January 31, 2025 • 54 mins
Watch Carol and Tim LIVE every day on YouTube: http://bit.ly/3vTiACF.
Bloomberg News Chief Technology Correspondent Mark Gurman discusses Apple canceling a project to build advanced augmented reality glasses that would pair with its devices, marking the latest setback in its effort to create a headset that appeals to typical consumers. Bloomberg News Economics Editor Molly Smith and Bloomberg News Global Economy Reporter Enda Curran talk about PCE data and how Trump tariff could impact economies around the world. Brian Steinwurtzel, CEO and Principal of GFP Real Estate, explains the development of the largest office-to-residential conversion in the country. Sharon Marcil, CEO of Boston Consulting Group NA, discusses her takeaways from the WEF in Davos. And we Drive to the Close with Sean O’Hara, President at Pacer ETFs.
Hosts: Carol Massar and Tim Stenovec. Producer: Paul Brennan.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Business
Week Insight from the reporters and editors that bring you
America's most trusted business magazine, plus global business, finance and
tech news. The Bloomberg Business Week Podcast with Carol Masser
(00:23):
and Tim Stenebeck on Bloomberg Radio chairs A.
Speaker 2 (00:27):
Apple right now are down about one point six percent.
They were hired by as much as four percent earlier
in the session, more than four percent earlier in the session.
This after the company reported earnings yesterday. Not a lot
of great news in the numbers that came out, some
real weakness in China and the iPhone. We're going to
talk about all that in just a minute. First, though,
we got to talk to Mark German about this Bloomberg
(00:49):
News exclusive that he reported just in the last couple
of hours. Mark German is chief Technology correspondent. He joins
us from Los Angeles. Mark, you came out just in
the last hour with this story about some big news
Apple canceling this sort of meta glasses competitor. What are
the details here?
Speaker 3 (01:07):
Thanks for having me. I mean, as we know, the
Holy Grail and the mixed reality industry are augmented reality glasses,
and so Apple's been working on this for some time.
Obviously the vision pro it's a technical and engineering marble,
but a commercial failure. Even the people who paid four
thousand dollars for it really aren't using it. So looking
for the next big thing in the MR space, and
that is AR glasses. So the original vision was a
(01:29):
lightweight pair of glasses that you connect to the phone,
use the phone's chip, use the phone's operating system to
power some of it, the battery. That had too many
technical hurdles to overcome, so they pivoted to making MAC glasses.
So AAR glasses that you can connect to your Mac
obviously beef your battery, more processing power, additional engines for
graphics in AI. But now they've pulled the plug on that.
(01:50):
Apple is abandoning Project N one zero seven. That's what
they call it internally, that's their augmented reality MAC glasses.
And now back to the drawing board. They need to
figure out future for this platform. They've spent tens of
billions of dollars investing in augmented and virtual reality, the
whole XR pipeline. Right now, I would say this is
not great they're lost, and it's it's it's not good.
(02:12):
It's not good, especially when you realize how behind they
are on AI too.
Speaker 2 (02:15):
Well, this is it's funny because we're talking about this
with Caroly. I had yesterday like this could be you
know where I was saying, this could be an option
for them because Meta glasses have been somewhat successful. I mean,
they're not selling off the shelves and they're you know,
it's still early technology. And Carolin made the point, well,
you know, Apple's not necessarily first car and Carol made
this point too, Apples not necessarily first to stuff, but
oftentimes they're their best to stuff. So I assume that yes,
(02:36):
they would come out with some sort of wearable piece
of eyewear that would really change the game. Does that
mean they're they're just done with this?
Speaker 3 (02:45):
We're talking about two different things here, right, So we're
talking about augmented reality glasses versus smart glasses. Right, So
the Meta raye ND glasses, those don't have displays, those
don't have augmented reality. Right. Meta is not going to
have AR glasses on the market until twenty seven on
the earliest, So we're still two three years out from that.
Actually happening now. I do think there is a world
(03:05):
where Apple could come out with some fashionable glasses that
have cameras and speakers and batteries not built in in
order to compete with the Meta ray bound glasses. That
being said, Meta will be adding a small little display
into their glasses next year. It's not an AAR display,
but it's going to be something similar to what you
saw from Google Glass a decade ago. Those are going
to be quite expensive. But certainly this is not a
(03:26):
good moment for Apple. This is I would say, this
is terrible. I quite frankly wouldn't be surprised if they
all but abandon their mixed reality efforts, but also want
to be surprised if they pull things together and they
try to get a model out in the future. I
would say three to five years from now is the
time horizon on an Apple standalone augmented reality glasses. So
(03:46):
these glasses that we're talking about today are something a
little bit in between what Meta has on the market
today and the eventual vision. Right, So standalone glasses the
glasses themselves, they have the displays, they have the OS,
they have the battery read the heap of the engine.
You don't need a connected to the phone. It's a
phone replacement. Apples is a bit of a mix. It
has the lenses, it has some onboard processing power, some
(04:08):
of the guts and the glasses, but you're going over
a cable and using mostly what's inside of the computer.
Speaker 4 (04:14):
Right.
Speaker 3 (04:15):
Meta has no displays. It's phone SYNCD what they're launching
in twenty twenty seven. This is their Orion prototype they
showed in October of twenty twenty four, just a few
months ago, that wirelessly pairs with a puck that you
keep in your pocket and a wrist device and between
those three mechanisms that's the whole operation of the device.
But what we really want are fully standalone glasses and
(04:36):
quite a ways out from that, all right, what's going.
Speaker 5 (04:39):
On at Apple?
Speaker 6 (04:39):
Like, are they just like is this just a you know,
they're having a tough kind of design moment or what's
going on that they are It sounds like kind of
completely walking away from it.
Speaker 3 (04:50):
This is a company that couldn't figure out a self
driving car. This is a company that hasn't been able
to figure out AI. This is a company that is
not able to figure out ar VR. For the time being.
The good news for them is they're still selling a
lot of iPhones and that's going to allow them to
keep having money to throw at R and D budgets
(05:10):
and try to figure something out. And I think they
eventually will, but it's a scary time right now.
Speaker 7 (05:15):
I can hear of you.
Speaker 3 (05:17):
Okay, Well, there's a lot of interest for a major
new product, and there's just not It just isn't something.
It's about re skinning the existing widgets. They're going to
have thinner iPhones, foldable iPhones, all sorts of stuff, smart
home appliances, foldable iPads. But in terms of a revolution,
we're far from it.
Speaker 6 (05:33):
But I mean, you know what's going on inside? Are
they just waiting mark for other people to kind of
figure some things out before they kind of jump on board,
or do they not have the right people engineers, design
folks like, like, what is it that's missing? Maybe in
the mojo of Apple of today.
Speaker 3 (05:50):
They've lost a lot of their visionaries, right, they lost
a lot of their top engineering talent over the last
several years. It's really about you know, vision and willing
to take bold risks to accomplish the next big thing.
They didn't want to take the bold risk getting a
car out. Fine, they took the bold risk getting the
vision pro out, but that took a little too long
(06:11):
and it was a bit of a failure at least
till now. I mean, I think with the proper marketing
and the proper price points, they'll be okay. But at
some point they're going to have to figure some stuff
out and make some hard decisions.
Speaker 2 (06:21):
You said, Apple is still selling a lot of iPhones.
We know that, but they're not selling as many as
analysts thought they would sell, especially, Okay, so.
Speaker 3 (06:29):
I will let's just be honest here, right, Like the
analysts come up with these numbers, they come up with
these forecasts, right, and then Apple announces a certain number, right,
and that either beats the number from the forecasts or doesn't.
Speaker 4 (06:45):
Right.
Speaker 3 (06:46):
But it's not like you're comparing Apple numbers to Apple numbers.
You're comparing Apple numbers to numbers that a bunch of
analysts came up with themselves, right. And so the question
is where are they getting this data from?
Speaker 4 (06:58):
Right?
Speaker 3 (06:58):
Why do we think that's how many they would have sold?
Is it how many they should have sold? How many
they thought they were going to sell? Right? So I
do think there are some fundamental questions about the whole
comparison between analyst estimates and what really were sold. I
personally think the better metric is how many they sold
versus how many they sold in the year prior. Are
(07:20):
they showing growth? What percentage of growth would we have
liked to see? Right? In terms of China, I think
that's more of a clear cut example of their performance. Right,
they dipped three billion dollars year. Every year, they're down
seven billion dollars compared to two or three years ago
in the holiday season. Right, So that's a bit more
cut and dry. The China things extremely concerning. I think
(07:41):
the iPhone to me was actually pretty good.
Speaker 6 (07:44):
I mean they're still selling one hundred and twenty four
billion dollars worth of stuff. Like I always think about
this mark when the numbers cross and we all kind
of just throw them out there. I mean, they still
sell a ton of stuff. That's just a quarterly number.
Speaker 3 (07:58):
Yeah, that's a lot. That's a four percent year of
year growth. That's good, right. I Mean we were at
a time period about a year and a half ago
we talked a lot of bit about this about how
they were declining on an annual basis quarter after quarter, right,
that was not a great time for them. But now
we're back in growth mode and that's why the stock
is up today. It reflects that they have growth in
the holiday perier. They're going to grow again in the
March quarter. So I think there are positive signs on
(08:19):
an overall basis. In terms of the products, I think
the Mac and the iPad were sneaky good hits recently.
And you know we've talked about John Turnis, the head
of Mac iPad engineering, right being in line to be
the future CEO. I mean, I think that we're just
keep pushing in that direction by having the main stays
in the Apple product pipeline doing as well as they're doing, right.
(08:41):
I think the questions about Apple are the periphreeze.
Speaker 2 (08:44):
Yeah, how about that services revenue? Though that came in
above estimates.
Speaker 3 (08:48):
It was great. Yeah, app store, cloud services, advertising business
at Apple is growing quite steadily, so that's helping on
the margins for them too. Obviously there's some fear around
the app store outside of the US the regulatory environments,
but it even seems like that's tapering down to right.
So services I think quite the positive. Can you imagine
if Apple didn't get into the services business and did
(09:09):
the full potion to services about five years ago, where
they would be right now. I mean, that whole initiative
has really I'm not going to say saved the company,
because it's hard to save a company that's making one
hundred and twenty billion a year, but it's done wonders
for them.
Speaker 6 (09:24):
Well, Tim and I talk about you know, we look
at our monthly statements or you know how much I
pay out to Apple on the services side, not even
on the hardware side. It's pretty remarkable. Hey, there's a
couple of other headlines that have come out over the
past week or so. Apple and Spacelink to support Starlink
network of iPhones, some different things coming out.
Speaker 5 (09:45):
What do we need to know about that?
Speaker 3 (09:48):
So this is an interesting one. So T Mobile in
the US is now rolling out a beta version of
their Starlink partnership with SpaceX. And even though Apple already
has its own global network for satellite infrastructure through Global Star,
if you're a T Mobile customer in the US, you're
gonna have a great experience using Starlink on your iPhone
when this rolls out officially in the coming months, and
(10:08):
so I'm very bullish on satellite networking, very bullish on
the future of satellite connectivity for devices. I think this
is going to be a great thing for iPhone customers,
but also are Android customers. Why this was newsworthy is
because all the disclosures to date is that this would
be a Android specific technology. But getting it on the
(10:29):
Apple ecosystem I think is great and so as an
as an Apple customer, I'm excited to take it first.
Speaker 5 (10:35):
Man, I'm a starlink customer. It's pretty amazing. It's pretty amazing. Anyway,
go ahead, Hey.
Speaker 2 (10:41):
Mark, just about forty five seconds left. We haven't gotten
your take on the deep seek news earlier this week.
How do you see that relating to Apple?
Speaker 3 (10:49):
Okay, so twofold. On one hand, it validates Apple's model
for artificial intelligence, right, But on the other hand, Apple's
model for artificial intelligence this is not very good. And
you have this random small company that nobody ever heard
of until last weekend eating Apple's lunch, right, So it
validates it, but also shows how far behind they are
(11:11):
at the same time, So I don't think it's a
great thing for Apple. I'm telling you Apple needs to
figure something out on their AI stuff. I just don't
understand how a company this resource rich, with the right
people in place, have been able to just completely miss
the boat on the biggest new technology since the Internet.
Speaker 5 (11:31):
Well unbelievable.
Speaker 6 (11:32):
Like I said, the tone in your voice, I haven't
heard that for a while. When it comes to Apple specifically,
he is Mark German.
Speaker 5 (11:39):
He's amazing.
Speaker 6 (11:39):
Bloomberg News Chief Technology correspond be sure too to check
out his weekly newsletter. You can find it at Bloomberg
dot com and of course I always on the Bloomberg terminal.
Speaker 8 (11:48):
You're listening to the Bloomberg Business Week podcast. Catch us
live weekday afternoons from two to five pm Eastern. Listen
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or just live on YouTube.
Speaker 6 (12:02):
President Donald Trump intends to move ahead with plans on Saturday.
Speaker 5 (12:05):
Tomorrow to impose twenty five.
Speaker 6 (12:07):
Percent tariffs on Mexico and Canada and a ten percent
levee on China. This was coming from the White House earlier,
the White House Press Secretary commenting on it.
Speaker 9 (12:17):
I saw that.
Speaker 10 (12:17):
Report and it is false. I was just with the
President in the Oval Office, and I can confirm that
Tomorrow the February first deadline that President Trump put into place,
that a statement several weeks ago continues, the President will
be implementing tomorrow a twenty five percent tariffs on Mexico,
twenty five percent tariffs on Canada, and a ten percent
(12:38):
tariff on China.
Speaker 6 (12:40):
All right, That, of course is the White House Press
Secretary Caroline Levitt earlier today when she said, I saw
that report and it was false. There were earlier reports
today that these tariffs would not be imposed until March first,
so she was clarifying that no, yes, indeed, it's going
to start tomorrow, So certainly something that we're following. We
also let some US economic news this morning on inflation.
The FED, of course watches very closely. So let's get
(13:02):
into it. Let's tie it all together in terms of
what it means for the US economy and really the
global economy. With us right now is Molly Smith, Bloomberg
News Global Economy Reporter. She's right here with Tim and
me in studio and out there in our DC bureau
where so much news is coming lately, Bloomberg News Global
Economy Reporter and a current Hey, Molly, I do want
to start with you.
Speaker 5 (13:22):
We did get inflation data, we got.
Speaker 6 (13:24):
To read on consumers in terms of spending incomes, and
yet this is all against the backdrop, like I don't know,
do we not even care about any of that anymore?
Because tariffs are now front and center.
Speaker 9 (13:34):
It really is.
Speaker 11 (13:34):
I mean, I honestly even was forgetting that we already
had pc this morning.
Speaker 9 (13:38):
So much has happened since then.
Speaker 5 (13:40):
Good point.
Speaker 11 (13:40):
So and of course this data for PCE is back
in December, so I mean tomorrow, February first, like man like,
December is really old news right now. And we also
kind of had a good sense of how this data
was going to come in because we got the GDP
data yesterday, which is quarterly and wraps a lot of
this stuff into it. So not too many surprise is
coming out of the December data, but just wrapping up
(14:02):
what we had a sense of that inflation is well,
maybe coming down depending on how you look at it,
but in a lot of ways still moving sideways, and
consumer spending tough to bet against the consumer, even if
it looks like there are signs that disposable incomes are
slowing in the savings rate is dipping, so reasonable to
think that, you know, consumer spending would start to slow,
(14:23):
especially if tariffs are enacted, if that is meaningfully going
to increase consumer prices. But it's just really hard to
bet against the American consumer. That's tales all the time.
Speaker 6 (14:33):
And a good that we have you here with Molly Smith,
and you look at the global economy, you look at
the US economy. Tarriffs twenty five percent on Mexico, Canada,
ten percent on China. I mean, these are the US's
largest trading partners. There's a lot that goes back and forth.
Your initial read on if this sticks, if it sticks
(14:54):
around for a while, what it could mean.
Speaker 12 (14:57):
Well, certainly a big headline, add a depressed briefing int
White High. Even though the President has warned about these tariffs,
imposing them tomorrow for everyone, I think is probably at
the shock end of the scale for most economists. But
still we have to wait and see to your point,
just what exactly our details in this The Press Secretary
did say will be twenty five percent on Canada and
Mexico and the ten percent on China. But we need
(15:19):
to know are we talking about all of the goods,
the merchandise goods across the borders and come in from
those countries. We need to know will there be any
exemptions for some sectors? How long will these tariffs be
in place for I mean, will there be mitigating circumstances
where Canada and Mexico and China complete their case. So
there's lots of you know, devil in the detail on this,
but taking it at face value, it would be quite
(15:39):
a shock because you're talking about, you know, everything from food,
avocado's my colleagues are all about today, lumber crossing the
border from Canada, cars and car parts go back and
forth on both borders, and then of course when it
comes to the US and China. I mean, obviously, China's
the world's biggest trading nation. They're the factory of the world,
so you know, the whole gambit of can asumer goods
(16:00):
will be coming in from that side of things. Now,
you can argue to talk about how much of an
inbact ten percent would have, but I think the bigger
focus for now, the bigger folcus I think right now
is on that twenty five per cent level. Chann and sorry,
Canada and Mexico.
Speaker 2 (16:12):
Well to that end, And I'm wondering who you think
absorbs the majority of these tariffs, especially those from Mexico
and from Canada. Does it, in your view, happen that
it's the consumer or is it the company where it
eats their bottom line who absorbs more Here.
Speaker 12 (16:27):
So there are a few parts in this chain. Number one,
the question becomes, will the exporter or the producer selling
their product cut their prices to factor in the tariff.
That's one side of it. The other side of it
is will the buyer the importer absorb the tariff rather
than pass it on? You know, if they have good margins,
kind of take the tariff on board I rather than
pass on to consumers. But to your point, this is
(16:50):
where economists say the rubber hits the road. In truth,
you know, these companies don't have those margins. Nobody's going
to take a cut in their selling price. So these
prices will eventually be passed along to consumer, pass on
to main street. Now, the Treasury Secretary Scott Besson made
the point recently his hearing that there are mitigatting circumstances.
He made the point that it's strong dollar can offset
the impact of tariffs, and they say consumer patterns will
(17:12):
change anyway. They won't buy tariff goods or there are
ways around us. But you know, writ large, there's a
question mark for sure over the impact prices for consumers
from tariffs.
Speaker 6 (17:24):
I do want to point out the tariffs would mark
the first wave of trade levies in Trump's new term,
and their impact will ripple well beyond Canada and Mexico
as other nations brace for the possibility that they may
be targeted next, and as US businesses await possible retaliatory measures.
And this is the one thing that it maybe stops
business from kind of moving ahead on something as they
try to figure out the impact of it. Molly, I
(17:45):
want to bring you back in here, because how much
can the US economy absorb if there is a bit
of a tariff war trade war here? And is it
more of an impact on growth or is it more
of an impact on inflation.
Speaker 11 (17:58):
Well, that's what we had a story out this We
those just examining that exact question. And the conversation this
time around really has been about inflation. But that's because
inflation is you know, of course, has dominated the conversation
for the last couple of years here versus in twenty nineteen,
the first full year after Trump's first room taffs were enacted.
You know, the inflation quote problem then was that we
(18:19):
couldn't get up to two percent inflation, that it had
been running so low for so many years coming out
of the financial crisis. So it's a very different conversation
now versus back then. What was really the concern that
was starting to unfold was looking at how growth is
starting to slow down in response to tariffs, how business
investment is stalling, industrial production is contracting, those factory jobs
(18:41):
are actually not coming back here, and how these are
then going to be headwinds to growth. Of course, that
all got very soon overshadowed by the pandemic and we
didn't really get to see the full effects of it
play out, but it's a good lesson for this time around,
and that's what our story was looking at. As we
just recently got new transcripts from the FED. These are
verbatim closed door accounts that come out with a five
(19:03):
year lag from those meetings that were in twenty nineteen,
and we saw that it was really more the growth
concerns rather than inflation that dominated the conversation back then.
Speaker 2 (19:11):
Well, speaking of the FED, there were a lot of
questions Molly to Fed chair J. Powell earlier this week
about Trump's proposed policies, and you know, just to paraphrase
a little bit, he basically said, well, we haven't seen
the policies enacted yet, so we can't really comment on them.
We don't have a roadmap for them necessarily. Now he's
now at the FED, they have their work cut out
for him because they know that these tariffs are starting tomorrow.
(19:32):
How does it change the conversation that they're having.
Speaker 11 (19:34):
Well, I think the flat that honestly Powell has gotten,
you know from economists who have commented on this since
the FED meeting on Wednesday, is that the Fed you know,
communication up until Wednesday was we are data dependent. We're
going away to see how economic data evolves and that's
going to guide our policy and how we think about
the economy. But the message that a lot of people
(19:55):
heard on Wednesday was we're going to wait to see
what Donald Trump and his administration doesn't that that's going
to guid or understanding of the economy. Those are two
very different things, and that's I mean, it's still just
again was saying devil in the details, like there's just
still so much unknown with that, and of course, how
much the data of that is going to pick up
as well.
Speaker 6 (20:14):
You know, and it makes me wonder about kind of
this Goldie Locke's economy, perhap, or just write economy that.
Speaker 5 (20:20):
President Trump inherited in his second term.
Speaker 6 (20:23):
You write about it in the BusinessWeek newsletter b W
Daily that is out on the Bloomberg and at Bloomberg
dot com.
Speaker 5 (20:30):
I mean, he came into this.
Speaker 6 (20:33):
Second term with a lot of things doing really well.
Speaker 12 (20:38):
Yeah, like Molly was saying, there, you've got a very
strong consumer base at the moment, you have strong aggregate GDP.
The labor market is cooling, but still in pretty good order.
The Fed chairman himself, Jerome Pile, said this week that
the economy is in a good place. Of course, the
question becomes what sort of a bouncing act President Trump
faces under one hounds once a go ahead with these tariffs,
(21:01):
how might that impact consumer confidence and business confidence? For example,
he also has other programs going on, for example, a
deportation program, which is a question mark for businesses who
might be impacted by that labor source. But of course,
on President Trump's side, he would make the point that
they're also pushing for lower taxes that will spur investment.
They also say higher tariffs will bring manufacturing and investment
(21:24):
back to the US as well, and of course raise
revenues to offset fiscal depths. So they're making the case
for what they need to do. But I think at
the very least, it's a lot of policy change for
any economy to manage in a short space of time,
and I think there's going to be a lot to
assess that's coming at US pretty fast now in the
weeks and the months ahead.
Speaker 6 (21:41):
We should point out too that, of course, this was
a major part of President Trump's campaign, his pledges to
impose sweeping tariffs. He is already ready ordered up reports
there do April first on overall trade issues in tariffs
that could lead him to trigger new levees or to
quit the Continental Trade pack giving negotiated with Canada and
Mexico in his first term. That agreement, by the way,
is up for review in twenty twenty six. One thing
(22:02):
I want to ask you, and you know, we filter
all of what comes out of Washington through the financial markets,
and we did see equity markets take a leg down
here on news from the White House Press secretary that
indeed there would be Tarr's forthcoming on Canada, on Mexico,
and on China. So I do wonder the president is
(22:24):
also sensitive to what happens in the financial markets.
Speaker 5 (22:27):
What is the overall thinking.
Speaker 6 (22:29):
Within the economic community in terms of how much of
it is bluster, how much of it is still campaigning,
how much of it is now a real activity, How
do you make sense of it, and how much do
we think that the president, once he sees some market reaction,
might reverse course.
Speaker 12 (22:46):
It's certainly a moving target. I mean, to your point,
a lot of e commists say this is a negotiating tool.
Some of President Trump's own officials have made that point.
I mean, Howard Lipnik in his hearing for Commerce Secrety
made the point this week Tariff's circumbany us for negotiating.
Scott Beston has made that point. So there is a
kind of a feeling. Now. Critics would say that's complacency
among the market watching community, because President Trump has made
(23:08):
it very clear to the people during his campaign that
he's going to go ahead with tariffs, and he has
a mandate to do so. But then to your point,
there is a question, and this is what it goes
back to. Earlier the point is making about the economy
and the bouncing Act. There is there a point where
if markets responding negatively, would that put the brakes on
President Trump's use of tariffs. This is a talking point
among market watchers all the time. You'd have to say,
(23:30):
so far, given all the tariff talks since President Trump
won the election and come back to office, markets having
to really toss themselves upside down on this, certainly not
equity markets. There's been bigger moves in currency markets. But
if we start to see equities come off sharply over
the coming weeks, I think that certainly would add a
fuel to this idea that there is a break in
President Trump's ambitions. But I wouldn't say we're there yet
(23:51):
on that one.
Speaker 5 (23:51):
It's a good point, Molly.
Speaker 6 (23:52):
One thing I want to ask you, though, if you
know a lot of analysis, is to also come down
that when it comes to tariffs, if it's kind of
one big dump and we know kind of what's hitting us,
that's one thing. But if it's a constant barrage every
few weeks or every month about some new tariffs being levied,
that is a bigger toll on the US economy, right.
Speaker 11 (24:13):
And to the point then of as well, what was
the real factor on growth in twenty nineteen, back when
in the first turn, when this was happening. The broader
uncertainty about US trade policy also factors into that that
businesses are really just almost paralyzed, you know, in like
terms of we just don't know how this outlook is
going to evolve. How can you really move forward with
(24:33):
investments that are moving on a much longer timeline than
what the White House is coming out with every other day.
So that really is difficult when you're thinking about how
you're going to be making, you know, multimillion billion dollar
decisions and you just really have no idea when that
moving target is going to hit.
Speaker 2 (24:49):
Yeah, I think important to look at the fine print
too of what happens tomorrow, given that some products could
be exempted, and you know, get an understanding for what
exactly this is going to hit. Hey, next week, we
do have more economic data coming a real look at
the jobs market next week with Jolts with the January
Employment Report survey says for at least the change in
(25:11):
private payrolls or changeing non front payrolls, rather one hundred
and sixty five thousand jobs added, what's the conversation that
you're going to be having around that.
Speaker 11 (25:19):
Though, honestly, the bigger conversation I keep forgetting that we
are getting January data, because the bigger one is more
about the revisions to all of last year. So that's
really where the conversation is happening. If you remember, we
got a report last August, this was an initial estimate
of what the revisions might show for payrolls through March
of twenty twenty four, and that estimate said that payrolls
(25:40):
would be marked down by more than eight hundred thousand
and that was the biggest downward revision since two thousand
and nine. That was very scary at the time and
even drew a lot of attention from Congress, which usually
like this is a pretty sleepy report for the most part.
So that's where a lot of the eyeballs are going
to be. The other big thing is we're going to
see how the new population estimates are going to impact
(26:02):
the household survey, and right this is going to be
really important to the Trump administration as well, because so
much of what has boosted the labor market in recent
years has been immigration, and if we start to see
that that's really starting to falter off, could really change
our understanding of the strength.
Speaker 6 (26:18):
All Right, Molla Smith, thank you so much, Bloomberg News
Global Economy Reporter, and of course out there in DC,
Bloomberg News Global Economy Reporter.
Speaker 5 (26:24):
End to current.
Speaker 6 (26:24):
Some newmes from Meta that maybe not surprising since we
kind of see a trend maybe happening.
Speaker 2 (26:29):
Yeah, the Wall Street Journal reports that Medicine talks to
reincorporate in Texas or another state. This would not relocate
its corporate headquarters from California, but it follows moves that
Elon Musk companies have made as far as leaving Delaware
and going to Texas. Again, the Wall Street Journal reporting
that news just moments ago.
Speaker 6 (26:49):
And we know most of US companies right are incorporating Delaware,
so this would be a little bit of a switch
against the trend that we've seen for decades. All Right, folks,
you are listening and watching Bloomberg Business Sweek Carol Master,
Tim Stanevek, morticalm In just a moment.
Speaker 1 (27:02):
You're listening to the Bloomberg Business Week podcast. Catch us
live weekday afternoons from two to five eas during Listen
on Applecarplay and Android auto with the Bloomberg Business app
or watch us live on YouTube.
Speaker 6 (27:15):
The nation's biggest office to residential conversion, it is hitting
the market with thirteen hundred apartments carved from a million
square foot brick fortress originally built to house computers and
not much else, which means they didn't really care too
much about window placement.
Speaker 2 (27:29):
No, they didn't, but after a two year transformation the
fifty five year old at building in Manhattan's Financial District.
For years it was used to process checks, money transfers,
and other paperwork for manufacturers, handover trust and later for
back office staff at a company called JP Morgan. That
building now Carol It's unrecognizable.
Speaker 6 (27:46):
GFP real Estate is one of the developers behind the building.
The firm has a portfolio of more than sixteen million
square feet, focusing on operating, property management, and development of
commercial real estate in addition to owning.
Speaker 5 (27:58):
Of course.
Speaker 6 (27:58):
Brian Steinwertzel, co CEO and principal of GFP real Estate.
He joins us from New York City. Brian, so happy
to have you here with us. As story, We've been
a little obsessed with it. Contextualize it for us. How
big of a project was this for your team. How
difficult was it to make this conversion?
Speaker 7 (28:16):
Well, Carroll, Tim, thanks for having me here. This is
the largest office residential conversion projects in the country to date.
We took a one million square foot building, basically had
to remove all of the brick from the outside of
the building, carved two lightwells throughout the building, and then
took all of that floor area and restacked it on
(28:36):
top for an extra ten stories. And what results from
that is over one three hundred apartments which we launched
leasing this week. That will include over one hundred thousand
square feet of amenities. And if you're in the building today,
there is a rooftop deck, indoor and outdoor pool, coworking,
(29:00):
pickleball courts, basketball courts, bowling alley, golf, simulators, arcades, pretty
much anything anyone would want in a residential building, Brian.
Speaker 2 (29:11):
For years, Carol and I've been talking to folks in
real estate, especially in the wake of the pandemic when
people weren't coming to offices in Manhattan and other cities.
But there was also a housing crunch and a lot
of affordabilly issues in cities such as this. How do
you make the numbers work here? Because we were told
over and over again it's just too hard to do.
In most buildings, the windows don't open, the bathrooms aren't
(29:32):
in the right place, the plumbing doesn't make sense. It
just doesn't work from a numbers perspective. How do you
make it work?
Speaker 7 (29:39):
Well, we start with an extraordinary team and the team
at GFP real Estate had just finished building David Geffenhall
for Lincoln Center, and we brought on such a Ruddy,
which is one of the top firms that does this
kind of work, and along with our partner metro Loft,
assembled a team that included over a thousand people that
have touched this project in order to make happen. You know,
(30:01):
New York City unfortunately has suffered a distress commercial office environment,
but we are looking to make lemonade where there's lemons.
And so we bought this building from the lenders and
from the prior owner, and we brought on a capital
partner that was willing to take the risk to do this.
And with that team of over a thousand people have
(30:22):
created this project.
Speaker 6 (30:25):
And you guys got what a five hundred and thirty
six million dollar loan for the acquisition of the building
its existing debt and the cost of conversion.
Speaker 5 (30:32):
And you know, so you.
Speaker 6 (30:34):
Did this, is it fully give us an idea of
occupancy what you were seeing, give us an idea of
the interest in the building.
Speaker 7 (30:44):
So the Financial District has done extraordinarily well over the
last decade. I actually lived in the Financial District in
two thousand and four, and the neighborhood is completely different today.
There's tens of thousands of residents that live there, and
every day there's more and more that are coming in.
You know, the big building has a big capitalization, but
the absorption in this market has been nothing sort of extraordinary.
(31:07):
There were two buildings that opened up recently in the
last year. Both of those are one of them is
completely full and the other one has actually is almost full.
And our anticipation just based on opening on Wednesday and
the number of tours and inquiries we've had, which is
in the hundreds, that we will lease very quickly.
Speaker 5 (31:26):
Can you say how quickly?
Speaker 7 (31:28):
Well, you know, I think for GFP real Estate and
our partners were very conservative in our assumptions of how long. Yeah,
but our hope is that by the end of next
year will be entirely leased.
Speaker 2 (31:39):
Does this create some sort of new blueprint for how
you move forward with conversions, is that what's next? Are
you interested in converting any more buildings? How are you
thinking about the path forward right now?
Speaker 7 (31:50):
Yeah, So, including this building, we have approximately three thousand
units that are in our pipeline that we're creating. So
we have several other projects that are coming down the
road and will be complete. And I think what's helped
us be successful is a partnership with the city and
state who recognized early on in the pandemic that this
was a major issue and that they had to sit
(32:11):
with the industry and come up with a game plan
for us to take these distress office buildings and create
housing out of them. And so there's a program called
the four sixty seven M program that the mayor and
governor both put into law last year and that has
helped become an accelerator for getting these kinds of buildings done.
(32:31):
And we are, along with our partners, fully invested in
these programs.
Speaker 6 (32:36):
Hey, one of the things, though, you know, you obviously
got through it all, what was though, the largest hurdle
to overcome with the office to residential conversion of this
size and scope.
Speaker 7 (32:49):
It's it's a great. It's a great question, and I'd
say there's almost like it feels like the largest hurdle
every month when you're in a project of this magnitude.
But this is a very complex building. It was designed
to look like an IBM punch card, and the way
they made the punch card lines is they actually had
the facade and each floor jut in and out at
different times on every different floor. And one thing that
(33:11):
we made a decision on early on in the project
is we wanted to actually carry forward that architecture but
at the same time have a new window wall throughout.
And so one of the most difficult things was we
actually have the window wall custom made and it comes
in and out on each floor and that architectural feature
can still be seen from the inside and the outside
of the project. But doing that and preserving that work
(33:35):
was one of the most difficult parts of this project.
Speaker 5 (33:37):
But you knew you wanted to do it right. It
wasn't just because you had to. You wanted to. Is
that fair?
Speaker 7 (33:43):
Yes, it is. I think every project that we take on,
and the majority of our portfolio are historic buildings. We
are looking to preserve whatever can be preserved, especially the
most important elements of that project, and even if it
costs a little bit more or takes a little bit
more time to do it important part and I think
the residents that will live there will see that and
(34:03):
feel good that this was preserved.
Speaker 2 (34:06):
Do the economics of this only work when you create
them for rentals or would it work for sales as well?
Speaker 7 (34:13):
I think the hard part with sales is the building
of this size you're doing. You have to do so
much condo sales that it's more suited towards rental. That
being said, there are a number of other conversion projects
that are condo. Our organization has owned the Flat Iron
Building with partners since the nineteen nineties. In that building
(34:34):
will be turned into a condominium building, but that building
has only a few dozen units, and so it's really
a different scale and magnitude.
Speaker 5 (34:43):
Hey, Brian just quickly got thirty seconds left.
Speaker 6 (34:45):
Here our team Arshanali Bosik catching up with Blackstone president
John Gray, and I think members of our team also
talking with him. He said they're the world's largest commercial
property owner. He said the worst is over for the
global office market after prolonged slump fueled by the pandemic.
Just got twenty five seconds here.
Speaker 7 (35:04):
Do you agree, Well, I certainly hope so, and I
would agree.
Speaker 2 (35:09):
So.
Speaker 7 (35:09):
GFP is the largest landlord of small and medium sized
tenants in New York City, and I think for a
while now we've seen positive absorption and and tenants returning
to the office. I think that he has it right
and I hope that continues.
Speaker 6 (35:21):
All right, great to check in with you, and hopefully
we can do so again in the future. Brian stein Wertzel,
he's co CEO and principle of GFP real Estate. Joining
us here in New York City.
Speaker 8 (35:31):
You are listening to the Bloomberg Business Week podcast. Catch
us live weekday afternoons from two to five pm Eastern.
Listen on Applecarplay and the Android Auto with the Bloomberg
Business app, or watch us live on YouTube.
Speaker 2 (35:44):
I don't need to tell you this, but there's a
lot out there for CEOs to navigate. Right now, we
got breaking news from the White House on tariffs. We've
been covering that this afternoon. Not to mention the new
administration in the White House, their priority is geopolitical threats,
technological disruption from AI and.
Speaker 6 (36:00):
Yeah, there are so much. Sharon Marcel is CEO of
Boston Consulting Group. Here's regularly from chief executive officers from
the c suite, and she joins us right now from
Raleigh Durham, No, North Carolina. Sharon, good to have you
here with us. You are just back from Davos. Our
team too. We've all been kind of talking about what
was talked about, what was top of mind, what was
(36:22):
concerned to the things that I heard It was President
Trump and artificial intelligence.
Speaker 5 (36:28):
What did you hear?
Speaker 13 (36:30):
Yeah, Carolyn, tim thanks for having me. I really appreciate it.
And exactly right, just back from Davos. I'm Sharon Marcel.
I'm the North America head of BCG, the Boston Consulting Group.
So this is my third year at Davos. I think
each each year you get a bit more out of it.
And you know, I was struck by a few things
(36:51):
in terms of Davos. I think number one was the
optimism in terms of the business growth orientation. And I
think that's you know, of course, particularly true in the
US and then in Asia, less so in core Europe
and in places like Canada and Mexico. When you spoke
to some of the uncertainty there with respect to tear US,
(37:14):
but there was, you know, a good sense of optimism.
Speaker 9 (37:18):
I think the other.
Speaker 6 (37:21):
Can I jump in for a second, because I'm just thinking,
what is the story that's dominating on this Friday, and
we're all trying to put some context around it. But
we do have President Trump attending to move ahead with
plans tomorrow to compost twenty five percent tariffs on Mexico
and Canada, a ten percent leve on China. The White
House has confirmed this, and this could be just step
(37:42):
one in more tariffs to come, perhaps on other nations.
We know that that has been certainly some broad expectations
ahead of.
Speaker 5 (37:50):
Donald Trump coming into the White House.
Speaker 6 (37:52):
How might this news, if it was out before Davos
maybe impact some of that optimism.
Speaker 13 (37:59):
I think what was anticipated at Davas was there would
be tear us, you know. I think that was a
promise during the presidential campaign, and I think that was anticipated.
I also think that we did a survey of companies
from around the world. Eighty five percent of companies have
a plan in terms of how to deal with it.
Speaker 9 (38:21):
Now.
Speaker 13 (38:21):
It's a plan which is very much in flux and
lots of different scenarios because it's not known exactly when
it will come, exactly what it will look like, and
so I think those scenarios are very fluid. But I
do think that versus in previous times, I think there
has been a lot of planfulness in terms of preparing
(38:42):
for what might come.
Speaker 2 (38:43):
You know, one thing that I've been pretty surprised about
over the last couple of weeks has been the changing
tone that we're hearing from US companies about this administration
and their willingness to really embrace it. And I'm wondering
what you're hearing behind the scenes from CEOs about that
is is it really is it really purely the cost
of doing business? Is that what it's seen, or are
(39:05):
they seeing this as embracing a fundamental shift in America
right now?
Speaker 13 (39:11):
Look, I think I think if you if you talk
to business leaders, you know they're positive in terms of
some of the economic signals. Now, those signals, you know,
aren't brand new, They're coming from twenty twenty four and before.
And I think I think there's optimism about the pro
growth posture of the administration. So so you know, I
(39:34):
don't know how much there is really new, but I
think there will be greater investment in the US.
Speaker 9 (39:41):
I think that's seen as a positive.
Speaker 13 (39:42):
I think there's an there there may well be a
lower tax regime, which could be positive in terms of
actually investing more on R and D, investing more in
the business community, and also for returns, and so I
think there's there's reasons for positivity, but I don't want
to underplay there's also a lot of volatility and a
(40:02):
lot of which is unknown that I think business leaders
are preparing well.
Speaker 2 (40:06):
Sharon, just give us an idea of who's some of
the business leaders you spoke to at Davos where we
like specifics here.
Speaker 9 (40:13):
Well, from a range of industries.
Speaker 13 (40:14):
I mean I spoke to people from the pharmaceutical industry,
people from the tech industry, people from the aviation industry,
So it was really a wide range of industries. No
one sample set, no.
Speaker 2 (40:27):
Can you give us any names.
Speaker 9 (40:29):
I can't.
Speaker 6 (40:32):
But you did say that there was optimism, and I
guess you know what I do wonder for CEO's Sharon,
is that, as you said, they expected tariffs, we were
kind of surprised on Donald Trump's first day or even
two days in the White House that we really didn't
get anything specific on that front. Because I think everybody
expected that to be the first thing out of the gate.
Having said that is for the C suite, even if
(40:57):
twenty five percent tariffs can be on Mexico and Canada
and who knows what might come might be onerous or problematic,
knowing what you are dealing with rather than the unknown,
is that better for the C suite or not?
Speaker 5 (41:11):
Necessarily?
Speaker 9 (41:12):
I think you're right. I think it's better.
Speaker 13 (41:14):
And I think when when you know what direction things
are heading in, you know you've done all the scenario analysis,
you have tentative plans for which direction you can head in,
but you know you're not going to put your dollars
at work until there's greater certainty. And so I think
I think as there is greater certainty, whatever direction that
heads be in, I think it will open up the
(41:35):
aperture in terms of investment.
Speaker 2 (41:38):
I think one area that we've been obsessed with over
those lists last week has been AI and really trying
to understand the way that the narrative was rewritten or
could be rewritten as a result of what we saw
from Deep Seek. And I know that was a big
part of the conversation at Davos. In your view, when
are you going to start to see companies that are
(41:59):
not actually in the AI space start to increase their
bottom lines as a result from this technology.
Speaker 13 (42:05):
I think that's a great question, and I think that
was actually the question at Davos, and there was a
lot of great discussion. A couple of years we've been
talking about AI, and the business community has been very
excited about AI, and I think what's encouraging is those
conversations are moving from hype and experimentation and use cases.
(42:27):
You know, we're doing twenty five use cases over here
and thirty five use cases over there, to actually, where
are we going to get tangible value in the core
processes in our business.
Speaker 9 (42:36):
That actually drive competitive advantage. You know.
Speaker 13 (42:39):
In fact, in twenty twenty four, PCG did a survey
of executives and we found that two thirds of AI
transformations were falling short of expectations. But we're finding with
our clients and in the conversations at Davos that are
succeeding it's because they're focusing. They're focusing on the areas
of the business that they can transform and create competitive
(43:00):
advantage versus lots of areas around the edges. And we
like to say, you know, look you can get the algorithms,
that's ten percent. You can get the tech stack, it's important,
but it's twenty percent. But what you have to be
able to do is get the processes in people and
really scale the transformation that we call it ten twenty seventy.
And I think that's a place where companies, clients, you know,
(43:24):
the folks and davas are leaning into where can we
really scale and get competitive advantage.
Speaker 6 (43:29):
Hey, before we go, just got about a minute left here, Sharon,
and I do wonder going back to you know, we're
just focusing once again on davas a little bit more.
Is the corporate community breathing a sigh of relief that
even though Donald Trump, many would say, President Trump is
(43:49):
unpredictable or can be unpredictable in terms of what we
get from him and sometimes at unexpected times or unexpected places,
that they expect it to be an easier regulatory and
very business friendly environment. So they're willing to kind of
put up with some things because they think the overall
policies will be much more friendly to doing business in
(44:13):
the United States.
Speaker 5 (44:14):
And just got about thirty seconds here.
Speaker 13 (44:16):
Sure, I think there's a couple of the economy is strong, right,
So I think that's that's the core input. And I
think if you think about this current administration, I think
some of the policies that Donald Trump campaigned on and
was elected on are a little bit more pro growth
oriented and and I think that you know, the business
(44:38):
leaders can see some of those policies and regulations as
being adventacious in terms of the growth the growth of
their business.
Speaker 6 (44:47):
And even tariffs. Just ten seconds they thought tariffs were
growth oriented.
Speaker 9 (44:54):
I think those are. I think tariffs are. I think
tariffs are back.
Speaker 13 (44:59):
But I think other policies that the administration is advocating
our growth oriented.
Speaker 6 (45:04):
All right, Great to get some time with you and
to share what you saw and heard at DAVO. Sharon Marcel,
chief executive officer of Boston Consulting Group North America, joining
us from North Carolina.
Speaker 1 (45:16):
This is the Bloomberg Business Week Podcast. Listen live each
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Auto with 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.
Speaker 6 (45:34):
All right, everybody just got about eighteen minutes to go
until we wrap up the trading day and the trading week.
Carol Master along with Tim Staneviek live here in our
Bloomberg Interactive Broker Studio live on Blueberg Business Week. Just
a reminder, we are anticipating at the top of the
hour in an update and briefing from the NTSB looking
at into that investigation to Wednesday's mid air collision at
(45:56):
Reagan National. So as soon as that begins, we will
take you there live the latest on that. In the meantime,
got to talk about the markets because a lot of
news coming out of DC and really top of mine
right now, Tim, is what we are anticipating at this point,
tariffs that go into effect tomorrow.
Speaker 2 (46:12):
Yes, I knew you were going to say.
Speaker 5 (46:13):
Tariffs the chief trading partners with the United States.
Speaker 2 (46:16):
Yeah, that would include Mexico Canada of those twenty five
percent tariffs, then ten percent tariffs on China. Shan O'Hara
is president at piacer Ets. They got about forty seven
billion dollars in assets under management. Sean joins us from
West Palm Beach, Florida this afternoon. Sewan, good to have
you with us. We did see stocks take a leg
lower after the White House said during the press briefing
(46:38):
that those tariffs would begin tomorrow. How are you looking
at the policies that have been enacted thus far at
least been talked about thus far by the Trump administration.
Speaker 14 (46:48):
Good afternoon, Thanks for having me. It's nice to be
with you both. I think there's some good and some bad,
if you will, or some that are appealing to investors,
and then some that make investors a little nervous, which
is probably why this information or news on tariffs is
sort of causing a little bit of stress in the
market overall. You know, if you take the President at
his word, he's going to reduce regulation, make it easier
(47:11):
for businesses to do the things that they do. I
think that's generally a positive. He's definitely got to focus
on America first. I think that's also generally a positive.
So as all of these policies sort of tend to
roll themselves out, we'll get a.
Speaker 4 (47:25):
Clearer and clearer picture.
Speaker 14 (47:28):
My own personal view on the tariff side is I
think we're making a lot out of something that may
not ultimately mean that much in the long run.
Speaker 4 (47:36):
I think the.
Speaker 14 (47:37):
President uses terrorists as a way to negotiate, if you will,
to get people to do the things that he thinks
they should do that would benefit Americans the most and
benefit the American economy the most. But I think you
get a little bit of a mixed bag going on,
some good, a little bit that makes us nervous, I guess,
or at least makes the market nervous.
Speaker 6 (47:54):
So soon, what do you make though of really the
pushback what seems on ESG, which has been actually happening.
I would say, certainly here on the financial side of
things for a while now, but even on DEI diversity,
equity and inclusion, the pushback on those policies, How do
you square when after I feel like it's been years
and years and years that consultants, McKinsey and others have
(48:16):
talked about the importance of diversity from even a financial level,
that diverse boards companies that are diverse in terms of
their approach and their composition, that they financially do better.
Speaker 5 (48:28):
Was that just all lies?
Speaker 4 (48:30):
Well?
Speaker 14 (48:30):
I mean, I guess that's what you get when you
ask mckensey consultants how you should run your business? A
little poke at that maybe within their twenty six year
old MBAs. I think generally speaking, if you run a company,
you should run a company for the benefit of your
shareholders first. And I think that you know it's it's
it couldn't happen soon enough in my view, that we
sort of have shifted some of these things off to
the side. I think that's a net positive for companies.
(48:53):
You know, one of the things that we need in
this market, and that American companies need is productivity growth.
When you have programs that sort of potentially stunt that
productivity growth or are an additional expense line in terms
of how they run their business, then that sort of
stunts productivity. And so we never were real big believers
(49:15):
in ESG or DEI. We never followed all the big
ETF issuers into the ESG to try to get the
big institutional assets under management. We just focused on trying
to find strategies in our ETF lineup that were really
focused on fundamentals that were good for companies that would
hopefully over time, make those companies more valuable and see
(49:35):
their stock prices rise.
Speaker 6 (49:37):
So, in terms of you said we kicked it off
talking about the second term of Donald Trump and the
White House, you said, some good policies, some bad policies.
The most right story in the Bloomberg has to do
with these tariffs that are coming on China, Mexico and Canada, right,
and they are expected to go into effect tomorrow. Twenty
(49:58):
five percent on Mexico and Canada, ten percent levy on China.
Speaker 5 (50:02):
Is that in your good bad column? In the bad column?
Speaker 6 (50:05):
In terms of the possible impact on companies and the
US economy and ultimately on US publicly held companies, I
did it.
Speaker 14 (50:13):
Put it in my bad. I put it in my
unknown category. We'll have to seek category.
Speaker 4 (50:18):
I think generally, why unknown?
Speaker 14 (50:19):
Yeah, Well, because I don't think we really know what
the ultimate tariffs are going to be, or if there
are actually tariffs that last. I mean, everybody needs to
keep in mind this is the second time that President
Trump has been president, and the first time he wasn't
very different in terms of.
Speaker 4 (50:35):
How vocal he was about tariffs.
Speaker 14 (50:37):
And in spite of all of that, the markets did
just fine and the American economy grew. And so I
think he's focused on the tariff side because of all
these trade deficits. In other words, we shouldn't have trading
partners where we're as unequal as we are. I'm not
sure we'll ever be equal on the trade side with China,
but we should do what we can, if you will,
to make sure that the American companies that are exporting
(50:59):
outside of the US US have an equal chance. And
so I suspect that we're not going to see, you know,
twenty five or thirty percent tariffs on Mexico or Canada.
They might meet somewhere in the middle, or they may
recraft an overall trade deal that makes them not necessary.
So I just I just think we need to wait
and see and be a little bit calm. I know that,
(51:19):
you know, it's one of those things that we talk
about on or that some people talk about on the
air all the time, and it makes everybody nervous. I
would just say, with regard to that, you know, let's
just pump the brakes a little on the hysteric hysteria there,
and let's wait and see what happens and what the
outcome is.
Speaker 2 (51:34):
Well, you have dozens of ETFs at PACER, including those
that are you've categorized as risk mitigation, high value growth,
somatic growth factor, structured structured outcome and income. Where are
you seeing the flows right now as far as money
coming in where people putting.
Speaker 4 (51:51):
In a great, great question.
Speaker 14 (51:53):
The biggest flows for us are coming into an ETF
the tickers COLG, it's our growth like twin sister or
brother to the cow Z value story used free cap move.
Speaker 4 (52:03):
We used free cash flow margin.
Speaker 14 (52:05):
That's a simple calculation as the sales a company gets
divided into the free cash flow, so it's just a
measurement of how effectively companies convert their sales to profits.
And the higher that free cash flow margin, the more
effective companies are. What's fascinating, and I think what's leading
to some of the inflows is that if you look
at say col G versus the Nastak one hundred or
(52:26):
the Russell one thousand growth, we're performing as well or
better over the last couple of years than those two
big indexes with one major distinction which I think is important,
and that is it we only have seventeen percent overlap
to the Russell growth and only about seventeen or fifteen
percent overlap to the Nastak one hundred in terms of
portfolio names, but we only have four percent of the
(52:47):
portfolio weight in the mag seven names, and so One
of the things that we're talking to advisors and investors
about is that what once was designed to be diversified
is not necessarily as the fight as you think based
on the way the market's performed the last couple of years,
and potentially one of the biggest risk to investors is
that over concentration, as much as has made us feel
(53:09):
great on the way up, could be ultimately as disappointing
on the way down. And so we're not saying, you know,
sell all your cues or sell your IWF, which is
the Russell growth ETFO. What we're saying is, you know,
you should recognize how how concentrated and dependent you are
to a very small number of names and perhaps find
a different way to do that. Yeah, and when you
use three cash flow margin as your screen, you wind
(53:30):
up owning names like Apple love.
Speaker 4 (53:31):
In, which is in the Russian growth but a very
small wave.
Speaker 6 (53:34):
We got to run have a great weekend, So glad
we got time. Sean O'Hara, President at Pacer ATFS.
Speaker 5 (53:39):
This is Bloomberg.
Speaker 1 (53:41):
This is the Bloomberg Business Week podcast, available on Apple,
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weekday afternoons from two to five pm Eastern on Bloomberg
dot com, the iHeartRadio app tune In, and the Bloomberg
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tech news. The Bloomberg Business Week Podcast with Carol Masser
(00:23):
and Tim Stenebeck on Bloomberg Radio chairs A.
Speaker 2 (00:27):
Apple right now are down about one point six percent.
They were hired by as much as four percent earlier
in the session, more than four percent earlier in the session.
This after the company reported earnings yesterday. Not a lot
of great news in the numbers that came out, some
real weakness in China and the iPhone. We're going to
talk about all that in just a minute. First, though,
we got to talk to Mark German about this Bloomberg
(00:49):
News exclusive that he reported just in the last couple
of hours. Mark German is chief Technology correspondent. He joins
us from Los Angeles. Mark, you came out just in
the last hour with this story about some big news
Apple canceling this sort of meta glasses competitor. What are
the details here?
Speaker 3 (01:07):
Thanks for having me. I mean, as we know, the
Holy Grail and the mixed reality industry are augmented reality glasses,
and so Apple's been working on this for some time.
Obviously the vision pro it's a technical and engineering marble,
but a commercial failure. Even the people who paid four
thousand dollars for it really aren't using it. So looking
for the next big thing in the MR space, and
that is AR glasses. So the original vision was a
(01:29):
lightweight pair of glasses that you connect to the phone,
use the phone's chip, use the phone's operating system to
power some of it, the battery. That had too many
technical hurdles to overcome, so they pivoted to making MAC glasses.
So AAR glasses that you can connect to your Mac
obviously beef your battery, more processing power, additional engines for
graphics in AI. But now they've pulled the plug on that.
(01:50):
Apple is abandoning Project N one zero seven. That's what
they call it internally, that's their augmented reality MAC glasses.
And now back to the drawing board. They need to
figure out future for this platform. They've spent tens of
billions of dollars investing in augmented and virtual reality, the
whole XR pipeline. Right now, I would say this is
not great they're lost, and it's it's it's not good.
(02:12):
It's not good, especially when you realize how behind they
are on AI too.
Speaker 2 (02:15):
Well, this is it's funny because we're talking about this
with Caroly. I had yesterday like this could be you
know where I was saying, this could be an option
for them because Meta glasses have been somewhat successful. I mean,
they're not selling off the shelves and they're you know,
it's still early technology. And Carolin made the point, well,
you know, Apple's not necessarily first car and Carol made
this point too, Apples not necessarily first to stuff, but
oftentimes they're their best to stuff. So I assume that yes,
(02:36):
they would come out with some sort of wearable piece
of eyewear that would really change the game. Does that
mean they're they're just done with this?
Speaker 3 (02:45):
We're talking about two different things here, right, So we're
talking about augmented reality glasses versus smart glasses. Right, So
the Meta raye ND glasses, those don't have displays, those
don't have augmented reality. Right. Meta is not going to
have AR glasses on the market until twenty seven on
the earliest, So we're still two three years out from that.
Actually happening now. I do think there is a world
(03:05):
where Apple could come out with some fashionable glasses that
have cameras and speakers and batteries not built in in
order to compete with the Meta ray bound glasses. That
being said, Meta will be adding a small little display
into their glasses next year. It's not an AAR display,
but it's going to be something similar to what you
saw from Google Glass a decade ago. Those are going
to be quite expensive. But certainly this is not a
(03:26):
good moment for Apple. This is I would say, this
is terrible. I quite frankly wouldn't be surprised if they
all but abandon their mixed reality efforts, but also want
to be surprised if they pull things together and they
try to get a model out in the future. I
would say three to five years from now is the
time horizon on an Apple standalone augmented reality glasses. So
(03:46):
these glasses that we're talking about today are something a
little bit in between what Meta has on the market
today and the eventual vision. Right, So standalone glasses the
glasses themselves, they have the displays, they have the OS,
they have the battery read the heap of the engine.
You don't need a connected to the phone. It's a
phone replacement. Apples is a bit of a mix. It
has the lenses, it has some onboard processing power, some
(04:08):
of the guts and the glasses, but you're going over
a cable and using mostly what's inside of the computer.
Speaker 4 (04:14):
Right.
Speaker 3 (04:15):
Meta has no displays. It's phone SYNCD what they're launching
in twenty twenty seven. This is their Orion prototype they
showed in October of twenty twenty four, just a few
months ago, that wirelessly pairs with a puck that you
keep in your pocket and a wrist device and between
those three mechanisms that's the whole operation of the device.
But what we really want are fully standalone glasses and
(04:36):
quite a ways out from that, all right, what's going.
Speaker 5 (04:39):
On at Apple?
Speaker 6 (04:39):
Like, are they just like is this just a you know,
they're having a tough kind of design moment or what's
going on that they are It sounds like kind of
completely walking away from it.
Speaker 3 (04:50):
This is a company that couldn't figure out a self
driving car. This is a company that hasn't been able
to figure out AI. This is a company that is
not able to figure out ar VR. For the time being.
The good news for them is they're still selling a
lot of iPhones and that's going to allow them to
keep having money to throw at R and D budgets
(05:10):
and try to figure something out. And I think they
eventually will, but it's a scary time right now.
Speaker 7 (05:15):
I can hear of you.
Speaker 3 (05:17):
Okay, Well, there's a lot of interest for a major
new product, and there's just not It just isn't something.
It's about re skinning the existing widgets. They're going to
have thinner iPhones, foldable iPhones, all sorts of stuff, smart
home appliances, foldable iPads. But in terms of a revolution,
we're far from it.
Speaker 6 (05:33):
But I mean, you know what's going on inside? Are
they just waiting mark for other people to kind of
figure some things out before they kind of jump on board,
or do they not have the right people engineers, design
folks like, like, what is it that's missing? Maybe in
the mojo of Apple of today.
Speaker 3 (05:50):
They've lost a lot of their visionaries, right, they lost
a lot of their top engineering talent over the last
several years. It's really about you know, vision and willing
to take bold risks to accomplish the next big thing.
They didn't want to take the bold risk getting a
car out. Fine, they took the bold risk getting the
vision pro out, but that took a little too long
(06:11):
and it was a bit of a failure at least
till now. I mean, I think with the proper marketing
and the proper price points, they'll be okay. But at
some point they're going to have to figure some stuff
out and make some hard decisions.
Speaker 2 (06:21):
You said, Apple is still selling a lot of iPhones.
We know that, but they're not selling as many as
analysts thought they would sell, especially, Okay, so.
Speaker 3 (06:29):
I will let's just be honest here, right, Like the
analysts come up with these numbers, they come up with
these forecasts, right, and then Apple announces a certain number, right,
and that either beats the number from the forecasts or doesn't.
Speaker 4 (06:45):
Right.
Speaker 3 (06:46):
But it's not like you're comparing Apple numbers to Apple numbers.
You're comparing Apple numbers to numbers that a bunch of
analysts came up with themselves, right. And so the question
is where are they getting this data from?
Speaker 4 (06:58):
Right?
Speaker 3 (06:58):
Why do we think that's how many they would have sold?
Is it how many they should have sold? How many
they thought they were going to sell? Right? So I
do think there are some fundamental questions about the whole
comparison between analyst estimates and what really were sold. I
personally think the better metric is how many they sold
versus how many they sold in the year prior. Are
(07:20):
they showing growth? What percentage of growth would we have
liked to see? Right? In terms of China, I think
that's more of a clear cut example of their performance. Right,
they dipped three billion dollars year. Every year, they're down
seven billion dollars compared to two or three years ago
in the holiday season. Right, So that's a bit more
cut and dry. The China things extremely concerning. I think
(07:41):
the iPhone to me was actually pretty good.
Speaker 6 (07:44):
I mean they're still selling one hundred and twenty four
billion dollars worth of stuff. Like I always think about
this mark when the numbers cross and we all kind
of just throw them out there. I mean, they still
sell a ton of stuff. That's just a quarterly number.
Speaker 3 (07:58):
Yeah, that's a lot. That's a four percent year of
year growth. That's good, right. I Mean we were at
a time period about a year and a half ago
we talked a lot of bit about this about how
they were declining on an annual basis quarter after quarter, right,
that was not a great time for them. But now
we're back in growth mode and that's why the stock
is up today. It reflects that they have growth in
the holiday perier. They're going to grow again in the
March quarter. So I think there are positive signs on
(08:19):
an overall basis. In terms of the products, I think
the Mac and the iPad were sneaky good hits recently.
And you know we've talked about John Turnis, the head
of Mac iPad engineering, right being in line to be
the future CEO. I mean, I think that we're just
keep pushing in that direction by having the main stays
in the Apple product pipeline doing as well as they're doing, right.
(08:41):
I think the questions about Apple are the periphreeze.
Speaker 2 (08:44):
Yeah, how about that services revenue? Though that came in
above estimates.
Speaker 3 (08:48):
It was great. Yeah, app store, cloud services, advertising business
at Apple is growing quite steadily, so that's helping on
the margins for them too. Obviously there's some fear around
the app store outside of the US the regulatory environments,
but it even seems like that's tapering down to right.
So services I think quite the positive. Can you imagine
if Apple didn't get into the services business and did
(09:09):
the full potion to services about five years ago, where
they would be right now. I mean, that whole initiative
has really I'm not going to say saved the company,
because it's hard to save a company that's making one
hundred and twenty billion a year, but it's done wonders
for them.
Speaker 6 (09:24):
Well, Tim and I talk about you know, we look
at our monthly statements or you know how much I
pay out to Apple on the services side, not even
on the hardware side. It's pretty remarkable. Hey, there's a
couple of other headlines that have come out over the
past week or so. Apple and Spacelink to support Starlink
network of iPhones, some different things coming out.
Speaker 5 (09:45):
What do we need to know about that?
Speaker 3 (09:48):
So this is an interesting one. So T Mobile in
the US is now rolling out a beta version of
their Starlink partnership with SpaceX. And even though Apple already
has its own global network for satellite infrastructure through Global Star,
if you're a T Mobile customer in the US, you're
gonna have a great experience using Starlink on your iPhone
when this rolls out officially in the coming months, and
(10:08):
so I'm very bullish on satellite networking, very bullish on
the future of satellite connectivity for devices. I think this
is going to be a great thing for iPhone customers,
but also are Android customers. Why this was newsworthy is
because all the disclosures to date is that this would
be a Android specific technology. But getting it on the
(10:29):
Apple ecosystem I think is great and so as an
as an Apple customer, I'm excited to take it first.
Speaker 5 (10:35):
Man, I'm a starlink customer. It's pretty amazing. It's pretty amazing. Anyway,
go ahead, Hey.
Speaker 2 (10:41):
Mark, just about forty five seconds left. We haven't gotten
your take on the deep seek news earlier this week.
How do you see that relating to Apple?
Speaker 3 (10:49):
Okay, so twofold. On one hand, it validates Apple's model
for artificial intelligence, right, But on the other hand, Apple's
model for artificial intelligence this is not very good. And
you have this random small company that nobody ever heard
of until last weekend eating Apple's lunch, right, So it
validates it, but also shows how far behind they are
(11:11):
at the same time, So I don't think it's a
great thing for Apple. I'm telling you Apple needs to
figure something out on their AI stuff. I just don't
understand how a company this resource rich, with the right
people in place, have been able to just completely miss
the boat on the biggest new technology since the Internet.
Speaker 5 (11:31):
Well unbelievable.
Speaker 6 (11:32):
Like I said, the tone in your voice, I haven't
heard that for a while. When it comes to Apple specifically,
he is Mark German.
Speaker 5 (11:39):
He's amazing.
Speaker 6 (11:39):
Bloomberg News Chief Technology correspond be sure too to check
out his weekly newsletter. You can find it at Bloomberg
dot com and of course I always on the Bloomberg terminal.
Speaker 8 (11:48):
You're listening to the Bloomberg Business Week podcast. Catch us
live weekday afternoons from two to five pm Eastern. Listen
on Applecarplay and Android Auto with the Bloomberg Business app,
or just live on YouTube.
Speaker 6 (12:02):
President Donald Trump intends to move ahead with plans on Saturday.
Speaker 5 (12:05):
Tomorrow to impose twenty five.
Speaker 6 (12:07):
Percent tariffs on Mexico and Canada and a ten percent
levee on China. This was coming from the White House earlier,
the White House Press Secretary commenting on it.
Speaker 9 (12:17):
I saw that.
Speaker 10 (12:17):
Report and it is false. I was just with the
President in the Oval Office, and I can confirm that
Tomorrow the February first deadline that President Trump put into place,
that a statement several weeks ago continues, the President will
be implementing tomorrow a twenty five percent tariffs on Mexico,
twenty five percent tariffs on Canada, and a ten percent
(12:38):
tariff on China.
Speaker 6 (12:40):
All right, That, of course is the White House Press
Secretary Caroline Levitt earlier today when she said, I saw
that report and it was false. There were earlier reports
today that these tariffs would not be imposed until March first,
so she was clarifying that no, yes, indeed, it's going
to start tomorrow, So certainly something that we're following. We
also let some US economic news this morning on inflation.
The FED, of course watches very closely. So let's get
(13:02):
into it. Let's tie it all together in terms of
what it means for the US economy and really the
global economy. With us right now is Molly Smith, Bloomberg
News Global Economy Reporter. She's right here with Tim and
me in studio and out there in our DC bureau
where so much news is coming lately, Bloomberg News Global
Economy Reporter and a current Hey, Molly, I do want
to start with you.
Speaker 5 (13:22):
We did get inflation data, we got.
Speaker 6 (13:24):
To read on consumers in terms of spending incomes, and
yet this is all against the backdrop, like I don't know,
do we not even care about any of that anymore?
Because tariffs are now front and center.
Speaker 9 (13:34):
It really is.
Speaker 11 (13:34):
I mean, I honestly even was forgetting that we already
had pc this morning.
Speaker 9 (13:38):
So much has happened since then.
Speaker 5 (13:40):
Good point.
Speaker 11 (13:40):
So and of course this data for PCE is back
in December, so I mean tomorrow, February first, like man like,
December is really old news right now. And we also
kind of had a good sense of how this data
was going to come in because we got the GDP
data yesterday, which is quarterly and wraps a lot of
this stuff into it. So not too many surprise is
coming out of the December data, but just wrapping up
(14:02):
what we had a sense of that inflation is well,
maybe coming down depending on how you look at it,
but in a lot of ways still moving sideways, and
consumer spending tough to bet against the consumer, even if
it looks like there are signs that disposable incomes are
slowing in the savings rate is dipping, so reasonable to
think that, you know, consumer spending would start to slow,
(14:23):
especially if tariffs are enacted, if that is meaningfully going
to increase consumer prices. But it's just really hard to
bet against the American consumer. That's tales all the time.
Speaker 6 (14:33):
And a good that we have you here with Molly Smith,
and you look at the global economy, you look at
the US economy. Tarriffs twenty five percent on Mexico, Canada,
ten percent on China. I mean, these are the US's
largest trading partners. There's a lot that goes back and forth.
Your initial read on if this sticks, if it sticks
(14:54):
around for a while, what it could mean.
Speaker 12 (14:57):
Well, certainly a big headline, add a depressed briefing int
White High. Even though the President has warned about these tariffs,
imposing them tomorrow for everyone, I think is probably at
the shock end of the scale for most economists. But
still we have to wait and see to your point,
just what exactly our details in this The Press Secretary
did say will be twenty five percent on Canada and
Mexico and the ten percent on China. But we need
(15:19):
to know are we talking about all of the goods,
the merchandise goods across the borders and come in from
those countries. We need to know will there be any
exemptions for some sectors? How long will these tariffs be
in place for I mean, will there be mitigating circumstances
where Canada and Mexico and China complete their case. So
there's lots of you know, devil in the detail on this,
but taking it at face value, it would be quite
(15:39):
a shock because you're talking about, you know, everything from food,
avocado's my colleagues are all about today, lumber crossing the
border from Canada, cars and car parts go back and
forth on both borders, and then of course when it
comes to the US and China. I mean, obviously, China's
the world's biggest trading nation. They're the factory of the world,
so you know, the whole gambit of can asumer goods
(16:00):
will be coming in from that side of things. Now,
you can argue to talk about how much of an
inbact ten percent would have, but I think the bigger
focus for now, the bigger folcus I think right now
is on that twenty five per cent level. Chann and sorry,
Canada and Mexico.
Speaker 2 (16:12):
Well to that end, And I'm wondering who you think
absorbs the majority of these tariffs, especially those from Mexico
and from Canada. Does it, in your view, happen that
it's the consumer or is it the company where it
eats their bottom line who absorbs more Here.
Speaker 12 (16:27):
So there are a few parts in this chain. Number one,
the question becomes, will the exporter or the producer selling
their product cut their prices to factor in the tariff.
That's one side of it. The other side of it
is will the buyer the importer absorb the tariff rather
than pass it on? You know, if they have good margins,
kind of take the tariff on board I rather than
pass on to consumers. But to your point, this is
(16:50):
where economists say the rubber hits the road. In truth,
you know, these companies don't have those margins. Nobody's going
to take a cut in their selling price. So these
prices will eventually be passed along to consumer, pass on
to main street. Now, the Treasury Secretary Scott Besson made
the point recently his hearing that there are mitigatting circumstances.
He made the point that it's strong dollar can offset
the impact of tariffs, and they say consumer patterns will
(17:12):
change anyway. They won't buy tariff goods or there are
ways around us. But you know, writ large, there's a
question mark for sure over the impact prices for consumers
from tariffs.
Speaker 6 (17:24):
I do want to point out the tariffs would mark
the first wave of trade levies in Trump's new term,
and their impact will ripple well beyond Canada and Mexico
as other nations brace for the possibility that they may
be targeted next, and as US businesses await possible retaliatory measures.
And this is the one thing that it maybe stops
business from kind of moving ahead on something as they
try to figure out the impact of it. Molly, I
(17:45):
want to bring you back in here, because how much
can the US economy absorb if there is a bit
of a tariff war trade war here? And is it
more of an impact on growth or is it more
of an impact on inflation.
Speaker 11 (17:58):
Well, that's what we had a story out this We
those just examining that exact question. And the conversation this
time around really has been about inflation. But that's because
inflation is you know, of course, has dominated the conversation
for the last couple of years here versus in twenty nineteen,
the first full year after Trump's first room taffs were enacted.
You know, the inflation quote problem then was that we
(18:19):
couldn't get up to two percent inflation, that it had
been running so low for so many years coming out
of the financial crisis. So it's a very different conversation
now versus back then. What was really the concern that
was starting to unfold was looking at how growth is
starting to slow down in response to tariffs, how business
investment is stalling, industrial production is contracting, those factory jobs
(18:41):
are actually not coming back here, and how these are
then going to be headwinds to growth. Of course, that
all got very soon overshadowed by the pandemic and we
didn't really get to see the full effects of it
play out, but it's a good lesson for this time around,
and that's what our story was looking at. As we
just recently got new transcripts from the FED. These are
verbatim closed door accounts that come out with a five
(19:03):
year lag from those meetings that were in twenty nineteen,
and we saw that it was really more the growth
concerns rather than inflation that dominated the conversation back then.
Speaker 2 (19:11):
Well, speaking of the FED, there were a lot of
questions Molly to Fed chair J. Powell earlier this week
about Trump's proposed policies, and you know, just to paraphrase
a little bit, he basically said, well, we haven't seen
the policies enacted yet, so we can't really comment on them.
We don't have a roadmap for them necessarily. Now he's
now at the FED, they have their work cut out
for him because they know that these tariffs are starting tomorrow.
(19:32):
How does it change the conversation that they're having.
Speaker 11 (19:34):
Well, I think the flat that honestly Powell has gotten,
you know from economists who have commented on this since
the FED meeting on Wednesday, is that the Fed you know,
communication up until Wednesday was we are data dependent. We're
going away to see how economic data evolves and that's
going to guide our policy and how we think about
the economy. But the message that a lot of people
(19:55):
heard on Wednesday was we're going to wait to see
what Donald Trump and his administration doesn't that that's going
to guid or understanding of the economy. Those are two
very different things, and that's I mean, it's still just
again was saying devil in the details, like there's just
still so much unknown with that, and of course, how
much the data of that is going to pick up
as well.
Speaker 6 (20:14):
You know, and it makes me wonder about kind of
this Goldie Locke's economy, perhap, or just write economy that.
Speaker 5 (20:20):
President Trump inherited in his second term.
Speaker 6 (20:23):
You write about it in the BusinessWeek newsletter b W
Daily that is out on the Bloomberg and at Bloomberg
dot com.
Speaker 5 (20:30):
I mean, he came into this.
Speaker 6 (20:33):
Second term with a lot of things doing really well.
Speaker 12 (20:38):
Yeah, like Molly was saying, there, you've got a very
strong consumer base at the moment, you have strong aggregate GDP.
The labor market is cooling, but still in pretty good order.
The Fed chairman himself, Jerome Pile, said this week that
the economy is in a good place. Of course, the
question becomes what sort of a bouncing act President Trump
faces under one hounds once a go ahead with these tariffs,
(21:01):
how might that impact consumer confidence and business confidence? For example,
he also has other programs going on, for example, a
deportation program, which is a question mark for businesses who
might be impacted by that labor source. But of course,
on President Trump's side, he would make the point that
they're also pushing for lower taxes that will spur investment.
They also say higher tariffs will bring manufacturing and investment
(21:24):
back to the US as well, and of course raise
revenues to offset fiscal depths. So they're making the case
for what they need to do. But I think at
the very least, it's a lot of policy change for
any economy to manage in a short space of time,
and I think there's going to be a lot to
assess that's coming at US pretty fast now in the
weeks and the months ahead.
Speaker 6 (21:41):
We should point out too that, of course, this was
a major part of President Trump's campaign, his pledges to
impose sweeping tariffs. He is already ready ordered up reports
there do April first on overall trade issues in tariffs
that could lead him to trigger new levees or to
quit the Continental Trade pack giving negotiated with Canada and
Mexico in his first term. That agreement, by the way,
is up for review in twenty twenty six. One thing
(22:02):
I want to ask you, and you know, we filter
all of what comes out of Washington through the financial markets,
and we did see equity markets take a leg down
here on news from the White House Press secretary that
indeed there would be Tarr's forthcoming on Canada, on Mexico,
and on China. So I do wonder the president is
(22:24):
also sensitive to what happens in the financial markets.
Speaker 5 (22:27):
What is the overall thinking.
Speaker 6 (22:29):
Within the economic community in terms of how much of
it is bluster, how much of it is still campaigning,
how much of it is now a real activity, How
do you make sense of it, and how much do
we think that the president, once he sees some market reaction,
might reverse course.
Speaker 12 (22:46):
It's certainly a moving target. I mean, to your point,
a lot of e commists say this is a negotiating tool.
Some of President Trump's own officials have made that point.
I mean, Howard Lipnik in his hearing for Commerce Secrety
made the point this week Tariff's circumbany us for negotiating.
Scott Beston has made that point. So there is a
kind of a feeling. Now. Critics would say that's complacency
among the market watching community, because President Trump has made
(23:08):
it very clear to the people during his campaign that
he's going to go ahead with tariffs, and he has
a mandate to do so. But then to your point,
there is a question, and this is what it goes
back to. Earlier the point is making about the economy
and the bouncing Act. There is there a point where
if markets responding negatively, would that put the brakes on
President Trump's use of tariffs. This is a talking point
among market watchers all the time. You'd have to say,
(23:30):
so far, given all the tariff talks since President Trump
won the election and come back to office, markets having
to really toss themselves upside down on this, certainly not
equity markets. There's been bigger moves in currency markets. But
if we start to see equities come off sharply over
the coming weeks, I think that certainly would add a
fuel to this idea that there is a break in
President Trump's ambitions. But I wouldn't say we're there yet
(23:51):
on that one.
Speaker 5 (23:51):
It's a good point, Molly.
Speaker 6 (23:52):
One thing I want to ask you, though, if you
know a lot of analysis, is to also come down
that when it comes to tariffs, if it's kind of
one big dump and we know kind of what's hitting us,
that's one thing. But if it's a constant barrage every
few weeks or every month about some new tariffs being levied,
that is a bigger toll on the US economy, right.
Speaker 11 (24:13):
And to the point then of as well, what was
the real factor on growth in twenty nineteen, back when
in the first turn, when this was happening. The broader
uncertainty about US trade policy also factors into that that
businesses are really just almost paralyzed, you know, in like
terms of we just don't know how this outlook is
going to evolve. How can you really move forward with
(24:33):
investments that are moving on a much longer timeline than
what the White House is coming out with every other day.
So that really is difficult when you're thinking about how
you're going to be making, you know, multimillion billion dollar
decisions and you just really have no idea when that
moving target is going to hit.
Speaker 2 (24:49):
Yeah, I think important to look at the fine print
too of what happens tomorrow, given that some products could
be exempted, and you know, get an understanding for what
exactly this is going to hit. Hey, next week, we
do have more economic data coming a real look at
the jobs market next week with Jolts with the January
Employment Report survey says for at least the change in
(25:11):
private payrolls or changeing non front payrolls, rather one hundred
and sixty five thousand jobs added, what's the conversation that
you're going to be having around that.
Speaker 11 (25:19):
Though, honestly, the bigger conversation I keep forgetting that we
are getting January data, because the bigger one is more
about the revisions to all of last year. So that's
really where the conversation is happening. If you remember, we
got a report last August, this was an initial estimate
of what the revisions might show for payrolls through March
of twenty twenty four, and that estimate said that payrolls
(25:40):
would be marked down by more than eight hundred thousand
and that was the biggest downward revision since two thousand
and nine. That was very scary at the time and
even drew a lot of attention from Congress, which usually
like this is a pretty sleepy report for the most part.
So that's where a lot of the eyeballs are going
to be. The other big thing is we're going to
see how the new population estimates are going to impact
(26:02):
the household survey, and right this is going to be
really important to the Trump administration as well, because so
much of what has boosted the labor market in recent
years has been immigration, and if we start to see
that that's really starting to falter off, could really change
our understanding of the strength.
Speaker 6 (26:18):
All Right, Molla Smith, thank you so much, Bloomberg News
Global Economy Reporter, and of course out there in DC,
Bloomberg News Global Economy Reporter.
Speaker 5 (26:24):
End to current.
Speaker 6 (26:24):
Some newmes from Meta that maybe not surprising since we
kind of see a trend maybe happening.
Speaker 2 (26:29):
Yeah, the Wall Street Journal reports that Medicine talks to
reincorporate in Texas or another state. This would not relocate
its corporate headquarters from California, but it follows moves that
Elon Musk companies have made as far as leaving Delaware
and going to Texas. Again, the Wall Street Journal reporting
that news just moments ago.
Speaker 6 (26:49):
And we know most of US companies right are incorporating Delaware,
so this would be a little bit of a switch
against the trend that we've seen for decades. All Right, folks,
you are listening and watching Bloomberg Business Sweek Carol Master,
Tim Stanevek, morticalm In just a moment.
Speaker 1 (27:02):
You're listening to the Bloomberg Business Week podcast. Catch us
live weekday afternoons from two to five eas during Listen
on Applecarplay and Android auto with the Bloomberg Business app
or watch us live on YouTube.
Speaker 6 (27:15):
The nation's biggest office to residential conversion, it is hitting
the market with thirteen hundred apartments carved from a million
square foot brick fortress originally built to house computers and
not much else, which means they didn't really care too
much about window placement.
Speaker 2 (27:29):
No, they didn't, but after a two year transformation the
fifty five year old at building in Manhattan's Financial District.
For years it was used to process checks, money transfers,
and other paperwork for manufacturers, handover trust and later for
back office staff at a company called JP Morgan. That
building now Carol It's unrecognizable.
Speaker 6 (27:46):
GFP real Estate is one of the developers behind the building.
The firm has a portfolio of more than sixteen million
square feet, focusing on operating, property management, and development of
commercial real estate in addition to owning.
Speaker 5 (27:58):
Of course.
Speaker 6 (27:58):
Brian Steinwertzel, co CEO and principal of GFP real Estate.
He joins us from New York City. Brian, so happy
to have you here with us. As story, We've been
a little obsessed with it. Contextualize it for us. How
big of a project was this for your team. How
difficult was it to make this conversion?
Speaker 7 (28:16):
Well, Carroll, Tim, thanks for having me here. This is
the largest office residential conversion projects in the country to date.
We took a one million square foot building, basically had
to remove all of the brick from the outside of
the building, carved two lightwells throughout the building, and then
took all of that floor area and restacked it on
(28:36):
top for an extra ten stories. And what results from
that is over one three hundred apartments which we launched
leasing this week. That will include over one hundred thousand
square feet of amenities. And if you're in the building today,
there is a rooftop deck, indoor and outdoor pool, coworking,
(29:00):
pickleball courts, basketball courts, bowling alley, golf, simulators, arcades, pretty
much anything anyone would want in a residential building, Brian.
Speaker 2 (29:11):
For years, Carol and I've been talking to folks in
real estate, especially in the wake of the pandemic when
people weren't coming to offices in Manhattan and other cities.
But there was also a housing crunch and a lot
of affordabilly issues in cities such as this. How do
you make the numbers work here? Because we were told
over and over again it's just too hard to do.
In most buildings, the windows don't open, the bathrooms aren't
(29:32):
in the right place, the plumbing doesn't make sense. It
just doesn't work from a numbers perspective. How do you
make it work?
Speaker 7 (29:39):
Well, we start with an extraordinary team and the team
at GFP real Estate had just finished building David Geffenhall
for Lincoln Center, and we brought on such a Ruddy,
which is one of the top firms that does this
kind of work, and along with our partner metro Loft,
assembled a team that included over a thousand people that
have touched this project in order to make happen. You know,
(30:01):
New York City unfortunately has suffered a distress commercial office environment,
but we are looking to make lemonade where there's lemons.
And so we bought this building from the lenders and
from the prior owner, and we brought on a capital
partner that was willing to take the risk to do this.
And with that team of over a thousand people have
(30:22):
created this project.
Speaker 6 (30:25):
And you guys got what a five hundred and thirty
six million dollar loan for the acquisition of the building
its existing debt and the cost of conversion.
Speaker 5 (30:32):
And you know, so you.
Speaker 6 (30:34):
Did this, is it fully give us an idea of
occupancy what you were seeing, give us an idea of
the interest in the building.
Speaker 7 (30:44):
So the Financial District has done extraordinarily well over the
last decade. I actually lived in the Financial District in
two thousand and four, and the neighborhood is completely different today.
There's tens of thousands of residents that live there, and
every day there's more and more that are coming in.
You know, the big building has a big capitalization, but
the absorption in this market has been nothing sort of extraordinary.
(31:07):
There were two buildings that opened up recently in the
last year. Both of those are one of them is
completely full and the other one has actually is almost full.
And our anticipation just based on opening on Wednesday and
the number of tours and inquiries we've had, which is
in the hundreds, that we will lease very quickly.
Speaker 5 (31:26):
Can you say how quickly?
Speaker 7 (31:28):
Well, you know, I think for GFP real Estate and
our partners were very conservative in our assumptions of how long. Yeah,
but our hope is that by the end of next
year will be entirely leased.
Speaker 2 (31:39):
Does this create some sort of new blueprint for how
you move forward with conversions, is that what's next? Are
you interested in converting any more buildings? How are you
thinking about the path forward right now?
Speaker 7 (31:50):
Yeah, So, including this building, we have approximately three thousand
units that are in our pipeline that we're creating. So
we have several other projects that are coming down the
road and will be complete. And I think what's helped
us be successful is a partnership with the city and
state who recognized early on in the pandemic that this
was a major issue and that they had to sit
(32:11):
with the industry and come up with a game plan
for us to take these distress office buildings and create
housing out of them. And so there's a program called
the four sixty seven M program that the mayor and
governor both put into law last year and that has
helped become an accelerator for getting these kinds of buildings done.
(32:31):
And we are, along with our partners, fully invested in
these programs.
Speaker 6 (32:36):
Hey, one of the things, though, you know, you obviously
got through it all, what was though, the largest hurdle
to overcome with the office to residential conversion of this
size and scope.
Speaker 7 (32:49):
It's it's a great. It's a great question, and I'd
say there's almost like it feels like the largest hurdle
every month when you're in a project of this magnitude.
But this is a very complex building. It was designed
to look like an IBM punch card, and the way
they made the punch card lines is they actually had
the facade and each floor jut in and out at
different times on every different floor. And one thing that
(33:11):
we made a decision on early on in the project
is we wanted to actually carry forward that architecture but
at the same time have a new window wall throughout.
And so one of the most difficult things was we
actually have the window wall custom made and it comes
in and out on each floor and that architectural feature
can still be seen from the inside and the outside
of the project. But doing that and preserving that work
(33:35):
was one of the most difficult parts of this project.
Speaker 5 (33:37):
But you knew you wanted to do it right. It
wasn't just because you had to. You wanted to. Is
that fair?
Speaker 7 (33:43):
Yes, it is. I think every project that we take on,
and the majority of our portfolio are historic buildings. We
are looking to preserve whatever can be preserved, especially the
most important elements of that project, and even if it
costs a little bit more or takes a little bit
more time to do it important part and I think
the residents that will live there will see that and
(34:03):
feel good that this was preserved.
Speaker 2 (34:06):
Do the economics of this only work when you create
them for rentals or would it work for sales as well?
Speaker 7 (34:13):
I think the hard part with sales is the building
of this size you're doing. You have to do so
much condo sales that it's more suited towards rental. That
being said, there are a number of other conversion projects
that are condo. Our organization has owned the Flat Iron
Building with partners since the nineteen nineties. In that building
(34:34):
will be turned into a condominium building, but that building
has only a few dozen units, and so it's really
a different scale and magnitude.
Speaker 5 (34:43):
Hey, Brian just quickly got thirty seconds left.
Speaker 6 (34:45):
Here our team Arshanali Bosik catching up with Blackstone president
John Gray, and I think members of our team also
talking with him. He said they're the world's largest commercial
property owner. He said the worst is over for the
global office market after prolonged slump fueled by the pandemic.
Just got twenty five seconds here.
Speaker 7 (35:04):
Do you agree, Well, I certainly hope so, and I
would agree.
Speaker 2 (35:09):
So.
Speaker 7 (35:09):
GFP is the largest landlord of small and medium sized
tenants in New York City, and I think for a
while now we've seen positive absorption and and tenants returning
to the office. I think that he has it right
and I hope that continues.
Speaker 6 (35:21):
All right, great to check in with you, and hopefully
we can do so again in the future. Brian stein Wertzel,
he's co CEO and principle of GFP real Estate. Joining
us here in New York City.
Speaker 8 (35:31):
You are listening to the Bloomberg Business Week podcast. Catch
us live weekday afternoons from two to five pm Eastern.
Listen on Applecarplay and the Android Auto with the Bloomberg
Business app, or watch us live on YouTube.
Speaker 2 (35:44):
I don't need to tell you this, but there's a
lot out there for CEOs to navigate. Right now, we
got breaking news from the White House on tariffs. We've
been covering that this afternoon. Not to mention the new
administration in the White House, their priority is geopolitical threats,
technological disruption from AI and.
Speaker 6 (36:00):
Yeah, there are so much. Sharon Marcel is CEO of
Boston Consulting Group. Here's regularly from chief executive officers from
the c suite, and she joins us right now from
Raleigh Durham, No, North Carolina. Sharon, good to have you
here with us. You are just back from Davos. Our
team too. We've all been kind of talking about what
was talked about, what was top of mind, what was
(36:22):
concerned to the things that I heard It was President
Trump and artificial intelligence.
Speaker 5 (36:28):
What did you hear?
Speaker 13 (36:30):
Yeah, Carolyn, tim thanks for having me. I really appreciate it.
And exactly right, just back from Davos. I'm Sharon Marcel.
I'm the North America head of BCG, the Boston Consulting Group.
So this is my third year at Davos. I think
each each year you get a bit more out of it.
And you know, I was struck by a few things
(36:51):
in terms of Davos. I think number one was the
optimism in terms of the business growth orientation. And I
think that's you know, of course, particularly true in the
US and then in Asia, less so in core Europe
and in places like Canada and Mexico. When you spoke
to some of the uncertainty there with respect to tear US,
(37:14):
but there was, you know, a good sense of optimism.
Speaker 9 (37:18):
I think the other.
Speaker 6 (37:21):
Can I jump in for a second, because I'm just thinking,
what is the story that's dominating on this Friday, and
we're all trying to put some context around it. But
we do have President Trump attending to move ahead with
plans tomorrow to compost twenty five percent tariffs on Mexico
and Canada, a ten percent leve on China. The White
House has confirmed this, and this could be just step
(37:42):
one in more tariffs to come, perhaps on other nations.
We know that that has been certainly some broad expectations
ahead of.
Speaker 5 (37:50):
Donald Trump coming into the White House.
Speaker 6 (37:52):
How might this news, if it was out before Davos
maybe impact some of that optimism.
Speaker 13 (37:59):
I think what was anticipated at Davas was there would
be tear us, you know. I think that was a
promise during the presidential campaign, and I think that was anticipated.
I also think that we did a survey of companies
from around the world. Eighty five percent of companies have
a plan in terms of how to deal with it.
Speaker 9 (38:21):
Now.
Speaker 13 (38:21):
It's a plan which is very much in flux and
lots of different scenarios because it's not known exactly when
it will come, exactly what it will look like, and
so I think those scenarios are very fluid. But I
do think that versus in previous times, I think there
has been a lot of planfulness in terms of preparing
(38:42):
for what might come.
Speaker 2 (38:43):
You know, one thing that I've been pretty surprised about
over the last couple of weeks has been the changing
tone that we're hearing from US companies about this administration
and their willingness to really embrace it. And I'm wondering
what you're hearing behind the scenes from CEOs about that
is is it really is it really purely the cost
of doing business? Is that what it's seen, or are
(39:05):
they seeing this as embracing a fundamental shift in America
right now?
Speaker 13 (39:11):
Look, I think I think if you if you talk
to business leaders, you know they're positive in terms of
some of the economic signals. Now, those signals, you know,
aren't brand new, They're coming from twenty twenty four and before.
And I think I think there's optimism about the pro
growth posture of the administration. So so you know, I
(39:34):
don't know how much there is really new, but I
think there will be greater investment in the US.
Speaker 9 (39:41):
I think that's seen as a positive.
Speaker 13 (39:42):
I think there's an there there may well be a
lower tax regime, which could be positive in terms of
actually investing more on R and D, investing more in
the business community, and also for returns, and so I
think there's there's reasons for positivity, but I don't want
to underplay there's also a lot of volatility and a
(40:02):
lot of which is unknown that I think business leaders
are preparing well.
Speaker 2 (40:06):
Sharon, just give us an idea of who's some of
the business leaders you spoke to at Davos where we
like specifics here.
Speaker 9 (40:13):
Well, from a range of industries.
Speaker 13 (40:14):
I mean I spoke to people from the pharmaceutical industry,
people from the tech industry, people from the aviation industry,
So it was really a wide range of industries. No
one sample set, no.
Speaker 2 (40:27):
Can you give us any names.
Speaker 9 (40:29):
I can't.
Speaker 6 (40:32):
But you did say that there was optimism, and I
guess you know what I do wonder for CEO's Sharon,
is that, as you said, they expected tariffs, we were
kind of surprised on Donald Trump's first day or even
two days in the White House that we really didn't
get anything specific on that front. Because I think everybody
expected that to be the first thing out of the gate.
Having said that is for the C suite, even if
(40:57):
twenty five percent tariffs can be on Mexico and Canada
and who knows what might come might be onerous or problematic,
knowing what you are dealing with rather than the unknown,
is that better for the C suite or not?
Speaker 5 (41:11):
Necessarily?
Speaker 9 (41:12):
I think you're right. I think it's better.
Speaker 13 (41:14):
And I think when when you know what direction things
are heading in, you know you've done all the scenario analysis,
you have tentative plans for which direction you can head in,
but you know you're not going to put your dollars
at work until there's greater certainty. And so I think
I think as there is greater certainty, whatever direction that
heads be in, I think it will open up the
(41:35):
aperture in terms of investment.
Speaker 2 (41:38):
I think one area that we've been obsessed with over
those lists last week has been AI and really trying
to understand the way that the narrative was rewritten or
could be rewritten as a result of what we saw
from Deep Seek. And I know that was a big
part of the conversation at Davos. In your view, when
are you going to start to see companies that are
(41:59):
not actually in the AI space start to increase their
bottom lines as a result from this technology.
Speaker 13 (42:05):
I think that's a great question, and I think that
was actually the question at Davos, and there was a
lot of great discussion. A couple of years we've been
talking about AI, and the business community has been very
excited about AI, and I think what's encouraging is those
conversations are moving from hype and experimentation and use cases.
(42:27):
You know, we're doing twenty five use cases over here
and thirty five use cases over there, to actually, where
are we going to get tangible value in the core
processes in our business.
Speaker 9 (42:36):
That actually drive competitive advantage. You know.
Speaker 13 (42:39):
In fact, in twenty twenty four, PCG did a survey
of executives and we found that two thirds of AI
transformations were falling short of expectations. But we're finding with
our clients and in the conversations at Davos that are
succeeding it's because they're focusing. They're focusing on the areas
of the business that they can transform and create competitive
(43:00):
advantage versus lots of areas around the edges. And we
like to say, you know, look you can get the algorithms,
that's ten percent. You can get the tech stack, it's important,
but it's twenty percent. But what you have to be
able to do is get the processes in people and
really scale the transformation that we call it ten twenty seventy.
And I think that's a place where companies, clients, you know,
(43:24):
the folks and davas are leaning into where can we
really scale and get competitive advantage.
Speaker 6 (43:29):
Hey, before we go, just got about a minute left here, Sharon,
and I do wonder going back to you know, we're
just focusing once again on davas a little bit more.
Is the corporate community breathing a sigh of relief that
even though Donald Trump, many would say, President Trump is
(43:49):
unpredictable or can be unpredictable in terms of what we
get from him and sometimes at unexpected times or unexpected places,
that they expect it to be an easier regulatory and
very business friendly environment. So they're willing to kind of
put up with some things because they think the overall
policies will be much more friendly to doing business in
(44:13):
the United States.
Speaker 5 (44:14):
And just got about thirty seconds here.
Speaker 13 (44:16):
Sure, I think there's a couple of the economy is strong, right,
So I think that's that's the core input. And I
think if you think about this current administration, I think
some of the policies that Donald Trump campaigned on and
was elected on are a little bit more pro growth
oriented and and I think that you know, the business
(44:38):
leaders can see some of those policies and regulations as
being adventacious in terms of the growth the growth of
their business.
Speaker 6 (44:47):
And even tariffs. Just ten seconds they thought tariffs were
growth oriented.
Speaker 9 (44:54):
I think those are. I think tariffs are. I think
tariffs are back.
Speaker 13 (44:59):
But I think other policies that the administration is advocating
our growth oriented.
Speaker 6 (45:04):
All right, Great to get some time with you and
to share what you saw and heard at DAVO. Sharon Marcel,
chief executive officer of Boston Consulting Group North America, joining
us from North Carolina.
Speaker 1 (45:16):
This is the Bloomberg Business Week Podcast. Listen live each
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Auto with the Bloomberg Business App. You can also listen
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Speaker 6 (45:34):
All right, everybody just got about eighteen minutes to go
until we wrap up the trading day and the trading week.
Carol Master along with Tim Staneviek live here in our
Bloomberg Interactive Broker Studio live on Blueberg Business Week. Just
a reminder, we are anticipating at the top of the
hour in an update and briefing from the NTSB looking
at into that investigation to Wednesday's mid air collision at
(45:56):
Reagan National. So as soon as that begins, we will
take you there live the latest on that. In the meantime,
got to talk about the markets because a lot of
news coming out of DC and really top of mine
right now, Tim, is what we are anticipating at this point,
tariffs that go into effect tomorrow.
Speaker 2 (46:12):
Yes, I knew you were going to say.
Speaker 5 (46:13):
Tariffs the chief trading partners with the United States.
Speaker 2 (46:16):
Yeah, that would include Mexico Canada of those twenty five
percent tariffs, then ten percent tariffs on China. Shan O'Hara
is president at piacer Ets. They got about forty seven
billion dollars in assets under management. Sean joins us from
West Palm Beach, Florida this afternoon. Sewan, good to have
you with us. We did see stocks take a leg
lower after the White House said during the press briefing
(46:38):
that those tariffs would begin tomorrow. How are you looking
at the policies that have been enacted thus far at
least been talked about thus far by the Trump administration.
Speaker 14 (46:48):
Good afternoon, Thanks for having me. It's nice to be
with you both. I think there's some good and some bad,
if you will, or some that are appealing to investors,
and then some that make investors a little nervous, which
is probably why this information or news on tariffs is
sort of causing a little bit of stress in the
market overall. You know, if you take the President at
his word, he's going to reduce regulation, make it easier
(47:11):
for businesses to do the things that they do. I
think that's generally a positive. He's definitely got to focus
on America first. I think that's also generally a positive.
So as all of these policies sort of tend to
roll themselves out, we'll get a.
Speaker 4 (47:25):
Clearer and clearer picture.
Speaker 14 (47:28):
My own personal view on the tariff side is I
think we're making a lot out of something that may
not ultimately mean that much in the long run.
Speaker 4 (47:36):
I think the.
Speaker 14 (47:37):
President uses terrorists as a way to negotiate, if you will,
to get people to do the things that he thinks
they should do that would benefit Americans the most and
benefit the American economy the most. But I think you
get a little bit of a mixed bag going on,
some good, a little bit that makes us nervous, I guess,
or at least makes the market nervous.
Speaker 6 (47:54):
So soon, what do you make though of really the
pushback what seems on ESG, which has been actually happening.
I would say, certainly here on the financial side of
things for a while now, but even on DEI diversity,
equity and inclusion, the pushback on those policies, How do
you square when after I feel like it's been years
and years and years that consultants, McKinsey and others have
(48:16):
talked about the importance of diversity from even a financial level,
that diverse boards companies that are diverse in terms of
their approach and their composition, that they financially do better.
Speaker 5 (48:28):
Was that just all lies?
Speaker 4 (48:30):
Well?
Speaker 14 (48:30):
I mean, I guess that's what you get when you
ask mckensey consultants how you should run your business? A
little poke at that maybe within their twenty six year
old MBAs. I think generally speaking, if you run a company,
you should run a company for the benefit of your
shareholders first. And I think that you know it's it's
it couldn't happen soon enough in my view, that we
sort of have shifted some of these things off to
the side. I think that's a net positive for companies.
(48:53):
You know, one of the things that we need in
this market, and that American companies need is productivity growth.
When you have programs that sort of potentially stunt that
productivity growth or are an additional expense line in terms
of how they run their business, then that sort of
stunts productivity. And so we never were real big believers
(49:15):
in ESG or DEI. We never followed all the big
ETF issuers into the ESG to try to get the
big institutional assets under management. We just focused on trying
to find strategies in our ETF lineup that were really
focused on fundamentals that were good for companies that would
hopefully over time, make those companies more valuable and see
(49:35):
their stock prices rise.
Speaker 6 (49:37):
So, in terms of you said we kicked it off
talking about the second term of Donald Trump and the
White House, you said, some good policies, some bad policies.
The most right story in the Bloomberg has to do
with these tariffs that are coming on China, Mexico and Canada, right,
and they are expected to go into effect tomorrow. Twenty
(49:58):
five percent on Mexico and Canada, ten percent levy on China.
Speaker 5 (50:02):
Is that in your good bad column? In the bad column?
Speaker 6 (50:05):
In terms of the possible impact on companies and the
US economy and ultimately on US publicly held companies, I
did it.
Speaker 14 (50:13):
Put it in my bad. I put it in my
unknown category. We'll have to seek category.
Speaker 4 (50:18):
I think generally, why unknown?
Speaker 14 (50:19):
Yeah, Well, because I don't think we really know what
the ultimate tariffs are going to be, or if there
are actually tariffs that last. I mean, everybody needs to
keep in mind this is the second time that President
Trump has been president, and the first time he wasn't
very different in terms of.
Speaker 4 (50:35):
How vocal he was about tariffs.
Speaker 14 (50:37):
And in spite of all of that, the markets did
just fine and the American economy grew. And so I
think he's focused on the tariff side because of all
these trade deficits. In other words, we shouldn't have trading
partners where we're as unequal as we are. I'm not
sure we'll ever be equal on the trade side with China,
but we should do what we can, if you will,
to make sure that the American companies that are exporting
(50:59):
outside of the US US have an equal chance. And
so I suspect that we're not going to see, you know,
twenty five or thirty percent tariffs on Mexico or Canada.
They might meet somewhere in the middle, or they may
recraft an overall trade deal that makes them not necessary.
So I just I just think we need to wait
and see and be a little bit calm. I know that,
(51:19):
you know, it's one of those things that we talk
about on or that some people talk about on the
air all the time, and it makes everybody nervous. I
would just say, with regard to that, you know, let's
just pump the brakes a little on the hysteric hysteria there,
and let's wait and see what happens and what the
outcome is.
Speaker 2 (51:34):
Well, you have dozens of ETFs at PACER, including those
that are you've categorized as risk mitigation, high value growth,
somatic growth factor, structured structured outcome and income. Where are
you seeing the flows right now as far as money
coming in where people putting.
Speaker 4 (51:51):
In a great, great question.
Speaker 14 (51:53):
The biggest flows for us are coming into an ETF
the tickers COLG, it's our growth like twin sister or
brother to the cow Z value story used free cap move.
Speaker 4 (52:03):
We used free cash flow margin.
Speaker 14 (52:05):
That's a simple calculation as the sales a company gets
divided into the free cash flow, so it's just a
measurement of how effectively companies convert their sales to profits.
And the higher that free cash flow margin, the more
effective companies are. What's fascinating, and I think what's leading
to some of the inflows is that if you look
at say col G versus the Nastak one hundred or
(52:26):
the Russell one thousand growth, we're performing as well or
better over the last couple of years than those two
big indexes with one major distinction which I think is important,
and that is it we only have seventeen percent overlap
to the Russell growth and only about seventeen or fifteen
percent overlap to the Nastak one hundred in terms of
portfolio names, but we only have four percent of the
(52:47):
portfolio weight in the mag seven names, and so One
of the things that we're talking to advisors and investors
about is that what once was designed to be diversified
is not necessarily as the fight as you think based
on the way the market's performed the last couple of years,
and potentially one of the biggest risk to investors is
that over concentration, as much as has made us feel
(53:09):
great on the way up, could be ultimately as disappointing
on the way down. And so we're not saying, you know,
sell all your cues or sell your IWF, which is
the Russell growth ETFO. What we're saying is, you know,
you should recognize how how concentrated and dependent you are
to a very small number of names and perhaps find
a different way to do that. Yeah, and when you
use three cash flow margin as your screen, you wind
(53:30):
up owning names like Apple love.
Speaker 4 (53:31):
In, which is in the Russian growth but a very
small wave.
Speaker 6 (53:34):
We got to run have a great weekend, So glad
we got time. Sean O'Hara, President at Pacer ATFS.
Speaker 5 (53:39):
This is Bloomberg.
Speaker 1 (53:41):
This is the Bloomberg Business Week podcast, available on Apple,
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weekday afternoons from two to five pm Eastern on Bloomberg
dot com, the iHeartRadio app tune In, and the Bloomberg
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