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Speaker 1: This is Masters in Business with Barry Ridholts on Bloomberg

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Speaker 1: Radio this week. I have a friend of mine, Jonathan

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Speaker 1: Miller of Miller Matrix is his blog and Miller Samuel

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Speaker 1: is his shop. Jonathan has been an observer of the

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Speaker 1: real estate market and industry for for decades, literally decades.

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Speaker 1: We met some years ago. I'm trying to remember if

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Speaker 1: the first thing we did was a conference. We were

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Speaker 1: on a panel with the old people, Bob Schiller and

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Speaker 1: Dottie Herman, who I believe was the head of Prudential

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Speaker 1: real Estate at the time, and it was oh seven

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Speaker 1: or oh eight, and you know, she was the only

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Speaker 1: one who was remotely bullish on the panel. It was Miller,

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Speaker 1: Schiller and me, and it was like bear bearer and barrassed.

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Speaker 1: It was was pretty amusing. We've been friendly for for

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Speaker 1: quite a while. UM. I find him to be really

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Speaker 1: a unique set of insights into what's going on in

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Speaker 1: the real estate market. What his firm does is gathered

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Speaker 1: data from around the country, very often in areas where

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Speaker 1: there are no other form of data collection going on.

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Speaker 1: Specific data far beyond what we see from the National

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Speaker 1: Association of Realtors or what what the commerce department puts

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Speaker 1: out about new houses, and he crunches the numbers and

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Speaker 1: comes up with some really really interesting perspectives. If you

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Speaker 1: go to a real estate agency somewhere and they give

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Speaker 1: you a tear sheet that shows you lots and lots

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Speaker 1: of information about recent sales and length of time on

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Speaker 1: the market and all that sort of stuff. His firm

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Speaker 1: is the firm that actually collects that data, analyzes it,

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Speaker 1: interprets it, and puts it out. He's got deals with

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Speaker 1: a number of different companies. Really a fascinating approach to UH,

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Speaker 1: taking data and repurposing it in a way that's useful

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Speaker 1: for consumers. I find him to be very, very insightful

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Speaker 1: about all things real estate. He also has a column

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Speaker 1: now he puts something out once or twice a week

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Speaker 1: on Bloomberg View in addition to what he does for

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Speaker 1: his UH daily blog at Miller Matrix. Just all around

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Speaker 1: nice guy and tremendously knowledgeable and insightful. The most fascinating

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Speaker 1: thing UH, and I hope this came across in the interview,

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Speaker 1: is he often gets tagged as an expert in divorce

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Speaker 1: settlements and litigation and all sorts of crazy stuff, and

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Speaker 1: he's I am not exaggerating when I say he's pretty

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Speaker 1: much been in every single penthouse in New York City.

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Speaker 1: But he's the go to guy to a praise these

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Speaker 1: fifty and a hundred million dollar properties. Not a lot

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Speaker 1: of people with a deep expert teasing that. And he

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Speaker 1: could tell stories and actually has, and we touch upon

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Speaker 1: it about some of these apartments that are just un believable,

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Speaker 1: just unbleeping believable. It's it's fascinating. And he tells um

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Speaker 1: all sorts of fascinating tales about where he's been, what

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Speaker 1: he's seen, how stuff gets priced. Is there really a

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Speaker 1: difference between forty five and forty eight million dollars? Turns

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Speaker 1: out an extra bathroom here and a little bigger window

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Speaker 1: there worth three million dollars. It's really quite interesting. If

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Speaker 1: you are all interested in real estate, and I am,

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Speaker 1: and I assume many of you are, I suspect you'll

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Speaker 1: find this conversation to be engrossing. Without any further ado,

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Speaker 1: my conversation with Jonathan Miller. This is Masters in Business

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Speaker 1: with Barry Ridholts on Bloomberg Radio Today. I'm actually thrilled

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Speaker 1: to have an old friend in the studio. You may

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Speaker 1: not have heard him directly, but you've probably read a

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Speaker 1: quote of his in the New York Times or anywhere

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Speaker 1: else somebody is talking about real estate. Today, I have

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Speaker 1: Jonathan Miller, founder and CEO of Miller Samuel Welcome to

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Speaker 1: the show. Great to be here. And I have to say, Barry,

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Speaker 1: you have a great voice for radio. I have a

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Speaker 1: face for radio, is what you're trying to say. So

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Speaker 1: for those of you who really don't know who Jonathan is,

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Speaker 1: he's fairly legendary in the world of real estate. I

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Speaker 1: think that's a fair statement. Right, well, at least in

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Speaker 1: my own mind. You're on legend in his own mind

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Speaker 1: if you're in New York real estate or a few

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Speaker 1: So let me back up and give your CV a

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Speaker 1: little bit. You're so you started out in this industry

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Speaker 1: as a agent and then an appraiser the mid eighties,

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Speaker 1: all right, and and what kind of set you apart?

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Speaker 1: I want to talk about three things so people know

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Speaker 1: who you are. First, you were one of the first

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Speaker 1: guys in the real estate world. And this sounds insane

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Speaker 1: because you would thought this was going on for decades.

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Speaker 1: Who said, Hey, all these transactions are generating a lot

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Speaker 1: of data. Why don't we take this data and take

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Speaker 1: a closer look at it and see if we can

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Speaker 1: discern any sort of meaning from how long a home

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Speaker 1: is on the market, for what it sells relative to

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Speaker 1: its asking price, etcetera, etcetera, etcetera. No one was really

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Speaker 1: doing this before you came along, not really. Most of

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Speaker 1: what was being done was marketing brochure not or very

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Speaker 1: complicated in the sense that it was sort of academia

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Speaker 1: and it was hard for the consumer to digest. Uh.

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Speaker 1: As journalists say the trend. Three data points make a trend,

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Speaker 1: and then I like to say, the trend is your

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Speaker 1: friend until it ends right depend at the end. I

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Speaker 1: like that that's even better. So that that's my contribution

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Speaker 1: to Uh. You know, it's true if it rhymes right right,

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Speaker 1: absolutely so the second so, so, assembling the data was

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Speaker 1: the first thing you did, and then miraculously you were

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Speaker 1: an objective commentator observer. You know, I used to mock

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Speaker 1: relentlessly the National Association of David Lay, the Chief Economists, right,

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Speaker 1: is painful, just just everything out of their mouths were

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Speaker 1: just horrific marketing spin. Well, you have this dilemma. So

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Speaker 1: in real estate transaction, to have this, you have this

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Speaker 1: if you look at the broad view, you've got it.

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Speaker 1: One end of the spectrum. You've got the real estate community.

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Speaker 1: It's always a good time to buy was literally it

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Speaker 1: was literally an ad they put out in the midst

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Speaker 1: of the housing collapse. It's always a great time to

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Speaker 1: buy or sell a house. What that really means is

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Speaker 1: it's always a great time to generate a commission based transaction.

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Speaker 1: And ps, my mother was a real estate agent. This

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Speaker 1: was dinner conversation. So I'm not bashing real estate agent

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Speaker 1: as an outsider. This was literally what I grew up with.

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Speaker 1: So when I mock these people, it's from the inside,

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Speaker 1: not the outside, right absolutely. And and then the other

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Speaker 1: end of the spectrum is the academics. You know, the

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Speaker 1: case Shiller index and and and all the problems of

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Speaker 1: that and what the purpose of it is and uh

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Speaker 1: and we've really position yourself somewhere in the middle, which

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Speaker 1: is essentially in the trenches, providing uh, sort of on

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Speaker 1: the ground observations about the market. And one of the

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Speaker 1: things that I found really fascinating being an appraiser was

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Speaker 1: during the whole big sort of housing boom, run up,

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Speaker 1: credit bubble back, uh starting circus, I started seeing it

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Speaker 1: in oh three oh four. Uh, no one else was

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Speaker 1: talking about it, and I thought it was really bizarre.

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Speaker 1: It was you were out in left field, and in fact,

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Speaker 1: to emphasize your data slicing skills. So first, the data

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Speaker 1: runs that you put together, Actually it's a feed into Bloomberg.

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Speaker 1: So if you're on a terminal, I don't know what

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Speaker 1: it's called. The Yeah, we have a Manhattan Luxury price index.

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Speaker 1: There's three different meat metrics that are used. We also

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Speaker 1: have a luxury rental price index. And uh, and I've

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Speaker 1: also seen your specific regional housing data. Yeah, here's NASA County,

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Speaker 1: here's parts of Flower right. We cover eighteen different markets,

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Speaker 1: so we cover we cover a whole bunch of markets

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Speaker 1: in New York City, Metro for markets in South Florida,

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Speaker 1: and then I'm now starting to develop research in Los Angeles.

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Speaker 1: So it's amazing because I'd love to see the San

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Speaker 1: Francisco think that would be Uh. I was approached about that,

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Speaker 1: but but nothing has come to it yet. But what's

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Speaker 1: amazing about it is the concepts of supply and demand

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Speaker 1: they don't change all that much. I mean the numbers change,

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Speaker 1: how many zeros are After it, I'm amazed what you

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Speaker 1: get in l A for a couple of million dollars

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Speaker 1: versus what you get in New Ye. Right, Well, you

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Speaker 1: always see you always see the celebrity, you know, a

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Speaker 1: Johnny Depp or whoever. It's like, Oh, they sold their

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Speaker 1: palatial state for three and a half million dollars and

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Speaker 1: I'm thinking, well, that's a large two bedroom in Manhattan.

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Speaker 1: That is not a prestige play. Speaking of which I said,

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Speaker 1: there are three things. The third thing, which is we'll

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Speaker 1: get to You've been in pretty much every penthouse in Manhattan.

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Speaker 1: Is that much of an overstatement? I have one of

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Speaker 1: the most of the greatest experiences seeing these insane penthouses

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Speaker 1: the design. However, what I don't usually get to see

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Speaker 1: is them in the evening at night. It's always during

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Speaker 1: the day, so I don't get to see them all

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Speaker 1: lights on the city, which is you know, half of

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Speaker 1: the spectacular aspect of review. But we see and you

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Speaker 1: know that in itself is a whole different submarket of

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Speaker 1: the housing market, uh, which is held up really well,

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Speaker 1: which has held up really well because the money is

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Speaker 1: almost an afterthought. It's irrelevant. I'm gonna buy this because

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Speaker 1: I can, and I don't know. Well, the whole uh,

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Speaker 1: just a digress to the whole phenomenon of this high

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Speaker 1: end aspect is it's a global phenomenon. It's just unique.

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Speaker 1: It's London, it's Hong Kong, it's Shanghai, it's it's to

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Speaker 1: any major city. It's it's booming because there's a boatload

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Speaker 1: of money. We're talking real estate with Jonathan Miller, CEO

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Speaker 1: and founder of Miller Samuel. Let's hold off on discussing

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Speaker 1: the penthouses just for a few seconds. I want to

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Speaker 1: talk for a moment. I want to pick your brains

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Speaker 1: for a moment about what it is that drives most

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Speaker 1: of real estate. We put together we were talking about this,

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Speaker 1: We're putting together a list, and it was everything from

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Speaker 1: demographics and household formation to interest rate wages. But really

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Speaker 1: all this comes back down to credit, doesn't it. It

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Speaker 1: really doesn't. And that's actually one of the key components.

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Speaker 1: If you look at the bulk of the housing market

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Speaker 1: right now, it's really defined by access to credit. If

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Speaker 1: you look at you know, I always like to say

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Speaker 1: housing is local and credit is national, and and so

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Speaker 1: literally you know, post Lehman, uh credit crunch. Uh. Every

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Speaker 1: market started behaving the same way. We had things like

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Speaker 1: rents rising because people were tipped back into the rental

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Speaker 1: market because they couldn't qualify. We also had inventory begin

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Speaker 1: to fall to record lows nearly universally across all housing

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Speaker 1: markets because a homeowner with lower negative equity, which is

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Speaker 1: roughly about all homeowners with a mortgage UH, don't qualify

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Speaker 1: for that next purchase, either a trade up, a ladder, mover,

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Speaker 1: or downsize. So what do they do. They sit and

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Speaker 1: they don't. They don't ender the market organically the way

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Speaker 1: that normally would bring their house to the market. And

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Speaker 1: then people that don't have a credit condition are saying, well,

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Speaker 1: I'm not I can't find the house I want, so

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Speaker 1: I'm not gonna list my house, and you sort of

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Speaker 1: double down on the problem. And only the only way

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Speaker 1: out of that are is twofold one is housing prices rise,

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Speaker 1: which naturally occurs because not necessarily own demand correct and

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Speaker 1: and and or if strong fundamentals either. It literally is,

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Speaker 1: if you can strain the supply, prices rise. And that's

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Speaker 1: been my biggest criticism of the pronouncement of the US

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Speaker 1: housing recovery as early as you know two years ago,

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Speaker 1: because the fundamentals in terms, you know, incomes generally stagnant

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Speaker 1: in the US, unemployment even though the numbers on the

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Speaker 1: top level look good, it's still not good. And credit

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Speaker 1: is about is tight, at least for residential mortgage, as

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Speaker 1: it was in the days following Lehman. So so, I

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Speaker 1: never thought in my career that I would be saying

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Speaker 1: that tight lending conditions are making housing prices rise. But

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Speaker 1: they are, but they really it's it's a combination of

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Speaker 1: tight lending conditions following a boom and bust in real estate,

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Speaker 1: because you end up with a lot of people who

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Speaker 1: don't have any look, under normal circumstances, you're in the

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Speaker 1: house for seven years. Even if you have tight credit conditions,

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Speaker 1: you should have some equity in the house. But if

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Speaker 1: you bought at the peak before at correction, if you

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Speaker 1: put little or no money down, there is no equity there,

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Speaker 1: and that locks you into that house unless you're just

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Speaker 1: gonna walk away. And if you do that, good luck

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Speaker 1: qualifying for right. And I think that you know, the

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Speaker 1: narrative about housing right now is this idea that you know,

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Speaker 1: is the housing recovery losing steam? You know, are we

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Speaker 1: seeing you know, projections for housing price increases are going

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Speaker 1: to be less this year than they were last year. Well,

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Speaker 1: last year was based on artificial conditions. I must see

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Speaker 1: two thousand thirteen from the context of the US housing

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Speaker 1: market as as really a an anomaly. In other words,

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Speaker 1: in two thousand ten, eleven twelve, we have this pent

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Speaker 1: up demand the election cycle to build up to the

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Speaker 1: fiscal cliff. The world apparently didn't end after the fiscal

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Speaker 1: cliff expired, and there was all of a sudden a

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Speaker 1: concern about rising interest rates because the economy was going

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Speaker 1: to get better, and you had all the fence sitters

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Speaker 1: moving out of them out of their tax change as well.

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Speaker 1: And that if the tax change was certainly well on

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Speaker 1: the high end of the market, especially and you had

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Speaker 1: people rush in, and you still have the low inventory issue,

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Speaker 1: prices rise. Now we're you know, we're doing these year

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Speaker 1: over year comparisons and activity or prices. If they're not

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Speaker 1: above last year, it's somehow a failure or a sign

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Speaker 1: of weakness. When I contend it's the wrong comparison to make,

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Speaker 1: it absolutely is. We're discussing real estate in America with

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Speaker 1: Jonathan Miller. So now let's talk a little bit about

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Speaker 1: the high end. We understand what's constraining everybody's houses. The

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Speaker 1: normal I don't even know what to call of. The

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Speaker 1: median house is about two D seven thousands, right, it's

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Speaker 1: right exactly somewhere on that and you know, obviously it's

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Speaker 1: really regional. Two seven thousand in the New York metro

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Speaker 1: area doesn't get you a lot. One of the people,

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Speaker 1: am I get to a closet in a hallway that

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Speaker 1: you're going to buy from the co op to combine

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Speaker 1: with your apartment. One of the people in my office

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Speaker 1: transferred here from Syracuse. They sold a house for a

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Speaker 1: hundred and seven thousand NOWS and I'm like, what is

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Speaker 1: I don't understand. You look at a picture of it.

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Speaker 1: It looks like a regular little you know, a starter house,

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Speaker 1: a ranch. But it would go for three in change here.

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Speaker 1: So when we talk about normal housing, what, what is

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Speaker 1: the story? What should we expect in the near future

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Speaker 1: from this housing market? Has the death of housing been exaggerated? Yes? Absolutely.

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Speaker 1: I think all it is is a reset from the

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Speaker 1: euphoria that we had last year, which was based on nothing.

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Speaker 1: I like to say it really was based on this

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Speaker 1: horrible skew created by by tight credit that we're already

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Speaker 1: seeing a spread or a widening in general between the

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Speaker 1: high higher end of the market and the balance of

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Speaker 1: the market in the context of the credit conversation we're

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Speaker 1: just having because it's so as you move up in price,

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Speaker 1: there's a higher probability of either more cash paid or

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Speaker 1: just all cash Outright. You also have the the the

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Speaker 1: preference by foreign or international buyers towards the high end

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Speaker 1: their global investors. Urban markets along the eastern seaboard, on

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Speaker 1: the West coast very similar, Phene, San Francisco, Seattle, Vancouver, Canada,

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Speaker 1: absolutely very similar. And and that's that's a key driver.

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Speaker 1: But other is that we're seeing a disparity between conforming

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Speaker 1: mortgages through the former g s c S versus jumbo

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Speaker 1: right that that banks like jumbo mortgages. They make money

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Speaker 1: on them, they want to so the business decision, well,

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Speaker 1: slago is what and they like own the jumbo mortgage

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Speaker 1: market right right there, they're they're a huge lion share

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Speaker 1: of the market nationally. But but any lender right now

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Speaker 1: is looking to do jumbo deals because they make a

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Speaker 1: favorable return on it. And then and and the the

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Speaker 1: the alternative, the the g SC related transactions, which is

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Speaker 1: of the mortgage market is still burdened by in many ways,

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Speaker 1: the credit outlook within that realm is very backward looking.

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Speaker 1: It's looking at the transgressions. The conservative element is from

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Speaker 1: the UH you know, the transgressions that were made several

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Speaker 1: years ago, the Department Justice going after banks for bad

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Speaker 1: lending practices, all those sorts of things. So it's very

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Speaker 1: backward looking, whereas I think the jumbo finance arena is

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Speaker 1: very much more current looking. Today, we're discussing real estate

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Speaker 1: and housing with Jonathan Miller. Earlier we were talking about

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Speaker 1: the difference regionally. How have these recoveries differed. You know,

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Speaker 1: I know South Florida is different than Arizona, is different

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Speaker 1: than Las Vegas, is different than Southern California, which is

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Speaker 1: obviously different than On Valley in Northern California. How do

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Speaker 1: these different regions compare and what does that mean for someone,

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Speaker 1: let's say living in New York or Washington, d C. Well,

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Speaker 1: when you look at you look at a lot of

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Speaker 1: the the national housing metrics, and you look at the

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Speaker 1: comparison by city, and you'll see generally what you see

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Speaker 1: is markets that were hit very hard. Probably the hardest

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Speaker 1: were the markets in the what fd i C calls

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Speaker 1: the Sand States, the Las Vegas of the world, essentially,

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Speaker 1: where there was a tremendous amount of speculation, carpenters and

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Speaker 1: nurses quitting their jobs and becoming real estate speculators, and

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Speaker 1: and so they fell much harder and farther. And you

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Speaker 1: know that what I like, the way I like to

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Speaker 1: describe it is when you go from a dollar to

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Speaker 1: two dollars, it's a dred percent increase. So the metrics

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Speaker 1: in terms of showing their increase made them look like, Wow,

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Speaker 1: they're really recovering much more quickly than other other markets

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Speaker 1: like New York, for example, that didn't have the speculation

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Speaker 1: that you saw in these markets. So it's really almost

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Speaker 1: in apples and orange comparison. What you're seeing now is

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Speaker 1: the markets that are seeing rapid rapid price growth. Some

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Speaker 1: of them, like in Las Vegas, the rates are cooling

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Speaker 1: rapidly because they've they've essentially recovered a lot of the

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Speaker 1: almost overcorrection that had occurred in those markets is a

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Speaker 1: lot of low hanging fruit, a lot of low hanging fruit.

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Speaker 1: Whereas markets were the economy is very fundamentally, very strong,

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Speaker 1: they didn't have a lot of speculation. Uh, you would

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Speaker 1: allude you had talked about it in an earlier segment

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Speaker 1: about you know, someone from upstate New York and how

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Speaker 1: much you got their market, their markets in the country

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Speaker 1: that didn't experience the same boom and bust. So they're

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Speaker 1: not going to rise from the the ashes because it

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Speaker 1: didn't really fall to the ashes. So so I think

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Speaker 1: the rule number one is there is no national housing market, uh,

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Speaker 1: in the in the way that it's presented to us

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Speaker 1: every month with all the reports. And and and secondly I too,

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Speaker 1: by the way, to be fair to case Shiller, they

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Speaker 1: do release their twenty and forty metro region housing prices

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Speaker 1: and then they jumb them all together. So when you

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Speaker 1: look at the individual index, you could still see and

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Speaker 1: there are a number of people who then take the

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Speaker 1: case Shiller data and slicing dice. In nice Land, you

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Speaker 1: could see. A couple of weeks ago, I ran two

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Speaker 1: different charts I forgot who I stole them from. One

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Speaker 1: showed the percentage recovery off the lows and how far

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Speaker 1: they still have to go to get to the highs,

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Speaker 1: and they were like Las Vegas was in both they

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Speaker 1: were crazy Wow. We're up off our lows, but we're

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Speaker 1: still But remember the high point that was reached was

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Speaker 1: complete fabrication and consense. It was based on right, it

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Speaker 1: was based on They were building these excerbs in Las Vegas,

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Speaker 1: these big McMansions. That was a two and a half

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Speaker 1: hour drive from any urban center, any job center. So

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Speaker 1: how are you going to support these homes if it

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Speaker 1: takes you whatever four hours round? Because what was driving

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Speaker 1: the demand was lenders were just looking to lend. That

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Speaker 1: was how they made money. They package up the mortgages

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Speaker 1: and sell them off to the offl of the risk

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Speaker 1: of somebody else. We're not in that world anymore, that's right.

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Speaker 1: The the shift in credit, and I've written about this

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Speaker 1: over the years, went from the borrower's ability to service

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Speaker 1: the loan to the lenders ability to sell the loan

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Speaker 1: to a securitizer. Once that shifted in the borrower's ability

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Speaker 1: to service, it no longer matter to hey, it was

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Speaker 1: just a matter of time before it collapsed. So so

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Speaker 1: now we talked before briefly about other regions. Texas is

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Speaker 1: an unusual region. I don't think a lot of people

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Speaker 1: realize why Texas avoided the boom and bust. There was

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Speaker 1: a change in their constitution. I think it was like

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Speaker 1: a century ago where they are not allowed to do

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Speaker 1: cash out. No cash out refinances against their state constitution.

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Speaker 1: So everybody maintaining their falling income, replacing it with helocks

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Speaker 1: and financing their their day to day. Uh. When you

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Speaker 1: run low on money, you just borrow more because how

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Speaker 1: prices always go up. The other the other quirk in

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Speaker 1: Texas is the idea that the transactions aren't publicly publicly recorded,

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Speaker 1: So so any any studies that are done come out

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Speaker 1: of the realtors, which is really a subset of the

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Speaker 1: public record to begin with, so it's not a full

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Speaker 1: data set. So you could almost argue too that ignorance

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Speaker 1: is bliss, that that the market wasn't fully informed of.

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Speaker 1: So if I use a Zilo app and show me

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Speaker 1: what's sold nearby in Texas, I'm not going to see

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Speaker 1: the same thing that I see anywhere in ins not

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Speaker 1: necessarily because the information isn't it's a nondisclosure state. So

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Speaker 1: there many non disclosure I don't know offhand. I want

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Speaker 1: to say there's about a dozen. Okay, today I'm speaking

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Speaker 1: with my friend Jonathan Miller of Miller Samuel. He is

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Speaker 1: an expert on real estate appraisal, transactions, home values, etcetera.

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Speaker 1: He has crunches, crunched a lot of data over the

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Speaker 1: past few decades about what drives housing. And one of

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Speaker 1: the things we really haven't talked about much but I

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Speaker 1: want to discuss is the international component about this. The

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Speaker 1: international buyers coming here to North America buying up real estate,

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Speaker 1: and the booming real estate markets we see in big

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Speaker 1: cities overseas. So why do we want to start with that, Well,

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Speaker 1: we'll start with the basic driver of it is I'd

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Speaker 1: like to say that global real estate, or specifically luxury

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Speaker 1: real estate, high end real estate in the in in

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Speaker 1: the context of world a worldwide content text is the

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Speaker 1: world's new currency. In other words, you need bitcoin, You

398
00:24:04,840 --> 00:24:09,760
Speaker 1: just need a really nice apartment for a nice mion

399
00:24:09,760 --> 00:24:12,600
Speaker 1: dollar price tag. So what you're seeing is you're seeing

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Speaker 1: across and this has really been a phenomenon that's virtually

401
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Speaker 1: exploded in the last three to four years, is you

402
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Speaker 1: have you have a lot of concern UH with wealthy

403
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Speaker 1: investors in terms of exposure to higher taxation as governments

404
00:24:30,320 --> 00:24:37,119
Speaker 1: grapple with UH weeken weakening or challenging economic conditions, political

405
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Speaker 1: turnout turnover. So you look at Europe for example, uh,

406
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Speaker 1: tremendous you know pressure, Uh, you know government shortfalls, where

407
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Speaker 1: do we get the money from, limits on compensation for

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Speaker 1: securities industry, all sorts of things. Uh. And then just

409
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Speaker 1: on top of that, a higher regulatory overlay for you know,

410
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Speaker 1: many of the wealthy that have their own businesses. You

411
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Speaker 1: start looking around the w world for maybe other places

412
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Speaker 1: to diversify your your your your net worth, and one

413
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Speaker 1: of them, it could be pork bellies, but one of

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Speaker 1: them is real estate and and real estate. Ironically, New

415
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Speaker 1: York is very favorable in the international environment since we're

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Speaker 1: sort of the starting place for a lot of them.

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Speaker 1: What's wrong with the world right now in terms of

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Speaker 1: credit problems? Um, so cash is king here. Cash is king,

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Speaker 1: and not only that, but it's really I think the

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Speaker 1: terminology here is this global safe haven that what you're

421
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Speaker 1: looking for is people. I'd like to say that we're

422
00:25:38,760 --> 00:25:42,600
Speaker 1: building the world's most expensive bank safety deposit boxes where

423
00:25:42,640 --> 00:25:45,480
Speaker 1: you where you put your valuables in it, like your

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Speaker 1: artwork and whatever else, and then you rarely go back.

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Speaker 1: And there's a lot of that going on here. You've

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Speaker 1: been in a number of those apartments. Oh absolutely, and

427
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Speaker 1: and uh, I don't know what mistake I made in

428
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Speaker 1: my career path, but but I'm not to own one

429
00:26:00,520 --> 00:26:04,560
Speaker 1: of those at least is that necessarily a mistake. You

430
00:26:04,760 --> 00:26:07,920
Speaker 1: have a very lovely home in Connecticut, and it's it's

431
00:26:07,960 --> 00:26:10,919
Speaker 1: certainly not a hundred thousand dollar ranch. It's it's a

432
00:26:10,960 --> 00:26:14,920
Speaker 1: little bit nicer than that. And so most of us,

433
00:26:15,680 --> 00:26:17,720
Speaker 1: most of us are not going to be in a

434
00:26:17,760 --> 00:26:22,280
Speaker 1: fifty hundred million dollar penthouse. In fact, nine percent of

435
00:26:22,359 --> 00:26:24,520
Speaker 1: us are not going to be And what you're telling

436
00:26:24,600 --> 00:26:27,120
Speaker 1: us is even the point of one percent who can

437
00:26:27,160 --> 00:26:30,440
Speaker 1: be in it, they're not even there. They're not amazing views,

438
00:26:30,480 --> 00:26:32,719
Speaker 1: aren't they. It really is. And the way you have

439
00:26:32,760 --> 00:26:36,040
Speaker 1: to look at it. What I find almost humorous about

440
00:26:36,160 --> 00:26:39,520
Speaker 1: the topic is when you'll see, for example, in London,

441
00:26:39,520 --> 00:26:43,000
Speaker 1: there have been three transactions over two hundred millions. That's amazing.

442
00:26:43,119 --> 00:26:45,880
Speaker 1: In the US, the three highest transactions there was one

443
00:26:45,920 --> 00:26:49,159
Speaker 1: for millions in the Hampton's, there was another one in

444
00:26:49,160 --> 00:26:51,359
Speaker 1: Connecticut for a hundred twenty million, and then there was

445
00:26:51,400 --> 00:26:55,480
Speaker 1: another one in California for around a hundred million. And

446
00:26:55,520 --> 00:26:58,359
Speaker 1: you throw those all together and it's not even a

447
00:26:58,400 --> 00:27:03,879
Speaker 1: billion dollars. It doesn't have anything to do with the

448
00:27:03,920 --> 00:27:06,800
Speaker 1: balance of the market. It is more like a circus

449
00:27:06,840 --> 00:27:10,399
Speaker 1: side show. It's an anomaly. It has nothing to do.

450
00:27:10,480 --> 00:27:13,280
Speaker 1: But but what it what I think the real estate

451
00:27:13,320 --> 00:27:16,080
Speaker 1: industry sees it as, and you know, perhaps there's some

452
00:27:16,119 --> 00:27:18,600
Speaker 1: truth to it. It's like, well, if someone's willing to

453
00:27:18,640 --> 00:27:21,359
Speaker 1: invest ninety million dollars in a condo that they're rarely

454
00:27:21,400 --> 00:27:24,119
Speaker 1: going to use, that means they're very confident about the

455
00:27:24,119 --> 00:27:26,879
Speaker 1: New York real estate market and they'll there. You know,

456
00:27:27,080 --> 00:27:29,919
Speaker 1: it's a good sign for everybody else. Maybe that's true.

457
00:27:30,080 --> 00:27:33,000
Speaker 1: I can't maybe the million dollars then you don't know

458
00:27:33,000 --> 00:27:34,560
Speaker 1: what the hell else to do. Well, I think that's

459
00:27:34,560 --> 00:27:36,960
Speaker 1: really what it is. And then what you're seeing is

460
00:27:37,160 --> 00:27:40,600
Speaker 1: you're seeing the other phenomenon you're seeing that's tied into

461
00:27:40,640 --> 00:27:43,359
Speaker 1: this look of the regions I talked about Europe. You

462
00:27:43,400 --> 00:27:46,280
Speaker 1: also have China. You have the wealthy Chinese trying to

463
00:27:46,280 --> 00:27:49,960
Speaker 1: extract their money out. You know, there's a right to

464
00:27:50,119 --> 00:27:54,560
Speaker 1: versify around the globe. Right Australia is undergoing Chinese investors

465
00:27:54,680 --> 00:27:57,280
Speaker 1: right now, Sydney and Vancouver. I've always thought of as

466
00:27:57,400 --> 00:28:01,920
Speaker 1: life raths for the wealthy Chinese absolutely who are concerned

467
00:28:01,920 --> 00:28:03,800
Speaker 1: one day they have to hit the eject button and

468
00:28:03,840 --> 00:28:05,560
Speaker 1: get the hell out of dome. And you have that

469
00:28:05,680 --> 00:28:09,960
Speaker 1: in uh In South America, the Brazilians have single handedly

470
00:28:10,080 --> 00:28:13,200
Speaker 1: bailed out the Miami housing market, which was a highly

471
00:28:13,240 --> 00:28:17,080
Speaker 1: speculative market with ten years of shadow inventory, inventory that

472
00:28:17,119 --> 00:28:21,480
Speaker 1: was essentially just built and can't be sold, and it's

473
00:28:21,520 --> 00:28:24,320
Speaker 1: all been gobbled up. There's really not like a hundred

474
00:28:24,400 --> 00:28:28,199
Speaker 1: thousand condos. It was a ten year absorption rate. It

475
00:28:28,200 --> 00:28:32,040
Speaker 1: would take to you know, conservatively to and and it

476
00:28:32,119 --> 00:28:34,840
Speaker 1: was done in three years. And it was primarily because

477
00:28:34,880 --> 00:28:39,120
Speaker 1: of Brazilians and Venezuelans. With the wealthy Venezuelans with the

478
00:28:39,200 --> 00:28:42,400
Speaker 1: regime change, we're looking to get out. And so you

479
00:28:42,440 --> 00:28:47,160
Speaker 1: see those phenomenons, but they have nothing to do with

480
00:28:47,360 --> 00:28:51,160
Speaker 1: any the average American homebuyers. So if someone is looking

481
00:28:51,160 --> 00:28:54,080
Speaker 1: to pick up a vacation property in Miami, not that

482
00:28:54,160 --> 00:28:57,479
Speaker 1: I am, but if you were, has that window closed,

483
00:28:57,480 --> 00:29:00,840
Speaker 1: did you miss the bargain opportunity? Were still seeing a

484
00:29:00,920 --> 00:29:04,320
Speaker 1: fairly brisk appreciation, right So that I'm sure there's you know,

485
00:29:04,400 --> 00:29:07,560
Speaker 1: depends every every neighborhood, every market it's a little bit different.

486
00:29:08,360 --> 00:29:12,000
Speaker 1: What's interesting, and this brings back to the credit discussion.

487
00:29:12,480 --> 00:29:14,440
Speaker 1: If you look at Miami, which is a market that

488
00:29:14,480 --> 00:29:19,840
Speaker 1: I prepare research for, about three quarters of all the

489
00:29:19,920 --> 00:29:24,680
Speaker 1: distressed condo sales are cash, right, I knew you're going

490
00:29:24,720 --> 00:29:29,480
Speaker 1: to go that way about that's amazing. Well compare that

491
00:29:29,560 --> 00:29:31,480
Speaker 1: to what the rest of the country is normally like,

492
00:29:31,840 --> 00:29:38,080
Speaker 1: right right, Well, it's about exactly. If you look at

493
00:29:38,120 --> 00:29:41,320
Speaker 1: the non distress meaning anything that's not a foreclosure or

494
00:29:41,320 --> 00:29:47,000
Speaker 1: a short sale condo market Miami, the cash buyers in

495
00:29:47,080 --> 00:29:55,400
Speaker 1: that market account for about there's there's almost no difference there.

496
00:29:55,840 --> 00:29:59,680
Speaker 1: The variation. It varies every quarter, but the variation is two.

497
00:30:00,960 --> 00:30:05,000
Speaker 1: It's really not a big difference, which means that it

498
00:30:05,280 --> 00:30:07,800
Speaker 1: is a cash market. It remains a cash market. So

499
00:30:07,920 --> 00:30:11,760
Speaker 1: guess what kind of new development projects are being built

500
00:30:11,760 --> 00:30:18,320
Speaker 1: in Misery appealing to international high end uh tremendous linkage

501
00:30:18,320 --> 00:30:20,440
Speaker 1: with New York City. It's about the same time to

502
00:30:20,960 --> 00:30:23,440
Speaker 1: fly to Miami as it is to take a car

503
00:30:23,560 --> 00:30:25,720
Speaker 1: to the Hampton's or not quite the same, but that's

504
00:30:25,760 --> 00:30:29,360
Speaker 1: sort of the three. It's seen as a competing element

505
00:30:29,440 --> 00:30:33,280
Speaker 1: to it, especially markets like Palm Beach which are almost

506
00:30:33,360 --> 00:30:37,160
Speaker 1: all New Yorkers, very high and very little foreign whereas

507
00:30:37,200 --> 00:30:41,320
Speaker 1: Miami is almost all foreign. So the cash you can

508
00:30:41,360 --> 00:30:45,640
Speaker 1: see for different reasons, the cash element of real estate really,

509
00:30:45,760 --> 00:30:48,560
Speaker 1: or the access to credit really defines how markets behave.

510
00:30:48,800 --> 00:30:52,840
Speaker 1: That's quite fascinating. So we we see foreigners coming to

511
00:30:52,880 --> 00:30:56,520
Speaker 1: the US and buying real estate, is that what's driving

512
00:30:56,560 --> 00:31:02,080
Speaker 1: things in London and Sydney and we're else it's exactly

513
00:31:02,120 --> 00:31:06,080
Speaker 1: the same phenomenon. So you're so in almost every major

514
00:31:06,880 --> 00:31:10,160
Speaker 1: how urban market in the in the world, you're seeing

515
00:31:10,880 --> 00:31:14,560
Speaker 1: record prices. Uh. Incidentally, the high end market in London

516
00:31:14,640 --> 00:31:17,960
Speaker 1: is about more expensive than the high end market in Manhattan.

517
00:31:18,880 --> 00:31:21,240
Speaker 1: So we're is it just a matter of not that

518
00:31:21,320 --> 00:31:26,720
Speaker 1: much more space there were more or I think it's Uh,

519
00:31:26,760 --> 00:31:29,120
Speaker 1: I think there is less space. I think that's part

520
00:31:29,120 --> 00:31:32,200
Speaker 1: of it. Also, there's a closer proximity to the Middle East,

521
00:31:33,000 --> 00:31:37,480
Speaker 1: to Russia, who while they're touted here as big players

522
00:31:37,520 --> 00:31:39,520
Speaker 1: in the real estate market here because they buy hope,

523
00:31:39,760 --> 00:31:42,840
Speaker 1: high profile, they're not even the top twenty for tourism.

524
00:31:43,040 --> 00:31:48,040
Speaker 1: It's completely overhyped. The foreigners that are very active in

525
00:31:48,080 --> 00:31:51,080
Speaker 1: the New York market. Uh. And on the East coast

526
00:31:51,240 --> 00:31:57,560
Speaker 1: tend to be from Europe and and the the Chinese

527
00:31:57,680 --> 00:32:00,920
Speaker 1: or you know, the Asia in general is probably the

528
00:32:00,960 --> 00:32:04,840
Speaker 1: fastest growing UH contributors to the market. There was just

529
00:32:04,880 --> 00:32:08,040
Speaker 1: an article you mentioned Middle Eastern money boosting real estate prices.

530
00:32:08,080 --> 00:32:11,400
Speaker 1: It was just an article on Bloomberg today that talked

531
00:32:11,400 --> 00:32:17,040
Speaker 1: about how the Dubai International Airport just passed Heathrow as

532
00:32:17,040 --> 00:32:21,040
Speaker 1: the biggest international airport in the world. That that's just unbelievable.

533
00:32:21,120 --> 00:32:24,360
Speaker 1: Dubai sees more traffic than London and that market is

534
00:32:24,520 --> 00:32:27,600
Speaker 1: largely driven by speculation. You know that It's it's a

535
00:32:28,440 --> 00:32:32,280
Speaker 1: not in the context of the flipping, right, it's more

536
00:32:32,320 --> 00:32:35,000
Speaker 1: of a long term equity play. I think a lot

537
00:32:35,040 --> 00:32:37,640
Speaker 1: of real estate investment right now or is that speculation?

538
00:32:37,640 --> 00:32:40,880
Speaker 1: Then if it's it is speculation, but not in terms

539
00:32:40,920 --> 00:32:44,320
Speaker 1: of I think. I think the way I discerned from

540
00:32:44,360 --> 00:32:49,440
Speaker 1: investment versus speculation is the time frame the window. So

541
00:32:49,560 --> 00:32:53,080
Speaker 1: for example, the time frame in the last housing boom

542
00:32:53,080 --> 00:32:55,959
Speaker 1: that got us got the real estate market into trouble,

543
00:32:56,240 --> 00:33:00,440
Speaker 1: the time frame was weeks months quarters. That time frame

544
00:33:00,520 --> 00:33:03,640
Speaker 1: now is five ten years. It's a much longer window.

545
00:33:03,640 --> 00:33:06,320
Speaker 1: It's really his investment, isn't it. It is an investment,

546
00:33:06,320 --> 00:33:09,200
Speaker 1: and that's really what real estate has always been. We

547
00:33:09,360 --> 00:33:12,520
Speaker 1: just lost our minds as a as a housing market

548
00:33:13,400 --> 00:33:18,760
Speaker 1: during the last cycle that that's quite called a systemic breakdown.

549
00:33:19,720 --> 00:33:24,920
Speaker 1: I'm speaking with Jonathan Miller of Miller Samuel, New York Times,

550
00:33:24,920 --> 00:33:29,200
Speaker 1: Washington Post, Wall Street Journal. There's a wall of quotes

551
00:33:29,280 --> 00:33:31,400
Speaker 1: in your office. When I walk in, like I have

552
00:33:31,600 --> 00:33:35,000
Speaker 1: five things frames I walk in, you have like a

553
00:33:35,200 --> 00:33:38,800
Speaker 1: whole way with like nine seven was cheaper than artwork,

554
00:33:39,000 --> 00:33:42,200
Speaker 1: I guess it is. So we're talking about real estate,

555
00:33:42,480 --> 00:33:44,480
Speaker 1: and you and I know each other for a long time.

556
00:33:45,120 --> 00:33:47,000
Speaker 1: There's a couple of things I wanted to share with

557
00:33:47,040 --> 00:33:50,200
Speaker 1: you that we haven't caught up. So you know, our

558
00:33:50,240 --> 00:33:53,160
Speaker 1: house has been on the market right for two weeks

559
00:33:53,200 --> 00:33:56,560
Speaker 1: before we were sold. So someone said to me, wait,

560
00:33:56,600 --> 00:33:59,440
Speaker 1: you sold your house in two weeks? Really liked seven

561
00:33:59,560 --> 00:34:01,600
Speaker 1: to ten days. But we had to wait for the

562
00:34:01,640 --> 00:34:04,400
Speaker 1: contract to come back. So someone said, how did you

563
00:34:04,800 --> 00:34:08,560
Speaker 1: price your house? And we had gotten a huge This

564
00:34:08,640 --> 00:34:13,360
Speaker 1: is like a middle class split level five hundred and change,

565
00:34:13,640 --> 00:34:17,680
Speaker 1: New Long Island, suburban bedroomtown, had not a big mansion,

566
00:34:18,719 --> 00:34:21,600
Speaker 1: a beautiful kitchen. I love our granite I actually haven't

567
00:34:21,640 --> 00:34:24,160
Speaker 1: had an affair with our gran That's that's a whole

568
00:34:24,200 --> 00:34:27,279
Speaker 1: another story. It is. It is, I just fell in

569
00:34:27,360 --> 00:34:30,280
Speaker 1: love with this granite and it haunted me for days,

570
00:34:31,000 --> 00:34:34,080
Speaker 1: and every other piece of granite just didn't do it.

571
00:34:34,719 --> 00:34:37,799
Speaker 1: I know that sounds ridiculous. People don't think of me

572
00:34:37,880 --> 00:34:42,719
Speaker 1: as a person in a kitchen stroking like this is

573
00:34:42,760 --> 00:34:47,120
Speaker 1: a nice piece of mica. But it's not. My grant

574
00:34:48,280 --> 00:34:52,840
Speaker 1: is a spectacular It is an So the that's another

575
00:34:52,880 --> 00:34:55,799
Speaker 1: story I could share the granite. So before I tell

576
00:34:55,840 --> 00:34:59,360
Speaker 1: you how we sold the house, the granite story was

577
00:35:00,120 --> 00:35:02,520
Speaker 1: we finally so we we ended up in a house

578
00:35:02,560 --> 00:35:05,040
Speaker 1: by accident. It's one of these stories. We had a

579
00:35:05,160 --> 00:35:07,880
Speaker 1: bye and then we went and sold our house, and

580
00:35:07,880 --> 00:35:09,960
Speaker 1: then we went back to our by where we had

581
00:35:10,040 --> 00:35:13,200
Speaker 1: an agreed deal, but we weren't in contract yet and

582
00:35:13,239 --> 00:35:17,000
Speaker 1: the seller had said to us, we decided we want more,

583
00:35:17,680 --> 00:35:20,440
Speaker 1: And basically it was like, well, wait, you told us

584
00:35:20,600 --> 00:35:23,160
Speaker 1: we had to do this really quickly, so we cut

585
00:35:23,160 --> 00:35:26,040
Speaker 1: our price significant. We cut a price fifty grand. That

586
00:35:26,120 --> 00:35:29,439
Speaker 1: house also first weekend, and that was in the midst

587
00:35:29,440 --> 00:35:32,080
Speaker 1: of the frenzy, so it was relatively easy to do. Hey,

588
00:35:32,120 --> 00:35:35,200
Speaker 1: if you want to more. That's fine, but then you

589
00:35:35,239 --> 00:35:38,440
Speaker 1: get full price or you get fast. You don't get both.

590
00:35:38,880 --> 00:35:43,320
Speaker 1: So if you want, I'll go break this deal and

591
00:35:43,600 --> 00:35:45,359
Speaker 1: only cut the price twenty five brand and you could

592
00:35:45,400 --> 00:35:47,280
Speaker 1: wait six months and we could do it at this price.

593
00:35:47,560 --> 00:35:51,040
Speaker 1: But you don't get both. And what response, Um, well,

594
00:35:51,040 --> 00:35:53,800
Speaker 1: we won more. By the way. The side note about

595
00:35:53,880 --> 00:35:58,160
Speaker 1: that is they had fifty deposit on a house that

596
00:35:58,360 --> 00:36:01,680
Speaker 1: they're six months in their kind tracked to close, elapsed,

597
00:36:02,040 --> 00:36:03,880
Speaker 1: and in order to not lose the fifty, they had

598
00:36:03,880 --> 00:36:06,480
Speaker 1: to come up with another fifty, which is why they

599
00:36:06,520 --> 00:36:10,239
Speaker 1: were prushing us for the five. We walked away from that.

600
00:36:10,800 --> 00:36:14,279
Speaker 1: Two years later they got their extra five, but they

601
00:36:14,360 --> 00:36:17,160
Speaker 1: lost a hundred to get it. And I remember saying

602
00:36:17,160 --> 00:36:19,640
Speaker 1: to the agent, look, I know I have a facility

603
00:36:19,640 --> 00:36:22,320
Speaker 1: of numbers, but you don't need to be a rocket

604
00:36:22,320 --> 00:36:25,040
Speaker 1: scientist to know that a hundred is a bigger number

605
00:36:25,040 --> 00:36:30,000
Speaker 1: than twenty five. So that sort of stupidity is life.

606
00:36:30,360 --> 00:36:32,680
Speaker 1: And here's the thing, And you made the comment, you know,

607
00:36:32,719 --> 00:36:34,920
Speaker 1: we sold our house in seven to ten days, right.

608
00:36:35,440 --> 00:36:37,800
Speaker 1: So what you're seeing now in the market in general,

609
00:36:37,840 --> 00:36:41,760
Speaker 1: and many housing markets, is when a seller who feels

610
00:36:41,840 --> 00:36:45,920
Speaker 1: very empowered because there's not a lot of supply out there,

611
00:36:45,960 --> 00:36:48,920
Speaker 1: so they don't have a lot of competition. The notion

612
00:36:49,000 --> 00:36:52,200
Speaker 1: that you sell in seven to ten days means too

613
00:36:52,200 --> 00:36:55,239
Speaker 1: many sellers, that the broker priced it too lower, the

614
00:36:55,239 --> 00:36:58,600
Speaker 1: seller priced it too low, they gave it away when

615
00:36:58,640 --> 00:37:02,279
Speaker 1: the wrong But that is wrong. You're absolutely right, But

616
00:37:02,440 --> 00:37:06,280
Speaker 1: that is that is a an assumption because it's sold quickly,

617
00:37:06,320 --> 00:37:10,640
Speaker 1: and I contend in this market, it's either price correctly

618
00:37:11,360 --> 00:37:13,759
Speaker 1: or it's not in the market. It's incorrectly right, right,

619
00:37:13,760 --> 00:37:18,640
Speaker 1: It's not a dimmer switch, it's a it's a it's

620
00:37:18,680 --> 00:37:21,480
Speaker 1: a it's an on off switch. So so here's what

621
00:37:21,560 --> 00:37:24,000
Speaker 1: I did in order the price of the house. And understand,

622
00:37:24,480 --> 00:37:26,719
Speaker 1: we found a house that we fell in love with.

623
00:37:27,480 --> 00:37:30,680
Speaker 1: And I'll spare the grizzly details, but it's a divorce,

624
00:37:30,760 --> 00:37:34,040
Speaker 1: and it's a little complex, and it's it's a nicer

625
00:37:34,120 --> 00:37:37,200
Speaker 1: house on a bigger piece of land in a nicer town,

626
00:37:37,840 --> 00:37:40,880
Speaker 1: right next to this big preserve. So I'm paying a

627
00:37:40,880 --> 00:37:44,040
Speaker 1: couple of bucks more for than SEC. But that house

628
00:37:44,120 --> 00:37:46,719
Speaker 1: was on the market. We haggled over the price. When

629
00:37:46,719 --> 00:37:49,879
Speaker 1: we finally they priced it too high. It had been

630
00:37:49,920 --> 00:37:52,720
Speaker 1: on the market for almost I think three hundred days,

631
00:37:53,239 --> 00:37:55,680
Speaker 1: we're a live one. Oh look, we got someone interested.

632
00:37:55,920 --> 00:37:58,120
Speaker 1: It's a contemporary house. You have to either like that

633
00:37:58,360 --> 00:38:00,479
Speaker 1: or not, so I know it's kind of a little

634
00:38:00,520 --> 00:38:03,480
Speaker 1: bit of a niche and it's an it's an odd price.

635
00:38:03,520 --> 00:38:06,160
Speaker 1: It's not one of these big multimillion dollar houses, but

636
00:38:06,239 --> 00:38:08,520
Speaker 1: it's not a five hundred thousand dollar house. And so

637
00:38:09,760 --> 00:38:12,919
Speaker 1: it was a weird house. And so our concern was, Hey,

638
00:38:12,960 --> 00:38:15,440
Speaker 1: we don't want to lose the house. We want to buy,

639
00:38:15,480 --> 00:38:18,279
Speaker 1: so we're not gonna give our house away, but we're

640
00:38:18,320 --> 00:38:21,840
Speaker 1: not gonna try and squeeze. Sometimes getting every last penny

641
00:38:22,000 --> 00:38:24,880
Speaker 1: is expensive. So here's what I did. I want. I

642
00:38:24,920 --> 00:38:28,239
Speaker 1: love the Zillo app. We've talked about this. We've both

643
00:38:28,280 --> 00:38:31,640
Speaker 1: been on our boats in the Long Island Sound using

644
00:38:31,680 --> 00:38:34,640
Speaker 1: the nearby button on the Zillo app to look at

645
00:38:34,680 --> 00:38:37,160
Speaker 1: all the prices of the houses that are either for

646
00:38:37,440 --> 00:38:42,040
Speaker 1: sale or sold that are waterfronts, and it's mind boggling.

647
00:38:42,440 --> 00:38:44,560
Speaker 1: When I've been, when I've been in the harbor by

648
00:38:44,600 --> 00:38:49,440
Speaker 1: Port Washington looking at King's Point, these houses are fourteen

649
00:38:49,480 --> 00:38:53,320
Speaker 1: and sixteen million dollars, like the co ops and condos

650
00:38:53,360 --> 00:38:55,839
Speaker 1: that are hundred million. That that's made up. Those are

651
00:38:55,880 --> 00:38:59,160
Speaker 1: just that's just not real. But eight ten, twelve million

652
00:38:59,160 --> 00:39:02,600
Speaker 1: dollar house, that's like a real number because there are

653
00:39:02,640 --> 00:39:05,520
Speaker 1: three four five million dollar houses. So I used that

654
00:39:05,640 --> 00:39:08,839
Speaker 1: Zillo app and I said, show me every house that's

655
00:39:08,880 --> 00:39:13,239
Speaker 1: sold in my town with this many beds, three bedrooms,

656
00:39:13,680 --> 00:39:17,560
Speaker 1: two baths, this this much, you know, and and then

657
00:39:17,560 --> 00:39:20,920
Speaker 1: I looked at them, and I said, everything that sold

658
00:39:21,800 --> 00:39:25,200
Speaker 1: at or above my price point. You know, I was

659
00:39:25,239 --> 00:39:28,320
Speaker 1: looking for the price where everything was either much bigger,

660
00:39:28,440 --> 00:39:32,000
Speaker 1: or nicer, or waterfront or some something that made it special,

661
00:39:32,640 --> 00:39:34,600
Speaker 1: and where that line was. And then I looked at

662
00:39:34,640 --> 00:39:38,359
Speaker 1: everything that was sold, and it was either not as

663
00:39:38,440 --> 00:39:40,680
Speaker 1: nice as our house. You know, we stutted the whole

664
00:39:40,680 --> 00:39:43,120
Speaker 1: house and completely and there's nothing, you know, what has

665
00:39:43,160 --> 00:39:45,520
Speaker 1: to be replaced. The garage door that was the we

666
00:39:45,680 --> 00:39:48,239
Speaker 1: ordered one, It never showed up, never paid for it.

667
00:39:48,480 --> 00:39:51,040
Speaker 1: That's literally the only thing that we didn't turn over

668
00:39:51,080 --> 00:39:54,040
Speaker 1: in the past seven years. And so in what you're

669
00:39:54,040 --> 00:39:57,719
Speaker 1: describing is you're describing the aggregation of real estate information

670
00:39:58,440 --> 00:40:01,839
Speaker 1: right to the consumer. And and so it's very different. Now,

671
00:40:01,920 --> 00:40:05,480
Speaker 1: what's interesting when I was talking before about the buyer saying,

672
00:40:06,480 --> 00:40:09,520
Speaker 1: or rather the sellers saying, oh, I sold it, price

673
00:40:09,560 --> 00:40:12,880
Speaker 1: it too low because it's sold too quickly. Uh. What

674
00:40:13,000 --> 00:40:16,680
Speaker 1: I also have seen through you know, decades of looking

675
00:40:16,719 --> 00:40:22,560
Speaker 1: at transactions and appraising, is that if you overprice, you'll

676
00:40:22,680 --> 00:40:26,360
Speaker 1: ultimately end up with selling your home for a lower

677
00:40:26,400 --> 00:40:29,040
Speaker 1: price than if you had priced it very close to

678
00:40:29,080 --> 00:40:32,680
Speaker 1: the market. It gets stale. That's a reality of it.

679
00:40:32,800 --> 00:40:35,160
Speaker 1: And I think a lot of sellers don't get that,

680
00:40:35,239 --> 00:40:38,000
Speaker 1: and they the agents lose interest. It's just you seeing

681
00:40:38,040 --> 00:40:40,520
Speaker 1: all what there, there's a nice house, but what's well

682
00:40:40,600 --> 00:40:42,360
Speaker 1: think of? Think of you know a lot of people,

683
00:40:42,560 --> 00:40:44,799
Speaker 1: you know, on one hand where we have all this

684
00:40:45,000 --> 00:40:49,480
Speaker 1: great transparency, but in the other hand, you're conveying a

685
00:40:49,680 --> 00:40:54,239
Speaker 1: disconnect with the market. You're saying, uh, I don't know

686
00:40:54,400 --> 00:40:56,759
Speaker 1: what's going on. This is what I want. So the

687
00:40:56,800 --> 00:40:59,640
Speaker 1: buyer's thinking, well, this person is going to be really

688
00:40:59,719 --> 00:41:03,560
Speaker 1: different cult to deal with. They're disconnected. Something wrong with

689
00:41:03,640 --> 00:41:06,600
Speaker 1: the house that we don't know about. There's it's just

690
00:41:07,160 --> 00:41:10,040
Speaker 1: it's all kinds of red flags and that slows down

691
00:41:10,719 --> 00:41:13,600
Speaker 1: the the market in terms of the interest of your

692
00:41:13,680 --> 00:41:15,839
Speaker 1: of your home. I see this over and over and

693
00:41:15,840 --> 00:41:18,560
Speaker 1: over again. It's quite amazing. So so when I looked

694
00:41:18,560 --> 00:41:20,640
Speaker 1: at the run of Zillo data. I said, when I

695
00:41:20,680 --> 00:41:23,400
Speaker 1: put my house up for sale, there is not going

696
00:41:23,440 --> 00:41:26,640
Speaker 1: to be a nicer house at this price point. In fact,

697
00:41:27,080 --> 00:41:30,880
Speaker 1: everything else plus or minus ten or twenty is not

698
00:41:30,920 --> 00:41:32,839
Speaker 1: going to be as nice because I'm trying to look

699
00:41:32,880 --> 00:41:35,160
Speaker 1: at it as a buyer. Hey, if I'm trying to

700
00:41:35,200 --> 00:41:39,560
Speaker 1: between choose between this house for and that, I'm gonna

701
00:41:39,560 --> 00:41:42,160
Speaker 1: go with a nicer house. And I also saw what

702
00:41:42,560 --> 00:41:46,960
Speaker 1: sold within that price point. I have a feeling that

703
00:41:47,160 --> 00:41:50,560
Speaker 1: six d is a tough number to get over because

704
00:41:50,920 --> 00:41:59,160
Speaker 1: if you're conforming mortgage, it's really tough. It's really tough

705
00:41:59,239 --> 00:42:05,000
Speaker 1: to to sell something much above that. So could we

706
00:42:05,080 --> 00:42:10,160
Speaker 1: have listed at six fort nine and and maybe squeezed

707
00:42:10,200 --> 00:42:16,000
Speaker 1: another maybe, But then we're trying to buy, and that's

708
00:42:16,040 --> 00:42:18,040
Speaker 1: the whole point of this is we want that house.

709
00:42:18,520 --> 00:42:23,720
Speaker 1: So you know, when when I started as a trader

710
00:42:24,160 --> 00:42:26,239
Speaker 1: early in my career, I remember one of the head

711
00:42:26,239 --> 00:42:29,600
Speaker 1: traders once said to me, I was trying to squeeze

712
00:42:29,840 --> 00:42:31,719
Speaker 1: like the last couple of eighths. This is back in

713
00:42:31,760 --> 00:42:35,040
Speaker 1: the days of fractions out of a trade, and he's like, look,

714
00:42:35,080 --> 00:42:37,840
Speaker 1: you could get out of this transaction a quarter point lower,

715
00:42:38,239 --> 00:42:40,440
Speaker 1: just hit the bit and move on. But but but

716
00:42:40,560 --> 00:42:42,480
Speaker 1: I could squeeze a few more eighths out of this.

717
00:42:42,800 --> 00:42:45,759
Speaker 1: He goes, Hey, I remember this old guy said to me, Hey,

718
00:42:46,040 --> 00:42:49,120
Speaker 1: leave a little something for the next guy. And can

719
00:42:49,160 --> 00:42:52,120
Speaker 1: I tell you something. It's good advice if you're spending

720
00:42:52,160 --> 00:42:55,640
Speaker 1: all this time and effort in energy to squeeze every

721
00:42:55,760 --> 00:42:59,959
Speaker 1: last dime. There are a lot of non monetary fact

722
00:43:00,080 --> 00:43:03,440
Speaker 1: there's that go into the transaction. How smooth it is,

723
00:43:03,480 --> 00:43:06,759
Speaker 1: how easy the people were dealing with, it's it's he

724
00:43:06,840 --> 00:43:09,960
Speaker 1: works at a finance company in New York. He's being

725
00:43:10,000 --> 00:43:13,080
Speaker 1: transferred from else. They've been so far more or less

726
00:43:13,080 --> 00:43:16,279
Speaker 1: a pleasure to deal with. And I can't help but wonder,

727
00:43:16,360 --> 00:43:18,320
Speaker 1: if I'm beating people up for that last ten or

728
00:43:18,360 --> 00:43:23,200
Speaker 1: twenty thou dollars, how much mental anguish is that going

729
00:43:23,280 --> 00:43:25,840
Speaker 1: to generate? Right? Because the whole the whole process is

730
00:43:25,880 --> 00:43:29,799
Speaker 1: so emotional. Anyway, it's surprisingly emotion it is, no matter what.

731
00:43:30,040 --> 00:43:31,799
Speaker 1: And then that was one of the problems during the

732
00:43:31,880 --> 00:43:35,719
Speaker 1: last boom and bus cycle was people are trying to

733
00:43:36,239 --> 00:43:39,880
Speaker 1: view housing as a you know, a stock or commodity.

734
00:43:40,120 --> 00:43:42,359
Speaker 1: But but you know what, and that's part of it.

735
00:43:42,440 --> 00:43:46,040
Speaker 1: But The bigger part is it also has a you know,

736
00:43:46,239 --> 00:43:50,440
Speaker 1: a use, a usage, that place to live part of

737
00:43:50,440 --> 00:43:53,360
Speaker 1: what you pay for. And it's an emotional I recall

738
00:43:53,480 --> 00:43:56,799
Speaker 1: the conversations I had with people. You oh, six oh

739
00:43:56,840 --> 00:43:59,319
Speaker 1: seven o eight. I'm sure you went through this way.

740
00:43:59,360 --> 00:44:02,440
Speaker 1: You're at a barb cure, a cocktail party. That was

741
00:44:02,480 --> 00:44:05,560
Speaker 1: the only conversation. And neighbors, would you know. Neighbors would

742
00:44:05,600 --> 00:44:07,680
Speaker 1: say to me, you know, I want to put my

743
00:44:07,760 --> 00:44:09,839
Speaker 1: house up. And by the way, these numbers are real.

744
00:44:10,160 --> 00:44:12,320
Speaker 1: That my house that I sold for five and change.

745
00:44:12,640 --> 00:44:15,719
Speaker 1: People selling for seven eight nine, which never nine, but

746
00:44:16,160 --> 00:44:21,879
Speaker 1: six seven almost eight. And I remember having a conversation saying, hey,

747
00:44:21,920 --> 00:44:24,439
Speaker 1: the guy would say to me, the Smiths so their

748
00:44:24,440 --> 00:44:29,360
Speaker 1: house for seven fifty. Why can't I get seven fifty.

749
00:44:29,400 --> 00:44:31,920
Speaker 1: We have a better yard, a better location on the street,

750
00:44:31,960 --> 00:44:35,000
Speaker 1: a nicer kitchen. Yeah, but the Smiths sold their house

751
00:44:35,000 --> 00:44:37,840
Speaker 1: two years ago. That was two years. If you have

752
00:44:37,880 --> 00:44:40,239
Speaker 1: a time machine, I promise you I could get you

753
00:44:40,280 --> 00:44:43,080
Speaker 1: seven fifty if you don't have. But I'm gonna tell

754
00:44:43,120 --> 00:44:46,280
Speaker 1: you I know people who still own Yahoo. It traded

755
00:44:46,280 --> 00:44:51,120
Speaker 1: it almost two right, it's thirty bucks. They can't get

756
00:44:51,160 --> 00:44:54,000
Speaker 1: to eighty. You can't get seven fifty. You have to

757
00:44:54,000 --> 00:44:56,880
Speaker 1: recognize the more. And then I would watch these people

758
00:44:56,920 --> 00:45:00,319
Speaker 1: put houses up for sale and they were all is

759
00:45:00,640 --> 00:45:03,080
Speaker 1: six months to a year behind the market. So the

760
00:45:03,160 --> 00:45:05,520
Speaker 1: market is at six hundred, there at seven hundred, the

761
00:45:05,520 --> 00:45:08,480
Speaker 1: market drops the fire. They're chasing it, chasing it, but

762
00:45:08,640 --> 00:45:11,520
Speaker 1: like on a year left we had and never hitting

763
00:45:11,560 --> 00:45:14,640
Speaker 1: the bid. We had a situation in Manhattan sort of

764
00:45:14,680 --> 00:45:17,960
Speaker 1: the the tipping point of the market, and we were

765
00:45:18,600 --> 00:45:21,799
Speaker 1: the Manhattan market was about two years behind the national market.

766
00:45:21,840 --> 00:45:25,240
Speaker 1: The national market peaked in the summer of six. Ours

767
00:45:25,360 --> 00:45:30,040
Speaker 1: was with Lehman in September of eight, and UH prices

768
00:45:30,440 --> 00:45:33,440
Speaker 1: within the next three to four months fell on average

769
00:45:33,480 --> 00:45:38,840
Speaker 1: about thirty. So essentially New York was late to the party,

770
00:45:38,960 --> 00:45:41,680
Speaker 1: but we caught up real quick. And remember most co

771
00:45:41,760 --> 00:45:45,680
Speaker 1: ops were requiring thirty or the average co op is

772
00:45:46,719 --> 00:45:50,839
Speaker 1: down so's so what we started to see is we

773
00:45:50,840 --> 00:45:54,040
Speaker 1: started seeing people start to come out three or four

774
00:45:54,080 --> 00:45:57,839
Speaker 1: months later to buy, and the broker feedback was, well,

775
00:45:57,840 --> 00:46:01,960
Speaker 1: they're all lowballers. They're all offering about thirty below what

776
00:46:02,120 --> 00:46:06,560
Speaker 1: it was six months ago. And my comment was, if

777
00:46:06,600 --> 00:46:10,120
Speaker 1: the only people in the market are buying something for

778
00:46:10,200 --> 00:46:14,040
Speaker 1: thirty only willing to pay less than what it was before.

779
00:46:14,480 --> 00:46:18,719
Speaker 1: The there that is the new market bid, right. They're

780
00:46:18,760 --> 00:46:21,239
Speaker 1: not low bowling, you're high bowling the ass. And it

781
00:46:21,960 --> 00:46:25,440
Speaker 1: was fascinating because the real estate community in general was

782
00:46:25,520 --> 00:46:29,319
Speaker 1: more negative than the consumer and and and it took

783
00:46:29,360 --> 00:46:32,120
Speaker 1: them longer to sort of rebound because they were devastated

784
00:46:32,200 --> 00:46:36,799
Speaker 1: because the whole principle of property going up forever was

785
00:46:36,960 --> 00:46:40,560
Speaker 1: shattered essentially. But you know, especially here in New York.

786
00:46:40,640 --> 00:46:45,040
Speaker 1: So I graduated grad school in eighty nine, and unlike

787
00:46:45,239 --> 00:46:47,640
Speaker 1: many of my peers who immediately ran out and bought

788
00:46:47,680 --> 00:46:52,600
Speaker 1: co ops and condos, the market crashed. First thing New

789
00:46:52,800 --> 00:46:55,279
Speaker 1: Fed Chack Greenspan did was cut rates, and he had

790
00:46:55,280 --> 00:46:59,279
Speaker 1: a little boom in real estate in nine and then

791
00:46:59,320 --> 00:47:02,400
Speaker 1: as rates kind of normalized, if you bought something in

792
00:47:02,480 --> 00:47:05,879
Speaker 1: eighty nine or ninety in New York City, you did

793
00:47:05,920 --> 00:47:09,080
Speaker 1: not get back to break even until I want to

794
00:47:09,080 --> 00:47:14,480
Speaker 1: say nineties six ninety seven, when the dot com boom

795
00:47:14,520 --> 00:47:18,040
Speaker 1: really started to just started to kick in. And we

796
00:47:18,040 --> 00:47:23,200
Speaker 1: were just discussing this in the office yesterday. I remember

797
00:47:23,280 --> 00:47:25,239
Speaker 1: that was still early in my career. I was on

798
00:47:25,280 --> 00:47:28,040
Speaker 1: a seal side. I worked in a brokerage farm, and

799
00:47:28,080 --> 00:47:32,560
Speaker 1: I recall hearing people say repeatedly, Hey, I need to

800
00:47:32,760 --> 00:47:35,360
Speaker 1: fifty from my account. I need a hundred eighty thousand.

801
00:47:35,440 --> 00:47:39,719
Speaker 1: I'm trading up, I'm buying a vacation property, I'm buying waterfront.

802
00:47:40,239 --> 00:47:43,799
Speaker 1: And back in the nineties, two thousand dollars was a

803
00:47:43,920 --> 00:47:47,480
Speaker 1: huge move. To go from four hundred to six hundred

804
00:47:47,600 --> 00:47:51,240
Speaker 1: was a big move in real estate. Now it's another

805
00:47:51,280 --> 00:47:54,600
Speaker 1: bedroom and a little bigger yard. But in the nineties

806
00:47:54,640 --> 00:47:59,560
Speaker 1: that was like five houses were really nice houses. Now

807
00:48:00,040 --> 00:48:02,520
Speaker 1: it's a split level. You know, in a in a development,

808
00:48:02,560 --> 00:48:06,919
Speaker 1: it's not a right. And what was what the conversation

809
00:48:07,080 --> 00:48:12,799
Speaker 1: was during the nineties, especially the early nineties, was I

810
00:48:12,920 --> 00:48:15,640
Speaker 1: know the market stinks, but I want to buy a house.

811
00:48:15,680 --> 00:48:18,200
Speaker 1: I'm gonna be I lived twenty years and you know

812
00:48:18,200 --> 00:48:20,319
Speaker 1: we're gonna be here. This is our home, and and

813
00:48:20,360 --> 00:48:24,040
Speaker 1: so I think that's I think that's always the right approach.

814
00:48:24,560 --> 00:48:27,560
Speaker 1: It has to be right for your situation. And I

815
00:48:27,640 --> 00:48:30,600
Speaker 1: just what I marveled at how we lost our way

816
00:48:31,120 --> 00:48:34,520
Speaker 1: during this last go round. You know, really you brought

817
00:48:34,600 --> 00:48:37,759
Speaker 1: you brought in ten million people who previously did not

818
00:48:37,920 --> 00:48:41,880
Speaker 1: qualify for mortgages. That creates a huge but it was

819
00:48:41,920 --> 00:48:45,600
Speaker 1: more than clearly more than than just that, right, and

820
00:48:45,680 --> 00:48:50,960
Speaker 1: so even you know, some people have pointed to as

821
00:48:51,040 --> 00:48:55,360
Speaker 1: the start of housing becoming unhinged. I look at that

822
00:48:55,400 --> 00:48:57,640
Speaker 1: as just getting back to where it was eight nine

823
00:48:58,160 --> 00:49:02,680
Speaker 1: and a tremendous amount of stock market wealth. It was

824
00:49:02,760 --> 00:49:06,080
Speaker 1: just diversification. There were people who turned to half a

825
00:49:06,120 --> 00:49:09,359
Speaker 1: million dollars into five million, or a hundred thousand into

826
00:49:09,400 --> 00:49:14,160
Speaker 1: a million. The numbers were just stupid. And so in

827
00:49:14,280 --> 00:49:16,880
Speaker 1: terms of how many zeros are on your IRA, A

828
00:49:17,560 --> 00:49:21,840
Speaker 1: doesn't affect your lifestyle. But moving to a fill in

829
00:49:21,840 --> 00:49:26,759
Speaker 1: the blank, bigger, nicer, closer to the water attitude, it's

830
00:49:26,800 --> 00:49:29,560
Speaker 1: a it's a huge lifestyle change. Also, you're no longer

831
00:49:29,719 --> 00:49:32,680
Speaker 1: in the middle class suburb you were. You're now in

832
00:49:32,719 --> 00:49:37,360
Speaker 1: a whatever, and people love those trade ups, which you know,

833
00:49:37,400 --> 00:49:40,120
Speaker 1: we started talking about this during the break and I

834
00:49:40,200 --> 00:49:45,440
Speaker 1: want during the broadcast, and I've written about this, I

835
00:49:45,480 --> 00:49:48,359
Speaker 1: know if you've written about it. I think all these

836
00:49:48,440 --> 00:49:51,600
Speaker 1: tales of this is the end of real estate as

837
00:49:51,600 --> 00:49:55,160
Speaker 1: an American pastime, I think that's nonsense. Wherever I look,

838
00:49:55,600 --> 00:49:59,799
Speaker 1: I see people still in love with real estate. So

839
00:49:59,840 --> 00:50:03,799
Speaker 1: when it so, here's the thing when you what what

840
00:50:03,880 --> 00:50:07,600
Speaker 1: I find after a change a condition where the markets

841
00:50:07,600 --> 00:50:11,920
Speaker 1: either going up or going down, pundits, observers, participants in

842
00:50:11,960 --> 00:50:15,840
Speaker 1: the real estate market, I think linear. In other words,

843
00:50:15,880 --> 00:50:21,560
Speaker 1: when housing prices are rising, they're gonna rise forever, they're

844
00:50:21,560 --> 00:50:25,320
Speaker 1: gonna fall forever. When inventory is falling, it's gonna fall forever.

845
00:50:25,680 --> 00:50:28,399
Speaker 1: And there's kind of there's no web and flow. There's

846
00:50:28,400 --> 00:50:32,520
Speaker 1: no it's not it's cyclical. It oscillates, it doesn't project

847
00:50:32,560 --> 00:50:35,160
Speaker 1: out right, and and so I find that all the time.

848
00:50:35,200 --> 00:50:36,719
Speaker 1: And then you know, the whole thing in you and

849
00:50:36,800 --> 00:50:39,879
Speaker 1: I have talked about this, the whole thing about home

850
00:50:39,920 --> 00:50:43,200
Speaker 1: ownership and how it's declined. Well, it it reached a

851
00:50:43,360 --> 00:50:47,719
Speaker 1: point uh Fannie May and uh Fannie May stated goal

852
00:50:47,800 --> 00:50:50,920
Speaker 1: at one point on their website was se home ownership

853
00:50:50,960 --> 00:50:54,759
Speaker 1: in the US we got to sixty nine and change ridiculous.

854
00:50:54,920 --> 00:50:58,560
Speaker 1: It's kind of ridiculous. And we're up from sixty nine

855
00:50:58,640 --> 00:51:01,240
Speaker 1: was about three to four percent above what the fifty

856
00:51:01,320 --> 00:51:06,160
Speaker 1: year norm normalized level was. So now we're falling below

857
00:51:06,600 --> 00:51:09,880
Speaker 1: the you know, we've certainly have been falling from the

858
00:51:09,880 --> 00:51:12,440
Speaker 1: sixty nine level, and now we're sort of right in

859
00:51:12,480 --> 00:51:16,600
Speaker 1: the middle of the long term range, and it's continuing

860
00:51:16,640 --> 00:51:19,359
Speaker 1: to fall. And and the pronouncement is, well, we're going

861
00:51:19,400 --> 00:51:22,960
Speaker 1: to be a nation of renters. And and it's a

862
00:51:23,080 --> 00:51:26,759
Speaker 1: kind of a ridiculous argument. It's as wrong to the

863
00:51:26,800 --> 00:51:31,160
Speaker 1: downside to the upside correct, and and really what it

864
00:51:31,280 --> 00:51:34,880
Speaker 1: is is, well, of course, home ownership is falling. Credit

865
00:51:35,000 --> 00:51:38,080
Speaker 1: is historically the tightest it's been in the modern era.

866
00:51:38,640 --> 00:51:42,000
Speaker 1: You have a weak economy, you have all these problems.

867
00:51:42,600 --> 00:51:47,200
Speaker 1: That's why kids are living at home with their parents.

868
00:51:48,920 --> 00:51:52,640
Speaker 1: It's it's not a lifestyle decision or a change, it's

869
00:51:52,680 --> 00:51:55,799
Speaker 1: a it's an economic decision because things are still not

870
00:51:56,160 --> 00:51:58,800
Speaker 1: that great. And let me tell you, by the time

871
00:51:58,920 --> 00:52:02,080
Speaker 1: this airs, my or get my house probably closed on

872
00:52:02,600 --> 00:52:06,839
Speaker 1: my mortgage with Wells Fargo either happened or didn't happen. Um,

873
00:52:06,880 --> 00:52:15,080
Speaker 1: but I've never experienced anything like the Wells Fargo jumbo investigation. UM.

874
00:52:15,160 --> 00:52:16,759
Speaker 1: I'm looking to see if I actually got an email

875
00:52:16,800 --> 00:52:20,600
Speaker 1: from them right now. Uh that it's been pretty pretty

876
00:52:20,600 --> 00:52:24,880
Speaker 1: astonishing the amount of detail that they've asked. They what

877
00:52:24,920 --> 00:52:27,640
Speaker 1: did I did I ever ever told you my game

878
00:52:27,680 --> 00:52:31,840
Speaker 1: show theory about banking with with lending. So think of

879
00:52:31,880 --> 00:52:33,960
Speaker 1: it this way. This is This is the this is

880
00:52:34,160 --> 00:52:38,080
Speaker 1: this is how to explain the irrational behavior that when

881
00:52:38,080 --> 00:52:40,640
Speaker 1: you interact with a bank to get a mortgage. Look

882
00:52:40,640 --> 00:52:43,919
Speaker 1: at a bank is playing a game show and let's

883
00:52:43,960 --> 00:52:46,160
Speaker 1: make a deal. Right So, Door number one is bar

884
00:52:46,360 --> 00:52:49,640
Speaker 1: from the FED for free, grow other lines of business,

885
00:52:49,880 --> 00:52:53,840
Speaker 1: rebuild your capital base, all those sorts of things, anything

886
00:52:53,880 --> 00:52:56,600
Speaker 1: but mortgage lending. Door number two is lend to Joe

887
00:52:56,640 --> 00:52:59,640
Speaker 1: and Mary holmebuyer for thirty years. Maybe one of them

888
00:52:59,800 --> 00:53:03,280
Speaker 1: lose the job. Maybe there's going to be uh decline

889
00:53:03,280 --> 00:53:06,600
Speaker 1: in their local housing market at some point. So there

890
00:53:06,640 --> 00:53:09,480
Speaker 1: there's there's risk, more risk associated with it. So they're

891
00:53:09,480 --> 00:53:12,200
Speaker 1: trying to equalize the risk. This is very simplistic, but

892
00:53:12,680 --> 00:53:15,279
Speaker 1: try to equalize the risk between the two choices. Now

893
00:53:15,320 --> 00:53:18,040
Speaker 1: that now Joe and Mary holmebuyer more a third of

894
00:53:18,080 --> 00:53:20,399
Speaker 1: your mortgage is never going to be the same risk

895
00:53:20,520 --> 00:53:26,400
Speaker 1: level as as as borrowing from the FED as a lender, right, so,

896
00:53:26,400 --> 00:53:28,680
Speaker 1: so they're gonna make them jump through hoops. And I

897
00:53:28,719 --> 00:53:33,120
Speaker 1: contend it's not triple A. It's really quadruple A. It's irrational.

898
00:53:33,360 --> 00:53:36,680
Speaker 1: It's irrational lending. And that's the condition. And then you's

899
00:53:36,880 --> 00:53:40,440
Speaker 1: is that our current conditional condition of quadruple A credit

900
00:53:40,480 --> 00:53:45,080
Speaker 1: and irrational. We have the cleanest mortgage product being created

901
00:53:45,120 --> 00:53:50,680
Speaker 1: in the history of mortgages because lenders, essentially, no matter

902
00:53:50,719 --> 00:53:54,000
Speaker 1: what the the ads say on TV, that's the sales side.

903
00:53:54,400 --> 00:53:57,719
Speaker 1: The underwriting side is afraid of its own shadow. And

904
00:53:57,800 --> 00:54:02,120
Speaker 1: part of that is because of uh, they're you know,

905
00:54:02,160 --> 00:54:05,960
Speaker 1: we're still under quantitative easing, although that's changing, but that

906
00:54:06,000 --> 00:54:10,480
Speaker 1: basically still very low. It's a little tight. But also

907
00:54:11,120 --> 00:54:14,479
Speaker 1: also the economy is not robust. We're not seeing real

908
00:54:15,480 --> 00:54:19,920
Speaker 1: strong income growth or employment numbers, you know when you

909
00:54:19,960 --> 00:54:24,200
Speaker 1: really break it down. So they're very conservative, and that

910
00:54:24,400 --> 00:54:27,839
Speaker 1: conservative is one thing. This is this, I think it's irrational.

911
00:54:27,960 --> 00:54:31,359
Speaker 1: I think it's it's beyond it's one step beyond conservative.

912
00:54:31,360 --> 00:54:34,360
Speaker 1: It's these guys have have examined me so closely. My

913
00:54:34,480 --> 00:54:38,520
Speaker 1: proctologist is jealous. So they've asked they're looking for reasons

914
00:54:38,719 --> 00:54:42,560
Speaker 1: not to lend to you. They've asked for three years

915
00:54:42,680 --> 00:54:46,400
Speaker 1: of personal tax documents. They've asked for three years of

916
00:54:46,560 --> 00:54:51,840
Speaker 1: business tax documents. They've asked for six months of corporate

917
00:54:51,880 --> 00:54:55,640
Speaker 1: and personal bank statements. And I'm happy to give them.

918
00:54:55,960 --> 00:54:57,680
Speaker 1: And every now and then they'll say what's this round

919
00:54:57,760 --> 00:55:01,239
Speaker 1: number we see on the fifteenth of each month. Well,

920
00:55:01,320 --> 00:55:03,920
Speaker 1: it's either drug lords giving me money or paycheck you

921
00:55:04,680 --> 00:55:07,160
Speaker 1: which would you guess? By the way, you have the

922
00:55:07,200 --> 00:55:10,920
Speaker 1: corporate account and the personal account, you can match. Oh

923
00:55:11,000 --> 00:55:13,560
Speaker 1: you lost X here, You've got X there. Do you

924
00:55:13,640 --> 00:55:16,680
Speaker 1: think maybe that's a coincidence or and some of the

925
00:55:16,719 --> 00:55:20,640
Speaker 1: stuff it's really you know, it's called fishing. Is essentially

926
00:55:20,640 --> 00:55:23,480
Speaker 1: they're looking for any reason not to lend to you.

927
00:55:23,600 --> 00:55:27,160
Speaker 1: To be fair to Wells Fargo, their staff has been phenomenal.

928
00:55:27,520 --> 00:55:30,480
Speaker 1: They've given us this checklist and they warned us, hey, listen,

929
00:55:30,880 --> 00:55:33,440
Speaker 1: by the way, this isn't a multimillion dollar mortgage. This

930
00:55:33,520 --> 00:55:37,799
Speaker 1: is barely more than the conforming mortgage a little more.

931
00:55:38,320 --> 00:55:41,439
Speaker 1: And the quite the hoops they've had us jumped through.

932
00:55:41,960 --> 00:55:45,240
Speaker 1: The one house we looked at that was in danger

933
00:55:45,320 --> 00:55:48,920
Speaker 1: of collapsing into the you saw, it would have been

934
00:55:48,960 --> 00:55:52,479
Speaker 1: double the mortgage, and the process was more or less

935
00:55:52,480 --> 00:55:54,520
Speaker 1: the same. And I'm like, you know, this house is

936
00:55:54,520 --> 00:55:57,200
Speaker 1: going to tumble into the sea. Rights, it's the risk,

937
00:55:57,280 --> 00:55:59,840
Speaker 1: isn't me. It's it's gravity, right, you'reware of it, right,

938
00:56:01,040 --> 00:56:04,760
Speaker 1: So so so we submitted the last of the paperwork,

939
00:56:04,880 --> 00:56:08,399
Speaker 1: they start processing it and just before they submitted, they said,

940
00:56:08,840 --> 00:56:12,080
Speaker 1: we have a question on your credit score. My credit

941
00:56:12,120 --> 00:56:15,160
Speaker 1: scores okay, it's pretty good. My wife's credit score is phenomenal.

942
00:56:15,520 --> 00:56:17,319
Speaker 1: And I said, well, what's the issue. You said, I

943
00:56:17,360 --> 00:56:20,000
Speaker 1: was above this cut off that well, over the past month,

944
00:56:20,080 --> 00:56:23,560
Speaker 1: your credit score dropped six points or something. Could you

945
00:56:23,840 --> 00:56:28,319
Speaker 1: could you explain this thing? And I'm like, I look

946
00:56:28,360 --> 00:56:30,040
Speaker 1: at this, I'm like, I don't know what be easy?

947
00:56:30,440 --> 00:56:33,160
Speaker 1: What is this? So they have to translate it into English.

948
00:56:33,480 --> 00:56:36,040
Speaker 1: And it turns out we hired two new people. We

949
00:56:36,160 --> 00:56:39,319
Speaker 1: bought two new computers for them, and this was the

950
00:56:39,400 --> 00:56:42,840
Speaker 1: Apple financing and I and they said, oh, well that

951
00:56:42,920 --> 00:56:45,879
Speaker 1: affects your credit. I go, look, you guys, see our

952
00:56:45,960 --> 00:56:49,160
Speaker 1: balance in our checking account. We could have gone out

953
00:56:49,200 --> 00:56:52,520
Speaker 1: and spent three thousand dollars on two new computers. We

954
00:56:52,560 --> 00:56:55,600
Speaker 1: could have done that thirty times over. But instead the

955
00:56:55,640 --> 00:56:57,600
Speaker 1: account and said, hey, it's better for taxes to lease

956
00:56:57,680 --> 00:57:00,160
Speaker 1: it then to buy. So we leased it for a

957
00:57:00,280 --> 00:57:04,920
Speaker 1: hundred and thirty five dollars a month. That's what caused

958
00:57:04,960 --> 00:57:07,560
Speaker 1: a credit score on the owner of the company. The

959
00:57:07,560 --> 00:57:13,000
Speaker 1: company lease this. It was like an insane it was

960
00:57:13,040 --> 00:57:16,320
Speaker 1: an insane. Yeah, but you go from whatever seven and

961
00:57:16,480 --> 00:57:20,360
Speaker 1: something down seven points that that's a percentage change. That's

962
00:57:20,400 --> 00:57:24,600
Speaker 1: the quadruple a standard debt everybody's being held to. And

963
00:57:24,640 --> 00:57:28,680
Speaker 1: that's the challenge and that's what's defining the housing market

964
00:57:28,840 --> 00:57:32,320
Speaker 1: right now. That that is. So I'm surprised if that's

965
00:57:32,320 --> 00:57:35,480
Speaker 1: the case that any houses are getting. So, you know,

966
00:57:35,560 --> 00:57:38,040
Speaker 1: we're here in Bloomberg. I have a contract I do.

967
00:57:38,120 --> 00:57:41,520
Speaker 1: I do a column for Bloomberg View. And they said,

968
00:57:41,600 --> 00:57:44,120
Speaker 1: you know, list all your sources of income. Well, here's

969
00:57:44,120 --> 00:57:46,280
Speaker 1: what I get from Speaking Apparent, Here's what I get

970
00:57:46,320 --> 00:57:48,880
Speaker 1: from our my day job, and here's what I get

971
00:57:49,840 --> 00:57:52,520
Speaker 1: from Washington Post, and here's what I get from Colombia,

972
00:57:52,800 --> 00:57:56,000
Speaker 1: and here's what I get from Bloomberg. And they're like, oh, well,

973
00:57:56,280 --> 00:57:58,800
Speaker 1: is it looks like it's the same amount every month

974
00:57:58,840 --> 00:58:01,640
Speaker 1: from Bloomberg. Well, yeah, a contract. Can you send us

975
00:58:01,680 --> 00:58:04,280
Speaker 1: the contract? And I had to ask somebody here, hey,

976
00:58:04,320 --> 00:58:06,600
Speaker 1: am I allowed to show this too, Like, yeah, I

977
00:58:06,600 --> 00:58:10,880
Speaker 1: don't worry about it. But meanwhile, you're asking for a contract,

978
00:58:11,000 --> 00:58:12,760
Speaker 1: and it's going to be a nineteen year old in

979
00:58:12,800 --> 00:58:16,600
Speaker 1: Ohio that's viewing the document, right, it's a little more

980
00:58:16,640 --> 00:58:19,880
Speaker 1: sophisticated than that, but not a whole lot more. And again,

981
00:58:19,920 --> 00:58:22,920
Speaker 1: to be look, I've been one of the biggest critics

982
00:58:22,960 --> 00:58:26,400
Speaker 1: of banks since the financial crisis. To be fair to

983
00:58:26,480 --> 00:58:32,160
Speaker 1: Wells Fargo, they have been really extremely professional, very proactive.

984
00:58:32,440 --> 00:58:34,760
Speaker 1: They would give us. It started out with this massive list.

985
00:58:34,760 --> 00:58:37,800
Speaker 1: I'm holding my arms six ft apart, and each week

986
00:58:37,840 --> 00:58:40,360
Speaker 1: I would get an update with okay, these three items

987
00:58:40,360 --> 00:58:42,960
Speaker 1: have been collected. Now we're waiting for these things because

988
00:58:43,000 --> 00:58:45,920
Speaker 1: to gather all this stuff up to get a p

989
00:58:46,120 --> 00:58:50,440
Speaker 1: n L statement about two of the companies for the now,

990
00:58:50,480 --> 00:58:53,360
Speaker 1: the accountants they're not going to do an audit unless

991
00:58:53,360 --> 00:58:55,520
Speaker 1: we want to pay a boatload of money for it.

992
00:58:55,880 --> 00:58:59,680
Speaker 1: And it turns out the words review are a term

993
00:58:59,720 --> 00:59:03,120
Speaker 1: of our art that implies an audit like level of scrutiny.

994
00:59:03,600 --> 00:59:06,080
Speaker 1: So Wells Fargo asked for a review of the p

995
00:59:06,240 --> 00:59:10,520
Speaker 1: and L and the accountants turned around and say, these

996
00:59:10,560 --> 00:59:14,400
Speaker 1: documents have been submitted in furtherance of federal tax filing.

997
00:59:14,440 --> 00:59:16,800
Speaker 1: They appear to be in order to us. That's the

998
00:59:17,000 --> 00:59:19,840
Speaker 1: most the accountants they wouldn't say we reviewed it. They

999
00:59:19,840 --> 00:59:24,800
Speaker 1: certainly aren't gonna say we ordered it. But apparently submission

1000
00:59:25,600 --> 00:59:29,520
Speaker 1: in order to a furtherance of tax filings was sufficient

1001
00:59:29,520 --> 00:59:32,640
Speaker 1: for well, I think think about that. So you have

1002
00:59:32,760 --> 00:59:36,920
Speaker 1: that whole interplay between the consumer and the lender. And

1003
00:59:36,920 --> 00:59:38,960
Speaker 1: then you look at the fact that you know, with

1004
00:59:39,080 --> 00:59:41,640
Speaker 1: the upticking mortgage rates over the last year, the rates

1005
00:59:41,960 --> 00:59:43,920
Speaker 1: came back down. They came back down, But we're pretty

1006
00:59:43,920 --> 00:59:46,280
Speaker 1: close to the lows now, aren't we And we're still

1007
00:59:46,320 --> 00:59:49,400
Speaker 1: I think we're half a point up. But in a

1008
00:59:49,480 --> 00:59:52,000
Speaker 1: quarter when we have a really a three seven five

1009
00:59:52,080 --> 00:59:54,360
Speaker 1: for very long, you were there for short, they have

1010
00:59:54,400 --> 00:59:56,600
Speaker 1: a fifteen minutes and then it was back to four.

1011
00:59:56,880 --> 00:59:59,680
Speaker 1: I mean, that seems to be the floor you don't

1012
00:59:59,680 --> 01:00:01,640
Speaker 1: you're not gonna bring for when you look at that

1013
01:00:01,880 --> 01:00:05,680
Speaker 1: and and U which created a lot of in many

1014
01:00:05,680 --> 01:00:08,680
Speaker 1: ways sort of on one hand, the spike in rates

1015
01:00:08,760 --> 01:00:13,440
Speaker 1: last year created this the surge, the last minute sort

1016
01:00:13,480 --> 01:00:16,560
Speaker 1: of gasp of air of getting people off the fence.

1017
01:00:17,200 --> 01:00:21,480
Speaker 1: And now it's sort of framing the discussion about housing now,

1018
01:00:21,520 --> 01:00:24,959
Speaker 1: which is it's less than last year, but really it's

1019
01:00:25,000 --> 01:00:28,240
Speaker 1: not really from historical context, it's no different, and the

1020
01:00:28,320 --> 01:00:31,480
Speaker 1: rates are really nominally different, there's really no difference, but

1021
01:00:31,640 --> 01:00:34,320
Speaker 1: a four handle is still in insane But it actually

1022
01:00:34,520 --> 01:00:40,480
Speaker 1: feels tighter or weaker, and and it's all from the

1023
01:00:40,520 --> 01:00:44,920
Speaker 1: credit orientation that is driving housing. So we really didn't

1024
01:00:44,920 --> 01:00:49,200
Speaker 1: get to what the proper role of government is in

1025
01:00:49,320 --> 01:00:51,680
Speaker 1: this because what some of the arguments that are being

1026
01:00:51,720 --> 01:00:55,840
Speaker 1: made is you have rates at record lows, but we

1027
01:00:56,240 --> 01:00:59,919
Speaker 1: have most of America unable to take advantage and refinance

1028
01:01:00,360 --> 01:01:04,640
Speaker 1: because either they lack the credit history the income history. Amazingly,

1029
01:01:04,640 --> 01:01:08,280
Speaker 1: they're making payments on a house at six percent. Imagine

1030
01:01:08,280 --> 01:01:11,560
Speaker 1: if they could refi at four that would do the economy? Yeah,

1031
01:01:11,560 --> 01:01:13,480
Speaker 1: that would that would be a huge although you were

1032
01:01:13,480 --> 01:01:18,160
Speaker 1: effectively transferring some income from banks and giving it to everybody, uh,

1033
01:01:18,240 --> 01:01:21,960
Speaker 1: everybody else. But the question is what's the proper role

1034
01:01:22,040 --> 01:01:25,360
Speaker 1: for government and all this? And if Fannie and Freddie

1035
01:01:25,400 --> 01:01:29,400
Speaker 1: are ultimately on the hook, why not waive some of

1036
01:01:29,440 --> 01:01:32,640
Speaker 1: these requirements and allow refies because if they default at

1037
01:01:32,640 --> 01:01:35,120
Speaker 1: six percent, they're going to default at four percent, and

1038
01:01:35,120 --> 01:01:37,800
Speaker 1: they're less likely to default at four percent, So why

1039
01:01:37,840 --> 01:01:41,320
Speaker 1: not let them do a refi? Right? I think I

1040
01:01:41,320 --> 01:01:44,400
Speaker 1: think the thinking right now, there's there's a lot of

1041
01:01:44,600 --> 01:01:47,200
Speaker 1: uncertainties about the former g scs in terms of what

1042
01:01:47,240 --> 01:01:50,200
Speaker 1: the role is they're going to merge them into one institution.

1043
01:01:50,280 --> 01:01:53,680
Speaker 1: But Congress doesn't have the will to do that. What

1044
01:01:53,720 --> 01:01:56,320
Speaker 1: was the word you gonna say that the will to

1045
01:01:56,400 --> 01:02:01,960
Speaker 1: do that is that, yeah, exactly. Uh. That And the

1046
01:02:02,040 --> 01:02:06,920
Speaker 1: problem is that it is a one size fits all

1047
01:02:06,960 --> 01:02:11,920
Speaker 1: orientation in government in terms of terms of risk. I

1048
01:02:11,960 --> 01:02:17,120
Speaker 1: think part of it is the austerity concern, or maybe

1049
01:02:17,200 --> 01:02:21,240
Speaker 1: that's window dressing on the problem. And so there there,

1050
01:02:21,280 --> 01:02:23,600
Speaker 1: we're not giving anybody credit to be able to make

1051
01:02:23,640 --> 01:02:27,919
Speaker 1: intelligent decisions. We're really just saying we're not doing this

1052
01:02:28,480 --> 01:02:30,920
Speaker 1: and let the chips fall where they may. And that's

1053
01:02:32,000 --> 01:02:37,000
Speaker 1: it's a it's a short sighted solution because like you said,

1054
01:02:37,360 --> 01:02:40,640
Speaker 1: there's lots of people with plenty of income. Uh, they

1055
01:02:40,680 --> 01:02:45,120
Speaker 1: might be low on equity and they don't qualify for REFI,

1056
01:02:45,200 --> 01:02:49,200
Speaker 1: and yet there's an existing mortgage at that low equity level. Exactly.

1057
01:02:49,760 --> 01:02:54,320
Speaker 1: Another component has been uh, and there's been discussion about it,

1058
01:02:54,520 --> 01:02:59,560
Speaker 1: is that the whole concept of principal forgiveness focusing on

1059
01:02:59,640 --> 01:03:03,040
Speaker 1: the the borrowers instead of focusing on the making the

1060
01:03:03,040 --> 01:03:06,920
Speaker 1: bank's hole, focus on main street the economy hall would

1061
01:03:06,920 --> 01:03:09,880
Speaker 1: make the economy hole, and then they're likely make banking hole.

1062
01:03:09,960 --> 01:03:13,800
Speaker 1: But we're sort of stuck in this this box right now,

1063
01:03:13,880 --> 01:03:17,200
Speaker 1: which is you know, Fannie May, Freddie Mack or making

1064
01:03:17,240 --> 01:03:21,320
Speaker 1: a ton of money. It's highly volatile, it's it could

1065
01:03:21,400 --> 01:03:25,560
Speaker 1: turn on a dime. Uh. We're still dealing with the

1066
01:03:25,640 --> 01:03:30,240
Speaker 1: legacy issues of bad lending practices d o J going

1067
01:03:30,280 --> 01:03:33,360
Speaker 1: after everybody. We have, uh, we have the buy backs

1068
01:03:33,360 --> 01:03:35,400
Speaker 1: being forced on the g S c s. We have

1069
01:03:35,520 --> 01:03:38,440
Speaker 1: Congress saying forced by the g S, forced by the

1070
01:03:38,480 --> 01:03:41,440
Speaker 1: g S. Right. In other words, if you sold a

1071
01:03:41,440 --> 01:03:44,240
Speaker 1: pool of mortgages to Fannie of Freddy and there was

1072
01:03:44,280 --> 01:03:49,880
Speaker 1: some sort of misrepresentation, fraud, whatever, it can be very slight.

1073
01:03:50,520 --> 01:03:53,840
Speaker 1: Really Oh yeah, I mean it's not just because we

1074
01:03:53,880 --> 01:03:57,000
Speaker 1: know there was a ton of fraud all around. There

1075
01:03:57,080 --> 01:04:00,680
Speaker 1: was there was application fraud, there was underwriting fraud, there

1076
01:04:00,840 --> 01:04:05,920
Speaker 1: was somebody's there was liar loans the whole deal. Because

1077
01:04:05,960 --> 01:04:10,200
Speaker 1: it was just it was just semantics. I've gotten into

1078
01:04:10,320 --> 01:04:14,040
Speaker 1: arguments with some of my conservative buddies about the liar loans,

1079
01:04:14,480 --> 01:04:17,840
Speaker 1: and my argument goes something like this, you're the bank,

1080
01:04:18,520 --> 01:04:22,000
Speaker 1: it's your capital, you're lending it, right, You're the one

1081
01:04:22,000 --> 01:04:25,400
Speaker 1: who's taking the risk. It's incumbent on you to make

1082
01:04:25,440 --> 01:04:28,640
Speaker 1: sure that the person you're lending it to has an income,

1083
01:04:28,840 --> 01:04:31,880
Speaker 1: has a payment history, has a credit score. When you

1084
01:04:32,000 --> 01:04:35,120
Speaker 1: say don't tell me that, what you're effectively saying is

1085
01:04:35,200 --> 01:04:40,040
Speaker 1: I don't care, so to blame the buyers for you know, look,

1086
01:04:40,040 --> 01:04:42,560
Speaker 1: you we all know the story. Wink wink, nudge nudge.

1087
01:04:42,960 --> 01:04:45,880
Speaker 1: What was going on with mortgage brokers? Here? Leave that blank,

1088
01:04:45,920 --> 01:04:48,919
Speaker 1: I'll fill it in. I mean people signed it and

1089
01:04:51,080 --> 01:04:55,520
Speaker 1: holding aside the bad behavior of the mortgage folks. If

1090
01:04:55,560 --> 01:04:59,360
Speaker 1: you don't ask for an income history tax file, now,

1091
01:04:59,440 --> 01:05:02,360
Speaker 1: this is the opposite of of the proctology exam I'm

1092
01:05:02,400 --> 01:05:05,560
Speaker 1: going through with Wells Fargo. If you ask for none

1093
01:05:05,560 --> 01:05:08,280
Speaker 1: of that. By the way, we refinance the house we're selling.

1094
01:05:08,560 --> 01:05:11,560
Speaker 1: I don't know. Two years ago it was more than

1095
01:05:11,640 --> 01:05:14,240
Speaker 1: fog a mirror, but not a whole lot more. And

1096
01:05:14,280 --> 01:05:17,440
Speaker 1: the house we had sold before this, I think we

1097
01:05:17,520 --> 01:05:21,560
Speaker 1: refinanced that three times over seven years. I've been in

1098
01:05:21,560 --> 01:05:24,080
Speaker 1: my house for ten years. I think every year the

1099
01:05:24,160 --> 01:05:26,520
Speaker 1: first couple of years I had it, I think it

1100
01:05:27,280 --> 01:05:30,640
Speaker 1: four times. Yeah, it's and the process was signed here,

1101
01:05:30,640 --> 01:05:34,720
Speaker 1: initials here, checks in the mail. It was insane. So

1102
01:05:34,880 --> 01:05:38,280
Speaker 1: where has it's gone to? One ridiculous extreme. Now we

1103
01:05:38,320 --> 01:05:41,959
Speaker 1: started an opposite extreme. But I hold the banks responsible

1104
01:05:42,240 --> 01:05:45,960
Speaker 1: if you don't ask people what's your income, what's your

1105
01:05:45,960 --> 01:05:48,880
Speaker 1: credit score, what were your tax filings, what's your payment history?

1106
01:05:49,200 --> 01:05:52,200
Speaker 1: How could you complain when they default? You didn't ask

1107
01:05:52,240 --> 01:05:55,360
Speaker 1: for that information, you didn't verify it. Hey, by the way,

1108
01:05:55,440 --> 01:05:58,680
Speaker 1: wink wink, nudge, nudge, give us a ballpark. Because they could,

1109
01:05:59,280 --> 01:06:01,920
Speaker 1: They could package and sell off the risk to somebody

1110
01:06:01,960 --> 01:06:07,360
Speaker 1: else who was unsuspecting. Although oh no, they knew, but

1111
01:06:07,400 --> 01:06:12,080
Speaker 1: they were more than unsuspecting. They were Look, we're taking

1112
01:06:12,080 --> 01:06:14,480
Speaker 1: this risk and spreading it out. One of my favorite

1113
01:06:15,000 --> 01:06:20,480
Speaker 1: discoveries when I was researching bailout Nation was the warranty

1114
01:06:20,880 --> 01:06:25,960
Speaker 1: keep It was the warranty that that came with these

1115
01:06:26,600 --> 01:06:31,760
Speaker 1: non bank originated mortgages, primarily out of California. Were with

1116
01:06:31,880 --> 01:06:38,200
Speaker 1: these jobs right? They gave a warranty that said, this

1117
01:06:38,440 --> 01:06:42,480
Speaker 1: mortgage will not this thirty year mortgage, this three and

1118
01:06:42,560 --> 01:06:46,600
Speaker 1: sixty month mortgage will not default for ninety days, and

1119
01:06:46,680 --> 01:06:48,560
Speaker 1: if it does, you could put it back to us.

1120
01:06:49,400 --> 01:06:53,440
Speaker 1: A toaster comes with a longer warranty than that. So

1121
01:06:53,680 --> 01:06:56,000
Speaker 1: how long did it take for the salespeople to figure

1122
01:06:56,000 --> 01:06:58,560
Speaker 1: out Hey, I'm not looking for people who could qualify

1123
01:06:58,600 --> 01:07:00,880
Speaker 1: for a thirty year mortgage. I'm just looking for some

1124
01:07:00,960 --> 01:07:03,760
Speaker 1: pushchmuck who's going to make the first three payments. And

1125
01:07:03,800 --> 01:07:06,160
Speaker 1: by the way, the first payment is effectively waived. It's

1126
01:07:06,320 --> 01:07:09,120
Speaker 1: covered in closing about the so two payments and I'm

1127
01:07:09,160 --> 01:07:11,760
Speaker 1: out in days. Think of the irony of that though.

1128
01:07:12,120 --> 01:07:16,960
Speaker 1: So during that period you had no credit standards whatsoever,

1129
01:07:17,360 --> 01:07:23,120
Speaker 1: housings housing prices rose rapidly. Fast forward to today, excess credit.

1130
01:07:24,080 --> 01:07:29,680
Speaker 1: The pendulum has overcorrected to the opposite degree. Housing prices

1131
01:07:29,680 --> 01:07:33,560
Speaker 1: are rising and in many markets at a very brisk pace.

1132
01:07:34,440 --> 01:07:38,280
Speaker 1: Credit is in play in both cases, but for completely

1133
01:07:38,280 --> 01:07:41,560
Speaker 1: different reasons. So somewhere in the middle is the much healthier,

1134
01:07:41,720 --> 01:07:46,800
Speaker 1: slower growth, more reasonable housing market. And that doesn't happen

1135
01:07:47,480 --> 01:07:52,080
Speaker 1: until you get real job growth, real income growth. Not

1136
01:07:52,240 --> 01:07:56,000
Speaker 1: a booming, but but just you know, the whole notion

1137
01:07:56,040 --> 01:07:58,080
Speaker 1: that you actually have to have a job and have

1138
01:07:58,240 --> 01:08:03,120
Speaker 1: a reasonable income to qualify. When that, when those conditions improve,

1139
01:08:03,680 --> 01:08:06,920
Speaker 1: that's how you ease credit. That's how you get housing

1140
01:08:07,040 --> 01:08:10,120
Speaker 1: to be truly what I call recovered. All we've seen

1141
01:08:10,240 --> 01:08:13,720
Speaker 1: right now I characterized as it's a rebound it's essentially

1142
01:08:13,800 --> 01:08:16,920
Speaker 1: off of a low, but there's dead cat bounce are

1143
01:08:16,920 --> 01:08:18,320
Speaker 1: a little more than that. I think it's a little

1144
01:08:18,320 --> 01:08:21,160
Speaker 1: more than that, because you know, there's so much psychology.

1145
01:08:21,479 --> 01:08:23,679
Speaker 1: I know, I know we have we have two cats.

1146
01:08:23,680 --> 01:08:26,920
Speaker 1: I'm not allowed to say that phrase at home, but

1147
01:08:26,920 --> 01:08:30,160
Speaker 1: but you know there is some psychology to it. People

1148
01:08:30,280 --> 01:08:33,360
Speaker 1: not being afraid to venture into the market and buy.

1149
01:08:33,880 --> 01:08:37,960
Speaker 1: But the problem is that it's everything is going to

1150
01:08:38,080 --> 01:08:41,720
Speaker 1: happen in slow motion and we want quick, quick results.

1151
01:08:41,720 --> 01:08:44,760
Speaker 1: That's not how the real world operates. Now, you don't

1152
01:08:44,800 --> 01:08:48,840
Speaker 1: get that sort of stuff. So let's solve America's housing,

1153
01:08:49,360 --> 01:08:53,680
Speaker 1: credit and economic problems. All and one fell swoop. So

1154
01:08:53,720 --> 01:08:57,480
Speaker 1: here's what we're gonna do. So we've noticed that Obama

1155
01:08:57,920 --> 01:09:01,160
Speaker 1: has essentially given up on Congress US, who the day

1156
01:09:01,160 --> 01:09:04,080
Speaker 1: we're recording this, we see in a gallop pole is

1157
01:09:04,120 --> 01:09:08,839
Speaker 1: now down to a seven percent record low since Gallup

1158
01:09:08,920 --> 01:09:13,840
Speaker 1: started asking this question, and I think it was three

1159
01:09:14,160 --> 01:09:16,920
Speaker 1: record low. Not only is it the lowest Congress has

1160
01:09:17,000 --> 01:09:21,000
Speaker 1: ever been, it's the lowest any institution America has ever

1161
01:09:21,040 --> 01:09:28,360
Speaker 1: ever marked and ament. And so Obama has very interestingly said,

1162
01:09:28,400 --> 01:09:30,240
Speaker 1: I'm going to take a page out of the George

1163
01:09:30,240 --> 01:09:33,600
Speaker 1: Bush playbook and bypass Congress, and there's a lot of

1164
01:09:33,600 --> 01:09:37,320
Speaker 1: stuff I can do through an executive order. And so

1165
01:09:37,400 --> 01:09:41,280
Speaker 1: here's what I want to know. We we know that

1166
01:09:41,320 --> 01:09:46,200
Speaker 1: there's a tremendous amount of economic activity and economic potential

1167
01:09:47,000 --> 01:09:51,120
Speaker 1: locked up in people who are are stuck in their houses.

1168
01:09:51,560 --> 01:09:57,160
Speaker 1: We also know that ultimately Fannie and Freddie, meaning the taxpayer,

1169
01:09:57,840 --> 01:10:00,040
Speaker 1: is on the hook for those mortgages, whether they a

1170
01:10:00,160 --> 01:10:03,559
Speaker 1: fault at six p or default at a lower rate.

1171
01:10:04,160 --> 01:10:07,840
Speaker 1: What would happen if the President said to the head

1172
01:10:07,840 --> 01:10:11,000
Speaker 1: of Fannie and Freddy, I want to institute a policy

1173
01:10:11,080 --> 01:10:14,880
Speaker 1: that allows people who are current on their mortgages, so

1174
01:10:14,920 --> 01:10:16,760
Speaker 1: we're not dealing with short sales, we're not dealing with

1175
01:10:16,880 --> 01:10:22,519
Speaker 1: underwater sales, to refinance at their existing mortgage amount or lower,

1176
01:10:22,640 --> 01:10:27,200
Speaker 1: so there's no cash outs at the prevailing interest rate.

1177
01:10:27,520 --> 01:10:30,720
Speaker 1: I know in theory this may reduce the income to

1178
01:10:30,800 --> 01:10:33,680
Speaker 1: Fannie and Freddie, although there will be all these transaction

1179
01:10:33,760 --> 01:10:37,920
Speaker 1: fees that will help them. What is this a can

1180
01:10:37,960 --> 01:10:40,160
Speaker 1: we can the President order Fannie and Freddie to do

1181
01:10:40,240 --> 01:10:44,400
Speaker 1: that and be what would that do to the to

1182
01:10:44,520 --> 01:10:47,720
Speaker 1: the U S economy and to the U S housing market? Well? Uh,

1183
01:10:48,760 --> 01:10:52,360
Speaker 1: so the caveat that you're not an economist, I probably

1184
01:10:52,360 --> 01:10:57,320
Speaker 1: say I'm a non economist proudly. So the new head

1185
01:10:57,360 --> 01:11:01,960
Speaker 1: of f h f A, the regulatory agency that overseas

1186
01:11:01,960 --> 01:11:05,920
Speaker 1: Fannie and Freddy that was formerly called O H G

1187
01:11:06,120 --> 01:11:11,400
Speaker 1: O and uh, they were asleep at the switch. Worse

1188
01:11:11,400 --> 01:11:13,559
Speaker 1: than asleep at the switch. They're the ones who gave

1189
01:11:13,600 --> 01:11:16,880
Speaker 1: Fanny and the G S c S permission in late

1190
01:11:16,960 --> 01:11:20,960
Speaker 1: two thousand five. Hey, you're losing market share at Wall Street.

1191
01:11:21,000 --> 01:11:23,599
Speaker 1: You don't have to just do conforming loans. You can

1192
01:11:23,640 --> 01:11:27,680
Speaker 1: do non conforming meanings sub prime and all day. And

1193
01:11:27,760 --> 01:11:30,960
Speaker 1: so two thousand six, Fannie and Freddy go headlong into

1194
01:11:31,000 --> 01:11:34,040
Speaker 1: that just as the market is topic. They might have

1195
01:11:34,080 --> 01:11:38,040
Speaker 1: been his final spasm. And actually, when they changed their

1196
01:11:38,160 --> 01:11:41,320
Speaker 1: name to f h f A, it literally was the

1197
01:11:41,400 --> 01:11:46,040
Speaker 1: same website, just with different U R L and the logos.

1198
01:11:46,080 --> 01:11:48,439
Speaker 1: Everything was the same. So I never quite understood that.

1199
01:11:48,479 --> 01:11:52,160
Speaker 1: And I sort of feel like the the rejiggering of

1200
01:11:52,280 --> 01:11:54,320
Speaker 1: Fannie and Freddy, if that were ever to happen, is

1201
01:11:54,320 --> 01:11:58,360
Speaker 1: going to be kind of the same thing. It seems

1202
01:11:58,360 --> 01:12:01,360
Speaker 1: like a can of worms. But anyway, I think that

1203
01:12:02,640 --> 01:12:06,240
Speaker 1: I think that you you take away income from Fannie

1204
01:12:06,280 --> 01:12:09,720
Speaker 1: and Freddie to give it to I think it's more.

1205
01:12:10,080 --> 01:12:12,200
Speaker 1: I think it's more important for the public to be

1206
01:12:12,320 --> 01:12:15,479
Speaker 1: on their feet and spending in a consumer economy than

1207
01:12:15,560 --> 01:12:18,960
Speaker 1: it is about worrying about whether Fannie or or Freddie

1208
01:12:18,960 --> 01:12:22,240
Speaker 1: you're gonna make five million dollars this core. I think

1209
01:12:22,240 --> 01:12:24,439
Speaker 1: that's ultimately that just comes back to the text. It

1210
01:12:24,439 --> 01:12:26,639
Speaker 1: comes back to the taxpayer anyway. So so I think

1211
01:12:26,680 --> 01:12:30,320
Speaker 1: that's important. We do have the head of the f

1212
01:12:30,520 --> 01:12:34,840
Speaker 1: h A. F h f A is much more pro

1213
01:12:35,040 --> 01:12:40,120
Speaker 1: consumer in terms of their outlook and providing some flexibility,

1214
01:12:40,200 --> 01:12:43,720
Speaker 1: trying to give flexibility to Fannie and Freddie. So I

1215
01:12:43,760 --> 01:12:48,839
Speaker 1: think that's all good. I just I haven't heard any

1216
01:12:48,880 --> 01:12:51,920
Speaker 1: overtures that the Obama administration would even entertain that. Well,

1217
01:12:51,920 --> 01:12:54,200
Speaker 1: I haven't spoken to them yet. But once I planned

1218
01:12:54,240 --> 01:12:57,599
Speaker 1: this idea, well, I I have full confidence that you

1219
01:12:57,640 --> 01:12:59,519
Speaker 1: could sell them on the idea. I don't know if

1220
01:12:59,520 --> 01:13:01,960
Speaker 1: I could sell it, but it's a fascinating concept. I

1221
01:13:02,000 --> 01:13:04,960
Speaker 1: think it's a I think it's probably a good concept

1222
01:13:05,080 --> 01:13:08,360
Speaker 1: because so much of our wealth is tied up uh

1223
01:13:08,640 --> 01:13:11,240
Speaker 1: people that are stuck. It's tied up in housing, and

1224
01:13:11,240 --> 01:13:15,440
Speaker 1: I think that triggers a lot of other things. The mobility,

1225
01:13:15,600 --> 01:13:20,960
Speaker 1: it triggers its real estate mobility, employment mobility, geographic mobility.

1226
01:13:21,040 --> 01:13:26,360
Speaker 1: That's a key thing. And I'm looking for the downside there.

1227
01:13:26,400 --> 01:13:30,720
Speaker 1: I don't think there really is any downside, especially from

1228
01:13:30,760 --> 01:13:34,600
Speaker 1: the naysayers if it was if you were if you

1229
01:13:34,640 --> 01:13:39,840
Speaker 1: were ignoring principal reduction. Principal reduction is sort of a

1230
01:13:39,880 --> 01:13:44,400
Speaker 1: hot hotbed of debate. I'm in favor of it. Let

1231
01:13:44,680 --> 01:13:46,599
Speaker 1: we could hold that to put that to the side,

1232
01:13:46,600 --> 01:13:49,479
Speaker 1: and don't even do that. Just the people who are

1233
01:13:49,840 --> 01:13:53,679
Speaker 1: current have employed. You want to REFI to a lower

1234
01:13:53,760 --> 01:13:57,800
Speaker 1: rate and nothing else changes. Even you know, if you

1235
01:13:57,800 --> 01:13:59,960
Speaker 1: have a four thousand dollar Morgans in the house, that's

1236
01:14:00,120 --> 01:14:03,080
Speaker 1: or three fifty, does it matter if the interest rate

1237
01:14:03,160 --> 01:14:06,720
Speaker 1: to to the note holder, if it's six percent or

1238
01:14:06,720 --> 01:14:10,240
Speaker 1: four percent, it shouldn't make a difference. So that there

1239
01:14:10,240 --> 01:14:13,680
Speaker 1: are people who hold the securitized notes, they have to

1240
01:14:13,760 --> 01:14:18,200
Speaker 1: expect a certain amount of maturation that happens normally. This

1241
01:14:18,280 --> 01:14:21,479
Speaker 1: is gonna be a huge shift. Now in theory, it

1242
01:14:21,560 --> 01:14:23,920
Speaker 1: creates a whole bunch of new paper that Wall Street

1243
01:14:23,920 --> 01:14:27,040
Speaker 1: can then move about and sell to these people. And

1244
01:14:27,080 --> 01:14:30,120
Speaker 1: if you want to hold onto whatever you have, you

1245
01:14:30,160 --> 01:14:33,200
Speaker 1: can hold it. The way this gets called is kind

1246
01:14:33,200 --> 01:14:37,519
Speaker 1: of complicated. Back from the investors that we're expecting a

1247
01:14:37,560 --> 01:14:42,000
Speaker 1: six return. I'm sorry that you're you're gonna have to

1248
01:14:42,000 --> 01:14:44,320
Speaker 1: get a less of a return like everybody. But you're

1249
01:14:44,320 --> 01:14:49,080
Speaker 1: probably reducing dramatically the default that's right, that's the trade off.

1250
01:14:49,080 --> 01:14:51,840
Speaker 1: You're you're getting a lower default risk because people can

1251
01:14:51,880 --> 01:14:55,840
Speaker 1: afford it, and you're you're helping the overall economy. So

1252
01:14:56,000 --> 01:14:58,280
Speaker 1: I'm looking I've been playing with this idea. I'm looking

1253
01:14:58,280 --> 01:15:01,400
Speaker 1: for a downside to it, and other than the fact

1254
01:15:01,439 --> 01:15:06,160
Speaker 1: that people hate government intervention. But you know, there's an

1255
01:15:06,280 --> 01:15:10,719
Speaker 1: article in The Times today by Neil Irwin talking about

1256
01:15:10,840 --> 01:15:14,480
Speaker 1: formerly of the Washington Post, talking about the Import Export

1257
01:15:15,280 --> 01:15:21,040
Speaker 1: Bank and how certain people hate it because it's government

1258
01:15:21,040 --> 01:15:24,160
Speaker 1: in bed with big business. And but the reality is

1259
01:15:24,439 --> 01:15:28,800
Speaker 1: that's the nature of industry globally, it has to be.

1260
01:15:28,920 --> 01:15:31,680
Speaker 1: That's what's going Listen, If if the European banks are

1261
01:15:31,680 --> 01:15:36,000
Speaker 1: subsidizing air Bus, how can the US not allow Boeing

1262
01:15:36,040 --> 01:15:38,840
Speaker 1: to compete on the same planet playing field. And if

1263
01:15:38,880 --> 01:15:42,280
Speaker 1: you don't do that, what ends up happening is they

1264
01:15:42,320 --> 01:15:47,000
Speaker 1: lose the battle right to Airbus because it's subsidized. The

1265
01:15:47,040 --> 01:15:50,160
Speaker 1: ironic thing is the jackasses who were opposed to this

1266
01:15:50,800 --> 01:15:54,600
Speaker 1: are Delta Airlines, because, by the way, worst airline in

1267
01:15:54,640 --> 01:15:57,599
Speaker 1: the planet, run by morons. I can't begin to tell

1268
01:15:57,680 --> 01:16:01,759
Speaker 1: you how much I hate despise that airline, my least

1269
01:16:01,800 --> 01:16:04,519
Speaker 1: favorite airline. Search the blog, search redults dot com for it.

1270
01:16:05,520 --> 01:16:07,720
Speaker 1: You'll see. I don't know, and I don't care to

1271
01:16:07,720 --> 01:16:10,879
Speaker 1: tell you the truth. But here's the amazing thing. Delta

1272
01:16:10,920 --> 01:16:14,639
Speaker 1: opposes it because they say, oh, you're subsidizing bowing sales

1273
01:16:14,720 --> 01:16:22,320
Speaker 1: to competitive um carriers overseas, and that's not the government's role. Hey, morons,

1274
01:16:22,560 --> 01:16:25,840
Speaker 1: Neil Irwin points out, you guys were rescued in a

1275
01:16:25,960 --> 01:16:29,720
Speaker 1: government bail out, so just sit there and shut the

1276
01:16:29,760 --> 01:16:32,479
Speaker 1: hell up. Or right, it's like, you know, wait, so

1277
01:16:32,560 --> 01:16:35,240
Speaker 1: you got yours and that's the end of it. Nobody

1278
01:16:36,000 --> 01:16:38,679
Speaker 1: of all the hypocritical things. I don't know if they're

1279
01:16:38,680 --> 01:16:42,000
Speaker 1: more hypocritical than they are a lousy airline, but those

1280
01:16:42,040 --> 01:16:46,080
Speaker 1: are your choices. Most hypocritical company in America, worst airline

1281
01:16:46,080 --> 01:16:49,320
Speaker 1: in America. So that's uh. This message is brought to

1282
01:16:49,360 --> 01:16:53,840
Speaker 1: you by Delta. Fly Delta, and maybe you'll make it there.

1283
01:16:54,080 --> 01:16:56,559
Speaker 1: I just had a couple of really bad experiences with them.

1284
01:16:56,560 --> 01:17:01,320
Speaker 1: Other people disagree with me about Delta, but UM actually

1285
01:17:01,400 --> 01:17:05,400
Speaker 1: rarely fly it, so I don't fly it anymore, and

1286
01:17:05,920 --> 01:17:08,760
Speaker 1: I'll never forget. I was flying to Atlanta to give

1287
01:17:08,760 --> 01:17:13,200
Speaker 1: a speech. I booked first class and they do what

1288
01:17:13,439 --> 01:17:16,000
Speaker 1: a lot of legacy airlines do, which is when they

1289
01:17:16,000 --> 01:17:18,680
Speaker 1: don't have a full flight, they cancel it and they

1290
01:17:18,760 --> 01:17:21,160
Speaker 1: roll you into the next flight. And I'm like, listen,

1291
01:17:21,200 --> 01:17:23,760
Speaker 1: I gotta be somewhere at six o'clock tonight. I know

1292
01:17:23,920 --> 01:17:27,760
Speaker 1: your your cancelation was nonsense. So they give me. They get, well,

1293
01:17:27,800 --> 01:17:30,000
Speaker 1: we'll get you on this plane, and they go from

1294
01:17:30,160 --> 01:17:36,560
Speaker 1: to A to B which is the middle from from

1295
01:17:36,640 --> 01:17:39,160
Speaker 1: at back by the bathroom. And I'm like, I'm sorry,

1296
01:17:39,479 --> 01:17:42,000
Speaker 1: I had a first class ticket. Why am I? And

1297
01:17:42,040 --> 01:17:44,320
Speaker 1: the woman says, well, A, you didn't have a first

1298
01:17:44,320 --> 01:17:47,680
Speaker 1: class ticket, you had a six g Y ticket, and

1299
01:17:47,840 --> 01:17:50,160
Speaker 1: B that's the only seat we you know, that's all

1300
01:17:50,200 --> 01:17:52,519
Speaker 1: we have at this time. So I'm like, let me.

1301
01:17:53,280 --> 01:17:55,680
Speaker 1: I just have to stop you there. I don't know

1302
01:17:55,720 --> 01:17:57,479
Speaker 1: what a six G Y is. When I went on

1303
01:17:57,520 --> 01:18:02,400
Speaker 1: to Delta dot com, um, your choice is either first

1304
01:18:02,439 --> 01:18:05,840
Speaker 1: slash business class or Economy and there was like a

1305
01:18:05,920 --> 01:18:09,960
Speaker 1: six hundred dollar difference in in price. So I don't

1306
01:18:10,000 --> 01:18:12,880
Speaker 1: know how what what six g y is or whatever

1307
01:18:12,960 --> 01:18:16,040
Speaker 1: the code was, but you give me two choices, business

1308
01:18:16,320 --> 01:18:19,639
Speaker 1: or coach. I picked Business. Is there an empty business

1309
01:18:19,640 --> 01:18:22,160
Speaker 1: class seat? I would like to have it? And at

1310
01:18:22,240 --> 01:18:24,120
Speaker 1: that point it's like I had to get down there,

1311
01:18:24,520 --> 01:18:27,759
Speaker 1: so I get on the flight. To add insult to injury,

1312
01:18:28,040 --> 01:18:31,320
Speaker 1: there's an empty seat in business. And then to make

1313
01:18:31,400 --> 01:18:34,240
Speaker 1: matters worse, when I called out to to say, all

1314
01:18:34,400 --> 01:18:39,679
Speaker 1: I bought this ticket for whatever. I'd like a refund

1315
01:18:39,680 --> 01:18:42,320
Speaker 1: of the difference, they proceeded to explain to me that

1316
01:18:42,360 --> 01:18:45,320
Speaker 1: they couldn't tell the difference in price. Let me stop

1317
01:18:45,320 --> 01:18:48,040
Speaker 1: your second. I work in finance. I could tell you

1318
01:18:48,080 --> 01:18:51,880
Speaker 1: the price of any of ten thousand stocks on any

1319
01:18:51,960 --> 01:18:55,439
Speaker 1: day for the last hundred years, at any second of

1320
01:18:55,520 --> 01:18:59,160
Speaker 1: the day. Your own tickets. You can't tell me what

1321
01:18:59,200 --> 01:19:01,960
Speaker 1: the hell these are outing for. I bought it. You

1322
01:19:01,960 --> 01:19:04,400
Speaker 1: could see the day I bought it. What were you

1323
01:19:04,560 --> 01:19:08,280
Speaker 1: selling the coach tickets for? It? Just refund me the difference,

1324
01:19:08,680 --> 01:19:11,240
Speaker 1: and I said, you know what, and they refused to

1325
01:19:11,240 --> 01:19:14,200
Speaker 1: do it. They actually sent me a certificate for two

1326
01:19:14,600 --> 01:19:18,120
Speaker 1: fifty dollars, which when I went to use seven months

1327
01:19:18,200 --> 01:19:21,759
Speaker 1: later was expired. So I said, you know, my penalty

1328
01:19:21,800 --> 01:19:24,040
Speaker 1: for this is one day I'm gonna have a radio show,

1329
01:19:24,640 --> 01:19:27,960
Speaker 1: And on that radio show, I'm gonna tell people I

1330
01:19:28,040 --> 01:19:30,800
Speaker 1: love Virgin American Airlines. Even though the last trip back

1331
01:19:30,840 --> 01:19:34,519
Speaker 1: from San Francisco, the seat didn't work, the juice didn't work,

1332
01:19:34,560 --> 01:19:39,000
Speaker 1: at the power on, the electrical didn't work, the TV

1333
01:19:39,120 --> 01:19:43,479
Speaker 1: didn't work. Still better than Delta and UM anytime if

1334
01:19:43,520 --> 01:19:46,639
Speaker 1: I have to fly Jet Blue, Jet Blue is always fine.

1335
01:19:47,000 --> 01:19:48,760
Speaker 1: I get to sit in the front of Virgin and

1336
01:19:48,840 --> 01:19:51,599
Speaker 1: Jet Blue, it doesn't matter you sit even the even

1337
01:19:51,640 --> 01:19:56,839
Speaker 1: even more spaces like that is the greatest air travel

1338
01:19:57,080 --> 01:19:59,800
Speaker 1: bang for the buck. There is just those extra six

1339
01:19:59,840 --> 01:20:03,120
Speaker 1: in just by you make all the difference. It really, uh,

1340
01:20:03,160 --> 01:20:07,840
Speaker 1: it really does. So somehow the poor people on a

1341
01:20:07,880 --> 01:20:10,240
Speaker 1: treadmill listening to this, like I thought we were talking

1342
01:20:10,240 --> 01:20:15,120
Speaker 1: about this, red sky will not shut up. So let's

1343
01:20:15,160 --> 01:20:20,799
Speaker 1: bring this back to housing and what this means going forward.

1344
01:20:21,120 --> 01:20:26,080
Speaker 1: Assume the government does nothing. What what is them? Just

1345
01:20:26,200 --> 01:20:28,960
Speaker 1: play out? Yeah, what happens with Fannie and Freddie? What

1346
01:20:29,080 --> 01:20:32,320
Speaker 1: should the role of government be and and what do

1347
01:20:32,360 --> 01:20:36,320
Speaker 1: we do with this, what how does housing manifest itself

1348
01:20:36,360 --> 01:20:39,160
Speaker 1: over the next couple of years. So I think that

1349
01:20:40,439 --> 01:20:45,000
Speaker 1: housing will follow the path of what the economy does.

1350
01:20:45,160 --> 01:20:48,519
Speaker 1: In other words, I think, I think when we see

1351
01:20:49,360 --> 01:20:52,720
Speaker 1: real improvement in the economy, and what I mean by

1352
01:20:52,720 --> 01:20:57,040
Speaker 1: that is simply more job real job growth, I think

1353
01:20:57,040 --> 01:20:59,360
Speaker 1: that that makes all the difference in the world, and

1354
01:20:59,400 --> 01:21:04,960
Speaker 1: that'll start to melt the problem increases, a little wage increase,

1355
01:21:05,439 --> 01:21:11,000
Speaker 1: nothing more, you know, huge, just improvement, an uptick. I think,

1356
01:21:11,560 --> 01:21:14,040
Speaker 1: to me, all that matters of the fundamentals that you know,

1357
01:21:14,320 --> 01:21:17,760
Speaker 1: this whole notion, this whole this whole notion of like

1358
01:21:18,040 --> 01:21:20,720
Speaker 1: housing is going to lead us out of this. I

1359
01:21:21,520 --> 01:21:25,240
Speaker 1: feel it's just the opposite. It always has been the opposite.

1360
01:21:25,720 --> 01:21:29,679
Speaker 1: But it's always stated as housing, you know, brings us out.

1361
01:21:29,840 --> 01:21:34,440
Speaker 1: It's always the the economic sort of interpretation of housing

1362
01:21:34,720 --> 01:21:37,280
Speaker 1: is always how we get out of a you know,

1363
01:21:37,400 --> 01:21:40,760
Speaker 1: a week period, and and I feel it's I don't

1364
01:21:40,800 --> 01:21:44,040
Speaker 1: know how that where that math comes from, but it's

1365
01:21:44,040 --> 01:21:46,360
Speaker 1: always backwards because you actually have to have a job

1366
01:21:46,400 --> 01:21:50,639
Speaker 1: and have you know, income prospects to qualify for a mortgage.

1367
01:21:50,680 --> 01:21:53,439
Speaker 1: So I feel it all goes hand in hand on

1368
01:21:53,520 --> 01:21:57,120
Speaker 1: the on the more specific government aspect of it is

1369
01:21:57,160 --> 01:22:00,960
Speaker 1: that I don't think Congress has the will or the

1370
01:22:01,040 --> 01:22:06,720
Speaker 1: ability to make a sea change to what is responsible

1371
01:22:06,760 --> 01:22:11,679
Speaker 1: for of the housing of housing mortgages in the country.

1372
01:22:11,880 --> 01:22:14,880
Speaker 1: I think that is just a disaster waiting to happen.

1373
01:22:15,280 --> 01:22:18,280
Speaker 1: Meaning what should they be doing. I think they'll do nothing.

1374
01:22:19,240 --> 01:22:22,280
Speaker 1: I mean as opposed to what would you want them

1375
01:22:22,320 --> 01:22:24,920
Speaker 1: to do? Uh, I think what I'd want them to do.

1376
01:22:25,120 --> 01:22:32,519
Speaker 1: So so what I've found is is, uh, there has

1377
01:22:32,600 --> 01:22:37,599
Speaker 1: to be more awareness of sort of separation of church

1378
01:22:37,640 --> 01:22:41,080
Speaker 1: and state. In other words, for example, you know the

1379
01:22:41,080 --> 01:22:44,120
Speaker 1: biggest culprits, one of the biggest culprits in this whole

1380
01:22:44,240 --> 01:22:49,080
Speaker 1: last down cycle where the rating agencies right where they

1381
01:22:49,360 --> 01:22:53,640
Speaker 1: are basically joined at the hip with the people that

1382
01:22:54,160 --> 01:22:57,600
Speaker 1: that you know that they were. They were under partners

1383
01:22:57,600 --> 01:23:02,200
Speaker 1: with underwriters, just real state appraisers were joined at the

1384
01:23:02,280 --> 01:23:05,599
Speaker 1: hip with mortgage brokers. Right, find the right appraiser, make

1385
01:23:05,680 --> 01:23:08,880
Speaker 1: the number, we can do the deal. Right. We have

1386
01:23:08,960 --> 01:23:11,479
Speaker 1: that whole and then we have the revolving door between

1387
01:23:11,479 --> 01:23:17,000
Speaker 1: the regulators and private industry. So there's no real separation.

1388
01:23:17,280 --> 01:23:21,000
Speaker 1: And to me, the only way you reduce that you'll

1389
01:23:21,000 --> 01:23:24,400
Speaker 1: never eliminate it, because human beings are really good at

1390
01:23:24,400 --> 01:23:28,040
Speaker 1: screwing things up. Just everything sort of devolves into chaos

1391
01:23:28,080 --> 01:23:30,320
Speaker 1: over time. I think you're trying to reduce it. What

1392
01:23:30,400 --> 01:23:33,880
Speaker 1: Dodd Frank does the wrong It sort of takes the

1393
01:23:33,920 --> 01:23:37,880
Speaker 1: wrong approaches. Let's regulate what happened in the past, and

1394
01:23:38,320 --> 01:23:42,720
Speaker 1: that's always true. Isn't every regulation backwards looking? By absolutely?

1395
01:23:43,000 --> 01:23:45,920
Speaker 1: You know, it's amazing how well the formation of the

1396
01:23:46,000 --> 01:23:50,120
Speaker 1: SEC and and glasst Eagle worked from the thirties because

1397
01:23:50,120 --> 01:23:52,400
Speaker 1: it was backwards looking, but it was also when the

1398
01:23:52,400 --> 01:23:54,800
Speaker 1: pace of change was so slow. It was good for

1399
01:23:54,840 --> 01:23:57,640
Speaker 1: seventy five years. That's whatever you pass, it's got like

1400
01:23:57,720 --> 01:24:00,240
Speaker 1: that's part of my problem with this whole no stion

1401
01:24:00,400 --> 01:24:05,840
Speaker 1: of red revamping Fannie and Freddie. When Fanny worked okay,

1402
01:24:05,880 --> 01:24:10,880
Speaker 1: from the depression up until right up until ten years ago, right,

1403
01:24:11,160 --> 01:24:13,640
Speaker 1: and so you have to look at what changed in

1404
01:24:13,720 --> 01:24:18,040
Speaker 1: O five the middle last decade to make them implode

1405
01:24:18,240 --> 01:24:23,080
Speaker 1: and then eliminate that. That's the we don't just because

1406
01:24:23,120 --> 01:24:25,439
Speaker 1: you put window you know, new window dressing on an

1407
01:24:25,479 --> 01:24:28,200
Speaker 1: agency that's effectively going to do the same thing doesn't

1408
01:24:28,200 --> 01:24:31,040
Speaker 1: make the problems go away. It's a waste of time.

1409
01:24:31,360 --> 01:24:36,760
Speaker 1: You know, the Fannie and Freddie bashers always conflate two

1410
01:24:36,920 --> 01:24:40,160
Speaker 1: or three issues. One is, Fanny and Freddie was a

1411
01:24:40,240 --> 01:24:45,719
Speaker 1: horrifically corrupt organization who spread a lot of lucre around

1412
01:24:45,800 --> 01:24:50,360
Speaker 1: d C. So they were the biggest supporters of public

1413
01:24:50,400 --> 01:24:56,280
Speaker 1: relations agencies. Every agency in Washington had a Fannie May account.

1414
01:24:56,360 --> 01:25:01,240
Speaker 1: They they were dominating. They spread them. Anny Franklin Rains

1415
01:25:01,360 --> 01:25:06,000
Speaker 1: was not afraid to spend the cash, and it was funny.

1416
01:25:06,040 --> 01:25:08,519
Speaker 1: It was It was funny that I remember seeing guys

1417
01:25:08,560 --> 01:25:11,760
Speaker 1: like Newt Gingrich not complain about them, and then you

1418
01:25:11,840 --> 01:25:15,040
Speaker 1: find out years later, even though everybody thinks of Fannie

1419
01:25:15,040 --> 01:25:18,560
Speaker 1: and Freddy is a democratic entity, they were spreading the

1420
01:25:18,600 --> 01:25:21,360
Speaker 1: money around on both sides of the aisle, which is

1421
01:25:21,400 --> 01:25:24,559
Speaker 1: the smart way to do it. One of the good

1422
01:25:24,600 --> 01:25:27,160
Speaker 1: parts about the bail out is that we stopped all

1423
01:25:27,200 --> 01:25:29,639
Speaker 1: that lobbying, at least for Fannie and Freddie. We could

1424
01:25:29,680 --> 01:25:31,200
Speaker 1: have done it for the banks and for Wall Street

1425
01:25:31,200 --> 01:25:34,960
Speaker 1: would be a much healthier country. Nobody thought to say, hey,

1426
01:25:35,040 --> 01:25:38,160
Speaker 1: Goldman in Bank of America shouldn't really be in the

1427
01:25:38,200 --> 01:25:41,280
Speaker 1: corridors of power. As much as Fannie and Freddie were

1428
01:25:41,760 --> 01:25:46,880
Speaker 1: stopping both, but but hold that aside. Do we need

1429
01:25:47,240 --> 01:25:53,080
Speaker 1: an entity between the buyers and the banks, working either

1430
01:25:53,240 --> 01:25:57,439
Speaker 1: with or with the im premature of government to keep

1431
01:25:57,520 --> 01:26:01,080
Speaker 1: mortgage rates down? We we've seen European don't have this,

1432
01:26:01,439 --> 01:26:04,880
Speaker 1: although they also don't have thirty year fixed mortgages. How

1433
01:26:05,000 --> 01:26:07,240
Speaker 1: is this done around the world? Will make this our

1434
01:26:07,360 --> 01:26:15,000
Speaker 1: last question. How are other mortgages processed, underwritten, regulated elsewhere

1435
01:26:15,479 --> 01:26:20,000
Speaker 1: that might provide an alternative example versus what Fannie and

1436
01:26:20,000 --> 01:26:24,559
Speaker 1: Freddie does. Well, So what's popular around the world are

1437
01:26:24,600 --> 01:26:28,640
Speaker 1: adjustable rate mortgages. I mean, that's that's not popular that dominates.

1438
01:26:29,720 --> 01:26:32,880
Speaker 1: I think many countries look at US as so it

1439
01:26:32,960 --> 01:26:36,920
Speaker 1: makes homeowners slaves to interest rate fluctuation very much so.

1440
01:26:37,000 --> 01:26:39,559
Speaker 1: And then on top of it, so countries like Spain

1441
01:26:40,200 --> 01:26:44,280
Speaker 1: where you can't walk away from a mortgage ever ever,

1442
01:26:44,800 --> 01:26:48,160
Speaker 1: so you are tied to that and you have to

1443
01:26:48,200 --> 01:26:51,120
Speaker 1: pay it back. There is no there is no get

1444
01:26:51,160 --> 01:26:54,320
Speaker 1: out of jail free card in in the mortgage world

1445
01:26:54,360 --> 01:26:57,559
Speaker 1: in countries like Spain in the US is in half

1446
01:26:57,600 --> 01:27:02,600
Speaker 1: the US. In the US, it's basically just you know,

1447
01:27:02,680 --> 01:27:05,280
Speaker 1: it's just another process you go through. It's but there

1448
01:27:05,280 --> 01:27:08,000
Speaker 1: are some states that a recourse states, meaning that that

1449
01:27:08,120 --> 01:27:10,920
Speaker 1: it's a debt you can discharge in bankruptcy, but you

1450
01:27:11,000 --> 01:27:13,920
Speaker 1: can't just walk away. And then there are nonrecourse states

1451
01:27:14,479 --> 01:27:18,080
Speaker 1: where the state the contract says in the event that

1452
01:27:18,120 --> 01:27:20,400
Speaker 1: you failed to pay for the house, the bank gets

1453
01:27:20,479 --> 01:27:23,360
Speaker 1: the house. You're done, which was always thought of as Okay,

1454
01:27:23,360 --> 01:27:25,519
Speaker 1: I'm not making the payments, I lose the house. That

1455
01:27:25,600 --> 01:27:27,360
Speaker 1: was thought of as a kind of fair trade off.

1456
01:27:27,720 --> 01:27:30,120
Speaker 1: Nobody expected a million people to do what it wants, right,

1457
01:27:30,240 --> 01:27:33,640
Speaker 1: an inundation of it, right, Yeah, the states that are

1458
01:27:33,640 --> 01:27:36,200
Speaker 1: dependent on the court systems were the slowest to recover.

1459
01:27:36,360 --> 01:27:41,040
Speaker 1: Larida had a their own you know, hyper right, which

1460
01:27:41,080 --> 01:27:43,960
Speaker 1: by the way, was supposedly was a debacle, a a

1461
01:27:44,120 --> 01:27:48,360
Speaker 1: gnarly mess of corruption and lack of oversight that and

1462
01:27:48,400 --> 01:27:50,880
Speaker 1: of itself. I'm sure there's a book in that from

1463
01:27:51,479 --> 01:27:54,400
Speaker 1: to sift through it. So so really, the countries that

1464
01:27:54,560 --> 01:27:58,160
Speaker 1: don't have g s c s in the middle, the

1465
01:27:58,200 --> 01:28:02,680
Speaker 1: alternative is fluctuating rates. You know, at rates, it's a

1466
01:28:02,680 --> 01:28:06,320
Speaker 1: different perspective. You know, I'm, as you said, I'm not

1467
01:28:06,360 --> 01:28:09,280
Speaker 1: an economist, and I and and there's a lot of

1468
01:28:09,320 --> 01:28:12,600
Speaker 1: criticism about the the effort that it takes to to

1469
01:28:12,760 --> 01:28:15,439
Speaker 1: manage a thirty year mortgage, and we shouldn't be doing that,

1470
01:28:16,479 --> 01:28:19,040
Speaker 1: uh and and but it works so well for so

1471
01:28:19,120 --> 01:28:22,960
Speaker 1: long exactly. So my my view of that is, you know,

1472
01:28:23,000 --> 01:28:27,040
Speaker 1: we're we're you know, we're questioning homeownership or questioning uh

1473
01:28:27,120 --> 01:28:29,599
Speaker 1: Fanny May, and we're questioning thirty year fixed. Yet they

1474
01:28:29,600 --> 01:28:32,639
Speaker 1: worked really well until about ten years ago. So why

1475
01:28:32,640 --> 01:28:34,800
Speaker 1: don't we look at what happened ten years ago and

1476
01:28:34,840 --> 01:28:38,240
Speaker 1: focus on that. So that was sub prime, that was

1477
01:28:38,320 --> 01:28:42,360
Speaker 1: liar loans, that was mass securitization, that was a lack

1478
01:28:42,439 --> 01:28:45,640
Speaker 1: of rating agency accountability. There were a lot of factors

1479
01:28:46,520 --> 01:28:51,559
Speaker 1: caused a functional system to freeze, choke and spit everything

1480
01:28:51,560 --> 01:28:56,000
Speaker 1: out all at once. So then you like, then you

1481
01:28:56,040 --> 01:28:57,840
Speaker 1: think there's a place for the g S c S.

1482
01:28:58,080 --> 01:29:00,880
Speaker 1: I think there's a place. I don't I. I The

1483
01:29:00,920 --> 01:29:03,600
Speaker 1: way I look at it is funnaments of the economy

1484
01:29:03,920 --> 01:29:07,200
Speaker 1: get back on track. All most of the stuff goes away.

1485
01:29:07,479 --> 01:29:11,639
Speaker 1: It's just a long, gradual process. I fear that by

1486
01:29:11,760 --> 01:29:16,120
Speaker 1: embedding even more layers of Remember, all the regulators were

1487
01:29:16,120 --> 01:29:19,400
Speaker 1: asleep at the switch. Everyone Sheilla Beart maybe one of

1488
01:29:19,400 --> 01:29:22,080
Speaker 1: the few exceptions, and the same with a woman who

1489
01:29:22,160 --> 01:29:26,320
Speaker 1: was the head of the commodities futures trading. She actually was. Yeah,

1490
01:29:26,400 --> 01:29:30,880
Speaker 1: she was soundly ignored by Greens. She was Chastis and

1491
01:29:30,960 --> 01:29:35,240
Speaker 1: Greens absolutely, So I agree Sheilabert and Uh. I can't

1492
01:29:35,240 --> 01:29:40,160
Speaker 1: recall the woman's name, but I s' that's it. And

1493
01:29:40,160 --> 01:29:42,400
Speaker 1: and they were the ones that sort of the voice

1494
01:29:42,400 --> 01:29:45,800
Speaker 1: of reason. But the balance was they're caught up in

1495
01:29:45,840 --> 01:29:49,200
Speaker 1: it too, and then a lot of it they didn't understand. It,

1496
01:29:50,920 --> 01:29:53,840
Speaker 1: didn't understand you know, the all the the you know,

1497
01:29:53,880 --> 01:29:56,840
Speaker 1: the financial engineering. So I don't think the answer is

1498
01:29:57,320 --> 01:30:00,479
Speaker 1: add more. You made the basket. I don't think I

1499
01:30:00,840 --> 01:30:04,599
Speaker 1: don't think adding more solves anything. I think it's let's

1500
01:30:04,640 --> 01:30:07,600
Speaker 1: get back to like fixing the economy first, and a

1501
01:30:07,600 --> 01:30:10,080
Speaker 1: lot of this stuff plays out. It's not that we're

1502
01:30:10,120 --> 01:30:12,479
Speaker 1: going in the right direction. It's just a slow motion

1503
01:30:12,520 --> 01:30:16,920
Speaker 1: and slow motion ride. So as the economy goes, so

1504
01:30:17,120 --> 01:30:20,720
Speaker 1: goes real estate. Absolutely, Jonathan, I've had you here for

1505
01:30:20,760 --> 01:30:23,920
Speaker 1: two hours. Thank you so much for coming in. It's

1506
01:30:23,920 --> 01:30:26,280
Speaker 1: been a pleasure pleasure to you know, you and I

1507
01:30:26,320 --> 01:30:28,719
Speaker 1: talked about this stuff all the time, but it's rare

1508
01:30:28,720 --> 01:30:32,040
Speaker 1: when we actually get to sit down for an uninterrupted

1509
01:30:33,040 --> 01:30:37,920
Speaker 1: meandering conversation about I thought the airline discussion was really important. Though,

1510
01:30:38,760 --> 01:30:42,400
Speaker 1: let me tell you something, it doesn't take much to

1511
01:30:42,479 --> 01:30:45,880
Speaker 1: set me off. I'm I'm getting better, though. I'm I'm

1512
01:30:46,000 --> 01:30:49,760
Speaker 1: much more present. I read a fascinating study the other

1513
01:30:49,920 --> 01:30:55,639
Speaker 1: day that essentially said the cathartic release of anger does

1514
01:30:55,720 --> 01:30:59,880
Speaker 1: nothing too. Some people say, how you get it out

1515
01:30:59,880 --> 01:31:02,280
Speaker 1: of your system? It turns out they've done studies and

1516
01:31:02,360 --> 01:31:08,320
Speaker 1: people it becomes persistent and higher when you especially when

1517
01:31:08,360 --> 01:31:12,360
Speaker 1: you're driving. UM. So, really, I'm trying to learn how

1518
01:31:12,520 --> 01:31:17,840
Speaker 1: to let these slights go and find a degree of peace.

1519
01:31:18,960 --> 01:31:24,360
Speaker 1: I forgive Delta Airlines for their gross incompetence, and I

1520
01:31:24,479 --> 01:31:27,680
Speaker 1: choose to use my flying you have We know you

1521
01:31:27,720 --> 01:31:32,000
Speaker 1: have choices in airlines today. Hell yeah, and that's why

1522
01:31:32,400 --> 01:31:37,280
Speaker 1: I could at least get over my cost with with

1523
01:31:37,360 --> 01:31:46,519
Speaker 1: Delta and gratefully fly. They apparently weren't. That's you're listening

1524
01:31:46,560 --> 01:31:50,160
Speaker 1: to Masters in Business with Barry rid Holts on Bloomberg

1525
01:31:50,240 --> 01:31:50,559
Speaker 1: Radio