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Inflation, Crypto, Commodities, And Credit (Podcast) · Bloomberg Intelligence

0:00
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
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Speaker 1: my co host Matt Miller. Every business day we bring
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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
0:11
Speaker 1: with essential market moving news on 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. All right, the Inflation
0:22
Speaker 1: Reduction Act. Matt and I talked about it a lot,
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Speaker 1: as it relates to E s G, As it relates
0:27
Speaker 1: to taxes, as it relates to climate. But the title
0:30
Speaker 1: Inflation Reduction Act, as I read through it, I'm like
0:33
Speaker 1: my hands around it. Is it reducing inflation? I don't know. Say.
0:36
Speaker 1: Yesterday we talked with Sadequaba right from I Squared Capital
0:40
Speaker 1: Infrastructure at Morgan Stanley. This guy is super plugged in
0:43
Speaker 1: and way smarter than me, like exponentially smarter, and he
0:46
Speaker 1: said it is longer term going to have a serious
0:49
Speaker 1: impact inflation. All right, Good for him. Carol Murphy's CEO
0:52
Speaker 1: of Kestro Holdings, joins us today. Carol, what do you
0:55
Speaker 1: what's your read of this Inflation Reduction Act? How should
0:57
Speaker 1: we think about it? Here? Well, I have to say,
1:01
Speaker 1: I'm with you, guys, and I think the title is
1:03
Speaker 1: a very clever piece of marketing, so kudos to whoever
1:07
Speaker 1: came up with the name. But I agree once you
1:10
Speaker 1: dig in, I mean, this is really about climate change policy.
1:13
Speaker 1: It's about access to healthcare. It's not about inflation. The
1:17
Speaker 1: thing that I mean, I understand why they named it
1:20
Speaker 1: that right got to it. They're selling it, and I
1:23
Speaker 1: don't even know how smart it was, because when you
1:25
Speaker 1: look at the details, you start to think this has
1:27
Speaker 1: nothing to do with inflation. But what gets me is
1:31
Speaker 1: they left in the carried interests tax loophole for you know,
1:35
Speaker 1: rich pe guys. And good for those rich pe guys.
1:37
Speaker 1: I'm not, you know, knocking them, but it just doesn't
1:40
Speaker 1: sound like something that Democrats would do. Then they didn't
1:42
Speaker 1: put the salt deduction in, which hurts middle class people
1:45
Speaker 1: like me, you know, and that seems like something the
1:48
Speaker 1: Democrats would want to I understand how this is a
1:50
Speaker 1: Democratic bill. Frankly on the tax side of things. Yeah,
1:55
Speaker 1: I have to agree, And it's a disappointment that those
1:57
Speaker 1: two got you know, left on the cutting room floor.
2:00
Speaker 1: I think those those are those have been objectives of
2:02
Speaker 1: you know, Democrats and others for quite some time now.
2:05
Speaker 1: They did get in the corporate minimum tax, which has
2:08
Speaker 1: been a goal and attack on share repurchases. So you know,
2:12
Speaker 1: that gets a little bit more to turn the screws
2:14
Speaker 1: on some companies in a way that you know supports
2:17
Speaker 1: democratic policy goals. UM. But I think you know, some
2:20
Speaker 1: of those other things that were left out were disappointed.
2:22
Speaker 1: What do you think about that? I mean, are they
2:24
Speaker 1: throwing a big giant blanket over all large corporations and saying,
2:30
Speaker 1: you know, these companies are all from now, I'm gonna
2:32
Speaker 1: pay minimum No. I mean when we look at the numbers,
2:37
Speaker 1: it's really just on the margin. I mean, it's a
2:39
Speaker 1: handful of companies that are going to be very impacted
2:42
Speaker 1: by that corporate minimum tax UM. And I think politically
2:45
Speaker 1: it plays very well to write this idea that very large,
2:49
Speaker 1: very profitable companies are able to avoid paying any taxes
2:52
Speaker 1: does not fit well with a lot of Americans. So
2:55
Speaker 1: I think it helps to kind of close the loophole,
2:57
Speaker 1: but really isn't going to impact all that many company
3:00
Speaker 1: me Karrot, we we've got somebody here at Bloomberg govin Signarelli.
3:04
Speaker 1: He's a strategist force here, and he spent his career
3:06
Speaker 1: on Wall Street trading UH currencies and bonds and all
3:09
Speaker 1: that kind of stuff. He kind of says, this focused
3:11
Speaker 1: by the FED on inflation is misplaced. He kind of
3:15
Speaker 1: feels like inflation is kind of taking care of itself.
3:17
Speaker 1: And I only look at you know, I look at
3:19
Speaker 1: gasolene prices three dollar for regular a gallant? Thank you?
3:24
Speaker 1: Did I say bar a gallant? I do that all
3:26
Speaker 1: the time. Okay, So that's for a regular unletted. So
3:31
Speaker 1: what's you're calling inflation here? So it's interesting because we've
3:35
Speaker 1: sort of been in that same camp, and that for
3:38
Speaker 1: good prices at least, it's pretty easy to follow the
3:42
Speaker 1: pig and the python and see how these inflationary pressures
3:45
Speaker 1: are working themselves out, and you know, things like container prices, subsiding,
3:50
Speaker 1: commodity prices easing. The harder part is on the services side.
3:55
Speaker 1: Those are prices that tend to move around a lot
3:57
Speaker 1: less and have still seen a lot of inflation. Um
4:00
Speaker 1: those prices tend to be very closely aligned with the
4:03
Speaker 1: labor market. So cooling the labor market is going to
4:07
Speaker 1: be really key to bringing that down. And we started
4:10
Speaker 1: to see some anecdotal evidence that the labor marketed cooling,
4:13
Speaker 1: but that typically takes a lot longer, so I think
4:16
Speaker 1: that will be the more difficult objective. Well, and not
4:18
Speaker 1: even um really anecdotal anymore. Yesterday I saw a survey
4:23
Speaker 1: from Price Waterhouse Coopers and they talked to more than
4:27
Speaker 1: seven US executives and board members across a range of industries.
4:31
Speaker 1: They said are They found that half of respondents said
4:35
Speaker 1: they're reducing headcount or planned to, fifty two percent have
4:38
Speaker 1: implemented hiring freezes. Um more than four and ten are
4:42
Speaker 1: ascending job offers. This is These are some real storm
4:46
Speaker 1: clouds on the horizon, yeah, for sure, and those will
4:50
Speaker 1: start to work their way into the actual numbers over
4:52
Speaker 1: the next couple of months. So I think this will be,
4:55
Speaker 1: you know, a big headwind. And I've been warning folks
4:59
Speaker 1: who are sort of newer to the job market that
5:02
Speaker 1: this is not a normal job market. This is so
5:05
Speaker 1: much easier to get a job than we often see
5:08
Speaker 1: during cycles. So I think folks who have only been
5:10
Speaker 1: in the job market for a couple of years really
5:12
Speaker 1: need to brace themselves. But Karen, can I ask you
5:14
Speaker 1: about something completely different here? Looking through your resume Um,
5:17
Speaker 1: I'm guessing you fell in love with Prague at some
5:19
Speaker 1: point and decided to stay there for a while. Do
5:22
Speaker 1: they not have the best beer in the world? I
5:25
Speaker 1: have never in all of my travels, and I drink
5:27
Speaker 1: beer everywhere I go, have better beer, had better beer
5:31
Speaker 1: than in the Czech Republic. It is so true. And
5:34
Speaker 1: the tech pride themselves on drinking the largest amount of
5:37
Speaker 1: beer per capita. And there's a reason that's great. So alright, So, Karen,
5:44
Speaker 1: I mean, you know, it's interesting in this economy here
5:47
Speaker 1: we focus on the consumer. The consumer seems like in
5:50
Speaker 1: pretty decent shape. It seems like the consumer has been
5:53
Speaker 1: so confounding because you're absolutely right, you know, job we
5:57
Speaker 1: we talked about the job market slowing, but right now
5:59
Speaker 1: it's very very strong. Wages are up, consumer balance sheets
6:04
Speaker 1: are very strong, but consumer confidence continues to look really poor.
6:09
Speaker 1: I mean, it's among the lowest that we've had in
6:11
Speaker 1: quite a number of years. So consumers are spending money
6:15
Speaker 1: like they feel good, but they're telling us that they
6:17
Speaker 1: don't feel good. And I'm worried that's going to fall
6:19
Speaker 1: off a cliff here when this when this job news
6:23
Speaker 1: comes home to roost and savings are down. I know
6:26
Speaker 1: that data is a little bit sketchy, but um credit
6:28
Speaker 1: card uses going up at some point, I'm worried consumer. Right,
6:32
Speaker 1: all right, Karen, thank you so much for joining us.
6:33
Speaker 1: Kara Murphy, c IO of Chestra Holdings here. She has
6:37
Speaker 1: a master's International Relationship University of Chicago and it be
6:41
Speaker 1: as an international politics from Georgetown. That's pretty darn good.
6:44
Speaker 1: I mean, you go to Georgetown, you're thinking about public service,
6:48
Speaker 1: you know, going into government, all that kind of good stuff.
6:50
Speaker 1: And then she gets a masters in Chicago. Not bad.
6:58
Speaker 1: Looking at bitcoin off eight point four seventy five four
7:03
Speaker 1: bitcoin and we can talk bitcoin because Tom Keen is
7:05
Speaker 1: not here. It's generally during surveillance. It is a bitcoin
7:08
Speaker 1: free studio. But Everett Millman East, chief markets analyst at
7:12
Speaker 1: Gainesville Coins. You look at precious metals at Gainesville Coins. Everett,
7:16
Speaker 1: but we also like talking to you about bitcoin. Any
7:20
Speaker 1: thoughts here about what we're seeing? Is this just a
7:22
Speaker 1: trading thing that isn't because of the FED? It's because
7:25
Speaker 1: of the Fed? Right? Yeah, I guess you're right. I
7:27
Speaker 1: guess you're right. What do you what do you have
7:28
Speaker 1: for us effort? Well? Sure, I think basically across markets
7:33
Speaker 1: right now, pointing to the FED is going to be
7:36
Speaker 1: the correct answer more often than not. But really, what
7:38
Speaker 1: I look at with the cryptocurrency market as it stands
7:41
Speaker 1: is it's caught in a bit of a catch twenty two. UM.
7:44
Speaker 1: The lack of a regulatory one of my favorites. The
7:49
Speaker 1: lack of a regulatory framework UM is certainly hampering adoption
7:53
Speaker 1: of bitcoin and other cryptos. But on the other hand,
7:57
Speaker 1: tight regulation really is antithetical to the core principles of
8:02
Speaker 1: bitcoin and many other cryptos, which is to say that, um,
8:05
Speaker 1: they're the entire animust behind bitcoin is to have completely
8:09
Speaker 1: private and largely anonymous transactions through a decentralized network. So
8:14
Speaker 1: the more that regulation comes in, the less likely that
8:18
Speaker 1: is to be the case. But again, I think almost
8:20
Speaker 1: anyone involved in the crypto space wants to see some
8:23
Speaker 1: sort of regulation to kind of put some people's fears
8:26
Speaker 1: to rest. Well, it's exactly the people who are selling
8:29
Speaker 1: you know, the picks and uh wheelbarrows that they want
8:34
Speaker 1: to see regulation because that's how they make their money
8:37
Speaker 1: on on the whole gold rush, not actually the gold
8:40
Speaker 1: The people who are into um bitcoin for real don't
8:44
Speaker 1: want to see UM censorship, government censorship allowed on money right.
8:49
Speaker 1: I talked to UM, the CEO of Cracking, a couple
8:52
Speaker 1: of days ago, and I thought it was really interesting
8:54
Speaker 1: because he's kind of torn. Cracking is one of the
8:56
Speaker 1: biggest crypto exchanges. Jesse Powell is the CEO, and he's you.
9:00
Speaker 1: And what you talked to him, you can see he's
9:01
Speaker 1: clearly torn because on the one hand, he has this business,
9:04
Speaker 1: he employs a ton of people, he wants to make money,
9:06
Speaker 1: and regulation and working with the government is he goes
9:09
Speaker 1: hand in hand with that. On the other hand, he's
9:11
Speaker 1: clearly like an early stage bitcoiner who wants who has
9:15
Speaker 1: the kind of libertarian viewpoint, and you just can't reconcile
9:18
Speaker 1: those two things. I tend to agree. I think the
9:22
Speaker 1: the idealism behind bitcoin, as he said, to have this
9:25
Speaker 1: sort of libertarian bent to being sound money and being
9:28
Speaker 1: censorship resistant UM. Even on a personal level, that was
9:32
Speaker 1: one of the main reasons that I got interested in
9:34
Speaker 1: bitcoin early on. But as we see, there really does
9:38
Speaker 1: need to be some establishment backing UM, and you know,
9:42
Speaker 1: some regulation would certainly spur that. We've seen that over
9:46
Speaker 1: the past year. A lot of major US corporations have
9:49
Speaker 1: been rather enthusiastic investors in crypto startups, but it's still
9:54
Speaker 1: on the order of about a billion dollars over a
9:57
Speaker 1: twelve month period. UM. That's being held back because again,
10:01
Speaker 1: if they make those investments, they start businesses and then
10:04
Speaker 1: here comes Washington with a hammer to crush all of
10:07
Speaker 1: those businesses. Well, that's um, that's that's a reason to
10:11
Speaker 1: not invest. That's the reasons shy away. So we're still
10:13
Speaker 1: seeing that playoff. Well, I mean every I tend to
10:15
Speaker 1: see it like this. There does need to be regulation,
10:18
Speaker 1: and there has to be a framework for bitcoin to
10:21
Speaker 1: work with governments around the world. If you wanted to
10:24
Speaker 1: trade trade for twenty dollars, right, if you want a
10:27
Speaker 1: bitcoin to cost ten tho dollars, if you need it
10:29
Speaker 1: to cost five grand for bitcoin, then yes, but not
10:33
Speaker 1: if you don't care about that, Not if you're someone
10:36
Speaker 1: who wants to use bitcoin just within the community of
10:40
Speaker 1: people who all have the same principles, Because if you
10:43
Speaker 1: open it up to regulation, as we've seen with um,
10:46
Speaker 1: the Russian invasion of Ukraine, they're gonna censor it. They're
10:49
Speaker 1: going to tell exchanges you can't trade with anybody who
10:52
Speaker 1: has a Russian residence, which I mean you can have
10:56
Speaker 1: your own view on what Vladimir Putin does, but certainly
11:00
Speaker 1: random dude you know in in the uh suburban or
11:04
Speaker 1: urban areas or rural areas of Russia has little to
11:08
Speaker 1: do with that, correct. And and that is a constant
11:12
Speaker 1: threat um, not just from censorship, but from the idea
11:16
Speaker 1: that uh, you know, governments and central banks would sort
11:19
Speaker 1: of co opt the idea with central bank digital currencies.
11:23
Speaker 1: That would because their government money, they would be very um,
11:28
Speaker 1: they would have no resistance to to censorship. Um. And
11:31
Speaker 1: we're still obviously although bitcoin has been around about a decade,
11:35
Speaker 1: we're still these early stages where the the pass forward
11:40
Speaker 1: is not entirely clear. And then we have to also
11:43
Speaker 1: take into account that it is not like bitcoin against
11:47
Speaker 1: one central enemy. Um. You have governments all over the
11:51
Speaker 1: world with their own individual interests that are kind of
11:54
Speaker 1: attacking this problem from their own angles. So I think
11:57
Speaker 1: that does create a although a very kind of wild
12:00
Speaker 1: West dynamic. Um, it is still fertile ground for some
12:04
Speaker 1: growth and experimentation with how how best to tackle is
12:07
Speaker 1: from a regulatory standpoint, Where is Lutz, Florida, Ah, So
12:13
Speaker 1: it was just north of Tampa. It's in the Tampa
12:16
Speaker 1: Bay area. That's where uh you guys, that's for your base, right, Yes,
12:21
Speaker 1: that's where Gainesville Coins headquarters. Of the name is a
12:23
Speaker 1: holdover from where we were founded. Um, but we do
12:26
Speaker 1: also have offices internationally, um in London and one in Singapore. Alright,
12:31
Speaker 1: So Gainesville is what's Gainesville? Isn't that the Gators? Is that?
12:35
Speaker 1: The University of Florida? Yeah, the University of Florida in
12:38
Speaker 1: the central part of the state. Alright, awesome, all right?
12:40
Speaker 1: And then Tallahassee's Florida State. I'm just getting my because
12:43
Speaker 1: you think about Florida, you know, you know, I just
12:45
Speaker 1: kind of think South Florida. But you gotta you gotta
12:47
Speaker 1: go to tahas for Florida State. Well, personally, I love
12:50
Speaker 1: the Panhandle the best, the best beaches, literally, folks listening
12:56
Speaker 1: around the world, you want to go to the best
12:57
Speaker 1: beaches in the US destin Florida and that kind of panhandles. Awesome?
13:01
Speaker 1: All right, Everett, thanks so much for joining us. We
13:03
Speaker 1: always appreciate talking to you. Everett Millman. He's a chief
13:05
Speaker 1: market analyst at Gainesville Coins. Located and beautiful Lut's Florida,
13:10
Speaker 1: just north of Tampa, Matt. I spend a lot of
13:14
Speaker 1: time in the central California coast, and I tell you,
13:19
Speaker 1: you know, like around Selina's you look as far as
13:21
Speaker 1: the eye can see literally our farms, and it's like
13:26
Speaker 1: we're most It just seems like most of our countries
13:30
Speaker 1: fruits and veggies come from. I mean, they're just everywhere
13:32
Speaker 1: for Aunt, miles and miles and miles and miles and miles.
13:35
Speaker 1: And one of the big companies there in Watsonville, uh
13:39
Speaker 1: is Drift Calls Thinks Strawberries, fresh strawberries. Those are the
13:42
Speaker 1: folks that bring you that kind of stuff so sore
13:43
Speaker 1: and boring. He's a president of Drift Calls of the America's.
13:47
Speaker 1: They are in fact based in Watsonville, California, near my
13:50
Speaker 1: crib in Carmel. Uh sore and thanks so much for
13:53
Speaker 1: joining us here. Talk to us about your business here.
13:56
Speaker 1: How's it from both a supply you know, in terms
14:00
Speaker 1: of the farms, the the environment, all that type of stuff,
14:05
Speaker 1: as well as the demand for your products. Yeah, and
14:09
Speaker 1: for the most part, I would say these things have
14:10
Speaker 1: been pretty good. Um. I think the reality is there's
14:14
Speaker 1: more people work from home and had to get a
14:16
Speaker 1: mid morning snack on afternoon snack. You know, they went
14:19
Speaker 1: to varies very frequently. And so the demand side in
14:22
Speaker 1: officiness has been very strong the last couple of years,
14:25
Speaker 1: and we actually don't really see that ending as we're
14:27
Speaker 1: sort of coming out on the other side. And so
14:29
Speaker 1: I think the demand side has been very good. Production
14:32
Speaker 1: is way more challenged. M We certainly had some pretty
14:36
Speaker 1: significant weather events, and an inflation, of course, is hitting us.
14:39
Speaker 1: I mean, we are planning next year's crop right now,
14:43
Speaker 1: and we are doing that with a cost structure that
14:46
Speaker 1: that we've never seen before. So what so inflation is
14:48
Speaker 1: gonna be with us? I can think of a few
14:51
Speaker 1: ways in which inflation would hit you. One of the
14:54
Speaker 1: stories we've been seeing a lot lately is the water
14:57
Speaker 1: shortage in California. Is that an issue for you? I
15:01
Speaker 1: mean a different issue in the long run. I think
15:03
Speaker 1: the reality is we have it off water today to
15:07
Speaker 1: grow up the crops we have, but we are several
15:10
Speaker 1: places where we're getting rationed down to sort of the
15:12
Speaker 1: minimum level where that we need. And if we get
15:15
Speaker 1: rationed anymore, then then some of the crops will not
15:17
Speaker 1: be combiable. So if you get rationed anymore. You can't say,
15:21
Speaker 1: all right, well we'll spend another ten There's there's little
15:25
Speaker 1: you can do, right, Yeah, I mean typically the way
15:28
Speaker 1: it it gets allocated out is like on a per
15:30
Speaker 1: acre basis, and we need about two and a half
15:33
Speaker 1: a computer water to grow strawberry crop. And if our
15:36
Speaker 1: allocation goes below that, you're just not going to have
15:39
Speaker 1: a product to crop. Right. So, and we are right
15:41
Speaker 1: there on the on the edge of that in a
15:42
Speaker 1: couple of districts in southern California. So and talk to
15:46
Speaker 1: us about your labor situation. We hear about it, you know,
15:49
Speaker 1: across almost every single industry, uh, you know, over the
15:52
Speaker 1: less several years, a labor shortage, and of course your
15:55
Speaker 1: labor uh you know market is a little bit unique.
15:58
Speaker 1: It's a lot of immigrants, legal and illegal. Talk to
16:02
Speaker 1: us about your labor supply kind of what you're doing there. Yeah,
16:06
Speaker 1: I mean I think that what's happening in California now,
16:09
Speaker 1: it's we're finally seeing a significant increase in the agricultural
16:13
Speaker 1: labor coming in under the age to a guest worker program.
16:17
Speaker 1: Really not something that you saw very much in California.
16:19
Speaker 1: Is much more common on the East Coast and that
16:23
Speaker 1: wasn't needed to supplement the shortage that we have. Without that,
16:26
Speaker 1: we we simply couldn't pick the crops. And we expect
16:29
Speaker 1: that to increase year after yearfter year going forward. So
16:32
Speaker 1: even if you're bringing in workers from other countries, I'm
16:35
Speaker 1: assuming um wage costs are still going up. There must
16:39
Speaker 1: be some pressure there with the inflation that everyone's seeing. Yeah,
16:43
Speaker 1: and I think on top of that, you know, California
16:45
Speaker 1: has passed, you know, a number of pieces of legislation
16:47
Speaker 1: that's made labor costs a lot more expensive. So even
16:50
Speaker 1: before you know, the general economy start feeling inflation, we've
16:55
Speaker 1: been feeling inflation for quite a long time. I would
16:57
Speaker 1: say for almost ten years. Labor costs has been going
17:00
Speaker 1: up twice the rate of inflation. And so we've been
17:03
Speaker 1: dealing this for a long time. And so efficiencies and
17:07
Speaker 1: increasing productivity has been a major focus of ours for
17:10
Speaker 1: you know, I would say the last six seven years.
17:13
Speaker 1: So our consumers willing to pay um the boost in prices.
17:18
Speaker 1: You know, every time I go to the grocery store,
17:20
Speaker 1: I throw a couple of boxes of strawberries and blueberries
17:23
Speaker 1: in the cart without looking. But my wife says, wait
17:25
Speaker 1: a second, those are ten dollars a box. You know,
17:27
Speaker 1: I don't know where we're shopping, but you get my
17:29
Speaker 1: you get my point. Yeah, absolutely, So yeah, I think
17:33
Speaker 1: the good nurses and it's that consumers are willing to
17:36
Speaker 1: pay for really good fruits. Okay, that's you know, if
17:40
Speaker 1: consumers are not going to trade down to cheaper, lower
17:43
Speaker 1: quality strawberries. I think that the evidence of that is
17:46
Speaker 1: very clear. Our company has historically done well and there's
17:50
Speaker 1: been an economic downturn because consumers may trade down their
17:53
Speaker 1: car or the vacation or not eat out as much,
17:56
Speaker 1: but they're not they're never trading down the quality of
17:59
Speaker 1: their berries when they eat them at home. So so
18:01
Speaker 1: that's definitely we believe that that's here to stay. And
18:04
Speaker 1: that's how that makes sense. Right. This is a relatively
18:06
Speaker 1: cheap indulgence and there's really no reason to go off
18:10
Speaker 1: to the three dollars strawberries when you can get better
18:12
Speaker 1: for dollar strawberries. So dry schools again, I know the
18:17
Speaker 1: Brandon listeners. Go google it. You'll you'll recognize the brand immediately.
18:21
Speaker 1: When when when you see it, Um, who does the
18:25
Speaker 1: average California strawberry? Who does that? Who? Does it compete
18:29
Speaker 1: with you know, I think we we like to think
18:32
Speaker 1: that we compete against you know, there's snacking alternatives, right,
18:35
Speaker 1: and that's what we've seen throughout the pandemic. We're not
18:38
Speaker 1: really competing against the other fruits. We really mean competing
18:43
Speaker 1: for a share the consumer stomach. And so we are
18:46
Speaker 1: really focused on going outside and looking to bring consumers
18:49
Speaker 1: into coming in from other categories and and make them,
18:53
Speaker 1: you know, make a healthier choice and eat fresh berries instead.
18:56
Speaker 1: I was wondering what the cheaper I guess the cheaper
18:58
Speaker 1: alternative would just be old and yuckier, as my daughter
19:02
Speaker 1: would say, strawberries. So you're obviously going to pick the
19:05
Speaker 1: best looking box that you can find at the store,
19:07
Speaker 1: right what what what you don't You don't compete with bananas,
19:12
Speaker 1: You don't compete with Kiwi's or blueberries. I mean, in
19:17
Speaker 1: the end, there's only so much fruit that ends up
19:19
Speaker 1: in the shopping basket. So of course there is some
19:21
Speaker 1: of that going on and um, but your strawberries is
19:25
Speaker 1: by far the number one category in produce and is
19:28
Speaker 1: the fastest growing category, has been so for ten years.
19:31
Speaker 1: It's not twice the size, So the the second biggest
19:33
Speaker 1: fruit category, which would be apples, and uh, you know,
19:37
Speaker 1: bananas is not growing that much and hasn't really grown
19:39
Speaker 1: for a long time. And I think it's just it's
19:41
Speaker 1: the versatility of berries, is the health benefits of berries.
19:44
Speaker 1: It is the indulgence of berries, right, I mean, not
19:47
Speaker 1: too many categories to sort of check all the boxes.
19:50
Speaker 1: And we're very fortunate our stars so so. And just
19:54
Speaker 1: you know, I spent a lot of time in the
19:55
Speaker 1: Central Valley. I see the folks picking the berries. So
19:58
Speaker 1: my question is what the time between the barry getting
20:01
Speaker 1: picked in Watsonville or Salinas and getting to a supermarket
20:06
Speaker 1: in New Jersey. That's not expensive. It's got an expensi
20:11
Speaker 1: cificate against the truck across. I mean, well over ten
20:14
Speaker 1: thousand dollars would be typical to get that truck across.
20:17
Speaker 1: We will have it there in three to four days, right,
20:19
Speaker 1: and then it gets to a distribution center in New
20:21
Speaker 1: Jersey and then out to the store, right, And so
20:24
Speaker 1: you know, New Jersey consumers probably realistically I can get
20:27
Speaker 1: their hands on the berries in six to seven maybe
20:30
Speaker 1: eight days, depending on you know, exective way it's at.
20:32
Speaker 1: So you know it's pretty fast. Yeah, that's the kind
20:35
Speaker 1: of trucking I want to do. That's when I get
20:37
Speaker 1: my CDL. That's what I want to Watsonville. I'm not
20:40
Speaker 1: doing these little hundred mile John's. Yeah, I want to
20:42
Speaker 1: go across country in three to four days. All right.
20:44
Speaker 1: It's good stuff. I'm telling you, folks. You go to
20:46
Speaker 1: Central Valley, California, and it is amazing. And we're gonna
20:49
Speaker 1: go back to Central Valley. We're gonna go back to
20:51
Speaker 1: California just a little bit. You know why Why because
20:53
Speaker 1: we're gonna talk to the CEO of Lamborghini. He's a
20:55
Speaker 1: pebble beach. He's a pebble beach. All right, that's how
20:57
Speaker 1: far away? How far away are you staring from pebble Beach.
21:00
Speaker 1: I'm twenty miles away, okay. And I saw all the
21:02
Speaker 1: cars yesterday. So there you got all right, good stuff.
21:07
Speaker 1: So in boring the president of Driscoll's of the America's
21:10
Speaker 1: think strawberries, blueberries, all that kind of stuff. And I
21:13
Speaker 1: tell you, it's just all inspiring to see these huge,
21:17
Speaker 1: huge vegetable and fruit farms in the Central Valley of California,
21:21
Speaker 1: truly feeding the rest of the country. Truly cool stuff.
21:28
Speaker 1: Carmendo Royal joins us. She's a credit reporter for Bloomberg News.
21:31
Speaker 1: She's got an article out today showing the banks are retreating,
21:34
Speaker 1: some banks like even Wells far especially Wells Fargo. That's
21:38
Speaker 1: the one because that's where I had my mortgage. When
21:39
Speaker 1: I had my mortgage for about fifteen minutes, I got
21:41
Speaker 1: my mortgage from Wells Fargo. Carmen, How can a banks,
21:44
Speaker 1: how can the banking industry like like a Wells Fargo
21:48
Speaker 1: pulled back even slightly from the mortgage market. Isn't that
21:51
Speaker 1: what they're job is. Yes, of course that's that's what
21:58
Speaker 1: they do. But they do certain types of mortgages, especially
22:01
Speaker 1: after early um, before I wait, they did all kinds
22:03
Speaker 1: of mortgages. They did, like the risk here ones, the
22:06
Speaker 1: ones that work that are now backed by the government.
22:08
Speaker 1: But right now they've kind of retreated. They do only
22:11
Speaker 1: more like Freddie and Sandy Mac mortgages, which has left
22:15
Speaker 1: like a lot of space from non bank lenders to
22:17
Speaker 1: kind of grow in this risk here parts of the
22:20
Speaker 1: mortgage world. Um, and now that's becoming an issue with
22:23
Speaker 1: like basically no business coming in, rates really high and
22:27
Speaker 1: the whole change in the rate cycle. Yeah, so the
22:29
Speaker 1: rate cycle is basically killing this business. Is regulation also
22:33
Speaker 1: a part of that? I mean, the rates is something
22:35
Speaker 1: Carmen that we can very easily see. You look at
22:37
Speaker 1: the mortgage rates and they're up over five some I've
22:41
Speaker 1: seen as high as six UM, and so I understand
22:45
Speaker 1: consumers are going to be turned away by by that,
22:48
Speaker 1: having been used to very low rates for the last decade.
22:51
Speaker 1: What about regulations is that a part of the problem
22:54
Speaker 1: right now? Right like regulation was kind of part of
22:56
Speaker 1: the problem after early and a lot of banks retreated them.
23:00
Speaker 1: Right now, the cost of class of that is at
23:02
Speaker 1: right now basically um two thirds at the top twenty
23:05
Speaker 1: lenders are non bank lenders, whereas before the crisis, it
23:08
Speaker 1: was about a third of the top top twenty lenders
23:11
Speaker 1: were independent firms. And that's kind of the problem, the
23:14
Speaker 1: fact that this non non bank lenders have much less
23:17
Speaker 1: capital to kind of maneuver compared to banks, and they
23:20
Speaker 1: also don't have a lot of factcess to emergency funding
23:23
Speaker 1: or other lines of credit like that. So how bad
23:27
Speaker 1: is going to be for these uh, non bank mortgage lenders?
23:30
Speaker 1: I mean, it's again, as you mentioned, they don't have
23:32
Speaker 1: the capital, they don't have a lot of the support. Well,
23:34
Speaker 1: everybody's pulling out, wells Fargo is shrinking, and the non
23:37
Speaker 1: bank lenders can't participate. Who's going to be around to
23:40
Speaker 1: give us mortgages? Someone will be there, but not everyone's
23:44
Speaker 1: going to disappear, but it's certainly going to consolidate a
23:47
Speaker 1: little bit. They were, especially in this prescure space, there
23:51
Speaker 1: were which was basically only independent non banks UM there.
23:56
Speaker 1: That's where most of the pain is going to come
23:58
Speaker 1: from UM because that they don't have that government backing,
24:01
Speaker 1: so the loans drop in value. They can't really go
24:04
Speaker 1: to the g s c s to kind of get
24:06
Speaker 1: funding from them, and that's why we've seen like some
24:09
Speaker 1: bankruptcies and they've been mostly focused on this space. So
24:13
Speaker 1: you know, I'm looking at the uh the story here
24:16
Speaker 1: and there's a couple of names sprout mortgage, first guarantee, mortgage.
24:20
Speaker 1: I mean, I'm not even tried go for a mortgage
24:24
Speaker 1: with one of these people, but the rage right, you're
24:26
Speaker 1: gonna do it, I guess. But who goes to these
24:29
Speaker 1: types of mortgage players? So there is usually more for
24:33
Speaker 1: non qualified mortgages, which is, for instance, if you don't
24:37
Speaker 1: have like W two's or basically if you're not eligible
24:40
Speaker 1: for mortgages that are backed by Fannie and Freddy or Jinny. Um.
24:43
Speaker 1: So you that's the type of mortgages that are mostly
24:46
Speaker 1: done by non bank lenders. Uh, and that banks kind
24:50
Speaker 1: of retreated from after eight because they were the riskiest ones,
24:53
Speaker 1: and they were the ones that are kind of like
24:54
Speaker 1: got a little bit more regulated. First guarantees owned by Pimco. Yeah,
24:59
Speaker 1: that got my I mean, what are they doing in
25:01
Speaker 1: that business? All right? Good stuff interesting here? I mean
25:03
Speaker 1: it's uh, you don't think about it as much, but
25:05
Speaker 1: as you know, interest rates go up and maybe some challenges.
25:08
Speaker 1: I think about it. You don't think about it so
25:10
Speaker 1: much because you just sold your house and you never
25:12
Speaker 1: had a mortgage to begin with note dumped it. I
25:14
Speaker 1: think about it because it took me months to get
25:16
Speaker 1: a mortgage. It was a painful, painful process. Why you're
25:20
Speaker 1: you're a good credit right right? Well, well I did
25:22
Speaker 1: get a good rate, but I still had to, you know,
25:25
Speaker 1: show all of these documents. I had no idea where
25:27
Speaker 1: they are and with keep stuff. But you're a star
25:29
Speaker 1: on television that you just didn't say, Hey, go see
25:31
Speaker 1: me on TV tomorrow, And that's good enough. I said,
25:33
Speaker 1: you know what cable news fame, and they were like,
25:36
Speaker 1: who are you again? All right, Carmen Royo, credit reporter
25:40
Speaker 1: for Bloomberg News, with that story out today and her
25:42
Speaker 1: team looking at the kind of the the mortgage market,
25:46
Speaker 1: but not from some of the mortgage players you might
25:48
Speaker 1: think about. Thanks for listening to the Bloomberg Markets podcast.
25:54
Speaker 1: You can subscribe and listen to interviews with Apple Podcasts
25:57
Speaker 1: or whatever podcast platform you for her. I'm Matt Miller.
26:01
Speaker 1: I'm on Twitter at Matt Miller en seventy three. On
26:05
Speaker 1: Fall Sweeney, I'm on Twitter at pt Sweeney. Before the podcast.
26:08
Speaker 1: You can always catch us worldwide at Bloomberg Radio