Rents Play Big Role in US Inflation

You can also listen to our radio show at two pm Eastern Time on Bloomberg Radio, or watch us on YouTube search Bloomberg Global News. We've got some good news and some bad news. We'll start with the good news. Rental inflation could be close to topping out this after it advanced almost six percent in the twelve months through July. There's also some bad news, though. Those high prices are going to be around for a while, because it could take a while to settle back down to anything resembling

what we saw before the COVID pandemic. So it, writes Matt Bosler, Federal Reserve reporter for Bloomberg News. He joins us now on the phone from New York City. Follow him on Twitter at bo E s Underscore. Matt, good to have you with us. How are you good? Thanks for having me, Yeah, it's always great to chat fed with you. And of course, um economic data CPI coming at us tomorrow. So this is a really important one. Why is why is our housing prices so important to watch? Like?

How does it give us an idea of where inflation is going? Yes, so a couple of reasons. Um, you know, first of all, the big one is just that rental inflation is the biggest component in the overall consumer Price Index, so you know, as goes rental inflation, so goes to c p I. Another reason is that it tends to be the most persistent uh component of the CPI for month to month, right, so you don't get these wild swings month in and months out where rent is plunging

one month and then surging. The bactive is pretty persistent and so it kind of gives you know, further impetus to that underlying trend. Um. And then probably the third reason, which is important for a lot of people who work in financial markets, is that, um, you know, it's really important to the Federal Reserve and you know, both because it drives the overall cp I. And also because you know, the FED tries to get a sense of underlying inflation

by slicing the indicing the numbers. You know, people may have heard of the median or trim means CPI measures by now, because you know, share Jerome Powell and other FED officials like to cite them. Those measures all tend to be dominated by rent as well, because you know, the more you chop out of the CPI, the bigger and bigger that biggest component still left over becomes an overall importance. And so that's why rental inflation really kind of holds the key to the trajectory for for both

inflation and FED policy going forward. Yeah, man, I wonder what do we know much about what the drivers of rent inflation are? I mean, I'm assuming this massive run up in housing prices, Uh, since the pandemic is a big part of it is, is that the main driver of of high rent inflation? Do you think? Yeah? So it's interesting because you know, I think before the pandemic, a lot of people used to look at things like

house prices. Um. House prices have become definitely more disconnected from rent during the pandemic just because you know, house prices are up so much and we haven't really seen the same kind of reaction in rents. You know, another big driver is wage growth. Rental inflation tends to track wage growth really closely over time UM, which just kind of gives you a sense of you know, landlords uh sort of power and being able to um, you know,

capture that marginal increase in income you know, among the workforce. UM. And you know, lately more forecasters have been turning to just you know, estimates of market rents, things that are put out like by companies like Zillo and apartment list on UM, you know, what's happening to the prices of

new leases. And it turns out the way that the rental inflation component in the CPI is constructed, it tends to lag those estimates produced by some of those other shops like Zoo and apartment lists by six to twelve months. And so that's actually an even zier way UM for forecasters to kind of get a sense of where, you know,

the CPI component of rental inflation is going. Okay, So Matt, give us an idea of the things to watch for to understand if if well, if if rental prices are going to start coming down, I mean, what could you say to people who are listening right now who just got that note from their landlord that rent is going to go up? Because I've heard stories about people getting their rent raised like, you know, four dollars a month, you know, when they renew their lease. Um, what is

it going to take for those prices to come down? Yeah, So, you know, obviously it's been crazy, especially in a lot of the big cities, but really across you know, the entire country this this year and last year. So you know, basically what those private sector measures of rental inflation are showing is that, um, you know, rental inflation really peaked

earlier this year and has started to moderate. Now. The problem is that you know, that's looking at new leases, right so when you move, you might have been facing

double digit increases this year and last year. This thing about the CPI is that's measuring um, you know, rental inflation for everyone and not just people who are moving, um, you know, in one given month or year, and so people tend to stay put and that's why the measures of new lease growth, um, you know, tend to filter much more slowly into the CPI, and so that's why the CPI component of rental inflation probably unfortunately, is going to stay elevated for quite some time, even if it's

close to topping out here, because um, you know what happens is you might stay in your apartment for another year or two and you might face you know, some rent increase. But you know, then when you move out, that's when the landlord really jacks up the price to to capture that full increase that we've been seeing in new leases, which is unfortunately why this is this is probably going to be with us for a while. All right, now,

we're gonna have to leave it there. It's actually a party on Saturday night for people who are moving away from the city. They lived in the same apartment for seven years and their neighbor came over and was like, the landlord is going to check the rent so much when you guys leave. Matt Bosler's fet a reserve reporter for Bloomberg News, joining us on the phone from New

York City. You're listening to Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. Well You might remember last year when otto Home was approved by the FDA. It's an Alzheimer's treatment. The whole approval process was pretty controversial, and we'll get to that in just a minute. But it's also a really expensive drug and now it's leaving millions in limbo. Writing about that in the upcoming issue of Business Week magazine is

Bob Langreth, his healthcare reporter for Bloomberg News. He's with us right now in the Bloomberg Interactive Broker Studio. We're also joined by Joel Webber, the editor of Bloomberg business Week, in the Bloomberg Interactive Broker Studio. You can follow both of these guys on Twitter. Joel is at Joel Webber

Show and Bob Langreth is at Robert Langrith on Twitter. So, Joel, give us an idea of why this whole thing is such a mass because I remember when it was approved, it was seen as like a really good sign, but then all this came back about the approval process. Backlash

is a good way to describe it. Yeah. Uh, Well, Biogen is probably the character at the center of this, which is Upstart biotech pharma company, and they have been really all over the Alzheimer space, and this was a you know, viewed by some quarters as a breakthrough treatment and and to that end, what was interesting about it was that backlash, right because at first everyone was very hopeful about it, and then all of a sudden it was like wait a second, and then it got really

confusing for us normal people. Um, and that's why we were like, Bob, Bob, can you help us make sense of this? And and you know that I think the main thing to know is that this is there are you know, so many people affected by this, and there's just been a dearth of anything right, and so a semblance of hope, uh matters And and therefore it also plays with a lot of emotions and and where's the science out again, Bob? So that's been the whole problem

with this whole saga of aging helm. It was supposed to be kind of the drug. There's this leading theory.

The disease is called amiloid. I won't go into the details, but anyway, it's been really controversial for years, and amage helm was supposed to be the drug was going to finally answer the question whether these drugs targeting this amiloid, this protein that builds up in the brain, whether it actually does something, whether it works, and they were doing the giant definitive trials there and they're supposed to get a definitive answer and then they cut them short, said

it failed. Then they said, wait a second, we think it works. We're gonna apply for approval. That it was approved and everyone thought was going to be a big seller, and then then there's this big backlash, massive backlash and what what are you doing approving and a lot of

a lot of doctors were quite upset about that. And then Medicare, which has covers almost everyone with Alzheimer's, basically one of one of the first times in history, said hey, you know, you know, we're not gonna, you know, cover this outside of the clinical trial because it's just not any real proof that it works. And so like everyone's now kind of like in limbo, no one knows quite what to do or you know, no one really even

knows whether this thing works or not. And so we now to wait for like yet more studies from other drug companies that are working on similar things to try to finally get some answers. But it's like the whole fields kind of at a stand so still while we kind of like work this out. It's just a very sad situation. So, Bob, I'm just curious, how does a drug get through the clinical trial process and get approved

if it doesn't seem like it works necessarily well? And uh yeah, the whole situation with Adella, it's just like bizarre and hard to understand and just very confusing. Uh. But they basically, I mean appears like the FDA essentially kind of wanting tired of not approving Alzheimer's drugs. And you know, this is my perception. I don't direct prove of this, but you know, yeah, they kind of wanted to approve something, and then this came along, and then

it became apparent. They originally tried to get approved through the regular mechanisms that became apparent. Then they went through a public advisory panel like doctors. It was roundly rejected. So then the FDA kind of found a backup way to approve it. There's mechanisms called accelerated approval where you don't actually have to show that it slows the disease or improved symptoms. It just improves a biomarker in this case, so that they could show it like improve your brain

scam look better, look prettier. But there was no evidence that, no proof that you actually over your content decline with slowing down. But your brain scam did look better, and that's how it got approved. Okay, So if you weren't confused to begin with, we might be even more confused because there's a whole another wave of Alzheimer's drugs coming from other drug manufacturers. So so what are you looking

for as we start to see results from these other candidas. Yeah, so it's going to be a very interesting fall because there's two more a big drug trials coming of similar drugs to add a helm. One is from Bob's partner, a size Japanese drug company. It invented like one of the first Alzheimer's pills ever, this drugg called air Accept three years ago and it's been trying to come up

with a better successor ever since then. So they have a giant trial that's supposed to report results potentially as soon as the end of this month and maybe early October. And then Roche, they big got Swiss drug company also is another giant trial. They have taken a drug that previously failed uh and then up to dose five times five times higher dose, saying they think that dose finally

might work and you know, we'll see. But if you know, both these things don't work, there's really going to have to be a big, big reassessment in the drug industry. Why they've put like so much attention on like one theory, one on one mechanism instead of spreading the bets and diversifying because you know, no one knows for sure, like what's going to finally work, and why, you know, why not spread your bets and tried a lot of different

ideas because you never know what's finally gonna work. Bob, you put a real human element in the lead of the story, a woman named Jerry Taylor who's actually Alzheimer's patient. Uh, she had a lot of hope for this drug. Um,

how's she doing? Is it helping her at all? Well, you know, and anyone patient, it's really you know, impossible to tell whether particularly drug, you know, it's helping you at all, because if these drugs work, you know, they're gonna slow that the slow the progression a little bit. They're not gonna halt it. It's very very clear if they work at all, it's gonna be a very modest effect,

so it's really hard to tell. She thinks and her husband thinks, you know, if she was on it for years through a clinical trial, they think, you know, it helped, but she's clearly you know, progress. But there you know, they're kind of her and her husband, they're like activists and they're really pushing for approval and coverage and they also like are trying to encourage the drug companies remaining drug companies that keep going to you know, get some trials.

But it's just a very hurd story. Is just a very poignant story because there's so little out there for this time. I wonder, is that the type of thing if you got it early enough that maybe the the benefits would be be greater. Yeah, So that's what they're

looking into. Now. They're looking into like pure prevention, like they're they're finding people with abnormal brain scans uh and seeing if any of these drugs can actually prevent the disease from progressing into cognitive decline like before you actually have any obvious symptoms. But the problem that's going to take another at five, six, several years to find that out. So that's just in the very earliest stages. But that's exactly where a lot of the research is going right now.

And just backing up to, you know, again this pipeline of all these other things that are coming, are they all using effectively the same approach that that is already up there now or are they going to different Yeah, so we're starting to see the beginnings of a shift, and some critics of the way he thinks would may you know, would probably say it's long overdue. But we're

starting to the beginnings of the shift. And you know, drug companies focusing some of the research more broadly and different theories of disease and different mechanisms of the disease. In particular, brain information is one area that's getting a lot of focused now and drugs going into trials, and that may be the thing that's actually killing nerve cells, not the emily that builds up years and years before. Bob Langrath his healthcare reporter for Bloomberg News. Check out

Bob's story. It's in the upcoming issue of Business Week magazine. You can read it now though on the Bloomberg terminal and also at Bloomberg dot com slash business Week. It's called the Alzheimer's drug approval. Mess is leaving millions in limbo. We're also very pleased this afternoon to be joined by Joel Webber, the editor of Bloomberg Business Week. He's also with us in the Bloomberg Interactive Broker Studio. Follow Joel on Twitter at Joel Webber Show, and also be sure

to follow Bob on Twitter as well. Robert Langworth at Robert Langworth is his handle. This is Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. Well, you might remember the last hour, I talked a little bit about this on our simulcast. Today's Big Take, it's about the world's hottest housing markets are facing a painful reset. We're talking about places like Vancouver and Toronto in Canada, and then also places including Australia

and other parts of the world. The story written by Ainsley Thomas and the Karen and edited by Kara Wetzel, our San Francisco bureau chief. She joins us right now on the phone from our San Francisco bureau. Kara, great to have you with us this afternoon. So, so, what are the themes that sort of tie these housing markets together. And where are we talking here, because not every single housing market is created equal. Yes, that's right, great to

be here. Uh. The really, you know, the sort of the markets that were really in focus on are the ones that were just have and hugely bubbly lack of the better word, over the past few years of the pandemic boom. This is Australia and New Zealand, Canada, where

investing in real estate just became a huge phenomenon. You know, you've seen price gains of plus per year and you know not apparently those are the ones that suddenly are rapidly cooling because now that we have this synchronized you know, interest rates from central banks around the world, um, borrowing costs are going up everywhere, and you have this combination of now prices or at record levels or were at record levels, and borrowing costs are now just wagh out

of people's reach. So they're having the quickest come down now. You know, Kara, when I read about potential double digit home price declines, I kind of have a nasty flashback to uh, you know about twelve thirteen years ago and the financial crisis. I mean, you covered that, right, so if you're like, it's a little close to home for you, some chills up the spot a little bit. Yeah, but

I'm wondering. I mean, so much has been done in the US to safeguard the financial system, and we've really moved away from those adjustable rate mortgages in the US that we're part of the problem back then. But I get the impression the rest of the world is still more exposed to adjustable rate mortgages than we are in the U. S Is that is that true? And you know, are there concerns out there about um some sort of ripple effects from a drop in property values into the

global financial system. Yes, that's absolutely true. So the U s um has vastly come away from addressable rate mortgages in the aftermath of the financial crisis. It's it's been about um seven percent is average of loans are in the past five years. And it makes sense because you know, rates have been so low, why would you not just

lock in those rates? But the US is actually something I've just found and working on the story is pretty unique in terms of having you know, thirty year fixed mortgages or even fishing here that a lot of these countries they are just the mortgage system works by they have mortgages that may reset every year depending on you know, what central banks do or what um or they may even reset just based you know, monthly or just you know,

just be directly tied. So that is definitely sort of what some of the concern is in some of these markets, like in New Zealand for instance, more than fifty mortgages are going to reset to a higher rate UM by next June. So yes, so these are it's not just you know, home buyers that are affected by the rising rates UM as it largely is here in the U S. It's also homeowners who now are going to be facing

higher monthly payments on loans. In some cases if they bought you know, at very high levels, probably were already stretching to make you know, to pay for these things. And so yes, that that is the concern, and that brings ripple effects of consumer spending and other other types of things for these economies. So that's something you know, again as a central banker's way how much to race rates and the effects on the broader economy. That's something

I think those bankers have to keep in mind. There. Kara is there any silver lining here with with with this sort of coming down from from the sky high prices. And I asked this question fully realizing that we're in an environment where interest rates are higher. So you know, even if houses become more quote unquote affordable, that monthly payment could be even higher than it was for a more expensive house because of interest rates. Yes, it could.

But me, yes, this liver lining is that I think you know, we've all been witnessed to this real estate frenzy. I mean in the US as well, where you know, you're bidding wars and you have to fight you know, fifteen other offers to get a home and that's not healthy either, and so slowing that down and that's um, you know, not necessarily a problem, and it kind of puts us back toward normalization. And yes, if home prices do come down a bit, you know, if you're a homeowner,

you're still sitting on a fair amount of equity. Prices have gone so much it's hard to cry too many tears for like, oh, um, you know my house gained twenty percent a year, is now only a ten percent from that figure. You're still you know, you're still doing okay. So maybe this provides an opportunity for you know, a bit of a cool down in the market and this abilization. I'm fascinating in the story Care that it says New Zealand was really the poster child of the pandemic housing boom. Well,

what's going on there? Is it just a matter of the lowest interest rates? We're people flocking to New Zealand in the pandemic? Have you seen those pictures? I'm willing to flock there personally, right, and we're all going to move there right right us in Peter Thiel right, Yes, exactly. Um, it's part of it. I think it's just becomes a cultural thing that this is where people see they can build their wealth and um, it's it's a big investment play.

And like it's just the culture of you know, you need to be a homeowner, and so everybody um flocked to it and it kind of builds on itself. I think a similar thing happened in Canada. It's just, um, you know, where people see the ability to build wealth that you need to buy a house, and and so in that extreme and and again and yes, and then this colliding at a time of low rates. Obviously the pandemic caused a lot of people to rethink how they're living and they need a bigger house to work from

home and that type of thing. It was a bit of a you know, all these issues colliding. If we were if we were tabloid, we could have gone with the headline underwater down under Oh nice, Mike always thinking about headlines as senior editor for Bloomberg News. Carol Welzel, Hey care, great to have you with us. It's Scarrel Wetzel, San Francisco bureau chief for Bloomberg New. She joins us on the phone from our San Francisco bureau. Follow her

on Twitter, you can do that at Kara Wetzel. You're listening to Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. Well, last week, President Biden took a victory lap on a lot of boost chip manufacturing. He attended the groundbreaking of Intel's new semiconductor manufacturing facility. It's just outside of Columbus, Ohio, totting one of his legislative wins in a crucial midterm election season.

So why Ohio, And how does a partnership like this work, and how does Intel find the right people? After all, the facility is going to support three thousand full time jobs, that's according to Intel. For this we termed to J P NSC President and CEO of Jobs Ohio. It's the Economic Development Corporation. It's a private one for the state of Ohio. He joins us this afternoon from Dayton, JP. How are you doing great? Doing great? How are you doing?

They were doing well? Thanks for joining us. So give us some color on on on how this went down, how how Intel chose Ohio and and and why you in your opinion, I mean, it's your job to play up the state. I mean you've got to be the biggest cheerleader for the state. Why you think Ohio was was picked as the site? So yes, it is my primary role. And you know, first thank you for for

having us here today. Uh you know, those of us that have lived here for a long time in Ohio, you know we made the choice to buy into this value proposition. It's very interesting value proposition in the American Midwest, in particular in Ohio. But Intel, you know it's one of the It was the largest investment in Ohio history, the largest economic development project in the history of the state and for those of us that have been here a while, Uh, it was the type of project that

always went somewhere else. You know, we've had steady outflow. You know, our population has been migrating lest in south really since after World War Two. NaSTA took a lot of our manufacturing south of the border and then was offshoring to Asia. So for decades, as the name rust Belt developed and Flyover State developed, this is something somewhat of a phenomena that's occurred those of us the state and stayed at it. Uh. We won because we've been

working at this so hard during the tough times. Our economic development muscle has become very lean. But if you talk to until the reason we want According to them, we had a site available. The reason we had a site available as we've been investing in sites. This the Governor Dwine, Lieutenant Governor Houston made a priority to invest

in sites. We have a very sophisticated private sector developer that worked hard to option the land required while the negotiation was going on, so they were incurring risk simultaneous to us negotiating. So we had a site available, big, complex site couldn't have vibrations, so it couldn't be close to a highway. Needed up to up to and more than a thousand acres to be compared to be prepared

for expansion. Needed access to millions and millions and millions of gallons of water, a lot of the water in the process for semiconductors. We also intel tell us they were competent, We had the talent that they need they needed. You may not know this, but Ohio has over a hundred and fifty educational institutions, community colleges, private universities, public universities. I went to my wife wrot to the Ohio State University. Yeah, she would be very upset if I didn't say the

Ohio States. So it's well known in our house. I'm sure it is, as we know from all the alumni that went there. I would do the University of Dayton, but you know, there's so many greats that our governor went to Miami University, great universities here, but we produced year a hundred and seventy seven thousand graduates, and up to this point, literally of those leave and go to other states. So we just we have a starting point, a multi tiered talent strategy where we're producing more STEM talent.

You know, we have plans through innovation districts that the Governor Dwine announced to have three innovation districts that will triple the number of STEM degrees to come out of our state. We've got certification programs to certify existing workers so they can upgrade their skills and be available UH to work high high end UH manufacturing and manufacturing technologies. UH. And then you know, as as many people leave the coasts in other areas, they're not all going to Texas

or to Nashville or Florida or to Denver. A lot of them quietly are coming to Ohio and HP I can I can't help but wonder if that being so close to the Ohio State University there in Columbus is part of what motivated UH in Intel to be attracted to this site. Am I right? That Intel is actually gonna be investing into some of the colleges and universities

of Ohio. As part of this, Intel has announced that they're going to be investing fifty million dollars into a consortiumable Ohio universities to help develop a very specific type of talent they're going to need and it's a consortium of universities led by the Ohio State University Dr Christina Johnson outstanding leader. Uh there and yes, the at Dale Singer has mentioned Ohio State several times as primary strength. Again, as long as none of that goes to their football program.

They got enough money that they do have enough money there. Hey, JP, we unfortunately have to leave it there, but you gotta come back and join us again. Really appreciate you taking the time this afternoon. Jpns c if A is a president and CEO of Jobs Ohio. It's the private economic development corporation in the state. Joining us on the phone from Dayton, Ohio Journal Yet, no, no, no, no no, honey, please, I'll do the ridels. I want to drive. It's good question.

This is the drive to the globe. We'll drive up down on Bluebird Radio. It's that time already. We got less than tenants go until the market and closes. Let's drive to the clothes for that. We are joined by Max Wasserman, founder and senior portfolio manager at near O Mark Capital, joining us on the phone from Northbrook, Illinois. Max, how are you. I'm doing well, Thank you. How are you guys doing doing well? Thanks? Hey, we just heard

from Charlie Pellett another rally that we're seeing. It's the fourth day in a row of gains for the S and P five hundred. Do we trust this rally? I'm very skeptical of this rally because everybody seems to be so confident in their ability to predict inflation and what the Fed's gonna do. So they're telling you they're going to be raising rates and it's not just that's because of peak inflation. They're gonna try to bring it down substantially.

So I think they may be surprised, regardless of the outcome tomorrow with cp I, if the Fed says we raise interest rate seventy five and we're going to continue until we see substantial decrease. It's not just that it's peaking, but they want to see a decrease in inflation. Is that sort of your base case? Max that, uh, you know, we'll see seventy five basis points at the next meeting and then a continuation of that size hike for the

foreseeable future. I think we will see if I'd be shocked that we don't do seventy five now considering that they've really come out the FEDS and said that they were going to be very aggressive after that. I think it's probably gonna be more in line with probably waiting for the data and more line of fifty and but regardless of that, keep in mind that the tapering comes off, so now you're gonna have basically bonds are not going to be supported by the Fed coming in September. So

that's gonna should be raising interest rates. So I think it could be a one two punch that I think people are just a little bit too excited right now. Max. It's uh, it's great to have a guy like you on the show because so often we talk to strategists who are macro types who refused to talk about individual stocks.

But I know you've got some stock picks for us, so I want to dive into them a little bit, especially as you're you know, you're talking about uh, you know, potential for even higher interest rates, presumably even higher mortgage rates. But yet home Depot is one of your picks, and I'm curious what you're seeing there and whether or not a potential cool down in the in the housing market

effects how you're thinking about home Depot at all. Right, Well, first, you know we are approaches were dividend growth investors, So we're looking for companies to have the ability and crow their cash flows increased the dividend, have tremendous market share potential. If you look at home depot with a nine hundred billion dollar dressable market, there's a few things people need

to keep in mind. One, there's about a hundred and thirty million houses out there and sent of them over twenty five years of age and over forty So regardless of what's happen, indeed, you need maintenance on these homes. And when you look at it from that perspective, we have underinvested in the upkeeping our homes for such a long period of time that that we think there's plenty of potential there and awesome we're looking at from this

price point. We're looking at stock now around three hundred, that was four twenty at a peak, and it's down about thirty percent year to date, training at a market multiple about seventeen times a five year dividant growth rate of seventeen percent, So we think this risk reward is favorable now. It doesn't mean in the next month it couldn't come down a little bit more, but if we look at the low on this stock of somewhere around two sixty six, which is about another fifteen percent, and

the upside well over thirty. We think somebody with a long term time rise in more than six months will be rewarded. Hey, Max, forgive me. We're gonna headline right now on the Bloomberg terminal. New Jersey raised to A from a minus by Fitch. The outlook is positive. Alright, finally some good news from my garden state, your home state, Mike. Let's lever her up. Time to lever her up. Hey, macks um, I don't have a good transition for that, but I want to talk to General Dynamics here because

we just talked to him. Depot one of your picks, also General Dynamics another one. Why what's your justification here? And why are you bullish? Well again, consistency of earnings is with you know, General dynamics in the defense industry. People failed to remember that regardless of who's in power, Democratic Republican, it really doesn't affect the demand for defense spending in even economic times. So we have a continual demand for defensemending. And actually, in light of these political

times and with Europe, rearming if you will. It really supports General Dynamics business is like, that's the nuclear subs. But on a positive note, there's a little tick on General Dynamics is zero space interest in the golf streams, and that's when you see people flying more hours, they're flying more demand for private jets by corporations and high net worth individuals, and that's where we see a tremendous potential is on that side of the business as well

as defense. Well, I want to talk defense real quick. We have this great feature on the Bloomberg terminal SPLCU type end and you can see the supply chain for the company General Dynamics. This is shocking, Mike. The revenue comes from the US. Yeah, it makes sense. I guess all those those weapons systems and uh, but you know it's your point of MAXs. I guess. Uh, as long as these geo political tensions are flaring, Uh, there's not gonna be any politician anywhere with the stomach to cut

the defense budget. Presumably. Well that yes, but these are long term contracts in nature. And also the fact that General Dynamics does the Marines, they do the nuclear subs, which are big demand. And also on their vehicles. You know, they have the Abram tanks right, and they have the Striker vehicles with Europe really wants a lot of these tanks and they want a lot of these vehicles, So that really demand for what to produce him. But in defense in general is a long term commit which which

has the ability to pass inflation on. But general dynamics again has a little bit more cyclical sign with narrow space, which we think has been underestimated because of COVID, nobody was flying for a period of time, so for many years we didn't look to that side of the business to grow. But we're seeing more miles are being flown and the new upgrade in their fleet of the G five hundred, six hundred and the internationally eight hundred. I just saw some video of that cool two the G

eight hundred. How much is that going to send me back? Yeah? But yeah, I mean it's spot to change for you. I can see your rolling up to work in that time. You gotta gotta figure out a place to land it down on like seventy two million. I wonder if that includes WiFi. I think they'll throw that in for you. Got taken along with maybe a Botle of Champagne. If you that is, I will tell you though, that is a cool looking plane. I saw some video of that

recently at the Dender Airport. I mean it is pretty I would I would definitely take one mic um okay Max before I let you go. You got one more company in here that we want to talk about. GPC Genuine Parts Company. What's going on there? Yeah, that's a twenty two billion dollar market cap out of Atlanta, Georgia, and they people are familiar with them. They owned the NAPA Auto Centers and the joining of their business. Do

it for you, So keep in mind one thing. You have about three hundred million cars out there that are over twelve years of age and they require about anywhere from eight hundred to a thousand year maintenance. And with rising interest rates, right, it's harder to buy new cars. They're expensive buying a new car, financing, trying to find a use cars becoming difficult. So people are repairing their cars and with the complication, they need somebody to do

it for them. And they've been experiencing like a ten to twelve percent growth rate in that side of the business. And that's really where we see it. You know, if you look at with the e contim blowing down, you're gonna keep that car longer. And with twelve year average, you know you have a built in sort of annuity stream if you're general park because the people need to repair their cars. Max, we unfortunately got to leave it there,

but please come back with us. This was great and also I can talk about jets for days, so pretty cool to hit on general dynamics there as well. Max Wasserman, founder and senior portfolio manager at near Mark Capital, joining us this afternoon on the phone from Northbrook. Ellen know It.

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