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Well, Amazon shares hitting their first record since twenty twenty one. Amazon CEO Andy Jassiott with a new letter that said his company's cloud infrastructure will become an essential part of the Jenai boom. He also said Carol that Ai may be the largest tech transformation since the cloud. He should know a thing or two about the cloud. Andy Jassey came from AWS, of course. I mean this is the guy you created AWS and that the societal and business benefit from Jenai will astound us.
All.
Let's get to it. A Spencer Soaper Bloomberg News Technology and e commerce reporter, and he was up early out there in Seattle covering it all, including the including the latest missive from the Amazon and ceo. Hay Spencer always good to check in with you. So what do we know? What do we need to know about this annual letter from jasse.
They get longer every year.
Sorry, well said, I love it.
He's up to he's up to fifty five hundred words, but he count this year from from from five thousand the previous year and forty five hundred the year before that.
He's like taking a cue from Jamie Diamond.
I think that's because it costs nothing. Is glad for him to put him up there, all right, he can read as much as he wants.
Yeah, yeah, but uh, I don't know. It was it was an interesting letter. It's uh, it doesn't It certainly doesn't generate as much buzz as his predecessor's annual letters, you know, founder Jeff Bezos. People would really dissect them and look for any clues on where Amazon might be headed, because it was always seen as just kind of being
so leading edge. But this one was more like the top really just read like an earnings report, just kind of going through some highlights and you've got to get deep down into the bottom before he starts talking aboutitive primitive tools is what he seemed to be highlighting that.
And I think what he's really trying to address is this feeling that maybe is like there's a sentiment that maybe Amazon's getting a little bit left behind in the AI race to like Microsoft and Google, and he's trying to really assert like, look, we're gonna make the infrastructure
that this stuff, you know, thrives on. And he's really trying to draw parallels between their investments and data centers and Amazon web services in the cloud with the next wave of AI, and that they're going to be in a good position to even if they're not out there in front publicly, they're gonna be building the tools behind the scenes that anyone working in the space is going to.
Want to use.
Spencer feels like a one two punch because last night at the White House, present Biden and Japanese Prime Minister a Fumio Kashida a big state dinner, but they also held a press conference. But they are enlisting Amazon an Nvidia to fund a new joint AI research program. The two nations looking obviously to do better when it comes
to collaboration around the technology. But it's interesting, Jeff Bezos was at that dinner, you know, it does sound like they're kind of all out there when it comes to AI. I don't know, how do you think about it when you report report about this company and kind of its role when it comes to artificial intelligence, sounds like the cloud. I mean, people are going to need the cloud maybe to you know, do some of this machine learning and data processing if you will.
Yeah, I mean it's all it's all going to be about like speed and efficiency, cost. And so when when I look at as a reporter, I try to ignore AI and artificial intelligence just as buzzwords and just figure out, Okay, what are what is it enabling you to do? What did you used to do, How is it done? How is how has that changed? How are you doing it now? And for the most part, it's really just automating a
lot of ROTE tasks, you know. So and and there's still always going to need that human element to differentiate. Like if everybody's using the same AI tools to do the same things, it's all going to look the same, you know. So it certainly helps in terms of inputs and ROTE tasks, you know, but it's still going to require that human element and creativity and things that these machines can't do to help people differentiate.
Spenster ask everyone this, and I haven't had the chance to ask you this, but you know, Jasse talked about the societal benefit here in your reporting. What are the wildest things that are going to benefit society from gen AI.
I think that just the processing of vast amounts of information is always the thing in spotting trends and stuff and doing it efficiently, you know, rather than having someone else do it. There's always this kind of framework of math and calculation that has to be done when it comes to breakthroughs. But the more you can delegate that to machines, you know, just the more you can focus
on and target your efforts and energy. So I think that's a lot of it is just you know, just processing data and that sort of thing to read trends. But in terms of like life changing breakthroughs, I just I haven't seen it, you know, you know. I imagine we'll be there and we'll look backward and recognize it. But right now, which it is hard to it's hard to see the forest through the trees.
Carol's still waiting for the robot that does dishes.
Yeah, you know, that's all I'm asking for and like kind of figures out what we need to do around the home and just takes care of it.
I'm with you.
I'd like to get rid of my to do list Spencer, thank you so appreciate it. Spencer Soper, He's Bloomberg News Technology and e Commerce reporter, joining us out in Seattle or Seattle Bureau. Check him out though on x at Spencer Soaper.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from two to five pm Eastern. Listen on Apple, card Play and Bright Auto with a Bloomberg Business act or want us live on YouTube.
Well.
Among our most read stories on the Bloomberg Today, it's specifically about Manhattan apartment rents unexpectedly declining in March after months of increases, though it's unlikely to be a sign of a softening market.
Yeah, the first time in four months that rents fell on an annual basis, and an unusual twist at the tail end of winter, when prices tend to begin climbing toward their traditional summertime peaks. Carol our next guest understands the Manhattan residential market, having represented buyers and sellers for more than thirty years.
All right, let's get to our interview. Back with us is Louise Phillips Forbes real estate broker at Brown Harris Stevens joining us here in studio. Nice to have you here. How are you? First quarter just wrapped up? How was it for you guys?
Well, not for everybody, but I feel like I'm very blessed in that I had a very strong quarter with twenty nine transactions and exceeding almost ninety million, and you know, and it's still coming. I mean, those rents dropped because people are buying.
How does it compare? I always think about this with like the past year, how it compares with the pandemic? How compares with the pre pandemic?
You know, I think what I would say to you is that there's only so long people are going to put their life on hold. They were so many individuals that were prevented from buying a home that we kind of had a wonky market in twenty eighteen and part of nineteen and twenty twenty. In January was strong, started to be strong, and then we had the pandemic. So, not to mention the pandemic, there's also the cause and
effect of interest rates in inflation. So people are not going to wait anymore, especially in a vertical market like New York.
So what's happening in your segment right now? Because you have a unique window into what's going on in residential real estate. You certainly do have a diverse clientele, but let's be honest, there are people with lots and lots of money who are buying very expensive property.
Yes, I mean literally, one week in March represented five hundred and fifty five million dollars worth of contract science. That's one week. That is quite powerful. And when you I said to you just earlier, like you know something's going on in the market when off market deals are done for seventy two million dollars in the West Village.
So what is going on in the market.
I think that.
There is a confidence in our economy. I think that you know we're not going to have you know, we have an election year, so you start to hear the rumbles. I'm going to wait till after that. I don't think people are going to wait because they are There's so many other circumstances that have prevented people from leaning into this market. So I am expecting this to continue. And my advice to my buyers is don't be late to the party, and you have to start looking for the
right home, not the right deal. And if you think with your heart before your head. You will find yourself being an owner instead of paying somebody else's more.
Having said that, right, we all remember like a pandemic, just various properties in multiple bids, especially outside kind of major metropolitan cities. Who's got the upper hand right now? Is it buyers or sellers at this point?
Viz Well, I think in vertical cities like New York that did not have a collapse in the market, but a pause in the market during it was a difficult time. I mean, we saw forty percent less transactions last year in twenty twenty three when we had people not making decisions for that period of time where interest rates and inflation was doing their dance. But you know, I will say that we are in a housing market crisis across
the nation. Places like think about Nashville, Austin, Darien, Connecticut. There's seven listings on the market in Darien, where compared to one hundred and seventeen you know, ten years ago, where are people going? And that's a cause and effect still shaking out from the pandem where people that market surged thirty five percent.
Right, So, but is this the new normal because we're not going back to that era of zero rates anytime soon at least no look never say never, but all all signs points that that's not.
I do think that we're going to have interest rates pull back continued to support our economy, but it's not going to be the zero rates. But let's be clear, when you're paying five or seven or six percent, you're making a lot more money in the bank with money in the bank. And when I had a three percent interest rate, I wasn't getting paid but fifty basis points on the money that I had in my bank account. So it all depends on how you choose to look
at it. And I do think that as interest rates pull back, even if they just go to five percent, prices are going to go up.
We're not there. We've got mortgage rates in the US rising for a second straight week, average thirty year fixed loan six point eight eight percent, up from six point eight two percent last week, and it's not a level reached in early March. Your buyers, So higher rates impact your buyers, give us remind us of you know, sometimes we bring in people like they're cash buyers. They're good.
Well, it forced a lot of cash deals last year because they were the ones they were getting the deals. Cash was always king, but in the market where people are priced out of it, that's why interest rates. With interest rates up, the rental market surged, particularly the one
bedroom market. If you're looking to buy a million dollar one bedroom and you can afford five thousand dollars a month for your one bedroom, you're pushing the thirty eight hundred dollars COVID deal out of the rental market because you'll pay forty five.
But so, who is your customer, like, give us an idea of like a typical I hate to say that, because it's probably not a typical transaction. Well, I think that the majority I do.
I mean, I would say I do from twenty million dollars to seven hundred thousand. So I am over the game.
I'm all over the game. I'm the majority of the deals.
Five probably, and most of them are taking mortgages. And there was a period of time where people saw the value in buying the rate down and paying fifty thousand dollars. Interest only loans are opportunities and choices. People like myself. I'm commission only, so when I flush fifty thousand dollars, I can buy down my mortgage and adjust my rate right there in real time.
Hey, speaking of commissions, got to ask about the National Association of Realtors in the settlement reached last month. What does that do to You're a business person, you're an independent contractor. I mean, commissions is how you make money. Does that affect the way you're getting paid?
Well, we.
Markets like New York are not quite like the mls outside and across the nation how that works. But you know, look, I think it's all a matter of transparency, about educating and talking and listen. I believe that it's very important for people to understand who they represent and that what their choices are. And I will be that person till I'm in my grave telling people the value that I'm supposed to be bringing to the table, and people have
historically never had a problem with paying for that. I think it's really just about the transparency. I'm not quite sure how the cause and effect is going to be. We are proactively starting to talk to all of our relationships because they need to understand this is a change. It's probably coming down to the pipe to us. I don't think it's going to affect us the same way it will outside of the city. But that's still part of the arm of our company.
Ten seconds on pricing, prices going up?
I think they're still strong.
Yes, they're still strong. Are they still going up?
I think that there are pockets of opportunity, and it depends on how long they've been on the market, and if sellers will allow the brokers to price their homes instead of themselves and pricing from yesterday, they're going to make those transactions.
Shot as Zoeys Louise Phillips Forbes real estate broker at Brown Harris T. Stevens. Of course joining us in studio.
You're listening to the Bloomberg Business Week podcast. Listen live each weekday starting at two pm Eastern on applecar Play and Android Auto with the Bloomberg Business ad. You can also listen live on Amazon Alexa from our flagship New York station, Just Say Alexa playing Bloomberg eleven thirty.
Well Big Deal. This week, Blackstone struck a roughly ten billion dollars deal for an apartment landlord in the latest sign at the real estate investor sees a right moment to pour money into the property market.
And in February, Bloomberg reporting on Predium, the largest single family landlord in the US and that it was planning new housing bets on apartment properties. The firm also recently sold a stake to hunter Point Capital as it seeks financial muscle for new initiatives.
Wenew, we want to know more, So with more and what Predium is up to. Back with us is ROBERTA. Goss. She's senior managing director, head of the bank, loan and COLO platform at Predium. She's joining us here in our Bloomberg Interactior broker studio. By the way, Predium has some fifty one point eight billion in assets under management. You know them. They're focused on US residential real estate, residential credit, and corporate credits. So all right, related out there, how are you great?
We've been really busy.
Well, tell us about that. What does that mean for you and what specifically?
So as a firm, we've been very focused on what opportunities are coming and through the dislocation that we really see as a result of regional banks pulling back. And I think that speaks to the strategic investments we've made and the fact that we really think we're going to be extending into new areas in single family rental. We're extending now into multifamily with the acquisition of BH which
is unique for us and terrific. And then on the rezidet side, we think also a potential big opportunity as we move forward, So extending from resie mortgages into commercial debt where we think there'll be a dislocation opportunity.
What did that dislocation look like?
So really more on the commercial side and focused on really the senior levels of debt within within commercial real estate.
Well, what kind of deals are getting done? So like walk us through some of the financial structures that we're seeing. And I know it's hard to kind of jump everything at a big bucket, but give us an idea. I guess what we're trying to do is right, the deals tell us to some extent, who's in the driver's seat or how much someone coming off of the concerns, the woes if you will have the regional banking sector, and
how other people have come in. But I'm curious about what kind of deals then are being done.
Yeah, So for us, it's really opportunities in multi family coming from you know, ownership of properties that need to be refinanced.
So under pressure, under duress.
I wouldn't I would say, not yet, but we're expecting more dress as we as we go through the next couple of years, so refinancing opportunities and the need for new sources, and I think this will move from the banks to more private, private debt and private asset management opportunities.
You mentioned the opportunities arising in the wake of the stress on regional banks, specifically what we saw in March of last year. I'm wondering if you think that the stress on regional banks is over, I think.
That's really hard to call. I'd say, uh, you know, when we looked at you know, Silicon Valley Bank a year ago, you would have said, okay, we're you know, that was a unique, uh situation. We've seen other banks you know, have to pull back and shore up capital over the course of the last year. So I think
it's very difficult to call. I think, you know, we're just believe that there's a broader opportunity as the regional banks, you know, over the next five to ten years really start to shrink to retrench.
Also in terms of is it it's interesting because I know Bloomberg going to think it was our Patrick Clark reporter back in February you guys were extending credit to homebuilders because of the void that was created by the regional banks as they were retreating back. So how would you kind of characterize that level of activity. You said you're very busy. Is it give us an idea exponentially, like in the last six months or something, how much it's increased.
Well, I think from our perspective in terms of being really busy, we've positioned ourselves strategically to be set up for all of these opportunities.
Whoever needs it.
Right, we had been very active with the home builders now for a cup of years and.
When you guys did well off the great financial crisis, right when it came to residential.
Yes, opportunities down started the firm in twenty twelve, really, as you know, with a view that there was a structural shortage of homes in the United States, and that has allen your founder, the founder, Don Mullen, and that really hasn't resolved. It's probably became become more amplified as we go, you know, over the last decade twelve years, and we think that that's still an opportunity and going to continue to be one.
So you don't think that will get resolved anytime soon.
The structural Yeah.
And the reason I ask is because there are some folks out there who are arguing, you know, it's getting so bad that we're starting to see actual zoning changes in some towns and municipalities, which you know, when it comes to people who fight these sorts of things, they're starting to give in in some areas because they realized that the housing crisis is so bad.
Well, I think that what we're trying to do is solve for this problem. And I think our relationship with the homebuilders really goes to that. We're trying to, you know, fix what we think is you know, a nationwide issue and partner with the right either municipalities or home builders or financial partners that are trying to solve for this shortage.
I wonder to Roberta, are there certain geographic areas where you guys are finding more opportunities than elsewhere.
Well, we've been almost exclusively focused on the Sun Belt, and that has been everybody loves the sun Pias. So from uh, you know, Arizona through through to Florida and you're going to stay there or I think for now that's where our resources are really concentrated. And I think through COVID we've seen a lot of migration to those areas.
Three family members too, though, kind of like just before COVID and then another one after COVID.
But don't even think about it, not yet.
But I kind of like the East Coast, I like I like Northeast alone.
What about the flip side of that question is areas that you'd that you see yourself avoiding over the next few years.
Within our three businesses, which are single family rental work, extending into multi and REZI mortgage debt, we're extending into commercial real estate debt. And then in my business, which is corporate credit I think, uh, probably one of the stronger of the three this year and leverage loans. You know, we're just we think that there's just opportunity to grow within those three businesses. So it'll be natural extensions, but probably not new businesses.
We'd be remiss and we'd like it because you guys have a great vantage point on kind of stuff that's going on in the economy, and here we are debating, you know, what the is going to do with the economic reports, just got about a minute left here. How would you describe kind of the business environment, the investment environment.
So I would say in my world, which is leverage loans and corporate credit, it has been incredibly strong all year.
Would to me say strength because if there's stress in the markets, that's not going to be.
There, right, it's not going to be It hasn't been in corporate credit, right, even though we've seen some elevation and defaults, you know, not nothing close to the levels we were seeing in the GFC.
And we don't get there.
No, we don't believe that we'll get back to GFC levels. We'll sort of sit last year defaults were in the just below four percent. We'll sit at that level this.
Year, but nothing like a downturn of recession. Forgive me, just got about twenty twenty five seconds.
No, we believe that corporate credit's going to continue to perform fairly strong this year. And elevated rates are good for leverage loans because we're a floating right product.
Right, And it does look like you guys are looking to do more deals a get more money to work. ROBERTA, thank you, so I appreciate it. ROBERTA. Goss, Senior Managing Director, a head of the Bank Loan and CLO platform over at Predium.
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Found it on Bluebird Radio.
All right, everybody, just about eighteen minutes left in today's trading session, getting ready to wrap up the Friday trade, which just turned from Charlie. We definitely have a Raleigh underway when it comes to the equity trade. In fact, we're seeing some buying here, certainly on Nasdaq one hundred looking at it now, up about one point eight percent. So interesting to see the interest in activity.
Okay, so maybe seeing some buying. But over on the yield curve, things look a little different, Carol. The tenure yield wow, moving higher right now by two basis points, up at four four point five six percent.
Yeah, we talked about right this is you know, it looks like the new reality, the new level, certainly when it comes to the tenure. Hey, let's see what Kathy Jones has to say about all of this. We've got a great voice on all of it as we drive to the clothes on this Thursday. She is managing director, chief fixed income strategist at the Schwab Center for Financial Research. So, Kathy, an interesting week again coming off a second inflation print.
But it really was CPI that you made us change our tune again in terms of rate expectations of what the Fed might do. How are you seeing it? What do you think is the reality when it comes to the US Treasury curve? What are you looking at?
Well, you know, yeah, I mean expectations changed on the CPI number, you know, so interesting now we're carrying it out to two and three decimal points to try to determine, you know, where we're going on inflation. I don't think the reality has changed dramatically. You know. We know the FAD doesn't target CPI as its major benchmarkets core PCE, and we had some decent numbers on a PPI today that feed in more closely to that core metric, that core PCE. So we may get a little bit of
relief when those numbers come out down the road. But I think the big question is, you know, is the FAD going to cut this year? If so, how many rate cuts are realistic to expect, and since the mandate that they have dictates that they need confidence that they're getting to two percent, doesn't look like these numbers are
giving them confidence. You know, the economy has been resilient, we have pockets of inflation still burbling up, not getting as much traction in the decline and inflation, so we're probably looking at two ray cuts this year instead of three. I still think that there will be ray cuts. I don't think the talk of hiking makes a lot of sense.
But but what, Kathy, what is the Feed need to cut rates if we still have an economy where it feels like growth expectations are moving up. We just talked with our Gina Martin Adams about earnings and you know she's looking for Our estimates are for decent earnings growth again for the second quarter or for the quarter that we just finished. So I mean, where is where's the weakness that the FED needs to maybe hedge against, if you will, in the US economy?
Yeah, I don't think it's so much as they're hedging against weakness in the economy allthough, there's pockets of softness that are shelling up. When you look at delinquencies and credit cards and car loans and things like that. But I think it's more normalization. Right, five and a half percent fed funds, when you effectively have inflation running it, let's call it two and a half to three, it's
a high reel interest rate. Can the economy continue with a high reel interest rate for a while, But you're definitely seeing pockets of weakness showing up, And their goal is not to tip the economy into recession or to stress it so much, just to get inflation down. So I think it's a waiting game. But I don't think the destination is all that different. The direction of travel is still down. It's just a much longer time to
get to the destination. The destination may be higher than in the past, not if still, but.
Just when I'm wondering, Kathy, about what your outlook for rates is for the remainder of the year here, I mean, I think a lot of people would have said, Okay, I think we're kind of done, seeing you know, four point five five percent on the tenure a couple months ago. That turned out not to be the case, with yields hitting their highest today on the tenure. That they've hit since November. How much higher do you think they could go this year or at least the cycle.
Yeah, it certainly looks like we could test for seventy five four eighty again, that that was sort of a stopping point. I don't that's on my base case scenario, but it is a possibility. I think as we get down the road, you know, we'll focus in on some of the better news on inflation rather than the worst
news on inflation. But you can't rule it out. I don't think we're going back to that five oh two high that we saw a year ago or close to a year ago, but you can't rule out another push up here for seventy five four eighty until we really get a grasp of you know, where is bad policy going. Has inflation actually stalled out? I don't think any of those things. I don't think it's stalled out. I think it continues to go lower. But you know, we have to test the thesis.
Why are we up today on the equity side of things? I don't usually like to do day to day, but I don't know.
I think it's kind of she's fixed income strategist.
Okay, all right, that's fine. Well based.
Why but you can still please, you can still feel free to answer.
You're smart, you watch the markets. It's all connected and they you know, we get that. So why is it based on if we're for and a half percent? Is it just potentially equity investors like, yeah, I can live with this.
Yeah.
I mean, I'm not the equity strategist, but I think you can. Look, you're just talking about corporate profits. I hit a new all time high in the last quarter. They're expected to continue to grow. That should be the driving force behind the equity market is those earnings. So if those earnings continue to look good, I imagine people will pile back into equities.
Okay, I'm getting some questions from some listeners and viewers here. Is there a perpetual demand for yield and fixed income if no cuts come?
Yeah?
I think so. I think one of the things that hasn't been focused on very much is how tremendous the demand has been for fixed income as since rates went up, Since the Fed hiked rates, we've had, you know, very strong inflows. The foreign capital continues to come in, but so domestically, you know, we were yield starved for a decade and now people look at five percent, four and a half five percent on relatively low risk assets and
they say, yes, I'll take that. You know, especially if you're trying to plan for the future, if you're trying to generate a paycheck and retirement all those things. You know, that's where the demand for fixed income is and it keeps coming in.
Well, that's interesting. I was listening, I think it was on surveillance this morning with Tom and the Gang, and I just think they were talking about one of their guests, like this idea that if you are near or thinking about retirement, locking in on the fixed income side of things on the US Treasury like this is not so bad. Why not do it and take risk off the table? Like that makes sense to me.
Yeah, locking into five percent on for the next two years, that's.
Not bad, right, Yeah.
Or look at her on the investment yeah, or investment great corporate bonds, which I've been you know, high ratings, generally very low default rate. Those yields are five to five and a half percent for you go out five to seven years. I mean, if you want to have a five percent yield, you don't have to sit at a short end. You can you can move out the curve and not take a lot of risk to get it all right.
Can leave it on that note, Hey, listen, Thank you so much. Kathy Jones, Managing Director, chief fixed income strategist over at the Schwab Center Financial Research, joining us from Miami.
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