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This is just one of those days, right Amy, It's just hard to keep up. It just fast and furious. You're doing great, all right, Amy Morris There, Hey listen, folks who do want to get to a Bloomberg exclusive. SpaceX is in talks to sell insider shares in a transaction valuing the rocket and satellite maker at about three hundred and fifty billion. That's accring to those familiar with the matter. It's a massive jump, highlighting the post election
gains across Elon Musk's business empire. It turns out it's good to be acquainted with the president elect.
Just look at Tesla since you know, November up forty in the month of November alone. Back SpaceX, though, would be a significant premium to a previously Muld evaluation of two hundred and fifty five at billion dollars, as reported by Bloomberg News and other media outlets.
Just last month.
SpaceX was last valued at about two hundred and ten billion dollars.
That was a tender offer earlier this year.
For more on all of this and the big glon universe, back with us as Max Chafkin Bloomberg Business with Columnists. He's also the co host of Elon Inc. The podcast. He's also the author of the contrarian Peter Thiel and Silicon Valley's Pursuit of Power. Max joins us here in the studio. So SpaceX operates in a space where they're pretty much the only player in certain certain elements of it.
I mean, look at what Boeing had to like call, you know, the US government had to call on SpaceX to rescue those astronauts because Boeing couldn't do it.
They are the only player in the United States for at launching astronauts, and they are the major player for all rocket launches of all kinds.
Okay, so that huge share of the market overall. Why why is the world so much better for SpaceX under Trump?
Because SpaceX is a government contractor and most of its money comes from the US gun That would have happened under It's true but so, but you know, it's it's easy to get you don't want to you don't want to overstate their dominance. So they dominate, But there are a bunch of other players, including a bunch of large defense contractors that also have programs uh, both for launches and also for for astronauts.
And if you look at.
The plans for the Moon mission, right it, SpaceX is only one of a handful of companies that have contracts for this mission. Now if now, Trump could very easily change that mix, and and there's already talk. Musk has has suggested that it would be you know, better to to skip the Moon and you know, go straight to Mars or something like that. So so there are lots of ways that Trump or Trump administration could help elon Musk. And like the most basic basic one has to do
with Starlink. So starlink was in the running for subsidies for rural internet. It lost out on some of those subsidies. Musk has been very angry about that, and the nominee Trumps nomine to run the FCC was one of the voices saying, hey, this is a great injustice. He's a huge fan of SpaceX and of Elon Musk.
So, so like, even if.
You don't see some kind of dramatic shift in space policy, this is very likely to lead to more revenue for SpaceX than it was already going to get. And you know that's why the valuation has gone up. It's actually much more straightforward than the case for you know, why Tesla should be worth forty or fifty percent more than was worth before.
So in other words, their businesses make sense and it's likely to just keep growing exactly.
Yeah, there's there are there are a bunch of clear ways.
And you see analysts, both telecom analysts and space analysts talking about this.
This is not Isn't that some kind of like hypothetical.
You have to squint and imagine some some weird huge regulatory changes to to you know, how how the government regulates Elon musks empire. This is just like the government taking out it's it's very large paycheck and and giving Elon Musk a little bit more money.
It's interesting because we're seeing it play out. So this is this is this, This is.
Playing out in the private markets right now. We've seen it play out in the public markets over the last month with Tesla forty percent basically in the month of November. Yeah, why why is SpaceX more of a beneficiary than Tesla, Because certainly public market investors are saying, hey, Tesla's a huge winner here too.
Yeah, I mean it's it's essentially the same argument, and I would be surprised. You know, this is what makes it surprising is the size of the figure and the fact that they just had they just wrote up the valuation very recently, as you said. But I would not be shocked if everywhere in Elon Musk's empire, so x XAI that's his AI thing, the boring company.
If we are, if they are also quietly.
Doing this kind of thing, looking at higher valuations, looking at what they can do to take advantage of this moment, because investors are very excited about this, and we should one thing to I should note about SpaceX that also makes it different from Tesla. And one of the reasons why this is more likely, it's more likely that they will benefit is that they have a good argument for this.
Their product, as you said, is good it.
You know, they are doing a good job, so you don't have to squint and see some kind of back room political thing you could just move the needle a little bit and it might lead to a lot.
Max mentioned X.
Yeah.
Axios reported earlier this week that Fidelity actually wrote up the value of X, which is, you know, in the last few months they've written down the value of their investment in X, but a lot of that.
Might have to do with XAI.
I mean, it's no I think it makes sense that they wrote the value up. And we've been saying that on the Elon podcast that this was going to happen.
I mean X.
If the election of Donald Trump a few weeks back showed us anything, it is that Elon Musk's media company is influential. And yes, the advertising business isn't looking great, but they have other ways to make money AI and making their data available to AI companies including X is one way.
Subscriptions could be another way. This is a company that has.
Gotten more important than it was before, and I think there's a case for raising the valuation.
We were just showing some footage of was it last month where president like Donald Trump was there with Elon Musk at another launch by SpaceX having said that, so great for Elon to be able to say, hey, Trump, you know he's there right very accessible in terms of talking to him. If they have a falling out, does everybody kind of rethink some stuff, and especially when it comes to valuations.
Look, any time you a business politicizes itself, it creates risk. And one of the reasons that business leaders try not to do this, try not to show up on stage with Donald Trump, is because if there is a break or if the political wind shift, then.
All of a sudden, you're in a box.
Now, I would say that I think Elon Musk has a lot to work with Even if the relationship this probably stressful and inevitably, you know, there may be a fracture interpersonal relationship.
Even if it falls apart.
Musk is going to have power or both in terms of at the negotiating table with the US government as SpaceX tries to sell it more launches or tries to sell at satellite internet services, because the competition is not that well established, because no one is shuttling astronauts back and forth, and also because Elon Musk will be important within the conservative movement whether or not Donald Trump likes him.
So are all the other billionaires who are doing space Jeff Bezos and Richard Brandson. It's not happening anymore.
No, No, they are all trying to do this.
And we saw Bezos, you know, offer his congratulations to the President elect on x on Twitter, where he hadn't posted for a long time. He also saw, you know, the Washington Post declined to make an endorsement, which at least some critics we're seeing as a you know, politically motivated thing designed to help Bezos' rocket company.
Now he denied that.
No, he very much wants to sell launches to the US government. And you're going to see other defense contractors, traditional defense contractors push back.
And it's not like they have nothing to work with.
These companies provide jobs and states, they operate factories, they have constituencies as well.
So it's not like Elon Musk.
Can can overnight take over the entire aerospace industry. He's just in a much better position than he was a month ago.
Okay, so Max talking about how powerful Elon is or t love excuse me, Yeah, Max talking about how powerful Elon is. Certainly when it comes to Tesla, when it comes to having the year of the President elect.
He doesn't win all the time.
Yeah.
I was going to say, there's a Delaware judge that seems to sort of have an edge right now.
Yeah, he's going on with this pay package.
So for a second time, Elon Musk's very very large, historically large pay package, which you know, as of now is worth more than one hundred million dollars according to the Bloomberg story that we published, although has been worth you know, fifty billion dollars. The last time it was rejected was rejected. Now, if you remember a judge had
rejected this, there was a shareholder vote. Shareholders approved the pay package, and the thought, at least from Elon Musk and Tesla's point of view, was that this would essentially.
Invalidate the Delaware ruling.
The judge said, no, you can't undo a court ruling by having a vote of shareholders. That's a novel application of law. That's invalid. And so we're sort of back
where we started. Tesla's shareholders would very much like to keep Elon Musk happy, which as far as they many of them see it, and he sees it, means paying him a huge amount of money, and Delaware is not amenable yet, although we'll see, Musk and his lawyers have said they're going to appeal to the Supreme Court of Delaware, so it's possible they could overturn it, and then it's also possible he could just take his business to Texas, as he's threatened to do.
We do you does this change when I know this is a state issue right now? But does this change when Donald Trump becomes president?
No? I mean it's a state issue. And it's also again, Musk has already.
Moved the company to tech Exis.
You could imagine trying to do this again and then fighting it out in a Texas court, which in theory would probably be more amenable to the pay package than than Delaware was. I just look at this as it. Musk doesn't need the money right now. He's very wealthy.
Well, you don't need to start a go fundme page for him.
No, he'll be fund on.
Later.
Yeah, I'm sure he'll take any checks we send him, but he doesn't need the money now. I do think this is a reminder that Elon Musk cannot He cannot change the laws of gravity, and he cannot.
Change the law laws.
You know, there are a lot of people making huge investments in his companies right now, including in Tesla, and even with this SpaceX deal based on some kind of vague sense that politics will sort of shift the laws of business in his favor. And but there are there are laws of business that are not in his favor, and this is one of them. He's he's repeatedly gone out against this Delaware judge. Remember this is the same judge that forced him to buy Twitter slash x.
So, so you know, he can't do everything.
And again there are going to be battles ahead, legal battles, political battles, and and he's vulnerable to you know, the whims of law and democracy and all that, just like everyone else.
I mean, he can't get it everything he wants.
What almost what?
Well, why is the Why is the money so important to him? I don't know, honestly, Like if you were let's see, you know here it goes in.
There, it's it's three hundred and fifty three.
Billion dollars ethicly SpaceX right. I mean, he's what's an extra fifty billion dollars? What can you buy with four hundred million dollars that you can't buy with three hundred and fifty million dollars.
I mean, he has said that he intends to, you know, play a big role in the midterm elections. There also there's chatter about potential huge donations to British politicians, so maybe he wants to just a little extra cash for his political stuff. But really I think this is more for him and the people who back him. About the principle, and Elon Musk is somebody who has put now now a principle. You know, I think there are people who
would snicker at that. But Elon Musk has put his own role in Tesla, in Tesla and its growth central to its brand, and he sees this as an.
Attack, you know, right, rightfully wrongly.
Max Chafkin always appreciated co host of the Elon Inc Podcast. A new episode downloading you're.
Listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from two to five pm Eastern Listen on Apple car Play and then brought auto with a Bloomberg Business app or want us Live on YouTube.
Well, I got to say to politics, yes, you know, there is so much going on Russia, Ukraine, Middle East, US China relations. And then it feels like, out of nowhere, what has become one of our most read stories on the Bloomberg. It's been a top the list for most of the day about a declaration of martial law in South Korea by the South Korean President Yun, only to be followed hours later by the country's parliament voting to
lift the declaration. I gotta say, Tim, it's a bit of a whipsite, yea it is.
We got a great live log on it from our team over at Bloomberg News. If you're on the URN, do check that out by going to tliv here with what is going on? Sidney Siler Senior Advisor, nonresident or career Chair, Center for Strategic and International Studies. Sidney was the National Intelligence Officer for North Korea at the National Intelligence Council from twenty twenty to twenty twenty three, one of the nation's top experts when it comes to North
Korea and Carol. Before that, he was the US Forces Korea Senior Analyst and Senior Defense Intelligence Expert for North Korea, serving as the principal advisor and senior expert on Korean Peninsula security issues to the USFK Commander and the US Defense Intelligence Enterprise.
All Right, we had to lay it out, and this is why we wanted to talk to Sidney. Hey, Sidney, great to have you here back on Bloomberg. Tell us about marshal law. Came as a shock I think to many domestically and abroad when they declared martial law. But the country has a history of martial law and military rules. So give us the history. What's important for the Bloomberg audience to know at this hour.
Well, thank you first vote for the vitation to speak on this. The history is relevant and important only because it's so from a different era. It's worth a warning not to actually view these recent developments in that context. North Korea, as you call the Korean Peninsula, divided right after World War Two, underwent a war trying to unify from nineteen fifty to fifty three, and South Korea's history has been moving from a very right wing pro US
authoritarian dictaintorship to the democracy we have today. Along the lines, there's been a couple of military coups, again ensuring a conservative hardline towards North Korea authoritarian in terms of its domestic system, but a gradual growth today to the economic miracle that has begun. And the last coup was nineteen eighty, so many years ago, such a different context today. That said, you know, it is one of the few tools at
the dispo of the president. It's one you don't want to break the glass on too early when you have the type of political deadlock that President Un has faced with the opposition, which is all focused on trying to regain power. In South Korea has a five year presidential system. One term you become a lane duck real quickly, and the opposition has been tasting blood. With President Un having twenty percent and below approval ratings, it was a surprise
that he chose this tool at this time. At the same time, there are elements of it that warned us not taking it too alarmedly and have reacting with caution, as the US government has so far.
Well, why is that the US government was certainly caught off guard? The White House was not notified ahead of time about this, but it sounds pretty alarmist. I mean, the idea of martiall rule in a democracy, that is certainly one of those things that I think people would say, you know, it'd be fair to respond with alarm there. Why should we be cautious about doing that?
Well, yeah, I hate to draw parallels, but I mean, if you just look at the dynamics of US political system, you know, back around the first Trump administration or even today, you know, worries about mobilizing national guards and using military capabilities. I mean, it, unfortunately, is something that we've seen in other democracies throughout the world. I think the quickness. You know,
first of all, President yun is a career prosecutor. He was very heavily involved in the impeachment that removed Pacinet from office, and so you know what he embarked on this, he does so from a position of understanding the constitution and probably understanding that has happened, it would be overturned
or rejected within hours. And so the fact that the system worked so quickly to have the National Assembly come together and reject the declaration, and that it looks like, you know, the initial steps involved with martial law are being backed off. It is a time to now kind of focus on the morning after, as it were.
Hey, I want to also bring into the conversation Rosalind Matheson, Bloomberg News News director of EMEA. Of course we're talking about Europe, the Mid East, in Africa. She's typically based in our London bureau, but lucky for us and we have been tapping into her big time that because she is here in New York and with all the news she's here in our New York studio, Raz we're listening to Sydney his view and giving us some context. How
are you seeing about what's going in South Korea? Because I have to say, when we all walked in, we're like, what is going on? And how do we make sense of it?
Everybody was shaking their heads.
We were quite stunned to see this news and particularly you know, coming in that late night televised address just denouncing you know, emergency martial law and the words marshal law of course resonating you know, in a very tricky environment historically in South Korea. And it's interesting to see how quickly again parliament, they managed to get into parliament and they voted to overturn it. So the question is what was he trying to achieve with this and what
does he do next? I mean, does he remain defiant in the face of parliament and trying marshal military support or does he accept you know, what people are saying here about his actions and does he resign or is he impeached at some point? I mean, it can't be necessarily a good outcome for him here. So does that plunge South Korean into a further period of political term or where you've got to maybe have elections, you've got
to have a new administration. And what does that mean for stability in South Korea?
Which we think that's North Korea we expects stuff to happen, not South Korea.
Well, we'll talk about the North Korean angle in a second, but City, I want to get your thoughts on you know, this idea of an unpopular leader declaring martial law. Does that make him less popular? I mean, this doesn't necessarily, as an outsider, seem like something that would you know, engender him with a larger group of folks.
Good point. Well, he did open his, you know, his announcement by stating that, you know, kind of using deep state like language, that there was no Korean agents throughout the US government, anti state agents that were out to undermine the very you know, foundations of the state of
the Republic of Korea. So it seems like he was hoping to try to galvanize support from the right, his conservative base, and maybe even some in the middle who would be more concerned about what the opposition was successfully doing and building support to challenge the ruling party in the next presidential Chile election, or even potentially to impeach Union. Talk about impeaching Union was already in play, and you may have just concluded that, you know, again, he had
nothing to lose. Most likely, when you look at the number of ruling party members who would now join with opposition forces, there's probably enough votes to you know, challenge whether Union will stay in power. He but Un is a guy who does what he believes is is right. Agree or disagree with his worldview that he was doing something for the to protect the Republic of Korea, and he was probably willing to accept whatever consequences would come out of there.
I wondered Ros if you had a question, because here he is like someone who's had some history, understands and has followed and you look at the world more broadly.
Yeah, I'm very interested, Sidney.
You were talking about how Ying perhaps felt he had nothing to lose, and could he try and galvanize people with this maneuver.
But again, in a country that's had.
A really difficult history when it comes to martial law and military rule and a real strong sense of wanting democracy amongst ordinary South Koreans. I mean, where do you see this going for you do you feel he's going to have to step down or he will be impeached.
My sense is he'll stay the course. He will say he acted in accordance with the constitution definitions, with some subjectivity as to whether the emergency justified or warranted the action, you know. And again, when you look at the history of martial law in Korea, it's not forty years passed since you know, the last coupdetas that kind of facilitated
martial law in that nineteen eighty time period. And again, having been my first tour in Korea in nineteen eighty two, it is a markedly different environment, markedly different world today. Other elements of the government system are functioning. They're not being rejected, you know, during the martial laws or when the when the military seizes power from civilians back in you know, nineteen sixty one, nineteen seventy, nine eighty, they were overturning the system. So far, all Yun seems to
be doing is addressing the people in that system. And so I think, again, you know, this is not too apocalyptic in terms of domestic South Korean politics. It survived challenges like this in the past. Yun will not, though, I.
Think sending what does this mean for the relationship between the North and the South. Is it an opportunity for North Korea to maybe potentially go on the offensive.
So what's interesting when you think about it, that would be the natural thought, right that Kim Jong lunn may see a weakness in South Korea that he could exploit. At the same time, Kim Jong Lund's got his own challenge and issues at home. Yeah, heavily involved in supporting the war in Russia. And perhaps more importantly, you know, with many people expecting Kim to do something, he is likely not to play into their hand and only provide further evidence that what Eton was saying about the North
Korea threat was right. There's a lot of value for North creator to stand down right now.
Sidney, thank you so much, So appreciate you finding some time for us. Sidney Siler, Senior advisor at the Career Chair Center for Strategic and International Studies, joining us from the nation's capital. Roz Mathison staying with us because I got to say, Roz, geopolitics, it's all we've talked about. I feel like for the last couple of years, and I'm not even quite sure where to go next.
Which geographically where to go?
Where would you go next? Like when you think about France, the Republic of Georgia, the Middle East, ongoing Syria, Aran, where would you go next?
Well, there's a lot going on, isn't there.
Yeah, that France is particularly interesting at the moment because we are careering towards the collapse of the government there as soon as tomorrow, and interestingly because the right and the left are joining together to do that, and that's going to be a really tricky moment for a very big economy in Europe and a lot of political instability ahead.
I mean, if Barnier goes, then you've got a period where Emmanuel Macron has to try and find another prime minister who'll be able to navigate a very tricky fiscal environment. I mean, if Barneo failed, and this is a very experienced politician with many years in Brussels, so he couldn't manage it, then who can.
I think a lot of Americans, with the system of government that we have here in the US and the dominance of the Democrats and Republicans, might have trouble comprehending the idea of the right and left coming together to top of a government.
Explain this to the American mind.
Yeah, it's not because they're supporters of each other, put it that way. In fact, they really don't like each other at all. But they have a common enemy, which is the French budget, and they all have problems with the French budget and they want changes to it. And the kind of changes that they're asking for are very populist and they're what the markets don't want because you've got a very big fiscal deficityel Like, I've seen this
with you before. Yeah, So it's not so they're comfortable bedfellows, but they've got a united enemy. And of course the backdrop is this is coming at a time when we have Donald Trump coming to.
Power in the US.
You've got elections coming in Germany next door. So you've got a period potentially of political uncertainty in Germany. I mean often after German election you don't have a functioning government for sometimes six months or more. You're low coalition wrangling that goes on. So you're not going to if you're talking about European unity right now, and a unified European view on everything from Ukraine to the Middle East, to trade to tariffs with the US, to you how
to handle Donald Trump in a second administration. You've got a lot of fragmentation occurring in particularly again the two biggest economies in Europe, France and Germany, And so what does that do in terms of a cohesive European approach to a second Trump administration.
I'm like questioning where to go next Georgia, Like, is that what is going on there? We know there's pro European protests, we're watching that, We've been watching some of the footage throughout the day. What do we need to know about that?
There was a little talk about whether that's a Madan revolution similar to what happened in Ukraine, that pro European push protests, and how successful they can be. But in Georgia, you know, the protests are big, but they're very fragmented. There's not a strong sense of who's driving.
Is Russia well that's.
Always a question. That was a question in Ukraine as well. Obviously during the protests that we saw there. Russia does not want these countries going into Europe's orbit. We saw that recently, gain questions over the elections in Moldova, for example, the referendum in Moldova about joining the EU. Wants to pull these countries away and make them argue with each other and make that kind of weaker.
We could talk to you about more about Russia, Ukraine, the Middle East, we could talk about Syria and iron We don't have time to do any of those things. What I want to do is just in our last forty five seconds, talk about the significance of all of this happening against a backdrop of the changing administration here in the United States, one that was caught off guard by South Korea today.
Well, that is the question, but also it just reflects a changing world beyond the US. You know, we're in a world where the US is no longer the singular dominant power. So you've see a lot of change erupting from that. Countries deciding to work out can they have that power block? Are they in that group instead? Where do they belong? The rise of the global South in that so a lot of fragmentation into different power groups.
And that's just natural when you see, you know, arguably a declining singular global power and more of a multi polar world.
Twenty seconds is there any Is there a common thread? Is it the rise of populism? Is it just another cycle in the world's history. How do you see that.
It's a bit of everything.
But it is that question again of populist movements in several countries.
It's not just all on.
The right, I would add as well, it's parties on the left and the idea of you know, public saying I want to party. A leadership is going to talk with you know, talk with me, not at me. And so politicians who are stute you pick up on that are the ones who are being successful.
Don't go home.
Just I was just going to say, this is why we love Bloomberg because people like you.
Thank you so much. Ros Mathis and Bloomberg's news new director News director, I should say, overseeing Ema.
You're listening to the Bloomberg Business Week podcast. Listen live each weekday starting at two pm Eastern on applecar Play and Android Auto with the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa play Bloomberg eleven thirty.
All right. Just about one year ago, our Bloomberg News team put together a great story highlighting the stock optimists who nailed twenty twenty three and saw more gains ahead. One of those stock optimists who made the right call last year's Ryan Dietrich. Dietrich expected the US economy to avoid a recession in twenty twenty three. Check it did right. Some say a little bit of a rolling recession, but really we kind of missed it in a big way.
You also bet inflation would cool sooner than the market was expecting.
Check it's it's still getting there. It's still getting there. We're still getting there.
Sticky.
Yeah.
He added exposure to stocks during the banking turmoil in March twenty twenty three, and as the S and P five hundred sank in October of twenty twenty three. You gotta say, tim check check good calls.
Yeah, Ryan Dietrich T, chief market strategist at the RIA and platform for advisors of the Carson Group. He joins us here in the Bloomberg Business Week.
Well done, well, Carol can hold on.
The year's not over here?
Okay.
Every time I present or something and I have you come and give that little intro that was that was very nice.
Thank you.
Listen, we are when people make bad calls. We kind of pointed out, oh yeah, and the same goes for when you make a really good call.
Well, thank you.
Yeah.
It was two years ago this month, December of twenty two, Carson Group went on a record. We went overweight stocks. We manage real money for our advisors, and we said no recession. It wasn't very popular, but as we know now we're looking at fifty four new all time highs, the back to back twenty percent games. We can get into all of it, but yeah, it's it's been a great run.
So some people might say the US stocks are expensive right now by certain measures, but you argue that they're still room with Do you argue the bull market is still young?
That's correct, you know. I mean a couples that answer this one. Stocks are a little pricy. I mean you look at the forward s and P five hundred earnings, they are a little bit pricey. But then you look at other parts of the market. I've come on with you guys for two years talking about some of these things. Small caps still are cheap, mid cap still our cheap industrials, financials, there are parts that are cheap. Yes, large caps are expensive.
When you talk about bull markets. So it's so fascinating. This one's about two years old right October twenty two, so I had two years, so we'll call it twenty five twenty six months right now. Once a bull market gets into its third year, like this one is right now into the third, that's yeah, not really, because it looks like a cruise ship. Once they get moving, they keep moving. I went back forty years, last five bowl
markets that got into a third year. Everyone that made it to at least their fifth year, and actually it was an average of eight years. I'm not saying this one's gonna go eight years. We're just saying these cycles can last a lot longer than you think.
But we're stocks as expensive in their second year as they are now in other bull markets.
I guess the short answer is no, that's a great point, they're not. And one other concern, if you want to use that is if you look at like we gained over sixty percent, okay the first two years, is bol market looking at like the last nine bowl markets that made it into the third year, that third year is up only like two or three percent. So some consolidation, we think we're gonna gain more than that the next twelve months will be clear, but those are some things
to think about. We just had a huge rally. We don't see a recession. Look at the economic data, all time highs and construction spending just yesterday, you know, all time highs and earnings estimates we still think are going to be strong, that we can get into more of the weeds of that. But there's no recession coming. So we still be overweight equities like we have been for twenty four months now.
You know, I'm looking at the equal weighted S and P five hundred and it's up about just shive eighteen percent for the year. S and P five hundred is up about twenty seven percent. If I look at both equal weighted, just coming off overbought levels, I'm assuming. Let me just pull it up on the Bloomberg the RSI and if you look at the relative strength on the S and P five hundred, yeah, overbought. So I mean, what is it? Just momentum creates momentum, which to me
doesn't say that's necessarily good thing to buy into. It's a different if it's fundamentals, it's earnings based, it's you know, those kind of things that I can actually trade on.
Yeah, there's different things you can look at there. When you think about the equal weight, what's that tell us? What tell us is a lot of participation, right, we know that. Look at various advanced cline lines of we've seen it brought me downs. Oh my goodness, yes, absolutely, just two weeks ago, right, there's eleven sectors. Ten of them outperformed the SP five hundred. Last week, eight of them outperformed the SP five hundred. What's happened since the election?
Small caps, midcaps, A lot of other areas, not just tech, not just communications, have been doing well. So that's that broadening up. But I'm with you one hundred percent. Those are the technicals. Then we look at the fundamentals. I mean, what are the credit spreads doing. You mentioned March of twenty three when you have the banking crisis. Yeah, we didn't really see much stress in the credit markets. Think about the yen carry trade on win those three very
scary days early here in August. You know what the US dollar did. US dollar went down. Then historically when the dollar goes up, that's a worry. Now, I will say right here and now one of our worry.
We're sold as a safe haven.
Exactly seen of the safe haven. But you've got dollar strength. I'm surprised, honestly, dollar has been as strong as I'm sorry, the market, stock market's been as strong as it has been with the dollar strength we've seen so into next year. If the dollar continues to strengthen, that is a concern of ours. We don't expect it to, but if it does, that could be a sign then you know, maybe a little more risk off is in play, but we're not seeing it yet.
Let's be clear, what is the difference going into twenty twenty five versus what you saw a year ago?
Sitting question, Yeah, that's good. Well, I guess we're one we're all one year older, you know, and that's that's for sure. But I will say one big difference what we're seeing now kind of the other answer. We are seeing broadening out. We are seeing a lot of participation. Remember those last two months last year big rally small caps rustled too by small caps gain like twenty one percent. Then they were flat the first six months of this year. But since the middle of the year, we are seeing
more of a broadening out, which is a nice thing. Also, manufacturing has not done very well in our country. We get it. But just look at that data we saw yesterday. Maybe we're starting, you know, maybe telling me there's a chance here, you're starting to see a bottom, if you will, in some of the manufacturing data, which is a positive. But services has been strong on the whole time. Earnings have been pretty strong in the whole time. So there
are some similarities. But you know, the reality again is one more thing on this. So we're up another Let's assume we're up twenty percent this year. I know we're not there yet, but we probably will be. We looked to back to back twenty percent gains since nineteen fifty found eight of them. What happened to next year? Marco was up six out of six times, up thirteen percent on average. So it's not like a huge game. But just because we're up twenty percent two years in a row,
that is not a reason to be bearish. And there's other stuff to look at. I get it, but that's just something to be aware of.
Any of those eight years have a new president in the White House.
Hmm.
That's a very good question. I'm not sure, but I can dive into that for a second here. When you look at you know, uh, well, as a new president is a re elected president. I get, we can look at it either way. But when you look at re elected presidents, year one stocks do really well and you're two to do really well, it's later in a re elected president's term they don't do as well versus the exact mirror image of that what we just saw President Biden first second year not as good, but third and
fourth are strong. And again get into the weeds of why this is probably because you know what you're gonna get. There's less uncertainty with someone who's potentially won a reelection, and I get it this time is a little bit different. But the reality again is, you know, you look what's happening. And then we can get into the F word the FED if you want. I mean, that's another big driver here.
Well, I want to do before we get to the F flord, let's do the T word tariffs.
What's that? Oh?
Okay, okay, because and I think Carol was getting at this, but yeah, I it was Thanksgiving that is coming gone unfortunately in the rearview.
But I'm wondering about the.
What that does to the market if President elect ends up going through with the tariffs that he's threatened. We had any head of trays on last week from data who said, you know he's going to do it. If he says he's going to do it, what does that do, especially to small caps?
Yeah, well, what do we know? We had a fifteen month rally after the election in twenty sixteen. February fourth is when we all say, slapped on tariffs and the market didn't have a very good year in twenty eighteen. Maybe there are other factors in there, but that's the
reality what happened now. I will say this, we're all talking about it now, all right, mister market's probably priced a lot of this in the reality is, if you do the twenty five percent tariffs on you know what, it's Canada and Mexico and ten percent tariffs on China the full thing, that probably will slow down the rally we've seen, maybe potentially cause a little bit more inflation. I will say this, though you look at inflation, you're your CPI in twenty eighteen and twenty nineteen when those
tariff started, It's not like we saw massive inflation. I get it. Parts of the economy saw inflation, but the overall economy you really didn't see inflation, so that's something important to remember.
My last question, I get a little hanky when everybody's so enthusiastic. We've the story about the strategists and their targets, and.
You should get Warren Buffett on. He's not super enthusiastic.
Not everybody is. And it makes me a little hinky. Whether it's still corporate real estate or office properties, or whether it's private credit because we don't have much transparency. What's the one thing that you think man keep an eye on, because that could be kind of the canary in the coal mine.
Yeah, I think I answered a little bit ago. The US dollar, right, if the dollar continues to be strong, that's the one thing. And honestly, yields. If yields keep going higher, look at the housing data. Housing is an issue. Small business confidence come back a little bit, but we're
not seeing small business investment. That's why we think with the higher productivity that we're seeing in our country, with inflation being last year's problem, the FED still can cut one will I'll leave you on this when the FED is cut with the market of all time highs. We took a look at this using Bloomberg data back in nineteen eighty. One year later, SP's been higher twenty times. It's happened twenty out of twenty times one year later. So we just saw a cut of all time highs.
You know. Recently we might see another one cut near all time highs here in December. That is a bolish thing. Do not fight the Fed, is what they taught us a long time ago. We'd still side with them.
Yeah, that kind of still holds it, so it always does. Hey, Ryan, thank you so much. Happy holidays.
I appreciate it and love being in your city.
Thank you nice having you in studio, Ryan Dietrich. He's chief market strategist at the Carson Group. As we said, joining us here in our Business Week studio.
You're listening to the Bloomberg Business Week Podcast. Listen live each weekday starting at two pm Eastern on applecar Play and Android Auto with the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa Play Bloomberg eleven thirty Carol.
Many Americans agree there's a housing crisis totally radically different though than from the last housing crisis. So instead of the values of homes dropping too fast as they did during the foreclosures debacle starting in two thousand and seven.
You covered that a lot.
Yeah, Oh my god, I remember going to people in uh I think it was Florida, forgive me, I'm trying to remember, but talking to homeowners who were just you know, losing their homes, couldn't afford it. It was just a really, really tough situation and just such a low And we know homes not only important for people to live in, but it's often their biggest investment.
So fast forward a few years and instead of home prices dropping too fast as they did during that foreclosure debacle back in two thousand and seven, they've stayed stubbornly high, locking many would be buyers out of the market, raising rants and adding to anxiety about the cost of living. Amy Rubinstein has spent her career in real estate. She's seen the industry through different cycles. She's the CEO of
Clear Investment Group. It's a Chicago based firm focuses on distressed mid size multifamily assets I think three hundred to twelve hundred unit portfolios and secondary and tertiary markets here in the US. The company currently has assets in Syracuse, New York, Columbus, Ohio, Shreveport, Louisiana, and in Illinois and Decalm in Chicago.
Amy, welcome, thank you, thanks for having me here.
So let's talk a little bit about the overall market right now and where you're seeing opportunity because we spend a lot of time talking about high prices. Yes, but you're going after a different type of market.
Where are you see value?
Yeah, you know, we're looking at renters who are renters by necessity and not lifestyle renters, so a little bit different than that housing market. But you know, we see a lot of We particularly love to invest where there's stable markets, not necessarily growth markets, because growth markets have a lot of speculation in them. They're really looking towards the future, what's going to happen, and they're usually priced
that way. But we like markets that are very, very stable, and of course we do try to stay away from so stable. You're just saying not a lot of price fluctuation, Well I'm not so much there. But stable as far as population, as far as rental growth, it at least keeps up with inflation, as far as job opportunity and employment stability. So it's that it's that kind of stable that we're looking for.
Pricing is going to go up, right.
That's as far as like we're in a we've been in a period of time where multifamily the real estate market is really segregated as far as different asset classes. But multifamily itself right now has had a bit of a pause for the last two years. Right There haven't been a ton of transactions going. And now I think we're starting to see those transactions pick up and so
pricing will start to rise with it. But we did have quite high pricing in twenty twenty twenty twenty twenty one and then started to drop down twenty twenty two, twenty twenty three.
Where exactly do you play in terms of what you do with an asset when you get it?
Do you then do you own and operate it? Do you flip it? Explain for everyone what you do.
What we particularly do is we look for assets that are distressed themselves in communities that are stable, and so we look for things that have severe problems and then we solve those problems and then we go ahead and turn around and sell it.
Okay, So what kind of problem, for example, a property in Syracuse.
High vacancies, high delinquencies. Sometimes that comes with some crime. Sometimes that comes with physical distress. Well, it almost always comes with some physical distress. And we're figuring out, what are all those problems, Why isn't this particular property performing like the ones that are surrounding it, and then how do we get it to be stable so that we can then go ahead and sell though.
It's when you buy distressed property, it's not like everything's in distressed. You're saying, here's one property and there's other properties multifamily around them that are actually doing okay, So why is it this particular property exactly?
Exactly that's what we're looking for, because then we understand the value because.
You're not going to necessarily buy into an area where it's all distressed.
No, because that's speculative. Then you have to guess, how do you get this whole community back up and running, which is a thing. It's just that's a lot to overcome. Right, So we're saying we understand the value of our asset because we know the value of all of our neighbor's assets. Now our assets not performing, so we have to figure out how to get it to that performance place.
In general, real estate is a pretty efficient market. Yes, what are you able to do that other players aren't able to do? Like why is that thing sitting there distressed until you come along?
I think a lot of buyers look for what is your incoming cap rate? What are you going to buy it? What's your NOI going to be when you first buy that property? And for us, that's not going to deter us if the property is negative cash flowing, because what we're really looking for is where are we going to get this property to what is the NI going to be when we complete this property? And what is the cap rate going to be when we sell this property?
As opposed to where is it now? Where is it now is just a variable, it's a place mark, right, So we're saying, all right now we're negative cash flowing. Here are all the problems on the table we needed to get it to this point, and we know exactly where that point is because we're not trying to change our asset class and how much time and how much money is it going to take us to get from point A to point Z? And that's basically our what our company does and what we when we raise a
fund we're looking to. Our diversification comes from our geographic diversification, but the assets that we're buying all look exactly the same.
You keep saying NI net operating income, correct, all right, So basically you're looking at expenses versus the income that you're getting from property. So it's kind of a basic metric that tells you a lot. What does your sector that you are involved in tell us more broadly about the real estate market?
Yeah, so we specifically are working with affordable housing, not affordable housing from a technical government standpoint. There's no restrictions on the properties that we buy, but we're servicing a tenant based sit somewhere between thirty five and eighty five thousand dollars of annual household income. And what we're right now, we're really servicing an area of great need because we are buying assets and even selling our assets far below replacement cost.
So when someone's trying to build.
A new property, they're not going to be able to compete with the pricing that we're going to be able to offer, and that's created a major shortage of affordable housing in the country because the costs of construction are really high right now, with interest rates high, the cost of construction is high, and therefore new affordable housing is not coming under the market.
So what are the rents that you typically charge in that kind of affordable housing?
It could be somewhere on average between seven hundred and twelve hundred dollars of rent.
Okay, yeah, how long?
How long does it typically take you to turn a building around?
We're stabilizing anywhere from twelve to thirty six months.
And do you what's the scale that you're able to bring given that it's relatively geographically diverse, so you need to have different people in those areas. It's not like you have one local company that you work with that you can scale that goes around and fixes things up. You have to actually find those folks market.
We're big on those sporting pa Well, we want to support the local markets that we're in. Those are the people that we're servicing. Those are the people we want to give the jobs to. So when we get to a property, we'll bring our staff out there to get it started up and running. But we're really trying to help to hire locally so that we can actually help that community that we're in. It's beneficial for everybody that.
How much is about getting it up and running well so that you can then sell it off. Like how long do you hold on to a property?
We're somewhere from two to four years usually, okay, typically what we're.
Doing, Yeah, what does turnover look like in terms of tenants during that time?
So our goal is not to displace people we really want, but.
Don't you have to raise rent in order to actually make the changes and have the money.
Beauty of what we do is we're really trying to go for efficiencies of the particular property itself. So we're really trying to figure out why aren't people paying their rent today, why are there so many vacancies today? And how do we sell for that? More so than how do we hike up everybody's rents, Because we're not trying to gentrify our areas. We're really trying to dig into that particular community. We want everyone to stay in their places, we want them to pay rent. We want to be
able to offer that affordable housing. We're not trying to price people out of that market. So it's less about raising people's rents and more about getting people to pay rent and to move into our builty But.
If someone's not paying their rent, then they can't really stay right.
So if someone is absolutely not paying the rent, usually we find that people aren't paying their rent for various reasons, and maybe they're not getting the services that they need, which is really why we have a massive shortage of affordable housing. I mean, yes, it's also because you can't get new construction, but it's also because you have a lot of owners who've run out of money and they're no longer putting money into their properties, and so someone has to come back and restore that value.
We've only got about twenty seconds left. You've been doing this forever, twenty years. You founded your company back in two thousand and three. I am curious when you find that distressed property among other properties that are doing well, is it typically the reason it's not doing well because owners are run out of money.
Yes, that's what our fund is really based off of, just buying deals where the sellers have been in distress, where there's there are dollars that have been lost on the table, and we're going to come back and bring back that value.
Pretty that is yeah, pretty interesting stuff. Amy, Thank you so much, Thank you, thanks for stopping by. Amy Rubinstein. She's chief executive officer of Clear Investment Group. Joining us right here in our Bloomberg Interactive Broker studio.
This is Business Week.
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On Bloomberg Radio.
All right, TikTok, everybody. We've got just about eighteen minutes left in today's trading session, getting ready to wrap up with the Tuesday trade. Just as you heard, Amy Morris, we're kind of rolling over our best levels of the session on both the S and P and the Dow No excuse me, S and P and the Nasdaq one hundred, but little change, really flat on the day, and I just feel like we're taking maybe a bit of a breather. We're going to hear from Jay Powell Fed Chair J
Powell tomorrow. We just talked with our Stuart Paul about that, and of course you got the big jobs report on Friday, so those will be really key in sentiment, economic backdrop, and then what it means, particularly the backdrop that companies are going to be living under for at least the next month or so. All right, let's get to it. Our drive to the closed guest on this Tuesday is Alexis Brown Robert. She's COO at Alexis Investment Partners and
she joins us from Houston, Texas. She the firm, i should say, has about one hundred and seventy million dollars in assets under management. Alexis, good to have you here with us. Tell us a little bit about the investors that you predominantly deal with, institutional retail, family offices. Just give us some background.
Well, Hi, Carolyn, Tim, thanks so much for having me on. It's great to be here and it's great to meet you guys.
So what we have is we really work with a variety of people.
We do work with high net worth individuals, individual investors in general, we work with small businesses retirement plans. For one case, we primarily though host a run and exchange trade and fund called the Alexis Practical Tactical ETF, and that's really the core of what we do, since that's where we make most of our tactical trades. It's really a flexible, go anywhere portfolio. It's one hundred percent of what I'm invested in and what my father's invested in.
Were a father daughter team, it's really just the two of us in the shop.
But you got the name of the fund. It's not called you know Dad, Yeah, Okay.
To be there.
My dad just really enjoys naming things Alexis or after no.
No, So I'm totally kidding.
Really it's I was the first Alexis and obviously I'm his child, and he named the firm Alexis Investment Partners. So prior life, he has been in this for thirty odd years and was chief investment officer president of a series of funds out of a firm out of San Francisco. And then when I went to college and decided to follow in his footstuffs like I had always dreamed, I had grown up in the business idolizing him and getting to do jobs of his prior firm even when I was in high school researching.
And then when I went to college and decided.
To pursue this, he created Alexis Investment Partners and from there, together we launched the Alexis Practical Tactical ETF. And the Trickerson was Lexi there because it is the core of Alexis. It's the core of what we do. We're benchmarked seventy to thirty, but we can go as high as one hundred percent equity as low as we want.
We don't tend to go quite.
To those extremes, but we're very flexible and really our goal is to add value through full market cycles by participating more and upmoves than we do in the down and some of the ways we look to achieve that are by incorporating a broader range of asset classes, so not just being stuck in equities and bonds. And it's really been all in this environment and being more model informed instead of just purely model driven.
So it has six about ninety six million dollars in assets in the Alexis Practical Tactical Fund expense ratio of about one percent is the money in the fund? How much of the money in the fund is from your clients like you place them in there, versus people who externally end up buying the fund.
I want to say about seventy five million and maybe close to eighty is ones that we that are part of the Alexis Investment Partners bucket, and then the rest is from outside investors. We do have a partnership with a firm out in Florida that has about a billion dollars in assets where we're a model provider for them for their tactical sleeves also called practical tactical and so a portion of that goes into the fund as well.
So it's interesting the let's see the holdings, am I looking at the right page, Carol, I think is that gold is the top? Is the top holding here?
Is that right?
Gold is the top holding? That is correct?
So, like I said, we incorporate a broader range of asset classes. Obviously, inflation has been a big worry for investors as well as geopolitical.
Risks and monetary risks.
I mean, it's not just the American Fed that's moving things around right now. Federal reserve banks all over the world are having to deal with very tough monetary conditions, and so gold has a tendency to do very well environments like that, and it has been so that is currently our top holding. Now we're not bears by any means, if you look through we're actually quite neutrally positioned right now. We're right about that seventy percent equity exposure as well.
Interesting tell us about and have you uped that recently or have you reduced that recently?
You know, it's fluctuated.
We had upped it and then we reduced it, and right now we're kind of nibbling back into things. We're really looking at it as there's a lot to like in markets at this moment.
There's equity markets in general or markets in total.
That's a really good question, I guess both, because we do have equity exposure. We have bought into a reads position lately. We do like our golds position really the part that we're not so crazy about sponds. We'd prefer cash and just other alternative there. But I think from an equity perspective, things are still looking strong and still looking good there, but it's not the only place we want to be, and we do want to recognize that
this has been a great year. Despite all of the headwinds and the crazy headlines, it's been a really great year, and so it would be very normal to take a breather here, and we'd want to have some buying power there.
Listen, it's been a great two years, certainly for the equity side of things, right. Anybody who's trying to be a bear as that our short this market has had maybe some moments of opportunity, but it's been tough. Having said that, post election, did you guys rethink any allocations.
You know, the election has been a funny one. So about half our clients.
Are super happy and the other half are freaking out and not happy at all.
I don't have the country for the world, true.
It's very so. I think really, no matter where you are politically.
Though, there's going to be good and bad to this administration, like there is to every administration. I mean, on one hand, you have tariffs and deportation and those are definitely risks.
And then on the other hands, I mean, you do have a much better business environment, you have taxes, and so from a market's perspective, we've really chosen to focus more domestically Since then, I would say there's just not a lot of benefit to being foreign in foreign stocks that we can see given that environment, And we do see a lot of fit to being domestics and from a more of a client side, from a financial planning side, we have no tax cuts are probably going to continue,
so roth conversions, we've been pushing those out, whereas we may have had more urgency around those otherwise.
And the key Q too. You like those big cap tech names, right, you're still okay with that? Just quickly get about twenty seconds.
Yes, No, we still do like tech for sure. I mean they have come up a long way, but they have great earnings. When you're looking at AI productivity, that's really where it's going to be.
But at the same time, with thing as important.
As AI, similar to we saw with the Internet, it's important to recognize that other players are going to be the ultimate beneficiaries.
Of that AI trade.
So while we still definitely do love tech, we also are a fan of diversifying outside of there because a lot of those names are really good out.
Of it as well. I want an ETF named after me.
You can do it, I can do it.
I recommend it.
That ETF. By the way, I have twenty nineteen, almost twenty percent this year. Alexis Brown Roberts, thank you so much. This is Bloomberg.
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