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Key Takeaways From The Fed · 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. Now, let's talk a
0:22
Speaker 1: little bit about the markets and the economy with Katie Nixon.
0:26
Speaker 1: She is chief investment officer at Northern Trust Wealth Management,
0:30
Speaker 1: joining us out of Rye, New York. And let's get
0:35
Speaker 1: first to UM your expectations for the number on Friday
0:40
Speaker 1: and how it plays into what we heard from the
0:43
Speaker 1: FED at Jackson Hole. Katie, Well, good morning and thanks
0:48
Speaker 1: for having me. I mean, I guess would be right
0:49
Speaker 1: around the consensus for the Friday number around seven fifty,
0:52
Speaker 1: a little bit of a decline from UM from last month.
0:55
Speaker 1: But I think the point is this data for the
0:57
Speaker 1: next several weeks, I mean maybe months, is going to
1:00
Speaker 1: just be really really noisy. As we're seeing UM some
1:03
Speaker 1: of this UH this other data command a bit softer
1:05
Speaker 1: than expected relative to UH pre delta expectations. So I
1:11
Speaker 1: think we're going to be in this period of sort
1:13
Speaker 1: of give and take with the with the macro data,
1:16
Speaker 1: which I mean again for for investors. It's very consistent
1:20
Speaker 1: with what we heard from the Fed on on Friday,
1:23
Speaker 1: from Powell on Friday, that you know, he's keeping his
1:25
Speaker 1: options open, all right. Well, I think investors need Katie
1:28
Speaker 1: to keep their options open as well. I'm looking at
1:30
Speaker 1: the tenure here, just stubbornly staying around this one point
1:33
Speaker 1: three zero level, seemingly in a trading bound. Tough to
1:37
Speaker 1: make a living down there at that kind of rate.
1:40
Speaker 1: Where are you kind of as you talk to clients
1:43
Speaker 1: here and you and your advisors at Northern Trust, where
1:45
Speaker 1: are you telling them to go in terms of asset
1:48
Speaker 1: allocation right here? Well, you know, I think this is
1:51
Speaker 1: a very very important um discussion to have right now,
1:55
Speaker 1: because there is this sort of feeling that we should
1:58
Speaker 1: be out of bonds because rates are so low. Um.
2:01
Speaker 1: But what we're telling our clients is, you know, fixed
2:04
Speaker 1: income plays high quality fixed income plays a really important
2:07
Speaker 1: role in your portfolio, even at these levels of yield,
2:11
Speaker 1: these low levels of yield, which, by the way, we
2:13
Speaker 1: expect you're going to stay low for probably even longer
2:16
Speaker 1: than the market expects. So get used to these uh
2:18
Speaker 1: these low yields are going to be with us for
2:20
Speaker 1: a while. But the role of fixed and the portfolio
2:22
Speaker 1: is to provide you that diversification. And what would seem
2:25
Speaker 1: time and time again is during stressful times in the market,
2:29
Speaker 1: risk assets all sort of performed the same UM. So
2:32
Speaker 1: we want to make sure that our clients have the
2:34
Speaker 1: right amount of fixed in. You don't want too much
2:36
Speaker 1: because the yields are so low, but you want to
2:39
Speaker 1: have uh an amount of fixed income that's going to
2:41
Speaker 1: help you meet your your goals during times of market
2:44
Speaker 1: stress and not force you to sell risk assets. But
2:47
Speaker 1: beyond that, within our risk asset portfolio, I'll tell you
2:51
Speaker 1: one area that we like right now. Obviously we like
2:53
Speaker 1: US equities that's worth you know, we've seen very strong growth.
2:57
Speaker 1: We continue to think we're gonna see from my to
3:00
Speaker 1: me into two and perhaps even beyond from an earnings perspective.
3:04
Speaker 1: UM the Feds on hold, so you know, the rate
3:08
Speaker 1: environment's going to stay very constructive also for the next
3:11
Speaker 1: several years. But we also like high yield and we're seeing,
3:15
Speaker 1: you know, the credit worthiness of high yield credits improve
3:19
Speaker 1: over this cycle, and we expect are going to continue
3:21
Speaker 1: to improve and we can see spreads grinds even tighter
3:23
Speaker 1: than they are right now. So US equities high yield,
3:27
Speaker 1: that's sort of where we're leaning into from a tactical
3:29
Speaker 1: perspective and our risk asset portfolio. What kind of taper
3:32
Speaker 1: do you want to see? UM? What kind of taper
3:36
Speaker 1: you know is helpful to your investors? Right? Well, we
3:41
Speaker 1: are expecting the taper to be very slow and very delivered.
3:45
Speaker 1: So six and nine months of tapering UM hopefully will
3:49
Speaker 1: be sort of back to the future and watching pink
3:51
Speaker 1: dry as I think Janet Allen said uh in the
3:54
Speaker 1: previous taper. UM, So we don't think it's going to
3:57
Speaker 1: be a meaningful event to the market. UM. We only
3:59
Speaker 1: have one data point the last time we went through tapering,
4:02
Speaker 1: and you know, after the taper tantrum, which is really
4:05
Speaker 1: a communication issue, the market really absorbed the taper very
4:08
Speaker 1: very well and then starts to focus on the next move,
4:11
Speaker 1: which is when are we going to see rates increase
4:13
Speaker 1: in For US, we may see a liftop in twenty three,
4:17
Speaker 1: but if we do, it's going to be much slower
4:19
Speaker 1: and much lower than the market thinks. So given that backdrop, Katie,
4:24
Speaker 1: in terms of the equity side of the business, are
4:27
Speaker 1: are you suggesting to your representatives and your clients that
4:30
Speaker 1: they focus more on maybe the good strong top line
4:33
Speaker 1: growth stories maybe in tech and healthcare or um maybe
4:37
Speaker 1: go into that lean into that rotation trade which has
4:39
Speaker 1: been working so well, which is more cyclical, uh sectors
4:43
Speaker 1: maybe like you know, banks or or energy. Where where
4:46
Speaker 1: are you on that discussion? Yeah, I mean, I think
4:49
Speaker 1: it's important to take a diversified approach. I think investors
4:52
Speaker 1: have learned this year especially that having both is kind
4:56
Speaker 1: of the way you want to go, because we've seen
4:58
Speaker 1: this pivot between growth and you for example, I mean,
5:01
Speaker 1: you know, we've had we had a value of performance
5:03
Speaker 1: and now sort of hear a date, growth is edging
5:07
Speaker 1: out value. They've both had very good absolute performance, but
5:09
Speaker 1: we've seen sort of that pivot between growth and value
5:12
Speaker 1: happen a lot of time. So we we advise our
5:15
Speaker 1: clients to lean into both and not to have to
5:18
Speaker 1: pick a side in this um in this race. One
5:21
Speaker 1: of the things that we are looking at though a
5:22
Speaker 1: lot right now, is helping the quality of our of
5:26
Speaker 1: our equity investment. So really looking at a quality as
5:29
Speaker 1: a factor and sort of adding that into the portfolios
5:33
Speaker 1: as we as we can. Katie, thanks so much for
5:36
Speaker 1: joining us. Great to get your insight on what is
5:40
Speaker 1: actually an exciting time, even though you know yields are
5:43
Speaker 1: low and it may be UM difficult. Your job might
5:45
Speaker 1: be more difficult than normally would be UM. Certainly from
5:48
Speaker 1: a journalistic perspective, it is fascinating to follow, even if J.
5:54
Speaker 1: Powell's intonation could be a little bit more exciting. Yes,
5:57
Speaker 1: exactly when he's reading a speech, I just want to
5:59
Speaker 1: go with him and just go through it once or twice,
6:03
Speaker 1: a little coaching. But I mean I found, you know,
6:07
Speaker 1: especially his defense of UM the inflation picture and their
6:12
Speaker 1: inflation take, I thought was spot on, and I think
6:17
Speaker 1: um Katie did too. She's got a great note that
6:19
Speaker 1: you can check out on the Northern Trust website and
6:22
Speaker 1: highly recommend going to wealth dot Northern Trust dot com
6:25
Speaker 1: to check that out. Katie Nixon um joining us the
6:28
Speaker 1: c i O of Northern Trust Wealth Management. This is Bloomberg. Now.
6:38
Speaker 1: We told you at the top of the show about
6:40
Speaker 1: thirty minutes ago that we saw the Consumer Board Consumer sorry,
6:45
Speaker 1: the Conference Board Consumer Confidence index coming out at one
6:48
Speaker 1: thirteen point eight. We were looking for a reading of
6:52
Speaker 1: one three and the prior reading was one twenty nine.
6:57
Speaker 1: So it looks a little bit soft here. Let's and
7:00
Speaker 1: Lynn Franco, Director of Economic Indicators and Surveys from the
7:04
Speaker 1: Conference Board. And Lynn, this actually makes sense considering the
7:08
Speaker 1: other high frequency data we've seen. Is just is this
7:11
Speaker 1: just an end of summer vacation thing, um, a little
7:16
Speaker 1: bit of cloudy vision into the beginning of school year?
7:18
Speaker 1: Why is this? I think what we're seeing here is
7:22
Speaker 1: rising concerns about the delta variant and to a somewhat
7:26
Speaker 1: lesser degree, consumers expressing some concern about rising gas and
7:31
Speaker 1: food prices. Uh, so we've seen that not only take
7:34
Speaker 1: a bite out of how they assess current economic conditions,
7:38
Speaker 1: but also pass somewhat of a cloud over their short
7:40
Speaker 1: term prospects. So it's virus and inflation, yes, And I
7:45
Speaker 1: mean the good news within this is that the employment
7:49
Speaker 1: indicators did not really decline substantially, so you know, we
7:54
Speaker 1: do expect the economy and the job market to remain strong. Hopefully, um,
7:59
Speaker 1: you know, can get a handle around this recent surge
8:02
Speaker 1: and that will help sort of alleviate some of consumers concerns,
8:06
Speaker 1: but it could pose a little bit of a you know,
8:10
Speaker 1: headwind to UH spending, especially in person spending. So Lynn
8:15
Speaker 1: talked to us on a FOP a little bit on
8:16
Speaker 1: that on that labor issue there, because we still have
8:20
Speaker 1: you know, a lot of folks that are out of work,
8:22
Speaker 1: but there's also a lot of openings out there and
8:24
Speaker 1: a lot of companies are raising pay How does the
8:27
Speaker 1: kind of the labor outlook factor in. I think the
8:31
Speaker 1: labor outlook, especially what we're seeing in our report that
8:34
Speaker 1: remained more favorable than the economic outlook, which I think
8:38
Speaker 1: is good news, you know, to help support spending. We
8:42
Speaker 1: do know that at least in terms of claims and
8:44
Speaker 1: other labor data, you know, we're sort of getting back
8:48
Speaker 1: to more favorable readings. So we hope that will help
8:51
Speaker 1: boost confidence in the coming months. And in fact, if
8:55
Speaker 1: we take a look at their spending intentions, um, you
8:58
Speaker 1: know here too, we saw a little bit of going
9:00
Speaker 1: off endurables and autos and home purchase intentions UH, and
9:04
Speaker 1: a shift more towards in person. We saw a little
9:06
Speaker 1: bit of a pickup and travel intentions UM. So that
9:10
Speaker 1: I think was a sort of good news, there is
9:12
Speaker 1: at least some willingness to continue to spend. You know,
9:16
Speaker 1: we all um watch LYNN and markets very closely. The
9:20
Speaker 1: non farm payrolls number. It's been referred to as the
9:23
Speaker 1: Granddaddy of economic indicators. Does the consumer care about this
9:27
Speaker 1: kind of data? Well, I think, you know, obviously they do.
9:32
Speaker 1: It impacts them. It supports consumer confidence. And we've only
9:35
Speaker 1: had a slight uptick in the percent of consumers who
9:38
Speaker 1: were telling us jobs are hard to get right, So
9:42
Speaker 1: I think that's somewhat favorable news and their outlook. Even
9:46
Speaker 1: though we saw a little bit of a decline in
9:47
Speaker 1: their outlook regarding where the labor markets headed, it still
9:50
Speaker 1: remains very positive overall. So it could be that this
9:54
Speaker 1: is sort of more delta driven than jobs driven and
9:58
Speaker 1: LYNN work. Some of the sub elemental unemployment benefits are
10:01
Speaker 1: set to expire in early September. How do you think
10:04
Speaker 1: that's going to be reflected in the data. I think
10:08
Speaker 1: what we're seeing here is we saw a little bit
10:10
Speaker 1: of a decline in the percent of consumers have said
10:12
Speaker 1: they expect their incomes to increase over the coming months.
10:16
Speaker 1: But we know right now from not only this survey,
10:19
Speaker 1: but other surveys UM that you know, most people are
10:22
Speaker 1: sort of stashing away the extra money. We saw an
10:25
Speaker 1: uptick in the savings rate, so at least consumers are
10:28
Speaker 1: somewhat willing and able to spend. I think just what
10:31
Speaker 1: we're seeing here is a little concern about the delta
10:34
Speaker 1: variant and that could likely impact in person services over
10:38
Speaker 1: the coming months. Is the vaccine rate at all playing
10:46
Speaker 1: into this, the fact that you know, certainly from our
10:49
Speaker 1: perspective here in Europe, Americans just aren't getting vaccinated as
10:53
Speaker 1: fast as we thought they would or as fast as
10:55
Speaker 1: we are. Well, I think if we see an uptick
10:58
Speaker 1: in vaccination rates which have that may help offset some
11:02
Speaker 1: of the concerns about UM, you know, the increase in
11:06
Speaker 1: the spread of the delta variant, So that would be
11:09
Speaker 1: one way to sort of counter the concern. Heylyn, thanks
11:12
Speaker 1: so much for joining us. We really appreciate it. Lin Franco,
11:14
Speaker 1: director of Economic Indicators and Surveys at the conference board.
11:20
Speaker 1: I want to bring in Joni right now. He's the
11:23
Speaker 1: CEO of e Toro joining us on the phone out
11:26
Speaker 1: of Israel, and I am very familiar with the TORO.
11:30
Speaker 1: I worked with a number of your analysts had them
11:33
Speaker 1: on various programs. You so, I get it. But you
11:36
Speaker 1: say you're the world's leading social investment network. That's the tagline.
11:41
Speaker 1: What does that mean? Hi, and thank you for having me.
11:45
Speaker 1: I'm actually here in New York. Um uh so very
11:48
Speaker 1: quickly is the largest social investment network. We have twenty
11:52
Speaker 1: two million registered users, mostly outside of the US, who
11:56
Speaker 1: registered to our social network where our users can trade
11:59
Speaker 1: from and free stock trading as well as cryptocurrencies within
12:03
Speaker 1: a social network, So everybody can actually see the most
12:07
Speaker 1: successful investors performance over time UH, their monthly UH performance
12:12
Speaker 1: as well as their actual portfolio location and communicate and
12:16
Speaker 1: collaborate with one another, and then use our patent technology
12:21
Speaker 1: to automatically copy the most successful investors. So if you
12:24
Speaker 1: see an investor which generated thirty percent returns every year
12:28
Speaker 1: for the past five years on average, you just click
12:31
Speaker 1: copy with let's say five thousand dollars in it copies
12:34
Speaker 1: his entire portfolio into your portfolio for that five thousand dollars,
12:39
Speaker 1: and every time he trades, it trades in your account
12:41
Speaker 1: at the same time, the same price and the same proportion.
12:44
Speaker 1: So he basically brought in the sharing economy into the
12:47
Speaker 1: world of trading and investing. So as you think about
12:51
Speaker 1: your customer base, JUNI, I mean obviously a big, big
12:55
Speaker 1: increase uh since the pandemic. How permanent is that, how
12:59
Speaker 1: sticky is that? How do you think about the growth
13:01
Speaker 1: of the folks that you know would be interested in
13:03
Speaker 1: your platform? First, First of all, we definitely have seen
13:08
Speaker 1: explosive growth over the past eighteen months since that I
13:13
Speaker 1: would generally say an inflection point that started the rise
13:17
Speaker 1: of millennial investors all over the world. In March, we
13:22
Speaker 1: just recently announced our Q two earnings this year. Uh,
13:28
Speaker 1: and we grew from Q two last year to Q
13:30
Speaker 1: two this year between a hundred and twenty and a
13:33
Speaker 1: hundred forty percent on various KPIs from registered users, where
13:38
Speaker 1: we added more than two and a half million registered
13:40
Speaker 1: users just this quarter in Q two. I think we
13:45
Speaker 1: are seeing again a very significant secular trend where there's
13:50
Speaker 1: a whole generation people who didn't participate in capital markets before,
13:55
Speaker 1: both in the US but also all around the world
13:59
Speaker 1: in your up in a Asia, who are simply asking
14:02
Speaker 1: what to do with our money, where to invest our money? Uh?
14:06
Speaker 1: And maybe it starts with a bigger question, which is
14:10
Speaker 1: a very big discussion right now all over the world
14:13
Speaker 1: what is the value of my money, which again comes
14:17
Speaker 1: from a confluence of circumstances of zero interest rates, a
14:21
Speaker 1: very big discussion about inflation, UH, and the fact that
14:25
Speaker 1: governments all around the world are printing money and at
14:28
Speaker 1: unprecedented rates are leading a whole generation to ask, what
14:33
Speaker 1: is the value of my dollars or euros or pounds
14:36
Speaker 1: and where can I invest my money so it will
14:39
Speaker 1: grow over time. I'm not sure if you saw the
14:43
Speaker 1: John Paulson interview UM with David Rubinstein we had on
14:47
Speaker 1: the area yesterday, but essentially the investor so famous for
14:51
Speaker 1: his big short during the crash of the housing market,
14:55
Speaker 1: said he doesn't recommend buying crypto at all. He thinks
15:00
Speaker 1: it's just worthless UM asset that is speculated on because
15:07
Speaker 1: of you know, I think what was the line, paul
15:09
Speaker 1: limited availability, limited supply of nothing. UM. Do you think
15:15
Speaker 1: it matters to UM young investors today? What the hedge
15:20
Speaker 1: fund titans of yesteryear think about crypto? I think not
15:27
Speaker 1: everybody has to love every asset in order for that
15:31
Speaker 1: asset to be successful over time. Not everybody loves Facebook.
15:38
Speaker 1: But Facebook is a successful company and a lot of
15:40
Speaker 1: investors in a Facebook stock have a scene appreciation over time.
15:46
Speaker 1: I can definitely say the same about Tesla stock and
15:49
Speaker 1: Amazon stock, who have had a lot of uh negative
15:53
Speaker 1: sort of people talk about it in sort of in
15:56
Speaker 1: past years, right when when Amazon in the only two
16:00
Speaker 1: thousands in Tesla just three, four or five years ago.
16:03
Speaker 1: I think, you know, every investor has his own right
16:07
Speaker 1: to analyze and to evaluate different markets. There's no doubt
16:12
Speaker 1: that the crypto markets one are super interesting and second
16:16
Speaker 1: are a sort of a generational asset class. The majority
16:20
Speaker 1: of investors any toro are under forty uh and uh.
16:25
Speaker 1: The majority of investors a toro hold both equities, so
16:29
Speaker 1: both stock markets as well as crypto assets. So I
16:34
Speaker 1: would generally say it's great when we have super smart
16:38
Speaker 1: people like Elon Musk, Casey wood and and and Jack
16:41
Speaker 1: Dorsey talk about crypto and and believe in in bitcoin
16:45
Speaker 1: and support it. But you don't need necessarily every investor
16:51
Speaker 1: in the world to believe in bitcoin in order for
16:54
Speaker 1: it to be successful over time. So generally you should
16:58
Speaker 1: always expect some people naysayers, otherwise the price would already moon.
17:03
Speaker 1: So you only I guess probably one of the next
17:05
Speaker 1: steps that a lot of people are are looking at
17:08
Speaker 1: in terms of the development of the crypto market. Writ
17:10
Speaker 1: large is some type of regulation. UH. What is your
17:14
Speaker 1: view of regulating the crypto market? How do you think
17:17
Speaker 1: it should play out? UM? What are your thoughts there?
17:21
Speaker 1: So we've we've founded ed Toro before crypto was out there,
17:26
Speaker 1: and we are a regulated financial institution. Were regulated in Europe,
17:30
Speaker 1: in the UK and Australia here in the US as
17:34
Speaker 1: well as expanding our our regulatory licenses both in Asia
17:39
Speaker 1: and the Middle East. So there's no doubt that when
17:42
Speaker 1: you think about consumers, when you think about retail investors, U,
17:48
Speaker 1: regulators are there to protect customers interest. That is the
17:54
Speaker 1: role and that is why a significant part of retail
17:58
Speaker 1: investors will eventually work with regulated financial institutions. I think
18:03
Speaker 1: regulators are definitely catching up. They see a lot of
18:06
Speaker 1: the benefits of blockchain technology UH and its value actually
18:12
Speaker 1: to eventually provide both innovation and protection to customers interests UH.
18:18
Speaker 1: And I think what we're seeing now, as we see
18:20
Speaker 1: in any innovation in any market that's regulated, regulators are
18:25
Speaker 1: learning and are putting in the rules in place to
18:28
Speaker 1: be able from one hand, to promote innovation and to
18:32
Speaker 1: to enable efficient markets and the growth of those markets,
18:35
Speaker 1: and in the same time protect customer interests. And we
18:39
Speaker 1: see that with with regulators all around the world. I
18:42
Speaker 1: think as in any market that's growing fast and striving
18:47
Speaker 1: on limitless innovation, it's it's very important to balance between
18:51
Speaker 1: fantastic joy Thank you so much for joining us. We
18:53
Speaker 1: really appreciated getting an update their Yuning I see CEO
18:56
Speaker 1: of El Toro. Home price gains set another record, fueled
19:04
Speaker 1: by bidding wars. Now for some of us, that's good news,
19:08
Speaker 1: for others not so much. Let's get the latest. We
19:12
Speaker 1: can do that with Sam Dunlop. He's a Chief Investment
19:14
Speaker 1: Officer of Public Strategies at angel O Capital Advisors about
19:17
Speaker 1: thirteen billion dollars in assets under management. Joining us on
19:21
Speaker 1: the phone from Atlanta, Sam, We're seeing these amazing surges
19:25
Speaker 1: in residential real estate. UM My question is is this
19:29
Speaker 1: a COVID fueled short term anomaly or is this something different?
19:36
Speaker 1: You know, it's definitely got some COVID um effects, clearly,
19:41
Speaker 1: but I think the real key, uh, you know, really
19:44
Speaker 1: going into the pandemic was that we were dealing with
19:47
Speaker 1: a pretty significant supply and demand mismatch of single family housing. UM.
19:52
Speaker 1: You know, prior to COVID, we were very optimistic on
19:55
Speaker 1: the housing market going into COVID. UH. Clearly COVID was
19:59
Speaker 1: a huge disruption, but coming out of COVID, UH, it
20:02
Speaker 1: really exacerbated the extraordinary supply to mean mismatch that we
20:07
Speaker 1: currently have. Just the the rise of the millennial as
20:10
Speaker 1: well as just the lack of investment in housing after
20:13
Speaker 1: the global financial crisis, you know, coupled with the pandemic
20:17
Speaker 1: and all time low mortgage rates just has home prices surging.
20:20
Speaker 1: I said, So, those are the two key issues then, Sam, right,
20:24
Speaker 1: the UM first one the idea that millennials weren't going
20:27
Speaker 1: to buy homes. As a result, I guess, uh, we
20:31
Speaker 1: weren't building as many as we should have. And the
20:33
Speaker 1: second is people weren't investing in homes as UM financial
20:39
Speaker 1: as a financial asset as well as a residential you
20:43
Speaker 1: know solution. And that changed during during the pandemic. Yeah. Absolutely,
20:48
Speaker 1: just just not seeing enough units come online, you know,
20:52
Speaker 1: to keep pace with uh, the already extraordinary supply shortage.
20:56
Speaker 1: I mean, just to give you some context, the National
20:58
Speaker 1: Social Association of Realtors, you know, they recently put out
21:01
Speaker 1: the single family supply demand gap was approximately six million
21:05
Speaker 1: units currently and when you couple the millennials as they
21:09
Speaker 1: as they come online in the housing market, there's you know,
21:12
Speaker 1: expected to be an additional three million units that will
21:16
Speaker 1: need over the next five years potentially to meet that demand. So, uh,
21:20
Speaker 1: you know, when you had the housing market really at
21:22
Speaker 1: the center of the of the last global financial crisis,
21:25
Speaker 1: you just had a lack of construction and lack of
21:27
Speaker 1: investment to meet those uh, pretty extraordinary macro conditions. So
21:32
Speaker 1: this has been a long time coming, but COVID has
21:34
Speaker 1: certainly exaggerated the effects. Especially uh, you know that Powell
21:39
Speaker 1: has taken us not only to the zero bound, but
21:41
Speaker 1: you know, continues to buy agency mortgages and treasuries and earnest.
21:45
Speaker 1: So talk to us about the mortgage market here is
21:47
Speaker 1: I know, there's you know, back in two thousand eight
21:50
Speaker 1: with the financial crisis, you know, a lot of it
21:51
Speaker 1: was just very poor credit standards, which led to you know,
21:56
Speaker 1: people who were barring that probably should not have been barring,
21:59
Speaker 1: and so on and so forth. Give us a sense
22:00
Speaker 1: of how you view the mortgage market here. Yeah, it's
22:04
Speaker 1: a great question, you know, we really look at and
22:06
Speaker 1: and and other market participants do as well. Uh, you know,
22:10
Speaker 1: shameless plug form Bloomberg. There there's a mortgage credit availability
22:13
Speaker 1: index that the Mortgage Bankers Association puts out that that
22:17
Speaker 1: you view on your terminal there. But uh, you know,
22:20
Speaker 1: it's the higher that score, the more available credit is.
22:23
Speaker 1: And if you look back to the preglobal financial crisis period,
22:26
Speaker 1: that index got as high as, uh the mid eight hundreds. Uh.
22:30
Speaker 1: And just to give you some context today, you know
22:32
Speaker 1: we're in the low one hundreds area. Uh. And you've
22:35
Speaker 1: just seen very little credit expansion uh in the post
22:39
Speaker 1: global financial crisis period, but you also saw a pretty
22:42
Speaker 1: significant amount of tightening uh and residential mortgage credit abilbility
22:47
Speaker 1: after the COVID crisis. So uh, that index got as
22:50
Speaker 1: high as one eighty pre COVID and now it's collapsed
22:53
Speaker 1: down to the one twenties today. So uh. You know,
22:56
Speaker 1: as far as looking at mortgages as an investment for
23:00
Speaker 1: for healthy credit quality, UH, it's certainly an area we've
23:03
Speaker 1: been focused on, just because you haven't seen credit credit
23:06
Speaker 1: standards really expand, especially from from some of the peak
23:10
Speaker 1: that we saw in the pre global financial crisis period,
23:13
Speaker 1: Is there any concern that we're looking at a bubble
23:16
Speaker 1: that could pop? You know? The good news is, I
23:20
Speaker 1: would say from a from a bubble perspective, and what
23:22
Speaker 1: we've been focused on is not only the credit standards
23:25
Speaker 1: that we talked about, but just the reduced amount of
23:28
Speaker 1: leverage UH and just the reduced amount of fraud in
23:31
Speaker 1: our view that that drove that bubble. And the pre
23:34
Speaker 1: global financial crisis period. You know, not only have mortgage
23:37
Speaker 1: credit standards tightened dramatically, but you've just seen a whole
23:41
Speaker 1: host of regulation and focus from the CFPB and the
23:44
Speaker 1: and the qualified mortgage rules and guidelines that has really
23:48
Speaker 1: improved the integrity of the of the origination process in
23:51
Speaker 1: the US. So it's not driven by a leverage per se,
23:54
Speaker 1: which is very important from a health perspective, and just
23:57
Speaker 1: looking at those fundamentals you're seeing it really driven by
24:00
Speaker 1: this supply and demand mismatch that we're seeing and again
24:02
Speaker 1: a very accommodative fed that we don't see going away
24:05
Speaker 1: anytime soon. Sam, thanks so much for joining us. Sam
24:07
Speaker 1: dunlap Is, Chief investment Officer of Public Strategies, angel Oak
24:11
Speaker 1: Capital Advisers. Thanks for listening to the Bloomberg Markets podcast.
24:15
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Speaker 1: or whatever podcast platform you prefer. I'm Matt Miller. I'm
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Speaker 1: on Twitter at Matt Miller three and on Fall Sweeney
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Speaker 1: I'm on Twitter at pt Sweeney. Before the podcast, you
24:29
Speaker 1: can always catch us worldwide at Bloomberg Radio