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Trump Widens Trade Fight, Meta Robot Investment · Bloomberg Intelligence

• 0:00
  Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the
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  Speaker 1: us live on YouTube.
• 0:23
  Speaker 2: I want to switch back to what kind of stay
• 0:25
  Speaker 2: with global trade?
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  Speaker 3: Here? Shawn donad Joints is here, Bloomberg News senior economics writer.
• 0:30
  Speaker 3: As President Trump widens the trade fight to include global
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  Speaker 3: taxes and regulation, Sean, thanks so much for joining us here.
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  Speaker 3: What is the latest from this administration as it relates
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  Speaker 3: to global trade, taxes, regulation.
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  Speaker 2: It's a wide mix of topics.
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  Speaker 4: It's a wide mix of topics. It's also a fast
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  Speaker 4: moving topic, as you can appreciate, and your previous guest
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  Speaker 4: was talking about. Look, yesterday President Trump announced a plan
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  Speaker 4: to come up with what he calls reciprocal tariffs, and
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  Speaker 4: that will apply to any country in the world. They're
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  Speaker 4: going to start by focusing on countries with which the
• 1:12
  Speaker 4: US has a large trade deficit or economies. So they're
• 1:17
  Speaker 4: looking hard at the European Union, for example. But what
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  Speaker 4: was interesting about yesterday in a real departure from what
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  Speaker 4: the US has done for decades is that they're going
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  Speaker 4: to try and calculate these reciprocal tariffs by looking not
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  Speaker 4: just at the tariffs that those other countries charge US goods,
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  Speaker 4: but also at taxes, at what they call non tariff barriers,
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  Speaker 4: which gets into things like regulation, and as they say
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  Speaker 4: in the order that President Trump signed yesterday, any policy
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  Speaker 4: that offers any kind of barrier to a US good.
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  Speaker 4: As someone I was talking to yesterday pointed out, that
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  Speaker 4: could even mean taking on the metric system if you're
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  Speaker 4: talking about the EEA, trying costs there. Uh So, it's
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  Speaker 4: a real broadening out of what Trump has has had
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  Speaker 4: as its kind of central grievances on trade in the past.
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  Speaker 4: One big target is the European Union's use of a
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  Speaker 4: value added tax, which is effectively a sales tax that
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  Speaker 4: all of its member countries operate. That's very different from
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  Speaker 4: what we have here in the US. We obviously don't
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  Speaker 4: have a national sales tax. We only have state level
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  Speaker 4: sales taxes, and so.
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  Speaker 5: None are as high as the v A T. So
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  Speaker 5: I mean, none are as high as as.
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  Speaker 4: The VAT and the real right from from from the
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  Speaker 4: Trump administration is that European exporders get to clim back
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  Speaker 4: v a T when goods leave the European Union, and
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  Speaker 4: that US exporters to the EU have to pay v
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  Speaker 4: a T when they arrive there. Now, tax experts say
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  Speaker 4: that's kind of a misreading of how how things works.
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  Speaker 4: VA T, much as a sales tax in Maine or
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  Speaker 4: Maryland would be U is a tax on something that
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  Speaker 4: you buy in that in that place. And those US
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  Speaker 4: goods that have to pay a v a T in
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  Speaker 4: or those US companies have to pay a VAT when
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  Speaker 4: they sell in France, say, are selling alongside French goods
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  Speaker 4: that also have to pay a VAT. Anyone has to
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  Speaker 4: pay VAT in Europe, so it's not quite the competitive disadvantage.
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  Speaker 5: It's a little different. I mean, if I order something
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  Speaker 5: from Maine, I don't pay main taxes on it, right, but.
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  Speaker 4: Right unless you buy it in May.
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  Speaker 5: I feel like this was a concept of a plan
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  Speaker 5: Sean more than really a plan, and I thought we
• 3:42
  Speaker 5: were going to get it. He tweeted that it was
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  Speaker 5: a big day, the big This is the big day, right,
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  Speaker 5: and then he said, well, a good one to a plan.
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  Speaker 5: And also we're not going to know until April first,
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  Speaker 5: like they still have to do studies. Didn't they study
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  Speaker 5: during the campaign? I mean, I know which countries have
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  Speaker 5: higher tariffs than we do on goods. All he has
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  Speaker 5: to do is get chat GPT right or a Bloomberg
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  Speaker 5: and he would get the numbers. Why does he need
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  Speaker 5: to study until April first? Is he serious about this?
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  Speaker 4: Well, because that's the business the government, right, There's a
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  Speaker 4: process here, and if he's going to invoke some of
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  Speaker 4: the authorities that he wants to invoke to apply these tariffs,
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  Speaker 4: and they are going to defend it against potential lawsuits
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  Speaker 4: from companies and defend it to the public, they have
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  Speaker 4: to at least go through a process of doing an
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  Speaker 4: official study. You should point out that.
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  Speaker 5: What was the point of twenty twenty five? Didn't they
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  Speaker 5: already do these studies?
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  Speaker 4: The twenty twenty five wasn't his thing. And we should
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  Speaker 4: also point out that his main economic officials, his main
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  Speaker 4: trade officials, although they were in the Oval Office yesterday,
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  Speaker 4: haven't actually been confirmed by the US Senate yet, and
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  Speaker 4: that rights Howard lot Make, the Commerce Secretary and incoming
• 4:56
  Speaker 4: Commerce Secretary, and Jason Greer his US Trade.
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  Speaker 3: All right, all right, Sean we'll stay on top of this.
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  Speaker 3: I know you will as well. Here Sean Dinham, Senior
• 5:05
  Speaker 3: economics writer, Bloomberg News. He's down there in Washington, DC.
• 5:10
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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  Speaker 1: weekdays at ten am Eastern on Applecarplay and Android Auto
• 5:17
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• 5:21
  Speaker 1: get your podcasts, or watch us live on YouTube.
• 5:25
  Speaker 2: A couple of the big topics that get people's attention.
• 5:27
  Speaker 3: If you're writing a story, put meta and AI into
• 5:30
  Speaker 3: the headline.
• 5:31
  Speaker 2: Oh yeah, you're going to get some reader ship.
• 5:33
  Speaker 5: Did you know that ai in Chinese means love?
• 5:38
  Speaker 2: I did not.
• 5:39
  Speaker 5: Yeah, I guess the word for love in Chinese is AI.
• 5:43
  Speaker 2: I don't know how you pronounce it. But where did
• 5:45
  Speaker 2: you come across this piece of information?
• 5:47
  Speaker 5: David English wrote about it on the Bloomberg terminal.
• 5:49
  Speaker 2: Then it's got to be true. So let's check in here.
• 5:52
  Speaker 2: Man Deep Singh.
• 5:53
  Speaker 3: He's a senior technology analyst at Bloomberg Intelligence. Man Deep,
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  Speaker 3: you got a big name, a big company, a leader
• 6:01
  Speaker 3: with deep pockets in meta talking about AI powered humanoid robots.
• 6:06
  Speaker 2: What's your takeaway here?
• 6:09
  Speaker 6: I mean, right now, it looks like everyone thinks that
• 6:13
  Speaker 6: is the next big hardware opportunity, whether it's Apple and
• 6:17
  Speaker 6: now Meta, they seem to be looking at that form factor.
• 6:21
  Speaker 6: And actually Nvidia dropped in that hint back in January
• 6:26
  Speaker 6: when they talked about a new chip or humanoid robots.
• 6:31
  Speaker 6: They released the new chip at CEES and they actually
• 6:35
  Speaker 6: released their own large anguid model for the humanoid form factor.
• 6:39
  Speaker 6: So it's not a surprise that everyone else is also
• 6:43
  Speaker 6: looking at that opportunity. And obviously you have Tessa who
• 6:46
  Speaker 6: already has Optimus as a product and has talked about
• 6:50
  Speaker 6: it almost on all their earnings calls, you know, recently, they.
• 6:55
  Speaker 5: Seem a little late to the party to me, frankly,
• 6:58
  Speaker 5: I think has so much money. You know, they go
• 7:02
  Speaker 5: after Twitter with threads, they go after open Ai with
• 7:07
  Speaker 5: whatever Meta's AI product is called.
• 7:10
  Speaker 2: They go after Tesla with well appleshow you don't have
• 7:12
  Speaker 2: to at first, you just have to be you know,
• 7:14
  Speaker 2: cool and good and all that kind of stuff. True.
• 7:16
  Speaker 3: So, Mandeep, is this something that the street's going to
• 7:20
  Speaker 3: like because it's AI? Or is this something the street's
• 7:23
  Speaker 3: going to say, you know, is this kind of like
• 7:25
  Speaker 3: the metaverse, which we didn't really like house. Do you
• 7:28
  Speaker 3: think the street's going to react to this.
• 7:30
  Speaker 6: Yeah, I think in the case of Meta, I mean,
• 7:33
  Speaker 6: there are question marks on their ability to design a good,
• 7:38
  Speaker 6: compelling hardware and look reband Meta glasses have been successful,
• 7:44
  Speaker 6: but when you look at the overall margin profile for
• 7:47
  Speaker 6: a company like Meta, I mean, ADS is such a
• 7:50
  Speaker 6: high margin business that hardware continues to be a drag
• 7:54
  Speaker 6: on their overall margins. And the fact that they're losing
• 7:57
  Speaker 6: almost twenty billion dollars every year on reality labs makes
• 8:01
  Speaker 6: you wonder if they add more hardware in the form
• 8:04
  Speaker 6: of humanoids, it could have mean bigger losses in that segment.
• 8:08
  Speaker 6: So I'm not sure if that's the right strategy for Meta.
• 8:12
  Speaker 6: Given they've had so much success, you know, with their apps,
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  Speaker 6: family of apps, and how good they have been in
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  Speaker 6: deploying AI across their apps, why would you want to
• 8:21
  Speaker 6: spend too much time on hardware. But I think Mark
• 8:24
  Speaker 6: Zuckerberg's view has always been he wants to control the
• 8:27
  Speaker 6: ecosystem from the hardware. I have that vertical integration, and
• 8:30
  Speaker 6: that's why they're doing it well.
• 8:31
  Speaker 3: MetaStock, just to give you a sense, up one percent
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  Speaker 3: today a twenty five percent year to date in a
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  Speaker 3: fifty five percent on a trailing twelve month basis.
• 8:38
  Speaker 2: So the market likes what's happening at Metal. Yeah, they're
• 8:42
  Speaker 2: killing it, but.
• 8:44
  Speaker 5: They don't control the ecosystem, right, I mean, where does
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  Speaker 5: Facebook have any hardware other than that virtual reality glasses
• 8:54
  Speaker 5: thing that I don't think anyone bought.
• 8:57
  Speaker 6: Well, okay, I think it just goes to show that
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  Speaker 6: Meta obviously is dependent on these app stores for their
• 9:06
  Speaker 6: apps to be successful, and they are. You know, they
• 9:10
  Speaker 6: have three of the most popular apps on both Android
• 9:13
  Speaker 6: and iOS app stores. So anytime Apple or Google makes
• 9:18
  Speaker 6: a change, that is where they got impacted with the
• 9:21
  Speaker 6: IDFA changes, and look, that's what they want to avoid
• 9:25
  Speaker 6: the next time it happens. Given every you know of
• 9:29
  Speaker 6: the software vendors is trying to infuse AI lllms at
• 9:34
  Speaker 6: the operating system level. So what does that mean for
• 9:37
  Speaker 6: a company like Meta, which has its own LLM and
• 9:41
  Speaker 6: wants to deploy it across more places. So owning the
• 9:44
  Speaker 6: hardware does have some potential over there.
• 9:47
  Speaker 5: I've upgraded to the pro model of chat GPT.
• 9:51
  Speaker 2: Now, oh yeah, that's not working. Were hanging for it?
• 9:54
  Speaker 5: Well, I kept getting cut off because I was asking
• 9:57
  Speaker 5: too many questions, but I use it locked Really how
• 10:01
  Speaker 5: much you pay twenty dollars a month? Sure, yeah, and
• 10:04
  Speaker 5: it's pretty pretty sweet, But I wonder if it costs
• 10:09
  Speaker 5: less to develop and run a large language model than
• 10:13
  Speaker 5: we thought.
• 10:14
  Speaker 2: I haven't.
• 10:14
  Speaker 5: I realized it's a couple of days old the story,
• 10:16
  Speaker 5: or a couple of weeks. But I haven't got your take, man,
• 10:19
  Speaker 5: deep is deep Seek full of it? I mean? Were
• 10:22
  Speaker 5: they just using illegally procured you know, Hopper chips or
• 10:28
  Speaker 5: Blackwell chips, or did they really like make an LLM
• 10:31
  Speaker 5: with six million bucks?
• 10:33
  Speaker 6: Look, that was their last training round. That wasn't inclusive
• 10:37
  Speaker 6: of all their training costs. But the bigger thing here
• 10:40
  Speaker 6: is Apple, you know, partnering with Ali Baba to deploy
• 10:44
  Speaker 6: LLLAM on their phone, and that's part of Apple intelligence.
• 10:48
  Speaker 6: So to me, you know, it's not just deep Seek anymore.
• 10:52
  Speaker 6: All the other companies over there in China, whether it's
• 10:56
  Speaker 6: Ali Baba or you know, the other ones I do,
• 11:00
  Speaker 6: et cetera, they all have their llms. They may not
• 11:03
  Speaker 6: be as capable as deep Seat, but this thing is
• 11:06
  Speaker 6: getting commoditized in my view, given every LLLM provider is
• 11:10
  Speaker 6: improving their reasoning capabilities and now Apple partnering. I think
• 11:14
  Speaker 6: that's a big step in terms of deploying their technology
• 11:18
  Speaker 6: and Apple I think did note at their last Drugs
• 11:20
  Speaker 6: call that Apple Intelligence was a big driver of refresh
• 11:25
  Speaker 6: refreshers wherever it was available.
• 11:27
  Speaker 2: All right, well, I'll like bob.
• 11:28
  Speaker 3: It's up three percent today, it's hitting a fifty two
• 11:31
  Speaker 3: week high, still below it's all time high from back
• 11:34
  Speaker 3: in twenty twenty, but it's up sixty eight percent over
• 11:36
  Speaker 3: the trailing twelve months. So certainly getting some love there.
• 11:38
  Speaker 3: Min deep Sink, thanks so much for joining us. Man
• 11:40
  Speaker 3: deep Sink, he's a senior.
• 11:41
  Speaker 2: Technology analyst for Bloomberg Intelligence.
• 11:46
  Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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• 12:00
  Speaker 2: Isabelle's sitting in for Alex Steel on Paul Sweeney.
• 12:02
  Speaker 3: We are live in the Bloomberg Interactive Brooker Studio in
• 12:05
  Speaker 3: New York City, streaming live on YouTube's ahead of to
• 12:08
  Speaker 3: YouTube dot com. That's the internet thing. Search Bloomberg Podcast now,
• 12:12
  Speaker 3: and that's where you will find us, all right. I've
• 12:13
  Speaker 3: been in this business since nineteen eighty six, and since then,
• 12:17
  Speaker 3: in my mind, Morgan Stanley has been the dominant franchise
• 12:20
  Speaker 3: when it comes to all things real estate, real estate finance,
• 12:23
  Speaker 3: and they still are today. Everywhere you go in the
• 12:25
  Speaker 3: supply chain in terms of real estate financing to find
• 12:28
  Speaker 3: ex Morgan Stanley people.
• 12:29
  Speaker 4: So we're really.
• 12:30
  Speaker 3: Appreciative to have our next guest, Lauren Hockfelder. She's the
• 12:33
  Speaker 3: co CEO of Morgan Stanley Real Estate Investment. She joins
• 12:36
  Speaker 3: us here in her Bloomberg Interactive Brooker studio. When I
• 12:38
  Speaker 3: talk about commercial real estate, I think the first lesson
• 12:40
  Speaker 3: I learned is don't just think about office space because
• 12:43
  Speaker 3: there's so much other stuff out there. Where are you
• 12:45
  Speaker 3: guys at Morgan Stanley seeing the best opportunities today?
• 12:49
  Speaker 7: Yeah, So we start with what's driving demand, and so
• 12:52
  Speaker 7: we invest behind long term mega trends. Trends we're focused
• 12:56
  Speaker 7: on today are e commerce, the supply chain, realignment, aging, demographics.
• 13:01
  Speaker 7: So where does that bring us? That brings us to
• 13:04
  Speaker 7: industrial warehouses, that brings us to senior living places that
• 13:10
  Speaker 7: are really going to be propelled not by cyclical up
• 13:13
  Speaker 7: and downs, but by these long term trends, which.
• 13:16
  Speaker 8: Do you see as leading right now? Because we've seen
• 13:19
  Speaker 8: a huge shift in commercial real estate, some people have
• 13:22
  Speaker 8: said it's bottom, but what are your views on that?
• 13:26
  Speaker 7: Well, Look, commercial real estate or private real estate values
• 13:30
  Speaker 7: in the US are down what twenty five plus percent
• 13:33
  Speaker 7: over the last two and a half years, while the
• 13:35
  Speaker 7: equity markets are up sixty plus percent over the same period.
• 13:39
  Speaker 7: We feel really good about the entry part point to
• 13:42
  Speaker 7: a lot of real estate today. We think that, you know,
• 13:45
  Speaker 7: we've seen a bottom start to form. Liquidity increasing, transaction volume,
• 13:51
  Speaker 7: increasing costic capital really coming in, spreads compressing. So we
• 13:55
  Speaker 7: really feel like twenty four was about moderation. Twenty five
• 13:59
  Speaker 7: twenty six, we may see the transition into an up cycle.
• 14:02
  Speaker 3: All right, what we got here, let's get an informed opinion.
• 14:06
  Speaker 3: Commercial office, real estate, New York, San Francisco, Chicago, Boston.
• 14:13
  Speaker 3: Have we seen the bottom that I can't remember seeing
• 14:16
  Speaker 3: too many transactions out there that would suggest we've seen
• 14:18
  Speaker 3: the bottom.
• 14:19
  Speaker 2: I don't know.
• 14:21
  Speaker 7: Divergence, So I think for the best of the best,
• 14:24
  Speaker 7: we've probably.
• 14:24
  Speaker 2: Seven thirty one lection to avenue best.
• 14:26
  Speaker 7: I mean absolutely, for the best of the best, you
• 14:30
  Speaker 7: are seeing not just resilience from some of the headwinds,
• 14:35
  Speaker 7: but actually the best of the best assets are benefiting
• 14:38
  Speaker 7: from what's going on right now, massive consolidation into these
• 14:42
  Speaker 7: top tier buildings. They've become like an oasis in the
• 14:45
  Speaker 7: office desert. Everyone only wants to be in these assets.
• 14:48
  Speaker 7: And so yes, you're seeing leasing pickup in our San
• 14:52
  Speaker 7: Francisco office assets. We are commanding all time high rents,
• 14:57
  Speaker 7: signing long term, high quality leases at way abou pre COVID.
• 15:01
  Speaker 7: That's stunning when the market's almost forty percent vacant.
• 15:04
  Speaker 3: So what happens to that forty percent is it just
• 15:07
  Speaker 3: have to find the bottom somewhere.
• 15:10
  Speaker 7: So look, I think yes, you're going to have some
• 15:14
  Speaker 7: conversions to alternative uses. There are major complexities with that,
• 15:19
  Speaker 7: both sort of zoning wise and physical construction wise. Some
• 15:24
  Speaker 7: of it will get converted, a lot of it's just
• 15:27
  Speaker 7: going to be cost prohibitive to really release in a
• 15:30
  Speaker 7: meaningful way. You have to retrofit for sustainability conditions and amenitization.
• 15:37
  Speaker 7: Demand has changed what it wants.
• 15:40
  Speaker 8: Apart from the example you gave, uncertain things they lingers.
• 15:43
  Speaker 8: We have investors, they'll cautious about jumping in. What do
• 15:46
  Speaker 8: you tell them or how do you convince them?
• 15:49
  Speaker 7: Look, it depends where there are certainly areas I would
• 15:52
  Speaker 7: not jump in. But when you look across the globe,
• 15:55
  Speaker 7: for example, we find the US to be the most
• 15:58
  Speaker 7: interesting market in which to invest today. The US is
• 16:01
  Speaker 7: always fifho right, first in, first out, it's correct to
• 16:05
  Speaker 7: the sharpest. It tends to rebound the quickest. So this
• 16:08
  Speaker 7: is a market for the right sectors, for things like
• 16:11
  Speaker 7: senior housing, industrial, certain other spaces. We find it really compelling.
• 16:17
  Speaker 7: There are other parts of the world, and frankly other
• 16:19
  Speaker 7: sectors that we don't think have bottomed yet. For those
• 16:22
  Speaker 7: lower quality assets, you still have a wall of maturities
• 16:25
  Speaker 7: that's coming. And don't mistake delaying with fixing the problem.
• 16:30
  Speaker 7: There's still some pain to come there.
• 16:32
  Speaker 3: Talk to us about the capital markets, the financing for
• 16:35
  Speaker 3: real estate. If you want to go buy a building,
• 16:39
  Speaker 3: do whatever you want to do in your real estate portfolio,
• 16:42
  Speaker 3: where do you get the capital?
• 16:43
  Speaker 7: So debt capital is absolutely coming back. So we saw
• 16:48
  Speaker 7: a period of time where there was just total illiquidity.
• 16:51
  Speaker 7: We've seen CMBs picked up very materially so, and we've
• 16:55
  Speaker 7: seen spreads compress very materially so. Of course, base rates
• 16:59
  Speaker 7: are moving around, maybe more than we'd all like, but
• 17:01
  Speaker 7: spreads have compressed, so you're seeing a return to some
• 17:05
  Speaker 7: of the from some of the balance sheet lenders, you're
• 17:07
  Speaker 7: seeing CMBs, and you're seeing really this massive rise in
• 17:11
  Speaker 7: non bank lenders. So these alternative asset management, private credit,
• 17:16
  Speaker 7: private credit, private real estate credit.
• 17:19
  Speaker 8: Interesting you mentioned that twenty twenty five or twenty twenty
• 17:22
  Speaker 8: six maybe the year of reckoning.
• 17:23
  Speaker 9: There was a big Bloomberg piece late.
• 17:25
  Speaker 8: Last year around November quoting a lot of people saying that, yes,
• 17:28
  Speaker 8: twenty twenty five will be our year. But then hindsight
• 17:31
  Speaker 8: that may look like wishful thinking, especially with the rates
• 17:33
  Speaker 8: they'll elevated. How are you squaring your thoughts on that?
• 17:37
  Speaker 7: Absolutely well, Look, we think this cycle is not going
• 17:40
  Speaker 7: to be about rate compression. So coming out of the GFC,
• 17:44
  Speaker 7: one of the ways we all did very well is
• 17:47
  Speaker 7: you know, rates fell, you had cheap debt, you had
• 17:50
  Speaker 7: cap rate compression. That was how a lot of appreciation
• 17:53
  Speaker 7: was created. We think this cycle is different, so we
• 17:56
  Speaker 7: do expect to see moderation and rates. Perhaps it's a
• 18:00
  Speaker 7: bumpy road down, but ultimately that's not what we're betting on.
• 18:04
  Speaker 7: We think this cycle is much more about cash flow growth,
• 18:08
  Speaker 7: and so what that means is you need to be
• 18:11
  Speaker 7: in those sectors that have those mega trends driving demand
• 18:15
  Speaker 7: and in those sectors where supply has just fallen off
• 18:17
  Speaker 7: a cliff. That's how you get cash flow growth and frankly,
• 18:21
  Speaker 7: owning assets that you can really improve. So not just
• 18:25
  Speaker 7: buy and hold, but buy and change.
• 18:28
  Speaker 3: If you had the chance to buy a B level
• 18:31
  Speaker 3: building on Third Avenue on forty eighth Street at fifty
• 18:34
  Speaker 3: cents on the dollar, would you buy it?
• 18:36
  Speaker 7: It really depends. So I think what people sort of
• 18:40
  Speaker 7: people tend to homogenize real estate, and I think there's
• 18:44
  Speaker 7: a big difference between a forty thousand square foot floorplate
• 18:46
  Speaker 7: and a twenty thousand square foot floor plate in terms
• 18:49
  Speaker 7: of what it wants to be and what it's sort
• 18:52
  Speaker 7: of highest and best use is. So it's just you
• 18:56
  Speaker 7: need to think about how that specific asset. It's not
• 19:01
  Speaker 7: bs B as B.
• 19:02
  Speaker 3: Okay, how about right across the street, can you lease
• 19:04
  Speaker 3: out some of that commercial space because it hasn't been
• 19:06
  Speaker 3: leased since the pandemic.
• 19:08
  Speaker 2: I don't know what's going on there, so we need.
• 19:10
  Speaker 3: That's commercial real estate. I don't know across the street
• 19:13
  Speaker 3: from us. Still after the pandemic, it was.
• 19:15
  Speaker 4: The victorious secret across.
• 19:16
  Speaker 3: This Not that I don't know what's going on there,
• 19:18
  Speaker 3: but Lauren, thank you so much for joining us. Lauren Hotfelder,
• 19:21
  Speaker 3: she's the co CEO of Morgan Stanley Real Estate Investing,
• 19:23
  Speaker 3: joining us live here in our Bloomberg Inactive Broker studio.
• 19:27
  Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
• 19:31
  Speaker 1: weekdays at ten am Eastern on Apple, Coarclay, and Android
• 19:34
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• 19:37
  Speaker 1: you get your podcasts, or watch us live on YouTube.
• 19:41
  Speaker 3: A lot of towers talk around the fireplace these days.
• 19:44
  Speaker 3: It seems to be the economic policy of choice for
• 19:48
  Speaker 3: President Trump and his administration, so industries around the world
• 19:51
  Speaker 3: are trying to figure out what impact it will have
• 19:54
  Speaker 3: on their.
• 19:54
  Speaker 2: Business, and that includes the luxury business.
• 19:56
  Speaker 3: Ronnie set Home joins and she's managing partner at set
• 19:59
  Speaker 3: hom Lag Group.
• 20:01
  Speaker 2: Ronnie, when you think about.
• 20:02
  Speaker 3: The luxury business, high priced items, by and large, different
• 20:07
  Speaker 3: price points, different types of consumers. But again, if they're
• 20:10
  Speaker 3: going to be subject to terraces, whether it's from Mexico
• 20:12
  Speaker 3: or China or anywhere.
• 20:14
  Speaker 2: How does that play out in the luxury business.
• 20:18
  Speaker 10: I'm not sure it's going to vote very well for
• 20:21
  Speaker 10: the luxury business. I mean, there is some stagnation already
• 20:25
  Speaker 10: with consumers purchasing luxury for the top one percent, none
• 20:29
  Speaker 10: of these tariffs will really have an effect on their
• 20:31
  Speaker 10: purchasing power. But there are a lot of Henry's out
• 20:34
  Speaker 10: there which are high earners, not rich yet, and they
• 20:38
  Speaker 10: may pause if they have to spend an extra ten
• 20:41
  Speaker 10: to twenty five percent on the same item Henry's.
• 20:44
  Speaker 9: I had to explain that to my parents.
• 20:46
  Speaker 2: I just heard it for the first time.
• 20:47
  Speaker 3: Here.
• 20:48
  Speaker 9: It's a thing, all right, high earners but not rich yet.
• 20:50
  Speaker 10: Okay, so yes, it is a thing.
• 20:53
  Speaker 8: Which industry in the luxury sector will be hardest hit, though.
• 20:58
  Speaker 10: I think the fast fashion will be the hardest hit.
• 21:03
  Speaker 10: I mean, right now, the tariffs that are going to
• 21:06
  Speaker 10: be imposed on China are not just a regular ten
• 21:10
  Speaker 10: percent tariff, but there's also a loophole which currently allows
• 21:15
  Speaker 10: fast fashion retailers from China like She and that probably
• 21:19
  Speaker 10: is one of the top ones that come to mind,
• 21:22
  Speaker 10: allows them to ship products to the United States tax
• 21:27
  Speaker 10: free if the total sale is less than eight hundred
• 21:30
  Speaker 10: dollars and if that goes away, I'm sure that that
• 21:35
  Speaker 10: industr will be hit very hard.
• 21:38
  Speaker 3: So I think a lot of retailers Ronnie are trying
• 21:41
  Speaker 3: to think about their strategy about to what extent can
• 21:43
  Speaker 3: they pass increased tariff costs along to their consumers or
• 21:48
  Speaker 3: how that gets absorbed within the supply chain. What are
• 21:51
  Speaker 3: the luxury companies thinking about how much can they pass
• 21:54
  Speaker 3: through to their consumers?
• 21:56
  Speaker 10: Well, I mean, as of January, a lot of the
• 21:59
  Speaker 10: luxury retailers have already increased their prices by as much
• 22:03
  Speaker 10: as ten percent, and consumers are used to increases every
• 22:08
  Speaker 10: January from luxury you know, good makers. However, I'm not
• 22:14
  Speaker 10: sure if you tack on another ten or twenty five
• 22:18
  Speaker 10: percent that they'll stick around. I mean, I'm I'm worried
• 22:21
  Speaker 10: about you know, Canada goose for example, as the name implies,
• 22:25
  Speaker 10: you know it's from Canada. They are very expensive jackets.
• 22:29
  Speaker 10: They're great jackets. But who's going to pay an extra
• 22:32
  Speaker 10: twenty five percent or more? It's unclear. So I'm not
• 22:36
  Speaker 10: sure if all of the tariffs can be really pushed
• 22:39
  Speaker 10: down at the consumer level, I think there's gonna be
• 22:42
  Speaker 10: some pain sharing here. But you know, that's just my opinion.
• 22:45
  Speaker 8: Where do you think consumers will shift their attention to.
• 22:48
  Speaker 8: We have some analysting maybe emerging markets like India or
• 22:52
  Speaker 8: the Middle East.
• 22:52
  Speaker 9: Is that what you're seeing as well?
• 22:55
  Speaker 7: Well?
• 22:55
  Speaker 10: Since about I think twoenty and nineteen, a lot of
• 22:59
  Speaker 10: companies that rely heavily on China, we're starting to diversify,
• 23:03
  Speaker 10: and right now Vietnam and Bangladesh are like second and
• 23:08
  Speaker 10: third in line. But yes, I do see some additional
• 23:11
  Speaker 10: diversification coming.
• 23:15
  Speaker 3: Secondary market circular cost for the luxury business, secondary markets
• 23:19
  Speaker 3: material how does that going to be impacted?
• 23:22
  Speaker 10: Yes, I think it's going to really change everything about
• 23:27
  Speaker 10: the secondary market. I mean, if you try to purchase
• 23:31
  Speaker 10: a handbag, which is, you know, one of the main
• 23:34
  Speaker 10: goods that people are looking for bargains for because not
• 23:37
  Speaker 10: everyone has twelve thousand dollars or something to spend on
• 23:40
  Speaker 10: a handbag, they go to places like eBay, and a
• 23:44
  Speaker 10: lot of individuals selling on eBay are international. And if
• 23:48
  Speaker 10: there's a tariff, likely if you're not paying attention, your beat,
• 23:52
  Speaker 10: your bag or whatever good you're buying is going to
• 23:55
  Speaker 10: be held up in customs awaiting a payment. And for
• 23:58
  Speaker 10: those consumers who are paying attention to how much the
• 24:01
  Speaker 10: tariff could be, they may be dissuaded from purchasing at
• 24:04
  Speaker 10: least online. Then you have secondary good providers that are
• 24:11
  Speaker 10: local in some places, like you know, the Real Real
• 24:13
  Speaker 10: or Fashion File. You can go into the store. But again,
• 24:17
  Speaker 10: depending on where the item came from, people may be dissuaded.
• 24:21
  Speaker 10: They just may not have enough money to spend an
• 24:24
  Speaker 10: extra ten to twenty five or whatever the percentages end.
• 24:27
  Speaker 8: Up being on the part of the company. What do
• 24:30
  Speaker 8: you think about the strategy of shifting some production to
• 24:32
  Speaker 8: the US. I mean, this would allow brands to avoid
• 24:35
  Speaker 8: TIFF's entirely, or maybe cut costs. For instance, energy prices
• 24:38
  Speaker 8: in the US are significantly lower than in Europe, so
• 24:41
  Speaker 8: maybe that would be one thing.
• 24:44
  Speaker 10: I think it really depends upon what good we're talking about. So,
• 24:48
  Speaker 10: for example, the beauty industry, it is heavily reliant on packaging.
• 24:53
  Speaker 10: Many people may not know, but oftentimes the formulas are
• 24:57
  Speaker 10: pretty much identical from brand to brand, and what you're
• 25:00
  Speaker 10: really paying for is the packaging. And of course, you
• 25:02
  Speaker 10: know the color people do have unique colors, and there
• 25:05
  Speaker 10: are so many reds, you know, I'm sure anyone trying
• 25:08
  Speaker 10: to purchase red lipstick has gotten the experience that they
• 25:11
  Speaker 10: had to try on thirty of them before they found
• 25:13
  Speaker 10: the perfect red. However, it's the packaging and the mold.
• 25:17
  Speaker 10: The creation of the mold is very expensive, so I
• 25:20
  Speaker 10: don't know, for example, if the beauty industry will be
• 25:23
  Speaker 10: able to pivot to us made immediately.
• 25:26
  Speaker 2: It might cost you much.
• 25:28
  Speaker 3: All right, Ronnie, thank you so much for joining us.
• 25:29
  Speaker 3: Ronnie set Home. She's managing partner at Sethom Law Group
• 25:34
  Speaker 3: as well.
• 25:35
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• 25:43
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