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Rocket to Buy Mr. Cooper, Gold Surges Amid Tariff Fears · Bloomberg Intelligence

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  Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. You're listening to the
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  Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am
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  Speaker 1: Listen on demand wherever you get your podcasts, or watch
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  Speaker 1: us live on YouTube.
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  Speaker 2: M and A Trade Today, M and A Monday.
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  Speaker 3: We haven't had too many deals this year, but we
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  Speaker 3: had one in the finance business, Rocket Mortgage to buy
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  Speaker 3: mortgage firm, mister Cooper, and a nine point four billion
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  Speaker 3: dollar deal all stock deal again. The first thing, you
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  Speaker 3: know me, what I do is I go to m A,
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  Speaker 3: go and see who's getting paid here Jp Morgan advising
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  Speaker 3: the acquirer. Here at Rocket and City advising the target
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  Speaker 3: mister Cooper. So everybody's getting paid there. I worked at
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  Speaker 3: both of those firms, so both of those folks getting paid.
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  Speaker 3: All right, let's talk about what's going on here. Paige
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  Speaker 3: Smith joins his consumer financial reporter for Bloomberg News. Paige,
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  Speaker 3: talk to us about this deal. Mortgage, I've Rocket More,
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  Speaker 3: I've heard of it, I've never heard of mister Cooper.
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  Speaker 2: Who are they?
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  Speaker 4: So, mister thanks for having me. Mister Cooper. Is more
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  Speaker 4: is best known, I would say, in the mortgage servicing
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  Speaker 4: side of things. So it's sort of after the fact,
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  Speaker 4: you've got your mortgage, but who are you actually interacting with,
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  Speaker 4: you know, gears down the line, it's actually going to
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  Speaker 4: be mister Cooper. But this is a big deal for
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  Speaker 4: Rocket because they've kind of they've been trying to position
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  Speaker 4: themselves as sort of a one stop shop for consumers
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  Speaker 4: finance offerings, So think credit cards in addition to your
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  Speaker 4: mortgage and you know, now theoretically your mortgage servicing rights.
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  Speaker 4: So it's a pretty big deal for this company based
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  Speaker 4: in Detroit. Dan Gilbert a pretty prominent person in the
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  Speaker 4: finance yep, pretty big in sports as well. But nine
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  Speaker 4: point four billion dollars, it's a big deal for these folks.
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  Speaker 5: And earlier this month we have Rocket also striking a
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  Speaker 5: deal to acquire redfin, which is a real estate brokerage.
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  Speaker 5: How will that build into this one or if they're
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  Speaker 5: even connected.
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  Speaker 4: At all, certainly it's it is basically sort of from
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  Speaker 4: a sort of a nose to toe, if you will,
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  Speaker 4: of the home buying experience, everything will sort of be
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  Speaker 4: under this Rocket umbrella. It you know, Redfinn as you
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  Speaker 4: as I think a lot of folks will know quite
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  Speaker 4: well is this platform for buying and selling homes, and
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  Speaker 4: it would be sort of a starting point for the
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  Speaker 4: home buying journey. Rocket is well known for originating, getting
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  Speaker 4: or creating mortgages, and now mister Cooper is well known
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  Speaker 4: for sort of the servicing of mortgages. So it's it
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  Speaker 4: is kind of from start to finish up the home
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  Speaker 4: buying process. Theoretically, if they.
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  Speaker 2: Got a lot of debt on their boundary.
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  Speaker 3: Because I being a former banker, I don't look at
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  Speaker 3: stock market values. I look at enterprise value to include
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  Speaker 3: the debt. It's eighteen point five billion dollars because that's
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  Speaker 3: what you get paid on. You get paid on enterprise A.
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  Speaker 3: So that is a big, big number there. Talk to
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  Speaker 3: us about the mortgage business. I mean, is it doesn't
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  Speaker 3: seem like there's a lot of deals happening in the
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  Speaker 3: in the business.
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  Speaker 4: Well, I mean, I think we can look at interest rates.
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  Speaker 4: It's certainly been a tough time for home buyers and sellers,
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  Speaker 4: and that also weighs on these home on these home lenders.
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  Speaker 4: It's a tough time for folks who kind of have
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  Speaker 4: put their eggs all in one basket, which is the
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  Speaker 4: home lending business. But that's kind of what Rocket has
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  Speaker 4: been aiming to do, is to really branch out and
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  Speaker 4: diversify their business so they're not so interest rate reliant
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  Speaker 4: or exposed rather which they have been in the past,
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  Speaker 4: and frankly that's showed up in their earnings over the
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  Speaker 4: past couple of years. So I chatted with Ceover and
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  Speaker 4: Krishna over the summer. Actually we did kind of a
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  Speaker 4: deeper dive into Rocket and the company, and one thing
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  Speaker 4: that he told me then was that artificial intelligence is
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  Speaker 4: actually a big bet that they're making to really try
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  Speaker 4: to boost the business and make that home buying process
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  Speaker 4: truly as smooth as possible for the customers to kind
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  Speaker 4: of amp up their offerings, and we'll see how it
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  Speaker 4: works out with for them in the end. But so far,
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  Speaker 4: numbers look pretty good.
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  Speaker 5: What was this deal expected? Were you hearing chatter before?
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  Speaker 5: Did its completely shock you?
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  Speaker 4: I was not hearing chatter before, and it seems like
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  Speaker 4: the market is responding in kind of an interesting way.
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  Speaker 4: But we're going to continue to follow the story and
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  Speaker 4: see how this kind of fits into the broader Rocket story.
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  Speaker 2: Who do they compete against?
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  Speaker 3: Do they compete against the banks that make the loans,
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  Speaker 3: or the banks that make the loans usually just syndicate
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  Speaker 3: them away. Right.
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  Speaker 4: Well, I kind of take a different take on that
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  Speaker 4: since I covered consumer and finance kind of broadly. I
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  Speaker 4: think of folks who are kind of trying to be
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  Speaker 4: that one one stop shop for consumer the consumer finance experience.
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  Speaker 4: So for me, I think of you know, so FI
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  Speaker 4: technologies for example. Yes, that is like a they have
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  Speaker 4: a lot of lending opportunities for consumers, but they do
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  Speaker 4: a heck of a lot of other business as well.
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  Speaker 4: Robinhood even coming at it from the investing side of
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  Speaker 4: things now offering banking products for folks. That's kind of
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  Speaker 4: how I think about it in terms of competitors. But
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  Speaker 4: that's just from a fintech consumer finance perspective. When it
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  Speaker 4: comes to home lenders, you know, other big folks in
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  Speaker 4: the space, the space. I was just looking at some
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  Speaker 4: data by Inside Mortgage Finance that placed United Wholesale Mortgagees
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  Speaker 4: number one, Pennymac is number two, and Rocket as number three.
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  Speaker 3: Penny Mac is what I use any that rings a bell, Okay,
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  Speaker 3: Dan Gilbert, Just for what it's worth, Kids on the
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  Speaker 3: rich top list of Bloomberg all the wealthy people.
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  Speaker 2: He comes in at number sixty two. That's not bad.
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  Speaker 3: Net worth of twenty eight point seven billion dollars up
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  Speaker 3: two point six billion year to date.
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  Speaker 4: Yeah, he's a force in Detroit. I would say some
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  Speaker 4: of our colleagues out of the Detroit Bureau did a
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  Speaker 4: great story on him last year. If you're interested in
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  Speaker 4: the terminal, David Welch shout out, all.
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  Speaker 2: Right, Page, thank you so much, appreciate it.
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  Speaker 3: Page Smith, consumer financi reporter of Bloomberg News, joining us
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  Speaker 3: in our studio here talking about Rocket mortgage buying mortgage
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  Speaker 3: firm mister Cooper nine point four billion dollar deal, so
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  Speaker 3: make more consolidation in that processing business of the mortgage business.
• 6:00
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  Speaker 3: As we're talking about all morning, Gold hitting another high today,
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  Speaker 3: up another thirty six dollars. That's one point one percent,
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  Speaker 3: three and twenty. I don't know, mbeed, Mike mcloone's got
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  Speaker 3: some thoughts here. Mike McGlone's Bloomberg Intelligence senior commodity strategist.
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  Speaker 3: He's down there in Miami Beach, of course he is, Mike. Now,
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  Speaker 3: it just seems kind of silly here. I mean, just
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  Speaker 3: every day we're up one percent. It can't just be
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  Speaker 3: the Chinese banks and Chinese.
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  Speaker 2: Consumers haul on, you know, hoarding all this stuff. What's
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  Speaker 2: going on out there now?
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  Speaker 6: I think we have gold trading basically as a put
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  Speaker 6: with the S and B five hundred, but it's almost
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  Speaker 6: one to one five hundreds, down about a percent today,
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  Speaker 6: and gold's up about a one percent today. So the
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  Speaker 6: bull is getting food, and the bull does need food.
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  Speaker 6: Gold is stretched above three thousand dollars and ounce. I
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  Speaker 6: think that's now a support level, but it's.
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  Speaker 7: Doing what it should do in an environment.
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  Speaker 6: We have a very extended US stock market going back downward.
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  Speaker 6: At the same time, it's taking the dollar with it,
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  Speaker 6: which has been usually odd. We kind of risk off
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  Speaker 6: the dollars going down. It's because the stock the dollar's
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  Speaker 6: so expensive too. So still very bullish gold, but I
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  Speaker 6: think you have to remember what it's doing now. It's
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  Speaker 6: what's our key thing is we've had four years of
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  Speaker 6: outflows and ETFs. Now they're starting to turn inflows. At
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  Speaker 6: the same time we've seen bitcoin peaking, so it looks
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  Speaker 6: like it's big pictures reversion just getting started. I'm still
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  Speaker 6: bullish gold, but it's somewhat dependent on that stock market
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  Speaker 6: going down.
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  Speaker 5: At these levels, it is hard to ignore gold ETFs, Mike.
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  Speaker 5: I mean, we've seen February in March, both months they
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  Speaker 5: took in twelve billion. That's the most since at least
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  Speaker 5: five years. So investors are really plowing into that. But
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  Speaker 5: recent buyers are also buying bars, coins and ETF so
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  Speaker 5: I think it's maybe the multiple avenues that they can
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  Speaker 5: express their views on goal.
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  Speaker 7: Yeah.
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  Speaker 6: So I think what you're seeing is we see we
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  Speaker 6: saw central banks are still buying, but they've been really
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  Speaker 6: big buyers the last years. And at the same time,
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  Speaker 6: with the stock market and a tear and high interest rates,
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  Speaker 6: ETF investors, most notably in the US and Western country,
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  Speaker 6: we're just selling say sorry, I don't need the rock.
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  Speaker 6: But now they're starting to realize the rock is really outperforming.
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  Speaker 6: It's almost four years now, one two, three, four years
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  Speaker 6: now it's beating the stock market and performance is starting
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  Speaker 6: to win.
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  Speaker 7: It's also seeing that what they were told about digital gold.
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  Speaker 6: Bitcoin it was better than gold, is finding out this
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  Speaker 6: bitcoin's down about thirty percent with the S and B
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  Speaker 6: five correcting about ten percent.
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  Speaker 7: It's proving its leverage beta.
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  Speaker 6: At the same time, gold's up while the stock market's
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  Speaker 6: going down. So they're seeing that diversication and shift over.
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  Speaker 7: The question is what stops it?
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  Speaker 6: And if you look at people like Anna Wong and
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  Speaker 6: Gena Martin Adams, I still think the US stock market
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  Speaker 6: can go lower with US GDP and US economic growth,
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  Speaker 6: and that's.
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  Speaker 7: Very bullish for gold long bonds and bad for the
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  Speaker 7: stock market.
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  Speaker 3: So again, there's no pe ratio to look at here, Mike,
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  Speaker 3: for an investor to say, oh boy, this is historically
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  Speaker 3: expensive here. You know, we need to get get out
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  Speaker 3: of a certain commodity. How do you kind of talk
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  Speaker 3: to clients about I guess just relative value.
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  Speaker 6: Well, one of my favorite ways look at gold palls
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  Speaker 6: the away what I published this morning. You take the
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  Speaker 6: price of gold announces divided by the S and P
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  Speaker 6: five hundred and it's just bumping up.
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  Speaker 7: Above zero point five, meaning you need.
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  Speaker 6: Two S and B five rs for one gold, and
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  Speaker 6: the last key times it did that was nineteen seventy
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  Speaker 6: two on the way up big rally.
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  Speaker 7: Remember that one. I was very young in.
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  Speaker 6: Two thousand and seven on the way up, and it's
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  Speaker 6: been now it's starting to break up higher. At the
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  Speaker 6: same time, the stock market's dropping from two times market
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  Speaker 6: caped to GDP. I mean that hasn't happened in US
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  Speaker 6: since the nineteen thirties. It's happened in Japan and nineties.
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  Speaker 6: It's happened in China in just.
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  Speaker 7: Few years ago.
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  Speaker 6: So that crocodile crocodile joe patterns just starting.
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  Speaker 7: To narrow, and I'm worried this it's going to keep narrowing.
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  Speaker 6: That means gold out performing most assets as a stock
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  Speaker 6: market just reverts to more normal levels.
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  Speaker 5: I'm going to resist bringing in bitcoin here since they're
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  Speaker 5: also right bitcoin and I know you write bitcoin two.
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  Speaker 5: But let's talk about can copper beat gold in a
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  Speaker 5: year of unprecedented austerity and tires in China increasingly relying
• 10:05
  Speaker 5: on stimulus.
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  Speaker 6: Well, I love the question because you know my answer
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  Speaker 6: is the questions leading as if I thought you're bringing
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  Speaker 6: im Glad you brought that up to my outlook for
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  Speaker 6: this month, I think copper's more likely to go to four,
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  Speaker 6: partly because I'm an next trader.
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  Speaker 7: I used to have have here. I know I probably
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  Speaker 7: would have been stopped out trying to short it. But
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  Speaker 7: now last week it made a new high.
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  Speaker 6: US copper price peaked at five dollars and thirty seven,
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  Speaker 6: down five dollars and thirty seven cents a pound. Last
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  Speaker 6: year's high was five twenty and then it dropped the four.
• 10:33
  Speaker 6: But the reason it went up is for odd reasons. Okay,
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  Speaker 6: it's expecting tariffs. We haven't had the tariffs and it's
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  Speaker 6: fully priced them in. So what copper usually does, it
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  Speaker 6: goes down because it goes up. And I think if
• 10:44
  Speaker 6: we see further weakness in the US stock mark, I
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  Speaker 6: think copper's much more likely dropped towards four. It's very
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  Speaker 6: unlikely to get to six, and that's what normally happens.
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  Speaker 6: If it continues higher from here, it's very discombobulating and
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  Speaker 6: it's really is counter to one of the major some
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  Speaker 6: of the major goals of President Trump, that's on showing productivity,
• 11:03
  Speaker 6: on showing markets and production and lower inflation and lower yields.
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  Speaker 3: Hey, Mike, you're from the farm belt. How's the US
• 11:12
  Speaker 3: farmer doing these days?
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  Speaker 6: They're having a rough time, most notably because of lower prices.
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  Speaker 6: The key thing I learned from farmers when I go
• 11:19
  Speaker 6: out there, they all dagg out look at it. I'll
• 11:22
  Speaker 6: be out there next month is the quote from Mark
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  Speaker 6: Twain that they don't make land anymore.
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  Speaker 7: I should buy some. And the quote is, well they
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  Speaker 7: are in Brazil. Massive supply of soybeans out of Brazil.
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  Speaker 7: That's the key thing.
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  Speaker 6: It's a reaction to the big pumping prices, technology, bringing
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  Speaker 6: them on better infrastructure. Brazil now exports double the soybeans
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  Speaker 6: the US does. US has been about the same for
• 11:43
  Speaker 6: ten years. Ten years ago they exported a lot less.
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  Speaker 6: So that supplies being met, prices are heading lower. You
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  Speaker 6: basically need a US drought for US grain prices to
• 11:52
  Speaker 6: go up this year.
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  Speaker 3: All right, tough one there. Mike mcloughan, thanks so much
• 11:55
  Speaker 3: for joining us. I always appreciate getting some time from you.
• 11:58
  Speaker 3: We can talk about anything, for metals, the precious to
• 12:00
  Speaker 3: the base metals, to the softs and oil and all
• 12:03
  Speaker 3: that kind of stuff.
• 12:03
  Speaker 2: So Mike covers it all.
• 12:04
  Speaker 3: Mike mcglon's and your commodity strategies for Bloomberg Intelligence.
• 12:09
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us Live
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• 12:23
  Speaker 3: All right, we got them, Sean Donn and he's down
• 12:25
  Speaker 3: in d C. He's joined us right now, senior economics writer. Sean,
• 12:28
  Speaker 3: you're in DC. You have to have some scoop for us, man.
• 12:31
  Speaker 3: What's going to happen? What's the President going to do
• 12:33
  Speaker 3: on Wednesday with these TERFs?
• 12:36
  Speaker 8: Well, look, the scoop this week is less about what
• 12:39
  Speaker 8: we're going to get on Wednesday, and I think really
• 12:42
  Speaker 8: thinking about the direction and I think that's what the
• 12:44
  Speaker 8: markets have been thinking about more and more in the
• 12:46
  Speaker 8: last couple of weeks. And the details of exactly what
• 12:50
  Speaker 8: we're going to get on Wednesday when the President steps
• 12:53
  Speaker 8: up to the microphone and announces these reciprocal tariffs and
• 12:57
  Speaker 8: proclaims liberation Day for the US economy are still being
• 13:00
  Speaker 8: worked out. And we heard that over the weekend. We
• 13:03
  Speaker 8: heard Kevin Hassett, the head of the National Economic Council,
• 13:08
  Speaker 8: saying he didn't know he didn't have any forward guidance
• 13:10
  Speaker 8: to offer as to what was coming. He just said
• 13:13
  Speaker 8: he trusts the president to decide to do the right thing.
• 13:16
  Speaker 8: Now what that right thing is, we don't know. But look,
• 13:19
  Speaker 8: the reality is the direction is a kind of known
• 13:22
  Speaker 8: here despite all this uncertainty, and that is that Donald
• 13:26
  Speaker 8: Trump is going to impose more tariffs, and then after
• 13:28
  Speaker 8: that there's going to come some more tariffs. And really
• 13:32
  Speaker 8: we are seeing the erection of a tariff wall around
• 13:35
  Speaker 8: the US economy, and we just don't know yet exactly
• 13:40
  Speaker 8: how high that wall is, but we are seeing a
• 13:43
  Speaker 8: real structural change in economic policy. And that is what
• 13:48
  Speaker 8: Donald Trump has been promising, not just during the last
• 13:52
  Speaker 8: year's campaign, but going back to twenty fifteen. And here
• 13:55
  Speaker 8: we are this week, we're going to see his biggest
• 13:57
  Speaker 8: attempt at that so far.
• 14:00
  Speaker 5: I was reading about this over the weekend, and we
• 14:02
  Speaker 5: have some reporting that Trump prefers a quote big and
• 14:04
  Speaker 5: simple tariff plan, suggesting no expectations or expectations could be
• 14:09
  Speaker 5: hard to come by. What does that mean for everyone.
• 14:13
  Speaker 8: Well, it means that Donald Trump likes big, round numbers.
• 14:17
  Speaker 8: And we've seen that going back to his first term
• 14:21
  Speaker 8: when he was urging his aids to scale up tariffs
• 14:25
  Speaker 8: rather than tone down tariffs when he was applying him
• 14:28
  Speaker 8: on Chinese goods. And I think we can expect the
• 14:30
  Speaker 8: same thing to happen this time around. Just over the
• 14:34
  Speaker 8: weekend we saw this again. When you know, previously Scott Essen,
• 14:38
  Speaker 8: the treasur the Treasury Secretary, had talked about a dirty fifteen,
• 14:41
  Speaker 8: signating that perhaps they were going to limit the tariffs
• 14:45
  Speaker 8: to the fifteen worst offenders when it came to the
• 14:48
  Speaker 8: US trade deficit and Donald Trump last night a board
• 14:51
  Speaker 8: Air Force one came back and said, no, it's going
• 14:53
  Speaker 8: to apply to all countries. So he wants something simple,
• 14:57
  Speaker 8: He wants something that he can sell to his but
• 15:01
  Speaker 8: he also wants something that can be transformational in his
• 15:06
  Speaker 8: mind for the US economy. He sees this as a
• 15:09
  Speaker 8: chance to put his stamp on US economic history and
• 15:13
  Speaker 8: in some ways repair the bad name that tariffs have
• 15:16
  Speaker 8: had for decades and decades.
• 15:18
  Speaker 3: Sean, what do we do about retaliation from some of
• 15:22
  Speaker 3: our big, biggest trading partners these days, Well.
• 15:25
  Speaker 8: We know it's going to come. That's what happens. Where
• 15:27
  Speaker 8: the Canadians have talked about it, the European Union have
• 15:31
  Speaker 8: talked about it. We've already seen retaliation from China, you know,
• 15:35
  Speaker 8: and that's where a lot of the economic damage will
• 15:37
  Speaker 8: come as well. Of course, you can model the direct
• 15:41
  Speaker 8: impact of reciprocal tariffs, and our folks at Bloomberg Economics
• 15:45
  Speaker 8: have modeled what they call a maximalist scenario, which would
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  Speaker 8: take four percent off US GDP over the next two
• 15:52
  Speaker 8: to three years. But that doesn't account for retaliation. It
• 15:55
  Speaker 8: doesn't account for what happens to business investment when you
• 16:00
  Speaker 8: have global trade wars that kind of batter everyone and
• 16:04
  Speaker 8: throw a huge amount of uncertainty into the mix.
• 16:07
  Speaker 5: Come Wednesday, what is the one thing or two things
• 16:09
  Speaker 5: that you're going to rush to look at, or the
• 16:11
  Speaker 5: thing that has been the most ambiguous, and now you're
• 16:15
  Speaker 5: looking for certainty if we get certainty on Wednesday, So.
• 16:19
  Speaker 8: The thing I'm really looking for is what comes next. Right,
• 16:22
  Speaker 8: we're expecting tariffs to be announced that will take effect
• 16:26
  Speaker 8: April third. The President has already said that auto tariffs
• 16:29
  Speaker 8: will go into effect April third. So I'll look at
• 16:32
  Speaker 8: what other tariffs will go into immedia effect, but also
• 16:35
  Speaker 8: the sorts of investigations that he is going to launch.
• 16:38
  Speaker 8: He has talked about other sectoral tariffs on everything from
• 16:42
  Speaker 8: semiconductors to copper. All of those are probably going to
• 16:46
  Speaker 8: involve investigations that are going to be launched under certain
• 16:50
  Speaker 8: trade authorities. And you know that's the tariffs that will
• 16:53
  Speaker 8: come after what we get on Wednesday.
• 16:55
  Speaker 3: All right, Sean, thank you so much, really appreciate. I'm
• 16:57
  Speaker 3: sure we're going to be talking to you quite often
• 17:00
  Speaker 3: in the coming day. Seawan Donnam. He's the senior economics
• 17:02
  Speaker 3: writer for Bloomberg News. He's based down there in Washington, DC.
• 17:08
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