Latest / Best of Business / Sam Dickie: Fisher Funds expert on the state of the US housing market

Transcript

Sam Dickie: Fisher Funds expert on the state of the US housing market · Best of Business

• 0:09
  Speaker 1: You're listening to a podcast from News Talks. They'd be
• 0:12
  Speaker 1: follow this and our wide range of podcasts now on
• 0:15
  Speaker 1: iHeartRadio together duper cels.
• 0:18
  Speaker 2: Something quite weird is going on in the US economy.
• 0:20
  Speaker 2: The big drivers of the US economy being the housing market,
• 0:23
  Speaker 2: the consumer, and the goods and services sectors are all
• 0:25
  Speaker 2: running apparently at very different speeds under the hood. Sam
• 0:28
  Speaker 2: Dickey from Fisher Funds is with us. He's been having
• 0:31
  Speaker 2: a look at it a.
• 0:32
  Speaker 3: Sam Good evening.
• 0:33
  Speaker 2: Okay, so let's look at each of these ones individually.
• 0:36
  Speaker 2: So let's look at the housing market. What parts of
• 0:38
  Speaker 2: it are running at different speeds?
• 0:40
  Speaker 3: Yes, super interesting, weird. As you said, under the hood,
• 0:44
  Speaker 3: they are in extremely different speed. So take new build
• 0:47
  Speaker 3: or new home sales. Those numbers are at decade highs,
• 0:50
  Speaker 3: so ten year highs, whereas the number of existing or
• 0:53
  Speaker 3: secondhand home sales are at ten year lows. In fact,
• 0:57
  Speaker 3: existing home sales are at twenty five year lows.
• 1:00
  Speaker 2: And what about the US by the way, can you
• 1:02
  Speaker 2: explain that? Why is that happening?
• 1:05
  Speaker 3: Yeah, so it's to do with the could rise in
• 1:09
  Speaker 3: mortgage rates. So if you think about it, most people
• 1:13
  Speaker 3: who are own home in the US signed mortgages or
• 1:16
  Speaker 3: I think for eighty or ninety percent of them sign
• 1:17
  Speaker 3: mortgages below three percent, so they're sitting on two and
• 1:21
  Speaker 3: a half three percent mortgage rates. And the prevailing morge
• 1:23
  Speaker 3: rate in the US is sort of was seven and
• 1:25
  Speaker 3: a half percent now about six and a half percent.
• 1:26
  Speaker 3: So the only reason and that mortgage is fixed for
• 1:30
  Speaker 3: thirty years, so the only reason you'd have to refinance
• 1:33
  Speaker 3: that is if you sold your house and moved, So
• 1:35
  Speaker 3: even though you might have to move for a job
• 1:36
  Speaker 3: or whatever, you're just not selling your house, so you're
• 1:38
  Speaker 3: trapped in your mortgage. Whereas that people do need housing
• 1:42
  Speaker 3: demandments this household formation every year in the US, so
• 1:45
  Speaker 3: that the new homes of satiating that demand.
• 1:50
  Speaker 2: What about the US consumer then? What are you seeing
• 1:52
  Speaker 2: under the hood there?
• 1:54
  Speaker 3: So the midd and high end consumers in pretty good health.
• 1:56
  Speaker 3: So overall retail sales in the US about three percent,
• 1:59
  Speaker 3: which is very solid, certainly to New Yeard anyway, and
• 2:02
  Speaker 3: the mid and high end consumers probably growing faster around
• 2:06
  Speaker 3: four percent. But the low end consumer is in pain
• 2:09
  Speaker 3: and their spending is probably flat or going backwards, so
• 2:13
  Speaker 3: they're effectively in recession.
• 2:14
  Speaker 2: Yeah, and that's pretty self explanatory, right, we can figure
• 2:16
  Speaker 2: out why that is and what's going on with the
• 2:18
  Speaker 2: freight market.
• 2:19
  Speaker 3: Yes, we've got in a decent freight recession in the
• 2:22
  Speaker 3: US for the past adding to twenty four months. So
• 2:25
  Speaker 3: you know, I think about the volume of goods transported,
• 2:27
  Speaker 3: they've been pretty anemic and freight rates have been falling
• 2:30
  Speaker 3: pretty sharply. In the manufacturing sector, which is part and
• 2:34
  Speaker 3: parcel of a very weak freight market, has effectively been
• 2:37
  Speaker 3: in recession. However, that the service is part of the economy,
• 2:40
  Speaker 3: and again this is the two speed and nature of this.
• 2:43
  Speaker 3: A lot of these key drivers has been very strong.
• 2:45
  Speaker 3: So think of services as finance, healthcare, restaurants, you're traveled.
• 2:48
  Speaker 3: That part of the US economy has thankfully been booming.
• 2:51
  Speaker 2: Why has it been booming.
• 2:54
  Speaker 3: Well, so particularly talking about that, remember the back end
• 3:00
  Speaker 3: of COVID. You're during OVID, the back end of COVID.
• 3:02
  Speaker 3: We talked about this before we all wanted to buy goods.
• 3:04
  Speaker 3: You remember this global supply chains were all snarled up.
• 3:08
  Speaker 3: So you're aboarding one bike. The bike shop ordered three
• 3:12
  Speaker 3: and it was big waiting less on everything from boats
• 3:14
  Speaker 3: to car parks around the world. And then this is
• 3:16
  Speaker 3: always the case with these kind of full worth effects,
• 3:19
  Speaker 3: the supply chains unstarred all the inventory it arrived at once,
• 3:22
  Speaker 3: and by that stage, we didn't want these bikes anymore.
• 3:24
  Speaker 3: We were more interested in going to restaurants and traveling
• 3:27
  Speaker 3: and all that good stuff. So we had this huge
• 3:31
  Speaker 3: kind of glutt of goods inventory around world and that's
• 3:34
  Speaker 3: taken eighteen to twenty four months to unline, and hence
• 3:38
  Speaker 3: the freight market in the US which carries all these
• 3:40
  Speaker 3: surrounds in recession.
• 3:42
  Speaker 2: I see. Okay, Now I can't imagine that this is
• 3:44
  Speaker 2: normal at all? Is it?
• 3:46
  Speaker 1: No?
• 3:47
  Speaker 3: Usually, I mean the driver's under the foot of any
• 3:50
  Speaker 3: set that can move a little bit in different directions,
• 3:53
  Speaker 3: but that this extreme sort of dispersion is quite unusual.
• 3:59
  Speaker 2: What does it mean for investors? Sam? What should investors
• 4:02
  Speaker 2: take from this?
• 4:05
  Speaker 3: I just think that we just need to be aware
• 4:06
  Speaker 3: that the global economy still haven't we properly, And I
• 4:09
  Speaker 3: know you and I have talked about this quite a
• 4:10
  Speaker 3: few times. We need to be more cautious than usual
• 4:13
  Speaker 3: on Macreek and four pasts, and more cautious than usual debts.
• 4:18
  Speaker 3: You know, if you're studying the company and its history
• 4:20
  Speaker 3: that best history won't necessarily repeat because this is quite
• 4:23
  Speaker 3: a weird economic cadence run right now.
• 4:28
  Speaker 2: Sam, Thank you as always, really appreciate your very interesting
• 4:31
  Speaker 2: insights into what's going on that Sam Dickey of Fisher Fund.
• 4:34
  Speaker 1: For more from News Talks ed B Listen live on
• 4:37
  Speaker 1: air or online, and keep our shows with you wherever
• 4:40
  Speaker 1: you go with our podcasts on IRT Radio