1 00:00:02,920 --> 00:00:10,719 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Business 2 00:00:10,720 --> 00:00:13,960 Speaker 1: Wait inside from the reporters and editors who bring you 3 00:00:14,000 --> 00:00:18,360 Speaker 1: America's most trusted business magazine plus global business, finance and 4 00:00:18,400 --> 00:00:22,840 Speaker 1: tech news. The Bloomberg Business Week Podcast with Carol Messer 5 00:00:23,040 --> 00:00:25,800 Speaker 1: and Tim Stenebeck from Bloomberg Radio. 6 00:00:27,680 --> 00:00:30,440 Speaker 2: You folks, we are of course continuing to follow the 7 00:00:30,520 --> 00:00:33,360 Speaker 2: latest on the accident at Baltimore's Francis Scott Keybridge. Six 8 00:00:33,400 --> 00:00:37,599 Speaker 2: people are presumed dead after search officials just pointing that 9 00:00:37,720 --> 00:00:40,920 Speaker 2: out press conference. So loss of life continues to be 10 00:00:40,920 --> 00:00:43,480 Speaker 2: obviously top of mind. The bridge, as you know, collapsing 11 00:00:43,560 --> 00:00:46,600 Speaker 2: in just a matter of seconds yesterday. But the consequence 12 00:00:46,680 --> 00:00:50,240 Speaker 2: is tim the catastrophic consequences could be set to stretch 13 00:00:50,240 --> 00:00:50,880 Speaker 2: out for weeks. 14 00:00:51,040 --> 00:00:53,360 Speaker 3: Yeah, as much as two point five million tons of coal, 15 00:00:53,479 --> 00:00:56,320 Speaker 3: hundreds of cars made by Ford and General Motors, and 16 00:00:56,400 --> 00:00:59,680 Speaker 3: lumber and gypsum are threatened with disruption. It's just another 17 00:00:59,720 --> 00:01:02,040 Speaker 3: pot factor that may need to go into the US 18 00:01:02,120 --> 00:01:06,360 Speaker 3: economic model or not if the logistical world can adapt 19 00:01:06,440 --> 00:01:09,080 Speaker 3: quickly so that Carol is where we go now it is. 20 00:01:09,160 --> 00:01:11,119 Speaker 2: Let's get to our Key interview on this Wednesday back 21 00:01:11,120 --> 00:01:13,920 Speaker 2: with US is Bloomberg News International Economics and Policy correspondent 22 00:01:14,000 --> 00:01:16,600 Speaker 2: Mike McKee. He's here in our studio in New York City, 23 00:01:16,800 --> 00:01:19,920 Speaker 2: along with Bloomberg News Global Economy reporter and occurr and 24 00:01:19,959 --> 00:01:23,160 Speaker 2: he's out there in our Washington, DC bureau. First up, Mike, 25 00:01:23,240 --> 00:01:24,840 Speaker 2: I do kind of want to start with you. You 26 00:01:24,920 --> 00:01:28,360 Speaker 2: do put always everything that's happening in our world into 27 00:01:28,720 --> 00:01:32,200 Speaker 2: the economic context for us. Are we hearing anything from 28 00:01:32,200 --> 00:01:36,200 Speaker 2: FED officials or from the economics community about the concern 29 00:01:36,319 --> 00:01:38,319 Speaker 2: that this will have on supply chains or is it 30 00:01:38,400 --> 00:01:39,640 Speaker 2: still kind of too early. 31 00:01:39,760 --> 00:01:44,040 Speaker 4: Nothink from the Fed yet? We have heard from economists 32 00:01:44,040 --> 00:01:46,600 Speaker 4: on Wall Street who put pencil to paper and try 33 00:01:46,640 --> 00:01:49,120 Speaker 4: to figure out what the impacts might be. And while 34 00:01:49,120 --> 00:01:52,000 Speaker 4: this is a terrible tragedy in human terms, and it 35 00:01:52,080 --> 00:01:55,440 Speaker 4: is going to have an economic impact, certainly on Baltimore 36 00:01:55,880 --> 00:01:57,920 Speaker 4: for quite some time, it is not going to have 37 00:01:57,960 --> 00:02:01,720 Speaker 4: a major impact on the overall UA economy. Tim brought 38 00:02:01,800 --> 00:02:05,920 Speaker 4: up the idea of how quickly logistics can adapt, and 39 00:02:06,280 --> 00:02:09,040 Speaker 4: we're being told by everybody in that business that they 40 00:02:09,040 --> 00:02:14,520 Speaker 4: can adapt fairly quickly. The biggest thing, as you mentioned, 41 00:02:14,560 --> 00:02:17,520 Speaker 4: is that automobiles. It was the biggest port for import 42 00:02:17,600 --> 00:02:20,520 Speaker 4: export of automobiles. They've got to get the port open 43 00:02:20,720 --> 00:02:24,080 Speaker 4: for about half of it. BW and BMW are outside 44 00:02:24,080 --> 00:02:28,640 Speaker 4: of the bridge, so they can still take in some cars, 45 00:02:28,680 --> 00:02:32,840 Speaker 4: and we understand may take in other people's as well, 46 00:02:33,240 --> 00:02:35,520 Speaker 4: and there are other ports. Savannah's built up a big 47 00:02:35,960 --> 00:02:39,400 Speaker 4: what they call roll on roll off capability and so 48 00:02:39,520 --> 00:02:41,960 Speaker 4: they will take some as well. So it looks like 49 00:02:42,000 --> 00:02:46,280 Speaker 4: they may be able to work this out relatively quickly now. 50 00:02:46,320 --> 00:02:49,080 Speaker 4: Pete Buddha Judge was just briefing at the White House. 51 00:02:49,360 --> 00:02:51,320 Speaker 4: He was asked how long it will take to get 52 00:02:51,320 --> 00:02:53,160 Speaker 4: the port open, which is going to be the key 53 00:02:53,200 --> 00:02:56,800 Speaker 4: economic question, and he said it's still too early to tell. 54 00:02:56,840 --> 00:02:59,320 Speaker 4: They're trying to figure it out. It'll be up to 55 00:02:59,400 --> 00:03:03,160 Speaker 4: how fast to the core of engineers can get Iron 56 00:03:03,320 --> 00:03:05,480 Speaker 4: out of the way out of the harbor. 57 00:03:05,680 --> 00:03:07,520 Speaker 3: Right, hey, and come on in here, because Mike just 58 00:03:07,560 --> 00:03:10,120 Speaker 3: went through some of those individual companies and what they 59 00:03:10,160 --> 00:03:12,720 Speaker 3: could do to adapt. But as you and the team 60 00:03:12,720 --> 00:03:16,160 Speaker 3: writing the Economics Daily newsletter out earlier today, the US 61 00:03:16,240 --> 00:03:19,000 Speaker 3: economy is in a different position right now. It's in 62 00:03:19,040 --> 00:03:21,280 Speaker 3: a much better position than it was a few years 63 00:03:21,320 --> 00:03:24,880 Speaker 3: ago to handle a challenge such as this, do we 64 00:03:24,919 --> 00:03:27,720 Speaker 3: have the pandemic to thank for this or is it 65 00:03:27,800 --> 00:03:28,360 Speaker 3: something else? 66 00:03:29,639 --> 00:03:31,959 Speaker 5: Yeah, So anytime we got a kind of a supply 67 00:03:32,120 --> 00:03:35,920 Speaker 5: chain scare, it's always benchmarked against what happened in the pandemic, 68 00:03:35,920 --> 00:03:38,640 Speaker 5: which was such an unusual time. We had this year 69 00:03:38,680 --> 00:03:41,440 Speaker 5: in the Red Sea crisis a you know, earlier part 70 00:03:41,440 --> 00:03:42,880 Speaker 5: of this year, people were saying, is it going to 71 00:03:42,920 --> 00:03:45,240 Speaker 5: be another global supply crunch? And of course now we 72 00:03:45,280 --> 00:03:49,200 Speaker 5: have this disaster yesterday with the human tragedy first and foremost, 73 00:03:49,320 --> 00:03:51,360 Speaker 5: with people asking what will this mean for the supply 74 00:03:51,480 --> 00:03:53,880 Speaker 5: chain story. I think, as Mike was saying, it's more 75 00:03:53,880 --> 00:03:56,480 Speaker 5: benign this time around, because there are a couple of differences. 76 00:03:56,520 --> 00:03:59,360 Speaker 5: There's a lot of capacity on international and shipping at 77 00:03:59,360 --> 00:04:01,560 Speaker 5: the moment, a lot of spare containers, a lot of 78 00:04:01,600 --> 00:04:04,080 Speaker 5: spare ships. Sure rates have gone up a bit, but 79 00:04:04,440 --> 00:04:06,280 Speaker 5: it's there, it's available if needed. 80 00:04:06,280 --> 00:04:08,240 Speaker 3: That's number one. And number two. 81 00:04:08,280 --> 00:04:11,440 Speaker 5: Of course, demand for goods is not like it was 82 00:04:11,600 --> 00:04:13,960 Speaker 5: during the pandemic. So one of the reasons that there 83 00:04:14,040 --> 00:04:17,000 Speaker 5: was such a choke point at ports and in manufacturers 84 00:04:17,000 --> 00:04:19,080 Speaker 5: around the world a few years ago was just the 85 00:04:19,240 --> 00:04:22,040 Speaker 5: share demand by people in the US spending their money 86 00:04:22,120 --> 00:04:24,080 Speaker 5: staying at home buying the stuff that they need. That's 87 00:04:24,080 --> 00:04:25,960 Speaker 5: not really there now. The hot side of the economy 88 00:04:26,240 --> 00:04:28,600 Speaker 5: is more on the service side of things, So that's 89 00:04:28,640 --> 00:04:31,680 Speaker 5: another reason why it's not expected to be, you know, 90 00:04:31,920 --> 00:04:34,600 Speaker 5: the complete choke point that you might suggest on paper. 91 00:04:34,839 --> 00:04:37,920 Speaker 5: And then as Mike's outlining, there's other options within the US. 92 00:04:37,960 --> 00:04:40,760 Speaker 5: You got the West Coast for other alternative ports. There's 93 00:04:41,120 --> 00:04:44,000 Speaker 5: road freight options to take some of this. So when 94 00:04:44,040 --> 00:04:47,480 Speaker 5: you stack it up, it's certainly a complication. It's certainly 95 00:04:47,480 --> 00:04:50,560 Speaker 5: a major issue for the regional economy up there around Baltimore, 96 00:04:51,000 --> 00:04:54,080 Speaker 5: but I don't think anyone's yet suggesting this is going 97 00:04:54,120 --> 00:04:56,839 Speaker 5: to be a major, major supply choke for the US 98 00:04:56,960 --> 00:04:58,080 Speaker 5: or the global economy. 99 00:04:58,200 --> 00:05:01,599 Speaker 4: One thing you just mentioned that Secretary of Budha Judge 100 00:05:01,600 --> 00:05:05,000 Speaker 4: brought up as after the pandemic, the Biden administration set 101 00:05:05,080 --> 00:05:09,280 Speaker 4: up a command post in the Transportation Department for logistics, 102 00:05:09,960 --> 00:05:13,480 Speaker 4: and they're activating that now so that they can work 103 00:05:13,560 --> 00:05:16,560 Speaker 4: with not just the UPS's and the Fedexes and the 104 00:05:16,600 --> 00:05:19,280 Speaker 4: trucking companies in the area, but all the smaller companies 105 00:05:19,320 --> 00:05:21,760 Speaker 4: in the area that need to coordinate getting in and 106 00:05:21,800 --> 00:05:24,680 Speaker 4: out and getting their stuff together. So he was suggesting 107 00:05:24,720 --> 00:05:28,760 Speaker 4: that that might make it easier for particularly smaller companies 108 00:05:28,800 --> 00:05:29,280 Speaker 4: to adjust. 109 00:05:29,360 --> 00:05:29,520 Speaker 6: Yeah. 110 00:05:29,600 --> 00:05:31,440 Speaker 2: Right, if you remember logistics, it's the big guys, but 111 00:05:31,480 --> 00:05:33,080 Speaker 2: there's a lot of little players too that get all 112 00:05:33,320 --> 00:05:35,960 Speaker 2: that stuff to us. Having said that, Mike, right during 113 00:05:35,960 --> 00:05:38,040 Speaker 2: the pandemic, as and I was pointing out, we were 114 00:05:38,040 --> 00:05:40,600 Speaker 2: buying so much stuff because we couldn't go anywhere. Now 115 00:05:40,600 --> 00:05:42,680 Speaker 2: we just want to go anywhere. And in my house too, 116 00:05:42,720 --> 00:05:43,760 Speaker 2: I'm like, I'm done with this stuff. 117 00:05:43,800 --> 00:05:46,960 Speaker 3: You don't need another couch. You're not going to need anything. 118 00:05:47,000 --> 00:05:49,200 Speaker 4: I hope you're not going to drive through Baltimore. 119 00:05:49,680 --> 00:05:51,880 Speaker 3: I'm not anytime soon. 120 00:05:52,240 --> 00:05:55,240 Speaker 2: Having said that, goods inflation it's come down way, like 121 00:05:55,279 --> 00:05:57,239 Speaker 2: where are we And if we do see a little 122 00:05:57,240 --> 00:05:59,480 Speaker 2: bit of pressure on the good side, can we afford 123 00:05:59,480 --> 00:06:00,600 Speaker 2: that economy? 124 00:06:01,200 --> 00:06:03,760 Speaker 4: Yes, we could afford it. It was going down for 125 00:06:03,839 --> 00:06:05,800 Speaker 4: months and months, and then in the last couple of months, 126 00:06:05,839 --> 00:06:08,880 Speaker 4: goods inflation has gone up a little bit, and that 127 00:06:09,040 --> 00:06:11,520 Speaker 4: is something the Fed is keeping an eye on because 128 00:06:11,560 --> 00:06:14,600 Speaker 4: if it starts to if it continues to do that 129 00:06:14,960 --> 00:06:17,000 Speaker 4: and picks up speed, then that's more of a concern. 130 00:06:17,040 --> 00:06:20,719 Speaker 4: They did expect goods inflation to flatten out, and basically 131 00:06:20,760 --> 00:06:23,360 Speaker 4: that's where we are with some minor increases. So we'll 132 00:06:23,400 --> 00:06:26,120 Speaker 4: have to see if this does push any prices higher. 133 00:06:26,200 --> 00:06:30,159 Speaker 4: Probably not, because of the fact that the country is 134 00:06:30,200 --> 00:06:33,240 Speaker 4: so big and this is such a small area in 135 00:06:33,320 --> 00:06:36,200 Speaker 4: terms of prices that will be affected. New car prices 136 00:06:36,480 --> 00:06:42,560 Speaker 4: have gone down, they're going down now, actually disinflating, and 137 00:06:42,640 --> 00:06:46,240 Speaker 4: so even if this puts a little straight on auto inventories, 138 00:06:46,320 --> 00:06:48,040 Speaker 4: shouldn't raise prices too much. 139 00:06:48,360 --> 00:06:50,360 Speaker 3: Might do we expect to hear from the FED at 140 00:06:50,400 --> 00:06:50,920 Speaker 3: all on this? 141 00:06:51,640 --> 00:06:55,240 Speaker 4: Oh? I would imagine that FED officials who speak will 142 00:06:55,279 --> 00:07:00,560 Speaker 4: get asked about it. I would imagine they will say this, Jaye, how. 143 00:07:00,560 --> 00:07:02,080 Speaker 2: Is are you talking on Friday? 144 00:07:02,200 --> 00:07:04,039 Speaker 3: Friday? 145 00:07:04,080 --> 00:07:06,760 Speaker 4: They will say the same thing that everybody else is saying. 146 00:07:06,760 --> 00:07:09,039 Speaker 4: It All the officials at this point is we just 147 00:07:09,080 --> 00:07:12,040 Speaker 4: don't know. We have to see how this plays out. Obviously, 148 00:07:12,040 --> 00:07:15,640 Speaker 4: there are logistical issues around the world right now, from 149 00:07:15,680 --> 00:07:18,960 Speaker 4: the Red Sea to Africa to. 150 00:07:20,680 --> 00:07:22,720 Speaker 3: Asia and so all that. 151 00:07:22,640 --> 00:07:25,800 Speaker 4: Will play into this, but it doesn't look like at 152 00:07:25,800 --> 00:07:27,280 Speaker 4: this point it would be huge. But I don't think 153 00:07:27,280 --> 00:07:28,640 Speaker 4: they have a good handle on it. 154 00:07:28,720 --> 00:07:31,320 Speaker 2: And another element to this is certainly the job market 155 00:07:31,440 --> 00:07:34,080 Speaker 2: right we're essentially back at full employment. I mean, how 156 00:07:34,120 --> 00:07:36,560 Speaker 2: does that so that if one other port somewhere needs 157 00:07:36,600 --> 00:07:38,840 Speaker 2: more workers are sown and so forth to pick up 158 00:07:38,880 --> 00:07:41,760 Speaker 2: the slack as a result of what's going on in Baltimore, 159 00:07:43,160 --> 00:07:43,920 Speaker 2: that's a positive. 160 00:07:43,960 --> 00:07:47,960 Speaker 5: I'm assuming, well, that's the hopeful case that you know, 161 00:07:48,040 --> 00:07:50,360 Speaker 5: people are back in the workforce, they are available, and 162 00:07:50,400 --> 00:07:53,200 Speaker 5: the flexibility there. But you know, it depends, you know, 163 00:07:53,240 --> 00:07:56,000 Speaker 5: if there was a real crunch on at the ports, 164 00:07:56,160 --> 00:07:58,080 Speaker 5: remember the threat of labor action in some of the 165 00:07:58,120 --> 00:08:00,920 Speaker 5: ports as well. You know, not benign to would be tested. 166 00:08:01,000 --> 00:08:03,360 Speaker 5: Because we know that broadly speaking, the jobs market's so 167 00:08:03,520 --> 00:08:06,440 Speaker 5: strong and there are plenty of employers in America complaining 168 00:08:06,440 --> 00:08:09,200 Speaker 5: that they can't get stuff so right here right now, 169 00:08:09,920 --> 00:08:12,040 Speaker 5: as we heard the White House say yesterday, the jobs 170 00:08:12,040 --> 00:08:15,400 Speaker 5: market is in good order. People are there and working. 171 00:08:15,640 --> 00:08:17,560 Speaker 5: That's a plus when you have something like this happening. 172 00:08:17,720 --> 00:08:20,080 Speaker 5: But of course it's not hard to see how the 173 00:08:20,160 --> 00:08:21,960 Speaker 5: labor market will be stretched a bit thin if there 174 00:08:22,080 --> 00:08:23,920 Speaker 5: was a further stress test. 175 00:08:24,200 --> 00:08:27,560 Speaker 4: One interesting aspect is that it will take time to 176 00:08:27,600 --> 00:08:31,800 Speaker 4: get the port open, and the job's survey is taken 177 00:08:31,880 --> 00:08:33,800 Speaker 4: during the week that includes the twelfth of the month. 178 00:08:33,840 --> 00:08:36,880 Speaker 4: So if they're not open in two weeks, there's one 179 00:08:36,960 --> 00:08:40,000 Speaker 4: hundred and forty thousand workers at the Port of Baltimore, 180 00:08:40,320 --> 00:08:44,560 Speaker 4: and if they can't, they have stuff that's come in 181 00:08:44,600 --> 00:08:47,199 Speaker 4: already that they're working and moving out. But if all 182 00:08:47,200 --> 00:08:49,640 Speaker 4: that stuff moves out it isn't replaced, then you could 183 00:08:49,640 --> 00:08:52,240 Speaker 4: have people who are laid off, and it could show 184 00:08:52,360 --> 00:08:55,480 Speaker 4: up in the April jobs report. I mean, hopefully it's 185 00:08:55,559 --> 00:08:57,840 Speaker 4: only temporary, but one hundred and forty thousand a lot 186 00:08:57,880 --> 00:09:00,000 Speaker 4: of people who wouldn't who might not be at. 187 00:09:00,720 --> 00:09:02,800 Speaker 3: It's not like, to Mike's point, those one hundred and 188 00:09:02,840 --> 00:09:05,920 Speaker 3: forty thousand folks could pack up and go south to 189 00:09:06,040 --> 00:09:08,320 Speaker 3: another port, or go north to the Port of New 190 00:09:08,400 --> 00:09:11,920 Speaker 3: York and New Jersey. Is their capacity? You mentioned capacity 191 00:09:11,960 --> 00:09:15,160 Speaker 3: on ships, but is there actual number of workers in 192 00:09:15,200 --> 00:09:19,320 Speaker 3: capacity at the ports to accept more well. 193 00:09:19,360 --> 00:09:21,160 Speaker 5: As I say, one of the big concerns of the 194 00:09:21,200 --> 00:09:23,040 Speaker 5: ports around the US at the moment is the threat 195 00:09:23,080 --> 00:09:25,000 Speaker 5: of strike action. If that was to go ahead, that 196 00:09:25,040 --> 00:09:28,640 Speaker 5: would potentially cause significant disruption. But I think beyond that, 197 00:09:29,240 --> 00:09:31,800 Speaker 5: my understanding is that ports are pretty much handling capacity 198 00:09:31,840 --> 00:09:34,439 Speaker 5: at the moment and even with the extra capacity that's 199 00:09:34,440 --> 00:09:36,520 Speaker 5: going to have to be spread out from Baltimore. Everyone 200 00:09:36,559 --> 00:09:38,720 Speaker 5: I spoke to you yesterday said it can be absorbed 201 00:09:39,000 --> 00:09:40,679 Speaker 5: into the system, but will just take a bit of 202 00:09:40,760 --> 00:09:43,320 Speaker 5: reshuffling up and down the East coast and maybe across 203 00:09:43,400 --> 00:09:45,480 Speaker 5: the West coast. I don't think that's going to be 204 00:09:46,080 --> 00:09:48,839 Speaker 5: the primary concern. The bigger issue is going is I 205 00:09:48,920 --> 00:09:51,160 Speaker 5: think effectively going to be on the port itself. How 206 00:09:51,200 --> 00:09:53,360 Speaker 5: long will this block a germain? How long will it 207 00:09:53,400 --> 00:09:55,439 Speaker 5: take to get that port reopened again, and how long, 208 00:09:55,480 --> 00:09:58,000 Speaker 5: of course will take the bridge to get built. Everyone 209 00:09:58,040 --> 00:10:00,240 Speaker 5: I've spoken to say that the rest of the just 210 00:10:00,280 --> 00:10:02,520 Speaker 5: six network should be able to absorb what's going to 211 00:10:02,559 --> 00:10:03,640 Speaker 5: happen over to coin months. 212 00:10:03,760 --> 00:10:05,320 Speaker 2: All right, one thing I want to just kind of pivot. 213 00:10:05,360 --> 00:10:07,319 Speaker 2: We've got about four minutes or so left here, and 214 00:10:07,360 --> 00:10:10,920 Speaker 2: I'm thinking, Mike, certainly about the Friday inflation read. You 215 00:10:10,960 --> 00:10:13,400 Speaker 2: guys are going to be here live reporting it out. 216 00:10:13,840 --> 00:10:14,080 Speaker 1: Yeah. 217 00:10:14,240 --> 00:10:17,200 Speaker 4: Jen Tecker was talking about people who get days off. 218 00:10:18,559 --> 00:10:21,280 Speaker 2: Oh, come on, you love this stuff. Jay Powell's going 219 00:10:21,360 --> 00:10:26,800 Speaker 2: to speak a few hours after that inflation reading. What's 220 00:10:26,880 --> 00:10:28,319 Speaker 2: top of mine? And then I want to kind of 221 00:10:28,360 --> 00:10:30,480 Speaker 2: spin it to you and about kind of the global 222 00:10:30,520 --> 00:10:32,839 Speaker 2: inflation picture, because I do feel like we focus on 223 00:10:32,880 --> 00:10:34,319 Speaker 2: the US, but you know, we got to kind of 224 00:10:34,320 --> 00:10:35,960 Speaker 2: think about what's happening around the globe. But let's talk 225 00:10:36,000 --> 00:10:36,960 Speaker 2: about Friday's data. 226 00:10:37,040 --> 00:10:40,800 Speaker 4: Well, Friday is the income spending in PCEE numbers for 227 00:10:41,040 --> 00:10:46,360 Speaker 4: the latest month for February, and it's it comes out 228 00:10:46,400 --> 00:10:49,040 Speaker 4: much later than CPI, but the Fed follows the PCEE 229 00:10:49,120 --> 00:10:52,000 Speaker 4: inflation numbers, so they're going to be very important, and 230 00:10:52,040 --> 00:10:54,640 Speaker 4: they're expected to rise just a little bit the way 231 00:10:54,679 --> 00:10:58,160 Speaker 4: that CPI did, but not as much as we saw 232 00:10:58,320 --> 00:11:00,800 Speaker 4: in CPI, so there will be a lot of attention 233 00:11:01,280 --> 00:11:04,520 Speaker 4: paid to those. We also get the income and spending numbers. 234 00:11:04,520 --> 00:11:08,400 Speaker 4: Retail sales we're not particularly great, so there'll be some 235 00:11:08,480 --> 00:11:12,320 Speaker 4: focus on whether Americans are still spending once you fold 236 00:11:12,360 --> 00:11:15,000 Speaker 4: in the services. I mean, you're taking your trips, you're 237 00:11:15,040 --> 00:11:16,920 Speaker 4: doing services, you're not buying goods. 238 00:11:17,120 --> 00:11:20,560 Speaker 3: But we need to see some strength there. 239 00:11:20,720 --> 00:11:22,760 Speaker 4: The one thing we have seen on a regular basis 240 00:11:22,880 --> 00:11:26,760 Speaker 4: is that incomes have been relatively strong, particularly when you 241 00:11:26,800 --> 00:11:30,160 Speaker 4: look at wages and salaries, and if that continues, then 242 00:11:30,200 --> 00:11:32,240 Speaker 4: you relax a little bit about the spending, and that 243 00:11:32,679 --> 00:11:35,960 Speaker 4: you know that people can afford it. They tend to 244 00:11:36,000 --> 00:11:39,679 Speaker 4: spend what they earn. So that's why we're looking at 245 00:11:39,679 --> 00:11:41,440 Speaker 4: all that, and then of course we get almost a 246 00:11:41,480 --> 00:11:47,320 Speaker 4: real time reaction from the chairman. I'm sure first question 247 00:11:47,360 --> 00:11:51,760 Speaker 4: will probably be the inflation numbers that day, and so 248 00:11:52,280 --> 00:11:55,000 Speaker 4: we'll get a sort of set up. It's very early. 249 00:11:56,160 --> 00:11:59,000 Speaker 4: They just met last week and we don't have another 250 00:11:59,000 --> 00:12:01,800 Speaker 4: FED meeting till May first. First, so you have to 251 00:12:01,880 --> 00:12:04,840 Speaker 4: kind of take anything. Jay pol says, not with a 252 00:12:04,880 --> 00:12:07,920 Speaker 4: grain of salt. But obviously it's going to be a while. 253 00:12:08,280 --> 00:12:10,960 Speaker 4: He could change his mind depending on what other data 254 00:12:11,000 --> 00:12:13,679 Speaker 4: we get. But you know, the markets come Monday morning 255 00:12:13,679 --> 00:12:15,440 Speaker 4: are all going to come in and react to it. 256 00:12:15,480 --> 00:12:17,920 Speaker 4: And if you get notes from the bond market people, 257 00:12:17,920 --> 00:12:21,040 Speaker 4: they're not really happy that he's doing this on a 258 00:12:21,160 --> 00:12:22,680 Speaker 4: day when the markets are closed. 259 00:12:22,880 --> 00:12:25,320 Speaker 2: You know, Josenthalen is you know, five things to watch 260 00:12:25,360 --> 00:12:27,160 Speaker 2: every morning, and we all kind of read through it. 261 00:12:27,200 --> 00:12:28,880 Speaker 2: And one of the things he was looking at is 262 00:12:28,920 --> 00:12:34,000 Speaker 2: global inflation and a Canadian CPI for February grew less 263 00:12:34,000 --> 00:12:37,400 Speaker 2: than expectations. You can flight inflation falling to its lowest 264 00:12:37,440 --> 00:12:40,240 Speaker 2: level in over two years. Coming in also cooler than expected. 265 00:12:41,160 --> 00:12:45,120 Speaker 2: I think Spain's preliminary harmonized CPI measure was less than 266 00:12:45,160 --> 00:12:48,240 Speaker 2: expected slightly. I mean, and as he writes, every economy 267 00:12:48,240 --> 00:12:50,439 Speaker 2: has its own story, but we are seeing a lot 268 00:12:50,480 --> 00:12:55,160 Speaker 2: of it feels like correlation between global economies and global inflation. 269 00:12:56,520 --> 00:12:58,560 Speaker 2: What do we know about that, what's the importance of 270 00:12:58,600 --> 00:13:00,839 Speaker 2: that and what it tells us maybe about what's going 271 00:13:00,880 --> 00:13:03,840 Speaker 2: on more globally around the world when it comes to 272 00:13:04,440 --> 00:13:05,720 Speaker 2: price pressures. 273 00:13:06,320 --> 00:13:09,400 Speaker 5: Carol, Absolutely, inflation's coming off right around the world. I 274 00:13:09,440 --> 00:13:11,679 Speaker 5: heard an economists this morning actually make the point that 275 00:13:11,720 --> 00:13:14,360 Speaker 5: in Europe inflation is going to come off much quicker 276 00:13:14,360 --> 00:13:17,240 Speaker 5: than people anticipate, and that's going to clear away from 277 00:13:17,240 --> 00:13:19,840 Speaker 5: mortgage rates, boring costs come down. Around the world, it's 278 00:13:19,880 --> 00:13:22,880 Speaker 5: a very similar story. I mean, the US has had 279 00:13:22,880 --> 00:13:24,439 Speaker 5: a bit of a scare earlier this year, as Mike 280 00:13:24,600 --> 00:13:27,160 Speaker 5: was alluding to there, but broadly speaking is on track 281 00:13:27,200 --> 00:13:30,880 Speaker 5: everywhere else. Let's not forget that the world's number two economy, China, 282 00:13:31,280 --> 00:13:34,839 Speaker 5: is battling deflation. They've never had the inflation outbreak to 283 00:13:34,920 --> 00:13:38,120 Speaker 5: begin with, but the other are Plenty of analysts will 284 00:13:38,120 --> 00:13:40,280 Speaker 5: tell you that when Shawn is battling deflation that will 285 00:13:40,280 --> 00:13:44,880 Speaker 5: take pressure off the global prices as well. So everyone 286 00:13:44,880 --> 00:13:46,520 Speaker 5: I speak to you and everything I read suggest that 287 00:13:46,600 --> 00:13:49,200 Speaker 5: this remains the year of this inflation around the world. 288 00:13:49,520 --> 00:13:51,880 Speaker 5: Boring costs and industrates are going to come down. Switzerland 289 00:13:51,920 --> 00:13:55,400 Speaker 5: has already moved, they had room to do so, of course, 290 00:13:55,400 --> 00:13:57,520 Speaker 5: but several others are expected to follow suit, and I 291 00:13:57,559 --> 00:14:00,200 Speaker 5: think once we get to midyear, you'll hear a loup 292 00:14:00,240 --> 00:14:02,800 Speaker 5: more chatter around which major tuns of mind would be 293 00:14:02,840 --> 00:14:04,520 Speaker 5: going first and by how much. 294 00:14:05,040 --> 00:14:07,559 Speaker 4: Mike's final thought, well, I think the one thing we 295 00:14:08,160 --> 00:14:10,679 Speaker 4: want to watch, particularly because it's a political year here 296 00:14:10,679 --> 00:14:13,080 Speaker 4: in the United States, gasoline prices. Oil prices have been 297 00:14:13,120 --> 00:14:15,880 Speaker 4: going up. We're getting into the season where there's more 298 00:14:15,880 --> 00:14:18,439 Speaker 4: oil demand and more gasoline demand, so that'll put some 299 00:14:18,480 --> 00:14:23,600 Speaker 4: pressure on prices, which would push headline inflation higher. That 300 00:14:23,880 --> 00:14:26,440 Speaker 4: is a certain concern to the FED because they look 301 00:14:26,440 --> 00:14:28,960 Speaker 4: at headline inflation. But it's also going to be a 302 00:14:28,960 --> 00:14:31,680 Speaker 4: factor in probably the political races. 303 00:14:31,720 --> 00:14:32,600 Speaker 2: I care when I go to the pump. 304 00:14:32,640 --> 00:14:35,000 Speaker 3: Don't you care what everybody cares? That's everybody cares about 305 00:14:35,040 --> 00:14:36,880 Speaker 3: the pump big time, all right. 306 00:14:36,920 --> 00:14:40,200 Speaker 2: Mike McKee, International Economics and Policy correspondent here at Bloomberg 307 00:14:40,240 --> 00:14:43,160 Speaker 2: End occurrent Global Economy Reporter. Bloomberg Radio will be live 308 00:14:43,240 --> 00:14:46,640 Speaker 2: Friday for that inflation read in of course Chair Powell 309 00:14:46,720 --> 00:14:49,440 Speaker 2: and his comments and speech. This is Bloomberg. 310 00:14:50,800 --> 00:14:54,480 Speaker 1: You're listening to Bloomberg Business Week with Carol Messer and 311 00:14:54,560 --> 00:14:57,800 Speaker 1: Tim Stenebeck on Bloomberg Radio and Television. 312 00:14:58,520 --> 00:15:01,760 Speaker 2: All right, everybody, Carol mass inctentic life here in our 313 00:15:01,840 --> 00:15:04,520 Speaker 2: New York studio. So I got to say that this 314 00:15:04,600 --> 00:15:06,240 Speaker 2: is something we talk a lot about, Tim, and that 315 00:15:06,320 --> 00:15:09,920 Speaker 2: is how financial inclusion major issue around the world. McKinsey 316 00:15:10,000 --> 00:15:12,320 Speaker 2: noting last year that nearly a billion and a half 317 00:15:12,360 --> 00:15:15,760 Speaker 2: people living in emerging economies don't have access to formal 318 00:15:15,800 --> 00:15:19,080 Speaker 2: savings and credit, and that while the overall global wealth 319 00:15:19,080 --> 00:15:22,080 Speaker 2: and income graph has narrowed since the eighties, inequality has 320 00:15:22,120 --> 00:15:25,720 Speaker 2: actually increased within advanced economy. So it's not just emerging, 321 00:15:25,760 --> 00:15:26,800 Speaker 2: it's advanced as well. YEH. 322 00:15:26,880 --> 00:15:28,760 Speaker 3: Needless to say, there's still a lot of work to 323 00:15:29,600 --> 00:15:32,520 Speaker 3: be done. And Shamina Saying knows that she's the founder 324 00:15:32,520 --> 00:15:35,560 Speaker 3: and president of MasterCard Center for Inclusive Growth. She's held 325 00:15:35,640 --> 00:15:38,920 Speaker 3: senior positions in the White House and the House of Representatives, 326 00:15:38,960 --> 00:15:42,120 Speaker 3: including appointments by President Obama. She joins us now from 327 00:15:42,240 --> 00:15:45,600 Speaker 3: New York City. Welcome, Shamina, How are you doing well? 328 00:15:45,600 --> 00:15:46,920 Speaker 7: Thanks, thank you so much for having me. 329 00:15:47,000 --> 00:15:48,800 Speaker 3: Yeah, thanks so much for joining us on this. So 330 00:15:49,000 --> 00:15:51,600 Speaker 3: a lot of your professional life, what you've done as 331 00:15:51,640 --> 00:15:54,480 Speaker 3: an adult, has centered around the global economy that takes 332 00:15:54,840 --> 00:15:58,400 Speaker 3: everyone into account. It's not something that is actually happening 333 00:15:58,600 --> 00:16:01,680 Speaker 3: right now. What's the nut that needs to be cracked 334 00:16:01,680 --> 00:16:04,240 Speaker 3: to break the great financial divide that we talk about 335 00:16:04,280 --> 00:16:04,720 Speaker 3: so much? 336 00:16:06,320 --> 00:16:08,160 Speaker 7: Well, it's such an important point, and I think Carroll 337 00:16:08,200 --> 00:16:11,560 Speaker 7: started off rather well, which is it really is about 338 00:16:11,640 --> 00:16:14,920 Speaker 7: financial inclusion? You know, I think we take for granted 339 00:16:15,760 --> 00:16:18,080 Speaker 7: that you know, sitting here in New York City certainly 340 00:16:18,520 --> 00:16:20,840 Speaker 7: and a lot of times in the United States, you know, 341 00:16:20,920 --> 00:16:24,280 Speaker 7: you have a phone that gives you access to a 342 00:16:24,320 --> 00:16:27,400 Speaker 7: train ticket or a train or a bus ticket, or 343 00:16:27,440 --> 00:16:30,720 Speaker 7: any kind of digital access that you need. That's just 344 00:16:30,760 --> 00:16:34,480 Speaker 7: not true for many millions of people around the world. 345 00:16:34,920 --> 00:16:38,760 Speaker 7: But we're making progress. I mean, I think at MasterCard 346 00:16:38,800 --> 00:16:41,440 Speaker 7: in the Center, we actually made a commitment to bring 347 00:16:41,520 --> 00:16:45,920 Speaker 7: a billion people into the formal financial system by twenty 348 00:16:46,200 --> 00:16:48,800 Speaker 7: twenty five, and we're almost there. We're at about eight 349 00:16:48,920 --> 00:16:51,360 Speaker 7: hundred and seventy million, so we are well on our 350 00:16:51,400 --> 00:16:54,640 Speaker 7: way to hitting that goal. But it's also important that 351 00:16:54,680 --> 00:16:57,680 Speaker 7: we make sure that small business owners succeed in what's 352 00:16:57,720 --> 00:17:01,360 Speaker 7: increasingly becoming a digital economy. So we made a commitment 353 00:17:01,400 --> 00:17:06,240 Speaker 7: there to ensure that we bring fifty million small business 354 00:17:06,240 --> 00:17:10,040 Speaker 7: owners into the formal economy again by twenty twenty five, 355 00:17:10,080 --> 00:17:12,840 Speaker 7: and we're almost there, that we're at forty eight million 356 00:17:12,960 --> 00:17:15,840 Speaker 7: right now. But the final piece around small business and 357 00:17:15,880 --> 00:17:19,239 Speaker 7: financial inclusion, to your point about closing that gap or 358 00:17:19,280 --> 00:17:24,080 Speaker 7: cracking that nut, is to ensure that we include marginalized 359 00:17:24,080 --> 00:17:28,120 Speaker 7: communities in those small business ownerships. And so as part 360 00:17:28,160 --> 00:17:30,760 Speaker 7: of our commitment, we wanted to make sure that at 361 00:17:30,840 --> 00:17:35,480 Speaker 7: least twenty five million of our target were women owned 362 00:17:35,560 --> 00:17:38,000 Speaker 7: or women led businesses. And I'm really happy to say 363 00:17:38,000 --> 00:17:41,760 Speaker 7: today that we surpassed that target and are now on 364 00:17:41,800 --> 00:17:45,280 Speaker 7: our way to even going further. So I think that. 365 00:17:45,840 --> 00:17:47,879 Speaker 2: What I want to one thing I want to ask you, 366 00:17:47,960 --> 00:17:50,000 Speaker 2: and I think folks would applaud your efforts in the 367 00:17:50,000 --> 00:17:52,119 Speaker 2: progress that you guys have made, and it seems like 368 00:17:52,160 --> 00:17:54,520 Speaker 2: ahead of schedule. Having said that, I'm going to get 369 00:17:54,560 --> 00:17:56,320 Speaker 2: a ton of hate mail if I don't ask you this, 370 00:17:56,400 --> 00:17:59,439 Speaker 2: and this is major credit card companies. To be fair, 371 00:17:59,840 --> 00:18:03,120 Speaker 2: they are quick to amp up rates on customers, even 372 00:18:03,200 --> 00:18:06,760 Speaker 2: good customers, but that may have a balance that maybe 373 00:18:06,920 --> 00:18:09,480 Speaker 2: is growing a little bit unwieldy, if you will, but 374 00:18:09,480 --> 00:18:12,480 Speaker 2: nonetheless maybe making their payments a way above the Fed 375 00:18:12,520 --> 00:18:15,000 Speaker 2: Funds rate, way above the prime rate. I mean, I'm 376 00:18:15,040 --> 00:18:16,840 Speaker 2: talking about what we've got a Fed funds rate I 377 00:18:16,880 --> 00:18:19,720 Speaker 2: think at about five or five and a half percent here, 378 00:18:19,760 --> 00:18:22,120 Speaker 2: and you're talking about rates that go to eighteen, nineteen, 379 00:18:22,240 --> 00:18:27,359 Speaker 2: twenty twenty eight percent so quickly on individuals. So what's 380 00:18:27,400 --> 00:18:30,680 Speaker 2: the thinking around that to make it easier for more 381 00:18:30,720 --> 00:18:33,480 Speaker 2: consumers and also for small business folks. 382 00:18:33,960 --> 00:18:35,600 Speaker 7: I think it's I mean, look, I think it's a 383 00:18:35,680 --> 00:18:40,400 Speaker 7: really important point. We've seen rates around the world, especially 384 00:18:40,400 --> 00:18:46,439 Speaker 7: in unregulated markets, climb way above even twenty percent, and. 385 00:18:46,400 --> 00:18:49,200 Speaker 2: Even in the US market, which is a regulated market, 386 00:18:49,200 --> 00:18:51,160 Speaker 2: we see them climb and I know it's within the law, 387 00:18:51,240 --> 00:18:54,280 Speaker 2: but nonetheless it seems many would argue, really not. 388 00:18:54,359 --> 00:18:59,480 Speaker 7: Fair, No exactly. I mean, the truth is that unless 389 00:18:59,520 --> 00:19:03,159 Speaker 7: we're working on making sure that small business owners and 390 00:19:03,240 --> 00:19:06,480 Speaker 7: those who are interested in participating in the digital economy 391 00:19:06,840 --> 00:19:10,720 Speaker 7: through regulated bank accounts, which is where we're focused. It's 392 00:19:10,720 --> 00:19:12,880 Speaker 7: going to be really important that we also include responsible 393 00:19:12,960 --> 00:19:16,560 Speaker 7: lending practices and the education that's required to ensure that 394 00:19:16,840 --> 00:19:20,440 Speaker 7: once you join the formal financial system, you're operating within 395 00:19:20,480 --> 00:19:23,040 Speaker 7: it in a way that helps you not only survive 396 00:19:23,400 --> 00:19:25,280 Speaker 7: but thrive in the digital economy. 397 00:19:25,320 --> 00:19:28,520 Speaker 3: If parents don't teach their kids that stuff, where are 398 00:19:28,560 --> 00:19:29,399 Speaker 3: they supposed to learn it? 399 00:19:30,840 --> 00:19:34,600 Speaker 7: So I think that's again it's a great point. As 400 00:19:34,640 --> 00:19:36,439 Speaker 7: part of the work that we've been doing in the 401 00:19:36,520 --> 00:19:39,119 Speaker 7: United States and in around the world, we've launched a 402 00:19:39,119 --> 00:19:41,760 Speaker 7: program that we call Strive, which is a focus on 403 00:19:42,040 --> 00:19:45,639 Speaker 7: small business owners. Like I said, in the United States 404 00:19:45,640 --> 00:19:48,280 Speaker 7: and around the world. In the United States in particular, 405 00:19:48,320 --> 00:19:51,200 Speaker 7: we're at a historic moment, and this is because there 406 00:19:51,240 --> 00:19:54,800 Speaker 7: are literally billions of dollars coming out of the federal 407 00:19:54,800 --> 00:19:58,360 Speaker 7: governments to the states to help support small business owners. 408 00:19:58,720 --> 00:20:01,119 Speaker 7: The problem is that but that money may or may 409 00:20:01,200 --> 00:20:04,040 Speaker 7: not get to them directly, as we saw during COVID, 410 00:20:04,359 --> 00:20:06,520 Speaker 7: and so part of our work with STRIVE is to 411 00:20:06,680 --> 00:20:11,240 Speaker 7: ensure that we're helping those intermediaries, those organizations that are 412 00:20:11,240 --> 00:20:16,160 Speaker 7: called community development finance institutions across the United States, they're 413 00:20:16,200 --> 00:20:19,239 Speaker 7: closest to the small business owner, and they're really the 414 00:20:19,240 --> 00:20:26,080 Speaker 7: ones who provide culturally competent and proximate education around financial lending, 415 00:20:26,119 --> 00:20:28,199 Speaker 7: the things that you're talking about. And so one of 416 00:20:28,240 --> 00:20:31,880 Speaker 7: the things that we really encourage is that small business 417 00:20:31,880 --> 00:20:35,760 Speaker 7: owners who are looking to capitalize on the enormous amount 418 00:20:35,960 --> 00:20:38,879 Speaker 7: of money that's coming out of the government right now, 419 00:20:39,080 --> 00:20:43,159 Speaker 7: they really connect with their local community development finance institution 420 00:20:43,640 --> 00:20:46,639 Speaker 7: to get close to the education as well as the 421 00:20:46,640 --> 00:20:48,360 Speaker 7: capital they need to start their business. 422 00:20:48,440 --> 00:20:50,359 Speaker 2: But you know, and I guess would I guess I 423 00:20:50,359 --> 00:20:52,280 Speaker 2: would jump in and just say that for a lot 424 00:20:52,280 --> 00:20:55,679 Speaker 2: of individuals, individuals are small business owners, they are responsible. 425 00:20:55,720 --> 00:20:57,919 Speaker 2: I feel like Mohammed Yunis of the Gramin Bank and 426 00:20:57,960 --> 00:21:02,760 Speaker 2: microlending have really taught us that these small entrepreneurs tend 427 00:21:02,840 --> 00:21:05,840 Speaker 2: to be very very responsible with their money, whether it's 428 00:21:05,920 --> 00:21:08,960 Speaker 2: especially in emerging in the emerging world, but also in 429 00:21:09,000 --> 00:21:11,399 Speaker 2: the developed world. And I guess it still seems like 430 00:21:11,760 --> 00:21:14,960 Speaker 2: the difficulty of getting the access and that is still 431 00:21:15,240 --> 00:21:17,920 Speaker 2: very very tricky. How do we open up that pipeline 432 00:21:17,960 --> 00:21:21,439 Speaker 2: even more without all the kind of connections or higher 433 00:21:21,480 --> 00:21:23,360 Speaker 2: costs that seem to go along with it. 434 00:21:24,080 --> 00:21:26,119 Speaker 7: I think you're one hundred percent right. I mean, you 435 00:21:26,160 --> 00:21:28,199 Speaker 7: can look at one of our partners right here in 436 00:21:28,200 --> 00:21:32,119 Speaker 7: the United States is actually grimen USA. Another partner is 437 00:21:32,560 --> 00:21:36,919 Speaker 7: the acci On Opportunity Fund, the Community Reinvestment Fund. There 438 00:21:36,960 --> 00:21:41,000 Speaker 7: are all sorts of again, they're called CDFI's in the 439 00:21:41,080 --> 00:21:45,440 Speaker 7: United States. They're called microfinance institutions outside of the United States, 440 00:21:45,640 --> 00:21:48,800 Speaker 7: but they're really the one. They're really organizations who are 441 00:21:48,840 --> 00:21:52,800 Speaker 7: working very closely with small business owners. And my view is, 442 00:21:52,840 --> 00:21:55,159 Speaker 7: and what we've seen is a lot of small business 443 00:21:55,160 --> 00:21:59,400 Speaker 7: owners don't actually know that these organizations exist. I can 444 00:21:59,440 --> 00:22:01,840 Speaker 7: just give you one example in South Dakota of a 445 00:22:01,880 --> 00:22:05,520 Speaker 7: woman who just opened her coffee shop and she had 446 00:22:05,560 --> 00:22:08,920 Speaker 7: been using her own personal credit card, which many times 447 00:22:08,920 --> 00:22:12,080 Speaker 7: small business owners do to borrow against that to kind 448 00:22:12,080 --> 00:22:16,120 Speaker 7: of buy the things she needed to start start her business. 449 00:22:16,520 --> 00:22:19,879 Speaker 7: Once she was connected to an organization called Four Bands 450 00:22:19,960 --> 00:22:23,640 Speaker 7: Financial Institution, which is a CDFI based in South Dakota, 451 00:22:24,040 --> 00:22:27,439 Speaker 7: they worked with her over several years to not only 452 00:22:28,240 --> 00:22:33,119 Speaker 7: ensure that her responsible her responsible perspective was supplemented with 453 00:22:33,200 --> 00:22:35,960 Speaker 7: the educational components she needed, but they worked with her 454 00:22:35,960 --> 00:22:39,040 Speaker 7: to get the actual capital she needed to open and 455 00:22:39,200 --> 00:22:41,840 Speaker 7: run her business. And so this is not a multi 456 00:22:41,880 --> 00:22:44,840 Speaker 7: day strategy. This is a multi year strategy if we 457 00:22:44,880 --> 00:22:47,240 Speaker 7: really want to make sure that small businesses not only 458 00:22:47,280 --> 00:22:51,520 Speaker 7: have the on ramps, but the tools, education, capital, also 459 00:22:51,640 --> 00:22:54,120 Speaker 7: access to digital that they need to succeed. 460 00:22:54,320 --> 00:22:56,679 Speaker 3: Heysh. I mean, if we think about your goals at 461 00:22:56,720 --> 00:22:59,640 Speaker 3: the center here in the US, I want to specifically 462 00:22:59,640 --> 00:23:02,800 Speaker 3: focus in the US before talking about the entire world. 463 00:23:03,080 --> 00:23:04,520 Speaker 3: If we think about your goals here in the US 464 00:23:04,560 --> 00:23:07,520 Speaker 3: when it comes to financial inclusion and closing the gap here, 465 00:23:08,119 --> 00:23:10,960 Speaker 3: what's the biggest impediment out there right now? What's the 466 00:23:11,000 --> 00:23:12,920 Speaker 3: biggest thing that holds people back? 467 00:23:14,359 --> 00:23:15,919 Speaker 7: Well, I think, you know, I think both you and 468 00:23:15,960 --> 00:23:18,760 Speaker 7: Carol have mentioned it when we've done our research and 469 00:23:19,080 --> 00:23:21,560 Speaker 7: uh and from you know, obviously personal experience. Being the 470 00:23:21,600 --> 00:23:24,720 Speaker 7: daughter of immigrants, I've seen it firsthand. My parents tried 471 00:23:24,760 --> 00:23:27,479 Speaker 7: to open a business when I was growing up in 472 00:23:27,520 --> 00:23:30,800 Speaker 7: southern Virginia and many of my colleagues have as well. 473 00:23:31,160 --> 00:23:34,320 Speaker 7: And the real what what we have seen and what 474 00:23:34,359 --> 00:23:39,680 Speaker 7: the research shows is that entrepreneurs aren't necessarily the ones 475 00:23:39,720 --> 00:23:42,520 Speaker 7: that we see in Silicon Valley who are looking for 476 00:23:42,600 --> 00:23:46,680 Speaker 7: that unicorn, who are looking for that that lightning bolt 477 00:23:46,840 --> 00:23:51,840 Speaker 7: path to you know, multi billion dollar valuation. Most entrepreneurs 478 00:23:51,880 --> 00:23:54,479 Speaker 7: that we have found are looking for stability. We call 479 00:23:54,520 --> 00:23:57,480 Speaker 7: them stability entrepreneurs. They want to make a good living, 480 00:23:57,760 --> 00:24:00,679 Speaker 7: they want to hire good, good staff from them, and 481 00:24:00,680 --> 00:24:04,960 Speaker 7: they want to grow in a consistent and responsible way. 482 00:24:05,200 --> 00:24:07,520 Speaker 7: And that's a little bit of a different framework than 483 00:24:07,560 --> 00:24:10,680 Speaker 7: I think folks think about when we think about entrepreneurs 484 00:24:10,840 --> 00:24:14,800 Speaker 7: and small business owners. That's one big thing is our mindset. 485 00:24:15,200 --> 00:24:17,159 Speaker 7: We need to meet them where they are, which is 486 00:24:17,200 --> 00:24:19,880 Speaker 7: in a place of let's get this right, let's grow 487 00:24:19,920 --> 00:24:23,199 Speaker 7: over time, let's go responsibly. But then they also have 488 00:24:23,280 --> 00:24:26,399 Speaker 7: to ensure that they get that access to capital so 489 00:24:26,440 --> 00:24:28,879 Speaker 7: that they're not using their personal credit cards that are 490 00:24:28,920 --> 00:24:33,560 Speaker 7: actually getting formal lending from CDFIs or banks. They go digital. 491 00:24:33,680 --> 00:24:36,800 Speaker 7: We found that during COVID, if you weren't going, if 492 00:24:36,800 --> 00:24:39,920 Speaker 7: you weren't in a position to go digital, were really 493 00:24:40,000 --> 00:24:43,920 Speaker 7: at a disadvantage for continuing your business. And finally, as 494 00:24:43,920 --> 00:24:46,840 Speaker 7: we've talked about, they have to grow their networks in 495 00:24:46,880 --> 00:24:49,200 Speaker 7: their know how so doing this in a way that 496 00:24:49,400 --> 00:24:52,879 Speaker 7: is not only expanding their capabilities with the nuts and 497 00:24:52,960 --> 00:24:56,560 Speaker 7: bolts of what you need to understand about interest rates 498 00:24:56,600 --> 00:24:59,439 Speaker 7: and marketing and markets, but you also need to be 499 00:24:59,480 --> 00:25:02,320 Speaker 7: able to access your peers who are on the journey 500 00:25:02,320 --> 00:25:04,920 Speaker 7: with you. And as Carol said, that's really about That's 501 00:25:04,920 --> 00:25:07,400 Speaker 7: really what the Gremen model taught us is that your 502 00:25:07,440 --> 00:25:10,640 Speaker 7: peer network is very important in your success. 503 00:25:10,720 --> 00:25:11,000 Speaker 8: All Right? 504 00:25:11,000 --> 00:25:12,600 Speaker 2: Can I leave it on that note, Shamina, thank you 505 00:25:12,640 --> 00:25:14,800 Speaker 2: so much, appreciate some time with you on this Wednesday, 506 00:25:14,800 --> 00:25:18,080 Speaker 2: shaminas saying she's founder and president at the MasterCard Center 507 00:25:18,080 --> 00:25:21,399 Speaker 2: for Inclusive Growth. Joining us there in New York City. 508 00:25:22,240 --> 00:25:25,760 Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us 509 00:25:25,800 --> 00:25:29,040 Speaker 1: live weekday afternoons from two to five pm Eastern Listen 510 00:25:29,080 --> 00:25:31,240 Speaker 1: on Apple car Play and then brout Auto with a 511 00:25:31,240 --> 00:25:35,400 Speaker 1: Bloomberg Business act or want us live on YouTube? 512 00:25:35,920 --> 00:25:36,600 Speaker 8: Well, time to share. 513 00:25:36,680 --> 00:25:39,080 Speaker 3: This is not the Kasso is a service that allows 514 00:25:39,080 --> 00:25:41,080 Speaker 3: you to own a share of the vacation home instead 515 00:25:41,080 --> 00:25:43,159 Speaker 3: of having to buy the whole thing. Like I said, 516 00:25:43,800 --> 00:25:45,560 Speaker 3: maybe an eighth of a share of a skihouse in 517 00:25:45,600 --> 00:25:48,880 Speaker 3: Park City or Breckinridge that'll set you back maybe seven 518 00:25:48,920 --> 00:25:51,240 Speaker 3: hundred and fifty five thousand dollars, or an eighth of 519 00:25:51,240 --> 00:25:53,399 Speaker 3: a share of a home in Malibu for under a 520 00:25:53,480 --> 00:25:56,520 Speaker 3: million dollars. So it's not just that you own a 521 00:25:56,600 --> 00:25:59,120 Speaker 3: share of it. You share the costs that are associated 522 00:25:59,119 --> 00:26:01,439 Speaker 3: with the home as well the other co owners, and 523 00:26:01,440 --> 00:26:05,159 Speaker 3: then Picasso handles the maintenance and other management issues. 524 00:26:05,320 --> 00:26:07,600 Speaker 2: All right, and now it's looking the company to broaden 525 00:26:07,640 --> 00:26:09,840 Speaker 2: it's appeal by offering shares at a lower price point. 526 00:26:10,080 --> 00:26:12,159 Speaker 2: So let's get into it with Austin Allison. He's co 527 00:26:12,200 --> 00:26:15,119 Speaker 2: founder and chief executive officer of Picasso. He joins us 528 00:26:15,560 --> 00:26:19,000 Speaker 2: in our studio, but coming in from San Francisco. How 529 00:26:19,040 --> 00:26:19,359 Speaker 2: are you. 530 00:26:19,800 --> 00:26:21,720 Speaker 6: I'm doing well. Thanks for having me today. 531 00:26:21,760 --> 00:26:23,359 Speaker 2: It's great to have you here. You know, before we 532 00:26:23,400 --> 00:26:25,760 Speaker 2: got started, you said you guys were launched in twenty twenty, 533 00:26:25,800 --> 00:26:28,000 Speaker 2: so you're coming up on your fourth year. 534 00:26:28,240 --> 00:26:30,680 Speaker 6: Yeah, three and a half years since launching. It's been 535 00:26:30,680 --> 00:26:31,400 Speaker 6: a wild ride. 536 00:26:31,600 --> 00:26:33,159 Speaker 2: I bet it is, all right, So give us an 537 00:26:33,160 --> 00:26:35,760 Speaker 2: idea of the trajectory. I mean, from when you started, 538 00:26:35,800 --> 00:26:38,800 Speaker 2: and I mean I'm assuming that was kind of fast 539 00:26:38,800 --> 00:26:40,640 Speaker 2: and furious and that there was a lot of demand 540 00:26:40,880 --> 00:26:41,520 Speaker 2: or was there? 541 00:26:41,760 --> 00:26:44,280 Speaker 6: Yeah, it was a crazy time for sure. Let me 542 00:26:44,400 --> 00:26:46,360 Speaker 6: just start with the mission and the vision of the company. 543 00:26:46,400 --> 00:26:49,680 Speaker 6: The vision is about empowering more people to find their 544 00:26:49,760 --> 00:26:53,240 Speaker 6: happy place through co ownership. And we started the company 545 00:26:53,280 --> 00:26:56,920 Speaker 6: in twenty twenty in San Francisco. We've grown to now 546 00:26:57,040 --> 00:27:00,400 Speaker 6: almost every market around the US, but until the week 547 00:27:00,440 --> 00:27:03,359 Speaker 6: we were operating in about forty destinations around the US 548 00:27:03,680 --> 00:27:07,240 Speaker 6: as well as Paris, London, and Mexico. And what we 549 00:27:07,280 --> 00:27:10,320 Speaker 6: do is very simple. We empower families to co own 550 00:27:10,440 --> 00:27:15,680 Speaker 6: beautiful luxury vacation homes together and Picasso manages every detail, 551 00:27:15,760 --> 00:27:19,200 Speaker 6: everything from design to furnishing to bill pay and maintenance. 552 00:27:19,200 --> 00:27:21,400 Speaker 3: Who determines the time that these families get to go 553 00:27:21,560 --> 00:27:25,320 Speaker 3: spring break is oftentimes overlaps with other spring break of families. 554 00:27:25,480 --> 00:27:27,320 Speaker 6: Yeah, so this is the number one question that we 555 00:27:27,359 --> 00:27:30,040 Speaker 6: get from prospective buyers. And the answer is we've created 556 00:27:30,080 --> 00:27:33,960 Speaker 6: a proprietary scheduling tool that we call smart Stay. It's 557 00:27:34,000 --> 00:27:37,800 Speaker 6: available from an app on your iPhone or Android, and 558 00:27:37,880 --> 00:27:40,160 Speaker 6: smart Stay will ensure that you get your pro rat 559 00:27:40,160 --> 00:27:42,600 Speaker 6: of time throughout the year. So if you own one 560 00:27:42,680 --> 00:27:44,760 Speaker 6: eighth of a home, smart Stay will ensure that you 561 00:27:44,800 --> 00:27:47,159 Speaker 6: get one eighth of the peak season, one eighth of 562 00:27:47,200 --> 00:27:49,520 Speaker 6: the non peak season, and one eighth of the holidays. 563 00:27:49,600 --> 00:27:51,840 Speaker 2: All right, so when the plumbing goes everybody's got to 564 00:27:51,920 --> 00:27:52,280 Speaker 2: chip in. 565 00:27:52,840 --> 00:27:55,160 Speaker 6: Well, yeah, and a lot of that is accounted for 566 00:27:55,359 --> 00:27:58,960 Speaker 6: and planned and advanced. So as the manager of the home, 567 00:27:59,040 --> 00:28:02,280 Speaker 6: Picasso is thinking about what things might break or what 568 00:28:02,320 --> 00:28:05,679 Speaker 6: things may wear over time, and we're actually accruing in 569 00:28:05,760 --> 00:28:08,760 Speaker 6: the budget so that there's funds available to repair some 570 00:28:08,880 --> 00:28:10,160 Speaker 6: of those things when they occur. 571 00:28:10,960 --> 00:28:12,920 Speaker 2: Yeah, go ahead, Carl, No, no, no, no, no, go ahead. 572 00:28:13,000 --> 00:28:14,800 Speaker 3: So talk to us about the business. Because you guys 573 00:28:14,960 --> 00:28:17,600 Speaker 3: sell you you buy the homes and then you resell 574 00:28:17,640 --> 00:28:19,560 Speaker 3: them as shares. Is that correct? 575 00:28:19,640 --> 00:28:22,520 Speaker 6: Well, kind of. Usually the way that it works is 576 00:28:22,560 --> 00:28:25,680 Speaker 6: we have thousands of listings on our website at Picasso 577 00:28:25,760 --> 00:28:27,720 Speaker 6: dot com. You can also see them on our app, 578 00:28:28,119 --> 00:28:31,320 Speaker 6: and consumers will go to our website and express interest 579 00:28:31,440 --> 00:28:34,480 Speaker 6: in homes that meet their needs. Once we see enough 580 00:28:34,600 --> 00:28:39,120 Speaker 6: interest in a particular home, then Picasso gets involved, works 581 00:28:39,120 --> 00:28:41,480 Speaker 6: with the listing agent to get the home under contract, 582 00:28:41,800 --> 00:28:44,560 Speaker 6: We do diligence on behalf of the ownership group, and 583 00:28:44,600 --> 00:28:47,560 Speaker 6: then we convert it into a co owned Picasso home. 584 00:28:48,600 --> 00:28:52,520 Speaker 2: Fascinating. Talk to us about the ramp up and demand 585 00:28:53,280 --> 00:28:55,719 Speaker 2: and types of sales. Just give us, give us some metrics. 586 00:28:55,960 --> 00:28:58,000 Speaker 2: We're bloomberg as we all. Yeah, I'd love to know 587 00:28:58,080 --> 00:28:58,479 Speaker 2: some of them else. 588 00:28:58,600 --> 00:29:01,240 Speaker 6: Yeah, Well, back to your question what it was like 589 00:29:01,360 --> 00:29:04,400 Speaker 6: launching during the pandemic. The first couple of years were crazy. 590 00:29:04,440 --> 00:29:07,360 Speaker 6: I mean, we grew from zero to We've done more 591 00:29:07,400 --> 00:29:09,760 Speaker 6: than a billion dollars in revenue over the course of 592 00:29:09,800 --> 00:29:12,640 Speaker 6: the first three years of the company's history. We have 593 00:29:12,840 --> 00:29:16,000 Speaker 6: thousands of owners and the way that our model works 594 00:29:16,240 --> 00:29:20,400 Speaker 6: is when we aggregate an ownership group and identify the home, 595 00:29:20,560 --> 00:29:22,960 Speaker 6: we make a service fee that's baked into the share 596 00:29:23,000 --> 00:29:25,640 Speaker 6: price of the home, and then we provide a variety 597 00:29:25,680 --> 00:29:28,680 Speaker 6: of services throughout the life of the relationship that we 598 00:29:28,760 --> 00:29:33,600 Speaker 6: have with our customers. So that includes things like property management, financing. 599 00:29:33,720 --> 00:29:37,720 Speaker 6: About seventy percent of people who buy a Picasso use financing, 600 00:29:37,920 --> 00:29:41,120 Speaker 6: and Picasso is the originator of those loans. We also 601 00:29:41,160 --> 00:29:43,720 Speaker 6: help with resale, so when you buy an eighth or 602 00:29:43,760 --> 00:29:47,320 Speaker 6: a quarter of a beautiful vacation home through Picasso, and 603 00:29:47,400 --> 00:29:50,360 Speaker 6: someday you decide to sell, we help with that sales 604 00:29:50,400 --> 00:29:52,880 Speaker 6: process as well, and it's really easy. 605 00:29:53,080 --> 00:29:55,480 Speaker 2: How long do people stay with their ownership, I'm curious 606 00:29:55,480 --> 00:29:56,160 Speaker 2: about turnover. 607 00:29:56,480 --> 00:29:59,160 Speaker 6: Yeah, it depends on the owner, but we estimate that 608 00:29:59,200 --> 00:30:01,560 Speaker 6: the average owner going to stay in their Picasso home 609 00:30:01,640 --> 00:30:03,480 Speaker 6: for about five years because. 610 00:30:03,240 --> 00:30:05,600 Speaker 2: They are staying in I mean you're now three and 611 00:30:05,640 --> 00:30:06,880 Speaker 2: a half years in, so the people. 612 00:30:07,000 --> 00:30:09,800 Speaker 6: Yeah, we're looking at cohort trends to estimate what we 613 00:30:09,840 --> 00:30:12,200 Speaker 6: think the average life is going to be. A whole 614 00:30:12,200 --> 00:30:15,400 Speaker 6: home somebody would typically stay in for you know, seven 615 00:30:15,480 --> 00:30:16,880 Speaker 6: to eight years on average. 616 00:30:17,240 --> 00:30:19,400 Speaker 3: Okay, let's say I'm interested in home in the mountains 617 00:30:19,880 --> 00:30:21,920 Speaker 3: in the winter, I want to ski there in the summer. 618 00:30:21,960 --> 00:30:23,720 Speaker 3: I want a mountain bike there. Where do I leave 619 00:30:23,720 --> 00:30:25,560 Speaker 3: my skis? Where do I leave my mountain bike? So 620 00:30:25,760 --> 00:30:27,880 Speaker 3: the seven other families don't mess with my stuff? 621 00:30:27,920 --> 00:30:29,960 Speaker 6: Well, one of the best parts of owning a home 622 00:30:30,160 --> 00:30:31,960 Speaker 6: is that you get to keep your stuff there. That's 623 00:30:32,000 --> 00:30:35,040 Speaker 6: true of owning a Picasso as well. We outfit every 624 00:30:35,120 --> 00:30:38,600 Speaker 6: Picasso home with eight owners closets, so when you show 625 00:30:38,680 --> 00:30:40,720 Speaker 6: up at the home, you pull your stuff out of 626 00:30:40,720 --> 00:30:43,200 Speaker 6: your owner's closet and you enjoy the home with none 627 00:30:43,200 --> 00:30:44,560 Speaker 6: of the headaches or none of the hassle. 628 00:30:45,520 --> 00:30:47,720 Speaker 2: What are some of the common headaches that come up 629 00:30:47,800 --> 00:30:48,600 Speaker 2: in this process. 630 00:30:49,040 --> 00:30:53,000 Speaker 6: Well, there aren't really any any headaches because we're taking 631 00:30:53,040 --> 00:30:55,520 Speaker 6: on that burden as the manager of the property. But 632 00:30:55,760 --> 00:30:59,080 Speaker 6: I would say the compromise associated with co ownership is 633 00:30:59,080 --> 00:31:00,880 Speaker 6: that you don't own a undred percent of the home, 634 00:31:00,920 --> 00:31:02,600 Speaker 6: which means you're not going to get one hundred percent 635 00:31:02,640 --> 00:31:03,200 Speaker 6: of the calendar. 636 00:31:03,280 --> 00:31:05,080 Speaker 2: You can't say, hey, honey, let's just for the weekend, 637 00:31:05,080 --> 00:31:05,520 Speaker 2: go up and. 638 00:31:05,600 --> 00:31:08,520 Speaker 6: You know, well, actually you can. You can, so as 639 00:31:08,520 --> 00:31:11,320 Speaker 6: long as the home is available, you can. But basically, 640 00:31:11,520 --> 00:31:14,040 Speaker 6: the main compromise with co ownership is that you're sharing 641 00:31:14,040 --> 00:31:16,120 Speaker 6: the calendar with other people. So the way that most 642 00:31:16,120 --> 00:31:19,479 Speaker 6: of our owners describe the calendar benefit is you're going 643 00:31:19,560 --> 00:31:21,920 Speaker 6: to get about eighty percent of the dates that you 644 00:31:21,960 --> 00:31:24,360 Speaker 6: want out of the calendar, and you're happy to make 645 00:31:24,400 --> 00:31:26,240 Speaker 6: the trade off on the twenty percent that you're not 646 00:31:26,320 --> 00:31:29,360 Speaker 6: getting because you're saving so much money. It's about eighty 647 00:31:29,440 --> 00:31:32,400 Speaker 6: five percent less expensive to own a picasso when compared 648 00:31:32,400 --> 00:31:35,040 Speaker 6: to owning the whole home. It's about seventy five percent 649 00:31:35,120 --> 00:31:38,440 Speaker 6: less expensive per night than renting a comparable Airbnb or 650 00:31:38,440 --> 00:31:41,560 Speaker 6: short terminal. So it just makes a lot of sense financially, 651 00:31:41,720 --> 00:31:44,760 Speaker 6: and it's a lot easier as well, because we manage 652 00:31:44,800 --> 00:31:45,520 Speaker 6: the whole experience. 653 00:31:45,520 --> 00:31:48,720 Speaker 3: How do you make decisions that for personalization? For example, 654 00:31:48,760 --> 00:31:50,720 Speaker 3: let's say, I want to get a hot tub at 655 00:31:50,840 --> 00:31:53,320 Speaker 3: that mountain home, but you know the other families don't 656 00:31:53,360 --> 00:31:54,920 Speaker 3: want a hot tub there. How do you do that? 657 00:31:54,960 --> 00:31:56,959 Speaker 2: It's like the co op, right kind of tested. 658 00:31:57,560 --> 00:32:01,120 Speaker 6: Yeah, it is analogous to the co op in some ways. 659 00:32:01,160 --> 00:32:04,520 Speaker 6: But when owners buy into a Picasso, they're typically buying 660 00:32:04,560 --> 00:32:08,080 Speaker 6: into the style of that home, the design of that home, 661 00:32:08,120 --> 00:32:11,480 Speaker 6: which which we manage, and the amenities of that home. 662 00:32:11,720 --> 00:32:15,280 Speaker 6: So if somebody wants to make a change, like let's 663 00:32:15,320 --> 00:32:17,320 Speaker 6: say that you bought into a home without a pool, 664 00:32:17,400 --> 00:32:19,600 Speaker 6: and later you decide you want a home with a pool, 665 00:32:20,000 --> 00:32:23,640 Speaker 6: most people would just sell out of their Picasso without 666 00:32:23,640 --> 00:32:26,040 Speaker 6: a pool and sell into a new one. But it 667 00:32:26,120 --> 00:32:28,320 Speaker 6: is possible for all the owners in a home to 668 00:32:28,400 --> 00:32:31,600 Speaker 6: actually vote and make a change to a home such 669 00:32:31,640 --> 00:32:34,000 Speaker 6: as a bedroom or a pool, and in that scenario, 670 00:32:34,160 --> 00:32:37,440 Speaker 6: Picasso would facilitate the project on their behalf awestin I'm. 671 00:32:37,280 --> 00:32:40,640 Speaker 2: Curious though, if you buy fractional ownership into a particular 672 00:32:40,720 --> 00:32:43,200 Speaker 2: piece of property and then you sell, do you sell 673 00:32:43,240 --> 00:32:45,400 Speaker 2: at the price you bought into or you with the 674 00:32:45,440 --> 00:32:47,720 Speaker 2: market bear? Like, how does that work? Because can you 675 00:32:47,840 --> 00:32:49,440 Speaker 2: lose money on that initial investment? 676 00:32:49,760 --> 00:32:53,080 Speaker 6: Well, like any real estate purchase. Yes, you could lose money, 677 00:32:53,120 --> 00:32:55,520 Speaker 6: but most real estate goes up in value over time, 678 00:32:55,560 --> 00:32:58,120 Speaker 6: and that's certainly what's happened with our real estate. So 679 00:32:58,520 --> 00:33:01,760 Speaker 6: people who have purchased a pic and later resold our 680 00:33:01,800 --> 00:33:05,320 Speaker 6: customers have made on average a ten percent gain over 681 00:33:05,400 --> 00:33:08,080 Speaker 6: what they paid. But it trans I mean with Picasso, 682 00:33:08,120 --> 00:33:10,200 Speaker 6: you're buying a home. The only difference is you're buying 683 00:33:10,240 --> 00:33:12,880 Speaker 6: a portion of it instead of the whole thing. So 684 00:33:12,960 --> 00:33:15,560 Speaker 6: it trades just like the underlying real estate would if 685 00:33:15,600 --> 00:33:17,840 Speaker 6: you were selling the whole home. But we make the 686 00:33:17,880 --> 00:33:21,200 Speaker 6: process easier by facilitating the share of part of the home. 687 00:33:21,280 --> 00:33:24,040 Speaker 3: There's a huge affordability problem in a lot of these towns, 688 00:33:24,200 --> 00:33:27,320 Speaker 3: absolutely right. How do you handle pushback? I know that 689 00:33:27,360 --> 00:33:31,760 Speaker 3: in some areas where you operate, for example in St. Helena, California, 690 00:33:32,320 --> 00:33:35,320 Speaker 3: you had to reach a settlement with the town. How 691 00:33:35,360 --> 00:33:37,200 Speaker 3: do you anticipate pushback on this model? 692 00:33:37,280 --> 00:33:40,920 Speaker 6: Yeah, well, the housing affordability problem is real and it's 693 00:33:40,920 --> 00:33:43,720 Speaker 6: here to stay. You know, homes aren't going to get 694 00:33:43,760 --> 00:33:46,680 Speaker 6: a whole lot cheaper into the future. So what we're 695 00:33:46,680 --> 00:33:50,200 Speaker 6: seeing is consumers are resorting to co ownership as a 696 00:33:50,240 --> 00:33:53,440 Speaker 6: way to make housing more affordable that could. 697 00:33:53,320 --> 00:33:55,720 Speaker 3: Also be said to price out locals from living there. 698 00:33:55,800 --> 00:33:58,480 Speaker 6: No, it actually has the opposite effect in a small town. 699 00:33:58,760 --> 00:34:02,480 Speaker 6: So one of the challenges in a small vacation home 700 00:34:02,520 --> 00:34:05,800 Speaker 6: community is that second home buyers are buying up a 701 00:34:05,800 --> 00:34:08,560 Speaker 6: lot of the median price homes. The beauty of this 702 00:34:08,719 --> 00:34:11,200 Speaker 6: model is it's kind of like car pulling, but for 703 00:34:11,280 --> 00:34:15,160 Speaker 6: second homes, where we're aggregating demand into fewer properties. So 704 00:34:15,200 --> 00:34:19,160 Speaker 6: instead of having eight families in San Francisco buying median 705 00:34:19,160 --> 00:34:21,520 Speaker 6: price homes in Napa just to have them sit empty 706 00:34:21,560 --> 00:34:25,280 Speaker 6: ten months per year, our model concentrates those eight families 707 00:34:25,320 --> 00:34:28,239 Speaker 6: into one home, so it actually creates more opportunity for 708 00:34:28,280 --> 00:34:31,439 Speaker 6: the local workforce. But like any new category, it takes 709 00:34:31,440 --> 00:34:32,440 Speaker 6: time to be understood. 710 00:34:32,440 --> 00:34:34,520 Speaker 2: Who's your typical buyer? Just got about thirty seconds. 711 00:34:34,680 --> 00:34:38,640 Speaker 6: Yeah, So the typical buyer ranges from a young family 712 00:34:38,719 --> 00:34:41,600 Speaker 6: that's early in their career and maybe can't afford or 713 00:34:41,600 --> 00:34:44,960 Speaker 6: can't justify owning the home of their dreams, all the 714 00:34:45,000 --> 00:34:47,799 Speaker 6: way to a very established, you know, empty nester that's 715 00:34:47,840 --> 00:34:50,960 Speaker 6: looking for a special happy place for the family. 716 00:34:51,080 --> 00:34:53,560 Speaker 2: Regat well that's the range. Just quickly, is there a bulk? 717 00:34:53,680 --> 00:34:56,719 Speaker 2: Is it like people a certain demographic in terms of age, I. 718 00:34:56,680 --> 00:34:59,560 Speaker 6: Would say the sweet spot is like forty to sixty 719 00:34:59,600 --> 00:35:02,160 Speaker 6: in terms of of age. And I would say seventy 720 00:35:02,160 --> 00:35:05,160 Speaker 6: to eighty percent of people are looking for a home 721 00:35:05,239 --> 00:35:07,480 Speaker 6: that's within a two to three hour commute from their 722 00:35:07,480 --> 00:35:08,120 Speaker 6: primary home. 723 00:35:08,200 --> 00:35:10,000 Speaker 2: And just quickly, one last question ten seconds. Do you 724 00:35:10,040 --> 00:35:12,000 Speaker 2: make money on every transaction? How does it do? 725 00:35:12,080 --> 00:35:14,320 Speaker 6: What's the business? We make money on the service fee upfront, 726 00:35:14,400 --> 00:35:17,160 Speaker 6: and then we make money on the recurring services that 727 00:35:17,200 --> 00:35:20,640 Speaker 6: we provide, including property management, financing and resale. 728 00:35:20,880 --> 00:35:22,600 Speaker 2: Really interesting, really cool stuff. 729 00:35:22,640 --> 00:35:23,839 Speaker 6: Thank you, Thank you so much. 730 00:35:23,920 --> 00:35:27,239 Speaker 2: Austin Allison, co founder a CEO of Picasso, joining us 731 00:35:27,239 --> 00:35:28,280 Speaker 2: here in studio. 732 00:35:29,360 --> 00:35:35,759 Speaker 1: Come brother Marco a journal How about you let me drive? 733 00:35:36,000 --> 00:35:38,040 Speaker 5: Oh no, no, no, no, who's going to drive? 734 00:35:38,320 --> 00:35:39,400 Speaker 1: Honey? 735 00:35:39,600 --> 00:35:44,480 Speaker 6: Please, I'll do the gravels. Let's wait, I want to drive. 736 00:35:43,280 --> 00:35:46,440 Speaker 6: It's good question. 737 00:35:50,239 --> 00:35:52,480 Speaker 3: This is the drive to the Globe. 738 00:35:52,360 --> 00:35:56,640 Speaker 8: Dot com communing well, Bun Jelda Don on Bluebird Radio. 739 00:35:56,800 --> 00:35:59,080 Speaker 2: All right, everybody, just about eighteen minutes left in today's 740 00:35:59,080 --> 00:36:01,480 Speaker 2: trading sessions. Some buying into the clothes. We got to 741 00:36:01,480 --> 00:36:04,160 Speaker 2: pop to the pside, which is kind of interesting. I 742 00:36:04,160 --> 00:36:05,719 Speaker 2: feel like in the last I don't know ten or 743 00:36:05,760 --> 00:36:09,560 Speaker 2: fifteen minutes. So fascinating to see still just up, as 744 00:36:09,640 --> 00:36:11,680 Speaker 2: John mentioned, about three tens of a percent on the 745 00:36:11,760 --> 00:36:14,200 Speaker 2: Nasdaq one hundred up, about seven tens of a percent 746 00:36:14,440 --> 00:36:16,239 Speaker 2: on the S and P five hundred, Dow up more 747 00:36:16,239 --> 00:36:18,799 Speaker 2: than one percent. But it's a straight lineup, So I'm 748 00:36:18,800 --> 00:36:20,839 Speaker 2: not sure. We talk about volatility as we get near 749 00:36:20,880 --> 00:36:23,200 Speaker 2: the end of the quarter, so maybe some of that 750 00:36:23,320 --> 00:36:25,879 Speaker 2: is at play, but nonetheless certainly notable as I look 751 00:36:25,880 --> 00:36:27,680 Speaker 2: at my Bloomberg and I look at the charts across 752 00:36:27,719 --> 00:36:28,040 Speaker 2: the board. 753 00:36:28,080 --> 00:36:30,440 Speaker 3: Also a reminder Carol that this quarter we're toward the 754 00:36:30,520 --> 00:36:33,920 Speaker 3: end of the quarter, but this quarter we're seeing the 755 00:36:33,960 --> 00:36:36,000 Speaker 3: market serge close to ten percent. 756 00:36:36,680 --> 00:36:38,239 Speaker 2: Yeah, it's been quite great quarter. 757 00:36:38,320 --> 00:36:40,560 Speaker 3: Yeah, I seven on the S and P five Was it. 758 00:36:40,520 --> 00:36:42,759 Speaker 2: Just last week? We had the best week right for 759 00:36:42,800 --> 00:36:44,919 Speaker 2: the four stocks here in twenty twenty four. 760 00:36:45,040 --> 00:36:47,080 Speaker 3: I want to think get an idea for what Mace 761 00:36:47,160 --> 00:36:49,680 Speaker 3: McCain has to say about all this. Mace's chief investment 762 00:36:49,680 --> 00:36:52,719 Speaker 3: officer at Frost Investment Advisors. They've got about five point 763 00:36:52,760 --> 00:36:55,759 Speaker 3: one billion dollars in assets under management, Mace joining us 764 00:36:55,800 --> 00:36:59,680 Speaker 3: from San Antonio, Texas. Mace, how are you very good? 765 00:37:00,040 --> 00:37:01,239 Speaker 8: Thank you for having me on today. 766 00:37:01,320 --> 00:37:03,560 Speaker 3: Yeah, good to have you with us. How are you 767 00:37:03,600 --> 00:37:07,040 Speaker 3: looking at a year where the quarter has already sent 768 00:37:07,120 --> 00:37:09,520 Speaker 3: shares hire by ten percent and we're not even three 769 00:37:09,520 --> 00:37:10,319 Speaker 3: months into this yet. 770 00:37:12,239 --> 00:37:14,640 Speaker 9: Well, in the very near term, we're a little cautious 771 00:37:14,840 --> 00:37:22,480 Speaker 9: in that, you know, measures of in semester sentiment are 772 00:37:22,480 --> 00:37:25,160 Speaker 9: pretty extreme and look like they could be overbought in 773 00:37:25,239 --> 00:37:25,680 Speaker 9: near term. 774 00:37:26,120 --> 00:37:28,360 Speaker 8: Of course, those conditions can stay over. 775 00:37:32,800 --> 00:37:35,960 Speaker 2: Oops, we're having a little technical difficulty, so we're going 776 00:37:35,960 --> 00:37:37,840 Speaker 2: to see if we can get back and reconnect with 777 00:37:37,920 --> 00:37:40,360 Speaker 2: Mace McCain over at Frost Investment Advisors. 778 00:37:41,480 --> 00:37:41,719 Speaker 6: Yeah. 779 00:37:41,920 --> 00:37:43,480 Speaker 3: Interesting about the sentiment, right. 780 00:37:43,560 --> 00:37:46,319 Speaker 2: Yeah, well, you know, quite a bounce, and I think 781 00:37:46,360 --> 00:37:47,640 Speaker 2: a lot of it has to do with and we've 782 00:37:47,640 --> 00:37:50,400 Speaker 2: talked about this right a lot about expectations in terms 783 00:37:50,400 --> 00:37:54,440 Speaker 2: of global central banks finally saying okay, we're ready to 784 00:37:54,480 --> 00:37:57,279 Speaker 2: start cutting rates. It's just it's not no longer. It's 785 00:37:57,320 --> 00:37:59,040 Speaker 2: no longer. You know, if we're going to do it, 786 00:37:59,040 --> 00:38:00,640 Speaker 2: it's just a case of time and when we're going 787 00:38:00,680 --> 00:38:00,960 Speaker 2: to do it. 788 00:38:01,000 --> 00:38:03,040 Speaker 3: I don't know about that though, right We know that 789 00:38:03,080 --> 00:38:04,640 Speaker 3: it's going to happen, We just don't know if there's 790 00:38:04,680 --> 00:38:07,080 Speaker 3: actually going to be three this year from the Federal Reserve. 791 00:38:07,200 --> 00:38:10,399 Speaker 3: We don't know if we've had or exactly we've had 792 00:38:10,400 --> 00:38:12,319 Speaker 3: more and more folks come on our air lately and say, 793 00:38:12,320 --> 00:38:14,839 Speaker 3: wait a second, we're looking you know the whoky said 794 00:38:14,920 --> 00:38:16,800 Speaker 3: yesterday Carol, that the FED is looking for an excuse 795 00:38:16,840 --> 00:38:17,160 Speaker 3: not to. 796 00:38:17,120 --> 00:38:20,600 Speaker 2: Cut exactly our guest that was in here. But it's interesting. 797 00:38:20,640 --> 00:38:22,239 Speaker 2: I'm looking at what, as you said, the S and 798 00:38:22,280 --> 00:38:24,520 Speaker 2: P five hundred since the beginning of the year, or 799 00:38:24,520 --> 00:38:26,880 Speaker 2: at least in this quarter, up about eleven percent. We're 800 00:38:26,880 --> 00:38:29,240 Speaker 2: looking at a Nasdaq one hundred that's up about fourteen percent, 801 00:38:29,320 --> 00:38:32,600 Speaker 2: so pretty significant run. Hey, we're back with Mace McCain, 802 00:38:32,680 --> 00:38:36,200 Speaker 2: chief investment officer at Frost Investment Advisors. So Mace, you 803 00:38:36,239 --> 00:38:39,000 Speaker 2: were talking a little bit about sentiment and what we're 804 00:38:39,040 --> 00:38:42,120 Speaker 2: seeing and maybe what it means perhaps going forward from here. 805 00:38:43,520 --> 00:38:45,759 Speaker 9: Yes, we look to be a little overbought in the 806 00:38:45,840 --> 00:38:48,400 Speaker 9: short term, but as I say, we could stay that 807 00:38:48,440 --> 00:38:51,400 Speaker 9: way for a while. But I think that your points 808 00:38:51,440 --> 00:38:53,279 Speaker 9: on the FED are very important. I mean, the FED 809 00:38:53,400 --> 00:38:54,839 Speaker 9: risk is skewed at this time. 810 00:38:55,520 --> 00:38:56,239 Speaker 8: The FED is. 811 00:38:57,840 --> 00:39:00,880 Speaker 9: You know, not going to be raising rights if inflation 812 00:39:01,080 --> 00:39:03,480 Speaker 9: stays sticky and comes in hot, we're just going to 813 00:39:03,480 --> 00:39:06,839 Speaker 9: get higher for longer. But if they have the opportunity, 814 00:39:06,880 --> 00:39:08,719 Speaker 9: they're going to start to cut later in the year. 815 00:39:08,880 --> 00:39:13,800 Speaker 9: So we kind of skewed bed risk to towards cutting 816 00:39:13,960 --> 00:39:14,800 Speaker 9: rather than raising. 817 00:39:15,040 --> 00:39:17,600 Speaker 8: So that's pretty supportive into markets. 818 00:39:17,680 --> 00:39:20,359 Speaker 2: But is it dangerous to rule out the idea that 819 00:39:20,400 --> 00:39:23,719 Speaker 2: maybe the FED ultimately considering. I don't know. We were 820 00:39:23,760 --> 00:39:25,239 Speaker 2: talking with Mike right a little bit about some of 821 00:39:25,280 --> 00:39:27,160 Speaker 2: the weakness we're starting to see in data points, But 822 00:39:27,600 --> 00:39:31,279 Speaker 2: you know, are we being still too enthusiastic when it 823 00:39:31,280 --> 00:39:34,480 Speaker 2: comes to expectations about how many FED cuts we might get. 824 00:39:35,880 --> 00:39:38,920 Speaker 9: Well, I think that they're off the table for a while. 825 00:39:40,239 --> 00:39:42,640 Speaker 9: And what's more important though, is, you know, we're in 826 00:39:42,680 --> 00:39:45,040 Speaker 9: an environment where we seem to be having either a 827 00:39:45,080 --> 00:39:49,840 Speaker 9: soft or no landing scenario. So people are figuring that 828 00:39:49,840 --> 00:39:52,200 Speaker 9: we're going to have a rate cut eventually. But right 829 00:39:52,239 --> 00:39:54,399 Speaker 9: now we're seeing a broadening of the market. We're seeing 830 00:39:54,440 --> 00:39:57,239 Speaker 9: mid caps and small caps a little bit better. And 831 00:39:57,320 --> 00:40:00,200 Speaker 9: I think people's expectations for growth is gone, I know, 832 00:40:00,840 --> 00:40:02,600 Speaker 9: and maybe we're going to get out of what has 833 00:40:02,640 --> 00:40:05,239 Speaker 9: been a profits recession ast we look into the next year. 834 00:40:05,920 --> 00:40:10,000 Speaker 9: So I think that the fundamental side, the earning side, 835 00:40:10,000 --> 00:40:15,359 Speaker 9: the cop of corporate side, is strengthening, and so as 836 00:40:15,360 --> 00:40:17,359 Speaker 9: long as that's going on for a while, it takes 837 00:40:17,400 --> 00:40:20,640 Speaker 9: the FED out of the it becomes less important in 838 00:40:20,640 --> 00:40:21,000 Speaker 9: the mix. 839 00:40:21,239 --> 00:40:23,680 Speaker 3: A means where do you not want to be right now? 840 00:40:26,320 --> 00:40:28,359 Speaker 8: The everything is run? 841 00:40:28,400 --> 00:40:30,720 Speaker 9: You know, we've seen junk bonds go up, credit credit 842 00:40:30,800 --> 00:40:35,319 Speaker 9: go up, interest rates have really rallied off of this 843 00:40:35,680 --> 00:40:38,160 Speaker 9: last falls highs and so. 844 00:40:39,080 --> 00:40:40,080 Speaker 8: On the credit market. 845 00:40:40,200 --> 00:40:44,040 Speaker 9: You know, we were looking at bonds and the basically 846 00:40:44,120 --> 00:40:46,040 Speaker 9: the shorter end the value of the curve three to 847 00:40:46,120 --> 00:40:51,440 Speaker 9: five years, looking to anticipate the FED easing. We also 848 00:40:51,560 --> 00:40:54,160 Speaker 9: think once again that we're going to see a rally 849 00:40:54,920 --> 00:40:58,360 Speaker 9: possibly in a mid cap and small cap if we 850 00:40:58,400 --> 00:41:01,200 Speaker 9: continue to see the product market broadened and we continue 851 00:41:01,239 --> 00:41:04,879 Speaker 9: to see growth surprise to the upside. So all that 852 00:41:04,960 --> 00:41:08,239 Speaker 9: is positive. It will probably take a little bit of 853 00:41:08,280 --> 00:41:14,000 Speaker 9: the spotlight of the leading leaders on technology as we 854 00:41:14,120 --> 00:41:16,680 Speaker 9: broaden the market, but that would be healthy to us. 855 00:41:17,080 --> 00:41:19,240 Speaker 2: Where don't you want to be in this market environment? 856 00:41:22,080 --> 00:41:25,759 Speaker 9: You know, we are concerned enough about sticky inflation that 857 00:41:25,800 --> 00:41:28,240 Speaker 9: I wouldn't want to be buying out. 858 00:41:28,080 --> 00:41:29,920 Speaker 8: Beyond ten years in the bond market. 859 00:41:30,760 --> 00:41:34,960 Speaker 9: We think that inflation expectations could rise based mostly on 860 00:41:35,640 --> 00:41:37,440 Speaker 9: the fact that we're going to we continue to be 861 00:41:37,520 --> 00:41:42,040 Speaker 9: short labor. If we do see manufacturing continue to strengthen 862 00:41:42,320 --> 00:41:42,960 Speaker 9: we're just going to. 863 00:41:42,880 --> 00:41:44,120 Speaker 8: See more demand for labor. 864 00:41:44,600 --> 00:41:48,520 Speaker 9: And unless we see workforce participation come up, we think that, 865 00:41:49,840 --> 00:41:54,320 Speaker 9: you know, seeing significant progress towards our heads inflation targets 866 00:41:54,320 --> 00:41:55,359 Speaker 9: could take a long time. 867 00:41:56,000 --> 00:41:59,279 Speaker 3: I'm curious about asset allocation in a market that's up 868 00:41:59,520 --> 00:42:02,040 Speaker 3: ten percent on the year, that had a great year 869 00:42:02,120 --> 00:42:05,000 Speaker 3: last year. If if somebody comes to you, a client 870 00:42:05,040 --> 00:42:06,359 Speaker 3: comes to you, a new client comes to you with 871 00:42:06,360 --> 00:42:11,200 Speaker 3: new money and says, you know, throw this money where 872 00:42:11,200 --> 00:42:13,000 Speaker 3: you think it should go for the next few years, 873 00:42:13,040 --> 00:42:14,560 Speaker 3: what does that asset allocation look like. 874 00:42:15,880 --> 00:42:17,960 Speaker 9: Well, you know, we had a great year last year 875 00:42:18,000 --> 00:42:19,520 Speaker 9: in the stock market, but if you look at two 876 00:42:19,600 --> 00:42:24,280 Speaker 9: years where it's not such great returns, So we borrowed 877 00:42:24,320 --> 00:42:27,080 Speaker 9: a lot this year, you know, catching up from last 878 00:42:27,120 --> 00:42:30,319 Speaker 9: year twenty three was based on a really four twenty two. 879 00:42:31,520 --> 00:42:34,719 Speaker 9: We're not at extreme valuations, very doubt believe. So we 880 00:42:34,840 --> 00:42:39,480 Speaker 9: still like stocks and so we think that you know, 881 00:42:39,719 --> 00:42:43,040 Speaker 9: the returns will be more modest because of valuations where 882 00:42:43,080 --> 00:42:45,560 Speaker 9: they are and the pe ratios, but we do think 883 00:42:45,640 --> 00:42:47,680 Speaker 9: that stocks will still be the best place to be 884 00:42:48,880 --> 00:42:51,839 Speaker 9: as and as I said, if we do get some 885 00:42:51,880 --> 00:42:55,080 Speaker 9: economic strength, we think that we could finally see some 886 00:42:55,480 --> 00:42:59,680 Speaker 9: participation in the small and mid cap and so hopefully 887 00:42:59,680 --> 00:43:02,320 Speaker 9: that'll out to market and help returns. 888 00:43:01,800 --> 00:43:02,480 Speaker 8: In the next year. 889 00:43:02,719 --> 00:43:05,160 Speaker 2: All Right, Mace, gonna leave it on that listen. Thank 890 00:43:05,200 --> 00:43:07,920 Speaker 2: you so much, so appreciate it. Mace mccainey's chief investment 891 00:43:07,920 --> 00:43:10,879 Speaker 2: officer at Frost Investment Advisors, as you mentioned earlier, about 892 00:43:10,920 --> 00:43:13,680 Speaker 2: five point one billion in assets under management, and he 893 00:43:13,760 --> 00:43:15,960 Speaker 2: was joining us there from San Antonio, Texas. 894 00:43:16,600 --> 00:43:20,440 Speaker 1: This is the Bloomberg Business Week podcast of a Little Apple, 895 00:43:20,680 --> 00:43:24,600 Speaker 1: Spotify and anywhere else you get your podcasts. Listen live 896 00:43:24,719 --> 00:43:28,080 Speaker 1: weekday afternoons from two to five pm Eastern on Bloomberg 897 00:43:28,160 --> 00:43:31,480 Speaker 1: dot Com, the iHeartRadio app, tune In, and the Bloomberg 898 00:43:31,520 --> 00:43:34,400 Speaker 1: Business App. You can also watch us live every weekday 899 00:43:34,440 --> 00:43:37,600 Speaker 1: on YouTube and always on the Bloomberg Jermale