Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg Business Week, insight from the reporters and editors that bring you America's most trusted business magazine, plus global business, finance and tech news as it happens. Bloomberg Business Week with Carol Masser and Tim Steneveek on Bloomberg Radio.
All right, everybody, we're going to get into some more conversations about the market trade and the sell off that we saw in today's session. Do you want to mention though, another earnings out after the close, b Riley, the institutional brokerage. Yeah, it's up about eleven percent here in the aftermarket. It has been, and the company a preliminary fourth quarter EPs
of a dollar fifty seven to two twenty two. Just starting to get some headlines, it looks like, so they're releasing the estimates of an unaudited fourth quarter twenty twenty for financial.
Don't worry, Carroll, my microphone is on now, I'll turn it on. My comment was they've been getting beat up. They have been getting beat up.
You did, you did stacks up about seventeen percent so far here in twenty twenty five. But yeah, we are seeing at least some movement in the after US, So we'll keep a watch on it and continue to watch it into.
No doubt about it's Tuesday trade.
It's gonna be a lot on our plate tomorrow.
Ninety percent from twenty twenty one.
Yeah, that's pretty ugly. Yeah, yeah, Okay, all right, So let's stay with the markets, folks, because we have seen some selling in today's session. We did finish off our lows. We have seen yields along the US Treasury curve moved down a bunch as well.
Tim.
Yeah, that sense of caution prevailing as long promise tariffs on top US trading partners are scheduled to take effect on Tuesday. Meantime, we did hear from TSMC alongside President Trump, planning to invest one hundred million dollars in chip plants into the US over the next four years. Jeff Proppleman is chief investment Strategist, head of Equities at Mariner Wealth Advisors.
He joins us this afternoon once again from Cincinnati. A day like today, Jeff, down on the S and P five hundred one point eight percent, the Nasdaq two point six percent. Are the clients calling.
Well, I'm they're not the phones aren't ringing off the hook, but I'm sure that they are, you know, in a little bit of a a worrisome mood if you will.
Today.
You know, our theme and thesis all year has been clear air turbulence. That's kind of what we talked about going into the year after being you know, very very bullish the past couple of years and really expected while we see the market advancing higher through the year ten to fifteen percent, pullbacks intermittently in some pockets, air pockets that we're going to hit kind of through the year.
And that's exactly what we're getting. And I don't think that we should be really surprised about that, given you know, what we've seen in the previous UH tariff reddick in announcements, what we saw over the weekend with regard to some of our you know, political partners throughout the world. So this is just where we're going to get. We need to buckle up, you know, for this and be prepared.
Well, is this an buying opportunity then, or do you see further downside where people could start you know, picking stuff up at I don't want to say a bargain given more valuations are right now, But is it a buying opportunity.
You know, I think it.
It certainly could be a buying opportunity. I would be biased to be there. But our message still in this environment is hold your ground. And after sixty percent cumulative returns over the last two years, we suggested the folks, hey,
that's probably taken your allocation well above normal. Cut back to normal going in you know, to the year, and you know, quite frankly, I would hover there now we have having said that, we have a base case of about sixty six hundred on the S and P five hundred, and I don't think any of the news today changes that.
And we do take our signal from earnings rates, credit spreads, trends, and inflation, and those are the things that are going to drive the market, and they still the mosaic is positive. So I would lean into what you're suggesting here in terms of this, this is an opportunity I think to add, particularly if you trimmed your allocation back to normal.
Having said that, it doesn't mean Jeff, that we couldn't see some more selling.
Oh no, no, I think our message kind of Look, we're five percent off the February nineteenth high, we're you know, just slightly off from you know where we were December first, you know, a couple of days after the election, and as I said, we were looking for air pockets of ten to fifteen percent just on the psychiatry of all this, you know, whether it is tariffs, concerned about federal debt, deportation,
geopolitical discussions and whatnot that moves to dial. When you're twenty two times earnings and you've had growth stocks significantly outperform and trade at higher PE levels, you're going to.
Get these moments. And so yeah, I think we could, we could go lower.
I wouldn't rush in, but you know, I think you're going to get some price points where you're going to say, okay, a lot of the carnages happened. And I also think Carol, that you can do some tactical repositioning in here. We've we've seen a shift in leadership, and I think what you own and how you're positioned in here is important.
We've made some adjustments to that and may.
Make some more meaning time to buy outside of the US.
You know, you know that's that's not a bad point. We are kind of domestically biased, but if you don't have exposure to international stocks. I certainly would be thinking about that this year in an active way. You don't need to do that passively. You do it in an
active manner. And certainly in the international markets have outperformed so far US, but also within US and from the sector standpoint, you saw extreme outperformance in the gross stocks, and the S and P five hundred is really a concentrated index right now with seven stocks representing a third of the portfolio. The Russell one thousand growth index, those gross stocks represent seven stocks more than fifty.
Percent of the portfolio, So I.
Think you want exposure there, but not to the same level as the index. In healthcare looks good and some of these defensive areas are leading this year. We would take the foot off the pedal a little bit.
Hey, And that's what I want to ask you, Jeff, about some of the areas that you like, and that includes some in consumer discretionary. And one name that you shared with our producer Paul Brennan is Kroger, and that was in the news today, the CEO resigning following an investigation into his personal conduct, the company replacing him. Following this investigation, which was deemed inconsistent their words with the
company's policy on business ethics. This is someone who has been in this industry, been in this company for a long time.
What's your take on that news.
Well, yeah, Carol, I know about as much as you do right now at this moment.
That was kind of breaking news.
And you know, I think, without learning further, they said it was a non business nature. This apparently was personal conduct. It's a wonderful business, a wonderful business model if you look at the basic fundamentals with regard to same store sales growth, trend in profit margins, their private label business, their digital marketing strategies. This is the type of stock that you want to own an environment when people are freaking out.
And it doesn't matter. I mean, this is a guy who basically grew up in the company, go back to nineteen seventy eight when he was a stock clerk. I've had an opportunity to talk to him and interview him, and I'm just you know, this is a business he knows so well. It doesn't matter to you in terms of an investment play.
If the CEO has changedpecially.
I think they have a deep bench and this wouldn't get me to actually rethink owning Kroger at this point. Certainly, I think, you know, we want to know more. But I think they do have a deep bench and a wonderful business model. So I think many companies have gone through you know, management change like this at the highest level and have executed quite well on the other side of that. I've seen no reason to think that they
cannot do that. But certainly it's it's a headwind here from a price action standpoint for you know, kind of the near term.
But those are the types of stocks.
Whether it's Kroger or Jay and Jay or am Jen or Vertex or some of the other names that I gave you in kind of you know, the more staple area of consumer or healthcare, Okay, that I think you want to look toward.
So it's not just Cincinnati bias about why you pick Kroger Company in the space there, just making sure, Jeff, just making you mention you didn't mention P and G. I was waiting for that one.
I did not do that.
Always great when you join us, but you know, we like it more in the studio when you come and visit us here in New York. So hopefully you'll do that soon. A big thank you to Jeff Crumpleman at Chief investment strategist and head of Equities at Mariner Wealth Advisors, Take Carol. Some news in the world of real estate today, Apollo Global providing a two hundred and seventy five million dollar loan to refi a pair of apartment towers in
Manhattan's Financial District. It's interesting because lenders, they've been active in financing luxury residential products in places such as Manhattan. Yeah, South Florida.
Good market, good market, strong market.
Yeah, demand for those areas remains high.
Yeah, they have been active for some context on that demand. We bring back Louise Phillips Forbes real estate broker at Brown Harris Steve, and she has sold close to six billion dollars worth of real estate since she began.
Back was it in the nineteen ninety nineteen nineties, nineteen ninety it's a lot, It's a lot. It's a lot.
Hey, nice to have you here back in our Bloomberg Interactive Broker Studio. I just want to start with something that you know, we are looking at a market that has had.
Some nervousness in it.
Today, we think it's pretty clear that there's concerns about tariffs out of the White House, what impact it will have on growth in the United States.
Just all of that.
Tell me coming into this.
What would you what do you what would.
What do you want to tell me about what's going on in your world in terms of the market, the economy that I'm sure your clients talk to you about, the business backdrop, the economic backdrop.
What are you hearing? So, I think there are a couple of things. I would say. You know, everybody thinks that the real estate market is going to react in the same way in the same time as the stock market, and that isn't necessarily the case. It does have cause and effects. I mean, you know, I just literally on my way over here, I was like, how many deals do we have in contract right now? You know? Over ten million? It's one hundred and four Wow, ranging from
ten million and above up to fifty five cents. This is just Manhattan, just Manhattan. Sounds like a lot? Is it a lot? It's a lot? I mean, listen, is that typical? Is that? Where we was like that somebody's not reading the news. However, people have been waiting a very long time. And I will say in two thousand. In March of two thousand, the market dropped six hundred points for me, and I was thank goodness, I dropped. I bought, I went to contract, and I put six
hundred thousand dollars into real estate. So I was thinking what would that have been worth if I didn't pull it out? So you know, you know, there's a lot of things that affect our markets. You know, you can go from inventory to interest rate. COVID policy policy has a big play. It doesn't scessarily affected call you know immediately, but immigration and who's going to be in our workforce, that's going to be an immediate impact along with tariff.
So talk a little bit about that. And now you're thinking about that As somebody who spies and sells real estate in New York City, I.
Mean I can just speak about a small, little minute example. In my own portfolio business, I did a renovation in twenty it was actually I think nineteen twenty nineteen. That was twenty seven hundred square feet. It cost US four hundred and thirty thousand dollars to do this renovation. They have their own GC. It's a construction company who also owns JC meaning general contractor general contractor, but they also own three billion dollars with real estate, so they know
what they're doing. Fast forward, this past fall, we completed the same exact renovation for eight hundred and fifteen thousand dollars.
I mean that is is that a material story or a labor story or yes?
And yes that is cause and effect of what we've all lived through globally. But what does that mean?
So to Tim's point, is it because the contractors to brothers who work in contractor and or contractors, they talk about lack of workers, I talk about higher materials costs. Is that what it is?
Yes, I mean it's part of that, but it's also everything. I mean, codes and the policies of getting construction done in your buildings. You know, since since surf side, you know, the policies for safety are much.
More the building collapse in Florida.
And much more impacting. What it costs for insurance. My own insurance and my own co op went up twice thirty eight percent. Yeah, so it's pushed in every angle. And then you have this kind of attitude sort of politically and policies that are going to have impact, and it's.
And yet you have more than one hundred contracts waiting to be signed, signed signed hard of ten million and above.
So it'd be interesting to see if any of those come out close because they're concerned about this impact. But at that luxury price and that level, you're dealing with one percent of the one percent of one percent. It's not the everyday guy. It's not even the guy that's buying buying that renovation that I did for eight hundred and thirty thousand dollars. They're thinking, shoo, that would be a hot that would be one point four for me. Right, So but listen, we.
Know it's the market we talk about of the wealthy in a kind of one class, right, Yeah, and then there's a lot of folks who moves, you know.
Who, who were affected. I mean, yeah, listen, but we're having a tough time. You start to see things that happen because of that cause and effect. If you think about I was reading an article about generational wealth, and you know, I'm looking at fifty percent of the first time buyer transactions that I've done in the last like three to FO since COVID, I would say fifty percent of those are gifting or co purchasing by parents, so and they're referring to it as the silver tsunami. So
it's interesting. And when you talk to your your wealth advisors, they're like, listen, there's going to be four trillion dollars general relation, generational. Hey, it's Monday, Yes, amen, I need another cup of copee. But but it's it's it's affecting that and it's going to be passed down. And when you're also dealing with the we have developers with the tariffs that are talking about putting in their contracts contingencies and who's going to sign a contract when you're not
sure what twenty five percent mean? What does that mean? So it's going to remain to be interesting.
Andrew Cuomo jumping into the mayor's race does.
A feeling you're going to go there?
Well, I'm just wondering. You know, we talk so much when you talk politics, we talk at the national level and out of Washington, DC. But your world is so focused on New York City. Sure, sure, I mean, does does the whose mayor matter?
Who governor and mayor and how they work together matter? But those policies, you know, you you know, when you had Bloomberg for twelve years, he you know, rezoned forty one percent of the land mass of Manhattan. It was tremendous growth and employment, and you know, areas that were unappreciating, not appreciating that have now become like, you know, great anchors for a whole area. We need strong leadership, no
matter who it is. We need strong leadership, and it also has to be somebody who understands cause and effect and is interested in the growth and also the well being of our quality of life.
Are you at all concerned about Governor Hokeel going up against President Trump and the way that you know, we saw with congestion price see Sean Duffy, the Transportation Secretary, essentially saying a couple of weeks ago, we're going after it. The Governor of New York saying, no, you're not. It's the state fighting the federal government. Does that concern you?
I think that you know, everybody who has sort of witnessed and experienced some of the transactional tone that Trump has is a tip for tat that can be concerning. But I also believe that, Look, I don't like congestion, I don't like that tax. It's costing me three thousand dollars a year to go to work. But if it's for the good of the people in general, then I'm grateful that I can pay for it.
Louis one thing I want to ask.
I'm going to tell you about the subway. When we're off air. You can talk about using you know, I do use.
It a lot. Okay, I do use a lot. I want to ask. It's my mobile office.
There's policy. There's also rate environment, and mortgage rates in the US drop for a six week six.
Hey, six point four today.
Right right to the lowest level more than two months. Yeah, exactly, So I love it. You knew it right on it. And that's one of the things we've been talking just looking at the.
US Treasury curve. It's one day trade. But are you seeing our story last.
Week said, as they say, seeing mortgage traits go down, that you're starting to see supply increase because people are now willing to maybe let go and maybe are you seeing any signs of that?
Absolutely? I mean I've had more bidding wars, I've been outbid more in the last two months. I mean, listen in.
But people are willing to start to let go of homes because.
Yes, and what they wouldn't do then they will do now and I each of those some of them have personal circumstances, but I think it's also an attitude in a tone like how long are you going to wait? Yeah? And what are the policies that are being implemented now going to be in six months? We know it usually takes six months to see it. In the real estate transactions, right right, that cause effect, unlike the stock market today. So I think that what's right for one person might
not be right for another person. But we are absolutely seeing a attitude shift for I would say the smart bigger picture people.
So two things, people willing to buy because they're comfortable where the rate is and people who are in a home who've maybe had a low mortgage willing to let go or I.
That mortgage thing is not a conversation as much as the next chapter of their life is a conversation. Okay, they're not letting go because there's nothing else to get. So if you're going to I don't know, Colorado, wherever there's some inventory that's not thirty two people bidding on one unit, then you might let go of your place in Darien, Connecticut that has like seventeen homes on the market, you know, so I think that those are things that
we're up against. I'll also just say that interesting the second week in February, they did forty one transactions transactions in one week north of four million, and that is the most activity that we have seen in that sector since twenty twenty two, since March of twenty twenty two.
Where's weakness in the market? What price point.
Priced incorrectly? Homes that are priced incorrectly me too high to those look low. I mean, every sector is moving if it's priced right. So I mean that's why we have one hundred and four units that are in contract for north of ten million. They I bet if I was to really do the analysis that those are all had had multiple price reductions.
Nothing in here says recession to you. Just quickly just got about twenty five seconds.
Not you hesitating. No, I'm just trying to be thoughtful. I feel that people have been just through. People can date their rate and you know, marry their home and refinance, and I think that's a lot of the attitude for people. And that's why you have parents more willing to take their inheritance and let them experience it, use it, have it than waiting for them to pass away. I hear that from a lot a lot of families.
Nice to check in with you. Thank you, thank you, thank you. Louise Phillips Forbes real estate broker at Brown Harris Stevens joining us once again. We kind of want to stay on real estate for a moment. Just had a really interesting conversation.
With market to market, which is nice, you know, not yet every day and every eye when it's on the blockchain, it will have like daily values.
But there was a piece of data that came out that kind of struck. US US Census Bureau data on office construction spending roads four tens of our percent from last month.
Why might you care?
This data generally refers to the value of new construction activity of office properties on a seasonally adjusted basis. So rising construction spending suggest increased amount of new supply to come, which presents a challenge for landlords tasked with leasing new and existing space. So this we thought might be a good setup for our next guest. We're going to continue talking real estate.
He's a commercial and office investor and developer back with us as Michael Chauveau, Founder, chairman and CEO, of the luxury real estate company that bears his name. It's got a current portfolio of ied at about eight billion dollars. It includes properties in New York, San Francisco, Miami Beach, and Chicago. He joins us from New York City. Michael, it's been a while since we spoke.
How are you. I'm great.
How are you guys doing?
We're doing pretty well. Look, can't ignore the market on a day like today the equity market does. Does a sell off such as this make you nervous at all?
I just heard of what you guys said. You know, we don't have to mark the market every day. Whatever happens in the market is really not doesn't know, it doesn't concern us. Real Estate and particularly commercial real estate are long term investments.
You know.
We buy trophy assets. We're going to own them for twenty to thirty years. The bumps in the road, obviously are are unpleasant, but they don't really affect the market obviously, like like the equity market or any other markets that are that are so sensitive to the daily activities.
No, but a market decline or pullback or if it's representative of things to come, an indication of maybe the US economy, softening earnings maybe not being as robust it will or could lead to companies saying I'm not going to expand, I'm not going to take that office space, or I'm not going to do this, or I'm not going to do that new building, that new office building
or headquarters. So tell us what's been kind of the mood the environment when it comes to movement demand and new build that you're seeing in the commercial office space right now?
Sure, I think that when you look at companies. Actually, since the election, we've seen a huge spike in office demand. We could talk about the San Francisco market. You know, we spoke about this multiple times. I've been on your shoe and every time it's the same question, what's going to happen in San Francisco. Two years ago I came to the show, I said San Francisco is going to be great when everybody thought it's going to get demised. And today San Francisco last quarter has seen the highest
level of leasing since COVID. So we're seeing a huge return as in San Francisco as as a market as a whole. We're seeing heightened tours, We're seeing companies expand space in San Francisco, which is something we haven't seen since before COVID. I think there is an absolute positive mood in the market again you're talking about. This is obviously the unknowns with the tariffs and things that change the market on a daily basis, but companies are making
longer term plans. We're seeing large companies now engaging again to make commitments, if it's law firms, if it's banks. Obviously the AI industry in San Francisco is booming, so we're quite positive. I mean, we've done at the Pyramid alone, We've done quarter millions corporate leasing over the last seven weeks. That's the mostly sing we've done over the last eighteen months. So we're seeing the reality of kind of the what we call the Trump election, and we'll have to see
how long this lasts. But as of now, things are at least on the lease inside, extremely positive.
You know, I was thinking of you when I saw this story today hit at noon, because I knew we were speaking to you about San Francisco. But Anthropic has raised three point five billion dollars at evaluation of sixty one point five billion dollars. The amount of money that we've seen go into these AI companies Open AI it's currently in tox or and even larger three hundred billion dollar valuation. How are you seeing that money ripple throughout San Francisco commercial real estate?
So in twenty twenty four, there were approbably about the eighty six new AI leases that were signed right and those leases some beyond open AI. A lot of them are startups or kind of a little bit later later stage companies. Those leases beyond large leases were ten to twenty five thousand score foot leases. Q one of this year, we're seeing AI companies go to fifty to one hundred thousand score foot spaces, which is a huge shift, right.
It means that there's larger commitment larger space, but it really means that companies are getting larger investments because a lot of these companies that still are not are not profitable. So we're seeing a very fast growth in the II business that's driving them to take more space. In San Francisco is obviously the hub of AI. So we feel very positive about the eye industry. You know, it's been it's been booming, it's been growing, I think at the
fastest industry we've ever seen of a single industry. That's driving the real estate market.
Michael, At what price are people taking new space? Is it at a discount to where it was pre pandemic.
So it depends what type of space, right, So again there's there's kind of the trophy space like the Transamerica Pyramid, and there is the commodity So the commodity space is trading at a discount, and at a big discount I would say thirty to forty percent discount than what it was pre COVID because it's a tremendous amount of inventory. And I think I told you on last time I was on that a lot of these buildings, in my opinion,
should just be demolished because they expired. But the trophy assets, if it's a Transamerica Pyramid in San Francisco or some of the other assets that we're handling, are are seeing
record rents. I mean, we've done rents at the Trans America Pyramid today that are three times the rent of pre COVID because companies at the top of the market are continuing to spend, are seeing growth and are willing to spend a lot more money on rent because over the last twenty years, the company's growth has been a lot faster than rent growth. Rent growth normally is three percent a year. Companies have grown, obviously if you look
at the market at a much faster pace. So a little bit of a catchup now is what companies are paying on rent versus their versus their NI or versus kind of the their income.
Hey, what we have you?
I want to talk about La. You've got the property, the Mandarin Oriental residences in Beverly Hills, climate change, the devastating LA fires from a few weeks ago, impacting the market? How is that happening? How is impacting construction that's being done in the area. Just thirty seconds?
So, l look, LA has suffered a huge, huge, a huge blow. Interestingly enough, it does it did for property that's available. It actually spiked demand because people needs to live. There's a shortage now of housing in LA. So it's an unfortunate thing. But there is right now a shortage of housing because there hasn't been real development in LA over the last twenty years, like anything of real substance.
All right, I'm going to leave it on that note. Wish we had more time, but look forward to next time. Michael, Thank you so much. Michael Schavoe. He's founder, chairman and CEO of the luxury real estate company Chevau, joining us with another view, if you will, on real estate, this time really the office property area. And we know they've been in San Francisco, a couple of couple of West coast Miami, Florida, so good view on that