Latest / Bloomberg Intelligence / GM Suspends Guidance, Carney Wins Canada Election

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GM Suspends Guidance, Carney Wins Canada Election · Bloomberg Intelligence

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  Speaker 1: or watch us live on YouTube.
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  Speaker 2: Let's get your earnings and go to GM. So, regardless
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  Speaker 2: of the quarter, they pulled their guidance and moved their
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  Speaker 2: earnings call to Thursday. They also froze their share buy back,
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  Speaker 2: all on issues surrounding tariffs. David Welsh's Bloomberg Detroit Brio
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  Speaker 2: Chief to recap some of those earnings, David, why did
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  Speaker 2: they push their call forty eight hours?
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  Speaker 3: What are they going to learn in those two days?
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  Speaker 4: As they were preparing last night for today's earnings call,
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  Speaker 4: there were reports coming out from US and others that
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  Speaker 4: the Trump administration would relax some of the auto tariffs,
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  Speaker 4: but there's no detail in there. There's some out there
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  Speaker 4: that they won't stack metals tariffs on top of auto tariff,
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  Speaker 4: for example, and there could be some relief on parts,
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  Speaker 4: but until automakers look at the details and see exactly
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  Speaker 4: what they're going to have to pay and what they
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  Speaker 4: won't be paying. It's hard for them to forecast earnings
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  Speaker 4: and sales and look, they have all kinds of ways
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  Speaker 4: to try to plan for tariffs and mitigate them and
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  Speaker 4: also model out the impact on the business, and they
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  Speaker 4: can't do any of that until they know exactly what
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  Speaker 4: it's going to say. So I think what GM did
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  Speaker 4: is they looked at this and they just said, hey,
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  Speaker 4: the guidance that they had given out did not count
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  Speaker 4: really for any kind of major tariff scheme here, despite
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  Speaker 4: the fact that Trump and campaign on it and said
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  Speaker 4: he was going to levy them. They gave guidance that
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  Speaker 4: had nothing to do with those tariffs. I think probably
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  Speaker 4: the tariffs are bigger than GM thought, much more aggressive
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  Speaker 4: than GM thought. So they've withdrawn the guidance and they
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  Speaker 4: had a six billion dollar share buyback. Two of it's
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  Speaker 4: already funded and will be done in the second quarter.
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  Speaker 4: The other four billions on hold again until they can
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  Speaker 4: understand what the tariffs will mean for their profits and
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  Speaker 4: their cash flow. So this is all about finding out
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  Speaker 4: what the details are, trying to model and plan the
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  Speaker 4: business going forward, and they just don't feel they can
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  Speaker 4: do it right now.
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  Speaker 5: What are GM and some of the other auto manufacturers
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  Speaker 5: doing now, David, in terms of are they making any
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  Speaker 5: changes to production, to sales incentives or is it just
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  Speaker 5: business as usual? As they try to figure out what's going.
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  Speaker 4: On, there are small changes here and there. It's really
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  Speaker 4: difficult to change production or change your parts. I mean,
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  Speaker 4: you can't do that overnight.
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  Speaker 2: You can't.
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  Speaker 4: It can take a year to do that, let alone.
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  Speaker 4: We've been at this for a couple of months. But
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  Speaker 4: the one thing General Motors has done so they have
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  Speaker 4: four pickup truck plants. It's their highest volume vehicle that
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  Speaker 4: the Chevrolet Silverado and gmcc Era. Two of the plants
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  Speaker 4: are in the US, ones in Canada, ones in Mexico.
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  Speaker 4: Of course, those vehicles coming from Canada Mexico are subject
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  Speaker 4: to tariffs at least on the parts, the nine US
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  Speaker 4: parts inside them, and that's pretty substantial. So what GM
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  Speaker 4: has done there is they've jacked up production at their
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  Speaker 4: four Wayne, Indiana plant to get more pickups out of there.
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  Speaker 4: They've just increased when they were already running three shifts,
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  Speaker 4: but they've increased the line speed, so they're working at
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  Speaker 4: faster to get more vehicles out. It'll add about fifty
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  Speaker 4: thousand trucks a year, and that's one way to offset
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  Speaker 4: tariff production of trucks and sell American made vehicles. And
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  Speaker 4: you're seeing stuff like that. You know, I think some
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  Speaker 4: companies may be slowing production of some vehicles that have
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  Speaker 4: tariffs on them because they either can't pass the cost
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  Speaker 4: on to consumers or it's no longer as profitable to
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  Speaker 4: sell so many of them. So you may be seeing
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  Speaker 4: some of that stuff, but a lot of it's been
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  Speaker 4: business as usual, but you're seeing some small moves like
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  Speaker 4: GM has made really.
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  Speaker 3: Interested to hear that that call on Thursday, David, Thanks
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  Speaker 3: so much.
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  Speaker 2: David Welsh, Bloomberg, Detroit via Chief Joining us there.
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  Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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  Speaker 2: All right, let's add to can Now you have Mark
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  Speaker 2: Carney's edge slips as Canada's election comes to a hectic end.
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  Speaker 2: He won yet by a very very very thin margin.
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  Speaker 2: David Gerr's correspondent for Bloomberg, host a Big Take podcast
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  Speaker 2: I should say to his party one, but walk us
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  Speaker 2: through the results.
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  Speaker 3: What we know.
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  Speaker 6: Yeah, an incredibly close race. So Mark Carney emerges here
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  Speaker 6: with the mandate, but it is not a majority mandate,
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  Speaker 6: which is what he and his party wanted. So what
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  Speaker 6: that means an effect, is in the coming days, he's
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  Speaker 6: going to have to figure out how he's going to
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  Speaker 6: work with other political parties in this country to pass
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  Speaker 6: his ambitious legislative agenda, so much of which centers on
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  Speaker 6: the economic predicament this country is in, and of course
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  Speaker 6: the trade this country's engaged with the US on. And
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  Speaker 6: so what Mark Carney said over the course of this
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  Speaker 6: campaign is he intends to win that trade war. He
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  Speaker 6: intends to go to Washington present himself in a meeting
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  Speaker 6: with President Trump as somebody who's not going to back
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  Speaker 6: down on Canada's position in that trade war. That's what
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  Speaker 6: we're going to be watching for here in the coming days.
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  Speaker 6: One effect that that meeting takes place again, it's something
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  Speaker 6: that he promised would happen in shorter We'll see if
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  Speaker 6: that's in days or weeks. But two things sort of
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  Speaker 6: up ended the course of this race over the last
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  Speaker 6: couple of months. The first of which, of course is
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  Speaker 6: Mark Arney becoming the leader of the Liberal Party. The
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  Speaker 6: second of which was Donald Trump returned into the White
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  Speaker 6: House in Washington and attacking this country really on two fronts,
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  Speaker 6: one on the side of trade in the economy, the other,
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  Speaker 6: of course, on the country's sovereignty. And Mark Karney has
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  Speaker 6: said from the get go here he never found those
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  Speaker 6: remarks from President Trump about Canada becoming the fifty first
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  Speaker 6: state as any kind of a joke. He took it seriously,
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  Speaker 6: and that is something he said over and over again,
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  Speaker 6: Alex and Paul is not negotiable.
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  Speaker 5: So talk to us about conservatism in Canada. Is it
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  Speaker 5: as vibrant as it is in the United States, as
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  Speaker 5: it is in some European countries like Germany. Is it
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  Speaker 5: to the point where anybody in Canada will be okay
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  Speaker 5: with being referred to as a fifty first state.
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  Speaker 6: That is definitely not the case. But you bring up
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  Speaker 6: a really interesting question that is where does the Conservative
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  Speaker 6: Party in this country go from here? So Peer PAULIV,
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  Speaker 6: the leader of the Conservative Party, who is in effect
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  Speaker 6: running against Mark Karney, actually lost his seat last night
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  Speaker 6: in a district just about thirty or forty five minutes
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  Speaker 6: from where I'm standing, So that kind of throws things
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  Speaker 6: up in the air in terms of will he continue
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  Speaker 6: to lead the Conservative Party. Is there going to be
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  Speaker 6: a situation in which he can kind of convince somebody
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  Speaker 6: else in the party who was elected to step down
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  Speaker 6: so that he could run in a by election for
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  Speaker 6: that seat. That's all up in the air here, and
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  Speaker 6: you ask just kind of about the breed of conservatism
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  Speaker 6: that we see here. Peer Polyev is somebody who has
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  Speaker 6: been compared in terms of political style to Donald Trump,
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  Speaker 6: the president of the United States. If there's make America
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  Speaker 6: great again in the United States, there's make Canada grade
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  Speaker 6: again here in Canada, as sort of headlined by Peer Polyev.
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  Speaker 6: So they had an amazing showing yesterday. By all kind
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  Speaker 6: of historical records, they did extremely well, if they still
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  Speaker 6: didn't best the Liberals, And that's really extraordinary again when
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  Speaker 6: you look at kind of the not so long ago history.
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  Speaker 6: Just a few months ago, before Mark Carney entered this race,
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  Speaker 6: the Conservatives had a twenty plus point lead over the
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  Speaker 6: Liberal Party and that was squandered here over the last
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  Speaker 6: few months. So there'll be a lot of soul searching.
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  Speaker 6: Paul and alex within the party about what went wrong
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  Speaker 6: and what the party can do differently going forward.
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  Speaker 2: So your's an insanely unfair question, considering that your reporter.
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  Speaker 2: So you know, I'll take this for the grand salt.
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  Speaker 2: But if President Trump had not come aggressively after Canada,
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  Speaker 2: either in terms of tariffs or more importantly making it
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  Speaker 2: a fifty first state, would this election have been different?
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  Speaker 2: Were there other issues that got kind of sidelined at
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  Speaker 2: this point?
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  Speaker 6: I think no doubt the fact that Donald Trump talked
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  Speaker 6: about Canada as much as he did and made those
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  Speaker 6: threats with something that Mark Karney, who is a career
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  Speaker 6: technocrat he headed the Bank of Canada and the Bank
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  Speaker 6: of England for a time, to serve as the chair
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  Speaker 6: of bloomberg Ingk's board and Brookfield Asset Management. This gave
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  Speaker 6: him an opening to present himself as kind of a
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  Speaker 6: foil to Donald Trump, to be a foil to that
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  Speaker 6: kind of breed of populism that we've seen in the
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  Speaker 6: president of the United States, and it really changed the polling,
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  Speaker 6: changed Canadian's engagement with this election. So yes, as that
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  Speaker 6: soul searching takes place among the Conservative Party, I think
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  Speaker 6: there's also an awareness of the fact that this is
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  Speaker 6: a very unique circumstance and the Canadians, as a result
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  Speaker 6: of what Donald Trump said and did, really kind of
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  Speaker 6: galvanized the electorate here in Canada in a way that
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  Speaker 6: they might not have three four five months ago.
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  Speaker 5: David, you've been up in Ottawa for a few days now,
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  Speaker 5: what's the feeling of the person on the street here,
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  Speaker 5: because as it relates to their relationship with the US,
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  Speaker 5: because I don't think I've ever come across anybody in
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  Speaker 5: my life that has anything negative to say about Canada.
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  Speaker 5: But you know, so, I'm not sure how how President's comments,
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  Speaker 5: how reflective they are of US folks, But how did
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  Speaker 5: the people in Canada feel?
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  Speaker 6: Just as Mark Carney didn't find the comments from the
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  Speaker 6: President about the fifty first state as a joke, nobody
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  Speaker 6: with whom I've spoken has found them funny as well,
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  Speaker 6: So they've taken it as a real serious threat also,
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  Speaker 6: And there's a sensus you talk to people here as
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  Speaker 6: I have over the last few days, of just kind
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  Speaker 6: of bewilderment why the circumstances are that the way they are.
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  Speaker 6: They listened to President Trump, they listened to that rhetoric,
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  Speaker 6: and they wonder sort of how they got here in
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  Speaker 6: light of what you're talking about, Paul, which is this
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  Speaker 6: is an allyship. This is a partnership that's existed for
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  Speaker 6: a couple centuries now, a very happy and important allyship
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  Speaker 6: of two nations.
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  Speaker 3: And to see it.
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  Speaker 6: Kind of changed in fundamentally in the way that it
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  Speaker 6: has been over the last few months has really astounded
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  Speaker 6: people here. And I'm going back to what the Prime
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  Speaker 6: Minister has said here. We're surprised by that rhetoric to
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  Speaker 6: begin with, but they've moved past that, as Mark Karney says,
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  Speaker 6: and now they have to kind of plot a new
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  Speaker 6: path forward that's going to take place in those negotiations
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  Speaker 6: in the White House, but also in just the way
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  Speaker 6: that the Liberal Party government here under Mark Karney is
• 9:13
  Speaker 6: looking at the world and kind of rethinking relationships with
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  Speaker 6: other countries. And we've seen that over his rather short
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  Speaker 6: prime ministership so far. He's made trips to Europe of
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  Speaker 6: course into England as well. He's trying to find new
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  Speaker 6: outlets for Canadian products and sort of new arrangements, new
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  Speaker 6: relationships for Canada engage in as the US kind of falls.
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  Speaker 3: To the side.
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  Speaker 2: All Right, David really great reporting. Thank you so very much.
• 9:33
  Speaker 2: David Gert. He's the host of Bloomberg a Big Take podcast,
• 9:36
  Speaker 2: also a correspondent for a Bloomberg News.
• 9:40
  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 Apple, Cocklay and Android
• 9:47
  Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever
• 9:51
  Speaker 1: you get your podcasts, or watch us live on YouTube.
• 9:54
  Speaker 2: So for the broader markets, the question is where are
• 9:56
  Speaker 2: those IPOs? Where's all the M and A. What happens
• 9:59
  Speaker 2: to private markets? We heard that report? Was it over
• 10:01
  Speaker 2: the weekend that Harvard wants to be offloading? Was a
• 10:04
  Speaker 2: Harvard or Yale, I'll fload their private equity slots because
• 10:07
  Speaker 2: they really need the liquidity. Joining us now is Ted Swimmer,
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  Speaker 2: head of Capital Markets and Advisory at Citizens Bank. Ted,
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  Speaker 2: what's your world like right now?
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  Speaker 5: Like?
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  Speaker 3: What are the concerns? What are the positives?
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  Speaker 7: Well, good morning Alex and good morning Paul. Things have
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  Speaker 7: certainly slowed over the last couple of months. From an
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  Speaker 7: M and A perspective. As we entered the year, we thought,
• 10:29
  Speaker 7: with lower regulation, potential upbeats and earnings, that we were
• 10:34
  Speaker 7: going to get off to a really good start in
• 10:36
  Speaker 7: M and A, and it started out that way. There
• 10:38
  Speaker 7: was a lot of really good activity going on. But
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  Speaker 7: since Liberation Day we've certainly seen things slow down a
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  Speaker 7: little bit. It's hard to find a buyer and a
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  Speaker 7: seller who can agree on what the next six months
• 10:48
  Speaker 7: of the year two years look like and therefore get
• 10:51
  Speaker 7: concerned about whether they should ink a deal or not.
• 10:55
  Speaker 7: After saying that it is still very orderly out there,
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  Speaker 7: we're not seeing We're still seeing a fair amount of
• 11:01
  Speaker 7: conversations going on. We're still we're still our pipelines a
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  Speaker 7: citizens have never been bigger. So there still feels like
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  Speaker 7: a lot of activity, a lot of discussions going on.
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  Speaker 7: It just feels like at the moment it's hard to
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  Speaker 7: get to a actual final contract on a deal. But
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  Speaker 7: it does not feel like the world the ground is crumbling.
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  Speaker 7: It still feels like there's activity. We saw a couple
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  Speaker 7: of deals get announced last week, so it's not the
• 11:28
  Speaker 7: end of the world, but it's still not as busy
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  Speaker 7: as we'd hoped it would be.
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  Speaker 3: Tedday, I know it's Citizens Bank.
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  Speaker 5: You guys Target, and a lot of your clients are
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  Speaker 5: middle size businesses and a lot of folks are saying,
• 11:38
  Speaker 5: you know, in the mid to smaller companies, they might
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  Speaker 5: feel the tariff impact more than the larger companies, the
• 11:43
  Speaker 5: Amazons of the world, the Ibms of the world. Are
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  Speaker 5: you hearing that from your clients that, boy, we're a
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  Speaker 5: little bit more. This is going to be an issue.
• 11:51
  Speaker 7: It's certainly industry specific as we talk about it. I mean,
• 11:54
  Speaker 7: we're in the data center space and they're not all
• 11:57
  Speaker 7: that concerned about tariffs, but certainly those who work with China,
• 12:01
  Speaker 7: we have customers who have drawn on their lines to
• 12:05
  Speaker 7: try to build up inventory pre pre teriff effect. So
• 12:09
  Speaker 7: we've seen some higher loan utilization as a result of that.
• 12:13
  Speaker 7: So yes, we're seeing and feeling some of that, but
• 12:16
  Speaker 7: truly very industry specific on who's having that impact on
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  Speaker 7: who isn't.
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  Speaker 2: So what do you make of where the private markets
• 12:22
  Speaker 2: are going to go? I just was mentioning how Yale
• 12:24
  Speaker 2: wants to offload some of their private equity stake in
• 12:26
  Speaker 2: order to get some funding and get liquidity. What are
• 12:28
  Speaker 2: you hearing on that end?
• 12:30
  Speaker 7: This is a good market for private for private capital,
• 12:32
  Speaker 7: especially on the on the loan side, with the banks
• 12:36
  Speaker 7: backing up a little bit on being able to give
• 12:38
  Speaker 7: certainty on underwriting positions. We're seeing, uh, we're seeing some
• 12:42
  Speaker 7: private capital reverse trends that we saw in the first
• 12:44
  Speaker 7: quarter when the syndicated market was going more banks. Now
• 12:47
  Speaker 7: private capital has a little bit more certainty on their deals,
• 12:51
  Speaker 7: So we're seeing that that impacts the leverage loan market.
• 12:55
  Speaker 7: What on the offset, it gives banks a lot of
• 12:58
  Speaker 7: a lot of ability to len to the direct lenders,
• 13:01
  Speaker 7: lend to the private capital, do equity issuances, do bond
• 13:04
  Speaker 7: issuances as those markets come back, So it works in
• 13:07
  Speaker 7: both ways. But we're seeing private capital have a really
• 13:10
  Speaker 7: good opportunity to put some loans to work on deals
• 13:13
  Speaker 7: that are more difficult time getting done the syndicated market
• 13:17
  Speaker 7: right now. So there's some good and some bad, I
• 13:18
  Speaker 7: think with everything with what's going on in the market
• 13:21
  Speaker 7: right now.
• 13:21
  Speaker 5: You know, for my Wall Street days, I remember being
• 13:24
  Speaker 5: taught early early on that MNY activity in large part
• 13:29
  Speaker 5: is based upon confidence and certainty. The more a c
• 13:33
  Speaker 5: suite and a board feels about their business, more confident
• 13:36
  Speaker 5: they feel about the trends in the industry, more aggressive
• 13:40
  Speaker 5: they can be in terms of making a big capital
• 13:41
  Speaker 5: commitment or making a big m and a trade that
• 13:45
  Speaker 5: doesn't seem like the environment we're in today.
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  Speaker 7: Again, it's industry specific, so I would agree with you, Paul.
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  Speaker 7: In certain areas where tariffs or policy may have an impact,
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  Speaker 7: it seems like the the M and A processes are
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  Speaker 7: being delayed a little bit till there's more certainty around
• 14:04
  Speaker 7: what's going on. In other places, we feel very good
• 14:07
  Speaker 7: about people need to transact. What's different about what's going
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  Speaker 7: on here than we've seen in a lot of other
• 14:13
  Speaker 7: markets is the loan market, the bomb market are acting orderly.
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  Speaker 7: There's still there. We're not seeing a time where there's
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  Speaker 7: not execution of deals. We've seen people go to the
• 14:22
  Speaker 7: bomb market today, we're seeing them go, we saw them
• 14:24
  Speaker 7: go last week. So that we're not in a frozen
• 14:27
  Speaker 7: period of time, and so if you're in an industry
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  Speaker 7: where it's not going to be impacted by terraffs, we're
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  Speaker 7: still seeing not robust M and A flow by any
• 14:35
  Speaker 7: stretch of the imagination, but we're certainly not seeing us
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  Speaker 7: shut down of the market altogether.
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  Speaker 2: What do you think brings back the animal spirits? Like
• 14:42
  Speaker 2: what specifically what we need to see And I know
• 14:45
  Speaker 2: everyone's going to say clarity on tariffs but in theory,
• 14:47
  Speaker 2: like what is that that your clients are like, press.
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  Speaker 3: The go button.
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  Speaker 7: I won't say what you just said not to say,
• 14:54
  Speaker 7: which is clarity.
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  Speaker 3: Everyone's like that, but something more more.
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  Speaker 7: Pots I think as more of this goes on, look
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  Speaker 7: there there's still a lot of money sitting on the sidelines,
• 15:03
  Speaker 7: looking to make acquisitions, looking to expand businesses. I think
• 15:07
  Speaker 7: corporates have a decent I mean, we saw Global Payments
• 15:10
  Speaker 7: last week make a very nice acquisition, and so we're
• 15:14
  Speaker 7: seeing some of that still go on in today's market.
• 15:18
  Speaker 7: I think we will continue to see those non tariff
• 15:22
  Speaker 7: related businesses continue to make acquisitions. The headlines our M
• 15:26
  Speaker 7: and A is down, and that is factually correct, but
• 15:29
  Speaker 7: it is still we are still seeing and feeling conversations
• 15:33
  Speaker 7: going on in a lot of different industries, which I
• 15:37
  Speaker 7: don't think it's going to take a lot to bring
• 15:38
  Speaker 7: those deals to completion and continue to build some momentum
• 15:43
  Speaker 7: into the M and A markets. I think they are
• 15:44
  Speaker 7: going to be certain industries we won't see things happen
• 15:47
  Speaker 7: for six months to a year or maybe longer, but
• 15:50
  Speaker 7: I don't know that that's going to impact the whole
• 15:54
  Speaker 7: M and A market like it did in during COVID,
• 15:56
  Speaker 7: or it did in twenty twenty three right after the
• 15:58
  Speaker 7: banks filed, or it did out in the Great Recession.
• 16:01
  Speaker 7: I think we're in a different market and we're feeling
• 16:03
  Speaker 7: different things right now. Again, we've seen transactions getting get
• 16:08
  Speaker 7: announced even last week during all the noise that was
• 16:11
  Speaker 7: going on about.
• 16:12
  Speaker 5: The IPO market. Let's look at one stub hub. You
• 16:14
  Speaker 5: guys are named a co manager on that deal. That
• 16:16
  Speaker 5: seems like a deal that would walk out the door.
• 16:18
  Speaker 5: Give us talk to us about stuff up as just
• 16:20
  Speaker 5: emblematic of what's happening in the IO.
• 16:22
  Speaker 7: I think you need in the IPO market to really
• 16:24
  Speaker 7: take off. That's where you really need confidence and you
• 16:27
  Speaker 7: need consistency. There are a couple of insurance deals that
• 16:30
  Speaker 7: we hope to get announced shortly that we think would
• 16:33
  Speaker 7: be another area that we could see the I P
• 16:36
  Speaker 7: O markets start to pick up. But it's still very
• 16:39
  Speaker 7: tough to test the markets right now with the fear
• 16:41
  Speaker 7: that you know, something in the middle of your your
• 16:44
  Speaker 7: your issue, your issuance day, would would hurt creater the stock.
• 16:47
  Speaker 7: So there's a lot there on the siland is there
• 16:50
  Speaker 7: a lot there ready to go? Stub Hub is a
• 16:52
  Speaker 7: good example of something that may go could go. I
• 16:55
  Speaker 7: don't have no even.
• 16:57
  Speaker 3: Maybe going could be going for how long.
• 16:59
  Speaker 7: Now, But there are industries that are not going to
• 17:05
  Speaker 7: be impacted like this that I think you will see
• 17:07
  Speaker 7: as soon as there's a little more stability in the market,
• 17:10
  Speaker 7: tests the markets and bring the markets out all.
• 17:12
  Speaker 3: Right, Ted, really appreciate it. Thank you for coming in.
• 17:14
  Speaker 2: Also great to see you, Ted Swimmer, head of Capital
• 17:16
  Speaker 2: Markets and Advisory at Citizens Bank, joining us in capital markets,
• 17:20
  Speaker 2: IPO private, all the good stuff.
• 17:24
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
• 17:28
  Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
• 17:31
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• 17:34
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• 17:37
  Speaker 5: If you listen to this programming, know Alex and I
• 17:39
  Speaker 5: really like to stay on top of the commercial real
• 17:41
  Speaker 5: estate business, certainly one of the businesses that was impacted
• 17:44
  Speaker 5: dramatically by COVID and in denounce long long recovery. Here
• 17:49
  Speaker 5: now in the midst of higher interest rates. Today we're
• 17:51
  Speaker 5: going to check out with Ben Miller, CEO of fund Rise,
• 17:54
  Speaker 5: joining us Washington, DC via zoom. Ben, I think when
• 17:58
  Speaker 5: you look at the stock market, the bond mark, at
• 18:00
  Speaker 5: the commodity markets.
• 18:01
  Speaker 1: You know, the.
• 18:02
  Speaker 5: Common word is probably just uncertainty out there, volatility out there.
• 18:07
  Speaker 5: How about the commercial real estate market? What's the last
• 18:09
  Speaker 5: three months been in that space?
• 18:12
  Speaker 8: The irony for real estate is bad news is good
• 18:15
  Speaker 8: news because interest rates have been higher for longer, for
• 18:18
  Speaker 8: the last few years, that's been weighing on real estate,
• 18:21
  Speaker 8: especially commercial real estate, and so anything that brings down
• 18:25
  Speaker 8: rates is going to be a boon for commercial real
• 18:27
  Speaker 8: estate owners. And so uncertainty, tariffs, recession, those are all great,
• 18:33
  Speaker 8: great words for real estate industry.
• 18:35
  Speaker 5: So where so that driven primarily by lower rates? I
• 18:39
  Speaker 5: get that, Where do you think the best opportunities are
• 18:42
  Speaker 5: here in commercial real estate?
• 18:45
  Speaker 8: Well, so, the functional effect of tariffs is that it
• 18:51
  Speaker 8: makes existing assets worth more. So my analogy is always
• 18:54
  Speaker 8: if I had one thousand cars on my lot, If
• 18:57
  Speaker 8: I was a dealer car dealer, and I had a
• 18:58
  Speaker 8: thousand cars on my lot, put a fifty percent tariffs
• 19:01
  Speaker 8: on all new cars, right, all those existing cars, all
• 19:04
  Speaker 8: the car inventory on my lots across the country be
• 19:07
  Speaker 8: worth more because the price just went up. And so
• 19:09
  Speaker 8: all the existing inventory of apartments and other assets are
• 19:13
  Speaker 8: going to be worth a lot more with tariffs, and
• 19:15
  Speaker 8: so it's a tax on flow and as a gift
• 19:19
  Speaker 8: to stock, if you know what I mean.
• 19:21
  Speaker 3: But what about the volatility? So rates are one thing,
• 19:25
  Speaker 3: stock is another.
• 19:25
  Speaker 2: But the volatility and uncertainty, how does that affect sentiment
• 19:29
  Speaker 2: in your market?
• 19:30
  Speaker 7: Yeah?
• 19:31
  Speaker 8: I mean real estate is a much slower moving asset.
• 19:33
  Speaker 8: It's it doesn't trade very often. People don't reorder their
• 19:37
  Speaker 8: leases very often, so it's much more It has much
• 19:43
  Speaker 8: more installation from volatility. I mean, because you can't really
• 19:47
  Speaker 8: trade it. That volatility doesn't matter as much as it
• 19:50
  Speaker 8: does for stocks or bonds.
• 19:53
  Speaker 5: But if the uncertainty, not necessarily the terifts per se,
• 19:57
  Speaker 5: but at the uncertainty push it or slows this economy ramatically,
• 20:00
  Speaker 5: maybe even pushes us into a recession.
• 20:02
  Speaker 8: That can't be good for real estate. Well, it depends
• 20:05
  Speaker 8: on the kind of real estate you mean. So office,
• 20:08
  Speaker 8: which has already been hit by work from home, is
• 20:11
  Speaker 8: very pro cyclical, so people only expand office space and
• 20:15
  Speaker 8: new leases when the economy's hot. The economy's cold, office
• 20:18
  Speaker 8: is going to get hit again. I think office could
• 20:20
  Speaker 8: go from bad to worse. But consumer staples like food groceries. Housing,
• 20:26
  Speaker 8: you've got to live somewhere, you gotta eat something. Those
• 20:28
  Speaker 8: actually end up doing pretty well in a recession, and
• 20:31
  Speaker 8: so multi family housing I think will really outperform. And
• 20:35
  Speaker 8: low rates rates matter a lot more than the economy,
• 20:39
  Speaker 8: and so if rates come down like I think they will,
• 20:41
  Speaker 8: it's going to be a win for most commercial estate.
• 20:45
  Speaker 2: Yeah, and then in terms of construction and new building
• 20:48
  Speaker 2: and materials like either that's going to get a lot
• 20:50
  Speaker 2: more expensive or as we're talking about, that's going to
• 20:52
  Speaker 2: get a lot tighter, which then if you own already
• 20:55
  Speaker 2: those buildings, that's better.
• 20:56
  Speaker 8: Right.
• 20:56
  Speaker 3: What are you seeing right now currently?
• 20:59
  Speaker 4: Right?
• 20:59
  Speaker 8: I mean, there was a absolute housing boom in twenty
• 21:03
  Speaker 8: twenty one twenty twenty two there because rates were so
• 21:06
  Speaker 8: low and demand was so high, and so we just
• 21:09
  Speaker 8: are working on our way through I think the largest
• 21:12
  Speaker 8: supply of new housing in decades. So that that hit
• 21:16
  Speaker 8: the market last year, it'll be sort of done by
• 21:20
  Speaker 8: the end of this year, and then we'll kind of
• 21:21
  Speaker 8: fall off a cliff and we'll end up with no
• 21:23
  Speaker 8: new construction, high rates, expensive construction costs, tariffs, uncertainty. Bank
• 21:30
  Speaker 8: lending is still pretty tight. I think we'll see sort
• 21:33
  Speaker 8: of the end of new construction for maybe this decade.
• 21:36
  Speaker 8: And that's again that's great for owners and maybe bad
• 21:40
  Speaker 8: for renters.
• 21:41
  Speaker 5: Ben talk to us about Florida. It's been a market
• 21:44
  Speaker 5: that really just goes up and down. It's had such
• 21:46
  Speaker 5: a multi year growth spurt coming out of the pandemic.
• 21:50
  Speaker 5: What's the state of the Florida I don't know the
• 21:52
  Speaker 5: apartment market any of that kind of stuff.
• 21:55
  Speaker 8: Yeah, I mean Florida I got hit by a climate
• 21:57
  Speaker 8: change too. I mean it was a really big hit
• 22:00
  Speaker 8: on insurance costs. It caused a lot of owners to
• 22:04
  Speaker 8: have second thoughts. The short term effect of a lot
• 22:09
  Speaker 8: of new supply in the market and insurance costs hit
• 22:11
  Speaker 8: Texas to Texas had a lot of challenges. So those
• 22:13
  Speaker 8: two markets have sort of the most growth and had
• 22:16
  Speaker 8: the most negatives. And in the short term, I think
• 22:19
  Speaker 8: Florida really, you know, doesn't doesn't look as good as
• 22:23
  Speaker 8: some of the other parts of the of the Sun Belt,
• 22:24
  Speaker 8: like you know, North Carolina, South Carolina, Georgia. But in
• 22:29
  Speaker 8: the more medium term, Florida and Texas just gets so
• 22:34
  Speaker 8: much more population growth in any other state. I mean,
• 22:36
  Speaker 8: some between the two of them that get over a
• 22:38
  Speaker 8: million people a year moving there, and over that like
• 22:41
  Speaker 8: three to five year period between migration and population growth.
• 22:44
  Speaker 8: I think that Florida and Texas will be just fine,
• 22:47
  Speaker 8: But in the short term is not that pretty all right.
• 22:52
  Speaker 2: Well, we appreciate the update. Let's keep talking and see
• 22:55
  Speaker 2: kind of how this all evolves. Ben Miller, co founder
• 22:57
  Speaker 2: and CEO at fund Rise, on the state of commercial illstate.
• 23:00
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