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Corporate Boards Are Shirking Responsibility On #MeToo Crises · Bloomberg Intelligence

• 0:05
  Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox.
• 0:08
  Speaker 1: Along with my co host Lisa Bramowitz. Each day we
• 0:11
  Speaker 1: bring you the most important, noteworthy, and useful interviews for
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  Speaker 1: you and your money, whether you're at the grocery store
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  Speaker 1: or the trading floor. Find the Bloomberg p m L
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  Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Following
• 0:33
  Speaker 1: the New Yorker article by Ronan Pharaoh accusing Less moon
• 0:37
  Speaker 1: Ves of unrequested approaches to a variety of women over
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  Speaker 1: the past few decades, the board of CBS is meeting today.
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  Speaker 1: We're talking about the future of its leader, and there's
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  Speaker 1: a lot of questions about whether he will be removed
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  Speaker 1: what this does with CBS versus Viacom. Sherry Redstone is
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  Speaker 1: the majority owner of CBS. Joining us now to talk
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  Speaker 1: about all this is Richard chamber As President and Chief
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  Speaker 1: executive officer of the Institute of Internal Auditors based in
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  Speaker 1: uh in, Florida. Richard, thank you so much for joining us.
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  Speaker 1: What do you think they're going to talk about in
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  Speaker 1: this meeting and what do you think they're gonna do? Well?
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  Speaker 1: Thanks thanks for having me on. You know it's always
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  Speaker 1: hard to know exactly how boards are going to respond
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  Speaker 1: when these sorts of things happened. I know we've been
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  Speaker 1: looking at this from the Institute of Internal Auditors over
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  Speaker 1: the past few months, and the one thing that strikes
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  Speaker 1: us is just how often boards um sort of overlooks
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  Speaker 1: this risk. In fact, eighty five percent of the companies
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  Speaker 1: that we surveyed said that they just didn't consider sexual
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  Speaker 1: mis contic to be a top risk. And so it
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  Speaker 1: just all too often seems that when these uh, when
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  Speaker 1: these things happen, everyone sort of looks at each other
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  Speaker 1: with a blank stare. Well. Mr Moonvess has said that
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  Speaker 1: many times in the past, perhaps he displayed behavior that
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  Speaker 1: people might not like, but that he never used his
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  Speaker 1: position to affect anyone's career. When when does an investigation
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  Speaker 1: of behavior that's disconnected from an actual job or position,
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  Speaker 1: When does that investigation cross the line? You know, I
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  Speaker 1: think what has to happen is, you know, when what's
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  Speaker 1: allegations are made and often there has a case here,
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  Speaker 1: there multiple sides to the story. You know, at that
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  Speaker 1: point it's really too late for boards and for companies
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  Speaker 1: to uh take the reins and in terms of making
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  Speaker 1: sure that they have the right policies in place, the
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  Speaker 1: right procedures for investigating allegations of misconduct to meet those
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  Speaker 1: things have to be played in place well beforehand, and
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  Speaker 1: and the policies need to include how will investigation of
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  Speaker 1: allegations against senior executives to be handled? At what point
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  Speaker 1: do they do they get elevated to the board. In fact,
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  Speaker 1: I would suggest anytime there's an allegation against the CEO,
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  Speaker 1: that the board or at least the chairman of the
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  Speaker 1: board is immediately made aware of it. So I think
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  Speaker 1: that a lot of it really comes down to sort
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  Speaker 1: of acknowledging and recognizing that this is a key risk
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  Speaker 1: that companies face and making sure you got all the
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  Speaker 1: right controls in place to mitigate that risk. So, Richard,
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  Speaker 1: you raise an interesting point, which is, you know, how
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  Speaker 1: much should the board be aware of some of these
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  Speaker 1: allegations and some of these cultural issues that are emerging
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  Speaker 1: across a slew of companies. I mean, we're we're pinpointing
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  Speaker 1: CBS because that's where the news is, but you can
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  Speaker 1: pick a lot of other companies that have also been
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  Speaker 1: having uh ME to movement movements represented there. Should the
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  Speaker 1: board be responsible? Should it be there their responsibility to
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  Speaker 1: go out and investigate some of the culture issues to
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  Speaker 1: make sure that things are on the up and up. Absolutely,
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  Speaker 1: to me, uh, you know, it's a shame that American
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  Speaker 1: boards are buying large shirking their responsibilities when it comes
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  Speaker 1: to oversight of this critical risk. They have an obligation,
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  Speaker 1: even even in in statutes in the US, they have
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  Speaker 1: obligations to maintain oversight of the way risks are managed
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  Speaker 1: in a company. And there's no risk, as we're seeing
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  Speaker 1: from a lot of the headlines over the last few weeks,
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  Speaker 1: there's no risk that's greater than having a high profile
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  Speaker 1: allegation against senior executives of this nature. And so to me,
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  Speaker 1: the board, as part of its oversight of risk management,
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  Speaker 1: needs to monitor the culture of the company, and that
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  Speaker 1: starts with the tone at the top. How is the company?
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  Speaker 1: How is the tone in the company being set by
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  Speaker 1: the senior CEO and senior executive. So the board absolutely
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  Speaker 1: has a responsibility, and I would tell you without equivocation
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  Speaker 1: that boards are by and large not fulfilling that obligation. Okay, So, Richard,
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  Speaker 1: given that, given the fact that CBS is that their
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  Speaker 1: board is now meeting, how able are they to actually
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  Speaker 1: handle this situation appropriately since they also are part of
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  Speaker 1: the problem. According to you, well, I and I can't
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  Speaker 1: really speak to the CBS board because I don't know
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  Speaker 1: what accents they may have been taking along the way.
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  Speaker 1: I would say that whole boards need to have some
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  Speaker 1: kind of a sense of what is the what is
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  Speaker 1: the help of the corporate culture. There are lots of
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  Speaker 1: ways they can gather that. One of the ways that
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  Speaker 1: we obviously recommend is to turn to the internal auditors
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  Speaker 1: of the company and ask the internal auditors to give
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  Speaker 1: them some kind of assurance about what UH controls are
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  Speaker 1: in place within the company to handle these kinds of allegations,
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  Speaker 1: what kind of UH codes of conduct or there, and
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  Speaker 1: what kind of mechanisms do people have to report allegations.
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  Speaker 1: And internal auditors are out there every day in you know,
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  Speaker 1: under uncovering issues in the company. They usually have a
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  Speaker 1: pretty keen grasp of what the culture of the company is.
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  Speaker 1: And boards how the direct access to these folks, so
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  Speaker 1: they should be asking them what's going on, what kind
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  Speaker 1: of culture do we have? Because it's a little late.
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  Speaker 1: Once that culture, if it is toxic once, it really
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  Speaker 1: kind of tarnishes the company. It's a little bit late
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  Speaker 1: for everybody to start acknowledging them that there were cultural issues. Richard,
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  Speaker 1: How does that happen when the president the chief executive
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  Speaker 1: of a company also happens to be the chairman of
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  Speaker 1: the board. That's the case at CBS. Well, that's why
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  Speaker 1: it's so I think that's why it's so powerful that
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  Speaker 1: internal auditors report to the audit committee, and the audit
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  Speaker 1: committees are shaired not by corporate executives but by independent
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  Speaker 1: board members. And it's those independent board members who chair
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  Speaker 1: the board, the audio committee of the board, who have
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  Speaker 1: the responsibility to turn to internal audit to look at
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  Speaker 1: other sources, um to get the answers. In fact, the
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  Speaker 1: survey I mentioned earlier showed that nearly three quarters of
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  Speaker 1: corporate boards almost had made no move to bring in
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  Speaker 1: any experts or the internal auditors to look at sexual
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  Speaker 1: harassment misconduct risks. In the case of CBS, the chairman
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  Speaker 1: of that board the audit committee is Gary Countryman. He's
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  Speaker 1: the former chairman of Liberty Mutual. Should they have a
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  Speaker 1: regular investigation or process to vet the chairman of the
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  Speaker 1: board or the chief executive for this very issue, Well,
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  Speaker 1: I would think there is there should be it again
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  Speaker 1: back to my back to my earlier point, I think
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  Speaker 1: audit committees have an ongoing responsibility to have the kind
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  Speaker 1: of dialogue with internal audit. They have executive sessions, usually
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  Speaker 1: with the internal auditors with nobody else from the executive
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  Speaker 1: management around. They have an ongoing opportunity to probe these
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  Speaker 1: kind of areas, to ask these kind of questions. There
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  Speaker 1: should be a clear expectations set with the legal counsel
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  Speaker 1: of the of the company to make sure that any
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  Speaker 1: allegation are brought to their attention as they involve the
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  Speaker 1: CEO or some other senior executives. To me, this is
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  Speaker 1: just a simple matter, not simple really, but certainly a
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  Speaker 1: matter of risk management. Companies face a litany of risks.
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  Speaker 1: To you know, we we we talked every day about
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  Speaker 1: operational risk, strategic risks, technology risk. This is another risk.
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  Speaker 1: And to me, smart boards, boards that are fully engaged
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  Speaker 1: in experting their responsibility will have the right risk management
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  Speaker 1: in place. We've got to leave it there. I want
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  Speaker 1: to thank you very much Richard Chambers, chief executive of
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  Speaker 1: the Institute of Internal Auditors, on how CBS could handle
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  Speaker 1: accusations against chief executive and chairman less Moonvest. Getting ready
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  Speaker 1: for a back to school a shopping parents are faced,
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  Speaker 1: perhaps with a variety of new items. Everyone needs an
• 9:05
  Speaker 1: ear phone holder as well as washy tape. Here to
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  Speaker 1: tell us more about the industry is Punamgyal, our senior
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  Speaker 1: retail analyst for Bloomberg Intelligence. Punam what kinds of back
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  Speaker 1: to school shopping can we expect this season? Yeah? You know,
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  Speaker 1: I think the back to school season this year will
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  Speaker 1: be interesting. Estimates are for a down one percent top
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  Speaker 1: to present, depending on who's look, but I think consumers.
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  Speaker 1: What I found very interesting is that apparel, you know,
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  Speaker 1: a key category for back to school, is going to
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  Speaker 1: see some momentum this year, which votes really well for
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  Speaker 1: the retailers that I cover department stores and apparel stores.
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  Speaker 1: And within that, I think Denham, which has made a
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  Speaker 1: strong comeback um, is going to be feeling that shar game.
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  Speaker 1: So people are going to be buying lots of genes
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  Speaker 1: as they head back to school. That's what we're seeing, Yes,
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  Speaker 1: I mean that's what the sur ratio. Are they going
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  Speaker 1: to be buying them through Amazon or their local store?
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  Speaker 1: So sets questions. I think Amazon will get some of
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  Speaker 1: that share. If no matter where I look and how
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  Speaker 1: I look, Amazon has been growing it's private label business,
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  Speaker 1: especially in apparel. We saw that on Prime Day and
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  Speaker 1: I think we'll continue to see that over the course
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  Speaker 1: of back to school and even into holidays. But that said,
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  Speaker 1: there are some very strong apparel players in Denham. When
• 10:20
  Speaker 1: you look at, for example, American Eagle, I think you
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  Speaker 1: know that's one retailer that stands out and that will
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  Speaker 1: continue to do well in the standard genes Um category,
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  Speaker 1: which is forecasted to be up for point five percent
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  Speaker 1: for this year, and then Old Navy. When you look
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  Speaker 1: at Economy jenes Um at the lower price points UM,
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  Speaker 1: Amazon is probably somewhere in between those two, so I
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  Speaker 1: think they'll also continue to gain share, not more people
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  Speaker 1: pay more for the same products this year. Will they
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  Speaker 1: see inflation at the store? I don't think so. No.
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  Speaker 1: While retailers would love to see inflation UM, but I
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  Speaker 1: think if you look at a like to like item,
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  Speaker 1: I don't think you'll see the price move up. That said,
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  Speaker 1: if you enhance the material UM, if there's more stretchability
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  Speaker 1: to it, if it's you know, better quality UM, then
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  Speaker 1: the price points there could go up from last year.
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  Speaker 1: So when you tell when you start to think about
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  Speaker 1: what to expect for the back to school season, how
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  Speaker 1: much you're looking at the spending ability of consumers the economy.
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  Speaker 1: I mean, what sort of factors in for you. I mean,
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  Speaker 1: the economy definitely matters, right, because at the end of
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  Speaker 1: the day, if the consumer isn't feeling that they are
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  Speaker 1: in a healthy position to spend, you're going to see
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  Speaker 1: a pullback. I don't see that this year. I didn't
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  Speaker 1: see that last year. Um. You know, we have consumer
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  Speaker 1: confidence still at near all time highs, unemployment rate as well,
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  Speaker 1: and the housing market queer frankly is still good. So um,
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  Speaker 1: we haven't seen consumers start to trade down or anything yet,
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  Speaker 1: which helps back to school spending. That said, you know,
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  Speaker 1: last year, um, if you look back at three Q,
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  Speaker 1: which in retail it's August Tember October, August was very strong,
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  Speaker 1: which which encompassed most of back to school, so they're
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  Speaker 1: up against some very tough comparisons for just back to school.
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  Speaker 1: But then when you forward in the quarter into September October,
• 12:02
  Speaker 1: it was very very weak last year if you recall
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  Speaker 1: the hurricanes and storms that we had and warm temperatures.
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  Speaker 1: So we think the opportunity for retail and three que
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  Speaker 1: back to school will be good, But the real opportunity
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  Speaker 1: is going to come in the latter half if temperatures
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  Speaker 1: are cooler than they were last year and we don't
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  Speaker 1: have as many storms. I'm just a little bit more
• 12:23
  Speaker 1: on denom. Does each item if it has more holes
• 12:28
  Speaker 1: and rips, doesn't cost more? Sometimes Yes, Um, depends on
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  Speaker 1: where you're shopping, you know, um in premium genes yes,
• 12:36
  Speaker 1: and standard genes Uh. I'd say the rips don't necessarily
• 12:40
  Speaker 1: dictate the price, but the fabrication of the denom does.
• 12:44
  Speaker 1: So if there is more stretchability, fits softer, yes, it'll
• 12:47
  Speaker 1: cost more. Then why would American Eagle, for example, be
• 12:50
  Speaker 1: offering thirty off if you buy three pairs of genes?
• 12:54
  Speaker 1: Is it just because their cost is so low that
• 12:58
  Speaker 1: off still means that making a decent an amount of money. Yeah.
• 13:01
  Speaker 1: You know, most of those formation promotions are typically built in,
• 13:03
  Speaker 1: so I wouldn't consider them last leading. Yet if you
• 13:06
  Speaker 1: saw seventy percent off, I would be a little concerned,
• 13:08
  Speaker 1: or even fifty percent off. So I think those are
• 13:11
  Speaker 1: built in, and it's really just to drive the customer
• 13:13
  Speaker 1: into the store and hoping that they also transact into
• 13:16
  Speaker 1: adjacent categories, whether they pick up a top while there
• 13:19
  Speaker 1: there are something else that built the basket. I honestly say, pim.
• 13:23
  Speaker 1: There have been some advertisements that are sheer parity, where
• 13:26
  Speaker 1: you basically have these genes that are are all holes
• 13:30
  Speaker 1: except for a couple of lines of denim, and they
• 13:33
  Speaker 1: cost like two hundred dollars. There's one post I'm thinking
• 13:35
  Speaker 1: of particular, and it was widely widely mocked online. Yes,
• 13:39
  Speaker 1: the look on your face does say it all. Tim, Well,
• 13:42
  Speaker 1: maybe there's a market for patches, all right, there's got
• 13:46
  Speaker 1: to be more than apparel, right, I mean, are we
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  Speaker 1: going to see big spending on technology? Yes? Absolutely. I
• 13:52
  Speaker 1: mean that's always a key category, whether it's laptops, you know,
• 13:55
  Speaker 1: I've had iPhones, whatever it maybe um shoppers needs back
• 13:59
  Speaker 1: to school for flies. Those are definitely top categories. If
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  Speaker 1: I look at just a survey that we pulled up
• 14:04
  Speaker 1: and it was done by Deloitte, you know, total back
• 14:07
  Speaker 1: to school spending the estimate twenty seven point six billion dollars,
• 14:10
  Speaker 1: the lion shares, apparel fifteen billion dollars, Computer and hardware
• 14:14
  Speaker 1: to your Technology UM point and electronic gadgets add up
• 14:18
  Speaker 1: to anywhere near three point seven and two point eight,
• 14:21
  Speaker 1: So you're looking at about six billion dollars starting to
• 14:25
  Speaker 1: talk about real money. Put Hum Goyle. Thank you so
• 14:27
  Speaker 1: much for being with us. Put Him Goyle. See your
• 14:29
  Speaker 1: US retail analyst for Bloomberg Intelligence, Pimm. Do you buy
• 14:33
  Speaker 1: clothes online? No? I don't really do a lot of
• 14:36
  Speaker 1: buying well, and you're the one who accuses me. I'm
• 14:40
  Speaker 1: not actually buying enough things, you know at my stage,
• 14:45
  Speaker 1: and there's no it's it's not an option. I don't know.
• 14:50
  Speaker 1: It's hit or miss for me. I mean there have
• 14:52
  Speaker 1: been some big wins, but some big seven and a
• 14:54
  Speaker 1: half billion that's what they're predicting for. That's what Putnam
• 14:57
  Speaker 1: says for spending for back to school and a half billions.
• 15:01
  Speaker 1: A lot of pencils. So as the US housing market
• 15:19
  Speaker 1: heating up or slowing down, here to talk with us
• 15:22
  Speaker 1: is Logan Motor Shami, senior loan officer for a MC Lending.
• 15:26
  Speaker 1: Thank you so much for joining us. Logan. It's really
• 15:29
  Speaker 1: been an interesting couple of months for the US housing market.
• 15:32
  Speaker 1: We got a bunch of negative data or sort of
• 15:36
  Speaker 1: seeming to paint the market with a pessimistic brush and
• 15:39
  Speaker 1: then today we got this good report at US petting
• 15:42
  Speaker 1: home sales increased for the first time in three months.
• 15:45
  Speaker 1: So can you be just sort of take a step back,
• 15:47
  Speaker 1: take stock? Where are we with the US housing market
• 15:49
  Speaker 1: right now? The US housing market looks exactly perfect where
• 15:55
  Speaker 1: it should be today. Um. I think the problem we
• 15:57
  Speaker 1: have here is that we have an institution of housing
• 16:01
  Speaker 1: and housing economists that have told the story that we
• 16:04
  Speaker 1: have record breaking demand vocifer strong, and all we need
• 16:08
  Speaker 1: is more inventory and once more inventory comes, sales will grow.
• 16:12
  Speaker 1: What we saw an existing home sales last week was
• 16:14
  Speaker 1: inventory rows, sales are down. This is the same thing
• 16:17
  Speaker 1: that happened in now We've got twice now in the
• 16:20
  Speaker 1: cycle where we were told we have record breaking demand,
• 16:23
  Speaker 1: but inventory rises and demand doesn't fall through with it.
• 16:26
  Speaker 1: So it's confusing and people get nervous because we're later
• 16:30
  Speaker 1: in the cycle. Home prices are rising, so people just
• 16:33
  Speaker 1: want to make sure that you know, they're not, you know,
• 16:35
  Speaker 1: in a situation where prices are going to collapse, and
• 16:38
  Speaker 1: that's not going to be the case in this cycle either.
• 16:40
  Speaker 1: So I think the extreme housing bowls and extreme housing
• 16:44
  Speaker 1: bears are going to be terribly frustrated for the upcoming
• 16:48
  Speaker 1: years because I truly believe they're not correctly reading the
• 16:51
  Speaker 1: data right and because of that, it creates confusion instead
• 16:55
  Speaker 1: of instead of a housing cycle that looks exactly where
• 16:59
  Speaker 1: it should be. Okay, well, logan, well, based on your
• 17:02
  Speaker 1: reading of the data, what do you conclude and help
• 17:06
  Speaker 1: Lisa out here give us a little picture into the future.
• 17:09
  Speaker 1: Purchase applications are at cycle highs. We've had year over
• 17:12
  Speaker 1: year growth every week. Basically, cash buyers are faulting as
• 17:15
  Speaker 1: a percentage of sales. So because of that, you're going
• 17:18
  Speaker 1: to need more mortgage demand to get growth from these levels.
• 17:22
  Speaker 1: This is the same thing kind of what happened last
• 17:24
  Speaker 1: year as well. We're kind of a flat to negative
• 17:26
  Speaker 1: sales trends, but purchase applications are still only as so
• 17:31
  Speaker 1: we're not we're not bearing some very strong economic cycle
• 17:34
  Speaker 1: where builders have to build out more homes. So the
• 17:36
  Speaker 1: inventory channels from the builders are actually looks pretty pretty
• 17:39
  Speaker 1: in line. Because new home sales are still growing, they're
• 17:41
  Speaker 1: actually better than than than I anticipated. So it's just
• 17:45
  Speaker 1: a very slow and steady housing cycle. So there's there's
• 17:49
  Speaker 1: not this There shouldn't be this very extremembarrassed theme with
• 17:53
  Speaker 1: the data that came in last week, or an extreme
• 17:55
  Speaker 1: bullish theme for all the data that has been out
• 17:58
  Speaker 1: here for years. With housing, it's just a very slow
• 18:00
  Speaker 1: and steady housing cycle. But it confuses people when they
• 18:04
  Speaker 1: see inventory increased year over year and demand go down.
• 18:07
  Speaker 1: And I think that's I think that's the miscommunication with
• 18:11
  Speaker 1: the housing community to the public because the public was
• 18:13
  Speaker 1: always told if we get more inventory, sales will take off,
• 18:17
  Speaker 1: and twice now in the cycle it has not happened.
• 18:19
  Speaker 1: Look in your uniquely positioned to give us insight and
• 18:22
  Speaker 1: how much the increase in mortgage rates has affected demand
• 18:26
  Speaker 1: for home loans. What has it been like. Well, even today,
• 18:32
  Speaker 1: purchase applications are up the year over year, so we
• 18:35
  Speaker 1: can we can assume that higher mortgage rates with higher
• 18:39
  Speaker 1: home prices might impact the rate of growth of housing.
• 18:43
  Speaker 1: But this isn't like was very evident mortgage rates rose late,
• 18:49
  Speaker 1: purchased applications were down year over year from the majority
• 18:53
  Speaker 1: of the year. We don't see that this year. So today,
• 18:56
  Speaker 1: even now, higher mortgage rates have not impacted stay else
• 19:00
  Speaker 1: in the sense that, uh, we're creating a negative trend.
• 19:03
  Speaker 1: But it's impacting I would say, the rate of growth
• 19:06
  Speaker 1: out here. But also it's harder to move up when
• 19:10
  Speaker 1: you're when interest rates are higher, you know, and I
• 19:13
  Speaker 1: know there's a lockdown rate theory, but higher home prices
• 19:15
  Speaker 1: make it harder for the move a buyer to buy
• 19:18
  Speaker 1: that expensive house. And we see this in the housing
• 19:21
  Speaker 1: tenure data. That housing tenure is at all time highs
• 19:24
  Speaker 1: right now. And this is a situation why builders aren't
• 19:27
  Speaker 1: building more homes. They know there's a massive amount of
• 19:29
  Speaker 1: supply that is out there that is cheaper, smaller, and
• 19:32
  Speaker 1: has a geographical advantage over them. So one thing that
• 19:35
  Speaker 1: I'm trying to understand, perhaps some of the confusion is
• 19:37
  Speaker 1: stemming from a bifurcation in the US market where certain
• 19:42
  Speaker 1: big cities that enjoyed massive booms in their housing markets
• 19:46
  Speaker 1: are seeing uh sort of market slowdowns. I mean, I'm thinking,
• 19:49
  Speaker 1: for example of San Francisco, do market, but you're starting
• 19:52
  Speaker 1: to see a plateauing and dipping in prices, and certainly
• 19:55
  Speaker 1: in New York. How much is that part of the narrative.
• 19:59
  Speaker 1: Here's here's here's the interesting. This is what I could
• 20:01
  Speaker 1: see in SoCal and I even took a bunch of
• 20:02
  Speaker 1: photos of price reduction homes. What I saw in June
• 20:06
  Speaker 1: and July was aggressive selling prices from real estate agents
• 20:11
  Speaker 1: and these homes drawn for thirty days and more. And
• 20:14
  Speaker 1: it's late July, and if you need to sell the
• 20:16
  Speaker 1: house before the you know, the school the school time
• 20:19
  Speaker 1: it comes in, you saw aggressive price cuts, you know,
• 20:22
  Speaker 1: as I saw price cuts of four or five, six,
• 20:24
  Speaker 1: seven percent even to sell the house. Okay, So there
• 20:28
  Speaker 1: is limits to what you could put onto the marketplace.
• 20:32
  Speaker 1: And that's what I'm seeing this summer, is that you
• 20:34
  Speaker 1: saw aggressive selling prices, thinking that it would just be
• 20:38
  Speaker 1: soaked up because inventory is monthly supply. Is that near
• 20:42
  Speaker 1: cyclothes And it didn't happen. And then you know, the
• 20:45
  Speaker 1: sales are delayed out because the price cuts are coming
• 20:48
  Speaker 1: in and most likely that all the buyers will pick
• 20:50
  Speaker 1: it up then. But that is what I That was
• 20:52
  Speaker 1: what I'm assuming is going is what we're seeing in
• 20:55
  Speaker 1: other places, that there's limits to how much price increases
• 20:58
  Speaker 1: you could get out of the house. Logan just quickly,
• 21:02
  Speaker 1: and I just want to mention you've got a great website, Logan,
• 21:05
  Speaker 1: your Financial Truth website where you put out your economic
• 21:10
  Speaker 1: and housing predictions. Just twenty seconds. Would you change anything
• 21:14
  Speaker 1: that you've described earlier this year? Absolutely not. It looks
• 21:18
  Speaker 1: perfect Because I talked about existing home sales will be
• 21:20
  Speaker 1: flat and negative, but inventory will increase and people shouldn't
• 21:24
  Speaker 1: panic about that. That was my exact line I used
• 21:27
  Speaker 1: UH in there. This is uh. This year looks exactly correct,
• 21:30
  Speaker 1: and new home sales are actually still outperforming my sales estum.
• 21:34
  Speaker 1: I though I was only looking for two to five
• 21:35
  Speaker 1: percent growth, were a little bit higher than that. Median
• 21:39
  Speaker 1: sales prices falling. That is actually a good thing. That
• 21:42
  Speaker 1: means lower home prices are coming in the market. We've
• 21:44
  Speaker 1: got to leave it there, but thanks very much for
• 21:46
  Speaker 1: being with a slogan Matsa Shami. He is the senior
• 21:49
  Speaker 1: loan officer for a MC Lending, giving us his perspective
• 21:54
  Speaker 1: on housing data, more good applications, and the housing market.
• 22:11
  Speaker 1: Joining us now in studio Car Wreca Donna, chief US
• 22:14
  Speaker 1: economist for Bloomberg Intelligence. Carl, gotta ask you about Kansas
• 22:21
  Speaker 1: City and Esther George, head of the Kansas City FED.
• 22:25
  Speaker 1: You're shaking your head. You're giving me this smile. This
• 22:28
  Speaker 1: means Esther George is going to vote, isn't she? Yes?
• 22:32
  Speaker 1: She will be voting in the absence of San Francisco
• 22:37
  Speaker 1: FED having a replacement for John Williams, who moved to
• 22:41
  Speaker 1: was the president at the San fran FED, who was
• 22:43
  Speaker 1: now the president at the New York FED. And what's
• 22:46
  Speaker 1: a little bit of of musical chair I mean esther
• 22:49
  Speaker 1: George is known as pretty hawkish. More than pretty hawkish,
• 22:54
  Speaker 1: she is one of the most resolute hawks on the committee.
• 22:58
  Speaker 1: So uh, A one vote can't can't slave the committee.
• 23:02
  Speaker 1: So you know, I don't think this materially will change
• 23:06
  Speaker 1: the discussion for economics UH and policy setting at the effect,
• 23:12
  Speaker 1: but nonetheless it will be a hawkish voice who counts
• 23:14
  Speaker 1: as a vote, not just not just an opposition. Carl U.
• 23:19
  Speaker 1: There is an enigma wrapped in a mystery, wrapped in
• 23:22
  Speaker 1: a paradox in the economic models. Right now, we have
• 23:27
  Speaker 1: the US administration, the President and his his staff talking
• 23:32
  Speaker 1: about sustained three percent growth in the US possibly more.
• 23:36
  Speaker 1: You hear a lot of bullish talk. You also hear
• 23:38
  Speaker 1: a lot of bullish talk from investors who are looking
• 23:41
  Speaker 1: at the fundamentals seeing incredible earnings. And then there is
• 23:45
  Speaker 1: the pessimism. And the pessimism is so pervasive where do
• 23:48
  Speaker 1: you fall on this. What's the right narrative right now?
• 23:52
  Speaker 1: I think we got two wrapped up in the notion
• 23:55
  Speaker 1: of new normal economic growth coming out of the Great Recession.
• 23:59
  Speaker 1: Because of the economy was so sluggish for so many years,
• 24:02
  Speaker 1: a lot of folks started to say, well, this, you know,
• 24:04
  Speaker 1: this is where we're stuck going forward. Uh. So I
• 24:08
  Speaker 1: think that was excessive pessimism. Uh. That being said, I
• 24:11
  Speaker 1: don't think that, you know, sustained growth that three or
• 24:14
  Speaker 1: four percent is really a viable option for the US economy.
• 24:18
  Speaker 1: Either you can hit those types of growth figures for
• 24:21
  Speaker 1: a short period of time. Uh. Sometimes if hll you know,
• 24:25
  Speaker 1: have the perfect storm of economic contributions like we saw
• 24:28
  Speaker 1: in Q two, you get it. Also, if you uh
• 24:32
  Speaker 1: cut taxes enough and basically embark on deficit spending, you
• 24:37
  Speaker 1: can also get sustained pick up, but only for a short,
• 24:41
  Speaker 1: medium time period and ultimately you have to pay the piper.
• 24:45
  Speaker 1: So I think what we're seeing now is the economy
• 24:47
  Speaker 1: is improving given where we are in the cycle. It's
• 24:50
  Speaker 1: not just a consumer story anymore. Businesses are spending, but
• 24:54
  Speaker 1: sustained growth in the three to four percent territory just
• 24:58
  Speaker 1: not in the cards. So we're gonna get a rate
• 25:00
  Speaker 1: hike in September. Any other rate hikes from the Fed
• 25:03
  Speaker 1: this year, that's going to depend on economic performance in
• 25:06
  Speaker 1: the back half of the year. Now what we saw,
• 25:09
  Speaker 1: you know, four point one percent growth in Q two.
• 25:12
  Speaker 1: My team is forecasting growth to moderate it about two
• 25:15
  Speaker 1: point eight percent in the back half of the year.
• 25:18
  Speaker 1: So if you're growing at two point eight percent, your
• 25:20
  Speaker 1: unemployment rate is four percent or just a little lower
• 25:23
  Speaker 1: inflations running at two percent, that seems like it would
• 25:26
  Speaker 1: augur for the Fed to continue on this gradual path
• 25:29
  Speaker 1: of normalization. But I suspect financial conditions, rather than economic performance,
• 25:35
  Speaker 1: are going to be the determinant of that potential fourth
• 25:39
  Speaker 1: rate HiPE, which will come up in December. And so
• 25:41
  Speaker 1: as we look at financial conditions, we have a FED
• 25:43
  Speaker 1: balance sheet that's tightening, the dollar has been appreciating significantly,
• 25:48
  Speaker 1: the yield curve is very flat. I suspect these financial
• 25:52
  Speaker 1: considerations will actually lead the FED to pause at that
• 25:56
  Speaker 1: December meeting, rather than purely looking at the economic data.
• 26:00
  Speaker 1: If you look at the economic data, it's a green light.
• 26:02
  Speaker 1: If you look at the financial data, it's flash and yellow.
• 26:05
  Speaker 1: Why would they not look at the economic data. Well
• 26:08
  Speaker 1: they're looking at both. No, I know, but why would they?
• 26:11
  Speaker 1: Why would they? They will look at the economic data
• 26:13
  Speaker 1: in isolation. Right, They're very concerned about the potential implications
• 26:18
  Speaker 1: of a flat yield curve, but they keeping they'll invert
• 26:21
  Speaker 1: it and wait forgetting you for just a second. We
• 26:25
  Speaker 1: got the report from Caterpillar today, right talk Karen neuble
• 26:28
  Speaker 1: Heart Bloomberg Intelligence said this is great. I mean, things
• 26:32
  Speaker 1: are really good, and they're raising prices and those price
• 26:36
  Speaker 1: increases are probably going to stick. You notice that in
• 26:40
  Speaker 1: the transportation industry, prices are increasing. Can't find truckers. Is
• 26:46
  Speaker 1: there an opportunity for the Federal Reserve to get ahead
• 26:49
  Speaker 1: of the curve here and actually go ahead with these
• 26:51
  Speaker 1: rate increases? The Fed doesn't want to get ahead of
• 26:54
  Speaker 1: the curve. They want to move with the data. But
• 26:57
  Speaker 1: you need to look at forward looking data. So it's
• 26:59
  Speaker 1: not the economy is doing at the moment four percent growth.
• 27:03
  Speaker 1: It's what you're expecting the economy to do over the
• 27:05
  Speaker 1: next couple of quarters that really matters. And I suspect
• 27:09
  Speaker 1: we're going to get a clue a little bit later
• 27:11
  Speaker 1: this week. And while the main focal points are the
• 27:14
  Speaker 1: FED meeting and the Job's Report on Wednesday and Friday, respectively.
• 27:17
  Speaker 1: What could be more important is the Manufacturing I s M,
• 27:21
  Speaker 1: which is out on Wednesday, and within that we have
• 27:24
  Speaker 1: new export orders. We've had a dramatic appreciation of the
• 27:27
  Speaker 1: dollar over the last couple of months, and that could
• 27:29
  Speaker 1: be the beginning of a down draft or a period
• 27:31
  Speaker 1: of weakness in the back half. Kadona, chief US economist
• 27:35
  Speaker 1: for Bloomberg Intelligence. Always well done, actually, Bloomberg Economics. Thanks
• 27:43
  Speaker 1: for listening to the Bloomberg P and L podcast. You
• 27:46
  Speaker 1: can subscribe and listen to interviews at Apple Podcasts, SoundCloud,
• 27:50
  Speaker 1: or whatever podcast platform you prefer. I'm pim Fox. I'm
• 27:53
  Speaker 1: on Twitter at pim Fox. I'm on Twitter at Lisa Abramo.
• 27:58
  Speaker 1: It's one before the podcast. You can always catch us
• 28:00
  Speaker 1: worldwide on Bloomberg Radio.