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Markets, Investing, And The Future Of NYC's Economy · Bloomberg Intelligence

• 0:00
  Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
• 0:04
  Speaker 1: my co host Matt Miller. Every business day we bring
• 0:06
  Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
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  Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
• 0:15
  Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
• 0:18
  Speaker 1: at Bloomberg dot com slash podcast well. As New York
• 0:22
  Speaker 1: City continues to reopen, one of the key issues is
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  Speaker 1: how do we ensure that it reopens and evolves on
• 0:30
  Speaker 1: in an equitable, wet, equitable way. And our next guest
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  Speaker 1: probably has some thoughts on that. Brad Lander, New York
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  Speaker 1: City control or candidate. He's also a veteran New York
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  Speaker 1: City Council member from Brooklyn. Brad, thank you so much
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  Speaker 1: for taking the time here. Um Again, as New York
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  Speaker 1: City continues it's reopening, there are definitely some concerns here
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  Speaker 1: that some of the funds that have been allocated for
• 0:51
  Speaker 1: that reopening that they be allocated in an equitable way.
• 0:56
  Speaker 1: Give us your thoughts on how that may develop. Thank you, Paul, Matt.
• 1:01
  Speaker 1: It's great to be with you, and I think your
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  Speaker 1: point is a good one. We're getting this one time
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  Speaker 1: federal funding. We've got about fourteen billion dollars coming in
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  Speaker 1: from American Rescue Plan and carres funding UM. And there's
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  Speaker 1: a lot of questions about it. You know, is it
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  Speaker 1: being distributed equitably? Are we making sure that every neighborhood,
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  Speaker 1: especially those hit hardest by COVID that had those lines
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  Speaker 1: outside the hospitals and food banks, UM, that we're investing
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  Speaker 1: in small business reopening. UM. There's a lot of other
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  Speaker 1: questions as well. We want to make sure we're investing
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  Speaker 1: that money and things that will help prime the economy
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  Speaker 1: that are one time investments and go don't create recurring
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  Speaker 1: obligations that hit our city budget in future years after
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  Speaker 1: the federal money dries up. Yeah, I just you know,
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  Speaker 1: the question about how you track the funds and what
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  Speaker 1: what you do if they're not spent wisely. It just
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  Speaker 1: seems to me, in general, and this isn't specific to
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  Speaker 1: Brooklyn or New York. UM, we pay farm far too
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  Speaker 1: much in taxes for what we actually get. The government
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  Speaker 1: spends a lot more on stuff than I would if
• 2:00
  Speaker 1: I were buying that stuff. How do you deal with
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  Speaker 1: that kind of spending? Run of muck? Well, look what
• 2:06
  Speaker 1: we need new York City to be is a place
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  Speaker 1: that people want to keep coming and creating and innovating
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  Speaker 1: and doing business, where cultures thriving, where businesses are thriving.
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  Speaker 1: Like that, So it makes New York City space you
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  Speaker 1: know special. And I will say, you know, Mike Bloomberg
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  Speaker 1: made clear when he was mayor, like, We're not gonna
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  Speaker 1: be able to like charge you the least in taxes
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  Speaker 1: to make New York City what it needs to be
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  Speaker 1: to have the technology and the education and the public
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  Speaker 1: safety um and the thriving neighborhood. So to me, it's less,
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  Speaker 1: you know, can we can we tax people less and more?
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  Speaker 1: Can we deliberate city that's thriving and that spreads those
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  Speaker 1: benefits around more? Completely completely agree? It's not about I
• 2:44
  Speaker 1: completely agree with you. It's not about taxing people less.
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  Speaker 1: I'm willing to pay what I pay even a little more.
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  Speaker 1: It's about getting value for that money, spending it in
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  Speaker 1: the right way. Agreed, And look, I think in that
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  Speaker 1: can make development. We have some compelling models. The Brooklyn
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  Speaker 1: Navy are you know, publicly owned city owned land. Working
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  Speaker 1: with the Brooklyn Navy are Development Corporation creating a platform
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  Speaker 1: for technology and clean energy companies creating good jobs. You know,
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  Speaker 1: I like the model of the new Cornal Tech campus
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  Speaker 1: on Roosevelt Island. UM. So yes, I think when we
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  Speaker 1: have this one time money that's a lot of it
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  Speaker 1: is for economic reopening, there is an opportunity to track
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  Speaker 1: it and to make sure it's going into the kinds
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  Speaker 1: of investments UM that do that. But right now we're
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  Speaker 1: really not doing that at all. It's almost impossible to
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  Speaker 1: tell where the money is going. How much is just
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  Speaker 1: for basic public health services, how much is to help
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  Speaker 1: our kids come back and recover socially, emotionally, academically, and
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  Speaker 1: how much is going into economic recovery. UM. So that
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  Speaker 1: step one is controller. When I want to do one day,
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  Speaker 1: you know, in the first hundred days, is put that
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  Speaker 1: tracking system up. The state controllers actually put something like
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  Speaker 1: this up and then yeah, like use it to show
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  Speaker 1: where we are in arn't tracking outcomes um, And then
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  Speaker 1: be able to show folks like you, um, this money
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  Speaker 1: is being spent in ways that will deliver a thriving
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  Speaker 1: economy and a more equal one. Today I can't do that,
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  Speaker 1: So I'm not gonna argue with you today. Today that
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  Speaker 1: money is being spent fairly willy nilly without a lot
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  Speaker 1: of strategy or a lot of good tracking. Um, it's
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  Speaker 1: going to be on the next mayor to put a
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  Speaker 1: budget out that really does a more strategic job as controller.
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  Speaker 1: What I'm gonna do is shining a spotlight on it,
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  Speaker 1: provide the data, you know, enable people to look and
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  Speaker 1: see is this going in the ways that we wanted to?
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  Speaker 1: Heybra had a recent Bloomberg City Lab analysis found that
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  Speaker 1: New York City has spent the most on overtime pay
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  Speaker 1: uh then the five biggest cities. That also found that
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  Speaker 1: the excess of overtime has led the higher pension payments
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  Speaker 1: because they counts all the overtime pay when calculating pensions
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  Speaker 1: UH for the New York City Police Department. What will
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  Speaker 1: you do to change that? Yeah, I've been a longtime
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  Speaker 1: critic of this. That City Lab report, you know, really
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  Speaker 1: put it in in black and white. But a bunch
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  Speaker 1: of us have been saying this for a long time. Uh,
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  Speaker 1: you know, hundreds of millions of dollars of overtime beyond
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  Speaker 1: what was budgeted. Like everyone has just treated the budget
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  Speaker 1: as like some numbers, It's okay if you blow through,
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  Speaker 1: and that's not This kind of goes to what you
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  Speaker 1: were saying before that was getting us improved public safety.
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  Speaker 1: You might still ask questions about it, but at the
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  Speaker 1: moment it's not we We we spend more per capita.
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  Speaker 1: We have, even before overtime, substantially more police per capita
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  Speaker 1: than any other big city in the United States, more
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  Speaker 1: than Lay, more than Austin, more than Houston. Um, and
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  Speaker 1: they don't do very much on that. Yeah, I gotta see.
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  Speaker 1: Last time I was up on the treat I saw
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  Speaker 1: a group of people ride by and clearly stolen motorcycles.
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  Speaker 1: I watched somebody doing a out in the open drug
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  Speaker 1: deal on the corner in the middle of the day
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  Speaker 1: and people were shoplifting and Dwyane read there were cops
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  Speaker 1: on each corner and they did nothing about any of it.
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  Speaker 1: How that even beyond that, as as the study showed,
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  Speaker 1: you know, we're spending a lot on overtime, and there's
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  Speaker 1: some real questions about is that oriented to achieving public
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  Speaker 1: safety or is that oriented to boosting uh boosting pensions. Look,
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  Speaker 1: I think there are some more promising ways to invest
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  Speaker 1: resources and keeping communities safe. I'm a big fan of
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  Speaker 1: these violence interrupted programs, these pure violence programs that are
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  Speaker 1: starting up in a lot of neighborhoods, and the cities
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  Speaker 1: putting more money in. But we really do need to
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  Speaker 1: track what are we getting for that money. And I'd
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  Speaker 1: give one more example. You know, I talked to a
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  Speaker 1: lot of people who are saying, you know, the subways
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  Speaker 1: don't feel as safe to me. I'm more likely to
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  Speaker 1: see someone who seems mentally ill, who seems like they
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  Speaker 1: might be homeless. You know. But what's effective there is
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  Speaker 1: providing supportive housing and mental health treatments that help those
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  Speaker 1: folks both be and live safely as opposed to having
• 6:48
  Speaker 1: somebody pull them off the subways when they're going to
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  Speaker 1: get right back on tomorrow. So, you know, I think
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  Speaker 1: we can bring a lot more data to the conversation
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  Speaker 1: about what keeps our communities safe. Do we have data?
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  Speaker 1: By the way, I'm in Berlin, Germany right now, and
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  Speaker 1: I noticed last night there's no traffic, or at least
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  Speaker 1: nothing compared to New York. Do we have data showing
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  Speaker 1: that congestion pricing can really solve this issue without being
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  Speaker 1: a regressive tax on commuters where work. Yes, I mean
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  Speaker 1: the short answer you know there is you know, look, um,
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  Speaker 1: there's a balance. You're not going to both get dramatic
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  Speaker 1: dramatic congestion reductions and dramatic increases in what you can
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  Speaker 1: invest in public transit. Like those things are gonna happen
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  Speaker 1: in some inverse relationship to each other. And but you know,
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  Speaker 1: the examples from London are pretty good. They have somewhat
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  Speaker 1: reduced traffic and substantially increased resources for transit investment. Um. Yeah,
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  Speaker 1: And I mean it will be really important that as
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  Speaker 1: the system gets stood up here, we are watching really
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  Speaker 1: carefully and we're balancing between those goals. And you know,
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  Speaker 1: we want both those things, both less traffic and more
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  Speaker 1: money for transit. We're not probably get them, you know,
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  Speaker 1: to get them both. And as the system gets tweaked, um,
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  Speaker 1: it is important that we really limit exceptions or exemptions,
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  Speaker 1: like we need a system that isn't like you know,
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  Speaker 1: so means tested. You know that it isn't achieving its
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  Speaker 1: broad traffic and transit goals. But I'm a longtime supporter.
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  Speaker 1: I've been fighting for it for a couple of decades,
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  Speaker 1: and I'm glad it's about to happen. Brad, Thank you
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  Speaker 1: so much. Brad Lander. There control or candidate let's talk
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  Speaker 1: about what really wealthy people are doing high work and
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  Speaker 1: that individuals in these markets. Michael Sonnenfeldt joins us. He
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  Speaker 1: is the chairman and the founder of Tiger twenty one.
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  Speaker 1: They've got a collective eighty five billion dollars in assets
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  Speaker 1: under management. Michael, thanks so much for joining us. So
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  Speaker 1: what do wealthy investors think about the stock market right now?
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  Speaker 1: We're covering your all time record highs and there seem
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  Speaker 1: to be so many headwinds that mr market is just ignoring. Yeah,
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  Speaker 1: thanks for having me. You know, our members are in
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  Speaker 1: a period where they're can learned about inflation, labor costs,
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  Speaker 1: UH and the supply chain issues. But at the same time,
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  Speaker 1: over of their assets are in startups and venture capital.
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  Speaker 1: That's an all time high, and of course the public
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  Speaker 1: markets are the exit for those startups and so there's
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  Speaker 1: more innovation going on. So our members are trying to
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  Speaker 1: counteract their concerns. We only have in public equity, it's
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  Speaker 1: our second largest allocation. But these are these are very
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  Speaker 1: interesting times and climate and energy is first and foremost
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  Speaker 1: on their mind, but labor and inflation as well. Michael,
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  Speaker 1: I know your members of as you mentioned entrepreneurs, all
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  Speaker 1: walks of the business of the economy. What are you
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  Speaker 1: hearing from them in terms of the supply chain issues
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  Speaker 1: that we hear about, you know, seemingly here for months now,
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  Speaker 1: and they don't really show any signs of abating anytime soon. Sure,
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  Speaker 1: you know, there's been a debate, uh about the FED.
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  Speaker 1: I'm using an example about whether inflation is transitory or
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  Speaker 1: now in a new trend, and it's the same issue
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  Speaker 1: on the supply chain. Is this the bull whip effect
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  Speaker 1: of coming back to work from the pandemic new ways
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  Speaker 1: of working, offices and so forth. Are we in a
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  Speaker 1: fundamental shift of supply chain of epic proportion? And it's
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  Speaker 1: too early to tell, but anybody who discounts does it
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  Speaker 1: at their peril. One thing to note, though, is as
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  Speaker 1: the economy becomes more data driven or high tech driven. Uh,
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  Speaker 1: the supply chain issues are in the physical world, but
• 10:38
  Speaker 1: in the internet world, in the digital world, the supply
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  Speaker 1: chain issues are a little less critical. And as these
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  Speaker 1: issues are more higher percentage of the economy. UH. That's
• 10:49
  Speaker 1: why the stock market seems to still not be being
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  Speaker 1: destroyed by these supply chain issues. It's it's a wonder
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  Speaker 1: to our members, but they're you know, they're playing on
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  Speaker 1: a rapidly chain landscape. So what about the labor shortage?
• 11:04
  Speaker 1: I mean, you have, um, you run businesses that that
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  Speaker 1: employ people. Your members run businesses that employ people. What
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  Speaker 1: are they hearing when they try and hire or or
• 11:15
  Speaker 1: where else are those people? What else are those people
• 11:18
  Speaker 1: doing with their time? So we now have we just
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  Speaker 1: crossed the thousand member mark. We're in five countries and
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  Speaker 1: over a hundred billion in assets, So there's a lot
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  Speaker 1: of businesses that are members continue to own. It's sort
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  Speaker 1: of the all stars of entrepreneurs. And it's not just
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  Speaker 1: the labor shortage. You know, I went into our office
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  Speaker 1: the other day. We have thirty people. Only two are
• 11:40
  Speaker 1: in the office. Everybody else is working from home. So
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  Speaker 1: in labor shortages, one of the things is how do
• 11:46
  Speaker 1: you retain key employees? How do you give them the
• 11:49
  Speaker 1: flexibility if they now want to work from home. But
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  Speaker 1: I think, as you've mentioned earlier on the program, this
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  Speaker 1: combination of supply chain issues and labor issues are creating
• 12:00
  Speaker 1: new challenges. Uh, and you have to be really fleet
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  Speaker 1: afoot and be able to respond as a small time entrepreneur.
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  Speaker 1: That's what a lot of our members are learning from
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  Speaker 1: one another how how how to respond in these changing times.
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  Speaker 1: You know, Michael, Prior to the pandemic, you know, one
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  Speaker 1: could argue UM issued number one for most business people
• 12:22
  Speaker 1: was climate energy usage, you know, green energy UM And
• 12:27
  Speaker 1: maybe it's take a little bit of a you know,
• 12:30
  Speaker 1: a back burner here during a pandemic, but it's going
• 12:32
  Speaker 1: front and center now, uh in Scotland and you know
• 12:35
  Speaker 1: they're getting together on a global basis to discuss these issues.
• 12:40
  Speaker 1: What are your member saying about this? So climate and
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  Speaker 1: energy are growing to be one of the number one
• 12:47
  Speaker 1: topics that are discussed at our monthly group meetings when
• 12:50
  Speaker 1: people get together all over the world. We're organized in
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  Speaker 1: groups of fifteen people and have about eighties some groups
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  Speaker 1: today in five countries. And when they're talking about energy,
• 13:02
  Speaker 1: they're trying to it's not just the energy transition. This
• 13:05
  Speaker 1: is going to be an opportunity set if you're a
• 13:08
  Speaker 1: commodity buyer, think of all of the copper that's going
• 13:10
  Speaker 1: to be used to rewire the world. There is so
• 13:13
  Speaker 1: much opportunity coming from the clean energy transition. About there's
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  Speaker 1: estimates of between two and six trillion dollars a year
• 13:22
  Speaker 1: that's going to be needed to rewire the planet, to
• 13:26
  Speaker 1: decarbonize the planet. It's probably the largest shift of investment
• 13:31
  Speaker 1: themes literally in the history of the markets. So you
• 13:36
  Speaker 1: can you can be concerned about climate you have every
• 13:39
  Speaker 1: reason to be, but in terms of investing in new
• 13:43
  Speaker 1: startups that are going to decarbonize the planet, this is
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  Speaker 1: an opportunity set like we've never seen before. And Michael,
• 13:50
  Speaker 1: thank you so much for joining us. We always love
• 13:52
  Speaker 1: chatting with you, getting your perspective in the perspective of
• 13:55
  Speaker 1: your members. Michael Son and Felt, chairman and founder of
• 13:58
  Speaker 1: Tiger twenty one. They have about one billion dollars in
• 14:01
  Speaker 1: assets under management. Again, Tiger twenty one is a peer
• 14:04
  Speaker 1: membership organizations for high net worth wealth creators and pre preservers,
• 14:08
  Speaker 1: helping them to navigate the challenges and opportunities that success creates.
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  Speaker 1: Always love getting Michael's perspective in the perspective of of
• 14:16
  Speaker 1: his members as they navigate these financial markets. And uh,
• 14:19
  Speaker 1: this reopening of the pandemic economy right Well, Matt, as
• 14:25
  Speaker 1: I take a look at the economic landscape out there,
• 14:27
  Speaker 1: one of the big questions I have is where are
• 14:29
  Speaker 1: all the workers? I see? Help one it signs up everywhere,
• 14:33
  Speaker 1: and then we're not coming to understanding one of the
• 14:35
  Speaker 1: key issues in the supply chain glitches. They can't find
• 14:38
  Speaker 1: enough truck drivers to get the stuff out of the ports.
• 14:40
  Speaker 1: So where are the workers? I think our next guest
• 14:43
  Speaker 1: may have some thoughts on that, Lisa Shallotte, Chief Investment Officer,
• 14:46
  Speaker 1: Wealth Management at Morgan Stanley. So Lisa, give me your
• 14:50
  Speaker 1: best guests to where the workers are? Good morning, everybody, um,
• 14:55
  Speaker 1: so thanks thanks for having me. You know, as as
• 14:58
  Speaker 1: you may note, uh, you know, we put out a
• 15:01
  Speaker 1: piece on this last week where you know, we suggested
• 15:05
  Speaker 1: that the pandemic actually accelerated a bunch of structural changes
• 15:10
  Speaker 1: that were probably already afoot with regard to the labor market.
• 15:15
  Speaker 1: And and our sense is that you know, right now,
• 15:18
  Speaker 1: a lot of folks maybe underestimating number one, the portion
• 15:22
  Speaker 1: of folks that maybe retired, uh, and that retirement rate
• 15:27
  Speaker 1: was accelerated around the pandemic. Our gases as many as
• 15:31
  Speaker 1: one point five to two million additional people dropped out
• 15:35
  Speaker 1: permanently dropped out of the workforce, um because of the pandemic.
• 15:40
  Speaker 1: And they were able to do so quite frankly because
• 15:43
  Speaker 1: financial markets and their their retirement savings were covered uh
• 15:48
  Speaker 1: so quickly and so fully. UM. A second group uh
• 15:53
  Speaker 1: of folks, uh we think relocated and really took advantage
• 15:57
  Speaker 1: of uh the ability for many jobs to quote unquote
• 16:01
  Speaker 1: go remote or move to a hybrid model that you know,
• 16:05
  Speaker 1: really created a mismatch between you know, the supply of
• 16:08
  Speaker 1: labor and the demand the geographic demand for labor. Uh.
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  Speaker 1: And it doesn't seem like some of those relocations are
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  Speaker 1: are unwinding. UH. And a third pieces is what we
• 16:20
  Speaker 1: would call, uh, you know, the the retraining and re
• 16:25
  Speaker 1: positioning of of folks that you know, we're in positions
• 16:29
  Speaker 1: that were deemed quote unquote non essential. Uh. And during
• 16:33
  Speaker 1: this last eighty four months of the pandemic, UH, those
• 16:37
  Speaker 1: individuals uh you know said, hey, the heck with that.
• 16:40
  Speaker 1: I'm gonna you know, use this opportunity, uh, you know,
• 16:43
  Speaker 1: to to train myself to get certified, to move into
• 16:47
  Speaker 1: a role that is considered more essential and more stable. UM.
• 16:52
  Speaker 1: And I'm not going to go back to some of
• 16:55
  Speaker 1: those those service uh jobs that that carry high stress
• 16:58
  Speaker 1: and and high public health risk. I can tell you
• 17:02
  Speaker 1: a couple of those hit home for me. My parents
• 17:05
  Speaker 1: both had been wary of retiring, um, you know, for
• 17:10
  Speaker 1: financial reasons, but they've just done so well recently in
• 17:14
  Speaker 1: markets that they've decided to pull the trigger this year.
• 17:18
  Speaker 1: So uh. And then in terms of the retraining element,
• 17:22
  Speaker 1: we've been we we talked so much about truckers on
• 17:24
  Speaker 1: this show, but I have been looking seriously into what
• 17:27
  Speaker 1: does it take to get you know, your long haul license,
• 17:31
  Speaker 1: your cd L and get a job, um, not just
• 17:36
  Speaker 1: like local delivery job, but are real you know, follow
• 17:40
  Speaker 1: that white line kind of job across the country. It's
• 17:44
  Speaker 1: not easy, it's really difficult. It takes a lot of time.
• 17:47
  Speaker 1: And obviously to make the big money you need a
• 17:49
  Speaker 1: lot of experience, So retraining takes a while. Uh. You know,
• 17:54
  Speaker 1: in light of this, Lisa, why are we still at
• 17:56
  Speaker 1: all time highs? We got this supply chain crisis, there's
• 17:59
  Speaker 1: a labor shortage, everyone's talking about real inflation, and yet
• 18:05
  Speaker 1: we're at one what's going on? Yeah? Look, I think
• 18:10
  Speaker 1: if there's two you know, fundamental things. One, we know
• 18:13
  Speaker 1: that this is a market that continues to be a
• 18:17
  Speaker 1: wash in excess liquidity. Um. You know, while a couple
• 18:22
  Speaker 1: of of the measures that we use to look at
• 18:24
  Speaker 1: financial conditions have begun to suggest a little bit of tightening. Uh,
• 18:29
  Speaker 1: you know it maybe at the ultra front end of
• 18:32
  Speaker 1: the curve. Um. The reality is is that there's still
• 18:35
  Speaker 1: a ton of cash out there. You know, we Morgan
• 18:38
  Speaker 1: Stanley has done some work in the last you know,
• 18:41
  Speaker 1: two weeks talking about the role of the individual investor
• 18:45
  Speaker 1: UM you know who's been you know, still has seems
• 18:48
  Speaker 1: to have access to ample balance sheet reserves to put
• 18:52
  Speaker 1: into the market. That that is a segment that is
• 18:55
  Speaker 1: quote unquote buying the dip. And and so we're we
• 18:58
  Speaker 1: have a lot of liquidity and they still very much
• 19:01
  Speaker 1: eager and willing to participate in this market. I think
• 19:04
  Speaker 1: the second thing is is that despite the headlines and
• 19:07
  Speaker 1: despite uh you know, downgrades and GDP growth for Q three,
• 19:12
  Speaker 1: despite the delta variant, so far, you know, corporate earnings
• 19:17
  Speaker 1: are holding up. Now. Uh, you know, our measures that
• 19:22
  Speaker 1: look at forward earnings revisions, uh say that that the
• 19:26
  Speaker 1: breadth of those earnings revisions has begun to roll over.
• 19:29
  Speaker 1: That these topics of inflation and input costs and lack
• 19:35
  Speaker 1: of labor and and and supply chain are going to
• 19:39
  Speaker 1: be a factor. But it doesn't seem that thus far,
• 19:41
  Speaker 1: and the reports that that we're hearing they are a
• 19:44
  Speaker 1: big enough factor to to throw water on this market.
• 19:49
  Speaker 1: So real couping least at thirty seconds. Where are you
• 19:51
  Speaker 1: telling clients to go right now? Yeah, so, look, we
• 19:55
  Speaker 1: like the cyclical story in in Q four and two. Um,
• 20:01
  Speaker 1: so we're buying financials, we're buying industrials, we're buying materials,
• 20:05
  Speaker 1: we're buying energy. We believe in in uh continued you know,
• 20:10
  Speaker 1: capax and investment cycle. We believe in the housing cycle.
• 20:15
  Speaker 1: So so those cyclical oriented issues which tend to still
• 20:19
  Speaker 1: have a little bit better valuation support than maybe uh,
• 20:23
  Speaker 1: you know some of the the uh the quote unquote
• 20:26
  Speaker 1: work from home or or evergreen stocks that have dominated
• 20:31
  Speaker 1: the indexes is where we're focusing. Lisa, thanks so much
• 20:34
  Speaker 1: for your time. Always appreciate getting a few minutes. If e.
• 20:36
  Speaker 1: Lisa's Chalote, chief investment Officer for Wealth Management at Morgan Stanley.
• 20:41
  Speaker 1: This is Bloomberg. Let's get back to the markets right now.
• 20:49
  Speaker 1: We can do a car talk segment. Yeah, I'm up,
• 20:52
  Speaker 1: but right now, let's get to uh. We have a
• 20:55
  Speaker 1: guest who has I think a pretty um, a pretty
• 21:00
  Speaker 1: out of consensus view. Well maybe not founder Chief executive
• 21:05
  Speaker 1: officer and portfolio manager at Infrastructure Capital Advisors. And I've
• 21:12
  Speaker 1: heard other people suggest that we could be going into
• 21:15
  Speaker 1: a recession JA because the consumer confidence numbers have just
• 21:19
  Speaker 1: fallen off a cliff and you don't typically see that
• 21:22
  Speaker 1: kind of drop without a recession. But you think the
• 21:25
  Speaker 1: FED will be to blame when we finally get there. Why.
• 21:29
  Speaker 1: First of all, thanks Paul and not for having me
• 21:32
  Speaker 1: on again. Well, we think that the FED has lost
• 21:37
  Speaker 1: control of inflation. Specifically, they increased the monetary based by
• 21:43
  Speaker 1: E three since the beginning of pandemic and um that
• 21:49
  Speaker 1: has had a huge impact on housing. They've lowered mortgage
• 21:55
  Speaker 1: rates to an all time low, and now housing prices
• 21:59
  Speaker 1: are up and rents are up ten So we see
• 22:03
  Speaker 1: that we think that the run rate inflation level is ten,
• 22:07
  Speaker 1: which sounds pretty radical, but I guess it seems today
• 22:11
  Speaker 1: conservative because there was a tweetum that we're in a
• 22:15
  Speaker 1: hyper inflation, which we definitely think we're not. That hyper inflation,
• 22:19
  Speaker 1: by the way, is commonly defined as ten percent per month,
• 22:25
  Speaker 1: and we're talking ten percent run rate per year, so
• 22:28
  Speaker 1: we're an order of magnitude and we're conservative than that,
• 22:30
  Speaker 1: but we do it would still be the highest we've
• 22:32
  Speaker 1: seen since you know, the early eighties, right, correct. Well,
• 22:37
  Speaker 1: there was one important thing, and I would urge all
• 22:40
  Speaker 1: listeners to focus on the housing sector because it's been
• 22:43
  Speaker 1: involved in eleven out of the eleven, the last eleven
• 22:46
  Speaker 1: recessions since World War Two. But the reason in my opinion,
• 22:51
  Speaker 1: that the FED got away with quantitative easing after the
• 22:54
  Speaker 1: financial crisis is we had four million extra homes. We
• 22:57
  Speaker 1: had a huge took five years to work this off,
• 23:01
  Speaker 1: so they got away with increasing the monetary base at
• 23:05
  Speaker 1: similar percentages. But this time we have really the opposite
• 23:10
  Speaker 1: where we have kind of normal construction and no excess housing.
• 23:13
  Speaker 1: So that's why you're seeing this accelerate inflation. And also
• 23:17
  Speaker 1: energy has its own separate dynamics. Natural gas is trading
• 23:21
  Speaker 1: at the equivalent oil equivalent of hyderen eighty dollars of barrel,
• 23:26
  Speaker 1: and so that's when we mark to market on a
• 23:29
  Speaker 1: run rate basis the BLS estimates of five point four,
• 23:33
  Speaker 1: we're getting right around ken and it can be worse
• 23:35
  Speaker 1: than Phoenix that their rents are up twenty three and
• 23:39
  Speaker 1: a half percent, so it would be more like thirteen
• 23:41
  Speaker 1: in Phoenix. How much of these inflationary issues j do
• 23:45
  Speaker 1: you believe our transitory as a photo reserve continues to
• 23:49
  Speaker 1: claim or and how much of them are are you know,
• 23:52
  Speaker 1: maybe a little bit longer term. Well, the best way
• 23:55
  Speaker 1: to frame that debate is to recognize that most of
• 23:58
  Speaker 1: the FEDS is a Keynesians neo Kansians, so they tend
• 24:02
  Speaker 1: to focus on cost push push inflation. So some of
• 24:07
  Speaker 1: these um, you know, production issues. Monitorists like Freeman would
• 24:12
  Speaker 1: call it too many dollars chasing too few goods. So
• 24:17
  Speaker 1: that's kind of the debate that's going, that's raging, but
• 24:20
  Speaker 1: we've never had And also the magnitude you know, three trillion,
• 24:25
  Speaker 1: I mean three trillion dollars of extra money in the system.
• 24:30
  Speaker 1: So I would argue that the recent data means that
• 24:35
  Speaker 1: the monitoris which is right now numbers about one on
• 24:38
  Speaker 1: the FED, which would be Bullard are winning the debate. Um,
• 24:43
  Speaker 1: what do you do as an investor? You're a portfolio manager,
• 24:46
  Speaker 1: so it's not just about these forecasts or talking about
• 24:49
  Speaker 1: what could happen. You've got to put your money in
• 24:51
  Speaker 1: the right place. Um, So you don't so you hopefully
• 24:54
  Speaker 1: make more than your benchmark and definitely don't want to
• 24:57
  Speaker 1: be losing any where do you put it? Well, we
• 25:01
  Speaker 1: UM have funds that are focused on preferred stock, so
• 25:05
  Speaker 1: we have tilted that away from the low spread preferreds
• 25:10
  Speaker 1: and into the higher spread, which happened to be also
• 25:13
  Speaker 1: inflation protected, so reads and pipelines and real assets utilities,
• 25:19
  Speaker 1: So we think that uh, those funds should do well
• 25:21
  Speaker 1: if we're correct about rising inflation or environment. And then
• 25:25
  Speaker 1: we also run a pipeline e t F, so we're
• 25:29
  Speaker 1: kind of just fortunate that energy and real assets are
• 25:33
  Speaker 1: likely to continue to appreciate, So it's it's a little
• 25:36
  Speaker 1: bit easier for us to do that. We don't run
• 25:38
  Speaker 1: a multi strategy equity fund where we have to cell
• 25:42
  Speaker 1: tech and buy energy what other other rotations would have.
• 25:46
  Speaker 1: I do think the next year will be adult swim
• 25:49
  Speaker 1: for investors, and being more defensive and being in yield
• 25:54
  Speaker 1: stocks like read, utilities, preferred is a good way to play.
• 25:57
  Speaker 1: And even if you miss out on a few rallies
• 26:00
  Speaker 1: or continued tech rally, you still get paid to wade.
• 26:03
  Speaker 1: So I think next year will be better to be defensive. Jay,
• 26:06
  Speaker 1: thanks so much for joining us. Really appreciate chatting with you.
• 26:08
  Speaker 1: Some I would call them as matsages. Some some out
• 26:12
  Speaker 1: of consensus calls here on the economy, although Danny Blanchler
• 26:17
  Speaker 1: was saying the same thing to it a couple of
• 26:18
  Speaker 1: weeks ago. Okay, good for Danny. Uh Jay half Field, founder,
• 26:21
  Speaker 1: chief executive officer and portfolio manager for Infrastructure Capital Advisors
• 26:26
  Speaker 1: joining us on the phone from New York City. He
• 26:29
  Speaker 1: believes that there is a fifty chance of recession in
• 26:35
  Speaker 1: This is Bloomberg. Thanks for listening to the Bloomberg Markets podcast.
• 26:39
  Speaker 1: You can subscribe and listen to interviews at Apple Podcasts
• 26:43
  Speaker 1: or whatever podcast platform you prefer. I'm Matt Miller. I'm
• 26:47
  Speaker 1: on Twitter at Matt Miller three. Put on fal Sweeney
• 26:51
  Speaker 1: I'm on Twitter at pt Sweeney before the podcast. You
• 26:53
  Speaker 1: can always catch us worldwide at Bloomberg Radio.