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Investing, Home Prices, And Fast-Food (Podcast) · 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. Every business day we bring
• 0:06
  Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
• 0:11
  Speaker 1: with essential market moving news on the Bloomberg Markets Podcast,
• 0:15
  Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
• 0:18
  Speaker 1: at Bloomberg dot com slash podcast. I have a all
• 0:23
  Speaker 1: work from home team for Bloomberg and on the first team,
• 0:27
  Speaker 1: along with Vince Signarella, is our next guest, Cameron christ
• 0:31
  Speaker 1: macro strategist Bloomberg News. He has mastered this work from
• 0:34
  Speaker 1: home thing and he's never coming back. Cameron, is there
• 0:38
  Speaker 1: a bare case for the mighty US dollar UH in
• 0:44
  Speaker 1: the short run? Um? Probably not, I mean anything beyond positioning.
• 0:51
  Speaker 1: Is it's tough to tough to enviantage simply because um yeah,
• 0:58
  Speaker 1: I mean interest rate expectations may go up, they may
• 1:01
  Speaker 1: go down after Jackson Hole, But so much of the
• 1:04
  Speaker 1: rest of the world, particularly major UM, major economies and
• 1:09
  Speaker 1: major currencies, are facing a significant headwind because of energy
• 1:14
  Speaker 1: prices UM, not just the price of oil, but most
• 1:18
  Speaker 1: particularly in Europe in the UK, the price of natural
• 1:21
  Speaker 1: gas UH and electricity and the US has re engineered
• 1:28
  Speaker 1: itself to be um much more independent in terms of
• 1:34
  Speaker 1: energy prices. Obviously we've got natural gas, but also even
• 1:38
  Speaker 1: even um crude oils. So a lot of what we've
• 1:42
  Speaker 1: a lot of the weakness we've seen in euro and
• 1:46
  Speaker 1: Sterling in particular, have been driven by this parabolic rise
• 1:51
  Speaker 1: in natural gas prices and electricity prices UM largely the
• 1:56
  Speaker 1: function obviously of the of the sanctions on Russia, and
• 1:58
  Speaker 1: there's not necessarily an obvious solution um to to mitigate that. Cam.
• 2:05
  Speaker 1: I love the title of your column today, and for
• 2:07
  Speaker 1: for international audience, you should definitely check it out on
• 2:10
  Speaker 1: the Bloomberg terminal says, what would you say Friday if
• 2:13
  Speaker 1: you were Jerome Powell? Kim, What would you say Friday
• 2:16
  Speaker 1: if you were Jerome Powell? Other than I resigned? So no,
• 2:22
  Speaker 1: I had to. I wouldn't necessarily say that, but I
• 2:25
  Speaker 1: know I had to put a disclaimer in the column
• 2:27
  Speaker 1: because I know people would write in to say that
• 2:29
  Speaker 1: that's what they would say. I would I would try
• 2:32
  Speaker 1: to say nothing. Um. Listen, last year he gave a
• 2:37
  Speaker 1: talk on the economic outlook, and he said that the
• 2:40
  Speaker 1: thought inflation was going to be transitory. And that the
• 2:43
  Speaker 1: official data understated the amount of labor market slack. I
• 2:47
  Speaker 1: mean with with I couldn't have gotten it anymore wrong, right, Uh,
• 2:54
  Speaker 1: has as the visibility in terms of the economic trajectory
• 2:59
  Speaker 1: increased or decrease since then, I would argue it's decreased. Um. Yes,
• 3:03
  Speaker 1: inflation has obviously run up and inspired without a control.
• 3:07
  Speaker 1: Maybe it's peaking. Maybe it isn't. I mean on a
• 3:10
  Speaker 1: year on year basis, it almost certainly is on a
• 3:13
  Speaker 1: on a broader, more high frequencies a month to month basis,
• 3:17
  Speaker 1: hasn't Maybe maybe not. The growth trajectory is obviously highly uncertain. Uh,
• 3:24
  Speaker 1: look at the disparity between says some of the p
• 3:26
  Speaker 1: m I data that we've had, which has been kind
• 3:29
  Speaker 1: of uniformly awful at least if you look at the
• 3:31
  Speaker 1: SMP iteration. Uh, And the the hard data has held
• 3:35
  Speaker 1: up relatively better in terms of like industrial production or
• 3:38
  Speaker 1: even core durable goods orders were pretty decent today. So listen,
• 3:43
  Speaker 1: the Fed doesn't have a clue what the world's gonna
• 3:45
  Speaker 1: look like or what the economy is gonna look like
• 3:47
  Speaker 1: in a year, so to trying to set out a
• 3:50
  Speaker 1: trajectory that's sort of carved in stone, and to guide
• 3:55
  Speaker 1: the market based on an outlook that's so uncertain, I
• 3:59
  Speaker 1: think is kind of kind of foolhardy. And they've already
• 4:02
  Speaker 1: said in fairness that they are kind of moving to
• 4:05
  Speaker 1: a more reactive meeting to meeting um framework. So in
• 4:10
  Speaker 1: that context, why would they do anything but keep their
• 4:14
  Speaker 1: options open while at the same time sort of validating
• 4:17
  Speaker 1: the expectation for the pricing of the market that rates
• 4:21
  Speaker 1: are going to go up by another sort of hundred
• 4:23
  Speaker 1: hundred fifty basis points. I mean, that's great from economic perspective,
• 4:26
  Speaker 1: but I think from a market's perspective that is extremely
• 4:29
  Speaker 1: positioned for some sort of hawk ish tilt from from
• 4:32
  Speaker 1: Chairman Powell on Friday? Does that almost set up the
• 4:36
  Speaker 1: chairman to fail to some extent. I mean, this is
• 4:39
  Speaker 1: just coming in the context of what we heard in
• 4:41
  Speaker 1: June where he basically implied that a recession is on
• 4:44
  Speaker 1: the table if that's what it takes to tackle inflation,
• 4:47
  Speaker 1: and then any comments kind of coming after that, even
• 4:49
  Speaker 1: in July was interpreted as relatively duvish. Is Shermon Powell
• 4:54
  Speaker 1: in the same position once again, Yeah, to a to
• 4:57
  Speaker 1: a degree. Um with the with the proviso. As you
• 5:01
  Speaker 1: allude to that market positioning has recently become quite a
• 5:05
  Speaker 1: bit more UH skewed towards betting on more more rate hikes.
• 5:12
  Speaker 1: If you look at the combined position of your dollar
• 5:15
  Speaker 1: futures and so for futures. According to CFTC, the non
• 5:21
  Speaker 1: commercial short has increased by about one and a half
• 5:24
  Speaker 1: million contracts since the June's that meeting, And that's thirty
• 5:27
  Speaker 1: seven and a half million dollars UH per basis point.
• 5:31
  Speaker 1: That's that's not inconsiderable, right, uh So, I think there
• 5:35
  Speaker 1: probably is a risk that if he doesn't say, well,
• 5:40
  Speaker 1: if we need to, we'll hike you back to the
• 5:41
  Speaker 1: stone age, that you have some sort of risk management
• 5:45
  Speaker 1: exercise where people end up being forced to cover a
• 5:49
  Speaker 1: few a few shorts because we are, after all, pricing
• 5:52
  Speaker 1: and something close to, if not quite at um the
• 5:55
  Speaker 1: peak policy rate for the entire cycle. Cameron is a
• 5:58
  Speaker 1: fellow do graduate. You got ten set? Is how confident
• 6:00
  Speaker 1: are you and coach Schier replacing coach k um moderate.
• 6:07
  Speaker 1: I think k lost as fastball in terms of game
• 6:10
  Speaker 1: coaching a long time ago. So WHOA, that's a hot
• 6:13
  Speaker 1: take coming at a Cameron Christ Although I would tend
• 6:16
  Speaker 1: to agree with that the Zion Williamson team should have
• 6:19
  Speaker 1: wanted all and I would just suggest that he was
• 6:21
  Speaker 1: out coached. You've gotta play defense, sorry, Cameron christ Macro
• 6:24
  Speaker 1: Strategies Bloomberg News and given us just the cold hard
• 6:28
  Speaker 1: truth as relates to coach k Um a little bit.
• 6:31
  Speaker 1: I love that you mentioned he's a duke rad after
• 6:33
  Speaker 1: I said John Griffin with the E v A g Yes, exactly.
• 6:35
  Speaker 1: We gotta even it up a little bit because I'm
• 6:37
  Speaker 1: surrounded by U v A and worse yet, Carolina people
• 6:41
  Speaker 1: here at Bloomberg News. I want to get to our
• 6:47
  Speaker 1: next guest, Johan Grown, VP and head of et F
• 6:50
  Speaker 1: Strategy to Alliance Investment Management. Johan, thanks so much for
• 6:54
  Speaker 1: joining us year. Appreciate you taking the time. I know
• 6:56
  Speaker 1: you guys at Alliance do your surveys on a pretty
• 7:01
  Speaker 1: periodic basis. I wonder what your survey work is telling
• 7:04
  Speaker 1: you about recession. Is that something we should really be
• 7:08
  Speaker 1: baking into our outlooks. Well, you have the recession fears
• 7:13
  Speaker 1: you know, are discussed by academics and politicians alike, right,
• 7:19
  Speaker 1: even more so perhaps politicians these days. But nevertheless, we
• 7:22
  Speaker 1: do a survey, So thank you for bringing that up.
• 7:24
  Speaker 1: And we actually see and have seen now for you know,
• 7:28
  Speaker 1: more than a couple of quarters in a row, that
• 7:29
  Speaker 1: we have two and three Americans that they're worrying about
• 7:32
  Speaker 1: a major recession might be around the corner. So not
• 7:35
  Speaker 1: not just a recession like you, but but a major recession.
• 7:38
  Speaker 1: There's a pretty fine distinction between those two. And then
• 7:41
  Speaker 1: we also see, obviously, you know, Asian chat Americans expecting
• 7:44
  Speaker 1: inflation to get worse. So we kind of have this
• 7:47
  Speaker 1: double a ammu of inflation and recession coming. And what
• 7:49
  Speaker 1: you can read between the tea leaves here is that
• 7:52
  Speaker 1: the average American is going to take action, you know,
• 7:54
  Speaker 1: based on their beliefs about the president that they're feeling
• 7:57
  Speaker 1: and seeing, but also about the future that they're expecting.
• 8:00
  Speaker 1: We'll square those two ideas here, because for a while,
• 8:03
  Speaker 1: it kind of felt like the wealth effect was perhaps
• 8:06
  Speaker 1: offsetting this kind of demand destruction implication of inflation, perhaps
• 8:10
  Speaker 1: pushing that recession timeline further and further out. But it
• 8:14
  Speaker 1: also feels like, just based on recent data, that wealth
• 8:16
  Speaker 1: effect is deteriorating. Would you agree, Yeah, you definitely see
• 8:21
  Speaker 1: the wealth effect of the tier rating and that will
• 8:24
  Speaker 1: further impact you know how people respond and react. And
• 8:26
  Speaker 1: you see that a lot of companies now are taking
• 8:30
  Speaker 1: some action and with layoffs and fingering around with the wages.
• 8:35
  Speaker 1: But it's the interesting part there, it's really that they're taking.
• 8:38
  Speaker 1: It's kind of like a preemptive strike. If you know
• 8:40
  Speaker 1: that there is way to pressure coming as people are
• 8:43
  Speaker 1: getting getting sensed by inflation, you know, you gotta you
• 8:46
  Speaker 1: gotta take accident as a business as a business owner,
• 8:49
  Speaker 1: and a couple of things you can do. And if
• 8:51
  Speaker 1: you signal through the workforce that you know now it's
• 8:53
  Speaker 1: not a good time to ask for a race, for example,
• 8:55
  Speaker 1: and then that can be helpful both on communication from
• 9:00
  Speaker 1: but also in terms of margin, keeping the margins cleaner.
• 9:03
  Speaker 1: So there are a couple of reasons for for for
• 9:06
  Speaker 1: all this. All right, John Johan, We've got some economic
• 9:09
  Speaker 1: geeks getting together out in Jackson Hole, Wyoming later this week.
• 9:13
  Speaker 1: What do you expect to hear from some of these
• 9:15
  Speaker 1: central bankers, from somebody some of these economists, and most
• 9:18
  Speaker 1: importantly for FED chairman j Pal. Yeah, I'll tell you.
• 9:22
  Speaker 1: I'm actually heading out there myself. Oh you're a geek. Nice,
• 9:27
  Speaker 1: very good. I'll be I'll be at you know, fair
• 9:30
  Speaker 1: distance from there from all the acts in there, but okay,
• 9:33
  Speaker 1: good stuff on a speech. I'm gonna head out in
• 9:35
  Speaker 1: the details and get some much needed are and all
• 9:38
  Speaker 1: good for you. I'll handle with the speeches, but I
• 9:41
  Speaker 1: think it's pretty for me. It's pretty clear what we
• 9:44
  Speaker 1: are is going to take the speech. She said many
• 9:46
  Speaker 1: times that inflation is the primary targets and them to
• 9:49
  Speaker 1: fight and it's basically unconditional that they can't fail on
• 9:52
  Speaker 1: this target, and they want to bring it out to
• 9:54
  Speaker 1: two percent. Well we are miles away from that. So
• 9:57
  Speaker 1: for him to waiver off of the the previously expressed
• 10:01
  Speaker 1: you know, desire to go aggressive, I think that's a
• 10:06
  Speaker 1: low probability that that it will start, you know, throwing
• 10:09
  Speaker 1: the dubbish feathers around the table at this point. So
• 10:12
  Speaker 1: I would expect him to lean harder into the basis
• 10:15
  Speaker 1: points cameras. I'm sorry the campras seventy five basis points
• 10:19
  Speaker 1: of over eight TI get opposed to fifty. But that
• 10:21
  Speaker 1: being said, he's also said that he's not going to
• 10:23
  Speaker 1: be providing as much predictive communication, you know, still let
• 10:28
  Speaker 1: the markets know where it might be going. So cannot
• 10:31
  Speaker 1: painted himself into a corner on that one. But the
• 10:34
  Speaker 1: longer the shortest is that he, uh, if he were
• 10:37
  Speaker 1: to go and backtrack now to become a little bit
• 10:41
  Speaker 1: more dubish and talk about a pivot, I think that
• 10:43
  Speaker 1: was really tarnish the credibility of of of him and
• 10:46
  Speaker 1: the set. So for me, it's a pretty clean cut
• 10:49
  Speaker 1: that it's going to be more of the same with
• 10:51
  Speaker 1: a little sprinkle of opening for September changes to the past,
• 10:57
  Speaker 1: but it should be minor or he will stir a
• 11:00
  Speaker 1: more anxiety in the market, you know, Uh, Johan, we
• 11:03
  Speaker 1: just asked our macro strategist slash Macroman Cameron crisis question.
• 11:07
  Speaker 1: I want to pose it to you as well. To
• 11:10
  Speaker 1: what extent is the bar set so high on the
• 11:12
  Speaker 1: hawkish front that the market is basically saying what you're
• 11:15
  Speaker 1: saying is that Charon Powell has to deliver, He has
• 11:18
  Speaker 1: to have some kind of commentary along the lines of inflation,
• 11:21
  Speaker 1: Trump's recession odds. But to what extent is he almost
• 11:26
  Speaker 1: set up to fail because the expectations are so hawkish. Well,
• 11:31
  Speaker 1: I don't think he can fail in this case, because
• 11:34
  Speaker 1: I don't think he has an option to to go jabsh.
• 11:38
  Speaker 1: You know, he needs to be steadfast in his commitment
• 11:41
  Speaker 1: and if again, if the waivers from that, I think
• 11:44
  Speaker 1: that the risk is that he will lose his most
• 11:46
  Speaker 1: important tool, and that is the one of verbal communication.
• 11:50
  Speaker 1: And for now that is the most precious commodity that
• 11:53
  Speaker 1: that has with it and that they can control. And
• 11:56
  Speaker 1: to to try to waiver from the predetermined path at
• 12:01
  Speaker 1: this point I think would be difficult. I mean, they
• 12:04
  Speaker 1: keep saying that their data driven, right, and that's that
• 12:07
  Speaker 1: might be fine. At this juncture, They're going to have
• 12:10
  Speaker 1: to be, you know, a little bit more brave. I
• 12:11
  Speaker 1: think it used a little bit more of their guts
• 12:13
  Speaker 1: because some of the day that will point in the
• 12:15
  Speaker 1: direction that may have been predicting in other works. Uh,
• 12:18
  Speaker 1: some receptionary winds starting to show up. Yeah, they could,
• 12:23
  Speaker 1: you know, point out I'm sure they will point that out.
• 12:25
  Speaker 1: But how much of that is their own doing and
• 12:27
  Speaker 1: how much of that is related to uh energy prices
• 12:30
  Speaker 1: and and other facts? Has you got to be saying?
• 12:34
  Speaker 1: All right, Johan, great stuff. Appreciate getting your perspective. Johan Grant,
• 12:38
  Speaker 1: vice president, head of et F Strategy at Alliance Investment Management,
• 12:42
  Speaker 1: as he gets ready to get out to the Grand Teatons.
• 12:44
  Speaker 1: That is a spectacular part of the country. I can
• 12:47
  Speaker 1: see why these central bankers like to get together out
• 12:50
  Speaker 1: there in August. It is absolutely spectacular. They might see
• 12:53
  Speaker 1: a bison or elk or something like that. We'll see.
• 12:56
  Speaker 1: Of course. Tom Keenan, the Surrounds team was there as well.
• 13:01
  Speaker 1: Let's switch gears to healthcare investing. You know, I'm probably
• 13:06
  Speaker 1: like a lot of people where when I think healthcare communis,
• 13:08
  Speaker 1: I'm I just think at the high cost of drugs
• 13:10
  Speaker 1: and they're just like, uh, you know, such a pain
• 13:12
  Speaker 1: and it's just such a drain on a lot of people.
• 13:15
  Speaker 1: But boy did they come through during this pandemic. I mean,
• 13:18
  Speaker 1: getting us this vaccine in record time just extraordinary. Uh,
• 13:23
  Speaker 1: And I for one to think a little bit differently
• 13:25
  Speaker 1: about some of those biotech and healthcare sectors. Shannon Susko,
• 13:28
  Speaker 1: she's a managing director for Edelman Smithfield joins us Shannon,
• 13:33
  Speaker 1: you know, I guess how did the impact of the
• 13:37
  Speaker 1: how did the pandemic impact invest investor allocation and healthcare sector?
• 13:42
  Speaker 1: Did you see any change or any allocation changes for
• 13:47
  Speaker 1: investors over the last several years as it relates to healthcare.
• 13:52
  Speaker 1: Good morning, Paul, Thanks for having me. Yes, absolutely. In fact,
• 13:55
  Speaker 1: one of the things that we saw was that, well,
• 13:57
  Speaker 1: health care has been traditionally a well insulated factor in
• 14:00
  Speaker 1: both good and down economies. Um, that we did see
• 14:04
  Speaker 1: that it has become more attractive since the pandemic and
• 14:07
  Speaker 1: the inaugural study that we just issued results for. In fact,
• 14:11
  Speaker 1: um investors were increasing their allocation at a greater rate
• 14:15
  Speaker 1: UM and in fact the greatest beneficiary of that were
• 14:17
  Speaker 1: really frontline services, so things such as device equipment and supplies,
• 14:22
  Speaker 1: pharmaceutical and specialty pharmaceuticals, and health and hospital systems, which
• 14:26
  Speaker 1: probably won't come as a surprise to your point on
• 14:28
  Speaker 1: the fact of of innovation in the pandemic and some
• 14:31
  Speaker 1: of the efforts to really galvanize and support of developing vaccines. Um,
• 14:36
  Speaker 1: certainly this was a key driver in the increased allocation
• 14:40
  Speaker 1: within the sector during this period. Well, it kind of
• 14:44
  Speaker 1: seems like when you're lacking about healthcare, the momentum in
• 14:47
  Speaker 1: healthcare has naturally taken off a massive interest from the
• 14:50
  Speaker 1: investor community and also broadly from the public since COVID nineteen,
• 14:53
  Speaker 1: that kind of makes sense. But now that we are
• 14:56
  Speaker 1: two and a half years. I want to say out
• 14:59
  Speaker 1: from from the sal onset of COVID, I'm curious if
• 15:02
  Speaker 1: the momentum behind the sector and the enthusiasm for investing
• 15:05
  Speaker 1: in things like biotech is waning your take. Now, that's
• 15:10
  Speaker 1: a it's a good point. And certainly biotech has been
• 15:12
  Speaker 1: you know, head hard in recent months, UM, despite the
• 15:15
  Speaker 1: fact that we saw, you know, something really miraculous from
• 15:18
  Speaker 1: an innovation perspective, right, we saw the development of a
• 15:20
  Speaker 1: vaccine that would normally take six to ten years happen
• 15:23
  Speaker 1: in twelves of fourteen months UM and and the data
• 15:27
  Speaker 1: from our survey really shows that investors expect the health
• 15:30
  Speaker 1: care sector to really continue to grow post pandemic um and.
• 15:34
  Speaker 1: Amongst those who increase their allocation UM, fifty seven percent
• 15:37
  Speaker 1: actually believe the sector will continue to grow post pandemic,
• 15:41
  Speaker 1: and fifty six expect higher returns compared to pre pandemic performance. UM.
• 15:46
  Speaker 1: You know, there's great interest in the sector, and in particular,
• 15:49
  Speaker 1: innovation UM has been a value driver that's quite clear
• 15:53
  Speaker 1: and very attractive to investors, um and and eighty seven
• 15:57
  Speaker 1: percent investors actually believe that the industry's response the COVID
• 16:00
  Speaker 1: nineteen pandemic proves out that the sector has the ability
• 16:03
  Speaker 1: to innovate and speed, and it's attracted more to the space.
• 16:06
  Speaker 1: So I do think we're going to continue to see
• 16:08
  Speaker 1: increased allocation pushing into healthcare um and and certainly we
• 16:12
  Speaker 1: expect the biotech markets to recover, hopefully within the coming year.
• 16:16
  Speaker 1: So in your report on investing in the healthcare sector,
• 16:20
  Speaker 1: there's I noticed the importance of the CEO and the
• 16:23
  Speaker 1: board of directors for healthcare investors, and we saw a
• 16:27
  Speaker 1: lot of CEOs get you know, primetime media coverage as
• 16:30
  Speaker 1: they were talking about their various approaches to COVID nineteen
• 16:35
  Speaker 1: talk to us about that the importance of the CEO
• 16:36
  Speaker 1: on the board. Sure, happy to, so, I think, you know,
• 16:40
  Speaker 1: it's really important that we don't underestimate the importance of
• 16:43
  Speaker 1: both the CEO but equally the board for healthcare investors.
• 16:47
  Speaker 1: In particular, our survey results indicated that investors much actually
• 16:52
  Speaker 1: trust the board nearly as much as the CEO when
• 16:55
  Speaker 1: making investment decisions. More specifically, of investors surveys um said
• 17:00
  Speaker 1: need to trust the healthcare company's board of directors, and
• 17:02
  Speaker 1: that compares to that say they need to trust the CEO,
• 17:06
  Speaker 1: before either investing or making a recommendation to invest um.
• 17:10
  Speaker 1: I think it. Also Marist mentioned that the trust in
• 17:14
  Speaker 1: a healthcare company before investment also came up as an
• 17:16
  Speaker 1: important factor. The vision and leadership of a CEO and
• 17:20
  Speaker 1: the board were second only to financial performance. All right,
• 17:23
  Speaker 1: good stuff. Shennon Susko managing director Edelman Smithfield out there
• 17:27
  Speaker 1: at with a report on investing in the healthcare system
• 17:31
  Speaker 1: of how investors perceived the healthcare space. Important stuff. Let's
• 17:39
  Speaker 1: talk the housing market pretty I think I can call
• 17:42
  Speaker 1: the peak of the market is when I sold my
• 17:45
  Speaker 1: home and Matt Miller bought his. That is that is
• 17:50
  Speaker 1: the people people have people have died on that hill.
• 17:53
  Speaker 1: I think so, I think so. I don't know. It
• 17:55
  Speaker 1: just seems like they're getting interest rates rising up. And
• 17:57
  Speaker 1: so let's talk the housing market. We can do that
• 17:59
  Speaker 1: with Eric Aidelberg, mortgage backed security strategist for Bloomberg Intelligence.
• 18:03
  Speaker 1: She's been on the street a long time. She knows
• 18:05
  Speaker 1: what she's talking about. She's also a biker. I e
• 18:08
  Speaker 1: bike pretty, so that's how you bike. You e bike
• 18:11
  Speaker 1: e bike. Yes, you have a little electric thing. That's
• 18:14
  Speaker 1: so when you go up hills, you have a little
• 18:15
  Speaker 1: bit of extra help. This is your peloton take. Yeah,
• 18:17
  Speaker 1: that's it. Erica talked to us about the housing market.
• 18:20
  Speaker 1: Here has it rolled over? If so, what does it
• 18:23
  Speaker 1: mean for investors? Well, you know, it certainly seems like
• 18:28
  Speaker 1: existing home sales, new home sales, building starts, home builder
• 18:32
  Speaker 1: inventor homebuilder or confidence. Everything is plummeting at this point.
• 18:36
  Speaker 1: And that's really based on the fact that the affordability
• 18:39
  Speaker 1: for the average homeowner is just deteriorated, with mortgage rates
• 18:43
  Speaker 1: having risen almost doubled this year. Um higher housing prices
• 18:47
  Speaker 1: has to help that case, but really the biggest factor
• 18:49
  Speaker 1: recently has been the rise in mortgage rates, which was
• 18:52
  Speaker 1: what the FED was intending when they started raising rates,
• 18:55
  Speaker 1: so they actually probably right now. See it is a
• 18:58
  Speaker 1: positive that you know, their ta been the breaks in
• 19:00
  Speaker 1: the housing market. Well, how long is that going to last?
• 19:04
  Speaker 1: When we're talking about something like affordability, for example, or
• 19:07
  Speaker 1: for new entrants. I mean, I have friends, Paul, You're
• 19:09
  Speaker 1: not going to believe this. I have friends who actually
• 19:11
  Speaker 1: put down payments on houses during the pandemic and now
• 19:16
  Speaker 1: our property owners and I can't even imagine owning property. Well,
• 19:20
  Speaker 1: the interesting thing is, if you look at historical mortgageates,
• 19:24
  Speaker 1: the two percent rates, three percent rates we saw in
• 19:26
  Speaker 1: the past couple of years during the pandemic. That's really
• 19:28
  Speaker 1: an aberration and if anything, maybe it's for a little
• 19:31
  Speaker 1: too much housing euphoria. Um So, as I said, the
• 19:35
  Speaker 1: FED probably doesn't mind that the housing market is slowing
• 19:38
  Speaker 1: down a little bit. But at this point, affordability is
• 19:43
  Speaker 1: actually below where a lot of people can buy a house.
• 19:47
  Speaker 1: So what's gonna happen is that home prices may have
• 19:50
  Speaker 1: to come down a little bit to adjust. That's what
• 19:52
  Speaker 1: I was thinking, because I hear my feder reserve and
• 19:55
  Speaker 1: they're're gonna get together again this week later this week
• 19:58
  Speaker 1: in Jackson Hole, I hear my fooders are talking about
• 20:01
  Speaker 1: higher rates, you know, and uh, that's doesn't seem to
• 20:05
  Speaker 1: be changing in your term. So if housing affordability is
• 20:08
  Speaker 1: going to improve, prices got to come down. But that
• 20:11
  Speaker 1: doesn't happen overnight, does it. It doesn't happen overnight. Though
• 20:14
  Speaker 1: we did see already existing home prices coming down in
• 20:18
  Speaker 1: the latest report, new home sales have bounced off their highs,
• 20:21
  Speaker 1: and certainly loan applications from the Mortgage Banker Association again
• 20:24
  Speaker 1: this morning showed purchase loans down. That doesn't necessarily mean
• 20:28
  Speaker 1: that all homes are going to fall in price, but
• 20:31
  Speaker 1: it might mean that the homes that people are willing
• 20:33
  Speaker 1: to buy might be lower priced homes. How about just
• 20:36
  Speaker 1: building homes? What's what are the builders saying? Are they
• 20:39
  Speaker 1: still building homes? Because I think one of the issues
• 20:41
  Speaker 1: that I've heard over the years is they're just not
• 20:43
  Speaker 1: building starter homes, entry level homes. They're building the big
• 20:46
  Speaker 1: mcmansion's because that's where the profit margin is for them,
• 20:49
  Speaker 1: but that's not really where the need is. Yeah. Well,
• 20:52
  Speaker 1: and even even in that sector, home builders right now
• 20:55
  Speaker 1: they're they're confidence level. There's an index that measures how
• 20:59
  Speaker 1: many homebuild there's are optimistic versus pessimistic, and when it's
• 21:03
  Speaker 1: below fifty, that means that more home builders are pessimistic. Uh,
• 21:08
  Speaker 1: and it just fell to forty nine for the first time.
• 21:10
  Speaker 1: So they are probably housing starts are actually pulling back,
• 21:14
  Speaker 1: building permits are pulling back. They're probably going to reduce
• 21:17
  Speaker 1: their building altogether. On the bright side, so far, new
• 21:20
  Speaker 1: homes for sale has been going up, but it's the
• 21:23
  Speaker 1: highest it's been actually since the before the Great Financial Crisis,
• 21:26
  Speaker 1: So you know, hopefully at least the current homes you
• 21:30
  Speaker 1: know in the pipeline will helpful some of the void
• 21:32
  Speaker 1: of the inventory gap that we're having. So how do
• 21:35
  Speaker 1: you trade this market? The mortgage market talky olds, talk spreads. It.
• 21:40
  Speaker 1: It's a little bit challenging because right now, given how
• 21:42
  Speaker 1: much mortgage rates have risen, and given how much of
• 21:45
  Speaker 1: the mortgage market was created in the past two years
• 21:48
  Speaker 1: between refinancings and purchases, almost all mortgages outstanding in the
• 21:53
  Speaker 1: mortgage index right now are trading at deep discounts. We're
• 21:56
  Speaker 1: talking like ninety dollar price. And the problem is that
• 21:59
  Speaker 1: if a housing market is slowing, prepayments on those is
• 22:03
  Speaker 1: gonna are going to be very slow, which, for one thing,
• 22:05
  Speaker 1: means that's going to still be the dominant part of
• 22:07
  Speaker 1: the mortgage index because they're not going to pay off,
• 22:10
  Speaker 1: but and it's also the dominant part of the fence holdings,
• 22:12
  Speaker 1: by the way, But it also means that you know,
• 22:15
  Speaker 1: you really have to gauge if the current level of turnover,
• 22:18
  Speaker 1: which is what determines mortgage value for deep discounts, is
• 22:22
  Speaker 1: going to be even slower than models project, and in
• 22:25
  Speaker 1: that case, mortgages might look a little expensive here as
• 22:28
  Speaker 1: in terms of the mortgage index. On the flip side,
• 22:31
  Speaker 1: if you turn that to what's currently being produced what
• 22:33
  Speaker 1: we call the current coupons, slower mortgage turnover and slower
• 22:37
  Speaker 1: mortgage prepaise is actually a good thing for those. So
• 22:40
  Speaker 1: you really have to probably pick your spots right now
• 22:42
  Speaker 1: in the mortgage index. Are we expecting other housing market
• 22:46
  Speaker 1: crash coming off of these usually high levels from the pandemic?
• 22:50
  Speaker 1: I don't see anybody talking about a housing market crash
• 22:55
  Speaker 1: because the amount of equity that most homeowners have in
• 22:59
  Speaker 1: their homes is so high right now given the recent
• 23:01
  Speaker 1: home forrice appreciation, that there's no reason for people to
• 23:05
  Speaker 1: really have foreselling or at least to default on their homes.
• 23:08
  Speaker 1: Um you know, it just could mean that people that
• 23:11
  Speaker 1: that offering prices that some people are trying to get
• 23:14
  Speaker 1: on their homes could well have to come down a
• 23:16
  Speaker 1: little bit absolutely, all right. Bachelors and mathematics from the
• 23:20
  Speaker 1: Universe of Chicago. That does not sound like fun at all.
• 23:23
  Speaker 1: Oh yeah, they always call university University of Chicago the
• 23:27
  Speaker 1: place that fund goes to die. But I had a
• 23:28
  Speaker 1: great experience there and it was fantastic education. Yeah, exactly,
• 23:34
  Speaker 1: everybody I know from Chicago that just wicked smart as
• 23:37
  Speaker 1: like Lisa bron it's another math geek, you know, I mean,
• 23:41
  Speaker 1: I don't know. I guess it's the thing that's just
• 23:43
  Speaker 1: something in the water, something exactly all right. Erica Heidelberg,
• 23:47
  Speaker 1: mortgage backed security Strategies for Bloomberg Intelligent. Thanks so much
• 23:49
  Speaker 1: for joining us here. And I will note she was
• 23:52
  Speaker 1: live and on Bloomberg Interactive Broker Studio. Let's talk about
• 23:58
  Speaker 1: the restaurant business to fast food business. A big name
• 24:01
  Speaker 1: that you're probably not familiar with, h Jolly B Group.
• 24:04
  Speaker 1: We have Mary Beth Dela Cruz, president of Jolly B
• 24:07
  Speaker 1: Group North America. She joins us on the phone. Mary Beth,
• 24:10
  Speaker 1: thanks so much for taking the time. Let's just start
• 24:12
  Speaker 1: with Jolly B Group. What are you guys? Talk to
• 24:15
  Speaker 1: us about your company and your presence in North America. Okay,
• 24:20
  Speaker 1: Hi Paul. First of all, I'd like to thank you
• 24:23
  Speaker 1: for this opportunity to talk about our company. Well. Jolly
• 24:26
  Speaker 1: Be Pots Corporation is the largest and fastest growing restaurant
• 24:31
  Speaker 1: company from Asia. So far, we are president already in
• 24:34
  Speaker 1: certified countries with over eighteen grants under the portfolio. Jolly
• 24:38
  Speaker 1: b is actually our flagship brand, and so far we
• 24:42
  Speaker 1: already have more than one thousand, five hundred locations globally.
• 24:46
  Speaker 1: UM North America has been sagged as UM like, you know,
• 24:49
  Speaker 1: a key growth siller for the business, and our vision
• 24:53
  Speaker 1: is to become one of the top five restaurant companies
• 24:55
  Speaker 1: in the world. Certainly an ambitious vision. I'm curious about
• 24:59
  Speaker 1: how your r pumping up at a time when food
• 25:01
  Speaker 1: prices are extremely high, inflation getting even higher, and I
• 25:05
  Speaker 1: think the willingness for people to spend on restaurants and
• 25:09
  Speaker 1: spend broadly is actually waning. How do you ramp up
• 25:12
  Speaker 1: in that environment? Well, UM, for while there's actually a
• 25:16
  Speaker 1: panse up demand for the brand. Right now, currently we
• 25:19
  Speaker 1: only have eighty four locations in UH North America, and
• 25:23
  Speaker 1: and so we continue to UM, you know, just continue
• 25:26
  Speaker 1: to aggressively expanded the United States. UM. The environment has
• 25:30
  Speaker 1: actually been very UM challenging, but the fact that we
• 25:34
  Speaker 1: are a quick service restaurant actually occurs well in this
• 25:38
  Speaker 1: kind of inflationary environment. I mean, people are actually UM
• 25:43
  Speaker 1: trading down to q s rs, and so we make
• 25:46
  Speaker 1: sure that we continue to offer the value to consumers
• 25:49
  Speaker 1: so that you know, they get to enjoy the product,
• 25:52
  Speaker 1: but at the same time find value in the offerings
• 25:55
  Speaker 1: that we have. Mary Bethew recently opened a store in
• 26:00
  Speaker 1: Times Square in New York. Tell us about that. What
• 26:02
  Speaker 1: are you kind of learning there in the first few days. Well,
• 26:05
  Speaker 1: it's truly exciting for us to finally land a location
• 26:09
  Speaker 1: in Times Square, and Time Square is all about like,
• 26:12
  Speaker 1: you know, the number of people going through it, and
• 26:14
  Speaker 1: you know, just the opportunity of being there and you know,
• 26:17
  Speaker 1: getting the brand exposed and uh, making it accessible to
• 26:21
  Speaker 1: a broader market really is a very good opportunity for us. UM.
• 26:25
  Speaker 1: We have been getting very good feedback on since the
• 26:28
  Speaker 1: opening day. We actually serve more than two thousands, five
• 26:32
  Speaker 1: hundred customers on opening day, which was like, you know,
• 26:34
  Speaker 1: crazy busy, and people are like, you know, welcoming the
• 26:38
  Speaker 1: kind of food and flavors that we offer. We know
• 26:42
  Speaker 1: that flavor or great food does not have any kind
• 26:44
  Speaker 1: of boundaries, and you know the fact that people are
• 26:48
  Speaker 1: open to our flavors right now just really is you know,
• 26:51
  Speaker 1: um putting in that curiosity to our brand a location
• 26:57
  Speaker 1: in Time Square. It's no secret that property prices a
• 26:59
  Speaker 1: rise in across the country. They're extremely expensive in New
• 27:02
  Speaker 1: York and Times Square is some pretty exciting property. Is
• 27:06
  Speaker 1: it paying off in terms of the consumer traffic that
• 27:09
  Speaker 1: you're getting, which, once again, costs are high, property prices
• 27:12
  Speaker 1: are high. Is the traffic making up for those costs? Um?
• 27:17
  Speaker 1: Certainly the traffic is doing or the kind of traffic
• 27:20
  Speaker 1: that we have is better than a lot better than
• 27:23
  Speaker 1: we expected. In fact, like you know, almost the traffic
• 27:27
  Speaker 1: in Time Square has gone to its pre pandemic level. Um.
• 27:31
  Speaker 1: I know that rent prices are really high, but it's
• 27:34
  Speaker 1: an overall investment for the brand. We know that tilS
• 27:37
  Speaker 1: and profits are part of it, but you know, just
• 27:39
  Speaker 1: the location of the business impact far beyond the monetary elements,
• 27:43
  Speaker 1: as it actually elevates our branding to the global stage
• 27:46
  Speaker 1: with other top brands. And you know, the big payoff
• 27:49
  Speaker 1: is actually expanding the visibility to m both tourists and
• 27:53
  Speaker 1: local to like. So, how do you compete in what
• 27:57
  Speaker 1: I would think is a very crowded kind the fast
• 28:00
  Speaker 1: food kind of business at McDonald's, Burger King, all of
• 28:04
  Speaker 1: all the names that we know, how do you guys
• 28:07
  Speaker 1: plan to compete here in North America? Well, our menu,
• 28:11
  Speaker 1: for one, is the one unique thing that we offer
• 28:14
  Speaker 1: to help us different shape ourselves from all the other
• 28:17
  Speaker 1: players in the market. Um, if you look at our menu,
• 28:20
  Speaker 1: we actually have like a unique breath of products, okay,
• 28:23
  Speaker 1: and flavors that you know, I'm not offering the other
• 28:26
  Speaker 1: fast food places case in poite familiar products like pie. Um,
• 28:31
  Speaker 1: you know you have apple pie, but you know, um,
• 28:33
  Speaker 1: we offer a pitch mango pie, which is our own
• 28:36
  Speaker 1: take off, like you know, apply that's made of pitches
• 28:39
  Speaker 1: and real Filippine mangoes. Uh in like you know, a flaky,
• 28:42
  Speaker 1: crusty bun, and that is what makes it different. We
• 28:45
  Speaker 1: also offer other products that are familiar to the market,
• 28:48
  Speaker 1: but we put in our own flavors that helped differentiate
• 28:52
  Speaker 1: it from all the other players. You know that all
• 28:54
  Speaker 1: sounds great. I'm curious about what you're what you're worried about,
• 28:56
  Speaker 1: what keeps you up at night? Just given the wall
• 28:59
  Speaker 1: of worry that would feel like we talked about every day,
• 29:03
  Speaker 1: you know, just the uncertainty of the economic environments that
• 29:07
  Speaker 1: keeps us, like, you know, really up at night. Um.
• 29:10
  Speaker 1: You know, our procurement departments, our real estate departments, are
• 29:13
  Speaker 1: store development departments. We've all been faced with, like you know,
• 29:16
  Speaker 1: increasing costs, costs, and and so we just have to
• 29:20
  Speaker 1: be you know, very agile when it comes to coming
• 29:23
  Speaker 1: up with alternative plants. Um, you know, if US stock
• 29:26
  Speaker 1: is coming or like you know, uh, you know we'll
• 29:29
  Speaker 1: be able to open a restaurant, those are like you know,
• 29:31
  Speaker 1: a lot of variables. But you know, through the pandemic,
• 29:34
  Speaker 1: we have learned how to peeve us and you know,
• 29:37
  Speaker 1: how to adjust. We've made alternative plans to make sure
• 29:40
  Speaker 1: that you know, if plann they didn't work, then we
• 29:42
  Speaker 1: have a plan D or C to uh to work with.
• 29:45
  Speaker 1: So what does that look like? Have us a little
• 29:47
  Speaker 1: bit more detail on how you prepare for an inevitable
• 29:49
  Speaker 1: recession for example? Um, First of all, we work very
• 29:54
  Speaker 1: closely with our suppliers and vendors. I mean we have
• 29:58
  Speaker 1: a lot of vendor school have worked with us already
• 30:01
  Speaker 1: for the past ten to fifteen years, and we continue
• 30:04
  Speaker 1: to nurture that kind of relationship with them. UM. So
• 30:07
  Speaker 1: that kind of uh you know, uh relationship with the
• 30:11
  Speaker 1: vendors helps us keep ahead of the curve. We know
• 30:14
  Speaker 1: what costs are about to commerce or any price in
• 30:17
  Speaker 1: crisis that's coming, uh, and then we plan for it. Um.
• 30:20
  Speaker 1: We do a lot of research and development work. Knowing
• 30:24
  Speaker 1: that there are supply issues as well. We make sure
• 30:27
  Speaker 1: that there are alternative raw materials that you know, we
• 30:29
  Speaker 1: can go to just so to ensure that there is
• 30:32
  Speaker 1: business continuity and and so there is a plan to
• 30:35
  Speaker 1: a plan in order for us to you know, just
• 30:38
  Speaker 1: really continue to uh go ahead with our with our
• 30:42
  Speaker 1: aggressive expansion. All right, Mary Beth, thank you so much
• 30:45
  Speaker 1: for joining us getting us up to date on all
• 30:47
  Speaker 1: things for the Jolly B Group. Very Beth de la Cruz,
• 30:50
  Speaker 1: President of the Jolly B Group North America. Thanks for
• 30:55
  Speaker 1: listening to the Bloomberg Markets podcast. You can subscribe and
• 30:59
  Speaker 1: listen to interviews, Apple Podcasts, or whatever podcast platform you prefer.
• 31:04
  Speaker 1: I'm Matt Miller. I'm on Twitter at Matt Miller three,
• 31:08
  Speaker 1: and I Fall Sweeney I'm on Twitter at pt Sweeney.
• 31:10
  Speaker 1: Before the podcast, you can always catch us worldwide at
• 31:13
  Speaker 1: Bloomberg Radio.