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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 moven News.
I'm the Bloomberg Markets podcast called Apple Podcasts or wherever you listen to podcasts, and at Bloomberg dot com slash podcast. Let's check in with Ed Harrison. He's the senior editor of Bloomberg News. Get his thoughts on these markets. Thanks so much for joining us via zoom here. What do you make of what we heard from fed chairman Pal yesterday and then maybe the market's reaction to it.
Yeah.
I think there are two things there, Matt. One is that there was no pushback from the FED, and I think that's the most significant of the two things. The second, obviously is the dot plot, which was relatively dubbished. But when you add those two together, particularly the one with the lack of pushback, it says that markets have room to rip from here. And this is exactly the opposite of what I was thinking ahead of the meeting. I was writing that the FED would at least do a
perfunctory pushback. But that's not what we got. When you look at the transcript of what Powell when he was asked questions Nick Timmeros or the Wall Street Journal, he asked him, look, you know, we've gotten a lot of easing and policy on your behalf. I anticipating a funds rate next year that's a full percentage point lower in September and missed, and Jerome Powell said and respond he said, look, you know, we're just going to do what we have to do. We're not going to think about the market.
They're going to do what they need to do, and we'll meet somewhere in the future in some place, and that was enough for the market to say, Okay, look, we have no pushback here. We're definitely just.
Gonna let it go.
And it's interesting, ed because when you think back to the November meeting, that was really when Powell had pushed back on all of the uh you know, or really more that paid more attention, i should say, to financial conditions, and that was a time when treasury yields were really going higher and you always like, oh, well, this is maybe kind of nice, you know, they're doing a bit
of the work for us, Like, we'll take that. And now there's been so much easing just built in in the treasury market for people thinking that this pivot was coming. Of course, on the now the decision has come, stocks and treasuries just ripping further. So is there really does Powell still care about the you know, financial conditions at this point or he's kind of just willing to let them go as they please.
Yeah, I think that he's given up. Looking at it, it makes a lot of sense in terms of thinking about where we are in terms of the easing cycle or the tightening cycle. We're basically by giving up on trying to get financial conditions in order. He's moving to a full on, you know, data dependent mode. That means that we're not giving you any guidance except for what you get in the SCP and as the data come in, we're going to do what we need to do, and
you guys do what you do. So in terms of going until the end of the year, you know, we got the retail sales that you guys were just talking about, which were bullish, as well as the initial and continuing claims, and the market's just completely disregarded that. You know, you look at the treasury markets at a minimum and they continue to go be below four percent on the ten year, and so what that says is that you you know, the path of lest resistance until the end of the
year is towards lower yields. And then we'll have to see what the day to show. And when the data come out, we're gonna see some volatility because there's no guidance as to what the Fed's reaction function will be. Everyone's now thinking March for the first cuts. But if if we see those retail sales numbers again and again and again like that we saw today, then people are gonna have to push back those those expectations.
You know.
It's I think one of the risks here, as I just kind of look at the market reaction yesterday and today, is that, you know, FED Chairman Powell may have lost the ability to rain in this market if the data does in fact go.
The other way.
I mean, it's just he seems to have, you know, kind of unleashed the wild spirits, if you will, of this market. I'm not sure how he ever gets back to any kind of cautious narrative here. I'm wondering if he's I'm gonna say, misplayed yesterday, but maybe it was misinterpreted by the market, or it just seems like it's tough to close the barn door now.
Yeah, you know, I think that that is a worry. My My worry is, and I've said this before, is nineteen ninety nine. You know, when I talked to you two times ago, I think we were talking about partying like it's nineteen ninety nine. He's allowing that to happen, And obviously if that happens, then what you see is
a harder landing down the line. It's very difficult to see a scenario in which you have unemployment at three point seven percent for an extended period of time without the Fed having to continually be at the ready to tighten financial conditions. And that's where we're headed into twenty twenty four. And with markets increasing the price earnings ratios, increasing their bets on cuts of interest rates, it sets up a very nasty headache down the line potentially.
Yeah, I mean, let's just roll it back just a little bit here for some perspectives. So we had that awesome jobs report on Friday of last week, you know, great payrolls number, unemployment rate down, and wages were up. Fast forward to this week the CPI report. You know, obviously you know a bit of concerning. I would think for Fed officials there that that service sector inflation is still very much powering ahead, so not much of a
dent there. And then of course they didn't get to see today before they met the retail sales and jobs claims data, but you would think all of that would be supporting higher rates at this point and not be talking about cuts.
Well, you know, I'd be interested to see what Michelle Bowman has to say, because I know that pale he flicked at her a little bit so as to not leave her dangling in the wind. She's one of the few people who thinks that rates should be higher.
He said that we could.
Go either way, but really it was a very perfunctory, very lip service type of comment on his part. I think that you know, the wind is blowing towards easing, and to the degree that we see those numbers that you were talking about, Jess go down, then we are going to get the easy that people expect. Perhaps not as quickly as they expect, but you know, the FED is primed in that direction, and I think that that's the path of least resistance at this point in time.
So, Ed, I mean, what's your view of inflation here? I mean, I guess the FED feels like it's on the right path, which it arguably is, but I guess it's just a question of timing to when we get to the inflation level that the FED really looks at. What's your view?
My view is that we're in an interesting paradigm that we haven't seen over the say, the last twenty years. You know, where you have the deglobalization, you also have a dearth of workers as the baby boomers leave the working population so there are some structural changes that create upward pressure on inflation in the US in particular. And so you know, with core PCEE inflation at three point
five percent, that's almost double the FED mandate. Really, you could get down to something in the two say like two to nine in the FED could start to ease, but beyond that it's going to be very difficult. And so I think that there's gonna be a lot of pressure on the FED going forward to continually be at the ready to tighten financial conditions because inflation is likely to continually be sticky given those headwinds.
Twenty seconds here, Ed, when's that first cut coming?
I would say the first cut is going to come June. That's that's what I would say. Okay, and so we're going to see some some steepening as a result of that, and then it's going to be a rapid cut because by that time it will be clear that the economy has deteriorated.
And thanks so much for joining us. Really appreciate it. Ed Harrison, Senior editor for Bloomberg News. We certainly recommend as every thing risk a column, good stuff, goodreads all the time, and we appreciate in a few minutes of his time.
You're listening to the team. Can'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.
People certainly liked what they heard from the FED yesterday. Let's bring in Jay Haffield. He's a CEO, founder and portfolio manager at Infrastructure Capital Advisors. He joins us live here in the Bloomberg Interactor Broker studio like he always does, never mails it in, never phones it in. The kids could learn something from that, Jay. I don't know what did you take yesterday. It's certainly surprised. I think the market with FED Chairman j Pals I guess tone of comments,
maybe even the dot pots as well. What did you take away from it?
Thanks, Paul and Mollie, Well, we were surprised, like the market, we had thought that the FED was only going to have two cuts priced into the dot plot. It's a welcome relief. But I think that you've had some new participants. They've come on to the FED, like Austin Goldsby, and they're looking at what they should look at which is more mosaic of data instead of myopically focusing on this PC core. We think that's a disaster and makes the
FED fundamental disaster, really total disaster. Yeah, the problem is you have to look. If you watch core PC, then you'll end up being incompetent Federal Reserve and you'll call inflation transitory when it's skyrocketing. So what you should do is look at PPI, look at CPI dash R that's R index or in other words, adjust the horrible shelter component of BLS and then use something called judgment instead of a rule that Greenspan used to use. Who was
the real star of monetary policy? And so it seems like they've taken the leap, and are you using judgment instead of just focusing on this one measure that's massively flawed?
So which ones are?
I mean?
Will you just rattle off a couple of metrics there? I mean, which one do you think right now has the most of a signal right now for inflation that you're really paying attention to.
Well, the reason that we've kind of nailed this cycle since the pandemic is that, unlike the FED, we look at monetary policy which drives housing market. And then we're lucky because they're energy investors. We have a pipeline fund. I founded a pipeline company, So if I would argue, if you have those two inputs, you can ignore monetary policy. Just look at the housing sector and energy prices and you will be a good forecaster. So right now, you know,
housing prices did come way down. They have ticked up we talked about the last time, so that's a little bit of risk. But rents are low, so we might have to have yet another index that has just rents.
Yeah, like you said, you would not know that looking at the CPI index.
Shelter or even our CPI dosh Our is ticked up because case Shiller went up. Rents are down again. This is the mosaic you have to look at. So we do think that inflation is contained, and we are pleasantly surprised that the Fed agree seems to agree with us.
Right now, All.
Right, Jay, and make sure our headline writers are ready here. What have you done to your s and P five hundred price target?
And why so we raised it this morning And the best way to summarize why is a terminal command MI IPR, which I would recommend everybody boots up. We sort of sadly only figured this out about two weeks ago.
That's market implied policy rates for everyone tuning in yees.
So if you look at one of the columns, it's a sea of red, but that's good red. So those are all the rate cuts that are priced in to all the major bond markets in the world. And so it's kind of obvious this data should exist because we have it in the US right because there's always theres
a futures market in every country. And so what's wildly bullish about this is that we were on two or three months ago and we had this non consensus call that the euro economy was terrible and that the Eurozone would be forced to cut or ECB would be forced to cut. But the good news is you don't even need to listen to our rationale because that's what market participants believe now. So I guess they're avid listeners of
Bloomberg Radio. And also, if you hover over the Eurozone chart, you can chick you can put up a GPO chart and you can see that it did plummet over the last two or three months. So this is the heart of the Bowld case. But it's even better because the ECB was very recalcitrant today and has what we think is kind of a crazy forecast of plus point eight
percent for GDP next year to strongly disagree with. But the good news is you don't we need to agree with our variant view on their economy because market participants in the Eurozone who trade Eurozone futures agree with us. That number tick down a little bit. It was one forty four as the negative the cuts price ten next year. After the Guard's speech, that ticked down six bases points. So that was a pretty hot as speech.
All right, So let me just summarize what the good folks at your firm, Infrastructural Capital Visors did this morning. They raised your price targraphy the S and P five hundred to fifty five hundred from fifty one to fifty. That's based on a twenty one and a half multiple on S and P consensus earnings for two seventy So that's your twenty twenty four year in target.
Correct and perspective. We're right now at forty seven to twenty five correct.
So that's great.
Yeah, what's the risk to your outlook here, is it earnings risk, is it macro risk? What are some of the.
Well, that's what a lot of people don't appreciate is the multip on the market is ninety percent driven by long term interest rates. So the reason we upgraded it is that we have this non consensus call that rates are going to drop from five but that looked a little bit problematic, so we're pretty conservative conservative about tenure. So but at a three fifty that implies a twenty one times multiple on EPs on smpeps and the consensus
is two seventy. And by the way, we did this methodology last year and came up at our forty five hundred target. So it's just a very straightforward. If you don't like, as you're pointing out, don't like one of our metrics, you can just plug in your own. We're using three point five percent, which implies twenty one and a half actually, and to seventy on earnings. And we are bullish about earnings, and we think most people miss the dynamic that earnings normally go up by ten percent.
You don't need margin expansion, you don't need a very strong economy because companies are retaining earnings about seventy percent invest about at fifteen percent after tax. That implies ten and a half percent growth. So the earnings estimates are normal, not crazy. And we don't think you need to debate that and wring your hands about it, because it's the companies reinvesting their cash flow primarily driving earnings.
So you had a start off by telling us that the FED and the APPOT yesterday indicated three rate cuts. You think that there's only going to be two. The dot plot though there was a pretty wide range in there. You know, that's just the median with three cuts, but there are eight participants who saw fewer reductions, five expect
deeper cuts. Who do you I mean, we obviously don't know whose dot really belongs to you, but you could take a reasonably educated guess who do you think is really the voice that you're following the most right now?
Well, we think that the thought leader initially was really Goolsby, that he came in and sort of said, the emperor has no clothes, that the labor market is not the key driver of inflation, and so and there are I think that you got to the heart of the matter is that pal was probably forced to come off his tone because he had a number of participants saying that inflation is actually plummeting that the economy is at risk.
We think it's fine, but it is at risk if they keep rates because keep in mind, if inflation really is going down, then real rates or skyrocketing if you keep them flat. So it is encouraging that there apparently has been a little bit of a palace coup and the hawks have been moved more to the center or even dubbish.
Off top of question. You see, Davis is where you graduated from. I'm a huge fan of the University California system. It's just amazing what they've done over generations, haven't they.
Yeah.
So the advantage too, that particularly those northern California schools have, like UC Davis, is that if you look at a map, if not from California, it's extraordinarily close to Silicon Valley.
Yep.
So those are great training schools. You don't learn like my kids Latin and all these other things, but you learn I was trained in business, economics, medical, so just the real professional school. It's practical, it's meant for public you know, kids as top ten percent students. So probably the model of the future. Although these are great schools we have in the Northeast.
Yeah, but it's just I mean Professor Galloway from NYUS. I'm a big fan of his. He's a huge proponent of the UC system and what it did for him and what it does for generations of kids in California to bring them to the next level. And that's powered a lot of the economy in the great economy for California. The lext one hundred plus year so Ja Halfield and then you got your MBA from some place in Philadelphia.
I don't know Jay Haffield. He's the CEO, founder and portfolio manager at Infrastructure Capital Advisors, raising the price target big time.
You're listening to the tape Kent'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.
Again. Movements in the markets here, we had a fed that I think, I mean, you look at the market reaction took the market by surprise.
With its cheerleaders everywhere. It is a good day.
Just ripping here Neil Grossman. He doesn't strike me as a cheerleader, but Neil Grossman's here, CEO TNKG Capital Joints here on our Bloomberg Interactive Broker studio. Neil, what did you make of yesterday and the reaction to the marketplace stuff?
Good morning and happy holidays? I think that was Christmas A couple of things. I guess. Number one I think I well, I took away. Number one is under the hood. Mister Powell may have just told everybody he's changing the definition of what inflation measures they're looking for, raising the target,
because I was amazed. The thing that really was most amazing to me was the fact that he said, we can't wait till we get to two percent to start removing or providing more liquidity, because that would be too restrictive.
So is that a different message there?
Well, that means you're two percent no longer really your target. And not only that. I know we've talked about the fact that we're now going to have close to five four years or so of high inflation on an average basis, But he's now I think, what's happened is raised the probability that getting to two percent is dropping, and the potential for reacceleration is a problem. Look, this whole rally started, I guess five six weeks ago when he made the
comment that the market's doing the work for them. Ten year notes were about five percent, give or take, and interest rates have dropped a full hundred basis points. Basically, the stock market's up something like twenty percent as of at least as of yesterday. The dollar had been weakening, you had a drop in commodity prices, so everything was since then has functionally said we were providing a lot
more liquidity in the market. Unemployment or the employment structure has although yes it's weakened, this is a very interesting thing. In a minute, it's still remarkably strong. So here's an interesting question. After the last employment number, the twelve month trailing average job at creation was still a two hundred and thirty five thousand jobs, pretty high. When was the last time that happened?
Would I say pre COVID.
Twenty fifteen for short period before that and before that two thousand, so to add two hundred and thirty five thousand jobs a month as an extraordinary rate of job creation in the absence of the fact that it's coming
down from what were much much higher levels. So the relative strength of the economy, because if you look at a five hundred thousand a year before, there's a slowing there, but our job creation rate is still extraordinary at a time when more or less maintaining the status quo of unemployments give or take about one hundred thousand a month.
Let's just come back for a second to one thing that you had just said, so and correct me if I'm wrong here. But I don't think the expectation was ever that the FED was going to wait for inflation to get to two percent before they started cutting.
I don't think that they'd ever made any comment they had a two percent target think.
And they still do it.
I don't believe that. Why not, because I don't think they're going to get to two percent, And even if they do get close to it, the type of liquidity provisions that will already be in the pipeline are going to be raising the probability that they're not getting there.
That's why. Right, So if the market, if the Fed's now talking about three cuts next year, the market's got I don't know, is it six or seven over the next If you're liquifying through the stock the equity market, if you're liquifying through rate cuts, you're you're already lowering number one, the price or raising the probability the prices are not going to fall as far fast number two, which is good, Which is sort of he didn't want
to talk about yestidy. I guess we've had a lot of wage settlements in the in the private sector, but also in the in the you know, the the coal adjustments for retirees. By the way, I'm one now, so I'm gonna be getting a lot more. But there was an eight point seven percent increase this year. Every government employee, I believe, and many public quasi public people are also
inflation adjusted. So those types of wage increases with inflation following means there's a lot more you know, potential upward pressure that can be consumption driven through a large part of the economy, and they're.
Not seeing like in general though, like inflation adjusted earnings as a whole, you know, ripping that much higher. I mean, it's now been positive for what like the last six months, but we're negative for two years.
Well, I'm not sure how negative they were. I guess first of all, you had what might be negative in a direct payment, but you have to add in the type of money the government was giving to people in the alternative and also for example, which is on the other side now, but telling people they don't have to pay their mortgages. I mean, there was a lot of loans, student loans, structural issues that made relative income look far better maybe than the straight measure of the payments themselves.
And I think what you're going to find, I mean, we'll see, but I think it's gonna be ver very hard for every any business that's got unionized employees and the government itself when it comes time to renegotiate, to sit there when they're employees say that's what they got, we get the same thing, which means there's an enormous amount of risk that that in fact, we have much more wage inflation in the pipeline or wage risk in the pipeline than anyone wants to accept.
Not a whole lot of unions left though, really did drive that for it.
Well, there are twenty million government employees in this country.
They have a good barning power.
They still have pretty good but I've never seen a government employee fired. I've never seen them be asked to take a wage cut, so etc.
Do you think in hindsight now, just seeing what the markets have done yesterday afternoon this morning don't fit Schuerman j Pal says, Oh, that's not necessarily the message I wanted to give.
I think he knew exactly what he was doing. I mean, he had an opportunity to couch this slightly differently as I said. I think that, to me, the single most important comment was a that if we're waiting until we get to two percent, we've waited too long. We see prices coming down. He ignored he didn't use the same statement he'd made six weeks ago. He should have said the market is now providing the type of liquidity we need. We don't need to do as much because of this,
but he didn't do it. So I think embedded in this message for the moment is the risk that they they've now accepted a higher level of inflation as parcel of their policy, which I of course think is a terrible outcome.
But a lot of people have been calling for that though, you know, saying like look like you know, we've got a structurally different economy that maybe, so an inflation target more around two and a half to three percent is more reasonable for like the world that we're living in now. Well, does that not sound like legit to you?
No?
Why not?
Because it has none of us, none of us have the privilege of my from my perspective, who set the FEDS mandate?
Congress?
Congress? What is the FEDS mandate.
To to maintain price stability and maximum imployment?
And what is price stability? Zero inflation? So is it? It is by definition? Now that the fact is the FED was an unusual institution because it had a duel mandate and it's actually there's a lurking third one about long probably stable long trombons. But the bottom line is they have a two factor optimization which allowed them to functionally play with both. I think it was the Swedish Central Bank who motivated this move to two percent, but
two percent is still not their theoretical mandate. And in fact, what was really sort of said to me they had inflation at about one quarter to one a half and full employment about a decade and a half ago, and they said, well, that's that's no good. We don't like inflation below a level, and then they all the modifications in how we define inflation and all these other measures. The answer is, if it's not a good thing, the
FED should be going to Congress. And by the way, just to go off track, Leena Khan and the FTC to mere the same issue. She is a regulator, an administrator. She's not a legislator. She is trying to functionally change the definitions and the practices in the anti trust world. She should have gone to Congress. She's lost every case, basically, and it's costing American businesses hundreds of millions, if not tens of billions of dollars in business and legal costs.
Shouldn't be FED. She should be in front of Congress saying times have changed, things have changed. Please, we need to revisit this. And so my point to your question is all of us, you know, we can all decide what we want, but we live in theoretically, and I think the FETE is telling you that doesn't make it difference. We live in a system where authority is granted from Congress to agencies to apply what they said, not to simply say I don't really care what what Congress said We'll do what we.
Want, right, Neil, great stuff. Well, you can do this all day, right.
Oh man.
I feel like Neil and I could probably talk for the next three hours on this show, but we're gonna have to keep it there for today. Thank you for joining us, all right.
Neil Grossman, co founder, former CIO TKNG Capital.
You're listening to the tape. Ken'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.
We want to get great to our next guest because we don't talk commercial real estate because I've got some big time opinions. I have known nothing about real estate. I know nothing about it, but i have some opinions. Our next guest really does know stuff about that. Mickey Enough Holly joins us CEO and chairman of Enough Holly Group. Mickey, thanks so much for joining us here in our studio. I'm a huge fan of New York City. I'm a huge fan of New York City.
Real estate.
But man, I'm hearing some dire stuff. People aren't coming back to the office. I'm looking down Third Avenue. I see lots of empty space there. What's your call on just I don't know how you want to go with this New York or just big cities, or how you're thinking about it.
Thank you for having me.
So, first of all, I don't I don't believe in the office sector of real estate, so I I invest mainly in the residential sector. People, Yeah, exactly, exactly, So this is the thing. You really, we really followed the demand.
So you just go to Florida.
Then well no, but let's let's talk about New York.
So you know, in the past, I actually converted many office buildings to to residential and then there was the period of time of you know, great office buildings and even office buildings and in the neighborhoods such as at Chelsea and the Flat Iron that were taken by the high tech kind of companies and and going converting back to to office. But my view of the office space
is not great. And unless you have a truly class a brand new office space like this one, like this one for example, right with all the dimenities that you have here, which is great, You're not doing well.
Residential is a completely different story.
Let's talk about that residential. So New York City we were talking earlier. We both agree that it's not dead. But in twenty twenty, there were a lot of people, including myself, where it felt you know, I actually I was sharing with you.
I loved how quiet it was.
But you did what a lot of people said couldn't be done, which you essentially sold out a beautiful residential building on seventy ninth and Madison Smack in twenty twenty into twenty twenty one. How did you do that and talk to us about how you're what was behind that?
So, yeah, going back to twenty twenty, once COVID did, I said, you know, around the March, we started to hear on a daily basis, New York City is dead.
New York City is dead.
Now did you have butterflies in your store und that time.
Just for a little bit or were I was already in and I had to. I had a few projects.
One of them was three years in the making. I bought multiple walk up buildings on Medsone Avenue, and I was.
I designed, and I started to build the first.
Res high end residential building anywhere between Park and Fifth Avenue in twenty five years, right.
So think about it.
For twenty five years, the only option for anyone that wanted to live between Park and Fifth Avenue, and I would say high sixties to meet the eighties is either one of the core buildings. Some of them are very famous, but old, small, small windows, old elevators, old mechanical systems, and no amenities. Right, so for twenty five years, no one could really figure out how to build a new building. So anyway, we were already coming out with the superstructure on Medicine Avenues between seventy.
And nine and eighty, and I was planning.
To open the sales office originally in April of twenty twenty.
I said, let's stop, right, let's see what is going on.
Well exactly, but then when the superstructure, we kind of stopped for about two weeks construction in New York, and then we continue and we're coming up on the ground and the superstructure was almost topping off, and we started to get phone calls from brokers and direct from buyers calling our office. Now we didn't have any sign on the site except our name, our company name. So people google whatever and they found our phone number and they called us.
So I said, oh, very interesting. So there is a demand. People are really they're really curious. They want to buy.
So September of twenty twenty, I dectarted to open the sales office.
The space was ready to open.
I didn't open it right September twenty twenty, I opened the sales office and between September and December of twenty twenty, I sold out.
That's amazing, that's just incredible because having been here in the.
City, the demand is here in good days and bad days. Of course, there is a slowdown. Of course, by the end of the day. If you have, by the way, not only real estate, if you have a product that is well there is a real demand for it, you're going to do well. It's all about the inventory and demand, right. So there was zero inventory and there was a demand, right, So that's why we were I mean, that was the first of three projects that since then sold out. We
did sold out on the Upper east Side. All of them were doing extremely well.
And I mean, you know, I'm now here in certain place, but I had been on the Upper Eastside. I saw day by day the one on eighty third go up. I mean just absolutely very distinct, and I think it's at the limestone. But the amenities, yeah, it's really pretty incredible.
So I want to ask you, you know, selfishly, I just put in a payment for very exciting I just put in a down payment for an apartment on sixty seventh and third so in Lenox. Thank you, But of course I want to hear you know if you think the value is going to go up, but it's you know, it's a build. But you know you've been talking about
these luxury buildings, all the amenities. Is there still value though for some of these buildings that are a bit simpler, you know maybe just like good location, doorman, elevator, laundry in uniting and a terrorist but like maybe you don't have the big gym and all these other amazing common spaces.
So so I would say I don't know if the value will go up because think about where we are in all luxury product, the way we live today, most of us, right, compared to our parents or definitely our grandparents, different quality, right, the different huge different, right, So there is a demand for quality. Also, most of us are much busier than our parents and definitely grandparents. So we
are looking for every moment that we have. We're looking for the lifestyle that everything will be very, very accessible and close to us. Imanities are very important. It's part of the lifestyle that we all or not all most of us that can afford are looking forward.
So I would tell.
You that there is no question in my mind that the appreciation of value is much higher for a really really good product and not as much for let's call it and all the product. Having said that, location is as always very important. So if you're in the right location, and you have the right bones, and you upgrade your unit, you will do well.
I hear that, how would you describe a South Florida right now? Because we have the story here. As you well know, seems like everybody in York City left for Miami. South Florida in general, give us your extens Is it much too fast down there or is that? Or can this market really? I guess drive.
So it's actually very interesting.
I have two what I call megaprojects in South Florida. I'm building a seventy story one point five million square feet in Miami in downtown Miami, in a neighborhood in Miami World Center, which is a new neighborhood in downtown Miami.
And I'm building a very.
Similar size tween fifty story towers in Fort Lauderdale in Flegler Village.
So here what sooth? Miami and Fort laudell are different.
But here's the thing. For us, Okay, it's all about demand. We think that we are quite we are quite good in designing and creating a really good product, but we're not good enough to create a demand. So we really follow the demand. We look at where the demand is and that's where we go. Specifically about Miami, Miami matured
to a point in my opinion of no return. Miami is Miami can offer not not everything that you can get in New York City, but almost everything between culture and restaurants and you name it, and sports and everything is there. And of course many months of the of the year, beautiful weather and the beaches and all of that. Right,
So you know this is this is for us. This is a really important market and also a market that attracts quite a lot of Latin American buyers that either want to park money in the US or they as investment or they just use their apartments X amount of weeks, you know, a year. So I think I think it's a strong market. I just opened a sales office for the Miami Miami Project four weeks ago. We are we are doing well, So we think it's a strong market.
Yeah, and that there's somewhere upside to it.
Yes, because here's the thing.
Remember, we are still in an environment or we are in an environment of high mortgage rates.
Right, so just drapleo seven percent today, but yeah, keep it yeah.
Correct, So going forward, thinking about going twenty four to twenty five, we believe and I'm sure that you believe that mortgage rate will start to go down, that there are still buyers that's sitting on the on the just on the fence and waiting right and waiting now long term projects, projects that are going to be complete in three four years anyway, they don't need to commit to
take mortgages right now. So it's all about deposit and taking a position in a market that eventually there will be appreciation in price.
You know, on this topic, just yesterday the Fed indicated that they are going to be lower and rates next year. So it supports everything that you're talking about. In terms of being below seven percent, the idea that rates will go lower. Is there a point where the housing market could overheat too much? Because I grew up in Upstate. My family member yesterday was just sharing a picture of a I think a fifteen hundred square foothouse going for
one point one million dollars. That same house five ten, twenty years ago literally would have been one hundred and fifty thousand dollars. And so I'm just thinking, if more fires put onto the market, it may be good. It will be good for somebody like you for a while, but at some point is that going to create issues?
So it's all about it's all about supply. It's all about the inventory, right and in the main you know, in the main cities there is, by by and large, there is lack of supply right now, think about it. It's not only the mortgage rates. There are only few developers that can build today. We were either lucky enough or qualified enough to close.
Sorry now it's just run out of time, But we'll get you back the next time. Sounds like you're in New York a lot, so we'll get you back. From Banana, South Florida, making a timely CEO and chairman of that Naftali group. We're gonna have more coming up. This is Bloomberg.
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 Faull Sweeney. I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio