December 2, 2025 • 32 mins
Watch Carol and Tim LIVE every day on YouTube: http://bit.ly/3vTiACF.
American Bitcoin Corp. stock plunged on Tuesday after restricted shares of the crypto miner co-founded by Eric Trump were freed up to be traded. The selloff was swift. Shares lost more than half of their value in less than 30 minutes as the equity lockup expired, triggering repeated trading halts. The stock pared declines later in the trading session.
Shares from a private placement that took place before American Bitcoin merged with Gryphon Digital Mining Inc. became available on Tuesday, according to the crypto miner and a post on the social media platform X by Trump.
“We expect near term volatility as those shares come to market and as some investors take the opportunity to realize gains,” Matt Prusak, president of American Bitcoin, said in a statement.
Crypto firms have often seen large declines after the end of share lockup periods or announcing private investment in public equity filings, as their largely retail investor base takes it as a signal to sell. Retail traders often fear that those early investors will want to lock in their gains and unload shares.
Today's show features:
- Bloomberg News Equities Reporter Monique Mulima on the crypto market and the pullback in shares of Eric Trump’s American Bitcoin Corp.
- Alan Zafran, Co-Founder and Managing Partner of IEQ Capital on the credit market outlook and AI bubble concerns
- Bloomberg News Wealth Reporter Biz Carson on Michael Dell’s $6.25 billion donation to help fund ‘Trump Accounts’ for American children
- Louise Phillips Forbes, Real Estate Broker for Brown Harris Stevens, on the outlook for New York City real estate under Mayor-elect Zohran Mamdani
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Transcript
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
Weekdaily reporting from the magazine that helps global leaders stay
ahead with insight on the people, companies, and trends shaping
today's complex economy. Plus global business, finance and tech news
(00:23):
as it happens. The Bloomberg Business Week Daily Podcast with
Carol Masser and Tim Stenebeck on Bloomberg Radio.
Speaker 2 (00:32):
I'm daving in CRP go on the Bloomberg terminal, Carol,
and I'm seeing that bitcoin is up above ninety two thousand,
and it's at right now up about six point seven percent.
Speaker 3 (00:42):
Yeah, that's today. But as you know, the narrative around
bitcoin has been a sharp pullback. We've seen that in
bitcoin prices over the past month or so. It is
punishing really the most speculative corners of the cryptocurrency market.
And the latest casualty is American Bitcoin Corporation. Shares of
the crypto Minor, which is co founded by Eric Trump,
lost more than half of their value in less than
(01:03):
thirty minutes today, triggering some repeated trading halts. So we
want to get a little bit more on what's going on.
Speaker 2 (01:09):
You're welcome, Monique Malima she's Equity's reporter for Bloomberg new
She's in the Bloomberg Toronto bureau. Monique help us makes
sense of what's happening to American Bitcoin right now? Down
thirty six percent as we speak on a day when
Bitcoin is actually higher. Why are we seeing so much
pressure on American Bitcoin today?
Speaker 4 (01:26):
Yeah, so American Bitcoin. They're bitcoin minor that was spun
out of Hot eight earlier this year, and they've also
been seen decliness throughout the years bitcoin prices have fallen.
Like you mentioned, bitcoin prices have been pressured recently there,
even with the gains today, still down close to around
thirty percent from their highs they saw earlier. And for
bitcoin miners like American Bitcoin, that weighs a lot on
(01:48):
them because they make most of their revenue through either
holding or selling bitcoin, So when the prices go down,
they're going to go down as well. And we've seen
that they've actually underperformed bitcoin over the past couple months.
Some of the other things that.
Speaker 3 (02:01):
Are well wait wait, let me just jump in here though,
why the disconnect, because my gut would be that with
bitcoin going back and bouncing up, mind you, the trend
that we've seen as of late has been a lower one,
but with a bounce up today, why wouldn't shares of
American Bitcoin also be higher.
Speaker 4 (02:17):
So American Bitcoin also has some other factors weighing on it.
Part of it is that, you know, for other bitcoin miners,
they've diversified, some of them are looking at AIDATA centers
and other opportunities to kind of get out of just bitcoin.
But for American Bitcoin, there are also some specific pressures today.
Eric Trump posted earlier on x that the company had
(02:37):
an unlock for some of its shares today, so that
might be pressuring as well. And you also have to
keep in mind for American Bitcoin, they have a largely
retail trader base in terms of their investors, and that
can make shares a lot more volatile to Some of
the things happening in the markets are changing sentiment, and
we've seen that crypto sentiment right now is a little
more negative.
Speaker 2 (02:55):
Yeah, I think that's absolutely fair to say, still a
lot more positive than it was yesterday, a little bit
of a rebound, we're seeing a little bit of a
floora now that's above ninety thousand. What are the folks
you talk to in the crypto community say to you
about sort of the next catalyst or the next ceiling
or floor to watch for.
Speaker 3 (03:13):
Yeah, so in.
Speaker 4 (03:14):
Terms of the next catalyst, people are really hoping to
see the Market Structure bill pass that's being considered by
the US Senate. That would give some more clarity around
kind of the crypto industry as a whole on the
regulation surrounding that. So they see that's a potential catalyst.
There's also just needs to be a better sentiment in
the markets in general. We're seeing crypto isn't just moving
(03:35):
off of its own prices in terms of tokens. It's
being affected by the broadom macro environment of more risk
off in terms of investors right now. And you know,
if we do see more interest rate cuts going forward,
maybe investors would also feel more confident. Analysts are thinking.
Speaker 3 (03:51):
So are we seeing though, I'm just trying to think
of some of the other miners that are out there
and maybe not apples to apples. I mean, I'm looking
at strategy it's actually up to But are other miners
being hurt as well?
Speaker 4 (04:03):
So Hot eight is being hurt today, but that's because
they still are the majority owner of American Bitcoin, so
their shares are down quite a bit more so off
of what's happening with American Bitcoin itself. But like I mentioned,
there's some specific factors to American Bitcoin because they did
have some shares unlocked today from some early investors. That
often can weigh on crypto companies, especially ones that have
(04:25):
a large retail investor bases, that can be a little
more kind of volatility added in because of that, because
they're moving a lot.
Speaker 3 (04:34):
Off of sentiment, so insider selling.
Speaker 4 (04:38):
Not necessarily that the insiders are selling, it's that there's
been an unlock, so they have the opportunity if they
choose to sell. But we've seen in passed for crypto companies.
We saw this with Sharplank as well earlier this year,
that one there are unlocks that those shares can often
then go down because of some of those retail investor
fears that oh, if the early investors can now sell,
(04:59):
maybe they'll choose to so then they're thinking, oh, maybe
we should get out before they do.
Speaker 2 (05:03):
Yeah. One thing we should notice we have spoken to
Eric Trump several times over the last few months. He
told me in September that he was committed to the company.
He knows about seven point five percent of it, and
then Carol, hebreiterated to us just in the last few
weeks that he's still committed to the company and he
hasn't sold any shares and will not be selling any
shares anytime soon.
Speaker 3 (05:21):
Yeah, definitely committed and certainly defending the idea of bitcoin.
But that is true of like many folks who are
within the bitcoin industry. And we've got a story on
the Bloomberg too that talks about like get ready for
like a tremendous rally again and a bounce back, you know,
so we definitely see this that what can be a
volatile trade. I just want to look ahead real quickly.
(05:41):
Just got about forty seconds here, Monique. You know, we've
got a FED meeting next week. If we get a
rate cut, you know, the gut response would be that
any kind of speculative high valuation you know, type of
asset should rally. Should we assume that that will be
(06:02):
true along the crypto universe.
Speaker 4 (06:05):
Yes, there are some analysts that are saying an interest
rate cut would help crypto. We've seen some more risk
pullback in terms of investors recently, as they were fears
earlier that maybe there wouldn't be interest rate cuts or
uncertainty around the path for interest rates going forward. So
they're hoping that once people have a little more certainty
around kind of the macro environment in the US and
(06:26):
where the economy is headed, then they'll feel more confident
being in some of these riskier assets like crypto.
Speaker 3 (06:32):
All right, we're going to leave it, Mounique, Thanks so much.
Monique Melima. She is equities reporter at Bloomberg News, joining
us from our Toronto bureau. Again, as we look at
American bitcoin, we did see some halts in the trade today,
but this dock, I'm assuming it's one of your decliners.
Speaker 2 (06:46):
Yeah, it is gone right now by thirty six percent,
but earlier in the session was down as much as
fifty one percent. Stay with us. More from Bloomberg Business
Week Daily coming up after this.
Speaker 1 (07:00):
You're listening to the Bloomberg Business Week Daily Podcast. Catch
us live weekday afternoons from two to five Easter and
listen on Applecarplay and Android Otto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 2 (07:15):
I think it's fair to say Michael and Susan Dell
took the Giving Tuesday pledge. Seriously, They're going to give
twenty five million American children two hundred and fifty dollars
each to jump start an investment account for their futures.
It's a six point twenty five billion dollar gift. It
builds on the Investor America Initiative, better known as Trump Accounts.
It was created earlier this year as part of President
Donald Trump's One Big Beautiful Bill Act. Here's President Trump
(07:37):
at the White House a little earlier today.
Speaker 5 (07:40):
An investment's going to be made. That investment's going to
continue to grow. We hope, right, We hope, but it
will and they'll be they'll feel like they'll feel like
Michael Dell someday, but at eighteen, they'll have a lot
of money, a lot more money than they would have had, potentially,
a lot of money.
Speaker 6 (08:00):
Got to see the power of compound interest early in
my life, and that has brought me here to this moment,
and hopefully we'll inspire that kind of opportunity for many
more young people in this country.
Speaker 2 (08:18):
That was Michael Dell earlier today. Right before that, that
was a President Trump, both from the White House talking
about this six point twenty five billion dollar gift. I
want to bring in a Biz Carson. She's a journalist
based out in our San Francisco bureau who wrote about
this donation, about this gift, She joins us from San Francisco. Biz.
(08:39):
What was it that got Michael Dell's attention with these
Trump accounts? You spoke to him ahead of this announcement?
Speaker 7 (08:47):
Yeah, I mean I spoke to him yesterday, and he's
very excited about investing in American children. It's been something
that his foundation has been doing for twenty six years,
but he kind of faced this philanthropic problem. It's a
good problem to have, but how do you give away
billions of dollars? And his foundation has done everything from
grants to scholarships, but this invest America Act, the Trump
(09:10):
accounts offered a new venue, a new way for him
as a philanthropist to give money to a large percentage
of American children. He was thinking of starting with Texas originally,
but it grew in scope and that's how we end
up with a six point twenty five billion dollar gift
that's going to impack twenty five million American children.
Speaker 3 (09:28):
Yeah, it's massive. You know, Tim and I have been
talking about this. I think everybody's been talking about this
story all day, BIZ, And so how does it all work,
like where does where's the fund registered, where's the fund managed?
Like how does it work? And who specifically is really
going to be able to access this?
Speaker 7 (09:45):
Well, it helps that this is officially a government program
because that's been a philanthropic problem of how do you
pick a nonprofit how do you make sure this is
actually getting in the hands of the people who they
plan to support. So under the Trump account and part
of the Big Beautiful Bills that this is now a
government program that's going to be handled through the US Treasury.
And so for the Trump accounts, those are going to
(10:06):
be seated for newborn children that are born between twenty
twenty five to twenty twenty with one thousand dollars from
the government, and those will be opened automatically after the
child is born. Then for all other children under the
age of eighteen, they're eligible to activate their account next
year starting after July fourth, and they can open an
investment account. And Dell's gift he's going to be giving
(10:28):
the money to the US Treasury. And so for children
who are not eligible under the newborn government credit but
are still under the age of ten and in certain
zip codes where the median income is below one hundred
and fifty thousand. The US Treasury will be dispersing the
money for those accounts as well, coming from the Dell gift,
and that's going to be two hundred and fifty dollars
(10:48):
to every child under the age of ten who signs
up and is eligible in these zip.
Speaker 2 (10:53):
Codes, certain zip codes? How do we c certain zip codes?
How do we know which zip codes?
Speaker 6 (10:58):
I don't know.
Speaker 7 (10:59):
That's a question, and I'm trying to figure out two
to figure out if I'm in that. It's going to
be a question.
Speaker 2 (11:04):
A lot of us had the same question early early
this morning we saw this.
Speaker 7 (11:08):
Yeah, he said he was going off census data when
we spoke yesterday, and that in his research, his foundation
takes a very data driven approach everything that looking at
zip codes where the median income is less than one
hundred and fifty thousand dollars, he believes he's going to
hit eighty percent of children in that ten and under bucket.
So it's going to be reaching twenty five million, or
(11:29):
eighty percent of children under the age of ten, so
the majority of American children.
Speaker 3 (11:34):
So is the money when it's taken out, is it taxed?
Is it taxes any investment. I'm just curious that under like,
how is it considered like when a student or an
individual becomes eighteen and can actually tap into it.
Speaker 7 (11:50):
Yeah, the money is going to be taxed, as I
believe it's ordinary income, So these are tax free gifts
going in and once they turn eighteen, they can use
the money for education, but they could also use it
for home ownership, startup, entrepreneurship costs, so it's a little
bit more flexible than like a five to twenty nine
for example. A lot of this tax stuff is still
(12:11):
being worked out. I think accountants will be busy in
the next year or so trying to understand the implications
of all of this. But it's designed that the money
is accessible only after the child turns eighteen.
Speaker 2 (12:23):
So there's an annual contribution limit on these Trump accounts
of five thousand dollars. It can be set up for
kids under eight starting on January first. As you mentioned, Biz,
it cannot be touched until individuals are eighteen, but then
it's distributed to holders at age thirty one, regardless of
whether or not they've taken anything out.
Speaker 7 (12:44):
I believe so, but like I said this, they're still
working out a lot of details.
Speaker 2 (12:48):
Well, I think I think it's fair to say not anybody,
like nobody really knows all the details about this, because
they are still being worked out. You did mention it's
more flexible than a five twenty nine, but it's not
totally flexible. You mentioned some of the things that the
money can be spent on. What happens if you don't
spend the money on those things.
Speaker 7 (13:11):
I'm not entirely sure. I think, oh, sorry, if you're
taking out the money to spend it on other things,
then you do have to pay that early penalty, okay, right,
so you can remove it penalty free. And there's a
lot of tax debate around these accounts right now because
are they better than a five twenty nine if you're
going to use it for education? Maybe not? Are they
better than other options available for children if you're looking
(13:33):
to invest. But I think the difference with these accounts,
and that's what Trump and other people are touting, is
that because they're automatically open for newborns, because they're going
to be easily activated for other children, is that they're
hoping to reach children who have never had a savings
account in their life. And so this is going to
unlock something different for them than perhaps a financially savvy,
(13:57):
higher income household that's looking to kind of maximize their
tax advantages.
Speaker 3 (14:02):
I mean, so you could technically you're saying at thirty
one or so we believe at thirty one, y're going
to have to if you haven't used it, I guess,
take the distribution, but you could roll it into another
investment account. I guess if it's about kind of like
wealth creation too, right, which is something we talk about,
you know, socioeconomically, Like it's the access is not the
(14:22):
same for people in the higher income strata versus the
lower always right, the opportunities to create wealth, and so
maybe this is something that helps people get to that
point create some wealth.
Speaker 7 (14:35):
Exactly, many children don't have savings accounts at all. There
will be children who have the maximized with accountants to
the degree, but this is really for those children who
don't have that financial knowledge to have a savings account
and then along the way equip them with financial literacy
because they'll be able to look at it and say, look,
I own part of Apple stock or something like that
(14:56):
through my index fund. You know, can I what is
happening with the company. How do I need to learn
about this? Then we see their money going up and
kind of understand compounding, which is a concept I'd say
most kids under ten don't understand.
Speaker 3 (15:10):
Biz Carson, thank you so much of Bloomberg News. This
is Bloomberg Radio.
Speaker 2 (15:15):
Stay with us. More from Bloomberg Business Week Daily coming
up after this.
Speaker 1 (15:23):
You're listening to the Bloomberg Business Week Daily 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 2 (15:37):
Carol. Yeah, let's talk a little bit about San Francisco.
Let's do that. Okay, just a few years ago it
was a symbol of post pandemic urban doul drums. Yeah,
it's a great story on the Bloomberg Now it's one
of the hottest housing markets in the country.
Speaker 3 (15:49):
Yeah, we're talking about an area where it's really been
hit by the AI boom.
Speaker 2 (15:53):
Yeah, it's reignited demand for high end homes among buyers
cashing in on soaring startup valuations. Now, in addition to
the new influx of tech money, the city's seen a
turnaround in crime. We're covering office demand in cleaner streets.
Mayor Daniel Lurry took office in January with a pro
business slant. He attracted wealthy donors to the cause of
improving San Francisco's fortunes.
Speaker 3 (16:11):
Remember, everybody was like, nobody's coming back to San Francisco,
and here it is.
Speaker 2 (16:16):
Yeah, of course it's coming back well closer to home
for us here in New York there are questions about
the status of residential real estate under the mayor elect
Zoron Mamdanni. He takes office in January wondering what Louis
Phillips Forbes is seeing. She's real estate broker with Brown
Harris Stevens. She's been in the industry for more than
three decades. She's got just around six billion dollars in transaction.
(16:36):
She joins us here in the Bloomberg Interactive broker's studio.
How are you?
Speaker 8 (16:39):
I am great, so happy to be back, Tim Carroll.
Speaker 2 (16:42):
So last time we spoke to you was pre election.
Now we know who the mayor will be. Yes, there
was a lot of handwringing ahead of the election about
people who would leave the city if Zoron Mam Donnie one.
Speaker 8 (16:54):
They haven't left. They haven't left, Just to be clear
that they have not left.
Speaker 2 (16:58):
Are you seeing it? What are you seeing in terms
of real life state right now? What are you hearing?
Speaker 8 (17:01):
I mean, listen, there was Look, we've just gone through
an unprecedented time where we had a government shutdown for
forty four days, which is the longest we've seen, and
we in our housing market here we had a lull.
But honestly, the last three weeks we have been on fire,
multiple bids. In many cases the days on market are
(17:22):
short shortening. This only lagging sector is between four and
six million dollars, which is not necessarily first time buyers.
But it's strong, and I'm feeling like we have an
energy that we should expect, a very a strong indicator
for twenty twenty six.
Speaker 2 (17:39):
So a million to four million doing very well, very well,
above six million doing well.
Speaker 8 (17:43):
I mean, it's not that it's not happening, it's just lagging,
especially if it needs work. But that's not new information,
the cost of doing renovations, et cetera.
Speaker 3 (17:52):
Wow, So what does that one to four million dollar
activity tell you?
Speaker 8 (17:56):
It tells me that people are not waiting for interest
rates to drop any more. That you know, if I
look at the key indicators for twenty twenty six, We're
going to have a stronger growth, probably four percent, four
to six percent. They're saying for increase in the pricing
for the median homes. We're going to have outer boroughs
like the Bronx and Queens seeing more advancement and probably
(18:20):
a quicker pace of growth to New York City just
because of affordability and first time buyers moving there. I
think people are going to wait for the interest rates.
Speaker 2 (18:30):
What do they say, marry the home, date the raid.
What do they say?
Speaker 5 (18:34):
Yes?
Speaker 8 (18:34):
What do you say, carry your home and date the race?
Buy more today than less tomorrow.
Speaker 2 (18:39):
I went by that, and I feel like things are
getting a little.
Speaker 8 (18:43):
Closer a place.
Speaker 3 (18:45):
Without believe it or not.
Speaker 2 (18:48):
You know, I didn't want a conflict of interests.
Speaker 8 (18:50):
No, I know that, But you're settled the rate.
Speaker 2 (18:54):
We've been dating this raid for a long time, thinking
that rates we're going to fall. Feels like we're kind
of engaged at this point. We might end up getting married.
But I'm going to have to refy at some point.
Speaker 8 (19:03):
Yes, but then because it's an arm But that's okay.
The bottom line is is that you know, hold the value.
Especially when rates are a little bit higher, the values
are lower. So the when they drop and again rates
have it, we keep its keep being. It continues to
be baked into the market, so it sometimes causes it
(19:24):
doesn't necessarily mean that your rates are going to actually drop.
Speaker 2 (19:28):
This is I'm glad you said this because if you
were joining us maybe three weeks ago, we'd be talking
about the idea of a fifty year mortgage, something that
Bill Polti of Fanny and Freddy floated a few weeks ago.
And I think at the end of the day, if
you have a longer mortgage, it means one you're paying
more in interest. But I don't think that's the story.
I think the real story is homes are bought on
(19:50):
monthly payments, and what monthly what you can afford, what
you can afford in a monthly payment. So if the
monthly payment goes down, that could actually increase the price
of these homes.
Speaker 8 (19:59):
Absolutely, And that is what if you look at what
things traded in twenty twenty one, which was a recovery market,
you know, we had two point eight five to three
percent interest rates, and those homes had massive growth. And
if you think about what happened outside of the city.
They were thirty five percent increases in evaluations.
Speaker 3 (20:20):
Right, so, as you know, moved out right, they wanted
to get away.
Speaker 8 (20:23):
It's supply and demand and that we're going to still
continue in twenty twenty six to have supply and demand
to outpace. We're going to have more demand than supply
will be there, well, more demand than supply, for sure.
We always talk about affordable housing.
Speaker 3 (20:40):
I mean, I don't know, do you anticipate something different
with this incoming mayor you know? I think that.
Speaker 8 (20:48):
I mean, I did not necessarily vote for him. However,
I believe he has great intentions. I believe that he
believes in what he believes in, and I think that
he has an opportunity with the charter the city. In
our election we had four charter city charter changes that
were all passed, which are an opportunity for him to
(21:12):
pave the way for a number of things, fast tracking
affordable housing. It doesn't go through the bottlenecking and the
political sort of opposition. It's no longer going to If
it's one hundred percent affordable, it will get passed in
a very steady quick way. And when you're looking at
the ability to reverse those charters. There are a number
(21:35):
of them that are all about fast tracking and ummifying.
Speaker 2 (21:40):
You want to say something, yeah, I did on the
affordable housing thing that that Carol was mentioning that what
we've spoken to quite a few people about when it
comes to housing affordability is it's still a question of
supply and demand and whether or not new homes get
built here in the New York City area over the
next few years. Is there a realistic assumption that that
will happen under this next mayor.
Speaker 8 (22:01):
I think that there are they are tools that are
at his disposal to overturn denials through a two to
one vote. That is a truth. We know that the
you know, if there is collaboration, it's a time for
not to have confrontation, but collaboration. And I think he
(22:22):
has an opportunity to bring those people. If you notice,
some of the things that he platformed and preached on
have quieted a little bit because he knows he has
to get things done.
Speaker 3 (22:33):
Well, you know, it's it's so rough because I think
a lot of people understand it's important that we provide
a variety of housing, for sure, for everybody who lives
in a major city right and make it affordable. At
the same time, builders are not going to build unless
they incentive. Is there right, So unless you get that
public private cooperation or something right.
Speaker 8 (22:54):
Unless the policies will the policies towards tax, towards the
what we used to have four twenty one A, which
would give the opportunity for a lowered and you know,
you get compensated for improving your land. Those are things
and policies that will mobilize the private sector.
Speaker 3 (23:12):
The other thing I would say is, let's let's improve
wealth for everybody, and maybe people can afford more homes
and you don't have to do so much affordable Louise,
We've got to run. Thank you so much. Louise Phillips Forbes,
real estate broker at Brown Harris Stevens.
Speaker 2 (23:26):
Stay with us more from Bloomberg Business Week Daily coming
up after this.
Speaker 1 (23:34):
You're listening to the Bloomberg Business Week Daily podcast. Catch
us live weekday afternoons from two to five East. During
this listen on Applecarplay and Android Auto with the Bloomberg
Business app or watch us live on YouTube.
Speaker 3 (23:50):
And you just focus on driving, focus on the roads.
Speaker 2 (23:55):
Would drive Boss, because I'm.
Speaker 8 (23:56):
Just gonna give you just taking bus d see, just
drive baby, See this is.
Speaker 3 (24:03):
The drive to the clothes.
Speaker 2 (24:04):
Where we're going.
Speaker 3 (24:05):
We don't need roads.
Speaker 1 (24:07):
On Bloomberg Radio.
Speaker 3 (24:09):
All right, folks, we're just about nineteen minutes away from
the closing bell on this Tuesday, December second, Carol Master,
Tim's Stanevik life here in our Bloomberg Interactive Brokers studio.
We've got stocks, as we continue to say, bounce it
around here. We're off our highs and lows of the session.
You heard Bill Maloney and Charlie Pellett just talking about
the trade. We're up about four tens of a percent
on the S and P five hundred as we are
(24:32):
driving near the end of the trading day, two hundred
and ninety seven points or six tens of a percent
higher in the Dow Jones Industrial Average NASDEK one hundred
to gain him nearly nine tenths of a percentage point
up two hundred and twenty three points. Foot on over
to the S and P five hundred, not quite an
even split. A few more names to the upside two
hundred and seventy eight at this hour, two hundred and
twenty two to the downside. Tim and three unchanged. And
(24:54):
if you take a quick look at the action and
the treasury trade, just watching those yields. As we are
now about a week out from the last FED decision
of the year, I'm looking at a tier note with
a yield of three point fifty one, shorter end of
the yield curve, most sensitive to what the Fed does
next week, and we're seeing that lower on the day
in terms of the ten year note, though higher, and
(25:15):
we're up about four percent four point zero eight to
be exact.
Speaker 2 (25:19):
I want to bring in Alan Zafferan. He's the co
founder and managing partner of IQ Capital. He's got about
thirty six point eight billion dollars in assets under management.
Alan joins us once again from Foster City, California. Alan,
it's been a few months. How are you doing.
Speaker 7 (25:32):
Great?
Speaker 9 (25:32):
Happy holidays, Carol and Tim.
Speaker 2 (25:34):
Thanks for having me on your show. Happy holidays to you.
There's a lot that I want to get to with you,
and I want to start with private credit. I know
that in the notes that you shared with us ahead
of this interview, you have an outlook for the fourth
quarter of this year, and you argue that private credit
remains a compelling core allocation offering material excess yield relative
to public fixed income even as interest rates to client
(25:56):
for floating rate bonds. Did you write that before or
after the concerns about private credit that have emerged over
the last few weeks.
Speaker 9 (26:05):
Both I would have written it before, and I'd still
write it afterward. And the reason is, in the event
you're really invested in a truly diversified private credit fund
or several funds where you have literally hundreds upon hundreds
and not thousands upon thousands of outstanding loans. Historically, these
private floating rate loans have terrific risk adjusted returns, and
(26:28):
even if eventually defaults go up a bit if the
economy softens, given their floating rate their senior you end
up collecting the predominance you're capital back even if there
is a default over time. That excessive amount of yield
you get relative to public bonds historically does well. It
would be different if you told me you're making a
handful of loans to ill liquid or poorly capitalized businesses.
(26:50):
So you need to be very prudent about which underlying
fund of manager you allocate your capital to, and you
want to make sure those companies have very large balance
sheets generating a bit positive cash flow. Those are the
kinds of private credit loans that we're very comfortable on.
Speaker 3 (27:05):
Hey, how do you think Alan, Hello, happy holidays to
you too.
Speaker 2 (27:10):
Happy hollidays.
Speaker 3 (27:11):
How do you think, though, if we see kind of
mass adoption of private credit, private equity throughout four one
K and investment retirement plans, how that impacts that market?
And I'm just trying to understand because, first of all,
we know it creates a whole new budget capital right
(27:31):
to invest. But I wonder if that leads to less
lucrative deals, messy deals, a lot of money, you know
what I mean. I'm just trying to understand how that
might ultimately play out.
Speaker 9 (27:41):
Yeah, I'm going to give.
Speaker 2 (27:42):
You sort of a three part answer.
Speaker 9 (27:43):
Part one is, albeit its great, it's the democratization of
alternative investments for all investors. You're right, there's going to
be more capital, more demand going into a set supply
of loans, so all things equal, the spread over public
bonds will be a little lower and it'll be a
little less active. Secondly, and more challenging is many of
(28:04):
the ways in which these private loans are offered are
in what they call open end funds and they offer
you the ability to have monthly or quarterly liquidity, And
the secret behind that is a manager will limit probably
no more than maybe five percent of the total fund
value to be liquid data, let's say in any quarterly basis.
So if there was headline risk and bad news came
(28:24):
out and a lot of investors panicked all at once,
the manager could theoretically gate or limit how much any
single individual could get out of the fund and any
quarter increment, even though it's advertised as quarter liquid. So
what you need to understand is if you are investing
in an opened end fund as a client, as an investor,
you need to understand that it's really more of a
(28:45):
permanent allocation of capital, and even though it may pay
cash flows monthly or quarterly, you need to recognize that
it may not be as a liquid as advertised. And
then the third part of my comment is in the
event investors panic, they can create an oversized negative reaction
and price not really reflective of the ability that companies
(29:06):
to pay their loans. But if enough people all want
to get out at once, you're going to have to
live through the cycle till prices reflect back to a
normal point in time. So if a lot of somewhat
less sophisticated investors plowing because they like a high yield,
they run the risk that they will get gated somewhere
along the way, and they need to understand that they
have to hold that asset class through a full cycle
(29:26):
to really understand that it has created a better higher
risk ad just returned the conventional bonds, but along the
way it could be a problem along the way potentially,
And that's why you want to be a very well
allocated set of loans with highly capitalized and cash flow
positive companies.
Speaker 3 (29:42):
Sounds like you're going to have to be much more
particular and be very careful, right.
Speaker 9 (29:46):
That's it. It's buyer beware. It's no different than equities.
You need to understand. Credit is actually positively correlated with equities.
So unlike treasury bonds, private credit goes up and down
in alignment with the direction of stock prices. So you
get paid to take this extra risk, but you're going
to bear extra price risk along the way.
Speaker 2 (30:06):
Okay, Allen, So are we done with private credit? Carrol
for the moment? Okay, I do want to move on
to some other things. We're not gonna have time to
get to everything. But the second, I guess our second
favorite thing to talk about right now is sort of
the where we are if this were an AI bubble,
and you make the case that we're not quite at
nineteen ninety nine yet, but we're getting a little close.
Speaker 9 (30:27):
I think that's probably right. I mean, look, just to
tell how hard it is to predict, Alan Greenspan, who
is the Federal Reserve Governor of the late nineteen nineties,
made a comment about markets can exhibit irrational exuberance. He
was basically saying things fill overvalued. Tim, do you have
any idea what date green Span made that comment?
Speaker 2 (30:46):
I think those were ninety five right, It was in.
Speaker 9 (30:49):
December of nineteen ninety six, and the SB five hundred
more than Yeah, it doubled from the point he made
that comment before the market peaked in March in two
thousand so, and he's diorect of the most malagural person
on the plant on it. So anybody's ability to pinpoint
a top it's a fool's Errand to try. What I
can say is this, the companies themselves, largely, certainly the hyperscalers,
(31:10):
have significant balance sheets and still generate profits. And cash flows,
which interesting if you look under the surface. Most more recently,
you're beginning to see a bit of dispersion amongst the
performance of various AI players. So as an example, more recently,
business is somewhat tied to Google's aig Gemini three product
tend to suddenly be performing better, and suddenly companies tied
(31:32):
to the open AI chat GPT tend to be performing
recently a little less well. It's telling me investors are
starting to discern slightly more both the underlying quality of
the underlying AI and secondly the strength and balance sheets
of these businesses to deliver what's being promised. And so
those are the early stages of markets being critical. And
(31:52):
that's healthy because if we just have a rational exuberance,
it's going to be a big bubble or not there yet.
Speaker 3 (31:58):
All right, we're going to leave it there. This was fun.
Happy holidays if we don't catch it before the end
of the year, and happy new Year. Alan Zaffron, co
founder managing partner of iq Capital, joining us from Foster City, California.
Speaker 1 (32:10):
This is the Bloomberg Business Weekdaily podcast, available on Apple, Spotify,
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(32:31):
and always on the Bloomberg terminal
Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg Business
Weekdaily reporting from the magazine that helps global leaders stay
ahead with insight on the people, companies, and trends shaping
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(00:23):
as it happens. The Bloomberg Business Week Daily Podcast with
Carol Masser and Tim Stenebeck on Bloomberg Radio.
Speaker 2 (00:32):
I'm daving in CRP go on the Bloomberg terminal, Carol,
and I'm seeing that bitcoin is up above ninety two thousand,
and it's at right now up about six point seven percent.
Speaker 3 (00:42):
Yeah, that's today. But as you know, the narrative around
bitcoin has been a sharp pullback. We've seen that in
bitcoin prices over the past month or so. It is
punishing really the most speculative corners of the cryptocurrency market.
And the latest casualty is American Bitcoin Corporation. Shares of
the crypto Minor, which is co founded by Eric Trump,
lost more than half of their value in less than
(01:03):
thirty minutes today, triggering some repeated trading halts. So we
want to get a little bit more on what's going on.
Speaker 2 (01:09):
You're welcome, Monique Malima she's Equity's reporter for Bloomberg new
She's in the Bloomberg Toronto bureau. Monique help us makes
sense of what's happening to American Bitcoin right now? Down
thirty six percent as we speak on a day when
Bitcoin is actually higher. Why are we seeing so much
pressure on American Bitcoin today?
Speaker 4 (01:26):
Yeah, so American Bitcoin. They're bitcoin minor that was spun
out of Hot eight earlier this year, and they've also
been seen decliness throughout the years bitcoin prices have fallen.
Like you mentioned, bitcoin prices have been pressured recently there,
even with the gains today, still down close to around
thirty percent from their highs they saw earlier. And for
bitcoin miners like American Bitcoin, that weighs a lot on
(01:48):
them because they make most of their revenue through either
holding or selling bitcoin, So when the prices go down,
they're going to go down as well. And we've seen
that they've actually underperformed bitcoin over the past couple months.
Some of the other things that.
Speaker 3 (02:01):
Are well wait wait, let me just jump in here though,
why the disconnect, because my gut would be that with
bitcoin going back and bouncing up, mind you, the trend
that we've seen as of late has been a lower one,
but with a bounce up today, why wouldn't shares of
American Bitcoin also be higher.
Speaker 4 (02:17):
So American Bitcoin also has some other factors weighing on it.
Part of it is that, you know, for other bitcoin miners,
they've diversified, some of them are looking at AIDATA centers
and other opportunities to kind of get out of just bitcoin.
But for American Bitcoin, there are also some specific pressures today.
Eric Trump posted earlier on x that the company had
(02:37):
an unlock for some of its shares today, so that
might be pressuring as well. And you also have to
keep in mind for American Bitcoin, they have a largely
retail trader base in terms of their investors, and that
can make shares a lot more volatile to Some of
the things happening in the markets are changing sentiment, and
we've seen that crypto sentiment right now is a little
more negative.
Speaker 2 (02:55):
Yeah, I think that's absolutely fair to say, still a
lot more positive than it was yesterday, a little bit
of a rebound, we're seeing a little bit of a
floora now that's above ninety thousand. What are the folks
you talk to in the crypto community say to you
about sort of the next catalyst or the next ceiling
or floor to watch for.
Speaker 3 (03:13):
Yeah, so in.
Speaker 4 (03:14):
Terms of the next catalyst, people are really hoping to
see the Market Structure bill pass that's being considered by
the US Senate. That would give some more clarity around
kind of the crypto industry as a whole on the
regulation surrounding that. So they see that's a potential catalyst.
There's also just needs to be a better sentiment in
the markets in general. We're seeing crypto isn't just moving
(03:35):
off of its own prices in terms of tokens. It's
being affected by the broadom macro environment of more risk
off in terms of investors right now. And you know,
if we do see more interest rate cuts going forward,
maybe investors would also feel more confident. Analysts are thinking.
Speaker 3 (03:51):
So are we seeing though, I'm just trying to think
of some of the other miners that are out there
and maybe not apples to apples. I mean, I'm looking
at strategy it's actually up to But are other miners
being hurt as well?
Speaker 4 (04:03):
So Hot eight is being hurt today, but that's because
they still are the majority owner of American Bitcoin, so
their shares are down quite a bit more so off
of what's happening with American Bitcoin itself. But like I mentioned,
there's some specific factors to American Bitcoin because they did
have some shares unlocked today from some early investors. That
often can weigh on crypto companies, especially ones that have
(04:25):
a large retail investor bases, that can be a little
more kind of volatility added in because of that, because
they're moving a lot.
Speaker 3 (04:34):
Off of sentiment, so insider selling.
Speaker 4 (04:38):
Not necessarily that the insiders are selling, it's that there's
been an unlock, so they have the opportunity if they
choose to sell. But we've seen in passed for crypto companies.
We saw this with Sharplank as well earlier this year,
that one there are unlocks that those shares can often
then go down because of some of those retail investor
fears that oh, if the early investors can now sell,
(04:59):
maybe they'll choose to so then they're thinking, oh, maybe
we should get out before they do.
Speaker 2 (05:03):
Yeah. One thing we should notice we have spoken to
Eric Trump several times over the last few months. He
told me in September that he was committed to the company.
He knows about seven point five percent of it, and
then Carol, hebreiterated to us just in the last few
weeks that he's still committed to the company and he
hasn't sold any shares and will not be selling any
shares anytime soon.
Speaker 3 (05:21):
Yeah, definitely committed and certainly defending the idea of bitcoin.
But that is true of like many folks who are
within the bitcoin industry. And we've got a story on
the Bloomberg too that talks about like get ready for
like a tremendous rally again and a bounce back, you know,
so we definitely see this that what can be a
volatile trade. I just want to look ahead real quickly.
(05:41):
Just got about forty seconds here, Monique. You know, we've
got a FED meeting next week. If we get a
rate cut, you know, the gut response would be that
any kind of speculative high valuation you know, type of
asset should rally. Should we assume that that will be
(06:02):
true along the crypto universe.
Speaker 4 (06:05):
Yes, there are some analysts that are saying an interest
rate cut would help crypto. We've seen some more risk
pullback in terms of investors recently, as they were fears
earlier that maybe there wouldn't be interest rate cuts or
uncertainty around the path for interest rates going forward. So
they're hoping that once people have a little more certainty
around kind of the macro environment in the US and
(06:26):
where the economy is headed, then they'll feel more confident
being in some of these riskier assets like crypto.
Speaker 3 (06:32):
All right, we're going to leave it, Mounique, Thanks so much.
Monique Melima. She is equities reporter at Bloomberg News, joining
us from our Toronto bureau. Again, as we look at
American bitcoin, we did see some halts in the trade today,
but this dock, I'm assuming it's one of your decliners.
Speaker 2 (06:46):
Yeah, it is gone right now by thirty six percent,
but earlier in the session was down as much as
fifty one percent. Stay with us. More from Bloomberg Business
Week Daily coming up after this.
Speaker 1 (07:00):
You're listening to the Bloomberg Business Week Daily Podcast. Catch
us live weekday afternoons from two to five Easter and
listen on Applecarplay and Android Otto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 2 (07:15):
I think it's fair to say Michael and Susan Dell
took the Giving Tuesday pledge. Seriously, They're going to give
twenty five million American children two hundred and fifty dollars
each to jump start an investment account for their futures.
It's a six point twenty five billion dollar gift. It
builds on the Investor America Initiative, better known as Trump Accounts.
It was created earlier this year as part of President
Donald Trump's One Big Beautiful Bill Act. Here's President Trump
(07:37):
at the White House a little earlier today.
Speaker 5 (07:40):
An investment's going to be made. That investment's going to
continue to grow. We hope, right, We hope, but it
will and they'll be they'll feel like they'll feel like
Michael Dell someday, but at eighteen, they'll have a lot
of money, a lot more money than they would have had, potentially,
a lot of money.
Speaker 6 (08:00):
Got to see the power of compound interest early in
my life, and that has brought me here to this moment,
and hopefully we'll inspire that kind of opportunity for many
more young people in this country.
Speaker 2 (08:18):
That was Michael Dell earlier today. Right before that, that
was a President Trump, both from the White House talking
about this six point twenty five billion dollar gift. I
want to bring in a Biz Carson. She's a journalist
based out in our San Francisco bureau who wrote about
this donation, about this gift, She joins us from San Francisco. Biz.
(08:39):
What was it that got Michael Dell's attention with these
Trump accounts? You spoke to him ahead of this announcement?
Speaker 7 (08:47):
Yeah, I mean I spoke to him yesterday, and he's
very excited about investing in American children. It's been something
that his foundation has been doing for twenty six years,
but he kind of faced this philanthropic problem. It's a
good problem to have, but how do you give away
billions of dollars? And his foundation has done everything from
grants to scholarships, but this invest America Act, the Trump
(09:10):
accounts offered a new venue, a new way for him
as a philanthropist to give money to a large percentage
of American children. He was thinking of starting with Texas originally,
but it grew in scope and that's how we end
up with a six point twenty five billion dollar gift
that's going to impack twenty five million American children.
Speaker 3 (09:28):
Yeah, it's massive. You know, Tim and I have been
talking about this. I think everybody's been talking about this
story all day, BIZ, And so how does it all work,
like where does where's the fund registered, where's the fund managed?
Like how does it work? And who specifically is really
going to be able to access this?
Speaker 7 (09:45):
Well, it helps that this is officially a government program
because that's been a philanthropic problem of how do you
pick a nonprofit how do you make sure this is
actually getting in the hands of the people who they
plan to support. So under the Trump account and part
of the Big Beautiful Bills that this is now a
government program that's going to be handled through the US Treasury.
And so for the Trump accounts, those are going to
(10:06):
be seated for newborn children that are born between twenty
twenty five to twenty twenty with one thousand dollars from
the government, and those will be opened automatically after the
child is born. Then for all other children under the
age of eighteen, they're eligible to activate their account next
year starting after July fourth, and they can open an
investment account. And Dell's gift he's going to be giving
(10:28):
the money to the US Treasury. And so for children
who are not eligible under the newborn government credit but
are still under the age of ten and in certain
zip codes where the median income is below one hundred
and fifty thousand. The US Treasury will be dispersing the
money for those accounts as well, coming from the Dell gift,
and that's going to be two hundred and fifty dollars
(10:48):
to every child under the age of ten who signs
up and is eligible in these zip.
Speaker 2 (10:53):
Codes, certain zip codes? How do we c certain zip codes?
How do we know which zip codes?
Speaker 6 (10:58):
I don't know.
Speaker 7 (10:59):
That's a question, and I'm trying to figure out two
to figure out if I'm in that. It's going to
be a question.
Speaker 2 (11:04):
A lot of us had the same question early early
this morning we saw this.
Speaker 7 (11:08):
Yeah, he said he was going off census data when
we spoke yesterday, and that in his research, his foundation
takes a very data driven approach everything that looking at
zip codes where the median income is less than one
hundred and fifty thousand dollars, he believes he's going to
hit eighty percent of children in that ten and under bucket.
So it's going to be reaching twenty five million, or
(11:29):
eighty percent of children under the age of ten, so
the majority of American children.
Speaker 3 (11:34):
So is the money when it's taken out, is it taxed?
Is it taxes any investment. I'm just curious that under like,
how is it considered like when a student or an
individual becomes eighteen and can actually tap into it.
Speaker 7 (11:50):
Yeah, the money is going to be taxed, as I
believe it's ordinary income, So these are tax free gifts
going in and once they turn eighteen, they can use
the money for education, but they could also use it
for home ownership, startup, entrepreneurship costs, so it's a little
bit more flexible than like a five to twenty nine
for example. A lot of this tax stuff is still
(12:11):
being worked out. I think accountants will be busy in
the next year or so trying to understand the implications
of all of this. But it's designed that the money
is accessible only after the child turns eighteen.
Speaker 2 (12:23):
So there's an annual contribution limit on these Trump accounts
of five thousand dollars. It can be set up for
kids under eight starting on January first. As you mentioned, Biz,
it cannot be touched until individuals are eighteen, but then
it's distributed to holders at age thirty one, regardless of
whether or not they've taken anything out.
Speaker 7 (12:44):
I believe so, but like I said this, they're still
working out a lot of details.
Speaker 2 (12:48):
Well, I think I think it's fair to say not anybody,
like nobody really knows all the details about this, because
they are still being worked out. You did mention it's
more flexible than a five twenty nine, but it's not
totally flexible. You mentioned some of the things that the
money can be spent on. What happens if you don't
spend the money on those things.
Speaker 7 (13:11):
I'm not entirely sure. I think, oh, sorry, if you're
taking out the money to spend it on other things,
then you do have to pay that early penalty, okay, right,
so you can remove it penalty free. And there's a
lot of tax debate around these accounts right now because
are they better than a five twenty nine if you're
going to use it for education? Maybe not? Are they
better than other options available for children if you're looking
(13:33):
to invest. But I think the difference with these accounts,
and that's what Trump and other people are touting, is
that because they're automatically open for newborns, because they're going
to be easily activated for other children, is that they're
hoping to reach children who have never had a savings
account in their life. And so this is going to
unlock something different for them than perhaps a financially savvy,
(13:57):
higher income household that's looking to kind of maximize their
tax advantages.
Speaker 3 (14:02):
I mean, so you could technically you're saying at thirty
one or so we believe at thirty one, y're going
to have to if you haven't used it, I guess,
take the distribution, but you could roll it into another
investment account. I guess if it's about kind of like
wealth creation too, right, which is something we talk about,
you know, socioeconomically, Like it's the access is not the
(14:22):
same for people in the higher income strata versus the
lower always right, the opportunities to create wealth, and so
maybe this is something that helps people get to that
point create some wealth.
Speaker 7 (14:35):
Exactly, many children don't have savings accounts at all. There
will be children who have the maximized with accountants to
the degree, but this is really for those children who
don't have that financial knowledge to have a savings account
and then along the way equip them with financial literacy
because they'll be able to look at it and say, look,
I own part of Apple stock or something like that
(14:56):
through my index fund. You know, can I what is
happening with the company. How do I need to learn
about this? Then we see their money going up and
kind of understand compounding, which is a concept I'd say
most kids under ten don't understand.
Speaker 3 (15:10):
Biz Carson, thank you so much of Bloomberg News. This
is Bloomberg Radio.
Speaker 2 (15:15):
Stay with us. More from Bloomberg Business Week Daily coming
up after this.
Speaker 1 (15:23):
You're listening to the Bloomberg Business Week Daily 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 2 (15:37):
Carol. Yeah, let's talk a little bit about San Francisco.
Let's do that. Okay, just a few years ago it
was a symbol of post pandemic urban doul drums. Yeah,
it's a great story on the Bloomberg Now it's one
of the hottest housing markets in the country.
Speaker 3 (15:49):
Yeah, we're talking about an area where it's really been
hit by the AI boom.
Speaker 2 (15:53):
Yeah, it's reignited demand for high end homes among buyers
cashing in on soaring startup valuations. Now, in addition to
the new influx of tech money, the city's seen a
turnaround in crime. We're covering office demand in cleaner streets.
Mayor Daniel Lurry took office in January with a pro
business slant. He attracted wealthy donors to the cause of
improving San Francisco's fortunes.
Speaker 3 (16:11):
Remember, everybody was like, nobody's coming back to San Francisco,
and here it is.
Speaker 2 (16:16):
Yeah, of course it's coming back well closer to home
for us here in New York there are questions about
the status of residential real estate under the mayor elect
Zoron Mamdanni. He takes office in January wondering what Louis
Phillips Forbes is seeing. She's real estate broker with Brown
Harris Stevens. She's been in the industry for more than
three decades. She's got just around six billion dollars in transaction.
(16:36):
She joins us here in the Bloomberg Interactive broker's studio.
How are you?
Speaker 8 (16:39):
I am great, so happy to be back, Tim Carroll.
Speaker 2 (16:42):
So last time we spoke to you was pre election.
Now we know who the mayor will be. Yes, there
was a lot of handwringing ahead of the election about
people who would leave the city if Zoron Mam Donnie one.
Speaker 8 (16:54):
They haven't left. They haven't left, Just to be clear
that they have not left.
Speaker 2 (16:58):
Are you seeing it? What are you seeing in terms
of real life state right now? What are you hearing?
Speaker 8 (17:01):
I mean, listen, there was Look, we've just gone through
an unprecedented time where we had a government shutdown for
forty four days, which is the longest we've seen, and
we in our housing market here we had a lull.
But honestly, the last three weeks we have been on fire,
multiple bids. In many cases the days on market are
(17:22):
short shortening. This only lagging sector is between four and
six million dollars, which is not necessarily first time buyers.
But it's strong, and I'm feeling like we have an
energy that we should expect, a very a strong indicator
for twenty twenty six.
Speaker 2 (17:39):
So a million to four million doing very well, very well,
above six million doing well.
Speaker 8 (17:43):
I mean, it's not that it's not happening, it's just lagging,
especially if it needs work. But that's not new information,
the cost of doing renovations, et cetera.
Speaker 3 (17:52):
Wow, So what does that one to four million dollar
activity tell you?
Speaker 8 (17:56):
It tells me that people are not waiting for interest
rates to drop any more. That you know, if I
look at the key indicators for twenty twenty six, We're
going to have a stronger growth, probably four percent, four
to six percent. They're saying for increase in the pricing
for the median homes. We're going to have outer boroughs
like the Bronx and Queens seeing more advancement and probably
(18:20):
a quicker pace of growth to New York City just
because of affordability and first time buyers moving there. I
think people are going to wait for the interest rates.
Speaker 2 (18:30):
What do they say, marry the home, date the raid.
What do they say?
Speaker 5 (18:34):
Yes?
Speaker 8 (18:34):
What do you say, carry your home and date the race?
Buy more today than less tomorrow.
Speaker 2 (18:39):
I went by that, and I feel like things are
getting a little.
Speaker 8 (18:43):
Closer a place.
Speaker 3 (18:45):
Without believe it or not.
Speaker 2 (18:48):
You know, I didn't want a conflict of interests.
Speaker 8 (18:50):
No, I know that, But you're settled the rate.
Speaker 2 (18:54):
We've been dating this raid for a long time, thinking
that rates we're going to fall. Feels like we're kind
of engaged at this point. We might end up getting married.
But I'm going to have to refy at some point.
Speaker 8 (19:03):
Yes, but then because it's an arm But that's okay.
The bottom line is is that you know, hold the value.
Especially when rates are a little bit higher, the values
are lower. So the when they drop and again rates
have it, we keep its keep being. It continues to
be baked into the market, so it sometimes causes it
(19:24):
doesn't necessarily mean that your rates are going to actually drop.
Speaker 2 (19:28):
This is I'm glad you said this because if you
were joining us maybe three weeks ago, we'd be talking
about the idea of a fifty year mortgage, something that
Bill Polti of Fanny and Freddy floated a few weeks ago.
And I think at the end of the day, if
you have a longer mortgage, it means one you're paying
more in interest. But I don't think that's the story.
I think the real story is homes are bought on
(19:50):
monthly payments, and what monthly what you can afford, what
you can afford in a monthly payment. So if the
monthly payment goes down, that could actually increase the price
of these homes.
Speaker 8 (19:59):
Absolutely, And that is what if you look at what
things traded in twenty twenty one, which was a recovery market,
you know, we had two point eight five to three
percent interest rates, and those homes had massive growth. And
if you think about what happened outside of the city.
They were thirty five percent increases in evaluations.
Speaker 3 (20:20):
Right, so, as you know, moved out right, they wanted
to get away.
Speaker 8 (20:23):
It's supply and demand and that we're going to still
continue in twenty twenty six to have supply and demand
to outpace. We're going to have more demand than supply
will be there, well, more demand than supply, for sure.
We always talk about affordable housing.
Speaker 3 (20:40):
I mean, I don't know, do you anticipate something different
with this incoming mayor you know? I think that.
Speaker 8 (20:48):
I mean, I did not necessarily vote for him. However,
I believe he has great intentions. I believe that he
believes in what he believes in, and I think that
he has an opportunity with the charter the city. In
our election we had four charter city charter changes that
were all passed, which are an opportunity for him to
(21:12):
pave the way for a number of things, fast tracking
affordable housing. It doesn't go through the bottlenecking and the
political sort of opposition. It's no longer going to If
it's one hundred percent affordable, it will get passed in
a very steady quick way. And when you're looking at
the ability to reverse those charters. There are a number
(21:35):
of them that are all about fast tracking and ummifying.
Speaker 2 (21:40):
You want to say something, yeah, I did on the
affordable housing thing that that Carol was mentioning that what
we've spoken to quite a few people about when it
comes to housing affordability is it's still a question of
supply and demand and whether or not new homes get
built here in the New York City area over the
next few years. Is there a realistic assumption that that
will happen under this next mayor.
Speaker 8 (22:01):
I think that there are they are tools that are
at his disposal to overturn denials through a two to
one vote. That is a truth. We know that the
you know, if there is collaboration, it's a time for
not to have confrontation, but collaboration. And I think he
(22:22):
has an opportunity to bring those people. If you notice,
some of the things that he platformed and preached on
have quieted a little bit because he knows he has
to get things done.
Speaker 3 (22:33):
Well, you know, it's it's so rough because I think
a lot of people understand it's important that we provide
a variety of housing, for sure, for everybody who lives
in a major city right and make it affordable. At
the same time, builders are not going to build unless
they incentive. Is there right, So unless you get that
public private cooperation or something right.
Speaker 8 (22:54):
Unless the policies will the policies towards tax, towards the
what we used to have four twenty one A, which
would give the opportunity for a lowered and you know,
you get compensated for improving your land. Those are things
and policies that will mobilize the private sector.
Speaker 3 (23:12):
The other thing I would say is, let's let's improve
wealth for everybody, and maybe people can afford more homes
and you don't have to do so much affordable Louise,
We've got to run. Thank you so much. Louise Phillips Forbes,
real estate broker at Brown Harris Stevens.
Speaker 2 (23:26):
Stay with us more from Bloomberg Business Week Daily coming
up after this.
Speaker 1 (23:34):
You're listening to the Bloomberg Business Week Daily podcast. Catch
us live weekday afternoons from two to five East. During
this listen on Applecarplay and Android Auto with the Bloomberg
Business app or watch us live on YouTube.
Speaker 3 (23:50):
And you just focus on driving, focus on the roads.
Speaker 2 (23:55):
Would drive Boss, because I'm.
Speaker 8 (23:56):
Just gonna give you just taking bus d see, just
drive baby, See this is.
Speaker 3 (24:03):
The drive to the clothes.
Speaker 2 (24:04):
Where we're going.
Speaker 3 (24:05):
We don't need roads.
Speaker 1 (24:07):
On Bloomberg Radio.
Speaker 3 (24:09):
All right, folks, we're just about nineteen minutes away from
the closing bell on this Tuesday, December second, Carol Master,
Tim's Stanevik life here in our Bloomberg Interactive Brokers studio.
We've got stocks, as we continue to say, bounce it
around here. We're off our highs and lows of the session.
You heard Bill Maloney and Charlie Pellett just talking about
the trade. We're up about four tens of a percent
on the S and P five hundred as we are
(24:32):
driving near the end of the trading day, two hundred
and ninety seven points or six tens of a percent
higher in the Dow Jones Industrial Average NASDEK one hundred
to gain him nearly nine tenths of a percentage point
up two hundred and twenty three points. Foot on over
to the S and P five hundred, not quite an
even split. A few more names to the upside two
hundred and seventy eight at this hour, two hundred and
twenty two to the downside. Tim and three unchanged. And
(24:54):
if you take a quick look at the action and
the treasury trade, just watching those yields. As we are
now about a week out from the last FED decision
of the year, I'm looking at a tier note with
a yield of three point fifty one, shorter end of
the yield curve, most sensitive to what the Fed does
next week, and we're seeing that lower on the day
in terms of the ten year note, though higher, and
(25:15):
we're up about four percent four point zero eight to
be exact.
Speaker 2 (25:19):
I want to bring in Alan Zafferan. He's the co
founder and managing partner of IQ Capital. He's got about
thirty six point eight billion dollars in assets under management.
Alan joins us once again from Foster City, California. Alan,
it's been a few months. How are you doing.
Speaker 7 (25:32):
Great?
Speaker 9 (25:32):
Happy holidays, Carol and Tim.
Speaker 2 (25:34):
Thanks for having me on your show. Happy holidays to you.
There's a lot that I want to get to with you,
and I want to start with private credit. I know
that in the notes that you shared with us ahead
of this interview, you have an outlook for the fourth
quarter of this year, and you argue that private credit
remains a compelling core allocation offering material excess yield relative
to public fixed income even as interest rates to client
(25:56):
for floating rate bonds. Did you write that before or
after the concerns about private credit that have emerged over
the last few weeks.
Speaker 9 (26:05):
Both I would have written it before, and I'd still
write it afterward. And the reason is, in the event
you're really invested in a truly diversified private credit fund
or several funds where you have literally hundreds upon hundreds
and not thousands upon thousands of outstanding loans. Historically, these
private floating rate loans have terrific risk adjusted returns, and
(26:28):
even if eventually defaults go up a bit if the
economy softens, given their floating rate their senior you end
up collecting the predominance you're capital back even if there
is a default over time. That excessive amount of yield
you get relative to public bonds historically does well. It
would be different if you told me you're making a
handful of loans to ill liquid or poorly capitalized businesses.
(26:50):
So you need to be very prudent about which underlying
fund of manager you allocate your capital to, and you
want to make sure those companies have very large balance
sheets generating a bit positive cash flow. Those are the
kinds of private credit loans that we're very comfortable on.
Speaker 3 (27:05):
Hey, how do you think Alan, Hello, happy holidays to
you too.
Speaker 2 (27:10):
Happy hollidays.
Speaker 3 (27:11):
How do you think, though, if we see kind of
mass adoption of private credit, private equity throughout four one
K and investment retirement plans, how that impacts that market?
And I'm just trying to understand because, first of all,
we know it creates a whole new budget capital right
(27:31):
to invest. But I wonder if that leads to less
lucrative deals, messy deals, a lot of money, you know
what I mean. I'm just trying to understand how that
might ultimately play out.
Speaker 9 (27:41):
Yeah, I'm going to give.
Speaker 2 (27:42):
You sort of a three part answer.
Speaker 9 (27:43):
Part one is, albeit its great, it's the democratization of
alternative investments for all investors. You're right, there's going to
be more capital, more demand going into a set supply
of loans, so all things equal, the spread over public
bonds will be a little lower and it'll be a
little less active. Secondly, and more challenging is many of
(28:04):
the ways in which these private loans are offered are
in what they call open end funds and they offer
you the ability to have monthly or quarterly liquidity, And
the secret behind that is a manager will limit probably
no more than maybe five percent of the total fund
value to be liquid data, let's say in any quarterly basis.
So if there was headline risk and bad news came
(28:24):
out and a lot of investors panicked all at once,
the manager could theoretically gate or limit how much any
single individual could get out of the fund and any
quarter increment, even though it's advertised as quarter liquid. So
what you need to understand is if you are investing
in an opened end fund as a client, as an investor,
you need to understand that it's really more of a
(28:45):
permanent allocation of capital, and even though it may pay
cash flows monthly or quarterly, you need to recognize that
it may not be as a liquid as advertised. And
then the third part of my comment is in the
event investors panic, they can create an oversized negative reaction
and price not really reflective of the ability that companies
(29:06):
to pay their loans. But if enough people all want
to get out at once, you're going to have to
live through the cycle till prices reflect back to a
normal point in time. So if a lot of somewhat
less sophisticated investors plowing because they like a high yield,
they run the risk that they will get gated somewhere
along the way, and they need to understand that they
have to hold that asset class through a full cycle
(29:26):
to really understand that it has created a better higher
risk ad just returned the conventional bonds, but along the
way it could be a problem along the way potentially,
And that's why you want to be a very well
allocated set of loans with highly capitalized and cash flow
positive companies.
Speaker 3 (29:42):
Sounds like you're going to have to be much more
particular and be very careful, right.
Speaker 9 (29:46):
That's it. It's buyer beware. It's no different than equities.
You need to understand. Credit is actually positively correlated with equities.
So unlike treasury bonds, private credit goes up and down
in alignment with the direction of stock prices. So you
get paid to take this extra risk, but you're going
to bear extra price risk along the way.
Speaker 2 (30:06):
Okay, Allen, So are we done with private credit? Carrol
for the moment? Okay, I do want to move on
to some other things. We're not gonna have time to
get to everything. But the second, I guess our second
favorite thing to talk about right now is sort of
the where we are if this were an AI bubble,
and you make the case that we're not quite at
nineteen ninety nine yet, but we're getting a little close.
Speaker 9 (30:27):
I think that's probably right. I mean, look, just to
tell how hard it is to predict, Alan Greenspan, who
is the Federal Reserve Governor of the late nineteen nineties,
made a comment about markets can exhibit irrational exuberance. He
was basically saying things fill overvalued. Tim, do you have
any idea what date green Span made that comment?
Speaker 2 (30:46):
I think those were ninety five right, It was in.
Speaker 9 (30:49):
December of nineteen ninety six, and the SB five hundred
more than Yeah, it doubled from the point he made
that comment before the market peaked in March in two
thousand so, and he's diorect of the most malagural person
on the plant on it. So anybody's ability to pinpoint
a top it's a fool's Errand to try. What I
can say is this, the companies themselves, largely, certainly the hyperscalers,
(31:10):
have significant balance sheets and still generate profits. And cash flows,
which interesting if you look under the surface. Most more recently,
you're beginning to see a bit of dispersion amongst the
performance of various AI players. So as an example, more recently,
business is somewhat tied to Google's aig Gemini three product
tend to suddenly be performing better, and suddenly companies tied
(31:32):
to the open AI chat GPT tend to be performing
recently a little less well. It's telling me investors are
starting to discern slightly more both the underlying quality of
the underlying AI and secondly the strength and balance sheets
of these businesses to deliver what's being promised. And so
those are the early stages of markets being critical. And
(31:52):
that's healthy because if we just have a rational exuberance,
it's going to be a big bubble or not there yet.
Speaker 3 (31:58):
All right, we're going to leave it there. This was fun.
Happy holidays if we don't catch it before the end
of the year, and happy new Year. Alan Zaffron, co
founder managing partner of iq Capital, joining us from Foster City, California.
Speaker 1 (32:10):
This is the Bloomberg Business Weekdaily podcast, available on Apple, Spotify,
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