October 24, 2025 • 33 mins
Watch Carol and Tim LIVE every day on YouTube: http://bit.ly/3vTiACF.
The Ontario government plans to stop running the anti-tariff advertisement that irked President Donald Trump after airing it during broadcasts of baseball’s World Series. The government-funded ad, which featured excerpts of late US President Ronald Reagan criticizing tariffs, will stop appearing after Friday and Saturday’s games, following Trump’s criticism of it, Ontario Premier Doug Ford said in a post on the social media network X.
“Our intention was always to initiate a conversation about the kind of economy that Americans want to build and the impact of tariffs on workers and businesses,” Ford wrote. “We’ve achieved our goal, having reached US audiences at the highest levels.”
Ford said that, following a conversation with Prime Minister Mark Carney, he’d pause the ad starting Monday “so that trade talks can resume.” The White House didn’t immediately respond to a request for comment.
Trump posted angrily about the television commercial, which played in some Republican-held regions of the US, saying Reagan’s comments were fraudulently used and that he would halt trade talks because of it.
Today's show features:
- Bloomberg News Ottawa Bureau Chief Laura Dhillon Kane on rising trade tensions between the United States and Canada
- Katy Kaminski, Chief Research Strategist and Portfolio Manager with AlphaSimplex Group and Drew Matus, Chief Market Strategist at MetLife Investment Management, with Bloomberg Television and Radio International Economics & Policy Correspondent Mike McKee on Friday’s inflation report amid the ongoing government shutdown
- Amy Rubenstein, CEO of Clear Investment Group, on the distressed real estate market
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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
Week Daily 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
(00:23):
news as it happens. The Bloomberg Business Week Daily Podcast
with Carol Masser and Tim Steneveek on Bloomberg Radio, We've.
Speaker 2 (00:32):
Got to talk about the latest between the US and Canada.
President Trump said late Thursday he would end on negotiations
with Canada over an ad critical of his tariffs on
Canadian goods. Just in the last thirty four minutes. Trying
to keep track here, Carol, Well, I gotta.
Speaker 3 (00:47):
Say, in the last not even twenty four hours, there's
been so much.
Speaker 4 (00:49):
Of this stun at US.
Speaker 2 (00:50):
Ontario Premiere Doug Ford said in a social media post
that the province will pause it's us AD campaign effective Monday,
after having spoken to Canadian Prime Minister Mark Carney and
the hopes that trade talks can resume. He said this
on social media. You can see the tweet on the
screen right here. In speaking with Prime Minister Karney, Ontario
will pause it's us AD campaign effective Monday, so that
trade talks can resume. Here's some of that ad, which
(01:13):
Ford said will run over the weekend quote so that
we can error commercial during the first two World Series games.
Speaker 5 (01:20):
Throughout the world, there's a growing realization that the weight
of prosperity for oral nations. He is rejecting protectionist legislation
and promoting fair and free competition. America's jobs and growth
are at state well.
Speaker 2 (01:35):
President Trump posts on social media that that ad was
quote fake and ended all of those trade negotiations. Then later,
Canadian Prime Minister Mark Karnei spoke to reporters this morning
before boarding a plane to Kuala Lumpur, Malaysia, where he
will attend the Asian Summit.
Speaker 6 (01:50):
Our officials, my colleagues have been working with their American
colleagues on detailed, constructive negotias, discussions on specific transactions, specific
sectors steel, aluminum and energy, and a lot of progress
has been made and we stand ready to pick up
(02:13):
on that progress and build on that progress.
Speaker 2 (02:16):
Does Mark Carney, a Canadian and Prime minister, before heading
to the Ossiana Summit, I want to bring in Laura
Dylan Kan Bloomberg News Autawa Bureau Chief. She joined us
from the Bloomberg News bureau in Ottawa. Okay, I'm kind
of out of breath trying to bring everybody up to
speed on what happened over the last sixty four hours, Laura.
But does it seem like, I mean, does it seem
(02:38):
like the ad from Ottawa really struck a nerve with
the President and that was unexpected.
Speaker 7 (02:46):
It was unexpected because this ad from the Ontario government.
Trump actually saw it earlier in the week and he
offered a pretty muted reaction when he first saw it.
He said, if I were Canada, I would probably run
the same ad. So it was surprising that he then
cited this ad in what seemed like and you know,
if I may interpret his truth social post, an angry
(03:08):
truth social post about the ad. So it seems he
had a couple of days to absorb it and then it,
you know, did trigger this response from him. So it
was very surprising from the Canadian side. But you know,
with Ontario Premier Doug Ford deciding to pull the ad
as of Monday, you know, he did note that if
(03:30):
their goal was to get us attention to this ad,
they have done their job. They spent seventy five million
dollars Canadian dollars on this ad campaign and Trump has
really amplified it. The views are way up ever since
Trump made this announcement.
Speaker 4 (03:44):
So you know, done, can.
Speaker 3 (03:50):
Well, I don't know about that.
Speaker 7 (03:51):
It is definitely the strikes end effect, you know, definitely
not good to have trade talks paused. As Mark Karney
noted this morning, trade talks had been progressing. We believe
that a steel and aluminum sector tariff deal was you know,
if not imminent, that there was real momentum happening toward that.
So now that Trump is now that Ford has said
(04:11):
he will pull the AD as of Monday, so that
trade talks can resume, what we're looking to confirm is
whether or not the US agrees with that. Hey, they
go back to the table.
Speaker 3 (04:20):
So what's at steak here?
Speaker 8 (04:21):
Because I'm going to be quite honest with you, I've
kind of lost where we are in the US Canadian
trade talks.
Speaker 3 (04:28):
So where are we? What are we discussing?
Speaker 8 (04:30):
I mean, what's crazy is we know the US and
Canada have been longtime trading partners and important trading partners
in terms of what goes back and forth between the
borders between these two countries, so being what's that issue
right now?
Speaker 3 (04:45):
And yeah, what's at stake basically, Well, what.
Speaker 7 (04:49):
Is really hurt in Canada are those sectoral tariffs on steel, aluminum,
autos and lumber. Now, autos and lumber, it doesn't seem
we're anywhere near a deal on those. Trump has said
many times that the US doesn't want to buy Canadian
cars and he doesn't appear to be interested immediately in
preserving the North American vehicle supply chain, but on steel
(05:11):
and aluminum sectoral tariffs, which have had a devastating effect,
particularly in Premiere Ford's province of Ontario. It did appear
that the Canadian and US negotiators were getting closer to
a deal. Those talks reopened after Mark Karney visited the
White House on October seventh, and there was a discussion
about maybe Canadians selling more energy to the US in
(05:32):
exchange for lowering those steel and aluminum tariffs. So that's
what we were getting close to. That was really upended
by this troop social post.
Speaker 8 (05:42):
What about Prime Minister Carney, the Canadian prime minister, you know,
formerly on the Bloomberg board, formerly within the private investment world.
You know, this is a man who's had several different
hats and I'm just you know, is a relationship between
US and Canada going to be different from.
Speaker 3 (06:05):
Now on as a result of what's going on right now?
Speaker 7 (06:09):
Absolutely so. Mark Karney has said multiple times that the
old relationship between the US and Canada is over in
some ways. That was sort of his campaign rallying cry
that allowed him to become elected earlier this year, was
taking that really tough stance against US protectionism and saying
that he would diversify Canada's trading relationships. That's a big
(06:32):
part of the reason he's in Asia right now is
to try and find new export market markets for Canada's goods.
And in fact, he just gave a speech in which
he said he plans to double non US exports over
the next decade. It remains to be seen whether that's feasible,
but these are some of his goals. This is some
of what he talks about. He wants to reduce our
economic dependence on the US. At the same time, I
(06:54):
think he, being a businessman an economist, he understands the
reality of Canada's very serious dependence on the US and
how difficult it is to untangle those chains. So he
is in the near term trying to reach some kind
of deal that would preserve US market access for Canada
and a new focus will be USMCA next year.
Speaker 4 (07:14):
Did that go ahead here?
Speaker 8 (07:15):
And that's not forgetting he was a Governor of the
Bank of England twenty thirteen to twenty twenty.
Speaker 3 (07:19):
A long time.
Speaker 2 (07:20):
We've interviewed him.
Speaker 3 (07:21):
Yeah, I mean, listen, we've interviewed Yeah.
Speaker 8 (07:23):
He understands markets, countries, right versus Prime minister.
Speaker 3 (07:27):
Yeah, yeah, from so many different perspectives.
Speaker 2 (07:29):
So I wonder about, you know, preserving access to the
US market and whether or not this advertisement undermined that
in the long run. We know in the short term
what it did, but in the long run does it
does it set back negotiations?
Speaker 7 (07:44):
It's hard to say in the long run in a
world where Trump is president, because announcements can just come
out of nowhere late at night on a truth social website.
So it is hard to sort of predict the future
of how things unfold. We have seen him and trade
talks with Canada before, and then they're back on once
(08:07):
Canada sort of backs down on its particular policy. We
saw that over the summer with Canada Plan to bring
in a digital services tax that would have hit American
tech giants. Trump canceled trade talks, Carney pulled the tax,
and then the trade talks resumed. What I will say
is that, to be clear, this was not a Canadian
government ad. It was the Ontario government and Mark Carney's
(08:29):
approach versus Ontario Premier doug Ford's approach. They've been very different.
And so doug Ford has really advocated punching back. He
talks tough, he's kind of a populist in some ways.
He can be a bit of a mirror, a Canadian
mirror image of Trump in some of the ways that
he talks. So I think that we've seen a few
(08:49):
times where doug Ford has created a bit of friction
between the Canada US relationship that Mark Carney is not,
you know, does not want to have.
Speaker 9 (08:58):
It.
Speaker 3 (08:58):
Definitely sounds like an important distinction.
Speaker 8 (09:00):
And I'm guessing some phones we're ringing or some text
messaging was going back and forth.
Speaker 3 (09:05):
Laura, thank you so much. Laura Dylan Caage.
Speaker 8 (09:08):
She's a Ottawa bureau chief, joining us from our Ottawa
bureau here at Bloomberg News.
Speaker 2 (09:13):
Stay with us. More from Bloomberg Business Week Daily coming
up after this.
Speaker 1 (09:21):
You're listening to the Bloomberg Business Week Daily podcast. Catch
US Live weekday afternoons from two to five eastering. Listen
on Applecarplay and Android Auto with the Bloomberg Business app,
or watch US Live on YouTube.
Speaker 8 (09:35):
Yes, we are in a US government shutdown. It's now
and it's fourth week. Is it twenty twenty four days?
Speaker 2 (09:41):
I believe, Mike, is that right? Twenty four to twenty four.
Speaker 4 (09:43):
Twenty four days? Oh, Chris County.
Speaker 3 (09:45):
We are, we are well.
Speaker 2 (09:47):
I'm trying to, but sometimes I forget what.
Speaker 4 (09:49):
The weirdest thing.
Speaker 3 (09:50):
It just feels like nobody cares.
Speaker 8 (09:51):
But anyway, we should point out though, in the absence
of a lot of official data from the US government,
we did get a highly anticipated read inflation today.
Speaker 3 (10:01):
It's a bit of a welcome surprise to him.
Speaker 2 (10:03):
Yeah, that's particularly for several policy makers who are leary
of cutting rates further here with the data and the
market and the FED implications we got, Bloomberg TV and
Radio International Economics and Policy correspondent Michael McKee, isn't it.
Speaker 3 (10:16):
Kind of a while, though?
Speaker 8 (10:16):
We're in this shutdown, and I feel like in the past,
when we've covered it, our covered shutdowns were all over it, NonStop,
and it's just the weirdest thing.
Speaker 10 (10:25):
Well, yesterday the President tore down half the White House,
So I.
Speaker 4 (10:31):
Know, it's kind of hard to know what to focus
on these days.
Speaker 10 (10:35):
The economy is chugging along, which is probably one reason
that we're not seeing a lot as much focus on
it because people are still we're not seeing big layoffs yet,
although the number of layoff announcements came this week, and
people are still their incomes are coming in, they're still spending.
If things continue to weaken, then it'll become much more
(10:56):
of an issue, and.
Speaker 8 (10:57):
Then we want to talk about an inflation report too
as well. Also got another guest with us.
Speaker 2 (11:01):
Yeah, Katie Kaminski is joining us. She's chief Research Strategies
in portfolio manager with Alpha Simplex Group. She joins us
from Boston. Mike here in the studio, Mike, let's go
back to the inflationary print though, and and really the
focus of it. Look, we don't know if even we're
going to get one for this month. We don't, or
do we know if we're we we don't know.
Speaker 10 (11:20):
The White House suggested that we wouldn't, but it's not definitive.
Speaker 4 (11:23):
It's not definitive.
Speaker 2 (11:24):
Why did we get one for last month Social Security?
It's because of the cost of living increase. The cost
of living increases, I believe. Yeah, two point eight percent
calculated based on the average of the third quarter cpis.
So they needed this last one from September to be
able to put that out and it legally has to
go out by the first of November.
Speaker 4 (11:44):
So interesting we got that.
Speaker 3 (11:46):
So not too worried about inflation right now.
Speaker 4 (11:48):
No, we're worried about inflation right now.
Speaker 3 (11:50):
Okay, I thought this was a softer print.
Speaker 10 (11:52):
It was a slightly softer print. But you know, what
people were watching for was two things. One is were
services prices still rising, and services prices were still rising,
with a big exception for home prices the way they
calculated with owners equivalent rent, and they almost collapsed down
(12:15):
up just a tenth after being up four tenths, five tents,
three tenths for some couple of years. So that could
be noise and it is an anomaly, and we don't know.
But if you take that out, then you have still
regularly about the same as we've been with the service prices.
And then tariffs used car prices dropped a lot during
(12:39):
the month, and if you take out autos, you still
have core goods prices rising. And we saw things like
furniture up nine tentsven percent, almost a full percentage point,
and other tariff goods rising in price.
Speaker 4 (12:55):
So it does show that that's starting to bleed through.
Speaker 8 (12:57):
Hey, listen, Katie, we want to bring you into this
because you know, if I look at the treasury trade
over this month, we've seen benchmark ten years below four percent.
It's kind of where we are, although we've had some
volatility in today's trade. Bring in your read on the
inflation print and what it means for the treasury trade.
Speaker 11 (13:18):
Well, this is a good question because what we've seen
is a little bit of jitters around this potential CPI print.
But to be honest, that bond trends haven't moved that much.
They've been up, then they've been back down, So there
doesn't seem to be a lot of movement in that
asset class in reaction to the FED. The movement's actually
(13:38):
much more in other asset classes like a strong dollar, which.
Speaker 3 (13:42):
Makes no sense right if we're getting lower rates.
Speaker 11 (13:44):
Exactly lower rates strong dollar, and then the movements today
that are consistent with this CPI mover the equity market
just you know, showing relief about some concerns about not
getting rate cuts because of the shutdown.
Speaker 2 (13:58):
I think so it might come on in on this
push it to next week. I mean, does that mean
that we might not get rate cuts as a result
of the shutdown.
Speaker 4 (14:04):
No, we'll get We'll get their a cut.
Speaker 2 (14:06):
The FEDS on surveillance talking about fifty basis points this
morning not going to happen.
Speaker 12 (14:12):
You want, you have to be outrageous if you want
to talk truth. And his name rhymes with Tom Kanu. No,
we're not going to get fifty basis points. We're get
twenty five. The question is will we even have any
descents other than Steven Myron, who's already sort of advertised
he's going to descent every.
Speaker 10 (14:29):
Time unless he gets unless he gets fifty or seventy
five basis points or whatever. I mean, that's why they
sent him there. But the FED came into this meeting
letting the markets believe in a twenty five basis point cut,
and there's nothing in the inflation data that's going to
say screamingly, you can't do that. So the FED will
(14:50):
just go ahead and and cut rates. But I wouldn't
put any bets yet on what's going to happen in December.
Speaker 8 (14:56):
Katie, you were on surveillance this morning, Tim and I
were listening. Were you one of those crazy kids or
said fifty basis points?
Speaker 3 (15:01):
I don't think so, No.
Speaker 4 (15:03):
Definitely not.
Speaker 11 (15:04):
I'd say I was surprised though, because I think the
numbers did come in a little bit. I thought they'd
come in as expected, So coming in a little better
than expected definitely accelerated some of the trends that we're seeing.
I do think it kind of relieved the market from concerns.
I think the bigger shocks would be if you had
any sort of shift in policy.
Speaker 4 (15:25):
So the less.
Speaker 11 (15:26):
Likelihood of a shift in policy is what has kind
of sued the markets right now.
Speaker 8 (15:30):
There's an interesting story in the Bloomberg that caught my attention.
I'm curious what you guys think about this. The bond
markets movements have been suggesting a US downturn for three years,
since three month treasure yields first pushed above ten year
ones are right throughing. This notes the yield kurs predictive power.
Maybe sounding a false alarm, this time. This is from
Campbell Harvey due to factors such as massive fiscal spending
(15:51):
and healthy finances of consumers and corporations.
Speaker 3 (15:53):
Do you agree, Katie?
Speaker 11 (15:55):
I would have to say it is very contextual because
when you look at the inverted yield curve over different
periods of time, you know, I think some of the
potential inflation and other issues with policy is this kind
of not necessarily means that there's a recession right away.
So I think it's been sort of a fall signal
during this market environment.
Speaker 10 (16:17):
Yeah, we should mention that Campbell Harvey is the Duke
professor who came up with the idea of the inverted
yield curve signaling recession. And I think there's been general
consensus at the FED and among economists since we went
through almost since we went through the Great Financial Crisis,
but certainly coming out of COVID that it's not reliable
(16:38):
now for a whole host of reasons.
Speaker 3 (16:40):
Ignore it.
Speaker 2 (16:42):
Yeah, Hey, Mike, we're going to be speaking with Drew
Mattis over at MetLife Investment of Management in just a
minute about the consumer. Preface for that conversation, like, lay
the groundwork here, how is the consumer doing.
Speaker 4 (16:56):
Well?
Speaker 10 (16:57):
I think you advertise it as the k shapedy, and
that explains kind of where we are with the consumer.
Speaker 2 (17:04):
But we we'll hear from true. He kind of argues
that the case that the top end isn't doing as
well as people think, well.
Speaker 10 (17:11):
I think the top end is doing just fine, because
when you get to the higher top end, you're making
all your money off of interest and dividends, and the
stock market just keeps going.
Speaker 4 (17:21):
Up and up and up.
Speaker 10 (17:22):
It's the people who are on fixed income and low
wages who are struggling now because inflection is still going
up and they're trying to make ends meet and finding
it harder and harder. If you've gone to the grocery
store lately to buy Hamburger something like that. So you
have this bifurcation, and the question is how long can
(17:44):
people hang out before they start pulling back on spending,
And there's anecdotal evidence that they're starting to pull back
in some areas already. Then if we get any layoffs,
as some of these companies you're seeing P and G
today had you know, good, good earnings. But oh yeah,
by the way, we're going to get rid of eighteen
hundred people.
Speaker 8 (18:04):
Hey, Katie, I want to go back to just one,
you know, about the idea of what we're seeing in
equity markets versus bond markets, versus the dollar strength. I mean,
I'm trying to you know, gold, silver rally. Uh then
more recently dropping back, do the market metrics fit together?
Speaker 3 (18:18):
Make sense?
Speaker 8 (18:19):
They tell one story or no? And if not, then
what does that mean? So this is a good question.
I think for me, the question has been, you know,
it's been a growth story in equities, having good GDP numbers,
so you're seeing that very strong equity trend. But coupled
with that seeing also very strong gold and a weaker
(18:39):
dollar has made me feel a little nervous about that.
You know, there's a chance that we might have an overstimulation,
so low rates, high growth, and you kind of have
inflation potential. I think today's print is helpful in the
short term, but those are the themes that I'm seeing
where there's sort of a hedge out there against you know,
things look good, but you know, we need to proceed
(19:01):
with caution. We could have inflation, we may have issues,
especially with a weaker dollar. So this firm dollar is
also kind of interesting to me. I think probably the
most interesting recently. All right, great stuff, great, what we
can do a double dip with Katie Kaminski on this
morning on this afternoon. She's chief research strategist portfolio manager
with Alpha Simplex Group.
Speaker 3 (19:19):
Hey, we're going to stay on this, Mike's going to
stay with us.
Speaker 8 (19:21):
We want to bring your attention to something that JP
Morgan's Asset Managements Chief Global Strategy David Kelly said this
morning too on BTV on Surveillance, talked about the FED
inflation and the K shaped economy.
Speaker 4 (19:34):
I think the Fed is going to keep on cutting rates.
Speaker 9 (19:37):
It's generally a better than expected report, but I think
what it really shows is we have a K shaped
economy and it's sort of a K shaped CPI report.
It is clear that mainstream retailers don't believe they could
pass on the tariff increases right now, and that's what's
making this inflation rate a little bit tamer.
Speaker 3 (19:55):
Than people feared want to bring in.
Speaker 8 (19:57):
Of course, that was JP Morgan's David Kelly earlier today,
but right now I want to add to the mix.
The senior economist actually was a former senior e condomst at
Leman Brothers. We've been talking to him for a long time.
We're talking about Drew Mattis. He is the chief market
strategist at MetLife Investment Management, joining us from New Jersey. Drew,
your recent note caught the attention of our Tayacherella about
(20:19):
how the consumer is not okay.
Speaker 3 (20:22):
Walk us through that.
Speaker 13 (20:24):
Well, there is a ke shaped recovery or consumer that
the upper end is doing reasonably well, but the question
is always kind of how what's the change look like?
And the change for the upper end consumer is beginning
to show signs of stress. Now, whether that's because a
lot of the federal workers would fall in that one
hundred thousand plus category or whether it's something else, what
(20:47):
we are seeing is that upper income consumers are increasingly
saying that their real incomes are expected to decline over
the next year, and their job separation anxiety is actually
quite high, particularly relative to kind of lower income cohorts,
probably because a lot of the jobs that had been
being created were actually kind of you know, healthcare and
(21:09):
kind of other jobs that in many cases tend to
be you know, kind of lower income side of things.
And so I think, yes, they're doing fine for now,
but there are signs of stress. And ignoring them is
something that can lead to trouble.
Speaker 2 (21:24):
I got to tell you, Drew, I see that anecdotally
right now with people really looking for jobs, who have
been making good money and got laid off, and you know,
been looking for jobs for months. At this point, when
when do we if we haven't already, how does that
then manifest in data? And we're not necessarily getting it
from the government, but how does that manifest in data
that investors can react to?
Speaker 13 (21:43):
Drew, Well, I think one way it will manifest itself
is a decline in service sector spending, which we had
been seeing at least through the August numbers, which were
the latest ones we had before the shutdown.
Speaker 4 (21:56):
You know what tends to happen when.
Speaker 13 (21:58):
You have to worry about things, when people begin to
adjust their lifestyles in ways that shouldn't really be adjusted.
And by that I mean, you know, buying a cup
of coffee in the morning is not a decision that
should really tax most people's brains or that they should
really think about if they're feeling good about their job
prospects or.
Speaker 4 (22:16):
That they have a job.
Speaker 13 (22:18):
And what we're seeing is people are pulling back on
those kinds of purchases, and when that happens, you know,
if you're.
Speaker 4 (22:23):
Not buying a cup of coffee, you're not going to
buy a car.
Speaker 13 (22:26):
And so we're beginning to see that roll off on
the service sector spending side of things. And yes, maybe
people are in the upper income tier are still splurging
on certain things, or maybe there's a cohort within that
upper income cohort that's still splurging on certain things. But
the reality of it is it seems like it's beginning
to shift into a kind of a.
Speaker 4 (22:45):
Lower growth dynamic.
Speaker 13 (22:47):
And of course we can't find any of the data
or we don't have the data to know whether or
not that in fact is happening.
Speaker 4 (22:54):
Drew, how much of tariffs are a problem.
Speaker 10 (22:57):
Given what we saw today that there is some leakage
in and there may be more coming. It's obviously not
what was feared back in April. But how how bad
is it? Johnny as that McMahan used to say.
Speaker 3 (23:13):
And google that and you don't know what he's talking about, because.
Speaker 4 (23:17):
I know I do know. Unfortunately, because I am.
Speaker 8 (23:19):
Old enough, I meant that for the rest of the
audience out there in our control room.
Speaker 13 (23:26):
Uh, you know, I do think we're going to see
it pass through. I think it's going to happen. It's
not going to be a full pass through, uh, nor
is it going to lead to kind of this kind
of uh you know, wage price spiral type inflation story.
It's going to be a one time adjustment and the
FED should look through it.
Speaker 9 (23:42):
You know.
Speaker 13 (23:43):
I was just complaining to you, Mike, though, you know,
what about all the credit card surcharges that I'm now
paying for. It seems like everything went up by three
percent on top of the three percent inflation rate, because
every time I want my credit card, I have to
pay a lot more to kind of just use it.
And so I think, you know, once again, it's going
to be something that people notice and are affected by it.
(24:04):
But one of the things that's actually helping people right
now is that gas prices are actually extraordinarily low, particularly
relative to where they had been. And so we look
at gas prices relative to kind of how much you
have to work to get there, So how many minutes
of your work life does it cost you to buy
a gallon of gasoline? And when you look at it
that way, it's actually quite contained as well below where
(24:26):
it had been. The last couple of years, which is
probably helping people continue to spend.
Speaker 8 (24:31):
All right, We're going to leave it on that note.
I know we will be continuing this conversation in the future.
Drew Mattis, thank you so much, Chief Market Strategies at
MetLife Investment Management.
Speaker 3 (24:39):
Of course, are thanks.
Speaker 8 (24:40):
Always to our own Mike McKee TV and Radio International
Economics and Policy corresponding.
Speaker 2 (24:45):
Stay with us more from Bloomberg Business Week Daily coming
up after this.
Speaker 1 (24:53):
You're listening to the Bloomberg Business Week Daily Podcast. Catch
us live weekday afternoons from two to five eas Listen
on Apple Karplay and Android Auto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 8 (25:06):
Interesting a couple of weeks, we've talked about Zion's, a
couple of regional banks science tumbling last week. The firm
said it was the victim of fraud on loans to
funds that invest in distressed commercial mortgages. After the collapse
of subprime auto ender Tricolor Holdings and autopart supplier First
Brands Group, some investors said they are becoming concerned about
cracks in the credit market. And then, of course there
(25:28):
was the JP Morgan Chase CEO Jamie Dimond.
Speaker 2 (25:31):
You can't forget what he said last week that there's
really just one cockroach, which some private credit executive size
of barb aimed at them. Blue Owl Capital Coco Mark
Lipschultz responded by saying banks should look at their own books.
Speaker 8 (25:43):
All right, we've got a view on the distressed market
specific area. Back with us is Amy Rubinstein. She's CEO
of Clear Investment Group. It's Chicago based, specializing in opportunistic
real estate investments, specifically in the distressed mid sized multi
family sector in mostly secondary and tertiary markets around the
United States.
Speaker 3 (26:01):
She is lucky for us in studio. How are you.
Speaker 14 (26:04):
I'm great, good to be back here.
Speaker 8 (26:06):
Well, it's great to have you back here, and I'm
just curious big picture of the environment. There's been a
lot of stuff over the last week. Tell us about
the distress market certainly the area that you play in.
Are there more distress situation slash opportunities out there for you?
Speaker 14 (26:21):
Yeah, there's a ton of opportunity right now.
Speaker 3 (26:23):
Is there always or is there more than there have?
Speaker 15 (26:25):
I will say when we're in buyer's markets, we see
more distress right now. We have seen a lot of
distress over the last couple of years and continue to
see it, although I think we might have bounced off
the bottom and might be starting to come back.
Speaker 3 (26:40):
Why do you think that, Well, I think that the drop.
Speaker 15 (26:43):
In interest rate that we recently had was a little
bit helpful. That was only twenty five basis points. But
what we've really been seeing is that bank spreads are
coming in as well. So while we only saw a
twenty five basis point drop from the FED, we're really
feeling something more like one hundred basis point drop.
Speaker 14 (27:00):
On the fact that banks are coming in.
Speaker 3 (27:01):
That makes it some situations not so stressful.
Speaker 15 (27:05):
It doesn't does It doesn't help people that have existing
marks that might have gone up on interest rates. But
as people are refinancing, we are finding a better lending
environment than we were about a year ago.
Speaker 3 (27:18):
So talk to us about a deal that you've recently did.
Speaker 15 (27:21):
So we are doing a deal right now that we're
getting spread. We're actually assuming alone that is being purchased
at debt. So we're seeing a lot of that in
the market right now, where you do see distress from
people and people are walking away from their equity in
order to save their personal guarantees.
Speaker 3 (27:40):
And so more than you saw maybe three months ago,
six months ago.
Speaker 15 (27:43):
It happens to be that we've had our lastly five
deals that we've looked at have had loans where we're
assuming a loan at debt and we're and the sellers
walking away losing all of their equity.
Speaker 2 (27:55):
Why are sellers walking away? Well, what do they not do?
What are they not able to do that? Then you
can come and do.
Speaker 15 (28:00):
So what this particular lender is doing for us is
dropping that interest rate. The lender doesn't want to lose
any of their equity in this yeah, So they instead
are saying, all right, we know that there things were
a little bit off. We know that interest rates were high,
and we know that that seller or that owner was struggling.
Here we have a new borrower coming in, who's going
(28:22):
to be solid, who's going to maintain the integrity of
our investment. Let's give them a little break for a
little while so they can get through this period.
Speaker 2 (28:29):
Are lenders doing that without a transaction going through? Could
that seller have gone to the lender and said, look,
we can't handle this rate. Can we renegotiate so then
you don't have to bring someone new and you know us.
Speaker 14 (28:41):
I do think that happens as well.
Speaker 15 (28:43):
Okay, so yes, I think that's a possibility, and I
think that's something that borrowers need to ask for, and
I think when they do ask, they're often.
Speaker 14 (28:51):
Able to negotiate something with their lender.
Speaker 8 (28:53):
Amy how many of these deals have some kind of
private credit in them as well or is it separate?
Speaker 15 (28:58):
So I think that is the reason that spreads have
come in because private debt really flooded the markets, and
while banks took a step back, I would say over
the last couple of years, banks kind of pulled back
wanting to see how the market was going, and then
all of this private debt flooded the market, which is
what really caused when banks wanted to come back in
(29:21):
the beginning of twenty twenty five, they started to enter
the market and they saw more competition than they had before,
and so then what happened is they started to bring
in their spreads.
Speaker 14 (29:29):
And that's what brings.
Speaker 15 (29:30):
Us to have that feel of a much lower interest
rate than just that twenty five basis points.
Speaker 8 (29:34):
So give us an idea you do work in multifamily,
Give us an idea of the types of properties or
the regional variations where maybe these deals are happening.
Speaker 15 (29:41):
Sure, we have a deal under contract right now in
Saint Louis, a deal under contract right now in Tuscaloosa.
So we're talking about you know, those are secondary and
tertiary markets. We're also in DC, so that's a primary market.
So it really depends on where we're finding the right deal.
Speaker 2 (29:58):
We're you not seeing deals because the market is so good.
Speaker 15 (30:00):
So some of the places we won't buy are places
that got a little bit overinflated.
Speaker 14 (30:06):
So some of those growth markets that are now starting
to show.
Speaker 15 (30:09):
Some Boston, Texas, Sure, Austin, Nashville, South Carolina.
Speaker 14 (30:13):
Yeah, absolutely, What.
Speaker 2 (30:14):
About California, there's a lot of questions about the future
governor who that is a lot of questions about regulations
and red tape. Sure during the next administration.
Speaker 15 (30:24):
Absolutely, we tend to stay away from California right now
because we just don't get cash flow there. So that
ends up being an appreciation market and so we never
really find that cashlot to be able to go into
that market.
Speaker 8 (30:37):
So would you go as far as to say, you know,
what we've seen over the past few months, in just
the past week that you know tricollar first brand.
Speaker 3 (30:45):
I mean there have been.
Speaker 8 (30:46):
Knock on effects when it comes to financing as a
result of this, or no, as a result of well
any like the real estate financing deals have what we
have seen with these, and nervousness within the credit market
hasn't had a new path.
Speaker 5 (31:00):
No.
Speaker 15 (31:00):
I actually think that we are seeing enough money in
the market to be lending. So I don't see that
there's an issue of borrowing. I see that there are
fundamentals that are still strong. Although even in September, I'm
sure everyone's kind of watching this drop in rental rates.
Right September was that first month where we really saw
(31:22):
a big drop. I think thirty basis points in just
that month alone. And if you kind of pull it
apart and look at it, what's causing this. If you
did dissect it, you're getting about half about fifty basis
points drop in lifestyle renters, so renters who are choosing
between home ownership and renting, and that probably is coming
(31:42):
from people wanting to go back into the home market.
You're only getting about ten basis points of drop in
renters by necessity, so you got to like dissect that number.
Speaker 2 (31:51):
How our delinquencies with tenants right now.
Speaker 14 (31:54):
That's an interesting question.
Speaker 15 (31:56):
We have seen that delinquencies and evictions have in a
higher trend than usual, but that hasn't been just as
of recent We've seen that over the last couple of years.
Speaker 2 (32:05):
So that hasn't changed it all in the last six
months or so.
Speaker 15 (32:08):
I haven't seen it in the last six months that
that's growing. It definitely is a trend that I think
started post COVID.
Speaker 3 (32:15):
Who's struggling?
Speaker 8 (32:16):
Who are those people in those properties? Just got about
thirty forty seconds.
Speaker 15 (32:19):
Yeah, well, you know, the rents are staying stronger in
these C class assets, but I think it's also that
lower income zone that is struggling more than the higher brackets.
Speaker 3 (32:29):
Are you talking recession at all or like or just no.
Speaker 15 (32:33):
No, We're still seeing things being very strong as far
as employment. I'm still seeing tenants come in that have
qualifications to rent.
Speaker 8 (32:40):
Well, listen, you're the perfect person to check it and
considering this environment in the conversations we've had over the
last week and mean, thank you so much, thanks for
coming in studio, Thanks for having me. Yeah, great to
have you here, Aby Rubinstein. She's see you have clear
investment group joining us right here.
Speaker 1 (32:53):
This is the Bloomberg Business Week Daily podcast, available on Apple, Spotify,
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(33:14):
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(00:23):
news as it happens. The Bloomberg Business Week Daily Podcast
with Carol Masser and Tim Steneveek on Bloomberg Radio, We've.
Speaker 2 (00:32):
Got to talk about the latest between the US and Canada.
President Trump said late Thursday he would end on negotiations
with Canada over an ad critical of his tariffs on
Canadian goods. Just in the last thirty four minutes. Trying
to keep track here, Carol, Well, I gotta.
Speaker 3 (00:47):
Say, in the last not even twenty four hours, there's
been so much.
Speaker 4 (00:49):
Of this stun at US.
Speaker 2 (00:50):
Ontario Premiere Doug Ford said in a social media post
that the province will pause it's us AD campaign effective Monday,
after having spoken to Canadian Prime Minister Mark Carney and
the hopes that trade talks can resume. He said this
on social media. You can see the tweet on the
screen right here. In speaking with Prime Minister Karney, Ontario
will pause it's us AD campaign effective Monday, so that
trade talks can resume. Here's some of that ad, which
(01:13):
Ford said will run over the weekend quote so that
we can error commercial during the first two World Series games.
Speaker 5 (01:20):
Throughout the world, there's a growing realization that the weight
of prosperity for oral nations. He is rejecting protectionist legislation
and promoting fair and free competition. America's jobs and growth
are at state well.
Speaker 2 (01:35):
President Trump posts on social media that that ad was
quote fake and ended all of those trade negotiations. Then later,
Canadian Prime Minister Mark Karnei spoke to reporters this morning
before boarding a plane to Kuala Lumpur, Malaysia, where he
will attend the Asian Summit.
Speaker 6 (01:50):
Our officials, my colleagues have been working with their American
colleagues on detailed, constructive negotias, discussions on specific transactions, specific
sectors steel, aluminum and energy, and a lot of progress
has been made and we stand ready to pick up
(02:13):
on that progress and build on that progress.
Speaker 2 (02:16):
Does Mark Carney, a Canadian and Prime minister, before heading
to the Ossiana Summit, I want to bring in Laura
Dylan Kan Bloomberg News Autawa Bureau Chief. She joined us
from the Bloomberg News bureau in Ottawa. Okay, I'm kind
of out of breath trying to bring everybody up to
speed on what happened over the last sixty four hours, Laura.
But does it seem like, I mean, does it seem
(02:38):
like the ad from Ottawa really struck a nerve with
the President and that was unexpected.
Speaker 7 (02:46):
It was unexpected because this ad from the Ontario government.
Trump actually saw it earlier in the week and he
offered a pretty muted reaction when he first saw it.
He said, if I were Canada, I would probably run
the same ad. So it was surprising that he then
cited this ad in what seemed like and you know,
if I may interpret his truth social post, an angry
(03:08):
truth social post about the ad. So it seems he
had a couple of days to absorb it and then it,
you know, did trigger this response from him. So it
was very surprising from the Canadian side. But you know,
with Ontario Premier Doug Ford deciding to pull the ad
as of Monday, you know, he did note that if
(03:30):
their goal was to get us attention to this ad,
they have done their job. They spent seventy five million
dollars Canadian dollars on this ad campaign and Trump has
really amplified it. The views are way up ever since
Trump made this announcement.
Speaker 4 (03:44):
So you know, done, can.
Speaker 3 (03:50):
Well, I don't know about that.
Speaker 7 (03:51):
It is definitely the strikes end effect, you know, definitely
not good to have trade talks paused. As Mark Karney
noted this morning, trade talks had been progressing. We believe
that a steel and aluminum sector tariff deal was you know,
if not imminent, that there was real momentum happening toward that.
So now that Trump is now that Ford has said
(04:11):
he will pull the AD as of Monday, so that
trade talks can resume, what we're looking to confirm is
whether or not the US agrees with that. Hey, they
go back to the table.
Speaker 3 (04:20):
So what's at steak here?
Speaker 8 (04:21):
Because I'm going to be quite honest with you, I've
kind of lost where we are in the US Canadian
trade talks.
Speaker 3 (04:28):
So where are we? What are we discussing?
Speaker 8 (04:30):
I mean, what's crazy is we know the US and
Canada have been longtime trading partners and important trading partners
in terms of what goes back and forth between the
borders between these two countries, so being what's that issue
right now?
Speaker 3 (04:45):
And yeah, what's at stake basically, Well, what.
Speaker 7 (04:49):
Is really hurt in Canada are those sectoral tariffs on steel, aluminum,
autos and lumber. Now, autos and lumber, it doesn't seem
we're anywhere near a deal on those. Trump has said
many times that the US doesn't want to buy Canadian
cars and he doesn't appear to be interested immediately in
preserving the North American vehicle supply chain, but on steel
(05:11):
and aluminum sectoral tariffs, which have had a devastating effect,
particularly in Premiere Ford's province of Ontario. It did appear
that the Canadian and US negotiators were getting closer to
a deal. Those talks reopened after Mark Karney visited the
White House on October seventh, and there was a discussion
about maybe Canadians selling more energy to the US in
(05:32):
exchange for lowering those steel and aluminum tariffs. So that's
what we were getting close to. That was really upended
by this troop social post.
Speaker 8 (05:42):
What about Prime Minister Carney, the Canadian prime minister, you know,
formerly on the Bloomberg board, formerly within the private investment world.
You know, this is a man who's had several different
hats and I'm just you know, is a relationship between
US and Canada going to be different from.
Speaker 3 (06:05):
Now on as a result of what's going on right now?
Speaker 7 (06:09):
Absolutely so. Mark Karney has said multiple times that the
old relationship between the US and Canada is over in
some ways. That was sort of his campaign rallying cry
that allowed him to become elected earlier this year, was
taking that really tough stance against US protectionism and saying
that he would diversify Canada's trading relationships. That's a big
(06:32):
part of the reason he's in Asia right now is
to try and find new export market markets for Canada's goods.
And in fact, he just gave a speech in which
he said he plans to double non US exports over
the next decade. It remains to be seen whether that's feasible,
but these are some of his goals. This is some
of what he talks about. He wants to reduce our
economic dependence on the US. At the same time, I
(06:54):
think he, being a businessman an economist, he understands the
reality of Canada's very serious dependence on the US and
how difficult it is to untangle those chains. So he
is in the near term trying to reach some kind
of deal that would preserve US market access for Canada
and a new focus will be USMCA next year.
Speaker 4 (07:14):
Did that go ahead here?
Speaker 8 (07:15):
And that's not forgetting he was a Governor of the
Bank of England twenty thirteen to twenty twenty.
Speaker 3 (07:19):
A long time.
Speaker 2 (07:20):
We've interviewed him.
Speaker 3 (07:21):
Yeah, I mean, listen, we've interviewed Yeah.
Speaker 8 (07:23):
He understands markets, countries, right versus Prime minister.
Speaker 3 (07:27):
Yeah, yeah, from so many different perspectives.
Speaker 2 (07:29):
So I wonder about, you know, preserving access to the
US market and whether or not this advertisement undermined that
in the long run. We know in the short term
what it did, but in the long run does it
does it set back negotiations?
Speaker 7 (07:44):
It's hard to say in the long run in a
world where Trump is president, because announcements can just come
out of nowhere late at night on a truth social website.
So it is hard to sort of predict the future
of how things unfold. We have seen him and trade
talks with Canada before, and then they're back on once
(08:07):
Canada sort of backs down on its particular policy. We
saw that over the summer with Canada Plan to bring
in a digital services tax that would have hit American
tech giants. Trump canceled trade talks, Carney pulled the tax,
and then the trade talks resumed. What I will say
is that, to be clear, this was not a Canadian
government ad. It was the Ontario government and Mark Carney's
(08:29):
approach versus Ontario Premier doug Ford's approach. They've been very different.
And so doug Ford has really advocated punching back. He
talks tough, he's kind of a populist in some ways.
He can be a bit of a mirror, a Canadian
mirror image of Trump in some of the ways that
he talks. So I think that we've seen a few
(08:49):
times where doug Ford has created a bit of friction
between the Canada US relationship that Mark Carney is not,
you know, does not want to have.
Speaker 9 (08:58):
It.
Speaker 3 (08:58):
Definitely sounds like an important distinction.
Speaker 8 (09:00):
And I'm guessing some phones we're ringing or some text
messaging was going back and forth.
Speaker 3 (09:05):
Laura, thank you so much. Laura Dylan Caage.
Speaker 8 (09:08):
She's a Ottawa bureau chief, joining us from our Ottawa
bureau here at Bloomberg News.
Speaker 2 (09:13):
Stay with us. More from Bloomberg Business Week Daily coming
up after this.
Speaker 1 (09:21):
You're listening to the Bloomberg Business Week Daily podcast. Catch
US Live weekday afternoons from two to five eastering. Listen
on Applecarplay and Android Auto with the Bloomberg Business app,
or watch US Live on YouTube.
Speaker 8 (09:35):
Yes, we are in a US government shutdown. It's now
and it's fourth week. Is it twenty twenty four days?
Speaker 2 (09:41):
I believe, Mike, is that right? Twenty four to twenty four.
Speaker 4 (09:43):
Twenty four days? Oh, Chris County.
Speaker 3 (09:45):
We are, we are well.
Speaker 2 (09:47):
I'm trying to, but sometimes I forget what.
Speaker 4 (09:49):
The weirdest thing.
Speaker 3 (09:50):
It just feels like nobody cares.
Speaker 8 (09:51):
But anyway, we should point out though, in the absence
of a lot of official data from the US government,
we did get a highly anticipated read inflation today.
Speaker 3 (10:01):
It's a bit of a welcome surprise to him.
Speaker 2 (10:03):
Yeah, that's particularly for several policy makers who are leary
of cutting rates further here with the data and the
market and the FED implications we got, Bloomberg TV and
Radio International Economics and Policy correspondent Michael McKee, isn't it.
Speaker 3 (10:16):
Kind of a while, though?
Speaker 8 (10:16):
We're in this shutdown, and I feel like in the past,
when we've covered it, our covered shutdowns were all over it, NonStop,
and it's just the weirdest thing.
Speaker 10 (10:25):
Well, yesterday the President tore down half the White House,
So I.
Speaker 4 (10:31):
Know, it's kind of hard to know what to focus
on these days.
Speaker 10 (10:35):
The economy is chugging along, which is probably one reason
that we're not seeing a lot as much focus on
it because people are still we're not seeing big layoffs yet,
although the number of layoff announcements came this week, and
people are still their incomes are coming in, they're still spending.
If things continue to weaken, then it'll become much more
(10:56):
of an issue, and.
Speaker 8 (10:57):
Then we want to talk about an inflation report too
as well. Also got another guest with us.
Speaker 2 (11:01):
Yeah, Katie Kaminski is joining us. She's chief Research Strategies
in portfolio manager with Alpha Simplex Group. She joins us
from Boston. Mike here in the studio, Mike, let's go
back to the inflationary print though, and and really the
focus of it. Look, we don't know if even we're
going to get one for this month. We don't, or
do we know if we're we we don't know.
Speaker 10 (11:20):
The White House suggested that we wouldn't, but it's not definitive.
Speaker 4 (11:23):
It's not definitive.
Speaker 2 (11:24):
Why did we get one for last month Social Security?
It's because of the cost of living increase. The cost
of living increases, I believe. Yeah, two point eight percent
calculated based on the average of the third quarter cpis.
So they needed this last one from September to be
able to put that out and it legally has to
go out by the first of November.
Speaker 4 (11:44):
So interesting we got that.
Speaker 3 (11:46):
So not too worried about inflation right now.
Speaker 4 (11:48):
No, we're worried about inflation right now.
Speaker 3 (11:50):
Okay, I thought this was a softer print.
Speaker 10 (11:52):
It was a slightly softer print. But you know, what
people were watching for was two things. One is were
services prices still rising, and services prices were still rising,
with a big exception for home prices the way they
calculated with owners equivalent rent, and they almost collapsed down
(12:15):
up just a tenth after being up four tenths, five tents,
three tenths for some couple of years. So that could
be noise and it is an anomaly, and we don't know.
But if you take that out, then you have still
regularly about the same as we've been with the service prices.
And then tariffs used car prices dropped a lot during
(12:39):
the month, and if you take out autos, you still
have core goods prices rising. And we saw things like
furniture up nine tentsven percent, almost a full percentage point,
and other tariff goods rising in price.
Speaker 4 (12:55):
So it does show that that's starting to bleed through.
Speaker 8 (12:57):
Hey, listen, Katie, we want to bring you into this
because you know, if I look at the treasury trade
over this month, we've seen benchmark ten years below four percent.
It's kind of where we are, although we've had some
volatility in today's trade. Bring in your read on the
inflation print and what it means for the treasury trade.
Speaker 11 (13:18):
Well, this is a good question because what we've seen
is a little bit of jitters around this potential CPI print.
But to be honest, that bond trends haven't moved that much.
They've been up, then they've been back down, So there
doesn't seem to be a lot of movement in that
asset class in reaction to the FED. The movement's actually
(13:38):
much more in other asset classes like a strong dollar, which.
Speaker 3 (13:42):
Makes no sense right if we're getting lower rates.
Speaker 11 (13:44):
Exactly lower rates strong dollar, and then the movements today
that are consistent with this CPI mover the equity market
just you know, showing relief about some concerns about not
getting rate cuts because of the shutdown.
Speaker 2 (13:58):
I think so it might come on in on this
push it to next week. I mean, does that mean
that we might not get rate cuts as a result
of the shutdown.
Speaker 4 (14:04):
No, we'll get We'll get their a cut.
Speaker 2 (14:06):
The FEDS on surveillance talking about fifty basis points this
morning not going to happen.
Speaker 12 (14:12):
You want, you have to be outrageous if you want
to talk truth. And his name rhymes with Tom Kanu. No,
we're not going to get fifty basis points. We're get
twenty five. The question is will we even have any
descents other than Steven Myron, who's already sort of advertised
he's going to descent every.
Speaker 10 (14:29):
Time unless he gets unless he gets fifty or seventy
five basis points or whatever. I mean, that's why they
sent him there. But the FED came into this meeting
letting the markets believe in a twenty five basis point cut,
and there's nothing in the inflation data that's going to
say screamingly, you can't do that. So the FED will
(14:50):
just go ahead and and cut rates. But I wouldn't
put any bets yet on what's going to happen in December.
Speaker 8 (14:56):
Katie, you were on surveillance this morning, Tim and I
were listening. Were you one of those crazy kids or
said fifty basis points?
Speaker 3 (15:01):
I don't think so, No.
Speaker 4 (15:03):
Definitely not.
Speaker 11 (15:04):
I'd say I was surprised though, because I think the
numbers did come in a little bit. I thought they'd
come in as expected, So coming in a little better
than expected definitely accelerated some of the trends that we're seeing.
I do think it kind of relieved the market from concerns.
I think the bigger shocks would be if you had
any sort of shift in policy.
Speaker 4 (15:25):
So the less.
Speaker 11 (15:26):
Likelihood of a shift in policy is what has kind
of sued the markets right now.
Speaker 8 (15:30):
There's an interesting story in the Bloomberg that caught my attention.
I'm curious what you guys think about this. The bond
markets movements have been suggesting a US downturn for three years,
since three month treasure yields first pushed above ten year
ones are right throughing. This notes the yield kurs predictive power.
Maybe sounding a false alarm, this time. This is from
Campbell Harvey due to factors such as massive fiscal spending
(15:51):
and healthy finances of consumers and corporations.
Speaker 3 (15:53):
Do you agree, Katie?
Speaker 11 (15:55):
I would have to say it is very contextual because
when you look at the inverted yield curve over different
periods of time, you know, I think some of the
potential inflation and other issues with policy is this kind
of not necessarily means that there's a recession right away.
So I think it's been sort of a fall signal
during this market environment.
Speaker 10 (16:17):
Yeah, we should mention that Campbell Harvey is the Duke
professor who came up with the idea of the inverted
yield curve signaling recession. And I think there's been general
consensus at the FED and among economists since we went
through almost since we went through the Great Financial Crisis,
but certainly coming out of COVID that it's not reliable
(16:38):
now for a whole host of reasons.
Speaker 3 (16:40):
Ignore it.
Speaker 2 (16:42):
Yeah, Hey, Mike, we're going to be speaking with Drew
Mattis over at MetLife Investment of Management in just a
minute about the consumer. Preface for that conversation, like, lay
the groundwork here, how is the consumer doing.
Speaker 4 (16:56):
Well?
Speaker 10 (16:57):
I think you advertise it as the k shapedy, and
that explains kind of where we are with the consumer.
Speaker 2 (17:04):
But we we'll hear from true. He kind of argues
that the case that the top end isn't doing as
well as people think, well.
Speaker 10 (17:11):
I think the top end is doing just fine, because
when you get to the higher top end, you're making
all your money off of interest and dividends, and the
stock market just keeps going.
Speaker 4 (17:21):
Up and up and up.
Speaker 10 (17:22):
It's the people who are on fixed income and low
wages who are struggling now because inflection is still going
up and they're trying to make ends meet and finding
it harder and harder. If you've gone to the grocery
store lately to buy Hamburger something like that. So you
have this bifurcation, and the question is how long can
(17:44):
people hang out before they start pulling back on spending,
And there's anecdotal evidence that they're starting to pull back
in some areas already. Then if we get any layoffs,
as some of these companies you're seeing P and G
today had you know, good, good earnings. But oh yeah,
by the way, we're going to get rid of eighteen
hundred people.
Speaker 8 (18:04):
Hey, Katie, I want to go back to just one,
you know, about the idea of what we're seeing in
equity markets versus bond markets, versus the dollar strength. I mean,
I'm trying to you know, gold, silver rally. Uh then
more recently dropping back, do the market metrics fit together?
Speaker 3 (18:18):
Make sense?
Speaker 8 (18:19):
They tell one story or no? And if not, then
what does that mean? So this is a good question.
I think for me, the question has been, you know,
it's been a growth story in equities, having good GDP numbers,
so you're seeing that very strong equity trend. But coupled
with that seeing also very strong gold and a weaker
(18:39):
dollar has made me feel a little nervous about that.
You know, there's a chance that we might have an overstimulation,
so low rates, high growth, and you kind of have
inflation potential. I think today's print is helpful in the
short term, but those are the themes that I'm seeing
where there's sort of a hedge out there against you know,
things look good, but you know, we need to proceed
(19:01):
with caution. We could have inflation, we may have issues,
especially with a weaker dollar. So this firm dollar is
also kind of interesting to me. I think probably the
most interesting recently. All right, great stuff, great, what we
can do a double dip with Katie Kaminski on this
morning on this afternoon. She's chief research strategist portfolio manager
with Alpha Simplex Group.
Speaker 3 (19:19):
Hey, we're going to stay on this, Mike's going to
stay with us.
Speaker 8 (19:21):
We want to bring your attention to something that JP
Morgan's Asset Managements Chief Global Strategy David Kelly said this
morning too on BTV on Surveillance, talked about the FED
inflation and the K shaped economy.
Speaker 4 (19:34):
I think the Fed is going to keep on cutting rates.
Speaker 9 (19:37):
It's generally a better than expected report, but I think
what it really shows is we have a K shaped
economy and it's sort of a K shaped CPI report.
It is clear that mainstream retailers don't believe they could
pass on the tariff increases right now, and that's what's
making this inflation rate a little bit tamer.
Speaker 3 (19:55):
Than people feared want to bring in.
Speaker 8 (19:57):
Of course, that was JP Morgan's David Kelly earlier today,
but right now I want to add to the mix.
The senior economist actually was a former senior e condomst at
Leman Brothers. We've been talking to him for a long time.
We're talking about Drew Mattis. He is the chief market
strategist at MetLife Investment Management, joining us from New Jersey. Drew,
your recent note caught the attention of our Tayacherella about
(20:19):
how the consumer is not okay.
Speaker 3 (20:22):
Walk us through that.
Speaker 13 (20:24):
Well, there is a ke shaped recovery or consumer that
the upper end is doing reasonably well, but the question
is always kind of how what's the change look like?
And the change for the upper end consumer is beginning
to show signs of stress. Now, whether that's because a
lot of the federal workers would fall in that one
hundred thousand plus category or whether it's something else, what
(20:47):
we are seeing is that upper income consumers are increasingly
saying that their real incomes are expected to decline over
the next year, and their job separation anxiety is actually
quite high, particularly relative to kind of lower income cohorts,
probably because a lot of the jobs that had been
being created were actually kind of you know, healthcare and
(21:09):
kind of other jobs that in many cases tend to
be you know, kind of lower income side of things.
And so I think, yes, they're doing fine for now,
but there are signs of stress. And ignoring them is
something that can lead to trouble.
Speaker 2 (21:24):
I got to tell you, Drew, I see that anecdotally
right now with people really looking for jobs, who have
been making good money and got laid off, and you know,
been looking for jobs for months. At this point, when
when do we if we haven't already, how does that
then manifest in data? And we're not necessarily getting it
from the government, but how does that manifest in data
that investors can react to?
Speaker 13 (21:43):
Drew, Well, I think one way it will manifest itself
is a decline in service sector spending, which we had
been seeing at least through the August numbers, which were
the latest ones we had before the shutdown.
Speaker 4 (21:56):
You know what tends to happen when.
Speaker 13 (21:58):
You have to worry about things, when people begin to
adjust their lifestyles in ways that shouldn't really be adjusted.
And by that I mean, you know, buying a cup
of coffee in the morning is not a decision that
should really tax most people's brains or that they should
really think about if they're feeling good about their job
prospects or.
Speaker 4 (22:16):
That they have a job.
Speaker 13 (22:18):
And what we're seeing is people are pulling back on
those kinds of purchases, and when that happens, you know,
if you're.
Speaker 4 (22:23):
Not buying a cup of coffee, you're not going to
buy a car.
Speaker 13 (22:26):
And so we're beginning to see that roll off on
the service sector spending side of things. And yes, maybe
people are in the upper income tier are still splurging
on certain things, or maybe there's a cohort within that
upper income cohort that's still splurging on certain things. But
the reality of it is it seems like it's beginning
to shift into a kind of a.
Speaker 4 (22:45):
Lower growth dynamic.
Speaker 13 (22:47):
And of course we can't find any of the data
or we don't have the data to know whether or
not that in fact is happening.
Speaker 4 (22:54):
Drew, how much of tariffs are a problem.
Speaker 10 (22:57):
Given what we saw today that there is some leakage
in and there may be more coming. It's obviously not
what was feared back in April. But how how bad
is it? Johnny as that McMahan used to say.
Speaker 3 (23:13):
And google that and you don't know what he's talking about, because.
Speaker 4 (23:17):
I know I do know. Unfortunately, because I am.
Speaker 8 (23:19):
Old enough, I meant that for the rest of the
audience out there in our control room.
Speaker 13 (23:26):
Uh, you know, I do think we're going to see
it pass through. I think it's going to happen. It's
not going to be a full pass through, uh, nor
is it going to lead to kind of this kind
of uh you know, wage price spiral type inflation story.
It's going to be a one time adjustment and the
FED should look through it.
Speaker 9 (23:42):
You know.
Speaker 13 (23:43):
I was just complaining to you, Mike, though, you know,
what about all the credit card surcharges that I'm now
paying for. It seems like everything went up by three
percent on top of the three percent inflation rate, because
every time I want my credit card, I have to
pay a lot more to kind of just use it.
And so I think, you know, once again, it's going
to be something that people notice and are affected by it.
(24:04):
But one of the things that's actually helping people right
now is that gas prices are actually extraordinarily low, particularly
relative to where they had been. And so we look
at gas prices relative to kind of how much you
have to work to get there, So how many minutes
of your work life does it cost you to buy
a gallon of gasoline? And when you look at it
that way, it's actually quite contained as well below where
(24:26):
it had been. The last couple of years, which is
probably helping people continue to spend.
Speaker 8 (24:31):
All right, We're going to leave it on that note.
I know we will be continuing this conversation in the future.
Drew Mattis, thank you so much, Chief Market Strategies at
MetLife Investment Management.
Speaker 3 (24:39):
Of course, are thanks.
Speaker 8 (24:40):
Always to our own Mike McKee TV and Radio International
Economics and Policy corresponding.
Speaker 2 (24:45):
Stay with us more from Bloomberg Business Week Daily coming
up after this.
Speaker 1 (24:53):
You're listening to the Bloomberg Business Week Daily Podcast. Catch
us live weekday afternoons from two to five eas Listen
on Apple Karplay and Android Auto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 8 (25:06):
Interesting a couple of weeks, we've talked about Zion's, a
couple of regional banks science tumbling last week. The firm
said it was the victim of fraud on loans to
funds that invest in distressed commercial mortgages. After the collapse
of subprime auto ender Tricolor Holdings and autopart supplier First
Brands Group, some investors said they are becoming concerned about
cracks in the credit market. And then, of course there
(25:28):
was the JP Morgan Chase CEO Jamie Dimond.
Speaker 2 (25:31):
You can't forget what he said last week that there's
really just one cockroach, which some private credit executive size
of barb aimed at them. Blue Owl Capital Coco Mark
Lipschultz responded by saying banks should look at their own books.
Speaker 8 (25:43):
All right, we've got a view on the distressed market
specific area. Back with us is Amy Rubinstein. She's CEO
of Clear Investment Group. It's Chicago based, specializing in opportunistic
real estate investments, specifically in the distressed mid sized multi
family sector in mostly secondary and tertiary markets around the
United States.
Speaker 3 (26:01):
She is lucky for us in studio. How are you.
Speaker 14 (26:04):
I'm great, good to be back here.
Speaker 8 (26:06):
Well, it's great to have you back here, and I'm
just curious big picture of the environment. There's been a
lot of stuff over the last week. Tell us about
the distress market certainly the area that you play in.
Are there more distress situation slash opportunities out there for you?
Speaker 14 (26:21):
Yeah, there's a ton of opportunity right now.
Speaker 3 (26:23):
Is there always or is there more than there have?
Speaker 15 (26:25):
I will say when we're in buyer's markets, we see
more distress right now. We have seen a lot of
distress over the last couple of years and continue to
see it, although I think we might have bounced off
the bottom and might be starting to come back.
Speaker 3 (26:40):
Why do you think that, Well, I think that the drop.
Speaker 15 (26:43):
In interest rate that we recently had was a little
bit helpful. That was only twenty five basis points. But
what we've really been seeing is that bank spreads are
coming in as well. So while we only saw a
twenty five basis point drop from the FED, we're really
feeling something more like one hundred basis point drop.
Speaker 14 (27:00):
On the fact that banks are coming in.
Speaker 3 (27:01):
That makes it some situations not so stressful.
Speaker 15 (27:05):
It doesn't does It doesn't help people that have existing
marks that might have gone up on interest rates. But
as people are refinancing, we are finding a better lending
environment than we were about a year ago.
Speaker 3 (27:18):
So talk to us about a deal that you've recently did.
Speaker 15 (27:21):
So we are doing a deal right now that we're
getting spread. We're actually assuming alone that is being purchased
at debt. So we're seeing a lot of that in
the market right now, where you do see distress from
people and people are walking away from their equity in
order to save their personal guarantees.
Speaker 3 (27:40):
And so more than you saw maybe three months ago,
six months ago.
Speaker 15 (27:43):
It happens to be that we've had our lastly five
deals that we've looked at have had loans where we're
assuming a loan at debt and we're and the sellers
walking away losing all of their equity.
Speaker 2 (27:55):
Why are sellers walking away? Well, what do they not do?
What are they not able to do that? Then you
can come and do.
Speaker 15 (28:00):
So what this particular lender is doing for us is
dropping that interest rate. The lender doesn't want to lose
any of their equity in this yeah, So they instead
are saying, all right, we know that there things were
a little bit off. We know that interest rates were high,
and we know that that seller or that owner was struggling.
Here we have a new borrower coming in, who's going
(28:22):
to be solid, who's going to maintain the integrity of
our investment. Let's give them a little break for a
little while so they can get through this period.
Speaker 2 (28:29):
Are lenders doing that without a transaction going through? Could
that seller have gone to the lender and said, look,
we can't handle this rate. Can we renegotiate so then
you don't have to bring someone new and you know us.
Speaker 14 (28:41):
I do think that happens as well.
Speaker 15 (28:43):
Okay, so yes, I think that's a possibility, and I
think that's something that borrowers need to ask for, and
I think when they do ask, they're often.
Speaker 14 (28:51):
Able to negotiate something with their lender.
Speaker 8 (28:53):
Amy how many of these deals have some kind of
private credit in them as well or is it separate?
Speaker 15 (28:58):
So I think that is the reason that spreads have
come in because private debt really flooded the markets, and
while banks took a step back, I would say over
the last couple of years, banks kind of pulled back
wanting to see how the market was going, and then
all of this private debt flooded the market, which is
what really caused when banks wanted to come back in
(29:21):
the beginning of twenty twenty five, they started to enter
the market and they saw more competition than they had before,
and so then what happened is they started to bring
in their spreads.
Speaker 14 (29:29):
And that's what brings.
Speaker 15 (29:30):
Us to have that feel of a much lower interest
rate than just that twenty five basis points.
Speaker 8 (29:34):
So give us an idea you do work in multifamily,
Give us an idea of the types of properties or
the regional variations where maybe these deals are happening.
Speaker 15 (29:41):
Sure, we have a deal under contract right now in
Saint Louis, a deal under contract right now in Tuscaloosa.
So we're talking about you know, those are secondary and
tertiary markets. We're also in DC, so that's a primary market.
So it really depends on where we're finding the right deal.
Speaker 2 (29:58):
We're you not seeing deals because the market is so good.
Speaker 15 (30:00):
So some of the places we won't buy are places
that got a little bit overinflated.
Speaker 14 (30:06):
So some of those growth markets that are now starting
to show.
Speaker 15 (30:09):
Some Boston, Texas, Sure, Austin, Nashville, South Carolina.
Speaker 14 (30:13):
Yeah, absolutely, What.
Speaker 2 (30:14):
About California, there's a lot of questions about the future
governor who that is a lot of questions about regulations
and red tape. Sure during the next administration.
Speaker 15 (30:24):
Absolutely, we tend to stay away from California right now
because we just don't get cash flow there. So that
ends up being an appreciation market and so we never
really find that cashlot to be able to go into
that market.
Speaker 8 (30:37):
So would you go as far as to say, you know,
what we've seen over the past few months, in just
the past week that you know tricollar first brand.
Speaker 3 (30:45):
I mean there have been.
Speaker 8 (30:46):
Knock on effects when it comes to financing as a
result of this, or no, as a result of well
any like the real estate financing deals have what we
have seen with these, and nervousness within the credit market
hasn't had a new path.
Speaker 5 (31:00):
No.
Speaker 15 (31:00):
I actually think that we are seeing enough money in
the market to be lending. So I don't see that
there's an issue of borrowing. I see that there are
fundamentals that are still strong. Although even in September, I'm
sure everyone's kind of watching this drop in rental rates.
Right September was that first month where we really saw
(31:22):
a big drop. I think thirty basis points in just
that month alone. And if you kind of pull it
apart and look at it, what's causing this. If you
did dissect it, you're getting about half about fifty basis
points drop in lifestyle renters, so renters who are choosing
between home ownership and renting, and that probably is coming
(31:42):
from people wanting to go back into the home market.
You're only getting about ten basis points of drop in
renters by necessity, so you got to like dissect that number.
Speaker 2 (31:51):
How our delinquencies with tenants right now.
Speaker 14 (31:54):
That's an interesting question.
Speaker 15 (31:56):
We have seen that delinquencies and evictions have in a
higher trend than usual, but that hasn't been just as
of recent We've seen that over the last couple of years.
Speaker 2 (32:05):
So that hasn't changed it all in the last six
months or so.
Speaker 15 (32:08):
I haven't seen it in the last six months that
that's growing. It definitely is a trend that I think
started post COVID.
Speaker 3 (32:15):
Who's struggling?
Speaker 8 (32:16):
Who are those people in those properties? Just got about
thirty forty seconds.
Speaker 15 (32:19):
Yeah, well, you know, the rents are staying stronger in
these C class assets, but I think it's also that
lower income zone that is struggling more than the higher brackets.
Speaker 3 (32:29):
Are you talking recession at all or like or just no.
Speaker 15 (32:33):
No, We're still seeing things being very strong as far
as employment. I'm still seeing tenants come in that have
qualifications to rent.
Speaker 8 (32:40):
Well, listen, you're the perfect person to check it and
considering this environment in the conversations we've had over the
last week and mean, thank you so much, thanks for
coming in studio, Thanks for having me. Yeah, great to
have you here, Aby Rubinstein. She's see you have clear
investment group joining us right here.
Speaker 1 (32:53):
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