March 27, 2025 • 44 mins
Watch Carol and Tim LIVE every day on YouTube: http://bit.ly/3vTiACF.
Bloomberg News News Senior Reporter Jennifer Dlouhy discusses President Trump signing a proclamation to implement a 25% tariff on auto imports and pledged harsher punishment on the EU and Canada if they join forces against the US, expanding a trade war and triggering threats of retaliation.
“What we’re going to be doing is a 25% tariff on all cars that are not made in the United States,” Trump said at the White House on Wednesday as he pushed ahead with a program seeking to bring more manufacturing jobs to the US.
Hours later, Trump suggested further tariffs would be imposed on the European Union and Canada if they worked together “to do economic harm” to the US. The reaction in currency markets including the euro and Canadian dollar was muted, and the S&P 500 fluctuated to start the day Thursday.
Bloomberg Economics US Economist Stuart Paul explains what Trump’s auto tariffs could mean for GDP and inflation. Katie Hubbard, EVP of Capital Markets for Walton Global, shares her thoughts on US housing data. Austin Walker, CEO of A. Walker & Company, talks about the Trump administration’s impact on affordable housing. And we Drive to the Close with Katie Nixon, CIO at Northern Trust Wealth Management.
Hosts: Carol Massar and Tim Stenovec. Producer: Paul Brennan.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:08):
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 news as it happens. The Bloomberg Business Weekdaily
Podcast with Carol Masser and Tim Steneveek on Bloomberg Radio.
Speaker 3 (00:33):
Let's get to the latest on trade. Certainly those trade
tariffs that we keep seeing coming from the White House,
the latest US trade salvo continuing to be dissected today
President Trump signing a proclamation that happened Wednesday at the
White House to implement a tariff on auto imports and
pledged harsher punishment on the EU in Canada if they
join forces against the United States, expanding a trade war
(00:55):
and really triggering some threats of retaliation.
Speaker 4 (00:59):
Well, we're going.
Speaker 5 (00:59):
To be doing.
Speaker 6 (01:00):
Is a twenty five percent tariff on all cars that
are not made in the United States, if they're made
in the United States, is absolutely not terror. We start
off with a two and a hared percent base, which
is what we were at, and we go to twenty
five percent.
Speaker 7 (01:14):
This is going to lead to the construction of a
lot of a lot of plants, a lot of this case,
auto plants, and you're gonna see numbers like you haven't
seen all right.
Speaker 3 (01:25):
That, of course was President Trump yesterday at the White
House with more. Let's head there and to Bloomberg new
senior reporter Jennifer Delowey, who is at the White House
at this hour. Jen, lay it all out for our
Bloomberg audience. How the tariffs roll out, what's the latest
and are there any exemptions?
Speaker 8 (01:44):
Right? So, the way these are constructed under the proclamation
that the President signed yesterday, they will initially hit fully
assembled vehicles and that will start essentially on April third.
The tariffs will be collected starting at twelve oh one
am that morning. They will eventually as soon as May third,
or by May third, start covering imported parts as well.
(02:06):
So you know your engines, your transmissions, your auto components.
The idea of being there is that, you know, White
House Trade advisors, the President believe that the US, you
know it was doing a lot of assembly of foreign
made components in its autoplants, and not enough a generation
of those high value parts themselves. So the idea of
extending to parts is a bid to reshore more of
(02:28):
the entire value chain. And importantly, while there is a
bit of a temporary safety net for us MCA compliant
trade from Canada and Mexico, it is only a very
temporary reprieve. After the government decides the US government decides
how to assess the US components of imported cars from
(02:49):
those countries, it will essentially assess the levy on everything
that is foreign about them. Even though obviously Canada and
Mexico are part of a trade deal that was negotia
in the first Trump term.
Speaker 9 (03:02):
Right then the president then who's the president now, made
a really big deal about that USMCA back during the
first term. We've seen the president already though, jen roll
back tariffs that have been announced, especially with regard to
our neighbor's closest to US. Is there any chance that
over the next month these could not be implemented or
(03:23):
they could be rolled back?
Speaker 4 (03:26):
You know?
Speaker 8 (03:26):
With this president, I think there's always a chance. We
have clearly seen his willingness to negotiate tariffs, especially with
Canada and Mexico. To be sure, the President yesterday in
the Oval Office said emphatically that these are permanent, These
will last his entire term. Even so, we now know that,
you know, it's been reported that there was a call
(03:49):
between Commerce Secretary Howard Lutnik and Ontario's premier, and after
that the Globe and Mail reported that, you know, the
province now expects the US to lessen the impact on Canada.
So there's there's certainly a lot of effort by countries
and companies that are being affected by these or expect
to be affected, to get some kind of exemption or
a dial down.
Speaker 3 (04:09):
So what else is coming next week in the way
of tariffs. It's really hard, Tim and I laugh. I
know Bloomberg has done a great job of like trying
to keep it true.
Speaker 9 (04:17):
Keep tr have the Trump tariff tracker, I have it
pulled up. It's a Bloomberg dot Com story. Right, google it,
you'll get right to it. It's really perfect.
Speaker 3 (04:24):
But to say that it is really great, but it's
like stuff still kind of is coming, and maybe more
stuff is coming. So tell us what we should expect
for you know, next week.
Speaker 8 (04:33):
I mean next week is very very big on the
tariff front. The President has been talking about April second
for weeks as being what he calls Liberation Day for America.
He has promised retaliatory I'm sorry, reciprocal apologies. He has
promised these reciprocal tariffs that will essentially reflect the levies
(04:56):
that other countries impose on the US, both in terms
of direct tariffs, but also things like a value added
tax or even you know, regulations that act to deter
the import of US goods into their countries. So the
idea is that those would be set to reflect kind
of what, as he puts it, what they charge us
will charge them. Yesterday he did signal some you know,
(05:18):
willingness to be maybe more lenient. He actually said, you know,
these will be more lenient than people are expecting, so
we'll see, we'll stay tuned. He also indicated that they
would hit all countries right away, as opposed to just
focusing on what he has considered the worst defenders, the
folks he calls the Dirty fifteen or also, by the way,
expecting sectoral tariffs. He has threatened those on pharmaceutical imports,
(05:42):
on imports of lumber, and on imports of semiconductors and chips.
It isn't clear how those and when those will all
be rolled out, but yesterday the President indicated that lumber
is likely next week.
Speaker 9 (05:55):
Well, perhaps to throw another I don't know, another variable
in here. China and TikTok and the way that there
could be a rollback in tariffs are partly as a
result of a negotiation strategy with TikTok. President Trumps that
he would consider lowering tariff rates imposed on China secure
Beijing support for that sale of TikTok's US operations to
(06:16):
an American company. What do we know about that? How
would that work? Is this just a negotiating strategy?
Speaker 8 (06:23):
You know, I think Trump clearly has shown that he
sees tariffs as not just an economic tool and not
just a tool of US geo political might, but really,
you know, an opportunity to exact concessions from other countries
and on China. Of course, you know, he is trying
the US government is trying to you know, shepherd a
deal that would allow for the sale of TikTok to
(06:45):
a US company. That deadline under a law that Trump
extended the deadline for. You know, he hits April fifth.
Yesterday he said, look, I'm willing to maybe I'd be
willing to shave some of their levies a little bit
shave the tariffs on China if they agree to the deal,
because there is some kind of China approval component here.
You know, how that actually works, we'd have to see,
(07:07):
but I think it's quite clear. You know, there are
concessions he wants from China on an array of fronts,
including drug trade and TikTok. Maybe something he's willing to
negotiate on.
Speaker 3 (07:17):
Is it just kind of always live In other words,
there could be more, there could be less. We just
that's kind of the environment, at least right now that
we're in.
Speaker 8 (07:26):
It's very fluid. I mean, even yesterday there was a
lot of fluidity around the scope of the autotiffs. Before
it was signed. We didn't know if it was going
to be parts. We didn't know if it was going
to be fully assimbled vehicles. And you know, even after
these things are put in place, they can be changed
many many times over. Fluid, unpredictable. That's where we.
Speaker 3 (07:44):
Are, fast moving river. That's what it feels like. All right, Jed,
thank you as always. We know you are super busy
as well. Bloomberg New senior reporter Jennifer Delowey joining us
certainly from the White House all right, latest on tariffs.
Now we want to kind of get to so what
does this mean potentially for the US economy?
Speaker 9 (08:01):
This on a day when we got another read on
the US economy for the final quarter of twenty twenty four.
For more, let's go to Bloomberg Economics US economist Stort
Paul he joins us here in the Bloomberg BusinessWeek studio
a lot of places to start. We could start with
fourth quarter GDP Weekly Jobless core PCE. We got an
important inflation print tomorrow, the one that the FED really
cares about. Does any of this matter when we continue
(08:23):
to see a president change his mind on tariffs or
impose more tariffs and really appear not to be done
with that process.
Speaker 10 (08:33):
GDP doesn't matter as much, The unemployment insurance claims don't
matter as much. I do think that the core inflation
and spending items do matter a lot. So tomorrow we're
going to get the February core PC inflation report, the
Fed's preferred measure of prices.
Speaker 9 (08:47):
We're expecting to.
Speaker 10 (08:48):
See zero point three five percent month on month core inflation.
That's about double the pace the FED needs to run
to get back to its two percent inflation target, and
we're also going to see a major surgeon spending, in
part on the back of audit which were auto sales
were terrible in January, major rebound in February. Why does
it matter? Folks are looking out in the world and
they're expecting to see tariffs hit, and they're pulling forward
(09:11):
their buying plans, so in anticipation of future prices tomorrow,
they're spending more today, which actually generates the inflation that
they're expecting to see tomorrow. Separate and apart from the separate,
apart from the cost push effects of higher tariffs. So yeah,
if you're the Fed, if you're consumers, if you're looking
at the broad macro data, things like inflation and spending
(09:33):
still do matter, separate apart from what's going on in
the West.
Speaker 9 (09:36):
You were telling me you're going to go buy six
cars this weekend. Yeah, so then you get before something
Saturday is going to beautiful data walk a lot.
Speaker 3 (09:44):
Well, you know, I've been thinking about this, like, how
do you as economists and you look at the US economy,
you know, what's the rule of thumb when it comes
to tariff'scope this much? This is what happens to the
US economy, or this is what happens to inflation? Do
you how do you play sure?
Speaker 10 (09:59):
So we have a broader models, We use a whole
host of different methodologies, but what it really comes down
to is looking at the size of the market that's
being tariffed, the size of the industry that's being tariff
the effective tariff rate, how much our effective tariff rate
across all imported goods moves, and then we map that
to GDP growth into inflation. So if we look at
(10:19):
what happened with autos yesterday, our effective tariff rate is
going to go up about two percentage points. Not huge.
We're still going to be running at an effective tarif
rate of just about five percent, not a big deal.
What it does do is take about two percentage points, sorry,
zero point two percentage points off a full year of growth,
and it boosts core inflation by about zero point one
(10:41):
percentage points. If we think about reciprocal tariffs and what
it could mean in the extreme, if we're looking at
value added taxes, if we're looking at non tariff measures,
and we're matching tariff rates with our major our top
fifteen trading partners, that's an effective tarifyrate of about thirty
five five percent, not five percent, thirty five percent, which
(11:03):
will shave off about four percentage points from growth over
about three years. So when you start mapping into the aggregate,
it could get to be some pretty big numbers.
Speaker 9 (11:12):
So how do you map that against this idea that
the President has, which is, if we impose these tariffs,
we will see a return of manufacturing back to the
United States, We'll see more economic activity in the United
States as a result. Do you map that out?
Speaker 10 (11:25):
We do the hit that consumers take and the consequences
for consumption, it tends to matter more than the investment
implications of trying to reshore additional manufacturing getting people back
to work. This is part of the problem with tariffs
in general, is that some of the benefits, like investments,
some of the benefits to auto producers, for example, are
(11:47):
very concentrated, but the costs are actually very diffuse, and
when they start racking up across the entire economy, they
get to be some pretty big numbers.
Speaker 3 (11:55):
One of the things I keep thinking about, Stuart, is
that as we look to bring more manufacturing back to
the United States, I mean, and I keep kind of asking,
do we want to be a manufacturer of shirts. Not
that there's anything wrong with being a manufacturer of shirts,
but what is better for an economy, a developed economy.
Is it better to be a service led economy high tech? Like,
what is it that's better from an economic standpoint for
(12:17):
a developed country?
Speaker 10 (12:18):
Being a services oriented economy and being a consumption oriented
economy is really what matters. And when that's the case,
you want to have a low You want to have
low imported goods costs, right, you want costs to be
relatively low. But there are four different factors I think
at least that are in play when thinking about what
could be motivating tariff policy. Right, you have typical vintage
(12:41):
trump Ism, going back to the eighties where he's just
looking at the trade balance and wants to win. You
advance Midwesternism I'm calling it, which is he looks out
to the Midwest, sees the rust belt totally hollowed out,
and says, cheap imported goods are not the American dream.
We need to bring hope and revitalize the hour manufacturing
base to give people jobs. You also have defensive on
(13:03):
shoring of major pharmaceuticals, for example, medical supplies and that's
a reason to onshore. And then finally you have this
negotiating tactic, this sort of monopsonist sort of you know,
we're the big market that everybody wants to sell into,
so we could extract rents from other folks. When all
of those motivations are in play, we're still going to
(13:25):
see tariff policy flying around. We're still going to see
these proposals separate apart from any sort of actual growth
that we could generate. That's a secondary effect.
Speaker 9 (13:36):
In your view as an economist, does this America First
agenda when it comes to manufacturing in the US does
that work?
Speaker 10 (13:45):
Will it work in terms of generating growth?
Speaker 7 (13:47):
Yes?
Speaker 10 (13:48):
Fundamentally no, because if we think about the things that
so Carol, as you mentioned, do we really want to
be manufacturing shirts? Not that there's anything wrong with that,
it's a low value good. It's not going to do
very much. The benefit to us of the additional manufacturing
jobs in low value goods like shirts probably isn't there.
If you want to do some of Erica First defensive
(14:09):
on shoring of things like semiconductors, the amount of revenue
that you generate per job created, or let's flip the
ratio and say how many jobs are created per million
dollars of revenue generated. You actually employ relatively few people.
So we're not gonna end up rebuilding a manufacturing industry
that captures a large share of our labor force. It's
just not gonna happen.
Speaker 3 (14:30):
Just twenty seconds because two, that's like the question I
feel like, because we talk about the gaps that are
here in the economy of the haves and have not,
So what is it from an economists perspective, really helps
the US economy benefit more in our society and just
really quickly productivity growth.
Speaker 10 (14:45):
It's all productivity growth, not reversing the de industrialization of
the past century. It's productivity growth. It's capitalizing on new
ideas and innovations. And that's why the US has outperformed
everybody else. It's mostly because of Silicon Valley and the
development of modern finance.
Speaker 9 (15:01):
In the US.
Speaker 3 (15:02):
Killer stuff, So appreciate it. Stuart Paul. Yeah, that was
like a masterclass, folks, you missed it downloaded.
Speaker 9 (15:07):
Check out his research at Bloomberg Economics. Read all of
the team's research. They know what they're doing.
Speaker 2 (15:13):
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Speaker 5 (15:27):
Well, US mortgage.
Speaker 3 (15:28):
Rates in the United States felt for the first time
in three weeks. Pending sales of US homes rebounded two
percent in February, So that be a economist's estimates due
to commer weather and a greater selection of houses. And
then you might recall earlier in the week sales of
new homes in the US bouncing back slightly last month.
That was kind of after a rocky start to twenty
twenty five, home builders benefiting again from better weather while
(15:51):
also leading on generous sales incentives to stoke demand.
Speaker 9 (15:54):
Him Despite the rebound, homebuilders are cautious due to increased
home supply, high mortgage rates prices, all so which may
limit support for the economy. We got a great voice
on this back with us as Katie Hubbard, Executi Vice
president of Capital Markets at Walton Global. It's the privately
owned asset in real estate investment company. It's got nearly
four point four billion dollars of land under management and
nearly ninety thousand acres under management here in the US.
(16:16):
Walton Global operates in the retail, industrial, and commercial sectors. Katie,
welcome back. It's good to see you. Usually you join
us from out West. It's good to have you here
in New York. Tell us why you're here, who you're
talking to, and what the temperature is of the folks
that you've been meeting with.
Speaker 11 (16:33):
Yeah, so specifically meeting with some of our clients and
also just attending a private equity real estate conference, meeting
with some of the top national homebuilders as well, and
just getting the sentiment that homebuilders are still feeling very
bullish right now.
Speaker 9 (16:44):
Why are they feeling bullish?
Speaker 11 (16:46):
People are really settling into that mid six percent mortgage
rate and.
Speaker 9 (16:49):
Settling into mid six percent? Wow, didn't take I hear,
I hear you say that could be worse. Yeah, it
could be worse. It hasn't been worse, but it could
get Okay, So why else?
Speaker 11 (16:58):
Yeah, just there's a there's also a land grab going
on in most major markets because land is scarce, and
home home purchasers are still out there looking to buy
homes and people are really starting to come off of
the sideline, so they want to be prepared to be
able to control the land, to be able to build
the homes.
Speaker 3 (17:16):
What makes home builders ultimately build.
Speaker 11 (17:19):
It's just it's a volume game. So the public homebuilders,
they want to hit their numbers while protecting their margins.
And as you mentioned, Carol earlier, you know, they are
offering incentives still to keep those numbers going and so
you can still you know, buy a brand new house
and get a mortgage rate buydown. Sometimes they're offering appliance upgrades,
you know, finishing kitchens with higher end granted, you know,
(17:40):
offering incentives to keep the volume going.
Speaker 3 (17:44):
Because you know, I was thinking about you know, we were,
you know, getting ready to talk with you. Earlier this year,
Bloomberg put out a story and forgive, I'm just going
to look at some notes here, and they said they
were looking to the nation's current housing crisis, as I
think was in January, and they talk about the lack
of home building coming off of the Great Recession more
than a decade ago, home construction never catching back up
(18:05):
to the demand of a growing population. Zillow has put
out some data, at least earlier this year, that the
US has a shortage of about four and a half
million homes. Is that still kind of where we are?
And again I think about what really needs to happen
for housing affordability and availability to kind of meet some
of the demand that's out there.
Speaker 11 (18:26):
Absolutely, I mean there is a shortage. So depending on
how you look at it could be you know, four
to even six million homes short in the country. And
so that's another thing that's keeping the builders going is
that the demand is still there. The regulation makes it
difficult for them to build. So that's something that administration can,
the Trump administration can.
Speaker 3 (18:43):
Do remind us what that is.
Speaker 11 (18:44):
And so that means it's just there's a lot of
bureaucracy and red tape when it comes to zoning and
land development, so.
Speaker 9 (18:50):
That actually that's local.
Speaker 11 (18:52):
It is local. But what the Trump administration has talked
about doing is incentivizing local jurisdictions to make it easier
to build houses faster. And then if they can build
them faster, they can ultimately build them cheaper. So they
can offer federal funding and tax incentives to the local
governments to bring to bring that down. So for example,
in Portland, there was a developer who've got an infill
(19:14):
lot and instead of rezoning it to build higher density.
Just was able to build seven homes on one lot,
and that's unique to Portland, but it's also an infill
place where the land is expensive, and so just being
able to offer that type of zoning where you can
build more houses on smaller areas would bring down potentially
(19:36):
bring down the cost. For example, in Houston, one of
the largest home builders is building five hundred square foot
homes detached, selling them for one hundred and eighty thousand dollars,
and then you can do a two story version for
you know, around two hundred thousand dollars, which works in
Houston because there's really no zoning laws and the demand
for that most exactly, it's just it's so affordable. People
you know that want want a house there, they'll pay
(19:58):
for that small a house. But in most cities the
zoning laws would not allow for that type of development.
Houston is just an anomaly. So we need to just
make the zoning easier.
Speaker 9 (20:08):
What are you hearing from home builders about potential challenges
labor given the crackdown on immigration, materials costs, given potentially
a shortage, given that there's a lot of demand in
Southern California post fires and rising costs you to tariffs.
What are you hearing from them about that?
Speaker 11 (20:23):
Yeah, so the last two months we have seen home
builder surveys and they're really not reporting any major changes
in labor. So that is something that they're definitely keeping
an eye on. But to date, nothing has really been
affected on tariffs. I mean, we saw the first Trump
administration have twenty percent tariffs on lumber, and actually lumber
prices didn't spike until twenty twenty one under the Biden
(20:43):
administration and then they settled back down into the mid
six hundreds per thousand board foot. So home builders, you know,
I was just talking to one of the luxury homebuilders,
a national builder here, and they're protecting maybe five thousand
dollars increase in overall home price for labor. But it's
not They're cautiously watching but not really expecting home prices
(21:04):
to go for the lumber.
Speaker 8 (21:05):
You know.
Speaker 3 (21:05):
I think, Katie, one of the things that we've talked
with you about is that how do we make sure
it's not just about building homes, but building homes where
we need them. And we've often talked about this has
gone on for decades of major cities where it's expensive
to live. But a lot of people work there, but
they can't afford to live there. So how do we
solve that problem.
Speaker 11 (21:24):
Well, as we've discussed before, you know that the administration
has said, well, we're going to give federal lands out
for development, which just doesn't work because those are going
to be lands that are in the middle of nowhere,
not close to job centers, and then just to go
through the political bureocracy of Congress getting appraisals and the environmentalists,
and then the developer ultimately has to be able to
(21:45):
make money on that. That's not going to be land
that's you know, in the middle of Alaska or Nevada
where there's no infrastructure.
Speaker 3 (21:51):
So what do we need to do then.
Speaker 11 (21:52):
So again it goes back to you know, hopefully rates
will come down, but rights.
Speaker 3 (21:57):
Have been lower and we still don't have enough afford
housing and kind of some of the major cities where
so many people work.
Speaker 11 (22:03):
Yes, and so really innovation is what's going to have
to come in and home bolders are trying to find
innovative ways to build. They're using modular using structural insulated panels,
so building off site and bringing those materials on to
reduce labor cost, but still it's it's it's not gonna
there's really no silver bullet.
Speaker 9 (22:20):
I want to remind everybody Walting loisvill buys land, holds
onto it, and then sells it to the big home builders.
How's land acquisition going right now?
Speaker 11 (22:28):
Yeah, it's great. I mean, if you're we're going into
tertiary markets for our clients, so places like you know,
we're buying in Panama City, Savannah, Georgia, Augusta, Georgia, Tucson, Wilmington,
North Carolina, so not those primary or secondary going to
those next that next in line where land is still
affordable and that does help bring down the cost.
Speaker 3 (22:47):
What's the most interesting trend in housing right now? Like
it's the McMansion over they go. I'm just in those
kinds of things.
Speaker 11 (22:55):
Yeah, I would just say the amenities really. Home bolders
want to be able to build a home where you
can have multi generation, so that entry level young family
coming in and then you've got the move up house,
and then you've got a place where mom and dad
can you know, don't have to go to an assisted
living facility, but they can have a single level home
in the same neighborhood. So they want pickleball courts, they
(23:16):
want swimming pools, they want all of the amenities to
attract that generation. And from the land side, you need
a big enough parcel of land to be able to
build a master planned community like that, all.
Speaker 3 (23:25):
Right, master planning communities. Yeah, interesting, Katie, Thank you, thanks
for coming back. Katiehubbard, Executive EP Capital Markets Ever at
Walton Global.
Speaker 2 (23:34):
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Well Move Out.
Speaker 3 (23:53):
The Trump administration to block a one point four billion
dollar program for green building retrofits has left hundreds of
in progress affordable housing projects in limbo. Renovations for aging
affordable housing projects across the US have been halted as
developers seek answers or alternatives now. The Green and Resilient
Retrofit program is one of a number of federal energy
(24:13):
efficiency initiatives that Elon Musk's Department of Government Efficiency DOGE
is looking to zero out to the frustration of affordable
housing developers across the country.
Speaker 9 (24:23):
Austin Walker's undoubtedly watching what happens out of Washington closely.
He's founder, CEO, managing principle at a walker In Company.
It's a New York based private equity fund manager and
it works with local firms and real estate management and development.
He joins us here in the Bloomberg Interactive Brokers studio.
Austin Welcome. I want to get to what's happening in
Washington in a minute, but first I just want to
get an understanding of what exactly your firm does, because
(24:46):
I think a lot of people would hear private equity
and affordable housing and say, wait a second, these two
things don't necessarily go hand in hand. Yeah, absolutely right.
Speaker 1 (24:53):
Affordable housing is developed and maintained and preserve through many
different forms. You know, where there's many infacture housing, single
family rentals, tax credit development, there's you know, firms like
us that really find unique opportunities to deploy flexible capital
to really develop and preserve these housing opportunities across the
(25:16):
entire landscape.
Speaker 9 (25:17):
Affordabhouse which part of the landscape, deplan in all parts
of it, all parts of it so even housing that
is regulated by the government, Yes, how do you make
money in that?
Speaker 1 (25:29):
A lot of it is feed generation. It's working through
a lot of programming, working with local municipalities to program
these opportunities. Right, it's part and parcel construction management, pricing
and working with a number of different grants and set
of programs. But it's largely driven really locally in terms
of incentives and other programs available to basically you know,
(25:51):
engineer capital stack to you know, create returns.
Speaker 3 (25:55):
How much of your business or investment is in that
area specifically, I.
Speaker 1 (25:58):
Would say probably twenty thirty percent is allocated to that area.
Speaker 3 (26:02):
Is there any concern in terms of what's going on
in government that some of that gets cut back?
Speaker 1 (26:06):
Yes, we got some favorable news. Last week was not
so favorable. You saw the administration past executive orders cutting
c d f I funds which are largely based on
you know, grants made through that to fund Community development
Finance institutions, which are a large cohort of financial liquidity
to the affordable housing space and that in the form
of loans, grants, other equity like subsidies. But they pass
(26:29):
the continuing Resolution, which is you know, again fully funding
you know HUD through which is the largest provider of
you know, affordable housing through housing choice vouchers UH Section
eight based you know, project based Section eight contracts supporting
you know, rents and affordable rents.
Speaker 9 (26:45):
Have you already been affected by changing out to Washington
in this administration?
Speaker 1 (26:49):
Absolutely? I mean we've had transactions that had to get
repriced installed because you know, either are financing you know,
opportunities our lenders where either cd f I lenders and
programs are dramatic changing. If you were going in with
a CDFI on pricing at an eight percent fixed rate loan,
and now you have to be you know, going midway
through a transaction at hard money to close it close
(27:10):
the transaction because you have deposits down that are hard.
You could be facing a four hundred basse points increase
in your cost of capital. These are real time changes
that are affecting the economics.
Speaker 3 (27:18):
So is that making you pivot in terms of different
you know, parts of your business, maybe spending more time elsewhere.
Speaker 1 (27:24):
Yeah. I think for us, you know, one of the
things we were born out of largely a market rate
development shop that focused mostly on workforce housing and attainable
housing so that's really just housing at large, but more
so C and B class housing, existing housing stock, which
you know, at the end of the day, most of
these policies, whether it's tariffs, immigration, other things, are going
(27:44):
to affect the supply demand imbalances, which are already extreme
due to you know, low housing starts, you know, especially
coming out of the GFC. You know, COVID interest rates
are so low. You finally got a little bit of
a pop in in development, you know pipeline, but that's
largely stalled due to the whips on interest rates coming
back up. So you know, we look at that being
a sustained problem just given that you know, tariffs are
(28:05):
going to increase lumber prices, other inputs for construction, so
construction costs going up. Immigration is going to affect labor
supply and you know labor wage rates. These are already
under extreme price pressures affecting the industry, and so we
see a very big problem with deliveries. But that's actually
good for existing housing, right because the demand is largely unchanged,
(28:28):
and so you know, we probably are going to see
inflationary pressure on rents as well, exacerbating the affordable housing problem.
So it's quite complicated and you know what's going on
right now across the sector.
Speaker 9 (28:38):
Katie Hubbard from Walton Global was just sitting in your
seat about an hour ago, and she is in the
city for meetings with her customers, who are the large
developers of the land that her company sells to them,
so the big home builders. She said, they're not yet
seeing increased cost due to materials. She says, they're not
(28:59):
seeing shoes when it comes to labor. Why are they
telling her that they're not seeing that, but you're seeing that.
Speaker 1 (29:05):
So you have to think about it. I guess from
a larger industry perspective, her and buyers largely publicly traded
companies Pulti, the likes right, they are not only mandated
by their boards to use legal labor versus the public
the private sector, which you know is able to tap
into a good point non legal immigrants for labor. There's
(29:26):
a big divergence between those and they're such a large scale.
They largely wholesale, bulk purchase and warehouse their materials, whether
it's overseas otherwise. They can navigate a large shift where
you have tariffs on Canadian lumber versus you know, bringing
in cabinets from China at bulk, and they basically forwardlock
their pipelines and they're able to price that out. They're
not feeling it yet, but if this is a sustained,
(29:47):
protracted tariff war that is more global in scope, you know,
it can make it very very same.
Speaker 3 (29:53):
Thing with labor. I'm assuming those you know who are
I guess you just US citizens or whatever they're going,
they're going to have a certain labor pool, and I'm
assuming those workers too are going to want their contracts
with the big publicly held Yeah.
Speaker 1 (30:09):
Absolutely, because there's there's certainty. But I think there's another
element to it. Renters, rental developers versus for sale developers.
A lot of the Pulti Homes, Toll Brothers, the larger publics,
their home builders their for sale product, so they're not necessarily,
you know, worried so much about the input they can
(30:30):
Largely it's such a supply constrained market. From a for
sale there's no inventory, so new deliveries are largely going
to be able to bear the price inflation that's going
to come out of increased cost of construction on a
for sale product. But at the end of the day,
financing everything else. As far as you know, multifamily rental
product is largely driven by the confluence of interest rates
(30:51):
and what you can charge on a nominal price per rent,
plus inflating expenses across insurance and other things. So it's
largely a cash flow problem, and inflation is going to
really impact housing development because you're solving to a cash
flow that at some point you can't inflate out of,
so those starts get halted.
Speaker 9 (31:07):
Hey, what do you see the federal government doing as
far as making land available for building? That was a
big part of the Trump administration's campaign, especially Jdvance took
that on and talked about federal land. What do you
see them doing?
Speaker 1 (31:22):
You know, it's interesting. I think it's something certainly that
they've been exploring. It is absolutely a big need. But
I think the biggest issue that's going to come out
of it is what are the local economies around federally
owned land that are actually going to support the economic
drivers that.
Speaker 9 (31:37):
Are There's a lot of federal land out west, but
are there the but we're industries to support people moving
to that part of the country.
Speaker 1 (31:46):
I think that's the biggest problem, you know, solver you know,
I mean issue that's going to come up with federally
owned land is how scalable is that for the capital markets?
Speaker 3 (31:55):
Where are the projects that you are involved in where
they mostly located.
Speaker 1 (31:59):
Yeah, So you know, we largely identify opportunities and municipalities
that are creative to you know, being you know, whether
it's pilot you know, payment in lieu of taxes, tax abatements,
other programs where you're getting property tax offsets in exchange
for housing affordability on the rental side, so capping your
rents on a certain percentage of our renolds. So we're
in Los Angeles mayor Bass Past eighty one. We just
(32:21):
got a site approved there for vertical construction. We have
acquisition preservation deal that we did in outside of Chicago
and that was a great transaction, you know, where we
worked with Fanni May on that that loan and you know,
got a twenty five percent tax abatement on that for
a very small asset aside for for rents. But it's
(32:42):
largely a workforce housing area serving an amazing school district.
But we're also in Florida, Houston, Atlanta, and we have
you know, projects that really are across the affordability stretch spectrum.
Speaker 9 (32:54):
So we hear a lot about how difficult it is
to build in California. Yeah, is that your experience?
Speaker 2 (32:59):
Yes?
Speaker 9 (33:00):
Is the California project that much more difficult than the
other projects will be?
Speaker 1 (33:03):
And we have another one in Long Island that we're
looking at very similar. You know, there's there's not a
lot of parcels for development, and then the environmental red tape,
the other local regulatory red tape heavy heavy, you know,
politics in terms of permitting. Getting through that process takes
an extremely well capitalized developer who has very very localized
expertise in working through the building departments to navigate that process.
(33:27):
Even on a largely ministerial approval process such as eighty one,
it still was very very difficult and largely contested project
to get through Ahson.
Speaker 3 (33:36):
Just to wrap up, who are the people that you
are housing? I think there's maybe not an understanding of,
you know, who all accesses? You know, what we talk
about access is access affordable housing. Like who are they?
Speaker 1 (33:50):
Yeah, I mean they're every They're everyday individuals. It's the
folks serving you coffee. It's your waiters, your bus drivers,
your teachers, firefighters. Every day folks right that are you know,
really going to feel the effects of you know, when
a cart and of eggs is thirteen bucks, in a
gallon of milk is eight bucks. You know, these are
(34:11):
people that are really you know, making it paycheck to paycheck.
That's largely the cohort that we serve, and that's why
these programs are really really necessary because you know, what
creates housing affordability in terms of the extreme lack of
supply is local zoning. Until there is a federal sweeping ability,
(34:33):
which is likely not going to happen in terms of
zoning approvals for multi family rezoning in commercial districts and everything,
it's going to be really challenging to deliver the type
of supply to actually naturally bring rents down. You have
a small, you know, test case in Austin, Texas where
they basically got rid of the permitting and zoning red tape.
(34:53):
They delivered fifty five thousand units and rents came down
by twenty five percent, and they will absolutely absorb those
units because there's an extreme need test case where you could,
you know, but doing that on a national level.
Speaker 3 (35:03):
Is going to be very great, super interesting. Thank you
so much. Glad you stop by Austin Walker, founder ceomaging
principle at a Walker and Company, joining us here on
business suite, brother marcle, how about you let me drive?
Speaker 9 (35:18):
Oh no, no, no, no, this is not a toy,
ug honey.
Speaker 3 (35:23):
Please, how do the riding gravels?
Speaker 2 (35:25):
Let's wake, I want to drive. It's a good question.
Speaker 1 (35:30):
Good.
Speaker 2 (35:33):
This is the drive to the clothes.
Speaker 9 (35:36):
Pongs for me a thing?
Speaker 2 (35:37):
Well, drill down on Bloomberg Radio.
Speaker 3 (35:40):
All right, everybody, we're just about eighteen minutes away from
the closing bell on this Thursday. Bouncing around here, Charlie
Bill Maloney just of course breaking down the trade for you.
Just a reminder, just down about two points on the
S and P five hundred. Call it flat on the day,
Dad John's industrial average, a decline of sixty seven points.
Good for a decline of about two tents of a percent,
same percentage decline, tim when it comes to the Nasdaq
(36:01):
one hundred, down about forty three points, but again off
our highs and lows of the session.
Speaker 9 (36:05):
Yeah, I mean the S and P five hundred right
now is not even down one tenth of one percent.
Speaker 8 (36:08):
I know.
Speaker 3 (36:09):
Flat.
Speaker 9 (36:09):
Yeah, it's like searching for direction despite the bunch of
tariffs I think caught some companies off guard.
Speaker 3 (36:14):
Yeah, it's kind of interesting, right.
Speaker 9 (36:16):
Yeah, it's like, didn't this get telegraphed yesterday? I think
the point that Jennifer Dellewey made earlier was there was
a lot of confusion about whether or not would include
auto parts companies, and it does. So you see those
companies getting hit pretty hard.
Speaker 3 (36:28):
Yeah, and then there's more to come next week. So
I think I don't know, I've got an inflation print tomorrow.
Let's see what Katy Nixon has to say about all
of it. She's chief investment officer at Northern Trust Wealth Management,
joining us from Chicago. Katie, nice to check in with you.
This environment, it's an interesting one and sometimes markets react,
sometimes they don't, but they seem to move around a
(36:48):
fair amount. How do you describe kind of where we
are and what's top of mind for investors and maybe
your clients, right, Carol.
Speaker 4 (36:56):
Well, thank you so much for having me, And I
guess I would just echo this sentiment that's been sort
of persistent through through your coverage, and that is just
this period of uncertainty. I don't think investors really know
which way to turn right now. The market today is
a really interesting example where you sort of look at
the at the averages, look at the bond in the
stock markets, and you say, not much going on, But
(37:18):
beneath the surface there certainly is a lot of churn.
Speaker 5 (37:20):
So I think investors are looking for a guiding life here.
Speaker 4 (37:24):
They're looking for some certainty. And I guess what we're
telling our clients.
Speaker 5 (37:27):
Is we may be waiting for we may be waiting
a bit longer.
Speaker 4 (37:30):
If if we're looking for that period of calm or
more or more certainty, I think we're going to be
living with more volatility and a lot more news and noise. Frankly,
that's going to impact markets for the foreseeable future.
Speaker 9 (37:43):
What is the foreseeable future? How much longer? I'm getting
a little tired. I'm getting a little tired.
Speaker 4 (37:50):
No, I know. Well, I mean we're all looking forward
to Liberation Day, of course, but we're getting some pre
news here that's certainly market moving, and I'm not sure
we're going to get the clarity that we probably need
on April second. And by that I mean I think
it'll still be a work in process. I think we've
learned through the last several weeks and months. Frankly that
(38:13):
you know, news evolves over time, things can change, so
it's very hard to have a lot of confidence and
what you hear is eventually going to be what turns
into persistent policy that won't.
Speaker 5 (38:25):
Change over time.
Speaker 4 (38:27):
So I think this is a time for investors to
really sit back and recognize the one important thing, which
is we're buying companies, right We're not buying politics, we're
not buying even economies. We're buying companies, and companies have
showed remarkably through time the ability to navigate and to
be resilient in the face of a lot of uncertainty.
Speaker 5 (38:49):
So although it's.
Speaker 4 (38:51):
Hard when you're reading the news and you're hearing about
these things on a regular basis, it's hard to remind yourself,
but it's important to remind yourself that at the end
of the day, it's all about fundamentals, how companies are
able to navigate this period of uncertainty, what the picture
looks like on the other side. We don't necessarily know
when we're going to get there, but we know we'll
get there at that point. As an investor, what you
(39:13):
really want to focus on is just the stability of
the fundamentals.
Speaker 3 (39:18):
Right, but the stability of the fundamentals can be whipsaw
based on the headlines that come out of Washington. And
so if we don't see things settle down sometime soon,
you know, does that once again make it hard to
invest on the fundamentals?
Speaker 5 (39:35):
You know, it does to a certain extent, Carol.
Speaker 4 (39:37):
But I think again, once once companies know the rules
of the road, they'll be able to navigate more resiliently.
Speaker 5 (39:44):
Right now, I think.
Speaker 4 (39:45):
Nobody knows what the rules of the road are going
to be. Again, I use the word persistently because we
might hear some news that could change, you know, in
a week or two. So I think we will be
in this period of fog for a bit here. And
I think we're actually going to hear more about that
from companies as they start to talk about their first
quarter earnings results. We're going to hear more about how
(40:06):
they're thinking about the navigation process here they as they
are also facing this period of uncertainty.
Speaker 9 (40:14):
Yeah.
Speaker 3 (40:15):
No, it's interesting. I feel like we just wrapped up earnings,
right they were kind of just a few at the
tail end. But I feel like we're already looking forward
to earning because we want to hear what the C
suite has to say about this environment. What are they
doing or what are they not doing as a result
of the volatility or the uncertainty going forward In the meantime,
So an investor comes to you and says, I've got
(40:38):
a portfolio or I've got some money I want to
put to work. What do you do with it today?
Speaker 5 (40:43):
Well, again, they're always opportunities in markets. And what I
would say is what we're seeing now is kind of
a washout of sentiment. You know, we see bearishness, you
know in the aai I survey staying you know, pretty
bearish for an extended peer period of time, which is
quite unusual and typically precedes decent periods of return for investors.
(41:06):
So we would say to any investor that comes to
us today, or frankly to our clients, get your strategic
acid allocation in line and get yourself invested, recognizing that
we're going to have a period of volatility, but also
recognizing that as a long term investor, this is not
a bad time to be putting money to work in
the market.
Speaker 4 (41:23):
But we would say, in addition to that, Carol is
start to think more globally. I think in the past
several years, most investors have had this tremendous home country
bias here in the US, and they've been right. The
US has roundly outperformed everything, and it's really been on
the backs of US large cap growth in a particular tech.
(41:44):
We're telling our clients, and we would tell a new
client to start.
Speaker 5 (41:48):
From a place of diversification.
Speaker 4 (41:50):
You want to have opportunities all across the world, and
you also want to have opportunities away from just that
super large cap US tech focus exposure and look at
other areas of the US market. Look at value stocks,
for example, as an interesting place to get some diversification.
Speaker 9 (42:08):
Right now, So, okay, US and value where do you?
Where do you? I mean, look, nobody knows what's going
to happen, but geographically, where do you see that performance
this year?
Speaker 5 (42:21):
Well?
Speaker 4 (42:22):
Short term, you know, prognostications are incredibly difficult. But what
I will say is we're more confident in the performance
of non US markets today than we were four or
five months ago. And that confidence comes from the combination
of monetary and fiscal stimulus that we see coming really
to the four overseas.
Speaker 5 (42:41):
Clearly, you guys have covered Europe really well.
Speaker 4 (42:44):
We see, you know, a really extraordinary amount of fiscal
stimulus being injected into an economy, and more importantly, into
a market that tends to be very sensitive to that, right,
defense spending, in structure spending, forget.
Speaker 3 (42:59):
So, Katie forget, just got about thirty seconds left. So
do you want to commit a fair amount of money
into Europe or not? Necessarily? Would you still stay with
the US and just quickly if you could.
Speaker 5 (43:07):
No, you do, Carol.
Speaker 4 (43:08):
Absolutely, you want to be as diversified as the global
markets and get your fair share of what could be
some outsize returns over the near term as investors start
to reposition their portfolios towards that opportunity.
Speaker 3 (43:20):
All right, we're going to leave it there, Hey, Katie,
thank you so much. Katie Nixon, chief investment Officer at
Northern Trust Wealth Management, joining us from Chicago on this Thursday.
Speaker 2 (43:29):
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Speaker 2 (00:08):
This is Bloomberg business Week Daily reporting from the magazine
that helps global leaders stay ahead with insight on the people, companies,
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and tech news as it happens. The Bloomberg Business Weekdaily
Podcast with Carol Masser and Tim Steneveek on Bloomberg Radio.
Speaker 3 (00:33):
Let's get to the latest on trade. Certainly those trade
tariffs that we keep seeing coming from the White House,
the latest US trade salvo continuing to be dissected today
President Trump signing a proclamation that happened Wednesday at the
White House to implement a tariff on auto imports and
pledged harsher punishment on the EU in Canada if they
join forces against the United States, expanding a trade war
(00:55):
and really triggering some threats of retaliation.
Speaker 4 (00:59):
Well, we're going.
Speaker 5 (00:59):
To be doing.
Speaker 6 (01:00):
Is a twenty five percent tariff on all cars that
are not made in the United States, if they're made
in the United States, is absolutely not terror. We start
off with a two and a hared percent base, which
is what we were at, and we go to twenty
five percent.
Speaker 7 (01:14):
This is going to lead to the construction of a
lot of a lot of plants, a lot of this case,
auto plants, and you're gonna see numbers like you haven't
seen all right.
Speaker 3 (01:25):
That, of course was President Trump yesterday at the White
House with more. Let's head there and to Bloomberg new
senior reporter Jennifer Delowey, who is at the White House
at this hour. Jen, lay it all out for our
Bloomberg audience. How the tariffs roll out, what's the latest
and are there any exemptions?
Speaker 8 (01:44):
Right? So, the way these are constructed under the proclamation
that the President signed yesterday, they will initially hit fully
assembled vehicles and that will start essentially on April third.
The tariffs will be collected starting at twelve oh one
am that morning. They will eventually as soon as May third,
or by May third, start covering imported parts as well.
(02:06):
So you know your engines, your transmissions, your auto components.
The idea of being there is that, you know, White
House Trade advisors, the President believe that the US, you
know it was doing a lot of assembly of foreign
made components in its autoplants, and not enough a generation
of those high value parts themselves. So the idea of
extending to parts is a bid to reshore more of
(02:28):
the entire value chain. And importantly, while there is a
bit of a temporary safety net for us MCA compliant
trade from Canada and Mexico, it is only a very
temporary reprieve. After the government decides the US government decides
how to assess the US components of imported cars from
(02:49):
those countries, it will essentially assess the levy on everything
that is foreign about them. Even though obviously Canada and
Mexico are part of a trade deal that was negotia
in the first Trump term.
Speaker 9 (03:02):
Right then the president then who's the president now, made
a really big deal about that USMCA back during the
first term. We've seen the president already though, jen roll
back tariffs that have been announced, especially with regard to
our neighbor's closest to US. Is there any chance that
over the next month these could not be implemented or
(03:23):
they could be rolled back?
Speaker 4 (03:26):
You know?
Speaker 8 (03:26):
With this president, I think there's always a chance. We
have clearly seen his willingness to negotiate tariffs, especially with
Canada and Mexico. To be sure, the President yesterday in
the Oval Office said emphatically that these are permanent, These
will last his entire term. Even so, we now know that,
you know, it's been reported that there was a call
(03:49):
between Commerce Secretary Howard Lutnik and Ontario's premier, and after
that the Globe and Mail reported that, you know, the
province now expects the US to lessen the impact on Canada.
So there's there's certainly a lot of effort by countries
and companies that are being affected by these or expect
to be affected, to get some kind of exemption or
a dial down.
Speaker 3 (04:09):
So what else is coming next week in the way
of tariffs. It's really hard, Tim and I laugh. I
know Bloomberg has done a great job of like trying
to keep it true.
Speaker 9 (04:17):
Keep tr have the Trump tariff tracker, I have it
pulled up. It's a Bloomberg dot Com story. Right, google it,
you'll get right to it. It's really perfect.
Speaker 3 (04:24):
But to say that it is really great, but it's
like stuff still kind of is coming, and maybe more
stuff is coming. So tell us what we should expect
for you know, next week.
Speaker 8 (04:33):
I mean next week is very very big on the
tariff front. The President has been talking about April second
for weeks as being what he calls Liberation Day for America.
He has promised retaliatory I'm sorry, reciprocal apologies. He has
promised these reciprocal tariffs that will essentially reflect the levies
(04:56):
that other countries impose on the US, both in terms
of direct tariffs, but also things like a value added
tax or even you know, regulations that act to deter
the import of US goods into their countries. So the
idea is that those would be set to reflect kind
of what, as he puts it, what they charge us
will charge them. Yesterday he did signal some you know,
(05:18):
willingness to be maybe more lenient. He actually said, you know,
these will be more lenient than people are expecting, so
we'll see, we'll stay tuned. He also indicated that they
would hit all countries right away, as opposed to just
focusing on what he has considered the worst defenders, the
folks he calls the Dirty fifteen or also, by the way,
expecting sectoral tariffs. He has threatened those on pharmaceutical imports,
(05:42):
on imports of lumber, and on imports of semiconductors and chips.
It isn't clear how those and when those will all
be rolled out, but yesterday the President indicated that lumber
is likely next week.
Speaker 9 (05:55):
Well, perhaps to throw another I don't know, another variable
in here. China and TikTok and the way that there
could be a rollback in tariffs are partly as a
result of a negotiation strategy with TikTok. President Trumps that
he would consider lowering tariff rates imposed on China secure
Beijing support for that sale of TikTok's US operations to
(06:16):
an American company. What do we know about that? How
would that work? Is this just a negotiating strategy?
Speaker 8 (06:23):
You know, I think Trump clearly has shown that he
sees tariffs as not just an economic tool and not
just a tool of US geo political might, but really,
you know, an opportunity to exact concessions from other countries
and on China. Of course, you know, he is trying
the US government is trying to you know, shepherd a
deal that would allow for the sale of TikTok to
(06:45):
a US company. That deadline under a law that Trump
extended the deadline for. You know, he hits April fifth.
Yesterday he said, look, I'm willing to maybe I'd be
willing to shave some of their levies a little bit
shave the tariffs on China if they agree to the deal,
because there is some kind of China approval component here.
You know, how that actually works, we'd have to see,
(07:07):
but I think it's quite clear. You know, there are
concessions he wants from China on an array of fronts,
including drug trade and TikTok. Maybe something he's willing to
negotiate on.
Speaker 3 (07:17):
Is it just kind of always live In other words,
there could be more, there could be less. We just
that's kind of the environment, at least right now that
we're in.
Speaker 8 (07:26):
It's very fluid. I mean, even yesterday there was a
lot of fluidity around the scope of the autotiffs. Before
it was signed. We didn't know if it was going
to be parts. We didn't know if it was going
to be fully assimbled vehicles. And you know, even after
these things are put in place, they can be changed
many many times over. Fluid, unpredictable. That's where we.
Speaker 3 (07:44):
Are, fast moving river. That's what it feels like. All right, Jed,
thank you as always. We know you are super busy
as well. Bloomberg New senior reporter Jennifer Delowey joining us
certainly from the White House all right, latest on tariffs.
Now we want to kind of get to so what
does this mean potentially for the US economy?
Speaker 9 (08:01):
This on a day when we got another read on
the US economy for the final quarter of twenty twenty four.
For more, let's go to Bloomberg Economics US economist Stort
Paul he joins us here in the Bloomberg BusinessWeek studio
a lot of places to start. We could start with
fourth quarter GDP Weekly Jobless core PCE. We got an
important inflation print tomorrow, the one that the FED really
cares about. Does any of this matter when we continue
(08:23):
to see a president change his mind on tariffs or
impose more tariffs and really appear not to be done
with that process.
Speaker 10 (08:33):
GDP doesn't matter as much, The unemployment insurance claims don't
matter as much. I do think that the core inflation
and spending items do matter a lot. So tomorrow we're
going to get the February core PC inflation report, the
Fed's preferred measure of prices.
Speaker 9 (08:47):
We're expecting to.
Speaker 10 (08:48):
See zero point three five percent month on month core inflation.
That's about double the pace the FED needs to run
to get back to its two percent inflation target, and
we're also going to see a major surgeon spending, in
part on the back of audit which were auto sales
were terrible in January, major rebound in February. Why does
it matter? Folks are looking out in the world and
they're expecting to see tariffs hit, and they're pulling forward
(09:11):
their buying plans, so in anticipation of future prices tomorrow,
they're spending more today, which actually generates the inflation that
they're expecting to see tomorrow. Separate and apart from the separate,
apart from the cost push effects of higher tariffs. So yeah,
if you're the Fed, if you're consumers, if you're looking
at the broad macro data, things like inflation and spending
(09:33):
still do matter, separate apart from what's going on in
the West.
Speaker 9 (09:36):
You were telling me you're going to go buy six
cars this weekend. Yeah, so then you get before something
Saturday is going to beautiful data walk a lot.
Speaker 3 (09:44):
Well, you know, I've been thinking about this, like, how
do you as economists and you look at the US economy,
you know, what's the rule of thumb when it comes
to tariff'scope this much? This is what happens to the
US economy, or this is what happens to inflation? Do
you how do you play sure?
Speaker 10 (09:59):
So we have a broader models, We use a whole
host of different methodologies, but what it really comes down
to is looking at the size of the market that's
being tariffed, the size of the industry that's being tariff
the effective tariff rate, how much our effective tariff rate
across all imported goods moves, and then we map that
to GDP growth into inflation. So if we look at
(10:19):
what happened with autos yesterday, our effective tariff rate is
going to go up about two percentage points. Not huge.
We're still going to be running at an effective tarif
rate of just about five percent, not a big deal.
What it does do is take about two percentage points, sorry,
zero point two percentage points off a full year of growth,
and it boosts core inflation by about zero point one
(10:41):
percentage points. If we think about reciprocal tariffs and what
it could mean in the extreme, if we're looking at
value added taxes, if we're looking at non tariff measures,
and we're matching tariff rates with our major our top
fifteen trading partners, that's an effective tarifyrate of about thirty
five five percent, not five percent, thirty five percent, which
(11:03):
will shave off about four percentage points from growth over
about three years. So when you start mapping into the aggregate,
it could get to be some pretty big numbers.
Speaker 9 (11:12):
So how do you map that against this idea that
the President has, which is, if we impose these tariffs,
we will see a return of manufacturing back to the
United States, We'll see more economic activity in the United
States as a result. Do you map that out?
Speaker 10 (11:25):
We do the hit that consumers take and the consequences
for consumption, it tends to matter more than the investment
implications of trying to reshore additional manufacturing getting people back
to work. This is part of the problem with tariffs
in general, is that some of the benefits, like investments,
some of the benefits to auto producers, for example, are
(11:47):
very concentrated, but the costs are actually very diffuse, and
when they start racking up across the entire economy, they
get to be some pretty big numbers.
Speaker 3 (11:55):
One of the things I keep thinking about, Stuart, is
that as we look to bring more manufacturing back to
the United States, I mean, and I keep kind of asking,
do we want to be a manufacturer of shirts. Not
that there's anything wrong with being a manufacturer of shirts,
but what is better for an economy, a developed economy.
Is it better to be a service led economy high tech? Like,
what is it that's better from an economic standpoint for
(12:17):
a developed country?
Speaker 10 (12:18):
Being a services oriented economy and being a consumption oriented
economy is really what matters. And when that's the case,
you want to have a low You want to have
low imported goods costs, right, you want costs to be
relatively low. But there are four different factors I think
at least that are in play when thinking about what
could be motivating tariff policy. Right, you have typical vintage
(12:41):
trump Ism, going back to the eighties where he's just
looking at the trade balance and wants to win. You
advance Midwesternism I'm calling it, which is he looks out
to the Midwest, sees the rust belt totally hollowed out,
and says, cheap imported goods are not the American dream.
We need to bring hope and revitalize the hour manufacturing
base to give people jobs. You also have defensive on
(13:03):
shoring of major pharmaceuticals, for example, medical supplies and that's
a reason to onshore. And then finally you have this
negotiating tactic, this sort of monopsonist sort of you know,
we're the big market that everybody wants to sell into,
so we could extract rents from other folks. When all
of those motivations are in play, we're still going to
(13:25):
see tariff policy flying around. We're still going to see
these proposals separate apart from any sort of actual growth
that we could generate. That's a secondary effect.
Speaker 9 (13:36):
In your view as an economist, does this America First
agenda when it comes to manufacturing in the US does
that work?
Speaker 10 (13:45):
Will it work in terms of generating growth?
Speaker 7 (13:47):
Yes?
Speaker 10 (13:48):
Fundamentally no, because if we think about the things that
so Carol, as you mentioned, do we really want to
be manufacturing shirts? Not that there's anything wrong with that,
it's a low value good. It's not going to do
very much. The benefit to us of the additional manufacturing
jobs in low value goods like shirts probably isn't there.
If you want to do some of Erica First defensive
(14:09):
on shoring of things like semiconductors, the amount of revenue
that you generate per job created, or let's flip the
ratio and say how many jobs are created per million
dollars of revenue generated. You actually employ relatively few people.
So we're not gonna end up rebuilding a manufacturing industry
that captures a large share of our labor force. It's
just not gonna happen.
Speaker 3 (14:30):
Just twenty seconds because two, that's like the question I
feel like, because we talk about the gaps that are
here in the economy of the haves and have not,
So what is it from an economists perspective, really helps
the US economy benefit more in our society and just
really quickly productivity growth.
Speaker 10 (14:45):
It's all productivity growth, not reversing the de industrialization of
the past century. It's productivity growth. It's capitalizing on new
ideas and innovations. And that's why the US has outperformed
everybody else. It's mostly because of Silicon Valley and the
development of modern finance.
Speaker 9 (15:01):
In the US.
Speaker 3 (15:02):
Killer stuff, So appreciate it. Stuart Paul. Yeah, that was
like a masterclass, folks, you missed it downloaded.
Speaker 9 (15:07):
Check out his research at Bloomberg Economics. Read all of
the team's research. They know what they're doing.
Speaker 2 (15:13):
You're listening to the Bloomberg Business Week podcast catch US
Live weekday afternoons from two to five pm Eastern. Listen
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or watch US Live on YouTube.
Speaker 5 (15:27):
Well, US mortgage.
Speaker 3 (15:28):
Rates in the United States felt for the first time
in three weeks. Pending sales of US homes rebounded two
percent in February, So that be a economist's estimates due
to commer weather and a greater selection of houses. And
then you might recall earlier in the week sales of
new homes in the US bouncing back slightly last month.
That was kind of after a rocky start to twenty
twenty five, home builders benefiting again from better weather while
(15:51):
also leading on generous sales incentives to stoke demand.
Speaker 9 (15:54):
Him Despite the rebound, homebuilders are cautious due to increased
home supply, high mortgage rates prices, all so which may
limit support for the economy. We got a great voice
on this back with us as Katie Hubbard, Executi Vice
president of Capital Markets at Walton Global. It's the privately
owned asset in real estate investment company. It's got nearly
four point four billion dollars of land under management and
nearly ninety thousand acres under management here in the US.
(16:16):
Walton Global operates in the retail, industrial, and commercial sectors. Katie,
welcome back. It's good to see you. Usually you join
us from out West. It's good to have you here
in New York. Tell us why you're here, who you're
talking to, and what the temperature is of the folks
that you've been meeting with.
Speaker 11 (16:33):
Yeah, so specifically meeting with some of our clients and
also just attending a private equity real estate conference, meeting
with some of the top national homebuilders as well, and
just getting the sentiment that homebuilders are still feeling very
bullish right now.
Speaker 9 (16:44):
Why are they feeling bullish?
Speaker 11 (16:46):
People are really settling into that mid six percent mortgage
rate and.
Speaker 9 (16:49):
Settling into mid six percent? Wow, didn't take I hear,
I hear you say that could be worse. Yeah, it
could be worse. It hasn't been worse, but it could
get Okay, So why else?
Speaker 11 (16:58):
Yeah, just there's a there's also a land grab going
on in most major markets because land is scarce, and
home home purchasers are still out there looking to buy
homes and people are really starting to come off of
the sideline, so they want to be prepared to be
able to control the land, to be able to build
the homes.
Speaker 3 (17:16):
What makes home builders ultimately build.
Speaker 11 (17:19):
It's just it's a volume game. So the public homebuilders,
they want to hit their numbers while protecting their margins.
And as you mentioned, Carol earlier, you know, they are
offering incentives still to keep those numbers going and so
you can still you know, buy a brand new house
and get a mortgage rate buydown. Sometimes they're offering appliance upgrades,
you know, finishing kitchens with higher end granted, you know,
(17:40):
offering incentives to keep the volume going.
Speaker 3 (17:44):
Because you know, I was thinking about you know, we were,
you know, getting ready to talk with you. Earlier this year,
Bloomberg put out a story and forgive, I'm just going
to look at some notes here, and they said they
were looking to the nation's current housing crisis, as I
think was in January, and they talk about the lack
of home building coming off of the Great Recession more
than a decade ago, home construction never catching back up
(18:05):
to the demand of a growing population. Zillow has put
out some data, at least earlier this year, that the
US has a shortage of about four and a half
million homes. Is that still kind of where we are?
And again I think about what really needs to happen
for housing affordability and availability to kind of meet some
of the demand that's out there.
Speaker 11 (18:26):
Absolutely, I mean there is a shortage. So depending on
how you look at it could be you know, four
to even six million homes short in the country. And
so that's another thing that's keeping the builders going is
that the demand is still there. The regulation makes it
difficult for them to build. So that's something that administration can,
the Trump administration can.
Speaker 3 (18:43):
Do remind us what that is.
Speaker 11 (18:44):
And so that means it's just there's a lot of
bureaucracy and red tape when it comes to zoning and
land development, so.
Speaker 9 (18:50):
That actually that's local.
Speaker 11 (18:52):
It is local. But what the Trump administration has talked
about doing is incentivizing local jurisdictions to make it easier
to build houses faster. And then if they can build
them faster, they can ultimately build them cheaper. So they
can offer federal funding and tax incentives to the local
governments to bring to bring that down. So for example,
in Portland, there was a developer who've got an infill
(19:14):
lot and instead of rezoning it to build higher density.
Just was able to build seven homes on one lot,
and that's unique to Portland, but it's also an infill
place where the land is expensive, and so just being
able to offer that type of zoning where you can
build more houses on smaller areas would bring down potentially
(19:36):
bring down the cost. For example, in Houston, one of
the largest home builders is building five hundred square foot
homes detached, selling them for one hundred and eighty thousand dollars,
and then you can do a two story version for
you know, around two hundred thousand dollars, which works in
Houston because there's really no zoning laws and the demand
for that most exactly, it's just it's so affordable. People
you know that want want a house there, they'll pay
(19:58):
for that small a house. But in most cities the
zoning laws would not allow for that type of development.
Houston is just an anomaly. So we need to just
make the zoning easier.
Speaker 9 (20:08):
What are you hearing from home builders about potential challenges
labor given the crackdown on immigration, materials costs, given potentially
a shortage, given that there's a lot of demand in
Southern California post fires and rising costs you to tariffs.
What are you hearing from them about that?
Speaker 11 (20:23):
Yeah, so the last two months we have seen home
builder surveys and they're really not reporting any major changes
in labor. So that is something that they're definitely keeping
an eye on. But to date, nothing has really been
affected on tariffs. I mean, we saw the first Trump
administration have twenty percent tariffs on lumber, and actually lumber
prices didn't spike until twenty twenty one under the Biden
(20:43):
administration and then they settled back down into the mid
six hundreds per thousand board foot. So home builders, you know,
I was just talking to one of the luxury homebuilders,
a national builder here, and they're protecting maybe five thousand
dollars increase in overall home price for labor. But it's
not They're cautiously watching but not really expecting home prices
(21:04):
to go for the lumber.
Speaker 8 (21:05):
You know.
Speaker 3 (21:05):
I think, Katie, one of the things that we've talked
with you about is that how do we make sure
it's not just about building homes, but building homes where
we need them. And we've often talked about this has
gone on for decades of major cities where it's expensive
to live. But a lot of people work there, but
they can't afford to live there. So how do we
solve that problem.
Speaker 11 (21:24):
Well, as we've discussed before, you know that the administration
has said, well, we're going to give federal lands out
for development, which just doesn't work because those are going
to be lands that are in the middle of nowhere,
not close to job centers, and then just to go
through the political bureocracy of Congress getting appraisals and the environmentalists,
and then the developer ultimately has to be able to
(21:45):
make money on that. That's not going to be land
that's you know, in the middle of Alaska or Nevada
where there's no infrastructure.
Speaker 3 (21:51):
So what do we need to do then.
Speaker 11 (21:52):
So again it goes back to you know, hopefully rates
will come down, but rights.
Speaker 3 (21:57):
Have been lower and we still don't have enough afford
housing and kind of some of the major cities where
so many people work.
Speaker 11 (22:03):
Yes, and so really innovation is what's going to have
to come in and home bolders are trying to find
innovative ways to build. They're using modular using structural insulated panels,
so building off site and bringing those materials on to
reduce labor cost, but still it's it's it's not gonna
there's really no silver bullet.
Speaker 9 (22:20):
I want to remind everybody Walting loisvill buys land, holds
onto it, and then sells it to the big home builders.
How's land acquisition going right now?
Speaker 11 (22:28):
Yeah, it's great. I mean, if you're we're going into
tertiary markets for our clients, so places like you know,
we're buying in Panama City, Savannah, Georgia, Augusta, Georgia, Tucson, Wilmington,
North Carolina, so not those primary or secondary going to
those next that next in line where land is still
affordable and that does help bring down the cost.
Speaker 3 (22:47):
What's the most interesting trend in housing right now? Like
it's the McMansion over they go. I'm just in those
kinds of things.
Speaker 11 (22:55):
Yeah, I would just say the amenities really. Home bolders
want to be able to build a home where you
can have multi generation, so that entry level young family
coming in and then you've got the move up house,
and then you've got a place where mom and dad
can you know, don't have to go to an assisted
living facility, but they can have a single level home
in the same neighborhood. So they want pickleball courts, they
(23:16):
want swimming pools, they want all of the amenities to
attract that generation. And from the land side, you need
a big enough parcel of land to be able to
build a master planned community like that, all.
Speaker 3 (23:25):
Right, master planning communities. Yeah, interesting, Katie, Thank you, thanks
for coming back. Katiehubbard, Executive EP Capital Markets Ever at
Walton Global.
Speaker 2 (23:34):
This is the Bloomberg Business Week Podcast. Listen live each
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can also listen live on Amazon Alexa from our flagship
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Well Move Out.
Speaker 3 (23:53):
The Trump administration to block a one point four billion
dollar program for green building retrofits has left hundreds of
in progress affordable housing projects in limbo. Renovations for aging
affordable housing projects across the US have been halted as
developers seek answers or alternatives now. The Green and Resilient
Retrofit program is one of a number of federal energy
(24:13):
efficiency initiatives that Elon Musk's Department of Government Efficiency DOGE
is looking to zero out to the frustration of affordable
housing developers across the country.
Speaker 9 (24:23):
Austin Walker's undoubtedly watching what happens out of Washington closely.
He's founder, CEO, managing principle at a walker In Company.
It's a New York based private equity fund manager and
it works with local firms and real estate management and development.
He joins us here in the Bloomberg Interactive Brokers studio.
Austin Welcome. I want to get to what's happening in
Washington in a minute, but first I just want to
get an understanding of what exactly your firm does, because
(24:46):
I think a lot of people would hear private equity
and affordable housing and say, wait a second, these two
things don't necessarily go hand in hand. Yeah, absolutely right.
Speaker 1 (24:53):
Affordable housing is developed and maintained and preserve through many
different forms. You know, where there's many infacture housing, single
family rentals, tax credit development, there's you know, firms like
us that really find unique opportunities to deploy flexible capital
to really develop and preserve these housing opportunities across the
(25:16):
entire landscape.
Speaker 9 (25:17):
Affordabhouse which part of the landscape, deplan in all parts
of it, all parts of it so even housing that
is regulated by the government, Yes, how do you make
money in that?
Speaker 1 (25:29):
A lot of it is feed generation. It's working through
a lot of programming, working with local municipalities to program
these opportunities. Right, it's part and parcel construction management, pricing
and working with a number of different grants and set
of programs. But it's largely driven really locally in terms
of incentives and other programs available to basically you know,
(25:51):
engineer capital stack to you know, create returns.
Speaker 3 (25:55):
How much of your business or investment is in that
area specifically, I.
Speaker 1 (25:58):
Would say probably twenty thirty percent is allocated to that area.
Speaker 3 (26:02):
Is there any concern in terms of what's going on
in government that some of that gets cut back?
Speaker 1 (26:06):
Yes, we got some favorable news. Last week was not
so favorable. You saw the administration past executive orders cutting
c d f I funds which are largely based on
you know, grants made through that to fund Community development
Finance institutions, which are a large cohort of financial liquidity
to the affordable housing space and that in the form
of loans, grants, other equity like subsidies. But they pass
(26:29):
the continuing Resolution, which is you know, again fully funding
you know HUD through which is the largest provider of
you know, affordable housing through housing choice vouchers UH Section
eight based you know, project based Section eight contracts supporting
you know, rents and affordable rents.
Speaker 9 (26:45):
Have you already been affected by changing out to Washington
in this administration?
Speaker 1 (26:49):
Absolutely? I mean we've had transactions that had to get
repriced installed because you know, either are financing you know,
opportunities our lenders where either cd f I lenders and
programs are dramatic changing. If you were going in with
a CDFI on pricing at an eight percent fixed rate loan,
and now you have to be you know, going midway
through a transaction at hard money to close it close
(27:10):
the transaction because you have deposits down that are hard.
You could be facing a four hundred basse points increase
in your cost of capital. These are real time changes
that are affecting the economics.
Speaker 3 (27:18):
So is that making you pivot in terms of different
you know, parts of your business, maybe spending more time elsewhere.
Speaker 1 (27:24):
Yeah. I think for us, you know, one of the
things we were born out of largely a market rate
development shop that focused mostly on workforce housing and attainable
housing so that's really just housing at large, but more
so C and B class housing, existing housing stock, which
you know, at the end of the day, most of
these policies, whether it's tariffs, immigration, other things, are going
(27:44):
to affect the supply demand imbalances, which are already extreme
due to you know, low housing starts, you know, especially
coming out of the GFC. You know, COVID interest rates
are so low. You finally got a little bit of
a pop in in development, you know pipeline, but that's
largely stalled due to the whips on interest rates coming
back up. So you know, we look at that being
a sustained problem just given that you know, tariffs are
(28:05):
going to increase lumber prices, other inputs for construction, so
construction costs going up. Immigration is going to affect labor
supply and you know labor wage rates. These are already
under extreme price pressures affecting the industry, and so we
see a very big problem with deliveries. But that's actually
good for existing housing, right because the demand is largely unchanged,
(28:28):
and so you know, we probably are going to see
inflationary pressure on rents as well, exacerbating the affordable housing problem.
So it's quite complicated and you know what's going on
right now across the sector.
Speaker 9 (28:38):
Katie Hubbard from Walton Global was just sitting in your
seat about an hour ago, and she is in the
city for meetings with her customers, who are the large
developers of the land that her company sells to them,
so the big home builders. She said, they're not yet
seeing increased cost due to materials. She says, they're not
(28:59):
seeing shoes when it comes to labor. Why are they
telling her that they're not seeing that, but you're seeing that.
Speaker 1 (29:05):
So you have to think about it. I guess from
a larger industry perspective, her and buyers largely publicly traded
companies Pulti, the likes right, they are not only mandated
by their boards to use legal labor versus the public
the private sector, which you know is able to tap
into a good point non legal immigrants for labor. There's
(29:26):
a big divergence between those and they're such a large scale.
They largely wholesale, bulk purchase and warehouse their materials, whether
it's overseas otherwise. They can navigate a large shift where
you have tariffs on Canadian lumber versus you know, bringing
in cabinets from China at bulk, and they basically forwardlock
their pipelines and they're able to price that out. They're
not feeling it yet, but if this is a sustained,
(29:47):
protracted tariff war that is more global in scope, you know,
it can make it very very same.
Speaker 3 (29:53):
Thing with labor. I'm assuming those you know who are
I guess you just US citizens or whatever they're going,
they're going to have a certain labor pool, and I'm
assuming those workers too are going to want their contracts
with the big publicly held Yeah.
Speaker 1 (30:09):
Absolutely, because there's there's certainty. But I think there's another
element to it. Renters, rental developers versus for sale developers.
A lot of the Pulti Homes, Toll Brothers, the larger publics,
their home builders their for sale product, so they're not necessarily,
you know, worried so much about the input they can
(30:30):
Largely it's such a supply constrained market. From a for
sale there's no inventory, so new deliveries are largely going
to be able to bear the price inflation that's going
to come out of increased cost of construction on a
for sale product. But at the end of the day,
financing everything else. As far as you know, multifamily rental
product is largely driven by the confluence of interest rates
(30:51):
and what you can charge on a nominal price per rent,
plus inflating expenses across insurance and other things. So it's
largely a cash flow problem, and inflation is going to
really impact housing development because you're solving to a cash
flow that at some point you can't inflate out of,
so those starts get halted.
Speaker 9 (31:07):
Hey, what do you see the federal government doing as
far as making land available for building? That was a
big part of the Trump administration's campaign, especially Jdvance took
that on and talked about federal land. What do you
see them doing?
Speaker 1 (31:22):
You know, it's interesting. I think it's something certainly that
they've been exploring. It is absolutely a big need. But
I think the biggest issue that's going to come out
of it is what are the local economies around federally
owned land that are actually going to support the economic
drivers that.
Speaker 9 (31:37):
Are There's a lot of federal land out west, but
are there the but we're industries to support people moving
to that part of the country.
Speaker 1 (31:46):
I think that's the biggest problem, you know, solver you know,
I mean issue that's going to come up with federally
owned land is how scalable is that for the capital markets?
Speaker 3 (31:55):
Where are the projects that you are involved in where
they mostly located.
Speaker 1 (31:59):
Yeah, So you know, we largely identify opportunities and municipalities
that are creative to you know, being you know, whether
it's pilot you know, payment in lieu of taxes, tax abatements,
other programs where you're getting property tax offsets in exchange
for housing affordability on the rental side, so capping your
rents on a certain percentage of our renolds. So we're
in Los Angeles mayor Bass Past eighty one. We just
(32:21):
got a site approved there for vertical construction. We have
acquisition preservation deal that we did in outside of Chicago
and that was a great transaction, you know, where we
worked with Fanni May on that that loan and you know,
got a twenty five percent tax abatement on that for
a very small asset aside for for rents. But it's
(32:42):
largely a workforce housing area serving an amazing school district.
But we're also in Florida, Houston, Atlanta, and we have
you know, projects that really are across the affordability stretch spectrum.
Speaker 9 (32:54):
So we hear a lot about how difficult it is
to build in California. Yeah, is that your experience?
Speaker 2 (32:59):
Yes?
Speaker 9 (33:00):
Is the California project that much more difficult than the
other projects will be?
Speaker 1 (33:03):
And we have another one in Long Island that we're
looking at very similar. You know, there's there's not a
lot of parcels for development, and then the environmental red tape,
the other local regulatory red tape heavy heavy, you know,
politics in terms of permitting. Getting through that process takes
an extremely well capitalized developer who has very very localized
expertise in working through the building departments to navigate that process.
(33:27):
Even on a largely ministerial approval process such as eighty one,
it still was very very difficult and largely contested project
to get through Ahson.
Speaker 3 (33:36):
Just to wrap up, who are the people that you
are housing? I think there's maybe not an understanding of,
you know, who all accesses? You know, what we talk
about access is access affordable housing. Like who are they?
Speaker 1 (33:50):
Yeah, I mean they're every They're everyday individuals. It's the
folks serving you coffee. It's your waiters, your bus drivers,
your teachers, firefighters. Every day folks right that are you know,
really going to feel the effects of you know, when
a cart and of eggs is thirteen bucks, in a
gallon of milk is eight bucks. You know, these are
(34:11):
people that are really you know, making it paycheck to paycheck.
That's largely the cohort that we serve, and that's why
these programs are really really necessary because you know, what
creates housing affordability in terms of the extreme lack of
supply is local zoning. Until there is a federal sweeping ability,
(34:33):
which is likely not going to happen in terms of
zoning approvals for multi family rezoning in commercial districts and everything,
it's going to be really challenging to deliver the type
of supply to actually naturally bring rents down. You have
a small, you know, test case in Austin, Texas where
they basically got rid of the permitting and zoning red tape.
(34:53):
They delivered fifty five thousand units and rents came down
by twenty five percent, and they will absolutely absorb those
units because there's an extreme need test case where you could,
you know, but doing that on a national level.
Speaker 3 (35:03):
Is going to be very great, super interesting. Thank you
so much. Glad you stop by Austin Walker, founder ceomaging
principle at a Walker and Company, joining us here on
business suite, brother marcle, how about you let me drive?
Speaker 9 (35:18):
Oh no, no, no, no, this is not a toy,
ug honey.
Speaker 3 (35:23):
Please, how do the riding gravels?
Speaker 2 (35:25):
Let's wake, I want to drive. It's a good question.
Speaker 1 (35:30):
Good.
Speaker 2 (35:33):
This is the drive to the clothes.
Speaker 9 (35:36):
Pongs for me a thing?
Speaker 2 (35:37):
Well, drill down on Bloomberg Radio.
Speaker 3 (35:40):
All right, everybody, we're just about eighteen minutes away from
the closing bell on this Thursday. Bouncing around here, Charlie
Bill Maloney just of course breaking down the trade for you.
Just a reminder, just down about two points on the
S and P five hundred. Call it flat on the day,
Dad John's industrial average, a decline of sixty seven points.
Good for a decline of about two tents of a percent,
same percentage decline, tim when it comes to the Nasdaq
(36:01):
one hundred, down about forty three points, but again off
our highs and lows of the session.
Speaker 9 (36:05):
Yeah, I mean the S and P five hundred right
now is not even down one tenth of one percent.
Speaker 8 (36:08):
I know.
Speaker 3 (36:09):
Flat.
Speaker 9 (36:09):
Yeah, it's like searching for direction despite the bunch of
tariffs I think caught some companies off guard.
Speaker 3 (36:14):
Yeah, it's kind of interesting, right.
Speaker 9 (36:16):
Yeah, it's like, didn't this get telegraphed yesterday? I think
the point that Jennifer Dellewey made earlier was there was
a lot of confusion about whether or not would include
auto parts companies, and it does. So you see those
companies getting hit pretty hard.
Speaker 3 (36:28):
Yeah, and then there's more to come next week. So
I think I don't know, I've got an inflation print tomorrow.
Let's see what Katy Nixon has to say about all
of it. She's chief investment officer at Northern Trust Wealth Management,
joining us from Chicago. Katie, nice to check in with you.
This environment, it's an interesting one and sometimes markets react,
sometimes they don't, but they seem to move around a
(36:48):
fair amount. How do you describe kind of where we
are and what's top of mind for investors and maybe
your clients, right, Carol.
Speaker 4 (36:56):
Well, thank you so much for having me, And I
guess I would just echo this sentiment that's been sort
of persistent through through your coverage, and that is just
this period of uncertainty. I don't think investors really know
which way to turn right now. The market today is
a really interesting example where you sort of look at
the at the averages, look at the bond in the
stock markets, and you say, not much going on, But
(37:18):
beneath the surface there certainly is a lot of churn.
Speaker 5 (37:20):
So I think investors are looking for a guiding life here.
Speaker 4 (37:24):
They're looking for some certainty. And I guess what we're
telling our clients.
Speaker 5 (37:27):
Is we may be waiting for we may be waiting
a bit longer.
Speaker 4 (37:30):
If if we're looking for that period of calm or
more or more certainty, I think we're going to be
living with more volatility and a lot more news and noise. Frankly,
that's going to impact markets for the foreseeable future.
Speaker 9 (37:43):
What is the foreseeable future? How much longer? I'm getting
a little tired. I'm getting a little tired.
Speaker 4 (37:50):
No, I know. Well, I mean we're all looking forward
to Liberation Day, of course, but we're getting some pre
news here that's certainly market moving, and I'm not sure
we're going to get the clarity that we probably need
on April second. And by that I mean I think
it'll still be a work in process. I think we've
learned through the last several weeks and months. Frankly that
(38:13):
you know, news evolves over time, things can change, so
it's very hard to have a lot of confidence and
what you hear is eventually going to be what turns
into persistent policy that won't.
Speaker 5 (38:25):
Change over time.
Speaker 4 (38:27):
So I think this is a time for investors to
really sit back and recognize the one important thing, which
is we're buying companies, right We're not buying politics, we're
not buying even economies. We're buying companies, and companies have
showed remarkably through time the ability to navigate and to
be resilient in the face of a lot of uncertainty.
Speaker 5 (38:49):
So although it's.
Speaker 4 (38:51):
Hard when you're reading the news and you're hearing about
these things on a regular basis, it's hard to remind yourself,
but it's important to remind yourself that at the end
of the day, it's all about fundamentals, how companies are
able to navigate this period of uncertainty, what the picture
looks like on the other side. We don't necessarily know
when we're going to get there, but we know we'll
get there at that point. As an investor, what you
(39:13):
really want to focus on is just the stability of
the fundamentals.
Speaker 3 (39:18):
Right, but the stability of the fundamentals can be whipsaw
based on the headlines that come out of Washington. And
so if we don't see things settle down sometime soon,
you know, does that once again make it hard to
invest on the fundamentals?
Speaker 5 (39:35):
You know, it does to a certain extent, Carol.
Speaker 4 (39:37):
But I think again, once once companies know the rules
of the road, they'll be able to navigate more resiliently.
Speaker 5 (39:44):
Right now, I think.
Speaker 4 (39:45):
Nobody knows what the rules of the road are going
to be. Again, I use the word persistently because we
might hear some news that could change, you know, in
a week or two. So I think we will be
in this period of fog for a bit here. And
I think we're actually going to hear more about that
from companies as they start to talk about their first
quarter earnings results. We're going to hear more about how
(40:06):
they're thinking about the navigation process here they as they
are also facing this period of uncertainty.
Speaker 9 (40:14):
Yeah.
Speaker 3 (40:15):
No, it's interesting. I feel like we just wrapped up earnings,
right they were kind of just a few at the
tail end. But I feel like we're already looking forward
to earning because we want to hear what the C
suite has to say about this environment. What are they
doing or what are they not doing as a result
of the volatility or the uncertainty going forward In the meantime,
So an investor comes to you and says, I've got
(40:38):
a portfolio or I've got some money I want to
put to work. What do you do with it today?
Speaker 5 (40:43):
Well, again, they're always opportunities in markets. And what I
would say is what we're seeing now is kind of
a washout of sentiment. You know, we see bearishness, you
know in the aai I survey staying you know, pretty
bearish for an extended peer period of time, which is
quite unusual and typically precedes decent periods of return for investors.
(41:06):
So we would say to any investor that comes to
us today, or frankly to our clients, get your strategic
acid allocation in line and get yourself invested, recognizing that
we're going to have a period of volatility, but also
recognizing that as a long term investor, this is not
a bad time to be putting money to work in
the market.
Speaker 4 (41:23):
But we would say, in addition to that, Carol is
start to think more globally. I think in the past
several years, most investors have had this tremendous home country
bias here in the US, and they've been right. The
US has roundly outperformed everything, and it's really been on
the backs of US large cap growth in a particular tech.
(41:44):
We're telling our clients, and we would tell a new
client to start.
Speaker 5 (41:48):
From a place of diversification.
Speaker 4 (41:50):
You want to have opportunities all across the world, and
you also want to have opportunities away from just that
super large cap US tech focus exposure and look at
other areas of the US market. Look at value stocks,
for example, as an interesting place to get some diversification.
Speaker 9 (42:08):
Right now, So, okay, US and value where do you?
Where do you? I mean, look, nobody knows what's going
to happen, but geographically, where do you see that performance
this year?
Speaker 5 (42:21):
Well?
Speaker 4 (42:22):
Short term, you know, prognostications are incredibly difficult. But what
I will say is we're more confident in the performance
of non US markets today than we were four or
five months ago. And that confidence comes from the combination
of monetary and fiscal stimulus that we see coming really
to the four overseas.
Speaker 5 (42:41):
Clearly, you guys have covered Europe really well.
Speaker 4 (42:44):
We see, you know, a really extraordinary amount of fiscal
stimulus being injected into an economy, and more importantly, into
a market that tends to be very sensitive to that, right,
defense spending, in structure spending, forget.
Speaker 3 (42:59):
So, Katie forget, just got about thirty seconds left. So
do you want to commit a fair amount of money
into Europe or not? Necessarily? Would you still stay with
the US and just quickly if you could.
Speaker 5 (43:07):
No, you do, Carol.
Speaker 4 (43:08):
Absolutely, you want to be as diversified as the global
markets and get your fair share of what could be
some outsize returns over the near term as investors start
to reposition their portfolios towards that opportunity.
Speaker 3 (43:20):
All right, we're going to leave it there, Hey, Katie,
thank you so much. Katie Nixon, chief investment Officer at
Northern Trust Wealth Management, joining us from Chicago on this Thursday.
Speaker 2 (43:29):
This is the Bloomberg Business Week podcast, available on Apple, Spotify,
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