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Talk a bit more about Intel.
I'm looking at a two day game because we've got a headline late Friday before the close. But you're looking at Intel shares now up about seven percent in the past to trading days, and so we're trying to figure out what comes next for Intel.
Yeah.
I mean, look, we're talking about this Bloomberg exclusive on Apollo Global Manager that's throwing it's it's hat and a potential financial investment into the Intel ring as well. So lots of just scotts, let's bring in Leanna Baker is Managing editor of the Bloomberg News Deals team here in
the studio. Great to see you, and from our San Francisco bureau, Ian King, Bloomberg News US Semiconductor and Networking reporter Ian I want to start with you in tell very popular all of a sudden among all these entities let's talk about Qualcom and it's interest what you find out.
Yeah, I mean we have to sort of point out that neither company is confirmed or said anything publicly about this, So at this point we're relying upon our own reporting and everybody else is reporting. Our understanding is that there has been some conversation at some kind of level about the possibility of acquiring Intel, and you know, to sort of flip it back to what you guys were saying, Intel is kind of at a historically sort of vulnerable point in terms of obviously share price, in terms of
where its operations are. Its management believe that it's at kind of a low point before a big upswing that it's had to spend really heavily. Others are less sanguine about this, are sorry, are more worried about where it is and worried that perhaps it would be better it would be better off in other hands.
Yeah, it's kind of fascinating to figure out what's the right way forward, as you have reported on so well, in that this has been long and coming. When it comes to Intel, Leanna, I want to bring you back into this. There's the Apollo story that you guys.
Have put out there. At Bloombery Exclusive.
What do we know about a possible deal where Apollo makes a pretty substantial investment.
Apollo is already a partner of Intel. Remember they have a joint venture with Intel in their factory in Ireland, So it's not surprising that Apollo would put their hat in the ring. That said, we don't know if Intel's going to accept this investment. We heard it's up to five billion. We don't have any terms. We said it's an equity like investment. We don't know if it comes with a board seat or what Apollo would ask for
to make this cash infusion. But it does show that Intel's board has some tough decisions to make on which path forward. Does it go with Qualcomm, does it go with Apollo, Could it go with Apollo and then still you know, go with Qualcom. One thing we know for sure, Broadcom, which is another name in the space which analysts have tipped, is another potential acquirir of Intel. We've reported that currently they're not evaluating an offer.
For I'm curious about Apollo.
Is this about protecting its investment already in Intel, or is it because they're really interested and they see something here?
Further Paulo is definitely opportunistic and they love to get their hands in really complicated situations. They're also turnaround specialists and they have some experience in semiconductors. Last year they put in about nine hundred million into Western Digital, which is another sort of struggling chip maker right now, Apollo though it has you know, it's work cut out for
them if they do take this investment. How much influence will they have an Intel, which has its own management team, and Apollo might have its own interest too on making sure their investment, you know, makes money.
Yeah, I mean, look, it's also an indication of obviously how excited Apollo are about chip makers as well. I mean, is there are their prospects they're going to want to go further in other places.
For now, all we know is that they're an investor in Western Digital, and they're an investor and joint venture partner and Intel, and they're looking to to do more with Intel. But we should also consider that they're an American investor, and that's something that's really important here. We didn't talk about the US government angle, so I'm sure the US government would like to see some sort of
US solution to this without a foreign investor. And another thing to mention is that any investment from Apollo or someone similar would close a lot faster than a long drawn out merger with a rival like Qualcott. That's something that's going to take a long time to play out, even if they do get to the finish line.
All right, So Ian, come on back in here.
This is something we've talked about a lot with you about the national security concerns and why this is such an important company, certainly to the US government. How are you You've covered this company for so long and it's kind of amazing to see where we are with this company right now. How are you thinking about the different parties that are interested about Intel's future and what happens from here and what you are hearing internally from the company.
Yeah, I mean it's a very complicated situation. As Honor has just alluded to. It's not just a case of two companies looking at each other and sort of deciding whether it makes sense for them to do this, even Intel, there are multiple parts to Intel. Whether perhaps qualt Com would just be interested in Intel's design efforts, which would get it into the PC market, which would get it into the server market. Qualcomm historically has said absolutely no
way do we want to become a manufacturing company. So if that's still the case, then what happens to Intel's manufacturing operations? And that's where the US government has a massive interest in bringing back manufacturing to this country, revitalizing manufacturing in this country. And then guess what, There's a country called China out there which has a massive say in this as well. China is the largest market for so may conductors. Both Intel and Qualcomm do a huge
amount of business there. China is going to have an absolute say when it comes to approving this kind of a deal.
But does that mean then, in to that point that the Apollo deal looks much simpler if you're pack Elsinger and try to make you know a kind of a decision or think about where to go with this as well, does it make an Apollo move much clearer and simpler and less of the anti trust concerns and others that you've outlined.
Yeah, I mean it's a much much smaller deal. And really all it essentially would be doing, if it's at the level that we understand it is, will be to sort of prop up the current plan. Basically, all of these investments and Intel has been bringing in into its factories from Apollo, from others are essentially bridge loans. Basically, it's saying, hey, we're going to build this factory. Help us out to build it out, and we'll pay you back with the profits we get from it later. Intel
retains control in these kind of situations. Five billion dollars is a lot of money, but it's not in the chip business, right, plant cost twenty Yeah.
It goes really quickly. Right, Hey, you know, I think it's kind of interesting.
There's another story in the Bloomberg about TSMC, Taiwan Semiconductor and Samsung discussing building major new factories in the UAE.
This is coming from the Wall Street Journal.
So I think about this story. It's Intel specific, but there's so much going on globally in the semi space as other companies are kind of figuring out their path going forward. When it comes to Intel in what is the value beyond the national security concerns?
Is it that.
It's a maker of chips a designer of chips? Like, where is the real value going forward?
Or both?
Absolutely?
Both?
Right, it's diminished as a franchise in PCs, but it's still seventy five eighty five percent of the market. It's diminished in servers, but it's still eighty percent of the market. So those are incredible franchises with the right products. Maybe they revitalize, maybe then ever get back to ninety nine percent, which they've been at. But eighty percent of a market isn't a bad position to be in if you can do that in a profitable way. It's factories up until
not too long ago were the best in the industry. Okay, if you can throw the capital at them, if you can get the volume the orders, maybe it becomes a valuable and absolutely essential asset again. So it's not dead yet, right, I mean, we're talking about picking over the bones, but it's not dead yet.
How much should we be thinking about other players in this sector as well? I mean Broadcom sitting on the sidelines for now. Is there any chance anything is going to get exciting for Broadcom when we're thinking about this feature?
I mean, the best person to ask will be hot Time, the CEO. He was asked out recently on his earnings and he said, look, I'm quite happy trying to you know, make VMware. The acquisition they made work a couple of years before I'll be the other side of that. And he had a big smile on his face figuratively when he was saying this, because they were asking him, Hey, are you interested, so he was basically saying, not right now.
Yeah, come on back in here. I am curious.
I'm sure you had a pretty busy weekend, which always happens with the M and A activity and the M and A world. What are you hearing from other bankers or other bankers kind of wait a minute, we've got to be talking to our clients like there's other things that might pop up.
It's funny, there's two counts of bankers, it seems, around the situation. There's either the ones working on this deal who don't want to talk to us and aren't answering their phones, and then there's the ones that are chasing this trying to get hired. And then there's the ones we're sitting on the sidelines who are saying, Okay, this is a really you know, funky deal, Intel, I don't know if I want to spend the time on this. If you know, it doesn't happen. Qualcomm's other big M
and A bets never panned out. You might recall they bought NX, They tried to buy NXP a few years ago and that died. They're going through their own a little bit of a transformation to M and A is just really hard for some inductor companies. Intel tried to buy a company called Tower, which also fell apart when
the Chinese authorities kind of left it in limbo. So it's just a really tough space and you have to know where to invest your time if you're an investment banker, to see you know which bets are going to pay off, because in chips it's been really difficult.
But it's interesting, isn't it, given that the movement we've seen in share prices in this sector as well, This is clearly very hot property and you kind of think that could spur further deals down the line. Or is it more of a case that we're looking at these individual big names defying their positions.
Ian would know more about why Intel is a unique situation right now. I think their earnings report in the summer and what's been happening the past few years has made them has made them vulnerable. As he said to different you know, M and A overtures the other deals in the semiconductor space have been a lot smaller and video we've reported does acquisitions, but you know, not that large,
and they usually do still attract scrutiny from regulators. So these companies are so big that whatever they do, even if it's a small tuck in acquisition, it's going to get some attention when.
It comes to the regulatory concerns here, because it's something that comes up a lot on these conversations as well, is that regulators in Europe, Is it the US or is it you know, coming from side of those markets.
It's all of the above. Actually, when you announce the je tekature. Yeah, these companies, as Ian mentioned, are global, but definitely China the regulator their sammer. They weigh in on these deals or sometimes they don't weigh in at all and they're left in limbo, and that leads to deals dying that EU obviously will have a say, and then we have US market and then any country where these companies do business we'll have a say.
Hey, you know one thing I wanted to ask you Ian, is I think about you know, AMD wasn't always as big a threat to Intel, right, Intel was really the big player and then I think about and video was not always a household name. Uh, And wasn't that you know when we bring up the semi space, wasn't the company we always kind of is a go to companies can reboot companies, consumer company can shift strategies, that can do acquisitions. So I mean so can Intel likewise, Right there is another chapter.
That's that's what the management is saying. That's what the management believe up until now that that you know they're maintaining. Look, hey, it's tough. It's tougher than we thought. Maybe we don't have the right AI chips out there right now, but you know, come on, we have so much inherent value. We can we can do this. We can get back to what we were, is their pitch. But the flip side of that is this is a brutal business. This
is a really really difficult business, particular manufacturing. You build these plants, you don't fill them. They drag you down. And that is a situation that Intel is facing, and that is why there's so much churn around. It is like, is this the opportunity of a lifetime, Is it ever going to be this cheap again? Or maybe this is Intel on a downward spiral, and there are lots and lots of opinions. And that explains what Leander just said, Well, how the bankers are viewing it, how Wall Street is
viewing it. They can't nobody can make their mind up right now. All they know is the road that Intel is on is a tough one right now. A lot has to go right.
I mean, to that point, does that tell us that the AWS deal wasn't as important potentially to investors as we thought it was.
It was a brief shot in the arm. But you know, we've seen this happen since Pat Gelsinger came back to the company a few short years ago. We have these brief moments of hope and then it becomes clear because it is clear because it's such a tough business that yes, it's a good sign, but the payoff is down the road, and the payoff isn't one hundred percent certain at this point. And that's I think this constant tension that we're seeing, which is maybe they are doing the right thing, but
good grief, so many things have to go right. And on the flip side, if you want to do a deal for Intel, so many things have to go right. There regulatory approval, financing everything that there's so much at stake here. It is such a complicated situation, so difficult for management and difficult for bankers, and difficult for regulators who are taking a look at this.
Right we talked about checking boxes.
There's a lot that has to be checked in order for this to something to happen, whether it's a deal or some kind of investment. Having said that, I just want to ask both of you, So, Leanna, what's is there a time frame you're thinking about? You know, these are stories that according to sources. I always feel like with these things they may or may not happen. So what are you thinking in terms of a time frame.
There's lots to consider about what's next. But I will say that time is the enemy of deals, So the longer things take you or less likely they are to get announced. But that said, there's still so much more to report on. So we know Qualcom's made a soft approach, but there's no official offer, So there's still maybe in the next week or so, we'll find out more about how receptive Intel is, what was actually offered and similar with the Apollo offer, and are there other names on
the sidelines? Intel also has a partnership with Brookfield and other private equity infrastructure player. We haven't heard that they're around this, but certainly now that the Apollo name is out there, will other names come out of the woodwork real quickly.
And so you fifteen seconds in terms of a time frame you're thinking about for Intel, Yeah.
I mean some of these deals need to minifese quickly, as Leanna just said, But Intel in terms of time frame can't afford too many more, if any of the kind of disastrous innings reports that we just saw, that's going to be a hard stop for them.
All right, so appreciate it.
A very big company story and certainly a big story on the Bloomberg Today in king US semiconductor and networking reporter at Bloomberg News out there in San Francisco, Leanna Baker right here in studio.
She is managing editor of the Deals team, and you can read more at Bloomberg dot com.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from two to five pm Eastern. Listen on Applecarplay and and Broyd Auto with a Bloomberg Business app, or watch us live on YouTube.
Well, we highlight and on a lot about everybody moving down south.
I've had a lot of family members move down south. It is it's nice and warm and toasty.
But in particular, we see a lot of people going to South Florida, financial types and more. And as a result of that move, how that has led to soaring prices of homes, especially among the super rich, which brings us to a new record perhaps for the most expensive residents in the Miami area. Let's get to it with Danny Hertzberg Wilt at the jills Zer Group. It's a
team within the Coldwell Banker community. It has been ranked by Real Trends in the Wall Street Journal as the number one real estate team in the nation, Florida and Miami for several years.
Including twenty twenty four.
Danny joining us from South Florida along with Bloomberg News Markets correspondent Abigail Doolittle, who keeps an eye on the real estate world.
She is joining us here in studio.
Hey, Danny, my understanding is you guys might have some news for us about a big closing.
What can you tell us.
We do we have some very exciting news.
First, Thank you so much, Carol, Steven, Abigail, and Bloomberg.
For having me today.
We have the record sale closing today and it's the highest sale in the history of.
Miami Dade County.
So Danny, something to ask about this sale. Not so long ago, I can remember Jeff Bezos making a big purchase. I feel like it was close to one hundred million, and then Ken Griffin was a more than one hundred million. So you're saying that this sale is more that it tops those well known billionaires.
So there's only been one sale in the history of Miami Dade County that broke one hundred million, which our team worked on. I was very proud to see might Mom break that record at one hundred and six million, and this surpasses that record, So this will be the all time highest sale. It's a very significant market update.
It tells you a lot about the story of Miami and the growth of the city and the number of billionaires and high net worth individuals moving to Miami and all the big companies that have been coming down here.
Well, let's take into that just a little bit more, Danny, because I know that prior to this pandemic gold rush for real estate, the biggest sale in Miami if I have this correctly, I think that forty seven million and twenty fifteen, and then there was another forty seven million sale in twenty twelve. Now forty seven million seems like nothing.
Yeah, yeah, it seems.
Like packaging perspective context. So has the table really been reset here?
Absolutely?
So that forty seven million record back in twenty twelve,
which we participated and was actually on Indian Creek. So it's very interesting that the story started there on Indian Creek, and then the markets spread throughout the city from Star Island to Gables of States North and South through Golden Beach, and then for many years, almost a decade, you didn't have a sale over fifty and since twenty twenty one, we now have had eight sales over fifty million, in sales over one hundred million, which is significant, right, and
the runner up sales are seventy million, seventy five million, ninety three million, so very significant numbers for Miami, which puts us on par with La New York on Beach and all the major global markets.
Danny step back, lay out this deal that you guys closed, What is this deal? Who did it tell us about because I believe it involved a couple of properties and what the amount was.
So this was a significant assemblage on Laguarse Island. The sale is just over one hundred and twenty two million total. It was an assemblage put together by doctor Pierce over many years. It was four properties put together one by one and then assembled together. It took several years to sell this property. It was a very complicated transaction with many zoning elements, and we showed it some of the
most high networth individuals in the world. It's the true trophy property of the city with downtown views and we have a growing downtown and you know, it's exciting the market.
We're having a lot of buzz we had.
What's interesting about the sale is not just breaking one hundred million, but to have multiple offers and backup buyers that kind of interest is just very telling the market we're in.
Tell us a bit about the profile of who's getting into this market. Who's got the big and deep pockets to be able to look at properties like this. Is it American buyers? Are you getting overseas buyers in there as well?
It's a great question.
So in general, these type of properties which we focus on the overwhelming majority of buyers have been domestic, moving from New York, Chicago, California, New Jersey, high tax states, really moving to Florida with no state income tax, and that's been the trend. A very small percentage have been in international buyers. But when I look through the list of the largest, most significant purchases, the record breaking sales, they've really been domestic buyers.
Okay, so Dana, you have all of these people who wanted to buy this property for more than one hundred and twenty two million dollars. And I should mention it's not for the properties, it's for the land. So these people buy these properties is knocked down the homes for the land, and then rebuild.
This is a teardown. Yeah, this is a teardown.
This is a teardown, one hundred and twenty two million dollar teardown.
But where do all.
Those other buyers go? Surely your pipeline is stuffed? What can you tell us about the next big sale?
So we've been working on it. It's complicated because this is the true trophy property. So finding the next best alternative for people has been challenging. We've been making calls knocking on doors, calling in, you know, trying to convince people to move. And although this is the record, I'm confident by the end of the year, early next year, we're going to see other sales even breaking this record.
It's not that there's not demand from the buyers. It's that we have few sellers at this point that are willing to move for these type of.
Properties and the most sought after community.
So you know, this was a land transaction, but many of the people looking at it wanted to finished home on a large parcel and that type of inventory just doesn't exist, so people are having to build it themselves. And land price is now for the best parcels of land, they're now one thousand foot for a land per foot basis. So we're getting creative. We're trying to put neighbors together in different communities. We're calling people. Maybe people are focused
on at home. Now we're pivoting to a penthouse. So we have to get creative. But we're used to working in a tight inventory environment. Going back to this, really starting twenty twenty, if we go pre pandemic, the overwhelming majority of buyers looking at this type of property, bidding on this property would have been international buyers, so it's completely switched from majority international to majority domestic in a very short period of time.
And what sort of incentives are you having to put up the incentives to get these neighbors to think about putting their properties on the market, because I mean, if you have all the buyers, how are you incentivizing them to think about selling.
So that's been really challenging.
So, you know, one thing that's been a great care at has been providing post occupancy agreements, particularly when people.
Are building or they're going to renovate.
So we work it into the deal where the seller can stay for six months, sometimes even a year rent free in the property. Then they have the proceeds from the sale to find their next you know, property to move to. We've had all sorts of sweeeners with you know, quick closings, long closings, all different sorts of accommodations, even people making arrangements, and many times we've had sellers say we'll take this deal, but only if you find me a property to go to. So it's contingent on me
finding a property to move to. And that's really only happening in the highest end of the market. That's where the demand is the strongest in the Miami market, the very very ultra high end, because you have few sellers and you have a pretty significant pool of buyers, so the post occupancy is the lead. But really a lot of it comes down to the number.
Is it right?
Many?
Well, go ahead, Oh no, I was just gonna say.
You know, usually when we ask or would you consider selling, and the answers typically know for many of these you know, trophy high net worth individuals and awn these type of properties. But when we frame it as you know, is there a number that you consider selling at with certain terms, then it opens the conversation and sometimes people don't realize, you know, there's a real many people. Not everybody, but most people have a number that if it's big enough, they may move.
They may you know, buy the property they were thinking.
About, or make different arrangements, and we try to create a deal structure that works for everybody.
And then in thirty seconds, Danny, I happen to know that there's one property in particular that you've called remarkable with a single buyer and a single seller, that you think could come to market by the end of the year early next year. Above this can you give us any more details on that?
And more like twenty seconds. Unfortunately, so my.
Lips are sealed.
But there is a potential transaction in the works. A buyer wants a property and.
We'll see if the seller will sell, but it will break this record.
And there are other potential buyers out there looking right now in our market stay that are looking at prices above this record sale.
Danny Herzberg Wheelter at the Jills Zeer Group.
You're listening to the Bloomberg Business Week podcast. Listen live each weekday. He's starting at two pm Eastern. I'll Apple Car and Android Auto with the Bloomberg Business and you can also listen live on Amazon Alexa from our flagship New York station just say Alexa playing Bloomberg. Eleven thirty.
Banks docs have rallied nearly three percent since last Wednesday following the Fed's half a point rate cut, since dropping back more than one percent. Back with us, though, to talk about what's going on when it comes to rate cuts and the impact on the banking community, is once again welcome to have with us. Frank Sorrentino, He's chairman and CEO at Connect One Bank Corp. It is the
publicly held New Jersey based community bank. They've got roughly a nine hundred and sixty two million dollar market cap.
Since we talked, connect One.
Expanded its reach into Long Island thanks to a merger with the First of Long Island Corporation. As for shares of connect One overall, they're up nearly ten.
Percent year to date.
They've rallied about forty five percent since mid June. Frank, so great to have you back with us here on Bloomberg Business Week.
How are you, Thank you, Carol. We're doing quite well and thank you for having me back on the program. You bet you great times.
You've been busy, you've been busy. Tell us about this deal, this tie up.
You didn't actually give us a clue, but you were spending a fair amount of time in Long Island.
But go ahead. Oh well, we've been working on Long Island for the last five years and this is a really great market adjacency with a company that has a very similar culture and an incredibly attractive client base. So
we're really excited to merge together with these folks. It's a great team of people and we're looking forward to giving that you know, First of Long Island as well as all of their clients a great experience on Long Island with some more capabilities, some more products, and some more services.
Hey, Frank, I'm sure the people of Long Island to be thrilled to hear you describe them as being incredibly attractive as well, So we'll take off for them too. But look are you Are you looking at any other incredibly attractive places for perhaps and more acquisitions.
Well, I think we've always said that we're opportunistic as it relates to M and A that you know, it's been five years since the last transaction that we've done, and I think you know, our organic growth story is also something to talk about. You know, we've grown quite a bit organically, and when there are good opportunities in sound and really interesting markets like Long Island, and there's the opportunity to do something with a partner that we
feel makes sense, we will seize that opportunity. So, you know, our growth has been a combination of both organic and M and A.
Let's take a step back and look at the big picture here for a minute about where the kind of broader situation is. After we've seen the FED cutting rates last week as well how much do you feel like there is a clear path ahead for what happens next, and how are you thinking about it in terms of your business on the future race environment.
Well, I think the FED has made it very clear that they have a series of targets ahead of them that they want to achieve. Whether they achieve them in a shorter time frame or slightly longer time frame, I don't really think matters all that much. So whether the next cut is twenty five or fifty, or whether they
skip one, or you know, whatever they do. But the fact remains they're clearly on a track to get to lower rates, probably somewhat some another one hundred or one hundred and twenty five basis points lower probably by year end, and that they have a definite target in mind for where they want the economy to go based on the data that they see today. If that data changes, they may change those targets.
How do you feel about the economy. You've been on with us a lot over the last year. You've often you know, I repeat myself, but when people were talking kind of dour about the economic outlook, talking recession, you were talking about robust was the word you often used when it comes to what's going on in the US economy. Tell us about what you are seeing and does it maybe mean the FED doesn't need to go one hundred and twenty five basis points because things are going really well.
Look things. I think we are still in a robust economy, and I think the FED has gotten it right to lead us through to a soft landing. They've you know, this was a mission, and it was a mission that many people had in doubt that they could ever achieve. But yet here we are. The economy is doing well. Business formations are at all time high, no matter how you look at that data, and I think that boats very very well. Home construction is going gangbusters.
And that's that's your work.
You play into residential, right, and you play into the visit we talk about it.
Is it still going gangbusters?
It is?
You know, well, again we're talking about the market areas that connect one bank serves, right. So the New York metro market is very constrained as it relates to housing. And so every construction project that we're involved with, when it's completed, whether it's homes, condos, town homes, they are sold, whether it's apartments they are being rented. And generally at higher than pro forma numbers. So that bodes well for
the economy. And keep in mind, you know, I've always been a big proponent of home building, whether it's for apartments or for people to own houses. When people move in someplace, they buy stuff, right, they buy a lot of stuff. It is one of the greatest generators for,
you know, in the economy that exists. And so when you see you know, home building going at a at a rapid pace, and you see people buying homes as fast as they can get them, they are bidding wars going on for existing home product day, there's just not enough. You speak to any realtor, they will tell you there's just not enough product on the marketplace. That tells me things are pretty good. People have jobs, people have the income to support, you know, their lifestyles, and those apartments
and those homes. So again, the reason I say robust is because I feel people have great jobs and are continuing to spend, and that's what our economy is based on.
We are seeing a very slight loosening happening in the labor market now, though, and I wonder how you're thinking about that in six months or a year's time, and as you'rerationing all these loans, these people right there enthusiastically buying homes in the area as well. How are you concerned? How are you testing with these these new borrowers also to see how much they would be able to withstand should the labor market take a bigger downturn.
Yeah, I don't see the labor market taking a big downturn. You know, we have to keep things in relative perspective. Right when you think about the labor market with a three and a half percent on employment rate five years ago or seven years ago, you would have told me that's impossible. We can't get there. The neutral rate or the you know, the stable rate was four and a half or five percent. So I think we're coming off a very incredibly strong economy and maybe it's you know,
maybe it's slowing a bit, but it's not faltering. Companies are still complaining that they can't find or source really good talent today, and so the opportunities are still there for folks and people who are in the you know, places in the economy where there's need for certain types of labor, certain types of services. They just can't find enough folks to fill those positions. So, you know, and I'm not sure that four percent the unemployment is something where we should be worried.
Well, you know, and one of the things we just had a discussion with our connorson he found out a financial advisory firm, but he wrote a Bloomberg opinion column that basically saying Frank that we're gonna have to kind of make the decision between either having lower mortgage rates, which some would like in a big way, or we're gonna let We're gonna have to have let the FED kind of, you know, maybe allow for a stable labor market,
like we just kind of can't have both. Like if you see the FED cutting rates even more, which would bring down mortgage rates even more, it probably means because the economy is coming undone and the and the labor market is coming undone.
So how do you see it? Is the FED going to have to kind of make some choices?
Are we going to have to make some choices about what we what we get with this US economy and want.
I think the FED is making choices. And I've been a staunch proponent of the Fed's actions over the last number of years. I think they've gotten it right. Could they have been a little bit faster on the uptake? Could they be a little bit slower maybe here, or maybe they need to go a little faster. I don't know, But overall, I think they've been doing a good job. Here we are. We're sitting in economy with very, very low unemployment, and we're sitting in an economy that is
growing where consumers continue to spend. So I think they're getting it right. If anyone is thinking we're going back to a time when we're going to have three percent mortgages, Okay, that's not going to happen. But the idea that we're going to have you know, four and a half, five percent, five and a half percent mortgages, that's nirvana if you
think about any other time period in our history. So we're not that far away from that, and yet still have low and low unemployment and still have you know, a growing economy with all the opportunities we have. The US leads the world in so many different industries. What else could you be wishing for. This is a good place to be and I think the FED is getting it right, and I think we're going to land in the right place.
Okay, I'm hearing all of the optimistic masters, and I appreciate them, and I hear you, but I do want to ask you if there's anything you're worried about, because you know, there are concerns out there, and I'm just a lot of.
American voters they certainly feel that way.
And I'm just curious as to what you're watching for the potential signs that maybe things might you know, there could be some bumps in the road in the way.
There's always the potential for bumps in the road, and we cancel all of our clients to you know, be aware, have situational awareness. Could there be a spike in you know, various indicators that there could be a change in interest rate policy that was unexpected Right six months ago, everyone thought maybe rates were going to go up. So I think it's I think it's important for people to prepare for a number of different eventualities.
That happens. You know, welcome to the world.
People should and people should People should should not you know, necessarily make business decisions only based on headlines there in the news. We should take a look at what's going on on the ground. What I am speaking to is what our clients are telling us about their business prospects and where they're willing to invest their capital. And the things we're being told is that it looks like the economy is on a very solid footing as we sit here today, and we'll continue to grow moving forward.
Hey thirty seconds.
So when you look at your loan book or when you look at loan demand, you don't see any signs of stress.
Look, there's always there's always signs of some sort of stress somewhere in the economy, and it moves from place to place. So yes, we always have to keep an eye on that. And you know, the lowering of interest rates is making some of those areas better off today than they were maybe six months ago, but it may create other issues in other places. Anyone who's lending money has to always, you know, be a into what parts of the economy are moving better than others. And that's
a very very you know, fast moving environment. So I wouldn't say it's devoid of any stress whatsoever. We certainly that's our job is to look at where those things are occurring.
Well, as you know, we always appreciate when we get some time with you, Frankie, Well, frank Sorrentino. He's chairman and at Connect one Bank Court joining us there from Long Island.
Brother marcome.
A journal now about you?
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Think well, jo it on on Bluebird Radio.
All right, everybody, just under twenty minutes left to end the Monday trading day. I heard Charlie breaking down the numbers, Bill Maloney as well, and we're definitely of our best life of the session. So I'm going to say Stephen just a little bit higher. But you know, it was a big week last week with the FED meeting. I feel like we're going to wait to see what FED speakers are saying, although a lot have been out in full force.
Yeah, that's when we heard from Aston Gosby among others, talking about many more rake cuts so expected over the next year, two many more meet It was sufficiently nebulous, is what I enjoyed it. I think we probably needed to hear him say it to really understand what it meant. And we're thinking about the year ahead. Let's bring in Veronica Wellison's Global investment Strattus at Wells Fargo Investment Institute. He joins us from Saint Louis. Veronica, Great to have
you with us on the program. So what's your reading on where markets are this week?
Right?
Are we in a sweet spot? We got the fifty basis points, we haven't gotten into earning season yet. Is this sort of a happy coasting moment or do we need to watch out for Iceberg's.
I think we're in a bit of a sweet spot right now. A pretty quiet day that we've seen today after a very eventful week last week. But I think ahead we've got some important data this week. Most importantly, we've got that PC inflation expected all on Friday. And while you know, markets have shifted their focus a little bit to the labor market over inflation, I do think that those inflation updates are going to continue to be important.
Yeah, I agree with you. We are so still data dependent. I mean, folks, if you thought we were over it, we are just so not. It's data dependent and inflation and even the Fed said right, Veronica made some point about that inflation is still not quite where they the FED would like it to be, so you know that they are watching as well.
Yeah.
Absolutely. You know a lot of people have taken the fifty basis point cut by the FED as a win over inflation. And I think what's going to be important for all of the various bet speakers we've got this week speaking or looking at what they're saying about inflation. They certainly haven't told us, you know, we have a victory over inflation. They still want to see that inflation number come.
Down some more on the south landing question, and we were speaking to the CEO of Bincorp there a moment ago, thank you, super optimistic about where things are going for the US economy, but this question of soft landing and the risks of that landing still in question. I mean, what's the market perception on that From your point of view, I.
Think the market is becoming a little bit more concerned that maybe there will be a recession. But I think soft landing is what's priced in and that's what the most likely scenario is. We're seeing economic.
Rights based on what you guys look at.
Yeah, I think we're seeing slowing economic growth, but not enough to put us into a recession. And I think by the time we get to that low in the growth, we'll start to see that acceleration and really avoid a recession.
At this point, what we're thinking about next year, you know, the idea of there being a better economic picture in play there as well. How do you position now to be ready for that next year?
I think for now we are a little bit cautious thinking of US large caps over small caps, and then in the fixed income space, we like investment grade over high yield, waiting for a little bit of a better entry point to making a shift to those risk on So once we start to feel a little bit more comfortable that the economy is starting to accelerate, that's when we want to make more of a shift to those more risk on areas of the market that tend to do well as the economy starts to reaccelerate.
All right, So, for people are putting new money to work right now, what's your advice for people who have existing portfolios? What's the tinkering you suggest right now?
I think right now a focus on the US large cap space. We've seen a bit of a rally year, so I'd focus on some of those sectors that have the best valuations right now that we're expecting to do well over the next twelve to eighteen months or so. So we like communications services, financials, energy, materials, and industrials.
We think that those sectors are, you know, a little bit better evaluation than tech, which has gotten a little bit overextended over the past couple of years, but should also benefit from the long term type of AI trends that has really boosted tech. I think sometimes people forget that other sectors will really benefit from that AI trade, and that's what I would really encourage investors to do right now.
Communication services as a whole, certainly a group that we talk about a lot.
It's a little bit lower in today's trade.
If I bring up the year to date numbers, let me just go there on the Bloomberg you see communication services up almost twenty six percent so.
Far this year. It's an interesting group though.
You know, you've got your media names, your traditional media companies, but you have something like Meta in there, you have Google in there. So when I know you can't necessarily talk specific names when you drill down into various sectors within communications services, is it some of the megacap tech names that you guys still find interesting or.
Is it some of the traditional is it the streamers?
Like?
What is it?
I think overall as a sector, we really like the opportunities there. We do think some of thecaps can still perform well as long as their earnings still deliver what the market is expecting. We've seen a little bit of market broadening this year with other names participating in the rally and not just that heavy concentration on those you know, top seven stocks or so. And I think that's what we're expecting to continue for the rest of this year
into twenty twenty five. So I still think that there's room for communication services to improve and adding that exposure on days when you see pullbacks is a really good idea.
What a big companies that are consumer focused. I wonder what's you're reading on the US consumer right now. We've had we've had the first rate cut. You know, that's going to help those that have mortgages to pay, but you know, more broadly, there have been signs of weakness in some of the data.
Yeah, and we're really seeing that consumer confidence also wane a little bit. As you know, consumers are just really they're really worried about inflation. They're really worried about where prices are now, and we haven't necessarily seen that flow through to retail sales, which have held up. Okay, it's softening a little bit, but it hasn't gotten to a concerning point, which is part of the reason why we're in that soft landing camp. We'll think the consumer will
be able to hold up. Okay, not as strong as they have been previously, but that's that's a big portion of why we're expecting economic growth to slow but not pull us into our recession, is just that the consumer should hold up. Okay.
Is the AI trade still a good one in your view?
I think it's important to think of the AI trade as more more than just a near term type of play. It's a it's a longer term theme which I think will play play out in the markets over you know, years to come, and so I do think it's important to think outside of the tech sector when you're when you're thinking of that AI play, That's not the only place where you'll really be able to see the benefits there.
In particular, the energy, material industrial sectors will also benefit in the AI because they're all part of you know, getting up to those AI solutions and right now they have a little bit better valuations and what we're seeing in the tech sector. So that's a really great way to play that longer term AI trend.
All right, Gonna leave it on that note. Listen Veronica.
We really appreciate your time today, by the way, and video is up about four tens of a percent in case you were I feel like we say AI, we have to talk about Nvidia.
That's Ronica at a stark level of investment Stratus at well Wells Fargo Investment Tendsity with us from Saint Louis.
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