Latest / Bloomberg Intelligence / Target, Preferred Stocks, Trump, and Mortgage Rates

Transcript

Target, Preferred Stocks, Trump, and Mortgage Rates · Bloomberg Intelligence

• 0:00
  Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
• 0:04
  Speaker 1: my co host Matt Miller.
• 0:05
  Speaker 2: Every business day we bring you interviews from CEOs, market pros,
• 0:09
  Speaker 2: and Bloomberg experts, along with essential market moven News.
• 0:14
  Speaker 1: I'm the Bloomberg Markets Podcast on Apple Podcasts or wherever
• 0:17
  Speaker 1: you listen to podcasts, and at Bloomberg dot com Slash podcast.
• 0:21
  Speaker 1: The retailers coming in with some numbers here today, Target,
• 0:26
  Speaker 1: TJ Max, we got Walmart tomorrow. Let's let's round table
• 0:30
  Speaker 1: this thing with some smart folks. Jen Bartash is senior
• 0:32
  Speaker 1: industry an also with Bloomberg Intelligence and Bloomberg News. Jen
• 0:36
  Speaker 1: joins us via the cam from the Princeton office of
• 0:40
  Speaker 1: Bloomberg Intelligence. And then we got Simone Foxman. She is
• 0:43
  Speaker 1: a Bloomberg reporter for Bloomberg Television, joining us here in studio,
• 0:48
  Speaker 1: Jen Bartashes, Let's start with you. TGT Target stocks up
• 0:52
  Speaker 1: over five percent the market. What is it like here
• 0:55
  Speaker 1: out of the Target results.
• 0:57
  Speaker 3: Well, when we look at Target, you know with the
• 0:59
  Speaker 3: market it likes is that margin is up and it's
• 1:02
  Speaker 3: up significantly over last year. At the same time, I
• 1:05
  Speaker 3: think everyone recognizes that it's a difficult operating environment, and
• 1:09
  Speaker 3: so even though target reduced, it's full of your guidance
• 1:12
  Speaker 3: for sales and for profit. I think that people are
• 1:16
  Speaker 3: encouraged by the the way that margins are responding even
• 1:19
  Speaker 3: in that environment.
• 1:20
  Speaker 1: All right, So genders for our viewers on YouTube, I
• 1:24
  Speaker 1: want to point out that you have what is probably
• 1:27
  Speaker 1: the best quote unquote office in Bloomberg. It is a
• 1:29
  Speaker 1: kind of a corner office. Now, no one, I mean
• 1:32
  Speaker 1: no one at Bloomberg has offices. We all sit at
• 1:34
  Speaker 1: our desks in kind of the bullpen style. But Jenna's
• 1:38
  Speaker 1: got bad as close as you can get to a
• 1:39
  Speaker 1: corner office. I just want to point that out now
• 1:41
  Speaker 1: because she's been running the Princeton office for decades. I mean,
• 1:45
  Speaker 1: she's basically the leader down there. So we were able
• 1:48
  Speaker 1: to bring her to BI. So that's pretty cool.
• 1:51
  Speaker 2: All right, Simone teach Simone Foughtsman sits near a window.
• 1:54
  Speaker 1: She does sit near a window.
• 1:55
  Speaker 4: I also sit near the great Michael McKee, who's a
• 1:57
  Speaker 4: frequent Bloomberg radio. Yes, but I once had my own
• 2:01
  Speaker 4: office because I was the only correspondent in the country.
• 2:04
  Speaker 4: So anyway, but yes, but you want to hear about
• 2:08
  Speaker 4: retail in the United States.
• 2:09
  Speaker 1: Yes, So what do you got here on our good
• 2:11
  Speaker 1: friends at TJMAX.
• 2:13
  Speaker 4: Yeah, I mean beaten a raise really right across the board,
• 2:18
  Speaker 4: raising their outlook for the year, seeing compar bill sales
• 2:21
  Speaker 4: three to four percent. I mean, the idea value is
• 2:24
  Speaker 4: attracting customers. They're seeing increased traffic across all their major brands.
• 2:29
  Speaker 4: According to the CEO, there even home Goods that was
• 2:33
  Speaker 4: not expected to do quite so well. Comp sales there
• 2:36
  Speaker 4: were expected to be slightly in the negative, but we
• 2:38
  Speaker 4: saw four percent year on year rise. So even though
• 2:43
  Speaker 4: consumers are looking away from their homes, they spent so
• 2:46
  Speaker 4: much time there, they've invested there during the pandemic, and
• 2:49
  Speaker 4: they are moving on, home goods is still able to
• 2:52
  Speaker 4: attract people. So a broadly very positive earnings report for TJX,
• 2:57
  Speaker 4: though I will say shares three points six percent higher,
• 3:00
  Speaker 4: not the five plus that we see.
• 3:02
  Speaker 1: Into time high for TJX. I wild point that out
• 3:05
  Speaker 1: all time high for the stock.
• 3:06
  Speaker 2: Well, I mean, are people stepping down? Are you starting
• 3:09
  Speaker 2: to see that?
• 3:10
  Speaker 5: Jen?
• 3:11
  Speaker 2: You know, for a long time we've been hearing guests
• 3:14
  Speaker 2: come in the studio and tell Paul and me that
• 3:17
  Speaker 2: people step down from target to Walmart. Are they stepping
• 3:20
  Speaker 2: down from Target to TJX.
• 3:22
  Speaker 3: Well, I think across the board, you're talking about what
• 3:25
  Speaker 3: we consider to be a flight to value, and so
• 3:28
  Speaker 3: regardless of where your household income level lies, people are
• 3:32
  Speaker 3: increasingly seeing value. And that's one of the things that
• 3:34
  Speaker 3: makes TJX such a great opportunity for people, and that
• 3:37
  Speaker 3: it's there's something always new they go in there. It's
• 3:40
  Speaker 3: treasure hunt. And if you're talking about the Walmart's and
• 3:44
  Speaker 3: the Targets of the world, you're seeing consumers shift into
• 3:48
  Speaker 3: areas where they think there is value. So there are
• 3:51
  Speaker 3: some shoppers who have moved from Target to Walmart, especially
• 3:54
  Speaker 3: when you're talking about essentials, where Walmart's prices are just
• 3:58
  Speaker 3: generally very, very sharp. But we're all also seeing people
• 4:00
  Speaker 3: move from Walmart down to dollar stores. So it's really
• 4:03
  Speaker 3: that progression of the flight to value that is really
• 4:07
  Speaker 3: describing the current economic environment and the consumer environment that
• 4:10
  Speaker 3: we're seeing.
• 4:11
  Speaker 4: And I think when you think about it too, you know,
• 4:13
  Speaker 4: the area we've heard folks across the consumer space be
• 4:18
  Speaker 4: really negative is those middle income consumers who want to
• 4:23
  Speaker 4: cut their discretionary spending, and TJX offers a bit more
• 4:28
  Speaker 4: of that discretionary spend. So instead of going to the
• 4:32
  Speaker 4: top line retailer, you have people going out and saying,
• 4:35
  Speaker 4: I want to do that treasure hunting. I think that
• 4:38
  Speaker 4: that is a better use of my wallet than just
• 4:42
  Speaker 4: simply going to a store where the kind of where
• 4:44
  Speaker 4: I don't have to do that, but I'm also going
• 4:45
  Speaker 4: to pay it.
• 4:46
  Speaker 1: And simone I noticed, you know, kind of what was
• 4:48
  Speaker 1: unusual for TJ Max here is okay, they beat the quarter,
• 4:51
  Speaker 1: and but unlike the Target who was cautious in their outlook,
• 4:56
  Speaker 1: they boosted. TJ Max boosted their outlook here. So what's
• 4:59
  Speaker 1: kind of the the.
• 5:00
  Speaker 4: Extremely strong commentary saying that they're off to an incredible,
• 5:04
  Speaker 4: a very strong start, I believe is word for word
• 5:08
  Speaker 4: in the third quarter. So I think everyone very optimistic
• 5:12
  Speaker 4: there that this flight to value, as Jennifer was talking about,
• 5:16
  Speaker 4: will continue even if even if a recovery to some
• 5:21
  Speaker 4: degree materializes in the way that Target has been I
• 5:24
  Speaker 4: guess hoping and praying for on their call, Jen, what do.
• 5:27
  Speaker 2: You hear about the excess savings? I heard someone this morning,
• 5:32
  Speaker 2: I think carl Rickodonna on Bloomberg Surveillance say that carl
• 5:36
  Speaker 2: Rickodonna over at BNP, Perry of BA saying that at least,
• 5:41
  Speaker 2: like you know, there's been a debate about whether or
• 5:43
  Speaker 2: not Americans still have excess savings left, but he says,
• 5:46
  Speaker 2: one thing is for sure that the lower let's say
• 5:49
  Speaker 2: three quinn tiles have already blown through it and have
• 5:52
  Speaker 2: nothing left.
• 5:54
  Speaker 3: Yeah, that's that's what we're seeing too. And there's you know,
• 5:57
  Speaker 3: growing use of credit card that credit cards and is
• 6:00
  Speaker 3: a little bit on the rise, especially for those quintiles
• 6:05
  Speaker 3: that he was talking about, and so those consumers are
• 6:09
  Speaker 3: really looking for where to spend that money. And I
• 6:12
  Speaker 3: think one of the other things to think about is
• 6:14
  Speaker 3: that the retailers in general haven't they still haven't gone
• 6:17
  Speaker 3: back to pre pandemic days of promotions and the same
• 6:20
  Speaker 3: types of levels of sales and discounts, and so although
• 6:24
  Speaker 3: they're offering value, that type of sales environment or promotional
• 6:27
  Speaker 3: environment hasn't yet come back. Now that maybe on the
• 6:30
  Speaker 3: horizon if things don't change soon. But I think it
• 6:33
  Speaker 3: also supports why we're seeing the popularity of things like TJX,
• 6:37
  Speaker 3: because people aren't getting those sales at the big box
• 6:41
  Speaker 3: retailers or some of the other retailers at the moment,
• 6:44
  Speaker 3: and so they're looking for where they can find some
• 6:46
  Speaker 3: of those key brands but at a much lower cost.
• 6:49
  Speaker 1: Simon, what else are you looking at here in the
• 6:52
  Speaker 1: retail space as we get somebody's come to reporting earnings.
• 6:56
  Speaker 4: Yeah, I mean tomorrow we have Walmart. That's the big
• 6:59
  Speaker 4: dog there. I think shares hit an all time high
• 7:04
  Speaker 4: earlier this week, and so I think expectations are very
• 7:07
  Speaker 4: high that they can do they can benefit from this
• 7:11
  Speaker 4: environment in a similar way to perhaps TJ Max. Is
• 7:14
  Speaker 4: that consumers are trading down, They're doing more of their
• 7:17
  Speaker 4: spending at Walmart. Walmart plus growing and increasing number of
• 7:21
  Speaker 4: subscribers that are using its food businesses and that sort
• 7:25
  Speaker 4: of thing. So that'll be an interesting data point to watch.
• 7:28
  Speaker 4: I'm also interested. You know, we heard from Target this
• 7:31
  Speaker 4: morning about the impact of student loan repayments kicking back up.
• 7:37
  Speaker 4: Do we hear that from TJ Max? They have yet
• 7:39
  Speaker 4: to have their call, do we hear that from Walmart.
• 7:42
  Speaker 4: We're just trying to get a sense of how much
• 7:44
  Speaker 4: this is actually going to weigh on consumers as we
• 7:46
  Speaker 4: head towards the fall, and then of course head towards
• 7:48
  Speaker 4: the holiday season.
• 7:49
  Speaker 2: You ever been a TJ Max Paul. Probably yes, I
• 7:53
  Speaker 2: have to say, I haven't been there in a while,
• 7:54
  Speaker 2: but when I when I would go, and still if
• 7:57
  Speaker 2: I would go today, Jenna is right or I don't
• 8:01
  Speaker 2: know who said that about hunting for like, it is
• 8:03
  Speaker 2: an adventure to go in there because there's so much
• 8:06
  Speaker 2: stuff and you know you're gonna find like like three
• 8:08
  Speaker 2: cool polo shirts for twenty nine to ninety nine that
• 8:11
  Speaker 2: you would normally pay, like I don't know, one hundred
• 8:13
  Speaker 2: bucks for.
• 8:14
  Speaker 4: So I think that's how you can make sense of it, right.
• 8:17
  Speaker 4: You know, when I was younger, I loved doing that
• 8:20
  Speaker 4: so much more.
• 8:21
  Speaker 3: Uh.
• 8:21
  Speaker 4: And I think if my thanks Bloomberg for paying me.
• 8:24
  Speaker 4: But I think if my pennies were tighter, I would
• 8:27
  Speaker 4: I would worry a little bit more about where each
• 8:29
  Speaker 4: dollar was going. Uh, And therefore I would feel like, Okay,
• 8:33
  Speaker 4: I've done. I've put in the hard work to go
• 8:35
  Speaker 4: and buy this handbag, even though you know, my dimes
• 8:38
  Speaker 4: are tight. Whereas Walmart, whereas whereas I guess you go
• 8:42
  Speaker 4: to Target, it's much everything's much more laid out for you.
• 8:44
  Speaker 2: I mean, my point is it's actually a great way
• 8:46
  Speaker 2: to spend an hour or two in the city, like
• 8:49
  Speaker 2: like going to a Barnes and Noble and.
• 8:50
  Speaker 1: Just hanging out.
• 8:51
  Speaker 4: But this is why you come.
• 8:52
  Speaker 1: This is the great Matt Miller.
• 8:55
  Speaker 2: When I was a kid, I used to do that.
• 8:57
  Speaker 1: Far you fall and Jen Bartash is senior Industrial so
• 8:59
  Speaker 1: Bloomberg can tell and simoon Foxman from Bloomberg. She's reported
• 9:03
  Speaker 1: there joining us talking to us about all things retail.
• 9:07
  Speaker 5: You're listening to the team Ken's are live program Bloomberg
• 9:10
  Speaker 5: Markets weekdays at ten am Eastern on Bloomberg dot Com,
• 9:14
  Speaker 5: the iHeartRadio app and the Bloomberg Business App, or listen
• 9:17
  Speaker 5: on demand wherever you get your podcasts.
• 9:21
  Speaker 1: Next week, Jackson Hole, I am still searching my inbox
• 9:24
  Speaker 1: for the invite Matt, and I'm just I know it's there,
• 9:26
  Speaker 1: I just can't find it. But I don't know if
• 9:28
  Speaker 1: that's gonna be a big deal. Anyway.
• 9:29
  Speaker 2: I heard they disinvited a lot of people, Like remember
• 9:32
  Speaker 2: when the Soho House canceled all the bankers memberships. Yes,
• 9:36
  Speaker 2: I think that's Jackson All did the same thing a
• 9:38
  Speaker 2: couple of years ago.
• 9:39
  Speaker 1: All right, let's bring in Danielle di Martino Booth. She's
• 9:41
  Speaker 1: the CEO and chief strategist at QI research. She joins
• 9:45
  Speaker 1: us live here in our Bloomberg Interactive Brokers studio and
• 9:48
  Speaker 1: on YouTube. So that's even better, Danielle. I guess the
• 9:51
  Speaker 1: narrative now with our feter reserve and with rates is,
• 9:54
  Speaker 1: you know, not how higher they go, but it could
• 9:56
  Speaker 1: be how long are we going to stay here? How
• 9:59
  Speaker 1: are you viewing that part of the narrative.
• 10:02
  Speaker 6: So I think the higher for longer narrative is something
• 10:05
  Speaker 6: that markets do not want to accept. But we have
• 10:07
  Speaker 6: to bear in mind that Jay Powell started in January
• 10:09
  Speaker 6: of twenty twenty two kind of like Obi wan Kenobi,
• 10:13
  Speaker 6: this will happen, This will happen, this will happen. These
• 10:15
  Speaker 6: are not the droids you're looking for. And so he's
• 10:17
  Speaker 6: managed to really extend this narrative. And I think that,
• 10:21
  Speaker 6: you know, if you look at what a lot of
• 10:23
  Speaker 6: people are starting to believe compared to twelve months ago.
• 10:25
  Speaker 6: Now they're saying we might not see quantitative tightening stop
• 10:29
  Speaker 6: until the fourth quarter of twenty twenty four. That is
• 10:32
  Speaker 6: a form of higher for longer, even if we see
• 10:34
  Speaker 6: rate cuts in twenty twenty four.
• 10:36
  Speaker 1: All Right, A very smart listener of ours kind of
• 10:39
  Speaker 1: wrote in and asked about that the relationship between running
• 10:44
  Speaker 1: off the balance sheet and interest rates. You made a
• 10:46
  Speaker 1: comment the last time you were here about that. What
• 10:49
  Speaker 1: did you mean by that relationship?
• 10:51
  Speaker 6: So, I mean we are a nation that exists. Liquidity
• 10:55
  Speaker 6: is the lifeblood of the US economy. It's seventy percent consumption,
• 10:59
  Speaker 6: but so much of business investment, so much of consumption
• 11:02
  Speaker 6: is derived from credit. And when you're pulling liquidity from
• 11:05
  Speaker 6: the system, you end up seeing things like the New
• 11:08
  Speaker 6: York FEDS work that shows that that companies anticipate rejections
• 11:13
  Speaker 6: being at the highest level on record in the next
• 11:15
  Speaker 6: twelve months when it comes to a credit card, home loan,
• 11:19
  Speaker 6: auto loans, and what have you. So that is a
• 11:21
  Speaker 6: reflection of a credit crunch, which I've learned to some
• 11:25
  Speaker 6: is a term that showed up in nineteen sixty six.
• 11:27
  Speaker 6: Oh two guys from Salomon Brothers created the term. They said,
• 11:31
  Speaker 6: they said, a squeeze and a pinch. They might be
• 11:33
  Speaker 6: kind of friendly. A crunch is not. A crunch can
• 11:35
  Speaker 6: break a bone. And that's what we're in the midst of, quietly,
• 11:38
  Speaker 6: and that's what we're seeing with Moodi's and Fitch and
• 11:40
  Speaker 6: the warnings that we've got on banks.
• 11:41
  Speaker 2: I love that. So what they these two guys of
• 11:44
  Speaker 2: Solomon said, you used to be people would say credit
• 11:47
  Speaker 2: squeeze or credit pinch, but that was like too fun.
• 11:50
  Speaker 6: It was too fun. And so that's what happened in
• 11:52
  Speaker 6: nineteen sixty six. You had banks pull back on lending
• 11:55
  Speaker 6: while the US government had been spending a lot of money.
• 11:58
  Speaker 6: I don't see any parallels here.
• 12:00
  Speaker 2: That's sarcasm for those of you who aren't watching.
• 12:03
  Speaker 7: And what did we see?
• 12:05
  Speaker 6: We saw a massive pullback. So there's something to be
• 12:07
  Speaker 6: said for quantitative tightening directly influencing that flow of liquidity
• 12:12
  Speaker 6: or not into the system. It's something we see every
• 12:15
  Speaker 6: Friday afternoon aft the close. In the fed's h eight document,
• 12:18
  Speaker 6: you're seeing commercial and industrial lending negative.
• 12:20
  Speaker 2: How much does the treasury issuance sort of add to
• 12:24
  Speaker 2: that liquidity problem?
• 12:26
  Speaker 6: Well, so the first three hundred billion or so, we're
• 12:29
  Speaker 6: kind of benign. You saw money move out of the
• 12:31
  Speaker 6: Fed's facility overnight facility. People were like, oh, look at this.
• 12:34
  Speaker 6: You know, I'm going to move it into into treasury bills,
• 12:36
  Speaker 6: money market funds. Where are we going going forward? I mean,
• 12:40
  Speaker 6: if inflation is as sticky as the inflation used to
• 12:43
  Speaker 6: say it's going to be. Then, if I'm a money
• 12:45
  Speaker 6: market fund, I'm going to say, wait a minute, I'm
• 12:47
  Speaker 6: not going to go into bills. If I think the
• 12:49
  Speaker 6: Fed's going to raise interest rates one more time in
• 12:51
  Speaker 6: twenty twenty three, maybe it's September, maybe it's December, then
• 12:54
  Speaker 6: I'll wait and I'll keep my money at the FED.
• 12:56
  Speaker 6: Meaning they're not going to naturally absorb all of this
• 13:00
  Speaker 6: treasury issuance, keeping that effect benign, and you end up
• 13:04
  Speaker 6: having quantitative tightening join with treasury built issuance, and you're
• 13:08
  Speaker 6: having a double pulling of liquidity out of the system.
• 13:11
  Speaker 1: All right, I consider myself a pretty good reader. That
• 13:13
  Speaker 1: the nuns of Blessed Saque instilled that in me early age.
• 13:16
  Speaker 1: But I'll tell you what, I am not reading the
• 13:18
  Speaker 1: FED meeting minutes come out later today.
• 13:21
  Speaker 2: That's why we have people like Danielle.
• 13:22
  Speaker 1: That's why I have people like Mount Sacred Heart. So
• 13:24
  Speaker 1: we're like, okay, yeah, very good. So what will you
• 13:27
  Speaker 1: be looking for in these meeting minutes.
• 13:30
  Speaker 6: The softer the landing narrative, the more they're gonna stick
• 13:33
  Speaker 6: with their higher for longer.
• 13:34
  Speaker 1: Okay, So I.
• 13:35
  Speaker 6: Mean, look, minutes can be massaged. Janet Yellen said so
• 13:38
  Speaker 6: in two thousand and eight. She said, minutes can be
• 13:40
  Speaker 6: like any other tool in the toolbox. It's not like
• 13:42
  Speaker 6: the minutes from a corporate board meeting or something like that.
• 13:44
  Speaker 6: In the three weeks that are that come in between,
• 13:47
  Speaker 6: the Fed can change what actually occurred inside that room.
• 13:50
  Speaker 6: It's kind of like magic. So if they want to
• 13:53
  Speaker 6: nod to retail sales being stronger than what was expected,
• 13:56
  Speaker 6: then you can have a more hawkish tone in these minutes.
• 13:58
  Speaker 6: And that's what I'm anticipating.
• 14:00
  Speaker 2: What about the difference between j Powell's standard line. You
• 14:04
  Speaker 2: know that we're going to keep rates higher for I
• 14:06
  Speaker 2: think last time he said for years or did so.
• 14:10
  Speaker 2: At the same time, we get a dot plot, which
• 14:12
  Speaker 2: I know is not a forecast from the Fed, but
• 14:15
  Speaker 2: it is each individual members essentially forecasts, right, that showed
• 14:20
  Speaker 2: at least one full percentage point of rate cuts next year.
• 14:24
  Speaker 2: How can he say We're going to keep rates at
• 14:27
  Speaker 2: this level for years and everybody, even you know, assuming
• 14:31
  Speaker 2: I'm assuming the voters are saying no, it's going to
• 14:34
  Speaker 2: come down one percent.
• 14:35
  Speaker 6: So it's kind of like if you ever heard one martini,
• 14:37
  Speaker 6: two martini three Martini's floor, so he can he can
• 14:41
  Speaker 6: withstand one or two descents and maintain his power base.
• 14:47
  Speaker 6: You start to get to a number like three, and
• 14:48
  Speaker 6: you start to say, is there a mutiny on the FMC.
• 14:51
  Speaker 6: So we might see descent next year from some of
• 14:54
  Speaker 6: the more dubbish contingency. He might want to hold out
• 14:57
  Speaker 6: for longer, and that might mean that we see his
• 15:01
  Speaker 6: first real dissent. And we have, I mean, we've seen
• 15:04
  Speaker 6: Neil Kashgari, who used to be the most delish person
• 15:06
  Speaker 6: on planet Earth, become like, you know, we're not finished
• 15:09
  Speaker 6: fighting Involution yet. So he's like very hellkish.
• 15:11
  Speaker 2: And still and still says we're not done exactly.
• 15:13
  Speaker 6: It was just a few days ago.
• 15:14
  Speaker 1: Our good friends at Goldman Sachs, I guess, on Sunday
• 15:16
  Speaker 1: put out a note saying that they expect the rate
• 15:19
  Speaker 1: cut in the second quarter of next year. Was that
• 15:22
  Speaker 1: just to sell books or do you think there's something to.
• 15:24
  Speaker 6: That talking a book at Goldman? My gosh, I've never
• 15:28
  Speaker 6: heard of such, just thinking. Look, Goldman tax has tremendous
• 15:31
  Speaker 6: influence on the New York Fed. The New York Fed
• 15:33
  Speaker 6: has a permanent vote on the Federal Open Market Committee,
• 15:35
  Speaker 6: this is a known known so it's I think Goldman
• 15:38
  Speaker 6: is definitely trying to control the narrative, and they've done
• 15:40
  Speaker 6: a very good job of that in the past, of
• 15:42
  Speaker 6: having you know, a very extra large influence on FED thinking.
• 15:47
  Speaker 6: But you know, Powell's not an academic. Powell was the
• 15:51
  Speaker 6: one who brokered the treasury scandal at Solomon Brothers with
• 15:54
  Speaker 6: Warren Buffett in nineteen ninety eight when he was just
• 15:56
  Speaker 6: a Treasury the secretary. Powell's not intimidated by bankers.
• 16:00
  Speaker 1: Sorry.
• 16:00
  Speaker 2: Interesting, one of the things that you were telling us
• 16:03
  Speaker 2: about Palell around s and p you know, thirty seven,
• 16:07
  Speaker 2: thirty eight hundred, was that he wants to break the FED. Put.
• 16:12
  Speaker 2: He wants to destroy the idea that the FED is
• 16:15
  Speaker 2: going to come to your rescue. Mister market. Every time
• 16:18
  Speaker 2: the equity indexes fall now we're at forty five hundred,
• 16:23
  Speaker 2: he is that making it harder for him to succeed.
• 16:25
  Speaker 2: When the market just continues dully as they raise.
• 16:28
  Speaker 6: No, it's making it easier for him. I mean, he's
• 16:30
  Speaker 6: basically shut down the commercial mortgage backed securities market. So
• 16:33
  Speaker 6: that's one corner of securitization that's vaporized into thin air.
• 16:37
  Speaker 6: When in March of twenty twenty, the entire commercial real
• 16:39
  Speaker 6: estate industry was like, hold on, we need a bail
• 16:41
  Speaker 6: out too.
• 16:42
  Speaker 1: But he's taken.
• 16:43
  Speaker 6: He's actually created price discovery in a market where none existed.
• 16:46
  Speaker 6: There was a building that just sold for sixty seven
• 16:49
  Speaker 6: percent off of its prior appraisal in San Francisco a
• 16:51
  Speaker 6: few days ago. So he's slowly killing off lines of
• 16:54
  Speaker 6: speculation into the markets. I think the CLO market is next.
• 16:58
  Speaker 6: So let the stock market be as high it once.
• 17:00
  Speaker 6: It gives Powell license to continue depleting liquidity from the
• 17:04
  Speaker 6: system and taking out some of the most speculative forms
• 17:07
  Speaker 6: covers the word yeah, all right, So I mean this
• 17:10
  Speaker 6: in the nicest way possible, Danielle.
• 17:11
  Speaker 1: But you are that's data geek of the highest magnitude.
• 17:15
  Speaker 1: What data are you looking at that? Maybe we're not so.
• 17:18
  Speaker 6: I follow two things very closely. The employee retention credit
• 17:21
  Speaker 6: it's advertised everywhere by a manage.
• 17:25
  Speaker 2: I mean we we.
• 17:26
  Speaker 6: It surpassed thirty billion for the first time in the
• 17:28
  Speaker 6: month of July, so on a twelve month run rate,
• 17:31
  Speaker 6: it's pumping four hundred billion dollars into the economy, very
• 17:34
  Speaker 6: real money. That's about one and a half percentage point
• 17:36
  Speaker 6: of GDP growth on an annualized basis. We're seeing that
• 17:39
  Speaker 6: manifest and much higher international travel. So it's going to
• 17:42
  Speaker 6: your kind of your top quintile of earners, if you will,
• 17:46
  Speaker 6: and that's being actively sold. So I'm paying very close
• 17:49
  Speaker 6: attention to active fiscal stimulus for billion dollars a year
• 17:52
  Speaker 6: is not nothing. In Daily Jobcuts dot Com, we've gone
• 17:55
  Speaker 6: from five business closings to nine from the summer months
• 17:58
  Speaker 6: after the debt sealing reserves into August. The founder of
• 18:02
  Speaker 6: the website said he's seeing a massive increase in companies
• 18:05
  Speaker 6: just closing up shop in August, saying I don't see
• 18:09
  Speaker 6: over the horizon the holiday season, holiday shopping season saving me.
• 18:13
  Speaker 6: So I'm paying really close attention to main Street as well.
• 18:17
  Speaker 2: Wow, very good, Daniel de Martinez to watch the fiscal side,
• 18:20
  Speaker 2: you know, because not a lot of fedgeeks do not
• 18:24
  Speaker 2: close enough attention to the fiscal highly relevant.
• 18:26
  Speaker 8: It's highly relevant.
• 18:27
  Speaker 1: Daniel de Martinez Booth CEO and chief strategist at QI Research,
• 18:32
  Speaker 1: joining us live here in our Bloomberg Interactive Broker studio,
• 18:34
  Speaker 1: which is always a treat.
• 18:35
  Speaker 5: You're listening to the tape Cat's are live program Bloomberg
• 18:38
  Speaker 5: Markets weekdays at ten am Eastern on Bloomberg Radio, the
• 18:42
  Speaker 5: tune in app, Bloomberg dot Com, and the Bloomberg Business App.
• 18:45
  Speaker 5: You can also listen live on Amazon Alexa from our
• 18:48
  Speaker 5: flagship New York station. Just say Alexa play Bloomberg eleven thirty.
• 18:54
  Speaker 1: You know, against my better judgment, I'm told we got
• 18:56
  Speaker 1: to talk about Washington and politics and all that stuff
• 18:59
  Speaker 1: that happens the making of the sausage. And if we're
• 19:01
  Speaker 1: gonna do that, we're gonna go to our ace, and
• 19:03
  Speaker 1: that is Nathan Dean. He's the senior policy Analyst US
• 19:07
  Speaker 1: Latin America for Bloomberg Intelligence. Bloomberg Intelligence, we got people
• 19:10
  Speaker 1: that just do everything, and we got a guy who
• 19:13
  Speaker 1: is mister Washington, DC, and that's Nathan Dean. He joined
• 19:15
  Speaker 1: us live here in our Bloomberg Interactive Brokers studio. Nathan,
• 19:18
  Speaker 1: where I want to start is kind of with President
• 19:20
  Speaker 1: Biden last week seemingly getting a little tougher with China,
• 19:25
  Speaker 1: but it seems like you kind of pulled some punches there.
• 19:27
  Speaker 1: Talk to us about what Biden did via I think
• 19:30
  Speaker 1: executive order last week with China and kind of what
• 19:32
  Speaker 1: it means.
• 19:33
  Speaker 9: Yeah, exactly. So President Biden put out an executive order
• 19:35
  Speaker 9: essentially directing Treasury to limit or prohibit US investments, so
• 19:40
  Speaker 9: primarily private equity venture capital fund investment into China in
• 19:43
  Speaker 9: certain sectors like quantum computing, AI, artificial I'm sorry, semiconductors. Now,
• 19:50
  Speaker 9: this was a much narrower order than what had previously
• 19:53
  Speaker 9: been anticipated, so I think the markets were actually kind
• 19:56
  Speaker 9: of happy with that. We don't think there's going to
• 19:58
  Speaker 9: be that much of an impact here, you know, most
• 20:01
  Speaker 9: of I think if you look at the private equity
• 20:02
  Speaker 9: firms today, the big ones, they're about two percent below
• 20:05
  Speaker 9: in terms of total assets with exposure to China. So
• 20:08
  Speaker 9: this is really just a symbolism executive order. Now the
• 20:12
  Speaker 9: Treasury has to implement it, so things could change, and
• 20:15
  Speaker 9: with anything in the US China relations, you know, Biden
• 20:17
  Speaker 9: can always pull the plug if you know it suits
• 20:20
  Speaker 9: as well.
• 20:20
  Speaker 2: You did have the at the end of last month,
• 20:23
  Speaker 2: the House Select Committee on the Chinese Communist Party. Oh
• 20:26
  Speaker 2: that's a Is that really the name? The House Select
• 20:29
  Speaker 2: Committee on the Chinese Yeah, it's lucky they threw the
• 20:31
  Speaker 2: word communist in there, so we know how they feel
• 20:33
  Speaker 2: about them, right, that's a little bit loaded. They they
• 20:36
  Speaker 2: alleged that Blackrock is investing in Chinese companies acting against
• 20:42
  Speaker 2: US interest. Now I'm guessing this is a Republican controlled committee.
• 20:46
  Speaker 2: Obviously those guys don't like Larry Fink. He's like the
• 20:48
  Speaker 2: new George Soros for a lot on the right. But
• 20:51
  Speaker 2: we had a story by Sila brush Out yesterday. I
• 20:53
  Speaker 2: said Blackrock, MSCI and other firms are bracing for tighter oversight.
• 20:59
  Speaker 2: Is that is that talk on Capitol Hill going after
• 21:01
  Speaker 2: these big, big Wall Street fund managers.
• 21:04
  Speaker 9: Absolutely, And to your point, it's actually a bipartisan committee
• 21:07
  Speaker 9: because being seen tough on China is good politics no
• 21:09
  Speaker 9: matter who you are. So you know, when President Biden
• 21:12
  Speaker 9: put out his order, we saw a statement from that
• 21:14
  Speaker 9: committee from both parties essentially saying that this could have
• 21:17
  Speaker 9: gone farther, and they wished it to have gone further. Now,
• 21:19
  Speaker 9: the question about Blackrock and the other firms is what
• 21:22
  Speaker 9: is considered oversight and what is actually going to happen.
• 21:25
  Speaker 9: Now that committee cannot write legislation. They need other committees
• 21:28
  Speaker 9: to do that. And with a Republican House, a Democratic Senate,
• 21:32
  Speaker 9: and a president who also has to stare Juginepigi in
• 21:36
  Speaker 9: the face at certain you know events. You know, I'm
• 21:39
  Speaker 9: not sure there's actually going to be actionable concern for
• 21:43
  Speaker 9: those firms, So it's mostly headline risk. Just always keep
• 21:46
  Speaker 9: in mind that when it comes to China, Congress loves
• 21:49
  Speaker 9: to be tough, but it's the White House that actually
• 21:51
  Speaker 9: pulls things back and moderates it.
• 21:53
  Speaker 2: Well, the White House, I mean Biden last week said
• 21:56
  Speaker 2: that the Communist Party are bad folks, right, he said
• 21:59
  Speaker 2: the best Elton wrote initiative, he called that the Debt
• 22:01
  Speaker 2: and News initiative.
• 22:02
  Speaker 9: Well, there's a difference between calling somebody bad folks and
• 22:06
  Speaker 9: actually creating a trade deal or you know, sanctions and
• 22:09
  Speaker 9: so forth that actually, you know, changes what we here
• 22:12
  Speaker 9: in New York City are trading on.
• 22:14
  Speaker 1: All Right, you're down in DC, better or worse, you're
• 22:16
  Speaker 1: in the swamp. You're part of it. Actually, quite frankly,
• 22:19
  Speaker 1: to be honest, what is what is the feeling in
• 22:22
  Speaker 1: DC about China? How worried should the world be about
• 22:26
  Speaker 1: us and China? What's the feeling in DC?
• 22:28
  Speaker 9: So, you know, there was this thought of, you know,
• 22:30
  Speaker 9: will we get into a war over a Taiwan and
• 22:33
  Speaker 9: we have a national security analyst who has been writing
• 22:36
  Speaker 9: about this on the terminal.
• 22:37
  Speaker 1: The general thought on Washington is we're still years away.
• 22:40
  Speaker 9: I mean that this is not something that you can
• 22:42
  Speaker 9: anticipate will happen in the next few years, you know.
• 22:45
  Speaker 9: And when it comes to how do you approach this
• 22:47
  Speaker 9: in terms of a market perspective, you know, it's sort
• 22:50
  Speaker 9: of something that like everything that we've seen before has
• 22:54
  Speaker 9: happened in the past. I mean, there's really you know,
• 22:56
  Speaker 9: there's not been a lot of actions from China that
• 22:59
  Speaker 9: haven't been actually done ten years ago, fifteen years ago,
• 23:01
  Speaker 9: so forth. So you know, we're just still in this
• 23:04
  Speaker 9: weight and see mode. I think most if you talk
• 23:07
  Speaker 9: to most Congress folks, they're just rather happy to blast
• 23:10
  Speaker 9: China and get the good politics from it.
• 23:13
  Speaker 2: I'm pretty excited because Ohio looks like it's going to
• 23:16
  Speaker 2: be the next state to legalize marijuana, and this is
• 23:19
  Speaker 2: something that we're following very closely. Right of course, for
• 23:22
  Speaker 2: recreational use, that would be the twenty fourth state now
• 23:25
  Speaker 2: still federally illegal. And Nathan, you follow closely the Safe
• 23:32
  Speaker 2: Banking Act, which I think is actually moving slowly enough
• 23:35
  Speaker 2: that following it closely is no problem, right, But the
• 23:37
  Speaker 2: cool thing about Ohio is Shared Brown is our senator,
• 23:43
  Speaker 2: the Senator from the Great State of Ohio, and he's
• 23:46
  Speaker 2: also the chairman of the Senate Banking Committee. So if
• 23:49
  Speaker 2: it's legal in his home state, does he have then
• 23:52
  Speaker 2: more I guess covered a push for broader legalization federally.
• 23:56
  Speaker 9: Yeah. I mean, if Shared Brown wanted this thing done,
• 23:59
  Speaker 9: he could have it done today. I mean, there's nothing
• 24:02
  Speaker 9: that is prohibiting the Safe Banking Act other than Shared
• 24:05
  Speaker 9: Brown and a couple of other senior senators. I'm both
• 24:08
  Speaker 9: parties when it comes to the Safe Banking Act. The
• 24:10
  Speaker 9: problem they have is or the bill has, is timing
• 24:14
  Speaker 9: and the procedures. Now, there's a lot of people hoping
• 24:16
  Speaker 9: that the Safe Banking Act goes as part of the
• 24:18
  Speaker 9: funding bill that is going to come up to September.
• 24:21
  Speaker 9: Now that's most likely going to end in a government shutdown,
• 24:23
  Speaker 9: and Speaker McCarthy was talking about having a quick continuing,
• 24:26
  Speaker 9: continuing lose resolution into December. That means the Safe Banking
• 24:30
  Speaker 9: Act probably won't be assigned to that.
• 24:32
  Speaker 1: Then you get into December.
• 24:33
  Speaker 9: There's only eight days where Congress is meeting per month, October, November, December,
• 24:37
  Speaker 9: and then we're in election season. So I just I'm
• 24:40
  Speaker 9: not sure the Safe Banking Act actually has a vehicle
• 24:42
  Speaker 9: to get the passage unless Shared Brown steps up and
• 24:46
  Speaker 9: says I want this done today. And I have not
• 24:48
  Speaker 9: seen anything that says that he's in. You know, he's
• 24:50
  Speaker 9: been a lot of he's been flirting a lot of yeah,
• 24:53
  Speaker 9: well I like this, but also this and so forth.
• 24:56
  Speaker 9: And there's a whole issue right now on Senator Jack.
• 25:00
  Speaker 9: It's been trying to negotiate with Republicans on and they
• 25:02
  Speaker 9: haven't made any headway on that.
• 25:04
  Speaker 1: What are you focusing on down there in DC legislation
• 25:06
  Speaker 1: wise or otherwise that Matt and I are totally ignorant of.
• 25:09
  Speaker 2: Well, the shutdown, for one, I mean just said, yeah,
• 25:11
  Speaker 2: that's big.
• 25:12
  Speaker 9: Well the shutdown is actually we you know, we dust
• 25:16
  Speaker 9: off our note every two years when this comes out,
• 25:19
  Speaker 9: and when it comes to the shutdown, markets get scared
• 25:21
  Speaker 9: within the first two days, and then once they realize
• 25:24
  Speaker 9: that the economic impact of a short term shutdown isn't
• 25:28
  Speaker 9: all that great, markets actually go up. If you look
• 25:30
  Speaker 9: at the thirty day shutdown that happened under the President
• 25:32
  Speaker 9: of Trump administration, the markets actually were pretty much fine
• 25:36
  Speaker 9: with it. And if you're invested in the contractors. Well,
• 25:38
  Speaker 9: most contractors, at least the big ones, have eighteen months,
• 25:41
  Speaker 9: two year, two and a half year contracts. So the
• 25:44
  Speaker 9: only people that are harmed are the contractors work in Washington,
• 25:47
  Speaker 9: DC and those of us who can't take our kids.
• 25:49
  Speaker 4: To the zoo.
• 25:50
  Speaker 1: See I mean when Nake and Deane you can go
• 25:53
  Speaker 1: from China to the US government shutdown, to weed to
• 25:57
  Speaker 1: the zoo, to the zoo all in one conversation.
• 26:01
  Speaker 5: You're listening to the Team canser Line program Bloomberg Markets
• 26:05
  Speaker 5: weekdays at ten am Eastern on Bloomberg dot Com, the
• 26:08
  Speaker 5: iHeartRadio app, and the Bloomberg Business app, or listen on
• 26:11
  Speaker 5: demand wherever you get your podcasts.
• 26:15
  Speaker 1: Joining us since Studios. Doug Baker, He's a portfolio manager
• 26:18
  Speaker 1: head of preferred Securities at Nouvene. Doug, I'm an issuer.
• 26:23
  Speaker 1: Why would I consider issuing preferred stock? Sell me on it.
• 26:27
  Speaker 8: It depends what geography you're talking about.
• 26:29
  Speaker 10: It If you're talking about the United States, most SERI
• 26:31
  Speaker 10: issuances from the bank and the insurance sector. Those two
• 26:35
  Speaker 10: sectors banks in particular issue prefers primarily to meet capital requirements.
• 26:39
  Speaker 10: Insurance companies capital requirements, but more importantly, they use prefer
• 26:42
  Speaker 10: to help manage their ratings.
• 26:44
  Speaker 2: So if I'm an investor, do I care if a
• 26:48
  Speaker 2: stock is preferred or not when I buy it?
• 26:51
  Speaker 1: Oh?
• 26:51
  Speaker 10: Absolutely, I mean, because there are several components to the
• 26:56
  Speaker 10: capital stock, and as a preferred investor, you're actually senior
• 27:00
  Speaker 10: to the common investors, so that that's first off, So
• 27:02
  Speaker 10: compared to the common shareholder, your senior.
• 27:05
  Speaker 5: But the.
• 27:07
  Speaker 10: Similarity with common stock is oftentimes the payments on a
• 27:11
  Speaker 10: preferred or considered dividends. So for individuals you get that
• 27:14
  Speaker 10: beneficial tax treatment a lot of instances. So so you're
• 27:17
  Speaker 10: you're kind of moving up the capital stack.
• 27:19
  Speaker 2: You're a little you're safer in the event of a bust,
• 27:21
  Speaker 2: which hopefully doesn't happen.
• 27:23
  Speaker 8: Yeah, yeah, you are. Arguably you are on paper you are.
• 27:27
  Speaker 8: The reality is that it just depends on the situation.
• 27:30
  Speaker 1: Are most preferreds are they? Are they investment grading?
• 27:34
  Speaker 8: Well, most of the issuers are in mosted issues. So
• 27:37
  Speaker 8: so here's how it works.
• 27:39
  Speaker 10: If you look at the issuers on average, you're going
• 27:42
  Speaker 10: to find that issuers are around.
• 27:43
  Speaker 8: A single a rated institution.
• 27:45
  Speaker 10: However, the preferreds on average are triple B rated, and
• 27:48
  Speaker 10: it's because they're subordinate in the capital stack the rating agencies,
• 27:52
  Speaker 10: because that subordination will knock the ratings down typically four
• 27:55
  Speaker 10: to five notches versus the senior ratio of that same issuer.
• 27:59
  Speaker 8: So you have exposure to investment grade rated companies.
• 28:03
  Speaker 10: However, the securities may not necessarily reflect that through their rating.
• 28:07
  Speaker 1: All right, So we had the little mini bank crisis.
• 28:10
  Speaker 1: The big banks. Oh, everybody's going to pay the price
• 28:12
  Speaker 1: with some I guess higher credit, I guess hire more,
• 28:15
  Speaker 1: more and more restrictions. How does that impact the preferred
• 28:17
  Speaker 1: market and their use of you know, the bank's use
• 28:20
  Speaker 1: of the preferred market.
• 28:21
  Speaker 10: So it's going to be, in our opinion, a lot
• 28:23
  Speaker 10: like two thousand and seven eighty nine, where horrible, horrible
• 28:28
  Speaker 10: situation right and earlier this year not as bad, but
• 28:31
  Speaker 10: still pretty traumatic. But looking forward, it's going to create
• 28:34
  Speaker 10: a great opportunity. We're going to see the regulatory environment change,
• 28:38
  Speaker 10: which is going to benefit the credit investor, which includes
• 28:41
  Speaker 10: the preferred investor. And one of the things that we're
• 28:43
  Speaker 10: seeing now is a big build in capital or likely
• 28:46
  Speaker 10: a big build in common equity capital going forward. So
• 28:50
  Speaker 10: it's going to be at the expense of the common shareholder.
• 28:52
  Speaker 10: It's going to dilute the return on equity, but it's
• 28:54
  Speaker 10: going to enhance the credit profile for the credit investor,
• 28:58
  Speaker 10: which includes the preferred investor.
• 29:00
  Speaker 2: So what do you like?
• 29:02
  Speaker 8: What do we like? We like the big banks.
• 29:04
  Speaker 10: We think that there are selective opportunities even in the
• 29:07
  Speaker 10: regional bank space. We know that that's kind of you know,
• 29:11
  Speaker 10: some people think that the regional banks just across the
• 29:13
  Speaker 10: board are.
• 29:15
  Speaker 8: Risky area of our market.
• 29:17
  Speaker 10: But if you actually do the work, you do the
• 29:19
  Speaker 10: objective analysis, things like commercial real estate, while they're risks,
• 29:23
  Speaker 10: a lot of these headlines that we had earlier this year,
• 29:27
  Speaker 10: you apply some analysis, you do some stress testing on it.
• 29:29
  Speaker 10: Indeed a risk, but more from an earning's perspective, right.
• 29:32
  Speaker 10: So we also like some of the spaces outside of
• 29:36
  Speaker 10: our larger sectors banks insurance, like aircraft lessors, So you
• 29:40
  Speaker 10: have aircraft leasing companies that are benefiting from this tremendous
• 29:44
  Speaker 10: boom in air travel and they're the ones that are
• 29:46
  Speaker 10: financing the airplanes. And so you do have some opportunities
• 29:50
  Speaker 10: in spaces outside of banks insurance companies to play the
• 29:52
  Speaker 10: preferred market. But at the end of the day, most
• 29:56
  Speaker 10: of your exposure and preferreds is going to be financial
• 29:58
  Speaker 10: services related.
• 29:59
  Speaker 1: Right, So when I if I buy a preferred stock,
• 30:02
  Speaker 1: I get a fixed rate a floating rate. He does
• 30:04
  Speaker 1: it all work?
• 30:04
  Speaker 10: It depends what you buy, okay, And that's where I
• 30:07
  Speaker 10: think active management can really help out, because there are
• 30:10
  Speaker 10: preferreds out there that will just pay the same fixed
• 30:13
  Speaker 10: rate coupon over the entire life of the security.
• 30:15
  Speaker 8: And if that's a perpetual.
• 30:16
  Speaker 10: Security, a lot of investors don't realize they're taking a
• 30:19
  Speaker 10: lot of duration risks or interest rate sensitivity risk with that.
• 30:22
  Speaker 10: But there's also a large population of securities that they
• 30:25
  Speaker 10: may start out paying a fixed rate coupon, but down
• 30:27
  Speaker 10: the road that coupon can adjust, and not only does
• 30:30
  Speaker 10: that allow you to benefit from a rise and rate environment,
• 30:32
  Speaker 10: but it also helps you control that interest rate risk,
• 30:36
  Speaker 10: which is really I think the primary risk of those
• 30:39
  Speaker 10: fixed rate structures.
• 30:41
  Speaker 1: All Right, So what's the risk to the preferred market here?
• 30:44
  Speaker 1: I mean, I guess I got concentration risk with the financials.
• 30:47
  Speaker 10: Yeah, So that's the first one that we mentioned, and
• 30:49
  Speaker 10: then the second one we were just touching on to
• 30:51
  Speaker 10: interest rate risk. Okay, Now, in our opinion, we think
• 30:55
  Speaker 10: that the interest rate risk is probably the one that
• 30:59
  Speaker 10: we can map the best. Truly, though, when it comes
• 31:03
  Speaker 10: to financial service exposure, there's only so much we feel
• 31:06
  Speaker 10: you can diversify away from that, so we do oftentimes.
• 31:10
  Speaker 10: When we're having these these discussions with investors and they
• 31:13
  Speaker 10: like preferreds, they want to add preferreds, one of the
• 31:15
  Speaker 10: things that we ask them to do is, hey, check
• 31:17
  Speaker 10: the rest of your client's portfolio. See how much other
• 31:19
  Speaker 10: financial service exposure is there already, because you don't want
• 31:23
  Speaker 10: to have them take an unintended bet on a sector
• 31:26
  Speaker 10: unless they mean to do so.
• 31:29
  Speaker 2: How do you first get into this?
• 31:30
  Speaker 5: Was it?
• 31:31
  Speaker 2: Were you doing your CFA and you're like, hey, I
• 31:32
  Speaker 2: like this section.
• 31:34
  Speaker 1: Well he went to the Here we Go University, Chicago
• 31:36
  Speaker 1: Graduate School of the Business, which I love. The GSB Moniker.
• 31:39
  Speaker 1: They've now received the kajillion dollars from mister Booth, so
• 31:42
  Speaker 1: it's a Booth School of Business.
• 31:44
  Speaker 2: I get it.
• 31:44
  Speaker 1: But I'm a GS big guy. There's not a bum
• 31:48
  Speaker 1: I've done like a dozen Chicago NBA guys. There's not
• 31:52
  Speaker 1: a bumm in THEO.
• 31:52
  Speaker 2: But they're they're all math people.
• 31:54
  Speaker 1: Yeah, well, yeah, they're geeky that way the math even
• 31:56
  Speaker 1: our listen there are Bramowitz, who is super smart. She's
• 31:59
  Speaker 1: undergraduate at Chicago. So they're all good. So anyway, but but.
• 32:03
  Speaker 2: Prefers, did you pick this or were you at Neuvien?
• 32:06
  Speaker 2: And they were like, somebody's got to do a preferred man,
• 32:08
  Speaker 2: it's you.
• 32:09
  Speaker 10: I hate to say it, but it's the latter. So
• 32:11
  Speaker 10: when I first came into Nouvene, I was actually a
• 32:13
  Speaker 10: derivatives guy. Yes, would you sure? And I don't tell
• 32:17
  Speaker 10: many people this, but I was a derivative sales.
• 32:19
  Speaker 8: Guy at Lehman Brothers.
• 32:21
  Speaker 2: Okay, so that doesn't come up very often anymore, you know,
• 32:23
  Speaker 2: you don't.
• 32:23
  Speaker 8: That's awesome.
• 32:24
  Speaker 1: So if I'm a banker, If I'm a banker and
• 32:26
  Speaker 1: I'm doing a new issue for Wells Fargo, You're like
• 32:30
  Speaker 1: one of my first calls. Right, you're a big buyer
• 32:32
  Speaker 1: in the marketplace.
• 32:33
  Speaker 8: I would hope, I would hope we're up there. Yeah.
• 32:35
  Speaker 10: So we're typically having the conversations with syndicate desks in
• 32:39
  Speaker 10: advance of a deal coming.
• 32:40
  Speaker 1: They're whining and dining you. They're the guy. You're the
• 32:43
  Speaker 1: guy that they need to get to.
• 32:44
  Speaker 10: Yeahs kind of gone the way of the dinosaur.
• 32:47
  Speaker 8: We don't get this. But what we do is we
• 32:51
  Speaker 8: give them the feedback.
• 32:52
  Speaker 10: We're going to be one of the largest typically players
• 32:54
  Speaker 10: in a book or in a deal for someone like that,
• 32:57
  Speaker 10: you know, so our larger competitors are gonna get the
• 32:59
  Speaker 10: phone call too. But the nice thing about that is
• 33:02
  Speaker 10: we get to help drive the terms of the deal
• 33:05
  Speaker 10: in favor of our investors.
• 33:06
  Speaker 8: So yeah, we're typically the.
• 33:08
  Speaker 10: Ones that will get, you know, the phone calls before
• 33:10
  Speaker 10: the deal really comes to market to get a you know,
• 33:12
  Speaker 10: temperature check of what we're looking for.
• 33:14
  Speaker 2: So when Paul was on the street, it was all
• 33:15
  Speaker 2: and I'm sure when you started as well, you were
• 33:18
  Speaker 2: flying everywhere twice a week, you were living out of
• 33:21
  Speaker 2: a hotel half the time, constantly face to face meetings.
• 33:25
  Speaker 2: And now is it completely changed.
• 33:27
  Speaker 10: It's actually going back to that oh yeah, back, yeah,
• 33:30
  Speaker 10: So we're doing I mean, I think we're the virtual
• 33:33
  Speaker 10: you know kind of remote meetings are That's going to
• 33:37
  Speaker 10: be still a big component of it. But yeah, I
• 33:39
  Speaker 10: think feet on the ground and I think getting involved
• 33:42
  Speaker 10: with folks face to face in a room.
• 33:44
  Speaker 8: Look, there's just better communication.
• 33:46
  Speaker 10: That way, and it also builds a level of trust
• 33:48
  Speaker 10: that Hey, you know, it's easy for me to say
• 33:50
  Speaker 10: on the phone, like, yeah, we're gonna have interest at
• 33:52
  Speaker 10: this type of level, but to do that in person,
• 33:55
  Speaker 10: I think there's just a different connection there. And I
• 33:57
  Speaker 10: think having that level of trust with you know, our
• 33:59
  Speaker 10: partners on the syndicate side, with our investors is truly important.
• 34:03
  Speaker 10: So that FaceTime, that in person travel has really picked up,
• 34:05
  Speaker 10: i would say, over the past years.
• 34:07
  Speaker 1: So, how many new issues do you guys at Moving
• 34:09
  Speaker 1: buy like you for your preferred fund?
• 34:11
  Speaker 10: Like, there haven't been many lately, and this out this
• 34:13
  Speaker 10: is one of the technicals to our market that's been
• 34:16
  Speaker 10: incredibly supportive valuations and it's going to stay this way.
• 34:19
  Speaker 10: We've had more preferreds redeemed this year than new issue
• 34:22
  Speaker 10: can keep up with. So yeah, and part of it
• 34:25
  Speaker 10: is that, you know, as the economy slows, our outlook
• 34:28
  Speaker 10: is banks aren't going to need as much capital because
• 34:30
  Speaker 10: they're balance sheet shrinks, right, not as many people want loans,
• 34:34
  Speaker 10: and if they're not making loans all, the size of
• 34:36
  Speaker 10: balance sheet shrinks, and their capital is measured as a
• 34:39
  Speaker 10: percent of their balance sheet. So we're seeing more redemptions
• 34:42
  Speaker 10: and we're seeing new issuance, but when new issuance comes,
• 34:46
  Speaker 10: use of proceeds as almost to refinance or to call
• 34:49
  Speaker 10: an existing preferred.
• 34:50
  Speaker 2: And it gets snapped up because people are looking for
• 34:52
  Speaker 2: the prefers. There's no supply.
• 34:53
  Speaker 10: They're looking to reinvest their cash, and luckily for them,
• 34:56
  Speaker 10: they're in this interest rate environment. The structures that we're
• 34:58
  Speaker 10: seen are very attractive, talking mid seven percent type coupons
• 35:02
  Speaker 10: with adjustable rate, you know, a component down the road
• 35:06
  Speaker 10: after the.
• 35:06
  Speaker 8: First call date. You know, it would be a little
• 35:10
  Speaker 8: bit more concerned if we.
• 35:10
  Speaker 10: Were in a low interest rate environment and folks didn't
• 35:13
  Speaker 10: have this attractive opportunity. We do think that the Yeffords
• 35:15
  Speaker 10: are coming to market today are going to be a
• 35:17
  Speaker 10: rare vintage because of these higher coupons.
• 35:19
  Speaker 8: He's attractive structure.
• 35:20
  Speaker 10: So so more often than not, we're participating in the
• 35:24
  Speaker 10: new deals that we do see.
• 35:25
  Speaker 1: All Right, Doug Baker, he is our go to preferred guy, right,
• 35:28
  Speaker 1: He's our go to preferred guy, portfolio manager, the head
• 35:30
  Speaker 1: of preferred securities at NOVENE.
• 35:32
  Speaker 5: You're listening to the tape. Catch are live program Bloomberg
• 35:35
  Speaker 5: Markets weekdays at ten am Eastern on Bloomberg Radio. The
• 35:39
  Speaker 5: tune in app Bloomberg dot Com and the Bloomberg Business App.
• 35:42
  Speaker 5: You can also listen live on Amazon Alexa from our
• 35:45
  Speaker 5: flagship New York station Just Say Alexa playing Bloomberg eleven thirty.
• 35:51
  Speaker 1: Let's get right to our next guest, Caroline Frederickson, Distinguished
• 35:54
  Speaker 1: Visiting Professor at Georgetown Law. Caroline, thanks so much for
• 35:58
  Speaker 1: joining us. We love to start as it relates to
• 36:00
  Speaker 1: former President Trump and his legal challenges. Why maybe just
• 36:05
  Speaker 1: give us a sense of kind of where his greatest
• 36:07
  Speaker 1: exposure is with these four issues that he's facing. From
• 36:11
  Speaker 1: your perspective, well, I.
• 36:13
  Speaker 7: Mean, they're actually therefore prosecutions, but there are a lot
• 36:16
  Speaker 7: more than four issues, so you know, it looks I mean,
• 36:22
  Speaker 7: I guess I would. I would start by talking about
• 36:26
  Speaker 7: which are the most consequential. We could look at both
• 36:30
  Speaker 7: the cases that are brought in DC. The federal case
• 36:34
  Speaker 7: focusing on January sixth, and the Georgia case is really
• 36:38
  Speaker 7: being central to the concern that we have about President
• 36:43
  Speaker 7: Trump allegedly trying to undermine our very democratic system. The
• 36:49
  Speaker 7: other two cases, albeit important, don't have the same kind
• 36:52
  Speaker 7: of real existential issues for the United States of America
• 37:00
  Speaker 7: continuing to exist as a democracy. Now in terms of
• 37:03
  Speaker 7: what the you know, sort of the ultimate greatest danger
• 37:08
  Speaker 7: is for Donald Trump. I mean, we'll still have to
• 37:10
  Speaker 7: see how this will unfold because we haven't seen either
• 37:14
  Speaker 7: of the prosecutors lay out their case. I think they're
• 37:17
  Speaker 7: There are a couple of different theories here, and one
• 37:20
  Speaker 7: is that the approach taken by the Department of Justice,
• 37:29
  Speaker 7: which has been not to name the the the so
• 37:33
  Speaker 7: far unindicted co conspirators, but to really move in a
• 37:38
  Speaker 7: different in a different and more focused way, is one
• 37:42
  Speaker 7: strategy to try and really focus the attention on Donald Trump,
• 37:46
  Speaker 7: perhaps behind the scenes, to try and negotiate with those
• 37:49
  Speaker 7: who haven't been named yet in the federal lawsuit, to
• 37:51
  Speaker 7: include some of the same people who are actually named
• 37:55
  Speaker 7: in the Georgia State prosecution, the Fulton County prosecutor in
• 38:01
  Speaker 7: that case. You know, you have nineteen defendants and forty
• 38:06
  Speaker 7: one charges, and I think they're taking a very different strategy,
• 38:11
  Speaker 7: which is very narrative, which is telling a story and
• 38:15
  Speaker 7: working on the potential of the defendants. They're turning on
• 38:19
  Speaker 7: each other, some of them taking plea deals and so forth.
• 38:23
  Speaker 7: So they're both very consequential for the president. It's really
• 38:26
  Speaker 7: hard to say they have both significant prison time for
• 38:31
  Speaker 7: you if he is prosecuted.
• 38:33
  Speaker 2: I want to ask Professor about something I saw on
• 38:37
  Speaker 2: the Times over the weekend that I think a lot
• 38:39
  Speaker 2: of people probably read, bringing up the possibility that according
• 38:44
  Speaker 2: to the original meeting of the fourteenth Amendment, Donald Trump
• 38:48
  Speaker 2: is ineligible to hold government office. And there was a
• 38:52
  Speaker 2: paper written by a couple of a couple of I
• 38:56
  Speaker 2: guess attorneys that are or were associated with the Federalist Society.
• 39:01
  Speaker 2: So this is coming from a fairly conservative group, right,
• 39:05
  Speaker 2: in which they argue that because he essentially engaged in insurrection,
• 39:12
  Speaker 2: he is barred from holding office due to this amendment
• 39:15
  Speaker 2: that was put in place after the Civil War. Does
• 39:18
  Speaker 2: that hold any water do you think?
• 39:20
  Speaker 7: I think it's a very strong argument. And first of all,
• 39:22
  Speaker 7: i'd say they're actually law professors, one of them, Will
• 39:24
  Speaker 7: bode Is at the University of.
• 39:27
  Speaker 2: Chicago exactly, and Michael Stokes Paulson from the University of
• 39:30
  Speaker 2: Saint Thomas.
• 39:32
  Speaker 7: And they're very conservative, associated with the Federalist Society, as
• 39:35
  Speaker 7: you said, but also originalists. And I think in the
• 39:39
  Speaker 7: sense that they that they went back and they looked
• 39:42
  Speaker 7: through a lot of the documentation around the around the
• 39:46
  Speaker 7: debates around the amendments adoption, and it was clear they
• 39:51
  Speaker 7: were not just focused on of those who've been guilty
• 39:56
  Speaker 7: of treason during the Civil War the Confederates, but was
• 40:02
  Speaker 7: meant to be prospective and keep people who have taken
• 40:05
  Speaker 7: an oath of office to the United States from being
• 40:09
  Speaker 7: eligible to serve again in such positions of trust. There
• 40:17
  Speaker 7: has been one successful effort so far to put some
• 40:21
  Speaker 7: keep somebody off the ballot, and that was brought by
• 40:23
  Speaker 7: group called Citizens for Responsibility and Ethics in Washington against
• 40:27
  Speaker 7: somebody who participated in January sixth insurrection, and they kept
• 40:32
  Speaker 7: him from being able to to get elected. So I
• 40:37
  Speaker 7: think it's a very strong argument, and I think it's
• 40:41
  Speaker 7: going to We're going to see how that will play
• 40:43
  Speaker 7: out as election officials take action from parts of.
• 40:47
  Speaker 1: The count Carolyn, what's your sense of the timeline here
• 40:50
  Speaker 1: with these four cases? When will the first one? I guess,
• 40:56
  Speaker 1: I guess, I guess what's the timeline as you understand it?
• 41:01
  Speaker 7: Well, it's very fluid right now. I mean, I think
• 41:03
  Speaker 7: the Special Prosecutor UH is trying to move forward as
• 41:10
  Speaker 7: expeditiously as possible, and it looks like they're going to
• 41:14
  Speaker 7: try and get that trial started before the end of
• 41:16
  Speaker 7: the year. I mean, these things are you know, UH
• 41:19
  Speaker 7: can keep changing. The mar Lago documents case looks like
• 41:24
  Speaker 7: it's going to start really underway in spring. The Fulton
• 41:30
  Speaker 7: County prosecution in Georgia. I think that's you know, they
• 41:35
  Speaker 7: have an interesting schedule that speedy trial rule that means
• 41:39
  Speaker 7: that anyone of those defendants can demand speedy trial, which
• 41:43
  Speaker 7: can really accelerate the pace of this that prosecution, meaning
• 41:48
  Speaker 7: that it could even be starting or you know, mid
• 41:52
  Speaker 7: mid fall, you know, October, November and uh, and those
• 41:56
  Speaker 7: cases could be divided because they could because some of
• 41:59
  Speaker 7: the defendant might commit you'll agree to a plea or
• 42:03
  Speaker 7: otherwise get severed.
• 42:05
  Speaker 1: All right, well off the obviously fluid situation, as you mentioned,
• 42:08
  Speaker 1: will stay on top of it. Thank you very much
• 42:09
  Speaker 1: for your time, Caroline Frederickson Distinguish visiting professor at Georgetown Law,
• 42:14
  Speaker 1: trying to give us a little bit more clarity as
• 42:16
  Speaker 1: this legal issues of the former president continue.
• 42:20
  Speaker 5: You're listening to the tape Cat's are Live program Bloomberg
• 42:23
  Speaker 5: Markets weekdays at ten am Eastern on Bloomberg Radio, the
• 42:26
  Speaker 5: tune in app, Bloomberg dot Com, and the Bloomberg Business app.
• 42:30
  Speaker 5: You can also listen live on Amazon Alexa from our
• 42:33
  Speaker 5: flagship New York station. Just say Alexa, play Bloomberg eleven thirty.
• 42:38
  Speaker 1: All right, let's talk about the housing market. The residential
• 42:41
  Speaker 1: real estate market. US mortgage rate climbs to seven point
• 42:45
  Speaker 1: one six percent, matching the highest sense two thousand and one.
• 42:48
  Speaker 1: That gets your attention.
• 42:49
  Speaker 2: Potentially have great credit. Yeah, and that's the gold standard
• 42:53
  Speaker 2: mortgage rate, because if you look at bank Rade, we're
• 42:54
  Speaker 2: already up over seven and a half.
• 42:56
  Speaker 1: That's right, Yeah, that's right. So we need to figure
• 42:58
  Speaker 1: out what's happening out there and what it means for
• 42:59
  Speaker 1: this market. Lisa's a sturt event. She joins us. She's
• 43:02
  Speaker 1: a chief economist at Bright MLS. Lisa, we had some
• 43:06
  Speaker 1: housing data come out today. Housing starts pretty strong, I
• 43:10
  Speaker 1: guess the housing industries, the homebuilders are trying to meet
• 43:13
  Speaker 1: the demand out there. But what's going on in a
• 43:16
  Speaker 1: residential real estate market today? How would you characterize it?
• 43:19
  Speaker 11: Yeah, it's such a strange market, housing market, isn't it.
• 43:21
  Speaker 11: It's housing has really confounded expectations in so many ways.
• 43:26
  Speaker 11: You point to the homebuilder data this morning, New housing
• 43:29
  Speaker 11: starts are up from a year ago, up from last month.
• 43:32
  Speaker 11: We're seeing that home bolders are really responding not only
• 43:36
  Speaker 11: to the demand in the housing market, which has stayed
• 43:40
  Speaker 11: surprisingly resilient despite those higher mortgage rates, but they're really
• 43:43
  Speaker 11: responding to the fact that inventory is really at near
• 43:47
  Speaker 11: record lows and there really is so little for prospective
• 43:51
  Speaker 11: home barers to choose from. Home builders are ramping up.
• 43:54
  Speaker 11: The amount of inventory that's accounted for by new home
• 43:58
  Speaker 11: construction is at its highest level really in the last
• 44:01
  Speaker 11: couple of decades, and it's been a really strong housing market.
• 44:05
  Speaker 11: We may be, though, prepared to see some changes in
• 44:07
  Speaker 11: the market as we head into fall.
• 44:10
  Speaker 2: So what what do you think the catalyst for that
• 44:13
  Speaker 2: will be, Because I don't know what's going to move
• 44:17
  Speaker 2: us out of this stalemate that we're kind of in
• 44:19
  Speaker 2: right now. Owners who have low mortgages don't want to sell,
• 44:23
  Speaker 2: and buyers can't afford the high mortgages or the prices
• 44:28
  Speaker 2: right right.
• 44:28
  Speaker 11: So you know, we sort of expected back a year ago,
• 44:31
  Speaker 11: when the Fed started raising rates and mortgage rates were rising,
• 44:34
  Speaker 11: that we would see a real strong pullback in demand,
• 44:37
  Speaker 11: maybe home prices would fall, but in fact, aside from
• 44:41
  Speaker 11: a slowdown late last year. We've seen buyers back in
• 44:45
  Speaker 11: the market in record numbers in the spring, primarily because
• 44:50
  Speaker 11: there's just such strong demand for home ownership. A lot
• 44:53
  Speaker 11: of folks have record levels of equity in their homes
• 44:56
  Speaker 11: that they're able to roll into a home purchase in
• 44:58
  Speaker 11: a sense from buying down at higher rate. But as
• 45:01
  Speaker 11: you point out, the real reason why home prices have
• 45:03
  Speaker 11: remained firm so far is inventory has been locked down,
• 45:07
  Speaker 11: as many homeowners are in those sort of golden handcuffs
• 45:10
  Speaker 11: of lower rates. But I think we're at a point
• 45:13
  Speaker 11: now where there's just a lot of fatigue in the
• 45:15
  Speaker 11: housing market, and rates surpassing seven or even seven and
• 45:19
  Speaker 11: a half percent could be what send us to a
• 45:22
  Speaker 11: much slower market in terms of transaction level here this fall.
• 45:27
  Speaker 1: So a lot of folks are wondering, like myself, when
• 45:30
  Speaker 1: mortgage rates are going to decline it? And is there
• 45:33
  Speaker 1: a level that once we get there, that I may
• 45:37
  Speaker 1: be free up some activity here? Is it five percent?
• 45:39
  Speaker 1: Is it six percent? Is it four percent? Is there
• 45:42
  Speaker 1: a rate where you think it would kind of thall
• 45:44
  Speaker 1: out this market?
• 45:46
  Speaker 5: Sure?
• 45:46
  Speaker 11: Yeah, right, it's not going to be three percent, right,
• 45:48
  Speaker 11: It's not going to be back to where we were
• 45:50
  Speaker 11: during the pandemic. I don't think it has to come
• 45:52
  Speaker 11: down even to four or five percent to help free
• 45:56
  Speaker 11: up some sellers who may be waiting to move but
• 45:59
  Speaker 11: feeling that final pinch.
• 46:00
  Speaker 5: You know.
• 46:01
  Speaker 11: One thing that we're tracking really closely is the fact
• 46:03
  Speaker 11: that the spread between the yield on the ten year
• 46:05
  Speaker 11: Treasury and the thirty year fixed rate mortgage still remains
• 46:09
  Speaker 11: quite wide. So even though mortgage rates will remain relatively
• 46:14
  Speaker 11: elevated here in the latter half of twenty twenty three,
• 46:17
  Speaker 11: if we do expect and I think we do expect,
• 46:20
  Speaker 11: that gap between treasury yields and rates to begin to narrow,
• 46:23
  Speaker 11: and we could see rates come down to below six
• 46:26
  Speaker 11: percent next year, which I think is what will be
• 46:29
  Speaker 11: enough to bring more sellers from the sidelines.
• 46:31
  Speaker 2: What's an historical what's a rule of thumb in terms
• 46:34
  Speaker 2: of that spread? Where is it typically or has it
• 46:37
  Speaker 2: been over say, the last twenty years.
• 46:39
  Speaker 11: Yeah, we're typically around maybe one point eight two percentage points,
• 46:42
  Speaker 11: So we're now up at three percentage points.
• 46:44
  Speaker 2: Ah, So historically we should see mortgage rates about six, right,
• 46:52
  Speaker 2: and we're looking at a little bit more than seven.
• 46:54
  Speaker 11: That's right, and so if you imagine sort of as
• 46:56
  Speaker 11: we move through the rest of the year that we
• 46:58
  Speaker 11: could we should expect rates to come down, maybe settling
• 47:02
  Speaker 11: around six and a half percent by the end of
• 47:04
  Speaker 11: the year, and continue to come down further as we.
• 47:07
  Speaker 7: Head into next year.
• 47:08
  Speaker 1: All right, So I guess I'm refinancing. I guess with
• 47:10
  Speaker 1: a five handle.
• 47:11
  Speaker 2: So right, what about Paul top ticked the mortgage market,
• 47:16
  Speaker 2: but he got an arm so he's ready to move
• 47:19
  Speaker 2: in and pounds when they rates come back down. What
• 47:21
  Speaker 2: about new supply coming on the market, So we know
• 47:24
  Speaker 2: that there is there are very little transactions in terms
• 47:27
  Speaker 2: of previously owned homes. Our builders out there putting up
• 47:31
  Speaker 2: new supply like crazy so they can get them into
• 47:33
  Speaker 2: the hands of home buyers who are willing to either
• 47:37
  Speaker 2: pay cash or go with a seven percent mortgage. Yeah.
• 47:40
  Speaker 11: You know, there's been a long period of time during
• 47:43
  Speaker 11: which homebuilders had a really tough time with supply chain issues,
• 47:46
  Speaker 11: difficulty getting materials and labor. And now over the last
• 47:49
  Speaker 11: few months, we've really seen homebuilders ramp up construction because
• 47:53
  Speaker 11: there's just simply no other inventory out there and they
• 47:56
  Speaker 11: are having to do things to entice buyers in though
• 48:01
  Speaker 11: we're seeing more builder financing.
• 48:04
  Speaker 2: We're seeing the builder financing at lower rates, right, Lisa,
• 48:08
  Speaker 2: that's right, that's right.
• 48:08
  Speaker 11: I'm sorry, Billage offering financing at lower rates to help
• 48:11
  Speaker 11: bring more buyers in. What we're not seeing is builders
• 48:14
  Speaker 11: dropping prices of new construction yet, and maybe they won't
• 48:19
  Speaker 11: have to as we head through the rest of the year.
• 48:21
  Speaker 11: But we are seeing, you know, some sort of give
• 48:24
  Speaker 11: backs in terms of upgrades and other things. But right now,
• 48:28
  Speaker 11: there are a lot of home buyers who are on
• 48:30
  Speaker 11: the lots of new houses and they didn't expect to be,
• 48:33
  Speaker 11: but that's where they are because that's what's available for
• 48:35
  Speaker 11: saying I.
• 48:35
  Speaker 2: Mean, why would you drop the price. You put up
• 48:36
  Speaker 2: a bunch of McMansions and you know, Connecticut commutable area,
• 48:41
  Speaker 2: and then you can if you say, hey, we'll give
• 48:43
  Speaker 2: you a four point nine to nine percent mortgage, people
• 48:45
  Speaker 2: are like, wow, okay, whatever you want.
• 48:48
  Speaker 11: Right, And it definitely is region specific.
• 48:50
  Speaker 5: Right.
• 48:50
  Speaker 11: We have some parts of the country we're not seeing
• 48:53
  Speaker 11: as much home building. Here in the Washington area, for example,
• 48:56
  Speaker 11: we're still seeing home prices of existing homes rising as
• 49:00
  Speaker 11: demand has slowed, and that's simply because we're not seeing
• 49:02
  Speaker 11: a lot of new construction that's been coming online.
• 49:05
  Speaker 1: So when the home builders are out there building and
• 49:08
  Speaker 1: again building permits, housing starts up three three point nine
• 49:13
  Speaker 1: percent month on month, much better than forecast here this morning.
• 49:18
  Speaker 1: What are they building? Are they building those McMansions or
• 49:20
  Speaker 1: are they building what the market really needs, which are
• 49:23
  Speaker 1: starter homes.
• 49:25
  Speaker 11: Well, the market needs starter homes for sure, but it
• 49:27
  Speaker 11: has been a long time since we've seen new construction
• 49:30
  Speaker 11: really be the main supplier of starter homes.
• 49:33
  Speaker 2: But what we are.
• 49:33
  Speaker 11: Seeing is a range of new construction activity in that
• 49:37
  Speaker 11: middle market as well as that luxury market, which then
• 49:40
  Speaker 11: allows the starter homes in the existing stock to be
• 49:44
  Speaker 11: vacated where folks are able to move up. I mean,
• 49:47
  Speaker 11: it's part of a whole housing ladder, right, But because
• 49:51
  Speaker 11: of the cost of materials, the cost of labor, the
• 49:53
  Speaker 11: cost of local regulation for home builders, it's really financially
• 49:58
  Speaker 11: challenging for a builder to build at very.
• 50:01
  Speaker 7: Low home prices.
• 50:02
  Speaker 11: So we really seeing sort of bin market and luxury
• 50:04
  Speaker 11: construction by and large.
• 50:06
  Speaker 2: What about multifamily.
• 50:08
  Speaker 11: Multi Yeah, the rental market has been certainly going like
• 50:13
  Speaker 11: gangbusters in many markets. In fact, we've seen that rents
• 50:16
  Speaker 11: are beginning to come down year over year. On a
• 50:18
  Speaker 11: national basis, rents are down in many markets across the US.
• 50:22
  Speaker 11: This is all happening despite the fact that mortgage rates
• 50:27
  Speaker 11: are higher. We're seeing just more new rental construction coming online,
• 50:30
  Speaker 11: which is giving renters more options. So if we're looking
• 50:33
  Speaker 11: for some sort of bright side in the housing market,
• 50:36
  Speaker 11: people who are in the rental market are finding more
• 50:39
  Speaker 11: options and are finding rents stabilizing, are coming down.
• 50:42
  Speaker 1: Heylly, so thanks so much for joining us. I really
• 50:44
  Speaker 1: appreciate getting your thoughts here. Lisa Sturt, event chief e
• 50:47
  Speaker 1: Commerce for Bright MLS.
• 50:49
  Speaker 2: Thanks for listening to the Bloomberg Markets podcast. You can
• 50:52
  Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever
• 50:56
  Speaker 2: podcast platform you prefer. I'm Matt Miller. I'm on Twitter
• 51:00
  Speaker 2: at Matt Miller nineteen seventy three.
• 51:02
  Speaker 1: And I'm Paul Sweeney. I'm on Twitter at pt Sweeney.
• 51:05
  Speaker 1: Before the podcast, you can always catch us worldwide at
• 51:08
  Speaker 1: Bloomberg Radio.