Ontario to Pause Anti-Tariff Ad Campaign After Trump’s Ire | Bloomberg Businessweek
Summary
US-Canada Trade Tensions: The podcast discusses the recent halt in trade negotiations between the US and Canada due to an ad campaign by Ontario criticizing US tariffs, highlighting the impact of political tensions on trade relations.
Impact of Tariffs: Tariffs on steel, aluminum, autos, and lumber are significantly affecting Canadian industries, particularly in Ontario, with ongoing negotiations aimed at reducing these tariffs in exchange for increased energy exports to the US.
Canadian Economic Strategy: Canadian Prime Minister Mark Carney is focusing on diversifying Canada's trade relationships beyond the US, aiming to double non-US exports over the next decade to reduce economic dependence on the US.
Inflation and Economic Indicators: The podcast covers recent inflation data, noting a softer print than expected, which has implications for Federal Reserve rate decisions and market reactions, including movements in the bond and equity markets.
Consumer Spending Trends: There is a discussion on the K-shaped recovery, where higher-income consumers are beginning to show signs of stress, potentially leading to a decline in service sector spending.
Distressed Real Estate Market: The podcast highlights opportunities in the distressed real estate market, particularly in secondary and tertiary markets, with banks and private credit playing significant roles in current financing dynamics.
Market Outlook: Despite some signs of stress in consumer spending and real estate, the overall market outlook remains cautiously optimistic, with strong employment figures and continued economic activity.
Transcript
[Music] Bloomberg Audio Studios, podcasts, radio, news. This is Bloomberg Business Week Daily, reporting from the magazine that helps global leaders stay ahead with insight on the people, companies, and trends shaping today's complex economy. Plus, global business, finance, and tech news as it happens. The Bloomberg Business Week Daily podcast with Carol Masser and Tim Stenbec on Bloomberg Radio. >> We've got to talk about the latest between the US and Canada. President Trump said late Thursday he would end all negotiations with Canada over an ad critical of his tariffs on Canadian goods. Just in the last 34 minutes. Trying to keep track here, Carol. >> Well, I got to say in the last not even 24 hours, there's been so much of this at us. Ontario Premier Doug Ford said in a social media post that the province will pause its US ad campaign effective Monday after having spoken to Canadian Prime Minister Mark Carney in the hopes that trade talks can resume. He said this on social media. You can see the tweet on the screen right here. In speaking with Prime Minister Carney, Ontario will pause its US ad campaign effective Monday so that trade talks can resume. Here's some of that ad which Ford said will run over the weekend. Quote, so that we can air our commercial during the first two World Series games. Throughout the world, there's a growing realization that the way to prosperity for all nations is rejecting protectionist legislation and promoting fair and free competition. America's jobs and growth are at stake. >> Well, President Trump posted on social media that that ad was quote fake and ended all of those trade negotiations. Then later, Canadian Prime Minister Mark Carney spoke to reporters this morning before boarding a plane to Kal Koala Lumpur, Malaysia, where he will attend the Asian summit. Our officials, my colleagues have been working uh with their American colleagues on detailed, constructive uh negotiations, discussions on specific transactions, specific sectors, steel, aluminum uh and energy. A lot of progress has been made and we stand ready uh to pick up on that progress uh and build on that progress. >> That's Mark Carney, Canadian, a prime minister before heading to the Azon Summit. I want to bring in Laura Dylan Kane, Bloomberg News Ottawa Bureau Chief. She joins us from the Bloomberg News Bureau in Ottawa. Okay, I'm kind of out of breath trying to bring everybody up to speed on what happened over the last 24 hours, Laura, but does it does it seem like I mean, does it seem like the ad from Ottawa really struck a nerve with the president and and that was unexpected? >> It was unexpected because this ad from the Ontario government, Trump actually saw it earlier in the week and he offered a pretty muted reaction when he first saw it. He said, "If I were Canada, I would probably run the same ad." So, it was surprising that he then cited this ad in what seemed like an, you know, if I may interpret his truth social post, an angry truth social post about the ad. Um, so it seems he had a couple days to absorb it and then it, you know, did trigger this response from him. Um, so it was very surprising from the Canadian side. Uh but you know with Ontario Premier Doug Ford deciding to pull the ad as of Monday, you know, he did note that if their goal was to get US attention to this ad, they have done their job. They spent $75 million Canadian dollars on this ad campaign and Trump has really amplified it. Uh the views are way up ever since Trump made this announcement. So um you know, >> so well done Canada. >> It's the stan effect. Truly the >> I don't know about that. It is definitely the striand effect. Um, you know, definitely not good to have trade talks paused. As Mark Carney noted this morning, trade talks had been progressing. We believed that uh a steel and aluminum sector tariff deal was, you know, if not imminent, that there was real momentum happening toward that. So now that Trump, now that Ford has said he will pull the ad as of Monday so that trade talks can resume, what we're looking to confirm is whether or not the US agrees with that. Will they go back to the table? So, what's at stake here? Because I I'm going to be quite honest with you. I've kind of lost where we are in the US Canadian trade talks. So, where are we? What are we discussing? I mean, what's crazy is we know the US and Canada have been longtime trading partners and important trading partners uh in terms of what goes back and forth between uh the borders uh between these two countries. So, what's being what's at issue right now and yeah, what's at stake basically? Well, what is really hurting Canada are those sectoral tariffs on steel, aluminum, autos, and lumber. Now, autos and lumber, it doesn't seem we're anywhere near a deal on those. Um Trump has said many times that the US doesn't want to buy Canadian cars, and he doesn't appear to be interested immediately in preserving the North American vehicle supply chain. But on steel and aluminum sectoral tariffs, which have had a devastating effect, particularly in Premier Ford's province of Ontario, it did appear that the Canadian and US negotiators were getting closer to a deal. Those talks reopened after Mark Carney visited the White House on October 7th, and there was a discussion about maybe Canadians selling more energy to the US in exchange for lowering those steel and aluminum tariffs. So that's what we were getting close to that was really upended by this truth social post. >> What about um Prime Minister Carney uh the Canadian Prime Minister uh you know formerly on the Bloomberg board um formerly within the private investment world. uh you know this is a man who's had uh several different hats and I'm just you know is is the relationship between us and Canada going to be different from now on as a result of what's going on right now? >> Absolutely. So Mark Carney has said multiple times that the old relationship between the US and Canada is over. In some ways, that was sort of his campaign rallying cry that allowed him to become elected earlier this year was taking that really tough stance against US protectionism uh and saying that he would diversify Canada's trading relationships. That's a big part of the reason he's in Asia right now is to try and find new export markets for Canada's goods. And in fact, he just gave a speech in which he said he plans to double non US exports over the next decade. It remains to be seen whether that's feasible, but these are some of his goals. This is some of what he talks about. He wants to reduce our economic dependence on the US. At the same time, I think he being a businessman, an economist, he understands the reality of Canada's very serious dependence on the US and how difficult it is to untangle those chains. So, he is in the near term trying to reach some kind of deal that would preserve US market access for Canada. And a new focus will be USMCA next year. >> Did that go ahead. >> And let's not forget he was a governor of the Bank of England 2013 to 2020. A long time. >> We've interviewed him. >> Yeah. I mean, listen, we've interviewed Yeah. He understands markets, countries, right? >> Prime Minister. Yeah. >> Yeah. From so many different perspectives. >> Uh so I I I I wonder about, you know, preserving access to the US market and whether or not this advertisement undermine that in the long run. We we know in the short term what it did, but in the long run, does it does it set back negotiations? >> It's hard to say in the long run in a world where Trump is president um because uh announcements can just come out of nowhere late at night on a truth social um website. So it it is hard to sort of predict the future of how things unfold. We have seen him uh end trade talks with Canada before and then they're back on once Canada sort of backs down on its particular policy. We saw that over the summer with uh Canada planned to bring in a digital services tax that would have hit American tech giants. Uh Trump canceled trade talks. Carney pulled the tax and then the trade talks resumed. >> Um what I will say is that to be clear this was not a Canadian government ad. it was the Ontario government and Mark Carney's approach versus Ontario Premier Doug Ford's approach. They've been very different. And so Doug Ford has really advocated punching back. Um he talks tough. He's kind of a populist in some ways. He can be a bit of a mirror a Canadian mirror image of Trump in some of the ways that he talks. So, um, I think that we've seen a few times where Doug Ford has created a bit of friction between the Canada US relationship that Mark Carney is not, you know, does not want to have. >> It definitely sounds like an important distinction and I'm guessing some phones were ringing or some text messaging was going back and forth. Laura, thank you so much. Laura Dylan Kaine, she's Ottawa bureau chief joining us from our Ottawa bureau here at Bloomberg News. >> Stay with us. More from Bloomberg Business Week Daily coming up after this. >> You're listening to the Bloomberg Business Week Daily podcast. Catch us live weekday afternoons from 2:00 to 5:00 Eastern. >> Listen on Apple CarPlay and Android Auto with the Bloomberg Business App or watch us live on YouTube. >> Yes, we are in a US government shutdown. It's now in its fourth week. Is it 24? >> 24 days, I believe. Mike, is that right? 24 days. 24 >> 24 days. Who's counting? >> Uh we are we are >> well I'm trying to but sometimes I forget what comes out. >> That's the weirdest thing. It just feels like nobody cares. But anyway, we should point out though in the absence of a lot of official uh data from the US government, we did get a highly anticipated read on inflation today. It's a bit of a welcome surprise, Tim. >> Yeah, that's particularly for several policy makers who are leerary of cutting rates further. We're here with the data and the market and the Fed implications. We got Bloomberg TV and radio international economics and policy correspondent Michael McKe. >> Isn't it kind of wild though we're in this shutdown and I feel like in the past when we've covered it >> or covered shutdowns were all over it non-stop and it's just the weirdest thing. >> Well, yesterday >> the president tore down half the White House. So, >> I know >> it's kind of hard to >> I know >> know what to focus on these days. Uh the economy is chugging along which is probably one reason that we're not seeing a lot as much focus on it because people are still uh we're not seeing big layoffs yet although number of layoff announcements came this week and people are still their incomes are coming in. They're still spending. Uh if if things continue to weaken then it'll become much more of an issue. >> And then we want to talk about an inflation report too as well. We've also got another guest with us. >> Yeah. Katie Kaminsky is joining us. She's chief research strategist and portfolio manager with Alpha Simplex Group. She joins us from Boston. Mike here in the studio. Uh Mike, let's go back to the inflationary print though. Uh and and and really the focus of it. Look, we don't know if we even were going to get one for this month. We we don't or do we know if we're we >> No, we we don't know. The White House suggested that we wouldn't, but uh >> but it's not definitive. >> It's not definitive. >> Why did we get one for last month? >> Uh social security. Uh it's >> because of the cost of living increase. >> The cost of living increase is >> 2.8% % I believe. >> Yeah, 2.8% calculated based on the uh average of the third quarter uh CPIs. So they needed this last one from September to be able to put that out and it it legally has to go out by the 1st of November. So >> ah that's why we got that. >> So not too worried about inflation right now? >> No, we're worried about inflation right now. >> Oh okay. I thought this was a softer print. It >> it was a slightly softer print. But uh you know what people were watching for was two things. One is uh were services prices still rising and services prices were still rising with a big exception for home prices the way they calculated with owner's equivalent rent and it uh they almost collapsed down up just a tenth after being up you know 4/10 510 3/10en for some couple of years. So that could be noise and it it it is an anomaly and we don't know but if you take that out then you have still regularly about the same as we've been with the uh service prices and then tariffs uh used car prices uh dropped a lot uh during the month and if you take out autos uh you still have >> core goods prices rising and we saw things like furniture up 9/10en of a percent almost a full percentage point uh and uh other other tariffed goods rising in price. So, it does show that that's starting to bleed through. >> Hey, listen. Um Katie, we want to bring you into this because, you know, if I look at the Treasury trade over this month, we've seen benchmark benchmark 10 years below 4% is kind of where we are, although we've had some volatility in today's uh trade. Um bring in your read on the inflation print and what it means for the Treasury trade. Well, this is a good question because what we've seen is a little bit of jitters around this potential CPI print, but to be honest, that bond trends haven't moved that much. They've been up, then they've been back down. So, there doesn't seem to be a lot of movement in that asset class in reaction to the Fed. The movement's actually much more in other asset classes, like a strong dollar. Um, and >> which makes no sense, right? If we're getting lower rates, >> Exactly. lower rates, strong dollar. Um, and then the movements today that are consistent with this CPI move or the equity market just, you know, showing relief about some concerns about not getting rate cuts because of the shutdown, I think. >> So, Mike, come on in on this. Push it to next week. I mean, does that mean that we might not get rate cuts as a result of the shutdown? >> No, we'll get we'll get the rate cut. The >> folks on surveillance talking about 50 basis points this morning. >> Not going to happen. >> Who are you want to get on surveillance, you have to be outrageous. If you want to talk the truth, you come on this show. >> His name rhymes with Tom Keen. >> Yeah. Uh, no, we're not going to get 50 basis points. We're get 25. The question is, will we even have any descents other than Steven Myron, who's already sort of advertised he's going to descent every time. Uh, >> unless he gets >> unless he gets 50 or 75 basis points or whatever. I mean, that's why they sent him there. But, uh, the Fed came into this meeting letting the markets believe in a 25 basis point cut. And there's nothing in the inflation data that's going to say screamingly you can't do that. So the Fed will just go ahead and and cut rates. But I wouldn't put any bets yet on what's going to happen in December. >> Katie, you were on surveillance this morning. Tim and I were listening. Were you one of those crazy kids who said 50 basis points? I don't think so. >> No, definitely not. I'd say I was surprised though because I think the numbers did come in a little bit. I thought they'd come in as expected. So coming in a little better than expected definitely accelerated some of the trends that we're seeing. Um I do think it kind of relieved the market from concerns. I think the bigger shocks would be if you had any sort of shift in policy. So the less likelihood of a shift in policy is what has kind of sued the markets right now. >> There was an interesting story in the Bloomberg that caught my attention. I'm curious what you guys think about this. The bond market's movements have been suggesting a US downturn for three years since three month Treasury yields first pushed above 10-year ones. Uh are right through on this notes. The yield curves predictive power may be sounding a false alarm this time. This is from Campbell Harvey due to factors such as massive fiscal spending and healthy finances of consumers and corporations. Do you agree, Katie? I I would have to say it is very contextual because when you look at the inverted yield curve over different periods of time, you know, I think some of the potential inflation and other issues with policy is just kind of not necessarily means that there's a recession right away. So I I I think it's been sort of a false signal during this market environment. Yeah, we should mention that Campbell Harvey is the Duke professor who came up with the idea of the inverted yield curve signaling recession. And I think there's been general consensus at the Fed and among economists since uh we went through almost since we went through the great financial crisis, but certainly coming out of COVID that uh it's not reliable now for a whole host of reasons. >> So, ignore it. >> Ignore it. Yeah. Hey, Mike. We're going to be speaking with Drew Mattis uh over at uh Metife Investment Management in just a minute about the consumer. Prep us for that conversation. Like, lay the lay the groundwork here. How is the consumer doing? >> Well, I I think you advertise it as the K-shaped economy or not. >> That explains kind of uh where we are with the consumer because >> well, as we'll hear from Drew, he kind of argues that the Kshap that the top end isn't doing as well as people think. Well, I think the top end is doing just fine. Uh because when you get to the top the higher top end, you're making all your money off of interest and dividends and the stock market just keeps going up and up and up. It's the people who are on fixed income and and low wages who are struggling now because inflation is still going up and they're they're they're >> trying to make ends meet and finding it harder and harder. if you've gone to the grocery store lately to buy hamburger or something like that. So you have this bifurcation and the question is how long can people hang out before they start pulling back on spending and there's anecdotal evidence that they're starting to pull back in some areas already. Then if we get any layoffs uh as some of these companies we're seeing PNG today had you know good good earnings but oh yeah by the way we're going to get rid of 1,800 people. Hey Katie, I want to go back to just one, you know, about the idea of what we're seeing in equity markets versus bond markets versus the dollar strength. I mean, I'm trying to, you know, gold silver rally, uh, then more recently dropping back. Do the market metrics fit together, make sense? They tell one story or no and if not, then what does that mean? >> So, this is a good question. I think for me the question has been, you know, it's been a growth story in equities having good GDP numbers. So you're seeing that very strong equity trend, but coupled with that, seeing also very strong gold and a weaker dollar has made me feel a little nervous about that, you know, there's a chance that we might have an over stimulation. So low rates, high growth, and you kind of have inflation potential. I think today's print is helpful in the short term, but those are the themes that I'm seeing where there's sort of a hedge out there against, you know, things look good, but you know, we need to proceed with caution. We could have inflation, we may have issues, especially with a weaker dollar. So, this firm dollar is also kind of interesting to me. I think probably the most interesting recently. >> All right, great stuff. Great what we can do. A double dip with Katie Kaminsky on this morning, on this afternoon. She's chief research strategist, portfolio manager with Alpha Simplex Group. Hey, we're going to stay on this. Mike's going to stay with us. We want to bring your attention to something that JP Morgan's uh asset management's chief global strategist, David Kelly, said this morning to you on BTV on surveillance. uh talked about the Fed inflation and the K-shaped economy. >> I think the Fed's going to keep on cutting cutting rates. Uh it's generally a better thanex expected report, but I think what it really shows is we have a K-shaped economy and it's sort of a a K-shaped CPI report. It is clear that that mainstream retailers don't believe they can pass on the tariff increases right now. And that's what's making this inflation rate a little bit tamer than people feared. want to bring in, of course, that was uh JP Morgan's David Kelly earlier today, but right now I want to add to the mix the senior economist um actually was a former senior economist at Leman Brothers. We've been talking to him for a long time. We're talking about Drew Mattis. He is the chief market strategist at Metife Investment Management joining us from New Jersey. Um Drew, your recent note caught the attention of our Talia Terrella about how the consumer is not okay. Walk us through that. Well, there is a K-shaped recovery or consumer. The the upper end is doing reasonably well, but the the question is always kind of how what's the change look like? And the change for the upper end consumer is beginning to show signs of stress. Now whether that's because a lot of the federal workers would fall in that 100,000 plus category or whether it's something else, what we are seeing is that upper income consumers are increasingly saying that their real incomes are expected to decline over the next year. Um and their job separation anxiety is actually quite high particularly relative to kind of lower income cohorts. uh probably because a lot of the jobs that had been being created were actually kind of you know healthc care and and kind of other jobs that that in many cases tend to be uh you know kind of lower income uh side of things and and so I think yes they're doing fine for now but there are signs of stress and ignoring them uh is is something that can lead to trouble. Yeah, I got to tell you, Drew, I see that anecdotally right now with people who've been looking for jobs um who have been making good money and and got laid off and you know been looking for jobs for months at this point. When when do we if we haven't already, how does that then manifest in in data? We're not necessarily getting it from the government, but how does that manifest in data that investors can react to, Drew? Well, I I think that one way it will manifest itself is a decline in service sector spending which we have been seeing uh at least through the August numbers which were the latest ones we had before the shutdown. Um you know what tends to happen when you have to worry about things or when people begin to adjust uh their lifestyles in ways that shouldn't really be adjusted. Uh, and by that I mean, you know, buying a cup of coffee in the morning is not a decision that should really tax most people's uh, brains. Um, or that they should really think about if they're feeling good about their job prospects or that they have a job. Uh, and what we're seeing is people are pulling back on those kinds of purchases. And, and when that happens, you know, if you're not buying a cup of coffee, you're not going to buy a car. And and so we're beginning to see that roll off in the on the service sector spending side of things. and and yes, maybe people are in the upper income tier are still splurging on certain things or maybe there's a cohort within that upper income cohort that's still splurging on certain things. Uh but the reality of it is it seems like it's beginning to shift into a kind of a lower growth dynamic. Um and of course we can't find any of the data or we don't have the data to know whether or not that in fact is happening. Uh Drew, how much of tariffs are a problem given what we saw today that there there is some leakage in and there may be more coming? It's obviously not what was feared back in April, but how how bad is it, Johnny, as as Ed McMahon used to say. >> And Google that if you don't know what he's talking about, cuz you should he'll know. >> I know he will. >> I do know, unfortunately, cuz I am old enough. I meant that for the rest of the audience out there in our control room. >> Uh, you know, I I do think we're going to see pass through. I I think it's going to happen. It's not going to be a full pass through. Uh, nor is it going to lead to kind of this uh kind of uh, you know, wage price spiral type inflation story. It's going to be a one-time adjustment. Uh, and the Fed should look through it. U, you know, I was just complaining to you, Mike, though. You know, what about all the credit card search charges that I'm now paying for? where it seems like everything went up by 3% on top of the 3% inflation rate because I every time I I pull out my credit card I have to pay a lot more to to kind of just use it. Um and uh so I think you know once again it's it's going to be something that people notice and are affected by it. But one of the things that's actually helping people right now is that gas prices are actually extraordinarily low particularly relative to where they had been. And and so we look at in gas prices relative to kind of how much you have to work to get there. So how many minutes of your work life does it cost you to buy a gallon of gasoline. And when you look at it that way, it's actually, you know, quite contained and well below where it had been the last couple years, which is probably helping people continue to spend. >> All right, we're going to leave it on that note. I know we will be continuing this conversation in the future. Drew Mattis, thank you so much. Chief market strategist at MetLife Investment Management. Of course, our thanks always to our own Mike McKe, TV and radio international economics and policy correspondent. >> Stay with us. More from Bloomberg Business Week Daily coming up after this. >> You're listening to the Bloomberg Business Week Daily podcast. Catch us live weekday afternoons from 2:00 to 5:00 Eastern. >> Listen on Apple CarPlay and Android Auto with the Bloomberg Business App or watch us live on YouTube. >> Interesting couple of weeks. Uh we've talked about Zion's a couple of regional banks. Zion's tumbling last week. The firm said it was the victim of fraud on loans to funds that invest in distressed commercial mortgages. Uh after the collapse of subprime auto lenderricolor holdings and auto parts supplier First Brands Group, some investors said they are becoming concerned about cracks in the credit market. And then of course there was JP Morgan Chase CEO Jamie Diamond. You can't forget what he said last week that there's really just one cockroach which some private credit executives size a barb aimed at them. Blue Owl Capital Coco Mark Lip Schultz responded by saying banks should look at their own books. >> All right, we've got a view on the distressed market, a specific area. Back with us is Amy Rubenstein. She's CEO of Clear Investment Group. It's Chicago based specializing in opportunistic real estate investments specifically in the distressed midsize multif family sector in mostly secondary and tertiary markets around the United States. She is lucky for us in studio. How are you? >> I'm great. Good to be back here. >> Well, it's great to have you back here and I'm just curious big picture the environment. There's been a lot of stuff over the last week. Um tell us about the distress market certainly the area that you play in. Are there more distress situation slash opportunities out there for you? >> Yeah, there I there's a ton of opportunity right now. >> Is there always or is there more than there have been? >> I will say when we're in uh buyers markets, we see more distress. Right now, we have seen a lot of distress over the last couple years and continue to see it. Although I I think we might have bounced off the bottom and might be starting to come back. >> Why do you think that? Well, I think that the uh drop in interest rate that we recently had was a little bit helpful. That was only 25 basis points, but what we've really been seeing is that bank spreads are coming in as well. So, while we only saw a 25 basis point drop from the Fed, we're really feeling something more like a 100 basis point drop based on the fact that banks are coming in. >> That makes it some situations not so stressful. It doesn't help or does it doesn't help people that have existing loans that might have gone up on interest rates, but as people are refinancing, we are finding a better lending environment than we were about a year ago. >> So, talk to us about a deal that you've recently did. >> Uh, so we um we are doing a deal right now uh that we're getting a spread. We're actually assuming a loan that is being purchased at debt. So, we're seeing a lot of that in the market right now where you do see distress from people and people are walking away from their equity in order to save their personal guarantees. >> And that's more than you saw maybe 3 months ago, 6 months ago. >> It happens to be that we've had our last like five deals that we've looked at have had uh loans where we're assuming the loan at debt and we're and the the sellers walking away losing all of their equity. >> Why are sellers walking away? >> Well, >> what are they not do what are they not able to do that then you can come in and do? So what this particular lender is doing for us is dropping that interest rate. The lender doesn't want to lose any of their uh equity in this >> exposure. Yeah. >> So they instead are saying all right we know that there things were a little bit off. We know that interest rates were high and we know that that seller or that owner was struggling. Here we have a new borrower coming in who's going to be solid, who's going to maintain the integrity of our investment. Let's give them a little break for a little while so they can get through this period. Are are lenders doing that without a transaction going through? Could that seller have gone to the lender and said, "Look, we can't handle this rate. Can we renegotiate so then you don't have to bring someone new in, you know, us?" >> I do think that happens as well. >> Okay. >> So, yes, I think that's a possibility and I think that's something that borrowers need to ask for and I think when they do ask, they're often able to negotiate something with their lender. Amy, how many of these deals have some kind of private credit in them as well or is it separate? >> So, I think that is the reason that uh spreads have come in. Okay. Because private debt really flooded the markets and while banks took a step back. I I would say over the last couple years, banks kind of pulled back, wanting to see how the market was going and then all of this private debt flooded the market, which is what really caused when banks wanted to come back in the beginning of 2025, they started to enter the market and they saw more competition than they had before. And so then what happened is they started to bring in their spreads and that's what brings us to have that feel of a much lower interest rate than just that 25 basis point. >> So give us an idea, you do work in multif family. um give us an idea of the types of properties or the regional variations where maybe these deals are happening. >> Sure. Uh we have a deal under contract right now in St. Louis, a deal under contract right now in Tuscaloosa. So we're we're talking about, you know, those are secondary and tertiary markets. We're also in DC, so that's a primary market. So it really depends on where we're finding the right deal. >> Where are you not seeing deals because the market is so good. So some of the places we won't buy are places that got a little bit overinflated. So some of those growth markets that are now starting to show some >> Austin, Texas. >> Sure. Austin, Nashville, >> South Carolina. >> Yeah, absolutely. >> What about California? There's a lot of questions about the future governor, who that is. A lot of questions about regulations and red tape. >> Sure. >> During the next administration? >> Absolutely. We tend to stay away from California right now because we just don't get cash flow there. So that ends up being an appreciation market. Uh and so we never really find that that cash flow to be able to go into that market. >> So would you go as far as to say you know what we've seen over the past few months and just the past week that you know uh first brand I mean there have been knock on effects when it comes to financing as a result of this or no? as a result of >> well any like of the real estate financing deals have what we have seen with these and nervousness within the credit market has it had an impact >> no I actually think that we are seeing uh enough money in the market to be lending so I don't see that there's an issue of of borrowing >> I see that there are uh fundamentals that are still strong although even in September I I I'm sure everyone's kind of watching this drop in uh rental rates Right. September was that first month where we really saw a big drop. I think 30 basis points in just that month alone. And if you kind of pull it apart and look at it, what's causing this? If you dissect it, you're getting about half um about 50 basis points drop in lifestyle renters. So renters who are choosing between home ownership and renting. And that probably is coming from people wanting to go back into the home market. you're only getting about uh 10 basis points of drop in renters by necessity. So you got to like dissect that number. >> How are delinquencies with tenants right now? >> That's an interesting question. We have seen that delinquencies and evictions have been a higher trend than usual, but that hasn't been just as of recent. We've seen that over the last couple of years. >> So that hasn't changed at all in the last 6 months or so. >> I haven't seen it in the last 6 months that that's growing. It definitely is a trend that I think would started postco. >> Who's struggling? Who are those people in those properties? Just got about 30 40 seconds here. >> Yeah. Well, you know, the the rents are staying stronger in these C-class assets, but I think it's also that lower uh income zone that is struggling more than the higher brackets. >> Are you talking recession at all or like or just No, >> no, we're still seeing things being very strong as far as employment. We're still seeing tenants come in that have qualifications to rent. Well, listen, you're the perfect person to check in considering this environment and the conversations we've had over the last week. Amy, thank you so much. Thanks for coming in studio. >> Thanks for having me. >> Yeah, great to have you here. Amy uh Rubenstein, she's CEO of Clear Investment Group joining us right here. This is the Bloomberg Business Week Daily podcast available on Apple, Spotify, and anywhere else you get your podcasts. 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Ontario to Pause Anti-Tariff Ad Campaign After Trump’s Ire | Bloomberg Businessweek
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[Music] Bloomberg Audio Studios, podcasts, radio, news. This is Bloomberg Business Week Daily, reporting from the magazine that helps global leaders stay ahead with insight on the people, companies, and trends shaping today's complex economy. Plus, global business, finance, and tech news as it happens. The Bloomberg Business Week Daily podcast with Carol Masser and Tim Stenbec on Bloomberg Radio. >> We've got to talk about the latest between the US and Canada. President Trump said late Thursday he would end all negotiations with Canada over an ad critical of his tariffs on Canadian goods. Just in the last 34 minutes. Trying to keep track here, Carol. >> Well, I got to say in the last not even 24 hours, there's been so much of this at us. Ontario Premier Doug Ford said in a social media post that the province will pause its US ad campaign effective Monday after having spoken to Canadian Prime Minister Mark Carney in the hopes that trade talks can resume. He said this on social media. You can see the tweet on the screen right here. In speaking with Prime Minister Carney, Ontario will pause its US ad campaign effective Monday so that trade talks can resume. Here's some of that ad which Ford said will run over the weekend. Quote, so that we can air our commercial during the first two World Series games. Throughout the world, there's a growing realization that the way to prosperity for all nations is rejecting protectionist legislation and promoting fair and free competition. America's jobs and growth are at stake. >> Well, President Trump posted on social media that that ad was quote fake and ended all of those trade negotiations. Then later, Canadian Prime Minister Mark Carney spoke to reporters this morning before boarding a plane to Kal Koala Lumpur, Malaysia, where he will attend the Asian summit. Our officials, my colleagues have been working uh with their American colleagues on detailed, constructive uh negotiations, discussions on specific transactions, specific sectors, steel, aluminum uh and energy. A lot of progress has been made and we stand ready uh to pick up on that progress uh and build on that progress. >> That's Mark Carney, Canadian, a prime minister before heading to the Azon Summit. I want to bring in Laura Dylan Kane, Bloomberg News Ottawa Bureau Chief. She joins us from the Bloomberg News Bureau in Ottawa. Okay, I'm kind of out of breath trying to bring everybody up to speed on what happened over the last 24 hours, Laura, but does it does it seem like I mean, does it seem like the ad from Ottawa really struck a nerve with the president and and that was unexpected? >> It was unexpected because this ad from the Ontario government, Trump actually saw it earlier in the week and he offered a pretty muted reaction when he first saw it. He said, "If I were Canada, I would probably run the same ad." So, it was surprising that he then cited this ad in what seemed like an, you know, if I may interpret his truth social post, an angry truth social post about the ad. Um, so it seems he had a couple days to absorb it and then it, you know, did trigger this response from him. Um, so it was very surprising from the Canadian side. Uh but you know with Ontario Premier Doug Ford deciding to pull the ad as of Monday, you know, he did note that if their goal was to get US attention to this ad, they have done their job. They spent $75 million Canadian dollars on this ad campaign and Trump has really amplified it. Uh the views are way up ever since Trump made this announcement. So um you know, >> so well done Canada. >> It's the stan effect. Truly the >> I don't know about that. It is definitely the striand effect. Um, you know, definitely not good to have trade talks paused. As Mark Carney noted this morning, trade talks had been progressing. We believed that uh a steel and aluminum sector tariff deal was, you know, if not imminent, that there was real momentum happening toward that. So now that Trump, now that Ford has said he will pull the ad as of Monday so that trade talks can resume, what we're looking to confirm is whether or not the US agrees with that. Will they go back to the table? So, what's at stake here? Because I I'm going to be quite honest with you. I've kind of lost where we are in the US Canadian trade talks. So, where are we? What are we discussing? I mean, what's crazy is we know the US and Canada have been longtime trading partners and important trading partners uh in terms of what goes back and forth between uh the borders uh between these two countries. So, what's being what's at issue right now and yeah, what's at stake basically? Well, what is really hurting Canada are those sectoral tariffs on steel, aluminum, autos, and lumber. Now, autos and lumber, it doesn't seem we're anywhere near a deal on those. Um Trump has said many times that the US doesn't want to buy Canadian cars, and he doesn't appear to be interested immediately in preserving the North American vehicle supply chain. But on steel and aluminum sectoral tariffs, which have had a devastating effect, particularly in Premier Ford's province of Ontario, it did appear that the Canadian and US negotiators were getting closer to a deal. Those talks reopened after Mark Carney visited the White House on October 7th, and there was a discussion about maybe Canadians selling more energy to the US in exchange for lowering those steel and aluminum tariffs. So that's what we were getting close to that was really upended by this truth social post. >> What about um Prime Minister Carney uh the Canadian Prime Minister uh you know formerly on the Bloomberg board um formerly within the private investment world. uh you know this is a man who's had uh several different hats and I'm just you know is is the relationship between us and Canada going to be different from now on as a result of what's going on right now? >> Absolutely. So Mark Carney has said multiple times that the old relationship between the US and Canada is over. In some ways, that was sort of his campaign rallying cry that allowed him to become elected earlier this year was taking that really tough stance against US protectionism uh and saying that he would diversify Canada's trading relationships. That's a big part of the reason he's in Asia right now is to try and find new export markets for Canada's goods. And in fact, he just gave a speech in which he said he plans to double non US exports over the next decade. It remains to be seen whether that's feasible, but these are some of his goals. This is some of what he talks about. He wants to reduce our economic dependence on the US. At the same time, I think he being a businessman, an economist, he understands the reality of Canada's very serious dependence on the US and how difficult it is to untangle those chains. So, he is in the near term trying to reach some kind of deal that would preserve US market access for Canada. And a new focus will be USMCA next year. >> Did that go ahead. >> And let's not forget he was a governor of the Bank of England 2013 to 2020. A long time. >> We've interviewed him. >> Yeah. I mean, listen, we've interviewed Yeah. He understands markets, countries, right? >> Prime Minister. Yeah. >> Yeah. From so many different perspectives. >> Uh so I I I I wonder about, you know, preserving access to the US market and whether or not this advertisement undermine that in the long run. We we know in the short term what it did, but in the long run, does it does it set back negotiations? >> It's hard to say in the long run in a world where Trump is president um because uh announcements can just come out of nowhere late at night on a truth social um website. So it it is hard to sort of predict the future of how things unfold. We have seen him uh end trade talks with Canada before and then they're back on once Canada sort of backs down on its particular policy. We saw that over the summer with uh Canada planned to bring in a digital services tax that would have hit American tech giants. Uh Trump canceled trade talks. Carney pulled the tax and then the trade talks resumed. >> Um what I will say is that to be clear this was not a Canadian government ad. it was the Ontario government and Mark Carney's approach versus Ontario Premier Doug Ford's approach. They've been very different. And so Doug Ford has really advocated punching back. Um he talks tough. He's kind of a populist in some ways. He can be a bit of a mirror a Canadian mirror image of Trump in some of the ways that he talks. So, um, I think that we've seen a few times where Doug Ford has created a bit of friction between the Canada US relationship that Mark Carney is not, you know, does not want to have. >> It definitely sounds like an important distinction and I'm guessing some phones were ringing or some text messaging was going back and forth. Laura, thank you so much. Laura Dylan Kaine, she's Ottawa bureau chief joining us from our Ottawa bureau here at Bloomberg News. >> Stay with us. More from Bloomberg Business Week Daily coming up after this. >> You're listening to the Bloomberg Business Week Daily podcast. Catch us live weekday afternoons from 2:00 to 5:00 Eastern. >> Listen on Apple CarPlay and Android Auto with the Bloomberg Business App or watch us live on YouTube. >> Yes, we are in a US government shutdown. It's now in its fourth week. Is it 24? >> 24 days, I believe. Mike, is that right? 24 days. 24 >> 24 days. Who's counting? >> Uh we are we are >> well I'm trying to but sometimes I forget what comes out. >> That's the weirdest thing. It just feels like nobody cares. But anyway, we should point out though in the absence of a lot of official uh data from the US government, we did get a highly anticipated read on inflation today. It's a bit of a welcome surprise, Tim. >> Yeah, that's particularly for several policy makers who are leerary of cutting rates further. We're here with the data and the market and the Fed implications. We got Bloomberg TV and radio international economics and policy correspondent Michael McKe. >> Isn't it kind of wild though we're in this shutdown and I feel like in the past when we've covered it >> or covered shutdowns were all over it non-stop and it's just the weirdest thing. >> Well, yesterday >> the president tore down half the White House. So, >> I know >> it's kind of hard to >> I know >> know what to focus on these days. Uh the economy is chugging along which is probably one reason that we're not seeing a lot as much focus on it because people are still uh we're not seeing big layoffs yet although number of layoff announcements came this week and people are still their incomes are coming in. They're still spending. Uh if if things continue to weaken then it'll become much more of an issue. >> And then we want to talk about an inflation report too as well. We've also got another guest with us. >> Yeah. Katie Kaminsky is joining us. She's chief research strategist and portfolio manager with Alpha Simplex Group. She joins us from Boston. Mike here in the studio. Uh Mike, let's go back to the inflationary print though. Uh and and and really the focus of it. Look, we don't know if we even were going to get one for this month. We we don't or do we know if we're we >> No, we we don't know. The White House suggested that we wouldn't, but uh >> but it's not definitive. >> It's not definitive. >> Why did we get one for last month? >> Uh social security. Uh it's >> because of the cost of living increase. >> The cost of living increase is >> 2.8% % I believe. >> Yeah, 2.8% calculated based on the uh average of the third quarter uh CPIs. So they needed this last one from September to be able to put that out and it it legally has to go out by the 1st of November. So >> ah that's why we got that. >> So not too worried about inflation right now? >> No, we're worried about inflation right now. >> Oh okay. I thought this was a softer print. It >> it was a slightly softer print. But uh you know what people were watching for was two things. One is uh were services prices still rising and services prices were still rising with a big exception for home prices the way they calculated with owner's equivalent rent and it uh they almost collapsed down up just a tenth after being up you know 4/10 510 3/10en for some couple of years. So that could be noise and it it it is an anomaly and we don't know but if you take that out then you have still regularly about the same as we've been with the uh service prices and then tariffs uh used car prices uh dropped a lot uh during the month and if you take out autos uh you still have >> core goods prices rising and we saw things like furniture up 9/10en of a percent almost a full percentage point uh and uh other other tariffed goods rising in price. So, it does show that that's starting to bleed through. >> Hey, listen. Um Katie, we want to bring you into this because, you know, if I look at the Treasury trade over this month, we've seen benchmark benchmark 10 years below 4% is kind of where we are, although we've had some volatility in today's uh trade. Um bring in your read on the inflation print and what it means for the Treasury trade. Well, this is a good question because what we've seen is a little bit of jitters around this potential CPI print, but to be honest, that bond trends haven't moved that much. They've been up, then they've been back down. So, there doesn't seem to be a lot of movement in that asset class in reaction to the Fed. The movement's actually much more in other asset classes, like a strong dollar. Um, and >> which makes no sense, right? If we're getting lower rates, >> Exactly. lower rates, strong dollar. Um, and then the movements today that are consistent with this CPI move or the equity market just, you know, showing relief about some concerns about not getting rate cuts because of the shutdown, I think. >> So, Mike, come on in on this. Push it to next week. I mean, does that mean that we might not get rate cuts as a result of the shutdown? >> No, we'll get we'll get the rate cut. The >> folks on surveillance talking about 50 basis points this morning. >> Not going to happen. >> Who are you want to get on surveillance, you have to be outrageous. If you want to talk the truth, you come on this show. >> His name rhymes with Tom Keen. >> Yeah. Uh, no, we're not going to get 50 basis points. We're get 25. The question is, will we even have any descents other than Steven Myron, who's already sort of advertised he's going to descent every time. Uh, >> unless he gets >> unless he gets 50 or 75 basis points or whatever. I mean, that's why they sent him there. But, uh, the Fed came into this meeting letting the markets believe in a 25 basis point cut. And there's nothing in the inflation data that's going to say screamingly you can't do that. So the Fed will just go ahead and and cut rates. But I wouldn't put any bets yet on what's going to happen in December. >> Katie, you were on surveillance this morning. Tim and I were listening. Were you one of those crazy kids who said 50 basis points? I don't think so. >> No, definitely not. I'd say I was surprised though because I think the numbers did come in a little bit. I thought they'd come in as expected. So coming in a little better than expected definitely accelerated some of the trends that we're seeing. Um I do think it kind of relieved the market from concerns. I think the bigger shocks would be if you had any sort of shift in policy. So the less likelihood of a shift in policy is what has kind of sued the markets right now. >> There was an interesting story in the Bloomberg that caught my attention. I'm curious what you guys think about this. The bond market's movements have been suggesting a US downturn for three years since three month Treasury yields first pushed above 10-year ones. Uh are right through on this notes. The yield curves predictive power may be sounding a false alarm this time. This is from Campbell Harvey due to factors such as massive fiscal spending and healthy finances of consumers and corporations. Do you agree, Katie? I I would have to say it is very contextual because when you look at the inverted yield curve over different periods of time, you know, I think some of the potential inflation and other issues with policy is just kind of not necessarily means that there's a recession right away. So I I I think it's been sort of a false signal during this market environment. Yeah, we should mention that Campbell Harvey is the Duke professor who came up with the idea of the inverted yield curve signaling recession. And I think there's been general consensus at the Fed and among economists since uh we went through almost since we went through the great financial crisis, but certainly coming out of COVID that uh it's not reliable now for a whole host of reasons. >> So, ignore it. >> Ignore it. Yeah. Hey, Mike. We're going to be speaking with Drew Mattis uh over at uh Metife Investment Management in just a minute about the consumer. Prep us for that conversation. Like, lay the lay the groundwork here. How is the consumer doing? >> Well, I I think you advertise it as the K-shaped economy or not. >> That explains kind of uh where we are with the consumer because >> well, as we'll hear from Drew, he kind of argues that the Kshap that the top end isn't doing as well as people think. Well, I think the top end is doing just fine. Uh because when you get to the top the higher top end, you're making all your money off of interest and dividends and the stock market just keeps going up and up and up. It's the people who are on fixed income and and low wages who are struggling now because inflation is still going up and they're they're they're >> trying to make ends meet and finding it harder and harder. if you've gone to the grocery store lately to buy hamburger or something like that. So you have this bifurcation and the question is how long can people hang out before they start pulling back on spending and there's anecdotal evidence that they're starting to pull back in some areas already. Then if we get any layoffs uh as some of these companies we're seeing PNG today had you know good good earnings but oh yeah by the way we're going to get rid of 1,800 people. Hey Katie, I want to go back to just one, you know, about the idea of what we're seeing in equity markets versus bond markets versus the dollar strength. I mean, I'm trying to, you know, gold silver rally, uh, then more recently dropping back. Do the market metrics fit together, make sense? They tell one story or no and if not, then what does that mean? >> So, this is a good question. I think for me the question has been, you know, it's been a growth story in equities having good GDP numbers. So you're seeing that very strong equity trend, but coupled with that, seeing also very strong gold and a weaker dollar has made me feel a little nervous about that, you know, there's a chance that we might have an over stimulation. So low rates, high growth, and you kind of have inflation potential. I think today's print is helpful in the short term, but those are the themes that I'm seeing where there's sort of a hedge out there against, you know, things look good, but you know, we need to proceed with caution. We could have inflation, we may have issues, especially with a weaker dollar. So, this firm dollar is also kind of interesting to me. I think probably the most interesting recently. >> All right, great stuff. Great what we can do. A double dip with Katie Kaminsky on this morning, on this afternoon. She's chief research strategist, portfolio manager with Alpha Simplex Group. Hey, we're going to stay on this. Mike's going to stay with us. We want to bring your attention to something that JP Morgan's uh asset management's chief global strategist, David Kelly, said this morning to you on BTV on surveillance. uh talked about the Fed inflation and the K-shaped economy. >> I think the Fed's going to keep on cutting cutting rates. Uh it's generally a better thanex expected report, but I think what it really shows is we have a K-shaped economy and it's sort of a a K-shaped CPI report. It is clear that that mainstream retailers don't believe they can pass on the tariff increases right now. And that's what's making this inflation rate a little bit tamer than people feared. want to bring in, of course, that was uh JP Morgan's David Kelly earlier today, but right now I want to add to the mix the senior economist um actually was a former senior economist at Leman Brothers. We've been talking to him for a long time. We're talking about Drew Mattis. He is the chief market strategist at Metife Investment Management joining us from New Jersey. Um Drew, your recent note caught the attention of our Talia Terrella about how the consumer is not okay. Walk us through that. Well, there is a K-shaped recovery or consumer. The the upper end is doing reasonably well, but the the question is always kind of how what's the change look like? And the change for the upper end consumer is beginning to show signs of stress. Now whether that's because a lot of the federal workers would fall in that 100,000 plus category or whether it's something else, what we are seeing is that upper income consumers are increasingly saying that their real incomes are expected to decline over the next year. Um and their job separation anxiety is actually quite high particularly relative to kind of lower income cohorts. uh probably because a lot of the jobs that had been being created were actually kind of you know healthc care and and kind of other jobs that that in many cases tend to be uh you know kind of lower income uh side of things and and so I think yes they're doing fine for now but there are signs of stress and ignoring them uh is is something that can lead to trouble. Yeah, I got to tell you, Drew, I see that anecdotally right now with people who've been looking for jobs um who have been making good money and and got laid off and you know been looking for jobs for months at this point. When when do we if we haven't already, how does that then manifest in in data? We're not necessarily getting it from the government, but how does that manifest in data that investors can react to, Drew? Well, I I think that one way it will manifest itself is a decline in service sector spending which we have been seeing uh at least through the August numbers which were the latest ones we had before the shutdown. Um you know what tends to happen when you have to worry about things or when people begin to adjust uh their lifestyles in ways that shouldn't really be adjusted. Uh, and by that I mean, you know, buying a cup of coffee in the morning is not a decision that should really tax most people's uh, brains. Um, or that they should really think about if they're feeling good about their job prospects or that they have a job. Uh, and what we're seeing is people are pulling back on those kinds of purchases. And, and when that happens, you know, if you're not buying a cup of coffee, you're not going to buy a car. And and so we're beginning to see that roll off in the on the service sector spending side of things. and and yes, maybe people are in the upper income tier are still splurging on certain things or maybe there's a cohort within that upper income cohort that's still splurging on certain things. Uh but the reality of it is it seems like it's beginning to shift into a kind of a lower growth dynamic. Um and of course we can't find any of the data or we don't have the data to know whether or not that in fact is happening. Uh Drew, how much of tariffs are a problem given what we saw today that there there is some leakage in and there may be more coming? It's obviously not what was feared back in April, but how how bad is it, Johnny, as as Ed McMahon used to say. >> And Google that if you don't know what he's talking about, cuz you should he'll know. >> I know he will. >> I do know, unfortunately, cuz I am old enough. I meant that for the rest of the audience out there in our control room. >> Uh, you know, I I do think we're going to see pass through. I I think it's going to happen. It's not going to be a full pass through. Uh, nor is it going to lead to kind of this uh kind of uh, you know, wage price spiral type inflation story. It's going to be a one-time adjustment. Uh, and the Fed should look through it. U, you know, I was just complaining to you, Mike, though. You know, what about all the credit card search charges that I'm now paying for? where it seems like everything went up by 3% on top of the 3% inflation rate because I every time I I pull out my credit card I have to pay a lot more to to kind of just use it. Um and uh so I think you know once again it's it's going to be something that people notice and are affected by it. But one of the things that's actually helping people right now is that gas prices are actually extraordinarily low particularly relative to where they had been. And and so we look at in gas prices relative to kind of how much you have to work to get there. So how many minutes of your work life does it cost you to buy a gallon of gasoline. And when you look at it that way, it's actually, you know, quite contained and well below where it had been the last couple years, which is probably helping people continue to spend. >> All right, we're going to leave it on that note. I know we will be continuing this conversation in the future. Drew Mattis, thank you so much. Chief market strategist at MetLife Investment Management. Of course, our thanks always to our own Mike McKe, TV and radio international economics and policy correspondent. >> Stay with us. More from Bloomberg Business Week Daily coming up after this. >> You're listening to the Bloomberg Business Week Daily podcast. Catch us live weekday afternoons from 2:00 to 5:00 Eastern. >> Listen on Apple CarPlay and Android Auto with the Bloomberg Business App or watch us live on YouTube. >> Interesting couple of weeks. Uh we've talked about Zion's a couple of regional banks. Zion's tumbling last week. The firm said it was the victim of fraud on loans to funds that invest in distressed commercial mortgages. Uh after the collapse of subprime auto lenderricolor holdings and auto parts supplier First Brands Group, some investors said they are becoming concerned about cracks in the credit market. And then of course there was JP Morgan Chase CEO Jamie Diamond. You can't forget what he said last week that there's really just one cockroach which some private credit executives size a barb aimed at them. Blue Owl Capital Coco Mark Lip Schultz responded by saying banks should look at their own books. >> All right, we've got a view on the distressed market, a specific area. Back with us is Amy Rubenstein. She's CEO of Clear Investment Group. It's Chicago based specializing in opportunistic real estate investments specifically in the distressed midsize multif family sector in mostly secondary and tertiary markets around the United States. She is lucky for us in studio. How are you? >> I'm great. Good to be back here. >> Well, it's great to have you back here and I'm just curious big picture the environment. There's been a lot of stuff over the last week. Um tell us about the distress market certainly the area that you play in. Are there more distress situation slash opportunities out there for you? >> Yeah, there I there's a ton of opportunity right now. >> Is there always or is there more than there have been? >> I will say when we're in uh buyers markets, we see more distress. Right now, we have seen a lot of distress over the last couple years and continue to see it. Although I I think we might have bounced off the bottom and might be starting to come back. >> Why do you think that? Well, I think that the uh drop in interest rate that we recently had was a little bit helpful. That was only 25 basis points, but what we've really been seeing is that bank spreads are coming in as well. So, while we only saw a 25 basis point drop from the Fed, we're really feeling something more like a 100 basis point drop based on the fact that banks are coming in. >> That makes it some situations not so stressful. It doesn't help or does it doesn't help people that have existing loans that might have gone up on interest rates, but as people are refinancing, we are finding a better lending environment than we were about a year ago. >> So, talk to us about a deal that you've recently did. >> Uh, so we um we are doing a deal right now uh that we're getting a spread. We're actually assuming a loan that is being purchased at debt. So, we're seeing a lot of that in the market right now where you do see distress from people and people are walking away from their equity in order to save their personal guarantees. >> And that's more than you saw maybe 3 months ago, 6 months ago. >> It happens to be that we've had our last like five deals that we've looked at have had uh loans where we're assuming the loan at debt and we're and the the sellers walking away losing all of their equity. >> Why are sellers walking away? >> Well, >> what are they not do what are they not able to do that then you can come in and do? So what this particular lender is doing for us is dropping that interest rate. The lender doesn't want to lose any of their uh equity in this >> exposure. Yeah. >> So they instead are saying all right we know that there things were a little bit off. We know that interest rates were high and we know that that seller or that owner was struggling. Here we have a new borrower coming in who's going to be solid, who's going to maintain the integrity of our investment. Let's give them a little break for a little while so they can get through this period. Are are lenders doing that without a transaction going through? Could that seller have gone to the lender and said, "Look, we can't handle this rate. Can we renegotiate so then you don't have to bring someone new in, you know, us?" >> I do think that happens as well. >> Okay. >> So, yes, I think that's a possibility and I think that's something that borrowers need to ask for and I think when they do ask, they're often able to negotiate something with their lender. Amy, how many of these deals have some kind of private credit in them as well or is it separate? >> So, I think that is the reason that uh spreads have come in. Okay. Because private debt really flooded the markets and while banks took a step back. I I would say over the last couple years, banks kind of pulled back, wanting to see how the market was going and then all of this private debt flooded the market, which is what really caused when banks wanted to come back in the beginning of 2025, they started to enter the market and they saw more competition than they had before. And so then what happened is they started to bring in their spreads and that's what brings us to have that feel of a much lower interest rate than just that 25 basis point. >> So give us an idea, you do work in multif family. um give us an idea of the types of properties or the regional variations where maybe these deals are happening. >> Sure. Uh we have a deal under contract right now in St. Louis, a deal under contract right now in Tuscaloosa. So we're we're talking about, you know, those are secondary and tertiary markets. We're also in DC, so that's a primary market. So it really depends on where we're finding the right deal. >> Where are you not seeing deals because the market is so good. So some of the places we won't buy are places that got a little bit overinflated. So some of those growth markets that are now starting to show some >> Austin, Texas. >> Sure. Austin, Nashville, >> South Carolina. >> Yeah, absolutely. >> What about California? There's a lot of questions about the future governor, who that is. A lot of questions about regulations and red tape. >> Sure. >> During the next administration? >> Absolutely. We tend to stay away from California right now because we just don't get cash flow there. So that ends up being an appreciation market. Uh and so we never really find that that cash flow to be able to go into that market. >> So would you go as far as to say you know what we've seen over the past few months and just the past week that you know uh first brand I mean there have been knock on effects when it comes to financing as a result of this or no? as a result of >> well any like of the real estate financing deals have what we have seen with these and nervousness within the credit market has it had an impact >> no I actually think that we are seeing uh enough money in the market to be lending so I don't see that there's an issue of of borrowing >> I see that there are uh fundamentals that are still strong although even in September I I I'm sure everyone's kind of watching this drop in uh rental rates Right. September was that first month where we really saw a big drop. I think 30 basis points in just that month alone. And if you kind of pull it apart and look at it, what's causing this? If you dissect it, you're getting about half um about 50 basis points drop in lifestyle renters. So renters who are choosing between home ownership and renting. And that probably is coming from people wanting to go back into the home market. you're only getting about uh 10 basis points of drop in renters by necessity. So you got to like dissect that number. >> How are delinquencies with tenants right now? >> That's an interesting question. We have seen that delinquencies and evictions have been a higher trend than usual, but that hasn't been just as of recent. We've seen that over the last couple of years. >> So that hasn't changed at all in the last 6 months or so. >> I haven't seen it in the last 6 months that that's growing. It definitely is a trend that I think would started postco. >> Who's struggling? Who are those people in those properties? Just got about 30 40 seconds here. >> Yeah. Well, you know, the the rents are staying stronger in these C-class assets, but I think it's also that lower uh income zone that is struggling more than the higher brackets. >> Are you talking recession at all or like or just No, >> no, we're still seeing things being very strong as far as employment. We're still seeing tenants come in that have qualifications to rent. Well, listen, you're the perfect person to check in considering this environment and the conversations we've had over the last week. Amy, thank you so much. Thanks for coming in studio. >> Thanks for having me. >> Yeah, great to have you here. Amy uh Rubenstein, she's CEO of Clear Investment Group joining us right here. This is the Bloomberg Business Week Daily podcast available on Apple, Spotify, and anywhere else you get your podcasts. 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