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Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim

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Speaker 1: Fox along with my co host Lisa Abramowitz. Each day

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Speaker 1: we bring you the most important, noteworthy, and useful interviews

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Speaker 1: for you and your money, whether you're at the grocery

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Speaker 1: store or the trading floor. Find the Bloomberg P L

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Speaker 1: Podcast on iTunes, SoundCloud and at Bloomberg dot com. I

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Speaker 1: am so glad that we are able to talk a

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Speaker 1: little bit about what's going on between Russia and Turkey

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Speaker 1: and what the potential implications are. This is something that's

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Speaker 1: been very much on my mind, as well as a

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Speaker 1: lot of people's minds. I'm pleased to bring in Richard Kahn,

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Speaker 1: managing partner at your Asia Advisors, who is an expert

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Speaker 1: on Russian relations and has extensive experience kind of deciphering

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Speaker 1: some of the tea leaves. So, Richard, you know, what's

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Speaker 1: your take on the sort of steps that have been

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Speaker 1: taken since the assassination of the Russian ambassador to Turkey. Well,

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Speaker 1: I think the reactions have to date been quite predictable.

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Speaker 1: Russia and Turkey have some time ago sort of moved

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Speaker 1: beyond the official position that there and uh, you know,

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Speaker 1: basically in a state of proxy war, uh, neither the

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Speaker 1: Syria being on opposite side. That had really changed, And

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Speaker 1: this recent terrorist incident underscores the alliance that they have

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Speaker 1: and which Russia basically is allowing and supporting the efforts

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Speaker 1: of Syria to deal with sing of Turkey to deal

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Speaker 1: with their problems on the Syrian border with Kurdish groups

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Speaker 1: that are within Syria and which are supporting Kurdish terrorist

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Speaker 1: activities within Turkey. And for the perspective of Russia, Russia

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Speaker 1: received from this deal the support, if you will, don't

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Speaker 1: know Turkey in um um basically the agenda that Russia

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Speaker 1: has in supporting assad in Syria. So it's uh. It

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Speaker 1: makes um sort of uh. Scenarios that or will envisioned

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Speaker 1: look quite simplistic when you when you consider how the

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Speaker 1: official positions really do not match with what is taking

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Speaker 1: place on the ground, and this the terrorist activity really

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Speaker 1: underscores those themes. Well, Richard. One thing that's taking place

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Speaker 1: on the ground and indeed under the sea is energy. Right.

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Speaker 1: The Russian government putting together a proposal and it has

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Speaker 1: passed to carry Russian natural gas under the Black Sea

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Speaker 1: to Turkey. Can you explain a little bit about the

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Speaker 1: the sort of strategy, energy strategy and the energy relationship

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Speaker 1: between Turkey and Russia. Well, this is in one of

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Speaker 1: the foundations for their relationship and the reason why even

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Speaker 1: after they're shooting down by you know, by the urgon

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Speaker 1: regime of Russian planes a year or ago, aggression plane

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Speaker 1: a year or so ago, that Putin nonetheless wanted to

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Speaker 1: find a way to move forward. There's been tremendous competition

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Speaker 1: in terms of how Russian oil would head towards Europe,

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Speaker 1: and certainly Turkey has you know, wanted it to pass

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Speaker 1: through uh their borders and and receive some compensation for that.

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Speaker 1: So it's been, um, it's been a relationship of practicality

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Speaker 1: between Putin and Urtagon, and I would expect at the

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Speaker 1: stage that the you know, they're going to continue to

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Speaker 1: signal that nothing is going to come between them. How

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Speaker 1: does the US factor into this? You know that President

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Speaker 1: elect Donald Trump is expected to have a closer relationship

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Speaker 1: or at least a better relationship with Vladimir put the

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Speaker 1: Russian head of Russia than previous administrations. Um, what will

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Speaker 1: that look like and what would be gained potentially from

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Speaker 1: a close relationship between the nations for these of the

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Speaker 1: situations we're describing right now in Turkey and Syrious. I

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Speaker 1: think part of the challenge that the Trump team are

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Speaker 1: going to have is figuring out what they really want

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Speaker 1: to do um and how to become more relevant to

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Speaker 1: to the resolution of these situations. Of Trump has historically been,

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Speaker 1: you know, quite critical of the Obama administration for their handling,

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Speaker 1: and so that they'll get a chance now to come

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Speaker 1: up with a game plan. By the way, I should

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Speaker 1: just say perhaps part of the game plan it has

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Speaker 1: to do with Twitter, because President elect Trump did say

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Speaker 1: today there were terror attacks in Turkey, Switzerland, and Germany

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Speaker 1: and it is only getting worse. The civilized world must

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Speaker 1: change thinking. So that was his contribution. Yes, that has

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Speaker 1: been his contribution. And obviously it's it's the old story.

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Speaker 1: It's one thing to be an outsider criticizing. What's always

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Speaker 1: challenging when you have someone actually succeed in gaining power.

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Speaker 1: At that point they need to govern and he's going

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Speaker 1: to have to come up with solutions, then go further

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Speaker 1: than just identify problems as being terrorists related, which this

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Speaker 1: instant it certainly seems they are, and but to then

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Speaker 1: move from there to a relationship, so particularly with Russia,

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Speaker 1: that reflects his instincts to men's senses, and try to

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Speaker 1: come up come up with solutions that's going to be

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Speaker 1: I think far more complex than he you may may

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Speaker 1: recognize at this stage. Russia, while perhaps being willing to

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Speaker 1: show a little bit of leg uh you know, it

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Speaker 1: is not is not instantly going to aband and they're

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Speaker 1: not going to instantly decide, you know, to abandon all

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Speaker 1: long health positions. And because those positions just is hours

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Speaker 1: are have been based on on real concerns and on

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Speaker 1: the strategic interests and so but that doesn't mean that

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Speaker 1: he should not try. I certainly look forward to seeing

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Speaker 1: his efforts to UM utilize the prospect of lifting sanctions

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Speaker 1: to tackle UM in a fresh way. The problems that

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Speaker 1: we faced was Russia and Ukraine, and obviously to see

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Speaker 1: if we can do some things to benefit the region

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Speaker 1: in Syria and and you know all the refugees there,

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Speaker 1: so you know, these are these would be noble things

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Speaker 1: to accomplish, and I suspect that that somewhere in his mind,

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Speaker 1: but uh, tactically to do that is going to be

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Speaker 1: extremely difficult. And then coming up with an overarching strategy

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Speaker 1: will be even more complex, I think for for Trump

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Speaker 1: and his advisors. Richard, the Turkish economy contracted for the

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Speaker 1: first time in seven years during the third quarter that

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Speaker 1: was revealed last week. This sputtering economy also includes a

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Speaker 1: collapse in private domestic consumption, dropping more than three percent

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Speaker 1: year over a year. What's the future of the Turkish economy,

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Speaker 1: Let's say the next six months, give me about thirty seconds. Well,

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Speaker 1: it looks it looks awfully gloomy, doesn't it. You know,

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Speaker 1: it's as we spoke of on previous occasions. You know,

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Speaker 1: these these terroristic activities obviously have a dramatic impact on tourism.

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Speaker 1: I can tell you we were planning to fly through

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Speaker 1: istanbul Uh within the last half year, and my wife

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Speaker 1: certainly commented to me that even a connection, there was

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Speaker 1: something that caused her, you know, some concern, and I

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Speaker 1: don't blame her. Ultimately, the tourism industry drives many nations,

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Speaker 1: in Turkey is certainly among those, so I would expect

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Speaker 1: to see an ongoing decline in tourism just because of

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Speaker 1: these terrorist incidents. Thanks very much. Richard Kahan is managing

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Speaker 1: partner at Eurasia Advisors, telling us about the relationship between

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Speaker 1: Turkey and Russia. One of the latest nominees of President

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Speaker 1: elect Donald Trump to his cabinet is Representative Mick Mulvaney

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Speaker 1: to oversee the office and charged of the US budget.

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Speaker 1: This is going to be a hot spot for debate

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Speaker 1: and frankly for policy. I want to bring in Billy House,

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Speaker 1: who covers the White House, for Bloomberg, to talk a

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Speaker 1: little bit about what this pick means for the budget

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Speaker 1: of the United States going forward. Billy Uh. Representative Mick

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Speaker 1: mulvaney is not known for being a fiscally liberal on

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Speaker 1: any level, and yet a lot of President Elect Trump's

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Speaker 1: policies would really require a certain expansion of the budget.

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Speaker 1: Do you expect there to be some kind of fight

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Speaker 1: that's being set up ahead, Well, that's absolutely a possibility.

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Speaker 1: Mc mulvany, a South Carolina congressman, has been one of

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Speaker 1: the most aggressive, pugilistic advocate advocates for cutting government spending,

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Speaker 1: particularly military spending. And as we know, the President elect

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Speaker 1: has said he's going to bolster the military. So there's

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Speaker 1: one key area right off the back that you gotta wonder,

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Speaker 1: how did these two guys. Mesh mulvaney has made a

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Speaker 1: career out of going after military spending and uh. Uh

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Speaker 1: so it remains to be seen how they're going to

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Speaker 1: get together on that. Billy. What's his relationship with the

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Speaker 1: Speaker of the House of Paul Ryan. Uh, it's strained. Uh.

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Speaker 1: Mulvaney was part of the group of outspoken fiscal conservatives

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Speaker 1: known as the House freedm Coccus, who basically forced the

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Speaker 1: previous speaker out of office, John Bayner. Um. The relationship

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Speaker 1: has been a little better with Paul Ryan. Paul Ryan

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Speaker 1: has only been Speaker for a little more than a year,

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Speaker 1: but already there had been growing streams on on some

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Speaker 1: of the promises that this group thought Ryan had made

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Speaker 1: and did not see through in this early part of

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Speaker 1: his tenure. Uh. There's some tension there, and there'll be

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Speaker 1: some tension as they discussed uh financial things together as

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Speaker 1: now as a member of the administration and the Speaker. So, Billy,

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Speaker 1: one thing that I'm looking at is if you have

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Speaker 1: this fiscal conservative who has come out aggressively in favor

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Speaker 1: of cutting the budget um, and then you have President

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Speaker 1: elect Trump who is looking for fiscal expansion infrastructure spending.

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Speaker 1: This is adding up to a lot of cuts and

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Speaker 1: a lot of difficult decisions that have to be made

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Speaker 1: in the upcoming months. Where do you what units of

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Speaker 1: the government do people expect to get cut the most, Well,

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Speaker 1: that's the good question. Uh. And is it cuts really

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Speaker 1: or is it hopes that the tax cuts generate that,

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Speaker 1: you know, revenue that could help pay for these things. So,

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Speaker 1: but you know, I just have to say the logic

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Speaker 1: of tax cuts generating revenue. Uh. You know a lot

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Speaker 1: of people wonder about that. In other words, that the

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Speaker 1: logic that tax cuts will be sufficient to ignite the

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Speaker 1: economy enough too then subsequently provide even greater tax revenues

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Speaker 1: going forward, correct exactly. And it's dubious that that could

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Speaker 1: occur very fast, much less occur at all. Uh. There

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Speaker 1: is some talk of repatriation of corporations who have located

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Speaker 1: outside of the country, allowing them to come back with

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Speaker 1: either no penalty or less penalty, and that way bringing

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Speaker 1: back maybe a portion of the tax money they would

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Speaker 1: have had paid. That could help boost them. But you're right, Uh,

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Speaker 1: Mint Mulvaney's gonna go after an agency spending and and

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Speaker 1: cuts and and and Paul ryan Is wants to go

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Speaker 1: after entitlement spending and cuts. But at the same time,

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Speaker 1: and as you've pointed out, the President elect and said,

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Speaker 1: he doesn't only go after entitlements like Medicare and and

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Speaker 1: uh social Security. So uh, it really is who gets

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Speaker 1: to who's going to control this agenda, and nobody knows

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Speaker 1: right now. Well, part of that agenda has to do

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Speaker 1: with immigration policy, and I was reading some past notes

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Speaker 1: about a representative Congressman Multveney, and he has been a

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Speaker 1: supporter of amnesty that puts some at odds with Senator

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Speaker 1: Jeff Sessions, who was slated to be the head of

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Speaker 1: the Attorney General, head of the Justice Department. And indeed,

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Speaker 1: he's got a quote I remember he said there are

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Speaker 1: jobs that American citizens will not do. He says, we

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Speaker 1: have businesses in his district that rely on migrant legal

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Speaker 1: migrant workers and a lot of them are in this state. Absolutely.

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Speaker 1: I mean, in February he even did a town hall.

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Speaker 1: He learned Spanish to be able to do this town

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Speaker 1: hall partly in Spanish, correct in his district. So he's

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Speaker 1: open to that. And and that again is another area

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Speaker 1: where he clashes with at least what has been you know,

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Speaker 1: said during the campaign by Mr Trump himself. Uh, it's

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Speaker 1: it's another wrinkle, another piece of the emerging Trump administration

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Speaker 1: that seemed to not all fit together. And it's and

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Speaker 1: it's representative because the executive orders that have been used

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Speaker 1: by President Obama on immigration policy. Uh, those are entered

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Speaker 1: into the federal registry. Right, that's actually correct. But Mr

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Speaker 1: Mulvaney has also been critical though of Obama's unilaterally making

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Speaker 1: changes to the system. So in a functional way, he's

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Speaker 1: opposed some of the Obama administration efforts, even though made

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Speaker 1: generally he kind of agrees with the ideas. Billy, is

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Speaker 1: this typical for an incoming administration to have so many

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Speaker 1: different key members of the cabinet that frankly are at

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Speaker 1: odds with each other. It's it's usually president reflects, cabinet

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Speaker 1: reflects the philosophy of the president. Here we have multi philosophies,

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Speaker 1: different viewpoints, and you know, maybe that's a good thing

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Speaker 1: when they get together. They ever do, will get together.

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Speaker 1: But it's certainly confusing, and it's certainly confusing to those

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Speaker 1: on Capitol Hills who will have to put the president

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Speaker 1: in his administration's visions into actual legislation and therefore, center

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Speaker 1: for Joey leader, Mitch McConnell, and Paul Ryan, who has

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Speaker 1: his own he's not a potty plant. Have to come

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Speaker 1: to grips with what they all mean when they all

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Speaker 1: talk about things. What we're gonna look forward to more

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Speaker 1: of your reporting. Many thanks. Billy House, Congressional reporter for

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Speaker 1: Bloomberg News, joining us from Washington, d c our Nation's capital,

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Speaker 1: home to a Bloomberg one and one oh five point

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Speaker 1: seven h D two. All right now to give us

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Speaker 1: a look at some of the pointees for President elect

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Speaker 1: Donald Trump's future cabinet. I want to bring in Tyler Cowen.

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Speaker 1: He is a Bloomberg View columnist. He's also professor of

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Speaker 1: economics at George Mason University, writes for the blog mar

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Speaker 1: General Revolution, and his books include Averages Overpowering America Beyond

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Speaker 1: the Age of the Great Stagnation. Tyler Cowen, thank you

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Speaker 1: for being with us. Go ahead, set out your thoughts

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Speaker 1: here about the nominees, the appointees for President elect Donald

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Speaker 1: Trump's cabinet and what skills they might bring to their

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Speaker 1: jobs that are different than the skills we may be

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Speaker 1: used to in these positions. Overall, I think Trump is

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Speaker 1: taking a lot of chances with these picks. But that's

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Speaker 1: based on an understanding of Washington gridlock. If in most

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Speaker 1: cases your agency heads don't get that much done anyway,

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Speaker 1: arguably you should take a lot of chances. So he's

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Speaker 1: picked people who have some credibility and influence with him,

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Speaker 1: who are good communicators, who in some cases, such as

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Speaker 1: Ben Carson, are pretty famous, and said, you know, narrow

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Speaker 1: expertise isn't always the main thing. So my overall assessment

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Speaker 1: is this is actually going to end up being effective,

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Speaker 1: whether or not you agree with Trump's use. Okay, Tyler,

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Speaker 1: you know, I read your column and I thought it

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Speaker 1: was fascinating the expect Trump's appointees to have a big impact.

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Speaker 1: And the reason why I thought it was so interesting

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Speaker 1: is because it raises a question of what matters more

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Speaker 1: for a cabinet member their ability to be famous and

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Speaker 1: to have a big persona and to be a Sylvester

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Speaker 1: Saloon with the big name recognition and good media presence,

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Speaker 1: or the knowledge, experience and capability of crafting legislations or

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Speaker 1: legislation or policies that will be effective. Well, again, this

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Speaker 1: is a gamble. But if the people at the top

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Speaker 1: of the agencies or appointments know that they don't know

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Speaker 1: all of the details, they can assign that two subordinates,

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Speaker 1: so there's a chance they think they know more than

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Speaker 1: they really do, and then you're in for a lot

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Speaker 1: of trouble. But again keep in mind, in a gridlocked world,

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Speaker 1: arguably an administration should be willing to take more chances. Well,

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Speaker 1: so you know, it raises yet another question just about

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Speaker 1: whether these uh, these cabinet members will delegate. I mean,

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Speaker 1: do we have any sense of whether first of all,

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Speaker 1: they will be able to delegate their sort of have

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Speaker 1: the nature to delegate some of the the tasks, and

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Speaker 1: also whether some of the institutional Washington crowd will stick around.

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Speaker 1: That's hard to assess, But keep in mind a lot

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Speaker 1: of the picks they have more business experience and military

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Speaker 1: experience than It's difficult, and those are areas where you

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Speaker 1: do have to learn to delegate to be effective. So

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Speaker 1: again I'm not saying you have to like Trump's ideas

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Speaker 1: or his picks. I'm saying, don't assume this is some

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Speaker 1: strategy list, you know, stabbing in the dark way to

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Speaker 1: approach the problem. I think it's actually pretty well thought out.

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Speaker 1: Tyler One, if you could use an example of Larry

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Speaker 1: Cuddlow as a contender to chair the Council of Economic

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Speaker 1: Advisors and how that fits into your perspective. Well, let

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Speaker 1: me first just say I know Larry, so my view

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Speaker 1: here may be biased, but I've seen a lot of

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Speaker 1: professional economists criticize him for not being a member of

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Speaker 1: the guild in the in a proper way. Larry is

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Speaker 1: a very smart guy. He's a very clear to sucker.

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Speaker 1: He has tremendous television experience in terms of being both

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Speaker 1: a communicator and someone Trump will listen to. You know,

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Speaker 1: that may end up being much more important. So I'm

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Speaker 1: actually pretty optimistic about that pick. Is there any pick

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Speaker 1: that you're less optimistic about? Well, the one that worries

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Speaker 1: me most is Michael Flynn as National Security Advisor. The

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Speaker 1: notion of him controlling the flow of information to Trump

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Speaker 1: on foreign policy. H That to me is the worst

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Speaker 1: of the picks. Is there any criteria that you would

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Speaker 1: suggest has changed because we now live in a Twitter

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Speaker 1: in chief environment. Well, most of the picks are surprises,

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Speaker 1: and it wasn't just drawing into the pool and picking

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Speaker 1: all the normal people from the Washington establishment. Uh So,

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Speaker 1: I think Trump in general is saying, look, the whole

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Speaker 1: world has changed. I won that shock you all. You've

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Speaker 1: all got to realize that's not the last thing to

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Speaker 1: have changed. Here's the next step of surprises. Have you

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Speaker 1: ever seen this type of cats in a bag approach

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Speaker 1: to cabinet members with lots of different views represented at

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Speaker 1: all sizes and kind of thrown together come up with

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Speaker 1: a coherent policy. Not in my lifetime now, So this

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Speaker 1: is uh something different. Okay, good, alright, son' say Tyler,

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Speaker 1: I just wanted to press you a little bit because, um,

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Speaker 1: this all sounds rhetorically, you know, great, and it knits together.

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Speaker 1: But if you were going out to hire someone to

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Speaker 1: run one of these large government agencies and departments, wouldn't

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Speaker 1: you want expertise previously running something like that. My personal

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Speaker 1: picks would be more along the line of traditional expertise.

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Speaker 1: But keep in mind Trump views himself as a disruptor

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Speaker 1: in a way that I personally would not endorse. I've

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Speaker 1: used stability as a higher priority. So given Trump's underlying

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Speaker 1: preference for disruption, these are what disruption picks look like.

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Speaker 1: But what I, as a whole make the same choices? No,

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Speaker 1: Tyler Cowen, thank you so much for joining Tell Collin

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Speaker 1: Bloomberg View columnist. He's also professor of economics at George

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Speaker 1: Mason University and writes for the blog Marginal Revolution. Since

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Speaker 1: the Fellow reserved A raised rates, interest rates on new

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Speaker 1: credit cards have increased by about a half a percentage point.

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Speaker 1: They were previously about fifteen point eight percent. Now they

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Speaker 1: average more than sixteen and a quarter percent. Here to

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Speaker 1: tell us more about consumer credit is Needy Verma, Senior

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Speaker 1: director of Research and Consulting with TransUnion, joining us from Chicago. Needy,

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Speaker 1: thank you very much for being with us. Tell us

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Speaker 1: about this consumer credit market forecast for seventeen. What does

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Speaker 1: it look to find? Good morning, Thanks for having me

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Speaker 1: here about this time of the year. We predict what

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Speaker 1: will happen in the marketplace in the next four quarters

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Speaker 1: to come in two thousand seventeen, to look into credit

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Speaker 1: performance as well as average debt levels for US borrowers.

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Speaker 1: And as you've already seen the rise in interest rate

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Speaker 1: that we saw last week, um that combination of the

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Speaker 1: interest rate rise and more to be expected in two

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Speaker 1: thousand seventeen, along with what we've seen as more and

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Speaker 1: more subprime borrowers in the consumer learning market. We're expecting

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Speaker 1: those two factors are going to spur delinquency rates UM

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Speaker 1: spurs linquistator, it rises into doound seventeen four, specifically auto

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Speaker 1: loans releases as well as credit cards UM. If you

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Speaker 1: look at the percent of sub prime accounts who have

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Speaker 1: a credit card UM in the US at the end

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Speaker 1: of third quarter of tow Down sixteen, that's really the

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Speaker 1: highest level that we've seen since the end of two

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Speaker 1: thousand and ten. When you look at auto finance for

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Speaker 1: that factor, it's the highest point since the conclusion of

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Speaker 1: two thousand thirteen. So we believe that with these anticipated

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Speaker 1: further rises in prime rate, along with the combination of

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Speaker 1: subprime consumer participation in the market, we are going to

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Speaker 1: see rising delinquency rates for auto as well as credit

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Speaker 1: cards in two thousand seventeen. So who's going to suffer

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Speaker 1: the losses from this? Will there be losses? I mean,

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Speaker 1: is it going to be the captive auto lenders or

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Speaker 1: will it be uh, perhaps big investment firms. I think

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Speaker 1: from an auto finance perspective, we do believe that independent

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Speaker 1: lenders have the highest share of sub prime accounts, so

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Speaker 1: definitely those lenders will be needed to be well prepared UM,

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Speaker 1: you know, just to make sure their underwriting strategies are

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Speaker 1: maintaining a good balance between expected losses, credit access and

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Speaker 1: investor returns and what have you. Who are the independent

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Speaker 1: lenders you're talking about, who are the biggest in this space?

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Speaker 1: These are going to be your independent lenders who only

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Speaker 1: do auto finance like sentendera auto essentially outside of banks,

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Speaker 1: credit unions and captives, everybody else is just lending auto

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Speaker 1: finance in the market. Those are those are considered your

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Speaker 1: independent lenders. How fast will the past a long be

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Speaker 1: for increased interest rates? We've gotten hints that the Federal

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Speaker 1: Reserve could raise interest rates as much as three times

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Speaker 1: in Yeah. Well, well, I can't speak for what to

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Speaker 1: anticipate in terms of rate rises. What I can share

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Speaker 1: is that our forecast includes about a fifty basis points

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Speaker 1: rise between Q four two thousand sixteen, which we've already

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Speaker 1: seen that UM as well as two thousands seventeen UM.

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Speaker 1: And then I think importantly we do understand there's an

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Speaker 1: impact from primary there's also an impact from contribution of

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Speaker 1: subprime borrowers gaining access in the market. I think it's

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Speaker 1: really important to not only look at the trajectory which

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Speaker 1: is going to be rising. But also look at the

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Speaker 1: levels itself. You look at the levels of auto loan delinquencies.

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Speaker 1: You know, we we reached the peak even at one

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Speaker 1: point six percent, which is quite low considering where we

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Speaker 1: saw saw mortgage ellinquencies. Mortgage relinquencies peaked at seven point

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Speaker 1: two at the beginning of two thousand and ten. We

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Speaker 1: never really saw those peaks in autos. So in in overall,

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Speaker 1: I think where we look at the levels for card delinquency,

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Speaker 1: which is expected to be one point four percent at

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Speaker 1: the end of two thousand seventeen, it was as high

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Speaker 1: as three both levels are still quite manageable despite the

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Speaker 1: fact there is more access available to subprime borrowers. And

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Speaker 1: I think that's really a factor to take into a

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Speaker 1: pound with very positive economic forces such as your better

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Speaker 1: employment picture, rising median household income um, we see increasing

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Speaker 1: in personal spending as a result of that. So those

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Speaker 1: are some of the offsets that we do need to

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Speaker 1: keep in mind along with the anticipated rise in prime rates. Right.

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Speaker 1: You know, one thing, as you speak media, I was

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Speaker 1: thinking to myself, well, you know you talk about rates

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Speaker 1: rising and how that tightens credit conditions. It makes it

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Speaker 1: more challenging for people to UH to to refinance at

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Speaker 1: low rates. And on the other hand, a lot of

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Speaker 1: people are baking into the stock market. Certainly uh this

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Speaker 1: sort of very optimistic picture of the U S economy

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Speaker 1: in the coming year. Can you square those two things, Because,

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Speaker 1: as you were saying, I mean, typically in a positive

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Speaker 1: economic backdrop, usually it will be easier for consumers to

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Speaker 1: pay off their loans. I mean, how much this is

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Speaker 1: the tightening going to really matter? Yes? So overall, you know,

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Speaker 1: the decent rates rises that we've we are expecting for

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Speaker 1: next year need to be really balanced by that positive

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Speaker 1: economic picture that you talked about. While it may be

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Speaker 1: difficult from a refinance market perspective for consumers to come

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Speaker 1: and get better rates, but if you look at the

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Speaker 1: unemployment rate and the fact that people are employed and

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Speaker 1: they have traps, and they have medium household income rising,

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Speaker 1: that those are also positive forces that are really helping

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Speaker 1: a very large market of US credit consumers, that is mortgage.

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Speaker 1: Look at mortgage for example. You know we're going to

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Speaker 1: hit about a two point one percent of inquancy rate

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Speaker 1: at the end of two thousand seventeen. That is a

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Speaker 1: very normal rate of delinquency that we should expect if

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Speaker 1: we are going to be in the lending business, and

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Speaker 1: that rate of delinquency is really supported by the fact

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Speaker 1: that people have more confidence in their homes. Home values

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Speaker 1: that rise, thinking a few more confident paying towards their mortgages,

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Speaker 1: UM law unemployment rates support those steady improvements over those

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Speaker 1: these several years we've seen and continued improvement in the market.

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Speaker 1: So while it may impact your refinance activity, it is

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Speaker 1: going to really bolster um the purchase market is going

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Speaker 1: to enable more first time home bars. In fact that

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Speaker 1: we predict will be quite dominant in the market next

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Speaker 1: year because of those positive economic forces enabling a strong

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00:26:25,320 --> 00:26:29,520
Speaker 1: foundation for our economy. Uh needed. I understand that the

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00:26:29,640 --> 00:26:33,960
Speaker 1: total dollar amount of credit card debt for consumers in

435
00:26:34,000 --> 00:26:39,000
Speaker 1: the United States that they're carrying is approaching a trillion dollars.

436
00:26:39,080 --> 00:26:41,280
Speaker 1: The last time we were at this level was two

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00:26:41,359 --> 00:26:44,440
Speaker 1: thousand seven. Does that tell you anything about where we

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00:26:44,480 --> 00:26:50,000
Speaker 1: are in the cycle. So just as a fact, we

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00:26:50,000 --> 00:26:53,679
Speaker 1: we measured debts for every single credit active consumer in

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00:26:53,720 --> 00:26:57,000
Speaker 1: the United States, and we look at cards both private

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00:26:57,080 --> 00:27:00,800
Speaker 1: label cards meaning your merchant cards, as as well as

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00:27:00,840 --> 00:27:03,680
Speaker 1: we look at general purpose card that consumers can use

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00:27:03,680 --> 00:27:07,480
Speaker 1: at any location. UM. When we look at those depth levels,

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00:27:07,520 --> 00:27:10,040
Speaker 1: they're not quite at a trillion dollars. Just looking at

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00:27:10,080 --> 00:27:13,800
Speaker 1: consumer debt alone, UM, I can tell you we're about

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00:27:13,840 --> 00:27:17,679
Speaker 1: seven eight billion dollars in credit card debt. These are

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00:27:17,720 --> 00:27:21,160
Speaker 1: balances that consumers carry on their credit card statement. UM,

448
00:27:21,240 --> 00:27:23,960
Speaker 1: that shows up in your mailbox every month. UM, that's

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00:27:23,960 --> 00:27:28,000
Speaker 1: seven or eighty billion dollars. Isn't as alarming. We've seen

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00:27:28,000 --> 00:27:30,320
Speaker 1: those levels in the past, and really what we've seen

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00:27:30,400 --> 00:27:34,320
Speaker 1: the last few years is personal spending, which has really

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00:27:34,680 --> 00:27:37,440
Speaker 1: been increasing as a result of that better employment picture

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00:27:37,480 --> 00:27:41,400
Speaker 1: we talked about, has continued to grow. And personal spending

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00:27:41,600 --> 00:27:44,719
Speaker 1: does benefit card balances because people like using their cards

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00:27:44,720 --> 00:27:48,400
Speaker 1: for the transactional convenience. I even buy my four dollar

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00:27:48,480 --> 00:27:51,080
Speaker 1: lat on a credit card, and that's the personal spending

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00:27:51,200 --> 00:27:53,960
Speaker 1: is benefiting the card balances. UM. So I think we

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00:27:54,000 --> 00:27:55,960
Speaker 1: do have to keep in mind that balances are a

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00:27:56,000 --> 00:27:59,439
Speaker 1: factor of sent as well as what consumers need for

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00:27:59,440 --> 00:28:01,320
Speaker 1: their credit. We're gonna have to leave it there. Thank

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00:28:01,320 --> 00:28:05,240
Speaker 1: you so much. Needy Verma, Transunion's senior director of Research

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Speaker 1: and Consulting, off to get a latte. This is Bloomberg

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Speaker 1: Thanks for listening to the Bloomberg pien L podcast. You

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00:28:18,640 --> 00:28:22,760
Speaker 1: can subscribe and listen to interviews at iTunes, SoundCloud, or

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00:28:22,800 --> 00:28:26,880
Speaker 1: whatever podcast platform you prefer. I'm Pim Fox. I'm out

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00:28:26,880 --> 00:28:29,760
Speaker 1: there on Twitter at pim Fox. I'm out there on

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00:28:29,800 --> 00:28:33,040
Speaker 1: Twitter at Lisa Abramo. It's one before the podcast. You

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00:28:33,080 --> 00:28:35,720
Speaker 1: can always catch us worldwide on Bloomberg Radio