The DOJ’s Landlord Lawsuit + Can Trump Buy Greenland?

24:49And basically what it does is like, OK, if you're charging market or above market, it says your money good. But if you're not, it encourages you to raise those rents. The problem here is it's information that is asymmetric, and that is the landlord has access to better information and, as a result, maximizes the rent to their advantage. And so that's why your boss tells you not to talk about your salary, because the people in charge who have information on everyone's salary, they have advantage. Because if someone's working in the company being underpaid and they don't know they're being underpaid, they don't know that Bob down the aisle is making 40 % more for no apparent reason, other than maybe he was there longer or came in more recently when the market, whatever it might be.

25:35So you might argue that is unfair. By the way, we purposely price our units 10 to 20 percent below what we think is market because I find if you have great tenants, you just hold on to them and it just reduces the amount of maintenance and headache. Anyways, enough virtue signaling. So institutional investors are about 25 percent of the residential market. And these landlords named in this DOJ case manage approximately 12%. Now, if they had real concentration in a market and they were all using the same software, then you could argue this is technically leading to price fixing. This to me doesn't feel necessarily like there's enough concentration or power to engage in price fixing and that they're basically just using analytics to optimize their pricing.

26:26And this is a bit of a populist movement, but I don't know if legally this holds water. I think the government plays a role here, but it's increasing the supply. To me, I don't understand how the economics here add up to price fixing. What are your thoughts, Ed? Yeah, I'm gonna take the other side of this. As a renter. Exactly, as a renter. As the landlord. I'm the landlord, you're the renter. Guess what we think about this issue? I love that. Exactly. So those six firms in that lawsuit, they own 1.3 million rental units across America, which I believe is a lot. And I think the thing to focus on is the trend that is happening.

27:08Because in 2002, investors made up around 12 % of all residential real estate transactions. And today, they make up 25%. And it is projected that by 2030, investment firms will own 40 % of the single-family rental units in America. So that is a huge trend. And what I've always felt with housing, where rents and prices are going up astronomically, is that yes, of course, there must be a supply issue. There must be an issue with we don't have enough houses. but I've always felt there's got to be something else. And that's why I really like this lawsuit, because this basically gives us the hard evidence of, yes, there is something else going on here.

27:59And it is the fact that you have these six gigantic firms that are buying up as much property as they can. And they have all of these things on their side. As you mentioned, they have this real page algorithm, which leverages their exclusive access to all of this data that we regular people don't have. And they use that to algorithmically extract as much rent as possible. In addition, they also have some evidence that these companies have been directly collaborating with each other to raise rents. And to your point on the legality of this issue, I think that that probably holds more water than saying, hey, you can't all be using this extremely powerful tool that the regular people don't have access to.

28:38But having said all of that, we're talking about it from a legal perspective. You know, what is the true legality of this situation. But I would say that this might just go beyond legality, because I feel like today, if we're living in a world where people can't afford to buy homes or even rent homes, then these questions of legality start to go out the window. Just some stats here. In the past four years, the cost to rent a single-family home has risen 30%. So rent is rising faster than inflation. It's rising faster than wages. And this is in combination with the fact that the prices of homes, they're rising higher than ever.

29:24And the medium home price is nearly half a million dollars a day. So it's difficult to rent and it's nearly impossible to buy, which just tells me that who cares about the legality of this? Someone needs to be doing something about this because this is becoming the most sensitive topic in America. And I think the last thing you want, if you're Blackstone or if you're Cushman and Wakefield or if you're Greystar, is to basically be unanimously labeled as this enemy of the people. And they're increasingly beginning to look like that, at least from my view as a lowly renter. I think there's some really good points in there.

29:56So first off, let's just acknowledge there's a housing crisis. And that is, if you're a young couple trying to get your life started and you just have absolutely, you know, rent is just eating up your entire paycheck. And it is just so hard for you to move out of your parents' house. and almost the American dream has become a fantasy. So we know at least a minimum, a big part of it, it's just a supply problem. We just need more homes built. Now, the argument you might make, so there was a proposed legislation or a movement last year to get institutional investors out of home ownership, full stop.

30:32Right, Ro Khanna's, right? That if you own more than 100 units, you have three years to divest, thinking that more competition would give them less market power. Now, what people forget is that, one, we have very strong private property laws. And when you limit the amount of capital going into something, keep in mind, there was someone selling that unit to someone else. And that person made money and made more money by virtue of the fact that institutional capital had come in. And also what people oftentimes rate is a lot of institutional capital has come in and purchased homes as they did in 2000 to 2007 and then got their asses handed to them and had to sell all of them and puke all of them into the market.

31:14And a lot of people got to buy home. I mean, these institutional investors aren't always the smartest buyers. Colony Capital identified Florida, I believe it was Florida, as a great place and went in and started buying up tons of rental units and then found that maintenance and management was a huge headache and ended up, I believe, selling them at not nearly the gain and maybe even a loss. So there is institutional capital coming into almost every consumer market. The question is, what could we do to bring down housing prices? And I think legally, if you have 50%, if two companies own 50 % of the rental units in, say, Southern Florida, or let's pick another market, in Buckhead, Atlanta, and COX is calling COY and saying, wink, wink, we're going to raise prices 8 % this year of rents, that's illegal.

32:07That's price fixing. But I get nervous around the unintended consequences of sequestering capital from a market and that it ends up backfiring. For example, rent control in Santa Monica meant to help renters, right? You can't raise rents. And the problem is no one's building in Santa Monica because there's no economic incentive. So as a result, what's happened is anytime something comes up for rent, usually when someone dies, it gets 100 applications and they end up picking that nice white family that makes$400 ,000 a year for the$800 a month rent controlled apartment. And it's ended up essentially creating housing discrimination.

32:52It's ended up backfiring. There's no new construction happening because there's no economic incentive. So I think they should look at this and say, are there certain regions where these guys are price fixing and coordinating with each other, which is illegal? But the notion that all institutional capital coming into a market results in higher prices isn't always the case. We need more housing. If you make this asset class really unattractive to institutional capital, you're going to have a lower supply of new housing stock. Should they be coordinating around pricing? Absolutely not. Now, I agree with you on all of your statements, and I agree that it is more nuanced, but I will just say that there are certain issues where I just don't care about nuance that much.

33:38And sometimes I think that can be tactically a good thing. You know, if we're going to call Blackstone and Cushman and Wakefield, if we're going to label them as the big bad wolf, maybe it's not entirely fair. Maybe it doesn't, you know, take into account all of the minor details and all the nuances. But I just feel that there are some issues where you have to be aggressive, you have to be bold, and you actually have to be a little bit emotional. And if it means sort of generalizing these large real estate investment firms in broad strokes, to be honest, I think I'm okay with that because I think the housing issue is so much more important than antagonizing a firm of a couple hundred people.

34:20Well, just as an experiment, a thought experiment, the next time you have a dispute or an argument with your girlfriend, I'd like you to say, I'm not interested in nuance. I feel strongly about this. And I'm just comfortable acting out of emotion here. And just see how that works. Let's report back. I will. I will. If it's a hill I want to die on, I will use that strategy. But just to be clear, though, you know, you said that the problem would be if these companies are wink-winking at each other and collaborating. That is the accusation. So we'll see if it's actually true or not when this goes to court.

34:56They're supposed to compete. They're not supposed to coordinate on pricing. And that is the accusation from the DOJ. I don't know, you know, I don't know if it's right. I That'll be for the courts to decide. I'm not interested in nuance. We'll be right back after the break with a look at Trump's Greenland pursuit. If you're enjoying the show so far, hit follow and leave us a review on Profit Markets.

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36:30We're back with Proftary Markets. Donald Trump has announced plans to acquire both the Panama Canal and Greenland, citing economic security and strategic benefits as his key motivations. His focus on the canal is partly driven by concerns over the, quote, exorbitant prices that Panama charges US vessels. Meanwhile, Greenland's wealth of resources like oil and natural gas add to its appeal. Whether any of this is even possible is unclear. The Panama Canal is owned and operated by Panama, and Greenland is a self-governing territory under Denmark. Trump, however, has not ruled out the possibility of using military or economic pressure to gain control of these assets.

37:12Scott, we're talking about Trump again. What do you make of this new expansionist strategy from the president-elect? There's so many levels here. I'm just, I'm pissed off that a president-elect and an unelected official, First Lady Alania, are dominating the news cycle. And I hold Democrats responsible for thinking that it's just so fucking ridiculous they thought President Biden was anywhere near capable of winning another election. And what's happening now is other than wrapping a Medal of Freedom around Bono for a nice scripted moment, he is incapable of actually responding and being in the news cycle in any meaningful way.

37:54He's still the president. Yeah. And if you didn't know that, you would think Donald Trump is president. And if Barack Obama had been president or Bill Clinton or George Bush and Donald Trump was spewing this just fucking nonsense, they would love the opportunity to from the West on just bitch slap this idiot and say and just point out how just fucking ridiculous this is. Just like, welcome to the White House, you moron. I hope you get your act together and understand the importance of the seat you're in. It's just insane. Anyway, this is just stupid. It's not going to happen. The Panama Canal is a small business that's, I don't want to say well run, but it's benign.

38:39It's about a$5 billion business. It just doesn't matter. It's not a threat to anybody. It's not like there's some big security concern there. I don't know where he got this. It's this Gulf of America bullshit. I, this is just so dumb. Greenland has more kind of strategic importance in almost every Tom Clancy novel that talks about the outbreak of World War III. Greenland ends up being a strategic asset in terms of refueling planes or docking submarines or whatever. It does play an important role, rare earth minerals. But the notion that we're going to show up and start trying to bully. So let me get this.

39:13We're threatening action against another member of NATO, Denmark. And what long-term, the meta-analysis here of why this is just so stupid, whether it's World War II, whether it's trying to expel Hussein from Kuwait, whether it's trying to repel Russians out of Ukraine, whether it's trying to create an economic response to ensure we don't go into a global meltdown economically to COVID, the most powerful thing we have is cooperation. and as strong as America is, it's only about a third of the global economy. We can't do this shit alone. We need allies. And the most powerful alliance in history, the North Atlantic Treaty Organization has kept the peace because there's a general understanding.

39:53If you attack Finland now, you're attacking all of us and all of us are really strong. All of us have really impressive militaries. And together, we are an insurmountable force in terms of our information technology, our kinetic power, our leadership, our commitment to democracy and our commitment to working together. We're like siblings that don't get along, but anybody hits you, your brothers are showing up and so are your sisters, and we're going to kick the ass of that person. You hit one of us, you hit all of us. And now what we're saying is, oh, the big brother, Joey, is shitposting and hurting his siblings.

40:28So this is not only a waste of energy, not only diminishing our standing in the world, it's just stupid. At some point, our allies are going to decide whether they can even share sensitive information with us. So I just find this so childish. It'd be childish if it wasn't so harmful. This is a kid playing and being an idiot, fine. But now he's playing with matches next to a bottle of kerosene. This is just stupid. Your thoughts? Yeah. Well, I think it's worth just going over the background on this Greenland situation. So Trump actually first proposed this back in 2019. And it was the same proposal.

41:11He wanted to buy Greenland from Denmark, who have controlled that island for more than 200 years. And Denmark said no. They said, quote, that is absurd. And then Trump got very angry about it. And then he canceled his visit to Denmark. And then nothing happened. And so here we are six years later, we're in the same situation. Denmark still controls the island. They're still saying, no, nothing has changed. So my prediction sounds like it's similar to yours's. Nothing is going to come of this. The only way this would work out for Trump is for the people of Greenland to decide to secede entirely from Denmark and then to decide to sell themselves to America, which already sounds crazy.

41:51And then it's even crazier when you realize that the prime Minister of Greenland has explicitly said, we are not for sale. So the whole conversation to begin with is absurd. Having said that, the notion of Greenland becoming part of America is, to be fair to Trump, I think, actually quite compelling. Because Greenland is highly valuable from a defense perspective because of its location in the Arctic Circle. It's very close to America and Europe, and most importantly, Russia. And also there's this added effect where as climate change is happening, the ice is melting in Greenland, which means that you can now navigate around the Arctic Circle by boat, or at least more so than you could before.

42:32But it's also quite valuable from an economic perspective. And, you know, while the GDP is tiny, they have huge amounts of natural resources. They have 3 % of the world's known oil reserves. They have 43 of the 50 minerals that the US government has declared critical. And so if this did work out in some way, I think it could actually be a good thing for our economy and for Americans. The trouble is just how he's going about it, to your point, which is through threatening and bullying an ally. And I think what we'll learn this year in 2025 is that unlike 200 years ago, where bullying and conquest was actually quite an effective tactic, I don't think it is anymore.

43:17I think it makes people dislike you. I think it makes them not want to do business with you. And the funniest thing about this is we saw it fail six years ago when he tried to do the exact same thing. He tried to bully them. They just said no. And then the whole thing fell through. So my takeaway from this is that this is perhaps a good idea, but as we often see, god-awful execution. But that's tantamount to saying its geography and its unbelievable oil reserves mean it would be a good idea for us to acquire the kingdom of Saudi Arabia. Okay, I agree with you. It'd be awesome for us to make Saudi Arabia the 51st state, but the Saudis might have a viewpoint around this.

43:58and I don't I have no evidence that the Danes are really excited about assault rifles and more Chick-fil-A I just have this isn't you know we we had the Louisiana purchase we bought Alaska but that was kind of it worked for everybody well that's the question can could we ever make it work for everybody in this situation could we make it work for the people of Greenland I think there's probably a world in which you could. I mean, the people of Greenland have said they want independence, but they don't have the money to do that right now. So that's why they still rely on Denmark. I think you could, if you really cared about this issue, go in there and figure out a way to say, we want to start a strategic partnership with you.

44:43You know, we'll trade goods and we'll invest in your community. But you don't do it by going in there and saying, hey, we would like to buy you. And then sending your son over in a jacket that says, Like he's acting like – With Charlie Kirk. It's like me showing up in a Roman Gabriel jersey when I was nine and pretending I was a quarterback. By the way, Roman Gabriel was an amazing quarterback. I think the most successful Hawaiian NFL player to that point. I used to have Roman Gabriel in pajamas. Number 18, Roman Gabriel. Before my dad left. Before my dad left. Don't you love me? And now I fill it with a$900 ,000 watch.

45:26Fill that hole. Look, this oddly kind of reminds me of what's going on with my podcast, my other podcast co-host, Kara Swisher, who is making noise about assembling a group to buy the Washington Post. This is a great analogy. Sorry, keep going. And I've said to her, I've said, okay, has anyone reached out to the owner, Bezos, to see if he's interested in selling? 100%. You're not going to shame Jeff Bezos into selling a newspaper that he spent$250 million on and he's worth$80 billion or I don't know what he's worth now. And so this all feels like peacocking and posturing. I agree. And I've been a part of as a principal or a board member in a number of acquisitions, divestitures, and sales.

46:11And unless you have a publicly traded stock and a massive amount of capital to do a hostile takeover, which usually a lot of times don't work, this isn't how you go about it. They reach out and say, hey, we love the company. We think there's tremendous – I think together we're much stronger. A ton of respect for what you've built. If you're ever interested, give us a buzz or should we talk? And but Denmark isn't going to be shamed into selling Greenland. They don't they don't need to. I mean, this is just not how you get deals done. And the way you put pressure on someone is as far as I can tell is when they're desperate, they need to sell something.

46:52They're a forced seller or they have a publicly traded stock and you make you can make a tender offer for the shares. And Greenland does not trade on the Nasdaq. The idea of, you know, the art of the deal, I feel like the response from Trump supporters would be like, oh, well, you guys don't know anything about dealmaking. This guy is sort of the king of deals. I think something that would be interesting to do starting January 20th is we should just keep a count of the amount of deals Trump is trying to make. Because what's going to happen here, I think, is that the deal is going to fall through.

47:26Nothing's going to happen. But he'll have done something crazy at another time. And then we'll be so distracted about the next thing that we'll have forgotten about this failed deal. So what might be a good idea for us is to just keep count. How many deals is Trump actually going to get done? He's had a lot of missteps. Several companies have gone bankrupt. He personally has never gone bankrupt. That's misinformation. But he's not by any stretch of the imagination. He was never accepted in the business community in New York. They didn't see him as a serious business person. And at some point, I think a lot of financial institutions didn't want to work with him because he was seen as not a reliable partner.

48:09Where he's made a shit ton of money is from being, and I think he will make money, is from being president. Yes. The truth social, I think a stake in truth social is worth several billion dollars. So he's a rich kid who is an outstanding TV star. And an outstanding politician. I mean, I don't, I'm not fully with you on downplaying his overwhelming success in. Great political instincts. Yeah. No doubt about it. And he's really leaned into the most profitable way to make money and that is to be a kleptocrat. Yes. So, yeah. And he was, let's stop talking about this guy. Let's move on. Should we touch on the Panama Canal at all?

48:50Have you ever been to the Panama Canal? I haven't. Yeah. Yeah, either or I. There you go. Next. Next. Panama City. We should go to Panama City. That's supposed to be a good time. It's supposed to be like kind of a low rent, kind of gritty Miami, which actually appeals to me. Oh, did I tell you I bought a soccer team in Bogota? Bogota? Are you serious? Yeah, I'm an investor. You bought or you invested? Investing. But I like to say bought and owner. That's it. You're out of the owner's box, bitch. Bought or invested. Yeah, I'm part of a... That's a very important distinction. I'm part of an investor group buying this team in Colombia.

49:26What happened to buying the Rangers in Scotland? It's too expensive. And it's also, I'm just sick of the weather. I'm going to buy, let's be honest, this is a vanity purchase. This makes no sense at all. And I don't have the money to buy a Premier League team or an MLS team, which I think is a total bubble. So I'm going where it's warm and where it's cheap. All right. I can't wait to be there. It's going to be fun. We're going to do a team trip down there, and you'll be very excited to see who some of my co-owners are. I can't wait. Yeah, exactly. We should do a Prof G Markets special episode, pitch side, and just maybe commentate on the game.

49:59Oh, we definitely have a Netflix series coming. Definitely. With me and Cartagena. Hola! Yo soy el perro. D 'Odde Salabiblioteca? That's going to be great. Let's take a look at the week ahead. We'll see the consumer price and producer price indices for December. And fourth quarter earnings season kicks off with JP Morgan, Bank of America, US Bank, Morgan Stanley, and BlackRock all reporting. Do you have any predictions? Mia put together some really interesting thoughts on who would be the most successful AI company of 2025. And the prediction is the following. the most successful AI company of 2025 is going to be, relative to where it is now in AI, is going to be Meta.

50:46And if you look at the amount of kind of information posted or sort of the fodder, the grist, or the fuel for LLMs, which is data, there's more human data posted to Meta than on Alphabet, Reddit, and Twitter combined. And she also forwarded information saying that They are second in terms of buying NVIDIA's latest GPU, in terms of bulk purchases, only second to Microsoft. And the unbelievable investment they've made in their, is it called their meta glasses or their smart glasses, is starting to pay off. And that is it's a super hot item. I think you talked about this. It's trending. It's sold out in a bunch of European stores and their investment in micro cameras and VR.

51:31It feels like they finally might have a vehicle or a tech product. But it feels like all the moons are lining up for Meta to make pretty big progress in AI this year. So anyways, my prediction is that the AI company no one's talking about right now, that we're going to start talking a lot about in the context of AI in 2025 is Meta. I'm with you on that. This episode was produced by Claire Miller and engineered by Benjamin Spencer. Our associate producer is Alison Weiss. Amir Silverio is our research lead. Jessica Lange is our research associate. Drew Burrows is our technical director. and Catherine Dillon is our executive producer.

52:07Thank you for listening to Prof G Markets from the Vox Media Podcast Network. Join us on Thursday for our conversation with Andrew Ross Sorkin, only on Prof G Markets.

52:20Lifetimes

52:25You have me In kind reunion

52:37As the world turns And the dark flies In love

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