WEBVTT - Economy, UK Election, Home Sales 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penel Podcast. I'm Paul swing you 0:00:05.360 --> 0:00:07.680 along with my co host Lisa Brahma Waits. Each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money. Whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg Penl podcast on Apple 0:00:15.520 --> 0:00:17.959 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:20.799 at Bloomberg dot com. Wall Street confidence ahead of the 0:00:21.960 --> 0:00:25.200 year seems to be increasing. Consumer confidence not so much. 0:00:25.239 --> 0:00:27.680 We've got to read today the consumer confidence in the 0:00:27.760 --> 0:00:30.720 US declined for a fourth straight month. The big question 0:00:30.760 --> 0:00:33.280 in my mind is are we seeing a sort of 0:00:33.280 --> 0:00:36.400 reversal where the consumer starts to sort of become less 0:00:36.440 --> 0:00:40.559 confident and less uh profligate when it's with its spending 0:00:40.960 --> 0:00:44.320 while Wall Street gets more excited about stock prices. Chris Rupkei, 0:00:44.520 --> 0:00:47.640 Managing director in chief financial economist at m UFG Union 0:00:47.640 --> 0:00:49.720 Bank joining us. Now, what do you make of this, 0:00:49.720 --> 0:00:54.160 this waning consumer confidence? Yeah, it's interesting because don't forget 0:00:54.200 --> 0:00:59.000 there's two separate measures, and uh, the Michigan survey of 0:00:59.120 --> 0:01:01.920 consumers sent mint as opposed to confidence more or less 0:01:01.960 --> 0:01:04.960 the same. Uh, it's come back quite a bit. So 0:01:05.040 --> 0:01:07.360 it was down in the dumps in August when the 0:01:07.400 --> 0:01:12.520 stock market had that turmoil and purchasing managers said manufacturing 0:01:12.600 --> 0:01:16.440 was in a recession. Uh. That consumer confidence measure has 0:01:16.480 --> 0:01:19.839 come back and doesn't look as worrisome as the one 0:01:20.120 --> 0:01:21.800 that came out today. So it's a bit of a 0:01:22.520 --> 0:01:25.000 mixed bag here. Yeah, it's Chris. We also have the 0:01:25.600 --> 0:01:29.040 again the housing data that come in very strong. Are 0:01:29.040 --> 0:01:32.880 you still confident that this consumer can continue to support 0:01:33.080 --> 0:01:37.400 this economy through well, so far, so good. We'll get 0:01:37.440 --> 0:01:41.119 another look at how many jobs are being created, uh 0:01:41.280 --> 0:01:44.640 next Friday. So that's really as long as it's not 0:01:44.800 --> 0:01:50.200 just what consumers or workers are spending, it's also how 0:01:50.240 --> 0:01:53.720 many new workers are being added each year. And right 0:01:53.720 --> 0:01:56.480 now the jobs reports you know, running about a hundred 0:01:56.560 --> 0:01:59.800 thirty thousand per month of new jobs. Those are going 0:01:59.840 --> 0:02:03.520 to be new consumers that will spend uh the economy, 0:02:03.880 --> 0:02:07.040 will you know, spend dollars that helps the economy grow. 0:02:07.160 --> 0:02:10.880 But yeah, we are. It is interesting real GDP numbers 0:02:10.960 --> 0:02:13.800 have come down the estimates for the fourth quarter, so 0:02:13.840 --> 0:02:16.280 we'll see how that all plays out. So I want 0:02:16.320 --> 0:02:17.880 to shift gears a little bit too. The housing market 0:02:17.919 --> 0:02:20.320 We've got a couple of better than expected data points 0:02:20.320 --> 0:02:22.679 out this morning showing that new home sales in the 0:02:22.760 --> 0:02:24.919 United States posted their best two months and more than 0:02:24.960 --> 0:02:27.680 twelve years. How much can we draw from that in 0:02:27.800 --> 0:02:31.760 terms of the broader economic reach. Yeah, people are surprised 0:02:31.800 --> 0:02:36.120 by this data. It gets revived dramatically sometimes. So the 0:02:36.200 --> 0:02:39.800 reason we the reason new home sales are so strong 0:02:40.720 --> 0:02:45.240 today is we had a wicked upward revision to the 0:02:45.639 --> 0:02:48.440 September data a month ago. In other words, a month 0:02:48.520 --> 0:02:51.079 ago we thought there was a seven hundred one thousand 0:02:51.120 --> 0:02:55.359 new homes being purchased annual rate, now at seven d eight. 0:02:56.200 --> 0:02:59.800 So the difference is seven hundred thirty eight means we 0:03:00.040 --> 0:03:02.680 reached a twelve year high and we came off modestly 0:03:03.600 --> 0:03:05.640 so far. I mean, don't forget to put it in 0:03:05.800 --> 0:03:09.560 historical perspective. During the housing bubble years over a decade ago, 0:03:10.320 --> 0:03:13.320 new home sales were running easily above one point two 0:03:13.360 --> 0:03:16.880 million per year at an annual rate, and now we're 0:03:16.919 --> 0:03:20.680 back to seven thirty eight thousand. Still, you know, it 0:03:20.720 --> 0:03:24.919 does show you that, you know, the consumer confidence can't 0:03:24.919 --> 0:03:27.280 be that bad off if they're buying the most new 0:03:27.320 --> 0:03:31.760 homes that they have in roughly twelve years. So you know, 0:03:31.800 --> 0:03:35.160 it's very mixed data today, I would say the underlying 0:03:35.280 --> 0:03:37.680 data is not that bad for the economy. We don't 0:03:37.680 --> 0:03:42.520 want to question the economic outlook for next year yet. Trade, Chris, 0:03:42.560 --> 0:03:46.320 it looks like we're making some headway on global trade, 0:03:46.400 --> 0:03:50.240 maybe a Phase one deal. From an economics perspective, what 0:03:50.280 --> 0:03:52.240 would that mean to you? To get such a deal? 0:03:53.560 --> 0:03:56.240 That would be good? I mean there's two different things. 0:03:56.240 --> 0:03:58.120 There's kind of like the announcement, it's kind of like 0:03:58.160 --> 0:04:02.840 FED policy. There's the end anouncement effect of trade deals, 0:04:03.200 --> 0:04:08.920 which could affect you know, stock market levels and investor confidence. 0:04:09.480 --> 0:04:11.880 And you know, the trade war effect on the stock 0:04:11.920 --> 0:04:14.160 market is nil. I mean maybe some of that is 0:04:14.200 --> 0:04:17.000 are always hopeful for an agreement, but with the SMP 0:04:17.160 --> 0:04:21.719 five closing up year to date last night, uh, people 0:04:21.760 --> 0:04:25.719 aren't worried about the you know, the these news headlines, 0:04:26.320 --> 0:04:29.720 but um, yeah, it would be big because the way 0:04:29.800 --> 0:04:33.599 I would approach this is that our next big deadline 0:04:33.680 --> 0:04:39.280 is December. There there's potentially we're gonna put tariffs on 0:04:39.320 --> 0:04:41.880 the final tronch a hundred sixty billion of goods that 0:04:42.279 --> 0:04:47.960 consumers like, things like cell phones, laptop computers, video game consoles, 0:04:48.080 --> 0:04:51.279 So we'll see where that goes. The biggest effect for 0:04:51.320 --> 0:04:54.560 me is an economist, is if the five billion roughly 0:04:54.960 --> 0:04:58.440 imports from China a couple of years ago, if those 0:04:58.480 --> 0:05:03.280 imports all get terrif at, that would be a hit 0:05:03.320 --> 0:05:06.520 of almost one percentage point to GDP. So if you're 0:05:06.520 --> 0:05:10.159 looking for two percent GDP next year, I'd have to 0:05:10.200 --> 0:05:13.680 market down closer to simply if the Troy. But you know, 0:05:13.920 --> 0:05:16.440 we got to go to tariffs across the board and 0:05:16.440 --> 0:05:18.480 we're not We're not there, and it looks like we're 0:05:18.520 --> 0:05:20.240 not going to get there, so that would be good news. 0:05:20.440 --> 0:05:22.240 One of the big challenges over the past year has 0:05:22.279 --> 0:05:25.880 been deciphering what is simply a global economy that is 0:05:25.920 --> 0:05:29.279 slowing down, the heels of China's economy decelerating, and what 0:05:29.560 --> 0:05:32.920 is due to trade. And I think about Hewlett Packard's earnings, 0:05:32.960 --> 0:05:34.720 for example, we were talking about this with an entree 0:05:34.760 --> 0:05:37.240 of us in earlier this morning. He was talking about 0:05:37.279 --> 0:05:40.280 how capital expenditures when it comes to the cloud, when 0:05:40.320 --> 0:05:44.520 it comes to services, have been going down. I mean, 0:05:44.560 --> 0:05:47.080 do you take something from this that goes beyond just 0:05:47.520 --> 0:05:50.320 do we get some you know, prophylactic deal. Uh that 0:05:50.320 --> 0:05:52.400 that sort of gives a truce and allows people the 0:05:52.480 --> 0:05:55.760 confidence to go forward. Well, one of the things I'm 0:05:55.800 --> 0:05:58.479 a little bit worried about is that this slowdown and 0:05:58.560 --> 0:06:03.040 business investment isn't completely due to China. I mean, China 0:06:03.080 --> 0:06:07.000 obviously the tariffs on some of the imports for manufacturers 0:06:07.000 --> 0:06:10.679 here isn't great. Equipment has been slowing, but don't forget 0:06:10.680 --> 0:06:13.080 what twelve year. I mean, we're ten years over ten 0:06:13.160 --> 0:06:16.159 years into an economic expansion, and there still is a 0:06:16.240 --> 0:06:19.480 business cycle. A lot of this equipment that companies buy 0:06:19.560 --> 0:06:21.760 is very long live, so they're not going to come 0:06:21.760 --> 0:06:24.719 out and buy every single year a bunch of the 0:06:24.760 --> 0:06:27.440 new equipment. You know, they space it out every three, 0:06:27.520 --> 0:06:30.359 four or five years. So what if they've already bought 0:06:30.400 --> 0:06:33.880 the equipment they need given this ten year expansion. So 0:06:34.000 --> 0:06:38.120 we're already seeing data like durable goods orders not going 0:06:38.240 --> 0:06:41.320 up anymore, which tells me that companies have as much 0:06:41.320 --> 0:06:44.159 equipment as they need right now to meet the current 0:06:44.200 --> 0:06:47.400 demand for goods and services. So it's not just China, 0:06:47.480 --> 0:06:51.320 but it's complicated. It's complicated. We are kind of in 0:06:51.360 --> 0:06:57.960 an aging economic expansion where purchases should slow UM naturally, 0:06:58.600 --> 0:07:02.400 so Chris, just next thirty second, UM, given your economic outlook, 0:07:02.400 --> 0:07:04.440 do you think the FED. I guess the market's discounting 0:07:04.480 --> 0:07:06.640 one FED rate cut maybe in that September meeting. Is 0:07:06.680 --> 0:07:10.360 that consistent with your outlook? I don't want to talk 0:07:10.360 --> 0:07:13.840 about rate cuts. I don't think it does any good 0:07:13.840 --> 0:07:15.760 at this level. I mean, we're not yet at the 0:07:15.880 --> 0:07:19.160 level of negative rates like Japan and Europe, which did nothing. 0:07:19.600 --> 0:07:22.200 I think they've kind of turned the light switch on 0:07:22.280 --> 0:07:25.040 and off too many times for interest rates the Federal Reserve, 0:07:25.440 --> 0:07:28.000 and now they've kind of broken their tool. I don't 0:07:28.040 --> 0:07:31.440 think cutting rates from one point seven five is going 0:07:31.480 --> 0:07:34.200 to cause any US corporation to go out and spend 0:07:34.240 --> 0:07:38.560 more on equipment, buy new offices or warehouses. I think 0:07:39.080 --> 0:07:41.680 the days of the FED running to the riding to 0:07:41.720 --> 0:07:45.120 the rescue and cutting rates and boost and growth, it's 0:07:45.160 --> 0:07:48.080 just not going to happen. I would prefer with the 0:07:48.120 --> 0:07:51.120 baby boom generation retiring, that they keep rates where they are, 0:07:51.480 --> 0:07:53.360 if not move them up in the next couple of 0:07:53.400 --> 0:07:56.040 years a little bit. Chris russ Ruki, thanks so much 0:07:56.080 --> 0:07:59.040 for joining us. We appreciate your thoughts. Chris Rupkey, Managing 0:07:59.080 --> 0:08:02.760 director in chief Financial Economists for mu f G Union Bank, 0:08:02.840 --> 0:08:19.440 joining us on the phone time to check in with 0:08:19.480 --> 0:08:23.320 Bloomberg Opinion. We're joined by opinion columnist Marcus Ashworth. Marcus 0:08:23.360 --> 0:08:26.120 has a columns covering European markets for Bloomberg Opinion. He 0:08:26.160 --> 0:08:30.480 joins us from the London radio studio of Bloomberg. So, Marcus, 0:08:30.760 --> 0:08:33.800 we're getting close to the election. December twelve is the election. 0:08:33.800 --> 0:08:35.920 What if you could just give us an update on 0:08:35.960 --> 0:08:42.560 how things are playing out there? Ha, well, um, yeah, 0:08:42.600 --> 0:08:45.640 it's pretty straightforward. Uh, if you want to look it 0:08:45.640 --> 0:08:48.600 in the round, which is never easy because it's always 0:08:48.600 --> 0:08:53.480 a new um comment or lead story of some form. 0:08:53.520 --> 0:08:58.040 But the polls are pretty certain that the ruling Conservative 0:08:58.040 --> 0:09:02.800 party on the Boris Johnson will get a commanding majority 0:09:03.679 --> 0:09:07.720 which will enable them therefore to go ahead and probably 0:09:07.720 --> 0:09:13.440 before Christmas, complete the Brexit withdrawal bill passage, which will 0:09:13.520 --> 0:09:17.360 enable them to leave the European Union before the end 0:09:17.360 --> 0:09:21.120 of January and then indeed move forward to doing a 0:09:21.160 --> 0:09:24.760 trade deal and the transition period which they think will 0:09:24.880 --> 0:09:28.400 end before the end of about this time in a year. Now, 0:09:28.440 --> 0:09:30.960 that's the conventional view, and there's lots of other people 0:09:30.960 --> 0:09:33.439 out there who would love to see lots of different things, 0:09:33.440 --> 0:09:37.160 and of course all all elections can go wrong and 0:09:37.200 --> 0:09:39.040 things can change. We have two and a bit weeks 0:09:39.080 --> 0:09:42.000 to go, and we certainly saw this time in two 0:09:42.040 --> 0:09:44.520 years ago that they all went horribly, horribly wrong for 0:09:44.559 --> 0:09:49.040 the previous Conservative Prime Minister tresam May. But this is 0:09:49.080 --> 0:09:53.920 a much more careful campaign from Boris Johnson. He's been 0:09:55.240 --> 0:09:59.480 under wraps doing everything he should do. The manifesto has 0:09:59.520 --> 0:10:05.199 been understated. Uh, they flashed out the Labor Party very skillfully, 0:10:05.240 --> 0:10:10.600 I think, to expose himselves as this massive Marxist sort 0:10:10.600 --> 0:10:14.760 of spend spend spend, unbelievable amount of plans that they 0:10:14.800 --> 0:10:18.839 want to want to bring um, which doesn't scare that 0:10:18.880 --> 0:10:21.000 many people, it would seem. With that, you know, if 0:10:21.000 --> 0:10:22.920 you look at the polls, it seems the Labor Party 0:10:22.960 --> 0:10:27.600 of actually shifted up slightly from a rock bed off 0:10:27.720 --> 0:10:31.480 we said, up towards thirty maybe early thirties now, So 0:10:31.520 --> 0:10:34.360 there is still a chance um of of not a 0:10:34.400 --> 0:10:36.880 conservative majority, but it's a pretty slim one. So I'm 0:10:36.920 --> 0:10:40.800 wondering what enthusiasm is in terms of the expected turnout 0:10:41.000 --> 0:10:44.320 for the December twelfth election. Well, you look at two things. 0:10:44.760 --> 0:10:48.719 One is circled voter registrations have getting very excited about today, 0:10:48.760 --> 0:10:51.839 which is a three million people have signed up to vote. 0:10:52.360 --> 0:10:56.439 Sarcasm from you, because why are you being sarcastic about that? 0:10:56.520 --> 0:10:59.160 Because I've seen this all before so many times, and 0:10:59.280 --> 0:11:02.960 all the youth, uh you know vote youth quake which 0:11:03.080 --> 0:11:05.640 was came around last time. We actually analyze the numbers 0:11:05.679 --> 0:11:09.040 more of an old not turn up than a youth quake. 0:11:09.440 --> 0:11:12.240 And it's not so much the youth, it's the middle 0:11:12.280 --> 0:11:15.600 band of sort of perhaps twenty five or forty five 0:11:16.240 --> 0:11:19.920 who have turned substantially more to the left in the 0:11:20.040 --> 0:11:23.520 UK over the last few years. And whether they turn 0:11:23.640 --> 0:11:28.080 up or they just just disperse, Uh, it is uh 0:11:28.559 --> 0:11:31.160 the question this time around. But that there is a 0:11:31.200 --> 0:11:34.599 definite lifting inverter registration is always an excellent thing in 0:11:34.640 --> 0:11:40.640 any democracy. By definitionally we can't command you know, decent turnout. 0:11:40.679 --> 0:11:44.680 Then you don't really have a mandate. So I think that, um, 0:11:44.760 --> 0:11:48.080 whether these guys turn out, Um, traditionally you find the 0:11:48.120 --> 0:11:50.559 youth vote doesn't turn out quite so much. It was 0:11:50.600 --> 0:11:54.080 a nice rainy day on December twelve. Um, then you 0:11:54.120 --> 0:11:56.640 know we should see. But there's a lot of good 0:11:56.640 --> 0:11:58.679 things going about this campaign, a lot of bad things. 0:11:58.760 --> 0:12:01.560 I'm sure we we We saw some some pretty interesting 0:12:01.840 --> 0:12:06.600 comments from the UH chief Rabbi today. So there's a 0:12:06.640 --> 0:12:09.600 lot of a lot of invector coming into this campaign. 0:12:09.679 --> 0:12:12.960 Which is which is you know, making it a pretty 0:12:13.000 --> 0:12:15.720 seminal election. I think, Marcus, I want to turn into 0:12:15.760 --> 0:12:18.240 a columny. You were published today talking about all right, 0:12:18.480 --> 0:12:22.800 Brexit asidement. But if and when Boris Johnson wins the selection, 0:12:23.360 --> 0:12:26.520 how is he going to relate to the Bank of England. Well, 0:12:26.640 --> 0:12:28.920 you know, one has to feel for central bank is 0:12:28.960 --> 0:12:31.680 not not much really, but you know this time around, 0:12:31.760 --> 0:12:35.280 I mean I've been pretty harsh on Mark Karney for 0:12:35.280 --> 0:12:37.520 for getting involved in the Brexit debate, where I think 0:12:37.520 --> 0:12:40.520 he shouldn't have done. Nonetheless, he's been pretty good at 0:12:40.559 --> 0:12:45.400 modernizing the Bank of England. But the economy is evidently 0:12:45.480 --> 0:12:47.800 going into a bit of a little slamp here, as 0:12:47.880 --> 0:12:49.800 is Europe, as of the rest of the world is 0:12:49.840 --> 0:12:52.079 not as not sort of necessarily but you know, a 0:12:52.120 --> 0:12:55.640 little bit of Brexit push behind it. Um I think 0:12:55.760 --> 0:12:57.880 first quarter, second quarter next year are going to be 0:12:58.320 --> 0:13:00.600 close to zero. I think in the in the UK. 0:13:01.080 --> 0:13:03.760 And that's going to mean does the Bank having have 0:13:03.920 --> 0:13:08.080 to actually cut interest rates which would be seemed countertutive. 0:13:08.120 --> 0:13:11.800 Off or we're reading is that there is huge fiscal 0:13:11.880 --> 0:13:14.320 spending coming from you know, if labor gets in it's 0:13:14.360 --> 0:13:20.040 it's karamba, I mean the lift uplifts. Yeah, it is karamba. 0:13:20.240 --> 0:13:22.640 It is literally ridiculous. And of course it won't happen. 0:13:22.920 --> 0:13:24.959 One was they won't get elected to even they get 0:13:25.000 --> 0:13:27.640 later to the minority government, other parties will stop them. 0:13:27.679 --> 0:13:32.000 But nonetheless that there is even on the expected Conservative 0:13:32.000 --> 0:13:34.480 when there will be a very big uplifting in fiscal 0:13:34.559 --> 0:13:37.360 spelling from should say simply from a two percent of 0:13:37.400 --> 0:13:41.280 budget deficit ratiator GDP to a three percent. That's a 0:13:41.320 --> 0:13:46.280 fifty uplift on your fiscal rule. That's big numbers actually 0:13:46.360 --> 0:13:49.880 for what one off you know into a into a 0:13:49.920 --> 0:13:52.240 new government and that's going to be a big spend. 0:13:52.880 --> 0:13:54.640 But how does the bank having in the Central Bank 0:13:54.720 --> 0:13:57.360 handle that well, obviously you think they would not want 0:13:57.360 --> 0:14:00.000 to raise rates. The trouble is is a short term 0:14:00.040 --> 0:14:02.560 they may be fools to Marcus Ashworth, Thank you so much, 0:14:02.960 --> 0:14:06.480 Marcus Ashworth, Bloomberg Opinion columnist joining us from London. Note 0:14:06.480 --> 0:14:09.000 where those elections are going to be held in short 0:14:09.120 --> 0:14:13.480 order December twelve, and we will be abiding by a 0:14:13.520 --> 0:14:16.400 whole host of rules ahead of that, where they're sort 0:14:16.400 --> 0:14:18.360 of phased in periods where we can't talk about it, 0:14:18.400 --> 0:14:20.040 but now we can talk all about it. So have 0:14:20.120 --> 0:14:22.040 no fear we're gonna go Brexit crazy. Ahead of this 0:14:22.040 --> 0:14:40.960 Thanksgiving break, well, new home sales posted the best two 0:14:40.960 --> 0:14:43.720 months in more than twelve years, really giving us another 0:14:43.800 --> 0:14:47.080 data point that the housing market remains quite resilient in 0:14:47.080 --> 0:14:51.480 the world of extraordinarily low interest rates mortgage rates. Jeff Tylor, 0:14:51.480 --> 0:14:54.120 co founder managing director for Digital Risk, joins us on 0:14:54.160 --> 0:14:56.840 the phone. So Jeff, what do you make of these 0:14:56.920 --> 0:15:01.320 numbers regarding the US home market. Well, thank you so 0:15:01.400 --> 0:15:03.840 much for having me, Paul today, a pleasure to be here. 0:15:04.000 --> 0:15:06.200 If you look at this entire year, coming into twenty 0:15:06.200 --> 0:15:08.280 and nineteen, it was projected to be at one point 0:15:08.400 --> 0:15:12.680 six trillion residential um mortgage market for this year. We're 0:15:12.880 --> 0:15:14.520 coming out at the end of the year, we're gonna 0:15:14.520 --> 0:15:17.520 be somewhere around two point three, So, you know, a 0:15:17.560 --> 0:15:21.280 statement of the obvious, It's been absolutely incredible year. For 0:15:21.400 --> 0:15:22.880 the housing market, and a lot of it has been 0:15:22.960 --> 0:15:26.000 driven by the volatility and interest rates which are down 0:15:26.040 --> 0:15:28.800 close to over a point. So right now we see 0:15:28.840 --> 0:15:33.040 extremely strong housing market nationally for new home sales, existing 0:15:33.080 --> 0:15:35.320 home sales and expecting that to go into a very 0:15:35.360 --> 0:15:39.720 strong Also, how monolithic is the US housing market? And 0:15:39.760 --> 0:15:43.000 I wonder whether the gains that we're seeing are being 0:15:43.080 --> 0:15:45.240 driven by the sun Belt in places that have been 0:15:45.240 --> 0:15:48.680 incredibly popular for tax reasons and weather reasons, and we 0:15:48.720 --> 0:15:52.120 have not seen the same strength in other places. So 0:15:52.120 --> 0:15:53.840 I think it can very You make a very good point. 0:15:53.840 --> 0:15:56.440 I mean it real is it's always location, location, location, 0:15:56.520 --> 0:15:59.240 I think post tax reform, I still we are starting 0:15:59.240 --> 0:16:02.440 to see more significant gains in areas like like Florida 0:16:02.560 --> 0:16:05.680 and Texas if people look to to relocate. But still 0:16:05.680 --> 0:16:08.440 in the Northeast and the Midwest, we're still seeing strong 0:16:08.640 --> 0:16:12.960 incremental price increase and demand in the marketplace. So on 0:16:12.960 --> 0:16:16.320 a national level, we have a very, very very strong 0:16:16.400 --> 0:16:20.320 mortgage market and haven't seen much weakness anywhere at all. 0:16:20.400 --> 0:16:23.239 The only thing that we are continue to see sometimes 0:16:23.400 --> 0:16:26.200 is the supply and demand with the home builders are 0:16:26.200 --> 0:16:28.520 actually being able to build, you know, the first time 0:16:28.840 --> 0:16:31.600 first on homebuyers in that price point that they're looking for, 0:16:31.720 --> 0:16:33.240 somewhere in the two to four and a thousand all 0:16:33.240 --> 0:16:35.440 that range. So, Jeff, give us a sense of the 0:16:35.520 --> 0:16:39.200 mortgage market today compared to say, you know, prior to 0:16:39.280 --> 0:16:42.480 the financial crisis, when uh, you know, it got very 0:16:42.560 --> 0:16:44.560 easy on the credit side. Where are we today? Is 0:16:44.560 --> 0:16:47.520 it a healthy market? It is? And so one of 0:16:47.520 --> 0:16:49.040 the things that we do at the Risk is were 0:16:49.040 --> 0:16:51.640 the largest quality control provider in the countries. On top 0:16:51.680 --> 0:16:55.240 of originations, we have that lens. The defect rate, to 0:16:55.280 --> 0:16:58.000 give you perspective today is somewhere about a point of three. 0:16:58.680 --> 0:17:01.760 The underwriting standard, the products that are in the market 0:17:01.760 --> 0:17:05.560 place are solid, are extremely solid. So when people talk 0:17:05.560 --> 0:17:08.200 about we're going to have a housing crisis potentially in 0:17:08.240 --> 0:17:10.000 a couple of years, that's not the case at all. 0:17:10.040 --> 0:17:13.639 This is not a bubble. These are subtle, subtle, solid standards. 0:17:13.920 --> 0:17:17.639 Regulatory rules are in place, really are very focused on 0:17:17.720 --> 0:17:21.119 making sure that people who qualify for loans are loans 0:17:21.119 --> 0:17:22.840 that they can't afford and that they can pay for. 0:17:23.040 --> 0:17:25.399 So we're very very happy at the quality of the 0:17:25.400 --> 0:17:27.879 mortgage zones being done nationally. Yeah, that's something a lot 0:17:27.920 --> 0:17:31.000 of people have talked about that will stave off another crisis. 0:17:31.240 --> 0:17:33.800 At the same time, there's some pretty fundamental shifts in 0:17:33.840 --> 0:17:37.760 the way that loans are extended in terms of what 0:17:37.840 --> 0:17:42.000 you call an online data, social media, etcetera. In order 0:17:42.080 --> 0:17:44.359 to extend credit. Can you talk a little bit about 0:17:44.359 --> 0:17:49.119 how that's transforming the real estate market at a great point, 0:17:49.359 --> 0:17:51.280 and I could go a little broader, even the consumer 0:17:51.359 --> 0:17:53.360 lending and to your point, the way that that consumer 0:17:53.400 --> 0:17:56.560 loans are being made to the millennials and Generation Z. 0:17:57.200 --> 0:18:01.080 They're getting really really creative between I've called a combination 0:18:01.320 --> 0:18:04.240 of a consumer loan UM and a home eq we 0:18:04.359 --> 0:18:06.240 loan if you already have a house, and then the 0:18:06.240 --> 0:18:08.960 way that they're reaching out and you know, through this 0:18:09.040 --> 0:18:12.560 digital uh digital omni channels to be able to get 0:18:12.600 --> 0:18:16.359 the first time HomeBuyer is interested in potentially buying a house. 0:18:16.520 --> 0:18:20.800 So you know, things like all the advertising via social 0:18:20.840 --> 0:18:24.080 media being that's really driving a lot of people who 0:18:24.080 --> 0:18:25.800 may be still be renting and trying to give them 0:18:25.800 --> 0:18:27.760 a different way of thinking about how they would come 0:18:27.760 --> 0:18:30.360 into the how they would come into the housing market 0:18:30.440 --> 0:18:32.119 for the first time as their current rentors. On the 0:18:32.119 --> 0:18:34.399 flip side, there also has been a lot of advancement 0:18:34.440 --> 0:18:38.440 made when it comes to digitally pricing homes and moving 0:18:38.440 --> 0:18:40.639 away from just a human assessor that comes in and 0:18:40.960 --> 0:18:44.280 designates a value to your apartment in your house. Can 0:18:44.320 --> 0:18:46.359 you give us a sense of how much that's getting 0:18:46.400 --> 0:18:52.480 adopted in invaluation models, that's a great question. So specifically 0:18:52.520 --> 0:18:54.359 in big cities where you have a lot of comparable 0:18:54.800 --> 0:18:58.199 A d MS automation valuation models are very accurate and 0:18:58.200 --> 0:19:00.800 can be used a lot by banks, and especially if 0:19:00.800 --> 0:19:02.920 they're refinancing a house. So let's say that the house, 0:19:02.960 --> 0:19:05.440 maybe it was sold a year ago, but the interest 0:19:05.520 --> 0:19:07.440 rates drop a point, so they come back in and 0:19:07.560 --> 0:19:09.680 do an a v M. That's used quite a bit then. 0:19:10.160 --> 0:19:13.320 But again, when you get out more in the rural areas, 0:19:13.520 --> 0:19:15.600 a lot of times you still probably need some of 0:19:15.640 --> 0:19:18.600 that human input to make sure that you're getting the 0:19:18.960 --> 0:19:21.280 right price points that you're learning against because there's not 0:19:21.359 --> 0:19:24.120 as many comps. So the A v M models really 0:19:24.160 --> 0:19:27.240 I think work well in larger urban areas, but when 0:19:27.240 --> 0:19:29.040 you get into some of the more rural areas in 0:19:29.040 --> 0:19:31.680 the country, you still need a combination of the data 0:19:31.680 --> 0:19:35.000 and technology, but probably having a person to put an eyeball, 0:19:35.040 --> 0:19:36.840 set of eyeballs, toll that helps to make sure you 0:19:36.880 --> 0:19:38.879 have a right price point. So, Jeff, I know there 0:19:38.920 --> 0:19:41.280 was a narrative out there for a while the millennials 0:19:41.320 --> 0:19:45.480 and gen Z folks were not buying homes similar to 0:19:45.600 --> 0:19:48.080 maybe past generations. Is that still the case or is 0:19:48.080 --> 0:19:51.680 that evolving? It's evolving and we're actually starting to see 0:19:51.720 --> 0:19:54.160 millennials and gen Z, which is you know, as defined 0:19:54.240 --> 0:19:56.920 it's twenty four years old, starting to look to buy 0:19:57.400 --> 0:19:59.680 much more right now. And so what's driving that? Which 0:19:59.720 --> 0:20:02.399 drive it is you know, they're able to move, specially 0:20:02.520 --> 0:20:05.879 millennials are able to move into the suburbs and so 0:20:05.920 --> 0:20:08.240 they can actually find a house that they can afford. 0:20:08.320 --> 0:20:10.320 The different here, though, is the way the workforces in 0:20:10.359 --> 0:20:12.639 America are changing. Think about how many of us have 0:20:12.680 --> 0:20:15.920 the opportunity to work remotely from home. So if you 0:20:15.960 --> 0:20:18.240 can work remotely from home, now, all of a sudden, 0:20:18.240 --> 0:20:20.879 they're not thinking about that commute like our parents might have, 0:20:21.040 --> 0:20:22.560 you know, five days a week. If they can work 0:20:22.560 --> 0:20:25.000 three days remote now let's saying okay, I can work 0:20:25.000 --> 0:20:27.240 from home. I want to go live in the suburbs. 0:20:27.280 --> 0:20:29.880 I can afford this, And then on top of that, 0:20:30.200 --> 0:20:33.840 you're seeing a lot of smarter the developers putting together, 0:20:33.840 --> 0:20:36.840 as the term called hip hip Serbia, where they're putting 0:20:36.880 --> 0:20:39.359 together these communities in the areas that really kind of 0:20:39.359 --> 0:20:42.040 make it feel more like it's an urban area. So 0:20:42.119 --> 0:20:46.199 you've got, you know, walkable restaurants, you've got restaurants that 0:20:46.200 --> 0:20:48.560 you would have want, places you want to go out, bars, 0:20:48.840 --> 0:20:50.720 things that you can do in a very very nice, 0:20:51.080 --> 0:20:54.880 uh central locations. So that's driving people from renting and saying, 0:20:54.880 --> 0:20:57.040 you know what, we're gonna go ahead and we're gonna 0:20:57.040 --> 0:20:59.960 buy what's all those new again hip strip malls? All right? 0:21:00.160 --> 0:21:03.000 Like this, this is, this is It's been a phenomenal, 0:21:03.359 --> 0:21:06.680 phenomenal conversation. Jeff Taylor, co founder managing director at Digital Risk, 0:21:07.240 --> 0:21:22.800 joining us on the phone. Well, I think the market 0:21:22.840 --> 0:21:25.760 consensus seems to be that the US and China are 0:21:25.880 --> 0:21:29.680 inching along towards a trade negotiation, maybe a phase one 0:21:30.320 --> 0:21:33.240 type of trade dealer. Next guest isn't so sure. Kamal 0:21:33.320 --> 0:21:37.160 shri Kumar, president of Shri Kumar Global Strategies, good friend 0:21:37.200 --> 0:21:39.480 of the show, joins us on the phone from Santa Monica. Shree, 0:21:39.520 --> 0:21:41.880 thanks so much for joining US again. I know you've 0:21:42.040 --> 0:21:47.040 generally been cautious about the I guess the progress that's 0:21:47.080 --> 0:21:51.800 being made here between US and China. What's your current view? Uh, 0:21:51.920 --> 0:21:54.879 thank you for having me, Paul, And in terms of views, 0:21:55.000 --> 0:21:57.600 they haven't changed much at all. In terms of the 0:21:57.680 --> 0:22:02.560 last several months b c. These trade talks start and 0:22:02.800 --> 0:22:07.480 go on from about March at May two eighteen onwards, 0:22:07.480 --> 0:22:09.240 so we have been on for more than a year 0:22:09.240 --> 0:22:12.560 and a half. We have heard several times that progress 0:22:12.640 --> 0:22:16.359 is being made. We even heard we were imminently completely 0:22:16.400 --> 0:22:19.520 resolved with the accord, and then we have gone back 0:22:19.560 --> 0:22:22.879 every time, probably with a Trump tweet or with a 0:22:23.080 --> 0:22:27.480