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Housing, Markets, The UK, And Elon Musk (Podcast) · Bloomberg Intelligence

• 0:00
  Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
• 0:04
  Speaker 1: my co host Matt Miller. Every business day, we bring
• 0:06
  Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
• 0:11
  Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
• 0:15
  Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
• 0:18
  Speaker 1: at Bloomberg dot com slash podcast. We have a great
• 0:22
  Speaker 1: Bloomberg intelligence strategists in here. Erica Addleberg is an NBS strategist.
• 0:28
  Speaker 1: And the reason that I find this so cool is
• 0:31
  Speaker 1: that the FED bought so much of these securities, right,
• 0:34
  Speaker 1: mortgage backed securities, and now they're selling them off in
• 0:39
  Speaker 1: quantitative tightening. Um, And I wonder how it's affecting the
• 0:43
  Speaker 1: actual market that consumers access. Erica does it? Do you
• 0:48
  Speaker 1: see it? Because we've seen a little bit of volatility
• 0:50
  Speaker 1: and mortgage race. Right, they went up to five seven
• 0:52
  Speaker 1: and came down to five three. That's I think, uh,
• 0:56
  Speaker 1: the f H, the Fannie MAE, Freddie mcnumb. But bank
• 1:00
  Speaker 1: rat maybe it is different. Nonetheless, a little bit of yeah,
• 1:04
  Speaker 1: um yeah. They own an impressive amount of mortgage backed securities.
• 1:08
  Speaker 1: They own over two point seven trillion at this point.
• 1:11
  Speaker 1: Which is about a third of the mortgage market. So
• 1:14
  Speaker 1: what they own really has an influence, and what they
• 1:17
  Speaker 1: do has an influence on mortgage back securities, which translates
• 1:22
  Speaker 1: into an influence on mortgage rates. They haven't technically started
• 1:26
  Speaker 1: to sell mortgage backed securities yet, they've mentioned job owned
• 1:30
  Speaker 1: at least that they may at some point in the
• 1:32
  Speaker 1: future in a way that technically they don't want to
• 1:35
  Speaker 1: disrupt the markets, but they have stopped adding them in
• 1:39
  Speaker 1: any significant size to their portfolio, and in fact they're
• 1:43
  Speaker 1: letting it run off, so as the paydouns and refinances
• 1:46
  Speaker 1: come in, they're not reinvesting the full amount, and they're
• 1:49
  Speaker 1: going to actually stop reinvesting all paydounds going forward. So far,
• 1:55
  Speaker 1: just the the influence of them not adding has pushed
• 2:00
  Speaker 1: mortgage rates up to around six percent. That's partly also
• 2:05
  Speaker 1: because treasuries have sold off an anticipation of FED funds
• 2:09
  Speaker 1: being pushed off, which has started to happen, but also
• 2:12
  Speaker 1: spreads have widened in mortgage backed securities relative to treasuries.
• 2:16
  Speaker 1: The current coupon, which is basically what's most closely tied
• 2:19
  Speaker 1: to the consumer rate, is up to about a hundred
• 2:22
  Speaker 1: forty basis points. It was as tight as sixty basis
• 2:25
  Speaker 1: points last year, So that's eight tenths of our percent
• 2:27
  Speaker 1: rise just because mortgages are widening, because the FED is
• 2:30
  Speaker 1: no longer planning to support the market. So if they sell,
• 2:33
  Speaker 1: when they sell, they're going to sell, right, They're not
• 2:36
  Speaker 1: just going to sit here and let them run off.
• 2:39
  Speaker 1: I mean, there are certainly a number of FED governors
• 2:41
  Speaker 1: have said that they don't believe in supporting the mortgage
• 2:45
  Speaker 1: market in this environment and are talking about selling. But
• 2:49
  Speaker 1: for every FED governor that says that, another one. I
• 2:52
  Speaker 1: heard UH Chair Williams talk at a mortgage banker conference
• 2:57
  Speaker 1: and he's like, if if that happens, we're going to
• 2:59
  Speaker 1: give you a lot of no is. It's going to
• 3:01
  Speaker 1: be pretty far in the future, and it's we're going
• 3:03
  Speaker 1: to do it in a way that doesn't disrupt the
• 3:05
  Speaker 1: secondary market. So, you know, I think they're kind of
• 3:07
  Speaker 1: talking out of both sides of their mouths, and I
• 3:09
  Speaker 1: think they want to give themselves the opportunity to sell um,
• 3:13
  Speaker 1: but probably not going to do so in a size
• 3:17
  Speaker 1: that really destroys the market. Hopefully. Erica, you know, you're
• 3:20
  Speaker 1: witnessing a pretty historic moment. Here and that Matt Miller
• 3:23
  Speaker 1: talked about mortgage rates. About talking about his own mortgage
• 3:25
  Speaker 1: never happens. He likes to brag about just how how
• 3:28
  Speaker 1: great of a rate he got, locked it in at
• 3:29
  Speaker 1: three and we just do it. You ruined us excellently.
• 3:33
  Speaker 1: You ruined it. Um. But anyways, point of the point
• 3:36
  Speaker 1: of that is affordability at the end of the day,
• 3:38
  Speaker 1: and that seems to be at the core of this
• 3:39
  Speaker 1: housing market story, especially you know, people like me who
• 3:42
  Speaker 1: are probably not in the market for for houses. Well,
• 3:44
  Speaker 1: a lot of my friends already put down payments on
• 3:46
  Speaker 1: them because they could. Um, I'm curious about the affordability story.
• 3:50
  Speaker 1: How does that change? Well, you know, affordability numbers came
• 3:53
  Speaker 1: out yesterday reflecting numbers as of the end of May,
• 3:56
  Speaker 1: so it reflected most of the rising mortgage rates, but
• 3:59
  Speaker 1: not all of it, and most of the rise and
• 4:01
  Speaker 1: home prices, but not all of it. That number is
• 4:04
  Speaker 1: now one oh two point five at a hundred. That
• 4:07
  Speaker 1: means that the average median income no longer will be
• 4:11
  Speaker 1: above the qualifying income below that. We're talking about housing
• 4:16
  Speaker 1: market nationally being unaffordable, and believe it or not, the
• 4:19
  Speaker 1: housing of affordability index, as run by National Association Realtors,
• 4:24
  Speaker 1: has never been below a hundred, so we are approaching
• 4:27
  Speaker 1: historic not you know, lack of affordability in the housing
• 4:30
  Speaker 1: market and one of few things palpable by the way,
• 4:34
  Speaker 1: I mean, because so many people I know either have
• 4:39
  Speaker 1: been priced out or have had to stretch so far
• 4:42
  Speaker 1: that they can't afford to do anything else. Yeah. One
• 4:45
  Speaker 1: of the interesting things we're actually seeing in the Mortgage
• 4:47
  Speaker 1: Banker Association Loan um Application Index is that the loan
• 4:52
  Speaker 1: sizes are decreasing while home prices we know are still
• 4:55
  Speaker 1: going up. So I think what that means is that
• 4:58
  Speaker 1: people are compromising on the type of house or the
• 5:01
  Speaker 1: location of the house that they want to buy, and
• 5:03
  Speaker 1: probably that that's a trend we might see going forward. Um,
• 5:07
  Speaker 1: I've heard of other people anecdotally that you know, finally
• 5:10
  Speaker 1: where their bid was finally accepted on a house in
• 5:12
  Speaker 1: this competitive housing market, and then they can't qualify for
• 5:15
  Speaker 1: the mortgage rates. So there's also been a big drop
• 5:17
  Speaker 1: in locks rate locks relative history. All right, Erica, thanks
• 5:22
  Speaker 1: so much for joining us. Eric Heddelberg here she is
• 5:25
  Speaker 1: a mortgage backed security strategist for Bloomberg Intelligence. Talking to
• 5:29
  Speaker 1: us about I think one of the issues that almost
• 5:32
  Speaker 1: everyone cares about. You know, either you're in the market,
• 5:35
  Speaker 1: or you want to get in the market, or you're
• 5:37
  Speaker 1: priced out of the market. UM, or like Paul Sweeney,
• 5:40
  Speaker 1: you're happy to be out of the market and you'll
• 5:42
  Speaker 1: never get back in. Let's get back to the markets here.
• 5:50
  Speaker 1: We have a little bit of an undecided Uh. We
• 5:54
  Speaker 1: don't really have a direction today, but we did have
• 5:57
  Speaker 1: an up week last week in face of so many
• 6:01
  Speaker 1: people calling a recession. San Sean Snyder joins us head
• 6:05
  Speaker 1: of investment Strategy at City US Wealth Management and Sean
• 6:09
  Speaker 1: um more and more people are saying we are currently
• 6:13
  Speaker 1: in a recession. I think um Ken Lane going recently
• 6:17
  Speaker 1: uh added his name to that pile as well. UM,
• 6:21
  Speaker 1: what do you think? Well, first off, thank you Matt,
• 6:24
  Speaker 1: and thank you Cretive for having me on the show.
• 6:26
  Speaker 1: You know, it's really interesting times. You know, I think
• 6:29
  Speaker 1: it is you know normal to think that the you know,
• 6:33
  Speaker 1: typical technical definition is going to be correct, which is
• 6:37
  Speaker 1: two negative quarters of economic growth. But it's not always
• 6:40
  Speaker 1: technically right. So if we look at the actual definition,
• 6:43
  Speaker 1: which is set by the National Bureau of Economic Research, UH,
• 6:47
  Speaker 1: it is a period of broad economic decline across you know,
• 6:51
  Speaker 1: a swap of the economy over a period of at
• 6:54
  Speaker 1: least several months, it's not two quarters of negative decline.
• 6:57
  Speaker 1: So if we actually look at the recession that occurred
• 6:59
  Speaker 1: in two thousand one, the US economy never experienced two
• 7:03
  Speaker 1: consecutive quarters of economic decline. And similarly, in the global
• 7:07
  Speaker 1: financial crisis, uh, the economy technically entered a recession December
• 7:12
  Speaker 1: two thousand seven, but the economy didn't experience two consecutive
• 7:15
  Speaker 1: quarters of contraction till the fourth quarter of two thousand eight.
• 7:18
  Speaker 1: So you know, that is the metric people tend to watch.
• 7:21
  Speaker 1: We had a negative UM one point six percent print
• 7:24
  Speaker 1: in the first quarter. It looks like we're tracking, according
• 7:27
  Speaker 1: to the Atlanta Fed, at maybe minus one point two
• 7:29
  Speaker 1: percent in the second quarter UM. But you know, in
• 7:32
  Speaker 1: those paths two recessions two one eight, the consecutive monthly
• 7:36
  Speaker 1: job losses are actually better metric in terms of calling
• 7:39
  Speaker 1: a US recession. And we're still seeing a really quite
• 7:42
  Speaker 1: strong labor market. And the other thing i'd say about
• 7:44
  Speaker 1: this two negative GDP prints that we've seen that are
• 7:47
  Speaker 1: potentially you're going to see, are really referencing a change
• 7:51
  Speaker 1: in private inventories. We have a glut of inventories that's
• 7:55
  Speaker 1: actually dragging down the GDP number. If you took out
• 7:57
  Speaker 1: that kind of anomaly being caused by the supply chain disruptions,
• 8:01
  Speaker 1: well then we'd actually have positive GDP. Consumer spending is
• 8:04
  Speaker 1: still positive, and I think, uh, this is likely not
• 8:07
  Speaker 1: mark the beginning of recession will probably come later in Well,
• 8:11
  Speaker 1: speaking of recession, I want to ask you about commodities
• 8:14
  Speaker 1: here because we are seeing a six point well almost
• 8:17
  Speaker 1: seven percent decline here in w t I. It feels
• 8:20
  Speaker 1: like the commodity's trade has been so overtalked about. I
• 8:24
  Speaker 1: mean everyone was saying that this is how you hedge
• 8:26
  Speaker 1: a portfolio that's just been dropping all year long. You
• 8:30
  Speaker 1: buy a barrel of oil, you add some of those
• 8:32
  Speaker 1: kind of contracts to your portfolio. It was the macro
• 8:35
  Speaker 1: head that was supposed to work. It's not the macro head.
• 8:37
  Speaker 1: So that's working right now, Sean, what do you do
• 8:39
  Speaker 1: with commodities. Well, you know, we technically still have a
• 8:43
  Speaker 1: global overweight on not resources, oil field services, and some
• 8:47
  Speaker 1: other defensive equities like dividend growers. But you know, if
• 8:51
  Speaker 1: you look at what's happening in the commodity space, you're
• 8:53
  Speaker 1: seeing aluminum prices come down, copper prices come down. That
• 8:57
  Speaker 1: is kind of a normal path to follow if we
• 9:00
  Speaker 1: are indeed headed towards the recession. But you've seen the
• 9:02
  Speaker 1: oil prices, you know, up until recently hold up better.
• 9:06
  Speaker 1: But again, you know, in some ways it might be
• 9:08
  Speaker 1: a positive. Right, So if oil can stay below hundred
• 9:11
  Speaker 1: dollars of barrel, then maybe that shaves off a couple
• 9:14
  Speaker 1: of percentage points off the headline CPI by the end
• 9:17
  Speaker 1: of the year. So essentially, the FED is trying to
• 9:21
  Speaker 1: cool off the economy through policy expectations. We're seeing that
• 9:25
  Speaker 1: feed through into commodities. And in a sense, yes, those
• 9:28
  Speaker 1: portfolio hedges that were meant to be um you know,
• 9:32
  Speaker 1: used as insurance aren't working right now. But it may
• 9:35
  Speaker 1: actually be a positive in the sense that Fed policies
• 9:37
  Speaker 1: working and that could help us avoid hard landing. So
• 9:40
  Speaker 1: it may not be completely negative. Sean just quickly got
• 9:43
  Speaker 1: thirty seconds here. What do you expect from earning earning season? Well,
• 9:48
  Speaker 1: I think it's gonna be interesting earning seasons. It seems
• 9:50
  Speaker 1: to be a disconnect with you know, investors expecting uh
• 9:54
  Speaker 1: ten percent EPs growth in two, but yet we have
• 9:57
  Speaker 1: to market down. It seems quite odd, but I think
• 10:00
  Speaker 1: energy companies are actually holding up that number. If you
• 10:03
  Speaker 1: strip out the energy company's contribution to earnings in the
• 10:05
  Speaker 1: second quarter, you actually have a negative earnings print about
• 10:09
  Speaker 1: three point eight percent, I believe. So it's really important
• 10:12
  Speaker 1: what happens to energy as far as the headline EPs,
• 10:14
  Speaker 1: and to me, it's not so much the earnings in two,
• 10:17
  Speaker 1: it's really what happens to earnings in three. Consensus is
• 10:21
  Speaker 1: still looking for eight point three percent headline EPs growth
• 10:24
  Speaker 1: in three, but if we do enter a session that's
• 10:27
  Speaker 1: gonna be wrong. It's going to be negative. Sean, thanks
• 10:30
  Speaker 1: so much for joining us. Shawn Snyder there, he is
• 10:32
  Speaker 1: head of investment strategy over at City US Wealth Management.
• 10:40
  Speaker 1: Matt Miller here with pretty good to Paul Sweeney out
• 10:42
  Speaker 1: this week, and it's his loss because ed Price is
• 10:45
  Speaker 1: with US senior fellow and former British senior fell at
• 10:48
  Speaker 1: n y U and former British trade official. And there
• 10:53
  Speaker 1: is a ton to talk about um ED starting with
• 10:56
  Speaker 1: the whole gas situation. We keep getting these warnings. I
• 10:59
  Speaker 1: think brutal Bruno Lamary yesterday was saying they could cut
• 11:02
  Speaker 1: you off completely. And today Janet Yellen Um was talking
• 11:05
  Speaker 1: more about trying to cap UH prices for everybody buying
• 11:11
  Speaker 1: Russian oil, which seems to me it's like poking the bear.
• 11:14
  Speaker 1: Right at some point they're gonna say, fine, we have
• 11:17
  Speaker 1: strong enough, strong enough pounce sheet that we don't need
• 11:19
  Speaker 1: to give you any oil, so they could just pull
• 11:21
  Speaker 1: everything off the market. What do you think. I think
• 11:23
  Speaker 1: we've been poking the bear, and we are poking the bear,
• 11:26
  Speaker 1: and I wouldn't be surprised if the bear pokes was back.
• 11:29
  Speaker 1: So you're talking about gas. I think that's that's the
• 11:31
  Speaker 1: right indicator. I think that's behind a lot of the
• 11:33
  Speaker 1: currency movements that it's so weird to see, Like Jordan
• 11:37
  Speaker 1: Rochester was on surveillance earlier and he's talking about his
• 11:40
  Speaker 1: euro call driven all by gas flows through Nordstream one pipeline.
• 11:46
  Speaker 1: That's just an odd connection to make. It's odd. It's
• 11:49
  Speaker 1: not the traditional fundamentals that you that you look at,
• 11:51
  Speaker 1: right Um. But I think I think that's right, and
• 11:54
  Speaker 1: I think that maybe the sort of slightly scary, slightly
• 11:57
  Speaker 1: simply way to think about that is that we are
• 12:00
  Speaker 1: kind of war with Russia right now and I think
• 12:02
  Speaker 1: that as that sinks in, markets are turning away from
• 12:05
  Speaker 1: the traditional numbers and gazing out of the window and thinking, Okay, well,
• 12:10
  Speaker 1: what would this look like if it really kicked off.
• 12:12
  Speaker 1: I mean, you guys tell me if that's an exaggeration. No, No,
• 12:17
  Speaker 1: I mean certainly financial right, because everyone is accusing Russia
• 12:22
  Speaker 1: of using energy resources, of weaponizing them, and of course
• 12:26
  Speaker 1: they're just doing that in retaliation for the sanctions that
• 12:29
  Speaker 1: we put on them, really sanctioned them because they attacked Ukraine.
• 12:32
  Speaker 1: So yeah, it definitely seems like a cold war. It
• 12:35
  Speaker 1: seems like a cold war that's heating up and becoming
• 12:38
  Speaker 1: a potential hot war. And one of the things that
• 12:39
  Speaker 1: I worry about is, for example, we've said that we're
• 12:42
  Speaker 1: not going to close the air space. Fine, um, and
• 12:45
  Speaker 1: we've said that we're not going to close the air
• 12:46
  Speaker 1: space because we're worried that that would be considered a
• 12:49
  Speaker 1: NATO intervention. Or we don't have a monopoly on what
• 12:52
  Speaker 1: constitutes a NATO intervention, do we. Because we're in a
• 12:54
  Speaker 1: two player game, Pewton could very well turn around and say, look,
• 12:57
  Speaker 1: I found this thing in the wreckage of one of
• 12:59
  Speaker 1: my hanks, and it says it says made in the
• 13:01
  Speaker 1: USA on it. So I feel like we've already crossed
• 13:04
  Speaker 1: some lines. And if we've if we've crossed those lines,
• 13:06
  Speaker 1: that one logic is that we continue to cross them
• 13:09
  Speaker 1: and have to continue to cross them, and this thing
• 13:11
  Speaker 1: spire us both militarily and financially. But there's there's a
• 13:15
  Speaker 1: certain level of exposure that continental Europe has that the
• 13:18
  Speaker 1: UK does not, and I have to ask to what
• 13:21
  Speaker 1: extent does that almost help the UK in the face
• 13:25
  Speaker 1: of all the other issues that it has. Yes, so,
• 13:28
  Speaker 1: um economics is always a relative beauty contest, and I
• 13:32
  Speaker 1: think that the post Brexit UK will be looking a
• 13:34
  Speaker 1: little bit better if it's not exposed to certain things
• 13:37
  Speaker 1: directly that are going on in the continent. I'm thinking,
• 13:39
  Speaker 1: of course, of the potential fiscal risk if we see
• 13:42
  Speaker 1: another U Area crisis, and of course the war in Ukraine.
• 13:44
  Speaker 1: That does look a bit better. However, it's not fundamentally
• 13:47
  Speaker 1: in the UK's interest to see Europe on fire. Right,
• 13:50
  Speaker 1: We've done that twice. It wasn't fun, it's not good.
• 13:53
  Speaker 1: So what we really want is a is a strong
• 13:56
  Speaker 1: European economy. We want a trading partner at whatever reduced
• 13:59
  Speaker 1: level after exit. But we want a trading partner that functions.
• 14:02
  Speaker 1: And I think that if you, if you go back
• 14:04
  Speaker 1: to the aforementioned Mr Puton m one definition of how
• 14:08
  Speaker 1: he wins this war is just to continue. It is
• 14:10
  Speaker 1: just to continue this grind so that the economic and
• 14:13
  Speaker 1: the financial and the energy consequences become ever more apparent. Well,
• 14:18
  Speaker 1: I mes pin here. I'm sorry because I'm going to
• 14:20
  Speaker 1: ask the question that I've kind of feels a little
• 14:23
  Speaker 1: contrary at the moment. I'm probably gonna get a lot
• 14:25
  Speaker 1: of Twitter heat for this, but I'm curious. We can
• 14:27
  Speaker 1: talk about your dollar parody for months now. Um, should
• 14:30
  Speaker 1: we be talking about pound parody with the dollar? Yes
• 14:33
  Speaker 1: we should, We should, not not necessarily right now, Okay,
• 14:36
  Speaker 1: but pound parity with the dollar is not outside the realm, which,
• 14:41
  Speaker 1: by the way, we have. I don't think we've ever
• 14:42
  Speaker 1: hit no no, no no, But I don't think that
• 14:45
  Speaker 1: it's impossible. Um, And so I think that we're going
• 14:48
  Speaker 1: to have to go back to again the fundamentals again,
• 14:50
  Speaker 1: how we think about currency, how we think about effects markets,
• 14:53
  Speaker 1: and really dig down into well, what do we think
• 14:56
  Speaker 1: is the equilibrium level for each of these currencies? And
• 14:58
  Speaker 1: why is it that we're wrong in our sort of
• 15:01
  Speaker 1: opening assumption every morning when we open the newspaper. They're
• 15:03
  Speaker 1: both getting crushed by the dollar right now, and neither
• 15:06
  Speaker 1: one is doing better than the other, which I know
• 15:08
  Speaker 1: because I see the euro at one dollar, I see
• 15:11
  Speaker 1: the pound at one eighteen euro pound is eighty five
• 15:15
  Speaker 1: eighty five cents or is that what you call it?
• 15:18
  Speaker 1: Hence sorry, europound is eight five pence. And I recall
• 15:22
  Speaker 1: about five or six years ago I was looking to
• 15:24
  Speaker 1: buy a Ducati S four R T in Sheffield dealership
• 15:30
  Speaker 1: and I was in Berlin and I was waiting for
• 15:32
  Speaker 1: the euro pound to uh, you know, adjust to my
• 15:35
  Speaker 1: favorite but it was at eight five pence then as well. Right,
• 15:38
  Speaker 1: so they're both moving down in Unison. Well, it makes sense,
• 15:42
  Speaker 1: right because again, if if the world is on fire,
• 15:44
  Speaker 1: which is a bit of a bit of an exaggeration,
• 15:46
  Speaker 1: but if the world is on fire, where do people go?
• 15:48
  Speaker 1: Certainly not the end? Certainly not the end. Although I
• 15:51
  Speaker 1: think I think B O J is not sweating it
• 15:53
  Speaker 1: as bad right now because they're thinking this is this
• 15:55
  Speaker 1: is not sustainable above two percent. I think they're looking
• 15:58
  Speaker 1: at supply chains and thinking we need to at a
• 16:00
  Speaker 1: bit further um with our easing program, because then we
• 16:03
  Speaker 1: might get to a sustainable two UM. But yeah, so look,
• 16:06
  Speaker 1: currency is are wild and I really don't rule anything out.
• 16:09
  Speaker 1: So for the pound here, let's go back for the
• 16:12
  Speaker 1: UK here. Broadly, we're also dealing with new leadership potentially
• 16:15
  Speaker 1: at the HELM. What kind of leadership are we talking about?
• 16:18
  Speaker 1: What kind of risks are we talking about? It kind
• 16:20
  Speaker 1: of seems like the Brexit controversy has has dropped that
• 16:24
  Speaker 1: whoever is in charge or does end up becoming a
• 16:26
  Speaker 1: charge's still going to become have very aggressive Brexit stands.
• 16:30
  Speaker 1: But I'm curious what are the nuances there that we
• 16:32
  Speaker 1: could see based on I think we have like how
• 16:34
  Speaker 1: many candidates, like six seven, I think it's seven hundred
• 16:38
  Speaker 1: the last time I shocked. I think I'm in the list.
• 16:40
  Speaker 1: But it's basically Rishi, Sunac and list, trust this, trust
• 16:45
  Speaker 1: the others that would cut taxes. Rishi is the conservative
• 16:48
  Speaker 1: candidate and everybody else wants to be it sort of
• 16:51
  Speaker 1: a populace. Yeah, Hunts would cut taxes. I think I
• 16:53
  Speaker 1: think most people want to cut taxes. But Richie's saying, look,
• 16:56
  Speaker 1: we've got this inflationary problem. We have to get our
• 16:58
  Speaker 1: arms around that fust So to your question, I think
• 17:01
  Speaker 1: that the real the real issue right now is where
• 17:04
  Speaker 1: is the tax policy land how fiscally responsible or otherwise
• 17:07
  Speaker 1: will the next pm B. So it's not really anything.
• 17:10
  Speaker 1: It's not really like a Labor versus Tory right now.
• 17:12
  Speaker 1: It's one nation Tory versus Prexittory. For international audience, we
• 17:16
  Speaker 1: should add to a lot of American listeners. Obviously, UM,
• 17:19
  Speaker 1: correct me if I'm wrong. We haven't actually had tax
• 17:22
  Speaker 1: cuts in the last three years, right, which has been um,
• 17:26
  Speaker 1: counter contrary to contrarian It's yeah, it's counterintuitive because the
• 17:30
  Speaker 1: Conservative Party, if it stands for anything, it probably stands
• 17:33
  Speaker 1: for lowering taxes. So this again it goes back to
• 17:36
  Speaker 1: the debate in the Tory party right now, which is
• 17:38
  Speaker 1: which one comes first, tax cuts or growth. And some
• 17:42
  Speaker 1: are arguing that if you cut taxes, you get growth,
• 17:44
  Speaker 1: and some are saying, well, we have to wait until
• 17:45
  Speaker 1: we get growth in order to cut taxes. So if
• 17:48
  Speaker 1: you're a you know, American audience are watching UK and
• 17:50
  Speaker 1: thinking about what the immediate indicators going to be. If
• 17:53
  Speaker 1: if Rishi wins, you can expect more fiscal discipline I
• 17:56
  Speaker 1: think the big concern for Americans right now is do
• 17:58
  Speaker 1: we end up with the same kind of rationing that
• 18:00
  Speaker 1: you have put in place today. At ETHRI, they're capping
• 18:03
  Speaker 1: the flights. Capping flights. That's not difficult. That's not good.
• 18:07
  Speaker 1: That's that's that's very much not good. And it lobbies
• 18:10
  Speaker 1: for building some more runways whatever whatever the climate love
• 18:13
  Speaker 1: he says, right, I mean, it's just getting some more
• 18:15
  Speaker 1: employees in, right, and getting some more people in shore
• 18:17
  Speaker 1: from Eastern Europe. Have you thought about boosting immigration from
• 18:21
  Speaker 1: Eastern Europe? I think about every morning, man. I think. Look,
• 18:24
  Speaker 1: if you look at the UK economy, it's like any economy.
• 18:26
  Speaker 1: If you want growth, you want productivity, you want population,
• 18:28
  Speaker 1: and you want per capita GDP. Garthur's result ed, Ed,
• 18:31
  Speaker 1: Thanks so much for coming in ed Price there, senior
• 18:33
  Speaker 1: fellow at n y U, Greg, Thanks very much. Now
• 18:41
  Speaker 1: you've probably heard Elon Musk's move determinate his deal with
• 18:44
  Speaker 1: Twitter is set to wind up in chancery court in Delaware,
• 18:48
  Speaker 1: but you may not know. Musk's actions also led to
• 18:51
  Speaker 1: a lawsuit back in May against the Tesla CEO on
• 18:55
  Speaker 1: behalf of Twitter shareholders for the drastic decline in Twitter
• 18:59
  Speaker 1: stock value. Joe Catchett is the senior partner at Cotchett,
• 19:04
  Speaker 1: Petrie and McCarthy, which, along with Bottini and Bottini, brought
• 19:10
  Speaker 1: the suit in the U. S. District Court for the
• 19:12
  Speaker 1: Northern District to California. Bloomberg, Dreg Jarrett and San Francisco
• 19:15
  Speaker 1: had an exclusive interview with Cotchett. They talked about the
• 19:18
  Speaker 1: shareholder suit against Musk and Twitter. Joe, you guys actually
• 19:23
  Speaker 1: filed a suit back on May against Elon Musk, and
• 19:28
  Speaker 1: it made news at the time, but it seems to
• 19:31
  Speaker 1: be taking on more prominence more importance right now. Can
• 19:34
  Speaker 1: you tell me about that suit. Well, it's absolutely clear
• 19:37
  Speaker 1: that we saw at the outset where Musk was going.
• 19:41
  Speaker 1: We alleged the complaint that much of what he did
• 19:46
  Speaker 1: was simply to drab the price down. We alleged that
• 19:50
  Speaker 1: he did this on purpose. She wanted to pick up
• 19:53
  Speaker 1: Twitter at a cheap price. And you show what happened
• 19:56
  Speaker 1: to these people at owned Twitter stock. They all lost
• 20:02
  Speaker 1: of the value and it was clear from the outset.
• 20:05
  Speaker 1: It's just amazing that everybody didn't see what was going on.
• 20:09
  Speaker 1: Many people did see it, stood by and watched the
• 20:13
  Speaker 1: whole scenario play out as we allege. We don't think.
• 20:18
  Speaker 1: We don't think. The facts will show that he had
• 20:22
  Speaker 1: a full intention at the outset to buy it at
• 20:25
  Speaker 1: the price he offered. The visions about fake accounts, he
• 20:30
  Speaker 1: knew all about it. As a matter of fact, Twitter
• 20:33
  Speaker 1: did have fake accounts. They just settled a major lawsuit
• 20:38
  Speaker 1: a year ago over the fake accounts. He was fully
• 20:41
  Speaker 1: aware of all of this. This is one of the
• 20:44
  Speaker 1: great great American Wolf Street stories of what's going on
• 20:48
  Speaker 1: with our stock market and the failure to be brutally
• 20:53
  Speaker 1: candid with you, the failure of our SEC to protect
• 20:59
  Speaker 1: people investing in the market these days. Joe, how many
• 21:01
  Speaker 1: shareholders are you representing and are you asking for anything
• 21:05
  Speaker 1: in this lawsuit? Yeah, we're asking that Twitter go after
• 21:11
  Speaker 1: Musk and pick up that one billion dollar penalty for
• 21:15
  Speaker 1: not going through with the deal. Further, we're asking that
• 21:20
  Speaker 1: must be liable for the downfall of that stop five
• 21:24
  Speaker 1: had to wet down. It involves knowledge and by the way,
• 21:29
  Speaker 1: just to work clear, a lot of the shareholders came
• 21:33
  Speaker 1: from pension funds, nonprofits, things of this nature. So it's
• 21:39
  Speaker 1: a it's an extraordinary case that the SEC should be
• 21:44
  Speaker 1: what effect do you think, if any, the chance to
• 21:47
  Speaker 1: record in Delaware will have on your suit. They're taking
• 21:51
  Speaker 1: it there to figure out exactly what to do about this,
• 21:54
  Speaker 1: and do you have any prediction of an outcome? Uh, well,
• 21:58
  Speaker 1: we know one thing. We know there's going to be
• 22:00
  Speaker 1: a wild court room fight, whether it is in the
• 22:04
  Speaker 1: chancery court or whether it is in the Northern District,
• 22:07
  Speaker 1: California where Twitter is home. Will see downstream. By the way,
• 22:13
  Speaker 1: I found it very interesting in your lawsuit that you
• 22:16
  Speaker 1: were talking about his leverage of Tesla stock in order
• 22:21
  Speaker 1: to be able to back alone, and the indication that
• 22:25
  Speaker 1: he was only able to leverage up to what of
• 22:29
  Speaker 1: the value of the Tesla stock in order to be
• 22:31
  Speaker 1: able to complete the loan to make the purchase of Twitter,
• 22:34
  Speaker 1: and that that had something to do or a lot
• 22:36
  Speaker 1: to do with him wanting to back out of this
• 22:40
  Speaker 1: in order to drive the price down. Can you can
• 22:42
  Speaker 1: you outline that for me? You know, he is holding
• 22:45
  Speaker 1: in Tesla, and Tesla was all part of the deal.
• 22:50
  Speaker 1: He wanted to use that as a leverage, if you will,
• 22:53
  Speaker 1: I shouldn't say leverage. He wanted to use it as
• 22:56
  Speaker 1: the basis for getting the money to buy Twitter and
• 23:00
  Speaker 1: was chaos. Both test Less shareholders suffered. Twitter shareholders suffered.
• 23:06
  Speaker 1: Everybody suffered as we allege into complaints through whatever you
• 23:10
  Speaker 1: want to call it. You want to call it arrogance,
• 23:12
  Speaker 1: you want to call it just flexing your your richest
• 23:16
  Speaker 1: man in the world muscle, or whatever you want to
• 23:19
  Speaker 1: call it. Uh, it's something that are our capitalist system
• 23:25
  Speaker 1: can't allow to happen. Too many people are affected by this.
• 23:30
  Speaker 1: Too many at tension funds have been hammered, too many
• 23:34
  Speaker 1: average people on the street that have money invested in
• 23:37
  Speaker 1: the stock market. Uh, we're taking advantage of and this
• 23:42
  Speaker 1: is a good example for the government to get off
• 23:45
  Speaker 1: their rear end and take a look at what's happening
• 23:48
  Speaker 1: out there, because this is happening in many different situations.
• 23:52
  Speaker 1: This one happens to be the epitome of arrogance. How
• 23:57
  Speaker 1: long is this courtroom winding road going to be between
• 24:01
  Speaker 1: your lawsuit the chance to record in Delaware? And there's
• 24:04
  Speaker 1: got to be a whole lot more happening here. It'll
• 24:07
  Speaker 1: be several months, but it is going to be chaos
• 24:11
  Speaker 1: in the in the courtroom wherever it ends up. Uh,
• 24:17
  Speaker 1: it will certainly be an interesting uh issue for all
• 24:20
  Speaker 1: of the America to take a look at Greg Jarrett
• 24:23
  Speaker 1: with that interview. Uh wait is Greg with us right now? Greg? So,
• 24:27
  Speaker 1: uh wrap it up for us? Um, what do you
• 24:30
  Speaker 1: think considering what we've learned in the past few days?
• 24:32
  Speaker 1: I mean, how's this going to turn out? Well? I've
• 24:34
  Speaker 1: got to tell you that Chet has a great track record.
• 24:38
  Speaker 1: You may remember he won three point three billion dollar
• 24:40
  Speaker 1: jury verdict against Lincoln Savings and Loan and Charles Keating.
• 24:44
  Speaker 1: He also represented former c I A agent Valerie, playing
• 24:48
  Speaker 1: against Dick Dick Cheney at all In and he's inflamed
• 24:51
  Speaker 1: over this. When I talked with him, Uh, he went
• 24:55
  Speaker 1: a lot further. He pretty much alleges right stock manipulation.
• 25:01
  Speaker 1: He says, every time you hear something from Elon Musk,
• 25:04
  Speaker 1: those stocks move wildly. And you know, he and his
• 25:08
  Speaker 1: clients speculate that that's for the purpose simply of making
• 25:12
  Speaker 1: more money. Fascinating, fascinating stuff, and I think also something
• 25:16
  Speaker 1: that we're all watching. They're these sort of not secret secrets, um,
• 25:21
  Speaker 1: that we could all agree on, but no one would
• 25:23
  Speaker 1: want to allege that sort of thing, certainly not on
• 25:25
  Speaker 1: public radio broadcast. Thanks for listening to the Bloomberg Markets podcast.
• 25:32
  Speaker 1: You can subscribe and listen to interviews at Apple Podcasts
• 25:36
  Speaker 1: or whatever podcast platform you prefer. I'm Matt Miller. I'm
• 25:40
  Speaker 1: on Twitter at Matt Miller three. Put on fall Sweeney
• 25:44
  Speaker 1: I'm on Twitter at pt Sweeney. Before the podcast, you
• 25:46
  Speaker 1: can always catch us worldwide at Bloomberg Radio