Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
Speaker 1: my co host Matt Miller.
Speaker 2: Every business day we bring you interviews from CEOs, market pros,
Speaker 2: and Bloomberg experts, along with essential market moven news.
Speaker 1: Find the Bloomberg Markets podcast called Apple Podcasts or wherever
Speaker 1: you listen to podcasts, and at Bloomberg dot com slash podcast.
Speaker 1: All right, Matt, we're going to elect electric vehicles. Matt,
Speaker 1: it's happening. I mean, you were so kind to let
Speaker 1: fired me up with the Bloomberg I mean with the
Speaker 1: Ford f one fifty.
Speaker 3: That was awesome.
Speaker 1: But I'm not going there unless there's like the batteries
Speaker 1: are better into charging stations everywhere we got gas stations.
Speaker 3: I'm not going to be a first adopter. Number of
Speaker 3: reasons I'm not going to be a first adopter there
Speaker 3: about it.
Speaker 4: Yes, call it that, but sorry my mic was off.
Speaker 4: Thank you, Ken.
Speaker 2: There are a number of reasons to be tentative about it.
Speaker 2: But how fun was it to drive the fifty light?
Speaker 1: Yeah, it's a beast. I have to admit that was
Speaker 1: pretty cool. Jeff Chramberlin joins us. He's the CEO of
Speaker 1: Volta Energy technology. He joined just live here in our
Speaker 1: Bloomberg Interactive Broker studio.
Speaker 3: Appreciate that.
Speaker 1: See, when it's a climate, we can get people coming
Speaker 1: into New York. When it's un week, people come into
Speaker 1: New York, you get them in studio. Jeff, tell us
Speaker 1: about your company, Vaulta Energies Technologies. What do you guys
Speaker 1: do here in this EV space?
Speaker 5: We invest in battery and associated tech technologies, including the
Speaker 5: kind of infrastructure you were talking about, charging stations, et cetera.
Speaker 5: A whole bunch of new technology requirements there that will
Speaker 5: be and RB are being adopted. And so our whole
Speaker 5: goal is to invest in companies at that inflection point
Speaker 5: when they come out of science and they're all ready
Speaker 5: for scale, and we're industrialists and we're investors by training
Speaker 5: and by experience, And ultimately I ran all the battery
Speaker 5: work at Ragon National Laboratory for ten years, got to
Speaker 5: see supply chains developing around the entire world and what
Speaker 5: the customer's needs were, so that we believe we can
Speaker 5: place capital more effectively than most.
Speaker 4: So unlike Paul, I am there.
Speaker 2: I'm ready, and I've got my eye on a few
Speaker 2: evs that I think are just amazing in terms of
Speaker 2: the powertrain. And my one concern is that I buy
Speaker 2: something and it becomes obsolete by the time it gets delivered.
Speaker 4: Do you see the same kind.
Speaker 2: Of what's it called Moore's law, you know in batteries
Speaker 2: that we famously saw in chips. Do they just double
Speaker 2: in capacity every year or have in price?
Speaker 5: Yeah? Thanks for the question, Matt, and by the way,
Speaker 5: thanks for having me on. I appreciate it. I come
Speaker 5: from the chip industry, and so we have tried to
Speaker 5: design or declare what a More's law looks like. But no,
Speaker 5: in Moore's law, it's double the density of transistors on
Speaker 5: a way for every twelve to eighteen months. What's happened
Speaker 5: in the battery industry is they were first commercialized lit
Speaker 5: the Mind batteries first commercialized in nineteen ninety two for
Speaker 5: cam quarters. So thirty years have progressed. The average is
Speaker 5: something like in the low single digits, maybe low double
Speaker 5: digits percentage improvements year over year as opposed to a doubling.
Speaker 5: So there is a kind of Moore's law for battery,
Speaker 5: but it's not as extreme as what you're describing me.
Speaker 5: But I do want to say one thing in two
Speaker 5: thousand and four when Tesla started the battery costs the
Speaker 5: unit of meritage dollars per killo what hour they were
Speaker 5: at about four to six thousand dollars per kilo what hour?
Speaker 5: Parody with gas powered vehicles, you need to be about
Speaker 5: one hundred to one hundred and fifty dollars a killo
Speaker 5: what hour. So they had the hubrit the hubris to
Speaker 5: believe economies of scale and better engineering could get you there.
Speaker 5: And guess what it did. The costs are down over
Speaker 5: ninety five percent since they were very close to parody
Speaker 5: with gas.
Speaker 4: So what are we looking at now for killo what hour?
Speaker 5: It's depending on the supplier. It ranges between eighty and
Speaker 5: one hundred and eighty dollars a kilo one hour. So
Speaker 5: we're essentially there.
Speaker 2: Okay, because the ones I like, well, GM has these
Speaker 2: massive two hundred and ten kilowat hour battery packs. I
Speaker 2: don't know how efficient they are, but I just like
Speaker 2: it's like a big block V eight, you know in
Speaker 2: the truck they get four hundred and fifty miles of range.
Speaker 4: The new Escalade EQ I think it's called or Escalate IQ,
Speaker 4: can't remember anyway, The.
Speaker 2: New EV Escalade does zer to sixty and five seconds
Speaker 2: and it weighs damn near ten thousand pounds. It's just
Speaker 2: unbelievable the amount of thrust you get from these electric motors.
Speaker 2: What do you think about the obsolescence of the battery
Speaker 2: though over a few years, Like, you can't just swap
Speaker 2: out a battery from these the way you could with
Speaker 2: an ice engine.
Speaker 5: You can swap them out. I mean you could if
Speaker 5: you wanted to keep your truck and put a more
Speaker 5: modern battery in it. There are ways to do that,
Speaker 5: But my guess is it'll be less costly for you
Speaker 5: as a consumer to buy a new vehicle. I don't
Speaker 5: think obsolescens going to move that quickly. And the battery tech,
Speaker 5: the key that they're aiming for is cost and range today.
Speaker 5: But there's another key that Paul mentioned it that's the
Speaker 5: infrastructure surrounding it. Where can I go to charge my
Speaker 5: vehicle quickly? What is potentially more important than range is
Speaker 5: ubiquitous fast charging. Can I fill my vehicle with energy
Speaker 5: to go three four, five hundred miles in five to
Speaker 5: twenty minutes. That technology is on the rise, It's being
Speaker 5: adopted right now.
Speaker 1: What do we know at this stage of development of
Speaker 1: the evs and batteries, about the supply chain, the raw
Speaker 1: materials need. I've heard from some people that that's going
Speaker 1: to be a gating issue. What do you know about
Speaker 1: that from your.
Speaker 5: Yeah, there's a lot of folks out there that talk
Speaker 5: about lithium being a resource. Lithium is the key, let's
Speaker 5: start there. In fact, I was hoping to talk today
Speaker 5: about a comparison with oil. The last time the human
Speaker 5: race has experienced an energy transition like the one that
Speaker 5: has started was a shift from whale oil to rock oil.
Speaker 5: And this transition is on the scale of that transition.
Speaker 5: By rock oil, I mean petroleum.
Speaker 2: What the shift from foil from whale oil? Which no, no,
Speaker 2: but now what's comparable now to the shift from oil?
Speaker 5: The shift from oil to renewable power and electric transportation
Speaker 5: is on par in terms of the size of the
Speaker 5: shift and the overall impacts on a wide variety of industries.
Speaker 5: As oil was. Oil was started for lanterns right look
Speaker 5: at where it ended up.
Speaker 2: So I'm wondering actually about that in terms of you know,
Speaker 2: how much lithium there is in the ground, how easy
Speaker 2: it's going to be. I guess it's going to get
Speaker 2: easier and easier to get it out of the ground.
Speaker 2: You know, is it as reliable as oil has.
Speaker 4: Been for the last century.
Speaker 5: Short answer is yes. I think there's a lot of
Speaker 5: handwringers that are telling us so there's not enough lithium
Speaker 5: and there's crust there. Definitely is. Your point's a good one.
Speaker 5: Though some is economic today in terms of extracting and
Speaker 5: refining it, some is not. One of the things we
Speaker 5: invest in, and we're not the only ones. Is new
Speaker 5: technology to make the extraction of lithium more economic, and
Speaker 5: so that getting back to the supply chain issue, you know,
Speaker 5: there's the headline is China controls a lot of the materials,
Speaker 5: but in the case of lithium, the vast majority of
Speaker 5: lithium that's ready to use in batteries comes out of China.
Speaker 5: But it's process there, it's not mind there. And this
Speaker 5: is something I was hoping to talk about, getting back
Speaker 5: to the supply chain, where is in mind the primary
Speaker 5: resources the so called cone in South America. Chile has
Speaker 5: a massive resource, so does Bolivia. In Argentina, that's where
Speaker 5: the biggest resources are. There's some in Australia, there's some
Speaker 5: in China, there's a lot in the US there And
Speaker 5: this is really what I'm saying. We're at the early
Speaker 5: stages of this. It's like finding a new you know,
Speaker 5: it started with spindletop oil oil did in Texas. Then
Speaker 5: we found oil, humans found oil in Saudi Arabia. This
Speaker 5: same thing is going to be happening with lithium.
Speaker 2: So are you you know, at Volta, are you investing
Speaker 2: in or are you involved in other companies investing in
Speaker 2: the processing of.
Speaker 4: These materials here because we don't want it to all be.
Speaker 5: Absolutely, we absolutely are including new technologies to process them
Speaker 5: more efficiently and less costly. So this and that is
Speaker 5: something I want to say. The supply chain movement is
Speaker 5: evidence of the maturity state of this industry. And what
Speaker 5: I mean by that is a guy from the chip industry.
Speaker 5: We'd been preaching to anyone that would listen, investors in
Speaker 5: the government up in Capitol Hill for fifteen years. The
Speaker 5: supply chains are going to move out of China. And
Speaker 5: here's why. In the chip industry it makes sense to
Speaker 5: have centralized manufacturing. The mass of microchips versus their value.
Speaker 5: Their value is massive compared to their mass. So you
Speaker 5: can get economies of scale, centralized manufacturing and Taiwan shipping
Speaker 5: around the world. You can't do that with the battery technology.
Speaker 5: And you don't have to look any further than the
Speaker 5: automotive industry itself to believe me that by units, the
Speaker 5: largest manufacturer of cars in the US is Toyota. They
Speaker 5: don't make their cars in Japan for the American customers.
Speaker 5: It's the same thing with battery tech. Those supply chains
Speaker 5: are moving right now.
Speaker 2: And by the way, in terms of the change in technology,
Speaker 2: what you're saying reminds me of something that Gary Shilling,
Speaker 2: who's a famous eighty six year old economist, He tells
Speaker 2: me when he was a kid, people were wringing their
Speaker 2: hands and worried that there wasn't enough copper in the
Speaker 2: Earth's crust for the telecoms industry.
Speaker 4: And obviously we've moved on from that piece.
Speaker 5: Yes, in the fiber. And there's another thing. There are
Speaker 5: New York Times articles in the nineteen thirties when the
Speaker 5: horseless carriage was really taken off, that there's not enough
Speaker 5: lead in there is crust. And this is an important
Speaker 5: point as well regarding movement of supply chains. Lead is
Speaker 5: recycled lead acid batteries out of vehicles. It's like ninety
Speaker 5: eight point seven percent of those are recycled. The same
Speaker 5: thing is going to happen here. So we may not
Speaker 5: have access to cobalt in those batteries that comes out
Speaker 5: of the congo, but we will because we're going to
Speaker 5: move to so called urban mining waste materials to get copper, cobalt, lithium,
Speaker 5: et cetera.
Speaker 4: Fascinating, So cool it is.
Speaker 1: I mean, I mean, I guess you get bachelor's in
Speaker 1: chemistry from Wake Forest, and what are youna do with that?
Speaker 1: So you triple down you get a PhD in physical
Speaker 1: chemistry from Georgia Tech. I mean, those are some serious
Speaker 1: engineering geeks down there in Georgia Tech.
Speaker 4: So he means that in a good way.
Speaker 1: Yeah, in a good way, some really big ones. So anyway,
Speaker 1: then you go into the electric car business, why not?
Speaker 1: Jeff Chamberlain, CEO Volta Energy Technologies, thanks so much for
Speaker 1: joining us, coming into the Bloomberg Interactive Broker's studio. So again,
Speaker 1: it is a climate week in New York, and so
Speaker 1: we get a lot of smart people coming through here
Speaker 1: talking to us about what's happening out there in the
Speaker 1: evolution of the energy space.
Speaker 6: You're listening to the Team Ken's are Live program Bloomberg
Speaker 6: Markets weekdays at ten am East ding on Bloomberg dot com,
Speaker 6: the iHeartRadio app and the Bloomberg Business App, or listen
Speaker 6: on demand wherever you get your.
Speaker 3: Podcast, Matt.
Speaker 1: Instead of buying the latest car with a scat pack
Speaker 1: or whatever it is, you could put your money into
Speaker 1: your treasure.
Speaker 3: You can get five points zero six percent today. How
Speaker 3: about that?
Speaker 2: I mean, it's probably a smart idea, which is why
Speaker 2: I won't be doing it, but a lot of others
Speaker 2: are not. Just in the twos, right, the fives hit
Speaker 2: the highest level since two thousand and seven. The tens
Speaker 2: hit the highest levels since two thousand and seven, and
Speaker 2: a reminder, you.
Speaker 4: Know that was sixteen years ago. So these rates are incredible.
Speaker 2: And keep in mind, right, prices move in the opposite direction.
Speaker 2: So when we see these high prices, that mean rates,
Speaker 2: It means that the prices are low. Why is everybody
Speaker 2: selling off treasuries right now? Let's ask Joanna Diegos. She's
Speaker 2: the co founder of bond Blocks and she joins us
Speaker 2: right now in the Interactive Brokers studio. So Joanna, I
Speaker 2: know you well from our ETF show or you're a
Speaker 2: frequent guest, and I also know from that show that
Speaker 2: everyone's been getting long in treasuries and they've been losing
Speaker 2: money on that big bet.
Speaker 7: Why yeah, over the last three months that that trade
Speaker 7: is down ten percent if you're going long treasuries twenty plus.
Speaker 7: I think that this is a trend that the treasury
Speaker 7: flow into the long end has been probably the biggest
Speaker 7: percentage of flow into treasuries year on year, So the
Speaker 7: twelve months trailing it's the biggest. It's a thirty percent
Speaker 7: of flows into treasuries for twenty twenty three. I think
Speaker 7: people are just taking a really really big view on
Speaker 7: trying to call the bottom and they're sticking with it,
Speaker 7: which is pretty fascinating that they're doing that. I think
Speaker 7: the good sign is that.
Speaker 2: Today it makes sense, right because we haven't seen yields
Speaker 2: this high and as we just said, sixteen years.
Speaker 4: Yes, yeah.
Speaker 7: I think I think the encouraging thing is that we've
Speaker 7: seen less of than twenty twenty three or recently is
Speaker 7: all of more flow into the short short end, so
Speaker 7: three months, six months and more flow balanced across US
Speaker 7: one one plus years into three, five ten, just as
Speaker 7: you described. I think that's encouraging and people are trying
Speaker 7: to just have feather in more duration into their into
Speaker 7: their portfolio.
Speaker 2: Now, just tell us quickly about your products at bond Blocks,
Speaker 2: because there are some very popular ETFs that people use
Speaker 2: to make these trades.
Speaker 7: Yeah, So for that very reason, we observe that you
Speaker 7: can't actually trade exact duration in the current and in
Speaker 7: the current ETF offering. So we launched eight duration specific
Speaker 7: treasury funds. So if you want one your duration to
Speaker 7: your duration three it duration, you can use our products
Speaker 7: more precisely for exactly the trades I think people are
Speaker 7: trying to put on. If you broadly put on duration
Speaker 7: in your portfolio, you may have you may you may
Speaker 7: overallocate to that duration. And so we want people in
Speaker 7: these markets to be able to be very very prescriptive
Speaker 7: and selective where they go into into high yield.
Speaker 1: Given rates where they are. Are you seeing flows? I
Speaker 1: mean it seems like you're perfectly positioned for where the
Speaker 1: market is today at bond Blocks. I mean are you
Speaker 1: seeing flows come in and if so, kind of where
Speaker 1: are they going?
Speaker 7: With a really cool trade this week in our double
Speaker 7: b high yield fund. We have a credit rating a series,
Speaker 7: and I think that's acknowledging the strength that you're seeing
Speaker 7: corporate balance sheets and the resiliency that has been in
Speaker 7: the economy this year. So I think I think people
Speaker 7: are taking on very measured risk and to see a
Speaker 7: trade like that is really compelling.
Speaker 3: Interesting.
Speaker 1: So for bond blocks, I mean, again, what are some
Speaker 1: of the products that are kind of most popular these
Speaker 1: days in your ETF portfolio.
Speaker 7: Yeah, we're starting to see increase interest across duration as
Speaker 7: I mentioned, like moving out a little bit into the
Speaker 7: duration trade, and as well, we're seeing interest in some
Speaker 7: of the corporate products that we have out. We have
Speaker 7: a really robust offering in high yield. We have over
Speaker 7: ten products in high yold. So you can trade sectors
Speaker 7: with bomb blocks, the bond blocks, you can trade credit ratings,
Speaker 7: as I mentioned, and I think Matt would be happy
Speaker 7: to hear that. In the summer, we saw a lot
Speaker 7: of interest in our triple C product.
Speaker 4: It's one of my favorite. So you just picked my favorite. Yeah,
Speaker 4: but they're.
Speaker 7: Tight, right, Yeah, So obviously they do what they say
Speaker 7: they're going to do. They track their indexes, they give
Speaker 7: you that exact exposure. Also, what I think is interesting
Speaker 7: is people are starting to realize that the fundamentals in
Speaker 7: high yield are really strong, and if you think about it,
Speaker 7: relative the other risks that are in your portfolios, those
Speaker 7: high coupon rates are providing you a ton of cushion
Speaker 7: for any relativity that might come going forward in fixed
Speaker 7: income plus relative to equities, which over the last ten
Speaker 7: or fifteen years portfolios have been heavily heavily allocated to
Speaker 7: eke out more return. These are great protocols to look
Speaker 7: for exposure to to get you to those levels of
Speaker 7: return seven ten percent a year, whatever you're looking for,
Speaker 7: with less risk. In fact, the broad high yield category
Speaker 7: has over less than half the risk of the S
Speaker 7: and P five hundred. Yet you're getting all this yield
Speaker 7: and all this cushion and strength and the balance.
Speaker 4: That's interesting.
Speaker 2: So high yield in general, which is what triple b's
Speaker 2: and lower.
Speaker 7: So no triple B is investment grade, so it's double
Speaker 7: B B and triple.
Speaker 4: C double B and lower.
Speaker 2: Yeah, that general category has less risk than buying the
Speaker 2: S and P five hundred.
Speaker 8: Yeah.
Speaker 7: From a Volatiley perspective, over the last ten years, you
Speaker 7: just don't think that you really have to reintroduce yourself
Speaker 7: to some of these categories and fixed income and remind
Speaker 7: yourself of the characteristics of them.
Speaker 2: You know.
Speaker 7: Also, this isn't the same credit cycle we've seen in
Speaker 7: the past. The defaults haven't shown up in past any
Speaker 7: kind of historical highs that they should be. They should be.
Speaker 7: The distressed names in the overall category is pretty low.
Speaker 7: It's only about seven and a half percent. So it's
Speaker 7: an interesting thing if you get familiar with the corporate
Speaker 7: issuers and the corporate categories investment grade two. There's a
Speaker 7: lot of relative risk and reward here that you haven't
Speaker 7: been able to deploy in your portfolio for a long time.
Speaker 4: Do you see demand for up and quality over high yield?
Speaker 7: Now up and quality over high yield like getting getting
Speaker 7: some of these? Yeah, so that's the thing. You can
Speaker 7: be really selective within these categories. With you know, at
Speaker 7: bomb blocks we have, you were able to choose the
Speaker 7: categories very very precisely, and so yeah, you can go
Speaker 7: seek out quality high yield and you can go seek
Speaker 7: out quality corporate exposure. And it sounds like those two
Speaker 7: things aren't supposed to go together, but there's just a
Speaker 7: lot of misconceptions about the category and what's going on
Speaker 7: with them right now.
Speaker 1: Yeah, I'm looking at ETFO on the Bloomberg terminal x
Speaker 1: c c C, the CC triple C rated US A
Speaker 1: dollar high yield corporate bond up twelve percent trailing twel
Speaker 1: month basis.
Speaker 7: Yeah, Yeah, that's that's that yield that is just really
Speaker 7: hard to look away from, especially with as I mentioned,
Speaker 7: the different level of volatility that that gives you in
Speaker 7: your portfolio. And you know, it's twenty twenty three, We're
Speaker 7: almost at the end of twenty twenty three at bomb blocks.
Speaker 7: If we don't see a recession or any downturn half
Speaker 7: through the end of this year or even into the
Speaker 7: beginning of next year, and you're going on your second
Speaker 7: almost third year of this market environment with yields at
Speaker 7: these levels, which are double where they were before the
Speaker 7: Fed started hiking rates. And really, if we think things
Speaker 7: are higher for longer with ja bomb blocks we do
Speaker 7: and we don't see these hard landings, you really need
Speaker 7: to think about what's going on with your portfolio for
Speaker 7: the next two to three years.
Speaker 1: All right, Joanna, always great stuff to chat with you.
Speaker 1: Joanna Diego's co founder of bond Blocks.
Speaker 6: You're listening to the tape cans are live program Bloomberg
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Speaker 6: You can also listen live on Amazon Alexa from our
Speaker 6: flagship New York station, Just say Alexa play Bloomberg eleven thirty.
Speaker 3: Danielle di Martino Booth made it here.
Speaker 1: To the studio. She's the CEO, Chief Strategistic QI Research.
Speaker 1: You came in from LaGuardia. Not a quick trip today.
Speaker 4: You need a police escort.
Speaker 3: Yeah, you need to dissk like in a helicopter press. Well,
Speaker 3: we know a guy that could help us out next.
Speaker 9: This is not the right time to like break a leg. Really,
Speaker 9: this is not the right time to need an ambulance
Speaker 9: in Matt.
Speaker 1: Forget about it, particularly on the East side. All right, Danielle,
Speaker 1: you were just talking about housing market. Give us some
Speaker 1: of those stats you were talking about, because Matt and
Speaker 1: I both now are real estate moguls.
Speaker 3: Home.
Speaker 4: Oh, yes, we own property. We own property.
Speaker 3: Exactly what are you seeing in the real estate market?
Speaker 9: Does that mean you topped the market?
Speaker 2: You know what?
Speaker 9: We're seeing is is kind of this this supply over
Speaker 9: supply bloodbath that we've been worried about for a few
Speaker 9: years on the apartment side finally coming to fruition. So
Speaker 9: before the pandemic, you might have had eighty two eighty
Speaker 9: three thousand units absorbed a month. This the last month,
Speaker 9: we had like forty six I want to say a thousand,
Speaker 9: don't quote me, but about about half of what was
Speaker 9: pre pandemic normal from the one hundred and nine thousand
Speaker 9: units that came online out of the pipeline. So you're
Speaker 9: not even getting fifty percent of what's being produced you had.
Speaker 9: You've had one point two million units come on in
Speaker 9: the last three years, and there's another one million units
Speaker 9: in the pipeline. So we saw multi family permits yesterday
Speaker 9: really get hit hard. But you've still got to work
Speaker 9: through a pipeline of another million units.
Speaker 2: Are going to take out a mortgage at seven and
Speaker 2: a half percent to well someday they will, right. It
Speaker 2: looks bad compared to a couple of years ago, but
Speaker 2: not so bad compared to twenty years ago.
Speaker 9: Refinancings were up like thirteen percent in this morning's Mortgage
Speaker 9: Bankers Association dated. Somebody's taking cash out of their homes
Speaker 9: at these mortgage rates.
Speaker 2: Wow, So does this is this what the FED wanted
Speaker 2: or does this make the transition transmission mechanism slower?
Speaker 9: It makes it a lot slower. Yeah, And I think
Speaker 9: that's exactly what we've seen.
Speaker 2: And because some people say, you know, when we talked
Speaker 2: to Danny Blanchflower, he says it takes eighteen to twenty
Speaker 2: four months for these great hikes to work their way
Speaker 2: through the economy. But other people like jan Hatzias say, actually,
Speaker 2: the lags are much quicker than they had been the past,
Speaker 2: which is why he thinks that they've worked their way
Speaker 2: through the coom.
Speaker 9: They could have been quicker, could have been, but the
Speaker 9: fiscal impulse kicked right back up. So that's not normally
Speaker 9: what you see when you're when your economy is slowing,
Speaker 9: when you're getting to the end of the cycle. You
Speaker 9: don't normally see the government re up completely re up
Speaker 9: as if we're at war, fiscal spending along with the
Speaker 9: employee retention credit which is now on hold, thank you god.
Speaker 4: But no one talks about the fiscal side.
Speaker 2: But if we were either when it comes to a
Speaker 2: driver of inflation, nor when it comes to the economy,
Speaker 2: everyone talks.
Speaker 9: In the month of July, the employer retention credit pumped
Speaker 9: out twenty nine point eight billion dollars in one month
Speaker 9: in cash directly deposited into people's check just like the
Speaker 9: stimulus checks were those one two three stimulus checks. It's
Speaker 9: the same exact thing that bypasses monetary policy and the
Speaker 9: fed'sibility to try and slow the economy.
Speaker 4: Now the plug's been pulled on.
Speaker 9: That, so you know, and student loans, people are preemptively
Speaker 9: getting out there and paying their student loans. Who would
Speaker 9: have predicted this, that we would have seen this spike
Speaker 9: and fiscal in government revenues in the month of August.
Speaker 9: People are like, hey, interest is going to start back up.
Speaker 9: This is just a fact of life. My budget's going
Speaker 9: to take a hit. I might as well just start
Speaker 9: paying right now in August.
Speaker 1: And they did, all right, putting all the millions of
Speaker 1: pieces of data that you look at and your team
Speaker 1: of QI research look at, what's your recession call.
Speaker 9: I think that the reason we're seeing some for lack
Speaker 9: of a better way to describe it, preemptive Chapter eleven filings,
Speaker 9: some stores just up. I mean, we're seeing massive amounts
Speaker 9: of stores closing, closing, closing, closing. I think we're seeing
Speaker 9: it because they know that the holidays are not going
Speaker 9: to save them, So I think we're I think I
Speaker 9: think we're finally getting to the hard part of the
Speaker 9: landing as opposed to where we've.
Speaker 3: Been, because I'm not buying it to that soft landing rhetoric.
Speaker 8: No, it's certainly not.
Speaker 9: With the UAW on.
Speaker 2: Strike, Okay, the government shutdown, and the government shutdown, u
Speaker 2: aw on strike, Student loan payments getting ready to resume.
Speaker 4: I've got a whole list I can't do. I don't
Speaker 4: have it.
Speaker 9: Uprate crisis as high as they are, people are substituting
Speaker 9: out things.
Speaker 2: Credit card debt rising, credit card delinquencies rising, auto load
Speaker 2: delinquencies rising.
Speaker 5: And where is it.
Speaker 9: It's in that sweet spot the thirty to thirty nine
Speaker 9: year old who has the biggest student loan payment. That's
Speaker 9: where you're seeing credit card delinquencies the highest, according to
Speaker 9: New York Fed data. Same thing with auto loan delinquencies
Speaker 9: the highest. Auto Finance weekly it's kind of a trade
Speaker 9: trade weekly. They said that repossessions this year are tracking
Speaker 9: at two million for the year, and there repossessions right
Speaker 9: now are just a factor of how many cars per
Speaker 9: day can the repo men get. There's literally it's capacity constrained.
Speaker 2: I have Danielle di Martino, booth fan, who always writes
Speaker 2: in when you're on he He has sent me like
Speaker 2: eight questions so far, but I'll state I'll just suppose one,
Speaker 2: which I think is really interesting. Do you fear the
Speaker 2: whoe home data is lulling investors into lazy risk adding,
Speaker 2: which makes sense to me.
Speaker 9: I do, especially because you have to understand that going
Speaker 9: into the Great Financial Crisis, we didn't have like a
Speaker 9: trillion plus dollar fixed income exchange trade at fund Universe,
Speaker 9: but now we do. So the structure of the financial
Speaker 9: system has changed, and what we see reflected in kind
Speaker 9: of high yield spreads, and that's where you're like danger, danger.
Speaker 9: We're not seeing it reflected in spreads because of the
Speaker 9: ETF structure, So you're just seeing spreads reflect inflows and
Speaker 9: redemptions from these gigantic fixed income ETFs and the super
Speaker 9: liquid names that trade when there's redemptions and when there's inflows,
Speaker 9: So you don't see the ninety percent of the garbage
Speaker 9: that's trading by appointment only reflected in spreads, So that
Speaker 9: gives investors, I think another this this air of confidence
Speaker 9: that they should not have.
Speaker 4: Al Right, that's fascinating.
Speaker 1: Does the FED share your sense of caution? Do you
Speaker 1: think such that they will just settle down and stop?
Speaker 9: I would have to say no, given how sanguine John
Speaker 9: Williams is, and that he runs the New York FED,
Speaker 9: where the market's desk is housed, and that's where they
Speaker 9: get their markets intelligence throughout the Federal Reserve system, So
Speaker 9: I would have to say absolutely not.
Speaker 4: So when's the when's the cliff risk?
Speaker 5: Here?
Speaker 2: Is it when unemployment jumps? Is it when we don't
Speaker 2: get a great holiday shopping season?
Speaker 4: Is it's?
Speaker 9: I think it's both of those things. Remember Yellow trucking
Speaker 9: had severance. Okay, so we didn't see that thirty thousand hit.
Speaker 4: The truck bankers initial jobs. A lot of people lost jobs.
Speaker 9: But thirty thousand people lost their jobs, but we didn't
Speaker 9: see that hit because of severance. So we've only got
Speaker 9: three states left that don't rising continuing jobless claims Oklahoma, Kansas,
Speaker 9: and Alaska. That's it. We had zero states with rising
Speaker 9: continuing jobs claimed last September. Now we have forty seven,
Speaker 9: fifty one forty seven.
Speaker 1: So you think the FED should sit stop raising rates
Speaker 1: and or should they actually cut rates?
Speaker 4: Where are you?
Speaker 9: I don't think we're necessarily at the juncture of cutting rates.
Speaker 9: But even when we get there in twenty twenty four,
Speaker 9: keep shrinking the balance sheet?
Speaker 3: And is the FED doing that?
Speaker 9: Oh yeah, okay, it's slowed a little.
Speaker 4: Bit and a half trillion now for eight and a
Speaker 4: half billion. It slowed a.
Speaker 9: Little bit during the debt ceiling showdown, which was very
Speaker 9: that was very clever.
Speaker 4: Fed space bowl go okay, Fed space Baal, go on
Speaker 4: the Bloomberg terminal.
Speaker 9: But what are you not going to hear asked at
Speaker 9: the press conference today. Nobody's going to ask them about
Speaker 9: the balance sheet. It's like the press is gagged.
Speaker 4: Why is that horedible?
Speaker 2: Because Neil Grosman comes in here, he calls it QD
Speaker 2: quantitative drip.
Speaker 9: Well again, but the first time they tried QT, they
Speaker 9: were trying to empty out a lake. Now every central
Speaker 9: bank in the world jumped in after the pandemic. So
Speaker 9: now QT is working where they're trying to empty out
Speaker 9: an ocean. So it's it's a it's a different dynamic,
Speaker 9: but that does not mean that it's not happening. And
Speaker 9: by the way, it's global, right, and it wasn't.
Speaker 4: It was a ton of supply.
Speaker 2: This is what we're just talking about with Ira Jersey
Speaker 2: right at the same time we're getting one and a
Speaker 2: half trillion.
Speaker 4: I think he said, yep, supply maybe through And I.
Speaker 9: Mean, you know, for the moment. You know, if you
Speaker 9: if you dig deep pension funds, life insurance companies, they're delighted.
Speaker 9: They don't know what to do with themselves with these yields.
Speaker 9: They're like, oh my gosh, I can do this weird
Speaker 9: thing called asset liability matching, which I haven't been able
Speaker 9: to do for years. I've been stuck in private equity
Speaker 9: paying god knows what fees for diversification that I you know,
Speaker 9: all of a sudden, I can't get why are we
Speaker 9: seeing CIOs of public pensions falling quickly one after another
Speaker 9: like dominoes.
Speaker 3: All right, Jess saying I'm glad you made it to
Speaker 3: the studio. It was worth every minute.
Speaker 1: Danielle di Martino Booth, she's the CEO and chief strategistic
Speaker 1: QI Research, one of our favorite folks I talked to
Speaker 1: about these markets, about the Federal Reserve. She did spend
Speaker 1: some time at the Federal Reserve Bank of Dallas, so
Speaker 1: she knows of what she speaks. Again, we're gonna hear
Speaker 1: from the Fed today. We'll get those minutes at two
Speaker 1: pm Wall Street Time. Bloomberg Surveillance TV coverage starts at
Speaker 1: one thirty. That's gonna be simulcast on radio.
Speaker 3: I believe the FED decide FED sides well full cover.
Speaker 6: You're listening to the team Ken's her live program Bloomberg
Speaker 6: Markets weekdays at ten am Eastern on Bloomberg dot Com,
Speaker 6: the iHeartRadio app, and the Bloomberg Business App, or listen
Speaker 6: on demand wherever you get your podcasts.
Speaker 1: It's not working in New York City the way I
Speaker 1: thought it was, which is city approved dispensaries and nice
Speaker 1: shops and all every block has two or these, two
Speaker 1: or three of these, you know, kind of I don't know,
Speaker 1: under the table kind of.
Speaker 2: I mean, the road to hell is paid with good intentions.
Speaker 2: I think the cannabis management in New York State wanted
Speaker 2: to do the right thing and then just ended up
Speaker 2: making a mess of it because there's only a few
Speaker 2: legal well there's only a few licensed dispensaries around here,
Speaker 2: but you can't get any of the products that everybody wants,
Speaker 2: so they go to everywhere else.
Speaker 1: All right, Kyle Kasen joins as he's the CEO of Glasshouse.
Speaker 1: Over the counter, ghbf WF is the ticker GHBWF. Yes,
Speaker 1: GHBWF is the ticker.
Speaker 5: Thank you.
Speaker 1: He joined us live here in our Bloomberg Interactive Broker studio.
Speaker 3: Kyle, you're in the city here today. You've seen it all.
Speaker 3: What did New York City?
Speaker 4: Well, what does Glasshouse do?
Speaker 3: What does glass House do?
Speaker 5: Let's go there, so thank you for having me on.
Speaker 10: Glasshouse Brands is a vertically integrated company in California. We
Speaker 10: own the largest greenhouse facility or cultivation facility in the
Speaker 10: history of man mankind. It's five point five billion square feet.
Speaker 10: Coupled with our other two greenhouses, if we have six
Speaker 10: million square feet of cultivation. We have ten stores throughout
Speaker 10: the state, and we have a manufacturing facility. So we're
Speaker 10: only in California and we're basically the largest seller of
Speaker 10: cannabis in the biggest state in the country.
Speaker 1: How is that business rolling out in the state of California.
Speaker 10: You know, it has been very, very difficult. The industry
Speaker 10: is littered with just carnage and lots of lost money
Speaker 10: and things like that. We are of cash flow positive,
Speaker 10: maybe the only company in the state of California is
Speaker 10: cashul a positive and we pay our two ade which
Speaker 10: without getting wonky. It just we can't deduct a lot
Speaker 10: of our expenses because it's federally illegal. So it is
Speaker 10: the craziest industry I've ever been in. But I love
Speaker 10: being in it, and we grow cheaper and better than
Speaker 10: anyone else in the country.
Speaker 4: But you can't.
Speaker 2: Your brands are not allowed to be sold in New
Speaker 2: York State and I imagine a number of other states
Speaker 2: because of the way the regulation works. Is there any
Speaker 2: potential for that to change?
Speaker 3: Yes.
Speaker 10: So the cause of that is the federal government. The
Speaker 10: federal government has absolutely done zero's we're a schedule on
Speaker 10: drug which is the most dangerous and right now checked
Speaker 10: I checked that the ticker just where I came in.
Speaker 10: The total number of overdose deaths in the history of
Speaker 10: human beings from cannabis is still at zero. So it
Speaker 10: is absolutely ridiculous what's happening. But we're starting to see
Speaker 10: some federal relief potentially coming.
Speaker 4: You have a number of brands. One of your brands
Speaker 4: is the Plus Gummies. Yes, And someone I know very.
Speaker 2: Well who hadn't smoked weed in years was given a
Speaker 2: box of those and thought nothing of it until he
Speaker 2: just decided to take it one day, and the experience was,
Speaker 2: I think different than he imagined.
Speaker 4: He ended up.
Speaker 2: Reorganizing his filing cabinet, cleaning out, you know, the dressing room,
Speaker 2: and it just was was something that was different than
Speaker 2: he may he may have expected.
Speaker 4: Do you hear that kind of story a lot all
Speaker 4: the time.
Speaker 10: And the one that I would tell you people that
Speaker 10: are of an older age, they go with the sleep
Speaker 10: gummies because they don't like ambien, they don't like, you know,
Speaker 10: some of the other things that are available pharmaceutically, and
Speaker 10: they can just take a five miligram gummy.
Speaker 5: And they sleep like a baby.
Speaker 10: There's no bad effects.
Speaker 3: It's a plant.
Speaker 10: And so that and then the next question from somebody
Speaker 10: like my eighty year old aunt and uncle that when
Speaker 10: they go on their RV they always have to have
Speaker 10: their Plus gummies is can I do something and maybe
Speaker 10: take the edge off, drink a little less wine?
Speaker 5: And we and we absolutely have those in the gummies as.
Speaker 2: Well, I mean I know a lot of people who
Speaker 2: quit drinking completely. Thanks in Part two plus gummies.
Speaker 10: I love that, And yes, I think cannabis is much
Speaker 10: more benign than alcohol.
Speaker 3: All right, competing, what's it like to compete in the
Speaker 3: state of California. Who are your competitors?
Speaker 2: Oh my goodness, you've got to compete against Kana, You've
Speaker 2: got Camino, Well, you've got Stizzy. I mean, you've got
Speaker 2: a lot of big name brands that you have to
Speaker 2: go up against.
Speaker 10: I was not expecting to hear a California expert.
Speaker 3: You are absolutely right.
Speaker 4: I have friends in California.
Speaker 10: Wild would be Wild, would be seriously upset. I don't
Speaker 10: know if you just mentioned Wild, But what I would
Speaker 10: tell you is the future of cannabis. If you're an
Speaker 10: investor and you say, hey, I want to look at
Speaker 10: investing in a multi state operator, first go to California
Speaker 10: to see on our stores. Again, we're vertically integrated, but
Speaker 10: in our stores we sell twenty five to thirty percent
Speaker 10: of our own products. We have to carry all these
Speaker 10: other brands that you mentioned because the consumer is very
Speaker 10: discerning in California and they want a selection, and so
Speaker 10: the trader Joe's model that you might see in a
Speaker 10: lot of the other states. We don't get that. We
Speaker 10: have to run it like we just have to run
Speaker 10: it straight and get the best products, and hopefully there
Speaker 10: are ours as well. And so yes, our cell throughout
Speaker 10: a lot of other stores that are also vertically integrated.
Speaker 4: So it's it's a very interesting Well, it's like beer.
Speaker 2: I mean, this is the problem I have with the
Speaker 2: New York City or New York State o CM Brooklyn
Speaker 2: Lauger is a fine beverage. But if I want Sierra Nevada,
Speaker 2: I don't want it to be illegal for me to
Speaker 2: buy it somewhere.
Speaker 3: Right. Why is it illegal?
Speaker 4: Well, because in New York.
Speaker 2: They can only sell products that are grown in state,
Speaker 2: so any of the California brands can't be sold here.
Speaker 3: Go on.
Speaker 2: But I mean, you're you know you're gonna go to
Speaker 2: You're gonna end up going to an unlicensed vender, is
Speaker 2: what's gonna happen, obviously, And then there are problems because
Speaker 2: you could get something that's counterfeit, and you could get
Speaker 2: something that's more dangerous than a typical marijuana product is
Speaker 2: in the first place.
Speaker 10: When I just want to sit and listen, because you're
Speaker 10: making the argument better than I could.
Speaker 1: All Right, when you walk down the streets here in
Speaker 1: New York City and you see all these unlicensed places,
Speaker 1: what's the city doing?
Speaker 3: How did they screw this up?
Speaker 10: What's amazing to me is and I would agree with
Speaker 10: the initial quote of you know, the road to Hell's
Speaker 10: paid with good intentions. All they had to do is
Speaker 10: look at look at the city of Los Angeles, who
Speaker 10: did this some time ago. We have illicit market and
Speaker 10: illicit market that's huge in California, and if you don't
Speaker 10: properly regulate the market, they will own it. And we
Speaker 10: have one store in the city of Los Angeles. It's
Speaker 10: our worst performing store because there's ten illegal stores around us.
Speaker 10: So when I saw what New York was doing, I
Speaker 10: thought it was crazy. And what's interesting is, you know
Speaker 10: you're gonna end up. They're gonna grow cannabis in the
Speaker 10: Hudson Valley. It's going to be far more expensive than
Speaker 10: what we grow in California.
Speaker 4: And so what's.
Speaker 10: Interesting is I think you're gonna just unless they decide
Speaker 10: they're going to take a harder line and regulate this
Speaker 10: market properly, you're gonna see California products continually sold.
Speaker 2: Yeah, because also maybe not as good, right, Hudson versus Humbled.
Speaker 2: It's a big delta. Do you expect the DA to
Speaker 2: make a decision this year.
Speaker 10: I expect them to make a decision. I've been told
Speaker 10: it'll probably before the end of the calendar year, and
Speaker 10: it will likely be a schedule three and go with
Speaker 10: the recommendation from the Health and Human Services Secretary.
Speaker 1: All Right, Kyle, we spent a lot more time, a
Speaker 1: lot more to talk, but I also want to talk
Speaker 1: about the real estate business in southern California. So we'll
Speaker 1: get in touch with you again. And of course, the
Speaker 1: next summer in New York, let us know, Kyle casn
Speaker 1: he's to see a glasshouse talking about the cannabis industry.
Speaker 1: More and more states are going there, but some more
Speaker 1: successfully than others.
Speaker 6: You're listening to the tape catch are live program Bloomberg
Speaker 6: Markets weekdays at ten am Eastern on Bloomberg Radio, the
Speaker 6: tune in app, Bloomberg dot Com, and.
Speaker 5: The Bloomberg Business App.
Speaker 6: You can also listen live on Amazon Alexa from our
Speaker 6: flagship New York station, Just Say Alexa, Play Bloomberg eleven thirty.
Speaker 3: All right, let's talk real estate here. Some he joins us.
Speaker 1: She's a chief economist at Core Logic, So some give.
Speaker 3: Us a sense.
Speaker 1: Here, we got mortgage rates just continuing to climb higher. Here,
Speaker 1: how's that impacting the real estate market?
Speaker 11: Yeah, it's been really bad for the housing market. It
Speaker 11: continues the housing market down to continues to drag home
Speaker 11: sales activity, particularly for existing homes because you know, there's
Speaker 11: inventory issue there that continues with elevated mortgage rates. So
Speaker 11: existing market is just crushed with higher mortgage rates.
Speaker 1: Sema, we cannot but notice in your zoom there's nobody
Speaker 1: in your office.
Speaker 4: There is does it work from home day?
Speaker 10: No?
Speaker 8: This is my back.
Speaker 3: Oh, it's your back.
Speaker 4: Okay.
Speaker 2: By the way, for listeners who aren't aware, you can
Speaker 2: go to YouTube dot com and search Bloomberg Radio and
Speaker 2: watch US streaming. You can see Selma there as well. Selma,
Speaker 2: how uh how bad is it in terms of you know,
Speaker 2: the drop in transactions, especially with previously owned homes, and
Speaker 2: when do you expect that to change?
Speaker 4: What's going to be the breaking point?
Speaker 11: Right? So home sales, existing home sales are trending some
Speaker 11: twenty three percent a year to date. I'll compare to
Speaker 11: a year before twenty twenty two, and decline is shrinking
Speaker 11: because home sales dropped off in latter part of last year,
Speaker 11: so because of the base effect, that is shrinking. But
Speaker 11: we are still expecting some twenty percent decline in existing
Speaker 11: home sales compared to twenty twenty two now that you
Speaker 11: know historically looking that lines up where we were in
Speaker 11: twenty fourteen. So it is pretty low and I don't
Speaker 11: see it improving anytime soon, unfortunately, because of high mortgage rates.
Speaker 11: I mean, I think really we'd have to see mortgage
Speaker 11: rates come down to closer to that six percent handle
Speaker 11: on the lower end, like six point two before we
Speaker 11: see any significant pickup in home sales activity and inventory
Speaker 11: for that matter, because inventory is really a huge constraint
Speaker 11: in addition to lack of affordability.
Speaker 1: Isn't there a little bit of a timing or I
Speaker 1: don't know, any point where mortgage rates are, whether it's
Speaker 1: three percent, whether it's six percent or seven point five percent,
Speaker 1: if they stay there for a while, don't people kind
Speaker 1: of get used to it that if nothing else, people
Speaker 1: start just doing deals again.
Speaker 11: Yeah, yeah, no, I mean that's definitely true, and we
Speaker 11: do see people moving for family reasons. So we you know,
Speaker 11: people are people that were going to move, that have
Speaker 11: to move anyways.
Speaker 8: You know, there's life events that happen and make people move.
Speaker 11: So you know, because of that, we're not seeing a
Speaker 11: larger decline in home sales activities. So if people were
Speaker 11: just staying put, I think that that decline would be
Speaker 11: even larger. But people do move every year because of
Speaker 11: family reason, job reasons, and these are now the major
Speaker 11: reasons that are driving those moves.
Speaker 1: You know, I look, I'm looking at the stocks of
Speaker 1: the homebuilders and are all up fifty percent kind of
Speaker 1: this year alone, up more than that on a trailing
Speaker 1: twelve month basis. So it's good to be in the
Speaker 1: homebuilding business. How much longer they can they enjoy this
Speaker 1: kind of demand?
Speaker 8: Well, I mean, I think we have a lot of
Speaker 8: pent up demand.
Speaker 11: And when you think about that housing shortage that we
Speaker 11: keep talking about for many years now, we are down
Speaker 11: you know, anywhere between two and five million homes. And
Speaker 11: you know, while the number of home news starts has increased,
Speaker 11: well not in the latest reading, but you know, with
Speaker 11: the permits being uh and we do expect home sales
Speaker 11: to pick up again. You know, I think we still
Speaker 11: have years to go because before we can, uh, you know,
Speaker 11: make up for that that loss or that inventory.
Speaker 8: That wasn't built. So we do have a lot of
Speaker 8: paint of demand.
Speaker 11: And you know, it's not just millennials, it's it's baby
Speaker 11: boomers who are now retiring and moving to other areas.
Speaker 11: People are still moving because they can work some some areas.
Speaker 11: You know, you still can work from home, and you're
Speaker 11: moving for that reason too. So I think we still
Speaker 11: have a lot of paint of demand.
Speaker 2: I wonder in terms of the FED activity or the
Speaker 2: FED uh you know, rate rising cycle, when this comes
Speaker 2: to an end, do you think, uh, and when we
Speaker 2: know it, do you think, you know, seven percent mortgages
Speaker 2: are going to look slightly less terrifying or are people
Speaker 2: going to wait for them to cut rates?
Speaker 8: Well?
Speaker 11: Right, So the knowing part is the critical part because
Speaker 11: I think that would introduce some certainty into the market.
Speaker 8: And we've talked about mortgage spread being.
Speaker 11: High before and it still remains high because of that
Speaker 11: uncertainty around what the FED is going to do and
Speaker 11: what inflation. You know, inflation seems to be an issue
Speaker 11: again now with rising gas prices and food prices. So
Speaker 11: all of that uncertainty introduces some risks that investors are
Speaker 11: not happy with or not not not you know, they
Speaker 11: want to account for that. So until we do have
Speaker 11: that more of that certainty, that's where when the spread
Speaker 11: is going to come down. And I think that's when
Speaker 11: people are going to come back in so, you know,
Speaker 11: and then.
Speaker 8: Obviously federal reserve cutting rates will help as well.
Speaker 4: Well.
Speaker 2: When I was a kid, a lot of people used
Speaker 2: arms and post financial crisis rate mortgages and post financial crisis,
Speaker 2: nobody except for Paul Sweeney has done so is that
Speaker 2: going to change.
Speaker 11: Well, we've seen pickup in arms over the last year,
Speaker 11: but honestly, even arms have gotten more expensive, so the
Speaker 11: share of arm or origination has gone down.
Speaker 8: As a result.
Speaker 11: But people, I mean people are trying in any way
Speaker 11: anyway that it can to save some money.
Speaker 1: So if a buyer finds something, h what is the
Speaker 1: mortgage market like, can I get a mortgage?
Speaker 2: Can I can of a competitive out there? What is
Speaker 2: the more banks rolling back? Are they much more cautious?
Speaker 11: Yeah, I mean I think there are particularly in that
Speaker 11: jumble market, you know, in the markets that is anyway,
Speaker 11: more uncertainty we've had more price reductions, there's less inventory.
Speaker 11: I mean, the markets that are suffering, they suffer too
Speaker 11: in terms of availability of lending. But overall, an interesting
Speaker 11: thing that I recently saw from HAMDA data is just
Speaker 11: how MU originations went to higher income households. So higher
Speaker 11: income households don't have as part of a time getting
Speaker 11: a loan as much as a lower income households.
Speaker 8: So so you know, that's that's really the concern here
Speaker 8: with lack of affordability. And then on top of that
Speaker 8: you can't even get a mortgage.
Speaker 1: So what's the what is your expectation of Core Logic?
Speaker 1: You know, a year from now, where do you think
Speaker 1: mortgage rates will be?
Speaker 11: Oh my crystal ball is not working these days. But
Speaker 11: you know, I think I'm hoping closer to six again.
Speaker 11: You know, our forecast for the end of this year
Speaker 11: six point seven. I think by the middle of next
Speaker 11: year we could be down to that six point to
Speaker 11: six point three.
Speaker 3: All right, Salma, thanks so much for joining us.
Speaker 1: Some a heaps chief economists at core Logic talking about
Speaker 1: the real estate biz.
Speaker 6: You're listening to the tape Cats are Live program Bloomberg
Speaker 6: Markets weekdays at ten am Eastern on Bloomberg Radio, the
Speaker 6: tune in app, Bloomberg dot Com, and the Bloomberg Business app.
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Speaker 6: eleven thirty.
Speaker 1: Boy, what perfect timing? UK delayed ban on sale of
Speaker 1: new petrol diesel cars until twenty thirty five, pushing it back.
Speaker 3: Our next guest probably hasn't.
Speaker 2: It's the worst timing. Why would they announce this during
Speaker 2: Climate Week?
Speaker 3: I don't know, That's my point.
Speaker 1: So I'm thinking what is going on there? Ian sim
Speaker 1: joins us. He's the CEO of Impacts Asset Management and
Speaker 1: the reasons this is irrelevant?
Speaker 3: Ian? How what's your investment strategy at Impacts? What do
Speaker 3: you guys do?
Speaker 12: So we're investing in the transition to a more sustainable economy,
Speaker 12: which essentially is the industrial revolution around clean energy.
Speaker 1: So your UK Prime Minister during Climate Week says we're
Speaker 1: going to slow it down a little bit.
Speaker 12: Well, the UK had become an outlier in the sense
Speaker 12: of banning or announcing a ban on internal combustion engine
Speaker 12: vehicles new sales by twenty thirty and just about everyone
Speaker 12: else that's got that twenty thirty five, how the European
Speaker 12: Union had committed to something five years later. So this
Speaker 12: is just an alignment with what the rest, all right.
Speaker 1: The other thing that blew me away just from chatting earlier,
Speaker 1: like environmental investing here has lost the momentum in the
Speaker 1: United States, and I know it's way different in Europe,
Speaker 1: particularly Northern Europe. But you got fifty billion dollars in
Speaker 1: assets under management. You're making big bets here.
Speaker 5: Yeah.
Speaker 12: So we've been going for twenty five years since I
Speaker 12: started the business in nineteen ninety eight, So we're running
Speaker 12: money for about one hundred institutional investors around the world,
Speaker 12: including many in the US. So actually, this is not
Speaker 12: about environmental investing. This is the industrial revolution, around renewable energy,
Speaker 12: around energy efficiency, around electric vehicles. These are producing better
Speaker 12: products for consumers, cheaper products, and this is good for everybody.
Speaker 4: Talk to us about like what might be a couple
Speaker 4: of the big areas where.
Speaker 3: You guys have invested in. Give us a sense of
Speaker 3: kind of how that works for.
Speaker 2: You, And I mean to sort of build on the
Speaker 2: idea that this is a revolution. We were talking a
Speaker 2: little bit earlier with someone who's invested in battery technology,
Speaker 2: and he told us this is like the shift from
Speaker 2: whale oil to petrocarbons, Like it's that big of a deal.
Speaker 12: Yeah, I mean, solar power has come down and cost
Speaker 12: by ninety five percent over the last twenty years. It's
Speaker 12: cheaper than.
Speaker 2: As has the price per kilo at hour for batteries precisely.
Speaker 12: Yeah, so that means that that you can get cheaper transportation,
Speaker 12: cheaper electrons when you plug a device into to the grid.
Speaker 12: So what are we investing in? What we're investing in
Speaker 12: large scale wind projects, We're investing in building's energy projects.
Speaker 12: If you just taken the average office building, you can
Speaker 12: typically reduce the energy use by thirty percent just by
Speaker 12: putting it a better building management system, better software, better sensors.
Speaker 12: So these are global opportunities, massive markets.
Speaker 2: Well, and I think it's nice that you highlight the
Speaker 2: office investment case because Paul and I we talk about
Speaker 2: us a lot, right, we like to talk about ourselves.
Speaker 2: But this isn't about as much consumer adoption as it
Speaker 2: is CapX. At least that's what corporate capex. That's what
Speaker 2: Jeff Chamberlain was telling us. He's the CEO of Vaulta
Speaker 2: Energy Technologies used to run Argon National Laboratory, and he
Speaker 2: said that's why he got into this business. Because you're
Speaker 2: going to see large multinational conglomerates really shifting spend into
Speaker 2: this transition.
Speaker 12: Yeah. I mean, this essentially is a game around strengthed
Speaker 12: assets or avoiding them. Because if you're an auto manufacturer
Speaker 12: and you've got a plant that's producing thousands of vehicles
Speaker 12: a year with internal combustion engines, but twenty thirty five,
Speaker 12: you're not going to have a market in Europe, so
Speaker 12: you need to pivot that manufacturing process to an electric
Speaker 12: vehicle process, and that's not easy. So this is where
Speaker 12: the investment capital comes in, because what we're trying to
Speaker 12: do is find for companies that are going to be
Speaker 12: winners over the next five to ten years. And those
Speaker 12: are the companies have got strategies that are going to
Speaker 12: be successful with twenty thirties.
Speaker 2: Which are the most exciting ones. I mean, I love cars,
Speaker 2: so I always think of battery later vehicles. But you
Speaker 2: could tell me like new HVAC systems are even more important,
Speaker 2: I would have no idea.
Speaker 12: Well, we're investing across the board. There isn't like a
Speaker 12: silver bullet here, that's going to be the one to
Speaker 12: go for. So and it's not just all about energy, right. Look,
Speaker 12: look what's happened in the water sector this year. We've
Speaker 12: got a huge contention in the UK around sewage overflows,
Speaker 12: pollution of rivers. I think there were problems with one
Speaker 12: of the big athletic events in Paris because people couldn't
Speaker 12: swim in the River Seine for the triathlon. That this
Speaker 12: is a major investment opportunity as well. Look at garbage,
Speaker 12: the amount of money that's just been put into landfill
Speaker 12: by throwing stuff away. Regulations are trying to tighten up
Speaker 12: on that. So there's new regulations in France now that
Speaker 12: are requiring buildings developers, buildings owners to guarantee the use
Speaker 12: of certain levels of recycled product and also guarantee the
Speaker 12: removal of waste when they're doing construction.
Speaker 4: Wow.
Speaker 1: Yeah, So what are some of the where are the
Speaker 1: new ideas coming from for to manage this transition? Are
Speaker 1: are there certain parts of the world that are you
Speaker 1: find the companies are kind of sprouting up.
Speaker 12: One of the reasons we opened an office in Hong
Speaker 12: Kong in two thousand and eight was because we could
Speaker 12: see that a lot of the technology around this revolution
Speaker 12: was going to come out of the Asian region. So
Speaker 12: we've built a very smart investment team in Hong Kong.
Speaker 12: We've just added some capability in Tokyo as well, so
Speaker 12: that sort of access from Singapore up to Tokyo via
Speaker 12: Hong Kong, Greater China, Korea, Japan, that's where a lot
Speaker 12: of this is coming from. But it's not just an
Speaker 12: Asian story. There's great technology coming out of the lambs
Speaker 12: in the US, as out of Europe as well.
Speaker 2: In your athas under management are big. I don't know
Speaker 2: if we said or not, but fifty billion right dollars?
Speaker 2: What's the trajectory, like, is it growing and where is
Speaker 2: that money coming from?
Speaker 12: So it's been growing rapidly recently, it's been plateaued for
Speaker 12: the last twelve months or so because we're in quite
Speaker 12: a fragile market for equity investing in general. So what
Speaker 12: I've been talking about are the fabulous opportunities in this
Speaker 12: industrial revolution. But we can't get away from the fact
Speaker 12: that equity market sentiment is quite weak at the moment.
Speaker 12: So that's meant that our flows are fairly flat right now.
Speaker 12: So looking at head eighteen months two years. We're expecting
Speaker 12: that to pick up again. But we've got distribution now,
Speaker 12: sales to clients across the world, one hundred sales and
Speaker 12: marketing people. So we're expecting that new money to come
Speaker 12: in from pension funds, sovereign wealth funds we're in dialogue with.
Speaker 12: We just won a mandate a year ago with the
Speaker 12: Government Pension Fund of Japan. We managed money for calsters
Speaker 12: out of California. But also the man and woman in
Speaker 12: the street are really starting to vote with their checkbooks
Speaker 12: through their money managers in favor of these new industries.
Speaker 12: There's a lot of private wealth money coming out way.
Speaker 2: I think it's interesting that growth in assets has been flat,
Speaker 2: considering we got over the last twelve months of the IRA.
Speaker 2: In that period, right, you're starting to see governments put
Speaker 2: not just millions or billions, but hundreds of millions, approaching
Speaker 2: trillion trillions of dollars behind this transition. Isn't that like
Speaker 2: the whistle to get on board?
Speaker 12: Yeah, So, the Inflation Reduction Act in the US, the
Speaker 12: Green Deal in Europe, and similar policies out of China
Speaker 12: are really propelling corporate investment. That's great for earning's outlook
Speaker 12: over the next sort of next few years. But we
Speaker 12: can't get away from the fact that multiples and the
Speaker 12: equity market are depressed because sentiment is weak as inflation
Speaker 12: has come through and central banks has been raising rates.
Speaker 12: But as right starts a plateau and inflation's under control,
Speaker 12: we can definitely see sentiment improving for equities, and that
Speaker 12: should be fabulous for growth at a reasonable price, transition
Speaker 12: to more sustainable garment when the sentiment, when that sentiment improves.
Speaker 1: Right, We have a guest that comes on occasionally when
Speaker 1: when he's in town. His focus is not necessarily new technology.
Speaker 1: His focus is just kind of capturing the energy that's lost,
Speaker 1: even like fossil fuels. You know, he's got some crazy number,
Speaker 1: you know, the the amount of energy that's lost. Me
Speaker 1: to take a barrel of oil out of the ground
Speaker 1: and it gets into whatever it's Jonathan Maxwell, right from
Speaker 1: Sustainable Development Capital. He also wrote the book The Edge,
Speaker 1: How competition for re sources is pushing the world and
Speaker 1: its climate to the brink yep And so, how do
Speaker 1: you guys think about that little part We're not little part,
Speaker 1: but that part of the whole move towards Green Industrial Revolution.
Speaker 12: Well, that's sting waste, I guess, right, mean, that's just
Speaker 12: money that's sort of lying on the sidewalk to be
Speaker 12: picked up. It's an absolute no brainer to invest in
Speaker 12: energy efficiency. The payback periods for many of the things
Speaker 12: that we're investing in that space for two three years.
Speaker 12: Another reason that they're not at scale is because I
Speaker 12: quite often very fragmented. So that's where our insights come
Speaker 12: in as analysts around the world is looking for these
Speaker 12: opportunities that can scale quite quickly with the right capital support.
Speaker 2: Interesting, it's I mean, I'm glad Climate Week happen because
Speaker 2: I've been learning a ton about an issue that you know.
Speaker 2: The problem is, I think for a lot of Americans,
Speaker 2: they get kind of beaten over the head of this
Speaker 2: ESG thing and it gets kind of.
Speaker 4: Muddied in with the whoe thing complain.
Speaker 2: It's become very politicized, and that makes it harder to
Speaker 2: talk about from an investment from a completely logical point
Speaker 2: of view.
Speaker 12: Yeah, we need to bear at ESG. ESG is an unhelpful,
Speaker 12: muddy concept. We need to move on from that.
Speaker 1: Because I like the way you phrase it, because I
Speaker 1: could take that message down the Tallahassee, Florida, Austin, Texas,
Speaker 1: and pitch.
Speaker 3: I think the.
Speaker 1: Pension funds well. And I wouldn't be physically thrown out
Speaker 1: of the office. You would be if you said esg right.
Speaker 12: But and if you go in and you say, look,
Speaker 12: if you buy an electric vehicle, it's got forty percent
Speaker 12: of the parts of an internal combustion engine vehicle. It's
Speaker 12: more reliable, it's going to be cheaper, it's going to
Speaker 12: be more fun to drive. Why wouldn't you want to
Speaker 12: buy one of those rather than the clunky old guests?
Speaker 3: Thusiads all right, Ian, thanks so much for joining US.
Speaker 1: Ian sim he's the CEO of Impacts Asset Management, joining
Speaker 1: US live.
Speaker 2: Thanks for listening to the Bloomberg Markets podcast. You can
Speaker 2: subscribe and listen to interviews on Apple Podcasts or whatever
Speaker 2: podcast platform you prefer. I'm Matt Miller. I'm on Twitter
Speaker 2: at Matt Miller nineteen seventy three.
Speaker 3: And I'm fall Sweeney. I'm on Twitter at pt Sweeney.
Speaker 1: Before the podcast, you can always catch us worldwide at
Speaker 1: Bloomberg Radio.