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ECB Cuts Rates Again, US Producer Prices Pick Up Slightly · Bloomberg Intelligence

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  Speaker 2: Let's get to the other big news of the day,
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  Speaker 2: which was actually the ECB cut rates by twenty five
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  Speaker 2: basis points. The future, though really questionable downgrade their broke
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  Speaker 2: growth forecast through twenty twenty six. Inflation, though, is still
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  Speaker 2: a very big concern for Europe, particularly when it comes
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  Speaker 2: to services. Hugh Worthington is Bloomberg Intelligence European rate strategist.
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  Speaker 2: I'm looking at a two year over in Germany and
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  Speaker 2: boon yields up by over six basis points. What was
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  Speaker 2: your take? Was it a dubbish hike a hawkish hike?
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  Speaker 2: The market is looking like a hawkish hike right now.
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  Speaker 3: Wells obviously, but.
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  Speaker 4: I think we're suffering a little bit of a hangover
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  Speaker 4: possibly the cut that the ECB did in June, which
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  Speaker 4: they signaled to the market in April, and then I
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  Speaker 4: think basically decided that they probably shouldn't have signaled it,
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  Speaker 4: you know, quite so soon. I don't think someone on
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  Speaker 4: the Governing Council we're clearly probably not really happy about that.
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  Speaker 4: And right now I think they're they're they're very keen
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  Speaker 4: not to give too much away as to be pre
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  Speaker 4: committing themselves to do anything in October or even in December.
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  Speaker 4: Hence this big focus that the ECB is going to
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  Speaker 4: be data dependent and they're not. They don't want to
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  Speaker 4: give a strong signals as to as to what's what
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  Speaker 4: they're going to do next, the one they will say
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  Speaker 4: about and some.
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  Speaker 3: Sort of the move from yields.
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  Speaker 4: I think it was it was suppose lightly predictable if
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  Speaker 4: they did go down this route and decide not to
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  Speaker 4: give us too much of a clue as to what
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  Speaker 4: a they're going to do next. You know, we had
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  Speaker 4: a big we had a big rally in rates in
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  Speaker 4: Europe two yels down around seventy five basis points, you know,
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  Speaker 4: going into that decision over the last couple of months
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  Speaker 4: or so summer, and expectations where policy rates are going
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  Speaker 4: to be in a year's time down around two percent
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  Speaker 4: now and they were running at around three percent at
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  Speaker 4: the time of the June meeting. So you know, we've
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  Speaker 4: had a big, you know, a big expectation from markets
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  Speaker 4: in particular that the ECB is going to cut quite aggressively.
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  Speaker 5: Also, we are covering the part portions of Christina the
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  Speaker 5: Guard's speech here talking about slower growth really for the
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  Speaker 5: foreseeable future. For your peer give us kind of your
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  Speaker 5: thoughts and what you're seeing from your marketplace as to
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  Speaker 5: the growth outlook for the EU.
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  Speaker 4: Yeah, I mean the growth outlook is it's pretty terrible really,
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  Speaker 4: particularly in core Europe and in particular in Germany. I
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  Speaker 4: think the Ones Bank penciled in growth of twenty twenty
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  Speaker 4: or zero point one percent, if you can call that growth.
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  Speaker 4: You know, France isn't isn't a great deal better either,
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  Speaker 4: But generally speaking, it's pretty sclerotic the growth outlook going forward,
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  Speaker 4: and actually it got downgraded slightly you know again today
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  Speaker 4: from those those what were previously pretty unimpressive figures.
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  Speaker 3: Anyway, but I.
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  Speaker 4: Think a lot of the focus this week in Europe
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  Speaker 4: as well as has been on this Dragi report, which
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  Speaker 4: is basically focusing on the fact that you know, growth
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  Speaker 4: in in Europe and in the EU in particular is
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  Speaker 4: very much underperforming. What's going on around the world particularly,
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  Speaker 4: but I think underforming a lot of what's going on
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  Speaker 4: in America and that sort of big reforms are needed
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  Speaker 4: in that there's this as a structural fundamental issue in
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  Speaker 4: terms of low growth in Europe, and obviously we're seeing
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  Speaker 4: the outcome of that at the moment. And it's interesting
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  Speaker 4: actually obviously the you know, with the ECB saying that
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  Speaker 4: they that they want to keep rates in restrictive territory
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  Speaker 4: and focus on inflation more than anything. Well, you know,
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  Speaker 4: they're not too much to help that because I think,
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  Speaker 4: you know, one of the main things that it is
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  Speaker 4: driving that sclerotic growth is very poor internal demand. And
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  Speaker 4: the one way suppose that they can improve on that
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  Speaker 4: is the cut rates in prime and pump a bit.
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  Speaker 4: But they don't seem cam to be to be deliving
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  Speaker 4: that at the moment.
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  Speaker 2: So do you think that the UCV is in or
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  Speaker 2: headed forest tangulation about forty seconds stagflation?
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  Speaker 3: I suspect not.
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  Speaker 4: Actually, I think we're probably now really a little bit
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  Speaker 4: too negative. But on inflation, I think things like oil
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  Speaker 4: prices are coming down, Signs of other bits of inflation
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  Speaker 4: are coming down. If I give anything, you know, the
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  Speaker 4: signs that they may well possibly understoose. On the inflation front,
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  Speaker 4: what you might get is inflation playing ball. But you know,
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  Speaker 4: I would say the growth side of things just being
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  Speaker 4: you know, remaining very unimpressive, very unexciting.
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  Speaker 6: Indeed.
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  Speaker 2: All right, Hugh, thanks a lot. We really appreciate it.
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  Speaker 2: Thank you very much. Hugh Worthington, Bloomberg Intelligence, European rate Strategies.
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  Speaker 2: I was talking about economists earlier this morning, and basically
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  Speaker 2: it's like, look, fiscal spend is all all what it's about. Like,
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  Speaker 2: if you got high fiscal spend, your growth is going
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  Speaker 2: to be okay.
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  Speaker 7: You know what.
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  Speaker 2: Europe doesn't really have the fiscal spend. That's just super capped.
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  Speaker 2: And that's the problem. They don't have a physical union,
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  Speaker 2: they have monetary union.
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  Speaker 2: All right, let's get to the eco data. Charl McGill
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  Speaker 2: god says that's not a movie market, but maybe Michael
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  Speaker 2: McKee will disagree. International Economics and Policy corresponded. All right,
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  Speaker 2: so you got the producer prices for August, Mike, Did
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  Speaker 2: this tell us anything?
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  Speaker 8: Not a whole lot.
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  Speaker 9: It tells you that there's still a sort of a
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  Speaker 9: range bound inflation level in producer prices, some categories up,
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  Speaker 9: some categories down, But it doesn't suggest any major building
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  Speaker 9: inflationary pressures, which is what the the FED would be
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  Speaker 9: worried about. Interesting thing was that trade services rose six
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  Speaker 9: tens of a percent, a fairly large increase, and that
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  Speaker 9: is based on retailer and wholesaler margins. So it's good
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  Speaker 9: news for profits.
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  Speaker 5: It appears, Oh okay, all right, very good. So you
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  Speaker 5: take this along with the CPI data. Does this give
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  Speaker 5: the Fed greater confidence that they in fact have inflation
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  Speaker 5: under control here and they can start easing interest rates.
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  Speaker 9: They can certainly start easing interest rates. I think the
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  Speaker 9: fact that we saw a little bit higher PPI on
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  Speaker 9: a month over month basis, a little bit higher CPI
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  Speaker 9: core on a month over month basis tells the Fed
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  Speaker 9: that they are they have inflation sort of under control,
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  Speaker 9: but it's not. The victory is not one yet, and
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  Speaker 9: they still need to be cautious, which puts them on
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  Speaker 9: the side of twenty five basis points as opposed to fifty.
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  Speaker 8: Doesn't discourage a cut.
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  Speaker 9: But I think that's what the markets are pricing now,
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  Speaker 9: is that the FED has to has to feel like
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  Speaker 9: it needs to be careful.
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  Speaker 2: You know, there's been a argument that if they go fifty,
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  Speaker 2: then it's going to set up you know, what do
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  Speaker 2: they know that we don't know, et cetera when you're
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  Speaker 2: talking to people. Is that a real argument or is
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  Speaker 2: it like, hey, things are actually okay, let's keep it
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  Speaker 2: that way and not mess about and cut fifty.
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  Speaker 9: I mean think the latter is correct nowadays, at least
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  Speaker 9: for people on Wall Street who have Bloomberg's The FED
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  Speaker 9: doesn't know anything that you don't know.
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  Speaker 2: I mean, like some inside super cool release the data.
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  Speaker 9: Well, you know, they release the data they have. Everybody
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  Speaker 9: else has access to the same economic data, and most
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  Speaker 9: big banks have analysts who are also talking to CFOs
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  Speaker 9: and CIOs and talking to people about what's going on
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  Speaker 9: in the company, So they're getting the same sort of
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  Speaker 9: read on the economy on a real time basis that
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  Speaker 9: the FED presidents get by talking to CEOs.
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  Speaker 8: All the FED.
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  Speaker 9: Banks do surveys on a regular basis of companies in
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  Speaker 9: their in their districts, and you know, that's that's.
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  Speaker 8: What the job of an analyst on Wall Street.
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  Speaker 9: So I think everybody kind of has the same information,
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  Speaker 9: but they have different motivations. The markets are looking for
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  Speaker 9: ways to make more money.
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  Speaker 8: Well, the FED is looking at.
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  Speaker 9: Was looking at inflation alone and now they're looking at
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  Speaker 9: both sides of their mandate.
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  Speaker 5: Right, So I mean again, if you step back, here
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  Speaker 5: is there when you talk to people, Michael, your sources,
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  Speaker 5: where are we in just the recession talk that gee,
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  Speaker 5: maybe the Fed's too late, and in fact, you got
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  Speaker 5: to pull this recession talk back onto the table. It's
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  Speaker 5: been kind of off the table for a while.
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  Speaker 2: Now.
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  Speaker 5: Where are we in terms of timing of the FED
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  Speaker 5: and what it means for the US economy.
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  Speaker 9: Almost everybody's cut back their recession forecasts. There are some
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  Speaker 9: people out there who well, there's always the.
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  Speaker 8: Stopped clock, folks.
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  Speaker 9: You know, at some point we're going to have a recession.
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  Speaker 9: And then there are people who think that we are
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  Speaker 9: going to we might have a recession because of previous
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  Speaker 9: recession indicators that don't seem to be working. This time,
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  Speaker 9: and chief among those is the inverted yield curve story.
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  Speaker 9: So when you look at the rest of the numbers,
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  Speaker 9: and things have definitely slowed, but they haven't gone into recession. Now,
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  Speaker 9: the biggest thing about recess is it's a confidence matter.
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  Speaker 8: You don't have a recession.
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  Speaker 9: When you go to recession, people stop spending and companies
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  Speaker 9: stop spending because they have lost confidence in their ability
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  Speaker 9: to be able to pay for things going forward. And
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  Speaker 9: at this point that doesn't seem to be on anybody's mind.
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  Speaker 9: We'll fly out tomorrow what the latest Michigan confidence numbers are.
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  Speaker 9: But while those have been down some, they're not down
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  Speaker 9: in recessionary territory. And businesses aren't saying we're going into recession.
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  Speaker 9: So at this point it might take some external factor,
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  Speaker 9: some geopolitical thing could destroy confidence.
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  Speaker 8: After nine to eleven yesterday, I.
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  Speaker 9: Remember what happened then, but people don't really see it
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  Speaker 9: and the FED doesn't see it happening.
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  Speaker 5: Here's my recession data point that I sent to Tom
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  Speaker 5: Kinyesus yesterday afternoon around lunchtime, walking from the Bloomberg headquarters
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  Speaker 5: and le Avenue over to the park. Beautiful day walk
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  Speaker 5: around Central Park, sixtieth Street, a bunch of swanky restaurants
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  Speaker 5: with outdoor seating packed I mean overflowing pack for lunch.
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  Speaker 5: So I'm like a guy sent Tom a message. I'm like,
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  Speaker 5: I don't see a sload on here on thest. Sixtieth Street.
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  Speaker 6: That's just that, and that's.
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  Speaker 2: Also tourists and also businesses. That's definitely a combo. Hey, Mike,
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  Speaker 2: thanks lot, really appreciate it.
• 10:23
  Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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• 10:39
  Speaker 5: Alex Deal Paul Sweeney live here in our Bloomberg Dinner
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  Speaker 5: at a broker studio. We're streaming live on YouTube as well,
• 10:44
  Speaker 5: So check us out there search Bloomberg Podcast and that's
• 10:46
  Speaker 5: where you will find us. One of the questions I
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  Speaker 5: think a lot of investors have, Okay, the economy is slowing.
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  Speaker 5: I get that, is that kind of a normalized slowing
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  Speaker 5: or is it something more than that? So let's check
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  Speaker 5: in with somebody who has some of these who thinks
• 10:58
  Speaker 5: about some of the same things. I believe is rep
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  Speaker 5: fixed income portfolio manager for JP Morgan Asset Management, joining
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  Speaker 5: us via zoom from the Big Apple of New York City.
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  Speaker 5: So when you look at some of the economic data here,
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  Speaker 5: is it concerning to you the rate at which the
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  Speaker 5: economy is slowing or is it seemed something more normalized
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  Speaker 5: to you?
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  Speaker 10: Hi, Paul, Thanks for having me. So that's the key question.
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  Speaker 10: And as we're contemplating FED easies, I think it becomes
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  Speaker 10: important what level of interest rates would be contingent or
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  Speaker 10: would be consistent with the soft landing. You know, I
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  Speaker 10: think that the base of deceleration does concern me a
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  Speaker 10: little bit. Now, if the FED can aggressively take greates
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  Speaker 10: to neutral or accommodative territory, maybe that pace of deceleration
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  Speaker 10: can slow down. But I still think the data mixed.
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  Speaker 10: You look at the layoff numbers, they are still low,
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  Speaker 10: they're not consistent with the recession. But then I look
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  Speaker 10: at other things. I look at, you know, the quits rate,
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  Speaker 10: the fact that the hiring rate has slowed down on
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  Speaker 10: the small business. You know, intent to hire has been
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  Speaker 10: slowing now for a while. The housing market's a little frozen,
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  Speaker 10: and this bace of decline that you talked about. I
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  Speaker 10: think you could argue it was normalization six months ago.
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  Speaker 10: Now it's making me a little bit more nervous that
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  Speaker 10: this might be something more. But I don't want to
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  Speaker 10: say that this is a recession. I think we're iner
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  Speaker 10: soft landing right now. The question is how long can
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  Speaker 10: it stay and can the FED cut rates quickly enough
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  Speaker 10: to allow that soft landing to continue.
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  Speaker 2: So that's sort of what I was asking Mike about,
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  Speaker 2: right because there is a school thought that they cut
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  Speaker 2: fifty next week, it's going to mean things are really bad,
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  Speaker 2: or it could also mean that they don't want it
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  Speaker 2: to get really bad and that that was sort of
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  Speaker 2: pre emptied.
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  Speaker 10: What do you think. I think it's how they message
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  Speaker 10: a fifty. If they do fifty, I think they might
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  Speaker 10: go twenty five. But if they do go fifty, I
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  Speaker 10: think suggesting that this is risk management front loading. Governor
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  Speaker 10: Waller last week brought up front loading for the first
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  Speaker 10: time any FED official has brought it up. On the
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  Speaker 10: easing side, I think it makes a lot of sense.
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  Speaker 10: The risks are clearly skewed to the downside. Six months ago,
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  Speaker 10: we were saying, well, risks are balanced, inflation might be high,
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  Speaker 10: inflation's not a concern anymore road based decline in inflation,
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  Speaker 10: notwithstanding monthly volatility. It's the growth side, is the labor
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  Speaker 10: side that's concerning. So if the Fed spins a fifty
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  Speaker 10: basis point, thud as being front loading. We're trying to
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  Speaker 10: get to neutral faster. And look at the starting point,
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  Speaker 10: we're at five and a half on the fund's rate
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  Speaker 10: or real rates, given inflation is running about two percent,
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  Speaker 10: that's a very restrictive level of policy. So it's how
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  Speaker 10: they spin it. I don't think a fifty will be
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  Speaker 10: viewed negatively if the Fed says we're just trying to
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  Speaker 10: get ahead of the curve or not be behind the curve.
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  Speaker 10: But on the same bend, I think if they go
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  Speaker 10: twenty five and we get the dot lot, and the
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  Speaker 10: dot lot suggests that they'll get to neutral sometime next year,
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  Speaker 10: I think they can finish the message and say, look,
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  Speaker 10: we've seen the market, we've seen the economy. We're responding quickly.
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  Speaker 10: We just think we can start at twenty five, but
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  Speaker 10: if things slow down faster, we can go fifty. I
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  Speaker 10: think that message the market will need to hear. Otherwise,
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  Speaker 10: get ready for a lot of tightening in financial conditions.
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  Speaker 5: So how does one structure or portfolio given kind of
• 13:59
  Speaker 5: that background.
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  Speaker 10: You know, I would say fixed incer makes a lot
• 14:03
  Speaker 10: of sense. We've been talking now for a year. When
• 14:05
  Speaker 10: does the FED start to cut rates. They've told you
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  Speaker 10: they're going to cut rates next week. We're debating twenty
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  Speaker 10: five or fifty, but it's starting. Lock in yields. I mean,
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  Speaker 10: I think the front end look very attractive, and the
• 14:16
  Speaker 10: FED might have hiked you're getting five percent in cash. Well,
• 14:20
  Speaker 10: now if you're getting six percent in a five year
• 14:22
  Speaker 10: bond or seven percent if you move into high quality,
• 14:25
  Speaker 10: high yield, I would say lock in yields, and I
• 14:29
  Speaker 10: would argue for your end of cycle. We can debate
• 14:32
  Speaker 10: how long that end can last, but active management makes sense.
• 14:35
  Speaker 10: So one of the things we're doing, we're still buying
• 14:38
  Speaker 10: high quality spread product. We think fundamentals are strong in
• 14:41
  Speaker 10: many sectors, so not just concentrated in any one sector.
• 14:44
  Speaker 10: But we're also buying duration. We're buying ten year treasuries,
• 14:47
  Speaker 10: We're putting on steepness. What if the economy does slow
• 14:50
  Speaker 10: down faster and the FED lags. You know, the FED
• 14:53
  Speaker 10: can cut rates, but it takes a while for that
• 14:55
  Speaker 10: to show up in the economy, interstrates will be a hedge.
• 14:59
  Speaker 10: So I would say that hedged portfolio ownspread, product, lock
• 15:02
  Speaker 10: and yield, buy some duration or or put on gas
• 15:05
  Speaker 10: stepnas to try and hedge that downside scenario.
• 15:08
  Speaker 2: Just some breaking news. We want to bring it to
• 15:10
  Speaker 2: our listeners. US sanctions Venezuela Court chief and election officials.
• 15:15
  Speaker 2: This is over that July twenty eighth presidential election that
• 15:19
  Speaker 2: is questioning that many like the US, are questioning the
• 15:23
  Speaker 2: legitimacy of that election that elevated Maduro again to the
• 15:28
  Speaker 2: head seat there. Just earlier today, Spain voted to recognize
• 15:34
  Speaker 2: the opposition leader a Mundo Gonzalez, challenging Nicholas's Maduro's election
• 15:40
  Speaker 2: in July, and Venezuela was not happy about that either,
• 15:44
  Speaker 2: so US sanctioning Venezuelan Court chief and election officials. Prio,
• 15:49
  Speaker 2: what's the question? How do you look at neutral? So
• 15:52
  Speaker 2: like we can obsess over next week for sure, what
• 15:55
  Speaker 2: to do short term, but what do you do longer
• 15:58
  Speaker 2: term if we don't know what is going to be?
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  Speaker 2: What if it's four, is it two or four? That's
• 16:03
  Speaker 2: a huge difference it.
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  Speaker 10: Is now you're at five and a half right now,
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  Speaker 10: So I think we have time to figure out neutral.
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  Speaker 10: You know, and the fact that growth is slowing despite
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  Speaker 10: all the fiscal easing, despite the fact that financial conditions
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  Speaker 10: are easy, tells you that monetary policy is restrictive. So
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  Speaker 10: if I go back to basics and I look at
• 16:23
  Speaker 10: our star estimates, they're all over the place, somewhere between
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  Speaker 10: zero and one percent, inflation close to two percent, so
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  Speaker 10: I come down to around three percent with a wide
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  Speaker 10: error band, maybe it's two and a half to three
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  Speaker 10: and a half. But I think this is why the
• 16:38
  Speaker 10: FED might have the luxury near term. They can cut
• 16:41
  Speaker 10: about one hundred basis points and see how the economy
• 16:44
  Speaker 10: is responding. And it's not just neutral rate. It's also
• 16:47
  Speaker 10: availability of credit, it's financial conditions, it's everything else that
• 16:50
  Speaker 10: go into conditions that help the economy, and then they
• 16:54
  Speaker 10: can decide are we're getting close to neutral. So I
• 16:56
  Speaker 10: think they can finish that neutral. It's unobservable to your point,
• 17:00
  Speaker 10: it's extremely important and we can't observe it, but we
• 17:02
  Speaker 10: can look at data and see how it's responding to
• 17:06
  Speaker 10: interest rates. But I would say somewhere in that three percent.
• 17:09
  Speaker 10: But I think what's fascinating is the market's not pricing
• 17:11
  Speaker 10: and accommodative despite the fact that the recession talk is
• 17:15
  Speaker 10: in the air. The end point after all the rate cuts,
• 17:18
  Speaker 10: So look at the totality of rate cuts is around
• 17:21
  Speaker 10: three percent. So the market's essentially telling you the Fed's
• 17:24
  Speaker 10: going to get too neutral and that's going to be
• 17:25
  Speaker 10: enough to keep the soft landing going. I have a
• 17:28
  Speaker 10: bit of a question there. If the lags are long,
• 17:31
  Speaker 10: or the FED is slow, or the economy is actually
• 17:33
  Speaker 10: decelerating faster in terms of underlying maybe the FED will
• 17:37
  Speaker 10: have to go into accommodative territory, so below three percent.
• 17:40
  Speaker 10: But I think we're going to figure that out as
• 17:42
  Speaker 10: time goes on.
• 17:43
  Speaker 5: All right, Prea, thank you so much for joining us.
• 17:44
  Speaker 6: Really appreciate it.
• 17:45
  Speaker 5: Pre Israe Fixed Income portfolio Manager, JP Morgan Asset Management
• 17:48
  Speaker 5: in New York City.
• 17:51
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
• 17:55
  Speaker 1: weekdays at ten am Eastern on Apple car Play and
• 17:58
  Speaker 1: Android Auto with them Blomberg Business. You can also listen
• 18:02
  Speaker 1: live on Amazon Alexa from our flagship New York station
• 18:05
  Speaker 1: Just Say Alexa playing Bloomberg eleven thirty.
• 18:10
  Speaker 5: Well, some of the news on the Bloomberg News wire
• 18:12
  Speaker 5: that's getting a lot of readership today is about two
• 18:16
  Speaker 5: of Wall Street's largest investment banks were rolling out measures
• 18:19
  Speaker 5: that may ease junior bankers workloads amid complaints across the
• 18:23
  Speaker 5: industry that weekly hours are increasingly creeping past one hundred
• 18:27
  Speaker 5: hours per week. Shreadanata Rogen joins us. He covers all
• 18:30
  Speaker 5: the big investment banks. He's a senior financial reporter for
• 18:32
  Speaker 5: Bloomberg News. He joins us here in our studio, shre So,
• 18:35
  Speaker 5: I guess bankers they've always been known, particularly the junior bankers,
• 18:38
  Speaker 5: for working long hours. And I know that kind of
• 18:42
  Speaker 5: during the financial I mean, you know, during the pandemic,
• 18:46
  Speaker 5: that became a recurring issue of concern. Where are we
• 18:49
  Speaker 5: today in terms of having to try to ease some
• 18:51
  Speaker 5: of the workload from some of those junior bankers.
• 18:53
  Speaker 11: I mean, what you're saying is dejvo all over again.
• 18:55
  Speaker 10: Right.
• 18:56
  Speaker 11: It just feels like we come back to the same
• 18:58
  Speaker 11: topic every few years. Not a surprise that it's often
• 19:01
  Speaker 11: tied to the time than we are starting to see
• 19:03
  Speaker 11: an upswinging deals. The last time this did become a
• 19:06
  Speaker 11: big issue was back during the pandemic. Remember the phase
• 19:09
  Speaker 11: probably a few months after the pandemic, when companies suddenly
• 19:12
  Speaker 11: needed this massive funding needs. All the investment banking firms
• 19:16
  Speaker 11: were working overtime on that. That turned into deal making opportunities.
• 19:20
  Speaker 11: And then you had the twenty twenty one s backpoom
• 19:22
  Speaker 11: and whatnot, and that viral presentation out out of Golden
• 19:26
  Speaker 11: Sacks and those junior bankers that really caused the stir
• 19:29
  Speaker 11: in the industry. What happened back then you had pay
• 19:33
  Speaker 11: rises across.
• 19:35
  Speaker 8: All of Wall Street.
• 19:36
  Speaker 11: All the firms were raising their base salary for their
• 19:38
  Speaker 11: junior bankers. And these are kids right out of college
• 19:41
  Speaker 11: who in their first, second, third year are standing to
• 19:44
  Speaker 11: make two hundred, three hundred thousand dollars at these firms.
• 19:47
  Speaker 11: It's become part of the conversation again a because there
• 19:51
  Speaker 11: has been an uptakeing deal after a bit of a
• 19:53
  Speaker 11: lull for a year eighteen months, and then there was
• 19:56
  Speaker 11: an unfortunate incident at Bank of America where one of
• 19:58
  Speaker 11: the junior investment bankers died, and people have tried to
• 20:02
  Speaker 11: draw a connection between the reason for his death with
• 20:06
  Speaker 11: the workload that he had. We don't know if there
• 20:08
  Speaker 11: can be a direct connection established, but at least that
• 20:10
  Speaker 11: has sparked conversation again, and you're seeing some of the results.
• 20:14
  Speaker 11: The Wall Street Journal was just the latest news outlet
• 20:17
  Speaker 11: to report on this fact that Bloomberg and everyone else
• 20:20
  Speaker 11: has been talking about for a few months now. Everyone's
• 20:23
  Speaker 11: talking about these rising workloads. There is tension and strain,
• 20:27
  Speaker 11: and banks are being forced to respond. Here you have
• 20:29
  Speaker 11: JP Morgan coming out with sort of fixed, trying to
• 20:33
  Speaker 11: fix some hours for its junior bankers for the first
• 20:36
  Speaker 11: time ever. Bank of America already had that, and it's
• 20:38
  Speaker 11: trying to do a better job of enforcement. When you
• 20:42
  Speaker 11: read the fine print zone when they talk about some exceptions,
• 20:46
  Speaker 11: when they talk about well except when there are live deals,
• 20:49
  Speaker 11: then you have to sit back and wonder. It's not
• 20:51
  Speaker 11: that people were logging eighty hour weeks and ninety hour
• 20:54
  Speaker 11: weeks and one hundred hour weeks just twiddling their thumbs.
• 20:56
  Speaker 11: They were probably doing it when there were live deals.
• 20:58
  Speaker 11: So will this really change anything or will we be
• 21:01
  Speaker 11: having the same conversation two years from now.
• 21:03
  Speaker 2: Well, also, I was reading I forget where I read it,
• 21:05
  Speaker 2: but that higher banking officials will just tell their junior
• 21:09
  Speaker 2: bankers like just don't log the hours like work. But
• 21:12
  Speaker 2: don't log it like you get around the requirements.
• 21:14
  Speaker 11: No, and that's been a problem. Either people are working
• 21:17
  Speaker 11: longer than the hours that they're supposed to and just
• 21:20
  Speaker 11: not to not get their bosses in trouble, which is
• 21:22
  Speaker 11: a thing, they will try and log less than the
• 21:26
  Speaker 11: number of hours they're working. In some cases, junior bankers
• 21:28
  Speaker 11: will feel that they have to log more ours than
• 21:30
  Speaker 11: they're working so that the very precious little spare time
• 21:33
  Speaker 11: that they do have does not get allocated under some work.
• 21:35
  Speaker 11: But we have to take a step back and wonder,
• 21:37
  Speaker 11: and this is this has been a conversation in the
• 21:39
  Speaker 11: in the in the industry for three four decades, five decades,
• 21:43
  Speaker 11: maybe longer. Now there is a cultural shift that needs
• 21:47
  Speaker 11: to take place, right, can't you can't have There has
• 21:51
  Speaker 11: to be a better utilization of these hours. Oftentimes you
• 21:55
  Speaker 11: have junior bankers responding to requests from their bosses and
• 22:00
  Speaker 11: then not hearing back till until they come back from
• 22:02
  Speaker 11: their dinner with their client. Notice something minor or major,
• 22:06
  Speaker 11: but suddenly say, fine, you know I might be looking
• 22:09
  Speaker 11: at this at nine thirty pm, but now that I'm
• 22:11
  Speaker 11: responding to you, I want the fix in the next
• 22:13
  Speaker 11: two us. The next three US, the next four US.
• 22:16
  Speaker 11: That cultural change is more important in figuring out how
• 22:19
  Speaker 11: to cap these hours out. I don't know how you
• 22:21
  Speaker 11: solve for.
• 22:22
  Speaker 5: That easily, but I'll tell you technology has changed the
• 22:24
  Speaker 5: game because part of the reason you're in the office
• 22:26
  Speaker 5: because you had no other resources. Yet if you wanted
• 22:28
  Speaker 5: to fix that thing in three hours, you had to
• 22:30
  Speaker 5: be in the office. Now I can do it from
• 22:31
  Speaker 5: I can do it for my phone at the Yankee Game.
• 22:33
  Speaker 5: Shriana rogens, senior financial reporter for Bloomberg News, a great
• 22:37
  Speaker 5: article today on junior bankers on Wall Street. They're working
• 22:40
  Speaker 5: pretty hard.
• 22:43
  Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
• 22:46
  Speaker 1: weekdays at ten am Eastern on applecar Play and Android
• 22:50
  Speaker 1: Otto with the Bloomberg Business App. You can also listen
• 22:53
  Speaker 1: live on Amazon Alexa from our flagship New York station.
• 22:56
  Speaker 1: Just say Alexa, play Bloomberg eleven thirty.
• 23:01
  Speaker 2: So here's a company that I find is really interesting
• 23:04
  Speaker 2: and I feel like it's an important conversation and want
• 23:06
  Speaker 2: to discuss. And the company is Calumet Specialty Products. Ticker
• 23:09
  Speaker 2: is CLMT. It trades in the New York Stock Exchange.
• 23:12
  Speaker 2: It trades about sixteen dollars and forty four cents a share.
• 23:15
  Speaker 2: It's a one billion dollar company. It's been around for
• 23:18
  Speaker 2: a very, very long time. It's been growing through M
• 23:20
  Speaker 2: and A for the past thirty years. They have a
• 23:22
  Speaker 2: ton of assets. They make things like vasoline WT forty
• 23:26
  Speaker 2: tire shine. They take oil and they make the products
• 23:29
  Speaker 2: that you use every day to function. Three years ago, though,
• 23:33
  Speaker 2: one one asset was turned into something a little bit different.
• 23:37
  Speaker 2: It's their Montana Refinery and they now use that to
• 23:41
  Speaker 2: process things like vegetable oil, canola oil, corn oil to
• 23:45
  Speaker 2: make sustainable aviation fuel. That's kind of interesting, so I
• 23:49
  Speaker 2: want to talk about it. CEO Todd Browman joins us. Now, hey, Todd,
• 23:53
  Speaker 2: you make all the stuff that we use every day.
• 23:55
  Speaker 2: Walk us through your decision though, to spend all this
• 23:58
  Speaker 2: time and money on the Montana refinery to make staff.
• 24:02
  Speaker 7: Yeah, you bet first. First Alex Paul, thanks, thanks for
• 24:05
  Speaker 7: having us today. I'm super excited.
• 24:07
  Speaker 8: To be here with you.
• 24:10
  Speaker 7: Look, we're we're an entrepreneurial and innovated company at our heart.
• 24:14
  Speaker 7: That's that's what we've been, you know, for the last
• 24:16
  Speaker 7: thirty years. And we saw an opportunity. We had a
• 24:19
  Speaker 7: great facility that was making specialty asphalt in Great Falls,
• 24:24
  Speaker 7: Montana a few years ago, early on in kind of
• 24:28
  Speaker 7: the COVID days, actually in twenty twenty, we kind of
• 24:30
  Speaker 7: looked at the environment and said, hey, this facility is
• 24:33
  Speaker 7: in exactly the right place at exactly the right time.
• 24:37
  Speaker 7: You know, arguably the fastest growing area in all of
• 24:41
  Speaker 7: energy is you know, sustainable aviation fuel, renewable diesel, and
• 24:45
  Speaker 7: we were a logistically advantaged facility.
• 24:47
  Speaker 3: We sit right on top of a whole bunch of
• 24:50
  Speaker 3: renewable feedstock.
• 24:51
  Speaker 7: We have direct access to California, British Columbia, Washington, Oregon,
• 24:55
  Speaker 7: a truck right away from from Canada.
• 24:57
  Speaker 3: So we looked at that opportunity and just said, hey,
• 25:01
  Speaker 3: you know.
• 25:01
  Speaker 7: We can make this conversion and turn something that's a
• 25:05
  Speaker 7: really nice niche specialty asphalt facility into a you know,
• 25:11
  Speaker 7: leader leader in sustainable aviation field.
• 25:13
  Speaker 3: In fact, we're the largest in the Western hemisphere.
• 25:16
  Speaker 7: And we'll keep saying that for a little bit longer,
• 25:18
  Speaker 7: but you know, just really excited about the business where
• 25:21
  Speaker 7: we're at in the growth trajectory of both that niche
• 25:24
  Speaker 7: of a business and Calium met as a whole.
• 25:27
  Speaker 2: So I guess the question becomes so here we go.
• 25:29
  Speaker 2: If we talked to like airline CEOs and they're like, yeah, yeah,
• 25:32
  Speaker 2: we totally want SAFF, but you know, it's kind of
• 25:35
  Speaker 2: expensive and or the supply is not really there. When
• 25:39
  Speaker 2: you decided to make this transformation, did you set up
• 25:42
  Speaker 2: long term contracts with an airline where they're going to
• 25:44
  Speaker 2: pay you a certain amount of money for your off
• 25:46
  Speaker 2: take and if so, how did that work?
• 25:49
  Speaker 7: Interesting question. So what we have is a massive amount
• 25:53
  Speaker 7: of flexibility. We can make renewable diesel or SAF And
• 25:57
  Speaker 7: obviously we talk a lot about SAFF because that's new
• 25:59
  Speaker 7: and you know, associated with a potential DOE loan, and
• 26:02
  Speaker 7: we have a large potential max SAFF expansion that will
• 26:06
  Speaker 7: take us from the largest producer of North America one
• 26:09
  Speaker 7: of the largest, not the largest in the world. So
• 26:12
  Speaker 7: so very excited about that. And Staff gets a lot
• 26:14
  Speaker 7: of coverage. But but really early on, you know, we
• 26:18
  Speaker 7: we initially launched with almost all renewable diesel, and we
• 26:22
  Speaker 7: were selling to you know, large blue chip companies and
• 26:26
  Speaker 7: and on the south side we're partnered with Shell, who's
• 26:29
  Speaker 7: one of the largest staff into wing fuelers there is.
• 26:34
  Speaker 7: So so what we do is we provide you know,
• 26:37
  Speaker 7: the s p K, which which Shell will then take
• 26:41
  Speaker 7: take all across the country even into even into.
• 26:44
  Speaker 3: Canada, you know, blend it.
• 26:46
  Speaker 7: They have the last mile logistics and then they actually
• 26:49
  Speaker 7: you know, serve the serve the airline, do the QC,
• 26:52
  Speaker 7: do the last mile terminaling, fueling at the facilities, all
• 26:56
  Speaker 7: of that and and sounds interesting, you know, it's it's
• 26:58
  Speaker 7: a it's such a high growth area that at this
• 27:01
  Speaker 7: point it's one airline, you know, one airport at a
• 27:04
  Speaker 7: time in converting because when you think about the complexities
• 27:08
  Speaker 7: that are involved and really changing the supply chain in
• 27:13
  Speaker 7: the fueling of something as sensitive as an important as
• 27:16
  Speaker 7: an airport, you want to make sure you have it right.
• 27:19
  Speaker 3: So it's really one airport at a time. We sell
• 27:21
  Speaker 3: to Shell.
• 27:22
  Speaker 7: Shell takes it to their facility, they blend it and
• 27:26
  Speaker 7: ultimately inject it into the you know, fuel the airplane.
• 27:30
  Speaker 5: Wow, it's just me and man, you weren't kidding, Todd.
• 27:33
  Speaker 5: Great Falls, Montana, Dude, that is up there. I mean
• 27:36
  Speaker 5: it's north of Yellowstone National Park. You're just a stone
• 27:39
  Speaker 5: stew from Canada, So I can't imagine that is just
• 27:42
  Speaker 5: extraordinary out there. Todd talk to us about like the
• 27:44
  Speaker 5: quality of the fuel. We were just talking to an
• 27:46
  Speaker 5: airline's analyst. It was just talking about, you know, the
• 27:49
  Speaker 5: need to get greater efficient engines from a fuel efficient perspective,
• 27:53
  Speaker 5: what's the quality and the performance of the sustainable aviation
• 27:57
  Speaker 5: fuel that you guys produce.
• 28:00
  Speaker 7: One of the things that's that's so beautiful about both
• 28:02
  Speaker 7: sustainble aviation fuel and renewable diesel is it's really a
• 28:06
  Speaker 7: drop in fuel. You know, there have been a lot
• 28:09
  Speaker 7: of technologies talked about to help with the energy transition,
• 28:14
  Speaker 7: and and a lot of them, particularly in an airline,
• 28:17
  Speaker 7: you know, which which we think is the hardest to
• 28:19
  Speaker 7: debate of all of the transportation.
• 28:23
  Speaker 3: Sectors. You know, it's it requires a change in infrastructure.
• 28:29
  Speaker 7: You know, if you're doing if you're doing battery fuel,
• 28:32
  Speaker 7: you know, you have to obviously have a have a
• 28:34
  Speaker 7: completely different plane. Hydrogen has been talked about, completely different engine,
• 28:38
  Speaker 7: you know. South one of the beautiful things about it
• 28:40
  Speaker 7: is it really just drops into an existing supply chain,
• 28:43
  Speaker 7: so it's easy. It works just as well as as
• 28:47
  Speaker 7: traditional fuel. Obviously, it's it's very highly monitored. The QC
• 28:51
  Speaker 7: on it's incredibly important, but molecularly it's it's very similar
• 28:56
  Speaker 7: to existing jet fuel that is out there today, so
• 29:00
  Speaker 7: we can just drop it into the same you know,
• 29:02
  Speaker 7: into the same system. There's some blending in QC work
• 29:05
  Speaker 7: that happens kind of there at the facility from shell,
• 29:08
  Speaker 7: but it's not something like an ethanol or biodiesel that
• 29:12
  Speaker 7: you know requires is able to be blended at very
• 29:16
  Speaker 7: small amounts. It's really molecular a very similar product to
• 29:20
  Speaker 7: the jet field that's being used today and on renewable
• 29:23
  Speaker 7: diesel front. In fact, end users don't even have to differentiate.
• 29:27
  Speaker 7: You can use renewable diesel or diesel and not even
• 29:29
  Speaker 7: differentiate between the two. You know, they're molecularly the same.
• 29:34
  Speaker 2: So when you decided to make this transformation in the
• 29:36
  Speaker 2: last three years with this refinery, was it expensive? Did
• 29:39
  Speaker 2: it cost a lot?
• 29:41
  Speaker 7: Yeah, it costs a lot and in fact, only started
• 29:43
  Speaker 7: at our stock was about a dollar in a depth
• 29:45
  Speaker 7: of COVID.
• 29:45
  Speaker 3: So we really went all in on this.
• 29:47
  Speaker 7: We've had a lot of conviction about sustainable aviation, feel
• 29:52
  Speaker 7: about renewable diesel, and most importantly, I think Montana's competitively
• 29:58
  Speaker 7: advantaged position in that area.
• 30:01
  Speaker 3: So so it was a major bet.
• 30:03
  Speaker 7: But we were able to make that decision quickly and
• 30:07
  Speaker 7: actually go from you know, ideation to fully operating in
• 30:11
  Speaker 7: just a few years. So, you know, we stood it
• 30:14
  Speaker 7: up at the very end of twenty twenty two. Twenty
• 30:17
  Speaker 7: twenty three was kind of we were piecing together the
• 30:21
  Speaker 7: various phases of the startup and commissioning. We worked out
• 30:25
  Speaker 7: the kinks, and in the second quarter of twenty four
• 30:29
  Speaker 7: we really demonstrated what a full steady state you know,
• 30:34
  Speaker 7: production can look like at Montaney Nobles.
• 30:36
  Speaker 3: So incredibly exciting time.
• 30:38
  Speaker 5: So who do you compete against? Is there a competition?
• 30:41
  Speaker 5: Is there a market here? Is there a competitive landscape
• 30:43
  Speaker 5: for sustainable aviation fuel?
• 30:46
  Speaker 7: You know, it's interesting. So every country is a little
• 30:50
  Speaker 7: bit different. In North America, there are really only two
• 30:54
  Speaker 7: suppliers currently. There are a few more that are coming
• 30:57
  Speaker 7: on because obviously this is just a major growth there are,
• 31:00
  Speaker 7: but right now, you know, there are only two that
• 31:03
  Speaker 7: are producing. So so and it's not, at least today
• 31:07
  Speaker 7: a mandated market. So obviously airlines will will make commitments
• 31:12
  Speaker 7: and try to get ahead of the game. They expect
• 31:14
  Speaker 7: mandates to come down the road. Same thing with with
• 31:18
  Speaker 7: with individual entities, you know, so there's private airlines are
• 31:22
  Speaker 7: a big either.
• 31:22
  Speaker 3: So there's there's certainly a big.
• 31:24
  Speaker 7: Market as it exists today, but the incremental supply is
• 31:29
  Speaker 7: actually imported. Now if you go globally, that's a little
• 31:33
  Speaker 7: bit different. When you go globally, there are mandates, and
• 31:36
  Speaker 7: the UK, for example, just came out and they're going
• 31:38
  Speaker 7: to mandate, you know, nearly a third of a billion
• 31:40
  Speaker 7: gallons by twenty thirty, Singapore, you know, same thing, one
• 31:44
  Speaker 7: hundred and fifty million gallons by twenty thirty, Japan, India.
• 31:47
  Speaker 3: So so there are globally a lot of mandates coming on.
• 31:51
  Speaker 7: And just here in our own, you know, backyard in
• 31:54
  Speaker 7: the United States, we have the SAFF Grand Challenge, which
• 31:57
  Speaker 7: says we want to have three billion gallons a year
• 32:00
  Speaker 7: of saff production by twenty thirty and thirty five billion
• 32:04
  Speaker 7: gallons a year by twenty fifty.
• 32:06
  Speaker 3: So you know, today we're the largest in North.
• 32:09
  Speaker 7: America and we're making thirty million gallons to forty five
• 32:11
  Speaker 7: million gallons a year.
• 32:12
  Speaker 2: Yeah, toss, how really we are? We gotta leave it there,
• 32:16
  Speaker 2: but that was really interesting. I really appreciate it, and
• 32:18
  Speaker 2: definitely come back let us know how that's going on.
• 32:20
  Speaker 2: I want to hear expansion plans or other plans along
• 32:23
  Speaker 2: this area. Tab Roman, CEO of Calummet Specialty of Products,
• 32:26
  Speaker 2: joining us on the future of staff and also like
• 32:29
  Speaker 2: they make sed up like Basoline.
• 32:31
  Speaker 1: Also, you're listening to the Bloomberg Intelligence Podcast. Catch us
• 32:36
  Speaker 1: live weekdays at ten am Eastern on applecar Play and
• 32:39
  Speaker 1: Android Auto with the Bloomberg Business app. You can also
• 32:42
  Speaker 1: listen live on Amazon Alexa from our flagship New York station.
• 32:46
  Speaker 1: Just say Alexa Play Bloomberg eleven.
• 32:49
  Speaker 5: Thirty, Alex Steel, Paul Swen, you live here in our
• 32:52
  Speaker 5: Bloomberg Directive for Workers Studio. We're streaming live on YouTube
• 32:55
  Speaker 5: as well. That's the Internet, I'm told. So you go
• 32:58
  Speaker 5: to Bloomberg dot com, go to YouTube dot com and
• 33:00
  Speaker 5: search Bloomberg Podcast, and that's where you'll find this. Let's
• 33:03
  Speaker 5: talk about housing, and there's a pronounced shortage of housing
• 33:06
  Speaker 5: in the United States, and that is certainly true here
• 33:10
  Speaker 5: in New York City. So let's break that down a
• 33:12
  Speaker 5: little bit. David Schwartz joins US Data's co founder and
• 33:15
  Speaker 5: principal of Slate Property Group slatest, developing over four billion
• 33:19
  Speaker 5: in real estate throughout New York City, representing over four
• 33:22
  Speaker 5: thousand apartments, so a good source for us and aw
• 33:25
  Speaker 5: Miguil do a little joints this markets reporter for Bloomberg News,
• 33:27
  Speaker 5: both of them in our studio here, David at Slate,
• 33:30
  Speaker 5: What are you guys doing? First of all, frame out
• 33:33
  Speaker 5: the housing challenges in New York City and the kind
• 33:36
  Speaker 5: of how you guys are trying to deal with that.
• 33:38
  Speaker 6: Yeah, first of all, thanks for having me here today.
• 33:40
  Speaker 6: I'm happy to be here to talk about housing. I mean,
• 33:42
  Speaker 6: I think it's no surprise that we have a shortage
• 33:45
  Speaker 6: of housing. We have a supply side issue. There just
• 33:47
  Speaker 6: aren't enough units for people. So if you think about
• 33:51
  Speaker 6: overall supply and demand metrics, we have more people that
• 33:53
  Speaker 6: need housing than housing to be supplied. New York has
• 33:56
  Speaker 6: been under supplying housing for a long time, and now
• 33:59
  Speaker 6: we're starting to see that around the country. But we
• 34:01
  Speaker 6: have many, many years of under supply of housing and
• 34:04
  Speaker 6: more people that need housing than housing available. So housing
• 34:07
  Speaker 6: prices are going up and we're seeing a crisis.
• 34:10
  Speaker 12: Well before we dig into affordable housing here in New
• 34:13
  Speaker 12: York City, and I know that you have a couple
• 34:14
  Speaker 12: of exciting projects, one in Brooklyn and one out by
• 34:18
  Speaker 12: JFK let's talk about the fact that, for the first
• 34:21
  Speaker 12: time in your memory, housing, affordable housing is a core
• 34:25
  Speaker 12: issue in the presidential election. Is it that exact, that
• 34:29
  Speaker 12: supply issue, or what's going on nationwide that this is
• 34:32
  Speaker 12: such a big deal.
• 34:33
  Speaker 6: Thanks for bringing that up. I am so pleased to
• 34:37
  Speaker 6: see that this is being talked about at the national level.
• 34:40
  Speaker 6: Housing is a crisis that all Americans are facing. Whether
• 34:43
  Speaker 6: we're in New York or North Carolina, Florida, the Midwest,
• 34:46
  Speaker 6: the West Coast, it's everywhere, and it's becoming a huge issue.
• 34:49
  Speaker 6: And it's a supply side problem. We don't have enough
• 34:52
  Speaker 6: units and we need a lot more. And that's why
• 34:54
  Speaker 6: it's nice to hear we heard a presidential candidate talking
• 34:58
  Speaker 6: about producing a lot more housing. I think she talked
• 35:01
  Speaker 6: about three million units. I think that's a good start.
• 35:03
  Speaker 6: I actually think we need a lot more than that,
• 35:05
  Speaker 6: but I'll start with three million. I think it's a
• 35:07
  Speaker 6: good way. But I think we're talking about a problem
• 35:08
  Speaker 6: that's in the ten million plus range.
• 35:11
  Speaker 8: How did we get here?
• 35:12
  Speaker 5: I mean, is our population surged over the last twenty
• 35:15
  Speaker 5: or thirty years?
• 35:16
  Speaker 6: How do we get here? Look, it's it's slowly and
• 35:19
  Speaker 6: then quickly. I think we've stopped producing enough units. I
• 35:23
  Speaker 6: think that after the GFC we stopped producing a lot
• 35:26
  Speaker 6: of units. We built fewer units, we built bigger units
• 35:30
  Speaker 6: housing the size of houses. If you guys remember like
• 35:33
  Speaker 6: the Levit towns for people from the New York area,
• 35:35
  Speaker 6: we were building houses that were thirteen hundred square feet. Now,
• 35:38
  Speaker 6: how's it a three thousand square feet? There are fewer units,
• 35:41
  Speaker 6: they're bigger, they're more expensive, but it's just total number
• 35:45
  Speaker 6: of units. If you look at anywhere, New York hasn't
• 35:47
  Speaker 6: supplied enough, but the whole country hasn't. And now we're
• 35:50
  Speaker 6: in a place in which housing costs have increased with inflation,
• 35:53
  Speaker 6: borrowing costs of increased, So we're adding more problems to
• 35:57
  Speaker 6: an already problematic area.
• 36:00
  Speaker 12: So in terms of actual affordable housing, I know that
• 36:04
  Speaker 12: this is an umbrella term for say, workforce housing, among
• 36:07
  Speaker 12: other types of housing. Can you dig down into that
• 36:10
  Speaker 12: a little bit more before we get specific on sleeves
• 36:13
  Speaker 12: propers And we should mention we actually had your other
• 36:16
  Speaker 12: co founder and principal, Martin Nusbaum, joined us a couple
• 36:19
  Speaker 12: of months ago to talk more broadly about your multifamily
• 36:22
  Speaker 12: and outside of affordable housing. But this is such an
• 36:24
  Speaker 12: interesting topic.
• 36:26
  Speaker 6: Yeah, thanks for bringing that up. I think it's important
• 36:28
  Speaker 6: to realize that this is one ecosystem. So all housing
• 36:32
  Speaker 6: is related to all other housing. So if you know
• 36:34
  Speaker 6: anybody who's bought a home, you might have wanted to
• 36:36
  Speaker 6: buy a home for certain dollars, you can't afford it.
• 36:38
  Speaker 6: You buy a home for a little bit less. So
• 36:40
  Speaker 6: everything is related. So any housing that's produced impacts affordable housing.
• 36:46
  Speaker 6: So we need to produce a lot more housing. So
• 36:48
  Speaker 6: one of the things that SLATEE is doing is we
• 36:50
  Speaker 6: filled the role where we are providing leverage, where we're
• 36:53
  Speaker 6: filling the gap where a lot of banks are no
• 36:56
  Speaker 6: longer able to provide financing because of all the things
• 36:59
  Speaker 6: that having in the banking sector. So without financing, can't
• 37:04
  Speaker 6: build more units. So that's one of the areas that
• 37:06
  Speaker 6: we're looking at. And then on the other side, we're
• 37:08
  Speaker 6: looking to build lots of units, whether it's workforce housing
• 37:11
  Speaker 6: or all. The difference is the truth is affordable housing
• 37:15
  Speaker 6: means different things to different people. But the fact is
• 37:18
  Speaker 6: most people are spending the majority of their income on housing.
• 37:22
  Speaker 6: Unless you're really really wealthy, your biggest expenditure is probably housing.
• 37:28
  Speaker 6: So whether you're talking about the teacher or the fireman,
• 37:31
  Speaker 6: or you're talking about somebody that works in a fast
• 37:34
  Speaker 6: food restaurant, they're both probably having a real crisis with
• 37:37
  Speaker 6: affording their housing. And it's not really pitting them against
• 37:40
  Speaker 6: each other because they both really need good quality and
• 37:43
  Speaker 6: affordable housing, but just at different levels.
• 37:45
  Speaker 2: So tell me some of the projects that you had
• 37:47
  Speaker 2: gone on, so you know.
• 37:49
  Speaker 6: We're doing something that I think is super innovative. We're
• 37:52
  Speaker 6: converting the first hotel in New York State to one
• 37:55
  Speaker 6: hundred percent affordable housing, the Baisley Park.
• 37:58
  Speaker 2: And a hotel to ho that's usually really tricky, right,
• 38:01
  Speaker 2: It's not as simple as like put a door in
• 38:02
  Speaker 2: and you're done.
• 38:03
  Speaker 8: Well.
• 38:04
  Speaker 6: It is tricky, but we made it a little bit
• 38:06
  Speaker 6: less tricky. So I think what we liked about it
• 38:08
  Speaker 6: is we take a hotel room, and if you have
• 38:10
  Speaker 6: a one hotel room that's a studio, you knock down
• 38:13
  Speaker 6: a wall for two hotel rooms and you turn it
• 38:15
  Speaker 6: into a one bedroom. You knock down two walls and
• 38:18
  Speaker 6: it's a two bedroom, if that makes sense. And really
• 38:21
  Speaker 6: the key there is we can build these units in
• 38:23
  Speaker 6: half the time because one of the problems we have
• 38:26
  Speaker 6: is that people that need affordable housing. If you need
• 38:28
  Speaker 6: affordable housing, you need it pretty quickly, right, So three
• 38:32
  Speaker 6: years or five years is probably less important to you
• 38:34
  Speaker 6: than if we could deliver it in a year or so.
• 38:36
  Speaker 6: I think that's something we could do around the country.
• 38:38
  Speaker 6: So we're doing the first one in New York. We're
• 38:40
  Speaker 6: fortunate here to have some really really smart and talented
• 38:43
  Speaker 6: and innovative people because it was complicated. But it's something
• 38:46
  Speaker 6: that we are looking at doing elsewhere. We're actually working
• 38:49
  Speaker 6: on a deal in North Carolina right now to do it,
• 38:51
  Speaker 6: and I think there's some prospects in Tennessee, out in
• 38:53
  Speaker 6: Utah and a few other places.
• 38:55
  Speaker 5: It's like building housing in New York City.
• 38:58
  Speaker 3: It doesn't I got lots of images.
• 39:01
  Speaker 5: I think the movie has been made about a TV
• 39:03
  Speaker 5: shows what's it like building stuff in New York City?
• 39:05
  Speaker 6: You know? I think, look, let's not let's not pretend
• 39:10
  Speaker 6: it's not really hard to do anything in New York.
• 39:14
  Speaker 6: You know, I grew up here and I first started
• 39:15
  Speaker 6: building here, So I think it's easier to start in
• 39:17
  Speaker 6: the hardest place and go to the other places.
• 39:19
  Speaker 12: Right.
• 39:19
  Speaker 6: I think they say, if you make it here, you
• 39:21
  Speaker 6: can make it anywhere. I'd say, that's what it's like.
• 39:23
  Speaker 6: In housing. Look, it's really hard to build in New York.
• 39:26
  Speaker 6: It's hard. New Yorkers are spirited, have a lot of opinions,
• 39:29
  Speaker 6: you know. I say that if you have ten people,
• 39:31
  Speaker 6: you'll get fifteen opinions on how to do something. But
• 39:35
  Speaker 6: I think it's great. I do think we have the
• 39:36
  Speaker 6: most talented people working in government sector, in financing and
• 39:41
  Speaker 6: building in New York. I think we have the most
• 39:43
  Speaker 6: talented people in the country, which is great. It's hard,
• 39:46
  Speaker 6: it's challenging, but we're up for the challenge. I'm a
• 39:48
  Speaker 6: lifelong New Yorker, I'm a brooklyn Ie, So we're ready
• 39:51
  Speaker 6: for the challenge and you know, having a little bit
• 39:52
  Speaker 6: of a fight as part of it. That's kind of
• 39:54
  Speaker 6: what we do so well.
• 39:55
  Speaker 12: Not only are you a lifelong New Yorker, but your
• 39:58
  Speaker 12: family is so known New York family. Your father's Gridlock
• 40:02
  Speaker 12: Sam and so of course we've recently had some of
• 40:04
  Speaker 12: this controversy around congestion pricing. It was about to happen
• 40:07
  Speaker 12: and then at the ninth hour Governor Hogel struck it down.
• 40:10
  Speaker 12: Where recently I heard that maybe we're going to get
• 40:12
  Speaker 12: a more diluted version of it.
• 40:14
  Speaker 6: What are your thoughts there?
• 40:15
  Speaker 12: And if it doesn't go through, do the businesses of
• 40:17
  Speaker 12: New York have to pick up that extra revenue and
• 40:20
  Speaker 12: doesn't get passed down?
• 40:21
  Speaker 6: Of course it does, yes, so if my dad does
• 40:23
  Speaker 6: it was the first Deputy Transportation Commissioner, Coin Gridlock. So
• 40:27
  Speaker 6: for many years I've been known as Gridlock, Saym's Sun
• 40:30
  Speaker 6: and even sometimes nicknamed Gridlock myself. So traffic has been
• 40:35
  Speaker 6: a big part of our life. Yeah, look, there's no
• 40:37
  Speaker 6: question that it is clogging up our streets. We can't move.
• 40:41
  Speaker 6: Anyone who drove in Manhattan yesterday was probably stuck in
• 40:44
  Speaker 6: traffic room.
• 40:45
  Speaker 2: Oh my god. I mean, but that's unique. Yesterday, it
• 40:48
  Speaker 2: was a unique day.
• 40:49
  Speaker 6: But you know, in general, I think it's slowing down
• 40:52
  Speaker 6: the economy. I think something needs to be done. I think,
• 40:55
  Speaker 6: you know, congestion pricing. I'm a fan of it. I
• 40:58
  Speaker 6: know there's a lot of people that are not so
• 41:01
  Speaker 6: happy with it. But again, we need something to make
• 41:04
  Speaker 6: traffic work better. We need people to be able to
• 41:06
  Speaker 6: get to places and do business. So we've got to
• 41:08
  Speaker 6: do something because New York sometimes grinds to a halt
• 41:11
  Speaker 6: and what I mean.
• 41:12
  Speaker 5: It kind of goes to the pull and push between
• 41:15
  Speaker 5: mass transit, taking money from congestion pricing to fund what's
• 41:19
  Speaker 5: underground oftentimes, which I'm a big fan of the subway system.
• 41:22
  Speaker 5: It's the most efficient way to get around to the system.
• 41:25
  Speaker 5: I'll die on that hill against anybody. So it's so much,
• 41:30
  Speaker 5: it's so complex, I get. It's just simply a question
• 41:32
  Speaker 5: dollars and cents. Who's going to pay for.
• 41:35
  Speaker 6: Look, we need a lot of investment into our subway system.
• 41:37
  Speaker 6: A big subway guy myself. It's the fastest way to
• 41:40
  Speaker 6: get around if I can't walk. We need a big
• 41:42
  Speaker 6: investment into it. If you look at our subways versus
• 41:45
  Speaker 6: other first world countries, you know they're lacking. I think
• 41:48
  Speaker 6: our subway system was incredible. We need a lot more
• 41:50
  Speaker 6: money for it. And yeah, that's always the problem. Who's
• 41:53
  Speaker 6: going to pay for any of our infrastructure. It's with
• 41:55
  Speaker 6: our affordable housing, right, we need a lot more money.
• 41:58
  Speaker 6: You know, affordable housing is infrastructure as well. I think
• 42:00
  Speaker 6: that's a big point. It really is. It's it's like
• 42:02
  Speaker 6: schools and roads and bridges and fire departments. I mean,
• 42:06
  Speaker 6: I don't it's the life blood, you know, why do
• 42:08
  Speaker 6: we Why does society pay for those other things? It's
• 42:11
  Speaker 6: to make society work. And I think you know, affordable
• 42:13
  Speaker 6: housing is infrastructure. It's all related. You can't look at
• 42:16
  Speaker 6: it on its own.
• 42:18
  Speaker 2: Yeah, where's Sean Tucker when you need them? We have
• 42:22
  Speaker 2: someone that joins us for the radio show who lives
• 42:24
  Speaker 2: in Jersey and is like horrifically horrified by the congestion
• 42:27
  Speaker 2: pricing is because it's gonna cost him so much more
• 42:30
  Speaker 2: money to get to work.
• 42:31
  Speaker 6: Let's get them up. Let's get him on with my
• 42:33
  Speaker 6: dad Gridlock say, oh my god.
• 42:35
  Speaker 2: And he also comes in at like three am or
• 42:37
  Speaker 2: like two am in the morning, right, so we've got
• 42:39
  Speaker 2: gonna take a train at two am in the morning.
• 42:41
  Speaker 2: So anyway, he bemoans it quite a bit, all right, David,
• 42:43
  Speaker 2: thanks a lot, really appreciated, great stuff. David Schwartz joining
• 42:46
  Speaker 2: us co principal and CEO of the Slate Property Group
• 42:50
  Speaker 2: Abagail do a little. Also appreciate you coming in for
• 42:53
  Speaker 2: that as well.
• 42:54
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