Latest / Bloomberg Intelligence / Jay Powell, January 6, Real Estate, And Markets (Podcast)

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Jay Powell, January 6, Real Estate, And Markets (Podcast) · Bloomberg Intelligence

• 0:00
  Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
• 0:04
  Speaker 1: my co host Matt Miller. Every business day we bring
• 0:06
  Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
• 0:11
  Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
• 0:15
  Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
• 0:18
  Speaker 1: at Bloomberg dot com slash podcast. Look at a little
• 0:22
  Speaker 1: bit of a review of kind of what we just
• 0:24
  Speaker 1: heard from some of the world's central bankers here again,
• 0:27
  Speaker 1: inflation front and center at their ECB form in Central Portugal.
• 0:32
  Speaker 1: When welcome Steve Matthews, US economy reporter for Bloomberg News. Steve,
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  Speaker 1: thanks so much for joining us here. It seems to
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  Speaker 1: be the theme, obviously for central bankers around the world
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  Speaker 1: to try to rain in inflation, which is a global story,
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  Speaker 1: while not pushing the world's economy into a recession. That's
• 0:50
  Speaker 1: certainly been h the balancing after fit Chairman j Pow,
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  Speaker 1: What did you take away? Yeah, I thought it was
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  Speaker 1: really an interesting discussion. There was a discussion and about
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  Speaker 1: you know what the central banks got wrong, you know
• 1:03
  Speaker 1: how they might get things better in the future. Uh
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  Speaker 1: poal was very clear that inflation is the priority. He said,
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  Speaker 1: you know, getting it down will cause some pain, but
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  Speaker 1: the pain of not getting inflation down would be worse. UH.
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  Speaker 1: He's asked about comments by Paul Krugman, the Noble Prize
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  Speaker 1: winning economists and your Times columnists, UH that you know,
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  Speaker 1: the biggest risk to the economy would be the FED
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  Speaker 1: overdoing it, and certainly a lot of the folks predicting
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  Speaker 1: a recession right now of you know, fear that the
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  Speaker 1: FED is going to do too much, you know, move
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  Speaker 1: too too far, too fast. And he said, no, he
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  Speaker 1: disagreed with that the bigger risk is that they don't
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  Speaker 1: do it enough, and that that they don't get inflation
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  Speaker 1: under control, so that you know, that's clearly where their
• 1:55
  Speaker 1: their head is. He He also endorsed market expectations for eight.
• 2:00
  Speaker 1: He cited the summary of economic projections of a couple
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  Speaker 1: of weeks ago which have the FMC raising rights to
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  Speaker 1: three and a half percent this year, around four percent
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  Speaker 1: next year. So you know, it was definitely a hawkish
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  Speaker 1: UH panel and interestingly there was not any disagreement with
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  Speaker 1: the other central bankers uh UM and from from the
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  Speaker 1: Bank of England e c B. Everybody is viewing inflation
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  Speaker 1: the same way as kind of a top priority. And
• 2:34
  Speaker 1: Steve Matt Miller's not here today but not to work
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  Speaker 1: because we have pretty GROUPDA in our studio. But uh
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  Speaker 1: and pretty thanks so much for joining us. But you know, Steve,
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  Speaker 1: it's interesting here. It seems like, you know, he's FED
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  Speaker 1: chairman pals kind of falling or you know, calling out
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  Speaker 1: that the U S consumers in in good shape. Here
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  Speaker 1: it kind of suggesting to me that they're in good
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  Speaker 1: enough shape that they can endure the FED being maybe
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  Speaker 1: as aggressive as they need to be. Do you think
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  Speaker 1: that's a message he's trying to get across. Yeah, I
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  Speaker 1: do think that. You know, there's been lots of concern
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  Speaker 1: about you know, what is the shape of the consumer.
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  Speaker 1: He's saying, Uh, they're still pent up savings out there,
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  Speaker 1: the labor department, the labor market is extremely strong. Uh.
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  Speaker 1: You know that the idea is that growth will come
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  Speaker 1: down from the really overheated growth of the last year
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  Speaker 1: to something more sustainable. And he's sounded not entirely confident
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  Speaker 1: that they can achieve a soft landing, but that's definitely
• 3:36
  Speaker 1: the goal. And he says there's still an avenue out there.
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  Speaker 1: He said it's made more difficult, more challenging by the
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  Speaker 1: events of the last several um several um months with
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  Speaker 1: the war in Ukraine, but it's still very feasible, Steve.
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  Speaker 1: I want to circle back to what you said earlier
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  Speaker 1: about just how hawkish some of these central bankers are.
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  Speaker 1: I think the question in the markets is just how
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  Speaker 1: hawk can they go and how much further do they
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  Speaker 1: have to go in this And I think I want
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  Speaker 1: to bring my little chart of the day here, if
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  Speaker 1: you don't mind, Paul Um, which was essentially the two
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  Speaker 1: year yield. We're looking at the front end of the
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  Speaker 1: curve that's still in negative territory when you're looking at
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  Speaker 1: real rates essentially inflation becoming so strong, whereas the rest
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  Speaker 1: of the yield curve is in positive territory. This is
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  Speaker 1: a part of the curve Cheer Howell has actually brought
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  Speaker 1: up before in his in his June press conference. But
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  Speaker 1: I have to ask, is that perhaps the signal that
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  Speaker 1: they're waiting for. Cheer Powell was asked specifically about the
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  Speaker 1: yield curve and he said, we're not worried about the
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  Speaker 1: yield curve. That's not something we're focused on. He was
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  Speaker 1: very dismissive about that that is not gonna be the
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  Speaker 1: thing that really moves him. It was interesting, uh, Madame
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  Speaker 1: Legarde said that Christine Legarde said that monetary policy is
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  Speaker 1: more about art than science, and she did not get
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  Speaker 1: any pushback about that. But the point is that all
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  Speaker 1: of them see monetary policy as somewhat discretionary. So we
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  Speaker 1: don't really know exactly what the metric is that's going
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  Speaker 1: to change things. You know, if you get a bad
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  Speaker 1: I s M number, if you get a bad employment number,
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  Speaker 1: is that going to change things or is it all
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  Speaker 1: about inflation. We really don't have a good sense of
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  Speaker 1: the exact reaction function, and in fact, from what Leguard
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  Speaker 1: was saying, they may not know. There's just some art
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  Speaker 1: to it. Steve, how surprised were you that FED chairman
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  Speaker 1: Chal Fed chairman Pal kind of said, hey, we blew
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  Speaker 1: this one. We we kind of missed the whole inflation thing,
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  Speaker 1: the duration, the supply side impacts, all that kind of stuff,
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  Speaker 1: And he was pretty clear there today he was clear,
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  Speaker 1: although at the same time he pointed out that if
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  Speaker 1: you went back a year ago to the forecast of
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  Speaker 1: all of the professional economists, all of the street economists,
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  Speaker 1: they all got it wrong too. So it's like he
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  Speaker 1: was making the point that yes, we got it wrong,
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  Speaker 1: but we weren't alone and getting it wrong, and and
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  Speaker 1: he pay to get it right. That that's certainly true.
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  Speaker 1: We pay him, taxpayers pay him. Uh. He made the
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  Speaker 1: point that there have been several supply issues, the disruptions
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  Speaker 1: that have happened, just one on top of the other.
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  Speaker 1: You had the COVID disruptions, which they thought would ease
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  Speaker 1: quickly obviously still haven't eased. You had, on top of that,
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  Speaker 1: labor market supply disruption with people not necessarily coming back
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  Speaker 1: into the labor market, and then you have the ward
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  Speaker 1: and they're all kind of piling on top of each other.
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  Speaker 1: And the one note of optimism that that he pointed
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  Speaker 1: out was all of these things have kind of come
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  Speaker 1: and disrupted supply one after the other, and threatened to
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  Speaker 1: do something with the inflation expectations. He said, there's a possibility,
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  Speaker 1: you know, not necessarily their base case, but a possibility
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  Speaker 1: that this unwinds faster than expected, so you could have
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  Speaker 1: improvement in inflation faster than they expect. Alright, Steve, good stuff.
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  Speaker 1: We always appreciate getting your perspective. St. Matthews, US economy
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  Speaker 1: reporter for UH Bloomberg News. He's based on in Atlanta. Alright,
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  Speaker 1: so we had an historic day on Capitol Hill in
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  Speaker 1: terms of the January six UH testimony. A lot of
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  Speaker 1: folks I follow on Twitter, a lot of the journalists
• 7:31
  Speaker 1: I follow on Twitter. We're trying to put it in context.
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  Speaker 1: Sing it was probably some of the most explosive testimony
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  Speaker 1: ever on Capitol Hill, and including uh, the Watergate testimony
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  Speaker 1: as well. So I need we need some perspective, and
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  Speaker 1: for that return to Tim O'Brien, executive editor for Bloomberger Opinion.
• 7:47
  Speaker 1: He's also an author who wrote Trump Nation, The Art
• 7:50
  Speaker 1: of Being the Donald. He did that in two thousand five.
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  Speaker 1: It's the dinnert definitive biography of Donald Trump. So, uh,
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  Speaker 1: Mr Brian has lots of perspective. Here's a it's to
• 8:00
  Speaker 1: all things President Trump. Tim, what did you make of
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  Speaker 1: the testimony yesterday? And then I love to get your opinion?
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  Speaker 1: Does it even matter? I don't know that it will,
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  Speaker 1: So I think it was important testimony. My perspective haul
• 8:15
  Speaker 1: is that it's important testimony from a criminal exposure standpoint,
• 8:20
  Speaker 1: and whether or not the justice Department is going to
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  Speaker 1: prosecute Donald Trump. I'm not sure these hearings as a
• 8:27
  Speaker 1: whole are going to change firmly committed Democrats and firmly
• 8:33
  Speaker 1: committed Republicans in their view of Trump or their political
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  Speaker 1: allegiance as um. I do think they will have an
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  Speaker 1: impact on that middle swath of independence who are going
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  Speaker 1: to swing votes in swing states, so it matters there.
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  Speaker 1: I think overall, I think the purposes of these hearings
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  Speaker 1: are laid down a fact pattern to convince the Justice
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  Speaker 1: Department that Donald Trump and a number of his advisors
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  Speaker 1: orchestrated a coup, a failed coup, and they have criminal
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  Speaker 1: liability because of that. And I think yesterday's hearing really
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  Speaker 1: established two crucial things. Trump knew that there was going
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  Speaker 1: to be violence on January six, and he went ahead
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  Speaker 1: with the rally anyway. And then once the rally began
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  Speaker 1: and there was evidence that people were arriving at the
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  Speaker 1: rally armed, Trump tried to uh convince the Secret Service
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  Speaker 1: to allow them to continue to enter the ellipse while
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  Speaker 1: they were armed. And then on the top of it,
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  Speaker 1: wanted to join them at the Capital to try to
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  Speaker 1: disrupt the Capital building, to disrupt the certification of the
• 9:36
  Speaker 1: electoral account. That's pretty damning evidence from a from a
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  Speaker 1: criminal ability standpoint. Can you explain to her audience is
• 9:44
  Speaker 1: a little bit about the significance of it going back
• 9:47
  Speaker 1: into an emergency meeting. This is a witness, Cassidy Hutchinson,
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  Speaker 1: who had already given a lot of testimony, she already
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  Speaker 1: been deposed. Why now in terms of these new revelations,
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  Speaker 1: That's such a good question, Critty. I. I don't you
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  Speaker 1: know they had interviewed Cassie Hutchinson previously, They had a
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  Speaker 1: lot of videotape of her testimony. They have shown snippets
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  Speaker 1: of that in the previous four hearings. Um. I you know,
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  Speaker 1: it's been reported that there were security concerns around her
• 10:19
  Speaker 1: safety or possibly the hearing if it was delayed any longer,
• 10:22
  Speaker 1: and that's why they decided to go ahead and have
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  Speaker 1: it now. Um. She switched attorneys. Her earlier attorney I
• 10:30
  Speaker 1: think was was advising her to not cooperate with the committee.
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  Speaker 1: She's clearly someone who believes she saw things that troubled
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  Speaker 1: her that needed to be made public and went forward
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  Speaker 1: with it. I think not only you know, sort of
• 10:44
  Speaker 1: under the threat to her own reputation, but possibly to
• 10:46
  Speaker 1: her personal safety. I think that's why they had an
• 10:48
  Speaker 1: emergency hearing. But I don't know for sure tempted extent
• 10:52
  Speaker 1: that former President trump criminal liability may have increased yesterday
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  Speaker 1: or as a result of yesterday's testimony, do you believe
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  Speaker 1: the Department of Justice, you know, has a political will
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  Speaker 1: to pursue anything at this point? I'm just not sure
• 11:07
  Speaker 1: what the you know, environment is like in Washington these days. Well,
• 11:12
  Speaker 1: I think it was it has been hisstory Paul as
• 11:15
  Speaker 1: to whether or not the d o J would go
• 11:17
  Speaker 1: up the food chain. They you know, they've they've esecuted
• 11:20
  Speaker 1: hundreds of protesters rioters who were at at the event
• 11:25
  Speaker 1: Um and there was a question where would they go
• 11:26
  Speaker 1: ahead and start to prosecute people who orchestrated that event?
• 11:31
  Speaker 1: And and now we see I think, you know, they're
• 11:33
  Speaker 1: they're clearly targeting John Eastman, for example, the advisor trup's
• 11:37
  Speaker 1: lawyer who encouraged him to tell my Pense not to
• 11:40
  Speaker 1: decide the election. They appear to be moving up the
• 11:43
  Speaker 1: food chain. But I think um Garland, I think doesn't
• 11:47
  Speaker 1: wanted to be a politicized investigation. I think he's going
• 11:49
  Speaker 1: to try to present this on the merits, and I
• 11:52
  Speaker 1: think he's being deliberate about that if if, in fact,
• 11:55
  Speaker 1: they keep going higher and higher on the food chain,
• 11:57
  Speaker 1: and it's not clear to me yet whether or not
• 11:59
  Speaker 1: they are. Can we talk about potential campaign for President Trump?
• 12:05
  Speaker 1: What are the implications here? Just walk us through it
• 12:09
  Speaker 1: for someone someone like me who's not familiar with the
• 12:11
  Speaker 1: politics of this all well critty, you know, famously, when
• 12:14
  Speaker 1: Trump was running in two s t he said I
• 12:17
  Speaker 1: could shoot somebody on Fifth Avenue and nobody would care.
• 12:19
  Speaker 1: And I think he's correct about that. There's I think
• 12:22
  Speaker 1: there's a you know, of the of the Republican base
• 12:28
  Speaker 1: that is firmly Trump and very maga and they don't
• 12:30
  Speaker 1: care what he does. Um but we've seen, you know,
• 12:34
  Speaker 1: in races this year in Georgia, for example, his leverage
• 12:38
  Speaker 1: isn't absolute, and more moderate Republican candidates have successfully run
• 12:44
  Speaker 1: and one and have have beaten Trump backed candidates and
• 12:48
  Speaker 1: other venues Trump backed candidates have one. I don't. I
• 12:51
  Speaker 1: think I think at the end of the day, in
• 12:55
  Speaker 1: terms of one, it will depend on whether or not
• 12:58
  Speaker 1: Trump decides to run. And even he doesn't run, I
• 13:01
  Speaker 1: think there are Trump like candidates waiting in the wings
• 13:04
  Speaker 1: to assume his mantle. I would point to people like
• 13:06
  Speaker 1: Granda Sciantist, the governor of Florida, or Josh Holly, Senator
• 13:11
  Speaker 1: from Missouri. So I don't think Trump is um is
• 13:13
  Speaker 1: going to go away as a political force. It just
• 13:16
  Speaker 1: may not be in the in the person of Donald Trump. So, Tim,
• 13:19
  Speaker 1: you know for President Trump as well or better than
• 13:22
  Speaker 1: any journalist out there. Resulting from again your work with
• 13:27
  Speaker 1: the former president on your book, what do you think
• 13:30
  Speaker 1: he really wants to do at this point of his life?
• 13:33
  Speaker 1: Do you think he wants to get back into the
• 13:36
  Speaker 1: cauldron of politics or his life at Mara Lago pretty
• 13:39
  Speaker 1: darn good at the moment. You know, he loves the golf,
• 13:42
  Speaker 1: he loves entertain himself. He's never particularly serious about policy
• 13:47
  Speaker 1: issues or really focusing on programmatic things, and the presidency
• 13:52
  Speaker 1: requires I think he was surprised as anyone that he won.
• 13:56
  Speaker 1: I don't think he's got a big appetite to get
• 13:58
  Speaker 1: back into it again. On the other hand, one of
• 14:01
  Speaker 1: the biggest things that drives him as being at the
• 14:03
  Speaker 1: center of the center of attention and and in the
• 14:06
  Speaker 1: media spotlight. And there's no spotlight like the presidency. I
• 14:10
  Speaker 1: think it's gonna be hard for him to stay away
• 14:12
  Speaker 1: from that because he's almost addicted to attention. Very very interesting.
• 14:16
  Speaker 1: All right, Tim, thanks so much, as always forgive us
• 14:19
  Speaker 1: a little bit of your time. Tom A Brian, executive
• 14:21
  Speaker 1: editor for Bloomberg Opinion. He's got a column out today
• 14:23
  Speaker 1: just kind of some of his takeaways from what he
• 14:26
  Speaker 1: observed yesterday from the testimony on Capitol Hill. And I
• 14:30
  Speaker 1: think the context of his book again Trump Nation, the
• 14:33
  Speaker 1: art of being the Donald uh and then being in
• 14:35
  Speaker 1: a very lengthy legal situation as a resulting from that book, uh,
• 14:41
  Speaker 1: with the former president, gives him some perspective there, so
• 14:44
  Speaker 1: very exying to get his take. Interest rates they are rising, uh,
• 14:51
  Speaker 1: and that is tough for a lot of business. Is
• 14:54
  Speaker 1: chief among them the real estate business. Lisa n she's
• 14:57
  Speaker 1: a partner and national tax leader for real estate practice
• 15:01
  Speaker 1: at Eisner Advisory Group, joins us here. Lisa, I think
• 15:04
  Speaker 1: about the commercial real estate business, and I think about
• 15:07
  Speaker 1: cap rates and you know, barrowing rates and all that
• 15:10
  Speaker 1: kind of stuff. But just give us a sense here,
• 15:13
  Speaker 1: after you know, fifteen years plus of really low rates,
• 15:18
  Speaker 1: we're an a rising interest rate in environment, what does
• 15:20
  Speaker 1: that mean, what are you seeing out there in the
• 15:22
  Speaker 1: real estate space? Yeah, hike, good morning, thank you. So
• 15:27
  Speaker 1: it's going to raise the cost of capital, and so
• 15:29
  Speaker 1: the capital that was really before going to the equity
• 15:32
  Speaker 1: the excess capital is now going to end up going
• 15:34
  Speaker 1: to the debt providers, and so those spreads are going
• 15:37
  Speaker 1: to be really hard to find. UM, and the investments
• 15:40
  Speaker 1: going forward, UM, if you're an investor, is going to
• 15:42
  Speaker 1: be a little different when you're looking at it. And
• 15:44
  Speaker 1: if you're a home buyer, UM, you're also going to
• 15:46
  Speaker 1: be looking at what you're at the future as well.
• 15:49
  Speaker 1: And so what you really need to look at is
• 15:52
  Speaker 1: the market that you're looking to be in, whether it's
• 15:54
  Speaker 1: you're an investor or a home buyer, and what's going
• 15:57
  Speaker 1: to fare well as where people are starting to move.
• 15:59
  Speaker 1: And it's all about growth and where do we predict
• 16:01
  Speaker 1: growth to go in spite of rising interest rates. So
• 16:06
  Speaker 1: I have to ask, though about this kind of demand
• 16:08
  Speaker 1: and supply issue that you have, because it kind of
• 16:11
  Speaker 1: seems like if you look at some of these other
• 16:12
  Speaker 1: inflation indicators, shipping rates, food prices, even inflation expectations, they're
• 16:18
  Speaker 1: coming down a little bit. And I think for a
• 16:20
  Speaker 1: lot of people. The assumption here was that perhaps housing
• 16:23
  Speaker 1: prices would follow, but the shortest just seems so dire
• 16:27
  Speaker 1: that even if you do have that reprieve for example,
• 16:30
  Speaker 1: and all these other kind of inflation drivers, the housing
• 16:32
  Speaker 1: market maybe exempt from that. Would you agree, I would
• 16:37
  Speaker 1: agree that there's parts of it that's that are absolutely
• 16:39
  Speaker 1: going to be exampt from that. And that's because in
• 16:41
  Speaker 1: oh seven, that single family uh those homes because of
• 16:46
  Speaker 1: what happened in the economy, then they stopped building as
• 16:48
  Speaker 1: many homes that that record pace. So for a single
• 16:52
  Speaker 1: family home there were there's always been less inventory on
• 16:55
  Speaker 1: the market for since two thousand and seven, and so
• 16:58
  Speaker 1: for that millennial now approaching into HomeBuyer, there's less product
• 17:03
  Speaker 1: for them, and so we've actually seen a rise in
• 17:06
  Speaker 1: single family rental market across the Mountain States and across
• 17:11
  Speaker 1: the Sun Belt to get those millennials into the homes
• 17:14
  Speaker 1: and feeling that they can't really purchase them there. They
• 17:17
  Speaker 1: can't afford those homes because with less inventory becomes higher
• 17:21
  Speaker 1: housing prices. And so we're going to continue to feel
• 17:24
  Speaker 1: that in the multi family market over the next few
• 17:26
  Speaker 1: years because of the lack of inventory in both single
• 17:30
  Speaker 1: family homes and in the multi family space and more
• 17:32
  Speaker 1: importantly affordable housing. As on the commercial real estate side.
• 17:38
  Speaker 1: You know, I work in midtown Manhattan. I see a
• 17:41
  Speaker 1: lot of real estate, commercial rule state on the ground
• 17:44
  Speaker 1: floor of these office hours empty. I live in New Jersey.
• 17:48
  Speaker 1: Every office park I go buy has got a first
• 17:51
  Speaker 1: you know lease sign up front with the jillions of
• 17:54
  Speaker 1: square feet. And I'm guessing that's because people are nobody's
• 17:56
  Speaker 1: going to the office anymore. How do you think about
• 18:00
  Speaker 1: just the office real estate space and the commercial real
• 18:02
  Speaker 1: estate space. It just feels like it's not just interest rates,
• 18:06
  Speaker 1: but this pandemic has changed the way we work and live. Yeah,
• 18:10
  Speaker 1: it's funny. There's a survey out there saying that people
• 18:12
  Speaker 1: are doing are saying one thing but doing another where
• 18:15
  Speaker 1: they're they're having a savings, they feel like their jobs
• 18:17
  Speaker 1: are sure, they want to go shopping again, they want
• 18:20
  Speaker 1: to experience ication, but they still don't want to go
• 18:22
  Speaker 1: back into the office. So they're willing to do everything
• 18:25
  Speaker 1: but that and the impact is going to take us
• 18:27
  Speaker 1: a lot of years to really understand how that big
• 18:30
  Speaker 1: picture is going to play on the commercial office space. Um,
• 18:34
  Speaker 1: you know, people are gonna be looking at the length
• 18:36
  Speaker 1: of the commute, what your job tight it type is,
• 18:38
  Speaker 1: and they're really gonna be puzzling together how for a
• 18:41
  Speaker 1: long term commercial business or commercial real estate owner, what's
• 18:45
  Speaker 1: going to happen with that space, not just on the
• 18:47
  Speaker 1: ground for retail, but all the way up on on
• 18:49
  Speaker 1: the vertical. That the urban properties are probably gonna get
• 18:53
  Speaker 1: hit harder than the suburban properties um. And remember the
• 18:57
  Speaker 1: suburban properties have a little bit lower qualities and those
• 19:00
  Speaker 1: rents have been pretty stagnant. Those are gonna start to
• 19:03
  Speaker 1: go up a little bit. And then we're going to
• 19:04
  Speaker 1: see in the urban space figuring out how to reconfigure
• 19:07
  Speaker 1: that space and what to do with it. And that's
• 19:10
  Speaker 1: really the big question is you know, you have to
• 19:12
  Speaker 1: have great light, you need to have flowing air and
• 19:14
  Speaker 1: open floor parents those amenities to attract that tenant um
• 19:18
  Speaker 1: But it's really going to be about where is that
• 19:21
  Speaker 1: commercial office space, what's that market look like, what property
• 19:25
  Speaker 1: type are you in, and how attractive that is to
• 19:29
  Speaker 1: to the tenants in the area. So she's going to
• 19:32
  Speaker 1: have a factor how sustainable is that is that building
• 19:34
  Speaker 1: going forward? So like in New York City here like
• 19:36
  Speaker 1: Hutson Yards for example, which is, you know, like the
• 19:39
  Speaker 1: whole West side of Manhattan got redeveloped over the last
• 19:42
  Speaker 1: decade or so and they've just got some incredible office
• 19:45
  Speaker 1: buildings there. I understand that's doing really well despite what
• 19:49
  Speaker 1: we're seeing in the overall markets. Is that just like
• 19:51
  Speaker 1: an example of boy, if you build really good stuff,
• 19:54
  Speaker 1: people will still rent it. And again it's the community
• 19:57
  Speaker 1: in the area around it. It's it's it's all open air,
• 20:00
  Speaker 1: there's open floor plan, there's tons of amenities in that
• 20:03
  Speaker 1: area that are attracting people to that location. And so
• 20:06
  Speaker 1: that's just testament to actually not just building, you know,
• 20:10
  Speaker 1: renovating your building, but understanding the community where you're building
• 20:13
  Speaker 1: is and what that experience now not just of your
• 20:16
  Speaker 1: not just of the residential tenant, but of the commercial
• 20:18
  Speaker 1: tenant within that development. They want an experience when they're
• 20:22
  Speaker 1: there as well. Um, and so that's really what the
• 20:24
  Speaker 1: trends are going to be going forward, is that the
• 20:27
  Speaker 1: experience of a commercial tenant as well as a residential
• 20:30
  Speaker 1: tenant within within that space. We have about thirty seconds
• 20:35
  Speaker 1: here very quickly. Warehousing is that in vogue at the
• 20:39
  Speaker 1: moment we're housing is definitely in vogue. It's still writing
• 20:43
  Speaker 1: high with the continued demand for space and storage. It's
• 20:47
  Speaker 1: starting to slow in a couple of markets actually, especially
• 20:51
  Speaker 1: those with some extensive development. So investors are really watching
• 20:55
  Speaker 1: that market because as because in that space the cap
• 20:59
  Speaker 1: rates are really really oh, you're gonna need a very,
• 21:01
  Speaker 1: very high rent to make those deal with work. So
• 21:04
  Speaker 1: there's still demand for like last mild distribution and self
• 21:07
  Speaker 1: storage and like the tech logistics. But you still really
• 21:11
  Speaker 1: need to look again at the space to see, you know,
• 21:13
  Speaker 1: what is in that warehousing space and what they're looking for. Lisa, great,
• 21:16
  Speaker 1: great stuff. Thanks so much for joining us. Really appreciate
• 21:19
  Speaker 1: getting your thoughts are at Leasa Knee Partner, National tax
• 21:21
  Speaker 1: leader for real estate practice at Eisner Advisory Group. Interest
• 21:25
  Speaker 1: rates are going up. That's tough for the real state
• 21:27
  Speaker 1: space where our opportunities. I don't know where you go
• 21:33
  Speaker 1: this year. I'm sitting here approaching July one. We've got
• 21:36
  Speaker 1: equity indices SMP down almost it's called a bear market
• 21:40
  Speaker 1: or thereabout. So we've got the just the most brutal
• 21:42
  Speaker 1: start ever to the year in the fixed income space.
• 21:45
  Speaker 1: We just talked to our friends at tc W about that.
• 21:48
  Speaker 1: I don't know where you go here? So I'm gonna
• 21:49
  Speaker 1: turn to professional Tracy McMillian, head of Global asset Allocation
• 21:53
  Speaker 1: Strategy at Wells Fargo. Tracy, where do you allocate assets
• 21:59
  Speaker 1: on a global base? Is? Given the start of the
• 22:01
  Speaker 1: year we've had so far, given maybe some of the
• 22:02
  Speaker 1: expectations for the rest of the year. Yeah, Yeah, it's
• 22:07
  Speaker 1: been a really tough start to this year for investors. UM.
• 22:11
  Speaker 1: As you mentioned, you know, equity markets are off to
• 22:14
  Speaker 1: a really terrible start. Fixed income markets are are also
• 22:19
  Speaker 1: down significantly, down double digits, which is highly unusual for
• 22:24
  Speaker 1: fixed income markets. So what we are telling investors and
• 22:30
  Speaker 1: in the face of you know this this difficult start,
• 22:34
  Speaker 1: is that, UM, first of all, that patients is important
• 22:39
  Speaker 1: and diversification is also still important. UM, but that uh,
• 22:45
  Speaker 1: this is a period where markets are likely to remain fragile.
• 22:50
  Speaker 1: So UM, long term investors should use diversification, use rebalancing
• 22:56
  Speaker 1: to manage risk. UM, they should go up in quality.
• 23:01
  Speaker 1: We believe in both fixed income and in equities. So
• 23:05
  Speaker 1: that for US means moving away from things like UH
• 23:09
  Speaker 1: small caps and into large and mid caps, and the
• 23:13
  Speaker 1: US moving towards US assets over international assets, and moving
• 23:19
  Speaker 1: up in quality and fixed income to to away from
• 23:23
  Speaker 1: things like high yield towards investment grade assets in fixed income.
• 23:29
  Speaker 1: Commodities is another area where diversification has really helped investors
• 23:34
  Speaker 1: this year. Having an allocation to commodities and having an
• 23:39
  Speaker 1: allocation to alternative investments like hedge funds can be helpful
• 23:44
  Speaker 1: for those investors, um for whom that's appropriate. Tracy, I'm
• 23:49
  Speaker 1: so glad you mentioned the commodities picture, because it feels
• 23:51
  Speaker 1: like that is the go to macro headge at the moment.
• 23:55
  Speaker 1: But I have to ask if your commodity trader you
• 23:57
  Speaker 1: know that those are some extremely volatile more kets, and
• 24:00
  Speaker 1: participation has actually been coming down when you look at
• 24:02
  Speaker 1: open interest because some people just don't want to deal
• 24:05
  Speaker 1: with that kind of volatility. You can lose very big.
• 24:07
  Speaker 1: So I have to ask, just because that's a trade
• 24:09
  Speaker 1: that's worked in the last two years, let's say, from
• 24:13
  Speaker 1: April onwards, does that necessarily mean it's a trade that's
• 24:17
  Speaker 1: going to work when you're still talking about recession. Yeah,
• 24:23
  Speaker 1: that's that's a great question creating, because, um, when you
• 24:27
  Speaker 1: enter a recession, essentially what's happening, as all of our
• 24:31
  Speaker 1: listeners know, is that we're seeing a contraction and growth.
• 24:35
  Speaker 1: And so you if you're seeing a contraction and growth,
• 24:38
  Speaker 1: then you would expect um less demand for commodities, and
• 24:42
  Speaker 1: so our commodities price is going to remain high and
• 24:45
  Speaker 1: continue to move higher. We believe they will. And the
• 24:49
  Speaker 1: reason why we think they will even though we are
• 24:53
  Speaker 1: entering this period where we we do foresee a recession
• 24:56
  Speaker 1: is because for years we have really anx elected the
• 25:00
  Speaker 1: infrastructure for energy, because there are geopolitical events um that
• 25:06
  Speaker 1: we think will probably persist through the winter and continue
• 25:10
  Speaker 1: to limit supply. And but I guess that, you know,
• 25:15
  Speaker 1: kind of the the big reason is because we think
• 25:17
  Speaker 1: we are also in a commodities bull supercycle. So we
• 25:23
  Speaker 1: think that this is a multi year cycle where commodities
• 25:26
  Speaker 1: will continue to move higher, um, you know, not a
• 25:30
  Speaker 1: straight line up, but will continue to trend upward. So, Tracy,
• 25:37
  Speaker 1: I mean, we're gonna have earning season kickoff in a
• 25:39
  Speaker 1: couple of weeks here led by the big banks here,
• 25:42
  Speaker 1: which will call into question, you know, kind of obviously
• 25:45
  Speaker 1: inflation impacts on margins and profitability. What are you looking
• 25:48
  Speaker 1: for for this earning season here? What are you mostly
• 25:51
  Speaker 1: tuned to? Yeah, what we're really looking for here is
• 25:55
  Speaker 1: forward guidance on input prices, UM, employment cause us UM
• 26:01
  Speaker 1: and how supply chains are remedying themselves. Uh. You know,
• 26:06
  Speaker 1: so we're gonna be looking for that guidance from the
• 26:10
  Speaker 1: management teams, and we do expect to see UM some
• 26:14
  Speaker 1: modest margin compression this time UM. And we also think
• 26:20
  Speaker 1: that earnings expectations from the bottoms up analysts are probably
• 26:25
  Speaker 1: too high and that they're going to be following this
• 26:28
  Speaker 1: forward guidance from management, so they'll follow management and actually
• 26:33
  Speaker 1: that could be the next too to drop as we
• 26:36
  Speaker 1: go through this earning season. UM analysts are probably going
• 26:40
  Speaker 1: to have to revise down their Q three and Q
• 26:43
  Speaker 1: four earnings expectations, and you know that could put and
• 26:48
  Speaker 1: into this rally that we've seen over the past few days.
• 26:52
  Speaker 1: But Tracy, to what extent is that getting priced in
• 26:54
  Speaker 1: right now? Because it feels like for the last year
• 26:56
  Speaker 1: we've been hearing these warnings about macrick and risk, about
• 27:00
  Speaker 1: recessionary risk. I mean, big Tech, for example, has been
• 27:03
  Speaker 1: warning about a slowdown. I'd argue since the first quarter
• 27:06
  Speaker 1: of to what extent has the market already digested those changes?
• 27:13
  Speaker 1: So a lot of it is in the markets. We
• 27:16
  Speaker 1: think a lot of the bad news has already been absorbed.
• 27:21
  Speaker 1: But what we think markets might be missing here is that, uh,
• 27:26
  Speaker 1: that they may be anticipating that the FED will not
• 27:31
  Speaker 1: stick to its resolve um even you know, even in
• 27:35
  Speaker 1: the face of a recession, a recessionary period. So we
• 27:41
  Speaker 1: think that the FED is going to continue to fight inflation. UM.
• 27:46
  Speaker 1: We don't think they will necessarily pause rate hikes even
• 27:50
  Speaker 1: if we do ter a period of negative growth. And
• 27:54
  Speaker 1: we think that markets are probably missing that aspect. They
• 27:58
  Speaker 1: may be to some extent still relying on that FED
• 28:01
  Speaker 1: put and we we just think that investors do need
• 28:05
  Speaker 1: to be cautious here. We could see another leg down.
• 28:09
  Speaker 1: Why can't I just go out and buy these big
• 28:11
  Speaker 1: tech stocks? Apple, Amazon, Microsoft? You know, I hear from
• 28:15
  Speaker 1: the kids that this intraweb thing is going to be
• 28:17
  Speaker 1: a big thing going forward. Can I just do that?
• 28:19
  Speaker 1: That's work so well for me over the last fifteen
• 28:21
  Speaker 1: or twenty years. It has worked really well for fifteen
• 28:25
  Speaker 1: to twenty years UM, And that's probably why we got
• 28:29
  Speaker 1: to the point where a lot of those companies were
• 28:32
  Speaker 1: so richly valued. And they were richly valued, remember in
• 28:36
  Speaker 1: an environment where UM interest rates were very low, so
• 28:41
  Speaker 1: we could discount that growth out on into the future
• 28:46
  Speaker 1: at very very low discount rates, which made higher prices,
• 28:50
  Speaker 1: higher valuations plausible. If we are headed into a period here,
• 28:57
  Speaker 1: which we believe we are, we're going to see higher
• 28:59
  Speaker 1: in place and higher rates, then we're we'd have to
• 29:02
  Speaker 1: reset that discount rate. UM. We do like information technology,
• 29:06
  Speaker 1: and we do think that UM here at these levels,
• 29:10
  Speaker 1: there are some buying opportunities, but you know, we would
• 29:14
  Speaker 1: not expect the kind of returns that we've seen if
• 29:16
  Speaker 1: in the last decade. Al Right, great, great stuff. As always,
• 29:19
  Speaker 1: Tracy and Chamillion, head of Global Asset Allocation Strategy at
• 29:23
  Speaker 1: Wells part Thanks for listening to the Bloomberg Markets podcast.
• 29:28
  Speaker 1: You can subscribe and listen to interviews at Apple Podcasts
• 29:31
  Speaker 1: or whatever podcast platform you prefer. I'm Matt Miller. I'm
• 29:35
  Speaker 1: on Twitter at Matt Miller three. Put on false Sweeney
• 29:39
  Speaker 1: I'm on Twitter at pt Sweeney. Before the podcast. You
• 29:42
  Speaker 1: can always catch us worldwide at Bloomberg Radio.