welcome to bloomberg markets it has been the biggest slow down retail sales lawyer. we have the s&p holding onto gains of .2%. but the tech heavy version is

down, near session lows. the dollar index is down .2%. off of the back of cooler yields. bitcoin, back over the 52,000 level up 1% on the day. we are near the session highs of the day but well below 460. we have fluctuated 10 basis points or more since we have seen the highest reach since the start of the year. there are some interesting movers. tesla, shares are declining. price cuts in korea.

stellantis also plans to cut prices. nvidia is one of the biggest decliners. john hancox matt miskin says this is how the economic data will impact it. the fed can't take their foot off the break yet and they will be on hold until some liquidity event happens. it is not there yet. sonali: we will discuss these moves with the founder of unison advisors. when you look at the repricing and where interest rates will go, at what point do you hire for longer risk interest rates? >> one this inversion has

started to disappear. i think that speaks to the animal spirit. everyone was convinced that there was going to be a recession and now, it looks like there is a going to be a recession. there is an animal spirit picking up, not slowing down. the fed has done a good job of moving short-term interest rates where they want them to go to achieve a particular purpose. it did that in 2001, and now look at the two year yield in the past two months? it was down to 4.1 but it had the effect of being a liquid of

it without the fed having to do it. sonali: what about the fears of re-acceleration of inflation? >> is so hard to say. i don't think anybody has a model for predicting inflation but the best we have is the market incentive and what i think is interesting in the breakeven and never got higher than 3.5%. now when we look back, if you're going to think about inflation on a five-year basis it may turn out that the breakeven was right.

i'm not sure on the five-year basis inflation will be higher than 3.5%. were very near the fed's target i don't expect inflation will spike to where it was before. i don't know if it will get back to to proceed soon but i think we are in the solid-state for a while. sonali: when you look at retail sales in many categories dealing the weight of inflation on consumers. when does the consumer story impact broader markets? >> it is hard for me to imagine the consumer staying as strong as it is today. dynamics are the savings are drawing down and inflation has

taken a toll on real wages and inflation has taken a toll on spending in general. i think you're probably going to have did munition of spending and it will have an impact on some segments of the stock market but i think you need to be careful about drawing straight lines from a slowdown in the economy and stock market. it appears to be very frothy and a ton of concentration. when you look at the industries most impacted are not sure they are unreasonably priced but i can imagine a scenario where the stock market is not affected by consumer spending. sonali: we have heard the word bubble tossed around, do you believe we are in a bubble and

if we are, what is that mean in terms of shock to the system? >> let me make a few brought observations. if you look at the global stock market, stocks outside the u.s. are reasonably priced or cheap. the intersection of u.s. stock markets, value, small caps, there is not from there. where things are expensive is quality stocks in the u.s. in the magnificent seven. the thing about the magnificent seven is if you look at their performance over the past 8, 9 years they returned 37% a year. 1% comes from dividends and 3% from valuation. they did not return what they

did because valuations went up. they did what they did because earnings growth was on fire. i think earnings growth will be slower. . sonali: what about the bond market? you see a decline on everything from the short and long in. is it still price for the potential for more losses? >> if you buy my view that we are out of pause state and inflation i think you're ok because interest rates should not go higher and they might even come down. even if you don't accept that as a premise, if we distinguish between the bond environment of today in the bond environment a

few years ago. two years ago there was no needle. when bob prices went down there was nothing to buffer them. short-term corporate servers 6%, short-term treasuries of 5%. there is some buffer that allows rates to go up and positive returns for bonds. sonali: we thank you so much for your time. coming up scott kelly from aetos capital real estate talks about the trends in commercial real estate. that's up next on bloomberg. ♪ hey you, with the small business... ...whoa... you've got all kinds of bright ideas, that your customers need to know about. constant contact makes it easy.

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sonali: this is bloomberg markets. commercial real estate deals are starting to pick up again but at the discounts forcing lenders to break loans. to do some banks had portfolios of commercial real estate loans that regulators said would merit more screening. scott kelly founder of aetos capital real estate along with abigail doolittle. when you think about the troubles we see in the regional banking system. is there a lot more still? scott: we are at the early stages. one of the things that regional banks did during covid's increase their exposure to commercial real estate because

there was very little demand for commercial loans. they weren't starting a lot of businesses so the exposure to commercial real estate went up and a lot of those loans were short-term loans with the short term maturity and the songs are coming due. all of the interest rates are up above the cap and refinancing levels are much higher. abigail: i know it's a region by region situation where we can't equate new york city to a healthier market. give assistance for what has been established and where do you see it going? if you can give us a number? scott: i don't think what

numbers possible. you will see deep discounts in some sectors, the office sector is one. apartments in residential and good markets, we will continue to do ok. the iconic office buildings were continue to do ok. lower quality stuff that is improperly financed. his an operational and financial issues that come to cause these large discounts. we have come together to take advantage of this because it's not just a financial workout financial workout. abigail: it's not just the properties but the loans. i am curious about multifamily.

so much is going towards office and distrust office but not this bunch is multi families. the reason bancorp is raising reserves is apart from multi families. scott: they bought a portion of their loan portfolio the regulators had to write it down again which is an indicator of where values are going and frankly where the regulatory environment is going which is to have much greater scrutiny on the true value of some of these loans. in the multifamily area, there is a lot of talk about the cyclical nature of real estate but there are profound secular changes. people moving out of high tax, high crime states to states that are more business friendly.

those secular shifts have a big impact on apartment and real estate. a lot of those buildings will do really well. a lot of people during the past few years have gone into the apartment business who were not qualified. people who would've never passed the mustard to be institutional quality muster. they raise lots of money with the idea that they would buy see quality stuff, do just a little bit of refurbishing and sell it at a higher rate. they said they would have cash flow of 20%, now it's up to 50%. there will be a lot of opportunities in the multi family sector. sonali: when people think about

the stress they keep trying to say, commercial properties. don't worry more broadly about housing. but multi families tells a different story. scott: there will be winners and losers. the multifamily workout will be a combination of operational and financial expertise. a lot of these properties, particularly those bought by syndicators the put a little money in and got the wrong capital structure without the expertise to turn these around. therein lies the opportunity. abigail: you were in china a few days ago, you have invested many millions in asian real estate.

what do you see there? is it worse than the reports? scott: china is a real enigma. the property markets themselves are incredibly soft. the big chinese real estate companies have very complicated and broken capital structures in this bunch they have taken money from customers to build condominiums which they have not yet built. they used it for general corporate purposes. they have corporate loans against buildings and when the government crackdown on lending there was a shadow banking system. the better ones went public in hong kong so they have public

shareholders and did high-yield debt issuance out of the hong kong entities. they have a broadcloth of competitors. this will be a test case on how the pipe is divvied up between those various constituencies. the underlying market continues to be soft. the government recognizes it and the past certain measure to make housing easier to get. but frankly, the problem is a lot bigger than the solution on the table. sonali: scott kelley and abigail doolittle. we will talk about the scrutiny of those commercial real estate loans. stick with us, this is bloomberg.

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sonali: this is bloomberg markets, it is time for the wall street b. we were just talking about the commercial real estate market and the stress attached to multiple banks. valley national has of 50 billion loan book. iver robin spoke on bloomberg earlier today. >> whether it's an office loan or multi family loan. the geography makes this

different. our average office is only 6 million in size which is a very small type of loan. >> there is this fear that we haven't seen the real pre-pricing and real estate. how much of you had to reprice assumptions of your holdings at a time where mortgage rates have skyrocketed and you've seen the lack of demand? >> there are a bunch of different variables and repricing. what is happening from a behavioral perspective? are people changing behaviors and what size offices and those are hard to determine. we've had 2.8 billion loans repriced in the past 12 months.

we have not had to restructure one loan. our peers have had to restructure those loans so it goes to the uniqueness of each organization. sonali: bloomberg intelligence reported joins us now. >> across regional banks and valley in particular have really reported stable product quality. what valley mentioned is refinancing but the cruxes they have more office exposure than most other banks. we are at a stage where we are looking at particular issues and

valley feels concentrated in commercial real estate. sonali: one thing we've been talking about is that it's not just about these office property , there is multi families that will come to the surface as well. herman: new york because exposure to regulated apartments which is taxed by how much they can charge their attendance. but if you look at the broader multifamily space it raises questions if some areas are overbuilt like in the sunbelt. it is not as dire in our view because the cash flows from these apartments are still intact. sonali: a lot of these loans are

coming from the pandemic era? herman: the nightmare that is commercial real estate is a rolling issue. we have lows that will mature this year next year. it depends on which loans come due and which ones have stress. we know this will be a longer-term issue. sonali: i feel like we've been talking about this for more than a year. coming up next we will speak with sarah house from wells fargo. after that drop in retail sales, many categories are finding pain . stick with us, this is bloomberg. ♪

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sonali: this is bloomberg markets. let's get a quick check on the market. the s p 100 and nasdaq 100 are diverting. the nasdaq 100 flat on the day, a little bit in the red. the two year yield has been on the rise. we have seen it near the highs of the day but we are still roughly flat at 4.56, and the 10

year at 4.2319. a slow down and u.s. retail sales. more weakening again for the consumer. >> we are starting to see delinquencies and credit cards and mortgage delinquencies have also started to rise in student loans are probably next. we are seeing the labor market that is not quite as tight as it has been. it looks to us that it is starting to weaken on the margins. sonali: we will discuss that economic outlook with sarah house. if you look at the data this morning, was there anything surprising about how the consumer is holding up.

sarah: we are starting to see fatigue in the consumer but like a lot of the other january data this was a tough time for seasonal adjustment. while we are seeing the consumer lose momentum, the degree of the drop we saw overstates the weakening we are likely to see over the coming months. sonali: what does this mean for the interest rate story? do you think the foot is still on the pedal for the fed with the direction of inflation we have seen this week? sarah: i think we are said to see growth moderate as we move through this year and overall, the fed policy is still restrictive. i think that's indicative of the bumpy path down to 2% rather

than acceleration. if we look at the spending, jobs data, it points to the fact that the fed is not going to be in a huge hurry to move but the policy is still restrictive and we will see economic growth slow. sonali: earlier this week you saw mortgage rates start to rise even though you did not see a significant surgeon yields until this week. with inflation still stinging, it is there more weakness i had for the consumer given these forces? sarah: we are looking for consumer spending to moderate as we move through the year. we are coming off a fourth quarter the persistent position for spending in the first

quarter. but we think we will see the fourth quarter closer to a 2% range. we did get a strong january jobs number there is downward pressure on the jobs number. as we get slower job growth and inflation is not improving, we will see a downshift in real income growth. the fact that it is not growing enough will put strain on the ability for consumer to spend. sonali: how leveraged is this economy to the u.s. consumer? sarah: the u.s. consumer is still a pretty good shape when you look at homeowners who have lost their mortgage rates but even those consumers with credit card debt and debt services

starts to creep out. but the solid leverage picture is not the big picture. is the overall pace of income growth moving forward. sonali: do you worry the pace of inflation is going to outpace wage growth? sarah: i think we will see positive real earnings growth but in terms of the rate of change of real income. last year, we saw inflation including energy and food. that declined by three percentage points which helps lift real income growth. this year we will see a moderate

. the jobs market is still rather tight and productivity enhancements that allows business to raise wages. sonali: where do you expect to see it in the next six months or so? given the recalibration of interest rates. sarah: what is happening in the jobs market? we will see some cracks in the job market before we saw revisions. given that is where most consumers earn their income that will be an important area to watch. we still have restrictive policy and i think that's going to continue to wait on company's willingness to hire.

coming at a time where there is less of that catch-up hiring, we are still seeing areas like hospitality and government catch to pre-covid levels. the job market will be fundamental for the consumer to continue to spend. sonali: we have been joking around about this fatigue off the back of this economic data but we are not done yet. how do you read the data coming up in relation to what you've seen all week? sarah: the producer pricing index will complete the picture of the pce deflator of the january data. the paint a more benign picture of overall inflation so we will

get ppi data with health care, financial services and insurance costs, air travel. that will help to fill in the gaps between what we saw on tuesday and what we will see in terms of the pce deflator. sonali: wells fargo senior economist sarah house, thank you for your time. the data shows a slow down and spending but earnings remained strong. stick with us, this is bloomberg. ♪ as a top-ten real estate manager, we harness the power of a 360° perspective, delivering local insights and global expertise across public and private equity and debt. our experienced team and vast network

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markets and i'm sonali basak. we are looking shares of top retail companies after earnings. abigail: it is bit of a mixed bag here. take a look at shake shack, heading to its best day since march of 2020. gaddy is down 15%. as far as what is going right for crocs and shake shack. they had a record year. they exceeded earnings expectations right across the board. as for shake shack, they returned to better profitability

but their operating margin was 20% and store growth outlook is pleasing to investors. let's take a look at yeti because demand is cooling for the yeti containers we all use. consumers, the sticker is pretty shocking. you're can i really have to want that high quality and consumers are shunning the higher price. plus, their forecast fell short and you can see here, revenues are pretty lumpy and the fourth quarter. sonali: coming up, we will dig further into retail. a big day for the consumer. stick with us, this is bloomberg. ♪

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sonali: this is bloomberg markets and i'm sonali basak. we focus on u.s. retail sales data. joining us now is the focus on retail companies. naveen jaggi joins us now. how do you think about the slow down as it pertains to how companies react? naveen: by most prediction, christmas holiday sales should be up yet we saw a 5.6 gain which tells us after the kind of

robust spending there will be a slow down. we have to look at the long term and they continue to be resilient and spend across all sectors. it will be the third, fourth quarter before we engaging the long-term real estate market economy. sonali: how do you expect that impact the consumer as they have already borrowed so much and struggling to pay back student loans? naveen: we have to keep in mind the way the consumer thinks. right now, the stock market is as high as it was 12 months ago. you have full employment and increased wages and take into account the low interest rate mortgage rise.

even though we see pressure, it may slow down growth but that's different than the way consumer spend money. i am not seeing signs that the u.s. consumer has slowed down significantly. we have an election year coming up and historically, they tend to keep consumers obey while they see which way the election will go. sonali: what do you think about the way retailers will respond? which one are you watching the most? naveen: i look at home depot, kroger, etc. you. we have home-improvement and furnishing sector and they are seeing a slowdown which should

not surprise us after such a robust 2020 and 2021 as people were working from home. it's hard to max that year-over-year. t.j. maxx and those brands have shown their resilience in the fourth quarter. out of those sectors, they show strong year over year results. if you look at the way consumers buy, they look for value. it will show up in the grocery sector, home goods, and i look at those as bellwethers. sonali: how do you think consumers will start to respond in terms of pricing? do they feel they need to slow down more? keith: they have already trended

down. naveen: if you look at the way they have behaved since 2008, the value retailer has taken away from the legacy retailer. if you look at dollar general and tj maxx. they have pivoted away from legacy retailers. this has been a 13, 14 year journey for them. that will be a continuing trend, not just a phase. sonali: is there a connection between the inflation we are seeing and what we might see further into the year when we get closer to the election and fear in the united states? naveen: inflation has probably peaked. interest rates are what everyone

is focused on now. we could see 2, 3 interest rate adjustments. we need to see that because the housing market is out of stall. that creates a stall in so many other sectors from housing, home furnishings and decorations that home-improvement. we may have a higher than normal inflation rate we have seen inflation cool off. sonali: naveen jaggi thank you for that new perspective. the latest filings from tiger global. we have been covering this all week. there has been a change in the way people view technology industry. how the tiger cubs doing in this

regard? pretty active buying 19 positions. salesforce is one of its biggest holdings. they also took a position on apple and domino's pizza. tiger global less activity over there. the general exposure is muted. sonali: michael burry and his stake in chinese companies, how does that jive in the hedge fund community? >> he bought ali baba so you see bullishness and asian tag but those docs of dog handout well for him.

and he has dropped some of his more bearish positions. it's interesting what he is doing for sure. sonali: if we talk about the family office because of how many hedge have converted. what else are we saying in the office space? >> biotech, merck, eli lilly. you are also seeing some tax positions with holdings and that's another move that george soros made. you are seeing biotech with family offices. sonali: were talking about

tiger, viking, how are they positioning in this environment? >> they sold out of their stake in meta entirely. i think many reasons the stocks have done well for a while and they wanted to some profits. it's interesting to see viking got out of that entirely. sonali: what about an aggregate? were there any leanings that you think are interesting among the filings last year? >> this data is backwards looking. through the end of december, it's not well-positioned at the moment but we saw a lot of

amazon, nvidia. these trends we see at this time of year but keep in mind, we don't see short positions and it is limited in the hedge fund universe. sonali: thank you so very much. on the hedge fund community. that does it for us out bloomberg markets. nasdaq is up .1%, nasdaq trying to break into the green. we have the two year yield below the 4.5 level, pretty much flat on the day. well below where we saw it after that surprising data. we are just hours away from more data into the strength of the u.s. economy with producer

prices expected tomorrow. bitcoin is flying high but a little less them before only up about .05%. stick with us, this is bloomberg. ♪

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