1 00:00:02,640 --> 00:00:05,320 Speaker 1: Welcome to the Bloomberg Penel podcast. I'm Paul swing you. 2 00:00:05,360 --> 00:00:07,760 Speaker 1: Along with my co host Lisa Brahmas. Each day we 3 00:00:07,880 --> 00:00:10,399 Speaker 1: bring you the most noteworthy and useful interviews for you 4 00:00:10,520 --> 00:00:12,600 Speaker 1: and your money. Whether at the grocery store or the 5 00:00:12,640 --> 00:00:15,960 Speaker 1: trading floor. Find a Bloomberg penl podcast on Apple podcast 6 00:00:16,120 --> 00:00:18,040 Speaker 1: or wherever you listen to podcasts, as well as at 7 00:00:18,079 --> 00:00:23,800 Speaker 1: Bloomberg dot com. A lot of people have been trying 8 00:00:23,800 --> 00:00:26,120 Speaker 1: to hate on the hil bond market for years. They've 9 00:00:26,120 --> 00:00:29,120 Speaker 1: been saying this area is inflated, it is going to 10 00:00:29,240 --> 00:00:32,120 Speaker 1: be a boys for a big fall. The result this 11 00:00:32,240 --> 00:00:34,720 Speaker 1: year so far has been a ten percent gain, the 12 00:00:34,800 --> 00:00:37,480 Speaker 1: best return for the first six months of a year 13 00:00:37,520 --> 00:00:39,880 Speaker 1: since two thousand and nine when we were climbing out 14 00:00:39,880 --> 00:00:42,880 Speaker 1: of a financial crisis. Joining us to talk about this sector, 15 00:00:42,880 --> 00:00:45,680 Speaker 1: Bill's Ox. He is chief investment Officer of fixed income 16 00:00:45,760 --> 00:00:48,559 Speaker 1: at Diamond Hill Capital Management. Thank you so much for 17 00:00:48,640 --> 00:00:51,680 Speaker 1: being with us today. I want to start with just 18 00:00:51,720 --> 00:00:55,560 Speaker 1: a broad question. How much more upside is there left 19 00:00:55,640 --> 00:00:58,520 Speaker 1: in the US hild bond market right now? Yea, there's 20 00:00:58,640 --> 00:01:02,760 Speaker 1: very little upside left. It's more about treading water right 21 00:01:02,800 --> 00:01:05,960 Speaker 1: here and earning your coupon for the back half of 22 00:01:06,000 --> 00:01:08,840 Speaker 1: the year. So all right, but we are again we're 23 00:01:08,880 --> 00:01:11,000 Speaker 1: at least it suggested we've had a great run here 24 00:01:11,319 --> 00:01:14,120 Speaker 1: in the high were ten plus years into this economic cycle. 25 00:01:14,440 --> 00:01:18,880 Speaker 1: Are there any sectors that you're overweight or underweight given 26 00:01:18,880 --> 00:01:21,240 Speaker 1: where we are in the cycle here. Yeah. I mean 27 00:01:21,280 --> 00:01:24,560 Speaker 1: one interesting sector that's still under a cloud, but a 28 00:01:24,600 --> 00:01:27,600 Speaker 1: different cloud than the equity markets are focused on, would 29 00:01:27,640 --> 00:01:31,640 Speaker 1: be pharma. In the high old space, the valuations are 30 00:01:31,760 --> 00:01:36,600 Speaker 1: very much washed out. Yesterday's deal with Allergan could be 31 00:01:37,680 --> 00:01:40,520 Speaker 1: a sign that that people are starting to take notice 32 00:01:40,520 --> 00:01:43,000 Speaker 1: of those valuations. And is that simply because of the 33 00:01:43,400 --> 00:01:47,280 Speaker 1: regulatory overhang of the sector? I think that's that's now. 34 00:01:47,280 --> 00:01:49,160 Speaker 1: The business has have been weak, but they're starting to 35 00:01:49,480 --> 00:01:52,960 Speaker 1: bottom out. But the primary issue on valuation today is 36 00:01:53,000 --> 00:01:56,800 Speaker 1: the political overhang for sure, although there are other challenges 37 00:01:56,840 --> 00:01:59,520 Speaker 1: to im think of Tava, for example, the biggest generic 38 00:01:59,600 --> 00:02:01,960 Speaker 1: maker UH and their bonds have been beaten up. There 39 00:02:01,960 --> 00:02:05,080 Speaker 1: an incredibly leveraged company and they haven't really seen the 40 00:02:05,120 --> 00:02:07,440 Speaker 1: same kind of pricing power that they had in the past, 41 00:02:07,720 --> 00:02:09,440 Speaker 1: and they faced a lot of headwinds. I mean, is 42 00:02:09,440 --> 00:02:11,120 Speaker 1: that an area where you'd be willing to go or 43 00:02:11,120 --> 00:02:15,360 Speaker 1: are you looking more toward US focused areas that have 44 00:02:15,480 --> 00:02:18,200 Speaker 1: been hit by speculation about policy. No. I think that 45 00:02:18,360 --> 00:02:20,480 Speaker 1: is one that that it makes sense to dip your 46 00:02:20,480 --> 00:02:24,240 Speaker 1: toe in table. Yes, okay, really interesting to see that 47 00:02:24,360 --> 00:02:27,520 Speaker 1: there is some opportunity there Are there any places that 48 00:02:27,600 --> 00:02:31,720 Speaker 1: you're selling right now? Well, I the of the U 49 00:02:31,800 --> 00:02:34,680 Speaker 1: S high old market right now has a maturity greater 50 00:02:34,720 --> 00:02:37,960 Speaker 1: than five years in a yield to worse below five percent. 51 00:02:38,200 --> 00:02:41,120 Speaker 1: That part of the market gives people comfort and that 52 00:02:41,240 --> 00:02:43,600 Speaker 1: the it's defensive, but the price is just too high. 53 00:02:43,639 --> 00:02:45,400 Speaker 1: I think that's an area that you actually have to 54 00:02:45,440 --> 00:02:47,840 Speaker 1: be selling right now. You know, one of the areas 55 00:02:47,840 --> 00:02:50,520 Speaker 1: that's just been a huge issue or has been kind 56 00:02:50,520 --> 00:02:53,960 Speaker 1: of the greater communication space, you know a T and T, Comcast, 57 00:02:54,040 --> 00:02:57,360 Speaker 1: things like that, and there's so much technology change going on. 58 00:02:57,440 --> 00:02:59,960 Speaker 1: There's some uh M and a activity in this space. 59 00:03:00,000 --> 00:03:03,760 Speaker 1: How do you guys feel about the communications sector? Big issuers? Yeah, 60 00:03:03,760 --> 00:03:05,919 Speaker 1: I mean in the high yield market, you're really talking 61 00:03:05,960 --> 00:03:09,920 Speaker 1: about Sprint and T Mobile and whether that deal gets 62 00:03:09,919 --> 00:03:13,239 Speaker 1: approved or not, Sprint will be under severe pressure of 63 00:03:13,320 --> 00:03:17,359 Speaker 1: that deal does not get approved, Probably a very high 64 00:03:17,440 --> 00:03:21,640 Speaker 1: probability that they file for bankruptcy and the investment grade space, 65 00:03:22,120 --> 00:03:24,440 Speaker 1: there's a lot of pressure on A T and T 66 00:03:24,600 --> 00:03:27,839 Speaker 1: and Verizon. I mean that those businesses are are very 67 00:03:27,880 --> 00:03:31,360 Speaker 1: mature right now, and they're they're tough, capital intensive businesses. 68 00:03:32,120 --> 00:03:34,320 Speaker 1: So the picture that you're painting right now, which is 69 00:03:34,360 --> 00:03:39,360 Speaker 1: security selection, treading water, coupon collecting for a firm that 70 00:03:39,440 --> 00:03:42,720 Speaker 1: overseas twenty three billion dollars. And I'm looking right now 71 00:03:42,760 --> 00:03:45,880 Speaker 1: at the inflows into the high yield sector. They have 72 00:03:46,000 --> 00:03:50,760 Speaker 1: been escalating, Uh significantly. Does that concern you given the 73 00:03:50,760 --> 00:03:53,280 Speaker 1: fact that there just aren't that many opportunities out there 74 00:03:53,480 --> 00:03:55,840 Speaker 1: to put that money to work in a way that 75 00:03:55,880 --> 00:03:58,480 Speaker 1: you think might be prudent. Well, if we were too 76 00:03:58,520 --> 00:04:01,200 Speaker 1: big and I had to put those inflows to work 77 00:04:01,400 --> 00:04:05,880 Speaker 1: and in a relatively less liquid high old market, I 78 00:04:05,920 --> 00:04:09,160 Speaker 1: would be concerned. But we're very disciplined in terms of 79 00:04:09,160 --> 00:04:11,960 Speaker 1: our capacity, so that inflows have been steady but not 80 00:04:12,040 --> 00:04:14,360 Speaker 1: at all difficult for us to put the war. We're 81 00:04:14,400 --> 00:04:20,640 Speaker 1: hearing more and more from economists, investors, strategists about rising 82 00:04:20,680 --> 00:04:23,840 Speaker 1: odds of a recession mid next year's that's something you're 83 00:04:23,880 --> 00:04:26,800 Speaker 1: thinking about as you think about your portfolio. Well, I 84 00:04:26,800 --> 00:04:29,359 Speaker 1: think the treasury market is is the best signal of 85 00:04:29,400 --> 00:04:34,800 Speaker 1: that right now, And we're discounting three rate cuts between 86 00:04:34,880 --> 00:04:37,440 Speaker 1: now and the end of the year, And to me, 87 00:04:37,560 --> 00:04:40,640 Speaker 1: that's kind of on the precipice of that, that's probably 88 00:04:40,680 --> 00:04:44,839 Speaker 1: still consistent with insurance against too low inflation, but anything 89 00:04:44,880 --> 00:04:47,920 Speaker 1: more than that. And now the treasury market is discounting 90 00:04:47,960 --> 00:04:51,279 Speaker 1: a much higher probability of recession. So we're we're close. 91 00:04:51,320 --> 00:04:54,039 Speaker 1: I'm close to being concerned about that, but not quite yet. 92 00:04:54,720 --> 00:04:57,960 Speaker 1: Are you more concerned about the longer term for the 93 00:04:58,040 --> 00:05:02,000 Speaker 1: high old bond market or the private depth markets right now? Yeah? 94 00:05:02,040 --> 00:05:05,600 Speaker 1: I think that the private debt markets probably have grown 95 00:05:05,760 --> 00:05:08,239 Speaker 1: much more rapidly that the high yield market. Although flows 96 00:05:08,240 --> 00:05:11,560 Speaker 1: have been strong this year, it's actually down in size 97 00:05:11,600 --> 00:05:13,680 Speaker 1: over the last three years or so, with the loan 98 00:05:13,720 --> 00:05:16,680 Speaker 1: market and then the private debt market increasing in size. 99 00:05:16,680 --> 00:05:20,839 Speaker 1: So I think that investor expectations in the private loan 100 00:05:20,880 --> 00:05:23,560 Speaker 1: market are probably more out of whack with reality than 101 00:05:23,640 --> 00:05:25,360 Speaker 1: what you would see in the high yield market. And 102 00:05:25,400 --> 00:05:28,919 Speaker 1: how significant is the risk that you see in say 103 00:05:29,000 --> 00:05:31,800 Speaker 1: a recession, I mean, are we looking at just normal 104 00:05:31,880 --> 00:05:35,360 Speaker 1: declines that are you know, not necessarily super painful but 105 00:05:35,520 --> 00:05:38,599 Speaker 1: you know our declines. Are we talking about something that's 106 00:05:38,600 --> 00:05:41,479 Speaker 1: more substantial than that? Yeah, I mean LDD Leverage finance 107 00:05:41,560 --> 00:05:44,760 Speaker 1: is extremely resilient. We saw that in the financial crisis. 108 00:05:44,800 --> 00:05:48,280 Speaker 1: Spreads blue out in uh, you know, a year and then, 109 00:05:48,400 --> 00:05:51,360 Speaker 1: but mostly in the three months after Lehman Brothers filed 110 00:05:51,960 --> 00:05:54,600 Speaker 1: to over two thousand basis points, but high yield was 111 00:05:54,640 --> 00:05:56,760 Speaker 1: back above its high water mark in the fall of 112 00:05:56,800 --> 00:06:00,400 Speaker 1: two thousand nine. So it's a very resilient asset class. 113 00:06:00,440 --> 00:06:04,080 Speaker 1: Each sector in leverage finance can pick up the other. 114 00:06:04,760 --> 00:06:06,839 Speaker 1: So I don't think it's going to bring the economy 115 00:06:06,880 --> 00:06:09,640 Speaker 1: down or anything like that. Bill Zocks, thanks so much 116 00:06:09,680 --> 00:06:12,320 Speaker 1: for being with us. Bill as a chief investment officer 117 00:06:12,320 --> 00:06:15,840 Speaker 1: of fixed income for Diamond Hill Capital Management, about three 118 00:06:15,839 --> 00:06:19,480 Speaker 1: billion dollars under management, is based in Columbus, Ohio the 119 00:06:19,800 --> 00:06:22,200 Speaker 1: Ohio State University. I don't know why you guys say 120 00:06:22,200 --> 00:06:24,560 Speaker 1: at the Ohio State, but it sounds good. We'll go 121 00:06:24,640 --> 00:06:40,800 Speaker 1: with it. Traders are preparing for the onset of G 122 00:06:41,120 --> 00:06:44,320 Speaker 1: twenty talks, and as one guest on Billover Television said 123 00:06:44,320 --> 00:06:47,599 Speaker 1: this morning, it really is b G two meeting because 124 00:06:47,640 --> 00:06:50,679 Speaker 1: really we're looking at j and Ping and President Trump 125 00:06:51,120 --> 00:06:53,960 Speaker 1: of China and the US getting together and coming to 126 00:06:54,040 --> 00:06:57,000 Speaker 1: some sort of ceasefire. Maybe perhaps to set the stage 127 00:06:57,040 --> 00:06:59,120 Speaker 1: from very pleased to say, we have Leland Miller with US, 128 00:06:59,200 --> 00:07:03,839 Speaker 1: chief executive for Sir China beij Book International in New York. 129 00:07:03,880 --> 00:07:07,239 Speaker 1: He's joining us in our Bloomberg Interactive Broker Studios Leland 130 00:07:07,680 --> 00:07:11,360 Speaker 1: Uh just to set the stage for these discussions between 131 00:07:11,720 --> 00:07:16,200 Speaker 1: Presidents JJ and Ping and Trump. What is the economic 132 00:07:16,280 --> 00:07:20,239 Speaker 1: backdrop in particular of China right now? Sure, so, people 133 00:07:20,240 --> 00:07:23,480 Speaker 1: who have been very gloomy over the last several months, 134 00:07:23,680 --> 00:07:26,680 Speaker 1: one because trade talks haven't gone well, but also you've 135 00:07:26,680 --> 00:07:28,560 Speaker 1: had pieces of official data that have come in that 136 00:07:28,640 --> 00:07:31,160 Speaker 1: haven't made people very happy. And then there's rumors of 137 00:07:31,200 --> 00:07:34,320 Speaker 1: trouble within the financial system, so a lot of pessimism 138 00:07:34,360 --> 00:07:37,520 Speaker 1: out there. Are new Q two data, which was released 139 00:07:37,520 --> 00:07:40,840 Speaker 1: this morning is actually more optimistic on that. So from 140 00:07:40,840 --> 00:07:43,440 Speaker 1: a top line perspective, Q two improved over Q one, 141 00:07:43,480 --> 00:07:45,600 Speaker 1: which I don't think many people expected. And then on 142 00:07:45,640 --> 00:07:50,720 Speaker 1: the sectual perspective, manufacturing and retail were the two co leaders. 143 00:07:51,000 --> 00:07:54,119 Speaker 1: So a lot of people probably assume manufacturing is under fire. 144 00:07:54,400 --> 00:07:56,480 Speaker 1: That's true because of the trade war, but there was 145 00:07:57,120 --> 00:08:01,120 Speaker 1: evidence of very strong policy support, so manufacturers borrowed more 146 00:08:01,240 --> 00:08:03,400 Speaker 1: and they borrowed the cheapest rates. This is the government 147 00:08:03,440 --> 00:08:06,800 Speaker 1: stepping in. And Rita also did relatively well, so we Uh, 148 00:08:06,880 --> 00:08:11,120 Speaker 1: there's some some worries on inventory, but the the key 149 00:08:11,160 --> 00:08:14,920 Speaker 1: metrics for those two sectors in particular or upbeat. Hiring 150 00:08:15,000 --> 00:08:17,320 Speaker 1: was upbeat, which means the trade war hasn't hit China 151 00:08:17,320 --> 00:08:19,440 Speaker 1: word hurts yet. Uh. And overall, I think that there 152 00:08:19,480 --> 00:08:23,440 Speaker 1: was improvement the economy. How about the shadow banking situation 153 00:08:23,480 --> 00:08:26,200 Speaker 1: that had been on the downside as China begun to 154 00:08:26,360 --> 00:08:29,520 Speaker 1: de lever over the less several years. What's the status there. Well, 155 00:08:30,160 --> 00:08:34,560 Speaker 1: when people heard the term deleveraging over the last several years, uh, 156 00:08:34,760 --> 00:08:37,760 Speaker 1: they assumed that China was actually actively deleveraging. I mean 157 00:08:37,800 --> 00:08:39,800 Speaker 1: the government was saying it was doing that. China was 158 00:08:39,840 --> 00:08:45,840 Speaker 1: never deleveraging. It was doing some aspects of financial uh, deleveraging, 159 00:08:46,040 --> 00:08:48,240 Speaker 1: and in particular, they were cracking down on shadow finance. 160 00:08:48,400 --> 00:08:50,880 Speaker 1: That's something that's crystal cleared our data. So for the 161 00:08:50,920 --> 00:08:54,280 Speaker 1: past two to three years, we've seen shadow finance cracked 162 00:08:54,280 --> 00:08:57,760 Speaker 1: down on a much lower share of overall borrowing over 163 00:08:57,800 --> 00:09:01,880 Speaker 1: time and UH more to that borrowing going from off 164 00:09:01,880 --> 00:09:04,480 Speaker 1: balance sheet to on balance sheet. The borrowing wasn't there, 165 00:09:04,520 --> 00:09:07,280 Speaker 1: wasn't less borrowing, but it was going from the shadows 166 00:09:07,360 --> 00:09:10,920 Speaker 1: to the on balance on balance sheet where it could 167 00:09:10,960 --> 00:09:13,800 Speaker 1: be was turning more transparent and more regulated. Well, that 168 00:09:13,920 --> 00:09:16,559 Speaker 1: just reversed completely. This quarter we saw an explosion I 169 00:09:16,600 --> 00:09:19,480 Speaker 1: think explosions right word for this of shadow banking and 170 00:09:19,559 --> 00:09:22,760 Speaker 1: Q two it was the highest one quarter jump we've 171 00:09:22,760 --> 00:09:26,160 Speaker 1: seen in shadow banking usage in the history of China 172 00:09:26,200 --> 00:09:29,280 Speaker 1: based book survey. So what clearly is happening here. Q 173 00:09:29,480 --> 00:09:32,080 Speaker 1: one was a big credit quarter for China that made 174 00:09:32,080 --> 00:09:34,000 Speaker 1: a decision that they were going to create a cushion 175 00:09:34,040 --> 00:09:36,280 Speaker 1: for the economy in a worst case scenario for the 176 00:09:36,280 --> 00:09:39,079 Speaker 1: trade war, prepare for the downside. And Q two was 177 00:09:39,120 --> 00:09:42,960 Speaker 1: an expansion of that, almost as much borrowing overall, almost 178 00:09:43,000 --> 00:09:48,120 Speaker 1: as aggressive, uh diminishment of of of rejection rates, et cetera, 179 00:09:48,520 --> 00:09:52,000 Speaker 1: but an expansion of shadow banking. So it's really amazing 180 00:09:52,040 --> 00:09:53,839 Speaker 1: what the Chinese have done since the fourth quarter in 181 00:09:53,880 --> 00:09:56,600 Speaker 1: the credit side. Leland, I want to just highlight this 182 00:09:56,640 --> 00:09:58,760 Speaker 1: point once again because this seems to be a really 183 00:09:58,760 --> 00:10:00,600 Speaker 1: big deal. You did just put out this early look 184 00:10:00,640 --> 00:10:04,800 Speaker 1: brief of the Q two Chinese economy. The fact that 185 00:10:05,120 --> 00:10:09,640 Speaker 1: shadow banking activity increased at the fastest pace quarter over 186 00:10:09,760 --> 00:10:12,640 Speaker 1: quarter since China Beijing book began in two thousand and 187 00:10:12,679 --> 00:10:16,959 Speaker 1: ten seems significant. What is the potential risk here? I mean, 188 00:10:17,040 --> 00:10:20,920 Speaker 1: how close are we to the consequences of this? Because 189 00:10:21,120 --> 00:10:23,880 Speaker 1: it is a pretty closed economy, so some people say 190 00:10:23,920 --> 00:10:28,199 Speaker 1: it's contained in terms of riskiness. Well, there's a reason 191 00:10:28,240 --> 00:10:31,000 Speaker 1: that the Beijing leadership cracked down on shadow banking several 192 00:10:31,040 --> 00:10:35,079 Speaker 1: years ago because they said, this is an enormous vulnerability. 193 00:10:35,080 --> 00:10:38,880 Speaker 1: It operates outside of most rules. It operates in a 194 00:10:38,960 --> 00:10:41,760 Speaker 1: very out pake manner. Uh. There's important parts of shadow 195 00:10:41,760 --> 00:10:43,920 Speaker 1: finance for the economy, but there's also Ponzi schemes, and 196 00:10:43,920 --> 00:10:47,800 Speaker 1: there's no real way to to control this unless we 197 00:10:48,160 --> 00:10:50,760 Speaker 1: shine a light on it. Now. They have been doing 198 00:10:50,800 --> 00:10:52,440 Speaker 1: more and more and more to crack down on shadow 199 00:10:52,440 --> 00:10:54,680 Speaker 1: finance for years, and what they're essentially doing right now 200 00:10:54,920 --> 00:10:57,280 Speaker 1: is just throwing that all out. You know, the Trump 201 00:10:57,320 --> 00:10:59,679 Speaker 1: trade war is such a priority to make sure you 202 00:10:59,720 --> 00:11:02,160 Speaker 1: don't look weak in the face of that, and in 203 00:11:02,320 --> 00:11:07,160 Speaker 1: order to guard your downside if this goes wrong. Uh, 204 00:11:07,160 --> 00:11:09,680 Speaker 1: they have essentially said we're gonna we're gonna forget about 205 00:11:09,679 --> 00:11:12,360 Speaker 1: the long term consequences which could hit in the short 206 00:11:12,440 --> 00:11:14,520 Speaker 1: term and medium term or long term. It's an unclear 207 00:11:14,559 --> 00:11:17,440 Speaker 1: how long the a you know, taking fuse they have 208 00:11:17,480 --> 00:11:19,480 Speaker 1: on this, but they decided that's not the priority. The 209 00:11:19,480 --> 00:11:21,200 Speaker 1: priority is to make sure that we're getting credit to 210 00:11:21,200 --> 00:11:24,040 Speaker 1: everybody that we have stronger growth numbers. And as a result, 211 00:11:24,040 --> 00:11:25,600 Speaker 1: they've tossed out some of the good work they've done 212 00:11:25,640 --> 00:11:27,839 Speaker 1: over the past few years. All right, let's turn our 213 00:11:27,960 --> 00:11:30,319 Speaker 1: attention to the G twenty. About an hour President Trump 214 00:11:30,320 --> 00:11:33,840 Speaker 1: aboard Air Force one for Osaka. What is in your 215 00:11:33,840 --> 00:11:38,640 Speaker 1: mind a realistic expectation for the G two. Right, Markets 216 00:11:38,640 --> 00:11:42,560 Speaker 1: have been much too barish on Osaka for weeks and 217 00:11:42,600 --> 00:11:46,400 Speaker 1: weeks because after President Trump implemented terrorists back in May, 218 00:11:46,760 --> 00:11:51,160 Speaker 1: there was this belief, due to the coverage UH that 219 00:11:51,360 --> 00:11:54,640 Speaker 1: the two sides were hardening and that China was preparing 220 00:11:54,640 --> 00:11:58,360 Speaker 1: for the long war and singing patriotic songs, and you know, 221 00:11:58,400 --> 00:12:01,319 Speaker 1: the US was was led tariff man who wanted to 222 00:12:01,400 --> 00:12:03,960 Speaker 1: lead the crusade against China, and you know, the two 223 00:12:04,240 --> 00:12:06,880 Speaker 1: you know, two sides had nowhere to go except farther apart. 224 00:12:07,160 --> 00:12:10,640 Speaker 1: This was never true. Nothing has fundamentally changed since the 225 00:12:10,720 --> 00:12:13,960 Speaker 1: terroriffs are raised, with the exception of some cracked some 226 00:12:14,040 --> 00:12:17,520 Speaker 1: technology company crackdowns that are going to be used as 227 00:12:17,559 --> 00:12:21,200 Speaker 1: trade fodder trade chips. In terms with President She so 228 00:12:21,440 --> 00:12:25,560 Speaker 1: we are not at a deal yet, but the atmosphere 229 00:12:25,600 --> 00:12:29,120 Speaker 1: for Osaka is one of the White House clearly wanting 230 00:12:29,320 --> 00:12:32,000 Speaker 1: a reset of talks. They're willing to punt the last 231 00:12:32,000 --> 00:12:34,640 Speaker 1: tranche of tariffs and its entirety to make that happen. 232 00:12:34,679 --> 00:12:36,719 Speaker 1: They're willing to give assurances on Huawei that will be 233 00:12:36,760 --> 00:12:39,160 Speaker 1: part of a final deal. All the music that she 234 00:12:39,320 --> 00:12:42,280 Speaker 1: wants to hear, uh and in return that the Chinese 235 00:12:42,280 --> 00:12:45,040 Speaker 1: have to say, we will return to the base text 236 00:12:45,600 --> 00:12:47,920 Speaker 1: and we will work from that base text that was 237 00:12:47,960 --> 00:12:52,160 Speaker 1: about nine note A Secretary of Nation said, So, assuming 238 00:12:52,160 --> 00:12:54,760 Speaker 1: that the Chinese go along with this, the President wants 239 00:12:54,760 --> 00:12:57,319 Speaker 1: to ride this out, and we're gonna see uh, quite 240 00:12:57,320 --> 00:13:01,360 Speaker 1: a quite a positive solution from a deal standpoint at Osaka. Really, 241 00:13:01,440 --> 00:13:03,800 Speaker 1: so you think it's not just gonna be uh, the 242 00:13:03,800 --> 00:13:07,440 Speaker 1: the uh, the fact that the trade tensions are going 243 00:13:07,480 --> 00:13:09,760 Speaker 1: to escalate, but there actually will be a resolution. I 244 00:13:09,800 --> 00:13:11,400 Speaker 1: don't think there's gonna be a resolution that there's not 245 00:13:11,440 --> 00:13:13,280 Speaker 1: gonna be a final deal. They're not ready to do 246 00:13:13,320 --> 00:13:16,240 Speaker 1: a final deal, but if they don't get along, you're 247 00:13:16,240 --> 00:13:21,160 Speaker 1: gonna see UH tariffs on all five billion starting July one. 248 00:13:21,520 --> 00:13:23,120 Speaker 1: And that was a real possibility. As a matter of that, 249 00:13:23,240 --> 00:13:26,920 Speaker 1: markets were rather scared a few weeks ago that this 250 00:13:27,040 --> 00:13:29,400 Speaker 1: was a becoming more and more of a possibility. Look, 251 00:13:29,480 --> 00:13:31,520 Speaker 1: that is not on the table right now. They have 252 00:13:31,559 --> 00:13:34,960 Speaker 1: not been war gaming that possibility. Internally, they want to reset. 253 00:13:35,200 --> 00:13:37,360 Speaker 1: So I think that the fact that this continues on 254 00:13:37,960 --> 00:13:41,160 Speaker 1: may not be seen as as bullish because in some ways, 255 00:13:41,480 --> 00:13:43,560 Speaker 1: you know, we're just getting tired of this entire tarade. 256 00:13:43,600 --> 00:13:46,080 Speaker 1: At the same time, this looked like it was going 257 00:13:46,400 --> 00:13:48,679 Speaker 1: in the wrong direction and it was accelerating in the 258 00:13:48,720 --> 00:13:51,800 Speaker 1: wrong direction. That wasn't true. But now markets are correcting 259 00:13:51,840 --> 00:13:54,360 Speaker 1: themselves and they will realize that this has got that 260 00:13:54,440 --> 00:13:57,000 Speaker 1: there is a clear glide path to a deal if 261 00:13:57,080 --> 00:13:59,640 Speaker 1: the two sides decide they want to get there. We'll 262 00:13:59,640 --> 00:14:02,320 Speaker 1: see out that this week, hopefully some movement there. Leland Miller, 263 00:14:02,360 --> 00:14:05,000 Speaker 1: CEO of the China Beige Book International, joining us in 264 00:14:05,000 --> 00:14:24,360 Speaker 1: our Bloomberg eleven three oh studios today starts the two 265 00:14:24,560 --> 00:14:28,760 Speaker 1: day extravaganza of democratic debates, including a twenty candidates to 266 00:14:28,840 --> 00:14:32,720 Speaker 1: become uh the lead in the contest against President Trump. 267 00:14:32,840 --> 00:14:35,440 Speaker 1: Joining us now, Tim O'Brien, I'm so glad to say, 268 00:14:35,480 --> 00:14:38,160 Speaker 1: executive editor for Bloomberg Opinion, joining us here in our 269 00:14:38,200 --> 00:14:42,040 Speaker 1: interactive broker's studios, always with fresh perspective and all things 270 00:14:42,040 --> 00:14:44,920 Speaker 1: politics and certainly President Trump. I'm just wondering, are we 271 00:14:45,000 --> 00:14:49,240 Speaker 1: looking at a circular firing squad tonight. That's a great question, Lisa. 272 00:14:49,360 --> 00:14:51,720 Speaker 1: I you know, we'll see what happens when all these 273 00:14:51,760 --> 00:14:53,880 Speaker 1: folks get on stage. It's a lot of people, but 274 00:14:53,960 --> 00:14:57,320 Speaker 1: I don't think the spirit of this is uh, they 275 00:14:57,320 --> 00:15:00,520 Speaker 1: want to try to assassinate each other. Uh. They clearly 276 00:15:00,600 --> 00:15:04,240 Speaker 1: need to get Biden out of their ways. To some extent, 277 00:15:04,360 --> 00:15:07,840 Speaker 1: Joe Biden hasn't had to put much effort into making 278 00:15:08,240 --> 00:15:11,080 Speaker 1: public statements around things he's He's stepped in it a 279 00:15:11,080 --> 00:15:14,360 Speaker 1: few times when he has, but he's clearly the front runner. 280 00:15:14,560 --> 00:15:17,040 Speaker 1: So I think the extent to which the people on 281 00:15:17,120 --> 00:15:19,480 Speaker 1: stage tonight, which Biden won't be there tonight, he'll be 282 00:15:19,480 --> 00:15:22,560 Speaker 1: there tomorrow, they needed to find themselves an opposition to 283 00:15:22,640 --> 00:15:25,400 Speaker 1: Joe Biden and then I think the second step is 284 00:15:25,440 --> 00:15:28,920 Speaker 1: an opposition to President Trump, and I think they don't 285 00:15:28,920 --> 00:15:31,000 Speaker 1: really see a need to define themselves in opposition to 286 00:15:31,040 --> 00:15:34,280 Speaker 1: one another. So do you think that beginning tonight and 287 00:15:34,320 --> 00:15:37,160 Speaker 1: through the all the the debates coming up, do you 288 00:15:37,160 --> 00:15:40,960 Speaker 1: think the strategy will be for these candidates to focus 289 00:15:41,040 --> 00:15:44,680 Speaker 1: on President Trump, attack President Trump, per se, or maybe 290 00:15:44,720 --> 00:15:47,720 Speaker 1: step back and maybe try to differentiate themselves to find 291 00:15:47,720 --> 00:15:50,120 Speaker 1: their own policies. And you know, Paul, I think I 292 00:15:50,160 --> 00:15:53,120 Speaker 1: think you know. I'm not a political consultant, but I 293 00:15:53,160 --> 00:15:55,240 Speaker 1: think you know, in the media, we do know when 294 00:15:55,320 --> 00:15:58,200 Speaker 1: things gain traction and when people start paying attention to things. 295 00:15:58,480 --> 00:16:00,720 Speaker 1: And I think each of these candidates gonna have to say, 296 00:16:00,760 --> 00:16:02,920 Speaker 1: because we're gonna have a limited amount of time, what 297 00:16:03,080 --> 00:16:05,920 Speaker 1: can I say that We'll get picked up after the 298 00:16:05,960 --> 00:16:08,760 Speaker 1: debates are over and give me the kind of follow 299 00:16:08,840 --> 00:16:10,760 Speaker 1: up where I can get asked on to other shows 300 00:16:11,000 --> 00:16:13,880 Speaker 1: and I can begin to define myself in front of voters, 301 00:16:13,920 --> 00:16:16,120 Speaker 1: because it's gonna be very hard with this many people 302 00:16:16,600 --> 00:16:18,800 Speaker 1: for any of them to really stand out. And one 303 00:16:18,880 --> 00:16:21,280 Speaker 1: question I have is how much to the left is 304 00:16:21,320 --> 00:16:23,680 Speaker 1: the Democratic Party swinging? And do we have a sense 305 00:16:23,880 --> 00:16:27,360 Speaker 1: of just where what's gaining tractions so far and what 306 00:16:27,440 --> 00:16:29,880 Speaker 1: that means about the direction of the party. Well, you 307 00:16:29,920 --> 00:16:32,440 Speaker 1: know that I think the Democrats have as similar dynamic 308 00:16:33,000 --> 00:16:35,720 Speaker 1: as the as the GOP does, where you've got you 309 00:16:35,720 --> 00:16:37,760 Speaker 1: know that the left wing of the Democratic Party is 310 00:16:37,800 --> 00:16:40,640 Speaker 1: pushing for bolder policy proposals in the same way that 311 00:16:40,680 --> 00:16:45,440 Speaker 1: the populist wing of of the GOP is. I think. UM, 312 00:16:45,480 --> 00:16:48,960 Speaker 1: I think the Democrats have to figure out what they 313 00:16:49,040 --> 00:16:51,360 Speaker 1: can put in front of a national block of voters 314 00:16:51,720 --> 00:16:55,560 Speaker 1: and make palatable. And I think traditionally in national elections 315 00:16:55,800 --> 00:16:59,600 Speaker 1: that's been the middle of the road kind of program. Uh. However, 316 00:16:59,640 --> 00:17:01,760 Speaker 1: there's very you know, we're in an era where there's 317 00:17:01,760 --> 00:17:04,800 Speaker 1: a lot of wealth inequality. UM. I think the Trump 318 00:17:04,880 --> 00:17:08,720 Speaker 1: presidency has brought intolerance and racial insensitivities to the frow 319 00:17:09,320 --> 00:17:12,040 Speaker 1: and to the four and I think that that's going 320 00:17:12,200 --> 00:17:16,520 Speaker 1: to Uh, those are issues that Democrats have to address. So, Tim, 321 00:17:16,520 --> 00:17:18,240 Speaker 1: I've got a million things to talk about here, but 322 00:17:18,280 --> 00:17:21,400 Speaker 1: let's shift gears to the Mueller hearings. Uh. It now 323 00:17:21,440 --> 00:17:25,040 Speaker 1: looks like Mr Mueller is gonna appear before uh Senate, 324 00:17:25,240 --> 00:17:28,000 Speaker 1: um a car before Congress next month. How important do 325 00:17:28,040 --> 00:17:31,280 Speaker 1: you think his appearance in his testimony is I think 326 00:17:31,320 --> 00:17:34,200 Speaker 1: the theatrics of it really matter, Paul. I think most 327 00:17:34,240 --> 00:17:37,440 Speaker 1: Americans haven't read the Mulla Report. It's a long, dense 328 00:17:37,520 --> 00:17:40,360 Speaker 1: thing that that we in the media have consumed. Apparently 329 00:17:40,400 --> 00:17:44,360 Speaker 1: the President hasn't read it um and I think the 330 00:17:44,480 --> 00:17:49,679 Speaker 1: congressional hearings offer this easily digestible visual way for average 331 00:17:49,680 --> 00:17:53,800 Speaker 1: Americans across the country to connect with what Muller believes 332 00:17:53,800 --> 00:17:57,080 Speaker 1: that report was about. And I think the second reason 333 00:17:57,119 --> 00:18:01,840 Speaker 1: that's important is I think Bill barr Uh really was 334 00:18:02,440 --> 00:18:07,399 Speaker 1: politically adept and and shrewd about trying to define it 335 00:18:07,440 --> 00:18:09,639 Speaker 1: before the report even came out, and he had a 336 00:18:09,640 --> 00:18:12,880 Speaker 1: lot of free air time as Attorney General to define 337 00:18:12,920 --> 00:18:14,920 Speaker 1: the report in a way that I think wasn't accurate. 338 00:18:14,960 --> 00:18:17,480 Speaker 1: I think it was designed to protect the president. I 339 00:18:17,520 --> 00:18:19,679 Speaker 1: don't think bar was hiding the fact that that's what 340 00:18:19,760 --> 00:18:21,760 Speaker 1: he was up to, but that doesn't mean it was 341 00:18:22,000 --> 00:18:24,560 Speaker 1: an accurate reflection of what the report said. And so 342 00:18:24,640 --> 00:18:26,520 Speaker 1: this is a moment for that to happen. I guess 343 00:18:26,520 --> 00:18:29,080 Speaker 1: that one question I have is there have been a 344 00:18:29,119 --> 00:18:32,240 Speaker 1: number of surveys that show that the bulk of Americans 345 00:18:32,320 --> 00:18:35,000 Speaker 1: are sick of the Mala report and aren't necessarily trained 346 00:18:35,040 --> 00:18:37,960 Speaker 1: on it, and that basically they think that probably President 347 00:18:38,000 --> 00:18:39,840 Speaker 1: Trump did some things that were wrong, but they kind 348 00:18:39,840 --> 00:18:41,919 Speaker 1: of just want to move on. And I'm wondering what 349 00:18:42,000 --> 00:18:45,160 Speaker 1: the political risk is for Harping on this point, even 350 00:18:45,240 --> 00:18:48,879 Speaker 1: if there is some credence to the view that there 351 00:18:48,880 --> 00:18:50,760 Speaker 1: that there are aspects of this report that have not 352 00:18:50,800 --> 00:18:53,199 Speaker 1: been highlighted well, because I think that there's more than 353 00:18:53,280 --> 00:18:55,359 Speaker 1: politics at work here where a nation of laws, and 354 00:18:55,400 --> 00:18:57,600 Speaker 1: I think one of the dangerous things that emerged here 355 00:18:57,680 --> 00:18:59,960 Speaker 1: is that I think the president and his attorney general 356 00:19:00,040 --> 00:19:03,560 Speaker 1: have defined him and the presidency is above the law. 357 00:19:03,640 --> 00:19:05,439 Speaker 1: And we live in a country which we believe no 358 00:19:05,440 --> 00:19:07,800 Speaker 1: one is above the law. And I think that people 359 00:19:07,800 --> 00:19:11,240 Speaker 1: on both sides of the political aisle should find common 360 00:19:11,280 --> 00:19:13,679 Speaker 1: ground around that principle, even if it comes at a 361 00:19:13,680 --> 00:19:16,720 Speaker 1: political cost. We've had other moments in our history where 362 00:19:16,720 --> 00:19:20,399 Speaker 1: politicians have taken unpopular stands or taken stands on issues 363 00:19:20,440 --> 00:19:23,760 Speaker 1: of photos don't care about, in order further the good 364 00:19:23,920 --> 00:19:26,320 Speaker 1: uh the good, the good will and the well being 365 00:19:26,320 --> 00:19:29,200 Speaker 1: of the nation. So do you think the Democrats will 366 00:19:29,280 --> 00:19:32,720 Speaker 1: use the Maldar testimony as perhaps a step towards impeachment. 367 00:19:33,680 --> 00:19:36,720 Speaker 1: I have no idea. You know clearly Nancy Pelosi does 368 00:19:36,760 --> 00:19:39,920 Speaker 1: not think impeachment is smart politically. I think there's law 369 00:19:39,960 --> 00:19:43,240 Speaker 1: and order types and and other principle people in the 370 00:19:43,320 --> 00:19:45,840 Speaker 1: in the party who think that it should happen regardless. 371 00:19:46,760 --> 00:19:49,200 Speaker 1: I'm wondering, considering the fact that you actually have read 372 00:19:49,240 --> 00:19:51,920 Speaker 1: through this report, what are the areas that you think 373 00:19:51,920 --> 00:19:55,760 Speaker 1: are going to get sort of highlighted as breaking the law, 374 00:19:55,880 --> 00:19:58,840 Speaker 1: moments that could be exactly speaking to what you what 375 00:19:58,880 --> 00:20:01,199 Speaker 1: you just said, Yeah, I've now read it twice, I'm 376 00:20:01,240 --> 00:20:04,480 Speaker 1: sorry to say. And um, I think the second half 377 00:20:04,520 --> 00:20:07,560 Speaker 1: of the report on obstruction of justice is glaring. I 378 00:20:07,600 --> 00:20:10,439 Speaker 1: think you can't read that report and not believe that 379 00:20:10,520 --> 00:20:14,439 Speaker 1: there were very definable instances in which the president tried 380 00:20:14,520 --> 00:20:19,320 Speaker 1: to disrupt the Mueller investigation and uh Jim Comey's investigation, 381 00:20:20,000 --> 00:20:22,000 Speaker 1: that he tried to pull other people in his orbit 382 00:20:22,040 --> 00:20:24,640 Speaker 1: to do this. It was very bald faced. I don't 383 00:20:24,640 --> 00:20:26,520 Speaker 1: think there's any doubt around it. I think the only 384 00:20:26,560 --> 00:20:29,920 Speaker 1: reason Bob Mueller decided not to indict the president is 385 00:20:29,960 --> 00:20:32,800 Speaker 1: because he believed that the Justice Department had a rule 386 00:20:32,840 --> 00:20:35,960 Speaker 1: preventing him from doing so I think the language and 387 00:20:35,960 --> 00:20:39,200 Speaker 1: the report clearly laid out that he believed it was 388 00:20:39,280 --> 00:20:41,399 Speaker 1: up to the Congress to decide what to do next, 389 00:20:41,680 --> 00:20:44,120 Speaker 1: but that he wasn't willing to exonerate the president from 390 00:20:44,160 --> 00:20:48,400 Speaker 1: having committed no crimes. What would be a successful outcome 391 00:20:48,480 --> 00:20:50,879 Speaker 1: for the Democrats with with this testimony? What are they 392 00:20:50,960 --> 00:20:54,399 Speaker 1: really looking for? Uh? You know, I think they're I 393 00:20:54,400 --> 00:20:55,919 Speaker 1: think they're I don't know. I don't know there's a 394 00:20:56,040 --> 00:20:58,280 Speaker 1: unified golder. I think there's some that would like to 395 00:20:58,359 --> 00:21:00,520 Speaker 1: see it, as you asked earlier, Paul out is, you know, 396 00:21:00,640 --> 00:21:02,760 Speaker 1: to make it a first step on the way towards impeachment. 397 00:21:03,000 --> 00:21:05,840 Speaker 1: I think there's others that would be satisfied for it 398 00:21:06,000 --> 00:21:10,520 Speaker 1: simply to raise doubts among the electorate about the president 399 00:21:10,600 --> 00:21:14,280 Speaker 1: and his ethics and the way he operates. How much 400 00:21:14,320 --> 00:21:17,639 Speaker 1: support is there from the Republicans to defend him regardless 401 00:21:17,800 --> 00:21:20,600 Speaker 1: of of what comes out. I think there's like one 402 00:21:20,640 --> 00:21:24,600 Speaker 1: thousand percent support from the Republicans to get in the 403 00:21:24,640 --> 00:21:27,000 Speaker 1: way of this. Yeah, I think that they I think 404 00:21:27,000 --> 00:21:29,560 Speaker 1: he's already got you know, last night, Mark Meadows went 405 00:21:29,640 --> 00:21:32,119 Speaker 1: on Fox and said that if Bob Mueller thinks he's 406 00:21:32,119 --> 00:21:35,040 Speaker 1: going to come in here and uh not get cross 407 00:21:35,080 --> 00:21:37,879 Speaker 1: examined by us. You know, he's got another thing coming 408 00:21:38,200 --> 00:21:40,360 Speaker 1: as if you know Bob Mueller, as a veteran prosecutor, 409 00:21:40,359 --> 00:21:43,840 Speaker 1: would really worry about a junior congressman's ability to cross 410 00:21:43,880 --> 00:21:46,360 Speaker 1: examine him in a public forum. I don't think Bob 411 00:21:46,440 --> 00:21:49,800 Speaker 1: Mueller will break a sweat during that hearing. Uh, but 412 00:21:49,880 --> 00:21:52,800 Speaker 1: clearly Mark Meadows, Jim Jordan, there's other people who have 413 00:21:52,920 --> 00:21:55,920 Speaker 1: argued beyond the report, I think to defend the president. 414 00:21:56,600 --> 00:21:59,160 Speaker 1: Tim O'Brien, thank you so much. He has a way 415 00:21:59,160 --> 00:22:02,240 Speaker 1: of phrasing than Tim O'Brien is. Is really a word 416 00:22:02,280 --> 00:22:05,280 Speaker 1: smith Beyond words Smith, he's fabulous. Thank you for joining 417 00:22:05,359 --> 00:22:08,480 Speaker 1: us to my Brian executive at her Bloomberg Opinion, Joining 418 00:22:08,520 --> 00:22:24,400 Speaker 1: us on our Bloomberg Interactive Broker studio. If you look 419 00:22:24,480 --> 00:22:27,600 Speaker 1: at home builder stocks, they have taken quite a fall, 420 00:22:27,640 --> 00:22:31,119 Speaker 1: with the biggest to day decline in the subsector of 421 00:22:31,160 --> 00:22:34,880 Speaker 1: the SMP five hundred since December. The question is how 422 00:22:34,960 --> 00:22:37,560 Speaker 1: far have we gotten already in the slowdown in the 423 00:22:37,600 --> 00:22:40,440 Speaker 1: housing market? Joining us now Logan Motor sham Me. He's 424 00:22:40,440 --> 00:22:44,679 Speaker 1: senior loan officer at AMC Lending Group. Joining US from California, Logan, 425 00:22:44,800 --> 00:22:47,000 Speaker 1: thank you so much for joining us. I want to 426 00:22:47,040 --> 00:22:51,359 Speaker 1: start there. How concerning is the slowing housing data that 427 00:22:51,359 --> 00:22:54,920 Speaker 1: we're getting. How concerning is it to you? Well? Last year, 428 00:22:55,440 --> 00:22:59,800 Speaker 1: towards the end of the new homesale market was flashing 429 00:22:59,800 --> 00:23:04,160 Speaker 1: your recession, you know, uh, the builder's confidence index was collapsing, 430 00:23:04,280 --> 00:23:08,720 Speaker 1: monthly supply spikes up to levels in and new home 431 00:23:08,760 --> 00:23:11,760 Speaker 1: sales were trending negative. So I was, you know, calling 432 00:23:11,760 --> 00:23:14,000 Speaker 1: for Hey, this is not a good data line. But 433 00:23:14,240 --> 00:23:16,520 Speaker 1: back then I said, new home sales are still too low. 434 00:23:16,640 --> 00:23:18,800 Speaker 1: Don't call a peak yet. We should be able to 435 00:23:18,840 --> 00:23:22,280 Speaker 1: get back, uh, get monthly supplied back down to below 436 00:23:22,320 --> 00:23:24,680 Speaker 1: six and a half months. Now. We've done that this year, 437 00:23:24,720 --> 00:23:27,480 Speaker 1: and new home sales are still being my estimates for 438 00:23:27,520 --> 00:23:30,760 Speaker 1: the year. But we simply have too much supply of 439 00:23:30,840 --> 00:23:34,440 Speaker 1: new homes for the builders to really start accelerating construction, 440 00:23:34,960 --> 00:23:37,440 Speaker 1: especially on single family homes now. And I think that's 441 00:23:37,440 --> 00:23:39,560 Speaker 1: the problem. And I think the market is starting to 442 00:23:39,600 --> 00:23:41,800 Speaker 1: get a get a whiff of this. That if if 443 00:23:41,880 --> 00:23:44,760 Speaker 1: we are seven days away from really having the longest 444 00:23:44,760 --> 00:23:47,440 Speaker 1: economic expansion ever with mortgage rates under five per cent 445 00:23:47,480 --> 00:23:50,680 Speaker 1: since two thousand eleven, and we have a really hard 446 00:23:50,720 --> 00:23:53,639 Speaker 1: time pushing housing starts to above one point four million 447 00:23:53,640 --> 00:23:56,960 Speaker 1: on permits. There's a problem for the builders, not just now, 448 00:23:57,000 --> 00:23:59,640 Speaker 1: but going out for maybe two or three more decades. 449 00:23:59,720 --> 00:24:03,440 Speaker 1: Can they really provide a product that would facilitate enough 450 00:24:03,520 --> 00:24:06,199 Speaker 1: demand to keep monthly supply low enough for them to 451 00:24:06,240 --> 00:24:09,440 Speaker 1: make money and to for for housing starts to keep 452 00:24:09,440 --> 00:24:13,280 Speaker 1: on growing at an acceptable rate. And I've always argued this, 453 00:24:13,520 --> 00:24:17,920 Speaker 1: they cannot compete with the bigger existing homesale marketplates. So look, 454 00:24:17,960 --> 00:24:19,679 Speaker 1: I want to get a sense of kind of the 455 00:24:19,720 --> 00:24:22,720 Speaker 1: new home sales market for versus existing how's that shaping 456 00:24:22,800 --> 00:24:26,280 Speaker 1: up right now? Even though existing home sales are down 457 00:24:26,320 --> 00:24:28,320 Speaker 1: this year, which was my poecast sales are down a 458 00:24:28,359 --> 00:24:30,920 Speaker 1: little bit, inventory up a little bit, it's still out 459 00:24:30,960 --> 00:24:34,480 Speaker 1: performing as it has this entire cycle. New home sales 460 00:24:34,800 --> 00:24:37,720 Speaker 1: basically had the worst demand curve ever in US history. 461 00:24:38,040 --> 00:24:40,760 Speaker 1: So existing home sales is doing better. In my mind, 462 00:24:41,200 --> 00:24:43,840 Speaker 1: new home sales has done one positive things. It brought 463 00:24:43,880 --> 00:24:46,440 Speaker 1: monthly supply back down to below six and a half months. 464 00:24:46,880 --> 00:24:50,560 Speaker 1: UH sales trends are still running a positive But if 465 00:24:50,600 --> 00:24:53,159 Speaker 1: we get above six and a half months again, a 466 00:24:53,160 --> 00:24:55,399 Speaker 1: monthly supply. That is a red flag. And this is 467 00:24:55,400 --> 00:24:57,120 Speaker 1: one of the reasons, and we talked about this last 468 00:24:57,200 --> 00:24:59,800 Speaker 1: year on the show. Why housing starts in twenty nine 469 00:25:00,480 --> 00:25:02,720 Speaker 1: is a question mark. We're still running negative year or 470 00:25:02,760 --> 00:25:06,119 Speaker 1: year and housing starts, but comps on all housing datas 471 00:25:06,160 --> 00:25:07,760 Speaker 1: are going to get a lot easier in the second 472 00:25:07,800 --> 00:25:10,040 Speaker 1: half of the year, so things should look a little 473 00:25:10,040 --> 00:25:13,040 Speaker 1: bit better on the year of year averages. But simply 474 00:25:13,080 --> 00:25:16,359 Speaker 1: there's not enough demand in the new home sales market 475 00:25:16,440 --> 00:25:20,280 Speaker 1: to warrant more construction, and the builders are more cautious 476 00:25:20,359 --> 00:25:23,120 Speaker 1: now than ever any time in the cycle. I'm trying 477 00:25:23,119 --> 00:25:27,080 Speaker 1: to understand how this bleeds through to housing values going forward, 478 00:25:27,119 --> 00:25:29,720 Speaker 1: because we have seen a decline in certain coastal cities 479 00:25:30,320 --> 00:25:34,240 Speaker 1: due to the salt deductions and other issues that might 480 00:25:34,280 --> 00:25:37,440 Speaker 1: have arisen, and just in general inflation and valuations there. 481 00:25:37,680 --> 00:25:40,359 Speaker 1: But what about throughout the nation, given the fact that 482 00:25:40,400 --> 00:25:45,920 Speaker 1: market rates are so low and heading lower adjusting to inflation, 483 00:25:46,160 --> 00:25:49,760 Speaker 1: home prices should be flattened. Some markets they are negative. 484 00:25:50,200 --> 00:25:52,960 Speaker 1: There's there are homeowners that bought their homes last year 485 00:25:53,000 --> 00:25:55,440 Speaker 1: and let's say early in spring that are down year 486 00:25:55,520 --> 00:25:59,840 Speaker 1: over year. This to me is a very healthy saw 487 00:26:00,119 --> 00:26:02,960 Speaker 1: of the housing market, the existing home sales market actually 488 00:26:03,280 --> 00:26:06,280 Speaker 1: performing this function. You know, a little bit demand weakness, 489 00:26:06,320 --> 00:26:09,200 Speaker 1: a little bit supply increase in certain areas where the 490 00:26:09,240 --> 00:26:12,080 Speaker 1: supply is actually more the rate of growth that's flowing down. 491 00:26:12,080 --> 00:26:14,600 Speaker 1: In some cases, people are are down in your rear. 492 00:26:14,880 --> 00:26:17,600 Speaker 1: I think that's perfectly fine. I think so many people 493 00:26:17,600 --> 00:26:20,520 Speaker 1: are in this housing bubble two point oh mentality that 494 00:26:20,560 --> 00:26:23,560 Speaker 1: they think that there's going to be just another crash 495 00:26:23,600 --> 00:26:25,919 Speaker 1: in prices. That's not how it works. You would need 496 00:26:26,000 --> 00:26:29,919 Speaker 1: to really see a significant demand decrease from where sales 497 00:26:29,960 --> 00:26:33,480 Speaker 1: are right now, even worse than the housing bubble and 498 00:26:33,560 --> 00:26:36,840 Speaker 1: crash to get prices to really accelerate down on a 499 00:26:36,920 --> 00:26:38,960 Speaker 1: national basis. So I think we're okay there. I think 500 00:26:38,960 --> 00:26:41,320 Speaker 1: that's what's happening with in the home price market is 501 00:26:41,359 --> 00:26:45,159 Speaker 1: positive in my mind. Uh that meeting sales prices for 502 00:26:45,480 --> 00:26:47,919 Speaker 1: the new homesale market following is a lot of that 503 00:26:48,000 --> 00:26:51,000 Speaker 1: has to do more with the makeshift of smaller homes 504 00:26:51,040 --> 00:26:53,600 Speaker 1: being part of the sales mix we have. We've seen 505 00:26:53,680 --> 00:26:57,480 Speaker 1: some discounting by the builders, but nothing dramatic yet. I 506 00:26:57,480 --> 00:26:59,679 Speaker 1: think that's where you, if you, if you really want housing, 507 00:26:59,720 --> 00:27:03,080 Speaker 1: start to really kick up to provide more homes out there. 508 00:27:03,119 --> 00:27:05,400 Speaker 1: You need. You simply just need a lot more new 509 00:27:05,440 --> 00:27:08,080 Speaker 1: home sales now than any other time in this cycle. 510 00:27:08,880 --> 00:27:10,840 Speaker 1: Look and are there any regions of the country that 511 00:27:10,840 --> 00:27:13,040 Speaker 1: are surprising you with maybe with a little bit on 512 00:27:13,080 --> 00:27:17,320 Speaker 1: the downside in terms of weakness. No, because the coastal 513 00:27:17,359 --> 00:27:19,720 Speaker 1: areas in the high price here is whenever mortgage rates 514 00:27:19,720 --> 00:27:24,400 Speaker 1: get higher, uh, they see a demand hit. And I'm 515 00:27:24,480 --> 00:27:27,120 Speaker 1: not a big fan of the salt deduction is really 516 00:27:27,160 --> 00:27:30,480 Speaker 1: impacting the coastal areas that we just mortgage rates got 517 00:27:30,600 --> 00:27:35,439 Speaker 1: up higher. This similar thing happened in actually uh and 518 00:27:35,520 --> 00:27:37,679 Speaker 1: here in California, sales are a little bit higher than 519 00:27:37,680 --> 00:27:40,280 Speaker 1: what they were in when when we saw the last 520 00:27:40,320 --> 00:27:42,840 Speaker 1: dip and there was no solved problem back then. Uh 521 00:27:42,960 --> 00:27:45,240 Speaker 1: So right now, because mortgage rates are coming back down, 522 00:27:45,280 --> 00:27:48,560 Speaker 1: it stopped the supply bleeding. You know, we're we're starting 523 00:27:48,560 --> 00:27:50,720 Speaker 1: to see a little bit more demand pick up, take 524 00:27:50,760 --> 00:27:52,960 Speaker 1: off a little bit of a supply. But again, these 525 00:27:52,960 --> 00:27:56,280 Speaker 1: coastal areas, whenever mortgage rates go up to about four 526 00:27:56,320 --> 00:27:58,840 Speaker 1: and a half to five percent, they see an impact 527 00:27:58,880 --> 00:28:04,200 Speaker 1: on demand. And that should be the case for sometime now. Look, Multasha, 528 00:28:04,560 --> 00:28:06,359 Speaker 1: thank you so much for joining us logan as a 529 00:28:06,400 --> 00:28:09,200 Speaker 1: senior loan officer for the A m C Lending Group 530 00:28:09,440 --> 00:28:13,359 Speaker 1: based in Irvine, California. Thanks for listening to the Bloomberg 531 00:28:13,359 --> 00:28:15,560 Speaker 1: P and L podcast. You can subscribe and listen to 532 00:28:15,600 --> 00:28:18,800 Speaker 1: interviews at Apple Podcasts or whatever podcast platform you prefer. 533 00:28:19,040 --> 00:28:21,720 Speaker 1: I'm Paul Sweeney. I'm on Twitter at pt Sweeney. I'm 534 00:28:21,760 --> 00:28:24,480 Speaker 1: Lisa abram Woit's I'm on Twitter at Lisa abram Woits 535 00:28:24,480 --> 00:28:27,320 Speaker 1: one before the podcast. You can always catch us worldwide. 536 00:28:27,359 --> 00:28:28,320 Speaker 1: I'm Bloomberg Radio.