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The foundation for the housing market remains healthy in 2022, with responsible lending standards and a tight supply environment, but, as the year continues, affordability challenges and a more hawkish Fed will likely slow appreciation and dampen housing activity.----- Transcript -----James Egan Welcome to Thoughts on the Market. I'm James Egan, co-head of U.S. Securitized Products Research here at Morgan Stanley, Jay Bacow And I'm Jay Bacow, the other co-head of U.S. Securitized Products Research. James Egan And on this edition of the podcast, we'll be talking about the 2022 outlook for the U.S. housing market. It's Thursday, January 20th at 10:00 a.m. in New York. James Egan All right, Jay. Now, since we published the outlook for 2022, the market has already priced in a much more hawkish Fed and Fed board members really haven't been pushing back. We've now priced in 100 basis points of hikes in 2022 in addition to quantitative tightening. How does this change how you're thinking about the mortgage market? Jay Bacow When we went into the year, we thought that mortgage spreads looked pretty tight and thought they were going to go wider, and that was in a world where we just thought the Fed was going to be tapering and stop buying mortgages, but still reinvesting. Now that they're pricing in that the Fed is going to be hiking rates and normalizing their balance sheet, mortgage spreads have widened about 20 basis points this year, but we think they have further room to go. This is because a normalizing Fed is going to mean that the supply to the market in conjunction with the net issuance is going to be the highest that the private market has ever had to digest. So, we think that could push spreads about 10 or 15 basis points wider, which is going to weigh on mortgage rates, but mortgage rates have already been going up. They are about 3/8 of a point higher just over the last month. And when we forecast mortgage spreads and interest rates to go higher over the next year, we think this could end up with about a full point rise in mortgage rates this year. Jay Bacow So, Jim, a point move higher in mortgage rates. What does that do to affordability? James Egan The short answer is they don't help affordability. For people who've been listening to our podcast before, affordability largely has three main components: home prices, mortgage rates and incomes. And so, if we're talking about mortgage rates, a full 100 basis points higher, that's going to be bad for affordability. But look, this just reinforces what we're thinking about affordability with respect to the housing market as we look ahead to 2022. In our outlook, we described affordability as the chief headwind to home prices and housing activity this year. Looking back to the end of 2021, home prices were climbing at a record pace of growth. And one of the good things about this climb is we think it's been healthier than the prior times that HPA even approached these levels. We got to almost 20% year over year growth because of the fact that we had an historically tight supply environment, and we had a lot of demand, and that demand was not being stimulated by easing lending standards. Lending standards themselves remained very responsible. James Egan But just because the foundation of the housing market today is healthy, and we believe it is, that doesn't mean it can't be too expensive. As home prices were climbing, mortgage rates continued to fall to record lows, and that really acted as a release valve with respect to affordability in the market. That release valve has already been turned off. Mortgage rates climbed throughout 2021. We expected them to climb in 2022. Yes, we now see them climbing faster than we anticipated, but that release Valve, as I mentioned, was already turned off. Affordability was already a substantial headwind in our call. Jay Bacow All right, Jim. So, we've talked about affordability. Can you remind us where do home prices currently stand? Haven't they started to come down a little bit? James Egan Yes. Home prices have been slowing for two months now. And it's becoming more pervasive geographically. James Egan As recently as July, 100 of the top 100 metro areas in the country, were not only seeing home prices grow year over year, but that pace of growth was accelerating. Five months later, the most recent data we have there is November, it's fallen from 100 out of 100 to 38 out of 100 metro areas, still seeing acceleration. The other 62? They're still climbing. But the pace of that growth has slowed. Jay Bacow All right, so home price growth is slowing. Does this mean that it just continues to slow and home prices actually go negative this year? James Egan We do think that home price growth will continue to slow, but we definitively think it will remain positive. We do not see home price growth going negative on a year over year basis. One of the biggest reasons there: healthy lending standards that we mentioned earlier. That kind of responsible underwriting we think keeps distressed transactions, so delinquencies - really foreclosures. It keeps those distressed transactions limited, and you really need an increase in the concentration of distressed transactions to see home price growth turn negative, or to see home prices turn negative. James Egan One of the other things we talked about affordability that we do think is playing a role in the housing market is supply. The supply market is at historical tights right now. That contributes to the healthy foundation that we see the housing market sitting on. We do think we are going to start to see a supply increase on the margins next year. Existing inventories continue to fall, but new inventories have been up over 30% year over year each of the past four months. While single unit starts might not be climbing at the same pace today as they were early in 2021, if we look at the number of single unit homes under construction today, that's surpassed the number of multi-unit homes under construction for the first time since 2013. We do think that will mean more supply coming on the market next year. James Egan The overall environment will be tight. But we will no longer be able to say historically tight. We will see positive year over year changes. That also weighs on the pace of home price growth, which is why we see it slowing to 5% by 2022. Jay Bacow OK, but Jim, you talked about supply and how that's been picking up recently, but that was based off of a period when mortgage rates are lower than they are today. What is this forecasted rise in mortgage rates mean for your expectations for housing activity going forward for the rest of 2022? James Egan So I think there's a few ways that this rise in mortgage rates can impact housing activity. The I think most straightforward way to think about it is on the affordability spectrum that we've been talking about. It's going to make the carrying cost, the debt service of housing those mortgage payments more expensive for households. And that affordability problem is going to weigh on purchase decisions that, as I mentioned earlier, reinforces what we were already thinking about the housing market this year. It also contributes to a lock in effect - borrowers that have homes at lower mortgage rates, it now increases their opportunity costs to move. They'd have to take on a larger mortgage if they were to move their home, and so it weighs on supply as well. James Egan We see it leading to a decrease in existing home sales. So home prices will slow, but they'll remain positive. We do think that home sales are going to fall. Throughout the totality of 2022 we see existing home sales coming in about 5% below where they'll finish 2021. Jay Bacow All right. So basically, a more hawkish Fed has meant that mortgage spreads have widened out and mortgage rates are heading higher. This has led to reduced affordability, which is also going to cause a bit of a slowdown in home sale activity and a slowdown in home price appreciation. But home prices will still near higher than where they are now. I got that right? James Egan Absolutely. James Egan Jay, thanks for taking the time to chat. Jay Bacow Always a pleasure, Jim. James Egan As a reminder, if you enjoy Thoughts on the Market, please take a moment to rate and review us on the Apple Podcasts app. It helps more people find the show.
In 2021, many expected the US dollar to face significant challenges yet the year ended with strong levels coming off a mid-year rally. As we look out at 2022, how much more can the dollar rise and where do other currency opportunities lie?----- Transcript -----Welcome to Thoughts on the Market. I'm James Lord, Global Head of Foreign Exchange and Emerging Market Strategy for Morgan Stanley. Along with my colleagues, bringing you a variety of perspectives, I'll be talking about the outlook for the US dollar and global currency markets. It's Wednesday, January 19th at 2:00 p.m. in London. This time last year, many strategists on Wall Street were expecting 2021 to turn out badly for the US dollar. But as we now know, the dollar ended the year much differently. The dollar troughed on January 6th, spent the first half of the year moving sideways, then began a pretty strong rally mid-year and finished the year around the strongest levels since July of 2020. And the question we've all been asking ourselves recently is - how much more can the dollar rise in 2022? Well, this year, most analysts and investors expect the dollar to continue to rise. But if last year's track record of prediction is anything to go by, this probably means that the dollar could instead head lower over the next 12 months. Our team at Morgan Stanley believes that the US dollar could be close to peaking. In fact, we've just changed our dollar call to neutral, which means we think it will just go sideways from here - after being bullish the dollar since June last year. Here's why: the Federal Reserve has indicated it may be close to raising interest rates, and we think that the Fed starting an interest rate hiking cycle could be a signal that the dollar's rise is close to finished. This may seem counterintuitive, since rising interest rates tend to strengthen currencies. But the US dollar has actually already gone up on the back of rising interest rates. A year ago, the market wasn't expecting any rate hikes for the year ahead. Now, the market is expecting nearly four hikes and for lift off to potentially begin as soon as March. If we look back at the last five cycles where the Fed has hiked interest rates, we can see the same pattern every time. The US dollar tends to rise in the months before liftoff, but fall in the months afterwards. This is a great example of buying the rumor and selling the fact. And if the market is right and the Fed hikes rates as soon as March, the peak of the US dollar for this cycle may not be too far away. We also need to remember that the dollar doesn't stand in isolation. Currencies are always a relative game and are valued against the currencies of other economies. Because of that, what happens in other parts of the world also affects the value of the US dollar. And what we've seen recently is that other central banks are also starting to think about tightening policy and raising interest rates, which will, to some extent, offset Fed hikes - reducing their impact on the dollar. We think this may be a good time for investors to start to reduce their dollar long positions, not add to them. What does the future hold for emerging market currencies? The consensus view is very negative on emerging markets, and that is the polar opposite of this time last year when everybody loved them. Like last year, though, we suspect the consensus view will probably be wrong by the time we close the year. Valuations on emerging market currencies and local currency bonds are cheap. If inflation peaks over the next few months, as Morgan Stanley economists expect, then investors may well take another look at emerging market bonds and any inflows would strengthen their currencies. Bottom line: the dollar has probably peaked for the year, but the future for emerging market currencies is brighter than most people think. As ever, the trick is in the timing. Stay tuned. Thanks for listening. If you enjoy Thoughts on the Market, please leave us a review on Apple Podcasts and share the podcast with a friend or colleague today.
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While our outlook for 2022 already called for a hawkish Fed, recent signals from the central bank of more aggressive tightening have given cause to reexamine some of our calls while remaining steadfast in key aspects of our narrative for the year.----- Transcript -----Welcome to Thoughts on the Market. I'm Mike Wilson, Chief Investment Officer and Chief U.S. Equity Strategist for Morgan Stanley. Along with my colleagues, bringing you a variety of perspectives, I'll be talking about the latest trends in the financial marketplace. It's Tuesday, January 18th at 11:30 a.m. in New York. So, let's get after it. Last week, our economics team adjusted its forecast on Fed policy, given the more hawkish tone in the most recent Fed minutes and commentary from Chair Powell and other governors. We now expect the Fed to fully exit its asset purchase program known as quantitative easing by April. We also expect the Fed to increase rates by 25 basis points 4 times this year and begin balance sheet normalization by July. That's a lot of tightening, and fits with our general outlook for 2022 that we published back in November. To recall, our Fire and Ice narrative assumed the Fed was behind the curve and would need to catch up in a hurry, given the dramatic move in inflation that we've experienced during this pandemic. Public outcry and consumer confidence measures suggest inflation is the number one concern right now - making this a political issue as much as an economic one. Expect the Fed to keep pushing until financial conditions tighten. What that means for equity markets is that valuations should come down this year via a combination of higher long term interest rates and higher equity risk premiums. The changes to our Fed forecast simply mean it's likely to happen faster now, making the hand-off between lower valuations and higher earnings more challenging. This is the classic finishing move to the mid-cycle transition we've been anticipating for months, and it appears we've finally arrived. Our outlook for 2022 incorporated a fairly hawkish Fed, and while that hawkishness has increased since we published in mid-November, it doesn't change our year-end targets, which are already well below the consensus. Specifically, our base case year-end target for the S&P 500 is 4400. This compares to the median forecast of approximately 4900. Our target assumes a meaningfully lower Price Earnings multiple of 18x the forward 12-month earnings. This would be a 15% drop from the current Price Earnings multiple of 21x. Our EPS forecast is largely in line with consensus. In short, our view differs with consensus mainly on valuation rather than growth. The faster ending to QE and more aggressive rate hikes simply brings this valuation risk forward to the first half of the year. Furthermore, given the Fed's new guidance it will try to shrink its balance sheet, means valuations could even overshoot to the downside of what we think is fair value. Bottom line, the bringing forward of tapering and rate hikes is likely to lead to a 10-20% correction in the first half of this year for the S&P 500, in our view. The good news is that markets have been adjusting for months to this new reality, with 40% of the Nasdaq having corrected by 50% or more. As we've noted many times, the breadth of the market remains poor as it goes through the classic rolling correction under the surface as the index grinds higher. This phenomenon is largely due to the relentless inflows from retail investors into equities. On one hand, this rotation from bonds to stocks by asset owners makes perfect sense in a world of rising prices. After all, stocks are a decent hedge against inflation, unlike bonds. However, certain stocks fit that billing better than others. In its simplest form, it means value over growth stocks or short duration over long - think dividend growth stocks. In addition, we would favor defensively oriented value stocks relative to cyclicals, given our view growth may slow a bit more in the near term before re-accelerating in the second half. Bottom line, don't fight the Fed and be patient with new capital deployments until later this Spring. Thanks for listening! If you enjoy the show, please leave us a review on Apple Podcasts and share Thoughts on the Market with a friend or colleague today.
Stewart Roberts: Father, husband, entrepreneur, angel investor, author, guest lecturer, board member and volunteer. Stewart worked for Morgan Stanley in NYC; co-founded TIX CHINA, a Shanghai-based trading company; studied at Harvard and served as the OC President of Tech Coast Angels, the largest angel investment group in the country. He has guest lectured at both UCLA's Anderson School and USC's Marshall School of Business. For eight years he served as a CASA mentor. Today, he leads men through life's transitions with retreats, online courses and books. He is the author of VISIBILITY: PLAYING TO WIN THE GAME OF LIFE. A few years ago, he found his dream life was falling apart. He was failing on multiple fronts — as a HUSBAND, a FATHER, with his HEALTH. He was angry. His wife was filing for divorce and he felt helpless. He had problems in his business that could not be solved. Do you know anyone like this? Can you relate? There was nowhere to go. No one had the answers for businessmen and fathers. What did he do? He stopped everything. He quit work. He studied, took classes, read countless books on everything from Self-development, Health, Exercise Marriage, Parenting and spent thousands on courses to get answers to his questions. It took a lot of time and several years to turn his life around. - His marriage saved! - His health restored! - His anger was gone! - His energy was back! After he had been through it, he wanted to store it away in his mind, not talk about it, never making the same mistakes again. Dad Up! Click here!! GET THE BOOK NOW https://www.stewartroberts.com/book https://www.linkedin.com/in/sturoberts1 https://www.facebook.com/StewartRobertsVISIBILITY https://instagram.com/amademansays?utm_medium=copy_link https://linktr.ee/Daduptribe Podcast | Dadup Podcast | Bryan Ward
After two years of support and accommodation from the Fed, 2022 is seeing a shift in tone towards the strength of the economy and risks of inflation, meaning investors may need to reassess expectations for the year.------ Transcript -----Welcome to Thoughts on the Market. I'm Andrew Sheets, Chief Cross-Asset Strategist for Morgan Stanley. Along with my colleagues, bringing you a variety of perspectives, I'll be talking about trends across the global investment landscape and how we put those ideas together. It's Friday, January 14th at 2:00 p.m. in London. Sometimes in investing, if you're lucky, you make a forecast that holds up for a long time. Other times, the facts change, and your assumptions need to change with them. We've just made some significant shifts to our assumptions for what the Federal Reserve will do this year. I want to discuss these new expectations and how we got there. The U.S. Federal Reserve influences interest rates through two main policy tools. First, it sets a target rate of interest for very short-term borrowing, which influences a lot of other interest rates. And second, it can buy government bonds and mortgages directly - influencing the rate that these bonds offer. When COVID struck, the Federal Reserve pulled hard on both of these levers, cutting its target interest rate to its lowest ever level of zero and buying trillions of government bonds and mortgages to support these markets. But now, almost two years removed from those actions, the tone from the Fed is changing, and quickly. For much of 2021, its message focused on erring on the side of caution and continuing to provide extraordinary support, even as the U.S. economy was clearly recovering. But now, that improvement is clear. The U.S. unemployment rate has fallen all the way to 3.9%, lower than where it was in January of 2018. The number of Americans claiming unemployment benefits is the lowest since 1973. And meanwhile, inflation has been elevated - with the U.S. consumer prices up 7% over the last year. All of this helps explain the sharp shift we've seen recently in the Fed's tone, which is now focusing much more on the strength of the economy, the risks of inflation and the need to dial back some of its policy support. It's this change of rhetoric, as well as that underlying data that's driven our economists to change their forecasts for the Federal Reserve. We now expect the Fed to raise interest rates 4 times this year, by a total of 1%. Just as important, we think they not only stop buying bonds in March, but start reducing their bond holdings later in the year - moving from quantitative easing, or QE, to so-called quantitative tightening, or QT. The result should help push U.S. 10-year yields higher up to 2.2%, in our view, by the middle of the year. For markets, we think this should continue to drive a bumpy first quarter for U.S. and emerging market assets. We think European stocks and financial stocks, which are both less sensitive to changes in interest rates, should outperform. Thanks for listening. Subscribe to Thoughts on the Market on Apple Podcasts or wherever you listen and leave us a review. We'd love to hear from you.
Das Schaulaufen der US-Banken mit ihren Zahlen für das abgelaufene Jahr startet, und Europas Finanzinstitute werden möglicherweise mit etwas Neid über den Atlantik schauen. Das ist eines der wichtigen Themen der aktuellen Wochenvorschau. Daneben gibt es auch noch weitere interessante Ereignisse in der kommenden Woche. So treffen sich die Eurogruppe und einen Tag später auch der EU-Finanzministerrat in Brüssel, wo somit der neue Bundesfinanzminister Christian Lindner die europäische Bühne betritt. Und wir werfen unter anderem auch einen Blick auf den Mainzer Glashersteller Schott, der von der Corona-Impfkampagne profitiert, und den Linux-Software-Spezialisten Suse. Der Fokus wird aber auf den amerikanischen Banken liegen, deren Lage und Perspektiven Bernd Neubacher, Leiter des Ressorts Banken und Finanzen, im Gespräch mit Christiane Lang erörtert, die im Anschluss daran gemeinsam mit Franz Công Bùi weitere Themen der anstehenden 3. Kalenderwoche vorstellt.
Confirmation hearings for Fed Chair Powell's second term highlighted the challenges for the year ahead. Inflation concerns fueled by high demand and disrupted supply chains, a tight labor market and the trajectory of the ongoing pandemic will make guessing the Fed's next moves difficult in 2022.----- Transcript -----Welcome to Thoughts on the Market. I'm Michael Zezas, Head of Public Policy Research and Municipal Strategy for Morgan Stanley. Along with my colleagues, bringing you a variety of perspectives, I'll be talking about the intersection between U.S. public policy and financial markets. It's Thursday, January 13th at 10:00 a.m. in New York. A key focus in D.C. this week is the Senate confirmation hearings for Fed Chair Jay Powell, who's been nominated for another term at the helm of the Federal Reserve. Whenever the Fed chair speaks, it's must-see TV for bond investors. And this remains as true as ever this week. See, the Fed has a really tough job ahead of them. The economy is humming, and it's nearing time to tighten monetary policy and rein in inflation. We know from their most recent meeting minutes that the Fed sees it this way. But how quickly to do it, and by what method to do it, well, that's more up for debate. That's because, in fairness to the Fed, there's no real template for the challenge that's ahead of them. The pandemic and the economic recovery from it have presented an unusual and hard to gauge set of inputs to monetary policy decision making. Take inflation, for example. There's no shortage of potential overlapping causes for the currently high inflation reads: supply chain bottlenecks; an unprecedented rapid rebound in demand for goods, both in absolute terms and relative to services; a sluggish labor force participation rate; and, influencing each of these variables, the trajectory of a global pandemic. The Fed's job, of course, is to assess to what degree these factors are temporary or enduring, and calibrate monetary policy accordingly to bring inflation to target. But to state the obvious, this is complicated. So it's not surprising that the recent Fed minutes showed they're considering a wide range of monetary tightening options. A lot is on the table around the number of rate hikes, pace of rate hikes and pace of balance sheet normalization. We expect Chair Powell will be further underscoring this desire for optionality in monetary policy in his forthcoming statements. Of course, another phrase for optionality might be policy uncertainty, and this is exactly the point we think bond investors should focus on. Precisely guessing the Fed's every move is likely less important than understanding the Fed has, and can continue, to change its approach to monetary tightening as it collects more data and better understands the current inflation dynamic. This is the genesis of the recent uptick in bond market volatility, which we expect will be an enduring feature of 2022. But volatility can mean opportunity, particularly for credit investors, in our view. Corporate and municipal bond credit quality is very strong, but both markets have a history of underperforming during moments of Treasury market volatility. That's why my colleagues and I are recommending for both asset classes to start the year with portfolios positioned cautiously, allowing you to take advantage of better valuations when they present themselves. In this way, like the Fed, you too will have options to deal with uncertainty. Thanks for listening. If you enjoy the show, please share Thoughts on the Market with a friend or colleague or leave us a review on Apple Podcasts. It helps more people find the show.
Many real estate companies are using over 10+ outdated systems to view their tenant and property data. That’s why Kevin Shtofman is here today, together with Jay Conner to explain how NavigatorCRE makes analyzing data easier by becoming a central data hub. Kevin Shtofman is recognized as one of the leading commercial real estate executives and CEO of NavigatorCRE. He leads the NavigatorSRVS and CRE operations & deployments teams with a focus on enterprise client success, scaling Navigator across the industry. In August, the company raised $17.5M in funding. He holds a BA in Economics from The University of Texas, an MBA in Finance and Entrepreneurship from Southern Methodist University, and an Executive Certificate in Machine Learning from MIT. Prior to joining Navigator, Kevin’s 16-year career includes positions at Deloitte, EY, and Morgan Stanley. Kevin is a noted speaker, author, and blogger within the growing Proptech sector. He has spoken at conferences around the world on next-generation real estate technologies. Timestamps: 0:01 - Get Ready To Be Plugged Into The Money 1:08 - Jay’s Free Private Money Guide: https://www.JayConner.com/MoneyGuide 2:04- Today’s guest: Kevin Shtofman 4:13 - Who is Kevin Shtofman? 5:19 - How did Kevin get started in Commercial Real Estate investing? 7:08 - What services does NavigatorCRE provide? 11:50 - What percentage of your clients are real estate investors vs large enterprises? 13:14 - What drives you to succeed? 20:10 - How do you keep balance in your life? 22:54 - Connect with Kevin Shtofman - https://www.NavigatorCRE.com 23:46 - Kevin’s parting message: Go out there continue to be motivated. Success creates success. Have you read Jay’s new book: Where to Get The Money Now? It is available FREE (all you pay is the shipping and handling) at https://www.JayConner.com/Book Real Estate Cashflow Conference: https://www.jayconner.com/learnrealestate/ Free Webinar: http://bit.ly/jaymoneypodcast Jay Conner is a proven real estate investment leader. Without using his own money or credit, Jay maximizes creative methods to buy and sell properties with profits averaging $64,000 per deal. What is Real Estate Investing? Live Cashflow Conference https://youtu.be/QyeBbDOF4wo The Conner Marketing Group Inc.P.O. Box 1276, Morehead City, NC USA 28557 P 252-808-2927F 252-240-2504 Channel https://www.youtube.com/channel/UCZfl6O7pRhyX5R-rRuSnK6w https://www.youtube.com/c/RealEstateInvestingWithJayConner RSS Feed http://realestateinvestingdeals.mypodcastworld.com/rss2.xml Google Play https://play.google.com/music/listen#/ps/Ihrzsai7jo7awj2e7nhhwfsv47y iTunes: https://itunes.apple.com/ca/podcast/real-estate-investing-minus-bank-flipping-houses-foreclosure/id1377723034 Watch on ROKU: Roku https://my.roku.com/add/realestateinvestingRoku https://my.roku.com/add/realestateinvesting Watch on Amazon Prime: https://www.amazon.com/How-Locate-Real-Estate-Deals/dp/B07M9WNZR6/ref=sr_1_3
➤ Tesla puts one of their main competitive advantages on display ➤ Discussing US inflation report and near-term outlook ➤ Analyst updates from Morgan Stanley and Global Equities Research ➤ Brandenburg Economic Minister Jörg Steinbach comments on Giga Berlin water supply case and factory approval ➤ Update on Giga Texas ➤ More information on China sales ➤ Volkswagen reports full-year EV sales ➤ Tesla adjusts Model X Plaid options ➤ Elon Musk comments on Tesla in India ➤ Tesla schedules Q4 earnings report Twitter: https://www.twitter.com/teslapodcast Patreon: https://www.patreon.com/tesladailypodcast Tesla Referral: https://ts.la/robert47283 Plaid producer Who Why Executive producer Jeremy Cooke Executive producer Troy Cherasaro Executive producer Andre/Maria Kent Executive producer Jessie Chimni Executive producer Michael Pastrone Executive producer Richard Del Maestro Executive producer John Beans Music by Evan Schaeffer Disclosure: Rob Maurer is long TSLA stock & derivatives
As the acute bottlenecks in supply chains resolve in the long-term, some structural issues may remain, creating both opportunities and challenges for policymakers, industry leaders, and investors.----- Transcript -----Michael Zezas Welcome to Thoughts on the Market. I'm Michael Zezas, head of public policy research and municipal strategy for Morgan Stanley.Daniel Blake And I'm Daniel Blake, equity strategist covering Asia and emerging markets.Michael Zezas And on part two of this special edition of the podcast. We'll be assessing the long term restructuring of global supply chains and how this transition may impact investors. It's Wednesday, January 12th at 9 a.m. in New York.Daniel Blake And it's 10:00 p.m. in Hong Kong.Michael Zezas So, Daniel, we discussed the short and medium term for supply chains, but as we broaden out our horizon, which challenges are temporary and which are more structural?Daniel Blake We do think there are structural challenges that are emerging and have been present for some time, but have been exacerbated by the COVID pandemic and by this surge in demand that we're seeing and a panic about ordering. So we are seeing them most acute in areas of transportation where we don't expect a return to pre-COVID levels of freight rates or indeed lead times. We also see more acute pressures persisting in parts of the leading edge supply chain in semiconductors, as well as in areas of restructuring around decarbonization, for example, in EV materials and the battery supply chain. But more temporary areas are those that have been subject to short-term production shortfalls and areas where we are seeing demand that has been pulled forward in some regards and where we are also seeing the channel being restocked in areas that were not necessarily production disrupted. And so this in the tech space, for example, is more acute in some consumer electronics categories as opposed to autos, where we do have very lean inventory positions and it will take longer to rebuild.Daniel Blake But in the short run, we do think what will be important to watch will be the development of new COVID variants and the responses from policymakers and public health officials to those and the extent to which production and distribution can be managed in the context of those challenges. So really, I think a lot comes back to the public policy decision. So what are you seeing and tracking most closely from here?Michael Zezas Yeah, I think it's important to focus on the choices made by policymakers globally. You and I have talked about and reported on this concept of a multi-polar world. This idea that there are multiple economic power poles and that each of them might be pursuing somewhat different strategies when it comes to trade rules, tech standards, supply chain standards, et cetera. So I think the US-China dynamic is a great example of this. Obviously, over the last several years, the U.S. and China have shifted to a model where they define for themselves what they think is in their best economic and national security interest and in order to promote those interests, adopt a set of policies that are both defensive and offensive. So with the U.S., for example, there were tariff increases in 2018 and 2019. Since then, they have mostly shifted to raising non-tariff barriers like export restriction controls and increasingly over the last year have also been pivoting towards offensive tactics. So promoting legislation to invest in reshoring like the US ICA. So what this means then is that companies that had been benefiting from globalization and access to end markets and production processes in the U.S. and China now may need to recalibrate and take on new costs when they're transitioning their value chain for these conditions of kind of new barriers, new frictions in commerce between the U.S. and China.Daniel Blake And take us through the corporate perspective. What are you seeing and how should we think about the corporate response to these supply chain challenges?Michael Zezas A conceptual framework we laid out was to put different types of corporate sectors into categories based on how much their production processes or end markets were subject to increasing trade and transportation friction and or subject to labor shortages. And we came up with four different categories using these two axes. The first category is bottlenecks, where you have tight labor conditions and increasing trade and transportation friction, leaves these industries little choice but to pass through higher costs. Reshorers is another category where you're potentially facing further production cost hikes from trade and transportation friction but these firms are increasingly interested in domestic investment that can steady their supply chain challenges. There's also global diversifiers where trade and transportation frictions may be steady, but labor scarcity and disruption risk creates margin pressure. So that pushes sectors like these to invest in geographical supply chain diversification so they can access new labor pools and automation technology that increases their productivity. And the last category is new globalizers. So this is a relatively capital intensive industry or an industry that's able to source labor globally, given limited impact from trade and transportation frictions. It really means that these business models might be able to pursue the status quo and not have to change much at all.Michael Zezas So, Daniel, do you have some examples of industries that might fit into these categories and how that might presents either an opportunity or a challenge for investors?Daniel Blake We have looked at this at the sector and company level for major companies impacted by this theme of supply chain restructuring. And what I would highlight is that semiconductors are the classic bottleneck industries. They have been the acute choke points in the global economy. They have seen rising pricing power. They have seen a significant investment going in, and that has been benefiting the semiconductor capital equipment names. In terms of the reshorers, we think naturally to the US capital goods cycle. And here, our analysts has highlighted more vertical integration and really securing more of the parts supply chain, really a shortening of supply chains that is a response to these supply chain uncertainties that have emerged. And then on global diversifier, this category here, we think, is quite relevant to a lot of the tech hardware space. So semiconductors is more higher tech and more capital intensive. And in contrast, the tech hardware space tends to be more associated with assembly, distribution, marketing. And here we do think that there is potential for more diversification to broaden out exposure across supply chains and labor pools going forward. And finally, on new globalizers, overall, the key categories we have looked at in this report, we didn't see falling into this bucket. But we do think there are sectors that will continue to be new globalizers, and we see them more in the consumer and services oriented spaces of the of the global economy.Michael Zezas So our framework represents a view of how things will settle globally over the medium to long term in a bit of a mixed picture where some sectors benefit, others have to transition through higher costs. But are there alternative cases, Daniel, where things could be better for the global economy or worse for the global economy than is envisioned in this framework we laid out?Daniel Blake If we turn to the bull case for the global economy, what we're really looking at is a scenario where demand remains manageable and supported. But we're seeing additional supply come through and an easing of supply chain tensions. So there we would look first to the demand side of the equation, given supply takes longer to ramp up. And for us, a bull case would see a recovery of consumption skewed towards services spending that has been held back by the pandemic, and that helps keep the jobs and earnings recovery moving. But it eases some of the stress on the goods supply chain that may also be alleviated by the acute bottlenecks that we talk about in our base case, resolving and taking some more anxiety out of purchasing managers equation into 2022. In contrast, the bear case is quite clear the acute risk at this point is around new COVID variants, the impact on production and transport, as we saw just recently. So the potential for a rerun of these restrictions is very much in front of us as we're seeing selective lockdowns at time of recording starting to come through in some cities in China. At this point not impacting production materially but that is something we are watching closely. And that means we do think there is potential for demand destruction. The policy response may not be as forthcoming with the scale of stimulus that we saw through 2020 and 2021.Michael Zezas Daniel, thanks for taking the time to talk.Daniel Blake Great speaking with you, Michael.Michael Zezas And thanks for listening. If you enjoy Thoughts on the Market, please be sure to rate and review us on the Apple Podcasts app. It helps more people find the show.
Colin Lynch os the Head of Global Real Estate Investments at TD Asset Management. Colin is responsible for Global and Canadian Real Estate Strategy, overseeing fund design and structuring, implementation and oversight of acquired assets for the Global Real Estate Strategy. In this role Colin manages Investments in over 1000 properties located in over 20 counties worldwide. In this episode we talked about: • Colin's Bio & Background • Financial Crisis • The Canadian Market from a Global Perspective • Post-COVID Real Estate Market Overview • Pricing & Affordability • Effects of Inflation • Commercial Real Estate Culture • Mentorship, Resources and Lessons Learned Useful links: https://www.linkedin.com/in/colinkrlynch/?originalSubdomain=ca Transcription: Jesse (0s): Welcome to the working capital real estate podcast. My name is Jesper galley. And on this show, we discuss all things real estate with investors and experts in a variety of industries that impact real estate. Whether you're looking at your first investment or raising your first fund, join me and let's build that portfolio one square foot at a time. Ladies and gentlemen, welcome to working capital the real estate podcast. My special guest today is Colin Lynch. Colin is the head of global real estate investments at TD asset management. Colin is responsible for global and Canadian real estate strategy, overseeing fund design and structuring implementation and oversight of acquired assets for the global real estate strategy. In this role, calling manages investments in over 1000 properties located in over 20 countries. Worldwide. We just updated that now. Colin, how's it going Colin (53s): Kid. Good. Thank you for having me here. Jesse (56s): Thanks for, thanks for being on the show. I'm really excited to talk with you today. I think there's a number of things that we'd like to cover, but before we do, as with every guest that we have on the show would love to get a little bit of more information on your background, how you got into real estate. We talked a little how it was a bit of an unconventional approach or entrance into real estate. So take us back, take us back and give us a little bit of a, of your background. Colin (1m 23s): Absolutely certainly unconventional approach to real estate. So first things first, I actually grew up as very much into music as a musician. And so I was one of those children that was in every sort of music class. By the time it got to high school was performing in a ton of ensembles through the, by the a hundred concerts a year, got to the end of high school, said time to explore something else. Cause I figured I, I had learned all that I could possibly learn in music, which was incorrect, but I figured I'd at least explored app. And so I went into a business and history. So I did three things in undergrad. I did the world concerned for a music. I did a bachelor of commerce at Queens, and I did a bachelor of arts in history at Queens. And, and then, you know, graduated and it was the heyday of the leveraged buyout, boom. And my mom who said, I was way too all over the place said, you got to get a skill. You've got to focus and you should go work for those banks because they never run into any issues, their board to stability. And so that's what I did I do to fleet, went out to investment banking and went to Morgan Stanley and got to experience the global financial crisis front and center. Ben went to, went to, to business school. And throughout that entire period, this is where you expect me to say, I had that passion for real estate, which I do, but I also had a passion for commercial aviation. So joined McKinsey and company in Chicago, but reality was all over the world, did that stuff. And after traveling all over the world, I said, look, that's fantastic, but I'd like to come back to a city I love and a nation I love and that's in Toronto. So I did that and this is where the real estate part comes in. I had been very interested in, in a lot of political activities. And so in 2014, in January, 2014, somebody that couldn't get elected asked me to help him. And that was the John Torrey mayoral campaign here in, in Toronto. And so 10 months later he was mayor. He asked me to work for him. I said, no. And through that conversation set of conversations that got introduced to this firm called Greystone, a firm that I had never heard of before. And, and after about a year of conversation, Greystone asked me to join. So initially I joined in strategy working for effectively the C-suite and, and then that turned into moving into the real estate world. So that's a long way of saying I had a very unconventional introduction to the world of real estate, but it was, it was a fun story to, to live through. Jesse (4m 26s): That's great. So in terms of the, the financial crisis component of that was that you were still a at Morgan Stanley at that, at that time. And if so, what were you doing? What were you doing for them there? Colin (4m 38s): Yeah, I was doing a number, number of different things. I, so I started started that Morgan Stanley focused on consumer retail and financial services. So financial sponsor stories. So serving pension plans who private equity firms in the light and then also timber companies. And then, and then as, as the financial crisis unfolded that broadened. And I basically worked across firstly every street, but spent a bit of time in real estate as well. And then from a type of activity, as I mentioned prior to the global financial crisis investment banking was doing a lot of leveraged buyouts and throughout the financial crisis also worked on things like that or in possession financing for companies going through insolvency or worked on a few, reached a sort of a few IPO's did some M and a, but at the conclusion of my term at Morgan Stanley, the governor of the bank of Canada, Mark Carney at the time requested some help on the financial stability plan for Canada that was quantitative easing effectively in Trent and requests was help design a program for the bank to implement a quantitative easing. And so that's what I did in the last sort of four months or so of my time at Morgan Stanley. So highly unusual investment banking experience for sure. A lot of industries and a lot of different types of activities that I participated in very much a function of the global financial crisis. Jesse (6m 21s): Yeah, for sure. I mean, it's still topical, I guess even the current environment we're in now. So I think the, the idea of just the macro economic perspective you got, I don't think it's something that's too dissimilar to some of what we're doing right now from a stimulus and, and a quantitative easing perspective. Colin (6m 40s): Very fair point. And you know, it's interesting because prior to this environment that we're in used to tell folks about that quantitative easing program, which the bank didn't actually have to implement. And the bank was here in Canada was one of the few central banks worldwide. They didn't have to implement quantitative easing well, fast forward to 2020, and we were pretty, pretty heavy on the quantitative Beason train. So, so, you know, it's things, things change and evolve over time. Yeah. Jesse (7m 11s): Yeah. Fair enough. So take us to, to the Greystone, to the actual foray into real estate, you know, what, what area did you, did you initially go into, and maybe for those that don't know a little bit about what they do? Colin (7m 25s): Yeah, absolutely. So Greystone began as the investment management corporation of Saskatchewan. So 35 years ago, thereabouts, it was a department of, of the government and it was spun out from the government and became sort of like the investment authority for the province of Saskatchewan then became owned by pension plans. And at that point looked very much like, you know, the Aimco as an example, what the government of Saskatchewan said at that point, when they spun it out was after five years, the pensions could do whatever they wanted in terms of their investment management services. And over time management bought out most of the interests of those pensions and, and that, that time Greystone had a very small real estate portfolio. It was a full suite, so public equities and fixed income, but also had real estate. And that real estate grew from about 200 million to on, on, by the time TD came around and bought Greystone in 2018, that real estate portfolio equity was about 16, 17 billion mortgages was around, I believe at the time about 4 billion. And so it was quite the successful run and Greystone had become a name for excellence in real estate, both equity and debt, even though Greystone began and, and still had quite a strong public equities and fixed income side to it. And so like that, I joined Ray stone working with the senior team in, and once I did a number of things around reorganizations U S expansion, et cetera, I said, look, it's time to fire me because I'm pretty much done. And then that, you know, originated into originate the conversation, which was, you know, do you want to be a coach, I E a manager, or do you want to be a player on the team? And I looked at that and I said, you know, what, why being a player on the team looks really interesting. And so that's the path I went down. And as we've looked at the different areas in Greystone and where my passion was, my dad grew up in construction. And so I grew up with, you know, floor plans, building plans, sorry, I'm on my, on my basement floor. You know, I had a fascination for real estate. And so I thought that would be a cool place to be. And so my foray in was working on our asset management division. And so we created a real estate asset management division in house to do a bit of that work a bit on the office portfolio, in the industrial portfolio. And then, so I worked on that, that I was also asked to help co-create the international strategy, which was taking Greystone success that we had experienced over 30 years within Canada and, and expanding that outside of Canada. And so I worked on those two initiatives and, and then the international strategy went from strategy to being a fund. And I went from creating the strategy to running the fund and then, and then that grew, and it was quite, it's been quite a successful ride. And then I was earlier this year, asked to take over the domestic portfolio, which is that portfolio that had been around for the, for the last 30 years. Jesse (10m 55s): Yeah. So in terms of, in terms of going into the fund model, what was it prior to that? Was it, was it raising capital for asset specific and w like, what was that transformation like? Colin (11m 5s): Yeah, so it was actually, so on the international side, it was literally building something from scratch. So Greystone prior to launching the international head, just domestic real estate. And it was a largely one strategy on the equity side and one strategy on the debt side, diversified across property types and by risk strategies and by geography and on international there's, there were a lot of investors con we call clients that were asking us, you know, why don't you have a strategy to invest outside of Canada? And for about a decade, the Greystone response was we hear you, but we're focused on delivering great results in Canada. And so when I came around and said, look, I really am interested in, in, in being a player on the team versus the coach, they said, great help us solve this. And so we, we literally had a whiteboard. That's how we began. And we, and we designed ground up a single, comprehensive global strategy, investing everywhere from Australia to Europe, to the U S across all the property types and all of our strategies in all formats. So it could be a fund investment or can be a JV, or it could be a club. And, and so we designed something with a tremendous amount of flexibility, which took a long time, but it was quite fun to be able to just literally create something from scratch and then, and then to actually build it, which, you know, you have all of the legal ramifications, regulatory ramifications fro in selling Greystone to TV in the middle of bad. And now you're pro you're owned by a traded bank and they've got their own regulations and then sort of, you know, build a track record and, and take that to the market and, and raise capital and, and deploy it. So that's been, that's been the journey on the international side and it's definitely been interesting. Jesse (13m 11s): Yeah, that is interesting. So we had a Michael Emery on the show a few months ago from allied REIT, and we know every time I have some Canadian Canadian guests that has started or work for a large Canadian real estate company, I always ask them the comparison to the U S or globally, where you have individuals playing in our backyard for a certain amount of time. And then I can imagine just like you're alluding to here, the regulatory environment, the probably the accredited investor differences and those kinds of complexities. Well, I'm sure there was a bunch of things that were challenging, but was there one thing or one or two things that was really one of the, one of the hardest parts about that transformation or about that ability to go from not just in playing in a Canadian market, but into a global space? Colin (13m 58s): Oh, that's a good question. Certainly the regulatory dynamic is, is, is challenging. The European union, as an example, is a highly regulated regulatory construct. And, and there's a lot of rules around if you're marketing a fund, there's something called a passport and you sort of have to have this passport that applies to certain European countries. We have a vehicle in Ireland called the ICAP, which Cyrus collective acid vehicle runs pretty akin to accompany. So with a legitimate board and, and, and all of the infrastructure service providers, companies that service that ICAP sending that up was quite, quite, quite the work, particularly as we're getting to the ninth ending of this, of this story, right, as COVID started. And so we sort of certainly felt the heat of regulatory concern just in general, as, as we were creating this as, as COVID habit. So that's probably a little bit of a boring answer cause folks, folks, really, not too many people get up in the morning wanting to talk regulatory details, but, you know, we had eight, eight external law firms helping us around the world on, on that, on that point. And so, you know, the, the complexity of that I think was unexpected. I would say I'd stepped back from that and say, there's a cultural difference, you know, in, in the U S for sure. You know, I think a bit more aggressive in Canada, we've got a smaller number of participants in the market that are fair. You know, quite a number are fairly well capitalized and have very long-term perspectives in terms of ownership, property. That's not uniform around the world. And certainly the U S is a deep and liquid place. And, and, and the regional variances are quite significant, but I think that broad sort of hates a little bit more aggressive is actually probably true. I'd say the real estate challenge for us is there's just a host of participants worldwide. And so, you know, we're active in Australia, we're active in the UK, we're active in Germany, we're active in Japan and, and finding sort of like-minded investors across all of those regions. It's just a lot to learn a lot to introduce yourself a lot of introductions to make, and a lot of subsequent sort of conversations. And then you layer that on, into, into do that in the pandemic. And, you know, fortunately we S we did maybe three years of those introductions and, and subsequent meetings, pre pandemic, but still we've, you know, we've had quite a number of those conversations. So layer on doing, doing that in a pandemic. And it becomes a quite interesting, Jesse (17m 2s): Yeah, a little more challenging than, than any other time or most times in terms of, if we go there on that, you know, lockdowns the government stimulus, what we we've talked about before eviction moratoriums a lot has happened in the, in the last crazy to say almost two years, how has that perspective for you? And I understand it's a big question, but how has that, how has your perspective as a, as somebody that deals with real estate on a, on a domestic and global level, you know, how has your opinion of the market and asset classes changed over the last year or two? Colin (17m 38s): Yeah, that is a big question. So generally put, I've been reminded of the ever present role of government in our lives and in particular in real estate. And I, and I don't think that can be overstated, right? So whether, you know, the, the eviction moratoriums, or simply put closing down a lot, a lot of the retail, et cetera, and that was a global story. And, and going through the different government programs requirements, et cetera, particularly during the first two waves of COVID was, was an exercise. And, and there's things that we know about. So the shopping malls closed, et cetera. There were other things that got a bit less play, but were also meaningful. I E different requirements for international investors use Australia as an example, there were new requirements for international investors looking to bring capital into the market due to COVID. So, you know, that, that was interesting now to real estate foundationally. I don't think COVID has changed my perspective on the different property types. So as an example, while located office and CPDs high quality had the view that if, you know, pre COVID, if, if you're making office investments, that's probably where you want to invest during COVID, don't have, I haven't changed my perspective on it, you know, has my overall sort of thoughts on office as a property type being tempered clearly. But I, you know, I think you talk to folks and say, and what you hear is, you know, COVID, hasn't really changed their direction of travel. I think that's, that's largely the same for me. I do think on the retail side at some point. So I used the UK as an example, where we saw a lot of devaluation of retail. At some point, you hit the level where you say, you know, the land value is, is, is higher than what folks are sort of trading in the market for. Right. And I think in the UK, you actually have some of those situations, but I think in, in Canada, there were probably some deals to be had in the retail space, depending on the type of retail you're looking at. And that probably, that would be a different point of view than one I would have had two years ago. It's just, we've seen, you know, a lot interns evaluations over the last two years, multifamily and industrial. I mean, you know, I think we've all been very interested on the industrial story, the E the E grocery dynamic, something I'm focused on a bit, most folks don't see that being a significant concern in, in, you know, for those that own grocery boxes. But I do think that that E grocery, even though most would say, it's fairly unprofitable for the operators. I do think it's worth watching. And, and then on the multifamily side, you know, the, the story say, Hey, everybody's moved out, Tim, we're all gonna live in, in, you know, in two hours outside of the metros or we're going to move someplace far. I think we're seeing that kind of played out to a small degree, but largely hasn't fully, and folks have moved back. And especially in, in the U S where folks have moved back into urban Metro San Francisco's a bit sluggish on that. But beyond that CEO look at Seattle, look at Boston, you've seen, you've seen those apartment rants quite dramatically increased this year. So, you know, some, all of that up and say, not dramatic changes in my view on real estate overall, but certainly certainly reinforcement in some areas and, and deeper thinking and others. Yeah. Jesse (21m 57s): I think I'm probably agree with everything you just said, from my perspective of what you're saying, it sounds like very similar to our outlook. Obviously we're biased in brokerage, but on the office end, I think that there was, if you were really in tune with what was going on in office, you saw a lot of these changes really predated COVID in the lockdown, the different ways of working, the ability to have people come in on potential alternating days. So I th I share your position on downtown well located transit oriented office. I think the story hasn't changed much for them. What's, what's been amazing is that record prices that we've seen in, in industrial and multi res industry industrial, you know, has been the darling of the industry, multi Rez. I think at the beginning of the pandemic, there was this concern that eviction moratoriums would have caused this, you know, mass vacancy, which I think just generally we didn't see, we saw people paying their rent, which I guess in theory, or in practice was kind of subsidy subsidized by the government's. Colin (23m 3s): Yeah, no, that's right. That's right. It was. And that goes back to the first point on the large role of government in, in our society. And, and to be fair, so much of our society was underwritten by the government, especially in that first lockdown, but our multifamily it's interesting because one could juxtapose a national headline from CNN, for instance, saying nobody's paying rent and rent collection is only at 70%. And multi-family, and then what I was hearing from, from institutional owners was, oh, no, our rent collections are 95%. And I, the worst I heard was like maybe 89%. And so, you know, that, you know, those two stats juxtapose show the importance of institutional ownership of the multifamily space and, and how that really paid off in, in, in, in, throughout the crisis, not withstanding the point that yes, government definitely helped pay the bills for a number of folks, but that really, really mattered. And also the types of multifamily that you were in, this is more of a us common than Canada, because, you know, you have a much broader spectrum in the us, but certainly some of that luxury multi-family was, was hit pretty hard in the U S but interestingly, it is bouncing back. Now I was in Boston six weeks ago, or so touring a bit of this product and it's, you know, it was quite interesting. The bounce back has been pretty robust. So anyway, for me, the point is institutional ownership and management of, of multifamily really made a difference in, in the crisis. Yeah. Jesse (24m 49s): And I think on that point with trip, you know, AAA or high-end multi res, I know that there was intra construction, you know, pivots from, okay, maybe let's go be like, you know, maybe we don't need the Taj Mahal, whereas prior to COVID, they might've gone for that super high end. But yeah, I think a big component of it has been, despite some of the government policies, people have continued to pay the rent. And it seems to be at least from the data that we have, that the not only the prices keep going up, but net operating income keeps going up. So the question really from my point of view is, you know, w where do we hit the wall first and pricing or affordability, you know, what, what tempers multi rise. Colin (25m 30s): Yeah, that's a really good question. And take it take cities like Vancouver and Toronto, which have robust shadow rental markets where that condo inventory is, is really, you know, subbing in for that luxury rental. And I candidly think that it's those owners that will have to deal with that question first versus a multifamily owners. And if I were to sort of locate myself along that spectrum, I have to think affordability's going to start being an issue one way or another. So whether it's, you know, people are paying, you know, the income proportions after, after tax income is, is, is off the charts. I'd say as, as a proportion of rent on average, you know, in, in, in, in Toronto and Vancouver, again, to a lot of that sort of condo shadow inventory, but it's worse for folks that are owner occupiers, just based off of the, you know, the significant appreciation that has happened. So, you know, I think it's a legitimate concern. I just don't think institutional multifamily Canada is going to be the first in line to address it. I think there's going to be some other folks who dressing at first and we'll see how it gets addressed. And then the big thing that everybody talks about in, in the public equities world is interest rates. And when will they go up and, you know, folks are concerned about inflation. And I think we genuinely are, cause it sucks that things are a lot more expensive quickly, but I think a lot more people are much more interested on how will central banks, if they decide that this inflation run is a bit more permanent than they thought, Hmm, how will they adjust interest rates to, you know, deal with that. And, and, and there, you know, if I look at that's the challenge and the folks lined up to, to face that challenge, those multi-family owners, aren't first in line, they're probably third in line. The first SIM are probably, you know, I would say highly leveraged homeowners that have, you know, purchased a product in the last year or so. Jesse (27m 47s): Yeah. Fair enough. In terms of moving on to a little bit more on the interest rate, inflation inflation environment, you know, we keep hearing whether this is transitory, whether inflation that we have right now, for those that don't know, I think the fed very quietly, you know, mentioned that they would no longer be targeting the 2%, you know, their, their typical target of a 2% inflation. And it kind of went under the radar, I think even from, from kind of financial news, but w what are your thoughts? And I guess in your role at TD, obviously you have to take a pretty broad global approach. How, how, how did that decision and what you've been seeing as inflation kind of creeping up, how is that influencing or changing, if it does your opinion on, on, you know, where you think you want to lock in rates where you think that you can, you can be in, in variable environments. Colin (28m 44s): Yeah. Good question. So numb number places, one on, on the fixed versus fair, but we, we have generally put, had a predisposition to have as much fixed as possible on the view that, you know, this environment is benign in terms of the cost of debt. And so if we could sort of lock in some of that, that's, that's quite attractive now in certain places, it's pretty hard to do that. So construction financing being one, but we're possible that's being broadly the approach and, and this, and now that's a worldwide thing. So, you know, I think that approach was most pronounced pre pandemic in places like Japan and also in Germany and other European countries. But I think now that's a Candace point, a us point, et cetera, on the other side, which is on the property type side, that's interesting, right? Because multifamily have one year, at least a student housing and maybe eight months, maybe 12 month policing. And when you look at an inflation world of rising interest rate world, that becomes quite interesting, even pre pandemic we're down in Australia, looking at industrial, we took a lot of comfort from the structure of leases in, in, for industrial product in Australia, which have a rental escalations each year. And it's quite quite attractive at two to 3% per year. And so some now, sorry, that's quite attractive right now, right? Hopefully, hopefully it's attractive in five years, but I think that's also important. What's the structure of the leasing in, in the property types that you're investing in. And, and it's interesting, even in the office environment today, we're seeing leasing transform a little bit. We're seeing shorter term leases, not due to inflation, just due to uncertainty in office, but the, you know, the, I guess the net benefit of what might be viewed as more challenging leasing dynamic is you might have a little bit more flexibility in the shorter term if we, if we do have, you know, rising rates due to rising inflation. So it is a complicated point, but we, we really began thinking about it in earnest in 2020. You know, we, we thought about it in 2019 and 2018, but in 2020, as we saw some of those significant changes and by the way, on the fed. Yeah. So that was a watershed moment. At least to me, when they moved off that sort of target, they also sort of announced, I think in the September meeting to be, you know, that they would begin tapering. Now we've been tapering in Canada for awhile, but I also think that's an important announcement that probably didn't get as much press as it should. And then the program to taper fully, I think goes until June of next year. And after that, you would, you know, at least conceivably expect that rates would begin to rise. And I think to most people that would be sooner than what most people anticipate for the U S fed to, to do so. Yes, the feds made a few announcements that I think of come beneath that radar screen. Jesse (31m 59s): I think it's one of those things that when it comes down to the ground level for us at the property level, whether it's, you know, office leasing or retail, I think there is potential for return of, you know, we've had leases where in the nineties and eighties, you'd see these legacy leases where they didn't have step-ups discreetly, but they had, you know, each, each year your rent would rise or your base rent would rise as a function of the CPI index. So it'd be interesting to see if we go back to more of kind of targeted step-ups that really want to go up with inflation, you know, if that's going to be a big enough thing where you, you see that translate, but yeah, it's, it's definitely something that's on the interest rate side, curious for all everybody, you know, we have people on that are, I find extremely smart that will have complete opposite opinions on inflation and interest rates. So it's one of those things where you watch carefully, but in terms of having a crystal ball for where, where rates are going to go, I mean, I think I've confidently said rates will have to go up for the last 10 years. Colin (33m 5s): Yeah, that's right. That's right. And, and, and eating a bit of humble pie is essential when, when, when prognosticating about these saints, because it's, you know, it's, it's almost like predicting currencies. There's just so much that goes in to, to, to, you know, what the fed does or what the bank of Canada does. And, you know, you can raise rate rates quickly or slowly. You might raise some that dance through there is, there's quite a lot in there. And then you've got geopolitics, you've got a health pandemic and, and, you know, so sitting in 2019, nobody would have anticipated, right. Where rates would be today, just nobody would have gone in that. Right. So to your point, yes, I, I definitely eat some humble pie as well. Jesse (33m 54s): Yeah, no, fair enough. You, you control what you can control. And, you know, we were in one of those few industries where you can directly almost directly pass on inflation to your customer, but it's a interesting point, especially in the Canadian environment, when you talk about student rentals where you essentially can mark to market your rental rates almost almost annually, usually two years, three years. But, you know, for those that don't know the Canadian environment, even in multi res, even though they're one year leases, you're not really marketing to market within, you know, every year, you know, the turnover can be, depending on the asset can be quite a bit different than, than student res. Yeah, Colin (34m 32s): Absolutely. And that, and, and, and that will be interesting going forward, right? Because you had folks in the last year or so, depending on the market and depending on the product, and this is more of a condo shadow inventory point that moves to take advantage of some of the lower rents in the multi-res side, that due to, you know, rent control, both, you know, use Toronto or Ontario as an example, you would think that the turnover rates going to decline materially, at least in the short term, as a result and in, in the student world, you know, it's, it's doubly interesting. So number one, you've got your normal turnover folks graduate, but you also have this year and next year cold called the bulge in the class. You've got people that might've delayed, that are now taking the class people that were at home that are now going back to campus. You've got campuses that were virtual, like Ryerson here in Toronto that are going back to in-person in January. So that re all of that combined, and then you've got international students that are coming back. It makes it a really interesting place to be in the student world. Yeah. Jesse (35m 50s): Yeah, for sure. Colin, I want to be respectful of the time here, but I do want to talk about the, the black opportunity fund for those that don't know what it is. I just want to, you know, before we, we ask our final questions here, I mean, just in kind of asking the question, are you able to talk a little bit about the fund moving on to kind of culture in our commercial real estate world? You know, we can talk about specifically here in our area, but I think culture is very similar, our commercial real estate culture. So I'd like to just kind of get your view on where we're at right now, from your point of view, you know, we're what improvements from a cultural standpoint you think that we can make and, and yeah. And on that talking a little bit about the fund and what it is. Colin (36m 37s): Yeah, absolutely. So first the culture culture in real estate, in the commercial real estate world, it is a highly congenial culture and relies a lot on personal and interpersonal interaction and the log on the power of networks. And that's just a global global point and familiarity with each other on the basis, usually of doing deals and transactions and working through situations, none of that's overly bad. What I have found, whether it's going to expo in new Nick or whether it's going to, you know, an animal con conference in Beijing is it's extraordinarily a male and be uniform. And when I stepped back from that, I think, you know, the folks that occupy our properties are not all male and not all uniform. And we live in one of the most incredibly rapidly changing and advancing times ever, right? We're in the fourth industrial revolution and everything literally is changing. And so how can an owner operator of real estate realistically tell their investors that they're the best in the world at what they do, but their staff is only, you know, only calls from a quarter of the population in the country or city in which they're in. I just don't think it's possible. There are smart people out there, brilliant people out there that would make fantastic real estate investors that aren't actually able to get into real estate for X, Y, Z at ABC reasons. So I think that's a problem for the real estate industry as much or more than it is a problem for society. But if we can solve that problem, we create better outcomes. And this isn't just that, you know, this isn't a CSR thing. I E the thing at the back of the annual report and where everybody's smiling, no, this is actually a, Hey, you can do, you can create better returns by having smarter people running the strategies, running the real estate. So what's the black opportunity fund, a billion and a half world's largest pool of capital to fund a black led black focus, black serving charities nonprofits on one hand businesses entrepreneurs on the other hand. And why, because when we went through the last two years accelerated by what happened, George Floyd, we saw a ton of organizations doing fantastic work, just subscale. They just need a capital. And it, why? Because we thought, Hey, why don't we start an, you know, a scholarship? Well, there's a ton of organizations getting scholarships. Why don't we start an after-school program? There's tons of organizations. There are literally hundreds and hundreds and hundreds of nonprofits, by the way, didn't say charities because they don't have even the scale to get through the process to become a registered charity. So they're non-profits, but they're, you know, moms and pops doing their best with the limited resources that we, that they have. So black opportunity for motivate contributions from corporations, governments, individuals, families, anybody, we think it's a whole, a candidate problem to scale up these charities, nonprofits on the businesses and entrepreneurs side. There are thousands of entrepreneurs and businesses, all of them virtually all of them, very small. And the number one issue statistically as surveyed is access to capital. And there is both and a perception issue and also true difficulty accessing meaning financial institutions are less likely, and this was studied by the, the federal reserve are less likely to give to an individual of color. There, there are like more likely to be determined, to be high risk. And as a result, individuals of color are less likely then to go to those financial institutions. So you have sort of this negative wheel created. And so we're just trying to break that and create an assessable pool of capital to provide. So that's the goal of the black opportunity fund. We have been raised capital TD just announced a couple of weeks ago, $10 million plus office space. Plus the conduct individuals, national bank announced 6 million, just over $6 million to, to the black opportunity fund. There's been a number of other contributions, but we're early meaning we've got a ways to go. We spent a lot of time creating the infrastructure at the correct governance, the board, et cetera, et cetera. And it's been a huge effort, more than 300 folks involved. We talked to thousands of businesses and charities and all, all across the country. And that's important to geography. Folks think about Toronto and Montreal. They overlook St. Johns and Halifax and equalizer. We want to focus completely across the country, French and English, female, and male, and, and, and also LGBTQ plus, et cetera, that is important to us. And so that's the black opportunity fund. Jesse (42m 29s): Yeah, I think, I think for, you know, from the point of view of the industry, I think me personally, I think that's why it's important to have these carefully, these organizations do these care for careful, you know, dis w whatever you want to call them, disparate impact studies, but we're looking at what policy actually does at the end of the day. You know, we have XYZ goal for policy, but what is really happening in reality? One thing that really clicked for me was I was in business school years ago in Toronto, and we had a venture capital capitalist that was talking to our class. And he said that he had his daughter, she was going into computer science and programming and university of Waterloo for, you know, the Americans listening pretty much our Silicon valley in Canada. And he said, he went, brought her into programming and it was an orientation. And as most people could imagine, 99.9, 9% male. And initially I remember thinking, well, you know, if, if you go into something and you have people that are interested in that and they want to do it, and it happens to be disproportionate to society, you know, that's people making, making decisions, but then you said something, I think it would always stuck with me. And when we have these conversations, I always think about this is, he said, these are, this is the generation that's going to design the virtual reality in geography. We plan the way that we navigate the world is a lot of it is going to be on the computer. A lot of it is going to be software. Do you really want this one cohort of people, no matter how great they are with all the blind, you know, the blind side, you know, the blind spots that they have. Do you want that to be what creates the future and designs it, or do you want to have a multitude of different views where the collective blind spots, you know, create something that is very clear? Colin (44m 22s): Yeah, no, that's exactly. That's exactly it. And the tech world to that point has had its owns for the realization. Cause you know, commercial real estate, isn't alone. I mean, I'd say broadly the investment world, same thing broadly, broadly the tech world. But if you stay, you know, I stepped back and I've, and I've posed this question and truly a few times, it's like, why, why is it that virtually all of the administrative assistants are female. And it's like, do you, do you grow up? Are you born? And you grow up and there's an innate desire as a female to become an admin assistant that doesn't exist for males. And clearly the answer is no, at least at least my interpretation and understanding of medicine yields me to conclude. That's probably not the case. It's probably a societal expectation. But if you take it to your example or the instance of commercial real estate owners, you know, how, how is it that you will grow? How can you grasp future trends? How will you understand how people want to live, work and play, how they want to shop the types of retailers? They w retailers that they want to go to the experience that they want to have in lifestyle oriented centers. How can you actually understand that? If it's five dudes planning out the layout of the mall, right? It just, I don't get it. So to me, it's kind of like, well, you want to, you want to draw people in so that you have these different points of view. So Jesse (46m 0s): You're just going to go to that mall and not have any place for, for your, any daycare to put your child. Colin (46m 7s): Yeah. Pretty much Jesse (46m 9s): Awesome. And okay. I've, you know, we've been very, very generous with your time here calling. We have four questions. We ask everybody on, on the show. So if you're cool, I'll S I'll send them your way. Colin (46m 20s): Sounds good. Jesse (46m 22s): Okay. What's one thing, you know, now in your career, you wish you knew when you started, Colin (46m 27s): I say, boldly use using the Wayne Gretzky analogy, which is old flea. Think about where that puck is going and skate, where that puck is going versus looking at the shiny object today and going to that shiny object today. Jesse (46m 46s): Yeah, that's great. I haven't heard that in a while B be where that thing or that puck is going to be not where it, not, where it is in terms of, we always ask guests in terms of what you would tell younger people, getting into our industry, and just generally your view of mentorship, Colin (47m 3s): Jay mentorships, critical more than my mistakes has been not caring mentors throughout my career. As I progress, meaning I have lots of mentors as I began my career. And then you sort of, you know, go through the different levels and you know, you get busy, it falls off you, you know, whatever, it's a terrible thing. I think mentors are absolutely critical. Gives you a perspective on, on things that you're seeing today that, that person's seen in a different way, 3, 4, 5 different times, and can tell you what they did or what didn't do more important than that is a mentor calls out your bullshit. And that's really important sometimes. And so that's valuable somebody coming into the industry today, what would I say? It is a relationship industry at the end of the day. I mean, you got to do the work you got to do well, you got to have passion for it. So if you don't have passion for real estate, don't go into real estate. So assuming you're passionate for real estate, it's a networking industry, it's a relationship industry. And so take that time to go out and take somebody to drinks. Or if you don't drink, take them to lunch, whatever it is, because that, that is what gets your career going in the industry. Jesse (48m 29s): Yeah, absolutely. What is one or two books or podcasts that you are constantly recommending? Colin (48m 35s): Yeah, that's a good question. I do like Malcolm Gladwell's books a lot. I wish I could say I've got a long book list. I wish I could say I've read all the books on that book list. There's a book that comes to mind. It was it's the power of one. I read it in literally high school, but it, it, it, it just speaks to me as a story about courage and resilience that, you know, I think is beneficial today. And if I go back to your earlier question about advice, people used to say in, I banking world, it's a marathon, not a sprint. It absolutely is. And so to run that marathon, you need resilience and you need that, you know, that, that capacity to endure, to learn, to fall down, to, you know, make mistakes and to get up even better. Yeah. That, that book, the pair, the power of one was quite, quite instrumental to me, even though I read it so many years ago. Awesome. Jesse (49m 39s): We'll put a link up to that. And the last question, my favorite layup first car make and model. Colin (49m 48s): So funny enough, I've never, I've never owned a car because I've always lived in, in urban centers and have, you know, subscribed to the notion of taking the subway, walking everywhere and now taking Uber's. But the first car is likely to be some form of electric vehicle. Can't say it's going to be a Tesla, but it might be a, so let's go with Tesla and some electric vehicles. Jesse (50m 16s): I like it. That's the first guest to prospect there, their first car. And the second one that, that they've always, they've always been public transit oriented. So I think that trend is going to continue going in that direction. Colin (50m 30s): Yeah. I was early on that train cause you know, you know, it was very unusual, but you know, just like the, not having a landline telephone, a terrain that was early on that too, but eventually I'm going to have to give them, I know I can, I can see it coming in. It's probably going to be that Evy, hopefully when those batteries are better, there you go Jesse (50m 50s): Calling for those, for those interested in getting in contact with you or anybody that wants to see, you know, what you guys are up to, what would be the best place to reach out? Colin (51m 1s): Yeah. So LinkedIn is, is, is good. People do reach out through that in terms of finding, you know, what we're up to black opportunity fund for bear has a good website, lots of info there. We keep it up to date as it relates to T them and global real estate and our Canadian real estate, there is a T damn website, like most websites in the, in the investment world. We don't tend to overload it with information. So, but T them does have a LinkedIn page. And so that is also quite active. So following either TDM on LinkedIn or on Twitter, there's there's information there. And if you don't want to do either and just want to message me on LinkedIn, you can, and eventually I'll get back to you. Jesse (51m 54s): My guest today has been calling Lynch con thanks for being part of working capital Colin (51m 59s): Pleasure. Pleasure. It was great conversation. Jesse (52m 8s): Thank you so much for listening to working capital the real estate podcast. I'm your host, Jesse for galley. If you liked the episode, head on to iTunes and leave us a five-star review and share on social media, it really helps us out. If you have any questions, feel free to reach out to me on Instagram, Jesse for galley, F R a G a L E, have a good one take care.
Show Notes - The Grow Your Business and Grow Your Wealth podcast with Gary Heldt - EP 78: Gil Baumgartenr – Found and CEO of Segment Wealth Management Gil Baumgarten is a 36-year veteran of the securities and investment industry. After beginning his career at the venerable EF Hutton in the early 1980s, Gil became a top producer for UBS and Smith Barney, what is today Morgan Stanley. However, Gil found Wall Street routinely emphasized its own interests over those of the client. By the time 2010 came about, Gil jumped off the brokerage train to start Segment, a fee-only firm where the interests of the client could align with the interests of the firm. In 2021, Gil published his first book, FOOLISH: How Investors Get Worked Up and Worked Over by the System. The best-selling book highlights the hidden problems endemic among Wall Street brokerage firms, as well as the deeply rooted self-destructive tendencies of investors, and provides investors with an actionable path forward. Gil's insights include: The importance of assessing suitability What fiduciaries do How Gil took his years of experience to write his book Foolish: How Investors Get Worked Up and Worked Over By The System What FINRA is How the pandemic impacted his company Why you should take bigger risks in your career Enjoy the show! Connect with Gil: Website: https://segmentwm.com/about/#segment Book: https://gilbaumgarten.com/book/ Connect with Gary: Website: https://sbadvisors.cc/ Facebook: https://www.facebook.com/SmallBusinessAdvisors LinkedIn: https://www.linkedin.com/in/gary-d-heldt-jr-388a051/ Learn more about your ad choices. Visit megaphone.fm/adchoices
Supply chain delays are on the minds of not only investors, policymakers and business owners, but the average consumer as well. How will recent challenges to supply chains be resolved in the near-term and will this create opportunity for investors?----- Transcript -----Michael Zezas Welcome to Thoughts on the Market. I'm Michael Zezas, head of public policy research and municipal strategy for Morgan Stanley.Daniel Blake And I'm Daniel Blake, equity strategist covering Asia and emerging markets,Michael Zezas And on part one of this special edition of the podcast. We'll be assessing the near-term restructuring of global supply chains and how this transition may impact investors. It's Tuesday, January 11th at 9 a.m. in New York.Daniel Blake And it's 10:00 p.m. in Hong Kong.Michael Zezas So, Daniel, we recently collaborated on a report, "Global Supply Chains, Repair, Restructuring and investment Implications." In it, we take a look at the story for supply chains over the short, medium and long term. Now, obviously supply chains are on the minds of not only investors and policymakers, but the average consumer as well. So I think the best place to start is, how did we get here?Daniel Blake Thanks, Mike. What we're seeing actually is a surge in demand for goods, particularly coming out of the US economy. As we're seeing accommodation of a record stimulus program post-World War Two, combined with a share in spending that has shifted from services towards goods that has been unprecedented. For example, to put this in context, we're seeing U.S. consumer spending on goods increased by 40% in the two years between October 2019, pre-COVID, to October 2021. And that compares with 28% increase that we saw in the entire 11 years following the financial crisis. And so what we're seeing is a sharp fall in services being more than made up for with an increase in spending on goods. And that's put enormous stress on supply chains, production levels, capacity of transportation. And in conjunction with the surge in demand that was seen, we've also seen some acute difficulties emerge in parts of supply chains impacted by COVID. For example, in South Southeast Asia, we've seen semiconductor fabrication, we've seen assembly, and we're seeing components being impacted by staffing issues as a result of COVID health precautions. And this has all been made worse by the uncertainty about sourcing products and lead times. So what we're seeing is manufacturers, we're seeing suppliers, distributors and the and the end corporates that are facing the consumer, putting in additional orders, whether that component is in short supply or not. And so that's increased the stress in the system and created uncertainty about where underlying demand sitsDaniel Blake And so, Mike, amidst this uncertainty, policymakers have really taken note of the issues, not least because of the inflation that's been generated. What reactions are you seeing from the administration, from Congress and from the Fed?Michael Zezas This is obviously unprecedented volatility in the behavior of the American consumer. And so not surprisingly, in the U.S., policymakers don't have the types of tools immediately at their disposal to deal with this. So you've actually seen the administration pull the levers that they can, but they're relatively limited. They've made certain moneys available, for example, for overtime work for port workers and transportation workers to help speed along the process of inventory accumulating at different ports of entry in the US. But there aren't really any comprehensive tools beyond that that are being used.Michael Zezas Daniel, what about policymakers in Asia and emerging markets? How are they reacting?Daniel Blake Yeah. In the short run, we're seeing a combination of tightening of monetary policy. For example, over 70% of emerging markets have been hiking rates by the fourth quarter of 2021. But we're also seeing competition for investment in global supply chains as they are being diversified by OEMs and as we're seeing some restructuring taking place. So we're seeing overall this competition happening across the value chain from battery materials like lithium and nickel in markets like Indonesia all the way through to leading edge 3D semiconductor manufacturing, where companies in Japan are partnering with industry leader Taiwan Semiconductor Manufacturing Corporation to try to pursue leading edge technology. So we are seeing this competition being a key feature of medium term trends.Michael Zezas So, Daniel, clearly a challenge in the near term to supply chains in the economy. What's our view on how this resolves itself?Daniel Blake Yeah, we have identified in conjunction with the global research team the most acute choke points, the primary choke points. And the short answer is we are seeing improvement in these in these areas. For example, in semiconductors, manufacturing capacity in in the backend foundry that was seen in Southeast Asia, we are seeing production come back in towards full capacity. And so we are seeing a real easing in the most acute bottlenecks. That should be good news for overall production levels and the most severe shortages. But at the same time, we do have some more persistent challenges, including rising costs and delays in transportation, as it will take some investment and multiple years likely to resolve the issues that we're seeing in labor shortages in areas like US trucking, in port capacity, intermodal capacity in the US. And as we see some persistent areas of demand really pushing for more investment, for example, in EV materials and the battery supply chain.Michael Zezas OK, so the most acute stresses we see resolving in the near term, and that's one of the reason, for example, our economists expect that inflation pressures will start to ease this quarter and into next. And as a consequence, the Fed will hike rates this year, but not necessarily according to the more aggressive schedule that they previously laid out. Daniel, what do you think are some of the more micro investment implications, sectoral investment implications, that we should pay attention to here?Daniel Blake Yeah, we are tracking very closely these key bottleneck segments in the global economy because we have seen companies producing those products have been sharp outperformers. And the challenge is obviously recognizing where these shortages will persist and where we see sustained pricing power. We do see that in some areas the semiconductors are continuing, we are still seeing investment channels in EV materials being a key source of demand. But on the flip side, we're also seeing an outlook for a reprieve in supply chains. As we mentioned some of the more acute challenges, for example, in auto production that may actually be a negative for some major semi companies, as they've benefited from these stronger margins. And so as that pricing pressure diminishes, we think investor consensus is somewhat too optimistic on this shortage and backlog persisting longer into 2022. In terms of implications, then that should be more of a positive for volume league players, for example, auto parts makers that have been held up in terms of their shipments as a result of shortages in other parts of the value chain. And the longer term, another favored investment theme coming out of the report is the likely strength of the US capex cycle in response to these challenges that we're seeing for supply chains.Michael Zezas Thanks for listening. We'll be back in your feed soon with part two of my conversation with Daniel Blake on the restructuring of global supply chains. As a reminder, if you enjoy Thoughts on the Market, please make sure to rate and review us on. The Apple Podcasts app. It helps more people find the show.
➤ Discussing Tesla's recent decisions ahead of the Q4 earnings report and product roadmap update ➤ Marco economic calendar check ➤ Tesla reportedly discusses aggressive growth plan for Tesla Energy, Megapack updates ➤ Analyst updates from Wedbush, Goldman Sachs, Morgan Stanley, and Global Equities Research ➤ Tesla secures US-based nickel contract ➤ Giga Shanghai output videos ➤ Reports of cold weather issues Twitter: https://www.twitter.com/teslapodcast Patreon: https://www.patreon.com/tesladailypodcast Tesla Referral: https://ts.la/robert47283 Plaid producer Who Why Executive producer Jeremy Cooke Executive producer Troy Cherasaro Executive producer Andre/Maria Kent Executive producer Jessie Chimni Executive producer Michael Pastrone Executive producer Richard Del Maestro Executive producer John Beans Music by Evan Schaeffer Disclosure: Rob Maurer is long TSLA stock & derivatives
As the year gets underway, we are seeing an aggressive rotation from growth to value stocks, triggered by Fed tapering. Will 2022 follow the patterns of the ‘taper tantrum' of 2013?----- Transcript -----Welcome to Thoughts on the Market. I'm Mike Wilson, Chief Investment Officer and Chief U.S. Equity Strategist for Morgan Stanley. Along with my colleagues bringing you a variety of perspectives, I'll be talking about the latest trends in the financial marketplace. It's Monday, January 10th at 11:30 a.m. in New York. So let's get after it. 2022 is off to a blazing start with one of the most aggressive rotations from growth to value stocks we've ever seen. However, much of this rotation in the equity markets began back in November, with the Fed's more aggressive pivot on monetary policy. More specifically, the most expensive stocks in the market were down almost 30% in the last two months of 2021. Year to date, this cohort is down another 10%, leaving 40% of the Nasdaq stocks down more than 50% from their highs. Is the correction over in these expensive stocks yet? What has changed since the turning of the calendar is that longer term interest rates have moved up significantly. In fact, the move in 10-year real rates is one of the sharpest on record and looks similar to the original taper tantrum in 2013. However, as already mentioned, equity markets have been discounting this inevitable move in rates for months. Perhaps the real question is, why is the rates market suddenly waking up to the reality of higher inflation and the Fed's response to it - something it has telegraphed for months? We think it has to do with several tactical supports that are now being lifted. First, the Fed itself likely increased its liquidity provisions at year-end to support the typical constraints in the banking system. Meanwhile, many macro speculators and trading desks likely shut down their books in December, despite their fundamental view to be short bonds. This combination is now reversed and simply added fuel to a fire that had been burning for months under the surface. Based on the move in 2013, it looks like real rates still have further to run, potentially much further. Our rates strategists believe real rates are headed back to negative 50 basis points, which is another 25 basis points higher. From our perspective, real rates are unreasonably negative given the very strong GDP growth. Therefore, the Fed is correct to be trying to get them higher. It's also why tapering may not be tightening for the economy, even though it's the epitome of tightening financial conditions for markets. We have discussed this comparison to 2013 in prior research and made the following observations as it relates to equity markets. First, the taper tantrum in 2013 was the first of its kind and something for which the markets had not been prepared. Therefore, the move in real rates was much more severe and swift than what we would expect this time around. Second, valuations were much more attractive in 2013 based on both price/earnings multiples and the equity risk premiums, which adjust for absolute levels of rates, which are much lower today. Listeners may find it surprising to learn that the price/earnings multiple for the S&P 500 is actually higher today than when the Fed first announced its plan to taper asset purchases back in September. In other words, valuations have actually increased as the tapering has begun, at least for the broader S&P 500 index. This is also similar to what happened in 2013 and makes sense. After all, Fed tightening is a good sign for growth and evidence that its policy has been successful. However, this time the starting point on valuations is much higher as already noted. More importantly, growth is decelerating, whereas in 2013 it was accelerating. This applies to both economic and earnings growth. In this kind of an environment, the most expensive parts of the market remain the most vulnerable. This argues for value to outperform growth stocks. However, given the deceleration in growth, we favor the more defensive parts of value rather than the cyclicals like we did during the first quarter of 2021. This means Healthcare, Staples, REITs and Utilities. And some financials for a little offense to offset that portfolio. Thanks for listening. If you enjoy the show, please leave us a review on Apple Podcasts and share Thoughts on the Market with a friend or colleague today.
The start of 2022 has brought a surge in COVID cases, new payroll data, increased geopolitical risks, and shifts from the Fed. Despite these new developments, we think the themes from our 2022 outlook still apply.----- Transcript -----Welcome to Thoughts on the Market. I'm Andrew Sheets, Chief Cross-Asset Strategist for Morgan Stanley. Along with my colleagues bringing you a variety of perspectives, I'll be talking about trends across the global investment landscape and how we put those ideas together. It's Friday, January 7th at 2:00 p.m. in London. Right out of the gates, 2022 is greeting us with a surge of COVID cases, a US unemployment rate below 4%, geopolitical risk and new hawkish Fed communication. Amidst all these issues, the question waiting for investors is whether the thinking of late last year still holds. We think the main themes of our 2022 outlook still apply - solid growth and tighter policy within an accelerated economic cycle. But clearly, there are now a lot more moving parts. One of those moving parts is the growth outlook. Our 2022 expectation was that global growth remains above trend, aided by a healthy consumer, robust business investment and healing supply chains. But can that still hold given a new, more contagious COVID variant? For the moment, we think it can. Our economists note that global growth has become less sensitive to each subsequent COVID wave as vaccination rates have risen, treatment options have improved and the appetite for restrictions has declined. Modeling from Morgan Stanley's US Biotechnology team suggests that cases in Europe and the US could peak within 3-6 weeks, meaning most of this year will play out beyond that peak. Having already factored in a winter wave of some form in our original economic forecast, we don't think, for now, the main story has changed. There are, however, some wrinkles. Because China is pursuing a different zero COVID policy from other countries, its near-term growth may be more impacted than other regions. And the emergence of this variant likely reinforces another prior expectation: that developed market growth actually exceeds emerging market growth in 2022. A second moving part is a shift by the Federal Reserve. Last January, the market assumed that the first Fed rate hike would be in April of 2024. Last August? The market thought it would be in April of 2023. And today, pricing implies that the first rate hike will be this March. An update from the minutes of the Federal Reserve's December meeting, released this week, only further reinforced this idea that the Fed is getting closer and closer to removing support. The Fed discussed raising rates sooner, raising them faster and reducing the amount of securities that they hold. Indeed, it would seem for the moment that central banks in a lot of countries are increasingly comfortable pushing a more hawkish line until something pushes back. And so far, nothing has. Equity markets are steady, credit spreads are steady and yield curves have steepening over the last month. The opposite of what we would expect if the markets were afraid of a policy mistake. As such, why should they stop now? For markets, therefore, our strategy is based on the idea of less central bank support to start the year. Our Foreign Exchange team expects further US dollar appreciation, while our US interest rate strategists think that yields will move higher, especially relative to inflation. We think that combination should be negative for gold but supportive for financial stocks both in the US and around the world. Thanks for listening. Subscribe to Thoughts on the Market on Apple Podcasts or wherever you listen and leave us a review. We'd love to hear from you.
Despite last year's strong showing for European equities, will the recent spread of the Omicron variant derail our positive outlook for the region in 2022?----- Transcript -----Welcome to Thoughts on the Market. I'm Graham Secker, Head of Morgan Stanley's European Equity Strategy team. Along with my colleagues, bringing you a variety of perspectives, I'll be talking about the recent rise in Omicron cases and whether this could derail our constructive view on European equities for 2022. It's Thursday, January the 6th at 2:00 p.m. in London. Before touching on Omicron and the case for European stocks in 2022, I want to start by looking back at last year, which ended up being a very good one for the region. True European equities did lag US stocks again in 2021, however, this is hard to avoid when global markets are led higher by technology shares given Europe has fewer large cap companies in this space. More impressive was Europe's performance against other regions such as Japan, Asia and emerging markets. In fact, when we measure the performance of MSCI Europe against the MSCI All Countries World Index, excluding U.S. stocks, then we find that Europe enjoyed its best year of outperformance since 1998 which, to provide some context, was the year before the euro came into existence. As ever, past performance is not necessarily a good guide to future returns. However, in this instance, we do expect another year of positive returns for European stocks in 2022, with 7% upside to our index target in price terms, which rises to 10% once dividends are included. This is considerably better than our Chief US Equity Strategist, Mike Wilson, expects for the S&P, while Jonathan Garner, our Chief Asian Equity Strategist, also remains cautious on Asian and emerging markets at this time. While we think the underlying assumptions behind that positive view on European stocks are actually quite conservative - we model 10% EPS growth and a modest PE de-rating - equity investors are likely to have to navigate greater volatility going forward, given scope for higher uncertainty around COVID, inflation, and the impact of tighter monetary policy on asset markets. The first of these factors was arguably the most important for markets through November and December, however, recent evidence that emerged very late in the year - that Omicron is indeed considerably less severe than prior mutations - has boosted risk appetite across the region, helping push bond yields and equity prices higher. From a more fundamental perspective, we are also encouraged that the sharp rise in COVID cases across Europe over the last couple of months does not appear to be having a significant impact on the economy. Yes, we did see quite a sharp drop in business surveys in Germany through December, however, this doesn't appear to be replicated elsewhere with the PMI services data in France and consumer confidence data in Italy staying strong for now. Going forward, we expect the driver of volatility and uncertainty to shift from COVID to central banks and the impact of tighter monetary policy on asset markets. While this issue will be relevant across all global markets, Europe should be less negatively impacted than elsewhere given the European Central Bank is unlikely to raise interest rates through 2022. In addition, the European equity market's greater exposure to the more value-oriented sectors such as commodities and financials, should make it a relative beneficiary of rising bond yields, especially if - as our Macro Strategy team forecast - this is accompanied by rising real yields (which should weigh most on the more expensive stocks in the US) or a stronger US dollar (which is more of a headwind for emerging markets). Consistent with this outlook, we maintain a strong bias for value over growth here in Europe, with a particular focus on banks, commodity stocks and auto manufacturers. While all three of these sectors outperformed last year, we think they are still cheap and hence offer more upside from here. Thanks for listening. If you enjoy the show, please leave us a review on Apple Podcasts and share Thoughts on the Market with a friend or colleague today.
Cory Klippsten is the founder of Swan Bitcoin & Bitcoiner Ventures, Advisor at $RIOT, 50x investor/advisor to VC-backed tech companies, and an alum of top companies you know like Google, McKinsey, Morgan Stanley, & Microsoft. As the CEO of Swan, Cory leads an elite team of Bitcoin experts on a mission to create ten million new Bitcoiners…people who not only own Bitcoin, but understand it. Swan accomplishes this through world class education and service for their retail clients, and additional personalized, concierge-level service for their private clients making Swan the go-to place for Bitcoiners to build, grow, and enjoy greater wealth with Bitcoin. Follow Swan: twitter.com/coryklippsten youtube.com/swansignal swanbitcoin.com Plus this weeks topics: France Goes Prude? Porn and Cultural Backlash; Elizabeth Holmes & Malcolm Gladwell's "Default To Truth": What flaws in human nature allow frauds to happen; Is Ben Shapiro "Retconning" COVID??? Learn more about your ad-choices at https://www.iheartpodcastnetwork.com
As 2022 gets underway, investors are concerned about the Omicron variant of COVID-19, yet markets are taking developments in stride, with higher stock prices and bond yields. Is this economic confidence misplaced?----- Transcript -----Welcome to Thoughts on the Market. I'm Michael Zezas, Head of Public Policy Research and Municipal Strategy for Morgan Stanley. Along with my colleagues, bringing you a variety of perspectives, I'll be talking about the intersection between U.S. public policy and financial markets. It's Wednesday, January 5th at 10:00 a.m. in New York. As we settle in for 2022, the early line of questioning from clients regards the impact of the Omicron variant of COVID 19. It's been shattering records for infections globally and in the US, disrupting air travel as workers stay home sick. So why then are markets so far this week taking this in stride? Higher stock prices and bond yields reflect more economic confidence than concern. Is that confidence misplaced? Not necessarily, in our view. That's because while Omicron is clearly a serious public health risk, the data suggests it may not trigger the level of public policy response that sustainably crimps economic activity, such as indoor capacity restrictions on service establishments or stay at home orders. Since the pandemic's onset, such responses have largely been dictated by state and local governments, and as we pointed out in this podcast a month ago, in most cases where restrictions were tightened, rising COVID hospitalizations and lack of bed capacity were cited as the culprit. So far, the data suggests hospital capacity may not be a problem with Omicron. Consider studies from the UK and South Africa, which have shown that Omicron is substantially less likely than the previously dominant Delta variant to land people in the hospital. This likelihood is lessened even more if an infected person was previously vaccinated. So even as case counts soar above those prior waves, it's not surprising to see that measures of hospital capacity stress across the US are yet to exceed those of prior waves. Further, as our colleagues in the Biotech Research team point out, the contagiousness of Omicron and subsequent protection against reinfection that the infected develop, at least for a time, has led to bigger but shorter infection waves in places like South Africa. This is why US government officials point out that Omicron could peak and fall quickly sometime this month. In short, the wave and any attendant economic risk could be over quickly, and this may be why investors are looking through it. Hence, we expect markets will refocus on inflation and Fed policy as key drivers for 2022, continuing to push bond yields higher this year in line with our team's forecast. Thanks for listening. If you enjoy the show, please share Thoughts on the Market with a friend or colleague or leave us a review on Apple Podcasts. It helps more people find the show.
FTC Legal Action on Log4j, Goolge Patches, Morgan Stanley & China Cybersecurity News CyberHub Podcast January 5th, 2021 Today's Headlines and the latest #cybernews from the desk of the #CISO: FTC warns legal action against companies who fail to mitigate Log4Shell Chrome 97 Patches 37 Vulnerabilities Google Patches 48 Vulnerabilities With First Set of 2022 Android Updates Morgan Stanley agrees to $60 million settlement in data breach lawsuit China moots additional security rules for apps that influence public opinion Story Links: https://therecord.media/ftc-warns-legal-action-against-companies-who-fail-to-mitigate-log4shell/ https://www.securityweek.com/chrome-97-patches-37-vulnerabilities https://www.securityweek.com/google-patches-48-vulnerabilities-first-set-2022-android-updates https://www.zdnet.com/article/morgan-stanley-agrees-to-60-million-settlement-in-data-breach-lawsuit/ https://www.zdnet.com/article/china-moots-additional-security-rules-for-apps-that-influence-public-opinion/ “The Microsoft Doctrine” by James Azar now on Substack https://jamesazar.substack.com/p/the-microsoft-doctrine The Practitioner Brief is sponsored by: KnowBe4: https://info.knowbe4.com/phishing-security-test-cyberhub ****** Find James Azar Host of CyberHub Podcast, CISO Talk, Goodbye Privacy, Digital Debate, and Other Side of Cyber James on Linkedin: https://www.linkedin.com/in/james-azar-a1655316/ Telegram: CyberHub Podcast Gettr: @Jamesazar ****** Sign up for our newsletter with the best of CyberHub Podcast delivered to your inbox once a month: http://bit.ly/cyberhubengage-newsletter ****** Website: https://www.cyberhubpodcast.com Youtube: https://www.youtube.com/channel/UCPoU8iZfKFIsJ1gk0UrvGFw Facebook: https://www.facebook.com/CyberHubpodcast/ Linkedin: https://www.linkedin.com/company/cyberhubpodcast/ Twitter: https://twitter.com/cyberhubpodcast Instagram: https://www.instagram.com/cyberhubpodcast Listen here: https://linktr.ee/cyberhubpodcast The Hub of the Infosec Community. Our mission is to provide substantive and quality content that's more than headlines or sales pitches. We want to be a valuable source to assist those cybersecurity practitioners in their mission to keep their organizations secure. #cybernews #infosec #cybersecurity #cyberhubpodcast #practitionerbrief
In this episode we chat with Borya Shakhnovich, the CEO of airSlate, a global SaaS technology company that provides no-code business process automation, e-signature and document management solutions. He's raised over $130 million dollars from notable firms including Morgan Stanley, General Catalyst and Silicon Valley Bank. We talk about the near ubiquitous use cases for the airSlate solution, Borya's journey as an entrepreneur and the value his investors have provided. The company generates over $100 million in revenue. We hope you enjoy the show.
With a new calendar year, the narrative in markets may not be shifting but there are still opportunities for investors to consider as growth rates, policy proposals, and interest rates shift in the coming year.----- Transcript -----Welcome to Thoughts on the Market and Happy New Year! I'm Mike Wilson, Chief Investment Officer and Chief U.S. Equity Strategist for Morgan Stanley. Along with my colleagues bringing you a variety of perspectives, I'll be talking about the latest trends in the financial marketplace. It's Monday, January 3rd at 11:30 a.m. in New York. So let's get after it. A new year brings new investment opportunities, even if the narrative isn't changing. More specifically, tightening monetary policy and decelerating growth supports our large cap defensive quality bias - a strategy that has worked well since we first started recommending it back in mid-November. On the first score, the Fed and other central banks appear to be determined to remove monetary accommodation in the face of higher inflation. Not only is inflation turning out to be an economic issue, but it's quickly becoming a political one given this is a midterm election year. What this means is the Fed will likely turn out to be more hawkish than investors expect, and that hawkishness is likely to be front-end loaded so markets have time to recover by November. As for the second part of the narrative, we think growth will decelerate this year as most of our leading indicators point to that outcome. Furthermore, this dynamic should be supportive of defensives outperforming cyclicals amid large cap quality leadership. This week, we expand our analysis to the industry level and illustrate that within defensives, Health Care, REITS and Consumer Staples tend to be the best performers in a decelerating but positive growth regime. As we reflect on 2021's strong performance from large cap U.S. equity indices last year, it's hard to get too excited about any remaining upside this year. Having said that, most individual stocks have gone nowhere since March, with many in a deep bear market. In many ways, 2021 looked a lot like 2018 - a year of rolling corrections and rotations as investors continually sought out higher ground in the high-quality S&P 500 index. As we enter 2022, the key question for investors is to decide if they want to stay with the relative winners, or is it time to go bottom fishing? New calendar years tend to support the latter strategy as the pressure of keeping up with the index eases. Hence, the new opportunities for investors. While we continue to favor the large cap defensive tilt that has been working, we recommend creating a barbell with stocks that have already corrected but still offer good prospects at a reasonable valuation. Over the past nine months, the quality bias has driven more and more money into a handful of large cap growth stocks - further highlighting the importance of favoring large over small since March. But as we already noted, this crowding has left many smaller stocks behind. A few areas we think make sense to consider include consumer services and other businesses with pent up demand. In the more growth-y segments, we think biotech and China Internet are good bottom fishing candidates. Meanwhile, we would still be careful with very expensive tech stocks that remain unprofitable. One final development to watch closely is long term interest rates. With a significant move higher in inflation and the Fed's pivot on policy, we think long term interest rates look too low. The sharp move higher today looks like the beginning of something more meaningful, and it could lead to new 52-week highs in short order if our technical view is correct. As such, we remain positive on financials as our sole cyclical overweight. A backup in rates is the reason, and that could be happening now. Bottom line, stick with a large cap defensive quality bias as we enter 2022, but balance it with financials and small mid-cap value stocks, particularly with the Fed and other central banks tightening policy faster than investors expect and rates likely back up. Thanks for listening. If you enjoy the show, please leave us a review on Apple Podcasts and share Thoughts on the Market with a friend or colleague today.
EPISODE 24 (Featuring Returning Guest Host: Combat Sports Finance Expert, John Nash) 1. Thoughts on Dana White's claims that UFC fighters are more financially secure than boxers 2. Fighting out a UFC contract without renegotiating a new one 3. Morgan Stanley's upgrade of UFC stock and what “overweight” means 4. The giant boom in UFC sponsorship in 2021—is it because the UFC capitalized on the Covid crisis? 5. Thoughts on Crypto and why the UFC is cashing in with sponsorship 6. Why Covid helped the UFC have a record year financially 7. Updates on the antitrust suit *Note: This episode was taped just before Christmas Throughout the 2021-2022 holiday UFC break we will continue to bring you podcast content every Monday, Tuesday, Thursday and Friday minimum, more days if we can. Watch for shows like ‘Crooklyn's Corner', ‘Show Money', more from ‘The MMA Depressed-us', ‘6th Round Retro', maybe even a guest podcast episode or two of ‘The Eugene S. Robinson Show Stomper!' — among others! On behalf of all of our crew on the entire Bloody Elbow Presents Podcast Network Team, have a safe and happy Holiday Season & be sure to stay tuned! If you enjoy our podcasts, "heart" us here on SC, or "like" & share over on whichever BE Presents Podcast Channel happens to be your listening platform of choice: * YouTube: https://www.youtube.com/c/BloodyElbowPresents * iTunes & Apple TV: itunes.apple.com/us/podcast/blood…&i=1000421882228 * iHeartRadio: www.iheart.com/podcast/269-Blood…Presents-30639274 * Spotify: https://open.spotify.com/show/55S2dpKYVqndaPTUojkELm?si=oGGPZ4kESkWZigLNnEg1ug * Stitcher: www.stitcher.com/podcast/bloody-e…esents?refid=stp * TuneIn: https://tunein.com/podcasts/Sports--Recreation-Podcasts/Bloody-Elbow-Presents-p1190843/ * OverCast: overcast.fm/itunes984162015/bloody-elbow-presents * Player FM: player.fm/series/bloody-elbow-presents * & Amazon Music: https://music.amazon.com/podcasts/b53e5086-2334-497c-82c0-24ddb5e0cfbb/Bloody-Elbow-Presents ... While you're there, don't forget to subscribe to Bloody Elbow Presents; that way you'll always be the first to get all of BE's daily MMA offerings. For previous episodes of the show, check out our playlists on all of our BE Presents channels.
More than half of asset managers still believe that hiring diverse teams comes at the cost of higherreturns, despite data showing otherwise. On this episode, host Carla Harris speaks to Heard Capitalfounder and CEO William Heard as he shares his journey to become a successful Black hedge fundmanager and how he's paving the way for money managers like himself, with less traditional pedigrees,to achieve their goals in the financial industry.https://www.morganstanley.com/what-we-do/inclusive-innovation-and-opportunityDisclaimer textThe guest speakers are neither employees nor affiliated with Morgan Stanley & Co. LLC. (“MorganStanley”). The views and opinions expressed herein do not necessarily reflect those of Morgan Stanley.The information and figures contained herein has been obtained from sources outside of Morgan Stanleyand Morgan Stanley makes no representations or guarantees as to the accuracy or completeness ofinformation or data from sources outside of Morgan Stanley. Morgan Stanley is not responsible for theinformation or data contained in this podcast.This podcast does not provide individually tailored investment advice and is not a solicitation of any offerto buy or sell any security or other financial instrument or to participate in any trading strategy. It has beenprepared without regard to the individual financial circumstances and objectives of persons who receive it.© 2021 Morgan Stanley & Co. LLC, Members SIPC.
In this episode, we speak with Earl Carr, Chief Global Strategist at Pivotal Advisors and editor of the September 2021 book, From Trump to Biden and Beyond: Reimagining US-China Relations. Earl was previously a Vice President at the Institute for Sustainable Investing at Morgan Stanley and serves on numerous boards, including The Association for Diplomatic Studies & Training and The Global Institute of Financial Professionals. Earl is a member of The National Committee on United States-China Relations, Black China Caucus, and also serves as a Senior Advisor to Engage Asia. He is fluent in Mandarin Chinese, and conversant in Japanese and Spanish. Earl weaves Chinese, Jamaican, Panamanian, and New York identities to build bridges in important ways. This is an eclectic episode where we cover climate infrastructure investment in Africa from US and Chinese financial institutions, the availability of climate-friendly Chinese investment products to US investors and vice versa, and the importance of cross-border collaboration. Relevant links: From Trump to Biden and Beyond: Reimagining US-China Relations https://link.springer.com/book/10.1007/978-981-16-4297-5 Earl Carr's LinkedIn: https://www.linkedin.com/in/earl-carr/ Earl Carr's Twitter: https://twitter.com/excarr
In crypto news today we review 2022 cryptocurrency predictions, Micro Strategy and Morgan Stanley buying the Bitcoin dip, big updates around US crypto regulations, Billionaire Joe Tsai tweeting "I like crypto" and more.Jason les Riot Blockchain Interview - https://youtu.be/NxWSZp2oL9QLearn more about Algorand - https://www.Algorand.com
Original Release on August 24th, 2021: Recent developments in space travel may be setting the stage for a striking new era of tech investment. Are investors paying attention?----- Transcript -----Andrew Sheets This week we are bringing you 4 encores of deep dives into different kinds of investing we consider at Morgan Stanley. Thanks to all our listeners for a great year and happy holidays! Adam Jonas Welcome to Thoughts on the Market. I'm Adam Jonas, Head of Morgan Stanley's Space and Global Auto & Shared Mobility teams. With the help of my research colleagues across asset classes and regions, I try to connect ideas and relationships across the Morgan Stanley platform to bring you insights that help you think outside the screen. Today, I'll be talking about the Apollo Effect and the arrival of a new space race. It's Tuesday, August 24th, at 10:00 a.m. in New York. In May of 1961, President John F. Kennedy announced America's plan to send a man to the moon and bring him back safely to Earth before the end of the decade. This audacious goal set in motion one of the most explosive periods of technological innovation in history. The achievements transcended the politics and Cold War machinations of the time and represented what many still see today as a defining milestone of human achievement. In its wake, millions of second graders wanted to become astronauts, our math and science programs flourished, and almost every example of advanced technology today can trace its roots in some way back to those lunar missions. The ultimate innovation catalyst: the Apollo Effect. 60 years after JFK's famous proclamation, we once again need to draw on the spirit of Apollo to address today's formidable global challenges and to deliver the solutions that improve our world for generations to come. The first space race had clear underpinnings of the Cold War between the U.S. and the Soviet Union. Today's space race is getting increased visibility due to a confluence of profound technological change, accelerated capital formation - fueled by the SPAC phenomenon - and private space flight missions from the likes of Richard Branson and Jeff Bezos. We think space tourism is the ultimate advertisement for the realities and the possibilities of Space livestreamed to the broadest audience. The message to our listeners is: get ready. This stuff is really happening. Talking about Space before the rollout of the SpaceX Starship mated to a Super Heavy booster is akin to talking about the Internet before Google Search, or talking about the auto industry before the Model T. We are entering an exciting new era of space exploration, one that involves the hand of government and private enterprises - from traditional aerospace companies to audacious new startups. This race is driven by commerce and national rivalry. And the relevance for markets and investors, while seemingly nuanced at first, will become increasingly clear to a wide range of industries and enterprises. The Morgan Stanley Space team divides the space economy into 3 principal domains: communications, transportation and earth observation. Our team forecasts the global space economy to surpass $1T by the year 2040. And at the rate things are going, it may eclipse this level far earlier. When I first started publishing on the future of the global space economy with my Morgan Stanley research colleagues back in 2017, very few people seemed to care, and even fewer thought it was material for the stock market. I would regularly ask my clients "on a scale of 0 to 10, how important is space to your investment process?" And by far the most common answer I received was 0 out of 10. A lot of folks said 0.0 out of 10, just to make the point. Not even four years later and, oh my goodness, how things have changed. The investment community and the general public are rapidly embracing the genre and becoming aware of its importance economically and strategically. So whatever your own area of market expertise, this next era of space exploration and the innovation and commerce that spawn from it, will matter to your work, and to your life. But beyond the national competition, the triumph, the glory, the failures and the many hundreds of billions of dollars that'll be spent on launches, missions and infrastructure - is a reminder of something far bigger that we learned over a half a century ago during the Apollo era - that Space is one of the greatest monuments of human achievement, and a unifying force for the planet. Thanks for listening. And remember, if you enjoy the show, please leave us a review on Apple Podcasts and share Thoughts on the Market with a friend or colleague today.
Original Release on September 30th, 2021: Lisa Shalett, Chief Investment Officer for Morgan Stanley Wealth Management, discusses the new shape of retail investing and the impact on markets.----- Transcript -----Andrew Sheets This week we are bringing you 4 encores of deep dives into different kinds of investing we consider at Morgan Stanley. Thanks to all our listeners for a great year and happy holidays!Andrew Sheets Welcome to Thoughts on the Market. I'm Andrew Sheets, Chief Cross Asset Strategist for Morgan Stanley Research.Lisa Shalett And I'm Lisa Shalett, Chief Investment Officer for Morgan Stanley Wealth Management.Andrew Sheets And today on the podcast, we'll be discussing the retail investing landscape and the impact on markets. It's Thursday, September 30th, at 2p.m. in London.Lisa Shalett And it's 9:00 a.m. here in New York City.Andrew Sheets Lisa, I wanted to have you on today because the advice from our wealth management division is geared towards individual investors, what we often call retail clients instead of institutional investors. You tend to take a longer-term perspective. As chief investment officer, you're juggling the roles of market analyst, client adviser and team manager ultimately to help clients with their asset allocation and portfolio construction.Andrew Sheets Just to take a step back here, can you just give us some context of the level of assets that Morgan Stanley Wealth Management manages and what insight that gives you potentially into different markets?Lisa Shalett Sure. The wealth management business, especially after the most recent acquisition of E-Trade, oversees more than four trillion dollars in assets under management, which gives us a really extraordinary view over the private wealth landscape.Andrew Sheets That's a pretty significant stock of the market there we have to look at. I'd love to start with what you're hearing right now. How are private investors repositioning portfolios and thinking about current market conditions?Lisa Shalett The individual investor has been important in terms of the role that they're playing in markets over the last several years as we've come out of the pandemic. What we've seen is actually pretty enthusiastic participation in markets over the last 18 months with folks, you know, moving, towards their maximum weightings in equities. Really, I think over the last two to three months, we've begun to see some profit taking. And that motivation for some of that profit taking has kind of come in two forms. One is folks beginning to become concerned that valuations are frothy, that perhaps the Federal Reserve's level of accommodation is going to wane and, quite frankly, that markets are up a lot. The second motivation is obviously concern about potential changes in the U.S. tax code. Our clients, the vast majority of whom manage their wealth in taxable accounts, even though there is a lot of retirement savings, many of them are pretty aggressive about managing their annual tax bill. And so, with uncertainty about whether or not cap gains taxes are going to go up in in 2022, we have seen some tax management activity that has made them a little bit more defensive in their positioning, you know, reducing some equity weights over the last couple of weeks. Importantly, our clients, I think, are different and have moved in a different direction than what we might call overall retail flow where flows into ETFs and mutual funds, as you and your team have noted, has continued to be quite robust over, you know, the last three months. Andrew Sheets So, Lisa, that's something I'd actually like to dig into in more detail, because I think one of the biggest debates we're having in the market right now is the debate over whether it's more accurate to say there's a lot of cash on the sidelines, so to speak, that investors are still overly cautious, they have money that can be put into the market. You know, kind of versus this idea that markets are up a lot, a lot of money has already flowed in and actually investors are pretty fully invested. So, you know, as you think of the backdrop, how do you think about that debate and how do you think people should be thinking about some of the statistics they might be hearing?Lisa Shalett So our perspective is, and we do monitor this on a month-to-month basis has been that, you know, somewhere in the June/July time frame, you know, we saw, our clients kind of at maximum exposures to the equity market. We saw overall cash levels, had really come down. And it's only been in the last two to three weeks that we've begun to see, cash levels rebuilding. I do think that that's somewhat at odds with this thesis that there's so much more cash on the sidelines. I mean, one piece of data that we have been monitoring is margin debt and among retail individual investors, we've started to see margin debt, you know, start to creep up. And that's another indication to us that perhaps this idea that there's tons of cash on the sidelines may, in fact, not be the case, that people are, "all in and then some," you know, may be something worth exploring in the data because we're starting to see that.Andrew Sheets So, Lisa, the other thing you mentioned at the onset was a focus on the tax environment, and that's the next thing I wanted to ask you about. You know, I imagine this is an issue that's at the top of minds of many investors. And your thoughts on both what sort of reactions we might get to different tax changes and also your advice to how individuals and family offices should navigate this environment.Lisa Shalett Yeah, so that's a fantastic question, because in virtually every meeting, you know, that I'm doing right now, this question, comes up of, you know, what should we be doing? And we usually talk to clients on two levels. One is on it in terms of their personal strategies. And what we always talk about is that they should not be making changes in anticipation of changes in the law unless they're really in need of cash over the next year or two. It's really a 12-to-18-month window. In which case we would say, you know, consult with your accountant or your tax advisor. But typically, what we say is, you know, the changes in the tax law come and go. And unless you have an imminent, you know, cash flow need, you should not be making changes simply based on tax law. The second thing that we often talk about is this idea or this mythology among our client base that changes in the tax law, you know, cause market volatility. And historically that there's just no evidence for that. And so, like so many other things there's, you know, headline risk in the days around particular news announcements. But when you really look at things on a 3-month, 6-month, you know, 12- and 24-month, trailing basis on some of these things, they end up not really being the thing that drives markets.Andrew Sheets Lisa, one of the biggest questions—well, you know, certainly I'm getting but I imagine you're getting as well—is how to think about the ratio of stocks and bonds together within a portfolio. You know, there's this old rule of thumb, kind of the 60/40, 60% stocks, 40% bonds in portfolio construction. Do you think that's an outdated concept, given where yields are, given what's happening in the stock market? And how do you think investors should think about managing risk maybe differently to how they did in the past?Lisa Shalett That's a fantastic question. And it's one that we are confronted with, you know, virtually every day. And what we've really tried to do is take a step back and, make a couple of points. Number one, talk about, goals and objectives and really ascertain, you know, what kinds of returns are necessary over what periods of time and what portion of that return, you know, needs to be in current cash flow, you know, annualized income. And try to make the point that perhaps generating that combination of capital appreciation and income needs to be constructed, if you will, above and beyond the more traditional categories of cash, stocks and bonds given where we are in terms of overall valuations and how rich the valuations are in both stocks and bonds, where we are in terms of cash returns after inflation, and with regards to whether or not stocks and bonds at the current moment are actually behaving in a way that, you know, you're optimizing your diversification.Lisa Shalett So with all those considerations in mind, what we have found ourselves doing is speaking to the stock portion of returns as being comprised not only of, you know, the more traditional long-only strategies that we diversify by sector and by, you know, global regions. But we're including thinking about, you know, hedged vehicles and hedge fund vehicles as part of those equity exposures and how to manage risk. When it comes to the fixed income portion of portfolios, there's a need to be a little bit more creative in hiring managers who have a mandate that can allow them to use things like preferred shares, like bank loans, like convertible shares, like some asset backs, and maybe even including some dividend paying stocks in, their income generating portion of the portfolio. And what that has really meant to your point about the 60-40 portfolio is it's meant that we're kind of recrafting portfolio construction across new asset class lines, really. Where we're saying, OK, what portion of your portfolio and what products and vehicles can we rely on for some equity like capital appreciation and what portion of the portfolio and what strategies can generate income. So, it's a lot more mixing and matching to actually get at goals.Andrew Sheets As a reminder, if you enjoy Thoughts on the Market, please take a moment to rate and review us on the Apple Podcasts App. It helps more people find the show.
Original Release on August 12th, 2021: Investor interest in thematic equity products such as ETFs has rapidly surged, particularly among tech themes. Why the momentum may only grow.----- Transcript -----Andrew Sheets This week we are bringing you 4 encores of deep dives into different kinds of investing we consider at Morgan Stanley. Thanks to all our listeners for a great year and happy holidays!Graham Secker Welcome to Thoughts on the Market. I'm Graham Secker, Head of the European and UK Equity Strategy Team.Ed Stanley And I'm Ed Stanley, Head of European Thematic Research.Graham Secker And today on the podcast, we'll be talking about the continued interest in thematic investing in Europe. It's Thursday, August the 12th, at 3 p.m. in London.Graham Secker So, Ed, I really wanted to talk to you today because investor appetite for thematic related equity products such as ETFs, mutual funds and the like has grown to the point that thematics has actually been carved out from our traditional sector research at Morgan Stanley. So as head of the European Thematic Investing team, can you walk us through what's behind the increased interest in this area and how you see the thematic landscape evolving over the next couple of years?Ed Stanley Thanks, Graham. To understand thematics, first you have to look at the geographies. And when you do that, it's really a two-horse race. Of the $450 billion in global thematic mutual funds in June this year, 60% of that was in Europe. So the lion's share. And then there's the U.S., which is the second largest geography for thematic investing, but growing very quickly indeed. If you look in the US year to date, for example, there have been over 100 thematic ETF launches-- comfortably double the run rate of thematic starts in 2020. Once you've looked at geography, then you have to look at the landscape by theme. And this is where thematic investing gets really interesting. The breadth of and growth in thematic strategies is truly extraordinary. Fund starts are compounding over 40% over the last three years and inflows for those funds have seen high double digit, and even triple digit growth, so far this year. Most obviously, themes like genomics and eSports fall into that high growth category. We even saw a dedicated ETF launch in June this year, particularly trying to gain exposure to the metaverse, which is the first of its kind. So while we don't make explicit forecasts on where we think thematic investing is going to be in a one year view, the momentum is showing no signs of slowing down. In fact, quite the opposite.Graham Secker So with any number of themes to choose from, the world really is your oyster, I think. So how do you whittle down or cherry pick where you spend your time?Ed Stanley It's a great question and that's really my number one challenge. While we're never short of ideas, determining which theme is the zeitgeist of the day is absolutely critical. And to do that, our thematic research really hinges on two streams of analysis. On the one hand, demographic change and on the other, disruptive innovation. We believe that these two groupings and the subthemes therein hold the key to shifting future consumption patterns, which ultimately all investors need to be conscious of. But with that said, for most investors to be interested in a theme, it needs to be actionable within at least three to five years. Consequently, for a theme to work, investors need a relatively near-term catalyst. So when we're looking within disruptive innovation, for example, we need to think what's the catalyst to make investors care about this theme? Be that a product launch, start-up funding, falling technology costs, regulation or government policy. When you can twin up an interesting thematic idea with a catalyst, that's really where we focus our attention.Graham Secker Another question I want to ask is, how do you test the pulse of the market to determine what is a live thematic debate and where you think investors may be too early or late to a theme?Ed Stanley Well, I suppose this really narrows down the previous point. So we now have our theme, so to speak. We have to ask ourselves, does the market already care about this theme or will the market care in the not-too-distant future? And this is where we think we've come up with a relatively interesting and novel solution to screen for that. Through a combination of four things: patent analysis, capital spending patterns by companies, the velocity of comments made by company management teams and finally, using Google Trends momentum data, we believe that we can relatively accurately pick which themes are either gathering momentum or, on the flip side, those that may have been past their initial peak of excitement.Graham Secker Okay. And on that point, what are some of the key themes you're watching right now?Ed Stanley Well, I suppose one that we can't ignore, particularly given my previous comments, is hydrogen. On all of the metrics I just mentioned, it's flashing green. Whether that's pattern analysis, company transcripts, CapEx intensity. It's a hotly debated theme as investors try to grapple with this long-term potential for the fuel. But even more simply, if we take a step back, one really only needs to look at the fund startups to see where the really exciting themes are. If we look back to January 2018, for example, there are only a handful of fintech funds around the world. Today, there are nearly 200 that we're keeping track of. Part of my role is to predict what is going to be the next fintech when it comes to themes. And the themes that are most likely to tick those boxes are, in my view, the near-term ones, electric vehicles, cybersecurity, 5G; the medium term, which encompasses augmented, virtual reality as well as eSports; and then longer term, you have space, quantum computing are all beginning to show telltale signs of thematic focus areas.Graham Secker Thanks, Ed. And finally, I want to ask you about concerns over a thematic bubble. There's been an exponential rise in the number of thematic products being set up recently. There's also been a high degree of attrition for thematic ETFs. So to what degree do you think the ongoing growth in thematic investing is here to stay? And how vulnerable do you think it could be to a prolonged technology bear market, for example?Ed Stanley You're absolutely right. Plenty of thematic ETFs, particularly in the US, have come and gone. That will likely continue to happen, particularly in themes where hopes exceed reality. What happens in a prolonged downturn remains to be seen in all honesty. We don't have enough back history from a wide enough variety or sample of these thematic funds, to be sure. But the test case of covid highlighted the early signs of structural growth in this market. There are more thematic funds post-covid than pre-. So my view is that this is absolutely a structural rather than a cyclical phenomenon, particularly as younger marginal investors increasingly want exposure to themes rather than sectors and geographies. But while I believe that thematic investing is a structural trend, no doubt it clearly leans towards tech-heavy equities and growth as a factor, particularly. So the bigger existential threat perhaps isn't so much a bear market, but instead persistently high interest rate environments, which remains to be seen. But for now, at the very least, the future looks pretty bright for thematics in our view.Graham Secker Very interesting. Thanks for taking the time to talk today, Ed.Ed Stanley Great speaking with you, Graham.Graham Secker As a reminder, if you enjoy Thoughts on the Market, please take a moment to rate and review us on the Apple Podcasts app. It helps more people to find the show.
Original Release on August 26th, 2021: Equity investors have applied factor-driven strategies for years, but the approach has seen slow adoption in bond markets. Here's why that may be changing.----- Transcript -----Andrew Sheets This week we are bringing you 4 encores of deep dives into different kinds of investing we consider at Morgan Stanley. Thanks to all our listeners for a great year and happy holidays! Andrew Sheets Welcome to Thoughts on the Market. I'm Andrew Sheets, Chief Cross-Asset Strategist for Morgan Stanley, Vishy Tirupattur And I am Vishy Tirupattur, Head of Fixed Income Research at Morgan Stanley. Andrew Sheets And on this special edition. And on this special edition of the podcast, we'll be talking about factor investing strategies and liquidity in corporate credit markets. It's Thursday, August 26th, at 3:00 p.m. in London Vishy Tirupattur And 10:00 a.m. in New York. Andrew Sheets So Vishy, before we start talking about factor investing and credit, we should probably talk about what is factor investing and why are we talking about it. So, what is this concept and why is it important? Vishy Tirupattur Factor investing whose intellectual roots are from a seminal paper from two University of Chicago professors in the early 90s, Eugene Fama and Ken French. It effectively is a way of identifying companies to invest using rules based systematic investing strategies, be it identifying quality, identifying value, identifying momentum or volatility or risk adjusted carry. A bunch of these strategies involve setting up a set of rules and systematically in following those rules to build a portfolio. And we've seen that these strategies in the context of equities have substantially outperformed more discretionary strategies. Andrew Sheets So you can kind of think about it as the Moneyball approach to investing, that you think over time doing certain types of things in certain situations over and over again systematically is going to ultimately deliver a better long run result. Vishy Tirupattur Exactly right. Andrew Sheets So you mentioned that this has been a strategy that's been around a long time in equity markets. Why hasn't it been around in credit? And what's changing there? Vishy Tirupattur The key for systematical rules-based investing strategies or factor investing is being an abundance of liquidity in the market. And the complexity of credit markets means that this has been a big challenge to implementing these types of strategies. For example, you know, S&P 500, not surprisingly, has 500 stocks. And underlying those 500 stocks are literally thousands of bonds that underlie those 500 stocks, that weigh in maturity, in coupon, in rating, in seniority, etc... Each of these introduces an element of complexity that just complicates the challenge associated with factor investing. Andrew Sheets So Vishy, that's a great point, because if I want to buy a stock, there's one stock, but if I want to buy a bond of that same company, there might be many of them with different maturities and different coupons. They're just not interchangeable, and that does introduce complexity. Vishy Tirupattur So one big thing that's happened is the advent of electronic trading. Electronic trading today accounts for almost a third of all trading in investment grade corporate credit and in over 20% of all trading in high yield corporate credit. This has made a significant difference and enables factor investing possible in the context of credit. Andrew Sheets So more electronic trading, more portfolio trading is improved liquidity and made certain types of factors, systematic strategies possible in credit. Are ETFs a part of this story? Obviously, those represent a portfolio of credit. We're seeing rising volumes within the credit market of exchange traded funds. How do you see that playing into this trend? And what do you think is the outlook there? Vishy Tirupattur Absolutely. ETFs constitute portfolio trades and portfolio trading indeed has become a very, very big part of trading here. Even five years ago, ETFs accounted for about 5% of all the traded volumes in investment grade and maybe about 20% in high yield. Today, they account for 16% of all traded volumes investment grade and 50% of all the traded volumes in high yield. So, ETF and portfolio trading in general has enabled not only greater liquidity, but smaller issue sizes and smaller issuers, and that's an important distinction. Andrew Sheets So how would this actually work in practice? You know, I could go out and I could just buy a credit fund that owns all the bonds in a particular market. Or I could try one of these factor strategies. What would the factory strategy actually be doing? I mean, what are the characteristics that our research suggests credit investors should be trying to favor versus avoid? Vishy Tirupattur Let me talk about two strategies. First is a risk adjusted carry strategy. So, you take the spread of the bond over Treasuries, so that gets the credit risk premium, divided by the volatility of excess returns of that particular bond over the last 12 months. Group all these bonds, sort them, and invest in the top decile that has the best risk adjusted return. And then rinse and repeat every month. And we have shown that using this strategy in investment grade, you can consistently beat the benchmark corporate bond index. So that's one strategy. Vishy Tirupattur The other one is a momentum strategy. Momentum can be both from the bond returns as well as from the underlying stock returns. Our research has shown that by combining equity momentum signals and corporate bond momentum signals, we can also achieve substantial outperformance over the benchmark indices both in investment grade and high yield, even though in high yield the outperformance is even more significant. Andrew Sheets So Vishy, why do you think that works? Because it would seem really obvious that, you know, investors wouldn't want to own bonds with a good return versus their volatility, that investors would want to own things that are going up and avoid things that are going down. So why would doing those things, why would following those rules, do you think, still deliver risk premium, still deliver return? Why do you think the market is kind of leaving those nickels kind of lying on the street for lack of a better word, for investors to pick up? Vishy Tirupattur Andrew, in the past this kind of a strategy that would involve, say, a monthly rebalancing, would mean very substantial transaction costs. What we would measure through the bid offer spreads in the bond market. So, 10 years ago, in plain vanilla investment grade bonds, the bid offer spreads, the spread in the difference between the spread of buying and selling bonds, was as high as 12 basis points. And today that number is 2-3 basis points. So, this means that transaction costs, thanks to the electronification, thanks to portfolio trading and ETF volumes, has meant very substantially lower transaction costs that makes these returns possible. And since factor investing is still at the very early stages of practice in credit markets, there are still large, unharvested risk premia in the credit markets for these types of strategies. Andrew Sheets And Vishy, my final question for you is, what are the risks here? If investors are going to look at the market from a systematic, more rules-based approach, what sort of questions should they be asking? Vishy Tirupattur I think key question to ask is how much dependencies there are on liquidity and how long will liquidity continue to be there in the markets. I think looking at this kind of analysis over multiple credit cycles, the four cycles, lower liquidity, higher liquidity periods, which is what we have done, those are the kinds of analyzes one would need to do to start paying greater attention to systematic investing strategies in credit. Andrew Sheets Vishy. Thanks for taking the time to talk. Vishy Tirupattur Andrew, always fun to talk with you. Andrew Sheets As a reminder, if you enjoy Thoughts on the Market, please take a moment to rate and review us on the Apple Podcasts app. It helps more people find the show.
You know you need a mentor to advance your career, but have you ever considered who your sponsor is? Carla Harris, vice chairman at Morgan Stanley, explains the crucial importance of identifying a person who will speak on your behalf in the top-level, closed-door meetings you're not invited to (yet). Learn why your pool of potential sponsors is bigger than you might think—and how to think carefully about how to present yourself to them. We're taking a break from the holidays, and hope you enjoy this TED Business archive talk as you plan for the year ahead and think about who will help you get the most out of 2022.
Education B.S.: Finance M.B.A: Finance & Securities Law Post-M.B.A: Cornell University Current Real Estate Investor & Developer since 2011 Career: 2 years, Morgan Stanley, Wealth Management 4 Years, Corporate Finance Consulting 4 Years, McKesson, M&A for $14B Portfolio 4 Years, Tanium (Cybersecurity), Managed $300M+ Software Portfolio 1 Year, Clari (SaaS), Finance Executive Active Companies CEO, Doorscout, LLC (Private Lending) Founder, Real Estate Investing Academy (Educational Platform) Co-founder, Grand Canyon Glamping (Selling 2021) CEO, Red Oak Development Group (Land Development) Active Projects 60 Acres Phase 1-3 Development: Williams, Az 15 Acres commercial land entitlement deal: Arizona 10 acre phase 1: Georgetown, Tx 15 acre phase 1: Texas (00:02 - 1:59) Opening Segment - Introduction of the host into the show - Alpesh introduces the guest of the show, Tom - Tom shares something interesting about himself (2:35 - 22:45) -How and when did you start investing in real estate? -When or where did you buy your very first investment property? -How did that first property work out for you? -How much did you pay for and what are you trying to sell it for? -Why land development? can you define land development? -Do you think (San Francisco) the builders will drop the price? -Why did you decide to look into land development? -Can you take us to the process of identifying land and then selling for profit? -Once you identify the land and figure out this is the land you want, once you acquire it what do you do? -Who are the people who buy this from you? -What is your personal investment criteria in finding land? -Where do you see the biggest opportunity in real estate right now? (22:45 - 23:15) Break - Welcoming listeners and guest back to the show (23:15 - 25:25) Fire Round - Will Tom change the business strategy after Coronavirus? – Tom's favorite real estate, finance, or other related books – Tools or website Tom recommends - Tom's advice to beginner investors – How does Tom give back? – How can Wealth Matters Podcast listeners reach out to Tom? (25:25 - 25:49) Closing Segment -If you want to learn more about the discussion, you can watch the podcast on Wealth Matter's YouTube channel and you can reach out to Alpesh using this link. Facebook: @wealthmatrs IG: @wealthmatrs.ig Tiktok: @wealthmatrs
Kevin Shtofman joins us today to discuss the prime goal of data ingestion and integration in real estate management, including its positive impact on your business. Stay connected to learn more about critical real estate market factors through data analysis.Key Takeaways To Listen ForData Ingestion: Definition, goal, and focus Benefits of software implementation in real estate investing Why do you need to track data in real estate?Ways to apply data science in real estate Impacts of data integration in real estate capital deploymentSurprising trends that will impact real estate market About Kevin ShtofmanKevin leads the NavigatorSRVS and CRE operations & deployments teams with a focus on enterprise client success and scaling Navigator across the industry. He holds a BA in Economics from The University of Texas, an MBA in Finance and Entrepreneurship from Southern Methodist University, and an Executive Certificate in Machine Learning from MIT. Prior to joining Navigator, Kevin's 16-year career includes positions at Deloitte, EY, and Morgan Stanley. Kevin is recognized as one of the leading commercial real estate tech executives in the industry and a noted speaker, author, and blogger within the growing Proptech sector.Connect with KevinWebsite: Navigator CRELinkedIn: Kevin Shtofman Twitter: @kshtofman; @navinewscreTo Connect With UsPlease visit our website: www.bonavestcapital.com and please click here, to leave a rating and review!SponsorThinking About Creating and Growing Your Own Podcast But Not Sure Where To Start?Visit GrowYourShow.com and Schedule a call with Adam A. Adams
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Recent signals from the Fed are indicative of a willingness to change its mind quickly. While bond investors may be wary of the volatility this could bring, it may also create opportunities in the new year.----- Transcript -----Welcome to Thoughts on the Market. I'm Michael Zezas, Head of Public Policy Research and Municipal Strategy for Morgan Stanley. Along with my colleagues, bringing you a variety of perspectives, I'll be talking about the intersection between U.S. public policy and financial markets. It's Wednesday, December 22nd at 10:00 a.m. in New York. While investors may be focused on the gridlock on the Build Back Better fiscal plan, we think it makes sense to shift our focus from Capitol Hill to the Federal Reserve, which just made a big move, and one that arguably matters more to markets in the near term than developments out of Congress. Last week, the Fed announced a more aggressive tapering of asset purchases. Perhaps more importantly, it signaled an expectation of hiking interest rates three times next year, rather than the two times most forecasters expected. In the press conference following the announcement, Chair Powell repeatedly signaled his intent was to demonstrate both that the Fed takes seriously the risk posed by a recent uptick in inflation, as well as the flexibility of the Fed's monetary policy, by discussing his willingness to adjust the taper and rate hike outlooks as data comes in. This last point is an important one for bond markets. In dealing with substantial uncertainty around the inflation outlook, you have a Fed that elected a pragmatic approach - a willingness to change its mind quickly as it sees fit. That's not a novel approach, but it may be fresh to many investors today who may be more accustomed to the slower, more deliberate approach that economic conditions pressed the Fed to take under its previous two chairs. But such an approach means it's harder to predict with confidence what will happen next to monetary rates. That uncertainty means more disagreement among investors, which in turn means more sustained volatility in the Treasury market. That's not necessarily bad news for investors, though. In our view, it actually may lead to some interesting opportunities in 2022 for credit investors. In the muni market, for example, elevated rates volatility has, more often than not, caused market weakness as investors shy away from price uncertainty in an asset class they generally want to own for reasons of capital preservation and asset allocation. But muni credit quality, in our view, is likely to remain quite strong in 2022, with continued strong economic growth allowing municipal entities to lock in their credit gains from government aid and a sharp GDP recovery in 2020 and 2021. So, if volatility leads to price weakness, we're likely to see this as an opportunity to add good credit, just at a cheaper valuation. So, beware the Fed and volatility, but don't fear it. We'll keep you updated here for the opportunities it may create. Happy holidays from all of us here at Thoughts on the Market. We'll be back in the new year with more episodes. And thanks for listening. If you enjoy the show, please share Thoughts on the Market with a friend or colleague or leave us a review on Apple Podcasts. It helps more people find the show.
With shifting focus across regulatory, monetary and fiscal policy, there is renewed confidence in the growth and recovery outlook for China in 2022.----- Transcript -----Welcome to Thoughts on the Market. I'm Chetan Ahya, Chief Asia Economist for Morgan Stanley. Along with my colleagues, bringing you a variety of perspectives. I'll be talking about the prospects for China's recovery amid regulatory, monetary and fiscal policy easing. It's Tuesday, December 21st at 7:00 p.m. in Hong Kong. China's policy stance is clearly shifting from over-tightening to easing, and with it, we think the cycle is also turning from a mini downturn to an upswing. We are more bullish than the consensus and see GDP growth accelerating to 5.5% in 2022. Over the years, China has experienced a number of mini cycles. These mini cycles in growth tend to follow the policy cycles. While tightening starts out as countercyclical, it eventually becomes pro-cyclical, and sometimes because external demand conditions deteriorate - for example, the onset of trade tensions in mid-2018. Once growth decelerates beyond policymakers' comfort zone, their priorities shift to stabilizing growth and preventing an adverse spillover impact into the labor market. In the current cycle, with sharp pick-up in external demand, policymakers stuck to their playbook and tightened macro policies to slow infrastructure and property spending. But from the summer of this year, as Delta wave-led restrictions weighed further on consumption growth, continued policy tightening pushed growth lower than policymakers' comfort zone. This time around, policy tightening was unusually aggressive, leading to a 10 percentage point drop in debt to GDP in 2021. Indeed, we have not seen this magnitude of debt to GDP reduction in a year since 2003-07 cycle. Moreover, the rapid succession of regulatory tightening actions related to the tech sector and decarbonization has taken markets by surprise, adding uncertainty and keeping market concerns on the boil. Now, with GDP growth decelerating to just 3.3% on a year-on-year basis in 4Q21, which would be 4.9% adjusted for high base effect, policymakers have hit pause on deleveraging and began to ease both monetary and fiscal policy a few weeks ago. Bank reserve requirement ratio cuts were coupled with guidance to banks to allocate more credit to priority sectors. At the same time, local government bond issuance has increased significantly, which in turn will translate into stronger infrastructure spending. And several local governments have also lifted property purchase restrictions. Two Fridays ago, policymakers convened at the Central Economic Working Conference - an annual meeting that sets the agenda for the economy in the year ahead - and the resulting statement suggested to us that there is a clear shift in policy stance, and they will continue to take action in a number of areas to stem the downturn, increasing our confidence in China's recovery. These policy easing measures will complement the sustained strength in exports and a pickup in private capex, driving the recovery. And in terms of market implications, our China Equity Strategy team continues to prefer A-shares rather than offshore markets, and our China Property and Asia Credit Strategy analysts are optimistic on the China property sector as well as China high yield property. The key risk to our call in the near-term is the Omicron variant. The effectiveness of China's containment and tracing capabilities has improved over time, such that each successive wave of COVID outbreaks has had a smaller impact on mobility and growth. However, Omicron's greater transmissibility suggests to us that it will keep China's COVID zero policy in place for longer and potentially force China to impose more selective lockdowns than during the Delta wave. Thanks for listening. If you enjoy the show, please leave us a review on Apple Podcasts and share Thoughts on the Market with a friend or a colleague today.
Our narrative of tightening monetary policy and decelerating growth continues to play out amidst developments in Omicron, failed legislation and signals from the Fed.----- Transcript -----Welcome to Thoughts on the Market. I'm Mike Wilson, Chief Investment Officer and Chief U.S. Equity Strategist for Morgan Stanley. Along with my colleagues bringing you a variety of perspectives, I'll be talking about the latest trends in the financial marketplace. It's Monday, December 20th at 11:30 a.m. in New York. So let's get after it. Our Fire and Ice narrative for tightening monetary policy and decelerating growth is playing out, with the central banks taking aggressive steps to deal with the higher-than-expected inflation. Meanwhile, Omicron and the failure to pass President Biden's Build Back Better bill have awakened investors to the risk of slower growth that we think is as much about the ongoing cyclical downturn as these external shocks. In short, stay defensive with your equity positioning. First, with the Fed preparing investors over the past four months for what could be a very long process of removing monetary accommodation from markets that have become dependent on it, the most expensive and speculative stocks have already been hit exceptionally hard. Furthermore, the quality trade has taken on a more defensive posture. Both of these shifts are very much in line with our 2022 outlook - be wary of high valuations and focus on earnings stability. In other words, favor large cap defensive quality. Second, with the market and the Fed now fully appreciating that inflation is not going to be transitory, investors must contend with the Ice part of our narrative. How much further will growth decelerate, and how much is due to Omicron versus the ongoing cyclical downturn that began in April? As noted in prior episodes of this podcast, we remain optimistic that this latest wave will prove to be the last notable one. Meanwhile, the peak rate of change in the recovery was way back in April of this year. Since then, we've seen a steady deceleration in growth that has little to do with COVID, in our view. Instead, this is the natural ebb of the business cycle and mid-cycle transition, which is not yet complete. Of course, this latest variant will be a drag on certain parts of the economy and perhaps bring forward the end of the mid-cycle transition more quickly. Finally, this past weekend Senator Manchin effectively put an end to the president's latest fiscal stimulus plan - another negative for growth in the near term. All of these developments fit nicely with our year ahead outlook for U.S. equities. Therefore, we continue to think most stocks will see valuations come down as central banks remove monetary accommodation and growth slows more than investors expect. Favor defensively oriented stocks over cyclical ones. This includes Healthcare, REITs and Consumer Staples. Meanwhile, consumer discretionary and certain technology stocks look to be the most vulnerable as we experience a payback in demand from this year's overconsumption. While other cyclical areas like energy, materials and industrials could also underperform, ownership of these sectors is not nearly as extreme as the discretionary and tech, nor are they as expensive. Finally, while major U.S. equity indices remain vulnerable, in our view, many individual stocks have been in a bear market for most of the year. As a reminder, almost 80% of all stocks in the Russell 2000 have seen a 20% drawdown during 2021. For the Nasdaq, it's close to 60%, while 40% of the S&P 500 has corrected by 20% or more. In our view, it makes sense to look for new investments in stocks that have already corrected, rather than the ones that have held up the best. We would recommend a barbell of these kinds of stocks with the more classic large cap defensive names that fit our current macro view. Thanks for listening. If you enjoy the show, please leave us a review on Apple Podcasts and share Thoughts on the Market with a friend or colleague today.
On this episode, we learn about how one woman is working to foster economic equity in the outdoors and how supporting founders of color will improve the outdoor industry for everyone. We hear from founder Patricia Cameron about her nonprofit, Blackpackers, which aims to address the gap in representation in the outdoors by providing gear, outdoor excursions and outdoor education for free or at a subsidized cost. Then, host Carla Harris sits down with Dan Kihanya, REI's Director of Corporate Development and Racial Equity. Dan explains REI's latest initiative “Path Ahead Ventures” which was created to invest in founders of color and promote inclusion within the outdoor industry. https://www.morganstanley.com/what-we-do/inclusive-innovation-and-opportunity Disclaimer textThe guest speakers are neither employees nor affiliated with Morgan Stanley & Co. LLC. (“Morgan Stanley”). The views and opinions expressed herein do not necessarily reflect those of Morgan Stanley. The information and figures contained herein has been obtained from sources outside of Morgan Stanley and Morgan Stanley makes no representations or guarantees as to the accuracy or completeness of information or data from sources outside of Morgan Stanley. Morgan Stanley is not responsible for the information or data contained in this podcast.This podcast does not provide individually tailored investment advice and is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it.© 2021 Morgan Stanley & Co. LLC, Members SIPC.
A quick preview of what you'll hear on the Thoughts On The Market podcast, which features short, thoughtful and regular takes on recent events in the markets from a variety of perspectives and voices within Morgan Stanley.
The Dow is holding onto early gains, but the Nasdaq is the big loser today – and the only major index still lower for December. So what's changed since yesterday? And how do you play this market? We'll ask the experts. Plus, AT&T is getting a boost today on an upgrade at Morgan Stanley. We'll speak with the analyst behind the call for 20% upside from here. And, in today's Rapid Fire: Google vs. Disney, Reddit files to go public, and an under-the-radar restaurant stock gets served some love from Wall Street.
Scott Wapner and the Investment Committee discuss the critical moment for stocks. A change in Fed Policy seems certain in the hours ahead, what will that mean for your portfolio, and how should you trade it. Plus, Morgan Stanley's Mike Wilson joins us to discuss his previous calls on the show and where he sees the market headed into year end and beyond. Plus, Goldman Sachs out with its list of top restaurant stocks for 2022. And later, Pete Najarian shares some Unusual Activity he's seeing in two consumer names.
For high achievers with executive ambitions, it is an unwritten rule for your success to have a dual focus on managing your performance and your relationships at the same time. Your success directly correlates with the mastery of your time management. Executive Coach Monique Betty, ‘Coach Mo', is joined by management consultant and author, Francis Wade. Author of Perfect Time-Based Management, How to Rescue Your Peace of Mind as Time Demands Increase. Connect with Monique Betty- LinkedIn - linkedin.com/in/moniquebetty1 Website – www.tuesdayswithcoachmo.com Connect with Francis Wade– LinkedIn - https://www.linkedin.com/in/franciswade/ Twitter - https://twitter.com/fwade Coach Mo Knows (a tip, a coaching question, and a bit of inspiration) Tip: Take Francis' assessment: mytimedesign.com/assessment/ Based on what he has identified as the 11 Fundamentals required for effectively managing your time, you can take the assessment to examine and rate your current skills. Grab a copy of his book: Perfect Time-Based Management - https://amzn.to/3IEpbTb Coaching Question: Challenge: For the next 48 hours track your hour-to-hour activities. Question: What is your greatest area for improvement in your time management efforts? (stop responding to in-the-moment requests, change how you plan your work, modify your email habits, social media habits, etc) Inspiration: Time is really the only capital that any human being has, and the only thing he can't afford to lose. ~Thomas Edison Resources: VIDEO: Tools for Maximizing Your Success – Carla Harris, Vice-Chairman & Managing Director, Morgan Stanley: https://youtu.be/yflSZODY6YU Eisenhower Matrix: https://todoist.com/productivity-methods/eisenhower-matrix Pomodoro Technique: https://lifehacker.com/productivity-101-a-primer-to-the-pomodoro-technique-1598992730
In this episode of Linch with a Leader, Mike sits down with leader Daniel Harkavy who not only leads his company, Building Champions, but coaches some of the greatest leaders in the world! Mike & Daniel not only talk about his spiritual journey but also spend time unpacking his newest book The 7 Perspectives of Effective Leaders! Here is more on the WHO Daniel is: Daniel Harkavy has been coaching business leaders to peak levels of performance, efficacy, and fulfillment for more than twenty-five years. In 1996 he harnessed his passion for coaching leaders and teams to found Building Champions, where he serves as CEO and Executive Coach. Daniel and his team of coaches have worked with thousands of clients and organizations to improve the way they lead and live. Daniel is a sought-after author and speaker, most recently authoring “The 7 Perspectives of Effective Leaders” which released in October 2020. His book “Living Forward,” a national best seller, was published in March 2016. Daniel also authored “Becoming A Coaching Leader: The Proven Strategy for Building Your Own Team of Champions” in 2007. As an executive coach and trusted confidant, Daniel works with high profile leaders to improve their leadership, decision making, influence, and overall effectiveness. Daniel's emphatic belief is that self-leadership precedes team leadership, and his goal is to help his clients optimize how they lead themselves first, then focusing on how to best work with their executive teams and all key constituents in their organizations. He engages with clients in many forms including one-on-one executive coaching sessions, executive retreats, speaking engagements and custom experiences. Some of the clients he has worked with include: Daimler, Nike, Chick-fil-A, Bristol-Myers Squibb, Pfizer, Infineum (an ExxonMobil and Shell company), Bank of America, Wells Fargo, MetLife, PrimeLending, US Bank, Northwestern Mutual, Morgan Stanley, Prudential, Merrill Lynch and many others. Daniel lives just outside Portland, Oregon, where he and his wife and family enjoy a little space for gardening and play. Daniel actively serves his community as a member of nonprofit boards and a mentor to those seeking his guidance. His other passions include surfing, snowboarding, and spending time with his family.
Check out the Holiday Sustainable Gift Guide For Conscious Consumers(2021) here.If you would like to nominate yourself or someone else for the 35 Social Entrepreneurs to Watch for in 2022 list, please email me with your nomination - grant at causeartist dot com. Here is last years list.Thanks to all the Causeartist Partners - Check them out here--------------------------------------In this episode, I speak with Adrian Rodrigues, Co-Founder of Provenance Capital Group, on the future of food and allocating capital into regenerative natural resource investments through blended capital structures.Adrian is a Co-Founder and a Managing Director of Provenance Capital Group where he helps develop blended capital structures that catalyze resilient biological systems and businesses. Before Provenance, Adrian co-founded the boutique consulting firm Hyphae Partners where he helped companies finance and build regenerative business models. Additionally, he worked at Patagonia within its Venture Capital arm Tin Shed Ventures, helping author a standard for Regenerative Organic Agriculture and exploring Regenerative Organic Land Funds. He is an experienced asset allocator, fundraiser, and business model innovator.Adrian spent six years at Morgan Stanley helping long time horizon investors manage their asset allocations and diligence investment opportunities across asset classes and sectors. He has also lectured on food innovation at the University of California Berkeley Haas School of Business and designed and taught an entrepreneurship intensive for farmers at the Stone Barns Center for Food & Agriculture.Adrian is a graduate of Berkeley Haas' full-time MBA program. At Haas, Adrian was a Portfolio Manager of the Haas Socially Responsible Investment Fund and a Member of the Center for Responsible Business' Student Advisory Board. He also serves as an inaugural advisor for the Investor Resource Council of J.E.D.I. Collaborative, which aims to frame the business case for embedding equity, justice, diversity and inclusion into our entire food ecosystem. He received a B.A. in English from Williams College, studied English literature at Exeter College, Oxford University, and holds the Chartered Financial Analyst designation.Also mentioned in the podcast:Soil Wealth Report - Croatan InstituteSponsors for Educational OpportunityManagement Leadership for Tomorrow (MLT)About Provenance Capital GroupPCG is a financial services firm focused on allocating capital into regenerative natural resource investments. We offer our clients deep expertise, superior guidance, bespoke access, and trusted partnership in the transition to an economy that is focused on people, planet, and profit.Listen to more Causeartist podcasts here.Check out the Impact Investor platform here - Discover Impact Investors from around the world.Partner with us - Learn moreWe are powered by:Podcast Made with TransistorPodcast cover design Made with CanvaBuild amazing web platforms with Webflow