1 00:00:00,840 --> 00:00:04,000 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 2 00:00:04,080 --> 00:00:05,280 Speaker 1: my co host Matt Miller. 3 00:00:05,640 --> 00:00:09,600 Speaker 2: Every business day, we bring you interviews from CEOs, market pros, 4 00:00:09,720 --> 00:00:13,600 Speaker 2: and Bloomberg experts, along with essential market moving news. 5 00:00:14,160 --> 00:00:17,279 Speaker 1: Find the Bloomberg Markets Podcast on Apple Podcasts or wherever 6 00:00:17,400 --> 00:00:20,480 Speaker 1: you listen to podcasts, and at Bloomberg dot com slash podcast. 7 00:00:21,400 --> 00:00:23,960 Speaker 1: A lot to chew on in terms of, you know, 8 00:00:24,040 --> 00:00:26,040 Speaker 1: kind of where these central banks are going, where rates 9 00:00:26,040 --> 00:00:31,200 Speaker 1: are going, we had clearly this this ECB panel in Portugal. 10 00:00:31,440 --> 00:00:33,040 Speaker 1: A lot to chew on here, but I think the 11 00:00:33,080 --> 00:00:36,640 Speaker 1: consistent message and again I think the central banks have 12 00:00:36,720 --> 00:00:40,279 Speaker 1: been consistent from day one. Yeah, we are fighting inflation 13 00:00:41,040 --> 00:00:43,080 Speaker 1: after they you know, I think the FED obviously was 14 00:00:43,320 --> 00:00:45,240 Speaker 1: late to the game. You could argue with that whole 15 00:00:45,240 --> 00:00:47,920 Speaker 1: transitory talk a couple of years ago, but since then, 16 00:00:48,280 --> 00:00:50,639 Speaker 1: I think it's been pretty consistent. Yet if you look 17 00:00:50,640 --> 00:00:53,800 Speaker 1: at the WRP function, the markets are kind of suggesting 18 00:00:53,840 --> 00:00:56,520 Speaker 1: that there may be some changes to that, so we'll 19 00:00:56,520 --> 00:00:58,320 Speaker 1: have to see you about it. Our next guest actually 20 00:00:58,320 --> 00:01:00,560 Speaker 1: has an informed opinion, which is great because we're just 21 00:01:00,640 --> 00:01:03,040 Speaker 1: kind of, you know, we're amateurs here. But Tim Dewey. 22 00:01:03,160 --> 00:01:06,600 Speaker 1: He's the chief US economist at sg H Macro Advisors, 23 00:01:06,640 --> 00:01:09,120 Speaker 1: and he's a professor at the University of Oregon at 24 00:01:09,160 --> 00:01:13,360 Speaker 1: The Ducks joined us here in our Bloomberg Interactive Broker Studio. So, Tim, 25 00:01:13,400 --> 00:01:17,080 Speaker 1: we heard from the central bankers today in Portugal. You know, 26 00:01:17,200 --> 00:01:20,760 Speaker 1: it seems like that they're pretty consistent with our job's 27 00:01:20,760 --> 00:01:21,120 Speaker 1: not done. 28 00:01:21,120 --> 00:01:23,920 Speaker 3: You right, right, And that was the message from the 29 00:01:23,959 --> 00:01:26,360 Speaker 3: dots for the Fed two weeks ago that they were 30 00:01:26,360 --> 00:01:29,600 Speaker 3: looking at another fifty basis points of raid hikes this year. 31 00:01:30,000 --> 00:01:32,040 Speaker 3: And Paul actually, I think sort of opened up the 32 00:01:32,160 --> 00:01:36,039 Speaker 3: chance for even more than that when he sort of said, well, 33 00:01:36,080 --> 00:01:38,240 Speaker 3: maybe we'll have to move in September two or you know, 34 00:01:38,280 --> 00:01:40,440 Speaker 3: we want to rule out moving every other meeting again. 35 00:01:40,720 --> 00:01:43,640 Speaker 3: And that's something that I don't think has really been 36 00:01:43,680 --> 00:01:47,280 Speaker 3: on the radar yet, the possibility that six percent is 37 00:01:47,319 --> 00:01:49,240 Speaker 3: still out there as an outcome. 38 00:01:49,120 --> 00:01:51,280 Speaker 4: And you think next meeting is a definite hike. 39 00:01:51,440 --> 00:01:53,600 Speaker 3: Yeah, I think I think we're I mean, i'd almost 40 00:01:53,600 --> 00:01:56,000 Speaker 3: say one hundred percent, just just because I don't know 41 00:01:56,280 --> 00:01:58,440 Speaker 3: everything all happened between now and then, but I think 42 00:01:58,480 --> 00:02:01,440 Speaker 3: that decision was made. In fact, if Paul is saying 43 00:02:01,520 --> 00:02:04,320 Speaker 3: we might have to go again in September. That would 44 00:02:04,320 --> 00:02:06,720 Speaker 3: tell me that that July is for sure. 45 00:02:07,360 --> 00:02:10,320 Speaker 1: So where does that take us into our discussion about 46 00:02:10,360 --> 00:02:12,560 Speaker 1: a recession? Where do you think that kind of shakes 47 00:02:12,600 --> 00:02:15,280 Speaker 1: out here? Because the economic data is still pretty solid. 48 00:02:15,520 --> 00:02:18,120 Speaker 3: Well, the economy is always more resilient than people give 49 00:02:18,160 --> 00:02:20,440 Speaker 3: it credit for. You know that the focus right now 50 00:02:20,520 --> 00:02:22,639 Speaker 3: is on recession because you can you can really chase 51 00:02:22,760 --> 00:02:25,400 Speaker 3: those rate cuts down from from a market perspective, right 52 00:02:25,440 --> 00:02:27,920 Speaker 3: you know that there's there's a potential for some for 53 00:02:27,919 --> 00:02:32,959 Speaker 3: for some big gains on that. But uh, it's it's 54 00:02:33,000 --> 00:02:37,000 Speaker 3: hard to knock the US economy down, is what we're 55 00:02:37,040 --> 00:02:39,960 Speaker 3: learning here, especially now when we're still on the side 56 00:02:39,960 --> 00:02:43,560 Speaker 3: effect of an enormous amount of phiscal stimulus and easy 57 00:02:43,600 --> 00:02:46,560 Speaker 3: monetary conditions that I think are still you know, propelling 58 00:02:47,520 --> 00:02:52,160 Speaker 3: underlying activity. So, uh, it is a recession going to 59 00:02:52,200 --> 00:02:55,160 Speaker 3: happen eventually? Can I tell you that it's going to 60 00:02:55,200 --> 00:02:58,720 Speaker 3: happen in the third quarter? It won't. Can I tell 61 00:02:58,760 --> 00:03:01,320 Speaker 3: you it will happen, you know, second quarter of next year? Maybe? 62 00:03:01,560 --> 00:03:04,240 Speaker 3: You know, I think that from my perspective. The interesting 63 00:03:04,320 --> 00:03:06,400 Speaker 3: thing here is that if you don't get that recession 64 00:03:06,400 --> 00:03:09,639 Speaker 3: anytime soon. There's really room for central banks to keep 65 00:03:09,720 --> 00:03:12,480 Speaker 3: hiking here in the second half, and it'll go on 66 00:03:12,639 --> 00:03:13,320 Speaker 3: beyond July. 67 00:03:13,680 --> 00:03:17,160 Speaker 4: Well, you mentioned stimulus, but Powell said that excess savings 68 00:03:17,200 --> 00:03:19,760 Speaker 4: is not the main driver of inflation. He's more concerned 69 00:03:19,800 --> 00:03:23,160 Speaker 4: about the labor market driving up income and consumption. 70 00:03:23,680 --> 00:03:25,120 Speaker 5: How would you rate that comment. 71 00:03:25,760 --> 00:03:28,760 Speaker 3: I think that's that's a real real issue, is if 72 00:03:28,760 --> 00:03:32,120 Speaker 3: you don't cool down the labor market eventually, you know, 73 00:03:32,240 --> 00:03:34,880 Speaker 3: the we've got some benefit right now, and we've got 74 00:03:34,920 --> 00:03:37,760 Speaker 3: certainly got lower energy prices. We're seeing headline inflation come down, 75 00:03:37,760 --> 00:03:40,720 Speaker 3: We're probably use car prices come down, shelter prices, so 76 00:03:40,760 --> 00:03:42,680 Speaker 3: we've got some benefits there that are really I think 77 00:03:43,040 --> 00:03:45,680 Speaker 3: going to likely hold down inflation here in the second 78 00:03:45,760 --> 00:03:49,040 Speaker 3: half of the year. We'll see those any of those 79 00:03:49,080 --> 00:03:53,400 Speaker 3: forecasts have actually you know, turned out badly in the past. 80 00:03:53,960 --> 00:03:56,880 Speaker 3: But but you know, if you if it's almost like 81 00:03:56,920 --> 00:03:59,280 Speaker 3: the pause that refreshes though, right, is that that's kind 82 00:03:59,320 --> 00:04:04,280 Speaker 3: of bringing down bringing up real incomes and spending capacity 83 00:04:04,320 --> 00:04:06,160 Speaker 3: that then would come to bear in the first first 84 00:04:06,160 --> 00:04:09,040 Speaker 3: half of the next year. So you know, if you 85 00:04:09,120 --> 00:04:11,560 Speaker 3: don't really I think that if you don't think the 86 00:04:11,600 --> 00:04:14,560 Speaker 3: Fed's right. If you don't start getting a little bit 87 00:04:14,560 --> 00:04:17,839 Speaker 3: more softer even software activity in labor markets, you are risking, 88 00:04:17,960 --> 00:04:19,440 Speaker 3: you know, a repeat of inflation. 89 00:04:19,760 --> 00:04:22,080 Speaker 1: Are you surprised that the labor market's been as resilient 90 00:04:22,480 --> 00:04:24,240 Speaker 1: as it has been. We still have a jolts number 91 00:04:24,279 --> 00:04:26,800 Speaker 1: that's near ten million job openings. You have to make 92 00:04:26,839 --> 00:04:26,960 Speaker 1: of that. 93 00:04:27,279 --> 00:04:30,640 Speaker 3: I think that people again underestimate the resilience of the economy. 94 00:04:30,760 --> 00:04:33,880 Speaker 3: Is that what has really amount is that we really 95 00:04:34,920 --> 00:04:40,280 Speaker 3: stoked it stoked, stoked the fire pretty hot. And so no, 96 00:04:40,400 --> 00:04:43,200 Speaker 3: I have I haven't been surprised. I'm not surprised by 97 00:04:43,200 --> 00:04:45,880 Speaker 3: the rebound in the housing market at all. I think 98 00:04:45,920 --> 00:04:47,719 Speaker 3: that you know, the FED has more work to do here. 99 00:04:48,080 --> 00:04:50,680 Speaker 4: Well, can we talk about housing numbers as well, because 100 00:04:50,720 --> 00:04:53,880 Speaker 4: housing starts leaping in May. I wonder if you think 101 00:04:53,880 --> 00:04:58,480 Speaker 4: that the FED failed to anticipate how higher rates would 102 00:04:58,720 --> 00:05:01,680 Speaker 4: sort of convince people to not put their homes on 103 00:05:01,760 --> 00:05:04,520 Speaker 4: the market. And if that's something that you are weighing in. 104 00:05:04,440 --> 00:05:07,039 Speaker 3: Your speration, it certainly seems to be like, Hey, it's 105 00:05:07,040 --> 00:05:09,120 Speaker 3: that the FED miss missed this. And we know this 106 00:05:09,200 --> 00:05:13,200 Speaker 3: because you know, last week during Paul's testimony. In the 107 00:05:13,200 --> 00:05:15,799 Speaker 3: first day he is written testimony, he says the housing 108 00:05:15,839 --> 00:05:18,160 Speaker 3: markets a week, and the second day he says, well, 109 00:05:18,160 --> 00:05:19,880 Speaker 3: we met with some builders yesterday and it turns out 110 00:05:19,920 --> 00:05:23,240 Speaker 3: the housing market's not that way right. Actually, it's rebounding. 111 00:05:23,240 --> 00:05:25,440 Speaker 3: And then we see the numbers start to come out. Now, 112 00:05:25,839 --> 00:05:28,800 Speaker 3: I think that we've been writing about this forever because 113 00:05:30,520 --> 00:05:34,279 Speaker 3: it seemed obvious to us that you really did break 114 00:05:34,320 --> 00:05:37,760 Speaker 3: the housing market in some respects by holding interest rates, 115 00:05:37,800 --> 00:05:40,320 Speaker 3: you know, near zero the policy level for so long. 116 00:05:40,400 --> 00:05:43,400 Speaker 3: You have so many people locked into these three percent 117 00:05:43,440 --> 00:05:47,080 Speaker 3: or less rates. There's no selling pressure. It's not like 118 00:05:47,120 --> 00:05:48,960 Speaker 3: two thousand and five, two thousand and six, two thousand 119 00:05:49,000 --> 00:05:51,440 Speaker 3: stas and even if some people start losing their job, 120 00:05:51,720 --> 00:05:54,680 Speaker 3: you're not gonna have mass selling pressure. At the same time, 121 00:05:54,720 --> 00:05:57,240 Speaker 3: you have the demographics of more and more millennials wanting 122 00:05:57,320 --> 00:05:59,880 Speaker 3: to buy homes, and so the only game in that 123 00:06:00,120 --> 00:06:04,400 Speaker 3: talent then becomes new construction. So, you know, we've thought, 124 00:06:04,520 --> 00:06:07,240 Speaker 3: you know, that the housing market was going to be 125 00:06:07,320 --> 00:06:11,159 Speaker 3: more durable than people anticipated for for what's really a 126 00:06:11,200 --> 00:06:13,159 Speaker 3: substantial increase in mortgage rates. 127 00:06:13,320 --> 00:06:16,720 Speaker 1: Yep, tell me about you. 128 00:06:14,640 --> 00:06:17,760 Speaker 3: Know, so if anybody's trying to move lately. It's kind 129 00:06:17,760 --> 00:06:20,160 Speaker 3: of a shocker, but you know, these are things that 130 00:06:20,200 --> 00:06:22,000 Speaker 3: once you sort of wrap your mind around and you 131 00:06:22,040 --> 00:06:24,920 Speaker 3: need a house, you say, okay, well, you know seven percent, 132 00:06:25,000 --> 00:06:27,240 Speaker 3: Eventually I'll be able to refinance it in five percent 133 00:06:27,360 --> 00:06:30,520 Speaker 3: or four percent, and I got to just pull the trigger. 134 00:06:30,680 --> 00:06:33,800 Speaker 1: So, Tim, what's the biggest risk to this economic outlook 135 00:06:33,839 --> 00:06:35,320 Speaker 1: for the next twelve months? Do you think is it 136 00:06:35,400 --> 00:06:38,680 Speaker 1: something exogenous or is there because we had the bank 137 00:06:38,760 --> 00:06:40,960 Speaker 1: issue a few months ago, people thought that might be 138 00:06:41,040 --> 00:06:43,000 Speaker 1: a real challenge for the economy. That's kind of abated 139 00:06:43,040 --> 00:06:44,440 Speaker 1: a little bit. What's the biggest risk out there? 140 00:06:44,480 --> 00:06:49,120 Speaker 3: Yeah, so it's it's it's always the exogenous shocks that 141 00:06:49,200 --> 00:06:50,840 Speaker 3: gets you at the end, right, I mean, so one 142 00:06:50,920 --> 00:06:52,520 Speaker 3: risk is the FED. I mean, it's sort of a 143 00:06:52,560 --> 00:06:55,880 Speaker 3: conventional story is that the FED has you know that 144 00:06:55,880 --> 00:06:59,159 Speaker 3: the Fed's already overtightened or will overtighten, and eventually that 145 00:06:59,240 --> 00:07:03,120 Speaker 3: will crash fresh investment activity and eventually firms will have 146 00:07:03,160 --> 00:07:05,320 Speaker 3: to lay off workers. Right, that's kind of the standard 147 00:07:05,360 --> 00:07:08,240 Speaker 3: recession story. But what seems to be emerging is right 148 00:07:08,279 --> 00:07:12,200 Speaker 3: now the FED is slowing the economy, and maybe it's 149 00:07:12,240 --> 00:07:15,160 Speaker 3: not until we get a real good shock, you know, 150 00:07:15,240 --> 00:07:18,520 Speaker 3: like last year, that Ukraine shock, or the energy shock 151 00:07:18,560 --> 00:07:22,920 Speaker 3: from Russia's invasion of Ukraine. That could have been the 152 00:07:22,960 --> 00:07:26,760 Speaker 3: sort of recessionary shock had not the economy been flying 153 00:07:26,880 --> 00:07:31,720 Speaker 3: so high at that time. So, you know, I again, 154 00:07:32,040 --> 00:07:34,960 Speaker 3: will a recession happen? You know, no, But these are 155 00:07:35,320 --> 00:07:39,120 Speaker 3: recessions are fairly rare. I mean, yeah, so, and they're 156 00:07:39,160 --> 00:07:41,960 Speaker 3: all adiosyncratic. There's a lot of you know, we tell 157 00:07:42,080 --> 00:07:44,760 Speaker 3: different stories about every session, and we'll tell a different 158 00:07:44,760 --> 00:07:46,880 Speaker 3: story about the next one than we have in undeath 159 00:07:46,880 --> 00:07:47,440 Speaker 3: the rest. 160 00:07:47,400 --> 00:07:49,080 Speaker 1: Tim for better worse. You are one of our go 161 00:07:49,160 --> 00:07:53,120 Speaker 1: to people for the Pacific Northwest. Your professor, University of Oregon. 162 00:07:53,120 --> 00:07:55,960 Speaker 1: That's where you got your PhD undergraduate, the University of 163 00:07:56,000 --> 00:07:59,360 Speaker 1: pujit sound most of us don't get to go to 164 00:07:59,440 --> 00:08:00,680 Speaker 1: that part of the world, maybe as much as we 165 00:08:00,720 --> 00:08:03,000 Speaker 1: would like, kind of kind of remote talk to us 166 00:08:03,000 --> 00:08:06,480 Speaker 1: about the economy out there, housing market, just job market. 167 00:08:06,520 --> 00:08:08,920 Speaker 1: How what's what's the feeling of the person on the 168 00:08:08,920 --> 00:08:10,920 Speaker 1: street in University of Oregon. 169 00:08:11,200 --> 00:08:14,920 Speaker 3: Well, you know the job I mean, during the pandemic, 170 00:08:14,960 --> 00:08:16,600 Speaker 3: you had a lot of people move to you know, 171 00:08:16,800 --> 00:08:19,520 Speaker 3: move into these you know, western towns, to be able 172 00:08:19,520 --> 00:08:22,400 Speaker 3: to gain gain gain advantage of that. I think some 173 00:08:22,440 --> 00:08:25,840 Speaker 3: of that has faded in the Northwest, and the Northwest has, 174 00:08:26,000 --> 00:08:28,160 Speaker 3: you know, more recently, I think struggled with some of 175 00:08:28,160 --> 00:08:29,480 Speaker 3: the things you see in a lot of the West 176 00:08:29,560 --> 00:08:33,480 Speaker 3: Western cities, you know, the the higher rates of homelessness 177 00:08:33,559 --> 00:08:37,440 Speaker 3: and so uh. You know, I think the economy is 178 00:08:37,440 --> 00:08:41,120 Speaker 3: is solid out there, but maybe not as solids as 179 00:08:41,120 --> 00:08:43,960 Speaker 3: we would we would have expected coming out of of 180 00:08:43,960 --> 00:08:46,679 Speaker 3: of this pandemic relative to where other places have been. 181 00:08:46,760 --> 00:08:48,880 Speaker 1: So did you guys get that influx of I don't know, 182 00:08:49,200 --> 00:08:51,520 Speaker 1: I mean just California for example, did they come up 183 00:08:51,559 --> 00:08:52,720 Speaker 1: to that part of the world. 184 00:08:52,760 --> 00:08:58,520 Speaker 3: You know, the Northwest has regularly been a receiver of 185 00:08:58,160 --> 00:09:02,000 Speaker 3: of of emmigrants from from California, just like a lot 186 00:09:02,000 --> 00:09:04,200 Speaker 3: of other places. And so yeah, that's certainly been a 187 00:09:04,240 --> 00:09:09,680 Speaker 3: long time trend that supported Organ's growth in particular. You know, 188 00:09:09,800 --> 00:09:13,960 Speaker 3: one one one interesting thing is Organ's internal natural rate 189 00:09:13,960 --> 00:09:16,360 Speaker 3: of growth has really slow to to basically zero. 190 00:09:17,200 --> 00:09:19,280 Speaker 1: So what are some of the core industries out there 191 00:09:19,320 --> 00:09:20,160 Speaker 1: that still. 192 00:09:20,400 --> 00:09:23,160 Speaker 3: Well, you know, the big ones that people talking about. 193 00:09:23,280 --> 00:09:26,720 Speaker 3: Everybody knows Nike obviously, Nike's got a big private vision 194 00:09:26,760 --> 00:09:30,520 Speaker 3: there and you have Intel has a large manufacturing facility, 195 00:09:30,559 --> 00:09:33,720 Speaker 3: and of course you have uh in Seattle, you know, 196 00:09:33,760 --> 00:09:37,360 Speaker 3: the Amazon Microsoft that's sort of that sort of tech around. 197 00:09:38,040 --> 00:09:41,000 Speaker 3: Tech is big in the Northwest. We have still forest 198 00:09:41,000 --> 00:09:45,920 Speaker 3: products certainly also another historical uh you know, element of 199 00:09:45,960 --> 00:09:48,280 Speaker 3: the of the of the Northwest economy. 200 00:09:48,559 --> 00:09:50,439 Speaker 1: All right, good stuff. He's one of our go to 201 00:09:50,559 --> 00:09:53,760 Speaker 1: people there. You don't see too many people come through. 202 00:09:53,640 --> 00:09:55,720 Speaker 3: Our office from you know, I'll try to do it 203 00:09:55,760 --> 00:09:56,160 Speaker 3: more often. 204 00:09:56,200 --> 00:10:01,160 Speaker 1: Yeah, exactly right, Dewey. He's the chief US economist S. G. H. Macroadvice, 205 00:10:01,200 --> 00:10:04,760 Speaker 1: which is also a professor at the University of Oregon. 206 00:10:05,000 --> 00:10:07,720 Speaker 1: The Ducks right there, PCUM coming into our Bloomberg Interactive 207 00:10:07,720 --> 00:10:09,880 Speaker 1: Brookers studio. Right now, let's get a little bit of 208 00:10:09,880 --> 00:10:11,720 Speaker 1: a reset here. We're going to get a business last 209 00:10:11,720 --> 00:10:12,560 Speaker 1: with mister John Tucker. 210 00:10:12,600 --> 00:10:15,840 Speaker 6: All right, Fares Stocksco. Right now, the major averages they 211 00:10:15,960 --> 00:10:20,120 Speaker 6: are mixed to. Little change now. The message that investors 212 00:10:20,120 --> 00:10:23,760 Speaker 6: for now seem to be latched onto from Fed cheer 213 00:10:23,880 --> 00:10:27,520 Speaker 6: Jerome Pal. A recession, he said, is not the most 214 00:10:27,640 --> 00:10:32,200 Speaker 6: likely scenario, as the economy remains fairly resilient. At that 215 00:10:32,679 --> 00:10:36,160 Speaker 6: Central Bank confab taking place in Portugal, so we're seeing 216 00:10:36,160 --> 00:10:39,880 Speaker 6: a rally in megacap stocks like Tesla and Amazon dot Com. 217 00:10:40,240 --> 00:10:43,840 Speaker 6: The chip makers also trimming some of the earlier sell 218 00:10:43,840 --> 00:10:46,000 Speaker 6: off that was driven by a report that the US 219 00:10:46,080 --> 00:10:50,240 Speaker 6: considering new curbs shares of Nvidia. Right now, that's one 220 00:10:50,240 --> 00:10:53,200 Speaker 6: of the laggards in the Nasdaq one hundred. It is 221 00:10:53,280 --> 00:10:57,080 Speaker 6: down just about one percent right now. Overall, SMP five 222 00:10:57,160 --> 00:11:00,840 Speaker 6: hundred one point lower, the Nasdaq one hundred up forty 223 00:11:00,960 --> 00:11:03,400 Speaker 6: seven points. That's up three tents of a percent. 224 00:11:03,640 --> 00:11:03,760 Speaker 3: Now. 225 00:11:03,800 --> 00:11:06,600 Speaker 6: The down jones of Dunster larverage one hundred and twenty 226 00:11:06,840 --> 00:11:10,240 Speaker 6: points lower. Right now. I'm going to see if Madison 227 00:11:10,280 --> 00:11:12,679 Speaker 6: knows this one. I know that I know that you're 228 00:11:12,720 --> 00:11:16,120 Speaker 6: going to get this. No, the guy, the man who 229 00:11:16,240 --> 00:11:21,640 Speaker 6: brought you chachia and clap on, clap off has died. Really, 230 00:11:21,760 --> 00:11:25,959 Speaker 6: Advertising executive Joseph Pettitt turned the Chia pet and clapper 231 00:11:26,080 --> 00:11:28,600 Speaker 6: light switch into retail sensations. 232 00:11:28,760 --> 00:11:30,640 Speaker 7: I know it was going to be a sad story. 233 00:11:30,679 --> 00:11:32,640 Speaker 7: You had me popping into the microphone. 234 00:11:32,640 --> 00:11:33,440 Speaker 6: It was ninety one. 235 00:11:33,880 --> 00:11:35,480 Speaker 1: He had clap on. 236 00:11:35,559 --> 00:11:39,360 Speaker 7: Now I see the founder clapper crapper, So. 237 00:11:39,440 --> 00:11:43,200 Speaker 1: Yeah, he's going Okay, that's a giant in the in 238 00:11:43,240 --> 00:11:45,560 Speaker 1: the business. All right, John Tucker, thank you so much. 239 00:11:45,800 --> 00:11:46,719 Speaker 1: We appreciate it. 240 00:11:48,280 --> 00:11:52,120 Speaker 8: You're listening to the team can't Live program Bloomberg Markets 241 00:11:52,160 --> 00:11:55,280 Speaker 8: weekdays at ten am Eastern on Bloomberg dot Com, the 242 00:11:55,360 --> 00:11:57,920 Speaker 8: iHeartRadio app and the Bloomberg Business. 243 00:11:57,559 --> 00:12:00,480 Speaker 9: App, or listen on demand wherever you get your guess. 244 00:12:02,120 --> 00:12:04,640 Speaker 1: Now, we've got the US government saying, hey, hey, let's 245 00:12:04,679 --> 00:12:07,640 Speaker 1: think about what chips were exporting to China, and that's 246 00:12:07,640 --> 00:12:09,440 Speaker 1: an issue for Nvidia and some of the other names. 247 00:12:09,440 --> 00:12:11,520 Speaker 1: So let's bring in somebody who kind of smart on 248 00:12:11,559 --> 00:12:13,839 Speaker 1: this stuff. We pay him to be smart on this stuff. 249 00:12:13,880 --> 00:12:17,880 Speaker 1: That's Man Deep Singh. He's head of our tech research 250 00:12:17,880 --> 00:12:21,000 Speaker 1: at Bloomberg Intelligence, along with some other guy in Chicago. 251 00:12:21,880 --> 00:12:23,560 Speaker 1: Man Deep talk to us about kind of just the 252 00:12:23,559 --> 00:12:26,520 Speaker 1: news today about the government and it's wanted to maybe 253 00:12:26,520 --> 00:12:28,600 Speaker 1: put a curb on the export of some of our 254 00:12:29,320 --> 00:12:30,920 Speaker 1: best chip technology to China. 255 00:12:31,760 --> 00:12:34,840 Speaker 10: Well, so, I think so far this was probably a 256 00:12:34,920 --> 00:12:38,760 Speaker 10: little you know, probability event when you think about the 257 00:12:38,760 --> 00:12:43,080 Speaker 10: odds of you know, government going full into you know, 258 00:12:43,120 --> 00:12:46,360 Speaker 10: imposing a band and which happened in Russia by the way, 259 00:12:46,840 --> 00:12:51,440 Speaker 10: last year when the war broke, And I think, right 260 00:12:51,440 --> 00:12:55,520 Speaker 10: Now what investors are grappling with is what happens if 261 00:12:55,520 --> 00:12:58,760 Speaker 10: that does occur, Like how does Nvidia get hit? And 262 00:12:58,800 --> 00:13:01,240 Speaker 10: the answer to that is all they have, you know, 263 00:13:01,280 --> 00:13:04,200 Speaker 10: fifteen twenty percent revenue expert. Now, what they did the 264 00:13:04,320 --> 00:13:07,520 Speaker 10: last time around such a ban was imposed was they 265 00:13:07,679 --> 00:13:11,960 Speaker 10: offered a lower performance variant which didn't fall in the 266 00:13:12,120 --> 00:13:15,160 Speaker 10: restrictive category and they were still able to sell to China. 267 00:13:15,240 --> 00:13:18,400 Speaker 10: So you could expect something similar from the chip makers. 268 00:13:18,400 --> 00:13:22,120 Speaker 10: They'll try to skirt around those restrictions by offering some 269 00:13:22,240 --> 00:13:26,600 Speaker 10: of their variant. I still think, you know, relocating the 270 00:13:26,600 --> 00:13:29,160 Speaker 10: supply chains is going to be much harder, and that 271 00:13:29,360 --> 00:13:32,720 Speaker 10: is the biggest risk for all these chip makers. Is 272 00:13:32,800 --> 00:13:36,480 Speaker 10: you still going to Taiwan. Taiwan has elections next year. 273 00:13:36,760 --> 00:13:38,920 Speaker 10: There's a lot that could happen, you know, in terms 274 00:13:39,000 --> 00:13:43,720 Speaker 10: of low probability events actually happening or there is that 275 00:13:43,920 --> 00:13:46,520 Speaker 10: risk that they could occur. So that's that's where we 276 00:13:46,559 --> 00:13:47,199 Speaker 10: are at, you. 277 00:13:47,160 --> 00:13:50,440 Speaker 4: Know, in terms of the risk of bringing things stateside. 278 00:13:50,480 --> 00:13:53,120 Speaker 4: I'm curious about the Chips Act because Anawan had an 279 00:13:53,120 --> 00:13:56,800 Speaker 4: amazing piece about this looking at how the Chips Act 280 00:13:57,160 --> 00:13:59,560 Speaker 4: could be adding to the us GDP and having a 281 00:13:59,600 --> 00:14:03,400 Speaker 4: negative effect on those inflation pressures because we're seeing so 282 00:14:03,520 --> 00:14:08,120 Speaker 4: much investment and construction regarding chip making here in the States. 283 00:14:08,160 --> 00:14:10,480 Speaker 4: Are you hearing about that from your sources? Kind of 284 00:14:10,520 --> 00:14:12,679 Speaker 4: a flood of money into that state side? 285 00:14:13,080 --> 00:14:16,600 Speaker 10: I mean there is, and every government right now wants that, 286 00:14:16,920 --> 00:14:20,840 Speaker 10: you know, manufacturing to come back. When it comes to semiconductors, 287 00:14:20,920 --> 00:14:24,360 Speaker 10: the problem is these are multi year investments. So you 288 00:14:24,440 --> 00:14:27,120 Speaker 10: start building a fab now, it's not going to be 289 00:14:27,600 --> 00:14:30,600 Speaker 10: productive for a couple of years. And that also is 290 00:14:30,640 --> 00:14:33,280 Speaker 10: a phased approach when it comes to you know, the 291 00:14:33,600 --> 00:14:36,480 Speaker 10: three nanometer or the five nanometer, we're talking about leading 292 00:14:36,960 --> 00:14:39,640 Speaker 10: chips here. Those are the ones that are being restricted 293 00:14:39,680 --> 00:14:42,720 Speaker 10: in terms of sales, and I would argue it's not 294 00:14:42,800 --> 00:14:45,000 Speaker 10: going to be at least three four years before you're 295 00:14:45,000 --> 00:14:49,480 Speaker 10: going to see leading node manufacturing here in the developed countries. 296 00:14:50,080 --> 00:14:53,760 Speaker 1: So where are we now a week later, since maybe 297 00:14:53,760 --> 00:14:55,440 Speaker 1: a lot last time we talked to you about AI. 298 00:14:56,280 --> 00:14:58,800 Speaker 1: What are you hearing from an investors here? How are 299 00:14:58,800 --> 00:15:01,680 Speaker 1: they going about trying to play this team? I know 300 00:15:01,720 --> 00:15:03,720 Speaker 1: you guys have a big research report on which I 301 00:15:03,800 --> 00:15:05,960 Speaker 1: highly recommend to folks that are on the Bloomberg terminal 302 00:15:07,560 --> 00:15:09,720 Speaker 1: kind of laying out the market and the opportunities and 303 00:15:09,760 --> 00:15:11,720 Speaker 1: so on. But when you talk to institutional investors, how 304 00:15:11,760 --> 00:15:12,760 Speaker 1: are they playing it right now? 305 00:15:12,960 --> 00:15:17,600 Speaker 10: Well, so clearly everyone wants exposure and hardware and semiconductors 306 00:15:17,680 --> 00:15:20,760 Speaker 10: is still the most tangible thing. On the software side, 307 00:15:20,800 --> 00:15:23,840 Speaker 10: you know, you have Snowflake and other database companies that 308 00:15:23,920 --> 00:15:28,360 Speaker 10: are trying to leverage the capabilities that in video or 309 00:15:28,400 --> 00:15:31,200 Speaker 10: some of these new types of chips offer. But at 310 00:15:31,200 --> 00:15:33,920 Speaker 10: the end of the day, everyone is trying to build 311 00:15:34,000 --> 00:15:39,400 Speaker 10: the compute capacity to you know, ingest their proprietary data 312 00:15:39,520 --> 00:15:42,640 Speaker 10: to build a large anguage model, and over time you're 313 00:15:42,680 --> 00:15:45,680 Speaker 10: going to find new use cases emerge which are more 314 00:15:45,720 --> 00:15:49,760 Speaker 10: domain specific. But right now everyone wants to build on 315 00:15:49,800 --> 00:15:52,800 Speaker 10: top of chat, GPT or you know, the large anguage 316 00:15:52,800 --> 00:15:55,320 Speaker 10: models that are out there and see what they can 317 00:15:55,400 --> 00:15:58,760 Speaker 10: get in terms of new output. And I think that's 318 00:15:59,200 --> 00:16:02,920 Speaker 10: the phase wherey but everyone feels this is a strategic 319 00:16:02,920 --> 00:16:06,280 Speaker 10: comparative right now from an IT spending perspective, and this 320 00:16:06,440 --> 00:16:09,400 Speaker 10: is as non discretionary as it can get. 321 00:16:09,680 --> 00:16:13,840 Speaker 4: Does it seem to you that the C three ais 322 00:16:14,080 --> 00:16:18,360 Speaker 4: those those kind of they're not meme stocks but MIMI 323 00:16:18,520 --> 00:16:19,720 Speaker 4: stocks and air quotes. 324 00:16:19,760 --> 00:16:22,800 Speaker 7: There are falling to the wayside. 325 00:16:22,920 --> 00:16:27,080 Speaker 4: Now, are we still seeing more euphoria around some of 326 00:16:27,120 --> 00:16:29,520 Speaker 4: those smaller names. 327 00:16:29,840 --> 00:16:31,880 Speaker 10: I think the way you have to think about it, 328 00:16:31,920 --> 00:16:33,880 Speaker 10: and we lay this out in a report. There is 329 00:16:33,880 --> 00:16:37,800 Speaker 10: that infrastructure layer for generative AI, which is dominated by 330 00:16:37,800 --> 00:16:41,200 Speaker 10: the hyperscalers along with Nvidia. And then you have the 331 00:16:41,320 --> 00:16:46,560 Speaker 10: platform layer, where every company is offering you a platform 332 00:16:46,800 --> 00:16:50,920 Speaker 10: or something a workbench where you can build your applications 333 00:16:51,000 --> 00:16:53,840 Speaker 10: on top of. And so the compute capacity will continue 334 00:16:53,880 --> 00:16:56,400 Speaker 10: to come from the hyperscalers, but when it comes to 335 00:16:56,440 --> 00:16:58,960 Speaker 10: the platform layer, it's very fragmented and it's going to 336 00:16:58,960 --> 00:17:03,880 Speaker 10: be very domain Specif every industry, whether it's healthcare, you know, industrials, 337 00:17:04,160 --> 00:17:06,760 Speaker 10: they'll have their own player in terms of offering a 338 00:17:06,800 --> 00:17:10,040 Speaker 10: platform where you're going to build an application. So C 339 00:17:10,200 --> 00:17:12,680 Speaker 10: three dot A I would fall in that platform layer. 340 00:17:13,240 --> 00:17:15,560 Speaker 10: How big that opportunity is going to be, no one 341 00:17:15,600 --> 00:17:19,920 Speaker 10: can tell right now, because ultimately it comes down to ROI, Right, 342 00:17:20,040 --> 00:17:21,679 Speaker 10: can you generate ROI? 343 00:17:21,840 --> 00:17:24,119 Speaker 4: I guess I'm curious then, what you think about a 344 00:17:24,160 --> 00:17:28,000 Speaker 4: company like a Kroger mentioning AI eight times in their earnings? 345 00:17:28,440 --> 00:17:30,719 Speaker 4: Do you think that there are some companies that like 346 00:17:31,600 --> 00:17:32,720 Speaker 4: you don't need to be mentioning this. 347 00:17:33,160 --> 00:17:36,400 Speaker 10: Any company that has large amounts of data and they 348 00:17:36,440 --> 00:17:40,560 Speaker 10: have digitized their systems, okay, fields, they have proprietary data 349 00:17:40,600 --> 00:17:43,920 Speaker 10: to feel this to this large anguige model. Yeah, what 350 00:17:44,040 --> 00:17:46,840 Speaker 10: kind of output or productivity they can generate? I don't 351 00:17:46,880 --> 00:17:49,160 Speaker 10: think they have a clue, but at least they're investing 352 00:17:49,240 --> 00:17:52,240 Speaker 10: with the hope that they can leverage their proprietary data. 353 00:17:53,040 --> 00:17:56,240 Speaker 1: What's the number one topic with your clients these days? 354 00:17:56,280 --> 00:17:56,840 Speaker 1: Is it AI? 355 00:17:57,480 --> 00:18:01,400 Speaker 10: I think everyone is focused on generative AI, but they 356 00:18:01,480 --> 00:18:05,440 Speaker 10: want to go to you know, the medium to long 357 00:18:05,520 --> 00:18:08,320 Speaker 10: term outlook in terms of who has a real mode 358 00:18:08,760 --> 00:18:12,040 Speaker 10: versus you know, what is near term and it will 359 00:18:12,040 --> 00:18:16,719 Speaker 10: phase out because right now, as Madison said, you know, 360 00:18:16,800 --> 00:18:19,760 Speaker 10: every company is talking about it in their earnings call. 361 00:18:20,040 --> 00:18:22,960 Speaker 10: Obviously some of it is hype, and I think you 362 00:18:23,000 --> 00:18:25,200 Speaker 10: will see some real winners and losers emerge. 363 00:18:25,440 --> 00:18:28,640 Speaker 1: All right, Madison just sent me this really cool tweet 364 00:18:28,880 --> 00:18:32,000 Speaker 1: about Airbnb, and I don't know it's from this guy, Nick Girly. 365 00:18:32,000 --> 00:18:35,240 Speaker 1: I don't know who it is. Talking about Airbnb revenue 366 00:18:35,560 --> 00:18:39,160 Speaker 1: top ten cities. It's dropping like crazy, forty fifty percent. 367 00:18:39,280 --> 00:18:39,800 Speaker 1: Why is that? 368 00:18:40,240 --> 00:18:43,320 Speaker 10: Well so travel? I think is in that phase where 369 00:18:43,440 --> 00:18:48,040 Speaker 10: consumer travel was very strong, very resilient, and right now 370 00:18:48,080 --> 00:18:51,600 Speaker 10: you could argue the concert are getting tougher for these companies. 371 00:18:52,040 --> 00:18:55,160 Speaker 10: And if there is any type of slowdown, the one 372 00:18:55,200 --> 00:18:58,040 Speaker 10: area where you think it's gonna hit is I think 373 00:18:58,200 --> 00:19:01,120 Speaker 10: consumer travel, business travel contine news to be strong, but 374 00:19:01,160 --> 00:19:03,920 Speaker 10: it was slow to come back. And that's fair. Uh, 375 00:19:03,960 --> 00:19:05,920 Speaker 10: there is that risk that you know, growth can de 376 00:19:06,040 --> 00:19:10,800 Speaker 10: cleberate sharply. Airbnb. We know it's still alternative accommodations, and 377 00:19:11,359 --> 00:19:13,440 Speaker 10: I think a lot of people are thinking about the 378 00:19:13,480 --> 00:19:16,760 Speaker 10: addressable market. Is it really that big to justify a 379 00:19:16,800 --> 00:19:18,640 Speaker 10: premium that Airbnb had. 380 00:19:18,760 --> 00:19:21,480 Speaker 1: I mean, it's interesting again, Maddie, thanks for forting this 381 00:19:21,520 --> 00:19:24,800 Speaker 1: tweet here. But like Phoenix year every year for the 382 00:19:24,840 --> 00:19:29,399 Speaker 1: month of May, Airbnb revenue Phoenix off forty seven percent, Austin, 383 00:19:29,440 --> 00:19:32,040 Speaker 1: Texas off forty six percent, Myrtle Beach forty five percent. 384 00:19:32,080 --> 00:19:35,080 Speaker 1: These are you know, actual North Carolina off forty two percent. 385 00:19:35,119 --> 00:19:38,159 Speaker 1: So these are towns that just were COVID towns, if 386 00:19:38,160 --> 00:19:40,720 Speaker 1: you will, COVID cities, people bailing out of the coast, 387 00:19:41,119 --> 00:19:44,520 Speaker 1: going to the the you know, the Austin Texas is 388 00:19:44,520 --> 00:19:47,199 Speaker 1: the Phoenixes of the world, and I guess that was 389 00:19:47,240 --> 00:19:50,120 Speaker 1: a huge benefit for Airbnb at the time. Now you're 390 00:19:50,119 --> 00:19:51,480 Speaker 1: just saying maybe some comps issues. 391 00:19:51,560 --> 00:19:54,320 Speaker 10: Absolutely, and we've seen that time and again. I mean 392 00:19:54,320 --> 00:19:58,000 Speaker 10: look at Zoom. You know, great covid pull forward, but 393 00:19:58,240 --> 00:20:01,320 Speaker 10: after that the comps got so m's tougher that you know, 394 00:20:01,359 --> 00:20:04,280 Speaker 10: they struggled for a while in terms of the top line. 395 00:20:04,320 --> 00:20:06,040 Speaker 10: And so I'm not saying this is going to be 396 00:20:06,080 --> 00:20:08,680 Speaker 10: another Zoom, but there's clearly a parallel to be drawn. 397 00:20:09,200 --> 00:20:12,120 Speaker 1: Yeah, an Airbnb stock is still fifty to fifty year 398 00:20:12,160 --> 00:20:12,440 Speaker 1: to date. 399 00:20:12,760 --> 00:20:15,879 Speaker 4: Yeah well yeah, so sorry Paul to step on you, 400 00:20:15,920 --> 00:20:18,960 Speaker 4: but it's interesting to look at just the read through 401 00:20:19,040 --> 00:20:19,600 Speaker 4: to the stock. 402 00:20:19,720 --> 00:20:20,920 Speaker 7: Does this have that impact? 403 00:20:21,080 --> 00:20:23,199 Speaker 1: Yeah? Interesting? All right, Now, Man Deep sing thanks so 404 00:20:23,240 --> 00:20:25,080 Speaker 1: much for joining us. Man Deep Singh is one of 405 00:20:25,119 --> 00:20:30,560 Speaker 1: our leading technology analysts at Bloomberg Intelligence, along with anarag 406 00:20:30,600 --> 00:20:34,679 Speaker 1: Rana and the whole tech team globally. And what's interesting is, 407 00:20:35,359 --> 00:20:38,080 Speaker 1: you know, there's Man Deep in the team came out 408 00:20:38,080 --> 00:20:40,280 Speaker 1: with this really big report on artificial intelligence, one of 409 00:20:40,280 --> 00:20:42,800 Speaker 1: the most red research reports from BI so you can 410 00:20:42,880 --> 00:20:45,800 Speaker 1: check that out on Big But it's also just kind 411 00:20:45,800 --> 00:20:48,400 Speaker 1: of investors are really clamoring to kind of figure out 412 00:20:48,440 --> 00:20:49,760 Speaker 1: what is AI. 413 00:20:49,920 --> 00:20:53,040 Speaker 8: You're listening to the tape catcher, our line program, Bloomberg 414 00:20:53,080 --> 00:20:56,679 Speaker 8: Markets weekdays at ten am Eastern on Bloomberg Radio, the 415 00:20:56,760 --> 00:20:58,840 Speaker 8: tune in app, Bloomberg dot Com. 416 00:20:58,560 --> 00:20:59,960 Speaker 9: And the Bloomberg Business App. 417 00:21:00,080 --> 00:21:02,840 Speaker 8: You can also listen live on Amazon Alexa from our 418 00:21:02,840 --> 00:21:07,880 Speaker 8: flagship New York station. Just say Alexa play Bloomberg eleven thirty. 419 00:21:09,000 --> 00:21:11,720 Speaker 1: All right, we've had some funky C suite conversations in 420 00:21:11,720 --> 00:21:13,600 Speaker 1: the studio, and this one I think my top the list. 421 00:21:13,640 --> 00:21:17,360 Speaker 1: Get this deep sea mining for like metals that they 422 00:21:17,480 --> 00:21:19,679 Speaker 1: use in batteries. I don't know what's going on here, 423 00:21:19,680 --> 00:21:22,119 Speaker 1: but we have the CEO here, Gerard Baron, Chairman and 424 00:21:22,160 --> 00:21:25,520 Speaker 1: CEO of the Metals Company. The symbol is it trades 425 00:21:25,560 --> 00:21:28,080 Speaker 1: on the Nasdaq, the symbols TMC. That's what you enter 426 00:21:28,080 --> 00:21:31,600 Speaker 1: into your Bloomberg terminal and check that out. Gerard, thanks 427 00:21:31,640 --> 00:21:33,040 Speaker 1: so much for joining us here in our Bloomberg and 428 00:21:33,119 --> 00:21:36,840 Speaker 1: Arctor Broker studio. What does your company do? Talk to 429 00:21:36,920 --> 00:21:39,200 Speaker 1: me like me and Maddy like we're five year olds. 430 00:21:39,440 --> 00:21:40,359 Speaker 3: Well, great to be here. 431 00:21:40,600 --> 00:21:44,639 Speaker 11: So the Metals Company are focused on developing a very large, 432 00:21:44,640 --> 00:21:49,280 Speaker 11: abundant resource of polymetallic nodules that lie on the sea 433 00:21:49,359 --> 00:21:53,000 Speaker 11: floor lie unattached. It's on the Pacific Ocean, about one 434 00:21:53,000 --> 00:21:56,360 Speaker 11: thousand miles off the coast of Mexico, and they were 435 00:21:56,359 --> 00:21:59,359 Speaker 11: discovered way back in the eighteen seventies, so almost one 436 00:21:59,440 --> 00:22:01,680 Speaker 11: hundred and fifty more than one hundred and fifty years ago. 437 00:22:02,240 --> 00:22:05,320 Speaker 11: And what they found is that they're very abundant in 438 00:22:05,400 --> 00:22:08,760 Speaker 11: nickel and copper and cobalt and mangetes. And it's a 439 00:22:08,760 --> 00:22:13,080 Speaker 11: really interesting project because when we think about the transition 440 00:22:13,160 --> 00:22:15,720 Speaker 11: away from fossil fuels, people have realized that we're going 441 00:22:15,760 --> 00:22:18,160 Speaker 11: to need a lot more metals, and we're pushing into 442 00:22:18,200 --> 00:22:22,840 Speaker 11: frontiers that are very bio diverse, and you're having to 443 00:22:23,119 --> 00:22:29,240 Speaker 11: dislodge indigenous communities having tremendous environmental impacts as opposed to. 444 00:22:29,320 --> 00:22:33,359 Speaker 11: What we're doing is we're collecting these nodules from an 445 00:22:33,400 --> 00:22:36,600 Speaker 11: area known as the Abyssle zone. It's the most common 446 00:22:36,680 --> 00:22:39,119 Speaker 11: area on our planet. About forty percent of the entire 447 00:22:39,160 --> 00:22:42,879 Speaker 11: planet is classified Abystle zone, where four thousand meters below 448 00:22:42,920 --> 00:22:46,560 Speaker 11: sea level, there are no plants, so zero flora, and 449 00:22:46,800 --> 00:22:49,920 Speaker 11: most of the fauna is bacteria living in the sediment, 450 00:22:50,320 --> 00:22:54,879 Speaker 11: so it makes sense that we're increasing extractive industries in 451 00:22:54,920 --> 00:22:57,800 Speaker 11: parts of our planet where there's the least life, not 452 00:22:57,920 --> 00:22:58,760 Speaker 11: the most life. 453 00:23:00,000 --> 00:23:02,720 Speaker 4: Oh again, like I'm a five year old, What can 454 00:23:02,760 --> 00:23:07,840 Speaker 4: this do for us on the planet Earth above the ocean? 455 00:23:08,040 --> 00:23:12,200 Speaker 11: Well, two things. The International Energy Agency predicts that will 456 00:23:12,240 --> 00:23:16,000 Speaker 11: need to increase extractive industries between five and six hundred 457 00:23:16,040 --> 00:23:20,119 Speaker 11: percent per annum by twenty forty. So the question is 458 00:23:20,640 --> 00:23:22,879 Speaker 11: where are those metals going to come from with the 459 00:23:22,960 --> 00:23:27,040 Speaker 11: lightest planetary and human impact. So we have to look 460 00:23:27,040 --> 00:23:30,359 Speaker 11: at a full life cycle analysis that well, what's it 461 00:23:30,400 --> 00:23:32,880 Speaker 11: going to mean for indigenous communities, what will it mean 462 00:23:32,960 --> 00:23:38,440 Speaker 11: to carbon SINCS and CO two emissions and impacts on biodiversity? 463 00:23:38,480 --> 00:23:42,719 Speaker 11: And so what this resource can do is supply a 464 00:23:42,760 --> 00:23:46,400 Speaker 11: supply of these important battery metals at the bottom end 465 00:23:46,440 --> 00:23:50,359 Speaker 11: of the impact curve. And it can also address the 466 00:23:50,400 --> 00:23:53,639 Speaker 11: issue of geopolitics, because what the world has woken up 467 00:23:53,680 --> 00:23:57,600 Speaker 11: to is that when it comes to battery metals, China 468 00:23:57,760 --> 00:24:00,600 Speaker 11: is opec. They dominate it, They've invested stood ahead of 469 00:24:00,600 --> 00:24:04,560 Speaker 11: the curve, and there are no real resources other than 470 00:24:04,600 --> 00:24:08,720 Speaker 11: this one that could provide mineral independence to the USA. 471 00:24:09,240 --> 00:24:11,760 Speaker 11: And we saw in the recent one hundred day review 472 00:24:11,840 --> 00:24:15,280 Speaker 11: that the number one strategic priority was to build nickel 473 00:24:15,600 --> 00:24:19,720 Speaker 11: processing capability in the USA. But the problem is, of course, 474 00:24:20,200 --> 00:24:22,600 Speaker 11: a lot of land based all bodies are very low 475 00:24:22,640 --> 00:24:25,240 Speaker 11: in grade, and you have to build the processing where 476 00:24:25,240 --> 00:24:27,960 Speaker 11: the deposit is. And no one wants a mine in 477 00:24:28,000 --> 00:24:30,800 Speaker 11: their backyard. Even if you found one in America, getting 478 00:24:30,800 --> 00:24:34,240 Speaker 11: it permitted is almost impossible, whereas we have an ocean 479 00:24:34,280 --> 00:24:37,920 Speaker 11: based resource. By the way, we've identified one point six 480 00:24:38,040 --> 00:24:41,760 Speaker 11: billion tons of these nodules, and that's enough to electrify 481 00:24:42,160 --> 00:24:45,800 Speaker 11: at least two hundred and eighty million mid sized EV 482 00:24:45,960 --> 00:24:50,359 Speaker 11: batteries using a nickel rich cathode chemistry. So that's enough 483 00:24:50,359 --> 00:24:54,280 Speaker 11: to electrify the entire USA passenger fleet. So we can 484 00:24:54,320 --> 00:24:58,880 Speaker 11: do two things, supply low impact battery metals and address 485 00:24:58,960 --> 00:25:02,640 Speaker 11: the secure already of supply issues that are now top 486 00:25:02,680 --> 00:25:03,600 Speaker 11: of everyone's mind. 487 00:25:03,840 --> 00:25:06,119 Speaker 1: All right, I understand that. Now explain to me how 488 00:25:06,200 --> 00:25:08,760 Speaker 1: you actually what are your mining and how do you 489 00:25:08,800 --> 00:25:09,160 Speaker 1: get it? 490 00:25:09,320 --> 00:25:13,200 Speaker 11: Well, so these nodules literally lie on the ocean floor. 491 00:25:13,280 --> 00:25:16,280 Speaker 11: Think of a golf driving range, So we're literally picking 492 00:25:16,359 --> 00:25:20,800 Speaker 11: up golf balls, and so that means we send down 493 00:25:20,800 --> 00:25:23,879 Speaker 11: a robot. We're four, two hundred meters below sea level. 494 00:25:24,160 --> 00:25:27,160 Speaker 11: We have a production vessel that sits on top. We've 495 00:25:27,200 --> 00:25:30,520 Speaker 11: already secured our first one. In fact, last year, for 496 00:25:30,600 --> 00:25:34,440 Speaker 11: six months we ran our first trials and to end trials, 497 00:25:34,480 --> 00:25:37,439 Speaker 11: and that was done for two things. One was to 498 00:25:37,520 --> 00:25:40,240 Speaker 11: test our system to get make sure it's production ready, 499 00:25:40,640 --> 00:25:44,200 Speaker 11: and secondly to understand the environmental impacts. So we had 500 00:25:44,200 --> 00:25:47,600 Speaker 11: another boat out there for six months with eighty people 501 00:25:47,640 --> 00:25:51,760 Speaker 11: on it, many of them scientists, observing the impacts of 502 00:25:51,800 --> 00:25:55,760 Speaker 11: the area before we harvested, During harvesting, and after we'd 503 00:25:55,760 --> 00:25:59,560 Speaker 11: collected all the nodules, and so our robot crawls along 504 00:25:59,640 --> 00:26:02,320 Speaker 11: the sea law lifting these nodules, pulling them into an 505 00:26:02,400 --> 00:26:07,159 Speaker 11: air riser which vertically transports the nodules to the production vessel, 506 00:26:07,440 --> 00:26:12,000 Speaker 11: and then that production vessel will stay in production constantly, 507 00:26:12,720 --> 00:26:16,000 Speaker 11: so it offloads the nodules to a transport vessel which 508 00:26:16,040 --> 00:26:19,960 Speaker 11: then carries them to shore. Now the opportunity, of course, 509 00:26:20,040 --> 00:26:23,239 Speaker 11: for North America or the West, is for us to 510 00:26:23,280 --> 00:26:28,080 Speaker 11: process those nodules in their backyard. But what we've announced 511 00:26:28,160 --> 00:26:31,159 Speaker 11: is that we're quite advanced with a company in Japan 512 00:26:31,640 --> 00:26:37,119 Speaker 11: because we're also able to utilize existing onshore processing facilities, 513 00:26:37,160 --> 00:26:41,119 Speaker 11: and that makes it a very attractive economic proposition because 514 00:26:41,600 --> 00:26:44,520 Speaker 11: of course, normally you have to build your processing where 515 00:26:44,520 --> 00:26:46,560 Speaker 11: the mine is, but in our case, we're in the 516 00:26:46,600 --> 00:26:49,399 Speaker 11: middle of the ocean. And the other great thing about 517 00:26:49,400 --> 00:26:52,640 Speaker 11: this resource is that if I was to show you one, 518 00:26:52,720 --> 00:26:56,160 Speaker 11: it's about the size of a potato, and we turn 519 00:26:56,280 --> 00:26:59,720 Speaker 11: one hundred percent of the mass of this nodule into 520 00:26:59,760 --> 00:27:04,359 Speaker 11: savailable usable material, so we generate no waste and no tailings. 521 00:27:04,840 --> 00:27:08,280 Speaker 11: But the first plant is likely to be in Japan, 522 00:27:08,960 --> 00:27:13,800 Speaker 11: and that means we'll produce the battery intermediate products of 523 00:27:14,040 --> 00:27:17,160 Speaker 11: nickel and copper and cobalt and manganese in that market. 524 00:27:17,359 --> 00:27:20,359 Speaker 1: All right, let me talk about the economics of this. 525 00:27:20,760 --> 00:27:22,680 Speaker 1: You guys are pre revenue right now, is that correct? 526 00:27:22,680 --> 00:27:23,080 Speaker 11: That's right? 527 00:27:23,119 --> 00:27:25,560 Speaker 1: Do you have the capital you need to kind of 528 00:27:25,720 --> 00:27:27,359 Speaker 1: get to that revenue stage. 529 00:27:27,480 --> 00:27:31,760 Speaker 11: We will require some more capital. We've raised money in 530 00:27:31,760 --> 00:27:35,119 Speaker 11: the last year from existing shareholders. We have some very 531 00:27:35,520 --> 00:27:40,639 Speaker 11: successful large shareholders, including Allseas, which is our partner on 532 00:27:40,680 --> 00:27:44,200 Speaker 11: the offshore side. We count Glenkor as a shareholder. They 533 00:27:44,240 --> 00:27:46,920 Speaker 11: also have an off take and we are talking, as 534 00:27:46,920 --> 00:27:50,119 Speaker 11: we've told the market to some strategic partners about earning 535 00:27:50,240 --> 00:27:54,080 Speaker 11: into the asset. Because the net present value for our 536 00:27:54,160 --> 00:27:56,760 Speaker 11: first area that we're developing, we know it as Nori 537 00:27:56,880 --> 00:28:01,199 Speaker 11: Area D is around thirteen billion dollars today now, so 538 00:28:01,240 --> 00:28:03,520 Speaker 11: it's a very valuable asset, and so we're talking to 539 00:28:03,560 --> 00:28:07,399 Speaker 11: strategics about earning into that asset and they tend to 540 00:28:07,520 --> 00:28:10,639 Speaker 11: like that. That's what smaller resource companies, whether it's in 541 00:28:10,680 --> 00:28:12,720 Speaker 11: mining or oil and gas, tend to do. They invite 542 00:28:12,720 --> 00:28:15,040 Speaker 11: the big guys to come and take an economic interest. 543 00:28:15,520 --> 00:28:18,120 Speaker 11: In our case, though we have such a broad array 544 00:28:18,160 --> 00:28:21,080 Speaker 11: of strategics. We have people from the oil and gas, 545 00:28:21,160 --> 00:28:25,560 Speaker 11: the mining world, the battery precursor world, actual customers. We're 546 00:28:25,560 --> 00:28:29,600 Speaker 11: seeing ev companies now start to invest in these supply 547 00:28:29,720 --> 00:28:32,680 Speaker 11: lines because they worried about where are the raw material 548 00:28:32,760 --> 00:28:35,840 Speaker 11: is going to come from, and so we're talking. 549 00:28:35,600 --> 00:28:39,240 Speaker 1: To many fascinating, fascinating story. I want you to come 550 00:28:39,240 --> 00:28:41,080 Speaker 1: back when you kind of get closer, to get further 551 00:28:41,120 --> 00:28:43,480 Speaker 1: along here, give us an update because this is really interesting. 552 00:28:43,520 --> 00:28:46,440 Speaker 1: Drod Baron, he's a chairman and CEO of the metals 553 00:28:46,480 --> 00:28:51,080 Speaker 1: company traded on the Nasdaq TMC. Fascinating story about the 554 00:28:51,240 --> 00:28:53,400 Speaker 1: something I didn't even know existed. I know these things 555 00:28:53,400 --> 00:28:55,800 Speaker 1: are on It literally looks like just a little rock 556 00:28:55,840 --> 00:28:57,479 Speaker 1: and you bring it up and you can make that 557 00:28:57,520 --> 00:29:00,600 Speaker 1: into the stuff we need for these batteries. So story 558 00:29:00,640 --> 00:29:03,040 Speaker 1: c suite conversations here in Bloomberg Markets, you never know 559 00:29:03,440 --> 00:29:06,360 Speaker 1: who Eric Molow is going to book for us. 560 00:29:07,520 --> 00:29:10,880 Speaker 8: You're listening to the team Ken's are Live program Bloomberg 561 00:29:11,000 --> 00:29:14,360 Speaker 8: Markets weekdays at ten am Eastern on Bloomberg dot Com, 562 00:29:14,440 --> 00:29:17,560 Speaker 8: the iHeartRadio app and the Bloomberg Business App, or listen 563 00:29:17,640 --> 00:29:19,760 Speaker 8: on demand wherever you get your podcasts. 564 00:29:21,680 --> 00:29:23,960 Speaker 1: Madison Mills and Paul Sweeny Here in our Bloomberg Interactive 565 00:29:23,960 --> 00:29:26,360 Speaker 1: Broker studio, let's get right to our markets around here. Yeah, 566 00:29:26,400 --> 00:29:29,360 Speaker 1: let's we get some players in here. Vinceignarelli, macro strategist 567 00:29:29,800 --> 00:29:35,600 Speaker 1: for Bloomberg News. And Callie coxhe is the etural strategist. Callie. 568 00:29:35,640 --> 00:29:37,680 Speaker 1: Let let's start with you. In that clip that Charlie 569 00:29:37,760 --> 00:29:40,320 Speaker 1: just played Doug Cask we had on this morning, he 570 00:29:40,560 --> 00:29:43,920 Speaker 1: was just saying, basically, he thinks his market is super expensive. 571 00:29:43,920 --> 00:29:47,240 Speaker 1: He's very nervous about the market, and he goes net short, 572 00:29:47,280 --> 00:29:49,640 Speaker 1: net long. He's net short right here. What do you 573 00:29:49,640 --> 00:29:52,280 Speaker 1: think about this market. Is it overextended? Are we too 574 00:29:52,320 --> 00:29:53,400 Speaker 1: far over our skis here? 575 00:29:54,040 --> 00:29:54,320 Speaker 5: Yeah? 576 00:29:54,400 --> 00:29:56,840 Speaker 12: So I think this comes down to if you think 577 00:29:56,840 --> 00:29:59,560 Speaker 12: the bull market can't continue, and that seems pretty obvious. 578 00:29:59,760 --> 00:30:01,400 Speaker 12: But if this is a bull market, you have to 579 00:30:01,400 --> 00:30:04,320 Speaker 12: remember that bull markets can be fierce even though we 580 00:30:04,360 --> 00:30:07,360 Speaker 12: have an uncertain future ahead of us. Since nineteen fifty, 581 00:30:07,680 --> 00:30:09,720 Speaker 12: the first year of every bull market, or in the 582 00:30:09,720 --> 00:30:11,600 Speaker 12: first year of every bull market, the S ANDP has 583 00:30:12,520 --> 00:30:14,880 Speaker 12: risen an average of forty three percent. 584 00:30:15,040 --> 00:30:16,760 Speaker 5: So we're a little cautious here. 585 00:30:16,840 --> 00:30:19,600 Speaker 12: We wouldn't say that we're so pessimistic that we would 586 00:30:19,600 --> 00:30:21,640 Speaker 12: think prices could go down, but we do think that 587 00:30:21,680 --> 00:30:24,520 Speaker 12: investors need to travel caution and really think about quality. 588 00:30:24,880 --> 00:30:26,840 Speaker 4: Well what about you, Vince, what are you thinking in 589 00:30:26,920 --> 00:30:29,040 Speaker 4: terms of whether or not this is a real bull 590 00:30:29,080 --> 00:30:31,479 Speaker 4: market or if the Wilson's of the world are going 591 00:30:31,520 --> 00:30:32,080 Speaker 4: to be correct. 592 00:30:32,320 --> 00:30:34,080 Speaker 13: I think it's a real bull market, and I think 593 00:30:34,120 --> 00:30:38,400 Speaker 13: mister Wilson's going to have a nice interesting conversation with 594 00:30:38,440 --> 00:30:39,520 Speaker 13: the world come the end of the year. 595 00:30:39,560 --> 00:30:42,600 Speaker 7: I think I think forty nine hundreds in your prediction. 596 00:30:42,720 --> 00:30:45,520 Speaker 13: No, I think we could backtrack, you know, one hundred 597 00:30:45,560 --> 00:30:48,240 Speaker 13: hundred and fifty points in the SMP. I mean, we've 598 00:30:48,240 --> 00:30:52,760 Speaker 13: come a long way, but the longer term outlook, you know, 599 00:30:52,840 --> 00:30:55,040 Speaker 13: the markets do not believe with the FETA saying I 600 00:30:55,080 --> 00:30:57,800 Speaker 13: do not believe with the FETA saying it's a credibility 601 00:30:57,800 --> 00:31:00,760 Speaker 13: issue for the FED to keep pushing this higher raise scenario. 602 00:31:01,120 --> 00:31:03,400 Speaker 13: I don't think it's real. I don't think it's justified. 603 00:31:03,480 --> 00:31:06,680 Speaker 13: And when the Fed does pause, this market's going to 604 00:31:06,760 --> 00:31:08,840 Speaker 13: rock and I think you could easily see it up 605 00:31:08,880 --> 00:31:11,520 Speaker 13: around forty eight hundred in the next twelve eighteen months. 606 00:31:11,800 --> 00:31:14,400 Speaker 1: So but Vince, you know, for better or worse. We 607 00:31:14,480 --> 00:31:17,239 Speaker 1: just listened this morning from you know, the ECB had 608 00:31:17,240 --> 00:31:22,000 Speaker 1: their panel in Portugal, and you know, leader leading banker 609 00:31:22,040 --> 00:31:25,680 Speaker 1: after another, including j Powell and Christine Leaguard talking tough. 610 00:31:25,880 --> 00:31:28,920 Speaker 13: They're they're talking tough because again I think they're so 611 00:31:29,800 --> 00:31:33,160 Speaker 13: trying to recover from the errors they made by calling 612 00:31:33,400 --> 00:31:37,960 Speaker 13: inflation transitory and they need to put a face on it. 613 00:31:37,960 --> 00:31:40,440 Speaker 13: And I think they're going to keep talking that tough 614 00:31:41,000 --> 00:31:44,080 Speaker 13: to a point where we're going to see real yields 615 00:31:44,160 --> 00:31:46,760 Speaker 13: rise because inflation is going to come down below levels 616 00:31:47,080 --> 00:31:49,440 Speaker 13: until they're ready to cut. And what that's going to 617 00:31:49,480 --> 00:31:51,680 Speaker 13: do it's going to drive a rally in the bond market, 618 00:31:51,880 --> 00:31:53,520 Speaker 13: and then it's going to drive that rally in the 619 00:31:53,520 --> 00:31:56,840 Speaker 13: stock market. And all the time they were talking this morning, 620 00:31:57,040 --> 00:31:59,960 Speaker 13: eels went down in the US, stocks went up in Europe. 621 00:32:00,720 --> 00:32:03,360 Speaker 4: Well, Kelly, talk to me about that global picture, because 622 00:32:03,400 --> 00:32:05,080 Speaker 4: you mentioned in your notes that six out of the 623 00:32:05,120 --> 00:32:08,120 Speaker 4: last seven bull markets started as the FED lowered rates. 624 00:32:08,200 --> 00:32:10,280 Speaker 4: So if they cut, does that. 625 00:32:10,320 --> 00:32:12,040 Speaker 7: Ruin their end goal here? 626 00:32:12,720 --> 00:32:15,680 Speaker 12: So I don't think they're cutting anytime soon unless we 627 00:32:15,720 --> 00:32:18,960 Speaker 12: see a recession. And I think obviously that's the wildcard 628 00:32:18,960 --> 00:32:22,440 Speaker 12: that everybody's grappling with. And you know, the lower FED 629 00:32:22,520 --> 00:32:25,440 Speaker 12: rates have come with recessions or have come with crises. 630 00:32:25,800 --> 00:32:27,920 Speaker 12: So the FED right now doesn't have a good reason 631 00:32:27,960 --> 00:32:28,680 Speaker 12: to cut rates. 632 00:32:29,320 --> 00:32:30,680 Speaker 5: And they see inflation, you know. 633 00:32:30,720 --> 00:32:33,360 Speaker 12: Quite high, persistently high, so they have a good argument 634 00:32:33,360 --> 00:32:34,520 Speaker 12: for keeping rates higher. 635 00:32:35,440 --> 00:32:36,720 Speaker 5: You know. I think that's a good story. 636 00:32:36,760 --> 00:32:39,040 Speaker 12: It shows that the economy is rocking and rolling, especially 637 00:32:39,120 --> 00:32:41,560 Speaker 12: when a recession is at the top of investors' minds. 638 00:32:42,000 --> 00:32:44,640 Speaker 12: But at the same time, I mean, a lot of 639 00:32:44,680 --> 00:32:47,320 Speaker 12: the rate sensitive sectors have rallied on the back of 640 00:32:47,360 --> 00:32:50,360 Speaker 12: some hope for lower rates, So I think that it's 641 00:32:50,400 --> 00:32:52,520 Speaker 12: an awkward truth to grapple with the fact that most 642 00:32:52,520 --> 00:32:55,760 Speaker 12: bull markets start in the depths of a recession. But 643 00:32:56,000 --> 00:32:58,120 Speaker 12: I'm not sure that has to be the same case here. 644 00:32:58,160 --> 00:33:00,760 Speaker 12: And we've seen a lot of things over the past 645 00:33:00,760 --> 00:33:02,960 Speaker 12: three years or so, and quite frankly, we could be 646 00:33:02,960 --> 00:33:04,640 Speaker 12: having a rotating recession at the moment. 647 00:33:05,600 --> 00:33:10,840 Speaker 1: Hey, Vince, what do you look at all over the market, commodities, rates, currencies, 648 00:33:10,880 --> 00:33:12,240 Speaker 1: all that kind of good stuff. What are you seeing 649 00:33:12,440 --> 00:33:13,920 Speaker 1: other parts? What are you hearing from some of the 650 00:33:14,160 --> 00:33:16,640 Speaker 1: traders that you talk to, just in terms of I 651 00:33:16,640 --> 00:33:19,040 Speaker 1: guess their willingness to take on incremental risk here. 652 00:33:20,000 --> 00:33:23,560 Speaker 13: I mean, I think they like the risk scenario in general. 653 00:33:24,320 --> 00:33:26,920 Speaker 13: They think the for the most part, the dollar was 654 00:33:26,960 --> 00:33:30,680 Speaker 13: run its course, that equity use a for real with 655 00:33:30,760 --> 00:33:34,320 Speaker 13: the you know, there are obviously exceptions out there, you know, 656 00:33:34,400 --> 00:33:37,240 Speaker 13: to the point kindly just made it about interest rates 657 00:33:37,280 --> 00:33:40,880 Speaker 13: and potential FED rate pause. You know, I don't think 658 00:33:40,920 --> 00:33:43,800 Speaker 13: they I agree, they don't have a scenario right now 659 00:33:43,800 --> 00:33:45,800 Speaker 13: where they're going to be cutting rates anytime soon. But 660 00:33:45,920 --> 00:33:48,120 Speaker 13: if you look at all the data for June, it 661 00:33:48,280 --> 00:33:52,360 Speaker 13: points to them holding In July as well. CPI was lower, PPI, lower, 662 00:33:52,400 --> 00:33:56,200 Speaker 13: export import price is lower, prices paid lower in all 663 00:33:56,200 --> 00:33:59,560 Speaker 13: the scenarios, sentiment better in terms of expectation. 664 00:34:00,040 --> 00:34:02,120 Speaker 1: So you don't think they're going to raise in July. 665 00:34:02,280 --> 00:34:04,560 Speaker 13: I'm not saying they won't. I'm saying they don't have 666 00:34:04,600 --> 00:34:07,720 Speaker 13: a reason to. The data suggests that they should hold 667 00:34:07,760 --> 00:34:08,520 Speaker 13: one more time. 668 00:34:08,719 --> 00:34:08,879 Speaker 9: Now. 669 00:34:08,920 --> 00:34:11,960 Speaker 13: If the data from June matches the data going into 670 00:34:12,040 --> 00:34:14,320 Speaker 13: the middle of July, then I think they should hold. 671 00:34:14,440 --> 00:34:17,040 Speaker 13: Whether or not they do again, I still think it's 672 00:34:17,080 --> 00:34:18,920 Speaker 13: a credibility issue, not a data issue. 673 00:34:19,239 --> 00:34:22,200 Speaker 4: Kelly, talk to me then about how retail investors should 674 00:34:22,239 --> 00:34:25,000 Speaker 4: be looking at FED moves in the market. More broadly, 675 00:34:25,640 --> 00:34:28,200 Speaker 4: you have a great tweet about how at least one 676 00:34:28,239 --> 00:34:30,800 Speaker 4: stock from each S and P five hundred sector except 677 00:34:30,840 --> 00:34:32,719 Speaker 4: for energy, has hit a fifty two week high in. 678 00:34:32,680 --> 00:34:33,359 Speaker 7: The past month. 679 00:34:34,320 --> 00:34:37,680 Speaker 4: How should retail investors be looking at and digesting that. 680 00:34:38,400 --> 00:34:41,000 Speaker 12: Yeah, so I want to remind everybody that retail investors 681 00:34:41,080 --> 00:34:43,759 Speaker 12: are mainly longer term investors. They get a really bad 682 00:34:43,880 --> 00:34:46,439 Speaker 12: knock in the market as being these short term day 683 00:34:46,520 --> 00:34:49,560 Speaker 12: trading type speculators, but a lot of retail investors are 684 00:34:49,600 --> 00:34:52,239 Speaker 12: just investing for a retirement or that nest egg, you know, 685 00:34:52,560 --> 00:34:55,600 Speaker 12: long term security. So if you're a retail investor, you're 686 00:34:55,640 --> 00:34:57,880 Speaker 12: looking long term, you're just taking some money from your 687 00:34:57,880 --> 00:35:01,680 Speaker 12: paycheck chucking it into an index fund. You know, review 688 00:35:01,760 --> 00:35:04,040 Speaker 12: the headlines, be aware of what's going on. But at 689 00:35:04,040 --> 00:35:07,000 Speaker 12: the same time, remember that ninety percent of these headlines 690 00:35:07,040 --> 00:35:09,680 Speaker 12: don't matter to you, and that you know, even if 691 00:35:09,719 --> 00:35:12,520 Speaker 12: we do plunge into another bear markets, every bear market 692 00:35:12,560 --> 00:35:14,000 Speaker 12: that we've hit, we've recovered from. 693 00:35:14,040 --> 00:35:15,560 Speaker 5: It's all about emotion management. 694 00:35:16,239 --> 00:35:18,280 Speaker 12: If you are a little bit shorter term, I would, 695 00:35:18,400 --> 00:35:20,880 Speaker 12: you know, I would be a little more cautious. I 696 00:35:20,880 --> 00:35:23,840 Speaker 12: would definitely, you know, consider the headlines more. This is 697 00:35:23,880 --> 00:35:26,600 Speaker 12: an interest rate sensitive market at the moment. I mean, 698 00:35:26,640 --> 00:35:29,120 Speaker 12: we've been talking about the FED for this entire conversation, 699 00:35:29,600 --> 00:35:31,640 Speaker 12: and the FED has a really good argument to keep 700 00:35:31,719 --> 00:35:34,120 Speaker 12: rates high no matter if they hike or pause in July. 701 00:35:34,719 --> 00:35:37,480 Speaker 12: So if you're looking over the next three to six 702 00:35:37,560 --> 00:35:40,080 Speaker 12: months or so, I would really focus on the companies 703 00:35:40,160 --> 00:35:43,080 Speaker 12: that have those quality balance sheets that can operate in 704 00:35:43,160 --> 00:35:45,799 Speaker 12: a slowing growth, high rate environment. And that's what we've 705 00:35:45,800 --> 00:35:48,400 Speaker 12: been telling our customers. We really pay attention to what 706 00:35:48,440 --> 00:35:52,400 Speaker 12: you're investing in and what can can survive these grinding conditions. 707 00:35:52,480 --> 00:35:54,160 Speaker 4: Well, Kelly, I want to ask you a follow up 708 00:35:54,160 --> 00:35:56,799 Speaker 4: on that because Goldman had a note recently about how 709 00:35:56,840 --> 00:35:59,800 Speaker 4: when retail investors start to take a little bit of 710 00:35:59,840 --> 00:36:02,320 Speaker 4: care they start to get out. That's an indicator that 711 00:36:02,360 --> 00:36:05,440 Speaker 4: they're about to miss out on a rally. Talk to 712 00:36:05,480 --> 00:36:07,480 Speaker 4: me about your view on that. Why do you think 713 00:36:07,520 --> 00:36:09,640 Speaker 4: that the retail investor just gets such a bad rep. 714 00:36:10,440 --> 00:36:12,719 Speaker 12: Well, it's a mystery to me. And I mean, you 715 00:36:12,760 --> 00:36:14,960 Speaker 12: know that I work for a retail brekerage, so obviously 716 00:36:14,960 --> 00:36:18,320 Speaker 12: I'm biased here. But individual investors have been stronger. They're 717 00:36:18,440 --> 00:36:21,160 Speaker 12: the most have thought in this cycle. I mean, we 718 00:36:21,400 --> 00:36:24,080 Speaker 12: take a quarterly survey it's called the Retail Investor Beat Survey, 719 00:36:24,280 --> 00:36:27,440 Speaker 12: and we flat out ask investors, what are you investing in? 720 00:36:27,600 --> 00:36:29,680 Speaker 5: What are you thinking about? What are you worried about? 721 00:36:29,719 --> 00:36:32,000 Speaker 12: Where do you see your money going in the next 722 00:36:32,000 --> 00:36:34,920 Speaker 12: three months? And their allocations have held pretty steady, even 723 00:36:34,960 --> 00:36:37,320 Speaker 12: though they've diversified a little bit. They've become a little 724 00:36:37,320 --> 00:36:40,800 Speaker 12: bit more tactical, and they, like every kind of investor, 725 00:36:41,200 --> 00:36:44,480 Speaker 12: are worried about the future. They're watching their risks. So 726 00:36:44,800 --> 00:36:46,960 Speaker 12: I'm not quite sure, you know, I think that there's 727 00:36:47,000 --> 00:36:50,360 Speaker 12: been a change in psychology and sophistication of the retail investor. 728 00:36:50,640 --> 00:36:54,439 Speaker 12: You know, since the global financial crisis, and consumers, let's 729 00:36:54,440 --> 00:36:56,600 Speaker 12: be honest, are in a really good position right now. 730 00:36:56,600 --> 00:36:59,040 Speaker 12: And most people invest when they have money, So I 731 00:36:59,080 --> 00:37:01,120 Speaker 12: have no doubt that people are taking chips off the table, 732 00:37:01,320 --> 00:37:03,600 Speaker 12: let's be real. But in mass you know, I think 733 00:37:03,600 --> 00:37:04,319 Speaker 12: investors are. 734 00:37:04,200 --> 00:37:04,719 Speaker 5: Still in it. 735 00:37:05,120 --> 00:37:08,160 Speaker 1: Hey, Vince, we got a company that people kind of 736 00:37:08,160 --> 00:37:10,960 Speaker 1: come in contact with every day, General Mills, make, you know, 737 00:37:11,320 --> 00:37:14,200 Speaker 1: consumer product stuff. They basically said they can no longer 738 00:37:14,239 --> 00:37:17,360 Speaker 1: pass price increases through to me and you and Callie's 739 00:37:17,440 --> 00:37:20,719 Speaker 1: walking down the supermarket aisle. That to me, if I'm 740 00:37:20,760 --> 00:37:24,760 Speaker 1: the Federal Reserve, that's real inflation peaking, if not completely 741 00:37:24,800 --> 00:37:27,480 Speaker 1: you know, coming down, which you know, it's just confirms 742 00:37:27,480 --> 00:37:29,160 Speaker 1: what we've seen from the government data. But there's a 743 00:37:29,200 --> 00:37:34,759 Speaker 1: real company touching real people every day, you know, do 744 00:37:35,000 --> 00:37:38,040 Speaker 1: I mean, does the market do? Do feed officials look 745 00:37:38,080 --> 00:37:38,880 Speaker 1: at that kind of stuff? 746 00:37:39,560 --> 00:37:42,680 Speaker 13: They do? I mean I interviewed Charles Ploster once when 747 00:37:42,680 --> 00:37:45,160 Speaker 13: I was with Wall Street Journal, and I started the conversation. 748 00:37:45,280 --> 00:37:46,880 Speaker 13: He cut me off and said, yes, I do go 749 00:37:46,960 --> 00:37:50,040 Speaker 13: to the supermarket and I do look at the cereal prices, 750 00:37:50,719 --> 00:37:52,719 Speaker 13: So I'm gonna I'm gonna hope that the rest of 751 00:37:52,760 --> 00:37:55,560 Speaker 13: them follow his lead and still do that. And I 752 00:37:55,560 --> 00:37:58,160 Speaker 13: think it speaks volumes that when when you have a 753 00:37:58,239 --> 00:38:02,080 Speaker 13: large retail company that touched retail and basically says we're 754 00:38:02,080 --> 00:38:03,960 Speaker 13: at a wall. You know, people are just not going 755 00:38:04,000 --> 00:38:07,360 Speaker 13: to buy if we keep raising prices. That suggests something 756 00:38:07,440 --> 00:38:10,080 Speaker 13: that's rolling over. That's a consumer that's starting to change 757 00:38:10,080 --> 00:38:13,040 Speaker 13: their buying habits, and consumers do. It's the old story. 758 00:38:13,080 --> 00:38:15,400 Speaker 13: If state gets too expensive, if beef's too expensive, you 759 00:38:15,480 --> 00:38:19,600 Speaker 13: buy more checking and it happens, and people will move 760 00:38:19,640 --> 00:38:23,200 Speaker 13: to alternatives if they have to. When a prices were 761 00:38:23,239 --> 00:38:27,239 Speaker 13: through the roof, people went to alternatives for breakfast, and 762 00:38:27,280 --> 00:38:30,239 Speaker 13: I think they'll they'll do the same. And considering how 763 00:38:30,320 --> 00:38:33,080 Speaker 13: much sugar is in cereal, it's probably good idea. 764 00:38:33,640 --> 00:38:36,640 Speaker 4: Okay, fair enough, but I do want to get your. 765 00:38:36,719 --> 00:38:39,560 Speaker 7: FX expertise while we have you here. You're an FX guy. 766 00:38:39,400 --> 00:38:43,080 Speaker 4: Obviously, how badly does a company like a General Mills 767 00:38:43,280 --> 00:38:46,480 Speaker 4: or more broadly, other consumer packaged goods companies that have 768 00:38:46,600 --> 00:38:50,680 Speaker 4: strong international exposure, how badly do they need some more 769 00:38:50,719 --> 00:38:52,920 Speaker 4: downside for the dollar to be successful? 770 00:38:52,960 --> 00:38:54,799 Speaker 13: In the second half of the year big time because 771 00:38:54,840 --> 00:38:57,279 Speaker 13: they don't hedge. And I've marketed to them forever and 772 00:38:57,320 --> 00:39:01,000 Speaker 13: they don't. They somehow think the dollar is always going 773 00:39:01,040 --> 00:39:06,320 Speaker 13: to be strong, and you know, they're they're going to 774 00:39:06,400 --> 00:39:08,719 Speaker 13: have where the dollar is going to be weak rather 775 00:39:08,760 --> 00:39:13,120 Speaker 13: and they're going to have this great situation. The dollar 776 00:39:13,239 --> 00:39:13,919 Speaker 13: is going to come down. 777 00:39:14,120 --> 00:39:15,319 Speaker 9: It's overdone. 778 00:39:15,480 --> 00:39:19,719 Speaker 13: And you know, the the large corporations, the large cap 779 00:39:19,800 --> 00:39:23,200 Speaker 13: companies just literally just don't hedge, and they you'll always 780 00:39:23,200 --> 00:39:25,520 Speaker 13: see I mean, you watch the earnings numbers, and the 781 00:39:25,520 --> 00:39:28,800 Speaker 13: earnings numbers that came out last year in particular were gruesome. 782 00:39:29,480 --> 00:39:31,920 Speaker 13: With the strength of the dollars. They were reporting some 783 00:39:32,120 --> 00:39:33,360 Speaker 13: huge FX losses. 784 00:39:33,520 --> 00:39:35,720 Speaker 1: So why don't they hedge? 785 00:39:36,280 --> 00:39:39,040 Speaker 13: It's a it's a cya story. I remember speaking to 786 00:39:39,320 --> 00:39:42,239 Speaker 13: a guy buying a company buying a railroad in Australia, 787 00:39:42,520 --> 00:39:44,799 Speaker 13: and I put a pitch together for them to save 788 00:39:44,840 --> 00:39:48,520 Speaker 13: them potentially thirty million dollars ten percent, and the treasurer 789 00:39:48,600 --> 00:39:50,840 Speaker 13: said to me, flat out, he said, if I do 790 00:39:50,960 --> 00:39:55,439 Speaker 13: this trade and you're wrong, I'll lose my job. I said, 791 00:39:55,440 --> 00:39:57,080 Speaker 13: but what about if I'm right and you say thirty 792 00:39:57,120 --> 00:39:58,440 Speaker 13: million dollars? He said, no, one will. 793 00:39:58,280 --> 00:40:01,759 Speaker 7: Knows every job is the same. 794 00:40:01,840 --> 00:40:04,160 Speaker 13: They said, there's no reason for me to take this 795 00:40:04,280 --> 00:40:05,880 Speaker 13: kind of risk. I don't get paid to save the 796 00:40:05,880 --> 00:40:07,320 Speaker 13: company money on this scenario. 797 00:40:07,680 --> 00:40:12,680 Speaker 1: Interesting, Kelly, for your clients, your customers, what are you 798 00:40:12,680 --> 00:40:16,319 Speaker 1: suggesting sector wise they allocate some where did they go 799 00:40:16,360 --> 00:40:18,360 Speaker 1: in the market here? Do you have any some sectors 800 00:40:18,360 --> 00:40:20,360 Speaker 1: that get that screen well for you guys? 801 00:40:20,840 --> 00:40:21,200 Speaker 5: Yeah? 802 00:40:21,239 --> 00:40:24,000 Speaker 12: So when I think about sector allocations, first, I think 803 00:40:24,000 --> 00:40:26,200 Speaker 12: about the economic trend, and I think that's pretty clear 804 00:40:26,239 --> 00:40:28,400 Speaker 12: at the moment. The FED has the economy and the 805 00:40:28,520 --> 00:40:31,560 Speaker 12: vice a vice. They're not letting up anytime soon. 806 00:40:32,320 --> 00:40:32,480 Speaker 5: You know. 807 00:40:32,480 --> 00:40:34,440 Speaker 12: If we hit a recession, then you have to rethink 808 00:40:34,440 --> 00:40:37,360 Speaker 12: the sector allocations, of course, But for now, in a 809 00:40:37,400 --> 00:40:39,919 Speaker 12: slow and growth, high rate environment, I think it makes 810 00:40:39,920 --> 00:40:43,399 Speaker 12: sense to look a little bit at defensives while keeping 811 00:40:43,480 --> 00:40:45,480 Speaker 12: your toes and some quality risk as well. When I 812 00:40:45,480 --> 00:40:48,800 Speaker 12: say quality risk, I mean looking at those rate sensitive sectors, 813 00:40:49,000 --> 00:40:51,160 Speaker 12: looking at those sectors that do well in an early 814 00:40:51,200 --> 00:40:53,480 Speaker 12: bull market, but focusing on the bigger. 815 00:40:53,160 --> 00:40:54,640 Speaker 5: Companies that you think can make it through. 816 00:40:54,800 --> 00:40:57,000 Speaker 1: So where does tech fall out in there? 817 00:40:57,080 --> 00:40:57,319 Speaker 9: For you? 818 00:40:57,400 --> 00:41:00,480 Speaker 1: Because Tech's been you know, the miracle sevens that have 819 00:41:00,520 --> 00:41:03,080 Speaker 1: been just kind of the stalwarts so far this year, 820 00:41:03,160 --> 00:41:05,920 Speaker 1: making up a lot of what they lost last year, granted, 821 00:41:05,960 --> 00:41:07,879 Speaker 1: but worst tech fit in for you. 822 00:41:07,800 --> 00:41:10,040 Speaker 12: Guys, Well, we all know that there are a lot 823 00:41:10,080 --> 00:41:13,040 Speaker 12: of flavors at tech. So there's big tech, you know, 824 00:41:13,080 --> 00:41:15,880 Speaker 12: there are the AI, you know, rising stars that people 825 00:41:15,880 --> 00:41:18,520 Speaker 12: have been looking at. I like to tell people this. 826 00:41:18,760 --> 00:41:21,520 Speaker 12: You know, if you're looking at the speculative smaller tech 827 00:41:21,560 --> 00:41:24,320 Speaker 12: companies that you you know, maybe believe in their story, 828 00:41:24,680 --> 00:41:27,399 Speaker 12: then sure, stay invested in that. But at the same time, 829 00:41:27,640 --> 00:41:30,560 Speaker 12: remember that this is a very tough operating environment for them. 830 00:41:30,760 --> 00:41:33,680 Speaker 12: Investment is going down, especially in the early stage companies, 831 00:41:33,960 --> 00:41:36,600 Speaker 12: and these are the types of businesses that get squeezed 832 00:41:36,600 --> 00:41:39,680 Speaker 12: by the higher costs and you know, higher. 833 00:41:39,520 --> 00:41:41,520 Speaker 5: Higher financing rates generally. 834 00:41:41,920 --> 00:41:44,920 Speaker 12: So, you know, big tech obviously they operate in the 835 00:41:44,960 --> 00:41:45,719 Speaker 12: same environment. 836 00:41:45,800 --> 00:41:46,960 Speaker 5: You know, I have some thoughts. 837 00:41:46,760 --> 00:41:49,760 Speaker 12: On if they'll lead the next wool market. They're looking 838 00:41:49,760 --> 00:41:51,640 Speaker 12: a little big and bloated to me. But big and 839 00:41:51,680 --> 00:41:54,919 Speaker 12: bloated could work here. You know, they have really big 840 00:41:54,960 --> 00:41:58,279 Speaker 12: cash modes and they have strong, healthy profit margins. So 841 00:41:58,719 --> 00:42:01,560 Speaker 12: investors looking at big tech that doesn't surprise me. I 842 00:42:01,560 --> 00:42:04,239 Speaker 12: think that that's a smart idea, especially if you're thinking 843 00:42:04,239 --> 00:42:06,120 Speaker 12: bigger and durable, smaller tech. 844 00:42:06,480 --> 00:42:08,520 Speaker 5: You know, I would say, probably think twice about that. 845 00:42:08,600 --> 00:42:10,520 Speaker 4: A lot of people looking into AI as well. 846 00:42:11,160 --> 00:42:13,279 Speaker 12: Yes, yeah, so we've seen that on our platform, you know, 847 00:42:13,320 --> 00:42:15,080 Speaker 12: we see it in the surveys that we watch. 848 00:42:15,480 --> 00:42:17,920 Speaker 5: And does that surprise you? It doesn't surprise me. 849 00:42:18,320 --> 00:42:20,440 Speaker 12: I mean there's a lot of hype out there around AI, 850 00:42:20,680 --> 00:42:22,840 Speaker 12: and I think, you know, you have a good argument 851 00:42:22,880 --> 00:42:25,880 Speaker 12: for saying that AI will probably change the world. 852 00:42:25,640 --> 00:42:27,000 Speaker 5: In some form or fashion. 853 00:42:27,400 --> 00:42:30,959 Speaker 12: You know, I'm a little cautious about how how much 854 00:42:31,040 --> 00:42:33,080 Speaker 12: we attribute to AI at the moment. You know, I 855 00:42:33,120 --> 00:42:35,520 Speaker 12: think it's a groundbreaking technology, but we need to see 856 00:42:35,520 --> 00:42:38,480 Speaker 12: it flow into economic productivity. We need companies to spend 857 00:42:38,480 --> 00:42:41,400 Speaker 12: on it, we need we need real utility from it. 858 00:42:41,480 --> 00:42:42,960 Speaker 12: We don't just need to talk about it. And I 859 00:42:42,960 --> 00:42:45,200 Speaker 12: think we can get there, but it's too early to tell. 860 00:42:45,440 --> 00:42:47,920 Speaker 1: I Ben's real quick. Just about thirty seconds. I'm going 861 00:42:47,960 --> 00:42:51,000 Speaker 1: at WTI crude oil sixty nine dollars a barrel. I mean, 862 00:42:51,800 --> 00:42:53,239 Speaker 1: where does it go from here? Do I just have 863 00:42:53,280 --> 00:42:54,120 Speaker 1: to be right on demand? 864 00:42:55,360 --> 00:42:56,799 Speaker 13: I think it's actually going to be more of a 865 00:42:56,840 --> 00:42:58,680 Speaker 13: supply issue. I think for it to go up I 866 00:42:58,719 --> 00:43:00,719 Speaker 13: think the Sudis are going to have to end engineer 867 00:43:00,760 --> 00:43:04,799 Speaker 13: another cut, opek engineer another cut. We're not yet, As 868 00:43:05,040 --> 00:43:07,920 Speaker 13: as Kelly said, We're in a slower growth environment. This 869 00:43:08,000 --> 00:43:10,400 Speaker 13: isn't an explosive growth environment. I don't think it's going 870 00:43:10,480 --> 00:43:12,759 Speaker 13: to come from the demand side as much as it 871 00:43:12,840 --> 00:43:14,879 Speaker 13: needs to be reduced from the supply side. I mean, 872 00:43:14,880 --> 00:43:18,480 Speaker 13: we keep hearing about you know. I mean they just 873 00:43:18,520 --> 00:43:21,160 Speaker 13: cut recently yep, and oil went down yep. So it 874 00:43:21,400 --> 00:43:23,960 Speaker 13: clearly isn't a demand issue to be There's just too 875 00:43:24,040 --> 00:43:25,120 Speaker 13: much supply out there. 876 00:43:24,960 --> 00:43:27,400 Speaker 1: All right, Vince, thanks so much for joining us. Vince Cignorella, 877 00:43:27,480 --> 00:43:31,280 Speaker 1: macro strategist for Bloomberg News, and Kellie Cox, us equity 878 00:43:31,280 --> 00:43:34,360 Speaker 1: analyst with Intro, joining us here in our Bloomberg Interactive 879 00:43:34,360 --> 00:43:37,360 Speaker 1: Broker Studio. We appreciate getting both of them together talking 880 00:43:37,400 --> 00:43:38,840 Speaker 1: about these markets. 881 00:43:39,080 --> 00:43:42,200 Speaker 8: You're listening to the tape Cat's are Live program Bloomberg 882 00:43:42,239 --> 00:43:45,840 Speaker 8: Markets weekdays at ten am Eastern on Bloomberg Radio, the 883 00:43:45,920 --> 00:43:48,000 Speaker 8: tune in app, Bloomberg dot Com. 884 00:43:47,680 --> 00:43:49,120 Speaker 9: And the Bloomberg Business App. 885 00:43:49,160 --> 00:43:52,000 Speaker 8: You can also listen live on Amazon Alexa from our 886 00:43:52,000 --> 00:43:58,080 Speaker 8: flagship New York station. Just say Alexa Play Bloomberg eleven thirty. 887 00:43:58,360 --> 00:44:00,680 Speaker 1: Madison Mills, and Paul Tween Here in our Bloomer Interactive 888 00:44:00,719 --> 00:44:05,919 Speaker 1: Broker's studio, let's talk real estate. Let's talk residential real estate, 889 00:44:05,960 --> 00:44:08,040 Speaker 1: and we can do that with our next guest, Selma Hepbitt. 890 00:44:08,280 --> 00:44:10,440 Speaker 1: She's a chief economist of core Logic. Salma, thanks so 891 00:44:10,520 --> 00:44:13,440 Speaker 1: much for joining us here. I guess my understanding is, 892 00:44:14,680 --> 00:44:16,560 Speaker 1: if you want to buy a new home, you really 893 00:44:16,560 --> 00:44:19,279 Speaker 1: only have one choice because people aren't selling their existing home, 894 00:44:19,360 --> 00:44:21,560 Speaker 1: so you got to buy a new home new construction, 895 00:44:21,640 --> 00:44:23,640 Speaker 1: and that had a huge number, the fastest pace in 896 00:44:23,719 --> 00:44:26,160 Speaker 1: more than a year. Just recently, give us a lay 897 00:44:26,160 --> 00:44:28,520 Speaker 1: of the land of how the residential real estate market 898 00:44:28,560 --> 00:44:29,839 Speaker 1: is right now. 899 00:44:31,480 --> 00:44:33,960 Speaker 14: Yeah, of course, thanks for having me on the show. 900 00:44:34,080 --> 00:44:37,279 Speaker 14: So home sales activity are sort of a tale of 901 00:44:37,280 --> 00:44:40,400 Speaker 14: two different markets. In terms of new home sales, they 902 00:44:40,400 --> 00:44:43,480 Speaker 14: are doing really, really well, as you mentioned their increase 903 00:44:43,560 --> 00:44:47,640 Speaker 14: to a fifteen month high, as builders have been able 904 00:44:47,719 --> 00:44:51,880 Speaker 14: to provide more incentives on one hand, and on the 905 00:44:51,920 --> 00:44:55,919 Speaker 14: other hand, as existing home sale inventory is almost non 906 00:44:55,960 --> 00:44:57,640 Speaker 14: existent in many markets. 907 00:44:58,560 --> 00:45:01,120 Speaker 7: So what needs to happen to change that? 908 00:45:01,200 --> 00:45:03,560 Speaker 4: I know that's kind of the million dollar question here, 909 00:45:03,600 --> 00:45:07,320 Speaker 4: but is there anything that I mean. 910 00:45:08,800 --> 00:45:11,520 Speaker 7: That can be done to kind of shift that dynamic. 911 00:45:12,960 --> 00:45:13,839 Speaker 5: Well, I think, you. 912 00:45:13,800 --> 00:45:17,719 Speaker 14: Know, the further we move away from those three percent mortgages, 913 00:45:18,000 --> 00:45:22,120 Speaker 14: and as people you know, and there's always a natural 914 00:45:22,640 --> 00:45:26,520 Speaker 14: transition that people go to through and sell their homes 915 00:45:26,600 --> 00:45:30,080 Speaker 14: and you know, they get a divorce, they have to 916 00:45:30,120 --> 00:45:33,520 Speaker 14: move for schools, they have to move closer to families. 917 00:45:34,400 --> 00:45:38,200 Speaker 14: So there's always that natural process of home sales activity 918 00:45:38,239 --> 00:45:41,200 Speaker 14: that happens. And so one combined with the other, I 919 00:45:41,200 --> 00:45:43,560 Speaker 14: think down the road we are likely to see more 920 00:45:43,640 --> 00:45:46,120 Speaker 14: new home sales on the market. The other thing is, 921 00:45:46,960 --> 00:45:51,279 Speaker 14: you know, baby boomers are the largest cohort that with 922 00:45:51,320 --> 00:45:54,920 Speaker 14: the highest home ownership rate, and of some fifty percent 923 00:45:55,120 --> 00:45:58,440 Speaker 14: of baby Boomers have on their homes free and clear, 924 00:45:58,960 --> 00:46:02,399 Speaker 14: and so for them, low mortgage rates, you know, are 925 00:46:02,400 --> 00:46:05,560 Speaker 14: not making any difference right now. It's more about making 926 00:46:05,560 --> 00:46:09,160 Speaker 14: that decision to leave their home, you know, and in 927 00:46:09,239 --> 00:46:12,000 Speaker 14: light of the fact that that home prices have gone 928 00:46:12,080 --> 00:46:14,600 Speaker 14: up so much, so that may be a difficult decision 929 00:46:14,680 --> 00:46:17,680 Speaker 14: for them. But the mortgage rates themselves are not a 930 00:46:17,719 --> 00:46:20,520 Speaker 14: constraining factor. So I think, you know, again, as we 931 00:46:20,760 --> 00:46:24,040 Speaker 14: as we move away from those really really favorable mortgage rates, 932 00:46:24,120 --> 00:46:27,840 Speaker 14: we're likely to see more turnover in terms of existing 933 00:46:27,840 --> 00:46:28,520 Speaker 14: home sales. 934 00:46:29,200 --> 00:46:33,279 Speaker 1: So what are the builders actually building these days? Because 935 00:46:33,320 --> 00:46:35,680 Speaker 1: it seems like what I hear from you know, pros 936 00:46:35,760 --> 00:46:38,760 Speaker 1: like you, we really need you know, kind of first 937 00:46:38,800 --> 00:46:41,880 Speaker 1: time home buyer kind of homes, entry level homes, and 938 00:46:41,920 --> 00:46:44,120 Speaker 1: that's not the stuff that's getting built. Because when I 939 00:46:44,120 --> 00:46:46,319 Speaker 1: talk to homebuilders, they say, I can make a much 940 00:46:46,320 --> 00:46:48,400 Speaker 1: better profit margin on some of these McMansions and I 941 00:46:48,440 --> 00:46:51,040 Speaker 1: can on an entry level house. What are they actually 942 00:46:51,080 --> 00:46:51,880 Speaker 1: building these days? 943 00:46:53,400 --> 00:46:57,360 Speaker 14: Well, I mean, so you know, it's very different regionally, 944 00:46:57,480 --> 00:47:00,720 Speaker 14: very much. And I think in markets where you don't 945 00:47:00,800 --> 00:47:05,560 Speaker 14: have a lot of regulatory constraints which increase the cost 946 00:47:05,640 --> 00:47:08,879 Speaker 14: of construction, that those are the areas where you're likely 947 00:47:08,960 --> 00:47:12,800 Speaker 14: to see more affordable or smaller homes, you know. And 948 00:47:12,800 --> 00:47:14,680 Speaker 14: and then on the on the flip side, the markets 949 00:47:14,680 --> 00:47:17,080 Speaker 14: that are more expensive, such as the West Coast markets 950 00:47:17,080 --> 00:47:20,799 Speaker 14: and Mountain West markets with a lot of regulatory constraints, 951 00:47:20,840 --> 00:47:24,960 Speaker 14: a lot of costs coming into the construction just to 952 00:47:25,000 --> 00:47:27,719 Speaker 14: start build building a home, that's where we are not 953 00:47:28,040 --> 00:47:30,840 Speaker 14: likely to see a lot of affordable housing. So you know, 954 00:47:30,920 --> 00:47:34,120 Speaker 14: it plays out very interestingly in how where people are moving. 955 00:47:34,200 --> 00:47:37,319 Speaker 14: So people are moving to those more affordable parts of 956 00:47:37,360 --> 00:47:39,879 Speaker 14: the country and to you know, where there is more 957 00:47:39,960 --> 00:47:42,560 Speaker 14: new construction because that's where they can afford. 958 00:47:43,320 --> 00:47:46,680 Speaker 4: Have we seen a reversal or at least declines though, 959 00:47:46,800 --> 00:47:49,200 Speaker 4: and people moving to those areas that are a little 960 00:47:49,480 --> 00:47:52,480 Speaker 4: are a little bit more affordable as we've seen you know, 961 00:47:52,560 --> 00:47:55,520 Speaker 4: employers pushing people to get back into the office for example, 962 00:47:55,640 --> 00:47:58,640 Speaker 4: have we seen that decline? And you know, people moving 963 00:47:58,640 --> 00:48:02,560 Speaker 4: from New York City to Austin and for example, right. 964 00:48:02,400 --> 00:48:03,360 Speaker 5: I mean, I think we do. 965 00:48:04,160 --> 00:48:07,440 Speaker 14: But again there's two different types of buyers. There is 966 00:48:07,520 --> 00:48:11,520 Speaker 14: the retired buyer and there is the buyer that is 967 00:48:11,560 --> 00:48:14,960 Speaker 14: still working. And for the buyer that's still working, they 968 00:48:15,040 --> 00:48:17,440 Speaker 14: are likely to be going back to larger cities. And 969 00:48:17,520 --> 00:48:20,560 Speaker 14: in our coreologic homepress index, and actually a case Shiller 970 00:48:20,560 --> 00:48:24,120 Speaker 14: index that came out yesterday showed a stronger home press 971 00:48:24,120 --> 00:48:28,879 Speaker 14: appreciation or at least a less of a declined deceleration 972 00:48:29,000 --> 00:48:32,240 Speaker 14: in home press appreciation in markets that are more larger 973 00:48:32,280 --> 00:48:36,239 Speaker 14: employment markets such as Boston and Chicago for example. 974 00:48:36,880 --> 00:48:38,440 Speaker 5: And then you still have the. 975 00:48:38,440 --> 00:48:42,200 Speaker 14: Markets in southeast and south in Texas and Florida, and 976 00:48:42,239 --> 00:48:46,200 Speaker 14: Carolina's for example, where you do have retiree is going 977 00:48:46,239 --> 00:48:48,400 Speaker 14: and where you do have those folks that are not 978 00:48:48,520 --> 00:48:51,719 Speaker 14: necessarily tied to a desk in an office. So, you know, 979 00:48:52,000 --> 00:48:55,800 Speaker 14: I would say that the rate of migration has slowed 980 00:48:55,840 --> 00:48:58,640 Speaker 14: in some ways, but it has not completely stalled, you know. 981 00:48:58,719 --> 00:49:01,520 Speaker 14: I think what we're seeing is we're seeing trends going 982 00:49:01,560 --> 00:49:05,480 Speaker 14: back to pre pandemic levels. And you know, even at 983 00:49:05,520 --> 00:49:08,080 Speaker 14: those times, we did see a lot of migration to 984 00:49:08,160 --> 00:49:11,400 Speaker 14: those more affordable markets. 985 00:49:11,400 --> 00:49:13,720 Speaker 1: Someone talk to us about just kind of this new 986 00:49:14,120 --> 00:49:18,120 Speaker 1: construction market, new home sales market. We've heard that some 987 00:49:18,280 --> 00:49:22,160 Speaker 1: builders are actually offering to buy down a buyer's mortgage. 988 00:49:22,160 --> 00:49:24,239 Speaker 1: So the six or seven percent maybe is more like 989 00:49:24,280 --> 00:49:26,839 Speaker 1: a three or four percent are you seeing? Is that 990 00:49:27,360 --> 00:49:29,920 Speaker 1: pervasive out there? Is that a good business practice? Is 991 00:49:29,960 --> 00:49:32,520 Speaker 1: that what's needed to get people into these homes? 992 00:49:33,800 --> 00:49:37,720 Speaker 14: Well, I think in terms of affordability, it does seem 993 00:49:37,800 --> 00:49:41,440 Speaker 14: like it was needed. It wasn't until you know, in 994 00:49:41,600 --> 00:49:45,200 Speaker 14: new home sales inventory climb to some ten months supply 995 00:49:45,400 --> 00:49:47,640 Speaker 14: at the end of last year when mortgage rates peaked 996 00:49:47,680 --> 00:49:52,040 Speaker 14: and seven percent, and that's when homebuilders started of providing 997 00:49:52,200 --> 00:49:55,280 Speaker 14: mortgage rade buydowns and we did see home buyers coming 998 00:49:55,320 --> 00:49:57,080 Speaker 14: back sort of in hoards in some way. I mean 999 00:49:57,360 --> 00:49:59,279 Speaker 14: we can see that by the numbers that were just 1000 00:49:59,320 --> 00:50:04,359 Speaker 14: released yes today. So people are sensitive to mortgage expenses, 1001 00:50:04,560 --> 00:50:08,759 Speaker 14: and typical mortgage payment rose to all time high at 1002 00:50:08,800 --> 00:50:11,160 Speaker 14: the end of last year. So a lot of people 1003 00:50:11,239 --> 00:50:13,560 Speaker 14: are pushed out of the market. So I think it 1004 00:50:13,760 --> 00:50:17,920 Speaker 14: is helping, it is helping bring folks back. But you know, 1005 00:50:17,960 --> 00:50:20,640 Speaker 14: on the other side, I think one thing we have 1006 00:50:20,719 --> 00:50:23,480 Speaker 14: to keep in mind is that people, you know, there 1007 00:50:23,560 --> 00:50:25,680 Speaker 14: is no inventory in a lot of markets out there. 1008 00:50:25,719 --> 00:50:28,680 Speaker 14: There's just simply nothing to buy. So people are turning 1009 00:50:28,719 --> 00:50:31,560 Speaker 14: towards areas where there is something to buy. Because we 1010 00:50:31,640 --> 00:50:35,759 Speaker 14: do have you know, millennial population largest cohort in the 1011 00:50:35,920 --> 00:50:39,160 Speaker 14: US that is becoming of coming off first time home 1012 00:50:39,239 --> 00:50:42,160 Speaker 14: buying age. And there's some fifteen million of them. And 1013 00:50:42,239 --> 00:50:45,160 Speaker 14: so they you know, they have good jobs, they you know, 1014 00:50:45,200 --> 00:50:48,480 Speaker 14: they went through school, they have good incomes, and so 1015 00:50:48,680 --> 00:50:51,759 Speaker 14: they are you know, likely to want to buy a home. 1016 00:50:51,960 --> 00:50:56,520 Speaker 14: Irrespectable mortgage rates are right now, looking at the overall 1017 00:50:57,680 --> 00:51:02,360 Speaker 14: share of mortgages that were they were originated with mortgage 1018 00:51:02,440 --> 00:51:05,839 Speaker 14: rate buydowns, it has increased from zero. You know when 1019 00:51:05,880 --> 00:51:08,520 Speaker 14: we were at a record low mortgage rates to some 1020 00:51:08,600 --> 00:51:13,280 Speaker 14: three percent at its highest points in November in November 1021 00:51:13,280 --> 00:51:16,919 Speaker 14: of last year. So it does seem, you know, it's 1022 00:51:16,960 --> 00:51:20,080 Speaker 14: not a huge increase, but it is. It has helped 1023 00:51:20,200 --> 00:51:22,279 Speaker 14: us spur market activity again. 1024 00:51:22,400 --> 00:51:23,360 Speaker 7: Some really quickly. 1025 00:51:23,440 --> 00:51:25,880 Speaker 4: Final thirty seconds here to what extent are some of 1026 00:51:25,880 --> 00:51:29,440 Speaker 4: the headwinds you're talking about forcing millennials to kind of 1027 00:51:29,520 --> 00:51:30,479 Speaker 4: just say, all right. 1028 00:51:30,400 --> 00:51:31,799 Speaker 7: I'm never going to own a home. I'm just going 1029 00:51:31,840 --> 00:51:33,239 Speaker 7: to keep renting. Are you seeing that? 1030 00:51:34,680 --> 00:51:34,919 Speaker 5: Yeah? 1031 00:51:34,960 --> 00:51:37,239 Speaker 14: I mean I think that's always sort of been the 1032 00:51:37,320 --> 00:51:40,520 Speaker 14: case for younger you know, younger people when they were 1033 00:51:40,560 --> 00:51:43,160 Speaker 14: in their early twenties and up to you know, maybe 1034 00:51:43,200 --> 00:51:46,000 Speaker 14: twenty five, and they you know, get out of school 1035 00:51:46,040 --> 00:51:48,440 Speaker 14: and they get that first job and maybe it's not 1036 00:51:48,560 --> 00:51:52,359 Speaker 14: paying what they were hoping to, so they're very pessimistic 1037 00:51:52,400 --> 00:51:55,480 Speaker 14: about their home ownership opportunities. I mean, when you think 1038 00:51:55,520 --> 00:51:59,200 Speaker 14: back about a decade ago when we were talking about millennials, 1039 00:51:59,280 --> 00:52:02,520 Speaker 14: you know, becoming that eventually becoming that largest population, and 1040 00:52:02,560 --> 00:52:04,960 Speaker 14: we survey them and they said, no, I will never 1041 00:52:05,040 --> 00:52:07,960 Speaker 14: buy because what's the point, you know, it's so expensive, 1042 00:52:08,680 --> 00:52:12,000 Speaker 14: and they eventually did. So I think, you know, if 1043 00:52:12,040 --> 00:52:16,280 Speaker 14: We give people enough time to you know, understand housing 1044 00:52:16,320 --> 00:52:20,280 Speaker 14: market conditions to save some down payment, you know, and 1045 00:52:20,320 --> 00:52:23,920 Speaker 14: their wages go up and they they couple with another 1046 00:52:24,040 --> 00:52:27,160 Speaker 14: person to have more down payment and more income for 1047 00:52:27,239 --> 00:52:29,439 Speaker 14: that home. I think they will, they will come into 1048 00:52:29,480 --> 00:52:30,200 Speaker 14: the market. 1049 00:52:30,480 --> 00:52:32,280 Speaker 1: Salma, thank you so much for joining us. I always 1050 00:52:32,280 --> 00:52:36,400 Speaker 1: appreciate getting your thoughts and analysis. Sama have chief economist 1051 00:52:36,520 --> 00:52:40,520 Speaker 1: at core Logic talking about the residential real estate market again. 1052 00:52:40,560 --> 00:52:43,720 Speaker 1: We got that new home sales number was just really 1053 00:52:43,800 --> 00:52:47,200 Speaker 1: gangbusters and the fastest pace in more than a year. 1054 00:52:50,040 --> 00:52:53,120 Speaker 2: Thanks for listening to the Bloomberg Markets podcast. You can 1055 00:52:53,160 --> 00:52:56,960 Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever 1056 00:52:57,040 --> 00:53:00,760 Speaker 2: podcast platform you prefer. I'm Matt Miller. I'm on Twitter 1057 00:53:00,960 --> 00:53:03,000 Speaker 2: at Matt Miller nineteen seventy three. 1058 00:53:03,320 --> 00:53:05,720 Speaker 1: And I'm Faul Sweeney. I'm on Twitter at pt Sweeney. 1059 00:53:05,840 --> 00:53:08,480 Speaker 1: Before the podcast, you can always catch us worldwide at 1060 00:53:08,480 --> 00:53:10,239 Speaker 1: Bloomberg Radio.