1 00:00:05,800 --> 00:00:08,720 Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim Fox. 2 00:00:08,760 --> 00:00:11,520 Speaker 1: Along with my co host Lisa Abramowitz. Each day we 3 00:00:11,640 --> 00:00:15,120 Speaker 1: bring you the most important, noteworthy, and useful interviews for 4 00:00:15,200 --> 00:00:17,840 Speaker 1: you and your money, whether you're at the grocery store 5 00:00:17,960 --> 00:00:20,720 Speaker 1: or the trading floor. Find the Bloomberg p m L 6 00:00:20,840 --> 00:00:31,200 Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. I'm 7 00:00:31,320 --> 00:00:33,800 Speaker 1: so pleased to have our next guest, someone who I've 8 00:00:33,840 --> 00:00:36,720 Speaker 1: been speaking with for years, but who now has a beard, 9 00:00:36,760 --> 00:00:39,440 Speaker 1: so it's completely different. Matt Tucker, head of I Shares 10 00:00:40,040 --> 00:00:43,480 Speaker 1: America's fixed income strategy at black Rock, the first portfolio 11 00:00:43,520 --> 00:00:46,440 Speaker 1: manager for a fixed income et F How much the 12 00:00:46,479 --> 00:00:50,040 Speaker 1: world has changed since then? Right? Quite a bit? Good morning, Lisa. Yeah, 13 00:00:50,080 --> 00:00:51,760 Speaker 1: you know. The joke I make is that I was 14 00:00:51,840 --> 00:00:53,720 Speaker 1: the first PM on the first fixed income e t 15 00:00:53,880 --> 00:00:59,080 Speaker 1: f B. At the time, nobody cared. Right now, Well, 16 00:00:59,280 --> 00:01:01,040 Speaker 1: but one day I want to ask you about, especially 17 00:01:01,160 --> 00:01:04,240 Speaker 1: as the total a U m asset center management and 18 00:01:04,280 --> 00:01:08,200 Speaker 1: fixed in comm e TF swells to eight hundred billion dollars, 19 00:01:08,600 --> 00:01:10,600 Speaker 1: where do we go from here? Are we sort of 20 00:01:10,920 --> 00:01:14,080 Speaker 1: past peak growth for this industry given the fact that 21 00:01:14,160 --> 00:01:16,840 Speaker 1: rates are rising, or do you see this a total 22 00:01:17,000 --> 00:01:19,600 Speaker 1: significantly increasing over the next few years, you know. A 23 00:01:19,680 --> 00:01:21,039 Speaker 1: For me, I think the joke is that we're still 24 00:01:21,080 --> 00:01:22,920 Speaker 1: in the early innings. Right. If you look at the 25 00:01:22,920 --> 00:01:25,120 Speaker 1: market so global fixed in com ets, as you said, 26 00:01:25,120 --> 00:01:27,840 Speaker 1: it's over eight hundred billion. The fixed income market is 27 00:01:27,880 --> 00:01:31,520 Speaker 1: over a hundred trillion dollars, So less than one percent 28 00:01:31,600 --> 00:01:33,600 Speaker 1: of all the bonds and kind of bond exposures in 29 00:01:33,640 --> 00:01:35,560 Speaker 1: the world are in ETFs, but so many of them 30 00:01:35,600 --> 00:01:37,959 Speaker 1: aren't even that liquid. So how much is sort of 31 00:01:38,000 --> 00:01:42,399 Speaker 1: ETF a bowl? I think a lot more, um, So 32 00:01:42,480 --> 00:01:44,840 Speaker 1: give us some projections. So I think in the next 33 00:01:44,880 --> 00:01:46,720 Speaker 1: five years you could see this will easily cross a 34 00:01:46,720 --> 00:01:49,360 Speaker 1: trillion and probably approached two trillion globally for fixed in 35 00:01:49,400 --> 00:01:52,040 Speaker 1: com ETFs. And we're still growing at pretty healthy fift 36 00:01:53,000 --> 00:01:55,400 Speaker 1: year growth rates um. Things like So, I think I 37 00:01:55,400 --> 00:01:56,720 Speaker 1: have to look at a couple different trends. So one 38 00:01:56,760 --> 00:01:58,600 Speaker 1: is you're just seeing more adoption of e t f 39 00:01:58,680 --> 00:02:00,960 Speaker 1: s as a way to invest in fixt income markets. Right, 40 00:02:01,160 --> 00:02:02,400 Speaker 1: they do a lot of things that you can do. 41 00:02:02,400 --> 00:02:03,760 Speaker 1: The one you can do the ETF you can't do 42 00:02:03,800 --> 00:02:05,960 Speaker 1: with the mutual fund or a bond, right, But at 43 00:02:06,000 --> 00:02:07,800 Speaker 1: the same time, you do have kind of these shorter 44 00:02:07,920 --> 00:02:10,160 Speaker 1: term periods where you have like rising rates that might 45 00:02:10,160 --> 00:02:12,880 Speaker 1: cause some pullback and fixed income, but that doesn't diminish 46 00:02:12,880 --> 00:02:15,400 Speaker 1: the overall trend, right, I mean, go back to thirteen, 47 00:02:16,000 --> 00:02:18,200 Speaker 1: the fan went, he had the taper tantrum. Rates went up, 48 00:02:18,360 --> 00:02:21,120 Speaker 1: people pulled money out of fixed income ETFs. Money came out, 49 00:02:21,120 --> 00:02:23,800 Speaker 1: but they went back in in fourteen, fifteen, sixteen, seventeen. 50 00:02:23,840 --> 00:02:26,359 Speaker 1: So you're gonna have these short term pullbacks, but long term, 51 00:02:26,360 --> 00:02:27,960 Speaker 1: I mean, the trend is still. I think you're gonna 52 00:02:28,000 --> 00:02:31,000 Speaker 1: still see adoption because there's still so many investors discovering 53 00:02:31,040 --> 00:02:33,480 Speaker 1: bond ETFs. So where's the biggest opportunity, where's the biggest 54 00:02:33,480 --> 00:02:35,639 Speaker 1: growth could come from? So I think the biggest growth 55 00:02:35,760 --> 00:02:37,840 Speaker 1: is this move towards model portfolios that's happening in the 56 00:02:37,880 --> 00:02:41,440 Speaker 1: wealth space, right, so so many wealth managers smart smart data, 57 00:02:41,680 --> 00:02:44,000 Speaker 1: well not even a smart data. So to put that aside, 58 00:02:44,080 --> 00:02:45,560 Speaker 1: I'll I think there is a growth area. But if 59 00:02:45,560 --> 00:02:47,240 Speaker 1: you put that aside and just say kind of bread 60 00:02:47,280 --> 00:02:50,440 Speaker 1: and butter, how investors invest today is changing. So it 61 00:02:50,520 --> 00:02:52,639 Speaker 1: used to be that a portfolio manager, say it a 62 00:02:52,880 --> 00:02:55,360 Speaker 1: say called a financial advisor would go buy a couple 63 00:02:55,400 --> 00:02:58,200 Speaker 1: active funds and say, Okay, that's my bond allocation. Now 64 00:02:58,200 --> 00:02:59,679 Speaker 1: they're saying, you know what, I can use e t 65 00:02:59,840 --> 00:03:02,720 Speaker 1: F to actually build my own exposure at the client level, 66 00:03:02,760 --> 00:03:06,280 Speaker 1: so every individual investor can have a customized fixed income portfolio. 67 00:03:06,680 --> 00:03:08,640 Speaker 1: That trend is still growing. I think it'll be a 68 00:03:08,639 --> 00:03:12,000 Speaker 1: ton more adoption of body tfs around that trend alright, So, 69 00:03:12,840 --> 00:03:15,880 Speaker 1: certainly there has been a lot of growth in government bonds. 70 00:03:15,880 --> 00:03:19,240 Speaker 1: Certainly there's been quite a bit of growth in corporate bonds. 71 00:03:19,280 --> 00:03:20,919 Speaker 1: But when it comes to the risk of your debt 72 00:03:21,200 --> 00:03:24,280 Speaker 1: high your bondy ts, for example, the assets have kind 73 00:03:24,280 --> 00:03:26,760 Speaker 1: of stagnated. It seems like recently there's been sort of 74 00:03:26,840 --> 00:03:30,280 Speaker 1: a leveling off, and even as volumes increase in institutions 75 00:03:30,360 --> 00:03:32,640 Speaker 1: use it more, it kind of has seems to have 76 00:03:32,680 --> 00:03:34,720 Speaker 1: reach a saturation point. Do you think that that's the case. 77 00:03:34,760 --> 00:03:37,480 Speaker 1: Do you think that they're sort of done growing. I'm 78 00:03:37,520 --> 00:03:39,200 Speaker 1: much sure they're done growing forever. I think at this 79 00:03:39,280 --> 00:03:40,920 Speaker 1: part of the cycle. Though, if you kind of look 80 00:03:40,960 --> 00:03:42,520 Speaker 1: at who's using them right now, you have a lot 81 00:03:42,560 --> 00:03:45,280 Speaker 1: of institutions, as you mentioned, using high O dtfs, the 82 00:03:45,360 --> 00:03:48,320 Speaker 1: liquidity is very strong. Um there, there's kind of enough 83 00:03:48,560 --> 00:03:50,640 Speaker 1: float out there to kind of support the liquidity that's 84 00:03:50,640 --> 00:03:52,640 Speaker 1: out there. I think if you had a period where 85 00:03:52,640 --> 00:03:54,480 Speaker 1: investors started to allocate more to HIE out as an 86 00:03:54,480 --> 00:03:57,120 Speaker 1: asset class, you'd see it grow. But honestly, where spreads 87 00:03:57,120 --> 00:03:58,720 Speaker 1: are right now and we are in the cycle, you're 88 00:03:58,760 --> 00:04:00,280 Speaker 1: just not seeing a lot of investor to and an 89 00:04:00,280 --> 00:04:03,040 Speaker 1: appetite for high yield um. Different part of the cycle 90 00:04:03,080 --> 00:04:04,600 Speaker 1: that changes, I think they grow, but I think at 91 00:04:04,600 --> 00:04:06,800 Speaker 1: this point it's hard to imagine it would grow, right 92 00:04:06,880 --> 00:04:09,040 Speaker 1: just like you're not seeing growth in highled mutual funds 93 00:04:09,080 --> 00:04:11,480 Speaker 1: or other HILD vehicles. So, Matt, what do you think 94 00:04:11,520 --> 00:04:15,760 Speaker 1: of bitcoin ETFs? We don't have any yet. I mean 95 00:04:15,880 --> 00:04:17,320 Speaker 1: bitcoin has got a hold of the problem and that 96 00:04:17,360 --> 00:04:19,280 Speaker 1: no one's quite sure if it's a security or not, right, 97 00:04:19,279 --> 00:04:21,040 Speaker 1: and so kind of tell you to fine. If it's 98 00:04:21,040 --> 00:04:23,039 Speaker 1: a security, it's hard to actually put it into something 99 00:04:23,080 --> 00:04:25,320 Speaker 1: else which is a security. So I think the regulators 100 00:04:25,320 --> 00:04:26,760 Speaker 1: have a lot of work to to kind of figure 101 00:04:26,760 --> 00:04:29,040 Speaker 1: that out and figure out how to legally treat bitcoin. 102 00:04:29,520 --> 00:04:32,440 Speaker 1: But once you actually have it established, the rules are established, sure, 103 00:04:32,480 --> 00:04:33,840 Speaker 1: I can see making its way to do an E 104 00:04:33,880 --> 00:04:35,640 Speaker 1: T F as long as it was eligible. Well, just 105 00:04:35,680 --> 00:04:38,280 Speaker 1: talking about that, I'm wondering with some of the derivatives 106 00:04:38,279 --> 00:04:39,920 Speaker 1: that have been used in e t F. Some'm thinking 107 00:04:39,960 --> 00:04:43,760 Speaker 1: of an E t F complex that has credit default 108 00:04:43,800 --> 00:04:46,600 Speaker 1: swaps as the backing. It's just sort of a derivative 109 00:04:46,640 --> 00:04:48,599 Speaker 1: of a derivative. Does that start to get you nervous 110 00:04:48,720 --> 00:04:51,520 Speaker 1: or you know, with the right parameters and the right holdings, 111 00:04:51,560 --> 00:04:54,160 Speaker 1: it's fine. I think as long as you structure and 112 00:04:54,200 --> 00:04:56,640 Speaker 1: manage the risks appropriately, it can be fine. Right, so 113 00:04:56,680 --> 00:04:58,640 Speaker 1: as you can imagine AID and all these things. I 114 00:04:58,680 --> 00:05:00,839 Speaker 1: think there are actually in the market credit fault swap 115 00:05:00,920 --> 00:05:02,640 Speaker 1: you know, back t tps. But as long as those 116 00:05:02,640 --> 00:05:05,240 Speaker 1: are fully collateralized, there's not a lot of leverage, I 117 00:05:05,240 --> 00:05:06,720 Speaker 1: think it can work. I think if you started getting 118 00:05:06,720 --> 00:05:09,640 Speaker 1: into layers of leverage, I think that's the lesson of 119 00:05:09,960 --> 00:05:12,160 Speaker 1: ten years ago, right, that's when you start to create 120 00:05:12,200 --> 00:05:14,480 Speaker 1: these structures that can unwind quickly in a crisis, but 121 00:05:15,000 --> 00:05:17,680 Speaker 1: fully collateralized, fully back whether you hold a bond or 122 00:05:17,680 --> 00:05:20,200 Speaker 1: a derivative, it shouldn't matter much. Actually, are there bad 123 00:05:20,240 --> 00:05:22,600 Speaker 1: actors in the E t F world that are doing 124 00:05:22,600 --> 00:05:27,080 Speaker 1: things that you think are imprudent? That's always a tough question. Um, 125 00:05:27,200 --> 00:05:29,000 Speaker 1: I like to I like to make your life difficult. 126 00:05:29,400 --> 00:05:31,960 Speaker 1: I think there are more and more actors in this space. 127 00:05:32,040 --> 00:05:33,320 Speaker 1: Right so I sit in a seat to your point 128 00:05:33,320 --> 00:05:35,440 Speaker 1: where I've been doing this for more than sixteen years now, 129 00:05:35,520 --> 00:05:37,839 Speaker 1: right so I take kind of a long lens on 130 00:05:37,880 --> 00:05:39,920 Speaker 1: this where I think there are very good providers who 131 00:05:39,920 --> 00:05:42,120 Speaker 1: put out very good products where they understand their risks 132 00:05:42,120 --> 00:05:45,000 Speaker 1: and how to list them, like black Rock for example. 133 00:05:45,040 --> 00:05:46,520 Speaker 1: Not to make this commercial, but yeah, so I feel 134 00:05:46,560 --> 00:05:48,360 Speaker 1: like when we've been doing this so long, we understand 135 00:05:48,400 --> 00:05:50,080 Speaker 1: this and understand how to do it. As you get 136 00:05:50,120 --> 00:05:52,880 Speaker 1: new players market, you can't name names, but but I 137 00:05:52,920 --> 00:05:55,919 Speaker 1: think you could firms that don't really understand the underlying 138 00:05:55,960 --> 00:05:59,200 Speaker 1: don't understand how to create funds. I think there's risks 139 00:05:59,320 --> 00:06:01,320 Speaker 1: like any industry, right you get more players in But 140 00:06:01,320 --> 00:06:04,120 Speaker 1: but what kind of reputational risk is there to you 141 00:06:04,320 --> 00:06:06,839 Speaker 1: and to your firm given the fact that there are 142 00:06:06,960 --> 00:06:12,560 Speaker 1: more players, some with less perhaps prudent standards. Um, I 143 00:06:12,560 --> 00:06:14,640 Speaker 1: am something that we definitely think about and talk about, 144 00:06:14,760 --> 00:06:17,000 Speaker 1: right this This idea that if there was a bad 145 00:06:17,040 --> 00:06:19,520 Speaker 1: actor who made some big mistake, there could be some 146 00:06:19,600 --> 00:06:21,520 Speaker 1: taint the e t F industry. That's kind of a 147 00:06:21,520 --> 00:06:24,160 Speaker 1: tail risk that every industry has, right, But I think 148 00:06:24,200 --> 00:06:26,960 Speaker 1: that the forces pushing the growth of ETFs are strong 149 00:06:27,040 --> 00:06:29,640 Speaker 1: enough that the industry would weather any such event. I'm 150 00:06:29,680 --> 00:06:31,479 Speaker 1: not really concerned about as a long term risk, but 151 00:06:31,720 --> 00:06:34,040 Speaker 1: as a short term pullback or cause for concern, or 152 00:06:34,040 --> 00:06:36,280 Speaker 1: an area where you might have to educate more. Yeah, 153 00:06:36,320 --> 00:06:37,880 Speaker 1: I mean there could be something. If you look at 154 00:06:37,960 --> 00:06:40,760 Speaker 1: leverage inverse funds classic example, right, they've gone through some 155 00:06:40,760 --> 00:06:42,880 Speaker 1: periods that they've had a lot of scrutiny from regulators 156 00:06:42,880 --> 00:06:45,440 Speaker 1: from investors, and when that's happened, we've gone out and 157 00:06:45,480 --> 00:06:47,520 Speaker 1: done a lot of education to help people understand, like, 158 00:06:47,680 --> 00:06:50,240 Speaker 1: these are what these securities are, this is how they operate. 159 00:06:50,240 --> 00:06:52,240 Speaker 1: These are risk you should worry about. And as long 160 00:06:52,279 --> 00:06:54,000 Speaker 1: as we keep doing that in educating the market, I 161 00:06:54,000 --> 00:06:57,440 Speaker 1: think we're fine. Matt Tucker, so good to see you, 162 00:06:57,640 --> 00:07:00,560 Speaker 1: like the beard. Thank you. Matt Tucker is the head 163 00:07:00,560 --> 00:07:03,640 Speaker 1: of I Shares America's for fixed income strategy at black Rock. 164 00:07:03,960 --> 00:07:07,880 Speaker 1: He was the first portfolio manager for a fixed income 165 00:07:07,920 --> 00:07:10,120 Speaker 1: et F. He said people didn't really care back then 166 00:07:10,560 --> 00:07:13,280 Speaker 1: nearly two decades ago, but people certainly care today. When 167 00:07:13,280 --> 00:07:17,960 Speaker 1: there is eight hundred billion dollars in fixed income et fs, 168 00:07:18,000 --> 00:07:20,480 Speaker 1: and definitely this is an increasing area where people are 169 00:07:20,520 --> 00:07:24,440 Speaker 1: seeing both liquidity and an ability to invest in debt 170 00:07:24,960 --> 00:07:39,200 Speaker 1: at relatively low fees. All focused today on marijuana, in 171 00:07:39,240 --> 00:07:43,440 Speaker 1: particular Till Right, the Canadian cannabis company that has searched 172 00:07:43,520 --> 00:07:47,640 Speaker 1: four hundred percent in just months and is now more 173 00:07:47,720 --> 00:07:53,000 Speaker 1: valuable than American Air, Clorox and CBS. So who's hearing coaching? 174 00:07:53,360 --> 00:07:56,080 Speaker 1: Perhaps it's Sam Massuchi. He joins us now. He's founder 175 00:07:56,080 --> 00:07:58,560 Speaker 1: and chief executive officer of e t F Managers Group 176 00:07:58,600 --> 00:08:01,240 Speaker 1: in Summit, New Jersey. Sam, thank you so much for 177 00:08:01,280 --> 00:08:04,880 Speaker 1: being with us. You have an exchange traded fund that 178 00:08:05,000 --> 00:08:10,040 Speaker 1: invests in marijuana companies. How has it benefited from the 179 00:08:10,160 --> 00:08:14,920 Speaker 1: recent popularity of all things marijuana. Well, the fund, which 180 00:08:14,960 --> 00:08:17,800 Speaker 1: was launched by the way at the end of December 181 00:08:17,880 --> 00:08:21,480 Speaker 1: last year with seven million, is now over six million 182 00:08:21,520 --> 00:08:25,440 Speaker 1: in assets. We had a thirty million in UH you 183 00:08:25,480 --> 00:08:29,840 Speaker 1: know since August. UM it's had a record high yesterday 184 00:08:29,920 --> 00:08:34,040 Speaker 1: and we're up mid August. So all of this positive news, 185 00:08:34,520 --> 00:08:38,840 Speaker 1: whether it's related to UH til ray, the recent canopy 186 00:08:38,920 --> 00:08:45,439 Speaker 1: growth transaction, UM, you know, growing global acceptance of marijuana 187 00:08:45,559 --> 00:08:47,880 Speaker 1: is really helping the funds and investors in the funds. 188 00:08:47,960 --> 00:08:51,640 Speaker 1: How concerned are you about deploying that cash because there's 189 00:08:51,640 --> 00:08:54,360 Speaker 1: sort of a limited number of candidates here to receive it, 190 00:08:54,480 --> 00:08:58,400 Speaker 1: certainly in the public market. Yeah, I mean currently the 191 00:08:58,440 --> 00:09:02,160 Speaker 1: fund has thirty four hold things across the globe. UM. 192 00:09:02,200 --> 00:09:05,600 Speaker 1: The number of opportunities and target companies I think will 193 00:09:05,600 --> 00:09:10,120 Speaker 1: continue to grow as again there's more regulatory certainty around 194 00:09:10,200 --> 00:09:15,040 Speaker 1: the space and more companies UH start to enter. So 195 00:09:15,120 --> 00:09:17,280 Speaker 1: I think the universe of stocks is just going to 196 00:09:17,400 --> 00:09:19,319 Speaker 1: keep growing. I mean, how do you define a marijuana 197 00:09:19,760 --> 00:09:23,559 Speaker 1: marijuana stock when a company like Coca Cola is thinking 198 00:09:23,600 --> 00:09:26,839 Speaker 1: about creating a drink that uses one of the ingredients 199 00:09:26,920 --> 00:09:32,680 Speaker 1: in cannabis to provide certain benefits or effects, and when 200 00:09:32,720 --> 00:09:35,040 Speaker 1: the big tobacco companies are behind the scenes trying to 201 00:09:35,080 --> 00:09:39,400 Speaker 1: lobby for legalization and create throw networks. So what we 202 00:09:39,520 --> 00:09:41,599 Speaker 1: do is we UM And by the way, this is 203 00:09:41,640 --> 00:09:44,920 Speaker 1: an index based fund. The index is produced by Prime 204 00:09:44,960 --> 00:09:47,720 Speaker 1: Indexes and we manage the portfolio to mass the index. 205 00:09:48,240 --> 00:09:52,400 Speaker 1: But the index is actually split up between pure marijuana 206 00:09:52,400 --> 00:09:56,640 Speaker 1: plays as well as companies that are becoming very involved. 207 00:09:56,679 --> 00:09:59,280 Speaker 1: But it's not their core business. I think Scott's Miracle 208 00:09:59,320 --> 00:10:01,280 Speaker 1: could grow, which is one of our holdings, is a 209 00:10:01,280 --> 00:10:04,960 Speaker 1: good example of that. Philip Morris is another. So it 210 00:10:05,160 --> 00:10:07,320 Speaker 1: is unique in that it is a pure play. It 211 00:10:07,400 --> 00:10:11,280 Speaker 1: does offer access to companies that are not UM only 212 00:10:11,360 --> 00:10:13,520 Speaker 1: in the cannabis space, as I said, in like a 213 00:10:13,559 --> 00:10:17,240 Speaker 1: Scots or a uh you know, some of these other 214 00:10:17,240 --> 00:10:20,160 Speaker 1: funds Philip Mars. But it does offer this kind of 215 00:10:20,200 --> 00:10:23,320 Speaker 1: access that benefits from the growth in this space, investor 216 00:10:23,400 --> 00:10:28,120 Speaker 1: demand and certainty around regulations. So, Sam, you are the 217 00:10:28,120 --> 00:10:31,520 Speaker 1: first cannabis et F in the US. Are you seeing 218 00:10:31,600 --> 00:10:34,000 Speaker 1: a lot of other E t F providers follow on 219 00:10:34,160 --> 00:10:38,080 Speaker 1: and try to get in the game as well recently? Um, 220 00:10:38,120 --> 00:10:40,280 Speaker 1: I'm not. I mean we're the only pure play in 221 00:10:40,320 --> 00:10:43,920 Speaker 1: the US. UM, there is a pure play in Canada. UM. 222 00:10:43,960 --> 00:10:47,199 Speaker 1: We have the benefit of having first mover advantage as 223 00:10:48,000 --> 00:10:50,440 Speaker 1: of all of our funds, our first mover UM and 224 00:10:50,559 --> 00:10:55,040 Speaker 1: so this is a very first mover driven business E 225 00:10:55,120 --> 00:10:58,720 Speaker 1: t F thematic ets in particular. So it's not to 226 00:10:58,720 --> 00:11:01,160 Speaker 1: say that others might not get in all, but you know, 227 00:11:01,200 --> 00:11:03,600 Speaker 1: we have that space. How concerned aregue that this is 228 00:11:03,640 --> 00:11:05,720 Speaker 1: just a passing fad? That this sort of is a 229 00:11:05,880 --> 00:11:08,719 Speaker 1: rolling ball of money that will roll out of the 230 00:11:08,800 --> 00:11:11,960 Speaker 1: cannabis space as we get more certainty around regulations and 231 00:11:12,000 --> 00:11:15,280 Speaker 1: get a clear sense of the winners and losers here. Um, 232 00:11:15,400 --> 00:11:17,200 Speaker 1: I don't think it is. I think it is an 233 00:11:17,240 --> 00:11:21,480 Speaker 1: industry and really within its infancy and again around the globe, 234 00:11:21,480 --> 00:11:26,200 Speaker 1: people are learning more about the medicinal properties. It's being 235 00:11:26,280 --> 00:11:29,800 Speaker 1: used for things like the treatment of children's epileptic seizures, 236 00:11:29,880 --> 00:11:33,880 Speaker 1: chrone disease, It's weaning people off of opioids. So certainly 237 00:11:33,920 --> 00:11:36,280 Speaker 1: the medicinal side of it will continue to grow as 238 00:11:36,280 --> 00:11:38,840 Speaker 1: we better understand the science and the benefits. One thing 239 00:11:38,840 --> 00:11:40,839 Speaker 1: I don't understand, though, is that's not where the real 240 00:11:40,840 --> 00:11:43,240 Speaker 1: growth opportunity comes from, right, I mean the real growth 241 00:11:43,240 --> 00:11:46,600 Speaker 1: here could be from recreational use, where it puts the 242 00:11:46,640 --> 00:11:51,120 Speaker 1: cannabis industry on par with the alcohol industry or the 243 00:11:51,160 --> 00:11:54,800 Speaker 1: tobacco industry. Correct. Well, well, I I don't know that 244 00:11:54,840 --> 00:11:56,600 Speaker 1: I agree with that. I think there's there There are 245 00:11:56,640 --> 00:11:59,720 Speaker 1: is two pronged growth, which is a benefit to investing 246 00:11:59,760 --> 00:12:03,120 Speaker 1: in this space. Sure, there is a recreational side. There's 247 00:12:03,200 --> 00:12:06,520 Speaker 1: less acceptance of recreational certainly within the US and globally 248 00:12:06,559 --> 00:12:10,080 Speaker 1: than medicinal, but there were very large companies doing some 249 00:12:10,120 --> 00:12:15,239 Speaker 1: tremendous work in the medicinal space, all benefiting from marijuana, 250 00:12:15,240 --> 00:12:19,280 Speaker 1: particularly the CBD components of the cannabis plant. So now 251 00:12:19,440 --> 00:12:21,199 Speaker 1: I think you're gonna see a lot of growth both 252 00:12:21,280 --> 00:12:25,280 Speaker 1: in both sections, which benefits the fund either way. Sam, 253 00:12:25,400 --> 00:12:27,839 Speaker 1: who are the investors that you're seeing put money into 254 00:12:27,880 --> 00:12:31,680 Speaker 1: your fund for the most partment, institutions, individuals, all of 255 00:12:31,679 --> 00:12:34,720 Speaker 1: the above. I mean we literally have hundreds of thousands 256 00:12:34,760 --> 00:12:37,120 Speaker 1: of investors in the fund. The ticker, by the way, 257 00:12:37,160 --> 00:12:40,240 Speaker 1: is m j UM. It's a stock that that you 258 00:12:40,240 --> 00:12:42,560 Speaker 1: know today. It's a you know, it's a forty four 259 00:12:42,640 --> 00:12:45,920 Speaker 1: dollar and thirty cent stock. So I think what it's 260 00:12:45,960 --> 00:12:48,880 Speaker 1: benefiting from is a lot of people wanted to invest 261 00:12:48,880 --> 00:12:51,040 Speaker 1: in this space, but they wanted to get away from 262 00:12:51,160 --> 00:12:55,920 Speaker 1: single stock risk. When you buy a portfolio of thirty 263 00:12:55,960 --> 00:12:59,760 Speaker 1: four thirty six stocks, it's giving you access to the theme, 264 00:13:00,280 --> 00:13:02,480 Speaker 1: but they're not having to do the research to pick 265 00:13:02,559 --> 00:13:05,360 Speaker 1: the right horse. This is a fund that does that 266 00:13:05,480 --> 00:13:08,200 Speaker 1: for you. Thank you so much for joining us. Really 267 00:13:08,800 --> 00:13:11,360 Speaker 1: a good time for for mj for your fund, UH 268 00:13:11,400 --> 00:13:13,840 Speaker 1: in a really compelling time as we watched the shift 269 00:13:14,040 --> 00:13:18,920 Speaker 1: from illegal to select legality and potentially beyond. Sama Succi, 270 00:13:19,080 --> 00:13:22,040 Speaker 1: founder and chief executive officer of et F Managers Group 271 00:13:22,080 --> 00:13:26,000 Speaker 1: in Summit, New Jersey. MJ invests in a range of 272 00:13:26,240 --> 00:13:30,040 Speaker 1: cannabis focused companies, UH, and it's just interesting to see 273 00:13:30,120 --> 00:13:35,400 Speaker 1: just how much these stocks have absolutely skyrocketed this year. 274 00:13:35,559 --> 00:13:39,199 Speaker 1: M J up nearly thirty seven percent year to date. 275 00:13:39,320 --> 00:13:42,280 Speaker 1: Till Ray, of course, is rocketing past some of the 276 00:13:42,400 --> 00:13:45,360 Speaker 1: hundred year old companies that are mainstays in the broader 277 00:13:45,480 --> 00:14:00,360 Speaker 1: US equity in disease. We have the chief ex oecative 278 00:14:00,400 --> 00:14:04,720 Speaker 1: officer of Auto Nation who started as a mechanic at 279 00:14:04,760 --> 00:14:08,000 Speaker 1: a mar Cities Benz dealership and has risen through the 280 00:14:08,080 --> 00:14:11,560 Speaker 1: ranks steadily to become the CEO, and he joins us 281 00:14:11,559 --> 00:14:13,960 Speaker 1: here in our eleven three studios as well, of course 282 00:14:14,080 --> 00:14:17,720 Speaker 1: as Craig Trudel, us Auto's team leader based in New York. 283 00:14:17,760 --> 00:14:21,000 Speaker 1: Here for us at Bloomberg News, Mike, thank you so 284 00:14:21,080 --> 00:14:24,640 Speaker 1: much for being with us. Mike Jackson, UH, executive Chairman 285 00:14:25,320 --> 00:14:28,640 Speaker 1: of Auto Nation. The announcement today that you are going 286 00:14:28,760 --> 00:14:32,800 Speaker 1: to retire as CEO and help find the next leader, 287 00:14:33,640 --> 00:14:36,720 Speaker 1: was this decession hard for you? To do now. I've 288 00:14:36,720 --> 00:14:41,200 Speaker 1: been thinking about it for us some years. Uh. The 289 00:14:41,280 --> 00:14:44,720 Speaker 1: company is in a great position, so there's a good 290 00:14:44,720 --> 00:14:49,800 Speaker 1: window for a transition. And next year I'll be seventy 291 00:14:49,880 --> 00:14:54,200 Speaker 1: years old and we'll have been CEO then for twenty years, 292 00:14:54,240 --> 00:14:57,480 Speaker 1: always sort of like breaking the rule of ninety and 293 00:14:58,400 --> 00:15:01,320 Speaker 1: so I think it's uh uh the right moment to 294 00:15:01,680 --> 00:15:06,560 Speaker 1: uh kick off a transition to an exciting new CEO 295 00:15:06,920 --> 00:15:12,200 Speaker 1: and UM the boards taking responsibility for the recruitment and 296 00:15:12,280 --> 00:15:16,120 Speaker 1: selection of the next CEO. I'm sure it will be 297 00:15:16,160 --> 00:15:20,920 Speaker 1: an outstanding, exciting, vibrant UH leader to join Auto Nation. 298 00:15:21,440 --> 00:15:27,560 Speaker 1: And my contract has been extended uh through as executive chairman. 299 00:15:27,600 --> 00:15:30,960 Speaker 1: So I'm excited myself to start an exciting new chapter 300 00:15:31,040 --> 00:15:34,200 Speaker 1: with the company. So, Mike, before we get into all 301 00:15:34,240 --> 00:15:37,800 Speaker 1: of the succession planning, I'm just wondering going forward, you know, 302 00:15:38,200 --> 00:15:42,160 Speaker 1: is the used car sales business going forward going to 303 00:15:42,200 --> 00:15:45,480 Speaker 1: look very different from the one that you grew up in. Well, 304 00:15:45,520 --> 00:15:48,600 Speaker 1: there's no question that's very different, and we've had a 305 00:15:48,680 --> 00:15:52,360 Speaker 1: part in changing it. We've branded the company Auto Nation 306 00:15:53,400 --> 00:15:56,520 Speaker 1: uh coast to coast, and we moved to one price 307 00:15:56,560 --> 00:16:00,280 Speaker 1: in all our pre owned operations across the comp ay 308 00:16:00,480 --> 00:16:05,840 Speaker 1: and our customers absolutely love it. It's how they want 309 00:16:05,880 --> 00:16:11,160 Speaker 1: to buy cars. It's and and our associates love eliminating 310 00:16:11,240 --> 00:16:14,160 Speaker 1: all the negotiation and haggle and be able to do 311 00:16:14,200 --> 00:16:16,200 Speaker 1: it much quicker. So if I look at our second 312 00:16:16,280 --> 00:16:19,800 Speaker 1: quarter for pre owned, uh, we're in that wonderful quadrant 313 00:16:19,880 --> 00:16:24,200 Speaker 1: where we have higher volumes at higher gross margins. Yeah, Greig, 314 00:16:24,280 --> 00:16:26,480 Speaker 1: come on in here. Yeah. And it's hard to talk 315 00:16:26,480 --> 00:16:29,240 Speaker 1: about all the change on the used car side without 316 00:16:29,360 --> 00:16:33,080 Speaker 1: talking as well about all of the changes on I'm sorry, 317 00:16:33,080 --> 00:16:36,440 Speaker 1: I'm the used car side without changes on the new side. Uh. 318 00:16:36,480 --> 00:16:39,720 Speaker 1: And maybe the biggest story in that respect for some 319 00:16:39,840 --> 00:16:43,040 Speaker 1: years now has been Tesla for a lot of people, 320 00:16:43,080 --> 00:16:46,920 Speaker 1: and this idea that can the the automaker sort of 321 00:16:47,000 --> 00:16:50,600 Speaker 1: circumvent the franchise model that we've come to know in 322 00:16:50,640 --> 00:16:53,360 Speaker 1: the US. How is that going for Tesla at this point? 323 00:16:53,400 --> 00:16:56,240 Speaker 1: In your view? Well, how how's it going for Tesla? Period? 324 00:16:56,880 --> 00:16:59,000 Speaker 1: I mean I have to you have to tip your hat. 325 00:16:59,640 --> 00:17:05,080 Speaker 1: The is is good for a luxury all electric vehicle, 326 00:17:05,280 --> 00:17:08,280 Speaker 1: and they were there first, and they've built a brand 327 00:17:08,320 --> 00:17:12,760 Speaker 1: that almost as a cult following They've never been able 328 00:17:12,760 --> 00:17:16,919 Speaker 1: to make money doing that. And their capital structure is 329 00:17:17,000 --> 00:17:23,639 Speaker 1: absolutely scary. Uh So the sustainability and viability is very 330 00:17:23,680 --> 00:17:26,639 Speaker 1: much open to question. Now. As far as their distribution model, 331 00:17:27,240 --> 00:17:31,080 Speaker 1: it's not what I would have chosen, but this is America. 332 00:17:31,119 --> 00:17:33,640 Speaker 1: I believe in free enterprise. If that's how they want 333 00:17:33,680 --> 00:17:39,640 Speaker 1: to do it, fine, I would observe that the rest 334 00:17:39,640 --> 00:17:43,440 Speaker 1: of us have electric vehicles coming in big numbers over 335 00:17:43,480 --> 00:17:47,560 Speaker 1: the next several years. Um Audi just launched its Etron 336 00:17:47,640 --> 00:17:52,320 Speaker 1: yesterday in San Francisco. It's absolutely sensational. So these are 337 00:17:52,680 --> 00:17:56,080 Speaker 1: very compelling electric vehicles and for the first time, on 338 00:17:56,160 --> 00:17:59,480 Speaker 1: top of everything else, Tesla is going to have real 339 00:17:59,640 --> 00:18:03,159 Speaker 1: company Titian and Elon Musk said that he was in 340 00:18:03,280 --> 00:18:07,160 Speaker 1: production hell last year. He recently said he's in deliveries hell. 341 00:18:07,680 --> 00:18:09,720 Speaker 1: Is that a hell that could have been avoided had 342 00:18:09,760 --> 00:18:12,480 Speaker 1: he not sort of snubbed his nose at the franchise dealer. 343 00:18:12,760 --> 00:18:15,320 Speaker 1: Greg I said this years ago. I said it for 344 00:18:15,400 --> 00:18:19,000 Speaker 1: a boutique model. What he's doing is fine. As soon 345 00:18:19,040 --> 00:18:21,720 Speaker 1: as he wants to do value, it's going to be 346 00:18:21,800 --> 00:18:25,080 Speaker 1: an issue. Well, here we are. We're now at the issue. 347 00:18:25,200 --> 00:18:29,679 Speaker 1: It is hell and um you know, all you have 348 00:18:29,720 --> 00:18:32,560 Speaker 1: to do is see these Model three sitting all over California. 349 00:18:32,760 --> 00:18:36,560 Speaker 1: And yeah, so, Mike, I do want to get your 350 00:18:36,600 --> 00:18:39,359 Speaker 1: your thoughts. The automation shares are down quite a bit 351 00:18:39,400 --> 00:18:41,439 Speaker 1: this year, but down about and there's been a lot 352 00:18:41,480 --> 00:18:45,159 Speaker 1: of concern raised about how we've reached peak autos and 353 00:18:45,240 --> 00:18:47,680 Speaker 1: we've turned to the corner and we're starting to see 354 00:18:47,960 --> 00:18:50,760 Speaker 1: some wobbly sales. What's your view there and do you 355 00:18:50,800 --> 00:18:52,600 Speaker 1: think that it's going to be a rocky road forward 356 00:18:52,640 --> 00:18:55,720 Speaker 1: for the entire auto industry? Well, I was always very 357 00:18:55,760 --> 00:18:58,800 Speaker 1: frank that I think I said it coming out of 358 00:18:58,800 --> 00:19:05,040 Speaker 1: the Auto show in something like that, that uh, auto 359 00:19:05,200 --> 00:19:07,880 Speaker 1: new vehicle sales are not going to climb forever, uh, 360 00:19:07,920 --> 00:19:09,800 Speaker 1: and that they're going to level off somewhere in the 361 00:19:09,920 --> 00:19:14,840 Speaker 1: high sixteen million units. And that's exactly what's happened. There's 362 00:19:14,880 --> 00:19:19,080 Speaker 1: been a very major shift though towards trucks, which I 363 00:19:19,119 --> 00:19:22,359 Speaker 1: think is permanent. In a month of August, the mix 364 00:19:22,520 --> 00:19:25,600 Speaker 1: was as vehicles to find his truck. Do you think 365 00:19:25,640 --> 00:19:28,280 Speaker 1: it's permanent? I think it's permanent, even with the concerns 366 00:19:28,280 --> 00:19:31,879 Speaker 1: about at some point we're gonna talk about gas consumption again, 367 00:19:32,240 --> 00:19:35,639 Speaker 1: now we're not, because alright, then, let me tell you 368 00:19:35,640 --> 00:19:39,920 Speaker 1: why it's permanent. Uh So, First, it's what the consumer wants. 369 00:19:39,960 --> 00:19:43,680 Speaker 1: They love the high seating position, they love the utility, 370 00:19:43,720 --> 00:19:45,719 Speaker 1: and they love the panache that comes with the design. 371 00:19:45,960 --> 00:19:49,119 Speaker 1: Step two, the fuel economy of these vehicles compared to 372 00:19:49,440 --> 00:19:53,720 Speaker 1: ten years ago, has doubled. We have small SUVs that 373 00:19:53,760 --> 00:19:57,800 Speaker 1: are as more fuel efficient than a sitan. It's absolutely amazing. 374 00:19:57,800 --> 00:20:00,119 Speaker 1: We have pickup trucks that get thirty miles to a 375 00:20:00,160 --> 00:20:04,120 Speaker 1: gown on the highway. So, and then you combine the 376 00:20:04,160 --> 00:20:09,040 Speaker 1: fact that gasoline prices are very reasonable of adjusted for inflation, 377 00:20:09,160 --> 00:20:11,960 Speaker 1: just under three dollars a gallon, and America is producing 378 00:20:12,000 --> 00:20:14,840 Speaker 1: its own petroleum. Again, We're up to ten million barrels 379 00:20:14,840 --> 00:20:19,000 Speaker 1: a day with fracking and it's sustainable. So what's going 380 00:20:19,080 --> 00:20:22,000 Speaker 1: to happen to get the American consumer out of this rucket? 381 00:20:22,000 --> 00:20:25,920 Speaker 1: Would take five six seven dollars a gallon gasoline to 382 00:20:25,920 --> 00:20:28,960 Speaker 1: to to push them back into Sedan's. I don't see 383 00:20:28,960 --> 00:20:35,200 Speaker 1: it happening. So that means um overall, Yeah, uh, it's 384 00:20:35,320 --> 00:20:38,640 Speaker 1: leveled off, but at a very nice place. All right, Craig, 385 00:20:38,800 --> 00:20:40,600 Speaker 1: just real quick here, I'd love to get your perspective. 386 00:20:40,640 --> 00:20:42,360 Speaker 1: Do you ever see a world two people you talk 387 00:20:42,400 --> 00:20:45,200 Speaker 1: to see a world in which the ride sharing industry 388 00:20:45,320 --> 00:20:48,439 Speaker 1: overtakes the car ownership industry. Is that going to upset 389 00:20:48,440 --> 00:20:50,720 Speaker 1: the model here? I think it's really hard to see 390 00:20:50,720 --> 00:20:53,520 Speaker 1: that in most of America. And I think one of 391 00:20:53,560 --> 00:20:56,520 Speaker 1: the things that Mike I've heard Mike talk about is 392 00:20:56,520 --> 00:20:59,600 Speaker 1: is that being really a model that is applicable and 393 00:21:00,040 --> 00:21:03,240 Speaker 1: useful in the cities, but so much of America, so 394 00:21:03,359 --> 00:21:05,720 Speaker 1: much so much of the American car buyers are the 395 00:21:05,720 --> 00:21:09,320 Speaker 1: folks in rural areas where Lift and Uber and the 396 00:21:09,359 --> 00:21:11,399 Speaker 1: like just have not scaled and are going to have 397 00:21:11,440 --> 00:21:14,960 Speaker 1: some real trouble, uh, scaling in any meaningful way. And 398 00:21:15,000 --> 00:21:17,200 Speaker 1: we've seen these companies make a lot of noise and 399 00:21:17,280 --> 00:21:19,399 Speaker 1: cities and and maybe pick off some buyers on the 400 00:21:19,440 --> 00:21:23,000 Speaker 1: margin here and there. But uh, you know, we're quite 401 00:21:23,040 --> 00:21:25,840 Speaker 1: a few years into these companies being around and we're 402 00:21:25,880 --> 00:21:28,360 Speaker 1: still selling you know, sixteen seven million. Look at who 403 00:21:28,359 --> 00:21:34,720 Speaker 1: they who They're disrupting taxis, buses, subways, rental cars. So 404 00:21:34,720 --> 00:21:39,440 Speaker 1: so the shared market is being disrupted by a shared business, yes, 405 00:21:39,600 --> 00:21:42,600 Speaker 1: and it really hasn't touched the personally used market. Unfortunately, 406 00:21:42,600 --> 00:21:44,480 Speaker 1: we have to leave it there. Thank you so much 407 00:21:44,480 --> 00:21:48,399 Speaker 1: for being here. Congratulations on an amazing tenure, uh rising 408 00:21:48,400 --> 00:21:51,240 Speaker 1: from being a mechanic to the CEO. Mike Jackson, executive 409 00:21:51,320 --> 00:21:55,679 Speaker 1: chairman of Automation, also chair at the Atlanta Fed. He 410 00:21:55,800 --> 00:21:57,960 Speaker 1: joins us here in the Leventhreeo Studios. Also our thanks 411 00:21:57,960 --> 00:22:01,520 Speaker 1: to Craig Trudell, us Auto's team leader for Bloomberg News 412 00:22:01,680 --> 00:22:14,520 Speaker 1: in New York. I want to talk about housing. There's 413 00:22:14,520 --> 00:22:17,160 Speaker 1: been a lot of questioning about how strong the US 414 00:22:17,240 --> 00:22:21,760 Speaker 1: housing market really is. An underlying that angst really is 415 00:22:21,800 --> 00:22:26,720 Speaker 1: the affordability question. Can Americans afford to own homes? Can 416 00:22:26,760 --> 00:22:29,080 Speaker 1: they afford the American dream? And joining us down to 417 00:22:29,119 --> 00:22:32,280 Speaker 1: talk about that is Danielle Hale, chief economist for Realtor 418 00:22:32,520 --> 00:22:35,280 Speaker 1: dot com. Danielle, thank you so much for being here. 419 00:22:35,640 --> 00:22:38,480 Speaker 1: Definitely some conflicting data this morning. We saw that US 420 00:22:38,520 --> 00:22:42,520 Speaker 1: housing starts rose more than forecasts, but permits slumped, suggesting 421 00:22:42,600 --> 00:22:45,480 Speaker 1: perhaps a little bit of a struggle there. I'm wondering 422 00:22:45,640 --> 00:22:49,560 Speaker 1: how much of this story is the ability for people 423 00:22:49,560 --> 00:22:53,440 Speaker 1: to actually buy homes right now? Yeah, I think that's 424 00:22:53,440 --> 00:22:56,280 Speaker 1: a great point, lisas so, housing starts were up, but 425 00:22:56,359 --> 00:22:58,439 Speaker 1: if you dig down and look at the data, single 426 00:22:58,440 --> 00:23:02,359 Speaker 1: family starts eat out just a really minor gain. Most 427 00:23:02,400 --> 00:23:04,359 Speaker 1: of the game came from a huge jump and multi 428 00:23:04,359 --> 00:23:07,480 Speaker 1: family starts. And when we think about the owner occupied 429 00:23:07,520 --> 00:23:10,399 Speaker 1: housing market, it's single family starts that lead to homes 430 00:23:10,400 --> 00:23:12,720 Speaker 1: that people can buy. Most of the multi family construction 431 00:23:12,720 --> 00:23:15,320 Speaker 1: that is built is built for rent UM. So this 432 00:23:15,440 --> 00:23:17,439 Speaker 1: really isn't helping people who are in the market to 433 00:23:17,520 --> 00:23:20,199 Speaker 1: buy a home. It's probably good news for renters. They 434 00:23:20,280 --> 00:23:22,680 Speaker 1: might see some relief and rent increases on the horizon, 435 00:23:22,720 --> 00:23:24,960 Speaker 1: but not so much on the on the home ownership side. 436 00:23:25,200 --> 00:23:28,000 Speaker 1: So can you talk a little bit about affordability because 437 00:23:28,000 --> 00:23:30,240 Speaker 1: a news story study that you guys put out showed 438 00:23:30,280 --> 00:23:33,320 Speaker 1: the only forty one of the US can actually afford 439 00:23:33,359 --> 00:23:38,840 Speaker 1: to own a home. How does that compare to the past. Yeah, 440 00:23:38,880 --> 00:23:41,560 Speaker 1: So what we're looking at in that study is the 441 00:23:41,640 --> 00:23:44,720 Speaker 1: media income family. So the media income family in counties 442 00:23:44,720 --> 00:23:47,399 Speaker 1: where forty one percent of the nation's population lives can't 443 00:23:47,440 --> 00:23:50,879 Speaker 1: afford to buy the median home listing price UM, and 444 00:23:50,920 --> 00:23:53,840 Speaker 1: so things are less affordable now than they have been 445 00:23:53,960 --> 00:23:57,280 Speaker 1: from most of the last seven or eight years UM. 446 00:23:57,280 --> 00:23:59,720 Speaker 1: But we're sort of back in line with what a 447 00:24:00,040 --> 00:24:03,320 Speaker 1: longer term picture of affordability is. So in the last 448 00:24:03,320 --> 00:24:05,520 Speaker 1: seven or eight years, mortgage rs have been incredibly low. 449 00:24:05,840 --> 00:24:08,960 Speaker 1: After the housing crisis, prices were low and have since 450 00:24:09,040 --> 00:24:12,119 Speaker 1: recovered um And so that created a huge opportunity for 451 00:24:12,160 --> 00:24:15,200 Speaker 1: people to get into the housing market. UM and we're 452 00:24:15,200 --> 00:24:18,440 Speaker 1: starting to see that that window is closing, at least 453 00:24:18,520 --> 00:24:21,439 Speaker 1: as far as you know, great opportunities. That doesn't mean 454 00:24:21,480 --> 00:24:24,600 Speaker 1: there aren't opportunities. Things are just less affordable now than 455 00:24:24,640 --> 00:24:27,400 Speaker 1: they have been in the recent past. I'm wondering what 456 00:24:27,480 --> 00:24:30,560 Speaker 1: this does with respect to the dynamic and the rental market. 457 00:24:30,600 --> 00:24:33,480 Speaker 1: We've seen a lot of money being raised for funds 458 00:24:33,520 --> 00:24:36,440 Speaker 1: managed by the likes of ox if or Blackstone to 459 00:24:36,560 --> 00:24:39,840 Speaker 1: buy up rental properties. How much does this sort of 460 00:24:40,240 --> 00:24:44,320 Speaker 1: create a puzzle or present possibly a challenge to the 461 00:24:44,400 --> 00:24:47,399 Speaker 1: costs that people end up paying if people are forced 462 00:24:47,400 --> 00:24:49,920 Speaker 1: into renting more than owning. In other words, can you 463 00:24:49,960 --> 00:24:52,399 Speaker 1: just give a sense of what the benefits are on 464 00:24:52,440 --> 00:24:56,440 Speaker 1: both sides here? Yeah, So if you're renting, you have flexibility, 465 00:24:56,840 --> 00:24:59,280 Speaker 1: um in the sense that if you need to move, 466 00:24:59,359 --> 00:25:02,080 Speaker 1: you can do so relatively easily. You're not responsible for 467 00:25:02,160 --> 00:25:05,320 Speaker 1: any of the property maintenance, and you don't take any 468 00:25:05,320 --> 00:25:08,360 Speaker 1: of the risks of anything breaking that falls on your landlord. 469 00:25:08,440 --> 00:25:11,720 Speaker 1: So it's great for younger households, and in fact we 470 00:25:11,760 --> 00:25:14,240 Speaker 1: see younger households are much more likely to rent than 471 00:25:14,280 --> 00:25:17,480 Speaker 1: to own. But for older households that are more established, 472 00:25:17,560 --> 00:25:20,040 Speaker 1: maybe you have kids in the picture, um it's nice 473 00:25:20,040 --> 00:25:23,800 Speaker 1: to have that stability. Um So, you don't get the flexibility, 474 00:25:23,800 --> 00:25:25,919 Speaker 1: but you get the benefit of stability. You get to 475 00:25:25,920 --> 00:25:28,240 Speaker 1: be in the same place, you get to call the 476 00:25:28,240 --> 00:25:31,560 Speaker 1: shots and make decisions, so you're not facing the question 477 00:25:31,600 --> 00:25:33,440 Speaker 1: of what is going to happen to my rent every year. 478 00:25:33,520 --> 00:25:36,720 Speaker 1: You get to pay a fixed monthly payment if you've 479 00:25:36,720 --> 00:25:38,960 Speaker 1: taken out a thirty year fixed rate mortgage, which is 480 00:25:39,000 --> 00:25:41,199 Speaker 1: by far the most common type of mortgage. Um So 481 00:25:41,200 --> 00:25:43,320 Speaker 1: there are a lot of benefits. And when you're a homeowner, 482 00:25:43,359 --> 00:25:45,360 Speaker 1: you're paying down your mortgage every month, and so you're 483 00:25:45,359 --> 00:25:49,800 Speaker 1: building up equity through that forced savings plan of making 484 00:25:49,800 --> 00:25:51,800 Speaker 1: payments on your mortgage. So it's a great way for 485 00:25:51,840 --> 00:25:54,240 Speaker 1: homeowners to accumulate wealth. And in fact, if you look 486 00:25:54,240 --> 00:25:56,960 Speaker 1: at the data, homeowners tend to have thirty to forty 487 00:25:57,000 --> 00:26:00,159 Speaker 1: times greater net worth and renters. A large part of 488 00:26:00,240 --> 00:26:01,720 Speaker 1: that is because of the value they've built up in 489 00:26:01,760 --> 00:26:03,880 Speaker 1: their homes. What do you think of the theory that's 490 00:26:03,920 --> 00:26:08,480 Speaker 1: been postulated that when the baby boomers get old, retired 491 00:26:08,520 --> 00:26:11,199 Speaker 1: downsize their homes, there's going to be a flood of 492 00:26:12,000 --> 00:26:14,679 Speaker 1: houses that are put up from market valuations are going 493 00:26:14,720 --> 00:26:17,440 Speaker 1: to crash. Have you heard this theory? I have heard 494 00:26:17,480 --> 00:26:22,040 Speaker 1: this theory, um quite a bit. I think that, um, 495 00:26:22,400 --> 00:26:24,080 Speaker 1: you know, the baby boomers own a lot of real 496 00:26:24,160 --> 00:26:26,560 Speaker 1: estate right now, and they're such a huge generation that 497 00:26:26,640 --> 00:26:32,480 Speaker 1: they have big impacts on the macro economy. I think that, um, 498 00:26:32,520 --> 00:26:34,919 Speaker 1: you know, baby boomers are living longer, They're healthier than 499 00:26:34,920 --> 00:26:37,639 Speaker 1: previous generations, so they're staying in their homes longer. I 500 00:26:37,680 --> 00:26:40,920 Speaker 1: don't think we're going to see a sudden exodus out 501 00:26:41,000 --> 00:26:44,879 Speaker 1: of their homes because I don't think they're moving to 502 00:26:45,359 --> 00:26:48,520 Speaker 1: assisted living type facilities as much as previous generations, and 503 00:26:48,520 --> 00:26:51,960 Speaker 1: they're certainly not moving as early to those types of facilities. 504 00:26:51,960 --> 00:26:53,480 Speaker 1: So I think they're going to stay in their homes 505 00:26:53,480 --> 00:26:55,080 Speaker 1: for a little longer. And I think that's going to 506 00:26:55,119 --> 00:26:57,119 Speaker 1: be good because it's going to spread out that wave, 507 00:26:57,240 --> 00:26:59,680 Speaker 1: so it's not going to be like a huge surge. 508 00:26:59,800 --> 00:27:02,600 Speaker 1: I think it will be a gradual increase and that 509 00:27:02,640 --> 00:27:04,840 Speaker 1: will help the market better adjust to absorb it, and 510 00:27:04,960 --> 00:27:09,200 Speaker 1: especially as millennials age into those years where they're forming 511 00:27:09,200 --> 00:27:12,040 Speaker 1: households having kids, I think that will help absorb some 512 00:27:12,160 --> 00:27:15,080 Speaker 1: of those homes that are out in the suburb. Danielle, 513 00:27:15,280 --> 00:27:17,280 Speaker 1: just twenty seconds here. Where do you think we are 514 00:27:17,320 --> 00:27:21,160 Speaker 1: in the housing cycle right now? I think prices are high. 515 00:27:21,160 --> 00:27:24,679 Speaker 1: I think sales are struggling because affordability is challenging. But 516 00:27:24,760 --> 00:27:27,080 Speaker 1: for households who are looking again, and I still think 517 00:27:27,119 --> 00:27:29,639 Speaker 1: there's opportunity in the housing market. Thank you so much 518 00:27:29,680 --> 00:27:32,920 Speaker 1: for being with us, Danielle Hale, chief economists for Realtor 519 00:27:33,200 --> 00:27:36,879 Speaker 1: dot com. And definitely, uh, quite a staggering number that 520 00:27:36,960 --> 00:27:39,720 Speaker 1: only the US can actually afford to own a home. 521 00:27:39,720 --> 00:27:43,720 Speaker 1: But great perspective there that this is not uncommon historically, 522 00:27:43,840 --> 00:27:46,960 Speaker 1: that this sort of is uh the historic average in 523 00:27:47,119 --> 00:27:50,240 Speaker 1: terms of what people could afford. Definitely also telling though, 524 00:27:50,280 --> 00:27:54,240 Speaker 1: as a number of big institutional firms plow into the 525 00:27:54,440 --> 00:28:02,080 Speaker 1: rental ownership business try and capitalize on this trend. Thanks 526 00:28:02,080 --> 00:28:04,720 Speaker 1: for listening to the Bloomberg P and L podcast. You 527 00:28:04,720 --> 00:28:08,520 Speaker 1: can subscribe and listen to interviews at Apple Podcasts, SoundCloud, 528 00:28:08,640 --> 00:28:12,120 Speaker 1: or whatever podcast platform you prefer. I'm pim Fox. I'm 529 00:28:12,160 --> 00:28:15,679 Speaker 1: on Twitter at pim Fox. I'm on Twitter at Lisa 530 00:28:15,720 --> 00:28:18,680 Speaker 1: Abramo wits one before the podcast, you can always catch 531 00:28:18,760 --> 00:28:20,480 Speaker 1: us worldwide on Bloomberg Radio