WEBVTT - Preparing For Negative Interest rates: Fiduciary CIO 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penel Podcast. I'm Paul Swinge you. 0:00:05.360 --> 0:00:07.760 Along with my co host Lisa Brahmas. Each day we 0:00:07.880 --> 0:00:10.440 bring you the most noteworthy and useful interviews for you 0:00:10.520 --> 0:00:12.640 and your money. Whether at the grocery store or the 0:00:12.640 --> 0:00:15.960 trading floor. Find a Bloomberg Penl podcast on Apple podcast 0:00:16.120 --> 0:00:18.040 or wherever you listen to podcasts, as well as at 0:00:18.079 --> 0:00:23.800 Bloomberg dot com. All right, here's multiple choice question for 0:00:23.840 --> 0:00:26.000 you on this Monday. Do you want to buy a 0:00:26.079 --> 0:00:29.600 US Steepener gold, US equities or we work? If you 0:00:29.680 --> 0:00:31.480 get a pre I p O. Luckily we're gonna have 0:00:31.520 --> 0:00:34.160 a manage gonna answer that question. That's Hans Olsen, chief 0:00:34.200 --> 0:00:37.880 investment officer a Fittisciary Trust with seventy eight million dollars 0:00:37.880 --> 0:00:40.760 in assets under management. So cross asked that that was 0:00:40.800 --> 0:00:43.760 your multiple choice question, which would you buy in ranking order? 0:00:44.920 --> 0:00:49.120 We work gold, we work pre IPO, A Steepener gold 0:00:49.200 --> 0:00:53.959 or US equities. Well, I'd have to do probably can 0:00:54.000 --> 0:00:58.600 I get to pain by the way? Yeah? Okay, Well 0:00:58.640 --> 0:01:00.960 that says a lot in then they have seven billion 0:01:01.000 --> 0:01:03.960 dollars of assets under management. He has to buy everything 0:01:04.000 --> 0:01:07.000 out there. So so why like it's my way of 0:01:07.040 --> 0:01:09.759 trying to see, like, where is their actual value right now? Yeah? Yeah, 0:01:09.800 --> 0:01:11.839 it's hard to find a lot of value any place 0:01:11.959 --> 0:01:14.920 right now. And perhaps the areas that we find it 0:01:15.040 --> 0:01:19.000 mostly would be in places like uh Europe, even the UK, 0:01:19.120 --> 0:01:22.679 which is really a non consensus trade for sure. But 0:01:22.760 --> 0:01:25.399 in the US, um you know, the earning scrowthon is there, 0:01:25.400 --> 0:01:28.480 the multiples are expanding. It's been pretty tough. We're overweight 0:01:28.560 --> 0:01:31.400 US equities for sure. We've tried to rotate more into 0:01:31.400 --> 0:01:34.880 the low volatility types of names as a way to 0:01:35.000 --> 0:01:37.600 do it responsibly. But but I have to say, Alex, 0:01:37.680 --> 0:01:40.720 the environment right now is is not great for people 0:01:40.760 --> 0:01:43.360 putting new money to work. We're speaking with Hans Olsen, 0:01:43.400 --> 0:01:47.040 chief investment officer Fidishary Trust. Hans, just let's start maybe 0:01:47.040 --> 0:01:49.760 just with your economic outlook. I mean, the U S 0:01:49.760 --> 0:01:52.559 seems pretty solid, but we see some weird news. Alex 0:01:52.600 --> 0:01:54.360 and I we were talking about earlier out of Germany 0:01:54.520 --> 0:01:56.400 earlier today. So how do you view the kind of 0:01:56.400 --> 0:01:58.480 the U S economy? Yeah, so the US company. If 0:01:58.520 --> 0:02:00.760 we if I were to color code the US economy 0:02:01.360 --> 0:02:04.840 with green being growth, yellow warning you know, danger, and 0:02:04.920 --> 0:02:07.720 red recession I think we're probably going from green to 0:02:07.840 --> 0:02:10.240 light green at the moment. So, whether it's the hard 0:02:10.320 --> 0:02:14.520 data the soft data, we see a collection of of 0:02:14.600 --> 0:02:17.360 surveys that all point to continued growth in the US 0:02:17.560 --> 0:02:21.320 slower than what it's been, but continuing to grow. Is 0:02:21.360 --> 0:02:24.120 your call on say U at UK equities and European equities, 0:02:24.160 --> 0:02:27.200 is that based on a Brexit thing? Or is that 0:02:27.320 --> 0:02:29.920 literally is that a value trade? Well, I think in 0:02:29.960 --> 0:02:33.160 the in the UK, both in the UK and Europe, 0:02:33.440 --> 0:02:35.280 you put the politics aside for a moment. If you 0:02:35.320 --> 0:02:38.720 look at things like valuation and earnings growth, they're better, 0:02:38.760 --> 0:02:41.080 They're more compelling than they are here in the United States. 0:02:41.320 --> 0:02:44.120 It just happened to be wrapped in the difficult wrapper 0:02:44.200 --> 0:02:46.720 of the politics. You know, our core assumption is that 0:02:46.760 --> 0:02:51.000 perhaps Brexit won't be anywhere near as bad as people think. Um, 0:02:51.120 --> 0:02:54.480 when you look at the statistics since the end of UM, 0:02:54.520 --> 0:02:57.119 since the since the vote back in two thousand sixteen, 0:02:57.880 --> 0:03:01.000 the one economy that has really defied expectations and the 0:03:01.040 --> 0:03:04.000 popular narrative has been the UK economy, both in terms 0:03:04.000 --> 0:03:08.000 of growth, inflation and the like. And uh, I'm not 0:03:08.040 --> 0:03:10.080 so sure about what we couldn't see that continue to 0:03:10.120 --> 0:03:13.640 happen even post Brexit. There will be some hiccups for sure, 0:03:14.040 --> 0:03:17.000 but I'm not sure it will be as devastating as 0:03:17.040 --> 0:03:20.160 people are are are postulating. So as you think about 0:03:20.160 --> 0:03:23.480 your global portfolio, where are you kind of in the allocation? 0:03:23.480 --> 0:03:26.080 How much risk are you taking these days? Um with 0:03:26.200 --> 0:03:28.840 the portfolio. Yeah, so that's a good question because it's 0:03:28.880 --> 0:03:33.720 really um an exercise in nuance increasingly UM So when 0:03:33.760 --> 0:03:36.240 the US equity market, as I've said, we've we've been 0:03:36.360 --> 0:03:39.560 rotating exposures, and where we have added exposure has been 0:03:39.600 --> 0:03:42.120 to more of the low volatility names, right, trying to 0:03:42.120 --> 0:03:45.080 stay away from any value biases. But but those companies 0:03:45.080 --> 0:03:48.840 with dividends uh and have less of an attachment to 0:03:48.880 --> 0:03:51.040 the overall market, so the data is lower to that 0:03:51.120 --> 0:03:54.080 of the market. On the credit side, you know, we 0:03:54.200 --> 0:03:57.320 have for some time been shorter in duration. We're lengthening 0:03:57.320 --> 0:03:59.440 out the duration because I think there is a real 0:03:59.600 --> 0:04:01.720 possible ability that in the next part of the cycle, 0:04:02.680 --> 0:04:06.200 amazingly enough, the US we'll see negative interest rates. And 0:04:06.240 --> 0:04:07.600 the other thing that we've been doing is we've been 0:04:07.840 --> 0:04:12.240 pivoting up into higher quality credits to in an attempt 0:04:12.280 --> 0:04:14.880 to get some sort of carry um, So it's kind 0:04:14.920 --> 0:04:17.760 of a belt and suspenders type of exercise. So what 0:04:17.800 --> 0:04:19.560 I would say to that is that you're not alone. 0:04:19.839 --> 0:04:22.280 And what I mean by that is that low volatility 0:04:22.320 --> 0:04:24.880 stocks have now inherently become more volatile because there's so 0:04:24.960 --> 0:04:26.719 much ment now money into it for the reasons that 0:04:26.760 --> 0:04:28.840 you said. You can make the same argument for going 0:04:28.920 --> 0:04:31.800 up the safety curve when it comes to an investment grade, 0:04:32.160 --> 0:04:35.400 and many argue that we're way overbought when it comes 0:04:35.400 --> 0:04:37.919 to the long end. So how do you deal with that? 0:04:37.960 --> 0:04:39.920 What do you say? Yeah, yeah, I think it all 0:04:39.920 --> 0:04:42.600 depends upon what your benchmark duration is, right. So we're 0:04:42.640 --> 0:04:45.400 we're not going out thirty years or twenty years. We're 0:04:45.400 --> 0:04:47.599 really trying to stay right on the benchmark, and for 0:04:47.720 --> 0:04:51.320 us that's probably going to be around four years five years, UM, 0:04:51.440 --> 0:04:53.960 whereas we were two to three years before. So we've 0:04:54.000 --> 0:04:56.200 we've lengked the note. And you're right, there's a lot 0:04:56.240 --> 0:04:59.080 of money in movement. Money is trying to find a home. 0:04:59.320 --> 0:05:02.400 Especially we're back to the Tina principle right where there 0:05:02.440 --> 0:05:06.200 is no alternative equities. Um. So it's it's not a 0:05:06.240 --> 0:05:08.839 perfect trade, but I think it's a trade and certainly 0:05:08.839 --> 0:05:11.040 over the the the adject that we've seen over the 0:05:11.160 --> 0:05:14.120 last week or so, those low ball names that we've 0:05:14.160 --> 0:05:17.560 invested and have held up quite well relatively, you know, 0:05:17.600 --> 0:05:20.560 they've they've outperformed by about three hundred basis points, which 0:05:20.600 --> 0:05:23.000 is not bad in an environment like that. So, Hans, 0:05:23.040 --> 0:05:24.440 what do you what do you expect to hear out 0:05:24.440 --> 0:05:26.120 of Jackson Hole at the end of this week. A 0:05:26.120 --> 0:05:28.760 lot of market participants think it's a very very important 0:05:28.800 --> 0:05:32.320 time for Chairman Pal to articulate kind of how he 0:05:32.440 --> 0:05:35.720 views the FED over the next you know, several quarters. Yeah, yeah, 0:05:35.760 --> 0:05:38.159 I think I think the tell is going to be 0:05:38.800 --> 0:05:42.200 Actually what there was a white paper that the I 0:05:42.400 --> 0:05:45.400 m F released and it reads something like a guide 0:05:45.440 --> 0:05:49.280 to deeply negative interest rates to fight Recession. It's it's 0:05:49.279 --> 0:05:52.240 sort of it's eighty five page white paper that is 0:05:52.320 --> 0:05:55.120 the that lays out the fund the foundations and the 0:05:55.120 --> 0:06:00.200 fundamentals about how to position the concept of negative interest rates. 0:06:00.279 --> 0:06:02.720 I think, particularly in the United States, and you're already 0:06:02.760 --> 0:06:05.719 seeing some of the FED governors talk about it um 0:06:06.080 --> 0:06:09.720 that it's not so unusual and that zero bound is 0:06:09.800 --> 0:06:12.520 really just a number. I think we'll start to see 0:06:12.560 --> 0:06:17.360 more of that conversation tumble out of Jackson hole without 0:06:17.360 --> 0:06:19.400 a doubt, and we're sort of setting ourselves up for 0:06:19.440 --> 0:06:22.760 the next cycle for I think higher probability of negative 0:06:22.760 --> 0:06:25.520 interest rates, which when you think about the US in 0:06:25.560 --> 0:06:28.200 the US, when you think about it in the reserve currency, 0:06:29.120 --> 0:06:33.240 never never, but but a reserve like currency, the Swiss 0:06:33.240 --> 0:06:36.480 franc they have negative interest rates. The entire German sovereign 0:06:36.560 --> 0:06:40.279 curve is below zero um. And you know, we have 0:06:40.320 --> 0:06:44.120 what sixteen seventeen trillion dollars worth of negative yielding debt 0:06:44.200 --> 0:06:47.400 of both the sovereign and corporate variety in Europe. But 0:06:47.440 --> 0:06:49.000 does that bring up M M T. And I say 0:06:49.000 --> 0:06:50.760 that because I've been talking about this black Bock paper 0:06:50.800 --> 0:06:52.840 all morning and probably boring Paul at this point, which 0:06:52.839 --> 0:06:55.840 is basically they talked about just that helicopter money. You're 0:06:55.839 --> 0:06:58.160 going to have to have coordinated monetary and physical policy 0:06:58.440 --> 0:07:00.840 in order to get stuff done in the next recession. 0:07:00.880 --> 0:07:03.440 I mean, is that basically what you think we're headed for? 0:07:03.640 --> 0:07:06.680 To sailing and observations there. Number one, I think we've 0:07:06.680 --> 0:07:10.520 come to the limits of monetary policy, and that's why 0:07:10.560 --> 0:07:13.240 I think we're hearing about you know, the ideas of 0:07:13.280 --> 0:07:17.000 another tax cut being floated this morning. And the other 0:07:17.040 --> 0:07:22.120 thing is that, uh, you know, when we're running trillion 0:07:22.160 --> 0:07:25.720 dollar plus uh deficits, which is what we're doing, especially 0:07:25.760 --> 0:07:27.520 at this point in the cycle, when we're talking about 0:07:27.600 --> 0:07:30.280 more tax cuts and we are talking about negative interest 0:07:30.360 --> 0:07:35.080 rates even considering them, that is actually you know, modern 0:07:35.120 --> 0:07:38.240 monetary theory, perhaps dressed up a little bit differently, but 0:07:38.320 --> 0:07:42.400 that's effectively it. So I think we're kind of there 0:07:42.440 --> 0:07:46.160 in many respects, and that's a really uncomfortable um um 0:07:46.280 --> 0:07:49.680 thought to ponder. Interesting. Hans Aulsen, thank you so much 0:07:49.720 --> 0:07:54.000 for joining us. Hans is chief investment officer for Fiduciary Trust, 0:07:54.040 --> 0:08:11.880 joining us here on our Bloomberg Interactive Broker Studio. Let's 0:08:11.880 --> 0:08:14.160 turn our attention now to gold that come out of 0:08:14.160 --> 0:08:17.680 the commodity is up about year to date. So is 0:08:17.720 --> 0:08:20.120 that just a move by investors for a safe haven 0:08:20.120 --> 0:08:23.040 asthmet asset, is there's something else driving the commodity to 0:08:23.080 --> 0:08:26.920 get those answers? We welcome Joe Cavatoni, Managing Director of 0:08:26.920 --> 0:08:29.040 the World Gold Council US joints us here in our 0:08:29.040 --> 0:08:31.800 Bloomberg Interact the Broker Studio. So Joe, thanks so much 0:08:31.840 --> 0:08:33.960 for being here give us a sense of what is 0:08:34.080 --> 0:08:37.920 driving gold here. So far, it's great to be here. 0:08:38.080 --> 0:08:41.480 What's driving gold in two thousand eighteen into nineteen has 0:08:41.520 --> 0:08:45.840 been pretty much risk and uncertainty, market risk and uncertainty, 0:08:46.240 --> 0:08:50.160 a client or an investors inability to understand where really 0:08:50.320 --> 0:08:53.120 the direction of the markets is going to go, and 0:08:53.440 --> 0:08:58.040 hearing regular and ongoing updates of large systemic issues that 0:08:58.120 --> 0:09:01.959 give them caution and concern. If it is talks about 0:09:02.160 --> 0:09:06.520 implementation of potential tariffs, if there's concerns around negotiations with China, 0:09:07.080 --> 0:09:10.080 whether there's a hard or soft exit, and Brexit, all 0:09:10.120 --> 0:09:13.120 of these factors are all playing in now. Added as 0:09:13.160 --> 0:09:16.040 of laid has been an increased concern, particularly in the 0:09:16.120 --> 0:09:19.040 US market, over negative real rates or is that even 0:09:19.120 --> 0:09:22.760 feasible or possible, so the rate moves, the dovish stance 0:09:22.800 --> 0:09:26.559 of the FED all factoring in gold as an asset 0:09:26.720 --> 0:09:30.320 is a global asset. So while we're seeing big risk 0:09:30.400 --> 0:09:33.360 factors that are taking place in developed markets around the world, 0:09:33.400 --> 0:09:36.360 maybe even the emerging markets, you're also seeing a shift 0:09:36.360 --> 0:09:41.000 as well globally around the dollarization and monetary policy that's 0:09:41.080 --> 0:09:43.400 leading central banks to be buyers so we're seeing investors 0:09:43.440 --> 0:09:46.600 taking risk positions that are careful, and we're also seeing 0:09:46.600 --> 0:09:49.880 central banks shifting their monetary policy to address it. So 0:09:49.920 --> 0:09:52.199 I was coming gold back in the olden days two 0:09:52.520 --> 0:09:55.360 nine for a few years. So I was part of 0:09:55.360 --> 0:09:57.520 all that conversation of what we see gold hit two 0:09:57.600 --> 0:10:00.160 thousand and if I have thought we'd hit negative rates 0:10:00.440 --> 0:10:02.640 UH in many many countries and that we could see 0:10:02.640 --> 0:10:04.760 it in the US, I would expect it easy goal 0:10:04.800 --> 0:10:07.679 to be what does it tell you that we're not? 0:10:09.640 --> 0:10:11.360 What does it tell us that we're not? What I 0:10:11.400 --> 0:10:15.319 think we need to understand is that the demand cycle 0:10:15.400 --> 0:10:19.120 for gold is driven and importantly needs to be understood 0:10:19.160 --> 0:10:23.560 and driven by strategic factors. So what I think we 0:10:23.600 --> 0:10:26.960 need to be careful and cautious of is momentum and 0:10:27.080 --> 0:10:31.320 short term opportunity costs move the price fast and actually 0:10:31.440 --> 0:10:33.760 in large percentage amounts. On a given day. We're almost 0:10:33.760 --> 0:10:36.960 down one percent today. Let's not get caught up in that. 0:10:37.080 --> 0:10:39.480 What I'd say is going back to your two thousand 0:10:39.640 --> 0:10:43.679 nine timeline, and actually goal goes even further back some 0:10:43.840 --> 0:10:48.480 five thousand years. I was talking about what I think 0:10:48.559 --> 0:10:51.520 is important for people to understand is that in this 0:10:51.640 --> 0:10:54.840 wave of demand increasing that we're seeing. This looks to 0:10:54.880 --> 0:10:58.920 be investors taking a strategic position, overweight in their commodity 0:10:58.960 --> 0:11:03.400 bucket and positioning for longer term systemic issues. So the 0:11:03.440 --> 0:11:07.559 financial risk the longer term, it's going to be a slow, methodical, 0:11:07.800 --> 0:11:11.959 continual increase in demand. Potentially, so will we get I'm 0:11:11.960 --> 0:11:15.480 not entirely sure, but what we're seeing today are signals 0:11:15.520 --> 0:11:18.440 telling us that gold as a relevant asset is going 0:11:18.480 --> 0:11:21.640 to continue to remain very high. Our conversations, again with 0:11:21.679 --> 0:11:25.760 institutional investors in particular, are about how much gold should 0:11:25.760 --> 0:11:27.920 I have in my portfolio, not this question of do 0:11:28.000 --> 0:11:30.800 I have a need for it in my portfolio. It's 0:11:30.920 --> 0:11:34.040 being found more and more prevalent in the conversations with 0:11:34.080 --> 0:11:37.480 institutional investors. What are the e t f s doing 0:11:37.600 --> 0:11:39.840 with gold and how are they impacting the gold market? 0:11:40.360 --> 0:11:43.320 The e t f s are proving to be exactly 0:11:43.360 --> 0:11:47.400 what we know them to be, an exceptional vehicle for 0:11:47.520 --> 0:11:50.720 investors to make a decision to invest in the precious 0:11:50.760 --> 0:11:54.760 metal itself. They can own the gold through the exchange 0:11:54.760 --> 0:11:57.000 traded fund, not only in the US market, which we 0:11:57.040 --> 0:11:59.719 all know a lot about. But what we're seeing are 0:11:59.800 --> 0:12:04.319 you K investors, German investors in particular, driving enormous amounts 0:12:04.320 --> 0:12:07.480 of demand. So a year to date, about nine percent 0:12:07.520 --> 0:12:09.520 of net new assets have flown into e T s. 0:12:09.559 --> 0:12:12.320 With price appreciation, that pool is up to nearly one 0:12:12.840 --> 0:12:16.280 thirty billion in overall holdings in e TF. So we're 0:12:16.320 --> 0:12:19.800 seeing investors saying I need to make a strategic decision. 0:12:20.240 --> 0:12:22.920 I want to own gold as a commodity or as 0:12:22.920 --> 0:12:27.760 a precious metal or in a particular investment bucket, divorcing 0:12:27.800 --> 0:12:30.600 themselves from concerning whether it's a commodity or it's not, 0:12:31.000 --> 0:12:34.080 simply saying it's a core allocation of my portfolio. So 0:12:34.120 --> 0:12:35.880 the e T s are enabling people to get it done. 0:12:36.280 --> 0:12:41.040 Volumes are transparent, which is helpful and actually significant. So 0:12:41.080 --> 0:12:44.400 if you need to buy, as an institution large percentages 0:12:44.440 --> 0:12:46.360 of gold over a course of a day, you're going 0:12:46.400 --> 0:12:48.560 to be able to get it done. Now, one last 0:12:48.559 --> 0:12:51.560 point that I'll make is that in the US, while 0:12:51.600 --> 0:12:54.000 we know that there are institutional flows that are going 0:12:54.000 --> 0:12:56.920 into the exchange traded funds, don't overlook the amount of 0:12:57.080 --> 0:12:59.880 retail investment that goes into these et s as well. 0:13:00.200 --> 0:13:02.080 If you're looking at the big wires or you're looking 0:13:02.080 --> 0:13:05.160 at the large platforms in the US. They all have 0:13:05.400 --> 0:13:09.160 available on them some mechanism to exchange traded funds to 0:13:09.200 --> 0:13:11.800 get access to gold, and there's plenty of choices today too. 0:13:12.200 --> 0:13:16.120 What happens if the dollar doesn't depreciate. I think that 0:13:16.160 --> 0:13:19.520 you need to understand that the dollar is one only 0:13:19.559 --> 0:13:23.000 one factor. Remember, gold as a global asset is impacted 0:13:23.000 --> 0:13:25.880 by demand in China and India, which makes up nearly 0:13:27.160 --> 0:13:31.719 It's driven by European geo political risk or or or 0:13:31.760 --> 0:13:35.480 economic concerns in those markets. So it's an important factor, 0:13:35.640 --> 0:13:38.640 but it's not the only factor to take into consideration. 0:13:39.080 --> 0:13:41.800 So the dollar has been kind of flatlining, right, But 0:13:41.880 --> 0:13:43.760 where are we going with gold? We're seeing a noticeable 0:13:43.800 --> 0:13:46.480 appreciation in the price. Why because the other factors are 0:13:46.559 --> 0:13:50.760 kicking in again, stepping away from tactical short term concerning 0:13:50.760 --> 0:13:54.439 issues which are important to understand, but understanding that financial 0:13:54.480 --> 0:13:56.720 market and the risks that come along with that will 0:13:56.760 --> 0:13:59.800 be driving long term. So just real, real quick, Joe, 0:14:00.280 --> 0:14:02.480 you mentioned central bank buying. Just give us a sense 0:14:02.520 --> 0:14:06.400 of how that works, what and just how it plays out. Basically, 0:14:06.440 --> 0:14:09.679 they're buying the bullion outright in the bullying market. They 0:14:09.720 --> 0:14:12.640 go into the OTC markets or the dealer market in 0:14:12.679 --> 0:14:16.880 the European arena, for example, and ultimately they're they're continuing 0:14:17.160 --> 0:14:19.040 I think it's now a nineteen year trend that we've 0:14:19.080 --> 0:14:21.920 seen in terms of increased the levels of of gold 0:14:21.960 --> 0:14:25.040 being added to the portfolio for monetary policy. So they're 0:14:25.040 --> 0:14:27.600 buying the real stuff. They're buying the real stuff. Absolutely. 0:14:27.800 --> 0:14:29.840 Joe Cavitoni, thanks so much for joining us. Joe's a 0:14:29.840 --> 0:14:32.880 Managing director for the World Council uh US talking to 0:14:32.960 --> 0:14:35.240 us all things about go get it, getting us updated 0:14:35.360 --> 0:14:37.960 on gold and it's a nice chart for the year 0:14:38.080 --> 0:14:56.480 looking at that. Boy in. One part of the economy 0:14:56.480 --> 0:14:59.880 that remains very strong is the consumer um and let's 0:15:00.080 --> 0:15:02.720 how the consumer is doing, particularly millennials and the younger 0:15:02.760 --> 0:15:05.400 demos in terms of buying homes and getting mortgages and 0:15:05.400 --> 0:15:08.640 all that fun stuff. With that, we welcome Vishaal gark. 0:15:08.640 --> 0:15:10.480 He is a founder and CEO Better dot Com. He 0:15:10.560 --> 0:15:13.480 joins us here in our Bloomberg Interactive Broker studio. Rochelle, 0:15:13.480 --> 0:15:15.520 thanks so much for joining us. I wonder if you 0:15:15.520 --> 0:15:17.880 could just give us just a brief description of what 0:15:18.040 --> 0:15:20.720 Better dot Com is what are you guys doing. Uh, 0:15:20.920 --> 0:15:23.800 thanks so much Paul and Lisa for having me better. 0:15:23.840 --> 0:15:29.200 Dot com is revolutionizing access to homeownership UH for millennials, 0:15:29.480 --> 0:15:34.680 and we're doing it by making the entire process better, faster, cheaper, 0:15:34.840 --> 0:15:37.760 so you can get a better mortgage and by doing that, 0:15:37.800 --> 0:15:40.040 you can get a better house. Uh. You can save 0:15:40.120 --> 0:15:42.440 up to three thousand dollars or more on a typical 0:15:42.520 --> 0:15:45.880 three thousand dollar house uh in just upfront fees because 0:15:45.880 --> 0:15:48.200 we don't charge any commissions and we don't charge any 0:15:48.200 --> 0:15:52.000 origination fees. And on top of that, UH, you can 0:15:52.000 --> 0:15:54.840 save some money on your rate. So an average consumer 0:15:54.880 --> 0:15:57.000 will save as much as a year on a three 0:15:57.600 --> 0:16:01.240 dollar mortgage of compared to your tradition mortgage banks or 0:16:01.280 --> 0:16:04.720 mortgage brokers. Because we take the commissions out of the process, 0:16:04.720 --> 0:16:07.480 we've automated a huge chunk of the process. We made 0:16:07.520 --> 0:16:10.160 everything much, much, much of it better. How do you 0:16:10.160 --> 0:16:14.440 make money? Uh? We make money mostly by uh packaging 0:16:14.480 --> 0:16:18.520 the loans and having investors who uh we have thirty 0:16:18.520 --> 0:16:21.240 two investors on our platform with about seven billion dollars 0:16:21.280 --> 0:16:24.040 of demand. A lot of the largest financial institutions in 0:16:24.040 --> 0:16:27.760 the country who actually want to have mortgages that are 0:16:27.800 --> 0:16:30.960 not originated by a commission loan officer or mortgage broker, 0:16:31.520 --> 0:16:34.320 because those typically tend to perform much much better, and 0:16:34.400 --> 0:16:36.800 so they pay us a premium for their mortgages and 0:16:36.960 --> 0:16:39.720 that's how we pay the bills. UM. You know, today 0:16:39.720 --> 0:16:42.040 we just announced that we raise a hundred and sixty 0:16:42.080 --> 0:16:45.600 million dollars from some great investors American Express City Bank, 0:16:45.760 --> 0:16:50.160 Ally Bank UH, the Health Plan of Ontario Pinebroke investors, 0:16:50.560 --> 0:16:53.400 and a lot of that. You know, when it comes 0:16:53.400 --> 0:16:56.440 down to is all of those banks and major investors 0:16:56.760 --> 0:16:59.400 are investing in us UH for the reason that I 0:16:59.440 --> 0:17:02.680 started the me five years ago. So five years ago, 0:17:02.760 --> 0:17:06.240 my wife was pregnant with our second child. We were 0:17:06.560 --> 0:17:10.159 shopping for houses just people do, UH, and it was 0:17:10.200 --> 0:17:12.399 just a really tough process to get a mortgage. My 0:17:12.440 --> 0:17:14.840 wife worked at a big bank and even there, it 0:17:14.880 --> 0:17:19.000 took our sixty days to get a mortgage approval, and 0:17:19.080 --> 0:17:20.600 we lost the house that we were going to buy 0:17:20.640 --> 0:17:22.720 to an all cash buyer who actually even paid less 0:17:22.720 --> 0:17:26.439 than we did. And UH, I thought that was fundamentally unfair. 0:17:26.760 --> 0:17:32.760 Like branch visits, facts machines going at Kinko's, and like 0:17:33.119 --> 0:17:36.360 literally UH sending my Social Security number and all these 0:17:36.359 --> 0:17:39.840 documents over on security email had cost us the home 0:17:39.920 --> 0:17:41.720 that we want to buy. So it's like, we're gonna 0:17:41.720 --> 0:17:45.280 make this better. Seventy of Americans need a mortgage to 0:17:45.320 --> 0:17:51.440 buy a home. And how is this thing that everywhere 0:17:51.480 --> 0:17:55.720 everyone uses? How is this industry that's fifteen trillion dollars 0:17:55.720 --> 0:17:58.360 in size exists as if the Internet was never invented. 0:17:59.200 --> 0:18:02.920 Do millenns buy homes? They do? Their home ownership rate 0:18:03.200 --> 0:18:07.760 is half of that of traditional UH generations before, like 0:18:07.840 --> 0:18:10.800 the baby movers and like so on average, you know 0:18:11.720 --> 0:18:14.200 of that those earlier generations were able to buy a home. 0:18:14.520 --> 0:18:17.760 Right now millennials about thirty five percent of them own 0:18:17.800 --> 0:18:20.440 a home, So there's this massive demand for them coming 0:18:20.840 --> 0:18:23.760 people like that. Do you think a lot of it 0:18:23.800 --> 0:18:27.080 has to do with challenges with student loans? Um They 0:18:27.280 --> 0:18:30.119 have a ton of student loans, so instead of spending 0:18:30.119 --> 0:18:32.800 the first fifteen years of their working lives saving up 0:18:32.840 --> 0:18:34.919 money to get a down payment to buy a home, 0:18:35.080 --> 0:18:37.600 they're paying off the loans for college. But there are 0:18:37.640 --> 0:18:40.600 all these products that are out there that your traditional 0:18:40.600 --> 0:18:43.840 mortgage broker doesn't know. Products by Fannie made that enable 0:18:43.960 --> 0:18:46.560 first time home buyers to put as little as three 0:18:46.560 --> 0:18:50.280 percent down to buy a home. And over half of 0:18:50.280 --> 0:18:54.480 our customer base, particularly for those buying a home, is millennials, 0:18:54.680 --> 0:18:56.639 and the average is thirty eight. And a lot of 0:18:56.680 --> 0:19:00.520 them are just they they want, they're they're getting, they're 0:19:00.560 --> 0:19:04.240 having kids, they're putting down roots. Um, they want to 0:19:04.280 --> 0:19:06.760 have a play room that they can actually paint the 0:19:06.800 --> 0:19:11.239 way the color they want. And so we see a 0:19:11.240 --> 0:19:14.280 lot of millennials entering. They're actually the largest group of 0:19:14.800 --> 0:19:17.840 home buyers this year. So as we've seen rates fall, 0:19:18.119 --> 0:19:20.640 what kind of activity have you noticed? We have seen 0:19:20.720 --> 0:19:23.520 demand go through the roof. Our business is up over 0:19:24.760 --> 0:19:26.960 from the year before. We're on track to do over 0:19:27.000 --> 0:19:30.119 five billion of mortgages this year and almost fifteen billion 0:19:30.240 --> 0:19:33.359 or so next year. And it's an amazing time to 0:19:33.400 --> 0:19:36.680 buy because rates being as low as they are, lower 0:19:36.720 --> 0:19:40.040 than they've ever been in the past, means lower rates, 0:19:40.359 --> 0:19:43.640 higher affordability. Higher affordability means you can buy a better 0:19:43.720 --> 0:19:46.400 house for the same amount of money. Remember, a lot 0:19:46.400 --> 0:19:48.600 of people are renting, but when you're renting, you're just 0:19:48.680 --> 0:19:53.840 paying your landlords mortgage. Exactly. Homeownership. Homeownership that's kind of 0:19:53.880 --> 0:19:55.880 been it's the issue about the millennials kind of being 0:19:55.960 --> 0:19:59.200 underrepresented in home ownership, but the potentially upside there for 0:19:59.240 --> 0:20:02.000 the housing market. Shall garg founder and CEO Better dot 0:20:02.040 --> 0:20:05.240 Com joining us here in our Bloomberg Interactive Broker studio, 0:20:05.440 --> 0:20:21.840 thank you so much better rhetor coming out of the 0:20:21.840 --> 0:20:24.280 White House about trade. Let's see where the action is 0:20:24.520 --> 0:20:27.159 with small Stock returned to Bloomberg Stocks editor Dave Wilson, Dave, 0:20:27.200 --> 0:20:28.840 what are you looking at this morning? Well, I'm looking 0:20:28.880 --> 0:20:32.560 at smaller companies doing a bit better than larger ones, 0:20:32.600 --> 0:20:35.080 at least for the moment. The Russell two thousand index 0:20:35.200 --> 0:20:37.320 up one point three percent. In the S and P 0:20:37.480 --> 0:20:40.840 five hundreds up one point two percent. Now one of 0:20:40.840 --> 0:20:44.399 the Russell's biggest games belongs to Empire Resorts, whose ticker 0:20:44.600 --> 0:20:48.800 is n Y and why the casino owner has climbed 0:20:48.840 --> 0:20:53.359 fifteen percent after its Malaysian majority owner offered to buy 0:20:53.400 --> 0:20:58.480 the shares it doesn't already hold. Uh Saws ticker s 0:20:58.480 --> 0:21:00.719 O n O is at a twelve and half percent. 0:21:01.000 --> 0:21:03.920 The maker of audio equipment was raised that Raymond James 0:21:04.000 --> 0:21:07.800 to the firm's top ratings. Strong By and tanker stocks 0:21:07.800 --> 0:21:12.359 are higher after dry Ships chairman and CEO Georgia Economu, 0:21:12.520 --> 0:21:14.679 agreed to buy the shares of his company that he 0:21:14.800 --> 0:21:19.159 doesn't already own. Nordic American Tankers ticker and A T 0:21:19.520 --> 0:21:22.840 has risen eight percent, and t K Tankers ticker t 0:21:23.240 --> 0:21:27.040 n K has advanced six and a half percent. Now 0:21:27.080 --> 0:21:29.720 A one of the Russell's steepest drops belongs to Revlon 0:21:30.000 --> 0:21:33.040 ticker r e V. The cosmetics maker has fallen about 0:21:33.080 --> 0:21:36.520 four and a half percent after gaining more than fifteen 0:21:36.520 --> 0:21:40.800 percent on Thursday and Friday. The earlier advance followed our 0:21:40.920 --> 0:21:46.240 report that Revlon hired Goldman Sachs to look at strategic alternatives. 0:21:46.640 --> 0:21:49.880 Bloomber Stocks editor Davals and thank you so much. Well, 0:21:49.960 --> 0:21:53.440 the tech companies are back down in Washington. This time 0:21:53.560 --> 0:21:57.520 they're they're testifying in support of a Trump administration effort 0:21:57.560 --> 0:22:01.080 to potentially punish France for enacting a three percent tax 0:22:01.119 --> 0:22:03.680 on global tech companies. To get the latest, we welcome 0:22:03.760 --> 0:22:07.400 Laura Davison laaras Congressional tax reporter for Bloomberg News, joining 0:22:07.440 --> 0:22:09.640