Threat of War Escalates

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We're going to stay on the Middle East and to why the US could be possibly drawn more deeply into the attacks on Rand's nuclear facilities, and that's where we want to go next.

For more, we head to our Washington DC News bureau into Bloomberg Newspending on in national security reporter Tony Capasio. First up, Tony, is the US preparing for war right now?

I think they're positioning what they call assets in the region for the eventuality of strikes. I'm not sure you can call it war, but the tanker thing, the twenty tankers in the region, I think that's a message to Iran that the US may be preparing for round the clock bombing campaigns and parts of Iran aided by air refueling aircraft.

When is war war and when is it just hostilities or conflict. Help me out here. I have a hard time understanding the differences.

Called declarations of war. Remember Iraq, we were going into a weapons of mass destruction and then there was regime change and all the cataclysm that happened from that for over a decade. A lot of echoes here, regime change, undeclared war, preemptive strikes, a lot of two thousand and three echoing through this conflict.

Why does the US maybe have to make its presence known in Iran? And I got to say all credit to Tim who, like on our morning call, was saying, we got to talk about the bunker Buster, give us some background on that and what we know and why that might also pull the US possibly to the conflict with her.

On Okay, the bunker Buster is a massive ordinance penetrator. It's a thirty thousand pound bomb that can only be dropped from the B two stealth bomber. They are now based in Whiteman Air Force Base. They were in Diego, Garcia recently, but they've come back.

So they would have to do long.

Refueling missions maybe fifteen hours sixteen hours in flight one way do their bombing precision bombing of the Farido en Richmond facility and then probably land to Diego, Garcia. That is an active war. It's not a preanmptive strike. It's an active war on an enemy that we don't have any that hasn't threatened the United States recently, So the public has to be aware of that. But that would be the biggest, biggest contribution we can make to destroying

Unfortunately, why is it that the US is the only country that has this bomb and the ability to deliver this bomb? Why has the US not shared this technology with other parts of the world, with its allies.

Well, A, it was secret until the number of years ago. The Pentagon is still very reticent to talk about it. But b it was designed around the B two bomber, the stealth bomber. You know, you can say what you want about it, but it's had successful mission since its introduction. Is first attack in Serbia in the nineteenth nineteen ninety six, I think it was. But it's our technology. It's a developed it's a classified weapons program on a classified bomb, a bomber.

Excuse me, no.

Other nation in the world really has that capability, that platform to carry it. Now if we have sold other bunker busters to Israel and the two two thousand pounds variety, but thus those can be dropped from F fifteen ease and some of their other aircraft, but they can't be dropped from F thirty five's Those bombs are too big for the F thirty five.

Your experience on this world covering the Pentagon, understanding national security? When the president calls his advisors into the situation room, what's the optics on that? Are there any conclusions we can make? Or is it just where they go to have a safe conversation about national security issues.

I think the optics are that the Joint Chase of Staff, their job is to present the president with not only options for military power, but the potential collateral or down the road impacts that the politicians. The politicians might not have thought of. I think any talk with Trump would also discuss the implications going back to Irock, remember the weapons of mass destruction. All of a sudden, the society collapsed there over two years and we were sucked into

I want to go back to the B two spirit you said, it's that Whiteman Air Force Base right now. Is where they're being, where they're stationed, where they're based. Is it possible that these could move to a different position ahead of some sort of US military action and that would indicate a certain red line that the US has crossed.

It definitely could.

They could do a high profile flyaway. Basically, they're not going to fly from white Men without being seen by local plane watchers and then split plane tracking software which may or may not be able to pick up every part of a stealth bomber's flight. But people in the region, in the area there, they'd be watching for these things and be flying off and there would be a lot of chatter about it. But yeah, if we still flow flew these two uh back to Diego Garcia, that'd be

You're not expecting boots on the ground by the US though.

Well, we've got forty We've got about forty thousand airmen, air women, airmen, naval and Army Navy marines in the region. It's like like four thousand or so in Iraq and another two thousand or so in Syria, all for the counter ISIS campaign. But I'm not expecting more boots on the ground, if that's what you mean.

Okay, you said four or forty.

Forty thousand in the region, Okay, to twenty five hundred in i Rock, Okay, and about two thousand in Syria. So the forty thousand would include airman in various bases around the region. We had many bases, and then the naval forces, so that'd be the cumulative all right.

Thank you so much. Can't even tell you how much we appreciate it. Tony as always Tony Capacio. He's Washington, DC's man on the ground when it comes to the Pentagon and national security issues, joining us from our bureau. They are so appreciated.

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In the meantime, we got some headlines this morning, and it had to do with the retail sector here in the United States. US retail sales falling for a second straight month in May, suggesting some anxiety over tariffs and also finances, prompting maybe consumers to pull back a bit after an early year spending rush. US retail sales. Here's the data, zero point nine percent to the downside month

We've got a trusted a voice on retail, somebody who's analyzed this area through multiple cycles and gets into the details like no one else. The founder, CEO and Chief Research Officer of Telsey Advisory Group, Dana Telsea here in our Bloomberg BusinessWeek studio. I want to start with the big picture data data. The data that we got earlier today,

So a couple things you have, Yes, it was one of the weakest months. You look at cars, which were the real weak link. It's twenty percent of retail sales. You've seen some of the other data points where the sporting goods department stores frankly did a touch better. I think overall the pull forward of sales, I think we're seeing some of that. We put out a tracker every Tuesday of eighty items and how the prices have changed. We've done this for nine weeks now, We're going to

So yeah, so add it up for us, like you've seen cycles, you've seen stress points that we have gone through, whether you know Great Financial Crisis, COVID, like, there's a lot of things. How would you describe the retail environment? And I know it's hard to throw everything in one bucket because there's so many different verticals.

I think right now it's more uncertain the change that's different this retail environment than others. Even luxury has come down, even your luck, so your high income spender isn't spending in the same magnitude, and you don't have the flood of tourists that have come to the United States like you had in the past to buy those discretionary items. You're still seeing essentials grocery. That's where the consumer is spending. They'll spend selectively on some services, but take a look.

It's interesting that you brought in tourism here, especially when it comes to retail. I'm wondering on the other side of things, we've heard from executives and companies, including Coca Cola that the crackdown on immigration is actually affecting their sales. I'm wondering from a retail environment, is the ice on undocumented immigrants weighing on sales for any retailers out there at this point. People being afraid to shop, people afraid to go out.

That sort of and you think about it for restaurants in terms of the workers working in restaurants, you've certainly seen it some of the low end points and the retailers. It's interesting that the dollar stores performed okay, so that's where you would think you would, yeah, right, show up, but it hasn't shown up there as much. And also you look at Walmart. Walmart's sales were better than expected, so.

We are seeing I hate to say trading down. I feel so like not nice, but I just feel like maybe just people are being smart right, I'm looking for the best.

Bar they are trading down. Look where Walmart has talked about the biggest growth coming from is their highest income consumer. You've seen it from others. Look at TJ Max on the off price side, You've seen what they have and they're an umbrella for pricing, so they'll always be lower than everyone else. And I think they're going to be a beneficiary as we go through the back half of the year.

When you and I spoke earlier this spring, you mentioned that we could be seeing some empty shelves later this year. Has that materialized in anything that you cover and is that still a possibility.

It's a possibility. It hasn't materialized yet because the goods that are on the shelves right now, there's still some of the lower cost goods. Ordering for holiday is happening right now, and it would show up frankly first when you get to the holiday season. But you know what, you have TJX buyers overseas in China right now looking to take over and take control of and acquire those canceled items. So go to the off pricers.

Yeah, kind of fascinating. Well, you know, and I just wonder, you know, ultimately in terms of supply chains, right, we talked about so much of that because of the tariffs, Dana. When you think about you know, clothes and things like that, I mean, it's already been moving away from China, correct, Like, give me some perspective on where all of the stuff that we are wearing, where it really is manufacting and where.

Things are coming from. Yes, they've all looked to reduce their exposure to China. Vietnam has been very popular. Mexico, Cambodia, Brazil hard to come back into North America and the US given the high labor costs, but it's been Mexico, it's been Vietnam it's been Brazil and Cambodia that we hear goods are going towards. How much is still made in China depends on which type or retail retailer. Everyone is trying to get to single digits. No one wants to stick there at double digits.

Was that happening ahead of It's been.

Happening since the last time we had tariffs. Everyone had accelerated it. But keep in mind one of the beneficies of China labor costs are compelling, and the make that they put into the product and the expertise is faster and better than others. As a long time sourcing executive always tells me, there's no China like China.

Wow, Okay, but.

It seems like Dana, at least for President Trump. It doesn't matter if it's made in China or it's made in Vietnam. It's not made in the US. It's going to be hit with a tariff. Yes, So how are retailers dealing with that?

They'll raise prices on some selective goods, and it's a third to third, a third, a third, they'll verify their sourcing, a third, they'll share the cost of the manufacture and a third, they'll raise prices on select goods to the end consumer.

When you say select goods, do you mean obviously it's we can't put them all in the same bucket.

Higher price goods, higher price.

Goods because the consumer has a higher willingness to pay because it's.

New and different. It's something that isn't a basic okay, which.

Makes me wonder like which companies are going to see it hurt in terms of their balance sheets on that you know, first quarter retail sales. Right, we've seen all these numbers, So which names do you think stand out really is the biggest winners? Which are the biggest loser. You look at.

Birkenstock with their closed toad shoes, very popular, still doing really well. I think that there's definitely some moment in there. You look at Tapestry with the Coach brand. They've been excelling. They've been able to get better prices on some of their goods. You look at Ralph Lauren who's been expanding their purview in terms of the demographics that they appeal

Okay, who doesn't too well.

We've seen some of the women's apparel retailers be slow, haven't been able to execute as well. It's definitely been more challenging. You just had the announcement yesterday of at Home filing for bankruptcy again. But these empty boxes are being taken by a lot of the dollar stores and the off price retailers. The off prices are each opening one hundred stores a year.

Data before we let you go, our companies, our retailers are afraid to communicate two customers that prices are going up as a result of tariffs, given what we saw from the White House pushing back on Amazon and on Wiemart.

Yes, I think you do have that, and I think that's why the phrasing and the wording select surgical price increases, and it's not across the board. Look at our price tracker every Tuesday and you'll see what changes.

All right, So second half should be interesting.

Very interesting. Want to see that back to school time period. Back to school typically is a pathway to the upcoming holiday season. Look what it was just announced today that Amazon's Prime day is going to be ninety six hours, four days longer length. Let's see consumer response, all.

Right, fascinating stuff. Always always appreciate the deep dove. Thank you very much. Dana Telsey of course, she's the founder, CEO, and Research officer of Telsey Advisory Group. Joining us right here in studio.

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Ocean going tankers collided and caught fire off the coast of the United Arab Emirates near the Strait of Harmu's

Yeah, the Israeli wrong conflict on the radar of the global shipping industry, and that's exactly where we want to go right now. Stas Stemmatist Santanas as chairman and CEO of the publicly held global shipping company Senergy Maritime. The ticker is SAHIP. Also United Maritime USAA is the ticker United was spun off from Synergy back in twenty twenty two. Stamata is good to have you back in the Bloomberg BusinessWeek studio here in New York. Last time you joined

Well, thank you for having me once again. It's great to be here. Well, I mean, I don't know what to say. I mean, every other month you have a different situation coming up. We started with the Reussian invasion to the Ukraine, and then we had the Red Sea who it is? And now we have this so you know, every little certain that comes up, it's great for you.

A little uncertainty or is it something more significant?

It's I want to be confident. I want to stay like very very optimistic that nothing you know, not a wider war is going to go around, but it's certainly, you know, one of the situations where we have to be really cautious about.

Have you had to change the routes of any of your ships as a result of this contract.

Absolutely.

I mean we were going through the Red Sea all the time, connecting let's say Australia to Europe and all that. Now we have to go around the Cape of Good Hope. So that has added a lot to the tone mile effect, and of course the pollution. Because you do more miles, you emit more co twos, it's more expensive for the consumers you go longer distance. So the answer is yes, I mean, every little thing that happens or bigger thing, it's good for rates.

But but for the Earth, I guess.

Do you see it getting worse in the Strait of Horn Moves anytime in the near future. I know you said you're optimistic, and you're optimistic by nature, but that's a real energy choke point. As Carol mentioned, I.

Want to believe that this nothing serious is going to happen, and the collision you had today is not.

Actually a product of wars.

It's the shadow fleet, you know, the shadow fleet has been going around since the Russian invasion, and you have all these undocumented and shadow ships going around, and it's like a danger and it's only a miracle that we haven't seen more of these things happening because of the shadow fleet.

It's forgiving.

Yeah, that's a product of the previous war, not like this war.

Now, how are you, as someone right who's got to watch these things so closely determine like or think about, Okay, this is not such a big issue, this could be something more substantial.

Well, we try to.

Be prepared, I mean, except for the insurance and stuff. Whenever we see like any conflict arising, we don't want to put the risk health risk of our crews, of our people, so we just stay out of that. And we're lucky to have partnered with some of the world's biggest chatters. And whenever we tell them that we want to avoid what areas, they listen to us. So they're not going to push us to go through the war areas.

What tools do you have ships to prevent from pirate attacks or defend from pirate attacks.

We I mean, if anyone says that they have sophisticated tools avoiding that they're lying because you know, we just avoid these areas and whenever we have to cross pirate, that is, we always have armed guards on board of ships.

Otherwise there's no other way to do it, no other way to do it.

I mean, whoever says that these are commercial ships, slow going commercial ships, targets and targets.

Yeah, so you just avoid it all together. It's very big, but yeah, super big. Okay.

One thing I want to ask you what's great is tim and I love to watch money flows, right, money tells you so much, but I also love to watch when it comes to transportation. Transportation flows tells us a lot about what's going on in the world. The US more protectionist policies. How has that impacted global drive? Ball to mad What are you seeing in that regard?

Well, I'm sureful it is what the right that is on eventually, but so far it has created a lot of uncertainty. A lot of people are just don't know

That's the thing.

Certain things already changing in terms of you like flows back to the United States. We have seen changes right already.

Indeed, yes, I mean what we do, which is aron oor coal and box site doesn't really change. It's still super strong the demand for these raw materials because you need it for infrastructure. As you know, a lot of investors in including a lot of people here in the government, have invested significantly in infrastructure in the Middle East. We have one point six three million dollars of investments happening there, new nice buildings and all that. So this is going

I guess the protectionist policies. I'm wondering what you're seeing in terms of goods flowing to and from China, and specifically of China is looking elsewhere for commodities that are typically sourced from the US. I mean, we could talk grains, we could talk corns, so I being wheat and the like, or we could talk other commodities too.

What are you seeing?

Well, suddenly the last few weeks we saw a surge in exports from the US golf, the American golf. So we see a surge in, we see a surge of America.

Yes, exactly, exactly.

Well, I just wanted to hear what you So we say surge in you know, corn products, maze, you know, grains and all that. So that has been good. Actually we're not expecting that. And we came into coming from the US. Yes, and we do a lot of coal, lot of going where to India and in China as well.

We see that they're picking up slowly, slowly.

That's but it was. It did slow down, It did.

Slow down a load. Yeah, but now it's picking up again. I don't know if it's going to be there to stay, but for the time being, it's going quite well the.

Last few weeks. Let's hope it's going to remain.

And we do a lot of coal trades out of India to sorry, Baltimore to India. So we've done a couple of trades recently which we hadn't done for a while.

So in terms of any of the flows that have shifted, is it just in your view, kind of defensive maneuvers and just a result of maybe short term blips and you think things are going to go back to the way it is, or do you see some new long term trade flows based on the shipping demand.

Well, China's reliance to the US grains has dropped a lot. I mean, they learned their lesson in the previous administration, not the immediate previous, but the previous before that. Yeah, and they have now dependent They're more dependent now in South American corpse, you know.

So that's the corpse, you know. So that's the thing.

If it ever gets back to, you know, importing more and more grain products from the US, I hope it does, but it doesn't really seem like that in the near future.

Before we let you go just thirty seconds, I think right now there's a focus on where ships are built that has ben yes in focus really ever in my career, specifically Chinese built ships. Are there any Chinese built ships in your fleet in.

Our Fluidat of the twenty nine we only have one, which is basically a Japanese yard based in China. So I don't know if that qualifies for Chinese altogether, but the vast, vast majority is made in China, Yes, made in China, but not really by a Chinese yard. So the Chinese interesting. So I'm not concerned about us. The only good thing I need to say is we've been in discussions with the US administration about that issue, and

Stematis love it when you join us yet Antanas, chairman and CEO of the public held global shipping company Synergy.

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When the word uncertainty is used over and over, we lean on other factors and metrics to help define a time period that includes something like global real estate carol, which of course is sensitive to macro factors like geopolitics, and yes, the interest rate environment, which we just discussed with Mike McKee.

Yeah, one company with a view on all of this is JLL former Jones Lang LaSalle, the publicly held global professional services firm specializing in real estate investment management. Travis McCready is the head of Industries Leasing Advisory in the Americas for JLL. It's also chair of the JLL Global Life Sciences Advisory Board. He oversees brokerage and advisory for

Of course he's busy.

He's got screens on screens in there.

It's very busy, screens on screens. I'm busy.

Well, listen as we As Tim mentioned in the in the lead up to you that when there's uncertainty and folks are saying uncertainty, a lot heads of companies are saying are One of our conversations on global shipping, uncertainty came up a lot. You know, where are you the busiest region of the world area of the United States category of real estate. Give us a picture, and where are you not busy?

Wow, I'd say uncategorically, without doubt.

We're busiest in data centers, which.

Is an area that affects pretty much every aspect of the economy, every vertical and technology vertical that we cover in real estate. Our ability to bring online additional data centers across the United States is a rate limiting factor to the growth of pretty much all our verticals.

In that regard.

Data centers are popping up anywhere that there's a correlation between access to power, access to the right amounts of land, and cooling infrastructure, which would include of course water and wastewater. So that's my area of biggest activity levels. Second being advanced manufacturing, and that's manufacturing, whether it's for semiconductors or for biologicals.

We're seeing a nice steady clip of activity around advanced manufacturing across the United States.

I'm wondering how you look at the protectionist policies that the Trump administration, I won't even say toying with the protectionist policies that the Trump administration has established or has actually put into action at this point, we're talking tariffs, we're talking about other ways to keep jobs here in the United States and keep manufacturing here in the United States. Has that affected your business.

Yeah, I think there's.

Uh.

These policies are still a lot of them are still in theory. So it's the uncertainty around these policies and how they'll play themselves out in practice, which is really driving a lot of decision making or in many cases, lack of decision making by a lot of our businesses. From a real estate standpoint, we definitely have felt post COVID, in particular, the desire for businesses to control their supply chain, and this is and this desire is really what's driving

Profits back into the R and D enterprise.

That's really having a deep structural effect on how our pharma companies are thinking about manufacturing here in the United States.

So play it out so meaning that they're going to You mentioned the number two busiest area is advanced biological So the thinking is, okay, especially pharmaceuticals doing more manufacturing more in the United States. And what about Puerto Rico. I thought at one point we were doing a ton of manufacturing there is there.

Oh, we continue to do a ton of manufacturing and import Rico.

In fact, next time you go to the drug store to buy tail and all, thank the Puerto Rican manufacturing ecosystem because that's where eighty to eighty five percent of all of the tile known in the United States comes from.

The advanced manufacturing. However, we're talking about proteins.

Biologics, selling gene therapy, manufacturing. A lot of that's happening in a smaller scale, and it happening domestically while within the continues forty eight that's you know, the type of manufacturing we've seen the announced post tariff conversation, we had about twenty seven billion dollars worth of those announcements.

The degree to which those announcements come to fruition, however, is what we're waiting to see.

There's still a lot of uncertainty around the both the tariff conversation and MFN conversation, and that will drive the degree to which, or the rate at which those manufacturing facilities are actually executed.

You know, I wanted to talk geographically a little bit with you because you've got such a great view on what happens around the country and around the world. For the last actually ever since I've been doing this job, the Sun Belt, we've been talking about it growing and growing, growing, and I'm starting finally to see a shift when it comes to the Sun Belt. Some weakness happening there right now.

Yeah, the sun belts in it both an exciting and slightly risky part of the United States right now from a real estate standpoint.

On the one hand, you're absolutely right.

We're seeing demographic shifts into the Sunbelt into the southern United States, and with that flow comes commercial activity. On the other hand, we're also seeing and we're also seeing UH structural weaknesses in the in.

The grid in particular. In particular, and.

The energy needs that these advanced technologies, whether it's UH semiconductors or even our healthcare clients, the energy needs that they're that they're demanding, we're increasingly having difficulty finding those sites, finding that power infrastructure in order to be to satisfy the commercial demand.

So you're absolutely right.

The point of signal strength obviously that we'll see first is around residential, but the safety, security strength and growth of the grid will dictate whether or not we can continue this this growth pattern going forward.

You know, we've actually had some really deep reporting on this here at Bloomberg. This idea of you know, folks that play into kind of the electrification play, the power demand, whether it's through data centers, that we just don't have the skilled workers to do it. And it's not just

We have this this section of our of our business we call location analytics or location advisory, which basically is a fancy, fancy way of saying that people's decision making is very complicated and there are a lot of variables that go into where to site a business or where which state to locate a business. It's not always about tax incentives or other sort of cash incentives.

It's really about access to two or three core variables. It's all.

They're always at the top of a One is power, and the second is people human capital. And it's our ability to be able to train the workforce of tomorrow that we'll be working in these advanced facilities.

Again, that's the.

Second great limiting factor of our growth. And here is where we need the technical schools, We need the community colleges, and we need higher education to be able to support that thirst that we have for trained human capital for these roles.

So we have a very.

Yes, we're real estate and we focus on infrastructure, but increasingly we have to focus on our ability to be able to deliver skilled workforce to be able to work in our facilities.

So relevant to our times right and for all the investors who are listening right when we see these go go sectors, whether it's data centers AI, there's a huge technical equipment, but human capital in for structure that's needed to power it going forward. And it's something we need to think about about the momentum, how strong it can

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