Latest / Bloomberg Intelligence / Preparing For Negative Interest rates: Fiduciary CIO

Transcript

Preparing For Negative Interest rates: Fiduciary CIO · Bloomberg Intelligence

• 0:02
  Speaker 1: Welcome to the Bloomberg Penel Podcast. I'm Paul Swinge you.
• 0:05
  Speaker 1: Along with my co host Lisa Brahmas. Each day we
• 0:07
  Speaker 1: bring you the most noteworthy and useful interviews for you
• 0:10
  Speaker 1: and your money. Whether at the grocery store or the
• 0:12
  Speaker 1: trading floor. Find a Bloomberg Penl podcast on Apple podcast
• 0:16
  Speaker 1: or wherever you listen to podcasts, as well as at
• 0:18
  Speaker 1: Bloomberg dot com. All right, here's multiple choice question for
• 0:23
  Speaker 1: you on this Monday. Do you want to buy a
• 0:26
  Speaker 1: US Steepener gold, US equities or we work? If you
• 0:29
  Speaker 1: get a pre I p O. Luckily we're gonna have
• 0:31
  Speaker 1: a manage gonna answer that question. That's Hans Olsen, chief
• 0:34
  Speaker 1: investment officer a Fittisciary Trust with seventy eight million dollars
• 0:37
  Speaker 1: in assets under management. So cross asked that that was
• 0:40
  Speaker 1: your multiple choice question, which would you buy in ranking order?
• 0:44
  Speaker 1: We work gold, we work pre IPO, A Steepener gold
• 0:49
  Speaker 1: or US equities. Well, I'd have to do probably can
• 0:54
  Speaker 1: I get to pain by the way? Yeah? Okay, Well
• 0:58
  Speaker 1: that says a lot in then they have seven billion
• 1:01
  Speaker 1: dollars of assets under management. He has to buy everything
• 1:04
  Speaker 1: out there. So so why like it's my way of
• 1:07
  Speaker 1: trying to see, like, where is their actual value right now? Yeah? Yeah,
• 1:09
  Speaker 1: it's hard to find a lot of value any place
• 1:11
  Speaker 1: right now. And perhaps the areas that we find it
• 1:15
  Speaker 1: mostly would be in places like uh Europe, even the UK,
• 1:19
  Speaker 1: which is really a non consensus trade for sure. But
• 1:22
  Speaker 1: in the US, um you know, the earning scrowthon is there,
• 1:25
  Speaker 1: the multiples are expanding. It's been pretty tough. We're overweight
• 1:28
  Speaker 1: US equities for sure. We've tried to rotate more into
• 1:31
  Speaker 1: the low volatility types of names as a way to
• 1:35
  Speaker 1: do it responsibly. But but I have to say, Alex,
• 1:37
  Speaker 1: the environment right now is is not great for people
• 1:40
  Speaker 1: putting new money to work. We're speaking with Hans Olsen,
• 1:43
  Speaker 1: chief investment officer Fidishary Trust. Hans, just let's start maybe
• 1:47
  Speaker 1: just with your economic outlook. I mean, the U S
• 1:49
  Speaker 1: seems pretty solid, but we see some weird news. Alex
• 1:52
  Speaker 1: and I we were talking about earlier out of Germany
• 1:54
  Speaker 1: earlier today. So how do you view the kind of
• 1:56
  Speaker 1: the U S economy? Yeah, so the US company. If
• 1:58
  Speaker 1: we if I were to color code the US economy
• 2:01
  Speaker 1: with green being growth, yellow warning you know, danger, and
• 2:04
  Speaker 1: red recession I think we're probably going from green to
• 2:07
  Speaker 1: light green at the moment. So, whether it's the hard
• 2:10
  Speaker 1: data the soft data, we see a collection of of
• 2:14
  Speaker 1: surveys that all point to continued growth in the US
• 2:17
  Speaker 1: slower than what it's been, but continuing to grow. Is
• 2:21
  Speaker 1: your call on say U at UK equities and European equities,
• 2:24
  Speaker 1: is that based on a Brexit thing? Or is that
• 2:27
  Speaker 1: literally is that a value trade? Well, I think in
• 2:29
  Speaker 1: the in the UK, both in the UK and Europe,
• 2:33
  Speaker 1: you put the politics aside for a moment. If you
• 2:35
  Speaker 1: look at things like valuation and earnings growth, they're better,
• 2:38
  Speaker 1: They're more compelling than they are here in the United States.
• 2:41
  Speaker 1: It just happened to be wrapped in the difficult wrapper
• 2:44
  Speaker 1: of the politics. You know, our core assumption is that
• 2:46
  Speaker 1: perhaps Brexit won't be anywhere near as bad as people think. Um,
• 2:51
  Speaker 1: when you look at the statistics since the end of UM,
• 2:54
  Speaker 1: since the since the vote back in two thousand sixteen,
• 2:57
  Speaker 1: the one economy that has really defied expectations and the
• 3:01
  Speaker 1: popular narrative has been the UK economy, both in terms
• 3:04
  Speaker 1: of growth, inflation and the like. And uh, I'm not
• 3:08
  Speaker 1: so sure about what we couldn't see that continue to
• 3:10
  Speaker 1: happen even post Brexit. There will be some hiccups for sure,
• 3:14
  Speaker 1: but I'm not sure it will be as devastating as
• 3:17
  Speaker 1: people are are are postulating. So as you think about
• 3:20
  Speaker 1: your global portfolio, where are you kind of in the allocation?
• 3:23
  Speaker 1: How much risk are you taking these days? Um with
• 3:26
  Speaker 1: the portfolio. Yeah, so that's a good question because it's
• 3:28
  Speaker 1: really um an exercise in nuance increasingly UM So when
• 3:33
  Speaker 1: the US equity market, as I've said, we've we've been
• 3:36
  Speaker 1: rotating exposures, and where we have added exposure has been
• 3:39
  Speaker 1: to more of the low volatility names, right, trying to
• 3:42
  Speaker 1: stay away from any value biases. But but those companies
• 3:45
  Speaker 1: with dividends uh and have less of an attachment to
• 3:48
  Speaker 1: the overall market, so the data is lower to that
• 3:51
  Speaker 1: of the market. On the credit side, you know, we
• 3:54
  Speaker 1: have for some time been shorter in duration. We're lengthening
• 3:57
  Speaker 1: out the duration because I think there is a real
• 3:59
  Speaker 1: possible ability that in the next part of the cycle,
• 4:02
  Speaker 1: amazingly enough, the US we'll see negative interest rates. And
• 4:06
  Speaker 1: the other thing that we've been doing is we've been
• 4:07
  Speaker 1: pivoting up into higher quality credits to in an attempt
• 4:12
  Speaker 1: to get some sort of carry um, So it's kind
• 4:14
  Speaker 1: of a belt and suspenders type of exercise. So what
• 4:17
  Speaker 1: I would say to that is that you're not alone.
• 4:19
  Speaker 1: And what I mean by that is that low volatility
• 4:22
  Speaker 1: stocks have now inherently become more volatile because there's so
• 4:24
  Speaker 1: much ment now money into it for the reasons that
• 4:26
  Speaker 1: you said. You can make the same argument for going
• 4:28
  Speaker 1: up the safety curve when it comes to an investment grade,
• 4:32
  Speaker 1: and many argue that we're way overbought when it comes
• 4:35
  Speaker 1: to the long end. So how do you deal with that?
• 4:37
  Speaker 1: What do you say? Yeah, yeah, I think it all
• 4:39
  Speaker 1: depends upon what your benchmark duration is, right. So we're
• 4:42
  Speaker 1: we're not going out thirty years or twenty years. We're
• 4:45
  Speaker 1: really trying to stay right on the benchmark, and for
• 4:47
  Speaker 1: us that's probably going to be around four years five years, UM,
• 4:51
  Speaker 1: whereas we were two to three years before. So we've
• 4:54
  Speaker 1: we've lengked the note. And you're right, there's a lot
• 4:56
  Speaker 1: of money in movement. Money is trying to find a home.
• 4:59
  Speaker 1: Especially we're back to the Tina principle right where there
• 5:02
  Speaker 1: is no alternative equities. Um. So it's it's not a
• 5:06
  Speaker 1: perfect trade, but I think it's a trade and certainly
• 5:08
  Speaker 1: over the the the adject that we've seen over the
• 5:11
  Speaker 1: last week or so, those low ball names that we've
• 5:14
  Speaker 1: invested and have held up quite well relatively, you know,
• 5:17
  Speaker 1: they've they've outperformed by about three hundred basis points, which
• 5:20
  Speaker 1: is not bad in an environment like that. So, Hans,
• 5:23
  Speaker 1: what do you what do you expect to hear out
• 5:24
  Speaker 1: of Jackson Hole at the end of this week. A
• 5:26
  Speaker 1: lot of market participants think it's a very very important
• 5:28
  Speaker 1: time for Chairman Pal to articulate kind of how he
• 5:32
  Speaker 1: views the FED over the next you know, several quarters. Yeah, yeah,
• 5:35
  Speaker 1: I think I think the tell is going to be
• 5:38
  Speaker 1: Actually what there was a white paper that the I
• 5:42
  Speaker 1: m F released and it reads something like a guide
• 5:45
  Speaker 1: to deeply negative interest rates to fight Recession. It's it's
• 5:49
  Speaker 1: sort of it's eighty five page white paper that is
• 5:52
  Speaker 1: the that lays out the fund the foundations and the
• 5:55
  Speaker 1: fundamentals about how to position the concept of negative interest rates.
• 6:00
  Speaker 1: I think, particularly in the United States, and you're already
• 6:02
  Speaker 1: seeing some of the FED governors talk about it um
• 6:06
  Speaker 1: that it's not so unusual and that zero bound is
• 6:09
  Speaker 1: really just a number. I think we'll start to see
• 6:12
  Speaker 1: more of that conversation tumble out of Jackson hole without
• 6:17
  Speaker 1: a doubt, and we're sort of setting ourselves up for
• 6:19
  Speaker 1: the next cycle for I think higher probability of negative
• 6:22
  Speaker 1: interest rates, which when you think about the US in
• 6:25
  Speaker 1: the US, when you think about it in the reserve currency,
• 6:29
  Speaker 1: never never, but but a reserve like currency, the Swiss
• 6:33
  Speaker 1: franc they have negative interest rates. The entire German sovereign
• 6:36
  Speaker 1: curve is below zero um. And you know, we have
• 6:40
  Speaker 1: what sixteen seventeen trillion dollars worth of negative yielding debt
• 6:44
  Speaker 1: of both the sovereign and corporate variety in Europe. But
• 6:47
  Speaker 1: does that bring up M M T. And I say
• 6:49
  Speaker 1: that because I've been talking about this black Bock paper
• 6:50
  Speaker 1: all morning and probably boring Paul at this point, which
• 6:52
  Speaker 1: is basically they talked about just that helicopter money. You're
• 6:55
  Speaker 1: going to have to have coordinated monetary and physical policy
• 6:58
  Speaker 1: in order to get stuff done in the next recession.
• 7:00
  Speaker 1: I mean, is that basically what you think we're headed for?
• 7:03
  Speaker 1: To sailing and observations there. Number one, I think we've
• 7:06
  Speaker 1: come to the limits of monetary policy, and that's why
• 7:10
  Speaker 1: I think we're hearing about you know, the ideas of
• 7:13
  Speaker 1: another tax cut being floated this morning. And the other
• 7:17
  Speaker 1: thing is that, uh, you know, when we're running trillion
• 7:22
  Speaker 1: dollar plus uh deficits, which is what we're doing, especially
• 7:25
  Speaker 1: at this point in the cycle, when we're talking about
• 7:27
  Speaker 1: more tax cuts and we are talking about negative interest
• 7:30
  Speaker 1: rates even considering them, that is actually you know, modern
• 7:35
  Speaker 1: monetary theory, perhaps dressed up a little bit differently, but
• 7:38
  Speaker 1: that's effectively it. So I think we're kind of there
• 7:42
  Speaker 1: in many respects, and that's a really uncomfortable um um
• 7:46
  Speaker 1: thought to ponder. Interesting. Hans Aulsen, thank you so much
• 7:49
  Speaker 1: for joining us. Hans is chief investment officer for Fiduciary Trust,
• 7:54
  Speaker 1: joining us here on our Bloomberg Interactive Broker Studio. Let's
• 8:11
  Speaker 1: turn our attention now to gold that come out of
• 8:14
  Speaker 1: the commodity is up about year to date. So is
• 8:17
  Speaker 1: that just a move by investors for a safe haven
• 8:20
  Speaker 1: asthmet asset, is there's something else driving the commodity to
• 8:23
  Speaker 1: get those answers? We welcome Joe Cavatoni, Managing Director of
• 8:26
  Speaker 1: the World Gold Council US joints us here in our
• 8:29
  Speaker 1: Bloomberg Interact the Broker Studio. So Joe, thanks so much
• 8:31
  Speaker 1: for being here give us a sense of what is
• 8:34
  Speaker 1: driving gold here. So far, it's great to be here.
• 8:38
  Speaker 1: What's driving gold in two thousand eighteen into nineteen has
• 8:41
  Speaker 1: been pretty much risk and uncertainty, market risk and uncertainty,
• 8:46
  Speaker 1: a client or an investors inability to understand where really
• 8:50
  Speaker 1: the direction of the markets is going to go, and
• 8:53
  Speaker 1: hearing regular and ongoing updates of large systemic issues that
• 8:58
  Speaker 1: give them caution and concern. If it is talks about
• 9:02
  Speaker 1: implementation of potential tariffs, if there's concerns around negotiations with China,
• 9:07
  Speaker 1: whether there's a hard or soft exit, and Brexit, all
• 9:10
  Speaker 1: of these factors are all playing in now. Added as
• 9:13
  Speaker 1: of laid has been an increased concern, particularly in the
• 9:16
  Speaker 1: US market, over negative real rates or is that even
• 9:19
  Speaker 1: feasible or possible, so the rate moves, the dovish stance
• 9:22
  Speaker 1: of the FED all factoring in gold as an asset
• 9:26
  Speaker 1: is a global asset. So while we're seeing big risk
• 9:30
  Speaker 1: factors that are taking place in developed markets around the world,
• 9:33
  Speaker 1: maybe even the emerging markets, you're also seeing a shift
• 9:36
  Speaker 1: as well globally around the dollarization and monetary policy that's
• 9:41
  Speaker 1: leading central banks to be buyers so we're seeing investors
• 9:43
  Speaker 1: taking risk positions that are careful, and we're also seeing
• 9:46
  Speaker 1: central banks shifting their monetary policy to address it. So
• 9:49
  Speaker 1: I was coming gold back in the olden days two
• 9:52
  Speaker 1: nine for a few years. So I was part of
• 9:55
  Speaker 1: all that conversation of what we see gold hit two
• 9:57
  Speaker 1: thousand and if I have thought we'd hit negative rates
• 10:00
  Speaker 1: UH in many many countries and that we could see
• 10:02
  Speaker 1: it in the US, I would expect it easy goal
• 10:04
  Speaker 1: to be what does it tell you that we're not?
• 10:09
  Speaker 1: What does it tell us that we're not? What I
• 10:11
  Speaker 1: think we need to understand is that the demand cycle
• 10:15
  Speaker 1: for gold is driven and importantly needs to be understood
• 10:19
  Speaker 1: and driven by strategic factors. So what I think we
• 10:23
  Speaker 1: need to be careful and cautious of is momentum and
• 10:27
  Speaker 1: short term opportunity costs move the price fast and actually
• 10:31
  Speaker 1: in large percentage amounts. On a given day. We're almost
• 10:33
  Speaker 1: down one percent today. Let's not get caught up in that.
• 10:37
  Speaker 1: What I'd say is going back to your two thousand
• 10:39
  Speaker 1: nine timeline, and actually goal goes even further back some
• 10:43
  Speaker 1: five thousand years. I was talking about what I think
• 10:48
  Speaker 1: is important for people to understand is that in this
• 10:51
  Speaker 1: wave of demand increasing that we're seeing. This looks to
• 10:54
  Speaker 1: be investors taking a strategic position, overweight in their commodity
• 10:58
  Speaker 1: bucket and positioning for longer term systemic issues. So the
• 11:03
  Speaker 1: financial risk the longer term, it's going to be a slow, methodical,
• 11:07
  Speaker 1: continual increase in demand. Potentially, so will we get I'm
• 11:11
  Speaker 1: not entirely sure, but what we're seeing today are signals
• 11:15
  Speaker 1: telling us that gold as a relevant asset is going
• 11:18
  Speaker 1: to continue to remain very high. Our conversations, again with
• 11:21
  Speaker 1: institutional investors in particular, are about how much gold should
• 11:25
  Speaker 1: I have in my portfolio, not this question of do
• 11:28
  Speaker 1: I have a need for it in my portfolio. It's
• 11:30
  Speaker 1: being found more and more prevalent in the conversations with
• 11:34
  Speaker 1: institutional investors. What are the e t f s doing
• 11:37
  Speaker 1: with gold and how are they impacting the gold market?
• 11:40
  Speaker 1: The e t f s are proving to be exactly
• 11:43
  Speaker 1: what we know them to be, an exceptional vehicle for
• 11:47
  Speaker 1: investors to make a decision to invest in the precious
• 11:50
  Speaker 1: metal itself. They can own the gold through the exchange
• 11:54
  Speaker 1: traded fund, not only in the US market, which we
• 11:57
  Speaker 1: all know a lot about. But what we're seeing are
• 11:59
  Speaker 1: you K investors, German investors in particular, driving enormous amounts
• 12:04
  Speaker 1: of demand. So a year to date, about nine percent
• 12:07
  Speaker 1: of net new assets have flown into e T s.
• 12:09
  Speaker 1: With price appreciation, that pool is up to nearly one
• 12:12
  Speaker 1: thirty billion in overall holdings in e TF. So we're
• 12:16
  Speaker 1: seeing investors saying I need to make a strategic decision.
• 12:20
  Speaker 1: I want to own gold as a commodity or as
• 12:22
  Speaker 1: a precious metal or in a particular investment bucket, divorcing
• 12:27
  Speaker 1: themselves from concerning whether it's a commodity or it's not,
• 12:31
  Speaker 1: simply saying it's a core allocation of my portfolio. So
• 12:34
  Speaker 1: the e T s are enabling people to get it done.
• 12:36
  Speaker 1: Volumes are transparent, which is helpful and actually significant. So
• 12:41
  Speaker 1: if you need to buy, as an institution large percentages
• 12:44
  Speaker 1: of gold over a course of a day, you're going
• 12:46
  Speaker 1: to be able to get it done. Now, one last
• 12:48
  Speaker 1: point that I'll make is that in the US, while
• 12:51
  Speaker 1: we know that there are institutional flows that are going
• 12:54
  Speaker 1: into the exchange traded funds, don't overlook the amount of
• 12:57
  Speaker 1: retail investment that goes into these et s as well.
• 13:00
  Speaker 1: If you're looking at the big wires or you're looking
• 13:02
  Speaker 1: at the large platforms in the US. They all have
• 13:05
  Speaker 1: available on them some mechanism to exchange traded funds to
• 13:09
  Speaker 1: get access to gold, and there's plenty of choices today too.
• 13:12
  Speaker 1: What happens if the dollar doesn't depreciate. I think that
• 13:16
  Speaker 1: you need to understand that the dollar is one only
• 13:19
  Speaker 1: one factor. Remember, gold as a global asset is impacted
• 13:23
  Speaker 1: by demand in China and India, which makes up nearly
• 13:27
  Speaker 1: It's driven by European geo political risk or or or
• 13:31
  Speaker 1: economic concerns in those markets. So it's an important factor,
• 13:35
  Speaker 1: but it's not the only factor to take into consideration.
• 13:39
  Speaker 1: So the dollar has been kind of flatlining, right, But
• 13:41
  Speaker 1: where are we going with gold? We're seeing a noticeable
• 13:43
  Speaker 1: appreciation in the price. Why because the other factors are
• 13:46
  Speaker 1: kicking in again, stepping away from tactical short term concerning
• 13:50
  Speaker 1: issues which are important to understand, but understanding that financial
• 13:54
  Speaker 1: market and the risks that come along with that will
• 13:56
  Speaker 1: be driving long term. So just real, real quick, Joe,
• 14:00
  Speaker 1: you mentioned central bank buying. Just give us a sense
• 14:02
  Speaker 1: of how that works, what and just how it plays out. Basically,
• 14:06
  Speaker 1: they're buying the bullion outright in the bullying market. They
• 14:09
  Speaker 1: go into the OTC markets or the dealer market in
• 14:12
  Speaker 1: the European arena, for example, and ultimately they're they're continuing
• 14:17
  Speaker 1: I think it's now a nineteen year trend that we've
• 14:19
  Speaker 1: seen in terms of increased the levels of of gold
• 14:21
  Speaker 1: being added to the portfolio for monetary policy. So they're
• 14:25
  Speaker 1: buying the real stuff. They're buying the real stuff. Absolutely.
• 14:27
  Speaker 1: Joe Cavitoni, thanks so much for joining us. Joe's a
• 14:29
  Speaker 1: Managing director for the World Council uh US talking to
• 14:32
  Speaker 1: us all things about go get it, getting us updated
• 14:35
  Speaker 1: on gold and it's a nice chart for the year
• 14:38
  Speaker 1: looking at that. Boy in. One part of the economy
• 14:56
  Speaker 1: that remains very strong is the consumer um and let's
• 15:00
  Speaker 1: how the consumer is doing, particularly millennials and the younger
• 15:02
  Speaker 1: demos in terms of buying homes and getting mortgages and
• 15:05
  Speaker 1: all that fun stuff. With that, we welcome Vishaal gark.
• 15:08
  Speaker 1: He is a founder and CEO Better dot Com. He
• 15:10
  Speaker 1: joins us here in our Bloomberg Interactive Broker studio. Rochelle,
• 15:13
  Speaker 1: thanks so much for joining us. I wonder if you
• 15:15
  Speaker 1: could just give us just a brief description of what
• 15:18
  Speaker 1: Better dot Com is what are you guys doing. Uh,
• 15:20
  Speaker 1: thanks so much Paul and Lisa for having me better.
• 15:23
  Speaker 1: Dot com is revolutionizing access to homeownership UH for millennials,
• 15:29
  Speaker 1: and we're doing it by making the entire process better, faster, cheaper,
• 15:34
  Speaker 1: so you can get a better mortgage and by doing that,
• 15:37
  Speaker 1: you can get a better house. Uh. You can save
• 15:40
  Speaker 1: up to three thousand dollars or more on a typical
• 15:42
  Speaker 1: three thousand dollar house uh in just upfront fees because
• 15:45
  Speaker 1: we don't charge any commissions and we don't charge any
• 15:48
  Speaker 1: origination fees. And on top of that, UH, you can
• 15:52
  Speaker 1: save some money on your rate. So an average consumer
• 15:54
  Speaker 1: will save as much as a year on a three
• 15:57
  Speaker 1: dollar mortgage of compared to your tradition mortgage banks or
• 16:01
  Speaker 1: mortgage brokers. Because we take the commissions out of the process,
• 16:04
  Speaker 1: we've automated a huge chunk of the process. We made
• 16:07
  Speaker 1: everything much, much, much of it better. How do you
• 16:10
  Speaker 1: make money? Uh? We make money mostly by uh packaging
• 16:14
  Speaker 1: the loans and having investors who uh we have thirty
• 16:18
  Speaker 1: two investors on our platform with about seven billion dollars
• 16:21
  Speaker 1: of demand. A lot of the largest financial institutions in
• 16:24
  Speaker 1: the country who actually want to have mortgages that are
• 16:27
  Speaker 1: not originated by a commission loan officer or mortgage broker,
• 16:31
  Speaker 1: because those typically tend to perform much much better, and
• 16:34
  Speaker 1: so they pay us a premium for their mortgages and
• 16:36
  Speaker 1: that's how we pay the bills. UM. You know, today
• 16:39
  Speaker 1: we just announced that we raise a hundred and sixty
• 16:42
  Speaker 1: million dollars from some great investors American Express City Bank,
• 16:45
  Speaker 1: Ally Bank UH, the Health Plan of Ontario Pinebroke investors,
• 16:50
  Speaker 1: and a lot of that. You know, when it comes
• 16:53
  Speaker 1: down to is all of those banks and major investors
• 16:56
  Speaker 1: are investing in us UH for the reason that I
• 16:59
  Speaker 1: started the me five years ago. So five years ago,
• 17:02
  Speaker 1: my wife was pregnant with our second child. We were
• 17:06
  Speaker 1: shopping for houses just people do, UH, and it was
• 17:10
  Speaker 1: just a really tough process to get a mortgage. My
• 17:12
  Speaker 1: wife worked at a big bank and even there, it
• 17:14
  Speaker 1: took our sixty days to get a mortgage approval, and
• 17:19
  Speaker 1: we lost the house that we were going to buy
• 17:20
  Speaker 1: to an all cash buyer who actually even paid less
• 17:22
  Speaker 1: than we did. And UH, I thought that was fundamentally unfair.
• 17:26
  Speaker 1: Like branch visits, facts machines going at Kinko's, and like
• 17:33
  Speaker 1: literally UH sending my Social Security number and all these
• 17:36
  Speaker 1: documents over on security email had cost us the home
• 17:39
  Speaker 1: that we want to buy. So it's like, we're gonna
• 17:41
  Speaker 1: make this better. Seventy of Americans need a mortgage to
• 17:45
  Speaker 1: buy a home. And how is this thing that everywhere
• 17:51
  Speaker 1: everyone uses? How is this industry that's fifteen trillion dollars
• 17:55
  Speaker 1: in size exists as if the Internet was never invented.
• 17:59
  Speaker 1: Do millenns buy homes? They do? Their home ownership rate
• 18:03
  Speaker 1: is half of that of traditional UH generations before, like
• 18:07
  Speaker 1: the baby movers and like so on average, you know
• 18:11
  Speaker 1: of that those earlier generations were able to buy a home.
• 18:14
  Speaker 1: Right now millennials about thirty five percent of them own
• 18:17
  Speaker 1: a home, So there's this massive demand for them coming
• 18:20
  Speaker 1: people like that. Do you think a lot of it
• 18:23
  Speaker 1: has to do with challenges with student loans? Um They
• 18:27
  Speaker 1: have a ton of student loans, so instead of spending
• 18:30
  Speaker 1: the first fifteen years of their working lives saving up
• 18:32
  Speaker 1: money to get a down payment to buy a home,
• 18:35
  Speaker 1: they're paying off the loans for college. But there are
• 18:37
  Speaker 1: all these products that are out there that your traditional
• 18:40
  Speaker 1: mortgage broker doesn't know. Products by Fannie made that enable
• 18:43
  Speaker 1: first time home buyers to put as little as three
• 18:46
  Speaker 1: percent down to buy a home. And over half of
• 18:50
  Speaker 1: our customer base, particularly for those buying a home, is millennials,
• 18:54
  Speaker 1: and the average is thirty eight. And a lot of
• 18:56
  Speaker 1: them are just they they want, they're they're getting, they're
• 19:00
  Speaker 1: having kids, they're putting down roots. Um, they want to
• 19:04
  Speaker 1: have a play room that they can actually paint the
• 19:06
  Speaker 1: way the color they want. And so we see a
• 19:11
  Speaker 1: lot of millennials entering. They're actually the largest group of
• 19:14
  Speaker 1: home buyers this year. So as we've seen rates fall,
• 19:18
  Speaker 1: what kind of activity have you noticed? We have seen
• 19:20
  Speaker 1: demand go through the roof. Our business is up over
• 19:24
  Speaker 1: from the year before. We're on track to do over
• 19:27
  Speaker 1: five billion of mortgages this year and almost fifteen billion
• 19:30
  Speaker 1: or so next year. And it's an amazing time to
• 19:33
  Speaker 1: buy because rates being as low as they are, lower
• 19:36
  Speaker 1: than they've ever been in the past, means lower rates,
• 19:40
  Speaker 1: higher affordability. Higher affordability means you can buy a better
• 19:43
  Speaker 1: house for the same amount of money. Remember, a lot
• 19:46
  Speaker 1: of people are renting, but when you're renting, you're just
• 19:48
  Speaker 1: paying your landlords mortgage. Exactly. Homeownership. Homeownership that's kind of
• 19:53
  Speaker 1: been it's the issue about the millennials kind of being
• 19:55
  Speaker 1: underrepresented in home ownership, but the potentially upside there for
• 19:59
  Speaker 1: the housing market. Shall garg founder and CEO Better dot
• 20:02
  Speaker 1: Com joining us here in our Bloomberg Interactive Broker studio,
• 20:05
  Speaker 1: thank you so much better rhetor coming out of the
• 20:21
  Speaker 1: White House about trade. Let's see where the action is
• 20:24
  Speaker 1: with small Stock returned to Bloomberg Stocks editor Dave Wilson, Dave,
• 20:27
  Speaker 1: what are you looking at this morning? Well, I'm looking
• 20:28
  Speaker 1: at smaller companies doing a bit better than larger ones,
• 20:32
  Speaker 1: at least for the moment. The Russell two thousand index
• 20:35
  Speaker 1: up one point three percent. In the S and P
• 20:37
  Speaker 1: five hundreds up one point two percent. Now one of
• 20:40
  Speaker 1: the Russell's biggest games belongs to Empire Resorts, whose ticker
• 20:44
  Speaker 1: is n Y and why the casino owner has climbed
• 20:48
  Speaker 1: fifteen percent after its Malaysian majority owner offered to buy
• 20:53
  Speaker 1: the shares it doesn't already hold. Uh Saws ticker s
• 20:58
  Speaker 1: O n O is at a twelve and half percent.
• 21:01
  Speaker 1: The maker of audio equipment was raised that Raymond James
• 21:04
  Speaker 1: to the firm's top ratings. Strong By and tanker stocks
• 21:07
  Speaker 1: are higher after dry Ships chairman and CEO Georgia Economu,
• 21:12
  Speaker 1: agreed to buy the shares of his company that he
• 21:14
  Speaker 1: doesn't already own. Nordic American Tankers ticker and A T
• 21:19
  Speaker 1: has risen eight percent, and t K Tankers ticker t
• 21:23
  Speaker 1: n K has advanced six and a half percent. Now
• 21:27
  Speaker 1: A one of the Russell's steepest drops belongs to Revlon
• 21:30
  Speaker 1: ticker r e V. The cosmetics maker has fallen about
• 21:33
  Speaker 1: four and a half percent after gaining more than fifteen
• 21:36
  Speaker 1: percent on Thursday and Friday. The earlier advance followed our
• 21:40
  Speaker 1: report that Revlon hired Goldman Sachs to look at strategic alternatives.
• 21:46
  Speaker 1: Bloomber Stocks editor Davals and thank you so much. Well,
• 21:49
  Speaker 1: the tech companies are back down in Washington. This time
• 21:53
  Speaker 1: they're they're testifying in support of a Trump administration effort
• 21:57
  Speaker 1: to potentially punish France for enacting a three percent tax
• 22:01
  Speaker 1: on global tech companies. To get the latest, we welcome
• 22:03
  Speaker 1: Laura Davison laaras Congressional tax reporter for Bloomberg News, joining
• 22:07
  Speaker 1: us on the phone from Washington, d C. Laura, thanks
• 22:09
  Speaker 1: so much for joining us. So again, we got the
• 22:11
  Speaker 1: big tech companies in front of Washington, but a little
• 22:13
  Speaker 1: bit different tack today. What are they trying to get across? Yeah,
• 22:17
  Speaker 1: so they're really concerned about this, Uh, this tax that France,
• 22:21
  Speaker 1: France has passed that would target largely large US companies Google, Amazon, Facebook, um,
• 22:26
  Speaker 1: and and so the Trump administration has said, yes, we
• 22:29
  Speaker 1: are concerned about this. And you really see a kind
• 22:31
  Speaker 1: of for the first time, h tech companies and the
• 22:33
  Speaker 1: Trump administration really being in lockstep on an issue. Um
• 22:37
  Speaker 1: what could happen from this? Uh? The administration is looking
• 22:40
  Speaker 1: at some sort of retaliatory and measure against France to
• 22:43
  Speaker 1: sort of set a precedent of look, don't go after
• 22:45
  Speaker 1: our tech companies to raise revenue for your country. Uh.
• 22:49
  Speaker 1: Tech companies concerned that they could be taxed not only
• 22:51
  Speaker 1: from France, but that other countries could follow suit Spain,
• 22:54
  Speaker 1: New Zealand for example, and they could be suddenly hit
• 22:56
  Speaker 1: from for little taxes from from countries all over the world.
• 22:59
  Speaker 1: And so I'm calling tech versus Tannin's because one of
• 23:02
  Speaker 1: the things is wine that Trump has threatened to tax
• 23:06
  Speaker 1: of all wine coming from France and Europe. But in
• 23:09
  Speaker 1: all reality, like, what could we actually do to retaliate?
• 23:14
  Speaker 1: So there's a couple of different things. One would be tariffs,
• 23:16
  Speaker 1: and it could be on French wine or or other
• 23:18
  Speaker 1: sorts of French products. Know, the percent tariff on wine
• 23:21
  Speaker 1: would be uh, you know, that would be a goold measure,
• 23:24
  Speaker 1: but there's lots of you know, either smaller tariffs are
• 23:26
  Speaker 1: targeting a broad base of French exports. The other thing
• 23:29
  Speaker 1: is there is a section in the tax code that
• 23:31
  Speaker 1: actually would allow the US government to basically double the
• 23:37
  Speaker 1: tax on French citizens and French companies operating in the US.
• 23:40
  Speaker 1: So there's a several different things that are legal within
• 23:43
  Speaker 1: the scope of the possible that that the U s
• 23:46
  Speaker 1: could do to try to get friends France to back
• 23:48
  Speaker 1: down from this. So, Laura, how important or how much
• 23:52
  Speaker 1: of a financial risk or is this tax to some
• 23:54
  Speaker 1: of these big tech companies. So we haven't heard any
• 23:58
  Speaker 1: sort of specific numbers yet they're saying will cost millions
• 24:01
  Speaker 1: to comply. A representative from Amazon said that their profit
• 24:05
  Speaker 1: margins are usually less than three percent, so this three
• 24:07
  Speaker 1: percent tax from France would wipe out some of their
• 24:10
  Speaker 1: profit margins on those transactions. So it's at least kind
• 24:14
  Speaker 1: of on a an anecdotally, it would be both expensive
• 24:17
  Speaker 1: to to be able to track all this to comply
• 24:19
  Speaker 1: with the tax as well as it could wipe out
• 24:21
  Speaker 1: um to profits, profitability, or result in higher prices for consumers.
• 24:24
  Speaker 1: So play this out for me. So tech goes to
• 24:26
  Speaker 1: the d C. They're like, we hate this, this is bad.
• 24:29
  Speaker 1: Everyone in the US is like, totally, we don't want
• 24:31
  Speaker 1: France attack at taxes. This is terrible. Then what happens.
• 24:34
  Speaker 1: So what the US is trying to do is to
• 24:36
  Speaker 1: get France to back away from this tax and focus
• 24:40
  Speaker 1: more on this big global conversation that's happening with a
• 24:43
  Speaker 1: hundred thirty companies led by you know, G seven, G
• 24:46
  Speaker 1: twenty to come up with some way to tax Uh.
• 24:50
  Speaker 1: Basically issue is that companies no longer you know, makings
• 24:53
  Speaker 1: and earned profits in one country. With the digital economy,
• 24:56
  Speaker 1: things cross borders all the time and it's really hard
• 24:58
  Speaker 1: to to say which come which country can tax which profits.
• 25:02
  Speaker 1: So they're trying to have this big multilateral discussion UM
• 25:06
  Speaker 1: to come up with some rules that everyone in the
• 25:08
  Speaker 1: world basically can agree on. That's what the US wants,
• 25:10
  Speaker 1: and that's what they're trying to urge France and others
• 25:12
  Speaker 1: who want to go off on their own to do. So, Laura,
• 25:15
  Speaker 1: what just give us a sense a little bit of
• 25:17
  Speaker 1: backstory here. What was France really thinking here with this tax?
• 25:20
  Speaker 1: Was it simply a money grab for them? Well personally
• 25:24
  Speaker 1: that and and there's a lot of anger in Europe
• 25:27
  Speaker 1: at American at American tech companies who they feel are
• 25:31
  Speaker 1: aren't paying taxes, that they are using um tax savants
• 25:35
  Speaker 1: to to avoid paying what they should be owe. And
• 25:38
  Speaker 1: they said, look, you know, if if the you know,
• 25:40
  Speaker 1: the U. S. Government isn't gonna address this, if there
• 25:42
  Speaker 1: isn't some sort of global consensus, we just want to
• 25:44
  Speaker 1: move quickly and make sure that we're uh, you know,
• 25:46
  Speaker 1: getting a portion, you know, and being a first mover
• 25:48
  Speaker 1: on this, they're able to grab a bigger piece of
• 25:50
  Speaker 1: the pie than they would have if they you know,
• 25:52
  Speaker 1: did this in coordination with all the other countries. So
• 25:55
  Speaker 1: what's the counter to that? I mean, that sounds somewhat reasonable.
• 25:59
  Speaker 1: It does, though, mean then the then the answer is, uh,
• 26:02
  Speaker 1: you know, especially for France where US is a close ally,
• 26:05
  Speaker 1: you know, what are the negotiations like if you know
• 26:07
  Speaker 1: there are extremes tariffs, you know, how long can they
• 26:09
  Speaker 1: can they withstand those? Or you know, if if every
• 26:12
  Speaker 1: other country has agreed to this other set of principles,
• 26:14
  Speaker 1: you know, could that be something that that France uh
• 26:17
  Speaker 1: signs onto. This is really uh France kind of took
• 26:21
  Speaker 1: a bold step kind of, I think, with the other countries,
• 26:25
  Speaker 1: assuming that they would be willing to movee back down
• 26:27
  Speaker 1: on this if there was a larger consensus on something
• 26:29
  Speaker 1: that would be agreeable. Laura Davison, thank you so much
• 26:31
  Speaker 1: for joining us. Lars Congressional tax reporter for Bloomberg News,
• 26:34
  Speaker 1: joining us on the phone from Washington, d C. Thanks
• 26:37
  Speaker 1: for listening to the Bloomberg P and L podcast. You
• 26:39
  Speaker 1: can subscribe and listen to interviews at Apple Podcasts or
• 26:42
  Speaker 1: whatever podcast platform you prefer. M Paul Sweeney, I'm on
• 26:45
  Speaker 1: Twitter at pt Sweeney. I'm Lisa Bramoy. It's I'm on
• 26:48
  Speaker 1: Twitter at Lisa Bramoy. It's one before the podcast. You
• 26:51
  Speaker 1: can always catch us worldwide. I'm Bloomberg Radio.