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Markets, Electric Vehicles, and REITs (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
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Speaker 1: with essential market moving news. Find a Bloomberg Markets podcast
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Speaker 1: called Apple Podcast or wherever you listen to podcasts, and
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Speaker 1: at Bloomberg dot com slash podcast. For now, let's talk
0:23
Speaker 1: about the bond story, because you are seeing a really
0:27
Speaker 1: massive historic moment here city coming out in this morning,
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Speaker 1: adding to the to the talk about a hundred basis
0:32
Speaker 1: points in these next two weeks. Nomura coming out of
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Speaker 1: course yesterday saying hundred is down there base case scenario.
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Speaker 1: What does that mean for investing? Well, let's bring in
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Speaker 1: Aaron Brown, the managing director and portfolio manager over at Pimco,
0:45
Speaker 1: of course, to bring a talk about all things macro
0:47
Speaker 1: strategy and investing. Aaron, thank you as always for joining us.
0:51
Speaker 1: A hundred basis points, how effective is that really relative
0:55
Speaker 1: to seventy five basis points? Is there an element perhaps
0:59
Speaker 1: of almost panics that comes with the facts of the
1:02
Speaker 1: Federal Reserve may have to be that aggressive, you know,
1:06
Speaker 1: I think that just given the inflation environment, that we're
1:09
Speaker 1: in right now. I don't think one hundred basis points
1:12
Speaker 1: should be considered a panicked you know raise. And in fact,
1:16
Speaker 1: if you look at what the fixed income pricing market
1:19
Speaker 1: is pricing in, there pricing in about nine two basis points.
1:22
Speaker 1: So the fixed income markets are ready pretty much priced
1:25
Speaker 1: in a hundred basis point move at the July f
1:29
Speaker 1: on C meeting, which is a little bit of a
1:31
Speaker 1: gift to the FED because they're not going to surprise
1:34
Speaker 1: markets if they do, in fact, hike one hundred basis points.
1:37
Speaker 1: I also think that the market right now is really
1:40
Speaker 1: focused on getting inflation down so well, you know, certainly
1:44
Speaker 1: in a normal environment, a hundred basis points would be
1:46
Speaker 1: a shock to markets. Given the inflation environment we are
1:50
Speaker 1: in right now, I think that's taking precedence over the
1:53
Speaker 1: size of the move. That said, you really have to
1:56
Speaker 1: think about whether or not it's going to be that effective,
1:58
Speaker 1: especially over the short for managing inflation lower. Absolutely, especially um,
2:03
Speaker 1: if the problem is on the supply side. Um, there's
2:06
Speaker 1: not much of the FED can do. However, you make
2:09
Speaker 1: a good point. Everybody is freaking out about the possibility
2:13
Speaker 1: of a hundred basis points, and even some of our
2:15
Speaker 1: writers this morning, we're calling it an historic rise. But
2:20
Speaker 1: the bottom line is, if you look back in history,
2:24
Speaker 1: the FED has raised rates by one percent or more
2:27
Speaker 1: thirty eight times since nineteen seventies. So it's not as
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Speaker 1: if it's a completely new move, right. I mean, we've
2:33
Speaker 1: seen Paul Volker do it at five percent in one clip, right,
2:38
Speaker 1: That's exactly right. So we have to put this in
2:40
Speaker 1: a longer term context. Certainly, over the last a couple
2:43
Speaker 1: of decades we haven't seen moves in this size, but
2:47
Speaker 1: if you go back overall longer window, we have, and
2:50
Speaker 1: we've also been in an inflation environment that's also unprecedented.
2:54
Speaker 1: So I think that right now the main focus of
2:57
Speaker 1: the FED is getting inflation lower and and doing what
3:00
Speaker 1: it takes in order to manage that that number, you know,
3:04
Speaker 1: to something closer to where they're comfortable. Okay, but let
3:07
Speaker 1: me let me put a counter point to Matt here. Yes,
3:11
Speaker 1: thirty eight times, a lot of them were throughout the
3:14
Speaker 1: eighties and the vulgar era. But isn't that that's the
3:17
Speaker 1: last time we had inflation this high? Right? But it
3:19
Speaker 1: isn't isn't the fear here, It's not just the fact
3:22
Speaker 1: that Vulgar hiked so aggressively they basically forced the entire
3:26
Speaker 1: economy into recession. It's also the idea that after this
3:30
Speaker 1: decade of the seventies of inflation, you have this mazed,
3:33
Speaker 1: massive deflationary spiral. So Aaron I have to ask, is
3:37
Speaker 1: that what we're in store for next? I think that
3:40
Speaker 1: what we're likely in store for next is not a
3:43
Speaker 1: deflationary spiral, but going back to and probably where the
3:48
Speaker 1: comfort is is going back to a two to three
3:51
Speaker 1: percent or even two to four percent band for inflation. Um.
3:56
Speaker 1: But I do think that there has been a fundamental
3:59
Speaker 1: shift over the last couple of years where we're likely
4:04
Speaker 1: not going back to the normal that we were in
4:07
Speaker 1: in the sort of pre pandemic period, but probably a
4:11
Speaker 1: higher normal than what we've been in over the last
4:14
Speaker 1: ten years with respect to inflation. And I think that
4:16
Speaker 1: that's okay for the FED. I mean, if anything, they
4:20
Speaker 1: they're managing to average inflation a little bit higher over
4:24
Speaker 1: the secular horizon. But um, you know, going back to
4:28
Speaker 1: sort of a disinflationary or deflationary environment I think is
4:32
Speaker 1: for for at least over the medium term, is off
4:35
Speaker 1: the table. Yeah, I don't think we're getting set up
4:38
Speaker 1: for another if we are signed me up, because that
4:43
Speaker 1: wasn't really a bad economic situation in terms of what
4:46
Speaker 1: you're buying right now. Um, where do you like, where
4:51
Speaker 1: the most? Where's the most opportunity on the curve? Gary
4:53
Speaker 1: Shilling was in here the other day says he's going
4:55
Speaker 1: along thirty years. That's no surprise, Yeah, And I actually
4:58
Speaker 1: don't disagree with that. I mean, I think that there
5:01
Speaker 1: is fundamental demand um for thirty years, you know, from
5:04
Speaker 1: pension funds and from insurance funds that look at the
5:07
Speaker 1: US relative to other markets globally and find an attractive yield.
5:13
Speaker 1: And I think buying the long end at this point
5:15
Speaker 1: also just in a longer term context, makes a lot
5:18
Speaker 1: of sense with respect to the fact that you know,
5:22
Speaker 1: three percent if you're guaranteed yield and return is pretty attractive.
5:27
Speaker 1: In this environment, it's gonna be you're hard pressed to
5:29
Speaker 1: get that, you know, in risk assets right now. I
5:32
Speaker 1: also think that Muni's offer from a taxable basis offer
5:36
Speaker 1: really attractive returns as well. So that's another sort of
5:39
Speaker 1: pocket of opportunity that investors should be looking at all. Right, Aaron,
5:44
Speaker 1: thanks so much for joining us. Pleasure having you on
5:46
Speaker 1: the program today. Aaron Brown there, managing director and portfolio
5:49
Speaker 1: manager at PIMCO. We'll stick with this market story here
5:56
Speaker 1: because stocks are just plummeting. It is not a pretty picture.
5:59
Speaker 1: Uh in the markets today down two percent. I wonder
6:02
Speaker 1: if we see a reversal even though there is this
6:05
Speaker 1: really massive wall of worry. You've got pp I prices
6:08
Speaker 1: that were at an eleven handle following the CPI report
6:11
Speaker 1: at nine. Do you have recession odds a hundred basis
6:15
Speaker 1: point hikes that are now the base case for Nomurra
6:18
Speaker 1: and city. And on top of that, you now have
6:21
Speaker 1: Jamie Diamond and James Gorman warning about recession remembers. These
6:27
Speaker 1: were two of the people who were so confident in
6:30
Speaker 1: consumer strength and now it kind of looks like they're saying, well, yeah,
6:33
Speaker 1: that whole recession scenario, there may be something to that.
6:37
Speaker 1: So how do you play the markets amid this wall
6:39
Speaker 1: of worry? We're gonna ask Brett Ewing, the chief market
6:42
Speaker 1: strategist at First Franklin Financial Services. Brett, thank you as
6:46
Speaker 1: always for joining. Let's start there a wall of worry.
6:49
Speaker 1: Do you hop into this market or not? Well, thanks
6:53
Speaker 1: for having me on UM, look the times to get
6:58
Speaker 1: out there and start put in some capital work, or
7:02
Speaker 1: when times where you have pete worry, and we're certainly
7:06
Speaker 1: in those times. Um, we're the economy is likely in
7:10
Speaker 1: a recession. UM. I think that the rate hikes are
7:15
Speaker 1: certainly getting baked in here for consecutive one percent, probably
7:20
Speaker 1: another fifty to seventy five and September. But the way
7:24
Speaker 1: we're looking at markets, UM, the question is not when
7:28
Speaker 1: we go in recession, it's just how deep it's going
7:30
Speaker 1: to be. And we do believe that it will be
7:35
Speaker 1: a fairly light recession. But we think that we are
7:38
Speaker 1: currently in one, if not soon. We were talking with
7:42
Speaker 1: Gary Shilling, who is granted UM well known bear yesterday
7:47
Speaker 1: on the program. He says we're about halfway there in
7:51
Speaker 1: terms of the market draw down, to use a term
7:55
Speaker 1: of our day. We've heard similar things from Michael Urry,
8:00
Speaker 1: who also is obviously known for his barish calls. But
8:03
Speaker 1: what do you think about that, the fact that we've
8:06
Speaker 1: seen valuation compression in the first half and now we're
8:10
Speaker 1: about to see the margin compressions. Yeah, I think the
8:14
Speaker 1: question is the real question is does inflation keep accelerating? UM?
8:22
Speaker 1: I think that's going to force the hand. I think
8:24
Speaker 1: the FED has already done their job. We're going to
8:27
Speaker 1: see a lot of demand destruction on the second half
8:30
Speaker 1: of this year. Um, we're already seeing it across the board.
8:34
Speaker 1: The commodity markets are showing it. So, you know, I think,
8:39
Speaker 1: have we hit a bottom in the market. I don't
8:41
Speaker 1: think that that's our primary issue here. I don't think
8:44
Speaker 1: it's got a massive leg down from here. I would
8:48
Speaker 1: say that we could go another five to ten percent
8:51
Speaker 1: right here, depending on the inflation numbers and how much
8:54
Speaker 1: more aggressive the FED would need to get. But isn't
8:58
Speaker 1: there a bull ace here for the stock market in
9:01
Speaker 1: that if there is a global recession? Isn't the recessionary
9:06
Speaker 1: playbook at least and I want to say, in the
9:08
Speaker 1: past twenty years or so, to hop right back into
9:11
Speaker 1: American markets, you buy American buy the dollar, buy US treasuries,
9:14
Speaker 1: by a defensive stocks, big tech. I feel like there
9:18
Speaker 1: has to be a bull case here for in the
9:20
Speaker 1: worst day scenario, fun flows from the rest of the
9:23
Speaker 1: world will rescue the stock market. Why aren't we seeing that? Well?
9:28
Speaker 1: I think I think the rest of the world is
9:31
Speaker 1: also having quite a bit of trouble here. Um. You know,
9:36
Speaker 1: our dollars just skyrocketing on the dollar index, and I
9:40
Speaker 1: think that the dollar index will be a big discussion
9:43
Speaker 1: in the Jackson Hole conference coming up in late August.
9:47
Speaker 1: I'm sure that there's many central bankers from around the
9:50
Speaker 1: world that are going to probably been Chairman Powell's here
9:54
Speaker 1: on that issue. Um. But I am in the bullish camp.
9:58
Speaker 1: Just to be clear, I do believe um in equities,
10:02
Speaker 1: and I think equities are absolutely the best asset class
10:06
Speaker 1: that you could be in right here. If you were
10:08
Speaker 1: putting capital work and you had a three to five
10:10
Speaker 1: year time horizon, there's no better place to go right now.
10:13
Speaker 1: I think trying to bottom tick is just meaningless right here.
10:17
Speaker 1: I do believe that we are going to have these
10:19
Speaker 1: inflation numbers start falling off as we move into the fall.
10:23
Speaker 1: That's our base case, and you can look at every
10:26
Speaker 1: market place. I mean look from getting of June. We've
10:29
Speaker 1: got gas down, oils down, coppers down, weeks down, I
10:37
Speaker 1: mean everywhere across the board. I believe you're gonna see
10:40
Speaker 1: rents roll over a little bit as we get into
10:42
Speaker 1: the fall because the v R B o UH scene
10:46
Speaker 1: is gonna probably have a correction and rent prices there
10:49
Speaker 1: anywhere from ten to I think the consumer is about
10:53
Speaker 1: to tighten up, and I think demand destruction the feat
10:58
Speaker 1: has already accomplished it. Yeah, it does look like um
11:02
Speaker 1: as Dangerous says, it's been to call a peak and inflation.
11:05
Speaker 1: It does look like these numbers should be it, because
11:07
Speaker 1: we do see eggs rolling over, we do see medals
11:11
Speaker 1: coming down, we do see oils coming down. We've seen
11:13
Speaker 1: that for the last couple of weeks. So and just
11:16
Speaker 1: to add to that, let's look at the labor market.
11:18
Speaker 1: I mean, there there's a lot of high level of
11:22
Speaker 1: layoffs within the technology sector that are rolling through. My
11:27
Speaker 1: sources are telling me it's it's rolling through the I mean,
11:30
Speaker 1: you just had the financial some of the financial companies
11:32
Speaker 1: report this morning. Layoffs are coming throughout the financial services
11:36
Speaker 1: industry as well. And if you look at the jobless claims,
11:39
Speaker 1: the four week moving average since the very first rate hike,
11:43
Speaker 1: it's up thirty eight percent already. Um And this's gonna
11:47
Speaker 1: keep accelerating. And and that's what the Fed wanted to do,
11:51
Speaker 1: is cool it off. They've actually done their job, but
11:54
Speaker 1: there's no way they can actually stop right here with
11:57
Speaker 1: these high headline numbers. Got it all right, Brett, thanks
12:00
Speaker 1: so much for joining us. Brett, you and their chief
12:01
Speaker 1: market strategists at First Franklin Financial Services. It's bringing Travis
12:08
Speaker 1: Hestor right now. He's chief Electric vehicle officer over at
12:12
Speaker 1: General Motors and uh, this company I think has made
12:17
Speaker 1: probably the most impressive electric vehicle of all time in
12:20
Speaker 1: the GMC Hummer. Pretty do you know what the Hummer
12:24
Speaker 1: can do? We're talking about a thousand horsepower, ten thousand
12:28
Speaker 1: pound feet of torque. It can crab walk. Travis, thanks
12:32
Speaker 1: for joining us. UM Now, most of us probably can't
12:36
Speaker 1: afford a Hummer, or we'd have to stretch to get it.
12:39
Speaker 1: But are these things coming down to price points that
12:43
Speaker 1: the average American could get into? Yeah, Hi, Matte, nice
12:48
Speaker 1: to be Thanks for having us son. Yes, we you know,
12:52
Speaker 1: I said, General Motives. We're very much into EVS for
12:55
Speaker 1: everybody in our vehicles and in our charging network. And
13:00
Speaker 1: from a vehicle point of view, you're right. The Hummer
13:02
Speaker 1: is a fantastic vehicle. It can do trab walking, it
13:06
Speaker 1: can do it has a what's to freedom mode, which
13:08
Speaker 1: is an acceleration mode, which is just fantastic. UM but
13:11
Speaker 1: it are more affordable, and you have sub thirty dollar
13:16
Speaker 1: cars like the Bolt from the Bolt of the UV,
13:18
Speaker 1: which are fantastic vehicles and very affordable and have some
13:24
Speaker 1: of our latest technology like take the Bolt EUV has
13:28
Speaker 1: the latest super cruse technology that's available UM and leads
13:33
Speaker 1: in almost any segment. So yeah, we have we have
13:37
Speaker 1: price points and vehicles from low affordable vehicles through to
13:41
Speaker 1: some more expensive vehicles and everything in between. I'm looking
13:44
Speaker 1: at Hannah Elliott right now. She's walking right outside the
13:47
Speaker 1: Bloomberg Interactive Broker studio and she just did an excellent
13:50
Speaker 1: piece on the Hummer that I'm sure you saw the
13:53
Speaker 1: cover cover piece for Bloomberg Pursuit. She's standing on the
13:56
Speaker 1: hood of the truck. UM on the other in the
13:59
Speaker 1: spectrum we talk about the Bolt, right. I was lucky
14:01
Speaker 1: enough to drive around Detroit UM with Mark Royce in
14:04
Speaker 1: his Bolt. I think it was the first generation and
14:09
Speaker 1: UM just the perfect vehicle for somebody on a budget
14:13
Speaker 1: who wants to get around without a big carbon footprint.
14:16
Speaker 1: Can you produce enough though, I mean, I know there's
14:18
Speaker 1: a huge chip shortage right now that stranded some vehicles.
14:23
Speaker 1: My Silverado truck included on lots. So what's the chip
14:28
Speaker 1: situation Like, Yeah, there's no doubt with UM, you know,
14:33
Speaker 1: the global economy and COVID and lots of supply chain
14:37
Speaker 1: issues that there's been straying in the in the supply
14:40
Speaker 1: chain network. But we're optimistic that we are in doing
14:44
Speaker 1: everything we can every day to UM produce as many
14:48
Speaker 1: vehicles that our customers desire. You know, we have a long,
14:51
Speaker 1: wide inglist because we have such great vehicles, but we
14:54
Speaker 1: do a lot to try and get them out and
14:56
Speaker 1: you know, the situation is continuing to improve by you know,
15:00
Speaker 1: it evolves every day. The area is UM increased clarity
15:05
Speaker 1: coming every day and we're getting better and faster every day. UM.
15:09
Speaker 1: But yeah, we're optimistic because we go forward. Matt Travis,
15:13
Speaker 1: I feel like everyone is getting into the e V
15:16
Speaker 1: game now. Naturally you have Tesla, you got GM, you
15:19
Speaker 1: got Forward, you name it. Everyone is hopping into this market.
15:23
Speaker 1: But I'm curious does the infrastructure really support it here
15:26
Speaker 1: when you don't actually have this network of charging stations
15:29
Speaker 1: that kind of funding. I think a lot of people
15:31
Speaker 1: expected from the White House, from the government, from the
15:34
Speaker 1: states like California, for example, who are very go green
15:38
Speaker 1: that doesn't necessarily exist yet. So in your opinion, I
15:43
Speaker 1: guess my question is twofold. One, how is GM differentiated
15:47
Speaker 1: at all? And two does it feel like the market
15:51
Speaker 1: is getting ahead of itself? Thank you, that's a great
15:56
Speaker 1: question creating. And uh, you know, we might have announcement
16:00
Speaker 1: yesterday of this coast to coast charging infrastructure network which
16:04
Speaker 1: is very significant. Uh you know, it's two thousand charging stalls,
16:08
Speaker 1: it's five hundred locations. Importantly, they're all three hundred and
16:12
Speaker 1: fifty DC fast charge stations, which allows you to put
16:17
Speaker 1: a lot of energy into the vehicle in a very
16:19
Speaker 1: short amount of time. They'll be co branded Pilot Flying
16:22
Speaker 1: J and Ultium Charge three sixty Ultium Charge three sixty
16:26
Speaker 1: GMS network that aligns eleven different charge poard operators and
16:32
Speaker 1: gives you, in this particular announcement yesterday, some very beneficial
16:37
Speaker 1: things to the GM customers who buy our vehicles, things
16:41
Speaker 1: like exclusive reservations, discounts on charging, a really great technology
16:47
Speaker 1: called plug and charge, which means you don't need to
16:49
Speaker 1: use credit cards anymore. You just plug them, the charge
16:52
Speaker 1: poort into the vehicle and the payment's taken care of.
16:55
Speaker 1: Integration into the vehicle what we call our my Brand apps,
16:59
Speaker 1: which are like the Chevrolet App or the Cadillac App,
17:03
Speaker 1: and that helps you to get real time charger availability,
17:07
Speaker 1: that does route planning, It allows you to make those
17:10
Speaker 1: coast to coast trips. And so it's a very significant
17:14
Speaker 1: um uh you know, north to south, east to west,
17:17
Speaker 1: city to city announcement. But as part of the GM
17:21
Speaker 1: Multium Charge three S network, we've previously announced a seven
17:25
Speaker 1: hundred and fifty million dollar investment into that infrastructure. That
17:29
Speaker 1: includes forty level two charges around dealer communities where we
17:34
Speaker 1: all live and work. It includes three thousand, two hundred
17:39
Speaker 1: and fifty d C fast charges in the inner city environment,
17:42
Speaker 1: which we do with our great partner e v Go.
17:46
Speaker 1: UM So, we know it's a pretty comprehensive network that's
17:48
Speaker 1: being built out here, and you know it's evolving at
17:51
Speaker 1: the same rate that evs are coming to market. And
17:54
Speaker 1: you know, we're in this latest announcement we just made,
17:57
Speaker 1: we will be getting that interstate free a charge are
18:00
Speaker 1: installed early here in two thousand and twenty three. We're
18:04
Speaker 1: moving pretty rapidly. Again, very cool, Hey Travis, tell us
18:07
Speaker 1: about you your job and you know how it's changed
18:11
Speaker 1: over the years at General Motors. I know you were
18:13
Speaker 1: the chief engineer for the Cadillac CT six, and you've
18:16
Speaker 1: held engineering positions with other on other i CE projects.
18:21
Speaker 1: Now you're um, now you're running the growth or the
18:25
Speaker 1: electric operations. What's the difference. Uh, yeah, So I've been
18:32
Speaker 1: with GM for almost twenty six years now, lots of it, Matt.
18:36
Speaker 1: As you said, I was a chief engineer on vehicles
18:38
Speaker 1: for a long time, UM, which was great because we
18:41
Speaker 1: do just such great vehicles. But as things have evolved here,
18:45
Speaker 1: you know, our technology development on electric vehicles and autonomous
18:50
Speaker 1: vehicles is just surging. It great. Rights I've been involved
18:54
Speaker 1: with both of them on the product development side, but
18:57
Speaker 1: now I'm lucky enough to get the opportunity to how
19:00
Speaker 1: developed this on the infrastructure side and some of the
19:03
Speaker 1: energy management side. And this is a highly fast evolving
19:08
Speaker 1: area of our industry. And you know, the US has
19:13
Speaker 1: such a great infrastructure with its freeway and highway networks.
19:18
Speaker 1: It's time to get the electric vehicle infrastructure side of
19:21
Speaker 1: that up and running. And I have a fabulous team
19:24
Speaker 1: of people who helped do that, and we have fabulous partners,
19:28
Speaker 1: people like Pilot Flying J and even EGO, who help
19:31
Speaker 1: us UM get that up and running, and then we're
19:34
Speaker 1: going to be able to help us execute that. So
19:35
Speaker 1: it's it's a fairly you know. It's our industry is
19:38
Speaker 1: evolving and our our roles are changing, and it's exciting.
19:42
Speaker 1: To be honest with you, it's I can't think of
19:45
Speaker 1: a more exciting time to be in our industry compared
19:47
Speaker 1: to the last hundred years. It's it's it's fantastic. I
19:51
Speaker 1: gotta say I would agree late sixties maybe late sixties,
19:55
Speaker 1: I'd be there right with the Camaro. But in any case, Travis,
19:58
Speaker 1: great to have you on. Thanks so much for joy
20:00
Speaker 1: in US chief Electric Vehicle Officer for General Motors. As
20:09
Speaker 1: we've been focused on today, more high, well high is
20:15
Speaker 1: an understatement. More massive inflation prints. With the p p
20:18
Speaker 1: I coming out at eleven point three yesterday, with the
20:21
Speaker 1: c p I out at nine point one, let's talk
20:23
Speaker 1: with someone who can maybe offer you a solution in
20:27
Speaker 1: terms of the right hedge. David Auerbach joins us right now,
20:30
Speaker 1: managing director from Armada E. T F Advisors. And the
20:35
Speaker 1: cool thing is David with you and my co anchor
20:38
Speaker 1: Kritty Gutta, I can say it's great to have y'all here. Yeah,
20:42
Speaker 1: it definitely is. David got his b A, his b
20:46
Speaker 1: A at Texas and his NBA at s m U. Well,
20:51
Speaker 1: the only reason he's telling me that is because for
20:55
Speaker 1: your information, David, and for our entire audience is my
20:58
Speaker 1: brother actually went to s m U. I grew up here.
21:00
Speaker 1: To me, I'm a Dallas I'm a Dallas gal. I
21:02
Speaker 1: spent a few years hitting the bars around s m US.
21:06
Speaker 1: My favorite places Highland Park one of my favorite places
21:08
Speaker 1: to hang out. Let's get back to well, actually it's
21:11
Speaker 1: it's really a real real estate and partly residential story
21:16
Speaker 1: that you have for us, David, right, because you think
21:17
Speaker 1: this is a great way to hedge against inflation. Absolutely,
21:21
Speaker 1: and thanks so much for having me really appreciate it
21:24
Speaker 1: and love the Dallas ties. That's so cool. You know,
21:26
Speaker 1: we take a very uniquepproach at our MADA. When we
21:29
Speaker 1: launched the Home Appreciation US RE d E t F
21:32
Speaker 1: in March, we have this view that we're building our
21:35
Speaker 1: fund on two fund principles. Number one, where people relocating
21:38
Speaker 1: across the country and then which the residential read segments
21:42
Speaker 1: are benefiting from that relocation. From where we sit, we
21:46
Speaker 1: know that real estate is personal. There's If there's one
21:50
Speaker 1: thing that the three of us all have in common,
21:52
Speaker 1: is that we're very fortunate enough to go to sleep
21:54
Speaker 1: with the roof over our head. Whether we live in
21:56
Speaker 1: an apartment, we rent, the house where we live is home,
22:01
Speaker 1: and that home is the most important investment decision that
22:04
Speaker 1: you make every single day. And as you mentioned about inflation,
22:09
Speaker 1: well we know that interest rates are going up basis
22:12
Speaker 1: points lock it in for sure, most likely a hundred
22:15
Speaker 1: at this rate. But what that means is that cost
22:17
Speaker 1: of that mortgage now gets more expensive. You have to
22:20
Speaker 1: come more to the table with the down payment, and
22:23
Speaker 1: so that's going to affect many first time home buyers
22:26
Speaker 1: and those that are probably in the market right now
22:28
Speaker 1: trying to buy that house. And for so many people
22:31
Speaker 1: it's just been impossible, right, I mean, not only were
22:34
Speaker 1: they priced out of the market when mortgage trades were cheap,
22:37
Speaker 1: now they have no chance of getting in. I know
22:40
Speaker 1: a lot of people just anecdotally who can't buy a house,
22:43
Speaker 1: and I know people who can't sell a house because
22:46
Speaker 1: the buyers just can't afford it. Now is that going
22:49
Speaker 1: to change? You know? I would say in the back
22:52
Speaker 1: half of the year, we would see some moderation. But frankly,
22:54
Speaker 1: I also think part of plays into that old number
22:57
Speaker 1: one rule of real estate location, location, location ship. If
23:00
Speaker 1: you go talk to folks that are in Nashville or
23:03
Speaker 1: Charlotte or in Austin, you know, they may have a
23:06
Speaker 1: different perspective. Right now, my neighbor across the streets sold
23:10
Speaker 1: his house within a week here in Dallas and almost
23:13
Speaker 1: got full offer on his property. And so, you know,
23:16
Speaker 1: I think there are pockets that you're still seeing massive,
23:19
Speaker 1: massive strength. But the bigger problem here is that we
23:23
Speaker 1: all know there is a massive supply demand and balance
23:26
Speaker 1: in the housing markets. There's just not enough housing inventory
23:30
Speaker 1: to satisfy the amount of demand that's out there. David,
23:33
Speaker 1: is that going to change? I want to bring up
23:35
Speaker 1: another Texan that we're going to have on a little
23:37
Speaker 1: bit later on the show. Daniel DeMartino booth Um, whom
23:40
Speaker 1: you may know she advised the fed and wrote a
23:44
Speaker 1: book called fed Up. She advised the Dallas Fed. Um.
23:48
Speaker 1: She has said it's possible that we have a glut
23:52
Speaker 1: next year of housing and cars because so many people
23:55
Speaker 1: are trying to fill this void. What do you think
23:57
Speaker 1: about that possibility? You know, I don't know about that
24:00
Speaker 1: glutt necessarily. Again, the part of the problem is that
24:03
Speaker 1: what I'm air quoting this that affordable housing product, that
24:07
Speaker 1: starter house doesn't exist anymore for those first time home buyers.
24:12
Speaker 1: But instead you're seeing this plethora of single family rental
24:15
Speaker 1: platforms from like invitation homes, American Homes for rent. You know,
24:20
Speaker 1: there's a tri con. There's a lot of single family
24:23
Speaker 1: rental properties that are out there. One other point, you know,
24:26
Speaker 1: employment growth is driving household formation. We know that the
24:29
Speaker 1: employment market is still strong with a three handle on
24:32
Speaker 1: the unemployment rate. As a result, again with inflation going up,
24:36
Speaker 1: gas prices are up, and if you're an apartment landlord,
24:38
Speaker 1: you're still knocking on your tenant's door on the first
24:40
Speaker 1: of the month saying where's my rent? Many of these
24:43
Speaker 1: apartment companies, as an example, reporting you know, double digit
24:46
Speaker 1: year over yr n o I growth, rental growth, strong
24:49
Speaker 1: quarterly sequential growth. We're going into the summer prime leasing
24:52
Speaker 1: season for these apartment guys that are you know occupied,
24:59
Speaker 1: and so again plays back into that thesis of where
25:01
Speaker 1: you live is that most important investment decision that you
25:04
Speaker 1: make for yourself, for your family and for your kids. David,
25:07
Speaker 1: we got about a minute here. This is a trend
25:09
Speaker 1: that's not going away anytime soon. Do you foresee any
25:12
Speaker 1: sort of pop of the housing bubble any time in
25:16
Speaker 1: our near future? If there is going to be I
25:19
Speaker 1: think a lob, it's going to be dictated on future
25:22
Speaker 1: increases of the interest rates. We know obviously this next
25:25
Speaker 1: one is there going to be more down the road
25:27
Speaker 1: this year because that will play into the own price
25:29
Speaker 1: appreciation and the moderation of the housing market going forward.
25:33
Speaker 1: But again with us focused on house R E t
25:36
Speaker 1: F here h A U S. You know, we're just
25:38
Speaker 1: trying to take it on a quarter by quarter basis,
25:41
Speaker 1: taking the news that's coming at us from the government, Fanning,
25:44
Speaker 1: may redfin Zelo, Bloomberg, all the sources that are kind
25:47
Speaker 1: of telling us where the housing market is headed. And
25:50
Speaker 1: right now I will tell you from where we sit,
25:53
Speaker 1: we really don't see that letting up until maybe, like
25:56
Speaker 1: I said, back half of this year, maybe into next year.
25:59
Speaker 1: All right, David, thanks how much for joining us. Great
26:01
Speaker 1: having you all on this morning. David auerback, managing director
26:04
Speaker 1: at Armada E. T F Advisers, talking to us about
26:08
Speaker 1: possible inflation hedges. He would suggest one, which is their
26:12
Speaker 1: Home Appreciation U s REAT. The ticker is house spelled
26:16
Speaker 1: in German h a u S and you can check
26:20
Speaker 1: it out on the Bloomberg h a U S Equity
26:22
Speaker 1: d S. Thanks for listening to the Bloomberg Markets podcast.
26:27
Speaker 1: You can subscribe and listen to interviews with Apple Podcasts
26:31
Speaker 1: or whatever podcast platform you prefer. I'm Matt Miller. I'm
26:35
Speaker 1: on Twitter at Matt Miller, three pt on Fall Sweeney
26:39
Speaker 1: I'm on Twitter at pt Sweeney Before the podcast. You
26:41
Speaker 1: can always catch us worldwide at Bloomberg Radio