Latest / Bloomberg Intelligence / EM Countries With Weaker Fundamentals See Repricing: BBH's Thin

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EM Countries With Weaker Fundamentals See Repricing: BBH's Thin · Bloomberg Intelligence

• 0:05
  Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm pim Fox.
• 0:08
  Speaker 1: Along with my co host Lisa Abramowitz. Each day we
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  Speaker 1: bring you the most important, noteworthy, and useful interviews for
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  Speaker 1: you and your money, whether you're at the grocery store
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  Speaker 1: or the trading floor. Find the Bloomberg P M L
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  Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. When
• 0:33
  Speaker 1: is the decline in the value of a currency a crisis, Well,
• 0:36
  Speaker 1: we'll find out from Dr winn Thin, Global Head of
• 0:39
  Speaker 1: Emerging Markets FX at Brown Brothers Harriman. Win Thin, Thanks
• 0:43
  Speaker 1: very much for being with us. I want you to
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  Speaker 1: give us your thoughts about what's happening with Turkey after
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  Speaker 1: we see the Turkish lea or a slide more than
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  Speaker 1: three percent against the US dollar trading right now at
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  Speaker 1: four point eight six. Yes. Um, we've been seeing a
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  Speaker 1: broad based emerging market sell off really since the quarter
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  Speaker 1: began actually back in late March. UM. But what we've seen, uh,
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  Speaker 1: the selling presidents have intensified for certain countries. Argentina was
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  Speaker 1: was sort of the first to come under the gun,
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  Speaker 1: and now Turkey is is being sold. Now Here's the
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  Speaker 1: difference to me is a critical difference. Both both starffer
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  Speaker 1: from very weak fundamentals um politically consider etcetera. But Argentina
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  Speaker 1: made some bold moves over the last time of weeks
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  Speaker 1: to try and and stop throughout they hike grace, announce
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  Speaker 1: some fiscal tightening and they said they would go to
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  Speaker 1: the IRONMAF for standby agreement. You know, all very orthodox
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  Speaker 1: and that's what Mr mcweys President mcwew is known for.
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  Speaker 1: But Turkey's is really on the other end of spectrum.
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  Speaker 1: Mr Urdwan, President Urdwan has has very rocky relations with
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  Speaker 1: it with the West. Uh. He's always talking about the
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  Speaker 1: you know, Western efforts to stabilize this country. He wants
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  Speaker 1: a lower interest rate on hike them. So there's really
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  Speaker 1: to me a stark difference UM in the post response.
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  Speaker 1: And because the Central Mark has done nothing yet um,
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  Speaker 1: the markets that have really green light to sell the
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  Speaker 1: leer at this point. So uh, when thank you so
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  Speaker 1: much for being with us, because I'm struggling to understand
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  Speaker 1: the situation in Turkey because frankly, the economy has been
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  Speaker 1: growing at a pretty quick clip that seems to be
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  Speaker 1: a lot of strength. There is this just simply a
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  Speaker 1: political crisis with President urduan being opposite in the face
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  Speaker 1: of an election trying to in gender support somehow with
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  Speaker 1: mass inflation. Well, you know, it's a little bit of everything. UM.
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  Speaker 1: The one I think you are correct that the economy
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  Speaker 1: is doing well. In fact, the many investors I think
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  Speaker 1: is doing too well. It's overheating. The inflation is up
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  Speaker 1: close to eleven percent UM, the current account definite is
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  Speaker 1: blowing out UM, and the center markets is basically stating
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  Speaker 1: on its hands as its current is weaken again within
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  Speaker 1: the context of broad based e M weakness. You know,
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  Speaker 1: in a rising US interest rate environment, UM emerging market
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  Speaker 1: typically comes under stress, and it's avoided for much of
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  Speaker 1: this past year, but it's really come back with a vengeance.
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  Speaker 1: Countries that have high degree at donal financing need to
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  Speaker 1: either the current account or short term external debt. Those
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  Speaker 1: are countries like Turkey that are very, very vulnerable in
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  Speaker 1: this environment. Argentina is also there. So to me, the
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  Speaker 1: interesting thing is that if you look at a year
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  Speaker 1: to date UM performance I always do this on your
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  Speaker 1: w c RS page for emerging markets, you'll see a
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  Speaker 1: wide wide DIVERSIONCE you've got four or five currencies that
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  Speaker 1: are actually up on the air, Columbian pace, Soach, Chinese
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  Speaker 1: jun Masian ring gatt taiba um. And yet you've got
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  Speaker 1: some that are down well, I guess the argent past
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  Speaker 1: dictually down your date Brazilian realium of ten percent. So
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  Speaker 1: you see some real divergences and thinks the way it
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  Speaker 1: should work, that is, the countries with the stronger fundamentals
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  Speaker 1: are going to outperform. That they may come under some
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  Speaker 1: selling pressure, but they will do realtive, do relatively better
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  Speaker 1: than countries with weaker fundamentals. And that's what we've really
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  Speaker 1: have seen unfolding this higher dollar, higher US rate environment.
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  Speaker 1: I wonder at what point this dispersion will break down,
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  Speaker 1: because we've seen a lot of money go into emerging
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  Speaker 1: markets over the past five years, into indexed funds that
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  Speaker 1: don't delineate between one country and another. And now you
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  Speaker 1: have a growing chorus of academics and uh AN investment
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  Speaker 1: managers saying that they are concerned about an emerging markets crisis,
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  Speaker 1: the latest being Paul Krugman today tweeting it's become at
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  Speaker 1: least possible to envision the classic style reinforcing crisis emerging
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  Speaker 1: market currency falls causing corporate debt to blow up, causing
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  Speaker 1: stress on the economy, causing further fall in the currency.
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  Speaker 1: Do you agree, I'm not quite embarished, And there's one
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  Speaker 1: big reason for that. Unlike I would say, even um,
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  Speaker 1: most emerging Martin currencies are not floating or manage floats um.
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  Speaker 1: In the past, we saw Maxican Tekila crisis with the
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  Speaker 1: Asian crisis, or we had a right of pigs come
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  Speaker 1: under stress and then eventually break, and those are much
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  Speaker 1: more destabilizing, much more stressful on economy because you're going
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  Speaker 1: from a fixed exchange rate to you know, a fully
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  Speaker 1: floating I would say probably thinking exchange rates. To me,
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  Speaker 1: the floating exchange rates are are are have been doing
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  Speaker 1: a job's they worked in a shock absorber. External shocks
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  Speaker 1: are reflecting weaker currency and they allow over time, these
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  Speaker 1: these countries and emerging countries to adjust their behavior. They're
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  Speaker 1: barring their hedging, et cetera over a more extended amount
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  Speaker 1: of time. So you know, to me, the weaker currencies
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  Speaker 1: are doing their job. This is what it's supposed to happen.
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  Speaker 1: Of course, we'll see some bankruptcies. I'm sure we'll see
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  Speaker 1: some de fause in the corporate set. Uh, sphere. But
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  Speaker 1: that's just that's just part of the game. I think
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  Speaker 1: that's one of the problems that UM people were miss
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  Speaker 1: pricing EM during this whole secure rate environment and now
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  Speaker 1: were repricing e M and the ones that we had
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  Speaker 1: the worst fundamentals, where we're sort of the most miss
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  Speaker 1: priced and we have got we're sort of early in
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  Speaker 1: this game. Who gets repriced next? Indonesia, Brazil, Well, uh, Brazil,
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  Speaker 1: I would say Brazil in Mexico are are sort of
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  Speaker 1: in the sites because we've got heightened political risk for
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  Speaker 1: both elections coming up, as well as uh, somewhat weak fundamentals.
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  Speaker 1: So you know, again, you know, we're not talking about
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  Speaker 1: a huge um you know, devaluation, sort of default evaluations.
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  Speaker 1: So now we are seeing, you know, under this floating
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  Speaker 1: stange red regime, we're seeing these currencies with poor fundamentals
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  Speaker 1: come under pressure. So I would probably throw in South Africa,
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  Speaker 1: perhaps Russia as well. India. Indonesia are sort of the
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  Speaker 1: worst in Asia, but not as really not as bad
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  Speaker 1: as what we're talking about in our c Argentina and Turkey.
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  Speaker 1: But you know, again, the microscope was on all these countries. UM,
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  Speaker 1: you know, I would just uh tell our clients and
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  Speaker 1: invested in general to be discerning, to look at the
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  Speaker 1: fundamentals and realize that, you know, you can't tell everything
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  Speaker 1: on masks. Some some should do better than others, some
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  Speaker 1: should do worse than others. And that's that's really part
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  Speaker 1: of the fundamental story that's lost sometimes when there's a
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  Speaker 1: lot of liquidity being thrown around. Dr Winton, thank you
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  Speaker 1: so much for being with us. A really important day
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  Speaker 1: for you to be here giving us some insight. Dr Winton,
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  Speaker 1: Global Head of Emerging Markets f X for Brown Brothers
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  Speaker 1: Harriman in New York. I'm sure this is a very
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  Speaker 1: interesting time for Dr Wintin as well as all those
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  Speaker 1: dealing in emerging markets, considering the volatility that we've seen
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  Speaker 1: throughout the spectrum of currencies from Turkey to Argentina. This
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  Speaker 1: is Bloomberg Markets divisions, potential divisions among Federal Reserve officials
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  Speaker 1: over the yield curve and inflation that will be under
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  Speaker 1: the spotlight today when the U. S. Central Bank publishes
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  Speaker 1: minutes of its last policy meeting. Here to tell us
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  Speaker 1: more about this situation is Matt Miskin. He is a
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  Speaker 1: market strategist for John Hancock Investments. He's based in Boston,
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  Speaker 1: but he joins us here in our eleven three oh studios. Matt,
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  Speaker 1: A pleasure to have you with us one if you
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  Speaker 1: could offer your thoughts. Are are you having internal divisions
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  Speaker 1: about the yield curve and inflation? And you would I
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  Speaker 1: think you'd be accurate in describing that. A lot of
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  Speaker 1: invest just feel divided as well. Yeah, actually we have
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  Speaker 1: very little division. That we believe that of the biggest
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  Speaker 1: risks in the market today is if they get that
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  Speaker 1: third rate hike in from here, making it a fourth
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  Speaker 1: rate hike. If you do the math on that and
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  Speaker 1: where the Fed funds rate will stand and the two
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  Speaker 1: year yield will stand on that, we could be looking
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  Speaker 1: at a three point three percent to year yield by
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  Speaker 1: year end the tenure treasury standing at just over three
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  Speaker 1: percent today. That would represent an inverted yield curve to us,
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  Speaker 1: that risk could be minimized if the Fed does go
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  Speaker 1: slowly and pauses on one of those rate hikes throughout
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  Speaker 1: the course of the year. We're gonna hear about that
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  Speaker 1: when the minutes are released at two and try to
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  Speaker 1: get inside for that June meeting that is that is
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  Speaker 1: coming up very soon. So you think that it's really
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  Speaker 1: important with these meeting minutes. Say from that perspective, well,
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  Speaker 1: the symmetry around the inflation projection is critical. If they
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  Speaker 1: can let that inflation tick above that two percent target
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  Speaker 1: and be okay with that, then that kind of sets
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  Speaker 1: the pathway for taking one rate hike off that table.
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  Speaker 1: So it is a start of that. Now is there
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  Speaker 1: going to be market moving I mean, we're talking the
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  Speaker 1: main meeting, but what investors and analysts are gonna be
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  Speaker 1: doing is trying to extrapolate do they go in June
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  Speaker 1: and does the summary of economic projections in the June
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  Speaker 1: meeting set that up? Okay, I want to make sure
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  Speaker 1: I really understand this. In other words, you're saying, if
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  Speaker 1: the Federals are of hikes four times this year, we
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  Speaker 1: will be looking at an inverted yield curve in short
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  Speaker 1: order by your end. If you do the math of
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  Speaker 1: the eight basis points between the Fed funds rate in
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  Speaker 1: the two year, you put that on two and a half,
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  Speaker 1: which is what the Fed funds rate will be by
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  Speaker 1: your end. If they do four rate x for the year,
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  Speaker 1: that gets you three thirty. So does that mean that
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  Speaker 1: we head into recession next year? Typically going back over
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  Speaker 1: the last seven recessions, it has been a forewarning of
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  Speaker 1: a forthcoming recession. Usually there's a window. You know, in
• 9:53
  Speaker 1: the mid two thousands it was twenty three months before
• 9:55
  Speaker 1: the recession happened. Market peaked before that, but in the
• 9:59
  Speaker 1: midnight the nineties it was about six months. So it's
• 10:02
  Speaker 1: not a precise measurement, but we would look at it
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  Speaker 1: as an opportunity to look to de risk assets and
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  Speaker 1: think about risk management more so in the end of
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  Speaker 1: this year and into next year. So panic now and
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  Speaker 1: avoid the rush. No, because our base cases the FED
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  Speaker 1: takes went off went off the table, and that the
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  Speaker 1: FED is trying to communicate to the market that inflation
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  Speaker 1: going about their target is okay. This is a relatively
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  Speaker 1: new phenomenon in terms of the symmetry language that's been
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  Speaker 1: put into their communication. UM. So, you know, risk management
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  Speaker 1: is always a part of our process. It's it's critical.
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  Speaker 1: Um But as we look into the end of the year,
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  Speaker 1: you know, we we see if the FED does continue
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  Speaker 1: to raise rates uh to that fourth time, Yeah, then
• 10:47
  Speaker 1: that would be time to kind of think about it
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  Speaker 1: even more so. What does that do to the dollar?
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  Speaker 1: I mean, the dollar strength is something that if you
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  Speaker 1: had said the had a reserve officials, you know, at
• 10:56
  Speaker 1: the beginning of the year, that we'd be at one
• 10:58
  Speaker 1: seventeen against the euro, it might not have have foreseen that. Yeah,
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  Speaker 1: you're absolutely right. And and to us that does mean
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  Speaker 1: dollar strengthening. That means US equities look better than international
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  Speaker 1: that's divergence of global growth instead of the synchronized global growth.
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  Speaker 1: I mean the p m I to date data today
• 11:15
  Speaker 1: just Europe, right, yeah, out of Europe and then the
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  Speaker 1: US market pm I just came out down one t
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  Speaker 1: of a you know, one tick basically, well, the European
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  Speaker 1: data came in softer. You're starting to see desynchronization of
• 11:27
  Speaker 1: of global growth here. So overnight or yesterday afternoon, Mark
• 11:31
  Speaker 1: Quisel of PIMCO said that they're recommending that clients increase
• 11:36
  Speaker 1: their allocation to cash to ten to fift from five
• 11:39
  Speaker 1: to ten percent. They said that they should probably cycle
• 11:43
  Speaker 1: out of credit, in particular longer dated corporate debt. Do
• 11:47
  Speaker 1: you agree. You know, the short en of the curve
• 11:50
  Speaker 1: is offering a pretty nice yield, So we get that
• 11:53
  Speaker 1: because cash is yielding. You know, if you look at
• 11:55
  Speaker 1: kind of the shorten the treasury curve to two and
• 11:58
  Speaker 1: a half percent. Not bad. The problem is you're not
• 12:01
  Speaker 1: going to get diversification from equities if you cut all
• 12:03
  Speaker 1: your duration away. Durations what you want when we get
• 12:05
  Speaker 1: into a recession, and you know that kind of strategy.
• 12:08
  Speaker 1: If you're balancing that too to offset your equities in
• 12:11
  Speaker 1: a downturn. You know, if you'd do collapse in the
• 12:14
  Speaker 1: in the longer end of the curve, that's actually where
• 12:17
  Speaker 1: you want to be. So I get it. You know
• 12:18
  Speaker 1: in the next six months that you're gonna be, you know,
• 12:21
  Speaker 1: mitigating the duration risk. As the short end goes up,
• 12:24
  Speaker 1: you're gonna get some money there from from holding that.
• 12:26
  Speaker 1: But when it goes to a recession time, you want duration.
• 12:30
  Speaker 1: So it'll be interesting to see if he ends up
• 12:32
  Speaker 1: putting that back on six months from tonight, if we're
• 12:34
  Speaker 1: kind of seeing this recession or environment that might be
• 12:37
  Speaker 1: happening in nineteen seconds. Is there something specific you want
• 12:43
  Speaker 1: to be looking for in the release of today's f
• 12:46
  Speaker 1: o MC meeting minutes symmetry, Do they really harp on
• 12:51
  Speaker 1: it or not? All right, thank you so much for
• 12:53
  Speaker 1: being with us. Really interesting ideas. Matt msk in, market
• 12:56
  Speaker 1: strategist for John Hancock Investments based in boss In, but
• 13:00
  Speaker 1: here in our eleven three studios today. Really interesting. I
• 13:03
  Speaker 1: wonder if the focus will be back on the yield
• 13:06
  Speaker 1: curve after the release of those meeting minutes, because, as
• 13:09
  Speaker 1: Matt was saying, they're expecting the yeld curve to invert
• 13:13
  Speaker 1: by year end. Should the federal reserve go four times?
• 13:16
  Speaker 1: Not necessarily a consensus view. I should just point out
• 13:19
  Speaker 1: there are other people who think that there's a significant
• 13:21
  Speaker 1: more amount more room we have to go. But fascinating,
• 13:25
  Speaker 1: Thank you so much. Right now we actually are looking
• 13:28
  Speaker 1: at some strengthening of the lot of Yeah, look at
• 13:34
  Speaker 1: that three percent. Now at the US ten year treasury yield.
• 13:54
  Speaker 1: As mortgage rates rise to the highest in at least
• 13:58
  Speaker 1: seven years of news, when will it start to crimp
• 14:02
  Speaker 1: people's demand for mortgages. Data today suggests that it already is.
• 14:07
  Speaker 1: To talk about this more, I want to bring in
• 14:08
  Speaker 1: Logan Mota Shami. He is senior loan officer for AMC Lending. Logan,
• 14:14
  Speaker 1: thank you so much for being with us. I'm talking
• 14:16
  Speaker 1: about the data that showed that US purchases of new
• 14:19
  Speaker 1: homes fell in April more than people had expected. Do
• 14:24
  Speaker 1: you think this is an indication that higher mortgage rates
• 14:27
  Speaker 1: is crimping into the home sales market at this point. No,
• 14:31
  Speaker 1: for multiple reasons. Number one purchase application data is that
• 14:35
  Speaker 1: cycle highs currently right now, and we've had year over
• 14:40
  Speaker 1: year growth in every single week this year, even with
• 14:44
  Speaker 1: higher home prices, even with higher mortgage rates UH and
• 14:49
  Speaker 1: working from a higher base. This is not like what
• 14:52
  Speaker 1: we saw in when rates were higher in a non
• 14:56
  Speaker 1: seasonal timing. You saw that impacting demand. So as of now,
• 15:01
  Speaker 1: absolutely not mortgage demanded. That cycle high. New home sales
• 15:04
  Speaker 1: for me personally is trending much better than I even
• 15:07
  Speaker 1: thought I was only looking for two to growth this year.
• 15:10
  Speaker 1: We're looking at double digit sales growth this year for
• 15:12
  Speaker 1: new home sales. The revisions were down, but they're not
• 15:15
  Speaker 1: down big. So so far, we haven't seen mortgage rates
• 15:20
  Speaker 1: impact demand at all. One bit. It's impacted the refinance market,
• 15:24
  Speaker 1: but not the purchase market. We'll get two refinances in
• 15:27
  Speaker 1: just a second. I'm curious, are you seeing people put
• 15:30
  Speaker 1: more cash down? No, Typically when home prices rise, UH,
• 15:35
  Speaker 1: the ability to UH put more down and gets limited.
• 15:39
  Speaker 1: But again the markets are different. You know, UH c
• 15:43
  Speaker 1: A home buyers typically tend to be the highest income
• 15:45
  Speaker 1: highest net worth asset people. So you know, if you
• 15:49
  Speaker 1: get some buyers who put down, but then you get
• 15:51
  Speaker 1: the most of the other markets, you probably get a
• 15:54
  Speaker 1: three to five percent down home buyer. So even new
• 15:57
  Speaker 1: tax regulations affecting the deduction of mortgage interest, that is
• 16:02
  Speaker 1: a beg pardon um. Property taxes not affecting home home sales.
• 16:08
  Speaker 1: Absolutely not, and it shouldn't. That's that's a very marginal
• 16:12
  Speaker 1: small number of perspective home buyers that would actually look
• 16:16
  Speaker 1: at that and change their mind. I don't think that
• 16:19
  Speaker 1: will will have any impact because the mortgage interest deduction
• 16:23
  Speaker 1: is still up to seven fifty thousands. You know, the
• 16:27
  Speaker 1: majority of homes are under that level, So I don't
• 16:30
  Speaker 1: see that being any impact whatsoever. You know, Logan, we're
• 16:33
  Speaker 1: talking in generalities and averages. Though the US is a monolith,
• 16:37
  Speaker 1: and obviously it's a fragmented market when it comes to
• 16:40
  Speaker 1: real estate. And I'm wondering, you know, can we break
• 16:43
  Speaker 1: out which part of the US property sales market is
• 16:48
  Speaker 1: actually driving the whole bus here? Because we know that
• 16:51
  Speaker 1: there has been robust growth in the prices and the
• 16:54
  Speaker 1: sales of the higher end houses. But you know, certainly
• 16:59
  Speaker 1: there has been a dearth of affordable housing for people
• 17:02
  Speaker 1: who are lower income, just the first time buyers, etcetera.
• 17:06
  Speaker 1: Where are we on that, on that sort of dynamic
• 17:09
  Speaker 1: that seems to have gotten a little bit out of whack.
• 17:11
  Speaker 1: There is no such thing as affordable housing in America.
• 17:15
  Speaker 1: We do not create the incentives or the backdrop to
• 17:19
  Speaker 1: create affordable housing. And this is a post phenomenon where
• 17:24
  Speaker 1: we've just been building bigger and bigger homes, and whenever
• 17:27
  Speaker 1: the economy gets weak, we lower interest rates, which spur
• 17:30
  Speaker 1: demand and the notion that there's anything affordable out there.
• 17:35
  Speaker 1: For a long time now, it's just not feasible in
• 17:38
  Speaker 1: my eyes, because we based affordability indexes on people who
• 17:43
  Speaker 1: supposedly have down with low interest rates. So I don't
• 17:48
  Speaker 1: even I don't even subscribe to that these I think
• 17:51
  Speaker 1: if you want affordability, you move towards the middle of America,
• 17:55
  Speaker 1: where home prices are much smaller than you know, the
• 17:58
  Speaker 1: coastal areas. Again, that goes into the U. S economy.
• 18:01
  Speaker 1: We've you know, more than the population are in five
• 18:05
  Speaker 1: six different areas in the US, and that tends to
• 18:08
  Speaker 1: be where the high overheating home prices are. But again
• 18:11
  Speaker 1: those people make money as well, and this is why
• 18:14
  Speaker 1: you see home sales still slow and steady. There's no
• 18:18
  Speaker 1: record breaking demand. This is one of the reasons why
• 18:20
  Speaker 1: you don't see housing starts get to fifty year moving average.
• 18:23
  Speaker 1: But we don't build affordable housing. We gave that up
• 18:26
  Speaker 1: decades ago when we've subsidized the housing market with low
• 18:30
  Speaker 1: down payments, low FCO score loans. Interest rates were lower,
• 18:33
  Speaker 1: they were rate of growths and falling for interest rates
• 18:35
  Speaker 1: for decades. So to me, it's impossible to get affordable
• 18:39
  Speaker 1: housing back based on what the builders need to do,
• 18:42
  Speaker 1: because the builders have to make money and they have
• 18:44
  Speaker 1: to build bigger and bigger homes to get that profit margin,
• 18:46
  Speaker 1: especially now with lumber prices of the labor costs stuff
• 18:49
  Speaker 1: as well. Well. Logan, you just described some of the
• 18:51
  Speaker 1: headwinds that many of the home builders are facing. And
• 18:54
  Speaker 1: we got the report from Toll Brothers this week. Obviously
• 18:57
  Speaker 1: they produced luxury housing, but do you see any divergence
• 19:01
  Speaker 1: between the health of your business and the somewhat lackluster
• 19:06
  Speaker 1: fortunes of the home builders. Here's the thing with the builders.
• 19:10
  Speaker 1: The builders were terribly expensive going into the year, and
• 19:13
  Speaker 1: since new home sales if you actually look at adjusting
• 19:16
  Speaker 1: to population used in a six month moving average, we're
• 19:19
  Speaker 1: basically a little tat about what we would see in
• 19:21
  Speaker 1: a recession. So they are dealing with low numbers and
• 19:25
  Speaker 1: they have to make as much money as possible out there.
• 19:29
  Speaker 1: So this is why they've been building bigger and bigger homes.
• 19:31
  Speaker 1: I think it becomes an issue for them, Uh if
• 19:35
  Speaker 1: interest rates go to six or six and a half percent,
• 19:39
  Speaker 1: because these are mortgage buyers. It's not like existing homes
• 19:42
  Speaker 1: that still has a record breaking cash buyer index out there. So,
• 19:46
  Speaker 1: but the demographics for housing has been sought from two
• 19:50
  Speaker 1: thousand and eight to two thousand. We're about to get
• 19:52
  Speaker 1: into a demographic boom for homeownership. So because the numbers
• 19:56
  Speaker 1: are still low for new home sales, they're going to
• 19:58
  Speaker 1: run into a better demograp aftric passion on like two
• 20:01
  Speaker 1: thousand and seven where we had a credit bubble. So
• 20:03
  Speaker 1: I think the builders sales have legs to go higher.
• 20:06
  Speaker 1: It just becomes a profit margin story. Lumber prices, labor cost,
• 20:12
  Speaker 1: land cost. These things matter more now at this stage
• 20:14
  Speaker 1: of the cycle because sales are starting to mature toward
• 20:18
  Speaker 1: more of a fifty year average, and when people talk
• 20:21
  Speaker 1: about a demographic boom. They talk about all the millennials,
• 20:24
  Speaker 1: people who are going to be moving out of apartments
• 20:27
  Speaker 1: and buying homes. Is there any evidence that this shift
• 20:30
  Speaker 1: that we've seen accelerate toward renting rather than owning will
• 20:34
  Speaker 1: reverse this is this is a really interesting topic. Millennials
• 20:39
  Speaker 1: are the biggest home buyers in America today and have
• 20:42
  Speaker 1: been for some time. They're the biggest home buyers in
• 20:44
  Speaker 1: the world. But they buy homes aged thirty two and on.
• 20:47
  Speaker 1: So that big demographic pitch right now that we have
• 20:50
  Speaker 1: in America or ages twenty three to twenty nine. So
• 20:53
  Speaker 1: this is why I've always stated for five years on
• 20:55
  Speaker 1: Bloomber you have to wait till years four. Now, last
• 21:00
  Speaker 1: it was the first year that we had more homeowners
• 21:02
  Speaker 1: and renters, and that makes sense that these people are
• 21:06
  Speaker 1: actually starting to live longer in their rents. Once they
• 21:09
  Speaker 1: get up to the thirty two age they start to
• 21:11
  Speaker 1: buy home. So we're still a few years away from
• 21:14
  Speaker 1: having a better demographic patch. But but once they get
• 21:18
  Speaker 1: to that age group, they if they if they do
• 21:20
  Speaker 1: have that kind of the educated, skilled wage factor in
• 21:23
  Speaker 1: their households, they tend to buy homes. So it's just
• 21:27
  Speaker 1: it's just a makeshift of the demographics in the cycle.
• 21:29
  Speaker 1: It's very unique. We're very old and we're very young.
• 21:33
  Speaker 1: But once they get to that proper age group, they
• 21:35
  Speaker 1: buy homes and that that data has been evident now
• 21:38
  Speaker 1: for for years. Thank you very much for being with us.
• 21:41
  Speaker 1: Logan Mata Shami he is a senior loan officer for
• 21:45
  Speaker 1: a MC lending group. They are based in Irvine, California.
• 21:49
  Speaker 1: You can follow Logan on Twitter at Logan Mata Shami.
• 21:53
  Speaker 1: That's m O H T A s H A M. I.
• 21:57
  Speaker 1: You're listening to Bloomberg. I'm pim file box along with
• 22:00
  Speaker 1: Lisa Abramowitz. Coming up, we're going to be taking a
• 22:04
  Speaker 1: look at what happens when Dodd Frank legislation is changed.
• 22:24
  Speaker 1: The US currently imports most of the uranium that is
• 22:27
  Speaker 1: used for fuel in nuclear power plants in order to
• 22:31
  Speaker 1: generate electricity. About four of the uranium used in the
• 22:36
  Speaker 1: United States comes from Russia. But what would happen if
• 22:41
  Speaker 1: the Russian legislature decides to ban the export of uranium
• 22:46
  Speaker 1: to the United States. Well, here to help us understand
• 22:49
  Speaker 1: the situation is Lee Courier. He is the president chief
• 22:52
  Speaker 1: executive and founder of next Gen Energy. They are based
• 22:56
  Speaker 1: in Vancouver, British Columbia, and they are the owners of
• 23:01
  Speaker 1: a vast track of land in the Athabaska region of
• 23:06
  Speaker 1: Canada where they mind for uranium. Lee, thank you very
• 23:09
  Speaker 1: much for being with us, my pleasure. So did I
• 23:12
  Speaker 1: set out the kind of situation that that is that
• 23:15
  Speaker 1: the country faces accurately? Yes, she did. You quite rightly
• 23:21
  Speaker 1: pointed out that the US relies very heavily currently on
• 23:26
  Speaker 1: uh uranian source from Kazakhstan. We'd respect to our project.
• 23:32
  Speaker 1: We're currently in development, heading towards production. Um not currently
• 23:37
  Speaker 1: in production. So Lee, just to sort of give a
• 23:41
  Speaker 1: sense of why why uranium is a hot topic. It's
• 23:46
  Speaker 1: used in nuclear weapons. Correct, Correct, and as a result,
• 23:49
  Speaker 1: perhaps comes under more scrutiny and has dealt with, greeted
• 23:53
  Speaker 1: with more skepticism than other than other commodities. Correct, well,
• 23:57
  Speaker 1: grect it is it is a sy energy obviously, anything
• 24:02
  Speaker 1: that that's produced in Canada or Australia, and countries that
• 24:10
  Speaker 1: produced uranium who they sell it to must be parties
• 24:14
  Speaker 1: to the non proliferation treaty and they only sell to
• 24:19
  Speaker 1: those countries. So, yes, it is used in nuclear weapons,
• 24:24
  Speaker 1: but is only mined um for electrical generation purposes. So
• 24:31
  Speaker 1: then this sort of goes into what Pim was talking about,
• 24:34
  Speaker 1: where the complicated sort of foreign relationship between the US
• 24:38
  Speaker 1: and Russia is sort of an interesting an interesting side
• 24:44
  Speaker 1: story to the uranium market. When Russia or Kazak sne
• 24:48
  Speaker 1: Is is actually supplying most of the US is uranium,
• 24:52
  Speaker 1: Yes they are. They're supplying it for the US in
• 24:55
  Speaker 1: power generation in the utilities, and the US produces domestically
• 25:04
  Speaker 1: very little uranium and hence they're currently reliant on imports
• 25:10
  Speaker 1: of uranium from Canada, Australia, Kazakhstan and predominantly to service
• 25:17
  Speaker 1: their their current requirements. So can you tell us what
• 25:22
  Speaker 1: would a ban on the export of uranium from Russia,
• 25:27
  Speaker 1: which accounts for fourteen percent of US imports, what would
• 25:30
  Speaker 1: that do to the price of uranium? Look at that
• 25:33
  Speaker 1: would exacerbate an already supply side situation where there's a
• 25:40
  Speaker 1: lot of minds around the world closing due to the
• 25:44
  Speaker 1: higher cost of production and being at the end of
• 25:47
  Speaker 1: their use from mind life. It would exacerbate the that
• 25:51
  Speaker 1: that situation and I think undoubtedly have a very positive
• 25:55
  Speaker 1: impact on the price of uranium. Are you expecting to
• 26:01
  Speaker 1: see higher prices in more demand for for the uranium
• 26:04
  Speaker 1: that you your company minds? Well, yes, I do. We
• 26:09
  Speaker 1: have an asset that's located in Saskatchewan, Canada. It's ranked
• 26:14
  Speaker 1: of the number one minded jurisdiction in the world. And
• 26:17
  Speaker 1: in this day and age, with geopolitical issues becoming even
• 26:22
  Speaker 1: more prevalent than than what they have been in the past,
• 26:27
  Speaker 1: uranium source from countries that have a very stable sovereign jurisdiction,
• 26:33
  Speaker 1: such as Canada and Australia. I think we'll start to
• 26:39
  Speaker 1: see a premium or or greater attention from the US
• 26:43
  Speaker 1: utilities with respect to sourcing their uranium supply from Canada predominantly.
• 26:51
  Speaker 1: You know, it's it's interesting when I think of aluminium,
• 26:54
  Speaker 1: for example, I have, you know, this feeling of industry
• 26:58
  Speaker 1: and this feeling of building things else aluminum foil from
• 27:01
  Speaker 1: my children's lunch. When I think of uranium, it kind
• 27:03
  Speaker 1: of makes me feel uneasy. I think about something that
• 27:07
  Speaker 1: sort of has a short half life, that's used in weapons,
• 27:10
  Speaker 1: that you know is dangerous um and flammable. Could you
• 27:14
  Speaker 1: give me just a sense, can you give me a
• 27:16
  Speaker 1: picture of what a uranium mind looks like and you
• 27:20
  Speaker 1: know sort of whether whether the impression that that I
• 27:23
  Speaker 1: have is sort of false and that it's just like
• 27:26
  Speaker 1: any other kind of mind material. It is when from
• 27:30
  Speaker 1: a mining perspective, look at the mind that we are
• 27:35
  Speaker 1: developing or or in the other ones in Canada or
• 27:39
  Speaker 1: anywhere in the world, really are very very benign. They're
• 27:42
  Speaker 1: no more complicated than a gold mine or a copper
• 27:46
  Speaker 1: mine or aluminum mine. Um. Look, uranium is a fantastic
• 27:52
  Speaker 1: source of energy. It's why nuclear energy is such. Is
• 27:57
  Speaker 1: the lowest cost of given output of electricity is the
• 28:03
  Speaker 1: lowest on the planet, and it emits no carbon emissions.
• 28:08
  Speaker 1: The fact that it's such a fantastic source of energy
• 28:12
  Speaker 1: is why it has been used in the past in
• 28:15
  Speaker 1: nuclear weapons. But um, from the mining perspective, it's it's
• 28:20
  Speaker 1: very benign. It's not until it gets into the nuclear
• 28:23
  Speaker 1: fusion process in the in the utility that it generates,
• 28:28
  Speaker 1: it's it's terrific power. But look, there's no deny it.
• 28:34
  Speaker 1: It has had that history in the past. But as
• 28:40
  Speaker 1: I said earlier, mind uranium is very benign. It's no
• 28:43
  Speaker 1: more complicated than many gold mines around the world. And
• 28:50
  Speaker 1: as a source of electricity, it's the lowest cost of power,
• 28:54
  Speaker 1: and that's over time. It's been province in the sixties,
• 28:57
  Speaker 1: that is the case, and now with carbon emissions being
• 29:01
  Speaker 1: such a well, I think it's actually one of the
• 29:04
  Speaker 1: planet's largest issues to resolve and properly address. Attention to
• 29:11
  Speaker 1: that is the only form of clean power that provides
• 29:16
  Speaker 1: base load power. So wind, solar, older renewables fantastic initiatives
• 29:23
  Speaker 1: and must be pursued. But with respect to our requirements
• 29:27
  Speaker 1: and the world's population through at least till at least,
• 29:31
  Speaker 1: nuclear power is the only answer, and I stress the
• 29:35
  Speaker 1: only answer, and I think a lot of countries are
• 29:37
  Speaker 1: starting to realize that China will become the world's largest
• 29:43
  Speaker 1: consumer of electricity of nuclear power sometimes in the decade
• 29:48
  Speaker 1: and overtaking the US as the largest consumer. And he
• 29:53
  Speaker 1: also seeing a lot of other countries around the world
• 29:59
  Speaker 1: extent and the licenses of nuclear power stations because it's
• 30:04
  Speaker 1: just unbeatable in terms of a good, clean, low cost
• 30:08
  Speaker 1: source of energy. Lee Curier, thank you so much for
• 30:10
  Speaker 1: being with us. He's president, chief executive and founder of
• 30:13
  Speaker 1: next Gen Energy based in Vancouver, British Columbia. Coming up politics, policy,
• 30:19
  Speaker 1: power and law, Bloomberg's own June Grosso it was joining
• 30:23
  Speaker 1: us now. The show is being broadcast from the Bloomberg
• 30:26
  Speaker 1: Law Leadership Forum. Real quick, June, what are you focusing
• 30:29
  Speaker 1: on today? Well, Rod Rosenstein is making a speech right now.
• 30:31
  Speaker 1: We're gonna be talking to the top lawyers at companies
• 30:34
  Speaker 1: like ge about regulatory compliance. Stick with it. Sounds fascinating.
• 30:38
  Speaker 1: I will be listening, so should you. Bloomberg Politics, Policy,
• 30:41
  Speaker 1: Power and Law. That is next, and Lisa Abramo it's
• 30:44
  Speaker 1: along with my co host Pim Fox, and this is
• 30:46
  Speaker 1: Bloomberg Radio. Thanks for listening to the Bloomberg P and
• 30:53
  Speaker 1: L podcast. You can subscribe and listen to interviews at
• 30:56
  Speaker 1: Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm
• 31:01
  Speaker 1: Pim Fox, I'm on Twitter at Pim Fox. I'm on
• 31:04
  Speaker 1: Twitter at Lisa Abramo wits one Before the podcast, you
• 31:07
  Speaker 1: can always catch us worldwide on Bloomberg Radio