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Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney. Alongside my co host Matt Miller.
Every business day we bring you interviews from CEOs, market pros, and Bloomberg experts, along with essential market movin news.
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All right, let's get down.
To Washington, DC, only because we have to where it's all happening.
Nathan Dean joins us.
He's a senior policy onis with Bloomberg Intelligence, and Jordan Fabian White House reporter with Bloomberg News, Nathan, I just want to start with you, are you going to shut down our government again?
What's going on down down there?
So you know, I may be a little bit out of consensus on this, we're still telling folks forty percent chance of a shutdown unless you have this like temporary shutdown that bleeds over to the weekend. The reason being is is that you know, there are so many different ideas that being thrown around by House Republicans, by the Senate, by Ukraine and Israel and so forth, and none of
these political cakes are baked. And you know, there's really no strategy of why you would have a shutdown at this point other than just we want to shut it down. And so we Speaker Johnson still and you know what you would call the the infancy of his speakership. And obviously he made some statements over the weekend that he's seeking for more time as he does his letter at
see our idea and so forth. We're telling folks, you know, he may be able to get that, So don't be surprised that this goes in the December fifteenth or even January February. But ultimately what people should know as they approach it from the market perspective is that there really isn't all that impact outside of just trying to just keep your eye on it. Even the defense contractors aren't all that exposed. I mean, we really would have to see a two months shutdown, if not longer, for those
economic impacts to be leading into the market. So unfortunately for a lot of the folks just watching, it's one of those political popcorn watch events again.
All right, So the White House has said that Johnson's plan would only lead to future shutdowns, and President Biden could issue a formal veto threat today. Jordan Fabian, you cover the White House for us. What do we expect from President Biden and what's the what are their problems with this plan?
I think we could see a veto threat today or something a little short of that, which is basically an advisor's recommendation that he not signed. It's these Washington terms of craft. But we'll be watching closer to see what they say. Look, the White House is frustrated with this dragged out process that you know, they thought should have been resolved with the debt ceiling agreement back in the spring,
which sets spending levels. Republicans through that out the window, and so they're frustrated over that and the fact that there's no Ukraine aid in this package, and the White House is getting anxious that maybe this is the last bite of the apple, and so they want to exert whatever leverage they can to try to get that included. And thus you're seeing these statements that are highly critical of Speaker Johnson's approach.
But they would be.
I mean, if if Biden veto's it shutting down the government, then the Democrats get the blame for something that the whole country is angry with the Republicans for right now. You know, they're in a great situation because the country blames all of this on the other party.
Do they risk that?
Yeah?
That's why I think Nathan raises a good point, which is that you know, I think you may and you raise valid points too, which is Democrats absolutely don't want any share of the blame for a government shutdown. So my suspicion is if a cr were to reach the President's desk, he would sign it and you know, kick the can down the road for a couple of months and try again in January to get his priorities funded. But it's still an open question of whether this laddered
CR gets through the House. There's still this faction of hell no fiscal hawk House Republicans who you don't want to take guess for an answer, and Johnson can only afford to lose three votes.
That's not a lot.
So we'll be watching closely. There's some test votes coming up in the next twenty four hours to see what level of support there is for this package.
So Nathan and I guess in the interim, what legislation is not getting worked on, it's not getting passed.
What are we missing here?
Well, I mean there's a lot of stuff that are it's more of the sector level. I mean, obviously we've talked about pot banking before. You know, there are a lot of people would love to see that move forward. There's really no work that's being done on it. Crypto the NDAA. You know, there's a lot of legislation out there that needs to get done and you know, we're just talking about c and so ultimately there's still going
to be enough time to get that stuff done. But you know, time's going to run out before we get into this election cycle where folks are just going to be more paying attention to their districts. I still think that a shutdown is coming. I honestly do think that
we're going to have a multi week shutdown. I just think it's going to be in the beginning of next year, because there will come a point in which Speaker Johnson and the Democrats just will not agree and both sides will say, Okay, I think politically it's best for us to just you know, have this fight out and let's
let the chips lie. But ultimately, for the Republicans right now, as you recall, you know, last week, they had a very bad week in Virginia where I am in Kentucky and Ohio and so forth like that, they don't want to have that happen twice in the span of two weeks. So I think right now that all this uncertainty is just going to get pushed into January and we'll be talking about it then.
Jordan.
Let's talk about, you know, the the upcoming election. We're already seeing ads from the Biden administration trying to convince Americans that his age isn't a problem, although many people polled are concerned about his ability to get through another four years. You know, what's their tactic and what do they say about I always wonder about Kamala Harris, because if you're really worried about the president's age, you should be doubly focused on the vice presidential candidate.
Right Well, the Biding campaign has a lot of money right now. They have about ninety one million dollars in cash in hand, So they're spending some money now to try and get those concerns alaied and try to lay the groundwork for a broader and more aggressive pitch later next year for reelection. So they're trying to address the age question. They're trying to address the Americans' concerns with
the cost of living. So if you look listen to their messaging, there's ads showing Biden walking through Kiev with the sunglasses on and talking about these things in the
Inflation Reduction Act that we're supposed to lower prices. But look, it's I think their best hope is not necessarily convincing Americans that you know, Biden is this spry young man, but that they're going to be possibly running against Donald Trump, someone who's very unpopular and someone you know who's also up there in age and has shown some propensity for gaffs and the like. So you know, it's like Biden always says, don't compare me to the almighty, compare me to the alternative.
Hey, Jordan, it's going to be a big week for President Biden out in San Francisco, who'll be meeting with Chinese President Jijiping. What's the White House? What's a kind of the game plan? Here's what's the goal? What would be a success?
What are you hearing.
They want to set a floor under this US China relationship. I don't think you're going to see a bunch of major deliverables coming out of this meeting, like some sort of agreement on Taiwan or broader economic rules of the road. Those are the two obviously main concerns in the relationship. But you could see things like resumption of military to military communication, some incremental things on climate, fentanyl trafficking cutting
out of this meeting. And I think that again, the meaning itself is almost a deliverable for President Biden, who wants to reset this relationship in a way that puts up guardrails, make sure that tensions don't escalate out of control like they did earlier. This year with a spibulin incident.
So perspective of just greater d C, I mean, what's the concern level here just about US China relations?
Well, I mean, first I want my pandas back. I mean, obviously we lost our pandas you know, I'm joking there, but you know, obviously, you know, when it comes to the US China relations, it comes down to clarity. That's what investors want, is they want to know what the
clarity is and what's going to happen. I mean there's you know, all these questions with Taiwan and so forth like that, and so I think anytimes you get this type of communication between the presidents in the premiere and so forth like that, that you get this at least get something that you can work with. So I don't think Washington in particular, and you know, Jordan can correct me if I'm wrong. You know, I don't think Washington
in particular has any real hopes for this meeting. But it's just something that we'd like to see so that we can see the communication, we can get information, we can get transparency, and at least have a better idea of what's happening down the road. Because if anytimes they're not talking, then you just get what's happening. Nobody knows, right, all.
Right, Nathan Hagger, Nathan Dean, thank you so much. We appreciate it.
Nathan Dean, He's a senior policy analyst with Bloomberg Intelligence, and Jordan Famian, a White House reporter with Bloomberg News, both of them down in DC.
You're listening to the team Ken's are Live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg dot Com, the iHeartRadio app, and the Bloomberg Business App, or listen on demand wherever you get your podcasts.
Looking at the stock of Boeing up four percent, looks like they sold a bunch of aircraft to the Emirates Airlines.
That sounds like a good deal. Let's break that down in Everything.
Aerospace with George Ferguson, senior aerospace, defense and airline analysts for Bloomberg Intelligence. Former militi sorry intelligence officer in the US Army. So we think mister Ferguson for his service here. George, talk us first about this Emirates deal. The number got my attention, like a lot of billions of dollars.
Yeah, no, it's a big order, right, So there's about ninety five airplanes, nine of them Triple sevens. But that triple seven, yeah, they already had the largest order.
In the book for that airplane.
Emirates likes to refresh their fleet sort of every fifteen years. They don't like to go much further than a fifteen year old airplane. They've been waiting for this Triple seven to show up, so they're adding more to that backlog.
I don't know that that.
Significantly boosts Bowing profit because my guess is that airplane comes out the door in the mid twenty twenties once it gets certified at low rates, you know, at threes or.
Fives kind of per month.
So I mean, every order is a great order, but that order probably takes a fair amount of time to fulfill. Seventy eight seven was interesting to see them order as well.
They would have five.
More, not a lot. They already had an order on the book for some seven eight sevens. They have orders in the books for seventy sevens and eight three fifties, which you know, I see is sort of two competing airplanes, the Boeing and the Airbus version of that smaller long haul airplane. Typically Emirates tries to run a cleaner fleet. They run a fleet of usually two types, so I'm a little surprised to see them keep that airplane on
the order books. I thought they might have placed an order for triple seven and rationalized that because I think that when they're done, they're going to want to go back to again a sort of a two airplane fleet, and I thought it was going to be a three point fifty triple seven. So that was pretty interesting to see them go back for five more seven eight sevens. Not a lot splashy order long period of time before we deliver all those.
Airport George walk us through. The difference is, you know, people who don't cover Boeing for a living may not and people don't fly as much as Paul Sweeney might not know what all these aircraft are. We we know the seven three seven and the A three twenties. They're the narrow body single aisle aircraft that really blow to actually be a passenger on because there's no room at all. But is the seven seven seven Is that a bigger airplane?
Yeah?
So you know, since the pandemic, we saw the eight three eighty and the seven four seven, the big four engine airplanes. We see them, We got to see them taken out of production. And so after those airplanes come out of production, Triple seven will be the largest airplane in the skies. Really, you know, the sizes of that Triple seven are starting to actually not even starting.
They're rivaling the seven four to seven.
You can get four hundred mid four hundred kind of numbers of people on that airplane, depending on how you can figure it.
There is big is the Triple seven?
I'm sorry? Is the Triple seven as big as the seven eighty seven? I thought the seven eighty seven, the Dreamliner was like the biggest one.
No, sorry, seventy seven is smaller. Seventy seven and A three fifty are both smaller. A three fifty nine hundred are both smaller than Triple seven, and they fit between that narrow body class that you seem to love so much, you know, the three twenty and seven three seven and that Triple seven. Really, those are the most in favor airplanes right now. Right they're at three hundred ish seed you know, kind of twin aisles, and the ranges are great.
On the three fifteen to seven eighty seven, they can get you, you know, really far around the world, so you could do a lot of non stops, try to pull in the best kind of firs, you know, fairs possible from those business travelers that don't want to connect anywhere. Triple seven has pretty good range as well, But that's going to be the largest airplane in the sky when seven four seven and eight three eighty are gone.
Nice, I want to fly that Triple seven. Where are the routes? Where can I get on one of those things?
I think if you go to Dubai, they got a lot of them in the fleet. If you go to kat Tar you find a lot of them too. United flies them.
I mean they're really you know, they're a component of most of the major, big full service airlines around the world.
All Right, the seven three seven Max, it was so in the news for the bad.
Reasons, patches all the time.
They fixed that. Now I feel like it's the same as plane on the planet. Sure they did. They fixed it, so just a little software fixed.
But the big thing is China. I mean, I got to start selling some of these planes to China.
Where are we there?
Yeah, so nothing has been shipped into China. We keep waiting eminently to see the Chinese take the airplanes that have already been built for them and you know, are awaiting sort of delivery. Going has been remarketing.
Some of those airplanes, So it kind of tells.
You that whatever discussions they're happening with the Chinese about taking those airplanes was kind of stalling lately. It feels like there might be a thawing up coming. I think if you're China, China pre pandemic took almost three hundred or about three hundred hour bodies a year, and it was something not one company could do, not just Airbus, not just Boeing. Now post pandemic, as they have reutilized their fleets and such, they just haven't needed deliveries in that of that size.
Last year. I think it was about one hundred narrow bodies they took. But if the Chinese look down the road and they think they're a three hundred plus narrow body delivery kind of market in the future and their COMACC nine one nine is not going to be ready to backfill or to supplant some of that Airbus and Boeing deliveries, they need to start thinking about having a better relationship with Boeing because Airbus won't be able to
fill all of their needs. Plus, if you're going to negotiate with Airbus and you're not buying Boeing airplanes, you're not really in a very good negotiating space, right, and so I think they need to start to thaw that relationship. We'll see how big an order comes out. These order books are long right now, They're six, seven, eight years long. So they got to start to get in the back of the queue if they want some airplanes.
I'm Boeing take to build a triple seven planes start to finish, Like if I put my order in now, when am I getting this plane?
Well, I mean the challenge, like I said, is this airplane's not certified yet. We've got to get the FA to certify it. We think it's sort of twenty twenty five ish, right. I think there's two hundred and fifty three hundred ish kind of orders on the books right now, a bunch of them emirates. If they what if they build five a month, you'd be getting sixty out the door, you know, per year. We got five years of backlog.
Golling will want to increase that if they see orders build and if you know, if they get enough of a backlog, nobody wants to ramp up production and ramp back down production.
So they like to see a couple of years or more before they start thinking about increasing those rates.
But you're still talking, you know, four or five years of backlog in the airplane.
And then here's my long held opinion, which I express every time we talk about Boeing. They never should have left Seattle. Yeah, lost their engineering chops and the left Seattle. This is my personal opinion.
Sure, hurt the culture.
Yeah, you could argue though they're now in Virginia. I know they're close to one of their biggest customers.
Yeah, I mean people come out to Seattle to see tech. That's a great part of the world. And then go down that highway that takes you back down to Seattle. From the airport. On the left hand side of the highway, it's all Boeing as far as I can see plane stack up.
You're listening to the tape Cat's are live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com, and the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station, Just Say Alexa playing Bloomberg eleven thirty.
Let's talk commercial real estate. Where are we in the cycle here? Margaret McKnight joins us here. She's a partner and head of real Estate Portfolio Solutions at Stepstone Group and Nasdak created stock symbil step to put into your Bloomberg terminal. She joins us live here in our New York studio. So, Margaret, this is how I frame out questions about our discussions about commercial real estate. The Lipstick Building, Third Avenue, I'm gonna call it fifty fourth Street or something.
I don't know where it is iconic building, but it's third Avenue. It's not Park Avenue, it's not Fifth Avenue. When not Thing Trades, is it going to be a twenty percent discount, a forty percent discount, a sixty percent discount to pre pandemic levels?
How bad is it out there for commercial real estate?
So the first thing I want to do is say that there's office and all other office is getting hit by a cyclic pullback, especially the tech tenants pulling back and bi secular problems because of work from home, so it is materially worse than any other property type. The other property types, while dealing with the cycle, also have
secular lift and we can talk about that, Okay. Right now, office is really struggling and the capital markets have pulled back, and most of what's going on in real estate is a capital market pullback.
So but also retail, right, I mean, we've heard a few cases of malls and you're from San Francisco, where you know, the owner just says we're out, We're done, like Westfield did out out at that retail center.
Right.
So, just like office is getting hit by technology change because zoom and teams let us work from home a ten or fifteen years ago, real estate got hit by e commerce. That was a while ago. Since then, the tenants have figured it out. We've all figured out what formats work and don't work, and the formats that work have repriced and are really interesting to investors. Some of these malls are the ones that don't and are largely pushed out of the institutional portfolios and not really where
the focus is. The focus is on things like industrial and multifamily that have a lot of lyft right now that are pretty interesting and you can use this period of turmoil to find good entry points and opportunity.
All right, So for the areas are just broadly defined, you know, commercial real estate, given where rates have moved this year, how does that impact your businesses? Like on a residential side, nothing's trading, Nobody wants to sell their house. What's it like on the commercial side.
Homes are not trading. That means more people are pushed and capped back in the rental market. So if you own rental properties, it's actually a pretty good time. It's slowing because it's vulnerable to the cycle, but the outlook is good. And similarly for industrial, which is benefiting from e commerce and it's benefiting from globalization. So what we really have is a capital markets correction, so prices are going down, balance sheets are restructuring. People New loans are
smaller than old loans, so people need recapitalization money. What we call gp led secondaries is one way to do it to actually keep their assets, and they're desperate for that money because the difference is a goose egg. So there's a really good time to deploy capital into some of these interesting strategies.
Really, which puts Stepstone I guess in a good position, right, Or what do you do at Stepstone? You offer private investors access to markets that the public doesn't see or Yes.
We design portfolios for institutional, large institutional and high private wealth clients that are designed to improve the odds of meeting their specific portfolio goals. And that's what I focus on particularly. And then that includes taking advantage of market opportunities, and then we also execute we help them find in that transactions.
So where are you guys putting capital to work these days?
Our favorite strategy right now is this gp LED this recapitalization where you've got an owner who needs to buy down his existing loan and is desperate for money to keep his asset so that they will pay a lot for that transitional money and not everything savable. So over time a lot, there will be motivated sales and distress sales that are also going to be a we're the
leading edge. We're definitely seeing in our book transactions that look like the immediate post GFC period which ended up yielding very attractive.
So what are some what are properties trading at today? Again, if that lifstick building trades today, what discount do you think that trade's at so Rules State on Third Avenue in Midtown.
Every property is different. That's that's the tricky part of commercial real estate. The property pricing indexes are down a little over twenty percent and trading is down about forty percent, so it's a little bit slower and not full price discovery. Office is completely different though. Office is what's really not trading and it's really broken.
So you like, where are you finding the distressed what will look like distressed opportunities? I mean you're not looking in office. I'm guessing or do or will you if they say, hey, this is seventy percent off.
Right now, we're not seeing that. Pricing is interesting enough because there's too much uncertainty. Employers and employees are in a big experiment on hybrid work and we don't know what that means for demand or for leases yet.
So it is so for office, it's just a falling knife that no one almost no one's willing to catch right now.
Institutional buyers are not going into office right now in any numbers.
I can't wait to see that. At some point it's going to be a just huge haircut. Yeah, But what you're saying is go.
By the lipstick building it no idea, what like, at thirty cents on a dollar, it's got to be a great deal, right.
Yeah, I mean at some point, but what's that number.
That's why I'm not in that business.
It's the same as any asset when there are no buyers, right, it's in free fall and you've got to have the I guess, the courage or the stupidity to go in there and try and catch it. But what you're saying, Margaret is that you're there's a shift in capital interest, right, They're more interested in multi family, they're more interested and I'm guessing like server farms.
Industrial warehouse is a big part of it because there's a huge shift in how people are using space right now. Instead of working at the office, we're working from home, We're shopping from home, we're playing at home. So that creates more demand on the residential side. And then also the warehouses you know, holds all the goods that come in for the shopping and are really winning on the deglobalization front, which, like you said, server farms, data centers
and whatnot are also big. So there's sectors in the market that have really interesting fundamentals and if you could use this moment to buy at a discount it. You know, good opportunities have now.
But can I get a Can I get capital to do that? Can I get a loan to do that? Well, banks lend to.
Me, so yes, banks are lending to their best customers. You can also restructure your existing loans. And again that's where this recap strategy comes in that we think is so interesting. As I said, trading value is down forty percent, it's not down one hundred percent, and it's way higher than it was during the GFC period. So there is still movement. There is a lot of especially if you're trying to sell office, it needs to be seller finance because there's no debt for office.
No debt for office.
Wow, seller finance.
Yeah, I don't like that. That's scary.
You know, I want to sell you this thing so badly that I'm going to lend you the money to buy it from me.
Yes, exactly, I've seen that before in other businesses.
So again, do you feel like where do you feel like we are just in I.
Guess it's really by the asset class, right, I mean, like I was gonna say, are we at the bottom here? But in certain sectors we've already bottom dinner trading higher, but for office maybe not there yet.
For non office where at the beginning, and probably a two to three restructuring period that should yield some very interesting, as I said, opportunities to help people restructure as we move through the business cycle and we come out the other side. You know, the motto now is stay alive till twenty five.
Stay alive till twenty.
That's not true for office. And I think the office is more like I alluded to retail was a ton of fifteen year correction. I think office is more like a ten year because tonants have to figure out their demands. There's long term leases that need to roll off, and it's going to take a while.
Wow.
Let's talk quickly about San Francisco. That's where you live, Paul and I think both love the city. I think it's beautiful. I love the Humphrey and Slocum ice cream place. I'm a deadhead, so I like to go around hate Ashbury, you know, and check out the scene there. I never really hung out in the industrial commercial center very much, but apparently it's dead. What do you think it is? The you know, are the death stories about San Francisco overblown, overwritten.
The Bay area is a center to the Vegas and most important tact ecosystems in the world. I am not going to beat against San Francisco at all. And it's a fabulous place to live.
Still, you still enjoy living there.
Yes, and remember we don't all live we don't live downtown. That's part of the problem. Office key card use says use office Houston, New York is fifty percent, office US in San Francisco is forty five percent. You just feel it because there's it's more concentrated, and the tourism is not back there, and here you have integrated uses, so it feels lively.
Yeap, when I hear tourism isn't back, that makes me want to go to that place.
Yes, you know, I love it, and I just I always tell people that are coming from Europe, Hey, I've got I'm gonna be hearing the stage for three or four weeks.
Where do I go to say?
One stop has to be San Francis. Yeah, do your Vegas, do your New York, but one stop has to be San Francisco. I'm just not sure if you can do that say that anymore. But I still think that's the case, so don't bet against the Bay Area.
Thank you very much. Margaret McKnight.
She's a partner and head of real estate Portfolio Solutions. The company's name is Stepstone Group. It is a NASTAC traded company.
St e EP is the ticker.
You're listening to the tape. Cat's are live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com, and 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, Matt, I'm taking my year to day gains. I'm going to the two year treasure.
I'm giving them my money at the window and we get five point zero four percent. It's not bad.
You've got a lot of reinvestment risk ahead.
That's not good. Then all right, let's talk to somebodyho does this stuff for a living.
Ted Oakley, founder and managing partner at Oxbow Advisors, joining us live in our Bloomberg Interactive Brokers studio.
You shoot, you're based where are you based? Down in Texas? Austin Austin. Okay, all right, so.
You didn't your school, you're a Texas tech. You didn't fire your coach and guarantee the seventy six million dollars, did you?
We did not. We don't have that kind of money.
Okay, very good. Want to see what's going on down there in Texas. Everything's bigger in Texas. I know, I get that, all right, Ted here again, I can be just fine. In my two year treasury of five point zero four percent, Matt says, I have reinvestment risk.
What do you guys do in these days?
Well, we own a lot of that. Actually, we have probably the highest level of treasures we've had since two thousand. Really, yeah, we're very high in the treasuries. We have a lot of the floating rate treasury, which is even shorter. It's based on a ninety day reset every Monday, and it's about five and a half. And then you know, we own some one year or two year and we own some long paper. But right now, that's that's where we have a lot of liquidity stashed.
What do do you have?
What are you looking for to maybe get more exposure to the equity markets? Is that evaluation thing is that or an earning thing. Is it a federal reserve thing? What is a catalyst that you guys are looking for?
You know, most of the companies we look at are guiding somewhat lower, you know, in the in the coming quarters. We don't look at whether they beat or not, because that's a game they all play, but we look at the guidance on it, and the guidance is going down for a lot of companies, and a lot of companies are just not cheap enough for us. We have companies we like, we've been buying some of the consumer staples
because they've gone back down to a level that we liked. Okay, but we've been you know, we still own legacy growth companies, but we cut back on them quite a bit.
So does that mean you're out of the market for the foreseeable future in terms of equities.
No, man, it means that we're about half in. You can look at it that way, I suppose. But you know, we really feel like that we'll have a better spot here in the next two or three quarters than we have right now. We really see weakness coming. We see a lot in a lot of industries across the country. We see transportation, retail, trucking. So many things are starting to weaken now, and so for us, we just don't think it's over yet. So that's why we're a bit cautious.
So do you have a recession built into your forecast here? Well, you could.
I think it'll go so slow that it will feel like one at least. You know, if you go to zero growth, Paul or one, you know, that will probably feel like a recession to some people because some industries will be very, very slow. And then you have to deal with this debt situation with the Fed too. I think that's a problem.
Ah, that's your rid of your belly.
Yeah, absolutely, I mean do you see any kind of fiscal discipline coming to this government anytime soon?
I don't. I haven't seen it before. Now maybe they come around, but you know, it takes both sides of the of the eyele to do it.
And does it matter to you?
Do you?
Are you concerned when you look at the debts and deficit or some people say we've been doing this since Reagan, we can keep doing it.
It matters to me in this respect. If you go back and look at countries where they get to a certain breaking point, and we're about three quarters there. And people don't realize that the average debt that we're paying right now is about two point six percent on all the federal debts. Well, guess what fifty percent of it rolls over in two years. At five you're gonna almost
double it. And people, I don't think people realize what happens when you when you get so much debt and then they monitor debation monetary system and I know it hasn't happened in the past, but now it's getting to a breaking point. You can follow it with countries over time and see what happens.
On the equity side here, I know you mentioned look looking for income, So oil and gas pipelines.
We still have those. We rarely sell the oil and gas pipelines. They're steady producers. They usually increase the income a little bit each year. If you wanted something to compete with your real estate on a private basis, you put on the oil and gas pipeline because half of them file on a K one just like real estate, so you don't have any current income tax on it. And secondly, they all pay between seven and nine so you get a.
Yeah, and you're not building pipelines anymore?
Are they You hit the nail on the head. It's like it's like I tell people, be like trying to get an easement for a for a railroad track, right, you think about that today you can't do that, and then you have environmental concerns and it's hard to get these days.
I tell people, when I was pitching the billboard companies back in the day, I say, they're not making any more billboards.
Can't get them up. Yeah, you gotta by the ones that are out.
There, and how's that business going?
Awesome? Yeah, awesome.
You can't You can't click through a billboard ad. You know, that's true, can't block it?
That's true. What about other real estate plays? For example, in Texas, I know there are a lot of big data centers, there's a lot of big factory sorry, big warehouse businesses. You got a lot of land down there, right, So there's even green energy is a huge industry in Texas, despite what we may all think about Texans attitudes towards that.
Well, that's true. But what we see and I'm I'm involved quite a quite heavily in a community bank, and so I see a lot what's going on on the real estate side. What we're seeing, Matt is really we're starting to see even some industrial properties come up for least because they're not full. And now we're starting to see some commercial buildings actually go back to the banks. I mean they're giving the keys back, and so it's starting to show. It's starting to show it's where and tear there too.
So do you guys at the bank you're involved with, you have commercial real estate exposure very very little fortunately, okay, But so are your customers. I mean, what are you seeing at that regional bank level. Is there loan demand there at these interest rates?
You know, in most community banks, Paul, the loan aman is about steady. It really is not going up or down. All the banks are fighting to try to get the loans. And so while you've got an eight and a half percent prime, they're having to come in at six and a half or six and three quarters and to get that business. That's what we're seeing. I think they're really the banks are really concerned about it because most of them have a situation where they have bond portfolios that
are not all that great. And then the other problem is they can get a lot of new you know see and nine new business loans.
That's hard for them.
So broadly defined, I mean, Texas is so big you can't talk about the state, But I mean, what are some of the driving forces down there for the economy. Is it still just people or people and businesses are coming into the state because of maybe favorable tax situation, good labor forces.
That's still the story there.
Well, that's what we see now at Oxbode. We do business in forty states, so we do business all over the country. But in Texas we have a lot of new business that came in just from people that moved from other states at high tax states. They just got tired of what was going on in some of their states. On the business side, portsol and gas is still a big business in Texas, but we have a lot of manufacturing, We have a lot of tech. We have a lot
of things that happen in the state. You know, the state's it's still a place where you can go and sort of be a bit of a maverick. And I think why people come there.
Yeah, I'm telling you like freedom, I know exactly.
It's in short supply some taxes, man, Yeah, can crush here.
Tell me about telling you about it all right? So what's your over the next twelve months?
Ted, what do you do you think you guys will get more into the equity market, increase your exposure. What do you think you'll be making some changes to your portfolio of the next twelve months.
What do you anticipate?
It would not surprise me to see us at least get a lot more if we have a break in the market that we feel like things are cheap enough, You'll see, let's get almost fully invested. We'll find companies we usually will. We really run about two hundred hundred and fifty companies that we would want to own that we look at quite a bit. Most of those are not hitting the screens we want to to buy right now.
And is that a valuation screen?
There's a valuation screen we like companies with. We find in the long run you need own companies that don't have a lot of debt. I mean, you know, debt really for us is not working in the long run for companies, and we just feel like we'll get a shot at better valuations we have right now.
What's your latest book? Stay rich with a balance portfolio?
Right?
So what am I doing there?
Am I just rish reward, making sure I don't get too far too skewed one way or the other.
You know.
One of the things I've noticed really since the pandemic particularly, is that people are really they're all in one or two things, like maybe they go all into crypt currency, all into real estate, all into the Magnificent seven, all in something, you know, and they don't have any balance. And one of the things I've found, and I've really interviewed in my life quite a few billionaires, and one of the things I've noticed about them is they usually
have balance. May not think it, but they have quite a bit of balance, have quite a bit of liquidity. And I see people today that are sort of complacent because nothing real bad has happened so far, and so they're all chocked full of one thing. And I just think that's not a good way to go. If you want to, I'll just give you a note. If you take a million dollar person nineteen hundred, they'd be a billion a day.
Yep, there you go. I could do that.
Man, Ted Oakley, thank you so much for joining us at Ted Oakley. He's a founder and managing partner in Oxbow Advisors. You should get him on the phone, but he's up here in the big Apple today, so we got him in the studio.
Thanks for listening to the Bloomberg Markets podcasts. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller nineteen seventy three.
And I'm fall Sweeney. I'm on Twitter at pt Sweeney.
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