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Apple AI Plans, EU Elections · Bloomberg Intelligence

0:01
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0:16
Speaker 2: So it's bringing on rog Rana. He's a tech analyst
0:18
Speaker 2: for Bloomberg Intelligence. You've been following Apple stock for decades here,
0:25
Speaker 2: how important is today?
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Speaker 3: Anurag?
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Speaker 2: I feel like Apple doesn't have the AI juice in
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Speaker 2: at stock.
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Speaker 3: Is that something they care about?
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Speaker 4: No, they have to care about it because that's the
0:37
Speaker 4: most important thing investor's mind right now. So there are
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Speaker 4: a few things we already kind of know thanks to
0:42
Speaker 4: Mark German. Is there's going to be most likely an
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Speaker 4: announcement with Open Eyes, some kind of joint agreement with
0:48
Speaker 4: them to use their technology into the new operating system.
0:52
Speaker 4: So I would say a lot of that is already
0:54
Speaker 4: built in. We all know that Apple doesn't have its
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Speaker 4: own large language model as good as what's available with
1:00
Speaker 4: Opening I or arguably with Google, so but they can
1:04
Speaker 4: partner with these two companies. So that's that's the luxury
1:06
Speaker 4: Apple has that it does not need to do with
1:08
Speaker 4: everything in house and that's what we're going to look
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Speaker 4: forward today, is what's the strategy in terms of working
1:14
Speaker 4: with partners and then using that technology to fuel the
1:18
Speaker 4: operating system.
1:19
Speaker 5: It does it? Will it justify their one up in
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Speaker 5: the stock?
1:22
Speaker 6: How do you make the correlation between the news and
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Speaker 6: what we're actually going to get and the actual move
1:26
Speaker 6: in the in Apple share price.
1:29
Speaker 4: So, Alex, one of the things I would say is
1:31
Speaker 4: for the past one and a half to two years,
1:32
Speaker 4: there has been nothing but bad news coming for Apple.
1:35
Speaker 4: You know, that has been an issue because iPhone growth
1:38
Speaker 4: has slowed down, mostly because of China. So I would
1:41
Speaker 4: say this is the first liver of good news that
1:44
Speaker 4: has the potential to improve iPhone sales next year. It's
1:47
Speaker 4: not going to do anything this year. I mean, it's
1:49
Speaker 4: it's very difficult to model that out. But if the
1:52
Speaker 4: operating system has enough juice for people to figure out
1:55
Speaker 4: and say I will go out and change my phone
1:58
Speaker 4: next year, I think that's the That is the gas
2:01
Speaker 4: that people are looking for, is whether that can go
2:03
Speaker 4: back and reignite sales growth.
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Speaker 2: And we were talking with Mark Herman earlier this morning
2:08
Speaker 2: and he kind of suggested that, you know, it can
2:10
Speaker 2: be taken as a little bit of an embarrassment by
2:13
Speaker 2: Apple that they do not have, you know, kind of
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Speaker 2: their own AI capabilities in house, that they need to
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Speaker 2: partner with open Ai. Do you think investors view it
2:23
Speaker 2: that way? They're just like, we don't really care how
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Speaker 2: you get it, just put it on the device.
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Speaker 4: Yeah, but personally I don't care how do you do
2:30
Speaker 4: get it on the device? Same thing for search. What
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Speaker 4: I really like about that if they partner it is
2:34
Speaker 4: then they don't have to spend billions of dollars to
2:37
Speaker 4: do it in house. If you look at the capex
2:39
Speaker 4: of Apple compared to some of the other companies, it's
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Speaker 4: much smaller.
2:43
Speaker 7: And you know, I'm.
2:44
Speaker 4: Okay with that because it helps out in my free
2:46
Speaker 4: cash flow. As long as they can partner with people,
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Speaker 4: I'm absolutely fine with it.
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Speaker 5: Well, let's go to the idea.
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Speaker 6: I mean, you can bring my daughter into this. So
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Speaker 6: I'm doing a lot of reading Estrian Apple. I'm taking
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Speaker 6: all my notes and doing my homework, and I said, hey, dydn't.
3:00
Speaker 6: I was like, you know that Apple's going to have
3:01
Speaker 6: this thing tomorrow and they're gonna maybe unveil something that
3:04
Speaker 6: will help emojis and you can get better emojis when
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Speaker 6: you're typing texts and she's like, that is so cool
3:10
Speaker 6: when you need to get the new phone, and I think, anurag,
3:12
Speaker 6: that's your point where like people like my daughter are like,
3:16
Speaker 6: that's awesome, upgrade your phone now, because I'm like, oh.
3:18
Speaker 5: A few years, a few years.
3:19
Speaker 6: She's like, no, no, you got to get the phone
3:21
Speaker 6: because I need the emojis so I can send texts
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Speaker 6: to my friends. That's basically what you're talking about. There's
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Speaker 6: a huge install base. You do something that even is
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Speaker 6: like semi cool, and that's going to drive sales.
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Speaker 4: Yeah, I mean, that's the coolness factor. And frankly speaking,
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Speaker 4: one of the things that really caught my attention is
3:35
Speaker 4: Mark German reported that the new features would be available
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Speaker 4: on iPhone fifteen Pro and the newer one that's coming.
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Speaker 4: I mean, that's a big deal because, frankly speaking, if
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Speaker 4: that's a very small portion of the total install base,
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Speaker 4: even those early adopters, if they go out and rush
3:52
Speaker 4: to increase their you know, the refresh the phone in
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Speaker 4: a much quicker way, that's going to help out Apple.
3:58
Speaker 2: All right, So what else today should we be looking for?
4:01
Speaker 3: Anna Raga?
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Speaker 2: I mean, is there going to be a new watch
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Speaker 2: and do anything or is it just getting everybody to
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Speaker 2: focused on AI.
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Speaker 4: Yeah, it's all going to be AI. And I think
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Speaker 4: one of the things I really like what I've seen
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Speaker 4: from Apple in the last six months is now they
4:13
Speaker 4: are all focused on this product because one of the things,
4:16
Speaker 4: again Mark said that, you know, they shut down the
4:18
Speaker 4: cards project, which has been around for you know, so
4:20
Speaker 4: many years, taking out massive amount of investments, and then
4:25
Speaker 4: they you could say that they diverted that attention and
4:27
Speaker 4: not focused on AI completely. But right now the entire
4:31
Speaker 4: company is focused on AI, embedding it every product, every
4:34
Speaker 4: operating system, every feature. And I think, and you know,
4:38
Speaker 4: one of the things we've heard even in China is
4:40
Speaker 4: consumers don't like that Apple has been behind in this
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Speaker 4: particular one and that has been a reason for them
4:47
Speaker 4: not to upgrade their phone. So I think Apple's taking
4:49
Speaker 4: this a lot more seriously. I think other tech companies
4:51
Speaker 4: are taking it a lot more seriously. Who have been
4:54
Speaker 4: you know, I would say, taking their dominant position in
4:57
Speaker 4: their respective markets for granted over the last few years.
5:01
Speaker 4: And that's what I think open ai has done for
5:03
Speaker 4: the rest of the ecosystem.
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Speaker 6: Also, honour more of the derivative plays from this. When
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Speaker 6: we're hearing the announcements from Apple in your world of software,
5:13
Speaker 6: where should we be paying attention to?
5:15
Speaker 4: I think see what we think is going to happen
5:18
Speaker 4: is over the next one to two years, every software
5:21
Speaker 4: company is going to embed more AI features into their
5:24
Speaker 4: core software product. Now, the question is some of them
5:27
Speaker 4: will have the ability to up charge for that, which
5:30
Speaker 4: means they will have a pro model or a premium
5:32
Speaker 4: model or a ProPlus model where the average revenue per
5:36
Speaker 4: user can go up. This way, they don't have to
5:38
Speaker 4: go out and look for a brand new user to
5:40
Speaker 4: sell that software. They just have to convince the buyer
5:44
Speaker 4: that it is worth your while to upgrade that software
5:47
Speaker 4: into the one that has AI features. I think that
5:50
Speaker 4: is where bulk of the investments are going to In
5:53
Speaker 4: terms of the software industry, we think every major company
5:56
Speaker 4: will play a role in it. The ones that we
5:58
Speaker 4: have seen so far is that's coming out from Microsoft,
6:01
Speaker 4: whether it's in the Office Suite or the one that
6:04
Speaker 4: we like quite a bit. Is there coding software where
6:07
Speaker 4: you could the software developers can actually do automated coding
6:11
Speaker 4: in a much faster way. I think that will have
6:13
Speaker 4: a massive upsell rate because the benefits of productivity are
6:17
Speaker 4: way too high over there.
6:19
Speaker 2: All right, on thirty seconds question of the day, I
6:21
Speaker 2: have an iPhone eleven toy upgrade now or wait.
6:25
Speaker 4: This winter when the next one comes in, which is
6:27
Speaker 4: the iPhone sixteen or so. I think you will be
6:30
Speaker 4: very happy with that particular.
6:31
Speaker 5: One I found. Did it work? Like can you run stuff?
6:35
Speaker 8: Yeah?
6:35
Speaker 6: But at some point, like the apps just don't update
6:38
Speaker 6: and the software doesn't update, and like you have to
6:40
Speaker 6: turn it in.
6:40
Speaker 2: Well, the big thing that what always prompts me to
6:43
Speaker 2: upgrade is the battery. When a battery starts, that's that's
6:47
Speaker 2: the message. All right, Honak, thanks so much for joining us.
6:49
Speaker 2: A rag ronnie. He saved me a couple of dollars today.
6:51
Speaker 2: I'm not gonna go out and buy a new iPhone.
6:53
Speaker 2: He's a senior technologyanels for Bloomberg Intelligence. Yeah, it's always
6:56
Speaker 2: the battery that kind of gets me.
6:58
Speaker 6: The battery is rough, Yeah, but I do my thing
7:00
Speaker 6: on like low battery all day, like you don't do
7:03
Speaker 6: they do?
7:03
Speaker 5: Yeah, which is fine.
7:04
Speaker 6: It just means it instead of like staying up and
7:06
Speaker 6: connected for a long time, it just goes to sleep
7:08
Speaker 6: and I just have to wake it up.
7:10
Speaker 2: Really yeah, but a last like anybody that you're the
7:12
Speaker 2: first person that.
7:13
Speaker 6: Business track for me, though I don't know, I feel
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Speaker 6: like this all makes some cheap sense. Anyway, We're definitely
7:20
Speaker 6: watching Apple and looking forward to that announcement coming there
7:23
Speaker 6: has a really big run up.
7:26
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Speaker 6: side of the entire world. David Powell is senior Euro
8:03
Speaker 6: Area economist for Bloomberg Economics and he joins us now
8:06
Speaker 6: David BTP bund spread right, you have the France versus
8:10
Speaker 6: German ten year spread fifty five basis points.
8:12
Speaker 5: We haven't seen that all year.
8:14
Speaker 6: You have a huge, huge sell off in the bond
8:17
Speaker 6: market some of the main countries, even in Italy and
8:19
Speaker 6: Spain and Portugal, equities are getting hit. What do you
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Speaker 6: make of what unfolded over the last twenty four hours
8:26
Speaker 6: in France and the European Parliament.
8:29
Speaker 9: Well, the far right parties of Europe had very large
8:33
Speaker 9: gains in the European elections. These are the elections for
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Speaker 9: the European Parliament, and that wasn't so much of a
8:41
Speaker 9: surprise in itself, because Poles were showing that was likely
8:44
Speaker 9: to happen. But the big surprise is what's happened in
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Speaker 9: France is the reaction of the French President, Emmanuel Marcon
8:50
Speaker 9: to the outcome, and he announced a snap parliamentary elections.
8:55
Speaker 9: This won't affect his role as president because that's a
8:59
Speaker 9: separate election, But soon the French will be going to
9:03
Speaker 9: polls to be voting for new members of parliament and
9:07
Speaker 9: for American listeners that's similar to the members of the
9:10
Speaker 9: House of Representatives, and then the composition of that lower
9:14
Speaker 9: house may change, and in fact polls suggest it will
9:19
Speaker 9: more in favor of the of the party that just
9:23
Speaker 9: won such a such a large number of seats in
9:26
Speaker 9: the European Parliament.
9:28
Speaker 2: So David in the European Parliament, what were some of
9:30
Speaker 2: the contributing factors to that strong performance by the far right.
9:35
Speaker 9: Well, Uh, discontent with with the with the way things
9:39
Speaker 9: are going. Of course that's not unique to Europe and America.
9:43
Speaker 9: A lot of voters of their concerns about inflation, what
9:46
Speaker 9: that means for their spending power, and that has the
9:49
Speaker 9: that that's that's had a similar impact on the on
9:54
Speaker 9: the electorate in Europe where people are upset about these
9:57
Speaker 9: high prices. Uh, the the the cost of living crisis
10:02
Speaker 9: as they refer to it. But in addition to those
10:06
Speaker 9: to those developments in France, but they've also had recently
10:10
Speaker 9: is a change to the pension system in order to
10:13
Speaker 9: make it more affordable. So they've lifted the retirement age
10:17
Speaker 9: and that was done by the French president and it
10:19
Speaker 9: was not a popular move as you can imagine. No
10:21
Speaker 9: one wants to be told that they have to work
10:23
Speaker 9: for longer in order to receive the same benefits, and
10:26
Speaker 9: that has been a source of support for this for
10:30
Speaker 9: the far right, which has come out which came out
10:33
Speaker 9: at the time opposing that that's done. They've also come
10:35
Speaker 9: out opposing recent changes that are being discussed to the
10:40
Speaker 9: system of unemployment benefits. So it is now a debate
10:45
Speaker 9: about shortening the duration of unemployment benefits that the government
10:50
Speaker 9: is leading.
10:51
Speaker 6: So what I find interesting, David is the idea and
10:53
Speaker 6: the more I read about it, the more it's like
10:55
Speaker 6: Mattcrol's calling the far right bluff and it's like, all right,
10:58
Speaker 6: you guys want those policies, Let's see how much you
11:00
Speaker 6: want those policies that What is your assessment as to
11:04
Speaker 6: how risky or not that strategy is and the effect
11:07
Speaker 6: you could have on the economy.
11:10
Speaker 9: Well, some of the things that Macwall's pushed through, like
11:13
Speaker 9: raising the retirement age and this debate about shortening the
11:17
Speaker 9: duration of employment benefits, Obviously they're not popular, but they're
11:20
Speaker 9: necessary because France is a huge budget deficit there under
11:23
Speaker 9: a lot of pressure from the European Commission to reduce
11:26
Speaker 9: the size of it. Their debt isn't growing increasingly large,
11:30
Speaker 9: and these reforms will reduce the amount that the government
11:34
Speaker 9: is to pay out to pensioners and the unemployed, and
11:37
Speaker 9: they'll also boost the potential size of the economy. So
11:40
Speaker 9: it's kind of a win win situation from an economic
11:43
Speaker 9: point of view. And even though these aren't popular, macalls saying,
11:49
Speaker 9: these are necessary steps in order to get the public
11:51
Speaker 9: finances in order. And the far right has been opposed
11:55
Speaker 9: to many of these moves, but they haven't they haven't
11:57
Speaker 9: proposed other solutions. So I think one of the things
12:02
Speaker 9: Macwoll's kind of doing here is saying is you know,
12:05
Speaker 9: you like to be opposed to what I'm doing, but
12:06
Speaker 9: you're not putting forth any solutions yourself. And while you're
12:10
Speaker 9: in opposition, I guess that's your job to oppose the government.
12:13
Speaker 9: But let's see if you can put together some policies
12:16
Speaker 9: yourselves that would solve the problems instead of just complaining
12:19
Speaker 9: about what he has proposed as solutions.
12:21
Speaker 2: David, can you give us a kind of an overview
12:23
Speaker 2: just maybe how the economic the economies of Europe are
12:27
Speaker 2: behaving generally speaking, How are they in terms of growth,
12:30
Speaker 2: how are they in terms of inflation these days?
12:32
Speaker 3: What are the trends?
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Speaker 9: Well, Europe, like the United States, has had an inflation
12:37
Speaker 9: problem of the last couple of years, and in Europe
12:40
Speaker 9: it was made even worse by the extreme rise and
12:44
Speaker 9: commodity prices that resulted after Russia's invasion in Ukraine. They
12:48
Speaker 9: have that inflation issue that's causing a cost of living crisis,
12:53
Speaker 9: And like the Federal Reserve, the European Central Bank very
12:58
Speaker 9: drastically raised interest rates, although unlike the United States, it
13:02
Speaker 9: had a major impact on the economy. So when we
13:05
Speaker 9: look back to twenty twenty three, I think the US
13:08
Speaker 9: economy grew something like three percent and the r Area
13:11
Speaker 9: economy did not grow at all. So there's been a
13:14
Speaker 9: much weaker economic performance as a result of the monetary
13:19
Speaker 9: tightening that's taken place.
13:21
Speaker 6: Yes, we got the ECB that did cut rates, we
13:23
Speaker 6: don't know when the next one's going to be. And
13:25
Speaker 6: then we get this violent move in bonn yields, and
13:28
Speaker 6: I appreciate compared the sovereign deck crisis, it's like peanuts,
13:31
Speaker 6: But nonetheless it's significant. At what point do bond yields
13:36
Speaker 6: effect everything else start to affect the economy, Like how high?
13:39
Speaker 6: How long do they have to stay for that to
13:41
Speaker 6: feel to that to be implemented into the economy.
13:45
Speaker 9: Yeah, I mean higher financing costs for the government. We'll
13:50
Speaker 9: have implications for the budget deficit and implications for lots
13:55
Speaker 9: of other things that are used as trademark interest rates
13:59
Speaker 9: in the economy in many places. However, as you said,
14:02
Speaker 9: these are small compared to what you're dealt with in
14:04
Speaker 9: the past in terms of the area debt crisis, and
14:07
Speaker 9: there's very unlikely to be any intervention from the ECB
14:11
Speaker 9: or anything like that, only because not only the movements small,
14:15
Speaker 9: but during a period of high inflation it's much more
14:18
Speaker 9: difficult for a central bank to intervene and to justify
14:22
Speaker 9: those moves than it is during a period of low inflation,
14:25
Speaker 9: because of course those interventions require just essentially printing money
14:29
Speaker 9: and using that money to buy those bonds. So we
14:33
Speaker 9: have had some movement in financial markets, but nothing that's
14:36
Speaker 9: screaming crisis, nothing that is screaming for the ECB to
14:40
Speaker 9: jump in and come the situation.
14:42
Speaker 3: All right, David, thank you so much. We appreciate that.
14:44
Speaker 2: David Palm, he's a senior your Area of Congress for
14:47
Speaker 2: Bloomberg Economics joining us from London the HQ for Bloomberg
14:51
Speaker 2: at Queen Victoria Street via that zoom thing. So again,
14:55
Speaker 2: some big moves, as Alex was pointing out earlier, of
14:58
Speaker 2: the euro off about a half of one percent sent
15:00
Speaker 2: one spot zero seven on the euro. You had the
15:03
Speaker 2: CAC fall off pretty substantially as well the French index.
15:08
Speaker 2: They're off about one point eight percent in terms of
15:11
Speaker 2: the stock market over there on the news of these
15:14
Speaker 2: snap elections.
15:15
Speaker 6: So my question is, then do we learn anything about
15:17
Speaker 6: how other elections will be treated like here in the
15:19
Speaker 6: US or not. We know hedging doesn't work with these things,
15:23
Speaker 6: as we learn, say with Brexit, so it's going to
15:25
Speaker 6: be very interesting to see how long these moves actually last,
15:28
Speaker 6: which might give us some insight into when they had
15:31
Speaker 6: the elections in July, when the UK has their election
15:33
Speaker 6: in July, and when we have our election as well
15:36
Speaker 6: in November.
15:38
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16:02
Speaker 5: Lisa was just giving you a check on the market.
16:04
Speaker 6: Also, Apple is down a touch, but it has a
16:06
Speaker 6: huge run up since the end of April, and Video
16:09
Speaker 6: is also down on that stock split. So we want
16:11
Speaker 6: to dig a little deeper here with Carol Pepper, founder
16:13
Speaker 6: and CEO of Pepper International. She joins us, Hey, Carol,
16:17
Speaker 6: do you want to buy Apple into today? Like, do
16:19
Speaker 6: you want to buy in Video on the stock split?
16:22
Speaker 10: Definitely buying Video on the stocksplit. I think that that's
16:26
Speaker 10: just a great sign. And in Video is going to
16:28
Speaker 10: run right back up to over a thousand bucks a share.
16:31
Speaker 11: It is the engine right now.
16:32
Speaker 10: So I would definitely buy it and tuck it away
16:35
Speaker 10: and not look at it, just leave it there on fear.
16:37
Speaker 11: Days and I'll go down. So on a fear day,
16:39
Speaker 11: buy the stock.
16:40
Speaker 2: So can we broad that out Carol to say, continue
16:44
Speaker 2: to buy some of these large cap growth stories across
16:46
Speaker 2: the border.
16:47
Speaker 3: Where do we try to find some value out there?
16:50
Speaker 10: No, I definitely feel like the value is long large
16:54
Speaker 10: cap growth. Frankly, the leaders and the bigger stocks are
16:57
Speaker 10: getting bigger. They're in a position with all the cash
17:00
Speaker 10: on their ballad sheet to be very muscular to make
17:02
Speaker 10: the innovative deals, to make long term investments where other
17:05
Speaker 10: companies are struggling. So in tech, at least, bigger is
17:09
Speaker 10: much better and that's where you need to stay. And again,
17:13
Speaker 10: if you haven't fully filled out your tech allocation, it's
17:16
Speaker 10: something to take a hard look at. In general, I
17:19
Speaker 10: think growth continue to outperform value. It has for over
17:22
Speaker 10: ten years, and I don't see that trend ending anytime soon.
17:25
Speaker 10: Although it's still very prutent to own the entire SMP,
17:29
Speaker 10: the US stock market is going to continue to outperform
17:31
Speaker 10: the rest of the world, certainly for the foreseeable future.
17:34
Speaker 6: You, Carol, you didn't mention Apple. You know you're talking
17:39
Speaker 6: about large cap growth. We're talking about tech. I asked
17:42
Speaker 6: an Apple you didn't talk about. It makes me think
17:44
Speaker 6: that that's not in this thesis you have.
17:47
Speaker 10: Well, I mean the problem that I've always had with
17:49
Speaker 10: Apple is I feel like their product set is not
17:51
Speaker 10: that broad.
17:52
Speaker 11: I mean, Okay, how.
17:53
Speaker 10: Many iPhones do people really need? Yes, you might upgrade
17:56
Speaker 10: the phone that you have, that, are you really going
17:58
Speaker 10: to penetrate.
17:59
Speaker 11: Larger groups of new users.
18:01
Speaker 10: I'm not so sure about that. They're very expensive. We're
18:04
Speaker 10: in a high inflation market.
18:05
Speaker 11: I'm not as.
18:06
Speaker 10: Excited about Apple as I am about the other big
18:09
Speaker 10: tech companies like Amazon, certainly Microsoft, in Nvidia.
18:13
Speaker 11: We've got Google, even Facebook. You've got companies.
18:16
Speaker 10: That are branching out into more areas of growth and expansion.
18:20
Speaker 10: And to me, Apple's fairly focused. The car thing was
18:23
Speaker 10: a mistake and now they have to backtrack on that.
18:26
Speaker 10: I mean, they're still always going to be in the
18:27
Speaker 10: top five. Don't get me wrong, you can own them.
18:30
Speaker 10: I'm just not in love with them. As let's say
18:33
Speaker 10: the leading story.
18:34
Speaker 3: So are you in love with Microsoft and Amazon?
18:38
Speaker 10: Yes, I've always been in love with Amazon since the beginning,
18:41
Speaker 10: since they went public. Microsoft, I think is very very
18:43
Speaker 10: strong and will continue to be. So they have a
18:46
Speaker 10: much stronger focus on, i think, the corporate side of
18:48
Speaker 10: the business, and that's very smart because all of this
18:50
Speaker 10: AI innovation will start affecting corporate America and Microsoft will
18:55
Speaker 10: most likely be one of the main delivery mechanisms because
18:58
Speaker 10: they're embedded in so many corporate systems and so many
19:01
Speaker 10: you know, Outlook systems and all the cloud storage that
19:05
Speaker 10: they're doing.
19:06
Speaker 11: I don't think that that's going to change.
19:08
Speaker 6: So there was a great piece on Bloomberg that talked
19:10
Speaker 6: about how big text profit growth is going to slow.
19:13
Speaker 6: It's not going to go negative or anything. It's just
19:14
Speaker 6: going to slow from the kind of growth that we've seen.
19:17
Speaker 6: But that other areas like industrials, materials and healthcare can
19:20
Speaker 6: see roughly twenty five percent profit growth by the fourth
19:22
Speaker 6: quarter after a contraction twenty percent or more in the
19:25
Speaker 6: first quarter. So I'm wondering, are you in love with
19:27
Speaker 6: stuff outside of tech and maybe in those sectors.
19:31
Speaker 10: Well, I certainly think those sectors have room to move,
19:34
Speaker 10: which is fantastic. Certainly, you know, the GFLP one story
19:39
Speaker 10: is going to continue and expand we're going to see
19:42
Speaker 10: new drugs coming on and that is a blockbuster category.
19:45
Speaker 10: But I also see that AI is doing tremendous work
19:48
Speaker 10: in things like cancer research and coming up with real
19:51
Speaker 10: cures in the health tech space. So I think healthcare
19:54
Speaker 10: will also always be a good core holding.
19:57
Speaker 11: But if you were to say what weight.
19:58
Speaker 10: To put it out, I would overweight tack more than
20:00
Speaker 10: I would overweight healthcare.
20:01
Speaker 1: Though.
20:02
Speaker 11: Of course, to me, healthcare is a continued growth story.
20:05
Speaker 10: Because we have a lot of aging populations all over
20:07
Speaker 10: the world and they just simply need more healthcare. So yes,
20:10
Speaker 10: I mean healthcare is always a good sector. Anything growthy
20:13
Speaker 10: is your friend. It doesn't mean the other sectors won't
20:16
Speaker 10: touch up eventually, because a rising tide will lift all boats.
20:20
Speaker 11: Especially when the rates start to go down. That's where
20:22
Speaker 11: I think you'll see value start to move some more.
20:25
Speaker 10: Because with value, you know, you just have very much
20:28
Speaker 10: smaller margins to play with.
20:29
Speaker 11: So when you have high interest.
20:30
Speaker 10: Rates, you're more squeezed, and it's very hard to get
20:32
Speaker 10: out of that squeeze any particular way if you're not
20:35
Speaker 10: in a sector that's growing.
20:37
Speaker 2: Hey, Carol, one of the themes coming out of the
20:39
Speaker 2: pandemic was on shoring and friends shoring, and a lot
20:44
Speaker 2: of folks are saying, take a look at Mexico.
20:47
Speaker 3: Is that a theme you like? And so how do
20:49
Speaker 3: you play that?
20:50
Speaker 11: Yeah?
20:51
Speaker 10: Absolutely well, As you guys know, I manage money for
20:54
Speaker 10: ultra wealthy families with over one hundred million dollars family offices.
20:58
Speaker 11: And they're very much looking at Mexico.
21:00
Speaker 10: There's a huge real estate play going on now between
21:03
Speaker 10: Mexico and the United States because many many businesses are
21:06
Speaker 10: relocating their operations out of Asia to Mexico so that
21:10
Speaker 10: they can just drive goods right across the border. Into
21:13
Speaker 10: the US if they have to, So they're preparing for
21:15
Speaker 10: the next pandemic. Frankly, Mexican they had a huge election.
21:20
Speaker 10: The election went left. Of course, the wealthy families over
21:22
Speaker 10: there are quite nervous, but the incoming president has really
21:26
Speaker 10: pledged to not mess with the economy, and so far,
21:29
Speaker 10: so good.
21:30
Speaker 11: I don't think she.
21:31
Speaker 10: Will question becomes how much will the outgoing president pass
21:35
Speaker 10: his agenda before he leaves. But having said that, I
21:38
Speaker 10: think they're all very happy with the way the economy
21:40
Speaker 10: has been growing over there. So yes, Mexico will continue
21:43
Speaker 10: to grow. It's only actually just getting started, and there's
21:47
Speaker 10: a lot of activity in the real estate section the section.
21:50
Speaker 11: There's a lot of joint.
21:51
Speaker 10: Venturing between US and Mexican family offices going on, So
21:55
Speaker 10: keep your eye on Mexico. It's also a fantastic retirement
22:00
Speaker 10: nation for Americans who can't afford to stay here with
22:03
Speaker 10: the current retirement I mean, you can live on your
22:05
Speaker 10: Social Security beautifully in Mexico and you can't do that
22:08
Speaker 10: in the US in retirement. So they were already massive
22:12
Speaker 10: communities of retired Americans living across the border. And again
22:16
Speaker 10: it's easy for them to get home if they prefer
22:18
Speaker 10: to have health care in the US.
22:20
Speaker 11: But it's a big trend. It's going to continue to grow.
22:23
Speaker 6: Well, my best friend's pushing Costa Rica like that's her thing,
22:26
Speaker 6: Like they're going to move her family for a year anyway.
22:28
Speaker 6: So yes, that is a trend, Carrol, for sure, just
22:31
Speaker 6: a headline that's crossing here. I feel like this is
22:32
Speaker 6: for Paul because he'll get into it. BTP boom spread
22:35
Speaker 6: ten year gap rises to fifty five basis points, the
22:38
Speaker 6: highest in a year, and that's the difference between what
22:40
Speaker 6: the ten yere yield in France versus Germany is yielding.
22:43
Speaker 6: And since Germany tends to be looked at as the
22:45
Speaker 6: risk free rate over in Europe, it's a sign of
22:47
Speaker 6: where the stress is. Before the sovereign dead crisis, France
22:51
Speaker 6: was really thought of his stable along with Germany, and
22:54
Speaker 6: the dead crisis kind of avoid miss that got rid
22:59
Speaker 6: of the got rid of that a little bit, and
23:01
Speaker 6: there was more political risk over in France. Also, the
23:03
Speaker 6: equity market is getting crushed. Did we learn anything, Carol, Like,
23:06
Speaker 6: I know you're a US person, but did we learn
23:09
Speaker 6: anything about what happened in the European Parliament and Macron's
23:12
Speaker 6: choice to call these elections for the lower house in
23:16
Speaker 6: relation to how we can trade and expect things here
23:19
Speaker 6: in the US in November.
23:21
Speaker 11: Oh, that's a really interesting question.
23:23
Speaker 10: Well, I would say that, in my opinion, the vote
23:26
Speaker 10: in the EU is a one issue vote. It was
23:28
Speaker 10: an immigration vote because literally they're intignated. Almost every country
23:32
Speaker 10: has massive numbers of people arriving on their shores by
23:35
Speaker 10: vote because very close to get to Europe from other countries.
23:39
Speaker 11: So you know, the Europeans are sick.
23:41
Speaker 10: Of the immigration crisis, and I think his decision to
23:45
Speaker 10: call snap elections is worrisome because he may lose even
23:48
Speaker 10: more and that's what people don't want to see.
23:51
Speaker 11: There is a fear of.
23:52
Speaker 10: A return to a World War two kind of fascism
23:55
Speaker 10: in Europe in reaction to immigration.
23:58
Speaker 11: That's what.
23:58
Speaker 10: But having said that, the souter parties still hold the majority,
24:02
Speaker 10: so I think for the EU itself, we're still set
24:05
Speaker 10: for this for this next cycle. But it's certainly a
24:08
Speaker 10: commentary on they're way more enthusiastic on climate change and
24:12
Speaker 10: they're way more aggressive on trying to somehow stop all
24:17
Speaker 10: of this incoming immigration into the your EU block.
24:20
Speaker 11: So I think those two factors are really.
24:23
Speaker 10: Driving that vote, because average people are not happy with
24:27
Speaker 10: what's happening in Europe. So having said that, when you
24:30
Speaker 10: come to the United States, you're definitely seeing a.
24:32
Speaker 11: Number of voters very unhappy about immigration.
24:35
Speaker 10: And it's something that has to be dealt with in
24:37
Speaker 10: this country as well. We just have to have a
24:41
Speaker 10: better system that functions better. So it is a big
24:44
Speaker 10: election issue. Both sides are trying to grab it. I
24:47
Speaker 10: don't know what the outcome will be. It's a split
24:50
Speaker 10: decision right now in this country. But I do think
24:52
Speaker 10: here people are worried about fascism as well. Fascism is
24:56
Speaker 10: a scary rise throughout the developed world right now, and
24:59
Speaker 10: I I do think in America we have a real
25:01
Speaker 10: allergy to fascism, and when it comes to the voting polls,
25:04
Speaker 10: I don't think people are going to tolerate fascist talk
25:07
Speaker 10: in the United States.
25:08
Speaker 11: That's just my opinion, all right.
25:11
Speaker 3: Keerl, thank you so much for joining us.
25:13
Speaker 2: Kyle Pepper, founder and CEO of Pepper International, joining us
25:15
Speaker 2: New York City via zoom.
25:17
Speaker 1: Here you're listening to the Bloomberg Intelligence podcast. Catch us
25:23
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25:26
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25:29
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25:33
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25:37
Speaker 2: Well, you know, we love these big take stories here
25:40
Speaker 2: at Bloomberg News.
25:41
Speaker 3: That's where our reporters a Bloomberg.
25:43
Speaker 2: News they do some really awesome deep dives and on
25:46
Speaker 2: some really interesting stories.
25:48
Speaker 3: Today is no different.
25:49
Speaker 2: How about this one talent exit at Williams New York
25:52
Speaker 2: Fed stokes concern on its way. Alex Harris joins is
25:56
Speaker 2: Bloomberg short Term interest rate reporter here. So Alex, thanks
26:00
Speaker 2: much for joining us here in our studio. The New
26:02
Speaker 2: York Federal Reserve Bank, that's a big one. And so
26:06
Speaker 2: what's happening with our friends at the New York Fed
26:08
Speaker 2: because we need to pay attention to this.
26:10
Speaker 8: Yeah, So what's kind of happened over the last couple
26:12
Speaker 8: of years is you've seen an exodus of basically senior management.
26:16
Speaker 8: These are people who have been with the bank for
26:18
Speaker 8: decades just deciding to exit, either that they retire or
26:22
Speaker 8: that they you know, find another opportunity on Wall Street
26:25
Speaker 8: or just really but what's ultimately driving it is the
26:29
Speaker 8: environment is just not they have found just not conducive
26:32
Speaker 8: either that you know, there's been changes in the banks,
26:35
Speaker 8: in the bank under the leadership of John Williams that
26:39
Speaker 8: they have found, you know, doesn't necessarily work for them anymore.
26:44
Speaker 8: And as a result, they're leaving. And what people are
26:47
Speaker 8: worried about is the so called brain drain. It leaves
26:50
Speaker 8: a vacuum of people who are experienced at fighting crises
26:54
Speaker 8: because remember a lot of these people have been there.
26:56
Speaker 8: They were there for the financial crisis, they were there
26:58
Speaker 8: for the repo market blow up, they were there in
26:59
Speaker 8: twenty like, they have crisis fighting experience, and so you're
27:03
Speaker 8: leaving a lot of that knowledge is leaving the bank.
27:06
Speaker 8: But then also just their ability and the question of
27:10
Speaker 8: are they ready for whatever's next, And that's what people
27:13
Speaker 8: are really concerned is they're feeling like something must is
27:16
Speaker 8: severely lacking in the under the leadership of John Williams.
27:21
Speaker 5: Why I love that you wrote this because Alex is
27:23
Speaker 5: usually the person that has those.
27:24
Speaker 6: Really nerdy rebo market articles where you're like, I know
27:28
Speaker 6: this is important. I know I'm going to read it
27:30
Speaker 6: three times and I'm still going to understand twenty percent
27:32
Speaker 6: of it and I have to email Alex Harris, so
27:34
Speaker 6: thank you.
27:34
Speaker 5: For writing an article that I understood right off the bat.
27:37
Speaker 5: What did they do about that?
27:38
Speaker 9: Then?
27:39
Speaker 6: I mean, is it as easy as like, hey, we're
27:41
Speaker 6: going to offer more work from home?
27:42
Speaker 5: Is it not that at all? Is it something very different?
27:45
Speaker 8: I think it's very different.
27:47
Speaker 5: I think really what.
27:49
Speaker 8: People are going to have to start looking at is
27:51
Speaker 8: taking a really serious look at the role of the
27:54
Speaker 8: New York FED. You know, for some people, they've said, look,
27:57
Speaker 8: Lourie William excuse me, got elevated out of the New
28:01
Speaker 8: York FED to running the Dallas FED. And she's taken
28:04
Speaker 8: a lot of that staff with her. She has this
28:06
Speaker 8: experience on the balance sheet. People really trust her. So
28:09
Speaker 8: now people are wondering, well, it doesn't necessarily have to
28:12
Speaker 8: be New York that carries out, you know, the implementation
28:14
Speaker 8: of the Fed's policies when it comes to their balance sheet,
28:17
Speaker 8: like this could shift to Dallas. So people are starting
28:21
Speaker 8: to ask that question or pose that question. At the
28:23
Speaker 8: same time, though, you know, people are pushing back and saying, no, no, no,
28:27
Speaker 8: this has to be in New York. We need to
28:28
Speaker 8: fix what is happening in New York. We need to
28:31
Speaker 8: retain talent in New York because the banks are here,
28:33
Speaker 8: and if something happens with the banking system, it's much
28:36
Speaker 8: easier to call everyone down to Liberty Street and say, hey,
28:39
Speaker 8: get in here, we got to figure this out than
28:41
Speaker 8: trying to call people all the way down to Dallas
28:43
Speaker 8: and say, hey, we got to figure this out.
28:45
Speaker 2: So historically, the New York Fed has been the branch
28:49
Speaker 2: that manages the Treasury's balance sheet, correct buying and selling bonds, well.
28:54
Speaker 8: The Fed's balance sheet, so there are whole things of
28:56
Speaker 8: treasuries and mbs and such.
28:59
Speaker 2: So it's been done. And again they have traders there
29:01
Speaker 2: and stuff that do this. I mean, this is where
29:02
Speaker 2: it happens in New York.
29:04
Speaker 8: Well, and you have other like Chicago still has you know,
29:07
Speaker 8: market analysis people. They still have all these things coming
29:10
Speaker 8: out of the other banks. But it is primarily a
29:13
Speaker 8: function of the New York Fed. Their tasked with managing
29:15
Speaker 8: their Fed's portfolio. Roberto Pearly is the SOMA manager, so
29:19
Speaker 8: he manages the FED securities portfolio. You know, so these things,
29:23
Speaker 8: and so the New York Fed really post financial crisis,
29:26
Speaker 8: has just taken on such a larger role. They've essentially
29:29
Speaker 8: become like a giant broker dealer just given the size
29:33
Speaker 8: and the sheer size of their balance sheet. And that's
29:36
Speaker 8: you know, someone like Christopher Whalen is making the argument
29:39
Speaker 8: that you don't need an academic We don't, you know.
29:41
Speaker 8: It's you don't need an academic running the New York Fed.
29:45
Speaker 8: You need someone who's comfortable with operations, with the nuts
29:47
Speaker 8: and bolts, and can kind of see it from a
29:49
Speaker 8: more markets oriented perspective than an academic one.
29:54
Speaker 5: So how do they pitch that?
29:55
Speaker 6: Because who's going to give up a job at Goldman
29:59
Speaker 6: that pays a nice tongue of change. Actually have no
30:01
Speaker 6: idea how much the New York Fed does, but I
30:02
Speaker 6: have to assume it's less.
30:04
Speaker 5: How do I do it?
30:04
Speaker 8: It's like I think, when I last look at the
30:07
Speaker 8: annual report from twenty twenty three, I think it's like
30:09
Speaker 8: a little over half a million dollars that the president
30:11
Speaker 8: of the New York Fed makes. But I mean, look, Beth Hammock,
30:14
Speaker 8: who ran funding, who ran the Goldman sex fundings?
30:17
Speaker 5: Are she's elevated.
30:19
Speaker 8: She's taking the role as the Cleveland Fed president. You know,
30:23
Speaker 8: Lorie Logan could always you know, people are speculating that
30:26
Speaker 8: she could come back to New York and run it.
30:28
Speaker 8: You know, these are the kinds of people I think
30:30
Speaker 8: that they envision when they're thinking about the role, and
30:33
Speaker 8: who could who can you know, possibly you know, helm
30:37
Speaker 8: the New York Fed after John Williams, who decides to
30:39
Speaker 8: retire a step down.
30:41
Speaker 3: Do we have a problem with John Williams.
30:43
Speaker 2: Is that a people placing the blame on these departures
30:46
Speaker 2: on John Williams and his.
30:47
Speaker 8: Style, or you know, I think it's a I think
30:51
Speaker 8: it's a bit of both.
30:52
Speaker 5: I think, you know, again, you know, when we.
30:54
Speaker 8: Spoke to people, the message was always he is a
30:58
Speaker 8: brilliant macro economist, but just ill suited for the role.
31:02
Speaker 8: I also think culturally, the other sense I got from
31:05
Speaker 8: people is that, you know, culturally it's very different than
31:09
Speaker 8: the San Francisco Fed, which is what he was running
31:11
Speaker 8: for seven years before he came and took the role
31:14
Speaker 8: in New York. It's just very different. And you know,
31:16
Speaker 8: sometimes culturally people don't fit and that's okay, and so
31:21
Speaker 8: that's something to also think about. And so I think
31:25
Speaker 8: it's a bit of both. I think it is somewhat
31:27
Speaker 8: of the culture and just sort of not meshing you know,
31:32
Speaker 8: they were just sort of ill suited for each other.
31:34
Speaker 5: Right, We'll keep an eye on good stuff.
31:36
Speaker 3: Yeah, Alex Harris, thank you so much for We appreciate it.
31:38
Speaker 3: Alex Harrish. She's a short term interest rate reporter working.
31:41
Speaker 2: On the big Take story here today, Talent Exit at Williams,
31:45
Speaker 2: New York stokes concern on its sway in the marketplace
31:49
Speaker 2: about the New York Federal Reserve. And you can catch
31:52
Speaker 2: those big take stories Bloomberg dot Com Slash Big Take
31:55
Speaker 2: or go on the Bloomberg terminal NI Space Big Take.
31:58
Speaker 3: Another good one today.
31:59
Speaker 1: Here you're listening to the Bloomberg Intelligence Podcast. Catch us
32:05
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32:08
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32:11
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32:15
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32:20
Speaker 3: Alex Steel and Paul Sweeney.
32:21
Speaker 2: We're live here in our Bloomberg Interactive Broker studio in
32:23
Speaker 2: Midtown Manhattan, what I'm going to call an A plus building.
32:27
Speaker 2: We're also streaming live on YouTube as well, as you
32:30
Speaker 2: can head over to YouTube and search Bloomberg Podcast talking
32:33
Speaker 2: about real estate on the commercial side. It is a
32:36
Speaker 2: hot topic for a lot of folks, particularly those in
32:39
Speaker 2: larger markets, where you're really trying to figure out how
32:41
Speaker 2: this commercial real estate, particularly the office real estate market
32:43
Speaker 2: is going to shake out here and what the impacts
32:45
Speaker 2: that will have across the economy. We have an expert
32:48
Speaker 2: with us today, Ken Fisher, joins us. He's a partner
32:49
Speaker 2: at Fisher Brothers. Joins us here on our Bloomberg Interactive
32:52
Speaker 2: Broker studio. Ken, thanks so much for.
32:54
Speaker 3: Joining us here.
32:55
Speaker 2: Let's just start right here in New York City office
32:58
Speaker 2: real estate.
33:00
Speaker 12: That's your view, Well, we're looking at a really a
33:03
Speaker 12: bifurcated market. There's the class A trophy market, and there's
33:08
Speaker 12: just about everything else. What we've seen in our portfolio
33:13
Speaker 12: is a lot of activity. Tours are still fairly robust,
33:19
Speaker 12: and we have we've made some very very big deals,
33:22
Speaker 12: some of the biggest deals in the country over the
33:24
Speaker 12: last year, year and a half.
33:26
Speaker 6: Yeah, let's get to some of Yeah, let's get to
33:29
Speaker 6: some of that, just to get perspective to the listeners.
33:31
Speaker 6: Fisher Brothers has a core commercial portfolio in New York
33:34
Speaker 6: City right that includes thirteen forty five Avenue of the
33:36
Speaker 6: America's twenty two hundred and ninety nine Park Avenue and
33:39
Speaker 6: Park Avenue Plaza like these are like big, huge centers
33:44
Speaker 6: that are really iconic in the financial industry. Talk to
33:47
Speaker 6: us about the kind of leases that you were signing,
33:49
Speaker 6: say last year, and what kind of leases are you
33:52
Speaker 6: signing this year.
33:53
Speaker 12: Well, that's been fairly consistent. The rents themselves have been
33:59
Speaker 12: fairly stag that they've been.
34:01
Speaker 7: They haven't moved much.
34:02
Speaker 12: What has moved is then effective rents, the rents after
34:06
Speaker 12: you factor in tenant improvement allowances and brokerage commissions and
34:10
Speaker 12: free rent, that number has gotten hit substantially. The amount
34:14
Speaker 12: of landlord worked has also increased. So as part of
34:17
Speaker 12: making the deal there's tenant improvement allowance. There's also the
34:20
Speaker 12: work that the landlord has to do in terms of
34:23
Speaker 12: capital expenditures to make the buildings leasable.
34:26
Speaker 2: So take for example, at thirteen forty five Avenue of America's,
34:30
Speaker 2: which those of us who have been here for more
34:32
Speaker 2: than fifteen minutes called sixth Avenue. Paul Weiss, big New
34:37
Speaker 2: York City law firm, just took I guess fifteen year
34:40
Speaker 2: one hundred and forty three thousand, square foot lease. So
34:46
Speaker 2: is that new space? Are they just kind of repositioning space?
34:49
Speaker 2: And what did you have to do? You have to
34:50
Speaker 2: put in pool tables and ping pong tables, all that
34:53
Speaker 2: kind of selling.
34:53
Speaker 12: I wish it was that simple. First it was seven
34:56
Speaker 12: hundred and sixty five thousands. Okay, we had a million
34:59
Speaker 12: square foot vacant see facing us in twenty twenty five
35:03
Speaker 12: with Alliance Bernstein moving out to Nashville, and so, you know,
35:08
Speaker 12: year before the pandemic, we actually looked inside the portfolio
35:13
Speaker 12: because we knew that we were competing now not only
35:15
Speaker 12: with our comp set, but also with new construction. We'd
35:18
Speaker 12: seen millions and millions of square feet of new construction
35:21
Speaker 12: that we hadn't seen since the sixties. Wow, And so
35:24
Speaker 12: we knew we had to invest and reposition the portfolio,
35:28
Speaker 12: and so we did so. And then of course the
35:30
Speaker 12: pandemic hit. And so in the middle of repositioning these
35:35
Speaker 12: assets with you know, massive amenities like we see here
35:39
Speaker 12: in this building, we also had to modify our stance
35:42
Speaker 12: and start.
35:43
Speaker 7: COVID proofing the buildings.
35:45
Speaker 12: So we did HVAC work, a touchless experience, bluetooth technology,
35:51
Speaker 12: all of that stuff that we hear about we incorporated
35:53
Speaker 12: into our portfolio, and the result was, you know, while
35:58
Speaker 12: again we said that rents were fairly stable, it was
36:01
Speaker 12: the amount of work that it.
36:02
Speaker 7: Took to get Paul Weise in.
36:04
Speaker 12: So it was not just what we saw in the
36:06
Speaker 12: deal itself, but what we had to do the repositioned
36:09
Speaker 12: ability to get Paul Weiss.
36:10
Speaker 7: To look at it.
36:12
Speaker 5: So, was that a healthy commercial real estate market? Is
36:15
Speaker 5: that an investment cycle?
36:17
Speaker 11: Like?
36:17
Speaker 5: How would you then describe it?
36:21
Speaker 12: Well, you know, again we're looking at a bifurcated market,
36:24
Speaker 12: so you know, we're competing with other Class A assets
36:31
Speaker 12: and so we long before the pandemic hit, we just
36:35
Speaker 12: knew what we were going to have to do. There
36:37
Speaker 12: was a stat that came out years ago that almost
36:40
Speaker 12: sixty percent of the market was over sixty years or earther,
36:44
Speaker 12: and so we fell into that concept.
36:47
Speaker 7: We fell into that grouping, and so.
36:49
Speaker 12: It became very very important for us to reinvest in
36:52
Speaker 12: the portfolio. And I think we will see that those
36:55
Speaker 12: who have reinvested and spent the capital expenditures necessary to
36:59
Speaker 12: reposition buildings have had some activity, and those who haven't
37:03
Speaker 12: have not.
37:04
Speaker 2: One of my first Wall Street interviews was in Park
37:06
Speaker 2: Avenue Plaza, the old First Boston Corporation back in.
37:09
Speaker 3: The day, and I was like, oh, this.
37:11
Speaker 7: Is really real place.
37:13
Speaker 3: Yes it does, Yes it does for many reasons. What
37:15
Speaker 3: percentage of.
37:16
Speaker 2: New York City is a type of quality?
37:22
Speaker 7: Oh gee, that's tought. I mean it's it's a It's
37:25
Speaker 7: not fifty No, it's not.
37:28
Speaker 2: So it's less than that. So I'm just getting to
37:31
Speaker 2: the question. Bloomberg News I referenced this article many times.
37:36
Speaker 2: A year and a half ago. Two years ago, Bloomberg
37:38
Speaker 2: News wrote a story about Third Avenue Times Square to write,
37:42
Speaker 2: where we are at Bloomberg's headquarters here fifty eighth Street, what.
37:46
Speaker 7: Do you do with that inventory?
37:48
Speaker 3: Because that's not a inventory for most of the most.
37:50
Speaker 12: Work, it's not if you look at if you look
37:52
Speaker 12: at the sub markets, you can you can kind of
37:54
Speaker 12: look at it from that. From that perspective, Park Avenue,
37:57
Speaker 12: sixth Avenue, these.
37:58
Speaker 7: Are the hot market.
37:59
Speaker 12: These are the hot places that a lot of deals
38:02
Speaker 12: are going because of the flight to quality that exists
38:04
Speaker 12: when market conditions take a you know, take a little
38:07
Speaker 12: bit of a stump. What we've seen is we have
38:10
Speaker 12: a building at six oh five Third Avenue, which straddles
38:12
Speaker 12: to sub markets, and so you know, look, it puts
38:16
Speaker 12: everything on the table. We've even examined the possibility of
38:21
Speaker 12: conversion to residential, which you know, again takes a lot
38:26
Speaker 12: of resources to do, so that's something that we've discussed.
38:30
Speaker 12: I don't think it's going to be relevant to six
38:31
Speaker 12: oh five, but again, you know, it's it's looking at
38:34
Speaker 12: this at the market in the form of sub markets
38:37
Speaker 12: and what is happening, and you can see the data.
38:40
Speaker 12: You know where most of these deals are happening are
38:43
Speaker 12: along those.
38:43
Speaker 7: To those markets.
38:45
Speaker 5: You're sorry, go ahead, but I.
38:47
Speaker 2: Guess my question is just pick a building out of
38:49
Speaker 2: thin air on Third Avenue, the Lipstick Building, because maybe
38:52
Speaker 2: some people are out of town can think about that building.
38:54
Speaker 3: That's what we're talking about.
38:55
Speaker 2: If that were to trade hands today, discount from pre pandemic.
39:01
Speaker 7: Just about it, I would say, wow, pretty close.
39:03
Speaker 3: That is amazing. That's to me. We haven't seen that
39:06
Speaker 3: market clear, have we No?
39:08
Speaker 5: But does it have to I have to, like someone
39:12
Speaker 5: going to sell the building tomorrow.
39:13
Speaker 2: Loans are coming up to be refinanced, and they have
39:15
Speaker 2: to do with a higher interest rate environment, so a
39:17
Speaker 2: lot of hands are going to be forced in the
39:18
Speaker 2: next couple of years, don't you think.
39:20
Speaker 12: I think yeah, I think you're more likely to see
39:23
Speaker 12: in a lot of cases, you know, workouts where there
39:26
Speaker 12: will be more equity required, you know, be invested back in.
39:30
Speaker 12: There'll be stricter covenants, more leasing reserves and reserves in general.
39:36
Speaker 12: I think you'll see that rather than the keys being
39:40
Speaker 12: handed back, And if it's a B or a C market,
39:43
Speaker 12: you might see residential conversions be discussed. I think you know,
39:48
Speaker 12: it's going to depend you know, in relation to that,
39:51
Speaker 12: it's going to depend a lot on when the loan
39:53
Speaker 12: matures as it relates to lease explorations.
39:57
Speaker 6: Yeah, in terms of your reinvestment in the equity you
39:59
Speaker 6: have to put in, are you done in that cycle
40:01
Speaker 6: or are you still putting in a bunch of cash
40:03
Speaker 6: to update all your stuff?
40:04
Speaker 12: No, we have repositioned our portfolio and I can still eat.
40:10
Speaker 7: So that's why he.
40:11
Speaker 5: Laughed at himself. When are you talking about it?
40:13
Speaker 12: We have we have made a substantial reinvestment and the
40:16
Speaker 12: results are that we have you know.
40:18
Speaker 5: We have leased, but that cycle's done for us?
40:21
Speaker 7: Yes?
40:21
Speaker 5: Yes, okay?
40:22
Speaker 6: Do you feel like others are really are they also
40:24
Speaker 6: starting to do it now? Or do you feel like
40:27
Speaker 6: for everyone that cycle is is done.
40:30
Speaker 9: No.
40:30
Speaker 12: I think I think you'll. It depends again on the
40:32
Speaker 12: asset and the sub market. You've got to be very
40:34
Speaker 12: careful about the amount of money you have to do
40:36
Speaker 12: it surgically. You can't invest the same amount of money
40:40
Speaker 12: that you would put into thirteen forty five, say it's
40:42
Speaker 12: six oh five as an example. So I think there'll
40:45
Speaker 12: be some, you know, some buildings yet to be repositioned,
40:48
Speaker 12: and there'll be some buildings that.
40:50
Speaker 7: Have gone through the cycle.
40:51
Speaker 2: Would you I don't know if you have a speculative
40:54
Speaker 2: part of your company that says, I'm going to go
40:57
Speaker 2: bid thirty cents on the dollar for this building on
40:59
Speaker 2: Third Avenue because I think at that valuation, even if
41:02
Speaker 2: I have to put money into that building, I can
41:04
Speaker 2: make a good return. Are you guys thinking about that
41:07
Speaker 2: or you just kind of focus on your core portfolio?
41:09
Speaker 7: No, I think we have enough to focus on right now.
41:11
Speaker 12: We've actually developed over the last couple of years about
41:14
Speaker 12: twelve hundred multifamily with three hundred yet to come down
41:18
Speaker 12: and Winwood in Miami. We're developing that right now. And
41:24
Speaker 12: you know, I think as far as we are concerned.
41:27
Speaker 12: We also have a major immersive retail experiential development in
41:32
Speaker 12: Las Vegas. That's plenty for us right now.
41:35
Speaker 2: Okay, Ken Fisher for joining us. Really appreciated, Ken Fisher.
41:40
Speaker 2: He's a partner of Fisher Brothers. For those of you
41:42
Speaker 2: who don't know it, I mean, particularly I think what
41:44
Speaker 2: I've learned about commercial real estate, it is oftentimes a
41:47
Speaker 2: family business. And there's a handful of New York real
41:49
Speaker 2: estate families, including the Fishers. But you think about the
41:53
Speaker 2: Dursts and the Tishman's and the Rudens and all that,
41:55
Speaker 2: and the Fishers are right there, and it's kind of
41:57
Speaker 2: a family business for a lot of these pies, with
42:00
Speaker 2: substantial Wall Street support, of course in terms of financing.
42:03
Speaker 2: But you go around New York City and other major
42:05
Speaker 2: markets and you see the same names time and time
42:07
Speaker 2: again in terms of it. Fourth generation now, yeah, fourth generation,
42:11
Speaker 2: just family business. Great stuff, Ken Fisher, Thank you very much.
42:15
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