Speaker 1: Welcome to Bloomberg Opinion. I'm Amy Morris. This week we
Speaker 1: look at the latest step in the climate change battle,
Speaker 1: protecting the ocean. It's absorbs about ninety percent of the
Speaker 1: heat chopped by greenhouse stresses so far and also absorbed
Speaker 1: about thirty percent of the CO two that we've emitted.
Speaker 1: So without the ocean, we'd be in a much stickier situation.
Speaker 1: We'll be talking with Bloomberg's Lara Williams. Bloomberg's Alexis Leandis
Speaker 1: joins us with the latest on the housing market. She
Speaker 1: says mortgage lenders are selling homebuyers a lie. And what
Speaker 1: will it take to attract and keep more workers. Bloomberg's
Speaker 1: Sarah Green Carmichael says, maybe don't worry about raises but benefits.
Speaker 1: We're really seeing employees resisting those calls to be back
Speaker 1: in the office four or five days a week. I
Speaker 1: think some of that pressure from companies is really misguided.
Speaker 1: You know, this is not the time to be climbing
Speaker 1: back a benefit that not only costs you nothing but
Speaker 1: actually helps employees be more productive. Let's get started. We
Speaker 1: begin with the rail road system in the US, which
Speaker 1: has had a rough couple of months after several Norfolk
Speaker 1: Southern derailments, one of them carrying toxic chemicals in East Palestine, Ohio,
Speaker 1: and the death of a train conductor this past week
Speaker 1: when a dump truck and a train collided at a
Speaker 1: railroad crossing in Cleveland, Ohio. And well, now we're learning
Speaker 1: more about safety measures that Norfolk Southern says it'll put
Speaker 1: in place while the National Transportation Safety Board continues its investigations.
Speaker 1: Democratic Senator Shared Brown of Ohio says the railroad is
Speaker 1: simply cutting too many corners. They've laid off a third
Speaker 1: of their workforce, they've compromised on safety, They don't the
Speaker 1: workers don't have enough time to do the thorough inspections
Speaker 1: they should do. But there's another part of this story too.
Speaker 1: The railroad itself usually doesn't own those rail cars. Those
Speaker 1: are often private owners, like shippers. So does that make
Speaker 1: a difference when it comes to maintenance and safety on
Speaker 1: the rails? Bloomberg Opinion columnist Brook Sutherland joins us Now, Brook,
Speaker 1: thank you for being here, Thanks so much for having me. Okay, So,
Speaker 1: the railroads don't own those rail cars. So if there
Speaker 1: is a problem with one of the rail cars, and
Speaker 1: maybe it starts a chain reaction like a derailment. Is
Speaker 1: the private owner responsible? Is that a complicated question to
Speaker 1: ask who takes care of that? It's definitely a complicated question,
Speaker 1: a lot more complicated than I think I even appreciated
Speaker 1: when I started looking at this. So the railroads do
Speaker 1: own some cars, and there's also an entity that's called TTX,
Speaker 1: which is jointly owned by all of the by a
Speaker 1: number of the major North American railroads and pools car
Speaker 1: asses between them. But the railroads and TTX typically own
Speaker 1: you know, box cars or container cars. They do not
Speaker 1: own hopper cars, which is in the case of this
Speaker 1: derailment that we saw, the one that had the overheated
Speaker 1: bearing or tank cars which carry chemicals which you know,
Speaker 1: in the case of the derailment, spilled or had to
Speaker 1: be released in a controlled way. So typically those are
Speaker 1: owned by private party, and that can be mean a
Speaker 1: number of different things. That can be the shipping company
Speaker 1: or the shipper you know that's transporting its goods down
Speaker 1: the railroad. It can be a railroad leasing company, or
Speaker 1: it can be a private investor like a bank or
Speaker 1: you know, even a hedge fund. And those owners are
Speaker 1: typically responsible for the maintenance of the car. They're responsible
Speaker 1: for keeping the car in good condition. Um. The railroad, however,
Speaker 1: has responsibility for, you know, overseeing kind of the overall train,
Speaker 1: and it does certain inspections when those cars come onto
Speaker 1: its line to make sure, you know, at least as
Speaker 1: far as it can be determined at that point in time,
Speaker 1: that those cars are in good shape. So there's a
Speaker 1: lot of varying responsibilities here, um, And all of this
Speaker 1: likely has to be sorted out in a legal way
Speaker 1: down the line, and I expect that it will be.
Speaker 1: But there's maarious responsibilities here that makes sense, and it
Speaker 1: also makes maybe explains why this seems so hard, because
Speaker 1: if you have multiple owners of multiple cars that are
Speaker 1: all on one train, I'm wondering, does that mean then
Speaker 1: you find different people performing different inspections at different times.
Speaker 1: Is there any consistency there? Sure? So, I mean there
Speaker 1: are regulations around, you know, keeping the cars themselves in
Speaker 1: good shape. And like I mentioned, the railroads are obligated
Speaker 1: to do an inspection of the train cars when they
Speaker 1: do come onto their line. Now, the railroads, they're somewhat
Speaker 1: limited in what they can inspect here. It's mostly what
Speaker 1: they can determine visually or from simple checks. So something
Speaker 1: like bearing, which in the case of the derailment, like
Speaker 1: we said, is what overheated and has been pointed to
Speaker 1: by the NTSB as a potential trigger for this derailment.
Speaker 1: That's in a metal box essentially, So the only way
Speaker 1: to really inspect it is to take the wheel set apart.
Speaker 1: Now you're not going to do that every time you
Speaker 1: want to run a train. So there is a system here,
Speaker 1: there is regulations, but you know, like we said, there's
Speaker 1: a number of different parties that have their hands on
Speaker 1: these rail cars. And that's not just the owner and
Speaker 1: one railroad. Also, by the way cars the way our
Speaker 1: network works in North America, cars will be transferred between
Speaker 1: the major North American railroads and also what we call
Speaker 1: short haul lines. Oh so if you have a train,
Speaker 1: say going through Ohio, and it's on the Norfolk Southern
Speaker 1: rail line at one point, it might be on a
Speaker 1: whole different rail line on another time, it's not consistently
Speaker 1: with that same rail line. Correct. The railroads don't have
Speaker 1: networks that traverse the entire United States. So if the
Speaker 1: shipment starts on the West Coast, for example, it might
Speaker 1: touch multiple different railroads before it makes its way to Ohio.
Speaker 1: Oh so, no, this is tremendously complex. It is, yes,
Speaker 1: And I mean I think we've seen this time and
Speaker 1: time again in the industrial sector, especially over the last
Speaker 1: couple of years, the supply chains and manufacturing have been
Speaker 1: in such a national spotlight. Is that these systems are
Speaker 1: not necessarily as simple as you might think, or as
Speaker 1: what we have grown used to, you know, in the
Speaker 1: world where we can track our FedEx and ups deliveries
Speaker 1: on our phone, or we can see with software, you know,
Speaker 1: so much more than we could even a few years ago.
Speaker 1: And I think it comes as a surprise to some
Speaker 1: people just how complicated these more industrial parts of the
Speaker 1: economy are. And it's not just railroads. We learned this
Speaker 1: as well from the ports, with all of the challenges
Speaker 1: that they had in navigating you know, the huge sturge
Speaker 1: of shifts that came in during that peak demand for
Speaker 1: physical good during the pandemic. I'm going to throw you
Speaker 1: a bit of a curveball here. In the case of
Speaker 1: the train derailment in East Palestine, there were toxic chemicals spilled,
Speaker 1: and Norfolk Southern came forward and said they've pledged to
Speaker 1: do whatever it takes to make things right. But as
Speaker 1: you said earlier, and as they've said, the Hopper rail
Speaker 1: car is where the problem began, and that doesn't belong
Speaker 1: to them. So does something like that tie our hands,
Speaker 1: tie Norfolk Southern's hands, or does it give them a
Speaker 1: reason to wash their hands of responsibility. I don't think
Speaker 1: that Norfolk Southern can wash the hands of responsibility here.
Speaker 1: I think you know, they've pledged to do whatever it
Speaker 1: takes to clean up the community, and I think they should.
Speaker 1: And I think this is a moment for not just
Speaker 1: nor Folks ou then, but all of the railroads to
Speaker 1: reevaluate safety and look at what happened here and say, Okay,
Speaker 1: what can we do better? Are there redesdencies that we
Speaker 1: can build into our system that might prevent something like
Speaker 1: this from happening again? Are there other regulations that have
Speaker 1: been proposed that maybe we thought didn't make sense, but
Speaker 1: this accident should force us to reevaluate. I think those
Speaker 1: conversations need to be happening. But I do think that
Speaker 1: those conversations should include the broader railroad industry, and that
Speaker 1: must also mean you know that rail car owners are involved,
Speaker 1: the shippers themselves, the leasing companies, and also regulators, and
Speaker 1: I think there should really be a collaborative conversation that
Speaker 1: brings in all parties here. I think, you know, the
Speaker 1: people in Ohio want answers, and that needs to include
Speaker 1: a discussion of who owned that railcar, how it was inspected,
Speaker 1: how it was maintained, and what went wrong with that bearing.
Speaker 1: I want to look ahead and figure out what may
Speaker 1: happen from here. I'm thinking regulations, other railroads watching this
Speaker 1: and how it plays out and following suit. What do
Speaker 1: you see coming out of this? I think that you know,
Speaker 1: there's been a lot of discussions about the hot bearing detectors.
Speaker 1: These are temperature sensors that are along the rail tracks
Speaker 1: in Norfolk. Southern has already said they're planning to enhance
Speaker 1: their work of these detectors. They're going they're already you know,
Speaker 1: roughly about every thirteen point nine miles, I believe the
Speaker 1: railroad said, but they're going to you know, take a
Speaker 1: closer look at any times where there might be longer
Speaker 1: gaps and make sure that they have proper density of
Speaker 1: those detectors. There's also new technology out there, whether that
Speaker 1: might be acoustic detectors, which can perhaps take up situations
Speaker 1: where the bearing is at risk of overheating before it
Speaker 1: actually does. There's also you know, new next generation technology
Speaker 1: that can scan a broader cross section of the wheel set.
Speaker 1: There's a lot of things that could be done potentially
Speaker 1: that might make this network of detectors slightly more robust.
Speaker 1: I should point out also that this is not something
Speaker 1: that is currently regulated. Railroads install these detectors voluntarily, and
Speaker 1: they have discretion over how they deploy them. So perhaps
Speaker 1: this is something that needs to be crystallized at the
Speaker 1: government level, and I think that's where you know, a
Speaker 1: lot of the discussion is and at this moment, and
Speaker 1: that probably seems like the most likely at this point.
Speaker 1: I know that there's been a number of different proposals
Speaker 1: that have put forward, and as far as anything else,
Speaker 1: it's somewhat difficult to handicap at this point. But you know,
Speaker 1: certainly it seems like the rail industry is going to
Speaker 1: stay in the spotlight and needs to have some serious
Speaker 1: conversations about safety. So beyond regulations and those conversations, new
Speaker 1: techn anologies to help people stay safe. Yes, absolutely, I mean,
Speaker 1: I think, you know, having covered the manufacturing industry, closely.
Speaker 1: There's a lot of technology being deployed there that could
Speaker 1: have a placed on the rails in terms of predictive maintenance,
Speaker 1: using industrial software and censors to draw data out of
Speaker 1: the equipment itself and make better decisions using that information,
Speaker 1: and in terms of how to run that equipment most
Speaker 1: efficiently and most safely. All right, thank you Brooke for
Speaker 1: taking the time with us. We appreciate it. Thank you
Speaker 1: so much. Bloomberg Opinion columnist Brooks Sutherland covers deals and
Speaker 1: industrial companies and writes the Industrial Strength newsletter here at Bloomberg.
Speaker 1: Coming up, we're going to take a look at what
Speaker 1: it takes to attract and retain workers. Bloomberg's Sarah Green
Speaker 1: Carmichael will join us. Just ahead. You're listening to Bloomberg Opinion.
Speaker 1: You're listening to Bloomberg Opinion. I'm Amy Morris. And despite
Speaker 1: fears of a slowdown, the labor market is still pretty tight.
Speaker 1: Most companies aren't laying people off. They're more concerned about
Speaker 1: retaining the workers they have. Some employers might not want
Speaker 1: to grant pay increases in an uncertain economy, but there's
Speaker 1: another way. We turned out. A Bloomberg Opinion editor Sarah
Speaker 1: Green Carmichael, and she joins us. Now it seems like
Speaker 1: an obvious solution if you can't give your workers raises,
Speaker 1: provide benefits. But does that work? It does? I think
Speaker 1: in terms of enhancing employee loyalty, there's some good evidence
Speaker 1: that benefits can do that, especially if they're well designed.
Speaker 1: So I'm specifically thinking about things three things. One is
Speaker 1: a benefit that's pretty rare or unusual. One is a
Speaker 1: benefit that has a real bang for the buck, offers
Speaker 1: real financial value to people. And then finally, you know,
Speaker 1: a benefit that actually has a meaningful impact on people's lives.
Speaker 1: If we think about something that's sort of the opposite
Speaker 1: of those I might pick like dental insurance or a
Speaker 1: sort of general employee wellness kind of benefit. Typically those
Speaker 1: sorts of benefits, they don't offer a lot of money,
Speaker 1: they're pretty common, and you're not even ever going to
Speaker 1: hear someone say like, well, you know, I really wanted
Speaker 1: to quit, but then I thought about my dental engas
Speaker 1: got dental. But yeah, But if you're thinking about something
Speaker 1: like maybe a sabbatical, well, now we're in a whole
Speaker 1: new ball game. Okay, So do you find that there
Speaker 1: are businesses that perhaps can't afford to give raises, but
Speaker 1: can somehow find a way to give these benefits, Like,
Speaker 1: is there some sort of cost effectiveness there? Yeah. So
Speaker 1: one of the things that's interesting about benefits is that
Speaker 1: they aren't in the US anyway. They are taxed differently
Speaker 1: than raises, for one thing, so there's some tax advantages.
Speaker 1: They are also typically cheaper to provide than across the
Speaker 1: board raise, especially at a time of such high inflation.
Speaker 1: So if you think about something like an on site
Speaker 1: childcare that's very rare benefit. It would be expensive to
Speaker 1: set that up potentially, but still cheaper than giving raises
Speaker 1: to a bunch of people. And you know, it might
Speaker 1: not only benefit employees who would use it, but also
Speaker 1: people who are younger, maybe thinking about having kids. It
Speaker 1: might convince them to stay with the firm for longer.
Speaker 1: So there's definitely economies of scale and offering a good benefit.
Speaker 1: Is it something that they can afford in other ways? Though,
Speaker 1: I'm just looking for more advantages for the business owner
Speaker 1: in providing these worker benefits. What are they finding for them? Yeah,
Speaker 1: of course. So one example comes from Google. You now
Speaker 1: many years ago they've now expanded their parental leaf policy.
Speaker 1: For example, twice and two thousand and seven they increased
Speaker 1: it from twelve weeks to eighteen weeks, and then just
Speaker 1: last year they bumped it up from eighteen weeks to
Speaker 1: twenty four weeks. And the reason that they are doing
Speaker 1: this is not just because it helps them attract talent
Speaker 1: and not just because it helps them sort of seem
Speaker 1: like a cool employer to work for. They have found
Speaker 1: that when they increased that benefit, they've reduced the rate
Speaker 1: at which women who've had children quit their jobs. So
Speaker 1: when they bumped it up from twelve weeks to eighteen
Speaker 1: weeks in two thousand and seven, they have the rate
Speaker 1: at which new moms were quitting. So that really matters
Speaker 1: because no matter what the labor market is like, it
Speaker 1: is always expensive to replace workers who leave. It takes time,
Speaker 1: it's disruptive, it costs real money. Sometimes you end up
Speaker 1: having to pay more to hire someone new from outside
Speaker 1: the organization. So retention is really important not only to
Speaker 1: continuity of the business, not only to productivity, but also
Speaker 1: to the bottom line. I'm going to throw you a
Speaker 1: bit of a curveball, but I trust that you can
Speaker 1: handle it. I'm not worried. You mentioned the data and
Speaker 1: keeping track of what it is that the employees want
Speaker 1: or what it seems to get them more quote embedded
Speaker 1: as you as you put it is that key to
Speaker 1: this for companies that you can throw all the benefits
Speaker 1: you want at your employee workforce, but you need to
Speaker 1: keep track of what works and what doesn't. You need
Speaker 1: to keep track of not just the cost effectiveness of it,
Speaker 1: but the personnel part of it too totally. And this
Speaker 1: is one of the reasons I think that you're seeing
Speaker 1: companies cut back on things like free food if free
Speaker 1: food costs real money and it's not something it's like
Speaker 1: something that's sort of nice to have, but it's not again,
Speaker 1: it's not keeping people from walking out the door. So
Speaker 1: I think companies are very smart. Companies anyway are very
Speaker 1: sensitive to like what's really keeping people here? What are
Speaker 1: people really evaluating. I think companies should always be evaluating
Speaker 1: their benefits to see what people are using. If you're,
Speaker 1: you know, commuter benefit, if no one is using that benefit,
Speaker 1: maybe don't keep offering it. Or if no one's using it,
Speaker 1: probably doesn't hurt you to keep offering it because you're
Speaker 1: not spending any money on it. That's true. I do
Speaker 1: think it makes sense to constantly be looking at and
Speaker 1: reevaluating the benefits you're offering and see what works. So
Speaker 1: let's talk about some of those employee perks that we
Speaker 1: saw during COVID that maybe are being brought back and
Speaker 1: brought back, as in clawed back, as in removed from
Speaker 1: the offerings that would be You mentioned the free food,
Speaker 1: the free lunch, subsidized parking, flexible work hours seems to
Speaker 1: be something that has a little more stickiness to it.
Speaker 1: No exactly. I think it's important to me to think
Speaker 1: about these in sort of two different categories, right. I
Speaker 1: think it's very easy for companies to put the case
Speaker 1: to their employees that something like subsidized parking is really
Speaker 1: a pandemic era benefit. It is something that helps you
Speaker 1: maybe avoid germs on the subway, and it is a
Speaker 1: way to get you into the office at a scary
Speaker 1: time where they recognize that you might really not want
Speaker 1: to come in for health reasons. It is much easier
Speaker 1: to take something like that away than it is to
Speaker 1: take away flexibility. Flexibility costs nothing for companies to offer.
Speaker 1: It is something that is highly prized by employees because
Speaker 1: when we're talking about flexibility, What we're really talking about
Speaker 1: is autonomy. Are you an adult? Can you decide how
Speaker 1: to do your job? Can you have control over when
Speaker 1: and where you work? That's something that is like a
Speaker 1: price beyond measure to an employee, And that's why I
Speaker 1: think we're really seeing employees resisting those calls to be
Speaker 1: back in the office four or five days, and why
Speaker 1: I think some of that pressure from companies is really misguided.
Speaker 1: You know, this is not the time to be clawing
Speaker 1: back a benefit then not only cost you nothing, but
Speaker 1: actually helps employees be more productive. When you say that
Speaker 1: it provides worker autonomy to have those flexible work hours,
Speaker 1: I want to go back to something we used to
Speaker 1: hear in the nineties all the time, the work life balance. Right,
Speaker 1: it means something, especially whether there's a pandemic or not,
Speaker 1: especially if you're a parent with young kids, especially if
Speaker 1: you are an adult who is taking care of an
Speaker 1: aging parent. To have that flexibility would not only give
Speaker 1: you more loyalty to your manager, but also would give
Speaker 1: you more opportunities to get more work done. But maybe
Speaker 1: when other people aren't in the office, that sort of thing. Yeah, exactly,
Speaker 1: you know, I think commuting is a huge times huck,
Speaker 1: and what we saw during a pandemic was yes, you
Speaker 1: laugh because yes, you know it's true. Oh yeah, what
Speaker 1: we saw during the pandemic was really that people recouped
Speaker 1: that commute time and they did use it. In some cases,
Speaker 1: they use some of it for their own wellness, but
Speaker 1: they use a lot of it and maybe even most
Speaker 1: of it for their jobs, and that's how they get
Speaker 1: more done. So I think it's something where I'm a
Speaker 1: manager in a company and if there's something I can
Speaker 1: give people that cost me nothing and that helps them
Speaker 1: do their jobs better and actually get even more done,
Speaker 1: that's something I'd like to keep giving them. Where do
Speaker 1: you see things going from here? Do you see more
Speaker 1: benefits being offered? Do you see more flexibility being offered?
Speaker 1: What are you going to be watching for in this workspace?
Speaker 1: I know you don't have a crystal ball, but where
Speaker 1: do you see the trends? A couple of trends. I'm
Speaker 1: seeing our greater flexibility around who counts as a loved one.
Speaker 1: So under old sort of caregiving policies, it had to
Speaker 1: be a child or a parent or a spouse who
Speaker 1: is sick for you to take some form of caregiving leave.
Speaker 1: But I'm now seeing more companies saying, you know what
Speaker 1: your loved one is, whoever you say it is, and
Speaker 1: if they need, you know, time for you to take
Speaker 1: care of them, you can have that paid caregiving leave.
Speaker 1: So that's one thing I'm seeing. Other stuff I'm really
Speaker 1: interested in is this sort of trend to sabbaticals. I'd
Speaker 1: love to have more data on that. The data we
Speaker 1: have so far as pretty thin, but I'd love to
Speaker 1: know if more companies are actually offering them. And then
Speaker 1: experiments like four day workweeks. There have been some fascinating
Speaker 1: experiments in Europe with the four day workweek. One manager
Speaker 1: in Iceland said it's like a gift from the heaven.
Speaker 1: I would love to see more data on that, and
Speaker 1: maybe some more US companies experimenting with that as well.
Speaker 1: All right, we're going to watch for it with you.
Speaker 1: Thank you, Sarah so much for taking the time. Thank
Speaker 1: you for having me, Bloomberg Opinion Editor Sarah Greencar Michael,
Speaker 1: don't forget. We're available as a podcast on Apple, Spotify
Speaker 1: or your favorite podcast platform. Stay with us. Coming up,
Speaker 1: we'll look at mortgages and the housing market. Bloomberg's Alexis
Speaker 1: Leondis warns that homebuyers are buying into a lie. This
Speaker 1: is Bloomberg opinion. This is Bloomberg opinion. I'm Amy Morris.
Speaker 1: Realtors and mortgage lenders are giving worried home buyers some
Speaker 1: advice as mortgage rates approach the two decade high of
Speaker 1: seven percent reached in November. Marry the house, date the rate,
Speaker 1: But that could be bad advice. Many new homeowners are
Speaker 1: finding themselves in a longer term relationship with today's rate
Speaker 1: than they expected. Vice President Kamala Harris has said that
Speaker 1: owning a home is really part of the American dream.
Speaker 1: A home represents financial security, the opportunity to build wealth
Speaker 1: and equity. We know that when we increase home ownership,
Speaker 1: it strengthens communities and it strengthens our economy. Vice President
Speaker 1: Kamala Harris on how homeownership can help the entire community.
Speaker 1: So what our home buyers facing? Joining us now with
Speaker 1: some insight, Bloomberg Opinion columnist Alexis leand us. Okay, so
Speaker 1: let's look at a little history. For the past ten years,
Speaker 1: rates were much lower. This rate hike is a relative
Speaker 1: satively new phenomenon. So psychologically, do you feel like that
Speaker 1: leads people to believe that maybe rates are likely to
Speaker 1: drop just any day now. Yes, I think because you know,
Speaker 1: even if we can look at the headlines and read
Speaker 1: the paper and see on Bloomberg and Scene BC, you
Speaker 1: know that rates are higher than they've been. I think
Speaker 1: for most adults and people who have been buying homes
Speaker 1: for the last ten or fifteen years, they've been accustomed
Speaker 1: to rates that have averaged less than four percent. And
Speaker 1: obviously we saw a very fast uptick in rates last
Speaker 1: year when the FED started hiking, and again we've seen
Speaker 1: rates start to increase this year, creep back up, and
Speaker 1: they're approaching that two decade hive seven percent that they
Speaker 1: reached in November. But the point of my column is
Speaker 1: to point out for those who think that they can
Speaker 1: just refinance because rates are in fact just going to
Speaker 1: drop back down to where they had been, they really
Speaker 1: need to think again and to maybe get comfortable with
Speaker 1: this idea of higher for longer, for years refinancing would
Speaker 1: give lenders more business and and the consumer more savings.
Speaker 1: What is it going to take to get back to that, right? Well,
Speaker 1: a lot of people you know, think like, oh, if
Speaker 1: I'm just going to cut my rate by half a
Speaker 1: percentage point, you know, that's going to save me monthly.
Speaker 1: And that may be true if you even do get
Speaker 1: that a half percentage point decrease, But ultimately you really
Speaker 1: have to think about the entire kind of life of
Speaker 1: the loan, like how long are you going to stay
Speaker 1: in the house for it. You have to think about
Speaker 1: things like refinancing costs. It's expensive to refinance. You know,
Speaker 1: there's an appraisal fee there, the origination cost, there are
Speaker 1: lots of things that are packed into that. It varies
Speaker 1: by lender, of course, but it can be anywhere from
Speaker 1: two percent to six percent of the loan amount. So again,
Speaker 1: to think that a refinance is going to be a
Speaker 1: slam dunk and we'll save you money, you know, may
Speaker 1: not necessarily be true moving forward. You know, that's something
Speaker 1: that you mentioned in your column on the Bloomberg terminal
Speaker 1: that really grabbed my attention as a homeowner, because sometimes
Speaker 1: when you refinance, you actually wind up paying more because
Speaker 1: that mortgage clock restarts right, it starts again, and you
Speaker 1: may think, well, hey, I'm saving a hundred or two
Speaker 1: hundred dollars on my monthly payment. But because you're starting again,
Speaker 1: and most people like if you end up doing a
Speaker 1: thirty year loan once again, you're starting over, so over
Speaker 1: the life of that loan, if you calculate all the
Speaker 1: interest you're paying, you may end up actually not coming
Speaker 1: out ahead. And a lot of this, again has to
Speaker 1: do with how long you're staying in the house for.
Speaker 1: If you plan to move soon, you may not care
Speaker 1: because you're just going to sell and pay off your
Speaker 1: mortgage and move somewhere else. But you also, if you
Speaker 1: are going to move soon, you don't want to move
Speaker 1: too soon because you want to make sure that you're
Speaker 1: staying in the house for long enough to recoup what
Speaker 1: you've paid to refinance in the first place. Now, let's
Speaker 1: talk about some other X factors, not just rates, but
Speaker 1: you mentioned in your column refinancing calculations are also more complex.
Speaker 1: Then realtors and lenders will admit, what do you mean, sure? So,
Speaker 1: I think a lot of times again, people just focus
Speaker 1: on the rate. Okay, if they think like I, you know,
Speaker 1: I just got a rate of six and a half percent, Well,
Speaker 1: once rates come down to six percent or even five
Speaker 1: and a half, you know that's a half a percentage
Speaker 1: point less on a monthly basis, I'm going to be saving,
Speaker 1: so it makes sense. But again, as I mentioned before,
Speaker 1: you really have to think about the refinancing costs. You know,
Speaker 1: the average refight can be five thousand dollars at least,
Speaker 1: so that's a lot of money, and you really then
Speaker 1: want to bake that into your overall calculation and be
Speaker 1: thinking about how long you're going to be staying in
Speaker 1: the house for and will it justify the amount that
Speaker 1: you're saving month to month. Okay, let's let's find a
Speaker 1: little happy here. Are lenders willing to work with you?
Speaker 1: I mean, should people be working with them to figure
Speaker 1: out those refinancing costs? Are are they able to work
Speaker 1: with borrowers? Do they have any wiggle rim right, No,
Speaker 1: that's a great question. I would point out there was
Speaker 1: a Freddie mac study not too long ago shown that
Speaker 1: lenders not just when it comes to refinancing, but overall.
Speaker 1: Freddie is seeing the biggest disparity among mortgage lenders when
Speaker 1: it comes to rates that you know, it really pay.
Speaker 1: It always pays to shop around, but it especially pays
Speaker 1: to shop around right now as rates are creeping up
Speaker 1: and up and up. That depending on perhaps if you
Speaker 1: have a pre existing relationship with the bank, if you
Speaker 1: have a sizeable amount of money in an account, you know,
Speaker 1: these are things that could help you and make a
Speaker 1: lender more willing to work with you on the refinancing front. Specifically,
Speaker 1: we have seen a handful of online lenders and smaller
Speaker 1: credit unions that are offering to pay for some or
Speaker 1: all refinancing costs if rates drop within a specified period
Speaker 1: of time. But you might not want to bank on
Speaker 1: that because who knows again where rates are headed, and
Speaker 1: there's so many factors having to do with inflation and
Speaker 1: recession and geopolitical risk that because of those things, you
Speaker 1: don't want to rush to refinance. Assume that this lender
Speaker 1: is going to recoup those fees or compensate you for
Speaker 1: those fees, and then we don't see that drop within
Speaker 1: that specified period of time. Do you find there's a
Speaker 1: difference between a first time home buyer versus somebody who
Speaker 1: has a home to sell. Yeah, that's such a great question. Definitely,
Speaker 1: because a first time HomeBuyer they have to come up
Speaker 1: with that down payment. Someone who's sold is someone who's
Speaker 1: already a homeowner is lucky enough probably to be sitting
Speaker 1: on home equity and as a result, they've seen, you know,
Speaker 1: the run up in home prices, so they're going to
Speaker 1: have this additional cushion. But you raise a great point
Speaker 1: that the other thing people have to be really careful
Speaker 1: about what this assumption about refinancing is if you refinance,
Speaker 1: you have to have Typically lenders require twenty percent equity
Speaker 1: in your home. If you're a first time HomeBuyer and
Speaker 1: you're making a smaller down payment of say, you know,
Speaker 1: seven percent, ten percent, much less than twenty percent. And
Speaker 1: we've seen home prices that increase, decelerate, slow down, and
Speaker 1: in some markets even decrease. You shouldn't be banking on
Speaker 1: getting to that equity within a year or so if
Speaker 1: that was you know, your ultimate goal or refi, because
Speaker 1: you might not be hitting that twenty percent equity in
Speaker 1: your home. I see. So let me ask a bit
Speaker 1: of a different question, not just about home buyers, but
Speaker 1: home builders. Is it a whole different ball game if
Speaker 1: you're talking about you own a lot but you want
Speaker 1: to build on that lot. Is that a whole completely
Speaker 1: different class. Yeah, I think it's a totally different class.
Speaker 1: The thoughts about refinancing are obviously different. Even I had
Speaker 1: written a piece recently about mortgage locks in this idea
Speaker 1: that you shouldn't rush to or pay extra to be
Speaker 1: locking in a mortgage rate for longer. But that advice
Speaker 1: kind of changes. If you are doing like you're buying
Speaker 1: a foreclosed home or it's a new lot in construction,
Speaker 1: and you're anticipating things to take longer, then maybe you
Speaker 1: do want to go aheadlock in that rate because it's
Speaker 1: going to be a different kind of time horizon than
Speaker 1: if you're just buying, you know, a pre existing home.
Speaker 1: And it's so hard to wrap your head around the
Speaker 1: idea that, oh, my goodness, rates aren't going down anytime soon.
Speaker 1: People of a certain age are not used to that concept.
Speaker 1: I know, it's really foreign. And then for others who
Speaker 1: you know, are older and we're around or buying homes
Speaker 1: in the eighties, for them, it's like, yes, seventeen percent
Speaker 1: mortgage rates, that's the norm. So it really depends what
Speaker 1: your frame of references. And you know, when you first
Speaker 1: started becoming a homeowner, you know that can help with
Speaker 1: your perspective for sure. Okay, so what's the guidance, what
Speaker 1: do we do? Do we do a fifteen year mortgage
Speaker 1: a thirty year fixed What should people be watching for
Speaker 1: in their mortgage rates? Sure? I mean it really depends
Speaker 1: on what you're looking for and obviously what your monthly
Speaker 1: flow and you know what kind of a forward payment wise,
Speaker 1: if you're going to REFI, a fifteen year mortgage isn't
Speaker 1: a bad idea if you feel like you have the
Speaker 1: cash flow to handle a bigger mortgage monthly payment. But
Speaker 1: ultimately then you will be paying less in interest because
Speaker 1: obviously you have a shorter loan, but you will have
Speaker 1: a big uptick in what you're paying month to month.
Speaker 1: So really, again depends on what your cash flow is
Speaker 1: and your outlook. But yeah, if you do REFI certainly
Speaker 1: considering a fifteen year mortgage. If you can handle that payment,
Speaker 1: is well worth it. Alexis, what are you going to
Speaker 1: be watching for in the next few weeks. I think
Speaker 1: we should really be watching to see, you know, what's
Speaker 1: going to happen with rates. As you mentioned before, I
Speaker 1: think to expect that rates are going to come down,
Speaker 1: I just think that that seems to be unrealistic at
Speaker 1: this point in time. I think we're going to see
Speaker 1: mortgage rates heading at least where they are or edging
Speaker 1: higher and higher. So that's why you just really shouldn't
Speaker 1: be banking on a quick REFI to get to that
Speaker 1: lower rate that we had seen for so many years
Speaker 1: after the Great Recession. It's so interesting that during the
Speaker 1: pandemic everybody wanted to add onto their homes and finance
Speaker 1: their homes and do some reconstruction on their homes, and
Speaker 1: all of those prices are just going up so much
Speaker 1: higher now. Yeah, to do anything to your home, it
Speaker 1: just feels like it's so much more expensive, whether you
Speaker 1: want to buy, you want to renovate, you want to
Speaker 1: borrow against it, whatever it is, it's just become a
Speaker 1: more costly thing for families all across the country. Okay, well,
Speaker 1: just hang in there. Thank you so much, Alexis, Thank
Speaker 1: you for having me. Alexis Leandis is a Bloomberg opinion columnist.
Speaker 1: She covers personal finance for Bloomberg. Now, if you want
Speaker 1: to know more about the health of the earth, just
Speaker 1: turn your attention to the ocean. Laura Williams is a
Speaker 1: Bloomberg opinion columnist covering climate change, and she joins us, Now,
Speaker 1: let's set the stage in your column on the Bloomberg terminal.
Speaker 1: You talk about how billions of people depend on the
Speaker 1: ocean for food and economic security. Just get into that
Speaker 1: just a little bit so people understand just the incredible
Speaker 1: impact that you've been able to witness working on this research. Yeah. Sure,
Speaker 1: So an estimated three billion people rely on the ocean directly,
Speaker 1: so that should be you know, their main source of
Speaker 1: protein or as a source of income from fishing. But
Speaker 1: in many ways, like everybody on the planet Earth relies
Speaker 1: on the ocean because the currents help control our weather.
Speaker 1: The Gulf Stream, which is you know, helped along by
Speaker 1: the ocean. It's like paused by the ocean that stops
Speaker 1: Europe from freezing over. So the ocean is really important
Speaker 1: for everyone. So your column makes the argument that the
Speaker 1: ocean not only really important for climate but has helped
Speaker 1: mitigate climate change. It walk me through that. Yeah, So
Speaker 1: the ocean is actually the world's largest carbon sink. So
Speaker 1: it's absorbs about ninety percent of the heat trapped by
Speaker 1: greenhouse stasses so far and also absorbed about thirty percent
Speaker 1: of the CO two that we've emitted through fossil fuels.
Speaker 1: So without the ocean and healthy ocean eco systems, we'd
Speaker 1: be in a much stickier situation in return in response
Speaker 1: to the climate crisis. So how is the ocean then
Speaker 1: suffering from our actions and what we do on a
Speaker 1: day to day basis sure? So, I mean humankind, We've
Speaker 1: been polluting our oceans with everybody's aware of the plastic problem.
Speaker 1: We've oil and sewage ends up in the ocean as well.
Speaker 1: We've also be in harvesting fish stots to depletion, destroying
Speaker 1: marine habitats with troll nets and deep sea mining. We've
Speaker 1: got loads of shipping vessels going across the ocean and
Speaker 1: that causes a lot of vibration which interferes with marine
Speaker 1: mammals and sometimes like stripes, turtles and whales and all
Speaker 1: those sorts of creatures. And we can really see the
Speaker 1: impact of that and the statistic so ten percent of
Speaker 1: marine species are at risk of extinction and a third
Speaker 1: of fish stocks are over fished, and that means reattaching
Speaker 1: them faster than they're able to replenish themselves. And as
Speaker 1: the water absorbs CO two and heat, obviously it's getting hotter.
Speaker 1: There are now heat waves in the ocean, which is
Speaker 1: kind of crazy to think about. And it's also becoming
Speaker 1: more acidic and that reachs havoc on animals that like,
Speaker 1: you know, coral and shellfish. Now there are moves to
Speaker 1: help protect the ocean, and you itemize these in your
Speaker 1: column on the Bloomberg terminal. What will this do? Tell
Speaker 1: me about those moves? Yeah, So recently the UN finally
Speaker 1: agreed on the text of what's being called the High
Speaker 1: Seas Treaty, and this will enable, once it's been enacted,
Speaker 1: nations to set up protected areas in international waters. And
Speaker 1: so international waters are you know, anywhere that's not in
Speaker 1: the national jurisdiction. And it covers you know, two thirds
Speaker 1: of the ocean and ninety five percent of the Earth's
Speaker 1: habitable environment by volume, So it's massive, and it previously
Speaker 1: had no protections. Okay, so then what are you watching for?
Speaker 1: What comes next? What can we expect or can we
Speaker 1: So this bill is in the process of being translated
Speaker 1: into the six official UN languages. Then it will need
Speaker 1: to be signed and ratified, and once it's being leadally
Speaker 1: adopted by sixty UN nations, it will go into force
Speaker 1: and then the real work will ben because it doesn't
Speaker 1: automatically put any areas under protection that are already some
Speaker 1: proposals for areas. But we'll then have to see sort
Speaker 1: of the taste being made for certain areas being set
Speaker 1: up for protection. And then also I will be interested
Speaker 1: in watching how strong the levels of protection are, because
Speaker 1: that's something that hasn't yet been decided. Bloomberg's Lara Williams,
Speaker 1: thank you for your time, Thank you, and that does
Speaker 1: it for this week's Bloomberg Opinion. We are produced by
Speaker 1: Eric Mallow. Don't forget We're available as a podcast on Apple, Spotify,
Speaker 1: or your favorite podcast platform. Stay with us. Today's top
Speaker 1: stories and global business headlines are coming up right now