WEBVTT - Stock Rotation Hits Tech Giants as Small Caps Rise 0:00:00.080 --> 0:00:07.000 Bloomberg Audio Studios, Podcasts, radio News. 0:00:08.920 --> 0:00:13.240 This is Bloomberg Business Week Daily reporting from the magazine 0:00:13.240 --> 0:00:17.840 that helps global leaders stay ahead with insight on the people, companies, 0:00:17.880 --> 0:00:22.760 and trends shaping today's complex economy, plus global business finance 0:00:22.800 --> 0:00:26.520 and tech news as it happens. The Bloomberg Business Weekdaily 0:00:26.640 --> 0:00:31.720 Podcast with Carol Masser and Tim Steneveek on Bloomberg Radio. 0:00:32.000 --> 0:00:33.360 We just want to get a check on kind of 0:00:33.360 --> 0:00:36.520 how we ended up today and as we get ready 0:00:36.560 --> 0:00:39.800 for some more big megacap tech earnings. We're talking about 0:00:39.840 --> 0:00:41.960 Alphabet and Amazon coming our way over the next couple 0:00:42.000 --> 0:00:43.960 of days. Eric Wiener is in the house back with 0:00:44.040 --> 0:00:47.080 us senior editor Equities America's at Bloomberg News. Here in 0:00:47.080 --> 0:00:50.920 our Bloomberg Interactive Brokers studio a lot coming at investors. 0:00:50.920 --> 0:00:54.760 Certainly we watch for headlines that impact the trade here. 0:00:54.880 --> 0:00:57.320 Is it still really though largely about earnings for the 0:00:57.320 --> 0:00:59.280 most part, although some policies like we saw with the 0:00:59.320 --> 0:01:02.959 homebuilders today, certainly impacted by some things that could come 0:01:02.960 --> 0:01:03.720 from the White House. 0:01:04.240 --> 0:01:08.200 Well, right now, as far as today is concerned, Anthropic 0:01:08.680 --> 0:01:12.840 really freaked out the market and software has been selling 0:01:12.840 --> 0:01:17.200 off software stocks in particular within tech have really done poorly. 0:01:17.240 --> 0:01:19.280 I mean, if you look at like the Magnificent seven, 0:01:19.560 --> 0:01:22.160 you can see Microsoft has really come down more than 0:01:22.200 --> 0:01:26.280 the others, and that's spending on AI and that's also software. 0:01:26.440 --> 0:01:31.760 So today you got a lot of movement around what 0:01:31.920 --> 0:01:34.560 is at risk, who is going to survive AI, who 0:01:34.680 --> 0:01:38.240 isn't going to survive AI? And as these tools come 0:01:38.280 --> 0:01:42.600 out and they take the place of other you know, 0:01:42.720 --> 0:01:46.200 data providers. You saw like the London Stock Exchange down, 0:01:46.360 --> 0:01:51.640 you saw SMP Global downtild. Yeah, really weird, really weird reactions, 0:01:51.680 --> 0:01:54.040 and it's because there people are afraid that they're going 0:01:54.080 --> 0:01:59.280 to be replaced. That's different than the big megacap earnings 0:01:59.320 --> 0:02:03.280 where you got Google coming in Google, well, Alphabet they're 0:02:03.440 --> 0:02:06.440 up like ten percent, they were the best performer last year. 0:02:07.360 --> 0:02:11.240 The question is that they're within spitting distance of Nvidia, 0:02:11.720 --> 0:02:15.079 you know, of passing them as the biggest as the 0:02:15.120 --> 0:02:17.640 biggest stock in the world market keep yeah, yeah, So 0:02:17.960 --> 0:02:21.680 I mean it's will they will they justify that rally? 0:02:21.880 --> 0:02:24.040 Well, you know, speaking of this and we're watching earning 0:02:24.080 --> 0:02:28.000 so closely, just want to mention Eric super micro computer 0:02:28.120 --> 0:02:30.600 crossing the Bloomberg terminal we are seeing the stock pop 0:02:30.680 --> 0:02:34.440 initially here in the after market, let's go to the outlook. 0:02:34.520 --> 0:02:37.240 The company talking about seeing third quarter net sales of 0:02:37.240 --> 0:02:39.880 at least twelve point three billion. That is way above 0:02:39.880 --> 0:02:42.840 the street estimate of ten point two five billion. Ce's 0:02:42.840 --> 0:02:45.520 third quarter just at EPs at least sixty cents this year. 0:02:45.560 --> 0:02:49.240 That's eight cents better than what the street is forecasting. 0:02:49.880 --> 0:02:52.720 And what's always key is what we're seeing in terms 0:02:52.760 --> 0:02:55.680 of margins. And right now we're looking back at the 0:02:55.800 --> 0:02:58.440 second quarter a just to gross margin tim six point 0:02:58.480 --> 0:03:00.960 four percent, that was a little light point fifty two percent. 0:03:01.000 --> 0:03:04.040 But nonetheless check in super Micro up about nine percent 0:03:04.080 --> 0:03:04.880 here in the after mark. 0:03:05.000 --> 0:03:07.680 Yeah, the company seeing third quarter net sales at least 0:03:07.680 --> 0:03:10.079 twelve point three billion, beating estimates of ten point twenty 0:03:10.160 --> 0:03:13.000 five billion dollars. Eric, before we let you go, does 0:03:13.040 --> 0:03:17.040 this this report from super Micro a sigh of relief 0:03:17.120 --> 0:03:18.800 after voluntility like today? 0:03:19.080 --> 0:03:22.320 Sure? I mean, and we're seeing examples of this that 0:03:22.480 --> 0:03:24.160 today may have been overdone. I mean, that is a 0:03:24.160 --> 0:03:26.799 lot of what we've heard from analysts, what we've heard 0:03:26.800 --> 0:03:29.680 from traders. It's just you know, it could have been 0:03:29.760 --> 0:03:32.280 kind of a deep seek moment where you know, people 0:03:32.520 --> 0:03:34.679 initially react and then sort of come back to the 0:03:34.720 --> 0:03:36.880 table and think, well, maybe that was overdone and we. 0:03:36.840 --> 0:03:39.480 Should say Aman deep seeing a Bloomberg intelligence said you know, 0:03:39.640 --> 0:03:42.120 software is not all going away, and he said some 0:03:42.200 --> 0:03:43.840 of it could have been a valuation. 0:03:44.120 --> 0:03:47.440 Exactly, well exactly, so, I mean, and you saw like 0:03:47.520 --> 0:03:50.880 Palenteer did really well. They haven't done great this year, 0:03:50.960 --> 0:03:53.360 but they got a bounce today because of their earnings. 0:03:53.360 --> 0:03:56.440 So you know, it's it's sort of a moving target 0:03:56.480 --> 0:03:58.720 when you're talking about AI with winners and losers, and 0:03:58.720 --> 0:03:59.840 we're just still in the. 0:03:59.840 --> 0:04:03.400 Very early innings. Eric Wiener, Senior Editor Equities America's at 0:04:03.440 --> 0:04:05.320 Bloomberg News. We wanted to talk to you for longer, 0:04:05.360 --> 0:04:08.440 but a bit of a busy show, so please come 0:04:08.480 --> 0:04:08.920 back again. 0:04:09.040 --> 0:04:09.560 We'll do it. 0:04:10.240 --> 0:04:14.080 You're listening to the Bloomberg Business Week Daily Podcast. Catch 0:04:14.160 --> 0:04:16.839 us live weekday afternoons from two to five eas during 0:04:17.040 --> 0:04:20.960 Listen on Applecarplay and Android Auto with the Bloomberg Business app, 0:04:21.160 --> 0:04:24.000 or watch us live on YouTube. 0:04:25.760 --> 0:04:27.800 Well our Market's live blog today, pointing out that Neil 0:04:27.839 --> 0:04:31.160 Utta of Renaissance Macro notes that something typically goes wrong 0:04:31.200 --> 0:04:33.680 in the stock market when a new FED chair takes over. 0:04:34.360 --> 0:04:36.720 Years that saw a FED leadership change also saw big 0:04:36.839 --> 0:04:39.360 s and P five hundred drawdowns, an average of seventeen 0:04:39.400 --> 0:04:42.400 percent to the downside for the past four chairs alone. 0:04:42.680 --> 0:04:44.800 Dot A writing in a note today that quote, if 0:04:44.839 --> 0:04:47.880 past is prologue, I would not be surprised to see 0:04:47.880 --> 0:04:51.200 the new FED chair test it, especially given the circumstances 0:04:51.200 --> 0:04:54.240 of his ascension to the job, a newfound policy dove 0:04:54.360 --> 0:04:58.039 tasked with convincing those around the FOMC likely suspicious of 0:04:58.080 --> 0:05:02.320 the motivations to his position. Neil joins us now he's 0:05:02.360 --> 0:05:05.839 partner and head of economic research at Renaissance of Macro Research. 0:05:05.880 --> 0:05:08.039 He joins us from New Jersey. Neil, good to see 0:05:08.080 --> 0:05:09.640 you. You also write in the note that you've been tracking 0:05:09.640 --> 0:05:12.359 how Warsha's sentiment has changed since his time as a 0:05:12.400 --> 0:05:15.600 FED governor during the Great Financial Crisis two thousand and 0:05:15.640 --> 0:05:20.960 six to twenty eleven. I believe what did you find? 0:05:24.000 --> 0:05:27.960 Well, good to be with you. I found what you'd expect, 0:05:28.000 --> 0:05:31.520 which is he's been hawkish throughout his entire public career 0:05:31.600 --> 0:05:34.600 up until about the six months during which he's been 0:05:34.600 --> 0:05:37.680 here for interviewing for the FED job. For a president 0:05:37.680 --> 0:05:39.760 who calls himself a low interest rate person. 0:05:40.160 --> 0:05:43.200 Shocking, I know, isn't it like kind of baffling? 0:05:43.400 --> 0:05:47.200 I think when I when the name was announced Neil, 0:05:47.320 --> 0:05:49.000 I was kind of like, wait, did I miss something? 0:05:49.040 --> 0:05:49.160 Like? 0:05:49.200 --> 0:05:51.279 So, what do you think is going on here? Are you? 0:05:51.320 --> 0:05:51.400 Do? 0:05:51.480 --> 0:05:51.919 You feel like? 0:05:52.000 --> 0:05:52.200 You know? 0:05:52.200 --> 0:05:56.000 It's interesting? Was a Gavin Newsom who was who did 0:05:56.160 --> 0:05:58.880 a big interview with our Bradstone and just said, you know, 0:05:58.960 --> 0:06:00.720 kind of the rule of law is in a part 0:06:00.760 --> 0:06:03.000 his view in terms of this presidency, but he said, 0:06:03.040 --> 0:06:04.760 one of the things the president does pay attention to 0:06:04.920 --> 0:06:08.280 is financial markets and do you think that was kind 0:06:08.279 --> 0:06:10.680 of in his thinking when he said I got to 0:06:10.680 --> 0:06:13.240 get I gotta put a FED chair in the market's respect. 0:06:14.880 --> 0:06:17.000 Yeah, I don't. I mean, I don't know, I don't. 0:06:17.000 --> 0:06:18.359 I don't know how to think about that. I mean, 0:06:18.400 --> 0:06:20.000 I think the upshot to all this is that the 0:06:20.000 --> 0:06:23.360 FED is bigger than any one person, right. It's it's 0:06:23.440 --> 0:06:27.320 it's an institution with lots of people, it's a it's 0:06:27.360 --> 0:06:32.040 an institution that's driven by consensus building, and there are 0:06:32.040 --> 0:06:35.120 a lot of people on the FYMC that rotated and 0:06:35.120 --> 0:06:37.520 out from the regional FED banks and there are no slouches, 0:06:37.720 --> 0:06:40.080 you know, like someone like Lori Logan or Beth Hammock. 0:06:41.279 --> 0:06:45.560 You know, their expertise I think is considerably stronger and 0:06:45.560 --> 0:06:47.720 in lots of places than Kevin Warsh. So I don't 0:06:47.760 --> 0:06:50.120 think they're going to be intimidated by by Kevin warfh 0:06:50.120 --> 0:06:53.760 sitting around that table. So I think the upshot here 0:06:53.920 --> 0:06:58.760 is that the the FED is bigger than any one person, 0:06:58.800 --> 0:07:01.680 and that probably limits a lot of the sort of 0:07:02.120 --> 0:07:05.520 anxiety that you might get to markets. I mean, the 0:07:05.800 --> 0:07:08.279 real test of all of these positions, in my opinion, 0:07:08.400 --> 0:07:11.920 is really in times of crisis, you know, not so 0:07:12.000 --> 0:07:13.160 much when things are normal. 0:07:14.400 --> 0:07:16.480 So we're going to get to crisis in just a second. 0:07:16.480 --> 0:07:19.320 But first I'm wondering if we're putting the cart before 0:07:19.320 --> 0:07:22.360 the horse at this point because of what we've heard 0:07:22.400 --> 0:07:25.600 from Senator Tom Tillis and the fact that he will 0:07:25.640 --> 0:07:30.120 not back a nominee until the probes into J. Powell 0:07:30.600 --> 0:07:33.640 are settled. What does that mean for the outlook? 0:07:35.200 --> 0:07:37.720 Well, typically when you have you know, the sort of 0:07:38.040 --> 0:07:41.679 changing of the guard, if you will, it takes about 0:07:41.760 --> 0:07:45.320 ninety days from the time the person is nominated by 0:07:45.360 --> 0:07:48.200 the President to when they're confirmed by the Senate. We'll 0:07:48.240 --> 0:07:51.000 see how long this one goes. You know, typically the 0:07:51.600 --> 0:07:54.560 hearing is scheduled before the committee is scheduled about a 0:07:54.560 --> 0:07:58.400 month after the person is nominated. Now, if Senator Tillis 0:07:58.400 --> 0:08:01.120 decides to kind of stick to a guns, I mean, 0:08:01.120 --> 0:08:02.760 he's got nothing to lose. He's not up for a 0:08:02.760 --> 0:08:06.520 re election. You know, we'll see. I mean, you know, 0:08:06.560 --> 0:08:08.400 I think, as is the case with any nominee, the 0:08:08.440 --> 0:08:10.440 longer they it's like a fish out of water, right, 0:08:10.480 --> 0:08:12.040 I mean, what happens If a fish is out of 0:08:12.080 --> 0:08:16.040 water long enough, it starts to smell. And so I 0:08:16.040 --> 0:08:21.080 think that's that's the risk. I think you run if 0:08:21.120 --> 0:08:23.280 both sides kind of hunker down. I mean, the President 0:08:23.320 --> 0:08:25.320 has basically said, let it go on for as long 0:08:25.360 --> 0:08:29.080 as it needs to, you know, but to get Tillis 0:08:29.080 --> 0:08:31.440 to back down, the President will need to back down 0:08:31.480 --> 0:08:32.520 from the investigation. 0:08:33.559 --> 0:08:36.559 Hey, you know, I do wonder what a wash FED 0:08:36.600 --> 0:08:40.640 will be like, Neil, having seen, like you, lots of 0:08:40.640 --> 0:08:42.920 different FED chairs, and I remember a time where I 0:08:42.920 --> 0:08:44.760 feel like you didn't really hear from a lot of 0:08:44.800 --> 0:08:47.520 FED speakers, and now it's just such the norm. Is 0:08:47.520 --> 0:08:49.880 he going to be a quieter FED chairman, so that 0:08:50.360 --> 0:08:52.240 we're not going to be able to pick up cues 0:08:52.320 --> 0:08:54.720 and speeches that he's going to be giving potentially if 0:08:54.760 --> 0:08:58.280 again he is indeed FED chair, the next FED chair. 0:09:00.080 --> 0:09:01.480 Yeah, I mean, I think that's been one of his 0:09:01.559 --> 0:09:03.400 sort of critiques of the FED, is that they talk 0:09:03.480 --> 0:09:03.880 too much? 0:09:04.760 --> 0:09:05.320 Do you agree? 0:09:05.440 --> 0:09:09.280 And I, you know, sometimes yes I do. I mean 0:09:09.320 --> 0:09:11.200 I think that there's something to be said for that. 0:09:11.280 --> 0:09:14.679 But there's also, you know, like with everything, there's a 0:09:14.679 --> 0:09:17.680 lot of incongruencies in what he's talking about, right, So 0:09:18.679 --> 0:09:20.640 you know, during his time as a governor, you know, 0:09:20.640 --> 0:09:23.640 I don't really recall any meaningful speeches that Warsh gave 0:09:24.400 --> 0:09:27.600 on the economic and policy outlook, and he probably looked 0:09:27.600 --> 0:09:30.160 at that as a sort of form of forward guidance 0:09:30.200 --> 0:09:34.360 that he didn't really believe in. But you know, he 0:09:34.440 --> 0:09:37.280 kind of is all about like, use less discretion in 0:09:37.360 --> 0:09:39.720 terms of policy, right, we should have more of a 0:09:39.800 --> 0:09:44.040 rules based framework. But I think what's interesting about that 0:09:44.200 --> 0:09:47.840 now is a lot of what he's talking about in 0:09:47.960 --> 0:09:51.280 terms of you know, trying to get rates down at 0:09:51.400 --> 0:09:55.600 least up front, is an appeal to discretion. Like, how 0:09:55.640 --> 0:09:58.600 else would you describe the sort of golden age, right 0:09:58.880 --> 0:10:02.400 these is that they have to kind of bring rates down, right, 0:10:02.480 --> 0:10:05.480 like we're in an economic golden age. It's a productivity boom. 0:10:05.559 --> 0:10:10.000 Nehru's low. We can cut rates without stoking inflation. Obviously, 0:10:10.040 --> 0:10:13.480 that's an appeal to discretion at some level. So you're 0:10:13.520 --> 0:10:16.080 actually going to need a lot of data to convince 0:10:16.120 --> 0:10:18.000 the people around the table to kind of buy into 0:10:18.040 --> 0:10:21.680 that theory. You can't just will it into the Fed's policy. 0:10:22.920 --> 0:10:24.679 The other thing I would say, he's also a big 0:10:24.720 --> 0:10:26.200 critic of forward guidance. 0:10:26.559 --> 0:10:26.719 Now. 0:10:26.760 --> 0:10:28.920 One of the things we know about forward guidance right 0:10:28.960 --> 0:10:32.480 this is, you know, basically guidance on interest rates is 0:10:32.720 --> 0:10:38.440 that helps move you know, so that basically allows like 0:10:38.520 --> 0:10:40.280 movements in the front end of the Yeld curve to 0:10:40.280 --> 0:10:42.679 translate more into the back end of the Yeal curve, right, 0:10:43.000 --> 0:10:46.000 because then markets anticipate what will come as a result 0:10:46.080 --> 0:10:48.320 of what the Fed's doing. Now, if you get away 0:10:48.320 --> 0:10:50.400 from forward guidance, that kind of goes away and it 0:10:50.440 --> 0:10:53.920 pushes up term premiums, which all else sql makes longer 0:10:54.000 --> 0:10:56.200 term interest for its higher, which is something they've said 0:10:56.200 --> 0:10:58.320 they want to get down. You know, of one of 0:10:58.800 --> 0:11:02.840 Worsh's big criticism back in twenty twenty four was that 0:11:02.880 --> 0:11:06.040 the FED wasn't able to get the entire curve down 0:11:06.080 --> 0:11:08.320 in twenty twenty four, even though they cut interest rates. 0:11:09.800 --> 0:11:12.320 I think what that misses is the fact that longer 0:11:12.400 --> 0:11:15.599 term rates fell into the cut. Right. Had they not 0:11:15.720 --> 0:11:17.680 had for a guidance, that wouldn't have happened, in which 0:11:17.679 --> 0:11:19.240 case they may have had to cut even more. 0:11:20.280 --> 0:11:20.640 Yeah. 0:11:20.840 --> 0:11:23.760 So look, I mean there's a lot of interesting little 0:11:23.840 --> 0:11:28.280 nuances that we can talk about for hours. 0:11:28.320 --> 0:11:31.080 Frankly, well, one nuance I want to ask you, and 0:11:31.120 --> 0:11:33.360 maybe it isn't just a nuance, but I do wonder 0:11:33.400 --> 0:11:37.680 about the connection with Stanley drunken Miller. We talked about 0:11:37.760 --> 0:11:42.080 this with our Eric Shatsker and the ties that he 0:11:42.320 --> 0:11:45.360 has famed investor, well known on Wall Street, certainly to 0:11:45.360 --> 0:11:48.520 the Bloomberg audience, to you, that he has ties to 0:11:48.600 --> 0:11:52.000 Best and the Treasury Secretary right Scott Besson, as well 0:11:52.000 --> 0:11:55.160 as to Kevin Warsh. I think the ft even talked 0:11:55.160 --> 0:11:57.680 about the Financial Times about the rise of the shadow 0:11:58.120 --> 0:12:01.320 FED chair, meaning Drunken Miller got about thirty seconds. Is 0:12:01.320 --> 0:12:04.040 that maybe something that could be a reality very quickly. 0:12:06.000 --> 0:12:07.400 I mean I don't know. I think a lot of 0:12:07.400 --> 0:12:12.160 this sort of enthusiasm for a tread treasury Fedicorp is 0:12:12.240 --> 0:12:16.280 quite misplaced. Okay, you know, I'm not sure. I'm not 0:12:16.280 --> 0:12:18.200 sure I buy into that. Again, that goes back to 0:12:18.200 --> 0:12:20.640 this issue around QWI, like why did the fed haf QWI. 0:12:20.720 --> 0:12:22.480 Did they do it to bail out the federal government 0:12:22.640 --> 0:12:24.720 or did they do it because the federal government wasn't 0:12:24.760 --> 0:12:26.560 doing anything? I mean that if you go back to 0:12:26.600 --> 0:12:29.360 that time, Carol, we were talking about how the government 0:12:29.440 --> 0:12:33.640 was doing a sequester and austerity, and you know, I 0:12:33.640 --> 0:12:36.760 think that kind of gets the causality around policy backward. 0:12:37.400 --> 0:12:40.560 All right, listen, We always appreciate when you jump up 0:12:40.600 --> 0:12:41.240 on Bloomberg. 0:12:41.320 --> 0:12:42.360 So thank you so much. Neil. 0:12:42.400 --> 0:12:44.640 Have a great week. Neil Data. He's partner head of 0:12:44.640 --> 0:12:49.400 economics at Renaissance Macro Research. Joining us from New Jersey. 0:12:51.080 --> 0:12:54.920 This is the Bloomberg Business Week Daily Podcast. Listen live 0:12:55.040 --> 0:12:57.920 each weekday starting at two pm Eastern an Apple car 0:12:58.000 --> 0:13:01.000 Play and Android Auto with the Bloomberg Business app. You 0:13:01.000 --> 0:13:04.200 can also listen live on Amazon Alexa from our flagship 0:13:04.240 --> 0:13:10.000 New York station, just Say Alexa played Bloomberg eleven thirty. 0:13:09.880 --> 0:13:12.080 Bloomberg News real estate report of Pat Clark joins us 0:13:12.080 --> 0:13:14.960 here in the Bloomberg BusinessWeek studio. What did you find out? 0:13:15.000 --> 0:13:15.760 How would this work? 0:13:16.640 --> 0:13:19.120 Well, there are details still to be negotiated right, but 0:13:19.160 --> 0:13:21.440 it would be what's typically known as a rent to 0:13:21.480 --> 0:13:26.560 owner pathway to home ownership program, where private investors acquire 0:13:26.600 --> 0:13:30.319 homes from homebuilders. These could be homes potentially that are 0:13:30.360 --> 0:13:33.920 sort of built tailored for this program, so maybe built 0:13:33.920 --> 0:13:36.760 on the smaller sides, not built yet, not built yet, 0:13:37.080 --> 0:13:39.400 and they could be built for this program, acquired by 0:13:39.400 --> 0:13:42.680 private investors who would then rent the homes out and 0:13:42.720 --> 0:13:45.920 then with some sort of opportunity for renters to convert 0:13:46.080 --> 0:13:49.760 into owners. Usually the way that's worked is there's some 0:13:49.800 --> 0:13:52.439 sort of help or, at least in more recent iterations 0:13:52.440 --> 0:13:54.559 on the model, there's some sort of program to help 0:13:55.160 --> 0:13:59.400 renters save a down payment. Some of the talk around 0:13:59.400 --> 0:14:01.720 this is that, you know, would there be a role 0:14:01.840 --> 0:14:05.240 for federally back mortgages. You know, does do Fanny and 0:14:05.280 --> 0:14:08.120 Freddie get involved in some way bring down the cost 0:14:09.360 --> 0:14:12.400 of you know, cost of in interest payments when you 0:14:12.440 --> 0:14:14.200 actually go and buy the home that you've been rented. 0:14:14.559 --> 0:14:17.920 So private investors Pat find them, provide the money up 0:14:17.960 --> 0:14:21.600 front for home builders to build, and then who gets 0:14:21.600 --> 0:14:23.520 all the permitting and all that good stuff. That's always 0:14:23.520 --> 0:14:24.000 so much fun. 0:14:24.160 --> 0:14:25.640 Well, the builders have to build the homes. 0:14:25.680 --> 0:14:27.440 But I think you know, the way one person described 0:14:27.480 --> 0:14:30.120 it to me is like builders are in the they're 0:14:30.120 --> 0:14:32.400 in the moving business, not the storage business, if like 0:14:32.440 --> 0:14:36.520 you indulge a cliche. And so the builders are the 0:14:36.520 --> 0:14:39.120 builders know how to get the homes built, built, and 0:14:40.040 --> 0:14:42.440 then they give them to someone else, right who can 0:14:42.680 --> 0:14:45.040 hold them on a balance sheet and figure out how 0:14:45.080 --> 0:14:48.080 to management manage them. I mean, managing these kinds of 0:14:48.120 --> 0:14:51.440 properties is not not necessarily. 0:14:50.840 --> 0:14:53.600 In the pitfalls before in this rent to own you 0:14:53.680 --> 0:14:54.760 report it in your story. 0:14:54.880 --> 0:14:57.440 It's one pitfall. It's you know, it's complicated, right, who's 0:14:57.440 --> 0:14:59.360 supposed to take care of the home during a period 0:14:59.400 --> 0:15:02.480 of time and its own you know, when when ownership 0:15:02.520 --> 0:15:05.760 is sort of transitory. So that's that's certainly one thing. 0:15:05.800 --> 0:15:08.800 It should be easier with newly built homes, right if 0:15:08.840 --> 0:15:10.360 you're doing this the way this has been done in 0:15:10.400 --> 0:15:12.720 the past, usually as you buy and exist in home 0:15:13.400 --> 0:15:16.480 and you know which comes with which could come with 0:15:16.600 --> 0:15:19.760 all sorts of like deferred maintenance in it, whereas these homes, 0:15:20.120 --> 0:15:22.400 you know, you would imagine could even have a builder 0:15:22.480 --> 0:15:25.000 warranty on them, and so that should be easier. The 0:15:25.040 --> 0:15:27.280 hard part really is coming up with a scheme that 0:15:27.400 --> 0:15:29.240 lets people convert. 0:15:28.920 --> 0:15:31.960 And bind the homes another challenge, I think, and I'm 0:15:31.960 --> 0:15:33.760 no real estate expert, but I'm told the three most 0:15:33.760 --> 0:15:37.040 important things when it comes to real estate are location, location, location. 0:15:37.240 --> 0:15:40.160 I've heard that before. Where are these homes going to 0:15:40.160 --> 0:15:42.080 be built? Because it kind of doesn't matter if you 0:15:42.120 --> 0:15:44.800 create a million homes and places where people don't want 0:15:44.840 --> 0:15:49.640 to live. Sure, you know that's I think. 0:15:49.440 --> 0:15:53.040 That that seems like the less hard problem, so really 0:15:53.080 --> 0:15:54.280 to me personally. 0:15:53.840 --> 0:15:56.520 Well, because that's where, to Carroll's point, the permitting comes in. 0:15:56.560 --> 0:15:58.600 Because a lot of a lot of the challenges with 0:15:58.600 --> 0:16:01.120 the affordability crisis is zoning and the fact that a 0:16:01.120 --> 0:16:03.520 lot of these places that are highly desirable with expensive 0:16:03.520 --> 0:16:06.640 home prices you can't build because of density issues. 0:16:07.920 --> 0:16:09.520 Yeah, I guess that could be an issue. I mean 0:16:09.520 --> 0:16:12.520 there's also, like we're talking about lots and lots of 0:16:13.200 --> 0:16:16.000 newly built single family homes. These have to go in 0:16:16.040 --> 0:16:18.000 the suburbs, they have to go where there's land to 0:16:18.000 --> 0:16:19.800 build them on and you. 0:16:19.760 --> 0:16:22.200 Know, as but is that where people want to live? Like? 0:16:22.240 --> 0:16:24.840 That goes I guess the argument pod because we've been 0:16:24.840 --> 0:16:27.520 talking about affordability you know this better than we do, 0:16:27.960 --> 0:16:31.080 like for decades, and so you have so many people 0:16:31.120 --> 0:16:33.320 working in these major cities, be it New York, be 0:16:33.360 --> 0:16:38.440 it La like and the ability to live close so 0:16:38.520 --> 0:16:40.760 you're not commuting an hour or two hours or three 0:16:40.800 --> 0:16:43.480 hours or whatever the heck it is. You know, it's 0:16:43.600 --> 0:16:46.600 it's difficult so to find that affordable housing that is 0:16:46.680 --> 0:16:49.200 close to where the jobs are. Is that where this 0:16:49.480 --> 0:16:51.960 I mean if you're buying, if you're building single family homes, 0:16:51.960 --> 0:16:52.920 that might not be the case. 0:16:53.240 --> 0:16:56.320 Sure, that's that's fair, right, is like, can you actually 0:16:56.680 --> 0:16:58.880 find a market for these kinds of properties? I mean 0:16:58.880 --> 0:17:01.560 there's there's It's not as though there are not homes. 0:17:01.800 --> 0:17:04.760 You know, homes are being built in the suburbs, right, 0:17:05.000 --> 0:17:06.639 some of them are built. You know a lot of 0:17:06.680 --> 0:17:09.160 capitals formed around this idea of built to rent, which 0:17:09.200 --> 0:17:11.760 is homes that are built for the purpose of renting 0:17:11.800 --> 0:17:16.399 out very often in communities, you know, in whole communities. 0:17:16.760 --> 0:17:19.960 Sometimes people call them horizontal apartment buildings. I think those 0:17:20.000 --> 0:17:22.960 are renting. I mean it's possible that, you know, not 0:17:23.080 --> 0:17:26.200 every project has rented as well as the developer thought 0:17:26.200 --> 0:17:28.480 it would when they started, because that happens too. And 0:17:29.160 --> 0:17:33.240 I think anytime you think about building at scale, there's 0:17:33.240 --> 0:17:35.480 a real estate cycle to contend with. 0:17:35.760 --> 0:17:37.199 But I. 0:17:38.720 --> 0:17:40.520 You know, I think that there are plenty of markets 0:17:40.520 --> 0:17:43.000 where you could find demand for this kind of product. 0:17:43.480 --> 0:17:46.600 I'm wondering about the companies that could benefit here. Lenar 0:17:46.760 --> 0:17:49.280 is up three percent in a day when the broader 0:17:49.320 --> 0:17:52.760 market is lower. We're seeing home builders in general higher 0:17:53.200 --> 0:17:57.120 apart from just a handful who are potential winners here? 0:17:57.600 --> 0:17:59.960 Yeah, I think anyone in the new home space right 0:18:00.119 --> 0:18:04.840 like builders building supply. You know, I don't. It's it's 0:18:04.960 --> 0:18:09.320 I wasn't able to unearth a lot of details regarding investor. 0:18:09.480 --> 0:18:11.560 You know, who is forming the capital to do this 0:18:11.760 --> 0:18:14.320 right and and and who gets to invest in this 0:18:14.480 --> 0:18:16.640 and on what kinds of terms? But you know, there's 0:18:16.680 --> 0:18:18.000 you could certainly see opportunities. 0:18:18.040 --> 0:18:21.600 So is it a fund is created and then home 0:18:21.600 --> 0:18:24.080 builders tap into that fund? Is that kind of how 0:18:24.119 --> 0:18:25.960 it works? Or we don't. We don't know yet. And 0:18:26.119 --> 0:18:28.679 I'm the other thing that, like I was thinking is 0:18:28.680 --> 0:18:30.359 that Okay. Now you have investors in Boved, you have 0:18:30.400 --> 0:18:32.520 home builders involved. These are all layers that have to 0:18:33.160 --> 0:18:35.440 make some money on this project, and I'm curious about 0:18:35.480 --> 0:18:37.720 how expensive these might be. I know the whole idea 0:18:37.760 --> 0:18:40.440 is about affordable homes, but I do think about people 0:18:40.480 --> 0:18:42.879 taking a piece of the action and how that drives 0:18:42.960 --> 0:18:43.800 up prices. 0:18:43.880 --> 0:18:45.919 Essentially, I think it's complicated. 0:18:46.160 --> 0:18:48.800 I think there's there's I always you know, I think we. 0:18:48.800 --> 0:18:50.080 Tried to get this across in the story. 0:18:50.080 --> 0:18:52.040 This is a this is a complex. 0:18:51.560 --> 0:18:56.680 Idea, and it may prove too complex to actually, you know, operationalize, 0:18:56.760 --> 0:19:01.320 but the you know, it's you know, at the same time, 0:19:01.359 --> 0:19:05.440 I think you could think about it as it may 0:19:05.480 --> 0:19:08.879 turn out that this is an idea that the housing 0:19:08.920 --> 0:19:11.919 industry broadly is trying to put in front of the 0:19:12.000 --> 0:19:15.800 Trump administration, because you know, both sides recognize that there 0:19:15.960 --> 0:19:19.080 is a housing affordability crisis and it needs to be 0:19:19.119 --> 0:19:22.960 addressed in some way. Everyone has an interest in doing something, 0:19:23.119 --> 0:19:26.080 and so, you know, if it turned out this was 0:19:26.080 --> 0:19:29.720 a conversation starter, I wouldn't be shocked. At the same time, 0:19:30.280 --> 0:19:33.359 you know, we have Trump accounts, right, we have Trump 0:19:33.440 --> 0:19:36.920 we have these this does seem to be a template 0:19:37.040 --> 0:19:40.000 that you know, some people have at least pushed from 0:19:40.119 --> 0:19:42.520 just idea to something that exists in the real world. 0:19:42.640 --> 0:19:44.000 And so it wouldn't shock me at that time. 0:19:44.000 --> 0:19:45.640 Were actually going to talk about TRUP account a little 0:19:45.640 --> 0:19:47.280 bit later on, No, it's interesting. Would they be called 0:19:47.280 --> 0:19:48.000