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This is Bloomberg Business Week Daily reporting from the magazine that helps global leaders stay ahead with insight on the people, companies, and trends shaping today's complex economy. Plus global business, finance and tech news as it happens. The Bloomberg Business Week Daily Podcast with Carol Masser and Tim Steneveek on Bloomberg Radio.
Hi, everyone, welcome to the Bloomberg Business Week Weekend Podcast. Well our backdrop this week a special program as we bring you highlights from our coverage at the annual Milkin Institute Global Conference held in Beverly Hills, California. It's now in its twenty eighth year. Tim is out this week, but with Mena's place is Bloomberg TV anchor Romaine Bostk.
Yeah, and the Milk and Global Conference is a gathering of individuals with a capital power and influence to change the world. So for the next two hours, we're going to speak with some of those who attended and who participated in panels on perhaps the biggest talks of the town, global trade and tariffs. And then we get to the flip side, where investors are finding opportunities everything from private credit to artificial intelligence.
I have to say, Romain, it felt pretty optimistic, but the tower ward came into a lot of conversations. All right, everybody. We were also there. Keep in mind just ahead of the Federal Reserve decision to leave rates unchange yet again, even as President Trump strongly urges Fetcher J. Powell and Company to lower interest rates. For the latest.
Economic news and all about the.
Fed decision, head over to Bloomberg dot com or head to the Bloomberg terminal.
And we had a lot of great conversations. But one of the big highlights was a conversation about the impact of tariffs on the global markets and how to manage that volatility. That conversation was with one of the biggest leaders in investment management, Pimco. It manages over two trillion dollars in assets, and we caught up with the CEO, Mani Romana.
I think people had made the assumption that they'd be a very quick resolution to the tariff question, and the reality is there's a lot we don't know, but that tariff are going to be high, and that we're going to have to deal with it for a long time, and that will need to readdress our thinking both in terms of economic growth but also inflation.
Can you make that change now, meaning like when you have to factor in what economic growth will be, what the impact of tariff's will be, even though we don't know, how do you make that pivot now?
I think you do scenario analysis.
The big three trading partners are China and Mexico Canada, So you basically run simulation and say, if this happened, then this will be GDP. If this happened, this will be inflation, and acknowledge that we don't know what the endgame is going to be the only thing we can reasonably say is the overwhelming likelihood is you will have high tariff for the foreseeable future, and we'll have to deal with this.
Manny once we know what the terms are. Just some of the uncertainty go away and things settle down. But it's structurally a different financial dynamic potentially depending on how high those tariffs are.
I think that's right, but I think a number of company we'll have to re engineer this supplight chain and optimize the production costs and the transfer pricing based on what the tariff will be. And I think that changing supply chain may not be as easy as what you make it to be. For us, we look at a set of macro parameters and optimize our portfolio and decide what we think is attractive in terms of asset and buy them at the best possible price.
The ones I mean for investors, do they just kind of stay put waiting for everything to settle, or are they starting to make those bets assuming it is going to be very different. Tell us a little bit about what you are seeing in terms of at the time.
I think you've seen enormous volatility in the equity market, and some are I would say with surprise that the equity market has bounced back to the Liberation Day level.
But you've seen clearly a move to cash.
All world, which is the bond world, has been pretty much unaffected. And my partner Dan Iverson has to say, where you look at the yell on the portfolio of bonds says six percent, six and a half percent, it's a very good predictor of what your return will be over the next five years.
So if you want to own bones, you're.
Gonna make six and a half percent, give or take over the next five years.
How are you going to get there a lot of uncertainty, and that's.
What I'm curious is about the volatility. And I mean you're referring to your CIO. I mean I thought an interview where you actual talked about how he was really embracing that volatility to a certain extent.
There's too competent to it.
What we like about volatil is the fact that it will provide investment opportunity and a source of alifi in terms of trading different part of the curve, but also different products and to move away from the US and find opportunity another part of the world. So you can always buy US asset, but you can also buy non US asset as a way to.
Get duration and hedge them back into dollars.
So, for example, we like Australian duration Australia as a dry Robert Academy. We like Australian bonds, but we hedge them back in two dollars.
That's the way to add OURPA to the portfolio.
How complicated is it to do that when there's also a ton of volatility in the FC space and no one seems to know where the dollars might be.
You may wonder what the two thousand people. We have a new public school, that's what they do. You know, we could deal with that. Just about that. We can deal with that.
At US Secretary Treasury Scott Besson obviously really kicking off milk and on Monday, and he talks about the importance of watching the ten year Do you agree in terms of US treasuries.
The cost of boring is very important? And I think I will answer this in twofold one. The US dollar as a reserve currency is really important and the ten year bond is in a way the barometer for the financial health of the world Academy, so it is really important. Now, I would say you look at the whole year Cove, you look at the short end, the ten year, the
thirty year. You think also about credit spread, they're very tight, and you think about all of this parameter and try to assess what's to come and how you're going to deal with it.
Mannie, one thing I'm curious about, and bringing up Secretary Bessett, what is the voice that you listen to most and trying to determine ultimately what happens in the US, especially when it comes to its financial system. You know, it's been the place the world's safe haven, right and.
It will remain the place of safe handy.
We're so sure, why?
Well, think about it.
The US dollar is the reserve currency, but it's also the most liquid treasury market in the world.
About an enormous factor.
And yes, you know, you can make a reasonable argument that the dollar is slightly expensive and that you may want to diversify from the dollar to other currency, but it doesn't mean, it does not mean that the dollar loses its status, and I think it's very important to keep that in mind.
There's no other reserve currency, there's no other place to.
Move trillions and trillions of dollars away from the dollar, and it is what it is.
Do you have faith in the Treasury Secretary to do the right thing or at least get the president's ear on doing the right thing, because he has said some things in regards to the fad the Treasury secretary.
Even so, I'm just curre is do you have faith?
I think the wonderful thing about financial markets is that they're efficient and so they'll tell them and that the market.
Reacts to policy.
And when the market doesn't like either policies or a tweet, the market react in such a way that people need to adjust the cost of action. The market wants the FED to be independent, and I think has voted very strongly about that, and I think that dictates some of the choices and some of the noise around all of this.
And you know, it's a good thing. Markets are there.
To reflect, to reflect supply and demand and also reaction to event in the world, and.
We saw that play out in a big way in April.
One side of that, though, basically to your comments about there kind of this being the most liquid market, this is kind of the reserve currency, and that's not going to end will lessen to a degree because when we look at our treasury market and we think about how many global investors hold our bonds, all the rumors that maybe certain nations might be willing to weaponize their holdings if the dispute with the US over trade escalates, does that concern you?
You know, there's no there's no free launch.
The reason why people own US dollar is because they like to own US dollar asset. There is a very strong case for American exceptionalism. The fact that the financial systems are very liquid and very well run, and that if you, for example, a Japanese investor, where there's about a trillion dollars of US debt held by Japanese institution.
It's a good place to be even hedge back in yen.
And I think that's that's really an important fact to remember in terms of the flow of fund and who needs to put money aware that is.
The treasury market healthy right now?
Totally?
You do not You weren't concerned.
At all about what transpired that first we to April, about the potential gum up in the system or that mismatch between buyers and sellers.
No. We On the contrary, I think we've seen very liquid market voice in treasury and in credits, and to be honest, yeah, you know, markets have been remarkably well behaved. We had a couple of difficult days during COVID before they FED intervened, but it's been very with sailing since. And you know, the markets offer plenty of opportunity to change your mind. One of the good contribution have been ETF where ETF have a lot people like us to do portfolio trade, rebalance or book and to use this
liquidity to move assets around. And I would really and fifacts this the markets are quite liquid.
I promise not all my questions are pessimistic, but I do have one with the guard I mean, you had a market, they had to deal with the trade issues that hasn't been resolved, but they certainly made some degree
a piece with where we are. There's now a big budget battle that's about to take place in Washington, and I do wonder as the lead leader of the biggest bond company, bon Investler out there is there concern that our fiscal deficit and the potential remedies that are being discussed in Congress could exasperate the situation in the fixed income market.
That's the wonder of being the reserve currency. Everything else being equal, you could run a slightly higher deficit than you would otherwise. And I think that, of course, people will look at the amount of deficit and you know, it is overwhelmingly likely that the deficit is.
Not going to get reduced.
But once again, would you rather own very high quality assets in the US or would you rather own bonds in southern Europe? You can decide which one you you would rather own. That's the reality. The reality is you need to invest somewhere so.
You're not worried about It's a lot of debt.
It's a physical situation.
It's been a lot of debt for a long time, but now we're at levels we haven't seen.
Should we just accept it?
No?
I think I would reply with a quote that I heard Jeannett Yellen gave in a private conversation. She said, all we can say is it's not a problem until it becomes a problem. And so it's a deeper meaning maybe that it appears like there's a tipping point, which is very hard to guess where all of a.
Sudden, either because the issue.
Will lose credibility or because the policy doesn't make sense to market participant people all of a sudden don't want to be the margin.
Old buyer our Thanks to filmco CEO Many Roman.
Coming out much more from Milk in twenty twenty five.
This is Bloomberg.
You were listening to the Bloomberg Business Week Daily podcast. Catch us live weekday afternoons from two to five pm Eastern Listen on Apple CarPlay and Android Auto with the Bloomberg Business app, or watch us live on YouTube.
I'm Carol Master along with Romaine Bostik in for Tim this week with a special edition of the Weekend Edition of Bloomberg Business Week. We are bringing you all the highlights from our coverage of the twenty eighth annual Milk and Institute Global Conference in Beverly. Hill's gotta say a lot of energy, A lot of people were here.
A big theme this week cautious optimism. Robin Grew is chief executive officer at Man Group, one of the world's largest publicly traded edge fund companies, managing over one hundred and sixty eight billion dollars in client assets. She says, despite recent market of volatility, there's still plenty of investment opportunity.
Volatility is a place where we need to lean in to do me. We are in volatile markets. We're not going back to a benign market environment, and so in that space, we have to be prepared to create diversify content and capability that's able to navigate these markets to provide outsized returns or alpha returns to our investments.
How do you do that though, because when you look at the strategies that Man Group has a lot of systemic strategy, systematic strategies, a lot of trend following strategies that we've seen over the last few weeks and months. Does not necessarily perform optimally when there is so much misdirection going on in the market.
Totally, totally, and they're not supposed to. I think that's the thing that we need to be mindful of. In a diversified portfolio, you're going to have assets and capabilities and strategies that do perform. And we've seen that in credit, we've seen it in great active equity management, we've seen it in multi strats. But you don't see it in trending because that whip saw and whiplashing behavior doesn't work
for it. But that's why when clients are talking to us about how do they position their portfolios, they're looking at the things that will operate in markets as we're seeing, and they're also thinking about defensive alpha. And what we do know and what we've had history around, is that when you have decades of experience in momentum and trend they operate well when this volatility slows down and then you can find the trends again.
Do you expect that volatility to slow down anytime soon?
I think that volatility is going to be here for some time. It's whether the volatility is accompanied by whiplash behavior and that's what the markets are looking for, that consistency, something that is predictable and capable of being predicted. But there's no doubt that the opportunity sets across markets are really interesting right now. One hundred days ago, you might not have thought about Europe as a growth opportunity. We're looking at Asia with a very different set of lenses.
We're seeing real opportunities for active and alternative investments. And it's about staying calm through this time as well. But volatility, will it be here for some time? I think so. Dispersion yep, I think so. But whiplash hope not forever.
I don't loo if you got a chance to hear what Scott Besson had to say at one of the milk and panels here, but there was a really interesting moment where he really turned to the audience and looked straight at them and said, we're trying to make everything more appealing for you, meaning for the investors out there that are in this room. Do you find any comfort in hearing those words out of Scott Besson?
Absolutely, we want this biggest deepest capital market to function really, really well.
We just also good.
To work by our clients to go and seek out alpha wherever that may be that outperforms across all markets. That's why we trade eight hundred plus markets in the world. That's our job to do that, and we do that for real individuals who have saved all their lives, who put into their pension pots, be their four one ks or they are raised. But yes, I think it's a tremendous statement that we have Scott Besson talking to us about actually being supportive of markets. I think that's a great thing.
Is that too little, too late?
This is a room full of people from around the world, and you know there's been a reallocation of capital, or at least a rethink of whether to reallocate capital away from the US to Europe for example, or even to other parts of the world.
To not too late.
I don't think so. I think we all look to the quality of the US as an investible space. Again, it's the opportunity set that's out there. Is it a bad thing that there's competition. Is there's a bad thing that there's growth in Europe or an opportunity set in Asia that's opening up.
I don't think so.
In the same way as I don't think it's a bad thing that we're seeing the opportunities in private.
Credit open up.
So I think there's plenty for us to keep our very detailed focus on. But no, I don't think it's too little, too late.
How do you keep your team, the folks who work under you, not just motivated, but to get them to understand what the long term goal is in an environment where we are so focused on these minute by minute, short term disruptions.
I think the.
Reality is you have to be you have to have confidence in the strategies you're running, and you have to know that those strategies are performing the way they should do in the market environments you're in. So you keep that focus at man group. If we have strategies that aren't working in a period of time, I don't have to go on to the floor and make people feel more unhappy.
They're doing that themselves.
So for what we do, it's about being sure that we're doing the best we can do. We continue to be at the cutting edge entrepreneurially of content and product and capability that we deliver.
That to our clients, that we deliver.
More than just funds or products, even to clients that we're delivering the decades of experience we have in AI or technology, or we're delivering the nearly twenty years of experience we have in our partnership with the Oxford Man Institute at Oxford University. It's about keeping people focused on the day job. It's about staying calm.
You mentioned AI, and of course Man Group is probably one of the early adopters, least in the finance space of AI, and I think we spoke about this at Bloomberg at best a few months ago. Does that become more critical in times like this having those types of capabilities or is it potentially a liability because you're effectively talking about I don't know something that's I don't want to say it's pre determined, but certainly there's a roadmap that's put out when it comes in these models.
Listen.
I think AI is a tool. We talked about it before. It is a great capability. When I think about generative AI and I think about AI agents, it's about deploying those. It means we can be better, faster, smarter. Doesn't replace the human being, and it doesn't mean that you need to ignore the risks that are incumbent in these capabilities too.
But I do.
I think that tech is part.
And past of what the future looks like. Undoubtedly AI part of that. Undoubtedly you don't have to look very far in this conference to see just the power and the capability of these future technologies.
You think the investment in that writ large, not just said Man Group investment in that AI tech that hasn't been disrupted at all. There hasn't been a rethink on that longer term investment opportunity.
Else We continue to think that AI and will continue to think that this is both being consumed within Man Group and within the work we do, but the broader reach outs into other industries and other spaces is going to be I think transformation.
You've been on the job for a while now, so you're not new, You're more of a veteran now, and you're a veteran at a time where this has to be one of the more challenging times to be a corporate leader, certainly of a financial company. And I am curious as to what you want to do to grow Man Group knowing that the world order that you came into, not over, is certainly being reshaped.
I think the great this is a privilege to sit in the seats we do. And I've been talking to clients NonStop really for the last one hundred days or so, and that privilege is something we shouldn't forget. You get a front row seat into what's happening in the world doing the jobs we do. And so my job, how has it changed in the last hundred days. It hasn't really. It's still about doing the right thing by clients. It's
still about sticking to the strategy we have. It's still about creating diversified or sootable and correlated content so our clients can benefit and can return value to their underlying savers and pensions.
Our thanks Demand Group CEO, Robin Group, all right.
Well.
Also top of mine this week was access to private credit. Given market uncertainty, I got to say, remain private credit always a big topic here.
The companies that get private credit loans are looking increasingly wobbly in banks are among those that could eventually be on the hook for those losses. For his take on the environment, we spoke to Steven Tannenbaum see this Golden Tree Asset Management founder and chief investment officer, overseeing almost fifty seven billion dollars for institutional investors so.
Right now spreads HyG which is the ETF, it's pretty much unchanged, yet the expectations for the economy have shifted down. So right now the market doesn't seem to believe that there's an issue, but predictions and the environment certainly doesn't reflect that.
So roundtrip, are we back where we want to be?
Or are we back at a place that's very different from where we started.
So I think the real issue is, is this twenty twenty two where the concerns about a recession are overblown and we're going to play.
Through this very much the resilience.
Ad Treasury Secretary Besson talked about it.
Or are we in for something.
That's more turbulent and that the expectations that the economy is slowing is actually going to be realized, in which case spreads do not reflect that.
When you look at how much spreads did increase in early April and then narrowing, that's a current sense similar to the rebound that was seeing in e public equity markets here, I.
Think there's certainly are complementary. There's been more dispersion in the equity market, and particularly in mid and small cap than what we've seen in the credit market, which has really been pretty much technically recovered pretty much to the levels that they were before.
When you're looking around right now and you've see what's already on your portfolio but also new opportunities, do you have some sort of transparent price to starting right now or are things kind of money?
In terms of the stuff we're doing now, there's always an idiosyncratic I've been a portfolio manager for thirty five years. There's always something to do. But in terms of the market that interesting, there's no fullmo of not participating. But we're going to get more evidence about how things are in the next forty eight weeks. And I'd rather be tighter with more confidence or believe that the market reflects the uncertainty.
So you don't want excitement, you want boring.
No, no, no.
I rather have a lower price with excitement, higher price with boredom, well said.
Well said, are you looking to do capital raises because you anticipate there's more opportunities to come once things settle down.
We're pretty good with capital, so we have our catchers mitt and also we're pitching some deals.
You know.
One of the things about this current environment is there's the m and a and some of the acid sales that private equity was expecting isn't coming realized. There's a wider gap between buyers and sellers. So one way to return capital to LPs is through dividend deals, so we want to facilitate that.
I am also curious we have seen spikes in terms of credit spreads widening. I think about the last month, the moments of stress here. Do you think that's it for this year? I mean, the volatility has been immense, and I understand what you're saying, the difference between the public and the private markets, and I'm curious which one is.
Right through at this So I remember during the UBS Credit Swiss and it lasted for maybe a day, and there was a good reason because the dynamics of that deal that were onerous to the Credit Swiss junior deadholders that you could extrapolate that, and it turned out because with the Swiss regulators different than the rest of Europe, you could pretty much isolate that. I think it's very
different in the US. It's still developing. And then there's also there's a tariffs with our allies and who we have very healthy relationships, and there's the more developing relationship with China that is unclear, and those are two different discussions and how they turn out we're going to see.
That was Steeve Tannenbaum, Founder, managing partner and CIO at Golden Tree Asset Management.
Still ahead on Bloomberg BusinessWeek, FCC Chairman Brendan Carr on incorporating private investments to grow wireless communication across the United States.
This is Bloomberg Business Week.
This is the Bloomberg Business Week Daily Pod. Listen live each weekday starting at two pm Eastern on Apple CarPlay and the Android Auto with the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station Just Say Alexa played Bloomberg eleven thirty.
I'm kel Master along with Romaine Bostik.
We've got a special edition this week of the weekend edition of Bloomberg Business Week. We are highlighting interviews from this past week's Milkin Institute Global Conference, held as it always is every year for twenty eight years in Beverly Hills, California.
And while tariffs and market volatility we're certainly top of mind this week at Milkan Technological advances and the US dominance in them well. That also featured prominently among their discussions.
They certainly did with thoughts on how the Trump administration is working toward generating eighty billion dollars in government revenue helping the US better compete with China.
We caught up with SEC Chair Brendan Carr.
President Trump has been very clear he wants to unleash America's private sector to build again. If you look back the last four years, so many infrastructure projects got down in dreams of red tape. We saw it with this forty two billion dollar Internet infrastructure plan that went nowhere, and so we've directed us to deregulate. In fact, we've engaged in the most massive deregulation effort at the FTC
that we've ever done. It's underweight right now. We've closed and looking to close two thousand dockets that have been opened. But probably the most important thing we can do for the economy right now is spectrum. These are the airways that your smartphones use. We made a lot of progress. I thought they're in the first Trump administration. We fell behind a little bit during Biden. We needed new hundreds of megaherts out in the marketplace. That's actually deflationary is
going to drive down prices for consumers. It's being pro competitive too.
Those dockets, I mean what actually the accelerated that? What was the outcome?
Yeah, So right now we're targeting all of those, we're seeking comment on it. We've already closed over one hundred dockets. We're doing a massive deregulation initiative, and permitting reform is so key. You know, we have these rules on the books that forced broadband providers like AT and T to invest billions of dollars in old copper line networks, where we're taking a fresh look at that so they can
move that investment over to high speed IP networks. So it's effectively moving billions of dollars of capital into new neck networks. So these are some of the economic agendas that we're running at the agency.
So what's the timeline on all of this.
It's a lot to get through, But what is the timeline that you guys are looking at?
It is our directions move on Trump speeds that we're moving very quickly. In the first hundred days already we've taken action across many of these fronts. Also national security, we set up a new Council on National Security. At the FCC, we're making sure that we're not vulnerable to threats that come from communist China, for instance. We're looking at making sure that people can make and manufacture things here in the US as well. So we're running a
full economic agenda. We're pretty proud of it.
What are you hearing from members of the telecom community about what they can do in terms of manufacturing here in the United States.
Yeah, there's a lot we can do. For instance, no piece of electronics can be used in the US unless it's tested in a lab, but so far as seventy five percent of those testings take place inside China. So we're looking at steps we can do to resure a lot of that testing as well, and that'll help give US manufacturers a boost.
How long would it take to do that, you know.
I think it can be pretty short order. We already have some of that testing here already, so we're taking steps to sort of further do it. But these are just you know, parts of the pieces we're running at the FCC. It's a really important agenda. Again, we've got to unleash America's private sector. They were held back too long by different red tapes and regulations permitting reform. Again, as I mentioned, a lot of state and local regulations
still slow down internet builds. There's a role for the FC to step in there and help clear the way. But spectrum, permitting, reform, deregulation, that's the driving agenda at the FCC. I think it's gonna be great for the economy.
How unified is this approach from the administration.
Is the FCC a.
Part of that?
Yeah, for sure. Look President Trump was put together just an all star team, particularly this second administration. Everybody is fully aligned. They're executing the president's agenda. You mentioned AI. I mean that's gonna be the use case that's going to drive so man of these telecom networks. That's how we have to get more spectrum out there. That's all we have to make it easier to invest in these
new high speed networks. When you look at the data demands of AI, you know, data generally is going up to AI is going to increase through the roof.
Where do we stand though, on spectrum because I've heard that before. What's out there and even though some of the spectrum that has been released over the last few years, there have been some concerns that they might be causing an appearance, particularly with some of the recent incidents that we had in aviation.
Here can that sort of coexist altogether?
Yeah, Look, you know, thankfully President Trump has a playbook on this. In twenty seventeen, we had fallen far behind China. He stepped up and said, look, I want to lead in five G. I want to lead in six G. Who cleared hundreds of megahertz of spectrum? We fell behind China. The reality is we are falling behind China right now. But we have the playbook. President Trump is going to step in. We're working right now. Chairman Ted Cruz and the Senate is working hard to get spectrum across the
finish line. We can put it in reconciliation, and that's going to help pay for a lot of the efforts that people want to do in there. It's going to be eighty billion dollars or more to be raised if we start auctioning this spectrum off chare card.
What does this do for people who really don't have access when it comes to telecommunications are rural areas we so so much of this post pandemic. Everyone has talked about helping these areos for a long time.
How do you actually help those Americans.
Yeah, there's a couple things we're doing there. When we get more spectrum out that will bring people across the digital divide, will give people more competitive options. But also think about this new new generation of low worth orbit satellites. Whether it's Starlink, Kuyper just started launching, there's other providers out there. When we bring that together as part of the solution, that's really the long term key to bridging the digital divide in a cost effective way.
Well, that's interesting that you bring up Elon Musk Starlink. Does we know his certainly close relationship with the president. I mean, how much of the work you are doing is kind of focusing on his kind of technology.
Well, look, I think the space economy in general is probably one of our top three issues that we're doing at the FCC. We need to start moving much more quickly. It took years to get the permits necessary for a lot of the communications for these satellites. We need to be doing that in a matter of days and weeks. But it's not just Starlink, but they do it safely.
Though there is some concern about how many satellites are up in space at this point.
We just did a big deep.
Dive yere at Bloomberg about concerns about satellites coming down.
I mean, there is a process here. How do you do this safely?
Yeah, we feel comfortable. There's order, debre mitigation rules that are in place if we license all the satellites. At the end of the day, we feel very comfortable that we can still get thousands of more satellites out there. We get in. The new trend is direct to people's cell phone, and that's something it's just emerging. In fact, we've given providers authority to go higher power from these LEO satellite systems to get even better direct to sell capabilities. This is a really exciting area.
I want you to talk though, particularly when it comes to the satellites in space. There's obviously a lot of competition between nations for that real estate, if you will, in the air. The US obviously had the first mover advantage. China has been launching like crazy. India now trying to get into the mix. I've we're seen in other countries, including in Latin America, also try to find space up there. Does this become a conflict at some point.
Look, I think this is going to be a very important geopolitical issue is you know, China is trying to launch their own version of whether it's Starlink or Kuiper, and when they're able to pair Belton Road with high speed internet provided from satellites with their own CCP content moderation filters, that's a real threat going forward. And that's why it's so imperative that the SEC moved quickly to allow US providers again a full range of them to launch, to compete to provide coverage.
And so that's what we're going to do with the age than our thanks to FCC Chairman Brendan Karr.
Now from investing in high speed networks to leading the global race for energy independence and artificial intelligence dominance. It's another major goal for the Trump administration.
Michael Kratzils is policy director for the White House Office of Science and Technology.
He says, the.
Administration is all in on energy and overall technological dominance.
Yes, and something that the President is very focused on and something we as administration are committed to ensuring, as the President says, unquestioned and unchallenged global technological dominance and that's to require a lot of work from us, from R and D to DRAGGED to adoption.
So there's a tunnel working on.
And as the President signed executive Order just a couple of weeks ago to make sure that our K through twelve education system is geared to prepare our students for for this AI future.
What's the runway for that?
Because there's been a lot of talk about how much of brain power, if you will, already exists, meaning so for the adults out there, and how many people we need to sort of train up, meaning the next generation of folks to ensure that we have enough skilled people to take this forward.
The President realized that it's critically important that we prepare the next generation of Americans to wield and utilize these tools. So we began with this Executive Order on Artificial Intelligence in K through twelve and essentially is doing three things. I think the first thing and the most important thing is bringing together public private partnerships to support AI education.
It's something that we cannot do alone. We have great.
Industry partners that care about helping here. We have great folks in philanthropy, great folks in government, and the K through twelve system itself. The second, which is really exciting, is a Presidential AI Challenge. So we want to create in a sense, an Intel Science Fair or like a Doe Science Foal or Premier competition for AI that would ultimately end up in a event at.
The White House next year.
And lastly, if you said we have to train Americans, reskill them, and retrain them with the AI tools that they need to succeed in this economy, we're working very closely with the Department.
Of Late to make that happen.
And just to be clear, so the President understands that and understands the importance of a government role in facilitating this, because when a lot of people talk about our leadership in the United States from a technological standpoint, they point back to a lot of those post World War two programs that came out of the Defense Department at DHARPA and other sort of government research facilities that fed into university research of facilities and ultimately into the private sector.
Is that the playbook?
Yeah, So what's very unique about the American innovation ecosystem is it it's really it's three parts. It's one part academia, one part private sector, and one part government and all of them kind of pass the torch from one another to drive innovation. So the federal government often funds early stage, basic pre competitive research. Universities make fundamental breakthroughs or discoveries.
Those are ultimately taken up by the private sector and commercialized, and the government steps in to help create a regulatory environment for those new technologies to succeed and thrive. So we're going to continue to work on that effort and make sure that we have the best functioning innovation ecosystem in the world.
What needs to be changed when it comes to the regulatory environment. You've been on the record in the past saying that you thought that things were there were too many barriers, if you will.
What's in the on.
The agenda right now that this administration wants to do to lower or at least smooth out those regulations.
We really have to find and identify barriers which are inhibiting the preferation of emerging technologies. We want to be flying supersonic again. We want commercial drone delivery to be happen in the United States. We want self driving vehicles
on the road. We want aipowered medical diagnostics. All these things have been slowed down or hampered by a regulatory process, which may be good intention, but it's just too slow, and we need to continue to leave the world on this and doing this deregulation is a big.
Piece of the Trump agenda.
Do you see us primarily in competition with China on that front?
Look, I mean, we're a competition with so many people around the world. Everyone wants to be a leader here, and obviously the PRC has made it very clear of that they want to leave the world by twenty The US is in a very lucky position where we are the world leaders. So we need to continue to make sure we have an environment where we can maintain that leadership.
And university is going to be a critical part of that, are they not. There's been a lot of discussions about the president's attacks on certain universities, about some of the brain drain that maybe we might see as a result of that. How do you reconcile that The most important.
Thing about fairly funded R and D we have to think about is it's not about spending a lot of money. If you spend a lot of money on the wrong things, it's worse than spending a little money on the right things. So we're making sure that the biggest priorities for the nation, things like leading and artificial intelligence, leading in quantum information science.
Can we continue to fund those.
Areas and make sure that our universities are a big part of that agenda.
Terrorists.
I have to ask you about Tarik's Your president has made it clear he's tariff man. They're here, they're coming. Does that have an impact though, on what you're trying to do? Do you have to factor in maybe the extra costs to whether bringings in or reshot things.
We're seeing as some of the greatest technology companies in America in the around the world are coming and they're investing in the United States, A Secretary Vestin said this morning, more investments coming to the United States in the last one hundred days than it has in the four years under President Biden. So what we're doing is actually bringing these new technologies here in the US.
We saw the TSMC.
Announcements that's happening in Arizona, where we're gonna be building meeting edge fabs here in the United States, and so many more great investments. So I think we're in a pathway to really make sure that we have the tools that we need to keep driving this AI leadership position.
That was Michael Pratzio's policy director for the White House Office of Science and Technology.
And that wraps up our first hour of the weekend edition of Bloomberg Business Week from Bloomberg Radio. Coming up in the next sixty minutes much more from Milkin twenty twenty five. This is Bloomberg Business Week. I'm Carol Masterton, joined by Bloomberg TV ancho. Remain pastic to stay with us. Today's top stories in global business headlines aren't coming up right now.
You are listening to the Bloomberg Business Weekday podcast. Catch us live weekday afternoons from two to five pm Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app ord. Watch us live on YouTube plenty ahead.
In our second hour of the weekend edition of Bloomberg Business Week, Carol master here along with Bloomberg TV anchor Romain Bostik, highlighting important and smart conversations from this week's Milk and Institute Global Conference in Beverly Hills.
We were there. There was a lot going on.
Including a conversation with former Baltimore Mayor Stephanie Rawlings.
Blake on housing affordability.
First up this hour.
As we've mentioned, many of the discussions at the Milk and Global Conference this week highlighted opportunities during uncertain times. One of those opportunities lies in global real estate and how market leaders are capitalizing on distressed assets and real estate debt amid tightening credit conditions.
Discussing investments in real estate and American exceptionalism. Our Debra Kaparral German and CEO of Ventas, Justin Kennedy, managing partner and co founder of three six five zero Capital, Andrew Smith, Managing director of Bayview Asset Management, David Seinbach, Global chief investment Officer at Hines, and Barry starn Like, Chairman and CEO of Starwood Capital Group. They joined Carol for a panel from the Milk and Global Conference.
Here's Deborah kicking it off.
I still think the US is the principal best investment in the world, and we're on sale now.
We're on sale now. So by yeah, David, what do you think?
Well, look, without questioning, the US remains the largest economy in the world. I do think that a lot of things are getting reworked in the global economy. I think it's some things you're going to pick up in the session, and I think embedded in that are some deep opportunities as well as some emerging risk.
Andrew, Yeah, I would echo their optimism as well. I think that it is largest economy in the world. We are a little bit on sale right now, but overall, you know, I don't know where else you're going to go to get the diversity and safety of opportunities. Despite some of the noise we're seeing out there, Boy.
It sounds like American exceptionalism will exists by American.
Yeah, I'm hoping Barry's going to say something different.
I'm counting on it as I'm with.
The rest of the crew.
He's so shy, you know.
Biggest most efficient capital markets, Yeah, biggest most important market, energy independent and let's call it. If we take the secretary as it is, word this will get fixed. So US looks pretty good.
All right, what do you say, Barry?
I don't want to make anyone to be sad. I yes, we win by default, but that's not the way we should win. We should win because we're doing the right things and the world admires us and wants to invest here. So I think it's a little more complicated than that. You know, we are the largest economy in the world's for now. Yeah, I guarantee you China will pass us because they're quickly building bridges into all the countries that
we have offended. We also have food independence. By the way, we used to have stable, quiet borders, but they're no longer here either. So we shouldn't take it for granted where we are. And we have a thirty seven trillion on its way to fifty trillion, and that's going to require funding from the rest of the world. So don't be so complacent on our position in the world. The British had a pretty good run sort of the Holy Roman Empire, you know, we had one hundred years and honestly,
I look back and I talk about this sometimes. If we don't fix our education system, the destiny of the United States is not good. And I saw this morning Abu dhabviusly introduced AI into schools. We have to actually get with the program. We can't rely on historic innovations that also came from immigrants that run all our great
tech countries that we want in the country today. So you got to look in the future, not in the past, and I think we have a lot of challenges we are we should win and I promise these guys.
I was going to start macro.
But the one thing that I think is interesting and forgive me, and I can't remember who's said this, but it's Donald Trump being the right question. He's just not the right answer. And W you're nodding.
Yes, I would point out and agree with a lot of what Barry's saying. But if you think about our global leadership position in biomedical research, for example, where the envy of the world, there's almost a trillion and spend and whatever, the question is cutting fundamental research that's going to cure Alzheimer's is essential and has a huge multiplier effect on the economy.
I think part of what we're saying there's just a lot of noise that we don't know how to cut through that the communication globally on what we're doing is not really there. So I think we all believe that the ultimate goals are ones that get us to the right place. But how many people do we offend along the way, and can we kind of reel it in enough to make a difference.
You live in a classhouse, you have at thirty seven trillion dollar deficit. The deficit will easily pass two trillion this year. Even in the Trump twenty nineteen economy, before the pandemic, he ran a jillion dollar deficit with a three point eight percent unemployment rate. We were basically, as one of the money matags said, we were on the sugar highs. We can have a twenty year plan. Doesn't have to be overnight, but we have to have a
plan to have global confidence. And you know it's supposed to revenue and the expense side, so it's not a foregone conclusion. We should win. I mean, we are by far the best at most of everything we do here, and people envy this country. We have to continue to want them to envy. And the best and the brightest have to come here and we have to let them in. So we want all these fabulous people here.
Just one question on tariff's So is Tariff's than the right strategy? Is it right? This pushback?
I'm not saying the back and forth, but in general of saying terms have to be fairer.
I do think deals will get cut. It's going to be time. It's probably take more time that we probably appreciate we're gonna have to live with this in between period of a lot of just uncertainties that businesses are pulling back to wait to see what plays out right. But I think even on the other side of this, it does feel like there will be more friction costs in the global business of trade. After you squeeze all the toothpaste out of the tube, it's really hard to
put it all back in. And so I think we are going to be living in a world of more friction costs. And I think that, though, to me, is a broader theme of degabalization that we've been watching for several years now. This is simply deglobalization playing out, and this is going to be one of many things that investors have to think about and navigate.
All right, well, let me just ask you guys.
Are you optimistic in terms of when it comes to real estate investing?
Yeah?
Actually for real estate yeah.
Yeah, you guys are pretty up.
Are you optimistic?
Maybe the outlier here?
You're going to be the out Well, that's opportunity for you.
We think so.
But it's at the same time a risk factor for
the markets. We see a situation where real estate has really changed fundamentally across a number of very important hurdles that people they have to think about in terms of their investment strategies in the current environment, particularly looking at the commodity part of the asset class, and maybe people up here maybe in a little bit different place relative to specialization Endeavor's book in the let's call it a plus plus targeting at hines as we look at the market,
these types of strategies have been very successful the same time successful at the same time, the commodity part of the market has suffered a huge shift in demand, and.
What s the class you're referring to.
All industrial has had a shift in demand to the positive side. Multifamily is kind of a more complex picture that's really regionally guided. But both retail was really the both retail and office where we first saw let's call it the impacts of technology changing, let's call it the core utility of properties. That these are markets where we're been through fifteen years of re equilibration in retail and we're just at the start of looking for equilibrium in
the office markets. On the commodity part of the asset class, you know, just a quarter mile away here on Avenue the Stars, the highest rents the highest occupancy ever seen. Same it's true in Park.
Avenue in New York.
Yet downtown Los Angeles is having the essentially an existential moment in terms of, you know, our tenants able to pay rents that or rent's able to be achieved that are at all the creative at any price for those assets. Month one year of rent on Centric City buys you a building in downtown Los Angeles. And this is a very new place for the markets, and this is what
we're concerned about. And then you know, the questions that this poses for let's call it traditional real estate strategies we think are pretty significant.
So that's a dispersion.
David, Well, yeah, as I also think, you know, what's happening in the market is this dispersion. But what's compounding that and I think investors need to be thinking about this in terms of the next couple of years, is new supply has really been cut off, right, interest rates move five inner basis points around the world, and the
development does not pencil anymore. And so so many projects around the world have been now stalled, stopped for now, and that people forget how long it takes to build things. You just don't throw these things up. I mean, there's the planning, there's the consent, there's all the things that have to happen locally. Then you have to actually do the construction.
And so I think that what.
We're going to see in this environment is right now is certainly a time to buy, not build, and there's some great opportunities on the buy side, but what people are not watching is the fact that we're not building anything, and that will drive even more rent growth for the
best in class and will become the big opportunity. So a thing I think investors miss, and this is a common you just see this through cycles, is the market is now in a buy phase, and which is great, I think again, I think it's a great opportunity, but they're going to miss these early development signals that will start emerging because the best margins and development are early in the cycle and they diminished as a cycle wears on.
So that's this turning point that we're not there yet, but I think it will be coming in the next eighteen months.
Say, I mean, I think most investors know the supply picture for real estate. If you're sophisticated, you know the multi stack is going to drop sixty percent, industrial stacks down seventy percent. Nobody in the right mind would build an office building lest it's a build to a suit for at tenant. Today hotels are still trying to build, but constant capital is so enormous that they're struggling to
make the numbers work. The lending markets, which Justin is in and I mean angels, so I mean they'll lend us money for office buildings at four or five hundred over, We'll say no, thank you. It's higher than massive negative leverage on the dead side.
But it is.
One of the most important premises of opportunistic investing in real estate is replacement cost. And you can buy almost everything pretty cheap here and with the land at zero and it's just a question of what it's going to cost to keep the building whatever it is tenanted. But
it is interesting to me. I started this new hotel brands One Hotels in Baccarat and we're not a commodity and because of that, we're like one hundred and fifty one hundred and seventy percent of a fair market share in every market we operate, and we're in like fifteen or twenty markets. Now it's happening in real estate too, and people are running office buildings better. She's running her
senior housing and assistant living and senior stuff better. Commoditization is leaving the table, and you have to do something better. It is really really interesting today how you take real estate and make it not a commodity. And it's upping the game on all of the operators in the business to figure out how to do in your assay class to steal market share because there's plenty of occupancy. You just have to be different.
That was Barry Sternlick, chairman and CEO of Starwood, Deborah Kafaro, chairman and CEO of Ventas, Justin Kennedy, managing partner and co founder of three six five zero Capital, Andrew Smith, Managing director at baybut Asset Management, and David Steinbach, Global Chief Investment Officer at Heines a panel discussion with Carol. The full panel discussion can be found at Milkin Institute dot org.
Lots of stuff check out all the conversations from Milkin as well. Hey, you're listening to Bloomberg Business Week coming up more from Milkin twenty twenty five with a look at individual companies.
This is Bloomberg.
This is the Bloomberg Business Week Daily Podcast. Listen live each weekday starting at two pm Eastern on Applecarplay and the Android Auto with the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station, Just Say Alexa played Bloomberg eleven thirty Carol Master.
Here alongside Romain taking for Tim Stenevik. This week, we're continuing our coverage from this year's Milkin Institute Global Conference held in Beverly Hills. Let's continue now with a look at how individual companies are navigating global economic volatility.
First up, Crudential Financial.
It just released its quarterly results, beating expectations and that's a big deal after the company missed expectations in five of the past eight quarters.
Yeah, it was a change in trend.
Prudential Financial, by the way, manages about one and a half trillion dollars in assets, so definitely a bell weather in the financial services environment. Andy Sullivan is the company CEO. He joined us at the Milk and Global Conference.
The underlying fundamentals were strong in the quarter. But that said, the reason I said what I said is we have so much more opportunity as a firm when I look at our under underlying capabilities, our people, our brand, you know, and then the long term tailwinds that our business mix positions us for retirement and private credit. Right, we can do more and we can deliver more for our stakeholders.
You did say I'm the all and you tell Blimberg, we've deployed capital.
As a company and not produced a return that we promised and communicated on public calls to our shareholders.
That must change. How do you get there?
And how long does it take you to kind of consistently provide the earning spectre that you'd like to to present to investors.
Yeah, well, so there's two sides to this, right, there's the organic side and then there's the organic side. On the organic side, I'm a big believer. You say, what you're going to do? You have an expected return level for the organic capital we deploy, and then it's it's about executing and executing well, a lot of that is about focus and making sure we're not spread too thinly as a company.
On the internetre were you spread too thinly?
And we were in so over the past five years, we've exited a number of international markets. We now have a portfolio of you know, we're in the markets we want to be in. We're in the largest retirement insurance and asset management markets in the world, but we were in too many markets and we were sub scaled. Unfortunately. You can look at that and say, well, that's not a big deal. There's that much capital deployed. But it's a management focus this year, right, Something funny.
I mean you bring that up. In prior to your being named.
I know there was a lot of talking Credential about leaning deeply deeper into that with regards to the potential for retirement income to be a major growth driver.
Is that still the case under your leadership?
Oh?
Absolutely, it's probably our best growth driver in the company. You know, whether you're talking about in the United States where where we call peak sixty five, where ten eleven thousand people are retiring every single day.
You know, a lot of work has.
Been done on accumulation in the US market, but not as much work on how to help people with protected income and decumulation. That's why I think you see this convergence of asset management and insurance, in particular in the annuity space, because there's such an opportunity, there's such a large gap in the market. But it's not just a
US issue. We're a major insurer in Japan obviously, with the aging demographic there and the fact that those citizens have almost most of their assets in the banks, they need the exact same.
Help with regards to the relationship you have with the pension finds and the deals that you make with them, so that are they offloading the risk to potential are you absorbing that risk?
So we're actually a primary writer of the of the annuities product you may be referred to. We've we've expanded our capabilities with a reinsurance capability. Really what that's about is we need to bring additional capital to the space. You know, just being if you're just looking at the mutual insurers or the public insurance, there's not enough capital to back the liabilities that really need to be put into the market to provide that level.
Of protected income.
So a lot of what you see is about bringing capital into the space.
I want to ask you about your asset management business PEGUM in particular. You guys report a net INFLOWCE of about four point three billion in the first quarter.
We're now fairly into the second quarter. How are things looking right now?
Well, I will say that the volatility has an effect. Right when you have policy on certainty and it creates volatility, business decision makers and individuals start to slow up on their decision making. We saw that in the month of March and we've seen that continue into the second quarter. You know, from an institutional number of transactions perspectives. So we have a we're the third largest real estate company
in the world. If we were on this nice trajectory of recovering from the lows of real estate, but what we saw in March and into the second quarter is a slow down now in transactions.
How well do you expect that to continue?
And I know it is based on we're all like the million, you know, tillion dollar question in terms of what we expect. Do you feel like things are settling down in terms of what we are hearing the cues from the White House?
Well, I would say, you know, from the conversation this morning with the Treasury Secretary, you know it is about when do we see these first tariff deals come into place. You know, I'm not going to be able or here to predict when that is. But what we're hearing from our clients is they want to stay invested and they and they would want to stay leaned in. So whether that's months or quarter is hard to say.
That was Andy Sullivan, CEO of Crudential Financial.
Another company we were able to highlight at Milkin this year's jet manufacturer Bombardier, the company posting guidance for twenty twenty five, again indicating it can navigate through an uncertain economic environment. Raman and I caught up with the company CEO, Eric Martel.
We got we've been here many many years actually, you know what, Milk, and we're doing this every year. We have a lot of our customer here, so it's an importunate need to have conversation with our customer and so this is a great conference. You know, there's a lot of interesting topic I would say we discussed these days. So we are happy to be here again for I don't know how many times stop counting.
Well, you know, but you are what's great about talking to someone like you are someone who's really.
Leveraged the supply chain across North America.
And I'm curious, what are some of the lessons that you've learned from building that out that maybe you could share with other folks who are looking at maybe I've got to do it, but it looks like it's just insurmounting.
I think in the early days of COVID, I would we talk about fall twenty twenty. We've made a very different decision at Bombardi. Instead of cutting people in supply chain, we had people which was very different than the normal crowd.
So I think that's what explained probably our ability to.
Better forecast over the last couple of years the number of airplane were delivered. So we have a very proactive approach trying to see problems coming up, like eighteen months before they come so that you have time to sort them out. So it's been serving us pretty well. We're not perfect, you know.
We still have things sometimes that come out at the last.
Minute, but so far we've worked very diligently with our supplier base, which we have five thousand supplier total, so which is brings some complexity, but it's been going fairly well so far.
What's the man like And let's start with the airlines first out side of the business, because several of the big carriers, not necessarily the ones that used embrayor use Bombardier jets. I basically said, look, things are going to be a little slower than what we thought in terms of passenger travel. Have you seen any real ripple effect of that down to the types of jets that you.
Sell yet, So, as you said, we're focused on business aviation, so we just do private jet. But clearly COVID was an accelerator for our environment. A lot of people, you know, go back to twenty twenty. In the summer of twenty twenty, a lot of commercial flight were rounded.
You know, a lot of the aizone did not happen.
So the people who could afford it maybe didn't buy their own airplane, but they about shares you know, from fleet operator and hours and started to fly private.
So we've seen an explosion of hours.
If I look at the hours our jets were flying in twenty nineteen, today it's about forty percent higher, and it's the new normal. It's been going up another three percent since last year. So clearly our business it was it created a new normal of activity and since then it's been just growing, keep growing.
So what ails the airlines does not necessarily affect your company, your customers in the same way.
They're little different customer base. You know, the people that buy our product are chairman CEO.
Either they have a company in the US, so they will use a smaller jet, or they have a global company and I don't know, they're in New York today, they need to be in Singapore next day and come back to Dubai three days later. So this guy, it's a very efficient tool for them. You know, they will never be able to do that flying commercially.
Can I ask you about the new eight thousand jet? Is that going to enter service this year?
It is?
Actually so we stopped flying the airplane. Now we flew the airplane. We have all the testing done. Now we're working with the authorities, you know on engines, you know, with g because you know, most of our customer base, supplier base sorry, is in the US, twenty eight hundred supplier in the US, and we are working with all these guys to get the eight thousands sotified by year end.
We're pretty excited because this is going to be the new.
Flagship of the industry, the biggest airplane in business aviation that flies further, faster, higher.
Than anything else that exists today.
Wait, so I'm just curious going back to busines, jet orders and companies in their environment. Are you seeing orders fall off from companies at all that as a sign of holding back to work, But it is something that, like I think we're looking for different indicators, like when it comes to what's the health of the overall outlook in a world where certainly at milk.
And everybody keeps talking about uncertainty.
You know what, it was very similar in the first quarter to what we saw three years ago when we hand the bank crisis, about three or four weeks of uncertainty and you know, we assemble the airplane in Canada, so there was question about the tariff I was going to work.
There was a bit of lack of clarity.
But as things clarified around the quater, we've seen things re engaging normally. So right now we have quite a bit of activity, you know here this week, but also you know, worldwide, I would say Middle East is very strong, APAC remains pretty strong, to Europe maybe a bit more slow, but.
The US is doing fairly well.
Eric Oth, you want to ask you President truck meeting with the Prime Minister of Canada Mark Carney. USMCA came up several times and the Prime Minister is stressing, you know, the importance of that agreement. I am curious what kinds of opportunities that integration specifically has provided you guys.
I think if you have a good trade.
Agreement, it is a good trade agreement already, and I think I understand exactly. The President of the United State wants to revisit that and we're I think our government will be fine doing so.
I think it's been a huge leverage from.
The three country that are part of the agreement over the years. Actually aerospace, even before NAFTA in nineteen seventy nine, we had a free trade agreement worldwide, and I think there's an aerospace you know.
Of course we assemble.
We're being seen at perceive as a Candian company, which I'm extremely proud of, but we are really a North American company. I have twenty eight undred supplier in the US, twenty eight hundred and many in New Mexico, also made in Canada, so overall we've done extremely well.
Altogether. It's a great business.
But it's important, you know, this is not something we can change overnight. It's going to have to take time if we want to move things around, bring back work into the US, which we still have a lot today. And it's interesting, despite being Canadian today, I have like if you take the global seventy five hundred today, forty two percent of all the cost of the airplane is US.
So because we do build a wing, which is one of the most important components here in Dallas, and we also buy the engines from ge.
La Fayel, right exactly. So if he wants to buy what is it, the new eight.
Hundred, it's eight thousand. It's out of my price range.
But I'm sure he's got some brother more eligible customers lined up.
We gotta have a discussion after you.
Know what, maybe one day I can train Eric. It's been a pleasure.
Thank you. It's been a pleasure to thanks to both of you.
That was Eric Martell's CEO at Bombardier.
Still ahead on Bloomberg BusinessWeek, the debt ceiling still called X date kicked down the road but for how long? Plus we tackle the housing affordability crisis in the United States with the former mayor of Baltimore.
What's more to come from Milkin?
This is Bloomberg.
You are listening to the Bloomberg Business Weekdaily podcast. Catch us live weekday afternoons from two to five pm Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app, or watch us live on YouTube.
I'm Carol Master along with Romaine Bostik, a special version of Bloomberg Business Week, our weekend edition this week, where we bring you highlights from our coverage of the Milkin Institute's Global Conference, held annually in Beverly Hills.
This past week, Treasury Secretary Scott testified before a House appropriations hearing in Washington and said the Treasury is on quote the warning track toward exhausting its capacity to stay within the federal debt limit.
We should point out the Treasury Secretary also here at Milk and making an array of comments about the US. Meanwhile, the head of the nonpartisan Congressional Budget Office suggests the Treasury has a few more months before exhausting its cash to keep paying its obligations in full and on time, thereby avoiding a potential default.
For more on that potential X date, we spoke to CBO director of Philip Swagel.
We still have it as late in the summer, you know, into August into September. It's of course It's possible that it can come forward depending on the continued revenue, especially in June, but for now we're comfortable with our later date that Congress has time to act on it.
The revenue you're seeing coming in, at least in the most recent mouth, you're encouraged by that.
You know, it was tracking reasonably well with our expectation, and this is the projections that we made back in January and February that the revenues are still in line with that.
One thing I want to ask you in terms of real deficit reduction, because one of the things that just did a global real estate panel and the thing that they are most concerned about seem to be the growing US deficit. What real constructive work are we doing to really reduce the deficit and what kind.
Of pain might it impose on US citizens?
Yeah, it's you know, I've seen the Treasury Secretary talk about that. He was here at the Milking conference this morning, I'm talking about it. He is writing in the Wall Street Journal about it, and so I know he's focused on it. I know the administration is focused on it. And it's important, it's necessary. It doesn't have to be done immediately, but that sense of this should be reassuring to the American people.
Why do you say it doesn't have to be done immediately? Many would have said ten years ago, fifteen.
Years ago, we would have had this conversation and talked about kicking the can down the road.
And here we are again. Why is it not an immediate problem?
No, No, you're exactly right that in the past there's been an urgency and then the lack of follow through, the lack of action. And that's part of my message is that we do as a country have time because the rest of the world still sees us as a country that's stable, that's secure, that's growing. There's lots of volatility in the US and the policy environment now, and that's a negative. We still have the trust of global investors and that's what gives us time.
How competent, though, are you right now? And your economic projections? The Treasury Secretary specifically called out the cbo'sgen projections of two percent or so. He's saying, in his view, that number should be closer to three percent.
What's the gap? Why? Why does that gap is?
Okay?
No, No, the gap is understandable because what CBO is doing is projecting the economy under career law, and what the Treasury Secretary's doing.
Is completely appropriate. He's saying.
With the president's agenda, you know, he says, we, you know, we the administration have a pro growth agenda. He thinks that will be successful, and of course all Americans hope it will be and that will boost economic growth, and if it does well, then that will be good for everyone. We're looking we're just looking at different things. So as we're looking at what was the economic trajectory before the President's agenda.
They're the balance though as well.
So we don't quite know which policies will become law or become real. I know that's going to take some time, but we do know the contours of this administration a crackdown on immigration, which immigration, of course, to a certain extent, has been a net positive at least on aggregate.
GDP growth in this country.
There's also a lot of issues when it comes to the IRA which the Trump administration is trying to scale back. When do you factor those impacts in and the potential drag on growth?
Okay, no, no, you're putting your finger exactly in.
The important question is that all of the change is happening, both the executive actions and then the legislation being considered by the Congress. How will those impact the economy? And so the executive action you mentioned on immigration, that affects the labor force, that affects the economy, It affects the federal budget. We are tracking that. It's still a little bit too soon to know what is the long term
impact of that. Is the decline in immigration temporary or is it a long term factor, And that's the kind of thing we are tracking. Our next update will be late spring, early summer, and we will build in that the IRA all the other changes into that next update.
You know, many economists that would in terms of immigration the importance in terms of feeding the labor market, providing a younger population. They point to Japan, they point to places like South Korea where folks are not having babies anymore, and even in America in terms of the small families
that people are having. So I understand what you're saying, but a lot of economists have done the research for years about the importance of immigration in terms of the health of economic growth for a nation.
Yeah, yeah, I know. It's it's what makes immigration a difficult issue is that it's both an economic issue, and you pointed to the key economic factors, but it's a social issue. It's a political issue. People worry about crime and safety and then local communities, and it builds together all those things. And then there's high schooled immigration and low skilled immigration and those are connected as well in
the policy space. So that's what makes it a difficult thing, is because it brings together so many cross currents in our society.
I am curious when you guys think about the outlook you do have. We're an earning season and we've been reporting on it, and you do have companies come out the two scenarios because they see it as one potentially where we are no growth or in a recession and so.
It doesn't look so good.
We have another where things look pretty normal and we're back to American exceptionalism. Tell us about the scenarios that you are planning for, because that's very different.
In terms of the US government with.
The fiscal pasture.
Looksi O, No, you're right, and we at CBO have the same dilemma as the companies to try to figure out which trajectory are we going on? And of course there's a spectrum between them. You know, we suspect the volatility of the last month will lead to slower business investment, reduce capital inflows, reduce foreign investment in the US. That will tend to have a negative effect on growth. On the other hand, if there are trade deals, if there's changes in regulation that are pro.
Growth, that will go in the other direction.
And that's where we're looking at, is to try to figure out the balance between the sort of the downward pressures, the volatility especially and the upward of the president's agenda.
Is there a balance or meaning one way or the other based on what we've seen so far, it's.
Just too soon because there's a sense in which we have all the volatility, we have all the negative parts, and now we're waiting on the positive and that I'll just say. You know, we posted our first cost estimate for the reconciliation Bill of the House Armed Services Committee. So there's lots more to come as the different committees in the House do their work and we will analyze it.
But it just gives you an education.
There's a lot more coming.
There's a lot of legislative activity, and that's the part that's still.
To be written.
That was CBO Director of Philipswegel.
Now, as we get ready to wrap up our coverage from the twenty eighth annual Milk and Institute Global Conference held in Beverly Hills this past week, now, one more conversation we wanted to bring to you on something that is very relevant and has hit the nerves of many across the country.
And that is the lack of affordable housing.
It's been an issue we've talked about though for a long long time.
Median home prices now approaching more than six times the US median income, and if you're renting, you're spending more than the third of your income on rent alone.
For more with the government as well as what the private sector can do to help alleviate the housing crisis, we spoke with Stephanie Rawlings Blake, Airbnb Housing Council Chair and the former mayor of Baltimore.
One of the things that I took out of the panel that we had is that it's going to take all.
Of us right.
Airbnb understands, for example, that they're not the cause of the housing supply shortage, but they can be a part of the solution. As a mayor, I knew that I didn't cause it, but I had to be a part of the solution.
And some of the.
Developers and private equity folks that were on the panel, they have to understand that they have to be a part of the solution as well. So it's an all hands on deck.
You know.
We talked on the panel that we're short in this country over five million homes and we're not going to close that gap by doing what we did yesterday or a decade ago. We have to think critically and with more innovation around how to build more, how to build faster, and how to build better.
How do you hug the city though grapple with economic growth, similar to what Baltimore went through where you had this huge resurgence, companies coming back, people moving back to the city. Of course, that also drives up typically real estate prices as people look for homes.
So if there's a balance, right, you want.
To reap the fruits of getting all those people back into your city, but at the same time, you don't want to shut everyone out who maybe isn't at a certain income level.
Where's the balance?
So I always look for the win win, and when you talk about bringing people in, that's always a good thing. But in Baltimore, like many cities, we have a circuit breaker, meaning the value of your home year over year could go up one hundred percent, but your property tax will only go up a fraction. And that allows people to stay in their homes and reap the benefit of wealth creation through their home. But they are also things like repurposing vacant homes. I think we need to think differently
about vacant homes. Yes, they're they're are black, but they're also an opportunity when home ownership is so far out of reach for many of America's young people, we can look to rebuild and these vacant homes as a way
because the infrastructure is already there. Right, cities like Baltimore were built for, you know, over a million people, so that infrastructures there, the people aren't there, So how do we look at those vacant homes as opportunities for families and young people to become homeowners.
Stephanie, I love that you went there because I think people are like, just build homes, build homes, build a five million homes. It's not just about building them anywhere. It's about building them where people need them, and they tend to be cities which tend to be expensive, So as soon as the build.
Happens, it's often expensive. How do we fix that.
How do we get developers, politicians, everyone to say, let's build where the housing is needed, and let's make sure we make it affordable.
How do we do that?
So cities like Baltimore are incentivizing affordable house incentivizing repurposing vacant homes. That was one of the projects that I started as mayor, my Vagans de Value program that our current mayor has taken on and made it his own. So we need to do things like that where we're
creating incentives like down payment assistance. The president of Don Hopkins at speaking here at Milk and they give employees like match for Max, They're giving their employees thousands of dollars and down payment assistance if they move around the university. So things like that, and we have to look for innovative ways to promote financing of these of affordable housing as well.
That was Stephanie Rawlings Blake, Airbnb Housing Council chair and the former mayor of Baltimore, and.
That reps up our special weekend edition of Bloomberg Business Week from Bloomberg Radio at the Milk and Institute Global Conferences past week. You can catch all the conversations from the event on the Bloomberg and at Bloomberg dot com.
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