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 Stenebeck from Bloomberg Radio.
Now in our weekend broadcast that will air this Saturday, Matt and I talked with Marcus Shaw, presidency at ALLT Finance, on increasing the presence of HBCU students working in the ALLT Finance world. We talk a lot about diversity, Matt, in all walks of finance and business and more.
And so do you executives.
I feel like, certainly coming off the pandemics, certainly coming off of George Floyd, diversity, inclusion, belonging has been top of mind.
Yeah, yeah, absolutely, And as it is Asian, American and Pacific Islanders a month, we're focused in on that aspect of it. But of course we're always watching and doing our best to promote gender equit and racial equity as well.
All Right, We've got a great guest on that. LENEA.
Irvin is CEO of Cokequill, a global nonprofit think tank advisory group founded back in four really to address bias and uncover barriers to advancement for underrepresented populations in the workplace, and we talk about it a lot. We still have a lot of progress to make. Lenaia, thank you so much for being with us. Tell us attle bit more about your organization specifically. You know, I got that from your website. I'm not gonna lie full transparency, but a
lot of people and organizations are working on diversity. There's a lot of conversations and yet we're making progress, but it's pretty slow. So tell us a little bit about what you do on a daily basis.
Yeah, I know, a coke cool. So we're a global think tank and we've been around nearly twenty years and we'll be do as conduct research. So we have a great team of PhDs and quants and you know, storytellers. We use data to tell stories of bias and barriers that talent face in the workplace. How are the stories you know, some of them are. You know, they're challenging,
but they present opportunity. We have a task force of over one hundred of the world's largest companies, large multinationals, and we advise them on you know, diversity, equity, inclusion, best practices. We spend time with their leadership teams as they think about cultural transformation and how they can actually create the conditions for talent to thrive.
Right, Yeah, I want to go back. How are the stories?
You guys are doing the data and you're checking it and then you're obviously presenting it to these big companies that you're working with. Just set the stage for us because I think it's a good reality check in terms.
Of where we are right So, you know, we're here obviously we're focused on Asian, Asian, American and Pacific islanders this month, and you know, the stories that we hear when we look across talent, across lines of difference. You know, there's there's just this persistent set of barriers that often go unseen by leaders in the work environment, often go
unseen by you know, colleagues for example. So we just launched to study strangers at home, and you know, the study really does fill a gap in existing research, at least we believe as it relates to Asian, Asian, American and Pacific islanders, and we give a little bit of horror historical context, but then we bring visibility into the ways anti Asian violence has impacted this talent in the workplace. Outside of the workplace, we.
Have colleagues here that's certainly coming off a.
Worse over the past few years, Asian American violence against Asian Americans.
I think we've all witnessed a pronounced increase. And what we find in the data is because.
The pandemic specifically right and then it was coming from Asia. We have colleagues here that they had their spouse is picking them up because they didn't want them on public transportation.
Absolutely, sixty two percent of our respondents said that the increase in violence, you know, COVID nineteen has cautioned them and they're commute to work right, you know, nearly two thirds, nearly two thirds of Asian professionals say that this ongoing
violence has impacted their their mental health. More than half say that it actually impacts their their ability to be productive at work, their ability to focus at work, their their relationships with their managers and colleagues, who you know, they're bringing this trauma in and they're surrounded by colleagues and perhaps leaders that don't really know how to support them. And so just imagine you know, the the near term and longer term career impacts that could have.
Right, So what's the answer in terms of I guess education and policy. What should we do specifically?
I'm most sure, like curious about what moves the needle because we have so many conversations we all do, like you know, planning or are we do you know, certain training sessions and stuff to make it all better?
But what really moves the needle?
Yeah, you know, it's a it's a combination of things. We often put forth a framework. It's simple audit awaken act. So we encourage companies and leaders to really kind of audit the current state of talent within their their ecosystem, within their work environment, and then awakened to some of
the barriers you know, talent are facing. When we embarked on this study around Asian Asian Americans and Pacific Islanders, you know, the experiences of microaggressions that are unique to Asian talent really surfaced, and I think it's important for you know, everyone to kind of understand. So there's this
experience in two sets. You know, there's this experience of being made to feel the perpetual foreigner, right, so you know, having colleagues assume that you're not born in the US, or when you say I'm born in the US, they don't know where are you really from, right, Or they're telling you that your English is good, right, the assumption is that English is not your first language. So they
have this constant othering. And then on the flip side, right, a counter to that, which it's kind of derived from the model minority myth our research kind of frames as over validation, right. And again it's it's in the way that shows up is the assumption that, Okay, their colleagues think Asian Asian Americans are they work harder, right from a stereotype, they're naturally smarter because of their race, they're perhaps only good at math or science, and so they
feel pigeonholed. A lot of Asian professionals, you know this, Look, we can be considered subject matter experts, but they're not considering us for leadership, right, So they're kind of dealing with and you initially people like, oh, that might be a tail when they think you're smarter, but the harm comes in limiting your ability and can I.
Ask you something?
Is it?
You know in terms of as we all try to get smarter on all of this and be more inclusive and make more people feel belong like they belong in environments.
Is it different in.
Terms of the exclusion that Asian Americans feel versus Black Americans versus I don't know, LGBTQ community. I am curious about in your conversations with big corporations how they do they put all diversity and inclusion in one bucket Because I have a hard time too when we have like different groups for different people.
Because if we're trying to be inclusive, if we.
Keep branching everything out, that to me is exclusive rather than inclusive idolic.
So I can't get my head around it.
Yeah, no, so we do. We do encourage when you look at data, for example, within an organization, disaggregating the data data does help you to see where there might be varied experiences for smaller groups right in way of representation, you know. But what we encourage, you know, companies to do is really consider who might not be given the same opportunities for advancement or development just by virtue of
perhaps not being seen right. You know, we think about whether it's representation of women in the c suite or representation of LGBTQ talent or black talent, you know, thinking about Okay, how can you be not only great allies but sponsors to these communities across lines of difference, Because I agree, you know there's there are limits to saying, well this group, we target this group and only support this group, we target that group, only support this group.
I think where we win is look at the data, Look where there are we look where there are barriers, right, look where there is retention and advancement gaps, and say how can we better deliver for that particular cohort and make sure that it's something that's top of mind for all leaders.
Right, So in terms I mean, you're not just someone who runs a think tank. You've also worked in corporate America. You've been on the street, yes, at Bank America, leading a huge organization there. Do you think that we're making progress on this on the diversity inclusion issues in general as a society, And I wonder what your take is in terms of is Wall Street doing any better or worse than the rest of the industry.
You know what, I will say progress is being made. I'm sure there are many that would say that it's not being made fast enough. I might be in that camp, but I know what the desk looked like twenty years ago. I know what it's like to be the only black woman, you know, in that particular business, the only.
Marcus said the same thing when we had him on when he was you know, in his first financial firm.
Absolutely, and so you know those experiences and you build allyship and and you know with with folks there. But I do, I do believe that Wall Street is unrecognizable to what it was a couple decades ago. You know, there are there are not only c suite but CEOs at these firms who truly believe that, you know, the diversity within their ranks.
Groups, yes, Black Americans, Asian Americans, LGBTK.
It is it is.
Not only is it important and it is the right thing to do and align with values, but it's also a competitive necessity. We are living in a world of disruption, right You've got to be able to activate talent if you're going to compete. You know, it's an the exponential age.
We don't know, Marcus said, You've got to let your greed overcome your bias.
Absolutely. Absolutely, You're a number on the street before you're you know, a face or anything else.
Well, great to check in with you and appreciate you stopping by. Lenaia Irvin, CEO of Coke Will joining us. You're in studio.
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, or watch us live on YouTube.
So a tense appeals court hearing yesterday over the FDA's approval of the abortion pill force the agency and the myth of pro stones forgive me brand new manufacturer to clarify confusion over the agency's authority.
And regulatory processes.
We know that this has been going on meantime. Also this week, Matt, we had North Carolina's Republican dominated legislature upheld a bill banning the most abortions after twelve weeks. So there's a lot going on when it comes to women's reproductive rights.
Yeah, I mean, this is a huge issue and it's going to be name done yet it's going to be a big issue I think in the upcoming election, and the kind of thing that I wouldn't normally want to touch with a ten foot poll. So it surprises me to see Republicans getting so involved.
What's been on their platform for a long time, and they but.
They haven't been as as they haven't been as loud about it, you know, and I think they run the risk of alienating a lot of people and then just carrying the thirty percent that they always care no matter what.
So that's the political side.
So let's actually just get an update a little bit more with Bloomberg News equality reporter Kelsey Butler.
She's on the phone in New York City.
So Kelsey, I just gave some of the headlines, but gets up to speed and kind of where we are in this and kind of the trend that we continue to see when it comes to women's reproductive rights.
Well, we're definitely seeing a continued erosion of abortion access across the country. I just had a story out last week and since then there have been other restrictions that have passed. In North Carolina, there is now a twelve week band that will be going into a fact soon. So it's things are moving at a breakneck speed and evolving really day to day. And what we're really seeing is now really the south of the country, the Midwest.
There are large regions where there's really no abortion access for patients.
So, Kelsey, does that go hand in hand with support? I mean, you know, on the pro life side of things, they want women to have these babies, so I'm assuming they're also providing a lot more support in terms of daycare, a lot more support in terms of helping mothers raise these children. Are we seeing that?
We're definitely not seeing that. I mean, the US is far behind when it comes to maternal health, has one of the worst maternal mortality rates in the developed world, and we know that there is a childcare crisis in this country as well. These are all things that our team writes about a lot, so we're not really seeing in a lot of these places. They also rank really low on things like childcare supports for new moms pregnant people as well, So it's just compounded really bad situation.
Hey, Kelsey, last question here, what else is on the docket that we need to be kind of keep on our radar here?
I think the biggest thing is the current litigation on the abortion pill is the most common method of ending pregnancies right now in the US, and any limiting access to that will certainly have ramifications for patients. Across the country.
All right, really appreciate the update, because there's been a lot going on, certainly on this front. Bloomberg News Equality reporter Kelsey Butler on the phone in New York City. Well, the wrangling definitely continuing over women's reproductive rights, so too often a debate between breastfeeding and baby formula. Our next
guest has some thoughts on that. Let's get to Cecilia to Maury, Associate professor at the Johns Hopkins School of Nursing in the Bloomberg School of Public Health, Department of Population, Family and Reproductive Health, of course, the Bloomberg School of Public Health, supported by Michael our Bloomberg, founder of Bloomberg LP and Bloomberg Philanthropies. Cecilia joining us on Zoom from Baltimore, Maryland. Cecilia, I can't tell you how much we have been talking about this in the newsroom.
Matt scot a young daughter. I had a daughter, she's now twenty.
But you know, the debate between breastfeeding and formula, there's so much. Tell us kind of what's top of mind for you here?
Sure? I mean, I don't you know, I don't think it needs to be a debate I think that would be my first point. So, as an expert in the field, I think what we need to be thinking about is how do we enable people to be able to thrive, to parent, and to be able to feed their babies responsively, and to enable people to breastfeed if they desire for as long as they wish.
Isn't it advisable? And I know this sort of throws me into the debate in a sense, but isn't it advisable to breastfeed if you can it? Doesn't it provide the child with a massive advantage in terms of health and development?
Yes?
Absolutely. I think that the best way to think about this is that this is the feeding norm for human beings. We are part of the group of mammals. This is a very ancient evolutionary adaptation and so it is set up to essentially provide a series of protect and protective benefits from infectious disease to noncommunicable diseases, and it basically
has implications for the entire life course. What I think is lesser known is that there are significant implications for mothers as well, for ovarian cancer, for breast cancer, as well as for metabolic diseases. So it really is a system with many, many different components and with effects over the entire life course socily.
To be fair, Matt and I've been talking also, and his wife had some difficulties. I had some difficulties early on.
My way, which, by the way, I didn't expect. No one prepared us for the fact that it's hard, might be tough for the baby to latch, It could be very it could be painful to very painful, and we could eventually had problems like mastitis. She had fevers of one hundred and four degrees. We were back in the hospital two or three times. I had no idea this was going to happen.
And for women and for first time moms, there's enough going on with your hormones and there's a lot of pressure, So how do you kind of think about that, because it can be very.
Absolutely that is actually the point. So the work that we've been doing on the Lens of Breastfeeding series that came out in February and that was launched in April and the United States is exactly about this. So the argument that we're making is that it's not up to
individuals to address systemic failures. It's actually a societal, whole society of responsibility to enact policies that support people much much better than these experiences that you have just shared with me, which are very common and part of the reasons.
Why what do the work we do? What do you mean in terms of policies.
So a whole series of recommendations that we made, so we really are thinking about this as a systems kind
of approach. So this is multiple systems coming together the health system, so implementing a series of steps that we know work to actually support people within the health system, from the Baby Friendly Hospital initiative, to skilled support to communities, steps that follow people postpartum, to workplace policies, which I think we need to mention and highlight because as the previous reporter also mentioned, we are extremely far behind among
even wealthy countries. We are the only OECD nation that lacks federal paid leave and has minimal supports for people at the workplace when they do return to work. So many people are returns.
So insane considering you have, you know, a large group of people in this country that are so opposed to abortion and yet they don't back any kind of support for the resultant babies and The other thing that really grinds my gears, Cecilia, is that, oh, if a man and men had these problems like mass titis, which most men have no.
Idea about it, that babies, we wouldn't be.
Se and doctors would research and treat the problems better. Right. I would look back into the after my wife came down with this for the second or third time, I looked back into the research and found the only reason that doctors started looking into it at all was because cows weren't producing enough milk. It's truly unbelievable.
Erry It's an appalling situation, and that's one of the things that we actually call for is much more attention for healthcare providers in their training on lactation and interlinked to that, also, we call for regulations on the marketing from commercial milk formula makers who have been aggressively marketing products and undermining breastfeeding using a series of very sophisticated
and far reaching tactics. So what we're calling for is actually a whole societal policy approach that puts together all these systems, so the houses stem to the workplace, to marketing regulations, so all of this together to actually provide the suppurtse to enable people to breastfeed. So that's a very different kind of argument than I think the debates on social media, you know, suggest that is not at all what we are talking about. We're not talking about
individuals solving societal problems. We're calling for systemic change.
I got to say here at Bloomberg, they were very good and there was a place where you could come to work after I came back to work after Aggie was born, and you know, you could pump if you needed to, and made it possible to kind of continue breastfeeding, which was a really plus for me.
Cecilia, thank you so much.
Feel like we don't talk about this enough and feel like this was just a conversation that needed to be had. Cecilia Tomory, Associate Professor the Johns Hopkins School of Nursing and the Bloomberg School of Public Health, Department of Population, Family and Reproductive Health.
On Zoom from Baltimore, Maryland. Any final thoughts there.
I just think it's a good conversation to have, and we need to keep talking about it until we treat it like a real health issue and real support.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Easter 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 play Bloomberg eleven.
Thirty well as the debt ceiling and budget negotiations continue in the US this week. In the new issue of Bloomberg Business Week, out on newsstands, online at Bloomberg dot com, slash BusinessWeek, and of course, on the Bloomberg Terminal, the cover story is this week's remarks. It's about king dollar and how the crown is slipping on the US green back and dollar denominated assets thanks to a few things going on, including that debt sealing standoff, regional bank failures,
and a few other things. So let's get into it and to explain really the implications of America's self inflicted policy wounds with US. Is Bloomberg News Global Economy Reporter endacurrent on cam in our DC bureau. BusinessWeek Global Economics editor Christiane Lynblad to my left and the editor of Bloomberg BusinessWeek Magazine, Joel Weber to my right, both in our Bloomberg Interactive Brokers Studio Jiel. I feel like the
mighty US dollar. It's still rained supreme, but it's getting a bit tattered.
Yeah.
And as we were kind of talking about this story, it was like, wow, you just start to think about all the things that are poised to go wrong in the US. And I told my art department, I was like, just imagine this house where the floorboards are coming in, the walls are caving in, the debt ceiling, the ceiling
caving in. Sounds like Matt Miller's house, right, And uh that led us to, you know, take a look at this story from from uh Celeia Mosen and the Current, and boy, it just felt very of the moment as all eyes continue to kind of like go towards DC. And you know, this debt thing Matt is is bad, yes, and there's no resolution yet.
It's got to be worry worrisome to our allies.
And when you do this again and again and again, it makes I think a lot of people around the world go, you know, maybe this America thing isn't what we need as the gold standard here.
Absolutely. I also wonder about something like the Russian invasion of Ukraine and the resultant American sanctions, you know, and the demands that we put on our allies and our
other trading partners. Christina, how important is that because I noticed right around the time that started, the Saudis started selling their oil to China in un and so you know, for example, I talk about the Bloomberg Dollar index, that's probably not the deciding factor, right, the actual value of the currency, but what people choose to use in transactions is far more important.
Yeah, there's been a big push since the invasion for some countries, you know, to start using more of their own currencies or the currencies of their trading partners. And I think it is definitely a result of the US
trying to weaponize its leadership. It's basically, it's fingerprints are all over the world financial system, not just the use of the dollar, but the way it was designed, going back to Breton Woods, right, And I think you know, well, Russia, this was the first time a central bank was targeted directly, which with sanctions, So you know, Russia central bank, it's
offshore reserves were cut off. And I think other countries looked at this and said, oh no, you know, we don't want to be in a similar situation, but aside from de dollarization and the aspirations other countries have about their own currencies, I mean, I think it's it's it's the self inflicted wounds that we really wanted to focus on, right, Like even small things that add up, like the improprieties with stocked trating amongst you know, central bank officials, you know,
ethics questions in the Supreme Court. People sort of seem to think, oh, you can brush these things off, but they start adding up to the idea that you know, the US has this prestige right, and it's wearing down.
So into you.
You you're uniquely capable having been in Hong Kong for a while, and now you're on this side of the pond. What does it bring that international perspective to this? How vulnerable is US prestige in the American down So.
Even if a dead ceiling agreement is reached over the next week or so, the optics of this are just horrible for the US economy globally, and for US leadership and for US influence. And you know, one side subplot from this death ceiling drama was that President Biden couldn't go to Port Moresby and Papua New Guinea for an
unprecedented meeting with Pacific Island leaders. That might not send much to person on the street in the US, but those Pacific Islands are one of the fault lines for the tussle between China and US for influencing that part of the world.
Right.
It's Asian American Pacific Islanders.
Month, right, and they have a summer going on for Moresby, and the US President couldn't go there, and that's the direct result of what's going on. The other point is I have never seen a frenzy like we've seen over the past few weeks about talk of d dollar rization, both from the investment community, the academic community, and the policy world. And we all know the obvious counterpoint as well, there's no alternative. Everybody knows there's no alternative for the moment.
But I can tell you it's a talking point like it never has been before. And that reflects, I think, on the internalist function that we're seeing in US policy making.
I have to say, and you know, you know, go back. I don't know how many years, or I feel like even a year ago that the thought of the US really defaulting on their debt like that was just non existent. But it does feel like that there's a lot more momentum based on kind of these self inflicted wounds that we keep seeing that you just wonder what the heck is going on in this country.
Yeah, and by the way, if you just go back a few steps the blame game over inflation. There are rights and wrongst that story, but the point is the US missed the development inflation, and of course that spread globally because US monitor policy goes globally because the dollar is what's used to buy and paid for stuff all around the world. So there was US inflation. Secondly, there was the US banking shop, the biggest shock since the financial crisis that toppled one of the world biggest banks
over in Switzerland, Credit Sweet. And now of course we have this row over the debt ceiling where the US government is having to come out and tell people, actually, we're not going to default something. Really you never thought you'd have to hear them say so. As we try to articulate in the piece, nobody's arguing that there will be a default. Nobody's saying that it is the end of the dollar. But you'd have to say the optics of this are not good at all.
Yeah.
The quote from Sarah House of Wells Fargo definitely caught my attention because she says, you don't even need to actually default in the debt for there to be real damage to the economy. So walk through that, because, like I mean, obviously, the worst case in here here is
that somehow we do default, the US does default. But even if we don't, all of this could be really bad, right, and maybe worth mentioning some of the Bloomberg economics data that you guys were able to incorporate into the story too.
Yeah, I mean, obviously, at the very least, will prompt governments and central banks around the world to look for alternatives in terms of managing their investments. It might start to look away from US government bonds, and that itself might start to drive up US boring costs over time, and as we discussed earlier, it might start to accelerate the use of alternatives, pushing other trading partners into other camps.
I mean, chinae seems to be out there every day of the week offering swap lines and trying to get people to buy and sell in their currency, for example. So the fact that we're in this space at all is just corrosive and eroodes the US includents that we're talking about.
So where do they go though, because in your story you talk about treasuries, right, twenty four trillion dollar market, You talk about central banks their official currency reserves still sixty percent. It's down certainly from a peak, but there's still so much that's you know, in demand when it comes to dollar denominated assets, and specifically.
Get what happen eleven when we had our credit rating. Yeah, cut everyone.
Poorting that treasure exactly.
And we actually pointed that out in the story because there was a Bloomberg survey that came out this week that said, like, you know, I think they asked people where, you know, after gold I think it was like, treasure is worth the number I mean, and that is this irony right like that it's it's still the safe haven.
But we were looking in the story at the long sweep of history too, and there was this great Golden Report that looked at how the British pound lost its reign, you know, and it talked about how there are these dynamics where one country over takes another in economic size that doesn't automatically cause, like you know, for it to lose its status if it already has sort of world dominant status as its currency. Then but Alon can come a financial crisis, Alon can come a world war, and
that can be enough. So yeah, I think we're saying is you know, there is nothing right now as an alternative, But I don't the US should not be complacent. There are many many people who are actively engaged in wanting to find alter.
What do you think an alternative could be? You know, China, the Chinese one has talked about often. I'm not sure how likely that is because when it comes to censorship of currencies, you know, China would be right there with the US. Is it possible that a decentralized currency, uh would ever actually be a contender?
Well, I think more than that, we could go back to a system before Bretton Woods, where there was many many different currencies, right, yes, right, it's like Maynard, you know, John Maynard Keynes had won the debate, like you know, you know, so there, maybe we don't have a dominant currency anymore, but we have a more you know, sort of evenly spread, you know, And to come.
On in on this, right, you do have this great global perspective, and you've been overseas in Asia. I mean, the US economy is still larger than China's, and I do wonder what the thinking is realistically about who could be, you know, could relay replace the US as kind of the world's currency.
Look, it's going to be a long road for the YU one. That's because China has really strict rules on moving money into and out of China. They've got like a closed capital count that's very different to the US. It's obviously there's got a long way to go on that respect. But nonetheless, every like I said, every day we get announcements by Ladesh, countries in Central Europe, Argentina talking about using either sloop lines or other facilities to
trade and use the one for settlement. That doesn't mean the dollar will be toppled overnight, but it starts to add to Chana's influence over the global trading system and the global economy. And that's of course coming at a critical time when the US is very pushing back right against that influence. So the One doesn't have to become the world's number one currency overnight for China to gain more influence over the global trading system.
But the fact that we're even having this conversation is part of what's insane about this, right, Like, the US has put itself in a situation where people are willing to like start having other conversations, and that all goes back to how America has not been able to kind of shore up its act.
Time and time again.
Yeah, and by the way, if I could just say ironically, the US has a very strong economy at the month. I mean, again, you can argue about it. Is there is there a slow downcoming or not. But we had another piece of Business Week this week with Reid, Picker and mccullague making the point that all these economis keep calling your sessions, but every time the data comes out
every month, they're pushing those session calls back. So the US is in a position of strength right now, but they're just pushing these wounds.
Because of our world currency reserve status. Right, It's pretty easy to have a strong economy if you run trillion dollar deficits. I could do it myself. But let's talk about what's at stake here, Christina. What benefit do we get by having the world reserve currency?
Well, right, we have a twenty four trillion dollar market of debt that everybody wants to buy, and that is the biggest thing we can finance, you know. I mean if you look at the you know, deficits forever and up to recently, the calculus was like that was okay because actually, even going into the pandemic, our service our debt service costs were falling, right, so we were like we had I mean, sorry, after the pandemic, we have this huge increase in debt, like and the debt servicing
costs were falling. It would not take a much of an increase in those costs, this financing costs, you know, to go up for us to be completely different dynamics in this country and talk about austerity, which is something we.
Have right now.
I think the way that average cost is about two and a half percent, But as long as we have nominal growth of seven that's cool.
Yeah, we can still carry it. Right, But you know, if this was another country to have the current account deficit that we have to have, like the like the net balance that we have, the investment position that we had, you know, investment investors with be going bonkers, you know and saying, oh my god, you know, this is a thing that's waiting to blow.
And what are the implications. So let's play it out here.
So let's say the dollar is no longer the world's reserve currency. What are the implications because I think about our investor audience and what they're thinking.
Yeah, well, so Christina Lea, it will make things more expensive for the US in the globe. But also, by the way it perversely, it would be a knock to emerging economies as well, because even though they complain about the US dollar, the US dollar is a channel for them to raise finance. Because if there are a lot of emerging governments around the world, who if they went out to the public bond market to sell a bond
in their own currency, nobody would touch it. But when they go to the global market and selling dollars, they can raise financing. So there is by the way, I just perverse angle to all of this that there's obviously a nock to US influence. There could be a direct hit US funding costs by extension and the economic impact of that. But you know, perversely, I think some of those emerging economies around the world you can't boor in their own currency and need investors to trade dollars with them.
They would also get a knock from this.
But if you want to know what the real near term implications would be, you look at what happened in the UK when Teresa May proposed a budget that was unfounded, unfunded.
How that right for you?
That is the kind of freak out moment that we risk having if people do not want to buy, you know, if they lose some of their appetite for US treasures jump in.
Interest and you know, as long as you're talking about the UK, one of the things I was telling Christina was like, like, let's not forget like Brexit shows what a real self inflicted wound.
Can look like.
And the US keep doing this like, you know, can show you what what the worst case scenario yanks.
All right, guys, that is a wrap, so appreciate it. It is the cover story of the new issue of Bloomberg Business Week. As we said, add on newsstands, on the
Bloomberg terminal at Bloomberg dot com, slash business Week. Our thanks to end a current global economy reporter at Bloomberg News in our DC bureau, and Christina Limblack, global economics editor at Bloomberg BusinessWeek here in studio along with Jill Weber, the editor of Bloomberg Business Week, here in our interactive broker studio Umbromarco.
Journal.
How about you let me drive?
No, no, no, no, who's going to run?
Honey?
Please, I'll do the driving. Gravels.
Let's mate, I want to try it.
It's good question time.
This is the drive to the Globe dot com Com.
I think we'll buy around Hilda.
Don on Bloomberg Radio.
All right, everybody, we've got just under eighteen minutes left in today's trading session.
Time for the drive to the cloone on this Thursday.
We've got equities up pretty much at their best levels of the session. We've seen yields also move up. I'm taking a look at a two year note with a yield of four point twenty five, just rolling over, but nonetheless certainly bump up.
There.
Let's get to it, though, and check in with Jeff Schwaber.
He's CEEO at the institutional all Asset Management Manager excuse me, Blue Raw Capital Markets. He joins us on Zoom from Newport Beach, California. Hey, Jeff, good to have you here on Bloomberg.
How are you.
I'm doing great, good to see. It's an up day and real pleasure to be here. Thank you for having me.
It does feel like there's some enthusiasm, maybe some calming down, but it's kind of been wacky when if you think about where their markets are thinking rates are going to go, it just kind of changes what it feels like from day to day, week to week. Having said that, you play a lot in the real estate space, and I'm curious about what you are seeing specifically in terms of opportunities or signs of caution.
Yeah. Sure, well, I'll tell you. It's been a tale of two cities.
We had a little bit of a draw down and necessary correction in real estate as the Fed went into a really aggressive hawkish cycle, but it was really expected. If you look at institutional real estate, the average cap rate is probably around four percent and the riskless rate ten. Your treasuries we're covering at one or two for years and years, and then after all the hikes, riskless rate
went up to four percent. So you almost had to have a decompression to create a necessary return premium for something that has greater risks than something backed by the full faith and credit of the federal government. So that's occurred, and we're really setting up for a nice little bullish scenario here.
We believe, well, as you know better than most real estate, it's not all the same bag, if you will. I mean, there's residential, there's office. You know, the worries on the office space. We're thinking a lot about real estate. I think about Sam Zell, what a player in terms of that, and of course his passing today. But we've been talking a lot about real estate generally when you break it down logistics, warehousing, multi apartment dwellings, if you will, single
family homes. I mean, where is it that you guys are seeing some of the opportunities. I mean, if I look at your blue rock total income and real estate fun you guys have been beating most of your peers on an average basis annually over the last five years. So I'm curious where you are putting new money to work. Where are you holding back on?
Yeah, no, that's the smartest question you could ask.
You're right, the devil's always in the details, and you can't throw a blanket over something as diversus real estate and make generalizations. We are extremely underweight office and retail, and our highest conviction sectors are the industrial sector, multifamily and single family rentals, as well as some debt in that space with Freddie Mack et cetera, and also some
specialty sectors like life sciences and data storage. With regard to industrial, for example, it's been probably the hottest sector for the past five or ten years, and we think it will be for the next five or ten and it's really fueled by the parabolic growth in e commerce. We probably need a billion or two additional square feed in the next four or five years of industrial real estate to satisfy the demand.
And frankly, you can't build it.
You can't build it fast enough, and rental bumps are probably five x the historic norm of two or three percent right now.
I am curious too.
You know this all that age, you know, location, location, location, so on something like industrial, and we're seeing it pop up around the country. But is there an geographical play or I'm assuming when they're building industrial they're going to put it in places that make sense in terms of serving the e commerce market, so that maybe location isn't such.
A big thing.
Yeah, No, you hit the hit the former certainly.
So in real estate, there's this there's this whole expression that and they refer to it as the smile markets, and so picture a map of the United States and
draw smiles. So you go from Washington State, you know, down the West coast and then across the Sun Belt and then up the Eastern seaboard, and e commerce and multi family are really driven by demographic in migration and that is by far excelling most in the Sunmelt, you know, probably from the Phoenix area over to Florida, Texas, Florida, up the Eastern seaboard to maybe the Carolinas, et cetera.
And it's really almost a two to three x growth curve and people who have focused there, like Blue Rock, have have significantly outperformed.
What about in terms of the raid environment, how do you think about that specifically and the impact you know, we certainly have seen it initially really kind of drag down the residential space, certainly the single family homes.
It feels like we're kind of working our way through it, if you will. But what about for you all overall?
Yeah, it's a couple of things to consider. The first is if you're utilizing leverage. We do, but rather conservatively we're probably twenty nine percent levern in our institutional fund that is exposed to like three hundred and ninety billion of real estate. It's the largest real estate and interval fund out there. But so obviously the the lower your leverage, the higher you're spread, and the more positive leverage you
can bring to the table. So you're not juicing your yields significantly right now when you look at the spreads between debt and cap rates, and as net operating income increases occur and that spread increases, you'll see more dynamic
features in that regard. But with regard to a rising rate environment, if you go back to nineteen seventy eight, for example, when the private Institutional index was incepted, we've had nine rising rate and inflationary periods, and in nine of nine in the following three to five years, because real estate is the hedge against inflation, classically, you've seen outperformance from the average returns of nine and a half or ten percent by somewhere between twenty and fifty percent up.
You generally get twelve to fourteen percent coming out of that rising rate cycle after the cap rate decompression. So we're hunkered down in positioning for what we believe is going to be a significant leg up over the next few years.
You said, you're extremely underweight office, extremely underweight retail office. I recently was out there on the West coast at Milkin and moderated a panel that was specifically on real estate, and we talked a lot about office. The theme that seemed to come away from it was that if you are in top tier properties, you're going to be fine in office, but if you're in you know, lower tier locations geographically or just lower types of properties, it's going
to be tougher for you. How are you seeing the office play and is there at some point though an entry point for you? And just got about forty five seconds.
Yes, sir, I think you hit it again.
Office comes in so many forms of CBD, central business district, multi tenant office, downtown, skyline, suburbia, et cetera.
It is, it is.
It's like a stock pickers market, it's a building pickers market. You have to be, like you said, in the in the high gateway msas and in higher occupancy areas. But we do believe anytime anybody said office is going to be is going to be dead.
It's been misproven.
So there will be entries, but we're staying our hand as we see right now.
All right, well, this was fun. Come back soon, love to continue the conversation. Joining us Jeff Schwaber, you see you at the institutional all asset manager, blue Rock Capital Markets. Joining us from the West Coast on Zoom from Newport Beach, California.
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