1: using some of his political capital to do that, he's
• 18:23
  Speaker 1: trying to kind of shore up his coalition and other
• 18:26
  Speaker 1: areas as well, and adgertain we will please be speaking
• 18:30
  Speaker 1: with you soon. Well, lots of news coming out of Washington,
• 18:44
  Speaker 1: d c is. We just listened to President Trump's press
• 18:48
  Speaker 1: conference about the government funding UH for border security, talking
• 18:53
  Speaker 1: about China trade. It's got a sense of how a
• 18:56
  Speaker 1: lot of these geopolitical issues are impacting the US and
• 19:00
  Speaker 1: global credit market. We bring in Michael Temple. Michael's a
• 19:02
  Speaker 1: director of Corporate Credit US and portfolio manager for a
• 19:06
  Speaker 1: Mundy Pioneer. A Mundy Pioneer has approximately eighty billion dollars
• 19:09
  Speaker 1: under management. Michael joins us here in our Bloomberg Interactive
• 19:13
  Speaker 1: Broker studio. Michael, thanks for being with us. UM A
• 19:17
  Speaker 1: lot of geopolitical noise out there, news out there, whether
• 19:21
  Speaker 1: it is China, whether it is the US government shutdown,
• 19:23
  Speaker 1: whether it's Brexit. How does that factor into your analysis
• 19:27
  Speaker 1: of the credit markets? Well, you know, I think it's
• 19:30
  Speaker 1: a top down factor that we have to think about.
• 19:32
  Speaker 1: How it might affect um consumer confidence, how it might
• 19:35
  Speaker 1: affect business confidence, and whether or not at the margin
• 19:39
  Speaker 1: it's going to create a slower economic activity, either in
• 19:43
  Speaker 1: the US or overseas. So if you look at the
• 19:45
  Speaker 1: bottom up, you see companies that still have pretty high leverage,
• 19:49
  Speaker 1: even though there's some d leveraging going on. You see
• 19:51
  Speaker 1: YO bond yields that have come down dramatically more than
• 19:54
  Speaker 1: five percent returns so far this year. Are we out
• 19:57
  Speaker 1: of the woods with respect to another credit crisis or
• 19:59
  Speaker 1: could we see another one? Well? I think a lot
• 20:02
  Speaker 1: of it depends on whether or not the slowdown that
• 20:06
  Speaker 1: we're seeing globally, in particular in Europe and you just
• 20:09
  Speaker 1: heard about China, whether or not that ends up causing
• 20:14
  Speaker 1: a much more rapid deceleration of growth in the US.
• 20:17
  Speaker 1: If it does, then we're going to revisit this problem
• 20:20
  Speaker 1: sometime in the near future. If it doesn't, if the
• 20:23
  Speaker 1: fedbacking away causes an improvement and confidence and the economy
• 20:27
  Speaker 1: is fine, then uh, I think we've probably seen seen
• 20:31
  Speaker 1: this for the last time for a while. Okay, So,
• 20:33
  Speaker 1: if the economy does slow materially in the US, what
• 20:37
  Speaker 1: will be the epicenter of the next credit crisis? Well,
• 20:41
  Speaker 1: you know, it's a good question. A lot of people
• 20:43
  Speaker 1: are looking at the US credit markets as the point
• 20:46
  Speaker 1: of a problem, and of course everybody looks back to
• 20:49
  Speaker 1: the last cycle when bank loans are doing really poorly
• 20:53
  Speaker 1: and had enormous defaults in the US I actually don't
• 20:56
  Speaker 1: think it's necessarily going to be the U S as
• 20:58
  Speaker 1: the epicenter. I think it's going to be overseas UM. Clearly,
• 21:03
  Speaker 1: growth is a lot slower in Europe right now, and
• 21:06
  Speaker 1: you're seeing a number of countries in recession. So could
• 21:10
  Speaker 1: you see defaults and increasing problems in Europe that ultimately
• 21:14
  Speaker 1: cycle back to the US. And what about China? What
• 21:17
  Speaker 1: if China cannot reinvigorate growth with its current stimulus program, um,
• 21:24
  Speaker 1: then we can start to see problems coming out of China.
• 21:27
  Speaker 1: So if if the FED is on the sidelines, which
• 21:31
  Speaker 1: it appears to be, does that imply that we're in
• 21:33
  Speaker 1: a trading range here, if at least for the short term.
• 21:36
  Speaker 1: I think so. You know, you've seen a tremendous rebound
• 21:38
  Speaker 1: in credit spreads. So the question will be, now that
• 21:42
  Speaker 1: the Feds off the table, what will be the next
• 21:44
  Speaker 1: factor that could potentially either cause credit what credit spreads
• 21:48
  Speaker 1: to tighten or widen? UM. I think now the market
• 21:51
  Speaker 1: is going to be focused on the um earnings growth.
• 21:55
  Speaker 1: So you know, I coined a phrase fed up with
• 21:57
  Speaker 1: the Fed. I think the market's done trying to figure
• 22:00
  Speaker 1: out what the FED is going to do. The FED
• 22:01
  Speaker 1: is basically said, we're on hold for some period of time,
• 22:03
  Speaker 1: so everyone's going to be focusing on different things. So
• 22:07
  Speaker 1: is the market fed up with the Fed? They are
• 22:08
  Speaker 1: for right now. Next week though, the Federal meet, and
• 22:11
  Speaker 1: I'm sure everybody will be laser focused on them once again,
• 22:14
  Speaker 1: im parsing every word of FED speak. Michael Temple, thank
• 22:17
  Speaker 1: you so much for being with us. Michael Temple, director
• 22:19
  Speaker 1: of Corporate Credit US and portfolio manager for a Moondy
• 22:23
  Speaker 1: Pioneer which oversees eighty billion dollars. Definitely interesting to think
• 22:27
  Speaker 1: are we out of the woods of the FED is
• 22:29
  Speaker 1: on hold? People still want to know that what they're
• 22:31
  Speaker 1: going to do with their balance sheet, and certainly there
• 22:34
  Speaker 1: is a lot of discussion about whether we have seen
• 22:36
  Speaker 1: the last rate hike of the credit cycle. Amazon dot
• 22:51
  Speaker 1: Com project scuttled in Long Island City raises a lot
• 22:55
  Speaker 1: of questions about the municipal bond market and frankly, infrastructure
• 22:59
  Speaker 1: to all using those funds. Focus on MUTIS is brought
• 23:03
  Speaker 1: to you by Build American Mutual BAM Green Star Bonds
• 23:06
  Speaker 1: finance projects that were protect and restore the environment with
• 23:09
  Speaker 1: more renewable energy and efficient transportation and buildings visit build
• 23:13
  Speaker 1: America dot com, slash green Star BAM Building America joining
• 23:18
  Speaker 1: us as he does to talk munis every week. Joe Maisak,
• 23:22
  Speaker 1: editor for The bloom Brief, focused on the muni bond market.
• 23:25
  Speaker 1: So I want to start there with Amazon, the idea
• 23:28
  Speaker 1: that you know, there was all of this activity that
• 23:31
  Speaker 1: was supposed to be coming there a lot of money
• 23:33
  Speaker 1: from tax revenues, albeit not the extra three billion dollars
• 23:36
  Speaker 1: of tax breaks that they did get. Are there any
• 23:39
  Speaker 1: projects that you know of that have actually been scuttled
• 23:42
  Speaker 1: or seriously called into question by Amazon's exit from Long
• 23:45
  Speaker 1: Island City? Uh, just from the Amazon effect or nationally,
• 23:52
  Speaker 1: I mean, I don't think there's been any you know,
• 23:55
  Speaker 1: New York projects that people have decided, no, forget about it,
• 23:59
  Speaker 1: let's not do it. But I guess that then on
• 24:02
  Speaker 1: a national level, has it been anything, uh, any movement
• 24:06
  Speaker 1: with respect to cities cities uh and sort of inviting
• 24:11
  Speaker 1: businesses in with with the potential for rebates and things
• 24:14
  Speaker 1: like that. No, this is the way it's done, you know,
• 24:17
  Speaker 1: the providing these tax subsidies, and it's not cash, it's
• 24:21
  Speaker 1: you know, it's kind of a tax cut. If you
• 24:23
  Speaker 1: will over a period of years is an acceptable way
• 24:27
  Speaker 1: and it has been an acceptable way of doing business
• 24:30
  Speaker 1: now for decades. I want to say, and you know,
• 24:33
  Speaker 1: I think it's going to go away because of Fox
• 24:36
  Speaker 1: Con in Wisconsin. We've had some very good coverage to
• 24:39
  Speaker 1: that this week, much bigger disaster than this Amazon business.
• 24:44
  Speaker 1: And of course the Amazon business, Uh, that's not going away.
• 24:48
  Speaker 1: Every once in a while you'll hear about a city
• 24:51
  Speaker 1: rejecting the idea of subsidies for a sports stadium, but otherwise, now, yeah,
• 24:57
  Speaker 1: that's what I want to go to, Joe. I mean,
• 24:58
  Speaker 1: the subsidies issues. Will was one of the issues that
• 25:01
  Speaker 1: I think some of the folks that came out against
• 25:03
  Speaker 1: the Amazon deal cited, Um, you know, why should New
• 25:06
  Speaker 1: York City provide three billion dollars of subsidies to the
• 25:09
  Speaker 1: you know, the biggest company in the world, the wealthiest
• 25:10
  Speaker 1: person in the world. But that is a key part
• 25:13
  Speaker 1: of how these deals are done. Do you see any
• 25:16
  Speaker 1: change to that, man? You know, I I have I
• 25:21
  Speaker 1: have two words for municipalities out there who all of
• 25:27
  Speaker 1: a sudden decide that, yeah, they're not going to play
• 25:30
  Speaker 1: the subsidy game anymore, and that is Brooklyn Dodgers Brooklyn.
• 25:38
  Speaker 1: Brooklyn's heart was ripped out for decades when the Dodgers left.
• 25:43
  Speaker 1: In theory, I mean, arguably you could say they never
• 25:47
  Speaker 1: recovered it, never recovered. The Dodgers should still be in Brooklyn. However,
• 25:53
  Speaker 1: the game wasn't played, and this is what happens. So fine,
• 25:57
  Speaker 1: you know you're happy now? I mean I want to
• 25:58
  Speaker 1: ask some of these politicians, particularly generous, I guess, uh,
• 26:02
  Speaker 1: you're happy now. You're not getting these jobs, You're not
• 26:05
  Speaker 1: getting this revenue. Huh what was the trade? Three billion
• 26:09
  Speaker 1: for billion and probably higher? Yeah. Well, I think this
• 26:14
  Speaker 1: definitely will will cause some soul searching among a variety
• 26:18
  Speaker 1: of different New Year political figures. I do want to
• 26:20
  Speaker 1: shift gears a little bit from one coast to another.
• 26:23
  Speaker 1: California scaling back its plans for a high speed rail line.
• 26:28
  Speaker 1: What's the deal here? And uh, you know, are there
• 26:30
  Speaker 1: any financing plans or expectations that are going to be
• 26:34
  Speaker 1: affected by this? Well, the state of voters approved ten
• 26:39
  Speaker 1: billion dollars for high speed rail in California, and that money,
• 26:45
  Speaker 1: those bonds will be sold, some of them already have
• 26:48
  Speaker 1: been sold, and they will use that authorization on a
• 26:53
  Speaker 1: much scaled back, so you're not getting Los Angeles to
• 26:56
  Speaker 1: San Francisco, You're getting more like a central valley. Uh
• 27:00
  Speaker 1: you know, uh link if you will. Um. Yeah, it's
• 27:07
  Speaker 1: very disheartening. I mean, I think the whole, the whole
• 27:10
  Speaker 1: high speed rail thing. You know, sometimes I almost wonder
• 27:13
  Speaker 1: that this is really more of a federal project than
• 27:16
  Speaker 1: anything else. Yeah. I think in the state of California
• 27:19
  Speaker 1: that loves the automobile, I'm not sure how embrace the
• 27:22
  Speaker 1: train would be, but they could certainly use some help
• 27:24
  Speaker 1: with the congestion there. So Joe in Florida, you have
• 27:27
  Speaker 1: the that's no longer called bright Line. They cancel the
• 27:32
  Speaker 1: cancel the I p O and said, well, we have
• 27:35
  Speaker 1: other sources of money. It's a railroad game is very
• 27:38
  Speaker 1: difficult to It's a very difficult game costly. So let's
• 27:41
  Speaker 1: go to another area that seems to be doing a
• 27:43
  Speaker 1: little bit better from a municipal bomb perspective. And that's
• 27:45
  Speaker 1: my favorite muni bond topic, which is Puerto Rico. Puerto
• 27:48
  Speaker 1: Rico had a good week last week with the senior
• 27:52
  Speaker 1: secured bonds. What are next steps for Puerto Ricos that
• 27:56
  Speaker 1: tries to dig out from this bankruptcy. Man, they gotta
• 27:59
  Speaker 1: di on the on on whether or not they're going
• 28:02
  Speaker 1: to go through this repudiation of six billion dollars. I
• 28:06
  Speaker 1: imagine this is something that has to be decided in
• 28:08
  Speaker 1: court over perhaps the rest of this year. But you know, we'll,
• 28:13
  Speaker 1: I mean, we'll certainly see how they move along, because
• 28:16
  Speaker 1: the geos are next. That's the next logical thing, and
• 28:19
  Speaker 1: I think there's seventeen billion in geos. They want to
• 28:21
  Speaker 1: repudiate six billion that were sold because they thought that
• 28:26
  Speaker 1: those bonds ran into the debt limit on the common volt.
• 28:31
  Speaker 1: Joe Mesac, thank you so much for being with us
• 28:33
  Speaker 1: as always. Joe masak uh He is editor of the
• 28:36
  Speaker 1: Bloomberg Brief, focused onymous of the bond market, checking out
• 28:40
  Speaker 1: all things in the muni world, which has been hot recently,
• 28:44
  Speaker 1: especially as a number of Congress members talk about a
• 28:48
  Speaker 1: possible revival of an infrastructure deal. Thanks for listening to
• 28:53
  Speaker 1: the Bloomberg Penl podcast. You can subscribe and listen to
• 28:56
  Speaker 1: interviews at Apple Podcasts or whatever podcast platform you prefer.
• 29:00
  Speaker 1: Paul Sweeney, I'm on Twitter at pt Sweeney. I'm Lisa
• 29:02
  Speaker 1: abram Wohits. I'm on Twitter at Lisa Abram woits one
• 29:05
  Speaker 1: before the podcast. You can always catch us worldwide. I'm
• 29:08
  Speaker 1: Bloomberg Radio.