Land Sales, Markets, And Investing In Automation

how about the land underneath all that real estate? Jason Walter, CEO of National Land Realty, he focuses on that. Jason, thanks so much for joining us here again. We're it's just been amazing during this pandemic, how strong the real estate and housing market has been. How about the land market. They're not making any more anymore land, So talk to us about the land market. Sure, yeah, that's correct, that

makes any more of it. Uh. We've experienced exception on great this year to the first half of the year, our sales were hundred uh and last year we were up thirty two since the pandemic April, since it began, we we've just sky rocketed. Jason I don't want to put you on the spot here, but you could help me solve a bit of a debate in my relatively new marriage. My husband would love to buy just a ton of land down in Virginia or West Virginia and not worry about buying a house. Just hold onto the

land and we can rent. I would rather save up and buy a house. Is buying land a better investment than buying a house in this market? Well, again, it all starts with lands. That you can do both both of you can be happy, okay. But but to answer your question, yeah, the returns of land, Um, it's a less followed to market. You know. After the last Great recession, the timber and egg land rule what we consider rule land, it outperformed the commercial sector for the first five years

after the downturn. It's it's less followed to it head is really good against inflation. Both timber and and agg about performed gold over the last several decades when it comes to inflation. So right now is just a really popular time to be buying land. So what kind of land? I mean? Um, do I buy farmland? Timber ranch land? I mean? What kind of land is? You know what

that you're recommending people take a look at. So it's a good question because most people a segmentum we don't typically detracts of land we sell incorporate three main components. You're typically buying it h for recreational use, could be hunting,

could be camping, could be four wheeling. But as a kind of a backup to your investment, it's typically going to have some agriculture done on it and timber, so you're you're kind of getting the best of all and liveability a lot of there's a really nice wave of people that are moving into more rural areas. You know, only ninety percent of the US population who lives on on yeah of the land. Yeah, Jason, it's so interesting.

I'm from the Washington, D c. Area, and every time I go home, it seems that the sprawl has gone farther and farther out from the city and now there's people, you know, new developments going up that are like an hour and a half commute into Washington is Land becoming more valuable even at farther and farther out distances from metropolitan centers. It is the way we track land is is what we call development zones. Future development zones and

the rural land the urban areas. The development area that only consists of three percent of the US land mass of the U s Land is considered rule. So it is treeping out into suburbs. You know, obviously the builders are building a lot of new homes um and so you're seeing that fringe pushed further and further out in

with there's a lot of reasons for that. But with the with being able to be delivered to the mail, with you know, all the technology it's available today, educational line, it's a lot easier and things are more accessible to live further out. Chason, I live in the most high, highly dense UH state in the country, in New Jersey. Where should I look in terms of other parts of the country. If I wanted to add some land to my portfolio, and I going to the south and I

going west, where am I going? Yeah? Two things about that comments that are interesting. One, we just tired of land broker in New Jersey. Here you go. I just sold my house. I'm done. I'm like Elon Muskom. Very few people in the US have to go more than an hour to get into a pretty rural area. But if you're looking at the entire country. You know, the sun Belts obviously experience a lot of growth. On the southeast is really booming. Um, that's probably where most of

the the business has taken place. All right. Interesting, Yeah, there's some ideas for you exactly be a rancher, all right. Jason Walter, thanks so much for joining us. Jason Walters, CEO of National Land Realty. He is a graduate of Clemson University. Enjoys watching football and his alma model. Maybe not so much this year, a little bit of a tough year for the Trevor Lawrence Clemson at tires. But Andy, it's interesting again when we talk about it. I don't

even think about owning land. I think about owning houses and stuff, right, But I guess to Jason's point, those things aren't necessarily mutually exclusive, maybe especially in this market. I mean, we have a great story out on the Bloomberg terminal right now about how first time home buyers like myself in theory, I can't get into the market right now because prices have just risen to such an

extreme level. People are paying all cash. Maybe if you can't go for it and buy the whole house, you can buy a plot of land with the intention to build later. Maybe that's kind of the backwards way into it. Well, Kayley, when I was a sell side equity analyst, the two meetings you had to get on your West Coast marketing trip was Capital Group and TCW, both in l if he didn't get those meetings on your schedule, my boss

won't even pay for the ticket. Tc WS. Big Brian will and joins this group Managing director for TCWS Fixed Income Group. Um, Brian, thanks much for joining us here. We've had a little bit of a pickup in yield out there. We had we kind of started the day yesterday with the you know, the ten year that the thirty year up, you know, ten basis points. What do you make of what we're seeing in the rates market

right here? Yeah, you know, it's interesting. Thanks for that introduction, Paul um In that uh, you know, we we had such kind of high employment numbers, positive employment numbers for months, we had very high, you know, inflation numbers, and then finally, why don't you get into September, we actually have an underwhelming employment number and an inflation number that comes and

blow expectations. And then it's only two weeks after that that the market starts to sell off, which kind of tells you the mark the waiting on the economic numbers from the at least on the bond market, it's not what it historically is. And really the bond market saying it's more focused on you know, the reopening and the pandemic and what's going on with Delta, etcetera. And then and so what you've seen is a sell off, although it's it's a little different than what we saw early

in the year. You know, we had a big sell off in the first quarter. Rates jumped higher. This time around, it's being led by the short end. Uh And actually, you know, while the two year in the five year are are kind of at their highs in terms of rates on the year, the ten uere in the thirty year, the long end of the curve is actually still about twenty thirty basis points lower than we saw back in March. Yeah, I feel like now we're much more focused on on

the belly rather than the long end. So in this kind of environment where yields are higher than they were but still low historically around one and a half percent, can you be a buyer of bonds? Well, I think the answer, that's what do you want it to be in your portfolio? I mean, you can't. Look. The nice thing about a discussion about bonds is it's pretty much

just math. Uh. In you know, you're looking at you know, yields of of one and a half percent, even if you move out of treasuries and you buy you know, investment grade corporate bonds, maybe you're talking two and a quarter or two and a half percent, and even like the lowest quality bonds out there. You know, you're talking about the high yield bonds. You know, brace yourself. You're talking about a four percent yield um on that market.

So there there isn't a lot there obviously, But at the on the flip side, you know it should just be part of an investor's portfolio, whether it's a you know, individual or an institution. Um and look at one and a half percent um. If we get a dramatic sell off in the equity markets and and you know they go down by more likely than not, you're gonna see

bonds rally. Uh. And the math would tell you that if you got you could still get a good solid hundred basis point rally in the bond market, which would be. You know, it would probably put your piece of your bond portfolio up about seven eight percent. And you know, on an absolute basis that does not sound all that interesting, But on a relative basis, relative to what's going to happen in your equity portfolio, you could still play a role for you. Ryan talked us about credit quality. UM,

I mean, you guys see everything out there. I haven't heard much about a real credit quality issues either from the big banks on the report earnings. Uh. Is that simply because we had the fedback stopping everything and we had fiscal stimulus every time we we we we turned around? Is that kind of the story? Are? Is there no real risk there? There's not enough time in your program

to talk about that? Is to your direct question, I'd say, yeah, let's two ways to measure credit quality, kind of observed credit quality, And by that I mean like, how are um let's say, borrowers default thing, uh, consumers let's say on credit cards, like what's the loss rate and it's at all time lows? Or let's say like in the corporate bond market, even in the high yield market, the leverage finance market. UM, let's say, look over the last

twelve months, like, what's the default behavior? How often are they not paying you know, the debt that comes due? Really again at all time lows, I think historical trailing, historical default rates is less than one percent. And so so if you if you, if you want to look back words, it's never been a better time to to kind of lend or be, you know, invest in the

credit side of the fixed income market. But on a forward looking basis, I can tell you that, first of all, which mentioned earlier, you're not getting paid to take a lot of risk right now in the bond market, right whether inspiration or whether it's credit. And then kind of

the implicit credit quality that has deteriorated significantly. It is, without a doubt a a borrow or friendly market, meaning that whether you're a person UM or particularly if you're a company or even a even a country, a sovereign nation, um, the terms of which you can borrow, not just the rates, but the terms around let's say like the covenant quality, let's say UM is as friendly as it's ever been. And so what that means is, you know, at some point in the future that's going to come back to

kind of bite bond investors um for that type of lending. UM. And those question is obviously it always is, is when does that trigger occur? Uh? And that all that kind of poor credit quality come back to to hurt bond investors. Brian, just quickly on spurs. We're still sitting around two five basis points for high yield spreads. Have we seen the tights of this particular credit cycle? Is it only wider

from here? Hard to say. I mean, look, you know everyone is so starved for for yield and for income. I mean, that's that's really that was the objective, right, you know of the FED kind of you know, it's it's a repression. UM. So you know, we hit a little early in the year two basis points of spread. You know, we're at two eight five today. UM. I think, way way way back when before the credit crisis. At one point, I think we hit about two and a quarter.

That was the all time low. So look, if we sit in this very kind of tight monetary controlled environment where you know, effectively the FED doesn't let um financial conditions deteriorate and volatility to pick up, and we let we we stayed in this environment for another year, Sure, I think we could breach to um. But but that's the question, right, you know, could they actually contain it?

You know, if let's say, let's say the Fed blanks you know, or that you know, they the playing this game of kind of almost like chicken with inflation, right, and if what if the fled finches flinches first, you know, they get into next year and they're not so confident in the transitory narrative, and then it starts to maybe increase interest rates a little sooner than the markets expects. That would be all that might be a trigger. We'll

pay attention to that certainly. Brian Will and thanks so much for joining US Group Boundaging Director for TCWS Fixed Income Group. Well, there's a lot going on down in Washington, DC right now. From a legislative perspective. We've got infrastructure, we've got spending plans, we've gotta keep the government going on. Just in terms of day to day operations. What's going on as it relates to the markets. How should we

think about this? Michael Jesus, chief US public policy and municipal strategist for Morgan Stanley, a little firm here in New York City, joins us. Michael, how are you framing out in your mind as you talk to your clients about how we should think about all of the variables in Washington, d C. From a legislative perspective. Yeah, hey, good morning. I think the more important debate at the

moment is the one about overall fiscal policies. So that's the infrastructure bill and the reconciliation bill, kind of the expansion of the social safety net, and there's some interesting decision points this week. They tell you if the Democrats are going to be able to go go big or if they're gonna go small, And that to us is important because I think the big option, which is our base case, it's probably a necessary condition for rates to continue to rise at the pace that they've been having.

Right now, we think the evidence points in the direction that they're going to be able to go big, or at least keep the possibility of going big alive, because the option where they go small would probably require a vote on the smaller bipartisan plan to go ahead without a commitment on that larger reconciliation plan, and right now that doesn't seem like it's going to be possible because House Progressives has effectively said they're going to hold their

votes on the smaller bill. Well, the Michael, the House is one thing, and the battle Pelosi is having to wrangle her caucus, especially the progressive ones there. But in the Senate, Joe Manchion Christ and Cinema have said, we don't want to go big. Three and a half trillion dollars is too large a price tag. So even if the House does one thing, can going big make it through the Senate. Well, I think that you've identified the right tension here. It's not just about it's not just

within the House or within the Senate. It's actually across both chambers and in many ways the groups that need to come to an agreement or the House progressive and the Senate moderates within the Democratic Party, and until there is some type of agreement, and at this point, you know, Speaker Pelosy herself, it's self evident that a big deal won't be as big as the three and a half trillion dollar reconciliation bill, but somewhere south of that, if

House Progressives and Senate moderates can agree on something like that, you could see forward progress on the smaller bill this week. But that doesn't seem to be there's no evidence so far that that agreement is forthcoming, and therefore there's probably still a fair amount of negotiation that has to happen, and we think this will easily slip into the fourth

quarter and continue as a debate. Michael, as you talked to your institutional investor clients, did they get a sense of or did you get a sense of this is just kind of how the sausage is made, it's business as usual. Or do you sent from your clients that they're saying, boy, this is problematic here. We can't even agree on infrastructure. Here is there concern out there? Um? I think if you're asking about as they're kind of an existential concern about whether or not government is functioning.

I don't think that's the way most investors are are thinking about it. They're thinking about whether or not this specific, this specific set of decisions can happen. What is going to be the impact to the debt and the death sit and how is it going to play out? And in that sense, this type of disagreement slow movement on what would be a very substantially sized bill. Um, it was a little bit of business as you will, and it's frankly, I think if it were too completely collapse

and fail. That wouldn't also be that surprising to many investors, because uh, it is I'd say generally the default assumption that that DC doesn't get things done as opposed to getting big, transformational things done. All Right, it would be great if this were the only conversation that is having to happen on Capitol Hill, but that is not the case. We have the potential government shutdown coming at the end

of the week if a continuing resolution isn't passed. They've separated out raising the debt ceiling from that since Republicans voted it down. How is the debt ceiling going to get raised by that October eighteenth deadline that Janet Yellen said, Hey, we're going to run out of money. Yeah, I mean here, I just highlight that there's a lot of paths that

lead to the debt ceiling being raised. The most obvious one that that's pretty well talked about at this point is that the Democrats decide to pivot to using the budget reconciliation process, move quickly on that process, and get that done with a party line vote the October eighteen deadline. Um, it's of course also possible that the option to use reconciliation expired over time if you'll move fast enough, sort

of forcing Republicans into the negotiation. But the point is that there's there's time, and there's options, and so the fact that you were not hearing from a lot of clients who are terribly worried about this, and I think it is probably up to early to be too concerned about it. Michael, you're also the municipal strategist at Morgan Stanley. What is your strategy for municipals right here given all

that's going on down in Washington. Yeah, I mean, I think I think it depends on what type of investor you are. UM, if you are an investor in an attack bracket and you have a need for owning duration, then it probably still makes sense to own municipals at the moment because credit quality is actually quite good. It's improving largely across the board, and on a tax adjusted basis,

there's necessarily a a better place to get that duration. UM, if you are someone who is managing against a broader fixed in COMME index and you want munies because you think they'll outperform corporates or something else, we wouldn't agree with that strategy, we think units are probably going to be an average, perhaps a slight underperformer versus other types of US dollar denominated credit. Alright, Michael, thanks so much

for joining us. We really appreciate getting your perspective here as we try to make sense of what's going on down in Washington in terms of all those legis pieces of legislation that are winding their way through Congress. Michael jesus chief US Public Policy and Municipal Strategists for more in Stanley, based in New York City. This is Bloomberg. Well, when enhanced unemployment benefits in US ended earlier this month, Manye, businesses thought that job seekers would flood back into the

labor market, but so far that hasn't happened. So what are businesses to do? Maybe one solution might be automation, enhanced automation. William Studebaker joins us. He's president in chief investment officer of robo Global. They have about four billion dollars in assets under mass man management across various indicries. Bill, thanks so much for joining us here. Talk to us

about I don't know, automation robots. Is that kind of the future for a lot of businesses that might post pandemic have a hard time, you know, finding a job folks to fill their job openings. Yeah, good morning, Paul Kaley. Yeah it wasn't. I mean, fortunately, as I discussed in my blog, the robots are here, and UM, the obvious solution right now, you know, is automation, and the trajectory

of automation is definitely undeniable. And what's exciting about what's happening now, it's that this revolution is very different in terms of scope, scale, and complexity of any other technological revolutions that we've seen. It is really coming down to really dollars and cents, and the competitive advantage that the service industry had had was access to cheap labor, and automated systems have had to compete against this. Historically, the

upfront capita costs UM made robots less competitive. But you know, with astronomical wage increases, particularly lower wage labor in the absence of labor in many cases UM, the service industry, wage increases UM have really changed this equation. So we're at a tipping point. As we have wage costs and is accelerated, you have costs of automation that have plummeted and quality is obviously improved as a result of automation, and this is really giving birth to a whole new

evolution to our economy and how business has done. Yeah, it's interesting. I was reading a note a story about a note from Mike Mayo, who's a bank analyst over at Wells far Ago very closely followed, and he said that the banking industry, the financial industry would be maybe cutting a hundred thousand jobs over the next five years in part due to improving a technology and automation. Is finance or any other industries sectors in particular that could

see this happening in a more accelerated way. Well, I think that's a hard question to ask. I think every industry is actually you know, right for automation, there isn't you know when you when you think about automation in general, and you know how much or how penetrated are are we in terms of automation, And with the exception of of industrial robotics principally auto which is about penetrated, virtually

every other industry has the minimous levels of penetration. Really, um, I would argue what's happening is not so much job loss. But what's happening is the nature of work is changing, and in many cases it's really what we're doing is automating tasks. So it's not about about complete job functions getting eliminated. But again, tasks are changing. We're moving more to a knowledge based work environment. Um. You know, I think back to the nine hundreds, we had sixty of

our workforce there was an egg. Now we have two percent. We're producing more less. This is all as a result of automation. So again, I think we're at a tipping point for proactivity improve in virtually every industry. Is how do you when you look at the labor situation today? You know, we've got again the enhanced uneppointment and if it's expired earlier in September, Um, we haven't necessarily seen a rush back into the labor market. What what do you make of kind of the folks that are not

participating in this labor market? Now? Well, I mean I think, um, you know, you know, the interesting thing that we've had in the economy. To put what's happened in perspective, it's actually kind of interesting. Um. In the second quarter of you know, we had the highest cdpeak growth in history. In fact, Jeep, your growth is now one person higher than the higher peak and we're producing the highest output was six point seven million fewer people. And this is

all as a result of automation. And you know the initial undeployment claims that came out, we're a little more elevated than I think expectations had it. Um. You know, demand for workers remains elevated as as the economy reopened. So I think the big issue for a lot of companies and is that with the reopening of the economy, the main issue is has been finding enough workers to meet the soaring demand. And I think going forward, um, a lot of companies are going to face a lot

of pressures with rising costs. And I think people have had the benefit of having enhanced benefits and and they recognized that, and I think that's made them very slow to you know, make future changes. Bill just quickly, we only have about a minute left. But if we're heading toward a more robotic, automated world, how do you position a portfolio for that. Well, I think this is undeniably

you know where we're going. When we sort of had the vision that robotics and AI where we're going to become very ubiquitous eight years ago, you know, fast forward, you know eight years later, we could be more convicted. I think what's interesting is I think most people sort of see this, but they're not positioned for it to take for example, are our Robotics Index, which has an e t F the tracts at robot Less than three percent of these companies are in the SMP five hunters.

So generally speaking, this is a very unowned part of the market for for most investors. And what we try to do is identified companies that have high revenue purity, that have market share and technological leadership. So these are really are very mature businesses and again importantly not owned by investors. And I think if you look at the SMP, SMP didn't exist roughly twelve years ago. So the evolution, the innovation that's happening is happening pretty rapidly. And this

is where you know we're going. And this is just online with what's happened, you know, with the Internet and probably a lot more powerful. Hey, Bill, thanks so much for joining us. I really appreciate getting your thoughts. Are fascinating topic. Bill Student Baker, President and chief investment officer for Robot Global. Thanks for listening to the Bloomberg Market podcast. You can subscribe and listen to interviews with Apple Podcasts

or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller nineteen seventy three and on Fall Sweeney. I'm on Twitter at pt Sweeney. Before the podcast. You can always catch us worldwide at Bloomberg Radio