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Interview With Bill McBride: Masters in Business (Audio) · Masters in Business

• 0:03
  Speaker 1: This is Masters in Business with Barry Ridholes on Bloomberg Radio.
• 0:08
  Speaker 1: This week on the podcast, I have an extra very
• 0:11
  Speaker 1: special guest. His name is Bill McBride. He is the
• 0:15
  Speaker 1: founder and runs the website Calculated Risk uh one of,
• 0:21
  Speaker 1: if not the best economic blogs out there, according to
• 0:25
  Speaker 1: pretty much everybody. So this was not my typical podcast
• 0:30
  Speaker 1: in the regular interview when I'm supposed to be doing
• 0:34
  Speaker 1: is asking questions and listening to what the guest responds,
• 0:38
  Speaker 1: and asking follow up questions and going uh huh uh huh. Yes.
• 0:42
  Speaker 1: But here's the thing. I know Bill since the first
• 0:48
  Speaker 1: day he started blogging, we were exchanging emails. I was
• 0:52
  Speaker 1: linking to him. I could I think I could honestly
• 0:56
  Speaker 1: say I linked to Calculator Risks before anybody had an
• 1:00
  Speaker 1: idea who they were. And um, I have been using
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  Speaker 1: his research and his charts for the better part of
• 1:07
  Speaker 1: I don't know, ten eleven years, and we have always
• 1:12
  Speaker 1: had an email relationship. I think we had a couple
• 1:16
  Speaker 1: of telephone conversations, but I had never met Bill before
• 1:21
  Speaker 1: until the night before we recorded this podcast. We went
• 1:25
  Speaker 1: to dinner and I purposefully, with with eight people, I
• 1:29
  Speaker 1: purposely did not speak to Bill and told him, I'm
• 1:32
  Speaker 1: not going to talk to you until the two of
• 1:34
  Speaker 1: us are in the studio, And so this is supposed
• 1:37
  Speaker 1: to be an interview, but it's not. It's it's supposed
• 1:41
  Speaker 1: to be a podcast Q and A. But it really
• 1:47
  Speaker 1: is a genuine conversation between two people who know each
• 1:51
  Speaker 1: other for a decade and really have never sat down
• 1:54
  Speaker 1: and had a conversation before. So if you're looking for
• 1:57
  Speaker 1: the usual Q and A that that I try and
• 2:00
  Speaker 1: provide each week on the show, this isn't it. This
• 2:04
  Speaker 1: is me and Bill just shooting the breeze. It's two
• 2:06
  Speaker 1: guys who know and respect each other for a long time,
• 2:10
  Speaker 1: and I found it illuminating and fascinating. Um, there's probably
• 2:15
  Speaker 1: too much of me and it relative to what should be,
• 2:18
  Speaker 1: so I'll apologize for that in advance. But hey, if
• 2:22
  Speaker 1: you've ever known someone for what seems like forever but
• 2:25
  Speaker 1: never met them, when you finally get to meet them,
• 2:28
  Speaker 1: there's gonna be a lot of back and forth, and
• 2:31
  Speaker 1: truth be told, I thought the conversation was fascinating. I'm biased,
• 2:36
  Speaker 1: So let me stop babbling because you'll hear enough of
• 2:39
  Speaker 1: that throughout the rest of the interview with no further
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  Speaker 1: Ado my two hour bull session with Bill McBride of
• 2:47
  Speaker 1: Calculated Risk. This is Masters in Business with Barry Ridholts
• 2:55
  Speaker 1: on Bloomberg Radio. I have a very special guest here
• 2:58
  Speaker 1: is somebody I have known for quite a long time.
• 3:02
  Speaker 1: Let me give you a quick background on Bill McBride,
• 3:05
  Speaker 1: who is the proprietor of Calculated Risk. He launched the
• 3:10
  Speaker 1: website in two thousand and five. The idea behind it
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  Speaker 1: let's put simple opinion free analysis and charts about economic
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  Speaker 1: data out in public where everyone can easily access it
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  Speaker 1: and understand it. Uh. It has been called the best
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  Speaker 1: of the economic blogs by such luminaries as Paul Krogman,
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  Speaker 1: The Wall Street Journal, Business Week, Time. Pretty much everybody
• 3:37
  Speaker 1: puts the blog in its list of top twenty, or
• 3:39
  Speaker 1: Top fifty, or top one hundred or top ten blogs.
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  Speaker 1: Bill's background is uh. He has an NBA from University
• 3:48
  Speaker 1: of California, Irvine, with a background in management, finance, and economics.
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  Speaker 1: And he had been running a public company or involved
• 3:57
  Speaker 1: in a public company in the he retired and was
• 4:02
  Speaker 1: looking for something to do. UM. Bill McBride, welcome to
• 4:05
  Speaker 1: bloom Bark. Thanks for having me, Barry. Let's start with
• 4:08
  Speaker 1: your background so you're you're running a public company. You're
• 4:11
  Speaker 1: one of the co founders of a medical devices company,
• 4:14
  Speaker 1: is that right? That's correct. Yeah, I was the head
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  Speaker 1: of R and D. So so tell us about this
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  Speaker 1: what what was this company about? Ultimately it got sold
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  Speaker 1: to a larger company. Yeah. Where we started in the eighties,
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  Speaker 1: we were designing cardiac telemetry, which is it's it's like
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  Speaker 1: a little box that you wear on you in the
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  Speaker 1: hospital that connects the picks up your e c G
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  Speaker 1: and sends it to a central monitor in the hospital.
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  Speaker 1: It's for in hospital use. Did you have a background
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  Speaker 1: in in medicine? I had. I had worked previously in
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  Speaker 1: a telecommunications company, so it was more technology than medical. Yes,
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  Speaker 1: and my mindergraduate grease and chemistry, so you know, it's
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  Speaker 1: kind of a mix of things. And so what we
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  Speaker 1: did is we um we kind of revolutionized that industry
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  Speaker 1: because in the eighties was when everybody was making the
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  Speaker 1: transition to digital in a out of different areas, and
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  Speaker 1: we used some of the cell phone technology to make
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  Speaker 1: the first digital cardiac telemetry. So so when someone gets
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  Speaker 1: an e KG in a hospital or the monitoring UM, well,
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  Speaker 1: you know, if you're in particular awards in the hospital, um,
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  Speaker 1: postcardiac surgery. If they once they like to take you
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  Speaker 1: off the bedside monitor and put you on a little
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  Speaker 1: telemetry unit so you can get up and walk around
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  Speaker 1: and still be monitored. And so that's the use for it.
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  Speaker 1: There's other We also pick up other parameters in addition
• 5:32
  Speaker 1: to E c G and then we sent it back
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  Speaker 1: to a central monitor with With that, then they can
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  Speaker 1: have a nurses station, they can monitor the people walking
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  Speaker 1: around the hospital. So what happened with this company in
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  Speaker 1: the nineties, So well, we we we grew very quickly.
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  Speaker 1: We we designed telemetry for most of the major medical
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  Speaker 1: device companies. They started using ours under their own name,
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  Speaker 1: and then uh we took it public in nine and
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  Speaker 1: then sold it to ge Medical. And at that point
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  Speaker 1: you are gainfully unemployed, that's correct, as one of the founders.
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  Speaker 1: So the site launches in oh five. What led you
• 6:09
  Speaker 1: to say, I have an idea, let's analyze economic data. Well,
• 6:13
  Speaker 1: economics is always a hobby for me, and uh I
• 6:16
  Speaker 1: specialized that and when I got my m b A,
• 6:18
  Speaker 1: that was my focus. Um, you know I in the
• 6:22
  Speaker 1: early two thousands, I had a few things that I
• 6:24
  Speaker 1: was doing in two thousand four. I remember thinking, what
• 6:27
  Speaker 1: is a blog? And I think I stumbled across yours
• 6:29
  Speaker 1: said the big picture. Uh I if you remember Angry
• 6:32
  Speaker 1: Bear when it was rich the three PhD economists, and
• 6:34
  Speaker 1: so that kind of inspired me. I said, well, you
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  Speaker 1: know what to really understand that, I'll just do one.
• 6:38
  Speaker 1: So I'll start a blog, but I'm not going to
• 6:40
  Speaker 1: write it about politics like most of the blogs I saw,
• 6:44
  Speaker 1: And what I want to focus on is housing because
• 6:48
  Speaker 1: of what I was seeing in southern California had just
• 6:50
  Speaker 1: gone off the rail. Yeah. You know, I was at
• 6:53
  Speaker 1: the gym one day and I was talking to this
• 6:55
  Speaker 1: attractive young lady who was a secretary for the Hurly
• 7:00
  Speaker 1: T shirt company. Oh sure, I know exact stuff. And
• 7:05
  Speaker 1: and uh, one day she came in and she goes, Bill,
• 7:08
  Speaker 1: I just bought a condo. Now this condo she bought,
• 7:12
  Speaker 1: she bought for four hundred and some thousand dollars. And
• 7:15
  Speaker 1: she had already told me she was making. She had
• 7:16
  Speaker 1: moved up. This is No. Four, This is a No. Four,
• 7:19
  Speaker 1: and she was she was probably making. You know, she
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  Speaker 1: had had gotten up to about forty a year and income,
• 7:24
  Speaker 1: so forget the old rule of two times tend to
• 7:29
  Speaker 1: tend to one with no money down. And so after
• 7:32
  Speaker 1: she told me the story, I said, how can you
• 7:34
  Speaker 1: afford that? When she started telling me about the teaser
• 7:36
  Speaker 1: rate she had for the first year or two, and
• 7:38
  Speaker 1: I said, well, what happens when that that comes do?
• 7:41
  Speaker 1: And she goes, well, I'll just either you know, might
• 7:44
  Speaker 1: either I will have more income, or I'll sell the unit.
• 7:47
  Speaker 1: And I thought, well, she if this is happening all
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  Speaker 1: over the place, there's gonna be no one to sell
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  Speaker 1: it to. So I went home that day and started calling,
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  Speaker 1: you know, some mortgage bankers I knew, and I said,
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  Speaker 1: is this really possible? Oh yeah, you know, you don't
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  Speaker 1: have to have you know anything, you know in um
• 8:00
  Speaker 1: you know the ninja loans, no income, no job, you know.
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  Speaker 1: She she was, yeah, no, acid she was. She was
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  Speaker 1: a great client, she had a job. Okay, So so
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  Speaker 1: you launched the blog and you decided to do something
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  Speaker 1: a little different than most blogs. Calculated Risk is fairly
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  Speaker 1: opinion free every now and then, and it's much more
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  Speaker 1: rare than the average blog. You'll come out and say
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  Speaker 1: this is my opinion about X y Z. I mean,
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  Speaker 1: that's like an annual event. Most of the time, you're
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  Speaker 1: just saying, here's the data, Here's what it means. Why
• 8:39
  Speaker 1: get why do you know? I do slip in a
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  Speaker 1: sentence or two here and there about what I think
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  Speaker 1: is happening with that data. And then every once in
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  Speaker 1: a while, I will, like you're saying, right, a overview
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  Speaker 1: piece of where I think we are in the economy
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  Speaker 1: and where we're going. You know, back in in two
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  Speaker 1: thousand five, one of the things I focused on was, uh,
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  Speaker 1: I was actually calling up regulators and asking them why
• 9:00
  Speaker 1: they're not doing anything? So I I, you know, I
• 9:03
  Speaker 1: and I would write about how which either regulators are
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  Speaker 1: not doing their job and here's why I'm Barry Ridolts.
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  Speaker 1: You're listening to Masters in Business on Bloomberg Radio. My
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  Speaker 1: guests this week is Bill McBride. He is the founder
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  Speaker 1: and chief author of the highly regarded economics blog Calculated Risk.
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  Speaker 1: Let's jump right back into this. You've developed an expertise
• 9:27
  Speaker 1: in in mortgages and housing and real estate economics. Was
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  Speaker 1: that something that you had done in a previous life
• 9:35
  Speaker 1: or is it just you gravitated it towards that because
• 9:38
  Speaker 1: you were in southern California and real estate in the
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  Speaker 1: early two thousands had just gone insane in California. Well,
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  Speaker 1: it really is a combination of things. My dad was
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  Speaker 1: in real estate, and he was and he was a builder.
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  Speaker 1: My mother was a real estate agent. So it was
• 9:51
  Speaker 1: always supper time conversation. Did you have that sort of
• 9:56
  Speaker 1: I at least saw what he was doing and chatted
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  Speaker 1: with him about it. Uh, you know, after I started
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  Speaker 1: my career, I was more science and technology oriented, but
• 10:05
  Speaker 1: I always have been interested in real estate. And so
• 10:08
  Speaker 1: you know, I mean I and and you know, I
• 10:10
  Speaker 1: had that a little bit of a background of what
• 10:12
  Speaker 1: they went through. And I saw my dad go through
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  Speaker 1: the ups and downs. Where was he a builder? What
• 10:17
  Speaker 1: part of the country in down to San Diego? Ah,
• 10:19
  Speaker 1: So that was really an interesting and fast growing But
• 10:22
  Speaker 1: your dad was in the Navy. There's a huge naval
• 10:26
  Speaker 1: base since in fact, I think that's how we ended
• 10:28
  Speaker 1: up there. That makes sense, Cornado Island in that whole area,
• 10:31
  Speaker 1: So we went from the Navy to San Diego to
• 10:34
  Speaker 1: San Diego and housing. So post war that had to
• 10:38
  Speaker 1: be just a huge boom over there. Yeah, san Diego
• 10:41
  Speaker 1: was booming the whole time. I you know, when we
• 10:43
  Speaker 1: moved there when I was five, and so you know,
• 10:45
  Speaker 1: I was there until I went away to college. It
• 10:47
  Speaker 1: was boom time back in the it was the sixties
• 10:50
  Speaker 1: and seventies and and but even then there were big
• 10:55
  Speaker 1: waves cycles. Yes, you could you could see the ups
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  Speaker 1: and downs. There were times when my dad was clearly
• 11:00
  Speaker 1: struggling financially, you know, elctially, my mom was a elementary
• 11:04
  Speaker 1: school principle, so she had a good, steady income. Uh
• 11:07
  Speaker 1: so they could offset each other. So so, how do
• 11:10
  Speaker 1: you respond to the comment that was everywhere back in
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  Speaker 1: the early two thousand's, you know, we've never had a
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  Speaker 1: downturn in the price of housing in the United States. Well, well,
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  Speaker 1: first of all, that's not true. It's utterly false. There
• 11:24
  Speaker 1: have been repeated examples all the way back to the
• 11:27
  Speaker 1: Great Suppression. You know. One of the things is if
• 11:29
  Speaker 1: if you remember, I'm sure you do, back in two
• 11:31
  Speaker 1: thousand and five, is the data wasn't very good or
• 11:34
  Speaker 1: very available, especially on house prices. You know, we we
• 11:37
  Speaker 1: had the what's now the f h f A house
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  Speaker 1: pricing decks just based on the Fannie and Freddie mortgages.
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  Speaker 1: But we didn't have Case Shiller publicly available, or core
• 11:46
  Speaker 1: Logic public or several of the other you know, Zilo,
• 11:49
  Speaker 1: that was just that wasn't even somebody's thought yet, you know.
• 11:51
  Speaker 1: And so now we have so much better data, and
• 11:54
  Speaker 1: some of those guys case Shiller and core Logic have
• 11:57
  Speaker 1: published their data back to previous times, and you can't
• 12:01
  Speaker 1: see those ups and downs. And so the people that
• 12:03
  Speaker 1: were saying there were no ups and downs, there was
• 12:05
  Speaker 1: no real good data for them to make that argument.
• 12:08
  Speaker 1: And and obviously they had never lived in southern California,
• 12:10
  Speaker 1: because I had seen the ups and downs in the
• 12:12
  Speaker 1: house prices absolutely and and like there was a there
• 12:15
  Speaker 1: was a real boom in the eighties. House prices peaked
• 12:18
  Speaker 1: around nineteen nine in my area, and they slid all
• 12:21
  Speaker 1: the way to the same exact experience in New York
• 12:26
  Speaker 1: seven crash shakes Wall Street, a little bit alan Greenspan
• 12:30
  Speaker 1: cuts rates. You have a little bit of a surgeon
• 12:33
  Speaker 1: in real estate throughout the eighties, and then it rolled over.
• 12:36
  Speaker 1: If you bought a condo or co op in New
• 12:38
  Speaker 1: York in nine, you did not get back to break
• 12:42
  Speaker 1: even on that purchase price until plus or minus. And
• 12:46
  Speaker 1: you can see in the charts. But during the Great Depression,
• 12:50
  Speaker 1: we know real estate prices of course plummeted, and I
• 12:53
  Speaker 1: think it was someone at Columbia, I'm not positive did
• 12:55
  Speaker 1: a study on Manhattan real estate and they estimated that
• 12:59
  Speaker 1: real estate price has dropped sev during the Great Depression.
• 13:03
  Speaker 1: I mean, how do you just shrug that off in
• 13:05
  Speaker 1: your models? It's it's impossible. I never understood why people
• 13:09
  Speaker 1: say real estate prices I never go down. I never
• 13:11
  Speaker 1: understood it because there's there's plenty of evidence. Even though
• 13:14
  Speaker 1: we don't have the data that we have today, there
• 13:16
  Speaker 1: was still plenty of evidence. So so let's talk about
• 13:19
  Speaker 1: I've I've been using the charts and the information you
• 13:23
  Speaker 1: put on cafe thank you for for how long? I mean,
• 13:26
  Speaker 1: it's got to be at least a decade. And I
• 13:31
  Speaker 1: got into a fight with the Wall Street Journal about
• 13:35
  Speaker 1: it was I want to say, oh six or oh seven,
• 13:38
  Speaker 1: and they were doing the look real estate prices are improving,
• 13:42
  Speaker 1: and the response was, well, no, it's June. They oh,
• 13:46
  Speaker 1: you're looking at it month over month. You have to
• 13:48
  Speaker 1: look at it year over year. So I grabbed and
• 13:50
  Speaker 1: I brought a copy of it. I'll put it up
• 13:52
  Speaker 1: on the site. I grabbed your existing home sales year
• 13:56
  Speaker 1: over year by month that shows the same seasonality it right,
• 14:02
  Speaker 1: you know it it's at its nata in December and January,
• 14:06
  Speaker 1: it slowly rises throughout the spring, peeks later in the
• 14:09
  Speaker 1: fall and rolls off. You can't just look at June
• 14:13
  Speaker 1: versus February and say, oh, housing is fine. But that's
• 14:16
  Speaker 1: what a lot of media was doing. Yeah, you know,
• 14:18
  Speaker 1: I think that was one of the issues back in
• 14:20
  Speaker 1: two thousand and five was the media. I don't think
• 14:23
  Speaker 1: they really knew how to report housing. There was some
• 14:26
  Speaker 1: but to say that people missed it completely is wrong.
• 14:29
  Speaker 1: There were some excellent articles, for sure, and and there
• 14:31
  Speaker 1: were some award winning articles. And and give us David Strettfield,
• 14:36
  Speaker 1: who was at the l A Times at the time,
• 14:38
  Speaker 1: now he's in New York Times. He won awards for
• 14:40
  Speaker 1: his housing articles. They were excellent. And uh, you know,
• 14:44
  Speaker 1: I mean so so there were there were plenty of
• 14:46
  Speaker 1: good articles, but I think they got lost in the
• 14:48
  Speaker 1: bad articles. And and you know, and you know how
• 14:50
  Speaker 1: the balance media works in classic false equivalent. If you
• 14:54
  Speaker 1: if you, if you talk to somebody who was very
• 14:57
  Speaker 1: concerned about housing, it could make a good argument on
• 14:59
  Speaker 1: the making mortgages. They would always go talk to somebody
• 15:03
  Speaker 1: who was impressive background who would say they own house
• 15:06
  Speaker 1: prices never go down. Uh, there's nothing to worry about,
• 15:09
  Speaker 1: you know. And and so I think for the average
• 15:12
  Speaker 1: person who was getting their information that way, it was
• 15:15
  Speaker 1: difficult to see that there was a problem. Now. I
• 15:17
  Speaker 1: run into people all the time to say, you know,
• 15:20
  Speaker 1: I thought there was something really wrong. So most people
• 15:23
  Speaker 1: in the back of their minds, especially people in areas
• 15:25
  Speaker 1: like you know, southern California, Florida, you know, Nevada, they
• 15:30
  Speaker 1: were thinking, I think a lot of people are going
• 15:33
  Speaker 1: there's something wrong here. How much of that is hindsight
• 15:36
  Speaker 1: bias where but by the way, it could be. You
• 15:38
  Speaker 1: recall the number of people legitimately in prints in a
• 15:44
  Speaker 1: verifiable way warning about housing prices. There were a handful
• 15:48
  Speaker 1: of people, a handful of us. You were one, well,
• 15:51
  Speaker 1: you me, you know, I, I know a few other
• 15:53
  Speaker 1: people they were doing it. But now every person I met, Oh,
• 15:56
  Speaker 1: of course I knew the housing crisis was about to collapse. Well, well,
• 16:00
  Speaker 1: I just I just looked at certain data and said,
• 16:02
  Speaker 1: this ratio which has been consistent home price to meeting income,
• 16:07
  Speaker 1: the cost of renting versus cost of owning. You covered
• 16:10
  Speaker 1: a ton of this stuff how how frustrating was it
• 16:14
  Speaker 1: when you saw the train wreck coming, but you couldn't
• 16:17
  Speaker 1: really convince the average person that hey, something wicked this
• 16:20
  Speaker 1: way comes. Well, you know, I I was really focused
• 16:24
  Speaker 1: on trying to to to get the regulators to pay
• 16:27
  Speaker 1: attention to it, and and that was a very frustrating
• 16:30
  Speaker 1: process because they because they were paying attention to it,
• 16:34
  Speaker 1: but they couldn't do anything. Their hands were tied. And uh,
• 16:37
  Speaker 1: you know, the the regular person. Uh, you know, I
• 16:39
  Speaker 1: started my blog, I was writing. I was writing for
• 16:42
  Speaker 1: friends and relatives, you know, so I was mostly just saying, hey,
• 16:46
  Speaker 1: you know, if they asked me, I would tell them
• 16:48
  Speaker 1: don't buy please, don't buy anything. You know. Uh you
• 16:53
  Speaker 1: know it's but you know, you put a blog out
• 16:55
  Speaker 1: there in public, and so all of a sudden people
• 16:56
  Speaker 1: start reading it. I'm very hults you're listening to mass
• 17:00
  Speaker 1: was in Business on Bloomberg Radio. My special guest this
• 17:03
  Speaker 1: week is Bill McBride. He is the founder of the
• 17:06
  Speaker 1: Calculated Risk website, lauded by everyone from Business Week, Wall
• 17:11
  Speaker 1: Street Journal, uh New York Times as the single best
• 17:14
  Speaker 1: economics blog there is. Um I put out a request
• 17:19
  Speaker 1: on the Big Picture as well as on Twitter uh,
• 17:22
  Speaker 1: if any of your readers had questions for you, and
• 17:25
  Speaker 1: I got a long list of stuff, let's let's jump
• 17:27
  Speaker 1: into some of them. I think some of these are
• 17:29
  Speaker 1: really interesting. First question, you're one of the few bloggers
• 17:34
  Speaker 1: who still maintains a comments section, and it's a mess. Sorry,
• 17:38
  Speaker 1: but I think that's honest. Why maintain comments? That's a
• 17:43
  Speaker 1: great question. And and uh, you know, comments early in
• 17:48
  Speaker 1: the blog were unbelievably outstanding, amazing. As a matter of fact,
• 17:53
  Speaker 1: I thought the comments, who are one of the key
• 17:55
  Speaker 1: elements to the blog. The comments turned more into just
• 17:59
  Speaker 1: a at session about unrelated information, off topic, trolls, spam,
• 18:06
  Speaker 1: it's gone off the right. Yeah, well you know, NPR,
• 18:09
  Speaker 1: by the way, just killed their common sense. You know.
• 18:12
  Speaker 1: We we do have a comment section where people have
• 18:15
  Speaker 1: to register so that you can't just get the drive
• 18:19
  Speaker 1: by commentors, so the trolling goes down, but the it's
• 18:24
  Speaker 1: it's basically off topic most of the time. BuzzFeed does
• 18:27
  Speaker 1: this thing now where you can comment, but only if
• 18:30
  Speaker 1: you register through Facebook, which is your real identity, so
• 18:34
  Speaker 1: you lose a lot of the really off the change.
• 18:37
  Speaker 1: But the racist nonsense, yeah, you know, the they and
• 18:41
  Speaker 1: we don't have that for the most part. And you know,
• 18:44
  Speaker 1: those people that are racists are bigoted in some way.
• 18:47
  Speaker 1: We've tried to band but the I keep it because
• 18:51
  Speaker 1: a lot of the old timers are still there, but
• 18:54
  Speaker 1: they chat more than they more than the economic content,
• 18:57
  Speaker 1: and they're kind of friends so they so, you know,
• 18:59
  Speaker 1: I just I leave it for them. If people don't
• 19:02
  Speaker 1: like the comments, then don't don't participation, don't read the
• 19:05
  Speaker 1: comments exactly. That's my view. And I if there's you know,
• 19:08
  Speaker 1: if there's ever you know, the anti semetic things I
• 19:11
  Speaker 1: banned so many people, well, it gets to be a
• 19:14
  Speaker 1: giant curation time sockets complicated. I had some people write
• 19:19
  Speaker 1: me when I killed comments on the Big Picture, which
• 19:21
  Speaker 1: is years ago. Um, well thanks for the site, but
• 19:26
  Speaker 1: I'm done. If you don't have comments, you know, you
• 19:28
  Speaker 1: understand how many hours a week it is to maintain
• 19:31
  Speaker 1: the comments, and you guys don't see the really horrific comments,
• 19:35
  Speaker 1: and it just got to be a total dreg But
• 19:38
  Speaker 1: that was a lost era. I thought the comments were
• 19:40
  Speaker 1: fantastic on you could read a really interesting article and
• 19:44
  Speaker 1: then spend a half hour reading some really smart, insightful
• 19:48
  Speaker 1: feedback on that audit there. Well, you know. I'm sure
• 19:51
  Speaker 1: some of your commenters are asked you any many of
• 19:53
  Speaker 1: mine were, Uh, one of the one of the I'm
• 19:56
  Speaker 1: sure we're going to talk about my code blogger, Tanta.
• 19:58
  Speaker 1: At some point I met Tanta through the comments. Yeah.
• 20:02
  Speaker 1: She she showed up and was commenting, and every time
• 20:06
  Speaker 1: she would either correct something I had said. If I
• 20:08
  Speaker 1: said something about the mortgage industry, and I would call
• 20:11
  Speaker 1: it my mortgage banker friends, and they go, oh, yeah,
• 20:13
  Speaker 1: she's right, all right, So I instantly corrected on my
• 20:16
  Speaker 1: blog and I'd credit Tanta and and uh, or she
• 20:20
  Speaker 1: would say, hey, yeah, that's you know. She she was
• 20:22
  Speaker 1: really sharp, she knew everything, and she was very quick witted.
• 20:25
  Speaker 1: And so that's how I actually got to know my
• 20:27
  Speaker 1: code blogger. Through the comments. That's where I met her.
• 20:30
  Speaker 1: So so let's talk about that she starts writing for you,
• 20:33
  Speaker 1: and well she this is what happened, and she commented
• 20:37
  Speaker 1: a lot in two thousand five. In two thousand six,
• 20:40
  Speaker 1: she disappeared from the comments. About six months later, she
• 20:44
  Speaker 1: reappeared and she told me that she had been diagnosed
• 20:49
  Speaker 1: with stage four ovarian cancer, had had left her job, uh,
• 20:54
  Speaker 1: and she had stopped commenting because she wasn't able to
• 20:56
  Speaker 1: and she didn't even think she was going to live
• 20:59
  Speaker 1: and so uh, I then asked her, well, why don't
• 21:02
  Speaker 1: you come and write for the blog if you're not working,
• 21:04
  Speaker 1: because she's working in the mortgage industry, and uh, and
• 21:08
  Speaker 1: it took me a little convincing, but she started in
• 21:10
  Speaker 1: I think her first post was in December two thousand six,
• 21:14
  Speaker 1: and almost two years before she passed away. So she
• 21:17
  Speaker 1: was a regular on the side for a while, but
• 21:19
  Speaker 1: and ultimately succumbed to the illness. Yes, but you know,
• 21:22
  Speaker 1: she was stunning before she started writing for the blog.
• 21:26
  Speaker 1: I probably wrote longer pieces. And then when she showed up,
• 21:31
  Speaker 1: she undergraduate Greems in literature. Her pieces were brilliant. Uh,
• 21:36
  Speaker 1: they were they they One of her goals, she said,
• 21:38
  Speaker 1: was to make blogs entries could be long and still
• 21:41
  Speaker 1: well read. And she accomplished. Uh. She would explain mortgage
• 21:46
  Speaker 1: uh issues in complete detail and all that stuff still
• 21:49
  Speaker 1: on the blog. Um. And you know, people from the
• 21:52
  Speaker 1: Federal Reserve were crediting her and in papers they were
• 21:55
  Speaker 1: writing because they were learning from her too. And you know,
• 21:59
  Speaker 1: she was real mortgage banker. She knew the banking, the
• 22:02
  Speaker 1: mortgage banking industry inside and out. You know, she was
• 22:05
  Speaker 1: absolutely terrified and and and she was scared because they
• 22:09
  Speaker 1: were they were all the mortgage industry was pulling back
• 22:12
  Speaker 1: on the risk management sign and his money to be made, yeah,
• 22:16
  Speaker 1: and worry about risk later, oh yeah. And and and you know,
• 22:18
  Speaker 1: and in the in the whole industry changed. They went
• 22:21
  Speaker 1: away from the three c's. You know, where you're you're
• 22:24
  Speaker 1: looking at credit and collateral and capacity to pay. And
• 22:27
  Speaker 1: we just went to FICO scores. I'm Barry Ridhults. You're
• 22:30
  Speaker 1: listening to Masters in Business on Bloomberg Radio. My guest
• 22:34
  Speaker 1: today is Bill McBride. He is the founder and proprietor
• 22:37
  Speaker 1: of the highly rated Calculated Risk Economics blog, well regarded
• 22:43
  Speaker 1: by many people. You don't have a PhD in economics,
• 22:47
  Speaker 1: you don't have a you have an m b A.
• 22:50
  Speaker 1: How did you go from essentially a medical devices h
• 22:55
  Speaker 1: company founder to one of the leading lights in in
• 22:59
  Speaker 1: financial economics writing well, I don't I don't know if
• 23:03
  Speaker 1: I'm a leading light, but but it's very nice all
• 23:05
  Speaker 1: those things people have said about me. But you know,
• 23:07
  Speaker 1: I I I've had always had an interest in economics.
• 23:10
  Speaker 1: I've always had an interest in housing. I study hard.
• 23:14
  Speaker 1: I I dig hard to try to understand the data.
• 23:18
  Speaker 1: And uh, and I've a lot I've worked with a
• 23:21
  Speaker 1: lot of economists since I started the blog, a lot
• 23:24
  Speaker 1: of economic academic economists that that I call friends. Now
• 23:28
  Speaker 1: give us some names, Jim Hamilton's down fantastic, Mark Toma
• 23:32
  Speaker 1: up in North another one, Tim Dewey. Sure, so you're
• 23:37
  Speaker 1: you're just named my starting lineup of that economists, right, Yeah? Yeah,
• 23:41
  Speaker 1: I mean so so, uh, you know those guys I
• 23:43
  Speaker 1: chat with, I chat with several of them all the time,
• 23:47
  Speaker 1: and uh, and you know, it's it's so it helps
• 23:51
  Speaker 1: me focus on what on what's important in economics and
• 23:54
  Speaker 1: how to understand it. And and I think they liked
• 23:57
  Speaker 1: that I really dig through the data and and so
• 24:00
  Speaker 1: it's kind of a mutual thing. So, so let's talk
• 24:03
  Speaker 1: a little bit about the state of the U. S. Economy.
• 24:05
  Speaker 1: I'm going to throw some things out that I hear
• 24:08
  Speaker 1: and see and read online that I question pretty um significantly.
• 24:15
  Speaker 1: And I want to just get your your feedback on
• 24:17
  Speaker 1: each of these. Um. You know, the recession never ended,
• 24:21
  Speaker 1: the economy is still spiraling downward, and we're going into
• 24:25
  Speaker 1: a depression. Well that's that's that's unrealistic obviously. UM. I
• 24:29
  Speaker 1: mean employment is up substantially since two thousand nine. Um,
• 24:35
  Speaker 1: the you know, the economy is growing slowly from a
• 24:38
  Speaker 1: GDP perspective. Uh. That's driven in my view by two
• 24:43
  Speaker 1: main things. One is, for some reason, productivities down, um,
• 24:47
  Speaker 1: something that I don't think anybody can really control, at
• 24:49
  Speaker 1: least measure productivity, right. But also and a key thing
• 24:53
  Speaker 1: that's very rarely mentioned is demographics. We've we've the prime
• 24:57
  Speaker 1: working age population started decreasing, not not workforce but population
• 25:02
  Speaker 1: in about two thousand and ten and decrease for five
• 25:05
  Speaker 1: or six years. And that's because of all the baby boomers.
• 25:07
  Speaker 1: So if you were born in the fifties or sixties,
• 25:10
  Speaker 1: so let's say you're born in nineteen fifty, that would
• 25:13
  Speaker 1: make you sixty six today, you're you're thinking about retiring, right,
• 25:16
  Speaker 1: and you're out of the prime working age. You know,
• 25:18
  Speaker 1: when as you get past sixty, which I can say
• 25:21
  Speaker 1: is happens you you you have less energy, you know,
• 25:25
  Speaker 1: So are you're speaking personally? You know? Yeah, you know
• 25:27
  Speaker 1: I'm t talking about myself. So so you know, when
• 25:30
  Speaker 1: when you get a little older, you you know, I'm
• 25:32
  Speaker 1: still doing things, but uh, yeah, I don't think I'm
• 25:36
  Speaker 1: as excited about spending a lot of hours a day working,
• 25:40
  Speaker 1: but you do spend a decent amount of I spend
• 25:42
  Speaker 1: a decent amount, nothing like what I was spending in
• 25:45
  Speaker 1: two thousand nine. But that's that's not age related, that's
• 25:48
  Speaker 1: just crisis crisis related. Yeah, you've got to be doing two, three,
• 25:51
  Speaker 1: four hours a day. Yes, oh yeah, at least you're
• 25:55
  Speaker 1: what my wife describes as gainfully unemployed. Right, It's like
• 26:00
  Speaker 1: you would be doing this whether there was money in
• 26:01
  Speaker 1: it or not. And h is there money in it?
• 26:05
  Speaker 1: That's a question that people ask, well, what is there
• 26:07
  Speaker 1: money and blogging? Well, first of all, when I started
• 26:10
  Speaker 1: the blog, I didn't take any advertising. For two or
• 26:12
  Speaker 1: three years, I didn't even think about it, so it
• 26:14
  Speaker 1: really was just a hobby. People said, hey, take advertising,
• 26:18
  Speaker 1: and so I eventually did. Uh. There's not a whole
• 26:22
  Speaker 1: lot of money in it, but but you know, there's
• 26:25
  Speaker 1: pays for some nice dinners out there you go. So
• 26:28
  Speaker 1: so it's still more or less a hobby that that
• 26:30
  Speaker 1: keeps you Uh yeah, active, Yes, you know. I I
• 26:33
  Speaker 1: guess I have this thing. I promise my readers that
• 26:36
  Speaker 1: I would call our try to call the next recession,
• 26:40
  Speaker 1: I said, And you've been pretty consistent saying we're knowing
• 26:42
  Speaker 1: your recession anytime. Yeah, So I I'm gonna say I
• 26:45
  Speaker 1: I hope to hang around long enough to do that,
• 26:48
  Speaker 1: and I don't see one in the near term at all,
• 26:50
  Speaker 1: So I guess I'm gonna be around for a while.
• 26:52
  Speaker 1: Let let's look at the indicators that you track in
• 26:54
  Speaker 1: order to identify a recession. And you track everything from
• 26:59
  Speaker 1: rail car waitings to two ships coming into the l
• 27:04
  Speaker 1: A port. It's not just GDP employment. You look at
• 27:07
  Speaker 1: it a ton of stuff. What what are some of
• 27:10
  Speaker 1: your favorite indicators to look at? Well? To me, the housing,
• 27:15
  Speaker 1: new home sales, housing starts. I always start there. You
• 27:19
  Speaker 1: know employment, of course, it's the big big dogs, right,
• 27:22
  Speaker 1: So I mean employment went negative for several months in
• 27:25
  Speaker 1: a row. I would really be Now. I heard from
• 27:27
  Speaker 1: some political candidate that all of the employment data is fake. Well,
• 27:32
  Speaker 1: I I think I don't think there's probably a better
• 27:35
  Speaker 1: organization than the b l S as far as telling
• 27:37
  Speaker 1: us being transparent on how they do their work. They
• 27:41
  Speaker 1: publicly announced all the changes. It's always you think pademically driven.
• 27:45
  Speaker 1: You can go to their website, you can understand exactly
• 27:48
  Speaker 1: what they do, what they don't do, and and how
• 27:51
  Speaker 1: any changes which have been minor over the years in
• 27:54
  Speaker 1: how they gather data. Uh, so they're completely transparent and
• 27:59
  Speaker 1: you call them up and ask them question. Yeah, and
• 28:01
  Speaker 1: they're and they're very they're very helpful. So the the
• 28:04
  Speaker 1: the it's possible to disagree that, oh there there's a
• 28:08
  Speaker 1: different way to measure it, but to say that they're
• 28:11
  Speaker 1: doing it fake is outrageous. And there's outrageous. Yeah, this
• 28:15
  Speaker 1: was what three thousand statisticians, PhD s, economists, etcetera. Could
• 28:20
  Speaker 1: you really fake something and not have that leak out somewhere?
• 28:24
  Speaker 1: They're not all from one party or the other. It
• 28:27
  Speaker 1: seems like an impossible claim. It is. It is impossible,
• 28:31
  Speaker 1: and and there are independent ways to measure some of
• 28:35
  Speaker 1: that and and and it looks good too. You know,
• 28:38
  Speaker 1: whether you look at a dB employment, which is a
• 28:41
  Speaker 1: private measure, they're on it. Also, they're they're part of
• 28:45
  Speaker 1: the part of the conspiracy. That's the always the answer,
• 28:48
  Speaker 1: you get it. Those those numbers are very very good
• 28:52
  Speaker 1: and and uh, you know, do they describe everything? No,
• 28:55
  Speaker 1: the model isn't perfect by any stretch. But but but
• 28:58
  Speaker 1: the but the methodology is transparent. It so you can
• 29:00
  Speaker 1: go in and it's the same as like new home
• 29:03
  Speaker 1: sales or housing starts. You can go and see what
• 29:06
  Speaker 1: they count, what they don't count, you know, how they
• 29:08
  Speaker 1: add them in. Uh. You know that was very important
• 29:12
  Speaker 1: during the crisis because you had to see you had
• 29:15
  Speaker 1: to see, like a new home sales, how they canceled
• 29:17
  Speaker 1: you know, they handled canceled contract was a whole separate Yeah,
• 29:20
  Speaker 1: and they handle the completely different than the public companies.
• 29:23
  Speaker 1: So and so you could you could kind of say, well, gee,
• 29:26
  Speaker 1: you know they're going to catch up on this and
• 29:27
  Speaker 1: they're following and uh, you know, the public companies basically
• 29:30
  Speaker 1: have to here's what here's what we got there reporting
• 29:33
  Speaker 1: net sales where the UH Census Bureaus tracking a house
• 29:39
  Speaker 1: and then if it gets canceled later, then they take
• 29:41
  Speaker 1: it out. So it's it's uh, but those sales that
• 29:44
  Speaker 1: they originally reported is still there. It's kind of it's
• 29:47
  Speaker 1: so it's's important to understand that methodology right now that
• 29:49
  Speaker 1: that's irrelevant because everything's tracking. The you know, if you
• 29:55
  Speaker 1: follow the home builders and you follow the new home sales,
• 29:58
  Speaker 1: they're pretty much tracking. So let's let's talk a little
• 30:00
  Speaker 1: more about housing. My friend Jonathan Miller, who's a highly
• 30:04
  Speaker 1: regarded appraiser and data assembly on housing, has been talking
• 30:08
  Speaker 1: for a good couple of years about the problem with
• 30:11
  Speaker 1: no equity and low equity homeowners and it sort of
• 30:15
  Speaker 1: gums up the chain of purchases. In other words, Hey,
• 30:19
  Speaker 1: we're in a starter home. Up, we have a second
• 30:21
  Speaker 1: kid on the way. Let's sell this house, move up
• 30:24
  Speaker 1: to a four bedroom, the people selling that house move
• 30:27
  Speaker 1: up to a larger house, and those people move up
• 30:29
  Speaker 1: to the big mansions. But as long as the people
• 30:31
  Speaker 1: at the bottom starter home are are kind of stuck
• 30:35
  Speaker 1: there because they don't have enough equity, the whole system
• 30:37
  Speaker 1: is sort of compromised, and it means that there just
• 30:41
  Speaker 1: isn't enough supply out there. How does how does that sound? Yeah? Yeah,
• 30:45
  Speaker 1: well you know that that is a problem. And and
• 30:48
  Speaker 1: and housing historically always has been this kind of chain reaction.
• 30:52
  Speaker 1: One guy sells and he can buy in another sell
• 30:55
  Speaker 1: and buy and sell and buy, and so the situation
• 30:57
  Speaker 1: we're in today's is pretty unique. Um. One of the
• 31:00
  Speaker 1: things that's rarely mentioned is is that the reason there's
• 31:03
  Speaker 1: such low inventory, especially at the lower ends, is because
• 31:07
  Speaker 1: of all those investors buying millions and millions of by
• 31:10
  Speaker 1: the rent, by the fix and flip, by the Yeah, yeah,
• 31:13
  Speaker 1: the fix and flip doesn't hurt the market, but the
• 31:15
  Speaker 1: but the by the rent, by to rent, there's a
• 31:18
  Speaker 1: there's millions of homes that were bought to rent and
• 31:20
  Speaker 1: at a huge discount right the height of the crisis.
• 31:23
  Speaker 1: And and so those guys and and and I talked
• 31:25
  Speaker 1: to some of those guys in private equity or orstors combination.
• 31:30
  Speaker 1: You know, I know moms and pops that bought six
• 31:33
  Speaker 1: eight places. I know some larger investors that bought thousands
• 31:38
  Speaker 1: and and uh and for the most part, none of
• 31:41
  Speaker 1: them are selling really Yeah, so they know why is that? Well, okay,
• 31:46
  Speaker 1: if they sell, they have to play capital gains and
• 31:48
  Speaker 1: then and there's one short way to make sure you
• 31:51
  Speaker 1: never pay capital gains taxes. Don't have a capital gain. Yeah,
• 31:54
  Speaker 1: So that's always to me, not a great reason not
• 31:58
  Speaker 1: to sell. Yeah, but but where else they're gonna put
• 32:00
  Speaker 1: them up? But then they have to move it to
• 32:01
  Speaker 1: somewhere else, right, and and you know, what are you
• 32:04
  Speaker 1: gonna do? And and those guys rents have gone up substantially.
• 32:07
  Speaker 1: They were buying these things with cap rates of when
• 32:11
  Speaker 1: they bought them, and the and the rents have gone
• 32:13
  Speaker 1: up dramatically, so on their original money, they're just they're
• 32:16
  Speaker 1: just cranking it. If they sell it, even if they
• 32:18
  Speaker 1: can avoid paying capital gains. If they sell it, avoid
• 32:21
  Speaker 1: capital gains, where do they put their money and get
• 32:23
  Speaker 1: that same return? You get one five one on the tenure. Yeah, yeah,
• 32:28
  Speaker 1: that's not negative yet, it's a positive. So those you know,
• 32:33
  Speaker 1: I I know several people personally that own you know,
• 32:35
  Speaker 1: maybe three or eight. They'd rather just get the income
• 32:38
  Speaker 1: and they're never going to sell them. We've been speaking
• 32:40
  Speaker 1: with Bill McBride. He is the founder and chief blogger
• 32:43
  Speaker 1: at Calculated Risk. Be sure and check out the site
• 32:48
  Speaker 1: Calculated Risk for just an incredible slew of economic data,
• 32:52
  Speaker 1: charts and analysis. If you enjoy this conversation be shown
• 32:57
  Speaker 1: check out our podcast extras, where we keep the digital
• 33:00
  Speaker 1: tape rolling and continue to discuss all things economic and digital.
• 33:05
  Speaker 1: Check out my daily column on Bloomberg View dot com
• 33:09
  Speaker 1: or follow me on Twitter at rid Halts. We love
• 33:12
  Speaker 1: your emails and comments. Please write to us at m
• 33:17
  Speaker 1: IB podcast at Bloomberg dot net. I'm Barry rid Halts.
• 33:22
  Speaker 1: You're listening to Masters in Business on Bloomberg Radio. Welcome
• 33:27
  Speaker 1: to the podcast. This is Barry ridhalts Bill. Thank you
• 33:30
  Speaker 1: so much for doing this. You know, you and my pleasure.
• 33:34
  Speaker 1: You and I have been ranting each other, no exaggeration.
• 33:39
  Speaker 1: It's got to be ten twelve years. I think we
• 33:44
  Speaker 1: had dinner this week. I think that's the first time
• 33:46
  Speaker 1: you met in person. Is that right? So I have
• 33:50
  Speaker 1: tons of of of stories and anecdotes. There's so many
• 33:55
  Speaker 1: questions to get through. And before I get to my
• 33:58
  Speaker 1: standard questions, there's there's just there's just so much stuff
• 34:02
  Speaker 1: I have to do. Um. By the way, before we
• 34:05
  Speaker 1: get to those questions, how are you enjoying your your
• 34:08
  Speaker 1: week in New York. I'm having a great time. The
• 34:10
  Speaker 1: weather couldn't be nicer. Yeah, yeah, thank you so much.
• 34:13
  Speaker 1: You you it was miserable, ninety and humid last week.
• 34:16
  Speaker 1: It's been it's been perfect today. I went for a
• 34:18
  Speaker 1: walk in the Central Park this morning. But it's been
• 34:21
  Speaker 1: it's been delightful. So so you're now spending to three
• 34:25
  Speaker 1: four hours a day blogging in the midst of the crisis,
• 34:30
  Speaker 1: oh eight oh nine, how much time will you devot
• 34:33
  Speaker 1: into the sun? I was probably spending maybe eight hours
• 34:35
  Speaker 1: a day full, a full day's work. But but I
• 34:38
  Speaker 1: was up, you know at five in the morning, uh,
• 34:40
  Speaker 1: and and doing work. And I was, you know, right
• 34:43
  Speaker 1: before I went to bed, I was doing work and
• 34:45
  Speaker 1: not it's not nine to five, it's it's all day.
• 34:48
  Speaker 1: It's digital sixteen seventeen hours a day. I did sleep
• 34:52
  Speaker 1: a little, and every once in a while they have
• 34:53
  Speaker 1: to set my alarm clock for the middle of the
• 34:55
  Speaker 1: night because I knew something crazy was coming when oh really,
• 34:58
  Speaker 1: so you would wake up to see, especially when stuff
• 35:01
  Speaker 1: was coming from Europe. You know, I'd be going all great,
• 35:04
  Speaker 1: I see my attitude as always, well it'll be there, Yes,
• 35:08
  Speaker 1: it'll be there in the morning. That's my attitude. Now
• 35:10
  Speaker 1: when when did you realize that the site was really
• 35:13
  Speaker 1: catching on? Uh? You know it kind of it kind
• 35:17
  Speaker 1: of just build. It's a boiled frog. Yeah, it happened
• 35:21
  Speaker 1: over time. You know. It was interesting because at first,
• 35:23
  Speaker 1: I'd say the first month because you see the traffic data.
• 35:25
  Speaker 1: You know, I was just sending it to friends and relatives.
• 35:27
  Speaker 1: All those posts now have lots of his but that's
• 35:29
  Speaker 1: because people have gone back in time, you know, maybe
• 35:33
  Speaker 1: in February two thousand five, Dr David, I'll tag of
• 35:37
  Speaker 1: Cleveland FED or Atlanta FED. Now, I guess he stumbled
• 35:41
  Speaker 1: on my blog somehow and he mentioned something that I
• 35:44
  Speaker 1: had written, and all of a sudden, my traffic was,
• 35:48
  Speaker 1: you know, a hundred readers a day out of the
• 35:50
  Speaker 1: blue readers a day, and and uh, and I went wow,
• 35:54
  Speaker 1: what happened there? And then something interesting happened is one
• 35:57
  Speaker 1: of those readers was one of the three PhD economists
• 36:00
  Speaker 1: at Angry Bear, and he called me up and say, hey,
• 36:03
  Speaker 1: could you write a weekly column about housing? Because that's
• 36:06
  Speaker 1: because I was completely focused on housing at the time,
• 36:08
  Speaker 1: and so I wrote a good reason. Yeah, I wrote that,
• 36:11
  Speaker 1: and within several months I was up to two thousand
• 36:13
  Speaker 1: readers a day. And what was the peak traffic in
• 36:17
  Speaker 1: oh eight oh nine? Yeah, probably averaged throughout oh eight
• 36:22
  Speaker 1: and in oh nine probably add twenty thousand readers a day.
• 36:26
  Speaker 1: What does that work out to be on a monthly basis? Uh?
• 36:31
  Speaker 1: I was probably four million, three four millions. It went crazy.
• 36:35
  Speaker 1: It was crazy. It was crazy. And then I'm probably
• 36:39
  Speaker 1: less cut and half after that. Yeah, I'm probably now right,
• 36:43
  Speaker 1: you know, maybe forty readers a day. But these are
• 36:46
  Speaker 1: forty important influential readers. Yeah, well they're you know, they're
• 36:50
  Speaker 1: obviously people that are very interested in economicus. And we
• 36:53
  Speaker 1: talked a little bit during the broadcast portion about comments.
• 36:56
  Speaker 1: How frustrating is it that comments was once so crucial,
• 37:01
  Speaker 1: so seminal, and now they're just a wreck. Well, you know,
• 37:05
  Speaker 1: in general, I don't I mean our our comments since
• 37:08
  Speaker 1: you have to register. It's they're they're okay, but they're
• 37:12
  Speaker 1: they're more clicky, and and there their long term people
• 37:15
  Speaker 1: who just talk about off topic subjects with a queue,
• 37:19
  Speaker 1: not not web click. Yes, yes, like like it's groups
• 37:23
  Speaker 1: of people. Yeah, they they have their topics they want
• 37:26
  Speaker 1: to talk about. It's unrelated. It's really it's completely different
• 37:30
  Speaker 1: when when in two thousand five, two thousand and six,
• 37:32
  Speaker 1: when I would post something, the topics were on topic.
• 37:35
  Speaker 1: I mean the comments were on topic, uh and insightful. Yeah,
• 37:38
  Speaker 1: and that's why I met a lot of great people,
• 37:39
  Speaker 1: including my code blogger you know, to me, I was
• 37:42
  Speaker 1: talking about this a little bit earlier. Is I remember
• 37:45
  Speaker 1: using Yahoo Finance when it first came out. That's you'd
• 37:48
  Speaker 1: comment on a company and the comments are great. It
• 37:50
  Speaker 1: didn't take long since they were all public for that
• 37:52
  Speaker 1: just to go completely downhill and be completely useless. In
• 37:55
  Speaker 1: the nineties, I very vividly so I began as a
• 37:59
  Speaker 1: trade in the in the mid nineties, and I very
• 38:02
  Speaker 1: vividly remember stumbling into Yahoo comments and a family member
• 38:07
  Speaker 1: had this huge position in I Omega had split two
• 38:10
  Speaker 1: one two for one. What started out as a ten
• 38:13
  Speaker 1: thousand dollar investment was like a three million dollar holding.
• 38:17
  Speaker 1: And I remember following the Omega Yahoo message boards with
• 38:22
  Speaker 1: people driving I think the factory was in Utah or
• 38:25
  Speaker 1: some crazy thing, driving by the factory on a Sunday
• 38:29
  Speaker 1: and all Wall Street is underestimating the revenue and profit numbers. Hey,
• 38:34
  Speaker 1: the factory parking lot is filled with cars on a
• 38:38
  Speaker 1: Sunday night. These guys are working double and triple shifts,
• 38:42
  Speaker 1: like it was that sort of serious investment was It
• 38:45
  Speaker 1: was awesome. You get that, You get that kind of
• 38:47
  Speaker 1: local color. Somebody knew something about the company, not insider information,
• 38:52
  Speaker 1: driving by just a parking lot. That's public, man, It's
• 38:57
  Speaker 1: it's amazing, so and and and you the only you
• 39:00
  Speaker 1: could get a little bit of that on tweeter. Now
• 39:03
  Speaker 1: somebody might take a picture of the parking lot. Of course,
• 39:05
  Speaker 1: then you got and you don't really know if it's
• 39:06
  Speaker 1: real or not that that's become and there's been a
• 39:09
  Speaker 1: lot of scams and hacks and things. You really have
• 39:12
  Speaker 1: to be careful with with what you see. You know,
• 39:15
  Speaker 1: I've talked about this very very little. I wrote Bailout
• 39:19
  Speaker 1: Nation with my commenters. I would post up three word
• 39:24
  Speaker 1: of forenger word thing in the evening that I had
• 39:27
  Speaker 1: written during the day. What do you think about this?
• 39:29
  Speaker 1: Tell me your thoughts, and people would say, have you
• 39:31
  Speaker 1: seen this article in the Christian Science Monitor off? You know,
• 39:34
  Speaker 1: because obviously the front page of the Wall Street Journal
• 39:36
  Speaker 1: in the New York Times everybody sees. So you have
• 39:39
  Speaker 1: this huge research team and people making suggestions and comments.
• 39:44
  Speaker 1: The golden age of blog comments was unlike anything. You know.
• 39:50
  Speaker 1: It's funny because one of my commenters wrote a fiction
• 39:53
  Speaker 1: book partially in the comments, called American Apocalypse. He's a lawyer.
• 39:57
  Speaker 1: Unfortunately has passed away now, but he It became a
• 40:01
  Speaker 1: pretty good seller on Amazon, and he wrote it in
• 40:05
  Speaker 1: the comments and people with It was a fiction thing about,
• 40:07
  Speaker 1: you know, if the financial crisis had really gotten dad,
• 40:10
  Speaker 1: I mean total second great depression or worse. And but
• 40:14
  Speaker 1: but you know, it's just kind of like you and
• 40:16
  Speaker 1: bell on Nation, except for he started it in the
• 40:18
  Speaker 1: comments and it was fun. It was kind of fun.
• 40:21
  Speaker 1: Have you ever gotten invites to speak or or take
• 40:24
  Speaker 1: a meeting with anybody from Treasury, Department, Federal Reserve, House,
• 40:30
  Speaker 1: Joint Economics Committee, anything like? Nothing? Well, the Treasury invited
• 40:34
  Speaker 1: me back once. Um, but that that was it. Uh.
• 40:38
  Speaker 1: When you say he invited you back, they they. If
• 40:42
  Speaker 1: I came, I got to to, you know, meet some
• 40:45
  Speaker 1: senior people. But but I was in California, so it
• 40:48
  Speaker 1: wasn't very union for me. I got the Tim Geithner invite,
• 40:51
  Speaker 1: which I think was the public relations Yes, did you
• 40:55
  Speaker 1: go to that? See, that's the one I was talking about.
• 40:57
  Speaker 1: And did you go to that? No, I was in California.
• 41:01
  Speaker 1: It's too far. It was in New York. It was
• 41:03
  Speaker 1: too far because it just smelled like one of those things.
• 41:05
  Speaker 1: Come on in, he'll come in, shake some hands to
• 41:08
  Speaker 1: a photo op. And why did I travel three hours
• 41:10
  Speaker 1: each way for this? It was? I politely responded and said, hey,
• 41:14
  Speaker 1: let me know the next time Tim is in New York.
• 41:16
  Speaker 1: I'm happy to meet with him, but I'm not interested
• 41:18
  Speaker 1: in a photo op. And that's that was the sort
• 41:21
  Speaker 1: of outreach trip. Oh, these bloggers are causing us trouble.
• 41:23
  Speaker 1: Let's let's did you ever get a sense that you
• 41:26
  Speaker 1: were causing trouble too, elected officials? Not at all. I
• 41:30
  Speaker 1: never felt that at all. I um no, you know,
• 41:34
  Speaker 1: there there was a time I think there was a
• 41:36
  Speaker 1: lot of resentment from the media about blogging. Let's talk
• 41:39
  Speaker 1: about that. I used to do this thing, and I
• 41:42
  Speaker 1: know Tanted did something similar called read it here. First
• 41:45
  Speaker 1: in the beginning when so I launched the Big Picture
• 41:49
  Speaker 1: and oh three, but before that it was a Yahoo
• 41:52
  Speaker 1: Geo City site. And after No. Eleven I had written
• 41:56
  Speaker 1: a piece that kind of had gone viral. So it's like, oh,
• 41:59
  Speaker 1: this internet thing going to be big one day. And
• 42:02
  Speaker 1: so I would notice the amazing coincidence. You'd write about
• 42:06
  Speaker 1: something and then a day or a week later it
• 42:08
  Speaker 1: would show up in Wall Street Journal, New York Times, Barons,
• 42:12
  Speaker 1: Business everywhere, the whole media. And my initial well, no
• 42:16
  Speaker 1: one would just steal this. I must have picked something
• 42:20
  Speaker 1: up and other people from wherever whatever motivated me to
• 42:24
  Speaker 1: write this, so they must have been motivated by the
• 42:27
  Speaker 1: same thing. I don't want to say it was in
• 42:28
  Speaker 1: the ether. But if I'm looking at an economic news release,
• 42:31
  Speaker 1: and Bill is looking at an economic news release, and
• 42:34
  Speaker 1: a reporter at x y Z paper is looking at that,
• 42:37
  Speaker 1: we're all looking at the same thing. And I assumed
• 42:41
  Speaker 1: it was a coincidence. And that changed. In two thousand
• 42:44
  Speaker 1: and four, I wrote a long form piece called Radio's
• 42:50
  Speaker 1: Wounded Business Model that basically trashed Clear Channel Communications and
• 42:55
  Speaker 1: trashed Infinity Broadcasting. It was really just rant and a
• 43:02
  Speaker 1: maybe it was. Three weeks later Barons has a cover
• 43:06
  Speaker 1: story and I'm a music buff and I hate program radio.
• 43:11
  Speaker 1: This wasn't motivated by anything out there. This was just
• 43:15
  Speaker 1: me going on a jag. And then Barons has a
• 43:18
  Speaker 1: cover story called Losing the Signal, and it was practically
• 43:22
  Speaker 1: a point by point thing. And that was a moment
• 43:24
  Speaker 1: where it dawned on me that hey, it's not in
• 43:27
  Speaker 1: the ether. These people are ripping you off. What Tanta
• 43:31
  Speaker 1: did something, well, tell us what what she did with
• 43:35
  Speaker 1: a similar bit of a thievery well, you know. But
• 43:38
  Speaker 1: first I was working with a lot of reporters on
• 43:41
  Speaker 1: on their stories, and you were anonymous back then. Yeah,
• 43:44
  Speaker 1: I would have people would call me up um and
• 43:48
  Speaker 1: and and uh we would chat about a story, possible angles,
• 43:53
  Speaker 1: ways to write it, and and every time they would go, I,
• 43:57
  Speaker 1: my editor will not let me mention that you're writing
• 44:00
  Speaker 1: a blog calculator risk. Can can I mention that you
• 44:03
  Speaker 1: used to be the executive this company? Use your real name?
• 44:05
  Speaker 1: I said, no, you know, if you can't, I'll help
• 44:08
  Speaker 1: you the on stories all you want that's there and
• 44:10
  Speaker 1: that good will over time paid off. But the you know,
• 44:14
  Speaker 1: I said no, I I just want to stay anonymous.
• 44:17
  Speaker 1: I didn't know why at the time, but it was
• 44:19
  Speaker 1: just kind of fun for me. And and you were retired,
• 44:23
  Speaker 1: you weren't looking to Yeah, I was. I wasn't. I
• 44:25
  Speaker 1: wasn't trying to make any money. I wasn't trying to
• 44:27
  Speaker 1: start a war. Uh Tanta. When when she came on,
• 44:30
  Speaker 1: she used to call me up. Yeah, she go, Bill,
• 44:34
  Speaker 1: they ripped off your story or they ripped off my story.
• 44:36
  Speaker 1: And and so then she wrote a piece about how
• 44:39
  Speaker 1: you know, if if if you want to use our
• 44:42
  Speaker 1: information point you really should mention that you where you
• 44:46
  Speaker 1: got it from. That's just kind of standard practice in journalism.
• 44:49
  Speaker 1: And uh yeah, and and and several journalism professors have
• 44:54
  Speaker 1: told me they use her piece two and they teach
• 44:57
  Speaker 1: it in their classes, colleges, and and and it was
• 45:02
  Speaker 1: immediately after that that we started getting mentioned everywhere. And
• 45:05
  Speaker 1: you know a lot of the reporters I know wanted
• 45:08
  Speaker 1: to mention us much sooner. So it was editorial and publishing,
• 45:12
  Speaker 1: not the actual right. Yes, the writer. Listen, writers, I
• 45:15
  Speaker 1: write a daily column. It's drummed into your head from
• 45:18
  Speaker 1: day one. Always source, always link, always quote, always footnote,
• 45:23
  Speaker 1: don't just take. And my nightmare is reading something and
• 45:27
  Speaker 1: kind of subconsciously ferreting it away and then it comes
• 45:31
  Speaker 1: out and it's like, oh, I I ripped someone off
• 45:33
  Speaker 1: by accident. That's my nightmare scenario. Yeah, you know you
• 45:37
  Speaker 1: and and and I think that's always hard for a writer.
• 45:39
  Speaker 1: I I I try to be very very careful and
• 45:43
  Speaker 1: linked to everything and and uh so what what I
• 45:46
  Speaker 1: started doing after the Baron's piece that to me was clearly, oh,
• 45:50
  Speaker 1: this isn't even nuance, this is just blatant. So I
• 45:55
  Speaker 1: started a series of reading here first columns, and I
• 45:57
  Speaker 1: would do side by side the two column I'd highlight
• 46:01
  Speaker 1: stuff I'd put on the blog, and especially with the
• 46:05
  Speaker 1: the outlets that included the author and editors. I never
• 46:10
  Speaker 1: had that from Bloomberg, and I'm not just saying that
• 46:12
  Speaker 1: because I'm here, but I've had it from because their
• 46:15
  Speaker 1: sources they have a really crazy strict sourcing mechanism. But
• 46:19
  Speaker 1: a lot of other places, I would take the two pieces,
• 46:23
  Speaker 1: say what a coincidence. I wrote this on Monday, you
• 46:25
  Speaker 1: published this on Tuesday. I would send it to the reporter.
• 46:28
  Speaker 1: I would send it to the editor, and I would
• 46:31
  Speaker 1: sort of politely on the blogs say read it here first,
• 46:35
  Speaker 1: And eventually I think they became embarrassed. So like oh
• 46:38
  Speaker 1: four or five, oh six, once you got into oh
• 46:41
  Speaker 1: seven and oh eight, and I was you know, I
• 46:44
  Speaker 1: had an official job title where I was a media
• 46:48
  Speaker 1: a market strategist and a media spokesperson, So it was
• 46:51
  Speaker 1: easy for me to say, hey, you don't have to
• 46:53
  Speaker 1: quote the blog, but at least credit the source. You
• 46:58
  Speaker 1: don't even have to link to it, but you know
• 47:00
  Speaker 1: you're stealing my work products. Well, you know, they would
• 47:03
  Speaker 1: the media would mention people like professor Jim Hamilton and
• 47:07
  Speaker 1: San Diego or Mark Thomas um but they'd always mentioned that, oh,
• 47:11
  Speaker 1: Mark Thomas a professor at University of Oregon. There was
• 47:13
  Speaker 1: an official tie. Yeah, not that he's writing a site
• 47:16
  Speaker 1: called the Economist View, which had the information you know
• 47:19
  Speaker 1: and say, so you know that that's what they were
• 47:21
  Speaker 1: comfortable doing, but not the referencing the blogs. It took
• 47:25
  Speaker 1: a different but they shifted and they sure, well what
• 47:29
  Speaker 1: first they rolled out their own blogs? Yeah, and and
• 47:31
  Speaker 1: then they realized that that it's all complimentary anyway. In fact, uh,
• 47:36
  Speaker 1: we would drive traffic for them. We mentioned that, oh
• 47:39
  Speaker 1: hey wait they you know, this guy had a good
• 47:41
  Speaker 1: thing about this, and and people would go read that
• 47:43
  Speaker 1: traffic And it got to the point where, uh, journalists
• 47:46
  Speaker 1: would send me their articles and say, hey, if you
• 47:49
  Speaker 1: like this, could you could you mention it or linked
• 47:51
  Speaker 1: to it or or if yeah, and and and uh
• 47:57
  Speaker 1: it really helped them. They would they when did that
• 48:00
  Speaker 1: lip take? When did it go from O blobs we
• 48:02
  Speaker 1: could steal with impunity and no, it had to be
• 48:04
  Speaker 1: in two thousand seven. Two thousand seven, that's when you
• 48:07
  Speaker 1: first started noticing people asking yeah, and and and all
• 48:10
  Speaker 1: of a sudden we were and it really boosted our
• 48:12
  Speaker 1: traffic to did did you ever get day loosed with
• 48:15
  Speaker 1: pr pitches? Hey would you like to meet the executive sales?
• 48:19
  Speaker 1: Well you get that every day, you do, Yes, every
• 48:22
  Speaker 1: day I relentlessly, relentlessly black Matt Black um list those
• 48:29
  Speaker 1: the people that just sends ridiculous. It's one thing that
• 48:33
  Speaker 1: it's unsolicited, but I don't really care about the sixteen
• 48:37
  Speaker 1: year old girls new pop song that's not relevant to
• 48:40
  Speaker 1: what we're reading. Yeah, well, you know I I I
• 48:43
  Speaker 1: think I saw the other day there's more PR people
• 48:45
  Speaker 1: now than there are journalists in America two to one,
• 48:49
  Speaker 1: or something that explains. That explains, that explains a whole lot.
• 48:54
  Speaker 1: Oh my god, that's awful. That that is a horrible,
• 48:57
  Speaker 1: horrible thought. Um On on the terminal, you have this
• 49:01
  Speaker 1: option on the bloomber terminal, you have this option. So
• 49:05
  Speaker 1: every now and then a reasonable PR pitch comes in
• 49:08
  Speaker 1: or or read will say so. I had Jeff Maggian Calda,
• 49:12
  Speaker 1: who is the founder and former CEO of Financial Engines,
• 49:16
  Speaker 1: which they work with Nobel Laureate Bill Sharp, and they
• 49:20
  Speaker 1: were really one of the first entities out there to
• 49:24
  Speaker 1: do what people are calling robo advising today. But it
• 49:27
  Speaker 1: was Bill Sharp and an entire four way to manage
• 49:32
  Speaker 1: for one case through a series of intelligent algorithms, and
• 49:36
  Speaker 1: they run like a hundred plus billion dollars. So someone
• 49:39
  Speaker 1: who worked for the company, sends an email, I love
• 49:42
  Speaker 1: the podcast. Are you familiar with Magine, Calda and Financial Engines? No?
• 49:47
  Speaker 1: I never even heard of them. Their public company this
• 49:49
  Speaker 1: and that. So I look them up. I'm like, how
• 49:51
  Speaker 1: have I never heard about these guys? They are all
• 49:54
  Speaker 1: rock stars. So that sort of pitch from somebody, that's
• 49:58
  Speaker 1: what It's a relevant pitch. Chin It's right and that
• 50:02
  Speaker 1: that wasn't even a PR person. I think it was. Um,
• 50:06
  Speaker 1: it was a quarry doctor at Boing Boing said, uh,
• 50:09
  Speaker 1: he published a whole list of so all these PR
• 50:13
  Speaker 1: shops email you and your black blacklist the PR shop.
• 50:17
  Speaker 1: So now you're getting these pitches from Gmail. So he
• 50:20
  Speaker 1: went out and published, I think was him. I hope
• 50:22
  Speaker 1: I'm not. He's getting the wrong person. A list of
• 50:25
  Speaker 1: everybody on this list is a PR wanker who is
• 50:29
  Speaker 1: using Gmail. They're multiplying so fast you can never So
• 50:33
  Speaker 1: here's a list. Add them to your black list and
• 50:35
  Speaker 1: you won't ever see anything from that. And I just
• 50:37
  Speaker 1: read that Apple and Google are now doing something similar
• 50:40
  Speaker 1: on the phone side. Um, it's amazing. How how this
• 50:46
  Speaker 1: problem so far, I've digressed so far. Let me jump
• 50:50
  Speaker 1: back to some of the questions that we just didn't
• 50:53
  Speaker 1: get a question, a chance to discuss. You mentioned your
• 50:57
  Speaker 1: you're we're publishing anonymously. What made you decide to come
• 51:03
  Speaker 1: out from behind the cloak of anonymity. Well, first, I
• 51:07
  Speaker 1: started that way just because I thought that's how you
• 51:10
  Speaker 1: did it. I mean, I just, oh, yeah, calculated risk.
• 51:12
  Speaker 1: I thought it was fun. You know, people don't need
• 51:14
  Speaker 1: to know who I am. The people who I originally
• 51:16
  Speaker 1: sent it to knew who I was. The when Tanta
• 51:20
  Speaker 1: came on board, Tanta was very concerned. She was very
• 51:24
  Speaker 1: obviously very hopeful that she would recover, so she wanted
• 51:27
  Speaker 1: to maintain and she she was very concerned if she
• 51:30
  Speaker 1: said certain things, she may never get another job. And actually,
• 51:34
  Speaker 1: people in the industry knew who she was immediately. Yeah,
• 51:37
  Speaker 1: there's only so many people that could be writing what
• 51:39
  Speaker 1: she wrote, and uh and and then there are very
• 51:43
  Speaker 1: few of those were women, so so uh uh. But
• 51:46
  Speaker 1: so you know, then as long as she wanted to
• 51:48
  Speaker 1: stay anonymous, I stayed anonymous too. I didn't want pressure
• 51:51
  Speaker 1: on her. And so, um, the first time my name
• 51:54
  Speaker 1: actually came out was in the obituary in the New
• 51:57
  Speaker 1: York Times. Really for Tanta no kidding. That was the
• 52:01
  Speaker 1: first time. I believe that was the first time my
• 52:03
  Speaker 1: name came out. Uh. And then after that, my name
• 52:05
  Speaker 1: is in the open. So I went ahead and just
• 52:07
  Speaker 1: started saying yeah. And that was pretty much because they
• 52:10
  Speaker 1: quoted me in the New York Times talking about Tante
• 52:13
  Speaker 1: and obviously they had her real name in that article too.
• 52:16
  Speaker 1: So I posted on the blog, asked calculator risk anything,
• 52:19
  Speaker 1: he's a little blast for the pet from the past. Yeah,
• 52:21
  Speaker 1: I look at that. I pulled the old header from
• 52:24
  Speaker 1: the blog spot days. Yeah, I like I like that picture.
• 52:28
  Speaker 1: I like that picture. I always like that. The path
• 52:30
  Speaker 1: right down the middle between the trees. I took that
• 52:32
  Speaker 1: up in Canada. That that's really so you guys can
• 52:36
  Speaker 1: see that on on the big picture. So the anonymity
• 52:40
  Speaker 1: just kind of ended. It ended when Tonta passed away.
• 52:43
  Speaker 1: It just it wasn't a conscious decision. Soon as soon
• 52:47
  Speaker 1: as she passed away, my name was in public anyway.
• 52:49
  Speaker 1: I I you know, I obviously linked to the New
• 52:51
  Speaker 1: York Times the Bituari, which was actually a lovely, lovely
• 52:56
  Speaker 1: it was they wrote a beautiful piece and and and
• 53:00
  Speaker 1: I think that's probably the first time anyone got im
• 53:02
  Speaker 1: obituary for being a blogger. She was so famous. I
• 53:06
  Speaker 1: think that that might very well be the case. So
• 53:08
  Speaker 1: let's talk about a related issue. What is the war
• 53:13
  Speaker 1: on data? I wrote a piece I don't know last
• 53:18
  Speaker 1: month or whenever that was the Bookmarke did and saved
• 53:22
  Speaker 1: it knowing this was coming up. By the way, for listeners,
• 53:26
  Speaker 1: Bill lives on the other side, literally about as far
• 53:28
  Speaker 1: away in mainland, United States. You're in Newport Beach, and
• 53:33
  Speaker 1: we knew you were coming in five months ago, four
• 53:36
  Speaker 1: months ago. So I started saying saving stuff. Oh, let
• 53:39
  Speaker 1: me ask him about this. That one has been with
• 53:42
  Speaker 1: me for a while, So let's let's jump into it.
• 53:45
  Speaker 1: What what is the war on data? Well, it's we
• 53:48
  Speaker 1: were talking about a little bit earlier. Um is there's
• 53:53
  Speaker 1: a sense that the data is false by a certain
• 53:55
  Speaker 1: group of people, not just the employment not just flogyment data,
• 54:00
  Speaker 1: but but they they you know, I'd have to go
• 54:02
  Speaker 1: back through my piece, but I forget all the things
• 54:05
  Speaker 1: I was pulling out. Some of it's political, some of
• 54:07
  Speaker 1: it's with people with positions, I mean market positions or
• 54:11
  Speaker 1: housing positions. Yeah, they're just there. There's there are a
• 54:14
  Speaker 1: group of people. It's just like people that reject climate change.
• 54:18
  Speaker 1: If you will, you know, uh, what do you say
• 54:20
  Speaker 1: in climate change is real? Now I gotta go, I
• 54:24
  Speaker 1: gotta go rethink everything. Um. But you know, there's there
• 54:27
  Speaker 1: are people that are that are rejecting data and going
• 54:30
  Speaker 1: with what they want it to be. The data wanted.
• 54:33
  Speaker 1: They want the data to be this for whatever reason,
• 54:35
  Speaker 1: whether it's political or or cognitive dissonance. Yeah, I think
• 54:40
  Speaker 1: I think some percentage of these folks don't even realize
• 54:43
  Speaker 1: what they're doing. Some are just outright lyne but there's
• 54:46
  Speaker 1: a healthy percentage that simply can't acknowledge well or or
• 54:50
  Speaker 1: they see their own circumstances and and maybe believe that
• 54:54
  Speaker 1: that's more widespread. You know, maybe maybe for whatever reason,
• 54:57
  Speaker 1: they're seeing more inflation than the inflation data shows and
• 55:02
  Speaker 1: because of where, how how they spend their money. Uh,
• 55:05
  Speaker 1: you know, no question, rent's gone up faster than than inflation.
• 55:09
  Speaker 1: So if a rent, if a rents a big portion
• 55:11
  Speaker 1: of somebody's monthly spending, they're going to think what those
• 55:14
  Speaker 1: inflation numbers are are incorrect. So, you know, there's some
• 55:17
  Speaker 1: of that. It's just that I think people are taking
• 55:20
  Speaker 1: that people in positions of of of some power are
• 55:23
  Speaker 1: taking that and or or commentators and and just attacking
• 55:27
  Speaker 1: data right and left. And you know, if if like
• 55:31
  Speaker 1: we were talking earlier, you you have to have a
• 55:34
  Speaker 1: good system of collecting data and you have to be
• 55:36
  Speaker 1: transparent on the data. And that's what we have at
• 55:38
  Speaker 1: the United States probably has the best data in the world.
• 55:41
  Speaker 1: But who's even close. There's no one even said well,
• 55:43
  Speaker 1: Western Europe is far behind us, and um um. And
• 55:47
  Speaker 1: at dinner last night a reporter who is hometown in
• 55:51
  Speaker 1: London was saying, the UK has terrible data competed in
• 55:54
  Speaker 1: the United States. Yeah, I mean and and and they're
• 55:57
  Speaker 1: and they're actually very good. It's you know, in the world.
• 56:00
  Speaker 1: World in the United States is just excellent. And well
• 56:02
  Speaker 1: we started post recession and post Great Depression in the
• 56:05
  Speaker 1: thirties and forties. This really came about, um from from
• 56:09
  Speaker 1: a number of people where it was pretty clear there
• 56:12
  Speaker 1: was no data to measure progress or lack thereof. Well,
• 56:15
  Speaker 1: you know that anytime you have something that you want
• 56:18
  Speaker 1: to understand, you have, the first thing you have to
• 56:20
  Speaker 1: do is measure it. Uh and and because then if
• 56:23
  Speaker 1: you say you make a policy change, well, how do
• 56:25
  Speaker 1: you know if it did anything? If if you're if
• 56:28
  Speaker 1: you can't measure it, and it's like it's like, you know,
• 56:30
  Speaker 1: losing weight or something. If you don't get on the scale,
• 56:33
  Speaker 1: how do you know if you've really lost weight? I
• 56:34
  Speaker 1: guess you could check. Yeah, but that's another measurement system.
• 56:38
  Speaker 1: I guess it is. Yeah. So um, yes, After the
• 56:42
  Speaker 1: Great Depression, they started doing really collecting much better employment data.
• 56:45
  Speaker 1: I was kind of hoping after the Great Recession that
• 56:49
  Speaker 1: there would be an emphasis on collecting better housing data.
• 56:52
  Speaker 1: I think they could improve the housing data in what way?
• 56:54
  Speaker 1: So so we have so let's go over some of
• 56:56
  Speaker 1: the housing stats. So you have the existing home sale,
• 57:00
  Speaker 1: which is reported by the National Association of Realtors. You
• 57:04
  Speaker 1: have a new home sales, which is UH Census Department
• 57:08
  Speaker 1: Bureau UM, which is sort of kind of self reported
• 57:12
  Speaker 1: by the builders themselves well independently, independently. And I recall
• 57:17
  Speaker 1: writing something that you can want to take a three
• 57:19
  Speaker 1: month average anytime you have an outlier to the upside
• 57:22
  Speaker 1: or outside and invariably flip reverses the fire. That's right,
• 57:26
  Speaker 1: we had a huge upside. Yeah, yeah, I would, I would.
• 57:29
  Speaker 1: I would say, hey, it's great, it's a great, great number.
• 57:31
  Speaker 1: I wouldn't say, yeah, yeah, that's that's And if you
• 57:35
  Speaker 1: go back and look at the data, you can always
• 57:37
  Speaker 1: spot the outlier and the month the following, because what
• 57:40
  Speaker 1: ends up happening is people, well they'll revise that down
• 57:43
  Speaker 1: and and the whatever follows it will be a terrible month,
• 57:46
  Speaker 1: and that will eventually get get revised up. And that's
• 57:50
  Speaker 1: one of the reasons I do graphs anyway. It is
• 57:52
  Speaker 1: because it kind of can show you where you're at. Yeah,
• 57:55
  Speaker 1: this would be a little spike up and and but
• 57:57
  Speaker 1: it's within the range of variability. We're getting there anyway.
• 58:00
  Speaker 1: I you know, it's only six fifty, that's not even
• 58:04
  Speaker 1: that big of a number. So that's right. So, so
• 58:06
  Speaker 1: we have new home sales, we have existing home sales,
• 58:08
  Speaker 1: we have contract signings, we have permits for for building
• 58:14
  Speaker 1: housing starts. Is a very important number. Why is that? Um, well,
• 58:20
  Speaker 1: that's one of the biggest impacts on the economy is
• 58:23
  Speaker 1: how many from the housing industry as opposed to existing
• 58:26
  Speaker 1: home sales. Existing home sales is just there's a mortgageys. Yeah,
• 58:32
  Speaker 1: that's the Yes, people do frequently buy a little more furniture.
• 58:37
  Speaker 1: But but but it's it's more from the direct sale.
• 58:40
  Speaker 1: That's all it is is the broker's fee and a
• 58:42
  Speaker 1: few other fees mortgages. That adds to the economy. But
• 58:45
  Speaker 1: when you build a new home sales, the whole prices
• 58:48
  Speaker 1: is new. It's that you've added to the existing wealth
• 58:50
  Speaker 1: of the company, the country. Uh so it's it's a
• 58:53
  Speaker 1: big deal. And what's the ratio of existing to new
• 58:56
  Speaker 1: home sales more or less? Uh, it's about eight to one,
• 59:02
  Speaker 1: maybe tend to one, even he used to it used
• 59:05
  Speaker 1: to be closer maybe six to one existing to the new.
• 59:09
  Speaker 1: Um there's there's been ever since the crisis, a lot
• 59:14
  Speaker 1: more existing home sales. New homes got slaughtered. Well, because
• 59:18
  Speaker 1: you're you're competing against foreclosures, you're competing against dramatically. Although
• 59:22
  Speaker 1: let's talk a little bit about foreclosures and and before
• 59:26
  Speaker 1: I get to foreclosures, I almost forgot multi family homes.
• 59:29
  Speaker 1: That's been a big uptick post crisis. Also, yes, And
• 59:33
  Speaker 1: is that just a reflection of rental demand or well? Yeah, Well,
• 59:37
  Speaker 1: you know, one of the nice things about for multi
• 59:39
  Speaker 1: family is there's the demographics have been incredibly positive for him.
• 59:45
  Speaker 1: At the same time you had all these people moving
• 59:47
  Speaker 1: out of foreclosed homes, and and and looking for a
• 59:51
  Speaker 1: place to rent. Now, a lot of those houses were
• 59:53
  Speaker 1: bought to to rent, and so that you would think, oh, well,
• 59:56
  Speaker 1: would you wouldn't have this multi family But but you
• 59:58
  Speaker 1: do have this huge surge in people in the twenties
• 1:00:01
  Speaker 1: and that's the main rental a demographic. So there's a
• 1:00:05
  Speaker 1: big cohort there. They're not going to buy. There's well
• 1:00:08
  Speaker 1: they're starting to move into the buying years. So we
• 1:00:11
  Speaker 1: were moving out of parents basement. They're certainly renting. Are
• 1:00:14
  Speaker 1: they forming households? That's another great data. Yeah, and they
• 1:00:17
  Speaker 1: will household formation and they will and and uh, you
• 1:00:20
  Speaker 1: know the problem with household formation data. See, there's an
• 1:00:23
  Speaker 1: area that we could really improve is everybody uses the
• 1:00:26
  Speaker 1: HVS Housing Vacancy Survey or whatever and and uh, and
• 1:00:30
  Speaker 1: that data is not consistent with with the annual census
• 1:00:36
  Speaker 1: or the ten year census. So and the Census Bureau
• 1:00:40
  Speaker 1: is aware of that and they're trying to figure out
• 1:00:42
  Speaker 1: why that data is so inconsistent. Um, but that's something
• 1:00:46
  Speaker 1: they can do a much better job of, I think
• 1:00:48
  Speaker 1: is is uh household formations. So the next president gets
• 1:00:51
  Speaker 1: elected and they say, I want to see some better
• 1:00:55
  Speaker 1: data on the economics side, and they pick up the
• 1:00:58
  Speaker 1: phone and say, Bill, you mind coming to d C
• 1:01:01
  Speaker 1: for a year or two. We have some work for you.
• 1:01:03
  Speaker 1: What sort of stuff would you would you look to add, refine, improve,
• 1:01:08
  Speaker 1: or eliminate. Well, I think housing is is so important
• 1:01:13
  Speaker 1: that I would definitely go through the methodology of each
• 1:01:15
  Speaker 1: of those. Um. One of the interesting things I think
• 1:01:19
  Speaker 1: is h for housing starts. If I'm remembering this correctly,
• 1:01:24
  Speaker 1: it might be new home sales, they don't include certain condos, right,
• 1:01:29
  Speaker 1: so if if if if they're side by side condos,
• 1:01:31
  Speaker 1: they include them. But if their high right condo condos,
• 1:01:34
  Speaker 1: they don't. And it's really complicated, and and and there's there,
• 1:01:38
  Speaker 1: and we're moving to where there's more of those being built,
• 1:01:41
  Speaker 1: so we could have more units coming on the market
• 1:01:44
  Speaker 1: than anybody's really aware. That has to be fixed. Yeah,
• 1:01:47
  Speaker 1: that that just needs to be resolved. What what aren't
• 1:01:49
  Speaker 1: we measuring that we should? Well, you know, I I'm
• 1:01:55
  Speaker 1: not completely confident in the private sources of of data.
• 1:02:00
  Speaker 1: So let's talk about the National Association of Realtors and
• 1:02:03
  Speaker 1: I'll throw them under the bus because I know you
• 1:02:05
  Speaker 1: don't want to do that. We all so everybody who
• 1:02:10
  Speaker 1: blogged about realistic and economics used to make fun of
• 1:02:15
  Speaker 1: the chief economists for the n R because they were
• 1:02:19
  Speaker 1: from the peak and oh six to the bottom in
• 1:02:23
  Speaker 1: they were just relentlessly optimistic. And I figured that guy's
• 1:02:26
  Speaker 1: named David David Young, that's the current guy. Um Laria. Yeah,
• 1:02:32
  Speaker 1: so he had the same book. So the fantastic thing
• 1:02:38
  Speaker 1: about that book is the same book came out two
• 1:02:41
  Speaker 1: or three times, same picture, same everything. This is a
• 1:02:45
  Speaker 1: blog post somewhere about it. And they just changed the
• 1:02:48
  Speaker 1: name of it. So the first name was something like
• 1:02:51
  Speaker 1: I'll google it and see if I can find it.
• 1:02:53
  Speaker 1: Why now is the time to buy housing? It was
• 1:02:55
  Speaker 1: right at the peak, and then two years later they
• 1:02:58
  Speaker 1: reissued it with a different house and take advantage of
• 1:03:01
  Speaker 1: the decline in housing. And then the third the third
• 1:03:05
  Speaker 1: cover was We're all going to die run for the
• 1:03:08
  Speaker 1: hills sort of thing. And and by the way, that
• 1:03:10
  Speaker 1: was at the bottom. It was it was quite quite amazing. Well,
• 1:03:14
  Speaker 1: you know when we're talking about than are you know,
• 1:03:17
  Speaker 1: I have a good relationship with a lot of the
• 1:03:19
  Speaker 1: industry people at nb A Mortgage Bankers Association, which I
• 1:03:24
  Speaker 1: find to be a much more realistic Those guys are.
• 1:03:27
  Speaker 1: They're straight shooters and and they and they do an
• 1:03:29
  Speaker 1: excellent job. National Associated Homebuilders same thing than are For
• 1:03:32
  Speaker 1: some reason, they're more cheerleader oriented because it's it's real
• 1:03:35
  Speaker 1: estate agents and uh and and uh here it is.
• 1:03:39
  Speaker 1: I actually found it the O five, Um, David Laria,
• 1:03:43
  Speaker 1: are you missing the real estate Boom? And then and
• 1:03:47
  Speaker 1: then um the second version of the cover in two
• 1:03:50
  Speaker 1: thousand and six was why the real Estate Boom Will
• 1:03:52
  Speaker 1: Not Bust? And then the two thousand and seven and
• 1:03:56
  Speaker 1: by the way, there's a house floating and a couple
• 1:03:59
  Speaker 1: with a kid looking at it. In the first two editions.
• 1:04:01
  Speaker 1: The third edition, All real estate is local. The house
• 1:04:04
  Speaker 1: is missing, it's just at and that is actually, this
• 1:04:08
  Speaker 1: is not fabricated. This is true. It's the same book.
• 1:04:13
  Speaker 1: You know, could not have been more wrong with with
• 1:04:17
  Speaker 1: three different covers. It's quite it's quite uh quite astonishing.
• 1:04:22
  Speaker 1: But their role is a cheerleader, right, I mean National
• 1:04:25
  Speaker 1: Associated Homebuilder their role they they they they're the homebuilders
• 1:04:29
  Speaker 1: really want to know what's happening, and so when they
• 1:04:31
  Speaker 1: gather data from them and distribute it, it's real. And
• 1:04:35
  Speaker 1: same with Mortgage Bankers Association. I'm not saying the NORDS
• 1:04:37
  Speaker 1: data isn't real. They just they they spin it. They
• 1:04:41
  Speaker 1: spent it very positively, and it's not really gathered in
• 1:04:44
  Speaker 1: a very scientific way. So, um, so isn't it based
• 1:04:49
  Speaker 1: on on on what McCall it on? Actual closings? Don't they? Yeah?
• 1:04:55
  Speaker 1: But you know they they're they're sampling. It's mushy, Yeah,
• 1:04:57
  Speaker 1: they were. They sample. What they do is they sample
• 1:05:00
  Speaker 1: certain large multiple listing services and that's they based it
• 1:05:05
  Speaker 1: off that. And then every what they were doing is
• 1:05:07
  Speaker 1: every ten years they would go to the Census Bureau
• 1:05:10
  Speaker 1: and and look at how many houses have sold, and
• 1:05:12
  Speaker 1: then they would try to rejigger. Yeah, if you will,
• 1:05:16
  Speaker 1: so and so I I to me, you know, we're
• 1:05:19
  Speaker 1: getting to the stage where why can't we count pretty
• 1:05:21
  Speaker 1: much every closing in America? I don't understand why not either? Yeah,
• 1:05:24
  Speaker 1: I mean, I I so that I know that's been discussed.
• 1:05:28
  Speaker 1: When you're in DC. Can we get the BLS or
• 1:05:31
  Speaker 1: i'd really Commerce Department? I like I'd like to see
• 1:05:34
  Speaker 1: them do that. And and you know the other thing
• 1:05:37
  Speaker 1: is is when they're calculating GDP, they're just estimating the
• 1:05:41
  Speaker 1: percentage that the salesperson gets and which has been under pressure,
• 1:05:45
  Speaker 1: and it's actually yeah, and and and I think that,
• 1:05:49
  Speaker 1: you know, it's very possible that that's being overstated a
• 1:05:52
  Speaker 1: little bit. So we really who knows, who knows? I
• 1:05:54
  Speaker 1: really don't know. Nobody knows. And and uh, I mean
• 1:05:56
  Speaker 1: there's a lot of estimating that goes on, but that
• 1:05:59
  Speaker 1: that whole industry is undergoing dramatic change right now. And
• 1:06:03
  Speaker 1: and uh, you know the online sites have just changed
• 1:06:05
  Speaker 1: it dramatically, so you you, you know, they could measure
• 1:06:08
  Speaker 1: that a lot better. And and so we've talked about
• 1:06:11
  Speaker 1: how they commit. They might be missing some high rise condos.
• 1:06:16
  Speaker 1: The the existing home sales and commissions I think could
• 1:06:19
  Speaker 1: be measured a lot better. Um house prices I think
• 1:06:23
  Speaker 1: is an interesting thing. The f h f A. It
• 1:06:25
  Speaker 1: does an excellent job, and they have an expanded series,
• 1:06:29
  Speaker 1: it doesn't get the publicity it deserves. Are they tracking
• 1:06:32
  Speaker 1: the same house over time? Yes, exactly. So that's what's
• 1:06:35
  Speaker 1: really fascinating. Supposed to repeat sales. But you know, even
• 1:06:39
  Speaker 1: even that, you know it's right away seven years apart
• 1:06:43
  Speaker 1: on average something like that. Yeah, something like that. And
• 1:06:46
  Speaker 1: but you know, even that has obvious flaws. What if
• 1:06:49
  Speaker 1: the people didn't maintain it what if they put in
• 1:06:51
  Speaker 1: a new kitchen, you know, uh so just put it
• 1:06:53
  Speaker 1: in the bathroom. Yeah, they and they try and and
• 1:06:56
  Speaker 1: they try to do some permitting. It was something permitted,
• 1:06:59
  Speaker 1: but you know a lot of people put in a
• 1:07:00
  Speaker 1: new bathroom without permitting it and nephews. So in my
• 1:07:05
  Speaker 1: town of Oyster Bay, unless you're changing the footprint of
• 1:07:10
  Speaker 1: the house or running a natural gas line in like
• 1:07:13
  Speaker 1: I'm in the midst of doing, you don't need a permit.
• 1:07:16
  Speaker 1: A permit for the natural gas. You could redo a kitchen,
• 1:07:19
  Speaker 1: you could redo a bathroom. You don't need a permit.
• 1:07:21
  Speaker 1: If you if you extend the house, if you change
• 1:07:23
  Speaker 1: the footprint, if you replace a make a deck bigger,
• 1:07:27
  Speaker 1: and it impinges on the name, you you need a permit.
• 1:07:30
  Speaker 1: But you know, it depends on what you do. Obviously.
• 1:07:32
  Speaker 1: I think in any area you can retile your bathroom
• 1:07:36
  Speaker 1: without a permit. I think if you move the electricity around, yep,
• 1:07:39
  Speaker 1: change the plugs, whatever, I think most places would require
• 1:07:42
  Speaker 1: a permit. Makes sense. You have to have the electrical
• 1:07:45
  Speaker 1: inspector to make sure it was done to so, you know,
• 1:07:49
  Speaker 1: But but a lot of people do that without permits.
• 1:07:52
  Speaker 1: So there's because you don't want to pay an increased
• 1:07:54
  Speaker 1: tax rate. You pay a fine at the end five
• 1:07:56
  Speaker 1: years later, so instead of paying a thousand dollars more
• 1:07:58
  Speaker 1: a year, you pay two. They never they never even
• 1:08:00
  Speaker 1: catch them. Sometimes you need a CEO, a certificate of
• 1:08:03
  Speaker 1: ocupancy when you do the sale, so people run around
• 1:08:07
  Speaker 1: before a closing in order to make all that um
• 1:08:10
  Speaker 1: On the spin from the National Association of Realtors, I'm
• 1:08:14
  Speaker 1: going way back two thousand and seven, there was a
• 1:08:17
  Speaker 1: quote in the Palm Beach Post. Some realtors are grumbling
• 1:08:21
  Speaker 1: about prices falling. Guess who they're not falling. Guess who
• 1:08:25
  Speaker 1: they're blaming. A growing number of realtors in Florida are
• 1:08:28
  Speaker 1: frustrated with the state and National Realtors Group efforts to
• 1:08:32
  Speaker 1: spin the market as one that is strengthening and where
• 1:08:36
  Speaker 1: home prices are stabilizing. We people can take Customers continue
• 1:08:40
  Speaker 1: to list their homes at prices that are unrealistic, and
• 1:08:43
  Speaker 1: as a result, sales volumes and thus commissions continue to
• 1:08:47
  Speaker 1: be depressed. So the net impact of the n a
• 1:08:50
  Speaker 1: R spin in oh seven was that agents were saying
• 1:08:53
  Speaker 1: to people, these prices are unrealistic, and they're saying, well,
• 1:08:58
  Speaker 1: I read the paper. Things are getting better. Yeah, that's
• 1:09:00
  Speaker 1: the problem. That's what the home builders don't tolerate. But
• 1:09:03
  Speaker 1: the agents, but on a national level have have mess wet. Yeah,
• 1:09:07
  Speaker 1: you know, but there's there's more than the National Association
• 1:09:10
  Speaker 1: of Realtors there they're compliding about. And if you own yeah,
• 1:09:14
  Speaker 1: well they are clearly. But if you if you own
• 1:09:16
  Speaker 1: a home and it's pretty much equivalent to your neighbor
• 1:09:19
  Speaker 1: and he sold it for six hundred thousand, and the
• 1:09:22
  Speaker 1: agents tell you when you're only gonna get five hundred thousand.
• 1:09:24
  Speaker 1: For years, you think that agents crazy. And and yet
• 1:09:28
  Speaker 1: that might have been a very fair price or maybe
• 1:09:31
  Speaker 1: even too high. How many times did you have that
• 1:09:33
  Speaker 1: conversation with people and they said, when did the neighbors
• 1:09:37
  Speaker 1: sell the house? Well they sold it to know five. Well,
• 1:09:39
  Speaker 1: it's oh eight and we have five million foreclosures exactly.
• 1:09:44
  Speaker 1: If you want to sell at that price, getting a
• 1:09:46
  Speaker 1: time machine, go back to oh five, you get that price. Yeah,
• 1:09:49
  Speaker 1: but you have to. It does take extra effort. You
• 1:09:51
  Speaker 1: do have to explain that to him and go through.
• 1:09:54
  Speaker 1: I do know a family member, my mom, who wanted
• 1:09:58
  Speaker 1: to sell in like two thousands heaven and uh and
• 1:10:01
  Speaker 1: moved to a retirement community and it worked out great
• 1:10:04
  Speaker 1: for her. But I I went down, we went and
• 1:10:06
  Speaker 1: looked at the local houses and they were the inventory
• 1:10:08
  Speaker 1: was really expanding, and I said, let's underprice everybody, and
• 1:10:12
  Speaker 1: and uh and we sold it right away and and
• 1:10:14
  Speaker 1: and you know what, that guy's got a nice house
• 1:10:16
  Speaker 1: and it's worth more than he paid for it. So
• 1:10:18
  Speaker 1: ten years later and yeah, he's he's fine, and he
• 1:10:21
  Speaker 1: and you know, he loves the house. And but my
• 1:10:23
  Speaker 1: mom got that money out. It made her her retirement easy,
• 1:10:27
  Speaker 1: you know. But other people were sticking to their prices,
• 1:10:29
  Speaker 1: you know, and or chasing them down, which is probably
• 1:10:31
  Speaker 1: the worst thing you can do. I did that with
• 1:10:34
  Speaker 1: a house we tried to buy, and thanks to technology,
• 1:10:37
  Speaker 1: you could look at every listing price and then you
• 1:10:41
  Speaker 1: find out so it's here, and then it's a hundred
• 1:10:43
  Speaker 1: thousand lower, and then it's a hundred thousand lower, and
• 1:10:46
  Speaker 1: you're watching them, but they're a hundred thousand or more
• 1:10:50
  Speaker 1: behind the market, so they're just following it down and
• 1:10:52
  Speaker 1: not selling it and just creating this paper trail. Or
• 1:10:55
  Speaker 1: chasing the market is one of the worst things you
• 1:10:57
  Speaker 1: can do. You gotta skate to where the puck is
• 1:10:58
  Speaker 1: gonna be not to where it was five minutes ago.
• 1:11:01
  Speaker 1: And really, you know, selling a house is so emotional. Hey,
• 1:11:04
  Speaker 1: we lived here for twenty years, we raised our kids here.
• 1:11:07
  Speaker 1: How could this only be worth x? It's worth three
• 1:11:10
  Speaker 1: X well to you, but you've already bought it. You've
• 1:11:12
  Speaker 1: gotta it's coming to somebody who doesn't have the memories.
• 1:11:16
  Speaker 1: You gotta get realistic. So we mentioned foreclosures before. Let's
• 1:11:20
  Speaker 1: talk a little bit about the foreclosure crisis way back when. Um,
• 1:11:26
  Speaker 1: what took place, uh during the from the O six
• 1:11:29
  Speaker 1: peak to bottom more or less? Um? And what did
• 1:11:35
  Speaker 1: we do right as a country and what are we
• 1:11:37
  Speaker 1: doing wrong with that? You know, I personally think it's
• 1:11:42
  Speaker 1: some areas of the country are still trying to recover.
• 1:11:45
  Speaker 1: So New Jersey, but that has that New Jersey has
• 1:11:50
  Speaker 1: its own specific Yeah. But but you know, but if
• 1:11:54
  Speaker 1: you go and look the states that have been slowest
• 1:11:57
  Speaker 1: to recover all have judicial foreclosures them. That's taken forever. Yeah,
• 1:12:02
  Speaker 1: and and you know by half the states are judicial.
• 1:12:04
  Speaker 1: You gotta go to court. The other states, it's it's
• 1:12:07
  Speaker 1: a straightforward system. What about the rocket courts that Florida
• 1:12:10
  Speaker 1: set up yeah, you know, I guess they've supposed to
• 1:12:13
  Speaker 1: be horrible by the way, I'm sure because people have
• 1:12:15
  Speaker 1: complained that they haven't even gotten noticed they've come home
• 1:12:18
  Speaker 1: and well, you know that it really didn't help. It
• 1:12:21
  Speaker 1: made things obviously much much worse for everybody that the
• 1:12:24
  Speaker 1: mortgage industry was cheating on the foreclosures constantly. Yeah, and
• 1:12:27
  Speaker 1: so ham Bondi, a g of of Attorney General of Florida,
• 1:12:31
  Speaker 1: got elected and stopped but with a lot of real
• 1:12:35
  Speaker 1: estate developer and real estate owners backings, and stopped all
• 1:12:39
  Speaker 1: the mortgage foreclosure cheating investigations that her office her predecessor
• 1:12:45
  Speaker 1: Edward not my favorite age in America. Yeah, but that
• 1:12:48
  Speaker 1: you know, to me, that that was that made things
• 1:12:50
  Speaker 1: a much much worse. Is if if they had just
• 1:12:54
  Speaker 1: followed the rules and and done things correctly, what do
• 1:12:57
  Speaker 1: you do when you can't find a note. We're missing
• 1:12:59
  Speaker 1: the note? Now, well you can always go recreated. I mean,
• 1:13:03
  Speaker 1: but they were paying there was actually I could cost
• 1:13:06
  Speaker 1: you a lot of money. That's one of the things
• 1:13:07
  Speaker 1: that Tanta was talking about. They they had cut the
• 1:13:10
  Speaker 1: back rooms so much that they that whole they just
• 1:13:14
  Speaker 1: kind of assumed, well, we're never going to have foreclosures,
• 1:13:16
  Speaker 1: you know where when when Tanta was working in that industry,
• 1:13:20
  Speaker 1: that was very important to check every file, to make
• 1:13:22
  Speaker 1: sure every file was completely correct. You know, you had
• 1:13:25
  Speaker 1: all every single piece of document, which is what they
• 1:13:27
  Speaker 1: do again today. So so what about let's talk a
• 1:13:30
  Speaker 1: little bit about MERS the Mortgage Electronic Registry. I like
• 1:13:36
  Speaker 1: the idea. I think it's greatly see I think that
• 1:13:38
  Speaker 1: it's a scam and it exists to not pay recording
• 1:13:42
  Speaker 1: tax or transfer tax county by county. They've been sued
• 1:13:46
  Speaker 1: by a number of people. Well I I yes, but
• 1:13:50
  Speaker 1: and it allows you to to put you could sell
• 1:13:53
  Speaker 1: a mortgage so many times that supposedly you're tracking it
• 1:13:56
  Speaker 1: through this electronic registry, but you weren't. There was some
• 1:14:00
  Speaker 1: any times we didn't couldn't tell who won't the house. Well,
• 1:14:02
  Speaker 1: first of all, it was implemented poorly. Once it's implemented poorly,
• 1:14:05
  Speaker 1: it's a bad system. So you don't there's no argument
• 1:14:08
  Speaker 1: for me on that. The general idea. I kind of like,
• 1:14:11
  Speaker 1: well if it was done with full congressional authority and
• 1:14:16
  Speaker 1: local authority, but that didn't happen. I mean, I mean
• 1:14:19
  Speaker 1: the idea of that that you because because what they
• 1:14:22
  Speaker 1: wanted to do was put the mortgage the mortgages into
• 1:14:24
  Speaker 1: mortgage backed security. Sure, and nothing wrong with that. No,
• 1:14:27
  Speaker 1: it's nothing wrong with that, But it's gotta you can't
• 1:14:29
  Speaker 1: have just some random companies saying wouldn't in my opinion,
• 1:14:33
  Speaker 1: we can't bypass the local authority because it's faster, easier, cheaper.
• 1:14:38
  Speaker 1: I'm convinced that mirrors is an underwritten story of the crisis.
• 1:14:42
  Speaker 1: But for mers, we may not have had as deep
• 1:14:45
  Speaker 1: and bed. You couldn't have cranked out as many houses
• 1:14:47
  Speaker 1: and as No, yeah you need you needed to that. Yeah,
• 1:14:50
  Speaker 1: So so that was that was you know, it was
• 1:14:52
  Speaker 1: a little bit of a grease enabler. But we want
• 1:14:54
  Speaker 1: your cause, so sure. No, definitely not a cause, but
• 1:14:57
  Speaker 1: definitely an enabler. God, there's so many questions I haven't
• 1:15:01
  Speaker 1: gotten to and I want to make sure I leave
• 1:15:04
  Speaker 1: leave some time to our standard questions. Um. So here's
• 1:15:09
  Speaker 1: an interesting question A reader had asked. Asked McBride what
• 1:15:12
  Speaker 1: policy choices he would make to improve a lot of
• 1:15:16
  Speaker 1: the bottom even if it hurt corporate America. Well, uh
• 1:15:24
  Speaker 1: not not. You know, I think that one of the
• 1:15:27
  Speaker 1: key things is is you've got to have wages up.
• 1:15:29
  Speaker 1: You have to get wages up for the lower income workers.
• 1:15:32
  Speaker 1: So how do we do that? And so with the
• 1:15:35
  Speaker 1: the to one thing you can do is you can
• 1:15:38
  Speaker 1: mandate a higher a minimum wage. That will help. How
• 1:15:41
  Speaker 1: many people earned minimum wage? It's not that many, but
• 1:15:44
  Speaker 1: it pushes up the people that are just above minimum
• 1:15:46
  Speaker 1: I guess everybody. And then but but I think the
• 1:15:51
  Speaker 1: key is more bargaining power for workers of some sort.
• 1:15:55
  Speaker 1: So that means stronger unions. Yeah, well we've crushed the unions, yes,
• 1:15:58
  Speaker 1: other than the public union um, which which have plenty
• 1:16:01
  Speaker 1: of problems still, you know, I mean because they have
• 1:16:04
  Speaker 1: all these pensions that are crazy. So with the public unions,
• 1:16:07
  Speaker 1: I'm kind of like, well, we should take a lot
• 1:16:09
  Speaker 1: of effort and and and work on those the pensions.
• 1:16:13
  Speaker 1: But but if when we're talking about improving a lot
• 1:16:15
  Speaker 1: of the lower fift I think getting some sort of
• 1:16:19
  Speaker 1: bargaining for workers, um and you know, whether they're unionized
• 1:16:25
  Speaker 1: or some other way. I'm not a labor expert, but
• 1:16:27
  Speaker 1: I do think that that's where one of the keys.
• 1:16:29
  Speaker 1: The the full of the may be a coincidence, but
• 1:16:33
  Speaker 1: the full of the strength of unions and the full
• 1:16:37
  Speaker 1: and middle class income is seems to be quite the coincidence.
• 1:16:42
  Speaker 1: One would imagine they're related. Oh, they're They're definitely related,
• 1:16:45
  Speaker 1: there's no question. And in raising the minimum wage is
• 1:16:48
  Speaker 1: going to help some. So you know, there's a policy
• 1:16:51
  Speaker 1: that we can do. I don't think that there's a
• 1:16:54
  Speaker 1: big negative impact for for I mean, for you know,
• 1:16:57
  Speaker 1: in most areas, especially in the course if you look right,
• 1:16:59
  Speaker 1: if you look in the Seattle and Portland and San
• 1:17:02
  Speaker 1: Francisco in l A, they could raise a minimum wage
• 1:17:05
  Speaker 1: to fifteen dollars and it's fine, may not work in
• 1:17:08
  Speaker 1: the heartland. Yeah, basically in l A you had to
• 1:17:10
  Speaker 1: pay that anyway. So um, well, you see Walmart McDonald's
• 1:17:14
  Speaker 1: raising the minimum that's telling you they're having trouble getting workers.
• 1:17:18
  Speaker 1: So so it's it's how you can either let the
• 1:17:20
  Speaker 1: market do it or speed along and do it legislatively.
• 1:17:24
  Speaker 1: I know a lot of people have a mandate. Yeah,
• 1:17:26
  Speaker 1: I mean, working for the minimum wage is pretty minimal.
• 1:17:29
  Speaker 1: And you're at even at at fifteen dollars, you're still
• 1:17:33
  Speaker 1: at a at a forty hour week, you're you're more
• 1:17:36
  Speaker 1: or less right at the poverty level, depending on how
• 1:17:38
  Speaker 1: many kids. I don't know, how you live in l
• 1:17:40
  Speaker 1: A or New York can It's it's impossible. You've taken
• 1:17:42
  Speaker 1: a second job working off the books. It's it's rough. Uh.
• 1:17:46
  Speaker 1: Interesting question that came in from another reader. Um, we
• 1:17:50
  Speaker 1: keep hearing about quote the next subprime. Where do you
• 1:17:54
  Speaker 1: see excesses in the credit market that might be the
• 1:17:58
  Speaker 1: next subprime? You know? Right now? It's I I think
• 1:18:02
  Speaker 1: we're okay in most areas. Um. I mean a lot
• 1:18:06
  Speaker 1: of people focus on the auto loans, but you know
• 1:18:08
  Speaker 1: auto loans at car the cars are easy to repossess.
• 1:18:11
  Speaker 1: The technology that's built into it now is you buy
• 1:18:14
  Speaker 1: a car if you don't have a good credit rating.
• 1:18:17
  Speaker 1: I wrote a column about this a few months ago.
• 1:18:19
  Speaker 1: And they building a remote kill switch, so you miss
• 1:18:23
  Speaker 1: a payment, they shut the car off. Yeah, people, you
• 1:18:25
  Speaker 1: want that car, you gotta water the money. And yeah
• 1:18:27
  Speaker 1: in in l A, you want your car bad for sure.
• 1:18:32
  Speaker 1: That's how you get to work or get to anything.
• 1:18:33
  Speaker 1: So you know, people pay. During the four closure crisis,
• 1:18:37
  Speaker 1: people were paying their car loans, but they weren't paying
• 1:18:39
  Speaker 1: their house loans. The story was you'd pay your visa,
• 1:18:42
  Speaker 1: you'd pay your car loan, you would skip the student loan.
• 1:18:45
  Speaker 1: You would skip the mortgage because what are they gonna do.
• 1:18:47
  Speaker 1: It's gonna take three years. Yeah, you know, I'm not
• 1:18:49
  Speaker 1: I'm not that concerned about student loans either. I I
• 1:18:53
  Speaker 1: think that there's things we can do, um, lower interest rates. Sure,
• 1:18:57
  Speaker 1: I I you know, when I went to school cool, Um,
• 1:19:01
  Speaker 1: you know, it really dates me. But I paid. I
• 1:19:04
  Speaker 1: went to University of California, Irvine. Paid two hundred dollars
• 1:19:07
  Speaker 1: a quarter to go to school. I went to Sunny
• 1:19:10
  Speaker 1: Stony Brook. My first semester was semester, not even quarter.
• 1:19:13
  Speaker 1: Two semesters four fifty. Yeah, so you know, uh, I
• 1:19:17
  Speaker 1: could go. I paid my way through school. I could
• 1:19:20
  Speaker 1: work on the weekends, pay my rent, pay my my tuition.
• 1:19:24
  Speaker 1: I think that that's kind of Now it's twelve thousand
• 1:19:26
  Speaker 1: a semester. What do you do? Yeah, I mean, if
• 1:19:28
  Speaker 1: you can't work on the weekends to go to school,
• 1:19:30
  Speaker 1: it makes life completely different. Sure, you know, not everybody
• 1:19:33
  Speaker 1: did that. Luckily, a lot of people when I was young,
• 1:19:35
  Speaker 1: their parents paid it because it wasn't that much either,
• 1:19:37
  Speaker 1: you know. But so you know there's I do like
• 1:19:40
  Speaker 1: the idea of making some education less expensive makes sense. What, um,
• 1:19:46
  Speaker 1: what asset classes do you see as expensive or is
• 1:19:49
  Speaker 1: that something you really don't pay close attention to. Um,
• 1:19:54
  Speaker 1: you know, I I I know it's not something I
• 1:19:57
  Speaker 1: don't write about. But you basically everything is at least
• 1:20:02
  Speaker 1: fairly valued now I don't see you know, like in
• 1:20:05
  Speaker 1: two thousand twelve, it was clear to me that if
• 1:20:08
  Speaker 1: you should be out buying as much real estate as
• 1:20:10
  Speaker 1: you could, um, the in two thousand nine, you should
• 1:20:16
  Speaker 1: be jumping in as hard as you can into the
• 1:20:18
  Speaker 1: stock market. So what do you do in two thousand six, Um, Well,
• 1:20:25
  Speaker 1: earlier this year I did buy. I put some money
• 1:20:26
  Speaker 1: into the stock market when we had that nice yeah,
• 1:20:30
  Speaker 1: and and so that was well, you know, luckily I'm
• 1:20:32
  Speaker 1: not sitting on any cash right now. I don't know
• 1:20:34
  Speaker 1: exactly what I would do today. You know, It's funny.
• 1:20:36
  Speaker 1: One of the things is I don't know what I'm
• 1:20:37
  Speaker 1: gonna do until I need to do it exactly. Uh.
• 1:20:41
  Speaker 1: I like that. I don't give advice on investing on
• 1:20:45
  Speaker 1: a daily basis. You know, back when, because we were
• 1:20:48
  Speaker 1: talking about the commenting and I participated in this site
• 1:20:52
  Speaker 1: called Silicon Investor for a little while. And they, by
• 1:20:56
  Speaker 1: the way, they came to fame in the late nineties
• 1:20:58
  Speaker 1: screaming bubble, and they were right eventually, but getting timing
• 1:21:02
  Speaker 1: on that is really you know, we would talk with
• 1:21:05
  Speaker 1: some you know, as as happens on every commenting thing.
• 1:21:08
  Speaker 1: At first it was really good, and uh we talk
• 1:21:11
  Speaker 1: about different stocks and and uh. One of the things
• 1:21:14
  Speaker 1: I discovered at the time is I could mention ten
• 1:21:16
  Speaker 1: stocks that I thought were good, and nine of them
• 1:21:19
  Speaker 1: would do great and one of them would really underperform.
• 1:21:22
  Speaker 1: And then people, every time I would say anything, people
• 1:21:25
  Speaker 1: come back, weren't you the one who liked x y Z? Yes?
• 1:21:28
  Speaker 1: Out of the ten stocks I mentioned x Y And
• 1:21:30
  Speaker 1: after a while you go, I'm tired of this, you know,
• 1:21:33
  Speaker 1: I let's let's chase let's chase away all the good
• 1:21:36
  Speaker 1: commenters and just get it to the point where it's
• 1:21:39
  Speaker 1: just garbage. And that's what they do. The nice thing
• 1:21:41
  Speaker 1: about you have an NBA. The nice thing about law
• 1:21:43
  Speaker 1: school is you learn the rules of rhetoric and debate,
• 1:21:47
  Speaker 1: and so you could very I can very quickly identify
• 1:21:50
  Speaker 1: that's a strong man argument, that's an ad hominum attack,
• 1:21:53
  Speaker 1: that's arguing from extreme that's all right, Like you start
• 1:21:56
  Speaker 1: to notice all than not and comments are us they're
• 1:22:00
  Speaker 1: all that. It's just a place where logic and reasoning
• 1:22:05
  Speaker 1: go to die. It's unfortunate. So last question before I
• 1:22:09
  Speaker 1: get to my standard questions. I asked everybody so you
• 1:22:14
  Speaker 1: said you don't see a recession anytime um soon? And
• 1:22:19
  Speaker 1: I never asked people for what where, what's your favorite stock,
• 1:22:22
  Speaker 1: what's what's your with is the market could be what's
• 1:22:24
  Speaker 1: your forecast? So I'm reluctant to ask this as a
• 1:22:28
  Speaker 1: forecasting question. But how long? So I'm gonna phrase it
• 1:22:32
  Speaker 1: slightly differently. How long do you see this economic expansion continuing?
• 1:22:39
  Speaker 1: Is this something that could go on for eight thirty
• 1:22:42
  Speaker 1: six months or a wee closer to the end of
• 1:22:45
  Speaker 1: the cycle than we are to the beginning. Oh, I
• 1:22:48
  Speaker 1: would say we're probably closer to the end in the
• 1:22:50
  Speaker 1: beginning because we've been this seven years, seven years, it
• 1:22:54
  Speaker 1: will go another seven years. It could actually because because
• 1:22:57
  Speaker 1: of the slow growth. I don't think it's gonna have Yeah,
• 1:23:03
  Speaker 1: I don't think that's going to happen. But you know,
• 1:23:05
  Speaker 1: you look around, look at mortgage I could be withdrawal
• 1:23:08
  Speaker 1: is still basically zero. You know people are really yeah
• 1:23:12
  Speaker 1: people you we used to we used to look at
• 1:23:14
  Speaker 1: that data point. It was. It was enormously you know,
• 1:23:17
  Speaker 1: people are pouring money out of their houses, you know,
• 1:23:20
  Speaker 1: and and yeah, we're I think we're I think we're
• 1:23:22
  Speaker 1: right at that starting to turn positive again. But that
• 1:23:25
  Speaker 1: can go a long time positive. So you know, the
• 1:23:28
  Speaker 1: in the economy, so so I you know, as far
• 1:23:31
  Speaker 1: as the cycle, I think we're mid cycle somewhere, maybe
• 1:23:36
  Speaker 1: late in mid cycle. I'm of that camp that sixth inning,
• 1:23:40
  Speaker 1: that metaphor no but no, yeah, but I'm I'm of
• 1:23:42
  Speaker 1: the camp that they recovers, don't expansions, don't die of
• 1:23:46
  Speaker 1: old age, they die for other reasons. And so we
• 1:23:49
  Speaker 1: need to see some real excesses. Um. You know, some
• 1:23:52
  Speaker 1: people it's easy to point out excesses, uh you or
• 1:23:56
  Speaker 1: or imagined excesses. You could say, well, look at the
• 1:23:58
  Speaker 1: bond market. The bond deals are so low. Clearly that's
• 1:24:00
  Speaker 1: going to blow up someday. Yeah. But I mean I'm
• 1:24:04
  Speaker 1: not I'm not so I'm not in that camp. I
• 1:24:06
  Speaker 1: I think that we're not seeing the excess as yet.
• 1:24:10
  Speaker 1: We're not seeing the inflation that the Fed really would
• 1:24:13
  Speaker 1: need to fight. I think that's going to be slow
• 1:24:15
  Speaker 1: to come. Um, the demographics is improving, in the US. Um,
• 1:24:20
  Speaker 1: you know, they forget about the baby boomers, they're moving on.
• 1:24:23
  Speaker 1: But we're getting that nice group in the in the
• 1:24:25
  Speaker 1: twenties or gen X, gen y, Yeah, millennials and and
• 1:24:29
  Speaker 1: don't and and you know there there could be a
• 1:24:32
  Speaker 1: little bit more inflation as they compete for products. But
• 1:24:35
  Speaker 1: but you know, I don't see it picking up dramatically
• 1:24:38
  Speaker 1: like we saw in the seventies at all. All right,
• 1:24:40
  Speaker 1: so let's jump into my standard questions. Already told us
• 1:24:43
  Speaker 1: about your background. Who are your early mentors, um as
• 1:24:49
  Speaker 1: far as economics as anything. Uh, I was very fortunate
• 1:24:56
  Speaker 1: to have some very good CEOs that I worked with,
• 1:25:00
  Speaker 1: Don Judgen. Don Judson at vital Com, I was absolutely
• 1:25:04
  Speaker 1: brilliant guy. Uh. I was kind of the number two
• 1:25:07
  Speaker 1: guy there for for a number of years. Um, you know,
• 1:25:10
  Speaker 1: he just he just would see things and and uh
• 1:25:14
  Speaker 1: and so he was great. And uh Don Barry two Dons,
• 1:25:19
  Speaker 1: the two Dons was at the at the telecommunications company.
• 1:25:23
  Speaker 1: He was the founder of that and just another brilliant,
• 1:25:26
  Speaker 1: positive person you know who just was a hard worker.
• 1:25:30
  Speaker 1: Both those guys really promoted my career. Um. So yeah,
• 1:25:34
  Speaker 1: those those two guys, I want a lot to the
• 1:25:37
  Speaker 1: two dons. How about investors, any particular investor influence your
• 1:25:42
  Speaker 1: approach to investing, be at real estate stocks whatever, um
• 1:25:50
  Speaker 1: some Warren Buffett. I can't go wrong with that. Yeah,
• 1:25:53
  Speaker 1: so uh could do us. Yeah on real estate, you
• 1:25:57
  Speaker 1: know a little bit. My dad Uh uh, you know
• 1:26:01
  Speaker 1: that's nice. My dad, My dad had. My dad's still around.
• 1:26:04
  Speaker 1: He's ninety four. So he got to see the blog
• 1:26:06
  Speaker 1: blow up. He got to yeah, you're all of your
• 1:26:09
  Speaker 1: post career success. He must have appreciated that. It's funny
• 1:26:12
  Speaker 1: because it's the only what's the only thing he ever
• 1:26:15
  Speaker 1: really understood that I did. Really he come and see
• 1:26:18
  Speaker 1: he come and look at the heart monitors and go,
• 1:26:19
  Speaker 1: what the heck is this all a that that that
• 1:26:22
  Speaker 1: you know when I started writing the blog. He understood that.
• 1:26:25
  Speaker 1: And uh but he you know, he had he had
• 1:26:27
  Speaker 1: some funny sayings. One was, the deal of the century
• 1:26:30
  Speaker 1: comes along every year, so you know you don't have
• 1:26:33
  Speaker 1: to like a year, flood comes along every five Yeah,
• 1:26:35
  Speaker 1: you don't have to. You don't have to jump on anything.
• 1:26:37
  Speaker 1: There'll be another good opportunity six months from now or
• 1:26:40
  Speaker 1: a year from now. He goes on the deal. Deal
• 1:26:42
  Speaker 1: of the century comes along every years. Um, let's talk
• 1:26:46
  Speaker 1: about books. What are some of your favorite books, be
• 1:26:49
  Speaker 1: they economic or otherwise, fiction or nonfictional. Well, I just
• 1:26:53
  Speaker 1: finished reading, Um, well I can I'll mention a few
• 1:26:56
  Speaker 1: economic books. Um. A book called Big Ship Ahead, Big
• 1:27:01
  Speaker 1: Shifts Ahead. Yeah. I don't have the whole title, but
• 1:27:04
  Speaker 1: that's the first person on the side. Yeah, it's a
• 1:27:06
  Speaker 1: it's I don't know if it's available yet. I read
• 1:27:09
  Speaker 1: a preview. It's by Chris Porter and John Burns, both
• 1:27:13
  Speaker 1: real estate guys. And Chris Porter's a demographic guy. And uh,
• 1:27:18
  Speaker 1: and this is really driven by democrat like Harry Dent
• 1:27:21
  Speaker 1: used to be Mr Demography. Yeah, well this book is
• 1:27:24
  Speaker 1: about the shifting demographics and what it means for businesses
• 1:27:29
  Speaker 1: and primarily for the real estate industry and housing. And
• 1:27:32
  Speaker 1: you enjoyed it and and yeah, because it's it's something
• 1:27:34
  Speaker 1: I think that that's very very important to understand. And
• 1:27:38
  Speaker 1: uh and you know what, how people are going to
• 1:27:40
  Speaker 1: be building different projects. Um. And I think they did
• 1:27:44
  Speaker 1: a really good job. It was very interesting to me. Um.
• 1:27:48
  Speaker 1: But else I really liked. Um. Uh, let me think,
• 1:27:53
  Speaker 1: what's the house of debt? House of debt? I could
• 1:27:59
  Speaker 1: see and I could see it sitting on my bookshelf
• 1:28:03
  Speaker 1: on the and yeah, and uh and dr she's in
• 1:28:08
  Speaker 1: California somewhere right or or he he's I think he's
• 1:28:13
  Speaker 1: in the Midwest. I'm thinking of a different book then. Yeah,
• 1:28:16
  Speaker 1: but it's got like the torn sort of page of
• 1:28:20
  Speaker 1: of I'm trying to remember what the cover looks like.
• 1:28:23
  Speaker 1: But House of Debt, and you can look that one up.
• 1:28:25
  Speaker 1: House of Debt, all right, okay? And that that what
• 1:28:27
  Speaker 1: they did with the two professors. What they did is
• 1:28:31
  Speaker 1: they looked at micro data in available in each city
• 1:28:36
  Speaker 1: to see how much um people, how much household debt
• 1:28:39
  Speaker 1: people had, and how that related to the strength of
• 1:28:43
  Speaker 1: the recovery or the depth of the recession. And it
• 1:28:46
  Speaker 1: was very very interesting and very insightful. So you know,
• 1:28:49
  Speaker 1: the more people could borrow, obviously, the more more trouble
• 1:28:52
  Speaker 1: they got into House of Debt. How they and you
• 1:28:54
  Speaker 1: caused the Great Recession? Can prevent it from happening again?
• 1:29:00
  Speaker 1: A mir Sufi and a tief me on, yes, all right.
• 1:29:04
  Speaker 1: And the other one was called Big Shifts, Big Shifts
• 1:29:09
  Speaker 1: Ahead by Porter and Burns John Burns and Chris Border.
• 1:29:13
  Speaker 1: Big Shifts Ahead Demographic Clarity for business that's not coming
• 1:29:18
  Speaker 1: out until October. Give me one more. What else have
• 1:29:20
  Speaker 1: you read that you've really enjoyed? Uh? The kersh Act
• 1:29:24
  Speaker 1: Ben Bernink? Oh? Really? Yeah? I thought that was fun.
• 1:29:29
  Speaker 1: You know, it's interesting because it's just from his perspective. Now,
• 1:29:31
  Speaker 1: you and I were writing about, you know, anything that
• 1:29:34
  Speaker 1: that's um about the crisis, the courage to act, a
• 1:29:39
  Speaker 1: memoir of a crisis and its aftermat Yeah, anything about
• 1:29:42
  Speaker 1: the crisis. I always disagree with something, and I'm sure
• 1:29:44
  Speaker 1: you would too, but that's but I'd like to see
• 1:29:46
  Speaker 1: other people's perspective. Did you really enjoy this? Because this
• 1:29:50
  Speaker 1: book has been sitting on a shelf, untouched, unloved, not
• 1:29:54
  Speaker 1: even I have. I didn't. I didn't read all of it,
• 1:29:56
  Speaker 1: but I read several chapters and not not even in
• 1:29:59
  Speaker 1: my It's like, do I really Although I will say
• 1:30:02
  Speaker 1: I've I've really enjoyed his blog. Yeah, and I like
• 1:30:07
  Speaker 1: the post the I like the post crisis per Nanke
• 1:30:11
  Speaker 1: better than the pre crisis. He was too blase and
• 1:30:14
  Speaker 1: too willing to you know, rubber Stamwood Greenspan was doing
• 1:30:17
  Speaker 1: pre crisis, but in the midst of the crisis and
• 1:30:20
  Speaker 1: after couldn't have had a better guy there when he
• 1:30:24
  Speaker 1: stepped up. We were very fortunately, yes, And I was
• 1:30:27
  Speaker 1: a big critic prior and in hindsight during the crisis.
• 1:30:32
  Speaker 1: Really you want a guy who's a student of the
• 1:30:33
  Speaker 1: Great Depression. He was slow to react to what was happening.
• 1:30:40
  Speaker 1: But then once I think one day he woke up
• 1:30:42
  Speaker 1: and said, holy count, you know, and and this everything
• 1:30:45
  Speaker 1: I've studied all my life, it's happening right now as
• 1:30:47
  Speaker 1: I'm sitting here. You know. It's it's really quite amazing. Yeah.
• 1:30:50
  Speaker 1: So you know, we we remember when he first got
• 1:30:52
  Speaker 1: appointed by George W. Bush and I thought, oh, three
• 1:30:56
  Speaker 1: something like that. He must have not not as chairman,
• 1:30:59
  Speaker 1: but just on the board. He was ce a counseled
• 1:31:02
  Speaker 1: Economic Advice Yeah, and that, you know, and that him
• 1:31:05
  Speaker 1: up to go on the FED. Yeah and that. And
• 1:31:07
  Speaker 1: I felt sorry for him when he was the c
• 1:31:09
  Speaker 1: A because he was saying things that really didn't make
• 1:31:12
  Speaker 1: sense in my view, and I thought, oh man, he there,
• 1:31:15
  Speaker 1: he's got to be political a little bit, right, And
• 1:31:18
  Speaker 1: but when once he got but I'm still really happy
• 1:31:20
  Speaker 1: that he got appointed because you could have got anybody,
• 1:31:23
  Speaker 1: and uh, we could have got somebody really bad who
• 1:31:25
  Speaker 1: felt like the FED shouldn't do anything right. And and
• 1:31:29
  Speaker 1: there are lots of people who think, just let it
• 1:31:32
  Speaker 1: run its course. It'll be really painful, but then we'll
• 1:31:35
  Speaker 1: come out the other end, cleansed and better. Well, you know,
• 1:31:39
  Speaker 1: and I you know, you kind of understand that except
• 1:31:42
  Speaker 1: for the realistic, it's not realistic, especially when you look
• 1:31:44
  Speaker 1: at all the people that are seriously injured during the downturn.
• 1:31:48
  Speaker 1: And and um, I mean instead of instead of picking
• 1:31:53
  Speaker 1: at ten percent, the uneployment rate might have piked at
• 1:31:55
  Speaker 1: twenty or twenty five percent. And then and it's not
• 1:31:58
  Speaker 1: only those twenty percent to get hurt, it's the next
• 1:32:00
  Speaker 1: ten or they are pulling way back. They're afraid they're
• 1:32:04
  Speaker 1: going to lose their jobs to paradox of thrift. Yeah,
• 1:32:07
  Speaker 1: and and and then and then you get I mean
• 1:32:08
  Speaker 1: you get you get suicide's divorced. Yeah, I mean you can't.
• 1:32:13
  Speaker 1: You can't let that go on for five seven years
• 1:32:15
  Speaker 1: and hope it's going to resolve itself. And besides, I think,
• 1:32:17
  Speaker 1: you know, Cain's kind of pointed out that you've got
• 1:32:20
  Speaker 1: a problem and it may never ever resolve with something
• 1:32:23
  Speaker 1: that but you know, if if the if the FED
• 1:32:25
  Speaker 1: can step up and you can get some physical policy.
• 1:32:28
  Speaker 1: Gee whiz, we turned it around from a financial crisis perspective.
• 1:32:31
  Speaker 1: We turned this around better than just about anybody. Ever,
• 1:32:34
  Speaker 1: the rest of the world certainly is still lagging behind
• 1:32:37
  Speaker 1: the US. All right, last two questions before they throw
• 1:32:40
  Speaker 1: us out of the studio. We've been here for almost
• 1:32:42
  Speaker 1: two hours. So a millennial or a recent college grad
• 1:32:45
  Speaker 1: comes up to you and says, I'm interested in blogging
• 1:32:50
  Speaker 1: real estate, um writing, What sort of advice would you
• 1:32:54
  Speaker 1: give them? Go ahead, have fun? You know. Look, people
• 1:32:59
  Speaker 1: ask me how I built my traffic. I could ask
• 1:33:01
  Speaker 1: you how you built your traffic in relentlessly through ten
• 1:33:05
  Speaker 1: years of brutal work. I just becoming overnight sensation. Yes,
• 1:33:08
  Speaker 1: I just wrote and wrote and wrote and and people
• 1:33:10
  Speaker 1: started picking up. People liked what I wrote, picked it up,
• 1:33:13
  Speaker 1: spread it around, you know, post go viral and and uh,
• 1:33:17
  Speaker 1: you know, so I don't people ask me, well, how
• 1:33:19
  Speaker 1: did you advertise? Not? I didn't how to spread the word.
• 1:33:22
  Speaker 1: I didn't um ever send out emails to journalists that hey,
• 1:33:26
  Speaker 1: this is an interesting piece, you should look at it.
• 1:33:28
  Speaker 1: Never so I've never I've never advertised it at all.
• 1:33:30
  Speaker 1: So I mean, I guess I'm advertising it now. But yeah,
• 1:33:34
  Speaker 1: but you're talking about after a decade of putting it out.
• 1:33:37
  Speaker 1: This this is less advertising than a a victory lap
• 1:33:40
  Speaker 1: slash retrospective. It's not like look at look at Bill
• 1:33:44
  Speaker 1: out Um promoting look at him hyping calculated risk. I've
• 1:33:50
  Speaker 1: asked you full disclosure. How many times have I said, Hey,
• 1:33:54
  Speaker 1: let's let's get you, let's do something, let's talk about this.
• 1:33:58
  Speaker 1: I recall linking to you back in I don't know,
• 1:34:03
  Speaker 1: oh five oh six I was doing. That's probably where
• 1:34:06
  Speaker 1: my traffic came from. I was first I was doing
• 1:34:09
  Speaker 1: the link fest for the street dot com, and then
• 1:34:11
  Speaker 1: I was doing them on the Big Picture and I
• 1:34:14
  Speaker 1: recall and you sent like a really lovely email. I
• 1:34:18
  Speaker 1: have it somewhere. Hey, thanks for the link, but you
• 1:34:21
  Speaker 1: you know, you crashed our site. You took it offline.
• 1:34:24
  Speaker 1: And it wasn't like I was getting that much traffic.
• 1:34:26
  Speaker 1: But in the scheme of bloggers, if you were getting
• 1:34:29
  Speaker 1: a thousand a day, that was a lot, you know,
• 1:34:32
  Speaker 1: way back in the early days. But so your advice
• 1:34:35
  Speaker 1: to someone who wants to start today this late date
• 1:34:38
  Speaker 1: covering housing or you would say, go for it. Yeah,
• 1:34:41
  Speaker 1: I think I think anybody can I think anybody can
• 1:34:43
  Speaker 1: do it if I mean, if there if they have
• 1:34:45
  Speaker 1: something to add there. I mean, you just have to
• 1:34:48
  Speaker 1: work at it and be and put up with a
• 1:34:50
  Speaker 1: low traffic to start. And you know, how how how
• 1:34:54
  Speaker 1: do you it's not I wouldn't consider a money maker.
• 1:34:56
  Speaker 1: I mean if it's if it's somebody's career, but if
• 1:34:58
  Speaker 1: it's somebody's sidelight, uh, something they do because they're passionate
• 1:35:02
  Speaker 1: about their passion about it and they've got something another
• 1:35:04
  Speaker 1: real job, which is what really most bloggers do. What's
• 1:35:07
  Speaker 1: up with you and zero heads? You've you've written some
• 1:35:09
  Speaker 1: some critical things. He's not happy with me. Oh I
• 1:35:14
  Speaker 1: I you know, I have no relationship with him at all.
• 1:35:16
  Speaker 1: I just think the sits a joke. Really, yeah, because
• 1:35:20
  Speaker 1: every now and then there's something of interest because he
• 1:35:23
  Speaker 1: has an expertise and derivatives what have you. But how
• 1:35:26
  Speaker 1: do you how do you know? How do you can't
• 1:35:28
  Speaker 1: find it's you know, I only have so much time
• 1:35:31
  Speaker 1: every day. I think this is a good lesson for
• 1:35:34
  Speaker 1: everybody is you have to you have to learn the
• 1:35:36
  Speaker 1: sites or the newspaper journalists that you want to read,
• 1:35:40
  Speaker 1: and and every once in a while you branch out
• 1:35:42
  Speaker 1: and pick up other people and and then decide whether
• 1:35:45
  Speaker 1: you want to keep reading them. You know, if I
• 1:35:47
  Speaker 1: see John Hills and Wrath at the Nick Tamaris, I
• 1:35:51
  Speaker 1: love both the work at the Walston Journal, I read
• 1:35:53
  Speaker 1: the article. It's just automatic, you know. I read everything
• 1:35:56
  Speaker 1: by Paul Krugman, and I read you know, um, I
• 1:35:59
  Speaker 1: have my group of people that I always read, and
• 1:36:01
  Speaker 1: I branch out and read other people too, and then
• 1:36:04
  Speaker 1: and sometimes they fall into that group, and and then
• 1:36:07
  Speaker 1: I'll start reading them if I see their name. Oh yeah,
• 1:36:09
  Speaker 1: I gotta. I think everybody has to have that filter.
• 1:36:12
  Speaker 1: I can't waste my time going through a hundred posts
• 1:36:14
  Speaker 1: to find the one little nute um and and you know, uh,
• 1:36:18
  Speaker 1: way back when I don't. I don't think I've been
• 1:36:21
  Speaker 1: to zero hedge site in five years. Really, Yeah, that's fascinating.
• 1:36:24
  Speaker 1: I have friends who are always sending me stuff, and
• 1:36:27
  Speaker 1: one out of five things are are kind of interesting them.
• 1:36:31
  Speaker 1: I know a lot of people read it. I don't
• 1:36:32
  Speaker 1: know why. And you know what, maybe they're better today,
• 1:36:35
  Speaker 1: you know, maybe maybe I maybe I've been I've been
• 1:36:37
  Speaker 1: blaming zero Hedge. I've been blaming that site for hedge
• 1:36:41
  Speaker 1: fund under performance for the past five years. They've been
• 1:36:44
  Speaker 1: relentlessly negative. They missed a giant move in equity, but
• 1:36:47
  Speaker 1: they were they were saying short uh in March of
• 1:36:49
  Speaker 1: two thousand nine when the market would hit six six six,
• 1:36:52
  Speaker 1: good time and uh. And they've never changed as far
• 1:36:54
  Speaker 1: as for you know, I was I used to go
• 1:36:56
  Speaker 1: for entertainment purpose, well you know back when, back when
• 1:36:59
  Speaker 1: I first did and and I'm sure this is true
• 1:37:01
  Speaker 1: for you too, is that. Um there was kind of
• 1:37:04
  Speaker 1: like camaraderie among the blogs. Absolutely. If I saw something
• 1:37:09
  Speaker 1: wrong or on on another side, or they saw something
• 1:37:11
  Speaker 1: wrong on mine, I we would exchange emails. Yeah, yeah, hey,
• 1:37:15
  Speaker 1: I think that maybe you're looking at this. And it
• 1:37:16
  Speaker 1: was great because then I could correct my article. Um
• 1:37:19
  Speaker 1: I zero Hedge came along. You know, they didn't call
• 1:37:23
  Speaker 1: the recession at all, obviously, didn't call it recovery. They
• 1:37:25
  Speaker 1: didn't see the housing bubble then, none of that because
• 1:37:28
  Speaker 1: they yeah, they came out way after and it was
• 1:37:30
  Speaker 1: all gloom and doom, yellow journalism. But like somebody sent
• 1:37:35
  Speaker 1: me an article from it and I said, oh, a
• 1:37:36
  Speaker 1: new site, you know, and I read it and I said,
• 1:37:38
  Speaker 1: well you I sent the guy an email and uh,
• 1:37:42
  Speaker 1: and I got the rudest reply and I went, I went,
• 1:37:45
  Speaker 1: what the hell I here? I am reaching out. I'm
• 1:37:47
  Speaker 1: not I'm not publishing it on my side. I'm not
• 1:37:49
  Speaker 1: embarrassing these guys. They just just just you can't you
• 1:37:54
  Speaker 1: really can't look at the data this way. You need
• 1:37:56
  Speaker 1: to do this. And it's something I knew really well,
• 1:37:59
  Speaker 1: and and you know, screw you kind of response and
• 1:38:02
  Speaker 1: and okay, fine, you know, you know, I had a
• 1:38:05
  Speaker 1: lunch with Chris Whalen set up a lunch with him
• 1:38:07
  Speaker 1: and me and a bunch of other people because I
• 1:38:09
  Speaker 1: was interested in the derivative stuff he was writing about
• 1:38:12
  Speaker 1: was excellent, and the high freagency trading stuff. He had
• 1:38:15
  Speaker 1: some really good insights. And then everything all kinda went
• 1:38:20
  Speaker 1: to just a degree of negativity and well being. Well
• 1:38:24
  Speaker 1: being negative drives traffic for a lot of people. I
• 1:38:27
  Speaker 1: guess you know, you if you if you're constantly bearish.
• 1:38:30
  Speaker 1: I always say that blogs having in centator to be
• 1:38:32
  Speaker 1: bearish because it drives traffic. It's kind of like, you know,
• 1:38:34
  Speaker 1: Wall Street Dalis having in centator to be bullish, you know,
• 1:38:38
  Speaker 1: and and it's the rare great economist on Wall Street
• 1:38:42
  Speaker 1: who can say we've got a problem. Um, and it's
• 1:38:45
  Speaker 1: it's you know, the very few bloggers are willing to
• 1:38:48
  Speaker 1: go both ways. So let's let me ask you my
• 1:38:51
  Speaker 1: very last question, my favorite question, and that is, what
• 1:38:56
  Speaker 1: is it that you know about real estate, about mortgages,
• 1:39:00
  Speaker 1: out writing and blogging that you wish you knew back
• 1:39:03
  Speaker 1: in two thousand and five when you launched the site? Well,
• 1:39:06
  Speaker 1: I wish I had met Tanta two years earlier. As
• 1:39:08
  Speaker 1: far as mortgages, Uh, everything I know I learned from her.
• 1:39:12
  Speaker 1: So uh as far as real estate, you know, I
• 1:39:17
  Speaker 1: it was it was so much fun early on reading
• 1:39:19
  Speaker 1: through all the technical documents and all of the sites
• 1:39:22
  Speaker 1: that would provide that as to how they gathered their data,
• 1:39:25
  Speaker 1: and so I really learned a lot. Um. If I'd
• 1:39:28
  Speaker 1: known that a little earlier, maybe I could have put
• 1:39:30
  Speaker 1: all the pieces together just a little bit earlier. Um,
• 1:39:34
  Speaker 1: you know, I I it was. It was a weird
• 1:39:37
  Speaker 1: thing in two thousand five. To me, I could clearly
• 1:39:39
  Speaker 1: see that the market was overvalued, that there was really
• 1:39:42
  Speaker 1: bad mortgages. But I kept asking myself, well, why why
• 1:39:46
  Speaker 1: are they making these mortgages to people that are never
• 1:39:48
  Speaker 1: going to pay them? I personally would never learn money
• 1:39:51
  Speaker 1: to people that aren't going to pay me, you know.
• 1:39:53
  Speaker 1: I it took me a two or three years to
• 1:39:54
  Speaker 1: finally really understand how they were rating based on two
• 1:39:58
  Speaker 1: nine nineties methodology. The methodology had changed. How that how
• 1:40:03
  Speaker 1: you know that you had this real uh originate to
• 1:40:07
  Speaker 1: to distribute model that that was just pulling. You know,
• 1:40:10
  Speaker 1: people were investing in these things that they thought were
• 1:40:12
  Speaker 1: triple A and they paid a higher yield than other
• 1:40:15
  Speaker 1: triple as, which wish you can sell that you can
• 1:40:17
  Speaker 1: sell an infinite amount of that because people can can
• 1:40:20
  Speaker 1: arbitrage between the triple as. You know, I mean it's
• 1:40:23
  Speaker 1: crazy how that whole worked. Once you realize how that
• 1:40:25
  Speaker 1: whole mechanism worked, and then it was obvious how it happened.
• 1:40:28
  Speaker 1: You know, I just couldn't understand originally why they make
• 1:40:31
  Speaker 1: loans that were never gonna get paid. Well, if you
• 1:40:34
  Speaker 1: can my my favorite. I did a ton of research
• 1:40:36
  Speaker 1: for Bailout Nation. One of my favorite little research discoveries
• 1:40:41
  Speaker 1: were that the primarily located in California, private sector mortgage
• 1:40:47
  Speaker 1: lenders who would then sell it to Wall Street would
• 1:40:49
  Speaker 1: sell it to Wall Street with a nine day warranty.
• 1:40:53
  Speaker 1: They would guarantee that this mortgage won't default, This thirty
• 1:40:57
  Speaker 1: year mortgage won't default for three months. Now, stop and
• 1:41:00
  Speaker 1: think about how misaligned those incentives are. I have a
• 1:41:05
  Speaker 1: question for you that's not on my list. I have
• 1:41:07
  Speaker 1: to ask, because I've been thinking about it. Are we
• 1:41:10
  Speaker 1: ever going to see a calculated risk book from you?
• 1:41:13
  Speaker 1: I don't think so, really, because I think that could
• 1:41:16
  Speaker 1: be really interesting. It looks like a lot of work
• 1:41:18
  Speaker 1: to me. Yet it's a lot of work. But when
• 1:41:21
  Speaker 1: you're done, I have a pH d. That's what it
• 1:41:24
  Speaker 1: feels like. Okay, Well, I think people would buy the
• 1:41:26
  Speaker 1: Calculators book, and I think it could be. That's very
• 1:41:29
  Speaker 1: nice to you to say, so you don't you know
• 1:41:32
  Speaker 1: how much work goes into it. I know. Hey, listen,
• 1:41:34
  Speaker 1: it's been five years and I've been thinking about, well,
• 1:41:38
  Speaker 1: I'm just now five years later on my Alright, maybe
• 1:41:40
  Speaker 1: I'll start thinking about, well you could you could see
• 1:41:42
  Speaker 1: five years. I'm sorry it's seven years later, but you know,
• 1:41:45
  Speaker 1: your master's in business, You've You've had over a hundred
• 1:41:48
  Speaker 1: interviews on my list. That's I've had two different publishers
• 1:41:51
  Speaker 1: reach out. Three different publishers reached out to me. Hey,
• 1:41:53
  Speaker 1: would you like to do this as a book? Sure?
• 1:41:56
  Speaker 1: I think it would be a great book. It could
• 1:41:57
  Speaker 1: be fun. Bill. Thank you much for for doing this.
• 1:42:01
  Speaker 1: This has just been really fascinating for for those of
• 1:42:05
  Speaker 1: you who listened, I apologize for babbling. I know Bill
• 1:42:08
  Speaker 1: for so long, and literally it's the first time we've
• 1:42:12
  Speaker 1: actually sat down and chatted. I was very chatty, and
• 1:42:16
  Speaker 1: it's because when you know someone virtually for twelve years
• 1:42:20
  Speaker 1: and you finally get to sit down and talk, you
• 1:42:22
  Speaker 1: feel compelled to uh, to hold up your half of
• 1:42:25
  Speaker 1: the conversation. For those of you who have enjoyed this conversation,
• 1:42:29
  Speaker 1: be sure to look up an inch or down an
• 1:42:31
  Speaker 1: inch on Apple iTunes and you can see any of
• 1:42:33
  Speaker 1: the other hundred plus conversations we've had, which is in
• 1:42:37
  Speaker 1: itself a mind blowing data point. I would be remiss
• 1:42:41
  Speaker 1: if I did not thank my producer and Today's recording engineer,
• 1:42:46
  Speaker 1: Charlie Volmer, our booker Taylor Riggs, and Mike Batnick, who
• 1:42:50
  Speaker 1: is the head of research. We love your comments, feedbacks, criticisms,
• 1:42:55
  Speaker 1: and and other assorted responses. Be sure and right to
• 1:42:59
  Speaker 1: us at M I B Podcasts at Bloomberg dot net.
• 1:43:05
  Speaker 1: I'm Barry Ritolts. You've been listening to Masters in Business
• 1:43:08
  Speaker 1: on Bloomberg Radio