This is Bloomberg Business Wait inside from the reporters and editors who bring you America's most trusted business magazine, plus global business, finance and tech news. The Bloomberg Business Week Podcast with Carol Messer and Tim Stenebek from Bloomberg Radio.
All Right, we keep saying it over and over again. Get a twenty four hour news cycle with a lot of news out of China. And I feel like I've been saying that for the last two or three weeks. And our Balance of Power newsletter coming out today noting all roads no longer lead to Rome, they lead to Beijing. And this as US Commerce Secretary Gina Romando was wrapping up her trip to China. Yeah, the UK Foreign Secretary also arriving. That's the most senior British diplomatic visitor in
five years. Russian President Vlatimir Putin's likely to visit as well in October.
That's a big one.
Yeah, to meet up with President Ji and so there's a lot going on.
Yeah, we're really glad to have back with us for some analysis, for insight on the situation, also for the market and business outlook of China. We've got Andy Brown with us He's the former editorial director at Bloomberg New Economy, and he spent three decades in Asia as both China editor and a columnist for The Wall Street Journal. Today, Carol Andy leads the China Hub as a partner at Brunswick Group. It's a critical issues advisory firm. He joins us on Zoom from New York City.
Andy, So good to have you back with us. We've been dying to talk to you because you really always give us some clarity on everything that's going on. So as our Balance of Power newsletter said, all roads no longer lead to Rome, They lead to Beijing, are they right?
Well, first of all, it's great to be back on the show, Carol, tim always to be with you.
All roads lead to Beijing.
Certainly, Gina Raymondo's road led to Beijing and by all accounts a very successful visit. The Chinese take Gina Ramondo very seriously. They trust her, They seem to have a good relationship with her. They find her pragmatic, relatively non ideological. And this is really quite remarkable given that Gina Raymondo is at the sharp end of US economic engagement with China.
Right She's the one that presides over this proliferating regime of sanctions and export controls and tariffs, which, of course this administration inherited from the last one, and the Chinese finders deeply threatening. Nonetheless, she had a pretty good visit, and her main message was no, no, no, we're not here to kill you. We don't want to put you out of business. This is not decoupling. This is de risking, and that's a very different thing.
Well, what did you make of her comment that she argued that China is driving away American companies by making investments in the world's second biggest economy increasingly hazardous. She said that, Okay, here's the quote, Andy, I know, you know it. We talked a little bit about it yesterday. Increasingly I hear from businesses China is uninvestable because it's become too risky. This is what Gina Ramando told reporters Tuesday when she was aboard a high speed train from Beijing to Shanghai.
Investment flows have been flowing out from foreign investors.
Well, she said the right thing, and that's what they need to hear because quite often in China, the CEOs of the companies that are investing there don't dare speak that kind of truth to power. And so you know, it takes a gene Raymondo to go over there and and say, look, we have a we have a problem, and businesses certainly do have a problem now in China. It's still I think it's significant though. The second part of your commentry, she went on a high speed train.
You know, that's that's interesting, right, That's that's kind of a common touch.
She hopped the train to go down to Shanghai.
The Chinese would have liked that.
They showcased, you know, really unbelievably efficient two hundred mile an hour of four and a half hours from from Beijing.
That Songhai, which is like unbelievable.
We don't have that here in What is it about her that resonates so well with Chinese officials, Well.
I think they feel that they can talk to her and they're going to get a straight answer. And that really was you know, and she she also you know, she she's she's constructive, right, so I thought, actually, she she handled it in a really smart way. She said, look, let let's start by with confidence building matches. So one of the things that she's agreed on is that the United States and China are going to promote.
Travel, right, tourism.
So who can disagree that it would be a good thing if more Americans went to China and more Chinese people came to the United States. Right, It builds trust, builds understanding people to people relations. You know, these countries have been separated now for three years under under lockdown.
Very few flights.
Now, I was in Beijing a couple of months ago. I was actually staying in four seasons hotel. Only foreigner in the in the whole hotel, right, I mean, the airport is half empty.
We need more interaction and it's.
Just a great place, a smart place to stop.
Well, Andy, talk more about that, and give us some anecdotes from your recent trip there, because you've spent so much time in the country. Uh, I know this is post pandemic. You went there kind of during the pandemic too, when you were helping with you know, with the Olympics for NBC. But but just give us the differences that you see now based on your recent trip.
Yeah.
Well, I mean you've got to go.
I mean you have to go there to feel this, the sense you get by talking to people on the street, my friends, people in the business community, people are kind of in shock, you know.
I mean I understand this.
You know, the the the the you know, the consumer confidence has really been shattered. I mean, people, I think feel really kind of discombind this disoriented.
I mean, what just happened.
You know, we went through a three a three year lockdown, and it was quite painful. I mean, you talk to people in Shanghai. They're suffering from something like post traumatic stress disorder.
Right.
These are these are you know, middle class, upper middle class families that didn't know if they were going to spend that night in bed in their own homes or be carted away to some isolation center, or if their kids would be taken from them, or if guys in white hazmat suits were going to burst through the front door, you know, and drag them out or put a lock
on the outside of the door. They didn't know sometimes if they could even feed their families, right, And they've been so used to a government that looks after all this, that you know, is focused.
On growth, focused.
On on you know, on.
Development, and it just seems like, you know, they're lurching from one blunder to another. And you know, the business, business confidence obviously is has has yet to recover, and the and the confidence of foreign investors. And that's what Gina Raimondo was was speaking to. You know, people got so used to the idea that Chinese supply chains were secure, right, and you could put them all in China. That's what Apple did the whole lot. And look what Apple's doing now.
You know, it's starting at the margins, pulling it out, you know, putting it in places like Vietnam, India. It's all about now de risking.
Back to Andy Brown, we go as you as we said earlier, he leads the China Hub. He's a partner over at Brunswick Group. Hosta with us on Zoom in New York City and you had the break.
Yeah.
My question, my question, Andy, is if China is doing so poorly in its attempted recovery from three years of lockdowns, if the consumer is so weak, if the concerns about shadow banks crumbling and not paying people back, do American companies really want to invest in China?
You know, Tim, I think it's so important to put this into perspective. China is not collapsing, okay, China is suffering from what some people.
Call the four d's.
You've got a demographic crisis, you have a debt crisis, you have a decoupling problem, you have a deflation problem. The headlines look terrible, and it is extraordinary.
China.
The Chinese economy is barely growing right now, and the US economy is steaming ahead.
I think it's growing what six percent?
A complete role reversal.
Right, but.
China is the world's second largest economy, and it's going to be the second or third largest economy for decades to come.
Right, it's not going away. I think what we can expect.
Big, big, big picture, a starting now a period of slow relative decline. Businesses still must be in China, right, they can't ignore China, and particularly the businesses that are relying on China for future growth luxury, chemicals, auto and so on. In those industries they're pouring investment in.
They have to.
I mean, you can't be half hearted in China. You've got to be all in because the competition there is really good. So if you're there and you're dependent on growth, you have to invest to keep up with the market. You have to invest in technology so that you're able to compete. And in fact, some of these companies have an aggressive strategy of investment. It's called in China for China right So they're buying local companies, they're investing in technology.
If you don't have to be in China right now, you don't want to be in China. If you've never been in China, you're certainly not going to go there for the first time now. And if you are in China, money investment that you might have put into China over and above the need to fuel and fund your footprint there, you're now looking at that money and say where else could I put it?
Should I put it.
In Vietnam, or in India, or in Mexico, or I might say here in the United States, which is one of the hardest investment destinations in the world right now?
So do you believe and in your consulting that you do with clients, Andy, I mean, is it right though? For the US and nations throughout Europe that have slapped trade and regulatory penalties on China. You know their claims that it's coercive economic market behavior, if you will, are they right to do so? Especially when you've got the world's second largest economy kind of going through tough times, like what's the balance between that.
Yeah, you know, look, Carol, I mean it is in nobody's interest to drive China further in where the country is looking in with now right and they feel threatened, they feel under sieged.
This is in nobody's interest.
It's in nobody's.
Interest now to exacerbate its economic downturn. It's in nobody's that China should want to build its own institutions and undermine the global US led system, so, you know, and they do feel that they are under siege.
And look, I get it that there.
Are internal trends in China that you know, are encouraging this move towards in you know, this this focus, a relentless focus on national security, but can one also has to understand that China is responding also to actions that the United States is taking that make it feel that the world of the United States is out to get them. So you know, they look at this meeting that the curtain Camp David with Japan and South Korea and the United States, and this just adds to the sense of containment.
So that's not in anybody.
And there are a lot of people that are saying, look, you know, maybe it's time for a time out on some of this. You know, would it be such a bad idea to lift the tariffs on China, which, after all, I'm achieving any of their objectives of narrowing the trades up plus and in fact of being paid for in the end by the US consumer. And frankly, I think that this was this was something you know, some of that sentiment is is exactly what Gina Raymondo was expressing in her visit to China.
We do the United States and China does two billion.
Dollars a day of trade, you know, and she said, look, this trade is good for China, good for the United States, and good for the and good for the world. So you know, let's let's put some of this in proportion.
And because can I just wait, follow if the world's second largest economy creator, we're going to feel it right here in the United States.
You are, but it's not going to create it, Okay. I think the way to think about it is that, you know, China is a giant, right, it is an economic giant. It's it's manufacturing sector is bigger than the United States and Europe combined. Okay, and this year it's going to It's going to leap ahead of Japan to become the world's largest auto export. It's gobbling up the
world's evy markets. It's a giant, but it's a giant with a weak heart, Okay, And that's going to make it less mobile, it's going to make it more prone to crisis.
But it's still a giant.
Andy this This is Secretary Romando's trip is coming at a time when we learned also that Vladimir Putin has agreed to visit China in his first trip since the ICC War crimes warrant was issued back in March. How should we look at China's embrace of Vladimir Putin and how that affects relations between the US and China.
Yeah, this is this is an interesting visit. This This will be his first truly internet. He's been to a couple of neighboring countries in Central Asia, he went to Iran, but this is the first major international trip that he's taken since the International Criminal Court and A indicted him on on on war crime charges earlier this year. And what this is telling us is the Chinese are not giving up on Vladimir Putin. He was and remains what chi Jin being calls my best friend, regardless of you
know what's happening in Ukraine. And look, I was in Beijing. You mentioned the Winter Olympics at the beginning of the beginning of last year, and this was where they hatched their no Limits partnership. Right on the opening day of Beijing Winter Olympics on February fourth, you know, games finished on February twentieth. Four days later, February twenty fourth, the tanks and armor and troops roll across the border into Ukraine, and ever since then China has been giving Russia diplomatic
cover in the Ukraine. The bottom line is that they can't have Putin failing in China. It would be a severe blow personally Tsijim, but also the way they look at it in China is, look, you know, if US led NATO win here, win next, all right, and and so you know, bottom light, they cannot allow him to fail.
It's complicated, right Andy though.
It's super complicated because they're paying a pretty heavy price for this. And we talk about business investment. European business is looking at looking at China. Now they're reading right over from Ukraine to Taiwan. And saying, you know, we made this big bet on Russia and look where it got us.
And you know we make making an even bigger bet on China.
Governments are looking at European governments are.
Looking at China in a very different way, you know.
I mean, this is Putin is Europe's public enemy number one, and this is you know, Chi Jinping's best friend. Having said that, I mean, there's there's quite a bit that they can salvage out of this number one.
You know, they're going to have a role.
They they will have a role in any peace agreement, and they'll certainly have a big role, one would think, in the reconstruction of Ukraine if and when we finally get a peace in that country.
Yeah, all right, listen, thank you so much. So appreciate it. We know it's all been busy for everybody, but so do appreciate whenever we get time with you. Andy bwall Andy Brown, as we said before, leads the China Hub as a partner at Brunswick Group and former Bloomberg colleague,
former editorial director at Bloomberg New Economy. But as we said, three decades in Asia, China editor our communist for The Wall Street journal, So his experience is on the ground experience and really understanding it all.
We have the data. We like to get the anecdotes from Andy two from his trips there totally.
You're listening to the Bloomberg Business Week podcast. Catch us Live weekday afternoons from three to six Eastern Listen on Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business App. Well, want us Live on YouTube?
So would you want to talk about the Hurricane Adela?
Is it right to daily Hidelia?
Delia too?
Sounded great in my ear anyway. More importantly, knocking out power to one hundreds of thousands of customers, grounding more than eight hundred flights, unleashing floods along Florida's coast far from where it came ashore as a category Threames three storm earlier Wednesday. So we've been all tracking it. I'm sure you all have seen it on news, no doubt about it.
Yeah, and Carol, you know, we track how much this stuff costs very closely because they're serious economic implications for disruptions and for repairs caused by storms. We talked about it with Hawaii. Estimates two are starting to come out about the cost of this storm, and key research says that IMMED lead to ten billion dollars in losses. And we know our team has already warned about FEMA running out of money following the fire in Hawaii.
All right, so let's get to it. Lee Mayfield is with us. He's director of Response at the Emergency Management Consulting from hagrid Y Consulting. Also the former director of Public Safety and Emergency Management for Lee County, Florida, which includes Cape Coral and Fort Myers. He joins us on the phone from Tampa. Also with us as Rob Caroline. He's a Bloomberg News meteorologist. He joins us on the phone in New York. Rob, I do want to start
with you. What's the latest on the storm and what you are seeing.
We're seeing in the process of working its way towards the Brunswick, Georgia area. Carrol, It's now causing wing dust in the vicinity of Brunswick. It's sixty miles an hour at Douglas, Georgia also reporting sixty mile hour dust moving off to the northeast at twenty miles an hour. There's a tornado watch that's an effect from the coastal areas of northeastern Georgia, along the South Carolina coast and into southeastern North Carolina. That's up through nine o'clock this seasoning.
The worst of the weather in regards to rain is north and northeast of that center of circulation that's west of Brunswick, Georgia. We're going to see four to eight inches of rain across that area over the next twenty four hours, which is going to lead to flash flooding near the core of what was the eye of the storm. That's where the highest winds are. You just mentioned the power outages. You look at the track map, you look
at the power outages. They match right up from where it when inland at each Florida this morning and where it is now. Over the next six to twelve hours, the track will change from northeast to east northeast, so it's going to allow the storm to move across northeastern Georgia then up through eastern South Carolina tonight. Computer models the latest ones coming in have the storm then exiting the US coast just east of Wilmington, North Carolina, around seven o'clock tomorrow morning.
So after seven o'clock tomorrow morning, rob Is. I mean, the worst of it is behind us.
The worst of it will behind us. We'll notice that it's probably going to become a strong tropical storm overnight because the core is still inland. So what's happening is those wings of one hundred and twenty five miles now made landfall this morning are slowly winding down. We'll probably still see some dust up over hurricane fourth strength leader tonight into tomorrow morning, especially along the South and North Carolina coast. The outer banks will probably see those type
of wings. But once it gets out into the Atlantic, all the really heavy rain that we're seeing north and northeast of the center will push out into the Atlantic and the flesh issues will go away. The only remaining issues will be some winds through midday tomorrow along the coast of North Carolina, and it's not as far south as Myrtle Beach, South Carolina.
Hey, one thing I want to get into Listen, we have storms, and we've had, you know, my whole lifetime hurricanes. We have hurricane season and I'm not playing light to it. And I you know, there's lives at risk, and hope everyone that is in the path of this storm does okay.
But what I want to get to with you, Lee, and then Rob way in on this as well, is in terms of what we increasingly are seeing in terms of the frequency, strength, force, and the impact and the amount of damage done by storms, and how climate change plays into it. Lee, how are you thinking about it bigger broadly and what worries you?
Sure?
Great question, you know, I think it's it's been almost a year since Hurricane Ian last year in the southwest Florida area, and here we are again. So I think this is part of our new reality. We've seen to have had a very busy five year period, especially when it comes to these devastatingcanes, and this one is no different.
Idalia is an incredibly catastrophic storm. So I think really brings front and center this idea of resiliency and recovery and what does that look like moving forward as we see more of these storms?
Well, what does resiliency look like?
Does it?
Does it look like actually people not living in places there they've traditionally livedly.
You know, it's a team effort. You know, this business and emergency management and resiliency takes a lot of different players. You know, local jurisdiction, state, federal government. NGO's private sector funding is a big component of this. So I think that's something we have to seriously look at how we fund these larger projects as we look towards resiliency and mitigation moving forward.
Well, and Rob come on in come back into the conversation in terms of the frequency and the volatility and the damage and the strength that we are seeing increasingly with the storms that impact the United States and really the world at large, but the US that we've seen, I mean, look at what happened on the West Coast. A storm just doesn't happen and there it happened. Just
was it a week ago or so? Should we be thinking as a nation about not building on certain areas because it's just getting tougher and tougher for people to exist there.
Well, that makes sense just from the fact that you know, barrier islands of the coast are temporary landforms. You know, they're not really meant to be built on. The last time we saw a hurricane or tropical storms at the West Coast was September of nineteen thirty nine. One of the things we meteorologists are aware of, and the hurricane cycle is there's a thirty year cycle with hurricanes, so the last peak rands through the nineteen fifties into the
nineteen seventies. We had a tremendous amount of storms go up the East coast. In the nineteen fifties we had Hazel, Carrol, Donna. They all occurred in less than ten years. We're now in the midst of another very active cycle that should start to end in the mid twenty twenties. It's been running since the mid nineteen nineties and starts to decrease around twenty five or twenty six, so we've got a couple more years with that. The other thing that we really have to take a look at is the oceans
on this planet are getting warmer. We're in a very warm cycle. The exist to do one thing, move heat from the tropical regions of the world to the polar regions. That's why they move around the Bermuda high They take that excess warmth that develops over the oceans during the summer and pushes it to the poles their heat engines,
so they're trying to redistribute heat. The warmer the oceans are, the stronger, these systems are going to be and the other thing I've noticed I've been doing this for a little over thirty years in my career, the fact they are intensifying much more rapidly. From Katrina in two thousand and five becoming a storm of you know, incredible magnitude thirty six hours, it went from a Cat one to a Cat five. We had the same problem several years
ago with Irma and Maria. They became Category five hurricanes in just.
A few days.
This storm went over waters that were ninety degrees or warmer over its seventy two hours in existence. And that's how you get a storm to go from a Cat one to a Cat or overnight. It's lee ocean driving this problem.
Lead weigh in on that. Do you agree with with Rob that this is this is the warmer oceans are doing this and it's intensified throughout your career as well.
Yeah, we've certainly seen this idea of rapid intensification. It's just really a big fear even of emergency managers. You know, Hurricane Michael comes to mind, and this one here is no different this week. You know, you're having to make decisions very quickly when these storms rapidly intensify and that's something that is difficult to do from a timing perspective and definitely a concern that we're having to deal with more in our profession.
All Right, we're going to leave it on that note. Listen, guys, thank you so much for weighing in on all of this and giving us some perspective. So appreciate it. Lee Mayfield, director of Response at the emergency management consulting firm Hagridy Consulting. As we said, also former director of Public Safety and Emergency Management for Lee Keunny, Florida, and our thanks to Rob Carolyn. He's a well known voice when it comes
to covering what's going on in the weather. A Bloomberg News meteorologist joining us, both of them on the phone. One in New York, Rob there, and of course Lee in Tampa.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to sixty on Bloomberg Radio, the Bloomberg Business App and YouTube. You can also listen live on Amazon Alexa from our flagship New York station, Just Say Alexa playing Bloomberg eleven thirty.
Got a head bang going on in our studio, Hey, We're talking cities stores already beginning to trickle out from the upcoming new double Cities issue of Bloomberg Business Week, out in its entirety on newsstands tomorrow, online at Bloomberg dot com slash Business Weekend on the Bloomberg and Tim we heard one of the stories from the issue yesterday. It was incredible.
Yeah, it was about the seven hundred and fifty acre Jericho Gate development. It's part of the fragile real estate boom emerging in Palestinian territories. We talked all about it with the Bloomberg News Israel Bureau chief Ethan Browner, also Bloomberg BusinessWeek editor Joel Weber, who is also back with us today.
He is, indeed, along with the BusinessWeek Technology editor Joshua Brustin and Bloomberg City Lab editor David Dudley. So let's
get into the city's issue. Joe jointing us from Massachusetts, Joshua us here in our Bloomberg Interactive Broker studio, and David on zoom from our Washington DC bureau and Joel we were, you know, kidding Tim and I earlier that we kind of know certain times of the year we look forward to the city's Issue because you just take us I said it yesterday, You take us to parts of the world that maybe we don't talk about but we really should be.
Yeah, and this has like just been a little source of pride for us because we've long done a city's issue, and then Bloomberg acquired City Lab and we were like, wow, now we can really make cities issues even that much better. And obviously Josh led the effort at the magazine. And when we started talking about this, I was like, you know, we don't have to kill ourselves. We don't need to
go big. And Josh was like, actually, I was planning going to do like a full issue takeover, and I have like all these amazing stories, and I was like,
oh my god, this is going to be amazing. So he tested it, and I think, you know, part of the framing we wanted to look at here is look here, we are a couple of years after COVID, although hey, cases still ticking back up and and cities are still in that aftermath, and and we wanted to kind of like look at a few of the ways that that's continued to play out and then find some of those really startling amazing stories that I'm sure we'll spend a
little bit more time talking about, including yesterday. But Josh, where were the places that when you sort of architected and you started from blank white pages and these exercises like where did you want to make sure that we got to visit?
Yeah?
I think there were a couple of things for the last Today's issue. Actually, I had written about the idea of trying to build a new city from scratch, and so I know there's been a lot of effort around the world to do this. And on my list of places to look at was a place called Forest City in Malaysia, which is a city that is being constructed on what will eventually be if all goes according to plan for artificial islands, have about seven hundred thousand people
on it. And the interesting thing about this city is that it was all based on the idea that the Chinese real estate market is just booming. It was being built by Country Garden, which whose name you might recognize if you've been paying attention.
To the No, we never talk about it.
China real estate market booming and Country Garden are two things we talk about quite a bit.
Yes, we do go ahead so one of the islands has been constructed. There is uh, there's room for not seven hundred thousand residents, but certainly I think in the tens of thousands. And things have kind of ground to a halt. They've ran into trouble with COVID there. Now there's serious questions about demand, and so we sent a really talented reporter there to look around, to talk to people, and just to kind of see what is happening with one of these big audacious projects.
Yeah, that real estate element attached to China, and it just really was a timely look at a place that you know, I think we're all very very curious and concerned about. So David that I want to bring you in because the City Lub was obviously totally instrumental in this. There was there was an idea that josh and I were noodling, and then josh was like, actually I talked to David and we should do what they're doing. I
was obsessed with concrete. I was like, we got to do a story about concrete, like so much of the world uses that as a building.
Do you hear what Joshua just you just said? That's true.
I was like, let me tell you about concrete, Josh, But but David, tell us about where where we went with that initial Colonel.
Yeah, sure, and thanks for playing playing the fog at to get us in here. We are we are fools for the city here at City Labs. So so yeah, So we had this project going where we were similarly kind of intrigued by and sort of astonished by the amazing kind of energy intensity of concrete production, which is, you know, something like eight nine percent of all carbon released in the atmosphere every year, and it's rivaled by steel production, and in many countries brick production, which is
an even older material, is also intensely polluting. And so we had been dueling around with this idea of having a whole series about what we call the Stuff of Cities, which is just sort of a dive into the history and the past and the present in the future of the most essential building blocks of urban life.
And we were able to.
Sort of convert that idea into this really lovely looking kind of print and online package that looks at not only concrete and steel and brick, but also glass and asphalt and wood sort of the oldest material of the six that is kind of coming back into vogue as a kind of economically and environmentally useful building material for all kinds of skyscapers.
Well, David, I don't want to get jo upset since he's really into concrete, But what is replacing concrete?
Well, that's the thing.
Nothing can replace concrete.
It is.
It is this miraculous artificial stone that has been a absolute kind of foundational material since Roman times. What we can do is we can we can devise ways of making it a little less polluting and hopefully a lot less polluting eventually. Uh So, there are there are techniques to fire it at lower temperatures. You know that the firing process of making cement is intensely kind of energy absorptive.
Uh.
There's chemical processes that can involve. There's uh adding more recycled elements. Uh, and there's also sort of being a little more flexible about how you use it and using different kinds of concrete for different applications. The concrete that that the Romans used, uh uh to millennia ago was actually sort of kind of environmentally and much less destructive. So this kind of kind of kind of nerding out to the to the greedy.
Like concrete too.
Joel is that your dog.
Mute that one?
Go ahead, David, please find So.
So what we were sort of fascinated by was how sort of the history of these materials to sort of tracked human civilization and how we are kind of simultaneously in desperate need of more of this and in desperate need of finding a way to clean up these industries. And each of these sort of industries faces their own different challenges with sort of finding the raw materials and finding ways to make it less destructive.
All right, So we talked about building materials. There's again it's the city's double issue. So everything in it is about cities. It's a collaboration with Bloomberg City Lab Joel Weber. There's a story a column in here by Joshua Green. It's about how GOP legislators are increasingly imposing their economic and cultural priorities on left leaning municipalities, places where perhaps a lot of New Yorkersfornians have moved during the pandemic Nashville, Tennessee.
What's the latest dispatch from Josh.
So what's really.
Interesting about this one was this, And this was a story that major props to Josh Bruce Deean for collaborating initially on Josh Green on this one with Josh Green on this one, but this tension between blue cities and red states, it really came to a head earlier this year, and we asked Josh to go to Nashville, where so much of this has really been culminating, and give us sort of a dispatch, because one interesting thing about this is that blue city red state relationship has been actually
like an incredible economic arrangement that everybody's benefited from. But what we're beginning to see is that Red states are kind of cracking down and a certainly an authority on what heretofore been Democratic strongholds, and that alliances sort of or a relationship is sort of now in flux in a way that we're going to really have to be watching how this plays out, because GOP is looking for more and more ways to pick up not only like talking points that they can launch onto, but also ways
that they can affect change, and targeting Blue city seems to be one of the ways that they can see immediate reactions, with which totally happened in Nashville. Even though a lot of this has been pushed back on since mister brucetein What did I miss in that description?
That's a pretty good description. I think the thing that's interesting here is that, as Josh immediately found once he started calling around, was that this is actually an area where you've really seen the transformation of the two political
parties play out. You know, in Washington, Congress isn't passing much, but one thing we've seen in recent years is that a lot of red state legislators have gotten a lot redder, and the makeup of the legislators in that Republican majority has gotten much different, more populist, more aggressive, especially cultural issues. At the same time that city level legislation is tackling
really hot button issues. Criminal justice has become, you know, even more of a forefront over the last couple of years, issues around transgender rights. A lot of times, cities are passing, you know, things to expand those rights, and states are looking to crack back on that and so they have the power to do so. And it's playing out not only in Nashville, but in a lot of other places as well well.
And you know, I want to bring you back in, David, because I do wonder you guys at City lab. You know what goes on in cities increasingly, I feel like coming out of the pandemic, you know, recent political cycles. George Floyd like the fabric of cities. Yes, it's the buildings, it's the structures, but politics is so much impacting the landscape of our nation cities.
Well, absolutely, I mean, as Jah says, the dynamic that you see in Nashville is repeated a lot of different states. You know, Texas, West Coast cities, cities and sort of more conservative state lawmakers are tangling in Oregon, and uh, you know, it's it's a it's a phenomenon that predates our current political era. It's not new in that sense. It's also not a phenomena that's unique to the United States.
You see variations on this in Europe, and you know, it's a it's a it's a it's a tension that has always sort of kind of been kind of woven into the landscape. The the the nature of urban life tends to require a certain set of policy solutions, and there is often a real kind of pushback from community members who don't see those policy solutions as reflecting their values. And that has manifested its way in all sorts of
interesting and and troubling ways. It really kind of got weaponized in a dramatic way, certainly in the Trump era, but it's it's it's always been sort of kind of humming beneath urban relationships for you know, Millennia probably.
Okay, I got one more thing I want to bring up, which as much as I talked about concrete to Josh, the other thing was, look like I want to I want to feel like cities are working, that they have answers, that they're trying to improve people's lives, and that or there are other people who have ideas to fix them. And you know, we started with this idea of real estate a little bit and Pat Clark did this element that we kind of turned into the first thing we
had in ways to fix cities. And obviously we've spent a lot of time talking about the problems with commercial real estate and empty office space. And Pat came up Josh with such a novel idea rooted in a real estate listing that he saw what was the big takeaway that we all need to get hip with.
Yeah, this was a really great insight from Pat. I mean I started bugging Pat about doing something about converting offices into apartments. Early on in this you know, it's something that we've been talking about a lot. It's hard to say something new about it because everyone said a lot about it, and so I kept bugging him, and eventually he said, well, I've talked to a couple of people who came up with this idea, like, why are
we trying to make these things nice apartments? Why don't we just make them really crappy apartments in the same way that in the same way that in Soho in the sixties, you know, those sweatshops that they turned into lofts. Those weren't nice lofts, but people but tastemakers moved in
and they loved them. And so the idea is, like, what if we can just make you know, the fluorescent lighting and the gray carpeting be sort of the drafty windows and the exposed brick of the you know, of the Soho of today.
I love that because you're right, we spent so much time talking about it, and I just thought that take on it was incredible so much in this issue. Thank you all. I really appreciate it, and just incredible incredible issue, Credible cities issue. Joe Weber, editor of Bloomberg Business Week. Josha Bustein, Technology Editor Bloomberg Business Week, who really put this all together? Aloe with David Dudley, editor at Bloomberg City Lab, joining us out there in DC. Guys, thank you.
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All right, everybody, just for eighteen minutes left in today's a session and we're watching, you know, a market where you know, you read through the economic news and maybe investors once again thinking, okay, maybe the FED is getting near the end, because we've got a little bit of a rally. And what the S and P five hundred is it for our fourth.
Data where we fourth n L forty five to fourteen?
Yeah, so we're a both that forty eight forty five hundred mark.
Okay, so much for the August doldrums, Carol. Month to date, the S and P's only down one point.
What do you call them?
Always fireworks in August at least the last I would say last five years, six years. I don't know.
There's one more day of the month and we could we could potentially be you know, for the month.
There's some drama. We did see yields back off a little bit. You here Charlie talking the numbers. Let's see what Hank Smith has to say about this environment. He's CIO of the individual and institutional wealth management firm Haverver Trust. He joins us on the phone from Bradner, Pennsylvania. Hank, good to have you back with us. How are you and how are you thinking about the market environment right now?
Well, it's great to be with you. Good afternoon, and I am doing very well. Thank you. Look, this has been one of the most interesting years in my uh thirty eight years in this business. And you know there's that Wall Street added bull markets climb walls of worry, and that has never been more true than this year when you consider everything the market has overcome in terms of very elevated inflation at the beginning of the year, you know, the most aggressive said right, height cycle that
we've experienced in thirty plus years. Also three bankruptcies and the potential for another banking crisis, and concerns about commercial loan repayments, concerns about student loan repayments, and the market has just seen its way through through it all. And look, we continue to remain pretty optimistic and but recognizing that we could very well Carol have a relatively flat rest of the year, but the broad market do pretty well.
So in other words, that is the so called Magnificent seven stall out here, which they clearly need a breather. You could also see plenty of laggards pick up the flat. That's if the broad averages remain relatively flat.
Can I say there is a point like, if you're an investor, at least on the equity I'm doing plain vanilla. You're looking at a Nasdaq one hundred that's up forty one percent so far this year, and you're looking at an S and P five hundred that's up seventeen percent.
Mind you, I'm just doing the bigger, broader averages. You know, to kind of put it in the bank, take a money market or some kind of with you know, you look at what treasuries are yielding and just say I'm good in twenty twenty three, Like you can see why people might just take a breather.
Absolutely, but look, small stocks offer tremendous opportunities. The equal weight that s and P five hundred is half of what the market calculated sm P five hundred, So there are plenty of opportunities. And and even in terms of valuation, the valuation of the market weighted cap s m P five hundred is skewed by those handful of tech stocks that uh, that are that are driving the valuation higher. But if you look at the equal way of sm P uh valuation, uh, it's much more reasonable.
So where are the opportunities for the stocks that haven't yet had the room to run or haven't run yet this year?
Well, I think, look, it'd be it'd be very healthy to see a broadening out of the market. And we saw a little bit of that in June, uh and then uh it was back to the magnificent seven driving the market. Uh, you know after after June. Uh. So I think there is opportunities both in uh, in healthcare, which has been a lagger, UH, in consumer staples which have been a lagger, and and and we have uh, we have pretty decent waitings in those two sectors where.
Don't you want to be. Is it just those names that have really led the big outperformers. And I hesitate too, if I can just do a kind of a second question that every time everybody's like, stay away from the big tech that have led, and then they have another drive up that's significant.
Right, and and and and so this year has been a mirror opposite of last year. And who would have predicted that after sustaining those very significant corrections, those the tech stocks would come roaring back. But it's hard to get excited about buying those stocks after the kinds of moves uh they've had, So we would we would caution investing in that area. Uh. And Plus it's it's hard, you know, if you're if you are trying to beat the index, you need to own more than seven percent
in Apple and Microsoft. And if you're a fiduciary, that's very difficult. You don't you just don't buy that much in uh in two stocks.
That's a really interesting point.
Uh.
Okay, So I guess my question is about those sort of unknown unknowns. What's out there that concerns you?
Well, look, whenever you're growing a below trend line, as as this economy is right now, despite what the Atlanta Fed tracker is forecasting for the third quarter. You're you are susceptible to external shocks. The problem is you can never identify those external shocks. And certainly back in March with that mini crisis banking crisis, one would have thought
at that time, oh, this is an external shock. And yet the market low or nearly the market low for this year was the day Silicon Valley Bank went bankrupt. And you could never have then said, let's buy stock. We're going to be up fifteen percent from here over the next handful of months. Yet that's exactly exactly what happened.
So I think the concerns about the beginning of the repayment of student debt, it's a concern, but I don't think that's going to be a big factor that is going to affect the economy one way or the other. And people have been talking about it for months now, so that's not a big issue.
Ten seconds, Hank new mind, put it in the equity market, put it in cash, put it in treasuries. If you had to pick the two those three, where do you do it?
Well, it is as long as you're as long as your time frames three to five years put it in equity.
Interesting, Okay, are you holding cash though a lot for your clients right now? Really quickly?
Uh?
Nook very little cash. But I can tell you the clients where we have a balance between dot com bongs have been very very happy with the driving.
All right, good stuck, Pig Smith. Thank you as much as always, Cio of ha Her for trust. On the phone from Radnor, Pennsylvania.
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