Surveillance: U.S. to Consider Negative Rates Within 10 Years

of course, on the Bloomberg. Our first guest this morning's Dominate Constant. He's managing director at deutsch Bank Global head of Interest rates Research, and he joins us now in the studio. Good morning, great to see you. Good morning.

Let me start with a broad question, and that is when when when you're looking at the curve, when you're looking at rates, how much is that forecast changed in light of say, what we heard from Mario Dragging last week, all of the chorus we've heard from from federal'serve policy makers as well. Has it changed much over these last

few months? Yeah? Yeah, I mean we we were around the Brexit period, we were a very constructive on rates and we had a target of tens and the flatter Yeel curve, and basically we think low rates became too much of a sort of a bad thing from the central bank perspective, especially at the long end. They felt that the Yel curve is too flat, was creating problems, but in the entitlement industry, creating challenges for say banks,

because they tend to like steeper Yeel curves. And so I think you've seen the sort of jaw boning exercise whereby they want to basically get her long rates up a little bit, and that's not because they want to tighten monster conditions per se, but they'd like a little bit of extra risk premium in there that can help

perhaps entitened entitlement people like the the insurers. And there's also been maybe an element whereby the hunt for year whereby investors who might otherwise buy bonds end up being pushed into riskuer assets by those instead and maybe create some kind of overvaluation and those those asset classes that

that's perhaps a concern. So I think, whether you agree with it or not, that's what the central bankers have been sort of your aiming at, and that the bj A targeted the tenure yield stop it going up all down the e CBS, you know, mumbling about taper, where not you really believe it. And obviously the feders pushing on with what they hope to do, to be able to do is raising rates in December. Looking at treasuries and specific is long and attractive to you right now

at all? I think it depends on your horizon, and obviously you know your view. I mean my view is it's it's it's it's getting attractive. It's not quite there yet.

I'd like to sort of basically by tenure treasuries, you know, above two percent, I think I can probably go there, um, but you're going to be buying it over two percent with a view it's going to come back down against around one and a half if not one in the quarter based on what we have as some sort of disappointing growth expectations, especially in the US over the next year. Who are the FED policy makers that you listened to

most closely? Of course you listen to to Cheer Yelling and vice cheer Fisher, But of the others, who's saying stuff that's the most materially interesting to you? Well, I think what's interesting is obviously sort of not not necessarily anyone in particular, but more the sort of general sort of you know, consensus outside the sort of yelling Fisher equation. And so you see, for example, some of the Hawks who are speaking maybe at the beginning of last year

you could happily ignore them. Then suddenly you see sort of some some more devilish members perhaps you know, like Rose and Grown or Evans sort of you know, moving towards some of those viewpoints. And then suddenly Dudley sort of you know, pops up again and says a tenure years or two late. So so you know, things like that, I think catch my attention. And and then you know

that there's some pressure. You know, we we know, you know, yelling is obviously you know, very much on the sort of dovish side classically speaking, but you know, there's some

sort of pressure. And I think it's like we kind of all agree, you know, we would like to see higher rates, but I think the idea is, you know, whether they have the guts to do it and that kind of uh, you know, it depends on what this sort of you know, significant you know, minorities that ends up dominic you're talking there about a more cautious view where interest rates will go lower for longer and everything

honkering down GDP estimates and such. When we do the dots, if we're going to continue to the do the dots, what is the constant long term that they should be looking at? Is long term? March of two thousand and seventeen is a long term where it is right now? Or should they go out because of your view to two thousand and twenty and make a guestiment out there? Well, I mean I think uh, um, I think long term is well, I mean right now, you know, we're thinking

long terms sort of around you. Obviously these sort of two or three years from now. I think the the issue that we have in in this sort of growth cycle is it's more of a stagnation rather than a recession. And what that means is that there's no sort of imminent sort of exogenous shock that's being applied to the economy that's suddenly gained a sort of turn this cycle. And uh and it's kind of like a slow bleed. But we see that, we we see the nature of

the slow blead. That's the idea that you know, as you hit fun employment and you almost go beyond what we consider funemployment. There's no sort of natural response of higher wages and all that kind of stuff, or productivity

kicking into at a higher level. And that means, you know, the long term really can be sort of out that sort of two, three, four, five years, But the probabilities as such that you you effectively will you know, there will be some some negative shocks somewhere in that time horizon, and that's where you know that they're done raising rates. Basically you stated earlier this morning, the idea that there

would be negative rates for longer. Does that leak over to a currently United Kingdom that's saying no, no, no, will never do negative rates. Is it even imaginable that Yellen and her follow on will have to consider negative rates? I definitely think that the US will have to consider negative rates on a you know, on a five ten year view, just because once this cycle really is finished. Uh,

the what's the choice? You're you're gonna cut rates a couple of times because that's you know, they won't have risen them that far, or you go back to these extraordinary measures on quantitive easing, which I think you know, have their own issues around them. So my guess is it's probably gonna be a combination on both. When the market will definitely think about negative rates. There are lots of legal issues for negative rates in the States that

so those have to be addressed. But it's a different issue in terms of the market being onto perhaps its price, in terms of market expectations they could price them. Uh. The I think the UK is different because the UK is obviously can have an extremely weak currency. It's having a weak currency, it can import inflation quite readily on that basis, is something that the US, you know, you can't do. The US is a very large economy, it's

a relative insula. We have a reserve currency, so by all means we can try and get our currency down at the expense of the rest of the world. But even then we're not going to import that much inflation because the service sector can hold it up. So I think, you know, they're that that's a difference. I mean, so the UK can perhaps avoid negative rates if they just

claps their currency. And one of the arguments of Japan and the Eurozone is they've found it very hard to collapse, you know, their currency interesting catalytically, what would be more powerful here for rates something out of the Bank of Japan or the e c B changed in either of those banks. Well, I mean, we've actually had a little buzzword recently whereby we've been arguing that sort of Japan has has kind of women has become the marginal price

of global assets. And they've done that because obviously they've been significant outflows out of Japan. I mean, they you know, they are a very big investor, but it's really through the j GB yield curve. Their yield curve absolutely collapsed earlier this year here on as interest rates came down, and that kind of forced a lot of money to come out of Japan into other bond markets. And it's all part and parcel of the constity of easy thing that they're doing, and also to some extent the negative

rates that they've employed. Uh that works through something we call the cross currency basis that got very extreme, which is kind of the cost to the Japanese investor of hedging their overseas and purchases. So we've been monitoring that very carefully and you can sort of see the influence they have on yields. And that's why when we talk about risk premium going away in our markets. We can actually sort of directly link it back to what the

Japanese investor base is doing. And I think you know, if I was are fed and you're sort of saying, well, you know, risk premium going away the markets isn't great because it may lead to financial fability issues. You know, maybe you want to reverse that a little bit. And imani not to get you in trouble with Mr Crying or compliance, but with your many many contexts over the year in London, what is the cranstant thought and the

future of finance and Wall Street in London. Well, I mean, my guess is that the London financial sector will figure it out in the sense that you know, London has always figured it out, so that it won't be nearly as draconian as uh, you know, as people sort of

perhaps fear. Um, I mean obviously right now. I mean that the whole concern around this sort of passporting is is a great concern and there are incentives clearly for the Europeans who uh you know, to take back certain banking functions and sort of in terms of clearing and things like that in the Eurozone. Um, but my my

guess is that you know that there will be. You know that London is too, too richer a center for financial talent, and they have all the incentives to try and work around whatever restrictions their talent was schooled uncertain theories in stan Fisher is recently Economic Club of New York speech talking on the I S curve Back to Hicks thirty nine. It's a different world today. I guess are you you using the theories you learned or is it a new world for you as you think every

day and trying to piece the system together. Well, we're sort of relying on the theories that we've learned. I mean, I I go back to uh Thatcher when she was this sort of great quote pro European She knew exactly what she was doing in terms of putting the London at the center of the financial world and all the

benefits that that was going to bring with it. And you know, for all the sort of headline news around these negotiations, I mean, why would you know, why would London or the British wanted to shoot themselves in the foot. It just doesn't make makes sense. So I think there's a lot of posturing going on at the moment. But yeah, I mean I would be uh, you know, I'd be shocked if there was in London was no longer what it currently is. We talked a lot about banks thinking

of moving headquarters or officers overseas. But among your friends and colleagues, is there a conversation about that about eaven in London because of the sentiment in the place. Is that changed it on since since the vote? Um? No, not not not so not so obviously. I mean to be honest, I think there's a lot of people sort of you know, still can't believe the outcome of vote. I remember London itself was overwhelmingly in favor, you know,

of staying within the the European Union. So um, you know, I think obviously people there are people who are concerned that if they don't have a British passport, what does that mean? And you know there's definitely you know, some people are running off and making sure they're getting their British passports. I mean, like you hear that from sort

of some colleagues. Um, But in general now I think there's you know, there's a there's there's still somewhat sort of disbelief that this is actually happening and this is why I think, Um, the the Tory government is trying to sort of insist that Brexit really means brexit, because it might be very easy for people to think, well, you know, maybe it doesn't actually mean that. Uh, And so that's why they're sort of having to approach this

in a hard way. Um. So we'll see what happens next year when they find they decide if and when they finally decided to pull the trigger on the article. From that referendum to the election here in the States, how much is is the campaign how much is the election weighing on forecasting rates at this point? You mean the election in the US? Yeah, well, I think it it could have weighed much more, uh, and to something

that perhaps it still does weigh. But if there was a sort of shake up in terms of the political sort of outlook in terms of gridlock. Um. So obviously, you know, there is a view that if there was a clean sweep, particularly by the Republicans, but perhaps by the Democrats, then maybe gridlock would end, and that could

change your outlook. I think if there's ongoing gridlock, um, I think people are going to say more of the same, and unfortunately more of the same is from an economic perspective and certainly from a financial market perspective, is a bit disappointing because it's going to mean more financial oppression, low volatility, regardless of your views on the actual parties.

I mean, we don't really want more the same. That's problem. Dominic, thank you so much, very generous of you to be with us for these hours this morning here at Bloomberg. He is with Deutsche Bank. Dominic Constant writing just terrific notes and the main theme I heard their folks as a real subdued view on rate structure forward, on where

yields are going. Well. Apple reported earnings yesterday after the bell, and we're drawn to the forecast of sales for the next quarter, Apples saying that will be between seventy six billion and seventy eight billion. Analysts had expected seventy five point four billion from what we're doing. By Walter Pi Sick, he's an analyst with B T I G. Walter. Always great to speak with you. Thanks great to be back on.

So the question going into this I think was woold Samsung's loss here all the trouble caused by the problems with the Galaxy Notes seven become Apple's gain and what do we learn from the port yesterday and in the

conference calls about that? Yeah, and I think the answer is kind of And by the way, we also heard some feedback from some of the operators that reported before Apple did, and I think my initial view was, or I guess the question was, if someone was buying a high end Android phone, did they just stick within that

ecosystem because that's what they were used to. And I think what we've been hearing is that that they have actually seen switchers, because there's not particularly on the larger the larger models that the seven plus versus the note that they were actually pulling these people in, which is

actually really good news. If Apple can get them in their own ecosystem and the customers please with it, it becomes sticking on their end, and it's gonna be harder for Android whatever vendor wants to get that customer back to pull them back. So, whether it was the operators earlier in the week or what Apple was saying on their call um, it sounds that they are benefiting. Now.

I just want to put one pause on all this is you can't get a seven plus right now right that the ship dates are not out until the end of the year, So so their own inability to to ramp up the volumes on the seven plus, maybe because they didn't expect this mix shift to happen um might limit how much that they can benefits. I think they really need to focus on getting those volumes up to grab you know, more and more of those um those Samsung customers that just don't have a product right now.

Kind of Tom is waiting for his his seven Let me ask you all to about the way that Tim Cook. How Tim Cook's Apple keeps people in that ecosystem. It's through services, I imagined. And what color did we get yesterday about how Apple has been improving its services. Obviously there were problems with Apple Music and and uh it's it's other offerings. Has that improved? Have we seen that stabilize, that's been that's been fun like this? The new messaging

is great. It had really lagged behind other third party applications. So that was, for one important because look, if you're texting all of your friends and it works well, you're less likely to leave if you need to stay on Apple Phone to do that. But even before things like that, the company for years has been focused on when you're near your computer or your iPad or things like that

that you know, all these services kind of transfer. They do whatever they can to keep you in so that they get your upgrade um every two years or however long it ends up being. Are they getting that upgrade? What is the character of the upgrade? When you talk to Apple bears, do they actually believe that people won't upgrade, that they'll sit on the phone for extra six hours

or six months. Those bears have have had their day, i think for the past year, because those upgrade rates were clearly extending if you looked at how the numbers were. But what's been surprising and frankly reflected on this rally in the stock you know, over the past couple of months, m has been that the upgrades have actually come in for this phone. I mean, everyone think about this months ago, right, Everyone's saying, oh, this is not really that great, We're

gonna wait till next year. And now the operators are actually seeing it. So the operators that have now reported are talking about upgrade rates or phone sales that that should go up, and there's saying like, look, are we can't even tell you where the demands can end up being because we're still not getting in supply from Apple to to really fully judge this, Yeah, it's a terrible problem stock exactly. Walter free cash flow forty three, fifty seventy and then the modeling of Wall Street is for

a diminishment of cash flow. Do you buy that or does the juggernaut continue? I mean the margins. Obviously, the concern was about fifty basis points. Nothing that's not something that's gonna crush their ability to degenerate free cash flow. Taxes were ticking up a little bit, but again marginally not something that's going to change the cash flow. The interesting thing was we were thinking that they were gonna buy ten billion dollars of stock back. I think they

only bought about four um. So as a result, I'm sorry six so so four less than we expected. So the cash position went up to fifty billions. So the cash is actually rising um at a time when you know, Cook on the call last night again brings up, well, we're intensely interested in these things. So you have to wonder again, what are they doing with their cash? Dividend work? Maybe increase the dividend, maybe acquisitions, will have to say

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Cousten is a mathematician from Brown University. He has the joy as a strategist of actually doing securities analysis before he was a guru, which makes for a different language in different work. David thrilled to have you with us with Goldman Sex. Of course, I've been watching the earnings and the new news for me is next to no growth up top in every quarter, every company's manufacturing down

the income statement. The money question for me for next year partial differentials, unit dynamics, price dynamics up at the revenue line. You've got to get down to E. But whatever margin you want to pick, is there enough wiggle room forward to keep that shell game going? Or they have they cost cut their way to maximum efficiency. Well, uh, with apologies to your pejorative question, I think there's uh,

there's enough wiggle rum. Yes, the margins are likely to remain flat, and that's an important issue to think about that with the U. S economy growing at around two percent, that means the top line revenue growth, if we include some inflation here as well, you're looking at modest top line growth called that four percent, a little faster from overseas.

So that's your revenue line growing in the four for perhaps five level broadly across the market, and margins are likely to have peaked either late this year or sometime in two thousand seventeen, depending on the individual sector of the market, but broadly speaking, markets margins have been flat for for about five years, and it's been technology margins. The technology margins have been the key driver of why

overall margins have I looked at pepsicolon. I don't know, it's just I looked at that company and it really stuck out to me, this game of making the margin down below, given that there's next to no revenue, do they have the wiggle room forward to continue to manufacture decent operating income decent eb what over well from an earnings point of view, certainly buy backs has been a contributor to fast faster earnings growth. Your revenue growth growing

very very modestly, and there's been some margin. Uh, whatever margins they have been able to eek out have been largely from buy backs and more technology spending to try to eke out singles and doubles basically has been very It's been a tough operating environment, and the market has reflected that how does real GDP growth affect the markets? I know you've been been modeling this. If that changes,

what effect does that have on the markets. So the way to think about real GDP growth is every one basis points, every one percentage points faster or slower growth, and it's going to add roughly five dollars a shared earnings and let's use a base of about a hundred and five dollars. So that gives you a immediate translation of how to think about your impact on faster or

slower GDP growth. Uh, the way to think of impact on earnings and about seventy of the revenues of US corporations are domestic and so therefore the most important driver of say sales, of margins of earnings for companies is the broad growth pace of growth in the economy, and the economy right now is growing at about two uh not a you know, super fast growth right clearly, but also it's it's it's not in contraction, so it's glowing

at a at at a muted level. And that is what has created uh a idea of what what Larry Summer's terms the secular stagnation, the idea that no matter how low rates are, it's not inducing corporations to be investing money. And so there they've been pretty reluctant, and that's what keeps growth slow. David and I were talking about what to talk to you about. I've got to ask you about M and A without talking specifically about

telephone or or or Time Warner. Does this game just continue because Jennet Yellen has made money so cheap that there's no growth. I gotta buy something to keep the game going. Well, if we think about the waterfall, and that's a good description waterfall of the preference preferred uses of cash most companies. First US is capital spending, and companies are spending a lot on capex for maintenance. That's first.

Second is research and development, and the third is M and A. Those are the three initiatives that most companies pursue in terms of growth, and so the idea of allocating capital to M and A makes sense in an environment where interest rates, as you point out, are very low and you can finance transactions at the big transactions like this work in the Costant History Library. Is there

a successful merger outcome big deals there? There are? There are some combinations that make strategic sense in terms of the business profile of individual companies. We've done a lot of work on spinoffs and so oftentimes you have a combination then that leads to a spinoff of another division. So there's often investment opportunities around those um but it depends. In some cases there's a long approval process that takes place, and that makes the investment process a little more difficult.

Just very quickly your thirty seconds David Costant on the general market by holder cell, can you acquire shares today? You are looking at modest increase over the next twelve months. You're looking at single digit quality five percent type of return. So you can call that try in the context of other opportunities, but it's still relatively modest in terms of historical John that's she's sure you're looking at a new Jersey looks better and better. I have some motion front

property and David, thank you so much. David Custom with Golvin Sex can't say enough about the acuity of his research. Jonathan Miller has been way too long since we've spoken to you. To our global audience. You have been out front in the real estate slowed down in New York, and I think maybe San Francisco, is it everywhere else or is it just contained the stupidity of these two zip codes? Uh, I think the it's not. First of all, we don't want to insult those two zip codes, but

sure we do. I can't affordable. Uh. So what we're seeing is more of a slowdown in higher priced housing markets, higher cost housing music. Uh, we're seeing a little bit of that. Actually. So what we've been seeing in these markets is an increase in resale inventory, which has slowed down the frenetic pace. UM, bidding wars aren't aren't what they were, but there's still above average. Where the way I described the market right now in general um is, uh,

we're somewhere between white hot and above average. Okay, that's a nice character. There are the vectors of owning a home the same as renting a home, right now, those two separate markets that you deal in. Uh, yes, absolutely, it's still much cheaper to buy. The problem is, um, and this is on a national front, is inventory is very tight. Uh so we're we're seeing you know, uh, affordability being cho lunched. I mean, that's really what it comes down to, throw into tight credit on the bank

lander side. And it's still the same story. Most recent note, it was about Greenwich, Connecticut, a town founded in sixteen forty. If I'm not mistaken, and you call it a hotbed of new urbanism. What's going on in Greenwich? Well, what's been fascinating about the suburbs that ring New York City, especially the high end markets, is you can see even the suburban towns are placing emphasis on in town development, proximity closer to the uh commuter lines to get into

the city. It's not the it's not your grandmother's neighborhood, so to speak. Um. What we're seeing also is in market side greenwag is there's an incredible disconnect between meaning many sellers there are still priced are anchored to two thousand seven and that market never really saw the boom that we saw in the city, and part of it is because consumer tastes have changed. Uh, the city, the high end is poached some of the high end demand from the sub inventory. Not a problem inwach Uh it is.

I wouldn't say it's not a problem, but I would say it's not. It's not limited that we don't have limited supply there. The way to describe Granwage and other high end housing markets in the suburban areas is just like the city, they're soft at the top, so there's very tight inventory lower you know, entry middle markets, and

it's it's very soft at the high end. There are transactions are high end, so you're so prestigious Jonathan Miller Miller Samuel that when you're quoted in whatever rag you're quoting in a thousand people in New York stand up and go, he's an idiot. And they do that because nobody believes what you're talking. Wait, wait is it, Tim Keen? Just coming? Wait John John, No one buys the slowdown idea. The top market uh six million in up for for Granwage.

No for the real world here. So for so the real world here, the top what we call the luxury market top ten percent is north of about four two what's a monthly mortgage and four point two million? Uh many buyers in that market mortgage right about of them don't have mortgages. So cash Mark, I want to come back very quickly. Here. Do you see that trickling down to mere mortals? I mean, Michael barr is trying to slip into three bedrooms to fireplaces for what seven hundred

a month or something? Michael, at least six seventy you live out past acron, Ohio. Right, does it trickle down you are? Yeah, Yeah, we absolutely are seeing some of that. Um, it takes a while because you're really looking at at least in New York, the development community is taking about two years. That's where I want to go because David Gurrow needs a new place. He's making kids so fast. He needs a new place out in the land of Jonathan Miller. Jonathan, I'm looking at ten thousand, five hundred

dollars a month. It's a duplex in Brooklyn, screams David Gura. There's a balcony with a cal patch on it where you can grow as artisanal. Hell, it's a modern new building. You have told us years ago. One of the big value adds of having you on is the boroughs in every city are gonna build new condoe like property to house people. Is it really going to be a blunt

you really buy that there already? Is that as you move to the very high end of the market, then glut is a harsh word, but it's it's certainly there's there's uh much more supply than there is as you move lower in price. In fact, the problem is is that because there's spent so much emphasis on luxury rental development that middle and entry level markets have basically had static housing stock, which is forced many to moved to the suburbs and become first time buyers. You mentioned on

the break Westchester. Yes, west Chester in the third quarter, and this has been going on for about five quarters. That's in Pennsylvania, that is that is in New York. Watch we have four sponsors up there p Nce that had the most sales in thirty five years. David Girl. What's really interesting about this is Scarlett Food's house has not gone up in Westchester because of the ice rink in the back. D ut. But what's interesting, even with that flood of volume over the last year year and

a half. You're really not seeing pricing housing prices rise much yet there's there was a lot of slack, so to speak, in the suburban markets, and I think it's going to take another year or two before we see a lot more price pressure like we're seeing in the city. Well, let's talk affordable housing broadly construed. As Thomas pointed out, I do live in Brooklyn. I'm on the Park Slope List Serve, and I'm amused always when there is the add for the bus tours of the suburbs that you

can take. There is a point at which people begin to way the serious move out to Maplewood or two. That reminds me for the foreclosure bus tours they had during the height of the foreclosure bubble. They exist, and uh, you know, I I wonder when that tipping point is going to be that you know, you have neighborhoods. People like to be in the neighborhoods because of who's in the neighborhood. This is a city that's really wrestling with

this problem right now. Oh yes, And I think this is what almost every municipality in the United States is wrestling with right now, is affordable housing and affordable housing Uh, not in terms of government subsidizement, in terms of middle class UM and working class housing. Uh. What we're seeing in in for example, your market in Brooklyn is this outward radial push. So right now Queen's is setting all time price records from the Brooklyn spellover. Are we going

to see a national policy? I mean, we make jokes about this, but this is not funny. It's off people are spending fifty plus and I letters from people. This is not about New York, San Francisco, Washington, in Boston, it's nationwide. Are you going to see a housing policy for people that you know? I make jokes about ten thousand five than a month. Come on, right, are we going to see a policy? You know? I think we can only see a policy when somebody actually figures it out.

There's been a lot of discussion about this over the last few years and no real concrete solutions. One of the big items I think would be to figure out a way to normalize credit UM so that we don't create this tightness of inventory UM and and I think you know, when you have tight credit, low interest unusually low interest rates. Uh. It really has caused development to focus on the top of the market nationwide, has the cell to buy got more difficult to make? In other words,

I'm renting in Brooklyn. I know many people who are, and the prospect of buying just isn't there is that changing? Are people more content renting than they have been in the past. Do you expect that's a trend that's going to continue. I don't know. If it's content, it's more that they you know, they really signed. Yeah, I think resigned is a is a better word. And that's why we're seeing this phenomenon. People like yourself, Uh that you know, and it's not even that rents are rising, it's just

that they're high. You know. The way I describe the rental market in New York is a high plateau. Uh. You know, in real estate, we tend to be very linear. When rent stopped rising, that means they're gonna fall. But that doesn't appear to be the case. Because we're five years ahead of population projections from the census. We have a record number of employees. There's just a mismatch between the jobs are creating and the housing net we're creating.

When you look at you know, let's go to you know, Westchester, the suburbs of New Jersey, John, you were mentioning the airfield today used to land airplanes the good old days, and Alton, New Jersey where I learned to fly, and we would plan in a cornfield, land in a cornfield. If you go stink and runway, if you go out to Coltsonick, you know wherever it is, it's it's I don't is it's across the Hudson, right, Yeah, it's in

central New Jersey, Central New Jersey. What is the market like there, John Miller, Uh, It's it's a similar situation. It's much like Fairfield County where you have a Westchester where where you're having heavy sales volume. Um. But but when you skew to the top of the market, that's where it's softest. This is not just a New York thing. This is what we're saying. Was seeing that in San Francisco, was seeing in l a um where the suburban markets are really starting to boom because the the role of

new urbanism has almost been too successful. The walkability that you know, the supply hasn't been able to react to demand in the right way. David. I know this is sacrilege for you, but a large part of our audience is going it's gives me you don't need a grantite counter. I mean there's a lot of people saying that that. You know, I remember the linoleum was ripped up on the kitchen floor and it wasn't a big deal, right John, help me here. I built my own counter. Actually may

made the grantit. Yeah, but a lot of that time comes down to the cost of land. The cost of land is what's driving the product. John millis never enough time. Thank you so much, come back when prices go down. Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on iTunes, SoundCloud, or whichever podcast platform you prefer. I'm out on Twitter at Tom Keene. David Gura is at David Gura. Before the podcast, you can

always catch us worldwide. I'm Bloomberg Radio. M Who you put your trust in matters Investors have put their trust and independent registered investment advisors to the two and four trillion dollars Why Learn more at find your Independent Advisor dot com.