WEBVTT - Powell Says More Good Inflation Data Would Boost Fed Confidence 0:00:02.920 --> 0:00:10.719 Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Business 0:00:10.720 --> 0:00:13.960 Wait inside from the reporters and editors who bring you 0:00:14.000 --> 0:00:18.360 America's most trusted business magazine, plus global business, finance and 0:00:18.400 --> 0:00:22.680 tech news. The Bloomberg Business Week Podcast with Carol Messer 0:00:23.040 --> 0:00:28.560 and Tim Stenebeck from Bloomberg Radio, Chess Manton and. 0:00:28.600 --> 0:00:31.640 David Gera Here in the Bloomberg Interactive Broker Studio. We 0:00:31.640 --> 0:00:34.760 were just speaking about how fetcher Jerome pal did say 0:00:34.960 --> 0:00:37.760 more good inflation data would still need to boost the 0:00:37.760 --> 0:00:40.120 Fed's confidence. But of course we will get another update 0:00:40.159 --> 0:00:44.080 on CPI David here on Thursday. So traders looking at that, 0:00:44.320 --> 0:00:46.599 and I wrote a story earlier today looking at sort 0:00:46.640 --> 0:00:48.800 of the options market what they were pricing in at 0:00:48.840 --> 0:00:51.640 the JP Morgan Trading dest sing a potential move here 0:00:51.680 --> 0:00:54.080 of about nine tenths of a percent. So that actually 0:00:54.080 --> 0:00:55.720 would be the biggest in about a month, because just 0:00:55.760 --> 0:00:57.880 a month ago we had CPI and the FED decision 0:00:57.920 --> 0:00:59.520 on the same day. But that is in line with 0:00:59.560 --> 0:01:03.000 the last three CPI prints. But we have two really 0:01:03.040 --> 0:01:05.160 great guests coming up to speak with us on this, 0:01:05.600 --> 0:01:08.560 so we'll also have Moly Smith, who's on our Economics Desk, 0:01:08.640 --> 0:01:13.119 but also Ira Jersey, who's Bloomberg Intelligence Headquarters in New Jersey. 0:01:13.200 --> 0:01:14.679 Get's going to speak with us, but first we're going 0:01:14.720 --> 0:01:16.720 to get a clip here hearing a little bit more 0:01:16.760 --> 0:01:19.120 of what Fed Chair Jerome pal had to say. So 0:01:19.319 --> 0:01:20.960 listen more of what he had to say about inflation 0:01:21.040 --> 0:01:22.760 as well as the path of interest rates. 0:01:23.200 --> 0:01:26.639 The most recent inflation readings, however, have shown some modest 0:01:26.680 --> 0:01:30.479 further progress and more good data would strengthen our confidence 0:01:30.560 --> 0:01:33.640 that inflation is moving sustainably toward two percent. We continue 0:01:33.680 --> 0:01:37.280 to make decisions meeting by meeting. We know that reducing 0:01:37.360 --> 0:01:41.000 policy restraint too soon or too much could stall or 0:01:41.040 --> 0:01:43.319 even reverse the progress that we've seen on inflation. 0:01:45.400 --> 0:01:48.200 All right, So that was obviously FED Chair Jerome Pale 0:01:48.320 --> 0:01:51.240 on Capitol Hill, who will be speaking tomorrow as well 0:01:51.280 --> 0:01:52.840 in front of the House. So I want to bring 0:01:52.880 --> 0:01:57.040 in Ira Jersey, who here works at Bloomberg News, who's 0:01:57.200 --> 0:01:59.720 our US interest rates strategiest and he's based actually at 0:01:59.720 --> 0:02:02.960 the Blue Intelligence headquarters in New Jersey, as well as 0:02:03.000 --> 0:02:06.400 Wally Smith, who is one of our top editors here 0:02:06.480 --> 0:02:09.320 for the economics desk. I'll start with you, Molly to 0:02:09.360 --> 0:02:12.040 kind of get a recap here of what people were 0:02:12.120 --> 0:02:14.720 expecting fed share pal to say versus what we ended 0:02:14.760 --> 0:02:15.400 up getting here. 0:02:15.639 --> 0:02:18.000 Yeah, very two, very different things. I think people were 0:02:18.040 --> 0:02:20.440 obviously hoping to get a bit more about the timing 0:02:20.520 --> 0:02:22.520 of when we might be seeing some interest rate cuts, 0:02:22.560 --> 0:02:25.120 and Powell on two occasions said he will not be 0:02:25.200 --> 0:02:28.079 offering any signals on the timing of interest rate cuts, 0:02:28.160 --> 0:02:29.960 which I said to the chat, I guess we can 0:02:30.000 --> 0:02:33.040 all go home, because it seems like that's really what 0:02:33.040 --> 0:02:35.400 we were all here for. And he then said again 0:02:35.440 --> 0:02:38.520 when another lawmaker had pressed him on the topic, had 0:02:38.560 --> 0:02:40.320 also said, yeah, I'm not really going to get into 0:02:40.400 --> 0:02:43.600 that today. So a bit of a bummer. So we're 0:02:43.639 --> 0:02:46.280 all still here sitting Okay, maybe one maybe two? 0:02:46.520 --> 0:02:50.200 Right TVD TVD Jersey. Let me turn to you. That's 0:02:50.240 --> 0:02:53.560 the editor's perspective. Let me get the market market strategy 0:02:53.600 --> 0:02:55.160 perspective on this is. But what were you listening for 0:02:55.200 --> 0:02:56.560 and what did you hear from the fed share today? 0:02:57.120 --> 0:02:59.000 Well, first, let me say that Laurie does a great 0:02:59.040 --> 0:03:01.680 job with the tea live chat. So if you're you know, 0:03:01.720 --> 0:03:03.640 if you can't listen to radio or watch TV and 0:03:03.680 --> 0:03:04.000 you have a. 0:03:04.000 --> 0:03:06.360 More live Yeah, for sure. 0:03:07.320 --> 0:03:09.919 I participate for example, and try to give my insights 0:03:09.960 --> 0:03:12.600 onto the rates market on those blogs as well. So 0:03:12.960 --> 0:03:16.640 the I think from j Powell, like like Laurie said, 0:03:16.760 --> 0:03:19.320 he said even in his prepared remarks that they were 0:03:19.360 --> 0:03:21.800 going meeting to meeting, he tried to say, where's data 0:03:21.840 --> 0:03:25.280 dependent as we can possibly be, and he reiterated that. 0:03:25.720 --> 0:03:28.920 So he didn't say anything broadly new in terms of 0:03:28.960 --> 0:03:32.520 the monetary policy perspective, but the fact that he reiterated 0:03:32.760 --> 0:03:35.400 basically what was said at in the June meeting minutes 0:03:35.440 --> 0:03:37.920 which were released last Wednesday when the market, when the 0:03:37.960 --> 0:03:40.800 bond market was closed, at least, I think was just 0:03:40.840 --> 0:03:44.160 telling in and of itself, because you know, it's pretty 0:03:44.160 --> 0:03:46.440 clear that they're trying to say, like, look, it might 0:03:46.440 --> 0:03:48.600 be September, it might be November, it might be December, 0:03:48.880 --> 0:03:50.760 but we're going to cut. The one thing that he 0:03:50.800 --> 0:03:52.880 did say that I think was important was he did 0:03:52.920 --> 0:03:57.280 reiterate that he didn't think that the next move as 0:03:57.320 --> 0:03:59.560 a hike was likely. And that's something that remember, just 0:03:59.560 --> 0:04:01.920 two months go, we were pricing for almost a twenty 0:04:01.920 --> 0:04:06.200 percent probability of a hike. That's almost being completely priced 0:04:06.200 --> 0:04:06.800 out of the market. 0:04:06.800 --> 0:04:08.600 Now, well, Molly, I want to bring you back into 0:04:08.640 --> 0:04:10.840 the conversation because David and I had mentioned we will 0:04:10.840 --> 0:04:13.360 get another update on CPI on Thursday. What are the 0:04:13.400 --> 0:04:15.920 expectations here from economists? 0:04:16.320 --> 0:04:19.279 Yeah, so probably going to get something that's a bit 0:04:19.320 --> 0:04:24.520 more of a maybe inflation still gradually coming down, if anything, 0:04:24.520 --> 0:04:26.960 maybe moving still a little bit sideways in this range 0:04:26.960 --> 0:04:29.240 that it's been in. You know we've seen which you know, 0:04:29.279 --> 0:04:32.359 Power alluded to today, the big moves in inflation have 0:04:32.640 --> 0:04:34.680 really are past us, which you know is to be 0:04:34.720 --> 0:04:37.120 expected at this point, there's less progress to be made 0:04:37.200 --> 0:04:39.600 and it's going to be coming in you know, smaller 0:04:39.680 --> 0:04:42.919 chunks with each report that we get. So there was 0:04:42.960 --> 0:04:45.640 definitely a lot of questions on housing inflation today and 0:04:45.839 --> 0:04:48.840 that there's you know, the best thing that Howell said 0:04:48.839 --> 0:04:51.159 that the Fed can do for the housing market is 0:04:51.160 --> 0:04:53.320 to get inflation back to two percent, so that that 0:04:53.400 --> 0:04:56.839 will hopefully then bring you know, treasury yields and interest 0:04:56.920 --> 0:04:59.080 rates back down and then make you know, mortgage rates 0:04:59.120 --> 0:05:02.520 also more affordable. So that's really yeah, to be expected 0:05:02.520 --> 0:05:05.000 from him. You know that they can't really control of course, 0:05:05.040 --> 0:05:08.279 that the US has a persistent structural shortage of housing, 0:05:08.320 --> 0:05:10.680 and that's what when he was saying, well, this is 0:05:10.800 --> 0:05:13.080 you on lawmakers to try to you know, that's more 0:05:13.160 --> 0:05:14.599 your job and that's not something that. 0:05:14.680 --> 0:05:15.040 We can do. 0:05:15.160 --> 0:05:16.320 And we're going to get into that a little bit 0:05:16.400 --> 0:05:18.560 later in the show. But Molly, let me ask you 0:05:18.560 --> 0:05:21.000 about the crucible in which this is happening. So this 0:05:21.040 --> 0:05:23.400 is before the Senate Banking Committee. You had a pretty 0:05:23.440 --> 0:05:26.000 forceful statement from the chair of that committee from Shared Brown, 0:05:26.279 --> 0:05:29.839 basically saying to the FED chair, stop raising rate stops 0:05:30.240 --> 0:05:32.839 bring rates down, that this is having a really deleterious 0:05:32.839 --> 0:05:34.640 effect on the American consumer, on those who want to 0:05:34.640 --> 0:05:37.120 buy houses. And there's also this kind of moment of 0:05:37.160 --> 0:05:39.680 emphasis on the chair's part about the independence of the 0:05:39.680 --> 0:05:41.520 Federal Reserve. As we see this kind of swirl of 0:05:41.520 --> 0:05:44.359 politics surrounding what might happen if Donald Trump were to 0:05:44.360 --> 0:05:46.600 be elected again, How did he deal with that sort 0:05:46.600 --> 0:05:48.159 of how did the setting of this kind of color 0:05:48.200 --> 0:05:50.000 your sense of what the FED chair had to say. 0:05:50.120 --> 0:05:52.800 Well, it seems like at least Powell and pretty much 0:05:52.839 --> 0:05:55.559 everyone on the Senate Banking Committee agrees that the FED 0:05:55.880 --> 0:05:58.480 is and should remain an independent institution, and that there 0:05:58.560 --> 0:06:01.440 was pretty unanimous support on that front, and you know, 0:06:01.480 --> 0:06:03.600 without of course addressing the elephant in the room that 0:06:04.120 --> 0:06:07.119 if Donald Trump were an elected president, that that's something 0:06:07.120 --> 0:06:09.520 that he's kind of looking to attack, right that he 0:06:09.839 --> 0:06:12.279 you know, wants to be a bit more involved somehow 0:06:12.320 --> 0:06:16.320 in how the FED sets monetary policy, and perhaps ousting 0:06:16.480 --> 0:06:20.040 Powell this was someone who he appointed. So yeah, clearly 0:06:20.080 --> 0:06:23.000 that there's a bit of you know, there's certainly a 0:06:23.000 --> 0:06:24.720 backdrop to all that, and I think he handled it 0:06:24.760 --> 0:06:27.960 pretty delicately and just stressing you know, the Fed's credibility 0:06:28.000 --> 0:06:29.480 really relies on its independence. 0:06:29.720 --> 0:06:32.000 Hey, I want to bring you back into the conversation. 0:06:32.080 --> 0:06:34.680 What are you seeing when we're talking about, say, speculative 0:06:34.720 --> 0:06:36.839 net positioning, when you're looking at the bond market, and 0:06:36.839 --> 0:06:39.839 what that tells us about where traders are betting, where 0:06:39.920 --> 0:06:41.800 rates could be headed in the second half of this year. 0:06:42.480 --> 0:06:44.880 Well, a lot of the spec positioning right now is 0:06:44.960 --> 0:06:48.720 really basis trade. So it's people trading futures versus cash. 0:06:48.800 --> 0:06:50.640 There's a little tiny bit of money to be made, 0:06:50.680 --> 0:06:52.680 So in order to be to make that money, though, 0:06:52.720 --> 0:06:54.600 you have to lever yourself a lot. So that's one 0:06:54.920 --> 0:06:58.159 reason why you have such large shorts and some of 0:06:58.200 --> 0:07:00.440 the some of the contracts. I want I go back 0:07:00.440 --> 0:07:02.800 to something that Molly said just a second ago, and 0:07:03.400 --> 0:07:05.960 you know that's about what J Powell and the FED 0:07:06.000 --> 0:07:10.000 independence argument, because you know, from a market perspective, I 0:07:10.040 --> 0:07:13.480 think that if the FED were will lose a significant 0:07:13.520 --> 0:07:16.400 amount of its independence, then you'd wind up in a 0:07:16.440 --> 0:07:18.960 situation where the bond market would probably sell off quite 0:07:19.000 --> 0:07:22.119 a bit and certainly get a much much steeper yield 0:07:22.120 --> 0:07:25.040 curve because it'd be worries that the FED would keep 0:07:25.040 --> 0:07:27.960 interest rates too low for too long in a future 0:07:28.040 --> 0:07:30.960 environment where you get more inflation. So I think that 0:07:31.000 --> 0:07:32.960 there is a risk there that something like that happens. 0:07:32.960 --> 0:07:35.440 And of course, you know, way back when when J. 0:07:35.600 --> 0:07:38.080 Powell was first appointed, I was actually surprised that Donald 0:07:38.080 --> 0:07:41.160 Trump appointed him because he appointed a mainstream kind of 0:07:41.480 --> 0:07:45.680 thinker from the from from the FED border governors instead 0:07:45.680 --> 0:07:48.160 of someone more duvish. So you know, Donald Trump will 0:07:48.160 --> 0:07:52.559 still have the opportunity to appoint Aduvish FED chair. He'll 0:07:52.600 --> 0:07:54.440 just have to wait, you know, eleven months to do that. 0:07:54.560 --> 0:07:56.960 And because that person won't take office till the beginning 0:07:57.000 --> 0:07:58.040 of twenty twenty six. 0:07:58.200 --> 0:08:00.440 Molly, we've talked a lot about inflation, is of course 0:08:00.440 --> 0:08:02.200 what we're all supposed to be talking about this part 0:08:02.240 --> 0:08:03.640 in the time, but we did get a little color 0:08:03.640 --> 0:08:05.840 from the FED chair on the labor market as well, 0:08:05.840 --> 0:08:07.360 And I wonder what stood out to you from from 0:08:07.360 --> 0:08:08.840 his comments. Of course, we have the rate now at 0:08:08.840 --> 0:08:10.920 four point one percent, but what did he say just 0:08:10.920 --> 0:08:13.160 sort of about his perspective, I guess the Fed's perspective 0:08:13.200 --> 0:08:15.160 on how healthy the jobs market is now? 0:08:15.280 --> 0:08:17.560 Yeah, I think you know, this is now starting to 0:08:17.560 --> 0:08:19.200 look a lot more like the jobs market that we 0:08:19.240 --> 0:08:22.360 had before the pandemic, which was a very healthy jobs market. 0:08:22.400 --> 0:08:25.040 And that Powell said something today that he hasn't really 0:08:25.120 --> 0:08:27.480 said yet but has probably been true for a while, 0:08:27.520 --> 0:08:30.360 that the labor market is no longer inflationary, and that 0:08:30.360 --> 0:08:33.199 that's something that you know, one economist I noticed that 0:08:33.280 --> 0:08:35.560 he had sent around to his distribution list that this 0:08:35.640 --> 0:08:37.319 has been the case for a while. But it's nice 0:08:37.320 --> 0:08:40.040 to see Powell finally acknowledging this because there has been 0:08:40.280 --> 0:08:43.559 so much concern about, you know, all these job openings 0:08:43.559 --> 0:08:47.200 and perhaps if that's propelling wages higher, or you know, 0:08:47.240 --> 0:08:49.600 what kind of inflationary environment that might get us into 0:08:49.720 --> 0:08:52.320 but he seemed to be, you know, a bit more 0:08:52.440 --> 0:08:55.320 comfortable with where the labor market is in relation to inflation, 0:08:55.480 --> 0:08:58.200 but certainly that you know, any like he's been saying, 0:08:58.200 --> 0:09:01.400 any unexpected weakening in the labor market could force the 0:09:01.440 --> 0:09:03.480 Fed to act a bit more aggressively. 0:09:03.800 --> 0:09:05.240 Molly, great to speak with you. Thank you very much. 0:09:05.240 --> 0:09:06.959 That's Molly Smith from our ECON team. Our thanks to 0:09:06.960 --> 0:09:09.839 Ira Jersey as well, chief US interest rate strategist to 0:09:09.840 --> 0:09:13.080 Bloomberg Intelligence, joining us from Bloomberg Intelligence headquarters just a 0:09:13.080 --> 0:09:15.560 bit south of here in New Jersey. And I know 0:09:15.559 --> 0:09:17.280 we want to get into some of what you're talking about, right, 0:09:17.400 --> 0:09:19.280 a knock on effect of this kind of very strange 0:09:19.320 --> 0:09:20.599 economic environment. 0:09:20.320 --> 0:09:24.280 That's right, and especially because why high rates have failed 0:09:24.280 --> 0:09:27.960 to dent record stock prices right now as well as 0:09:28.120 --> 0:09:30.680 home price is too. So who better to bring in 0:09:30.720 --> 0:09:34.600 than Bloomberg's own personal finance reporter, Suzanne Wooley, who's here 0:09:34.600 --> 0:09:37.280 in the Bloomberg Interactive Brokers studio. Thanks so much for 0:09:37.360 --> 0:09:40.280 joining us this afternoon. And it's interesting because you wrote 0:09:40.280 --> 0:09:43.120 about how more people in the market right now, especially 0:09:43.120 --> 0:09:45.000 when you're thinking about stocks and what's happening with housing 0:09:45.040 --> 0:09:48.040 prices staying relatively high here, but it's still a confusing 0:09:48.120 --> 0:09:51.360 world of finance. And this is also you wrote for 0:09:51.880 --> 0:09:54.880 her latest Bloomberg Business Week story here, So walk us 0:09:54.880 --> 0:09:57.520 through this sort of dynamic, especially coming out of the pandemic, 0:09:57.520 --> 0:09:59.760 and how unique this is compared to history. 0:10:00.160 --> 0:10:02.040 Well, for most of us, we went through such a 0:10:02.040 --> 0:10:05.280 long period of really reads near zero, you know, back 0:10:05.360 --> 0:10:07.640 in twenty twenty it's early as twenty twenty two though, 0:10:07.679 --> 0:10:10.200 they were at zero point zero eight percent. Now this 0:10:10.280 --> 0:10:12.680 is the federal funds, right that I'm talking about. Now 0:10:12.679 --> 0:10:16.560 it's around five point three percent, so very abrupt ramp up. 0:10:16.600 --> 0:10:18.920 You know, they're like eleven fed hikes and something like 0:10:18.960 --> 0:10:20.720 a sixteen month period, right. 0:10:20.600 --> 0:10:21.760 So came on big. 0:10:22.200 --> 0:10:24.439 And normally the script would be that we would expect 0:10:24.480 --> 0:10:27.200 the stock market to take a hit, and you know, 0:10:27.280 --> 0:10:30.520 housing with mortgage rates now at seven percent, in twenty 0:10:30.559 --> 0:10:33.200 twenty one they were like around three percent, you expect 0:10:33.240 --> 0:10:36.880 that to take a hit. Hasn't happened, obviously, you know. 0:10:37.679 --> 0:10:40.200 And a big reason with the stock market is of course, AI, 0:10:40.720 --> 0:10:44.760 right is just like powered over everything, and you know 0:10:44.800 --> 0:10:49.640 when you look at the SMP and Vidia, it contributed 0:10:49.679 --> 0:10:53.240 by thirty percent of the index is gained to date. 0:10:53.679 --> 0:10:57.920 You know, Microsoft contributed another ten percent. So AI is 0:10:58.120 --> 0:11:02.160 just sending it, you know, a market cap index flying. 0:11:01.960 --> 0:11:05.080 And even things beyond traditional tech and gross stocks. If 0:11:05.080 --> 0:11:07.760 you look at utilities with people think it's more kind 0:11:07.760 --> 0:11:10.400 of steady diven in low volatility. But if you have 0:11:10.559 --> 0:11:13.280 the particular sub industry groups within it that are related 0:11:13.280 --> 0:11:15.959 to data center businesses, those have taken off at certain 0:11:15.960 --> 0:11:17.199 points this year two exactly. 0:11:17.240 --> 0:11:19.280 It's like an AI is, you know, an energy play. 0:11:19.320 --> 0:11:22.439 It's such a huge energy guzzler, you know, so those 0:11:22.440 --> 0:11:24.480 things have propped it up and underneath when you look 0:11:24.520 --> 0:11:27.440 under the hood at the SMP. I was just listening 0:11:27.480 --> 0:11:30.400 to Goldman Sachs's mid year investment outlook and one of 0:11:30.480 --> 0:11:32.920 their experts was talking about, how, you know, the average 0:11:32.960 --> 0:11:35.480 gain and the stock for the SMP for the year 0:11:35.559 --> 0:11:38.520 is like three percent, you know, so beneath the breadth 0:11:38.679 --> 0:11:41.560 as we know is just so narrow. In the mag 0:11:41.640 --> 0:11:44.600 seven or mag whatever they are now six ' five. 0:11:44.840 --> 0:11:45.880 Right, we've gone from a lot of. 0:11:48.880 --> 0:11:50.520 I want to ask you about the kind of consumer 0:11:50.679 --> 0:11:53.000 psychology aspect of this. There's such a great line in 0:11:53.040 --> 0:11:55.000 your piece about how for most people into the age 0:11:55.040 --> 0:11:56.440 of thirty five, they never had to live in a 0:11:56.440 --> 0:11:58.960 world where rates are what they are. You talk about 0:11:59.200 --> 0:12:01.480 what we've become a custom them to. How have you 0:12:01.480 --> 0:12:03.360 found as you talk to people reporting out this piece, 0:12:03.559 --> 0:12:06.440 what council have they given people who might long for 0:12:06.520 --> 0:12:09.760 those lower rates not even not even know that they 0:12:09.800 --> 0:12:11.000 used to be as high as they are in higher 0:12:11.000 --> 0:12:11.600 see right. 0:12:11.640 --> 0:12:14.280 Well, I mean some people are saying, listen, you know 0:12:14.360 --> 0:12:16.880 these rates are really not that unusual when you look 0:12:16.920 --> 0:12:21.000 over the long scheme of things, so you know they 0:12:21.240 --> 0:12:25.240 people are thinking that rates I mean a lot of 0:12:25.240 --> 0:12:27.079 people think rates will go down now with people are 0:12:27.080 --> 0:12:29.120 saying that the Fed maybe we'll get one cut in 0:12:29.600 --> 0:12:32.840 September and such. But you really have to sort of 0:12:32.880 --> 0:12:36.640 rethink some of your basics. There are a lot of 0:12:36.640 --> 0:12:39.559 people who have gotten into buy now, pay later loans. 0:12:39.520 --> 0:12:42.160 Which we know so little about still exactly. 0:12:42.200 --> 0:12:43.800 It's sort of a black box in a way. 0:12:44.360 --> 0:12:47.000 And we had a poll on a Harris poll don 0:12:47.320 --> 0:12:49.280 back in April that showed that forty three percent of 0:12:49.280 --> 0:12:54.560 people in those loans were behind in their payments. And 0:12:55.760 --> 0:12:57.600 you know, that's an area where they're going to feel 0:12:57.600 --> 0:13:00.840 a lot of interest rate pressure, but also just in 0:13:00.880 --> 0:13:03.200 buying a home you have to sort of think through 0:13:03.240 --> 0:13:07.640 it a bit differently because if you want to get 0:13:07.640 --> 0:13:13.280 a seven percent mortgage rate, you know, and rates don't 0:13:13.280 --> 0:13:16.520 go down that much, you really can't. I mean, it's 0:13:16.559 --> 0:13:19.240 not why is to take a flyer and. 0:13:19.200 --> 0:13:21.079 Just think, oh, yeah, you're down the road, I'll be 0:13:21.160 --> 0:13:22.360 down to whatever. 0:13:22.600 --> 0:13:22.880 You know. 0:13:23.080 --> 0:13:25.319 Do we see people taking more flexible rates or are 0:13:25.320 --> 0:13:28.439 trying different? Are they just wedded to the notion that 0:13:28.440 --> 0:13:29.880 it's going to be high or where it is? 0:13:29.920 --> 0:13:32.960 For there are little pockets that are starting to pop up, 0:13:33.080 --> 0:13:36.679 Like there's something called it's a little complicated, but it's 0:13:36.679 --> 0:13:40.920 an assumable mortgage, and it's when you can actually assume 0:13:41.440 --> 0:13:44.440 the seller's mortgage at their rate. Interesting, you know, at 0:13:44.480 --> 0:13:47.560 their you know, it's it's complicated to do. But more 0:13:47.600 --> 0:13:51.040 startups are popping up to create a sort of a 0:13:51.080 --> 0:13:54.520 more organized market for these assumable mortgages because it's so appealing. 0:13:54.880 --> 0:13:57.040 If you could just inherit someone's three percent mortgage, that 0:13:57.080 --> 0:13:59.760 would be great. It's very expensive because you have to 0:13:59.800 --> 0:14:02.680 sort of pay the premium on their home and you 0:14:02.720 --> 0:14:05.959 have to pay off the equity that's in their mortgage, so. 0:14:05.920 --> 0:14:07.439 You need a lot of fun money for that. 0:14:07.840 --> 0:14:11.520 Yeah, it's not an appealing option for most people. 0:14:11.840 --> 0:14:13.960 Well, we only have about forty five seconds left. But 0:14:14.000 --> 0:14:16.560 what do you think are the biggest takeaways for people 0:14:16.600 --> 0:14:18.680 to take from your story? As well as how long 0:14:18.760 --> 0:14:21.640 this dynamic can continue, which obviously a million dollar questions. 0:14:22.960 --> 0:14:25.320 I think a lot of people that I spoke with, 0:14:25.440 --> 0:14:28.920 more of the financial planner types, were just giving some 0:14:28.960 --> 0:14:32.080 good solid advice about diversification and if you're sitting on 0:14:32.120 --> 0:14:34.440 some really big equity gains, and now, particularly in tech, 0:14:34.880 --> 0:14:37.200 they've been telling some of their clients, you know, maybe 0:14:37.320 --> 0:14:40.720 do a little profit taking, just make sure you're diversified 0:14:41.480 --> 0:14:44.560 because there's just so much talk right now about it 0:14:44.720 --> 0:14:48.040 expecting greater volatility, how long this lasts, which we've been 0:14:48.040 --> 0:14:51.400 hearing forever, But they're just kind of telling people to 0:14:51.400 --> 0:14:53.680 remember if they need to rebalance now, they can get 0:14:53.720 --> 0:14:55.000 five percent on a bot. 0:14:55.320 --> 0:14:58.560 Right. Well, that was Sulisane really personal finance reporter at 0:14:58.560 --> 0:15:02.000 Bloomberg News on why hireing have failed to dent record 0:15:02.200 --> 0:15:04.920 stock prices and housing prices here, thanks so much for 0:15:05.000 --> 0:15:08.080 joining us. Well more coming up, this is Bloomberg. 0:15:09.720 --> 0:15:13.200 You're listening to the Bloomberg Business Week podcast. Catch us 0:15:13.280 --> 0:15:16.520 live weekday afternoons from two to five pm. Easter listen 0:15:16.560 --> 0:15:18.720 on Apple car Play and then brought auto with a 0:15:18.760 --> 0:15:22.920 Bloomberg Business app or watch us live on YouTube. 0:15:23.880 --> 0:15:26.840 And another really interesting story, David, that is in the 0:15:26.920 --> 0:15:29.960 terminal that we've been reading here is about looking at 0:15:29.960 --> 0:15:33.240 Bobby Jane's complex hedge fund debut and how it's spawning 0:15:33.320 --> 0:15:37.200 fans as well as doubters to Who better to come 0:15:37.200 --> 0:15:40.040 in than the author of the story, Ahemma Palmer, who's 0:15:40.080 --> 0:15:43.160 here at one of our hedge fund reporters at Bloomberg 0:15:43.200 --> 0:15:46.200 News in New York in studio with us. So walk 0:15:46.280 --> 0:15:49.440 us through your story here about Bobby Jane's fund. What 0:15:49.600 --> 0:15:53.720 makes it so complex such that it is unprecedented? 0:15:53.960 --> 0:15:56.560 Yes, So what he's trying to do here is launch 0:15:56.600 --> 0:16:00.520 a fully formed multi strategy hedge fund. Means is going 0:16:00.560 --> 0:16:03.440 to trade six strategies on day one when it launched 0:16:03.520 --> 0:16:06.280 July first trade all of those strategies, have the teams 0:16:06.320 --> 0:16:09.560 built out, have everyone hired in the right seats, all 0:16:09.600 --> 0:16:14.360 the operational back and operational infrastructure and back office teams. 0:16:14.520 --> 0:16:17.680 It's a pretty big undertaking. It's never been done before. Typically, 0:16:17.680 --> 0:16:20.400 hedge funds start out small with one or two strategies, 0:16:20.440 --> 0:16:23.200 and then they add on more over time. What he's 0:16:23.280 --> 0:16:26.880 doing here is birthing a fully formed multi shrat heedge fund. 0:16:27.000 --> 0:16:29.160 Why is he going this route? So you describe the 0:16:29.200 --> 0:16:31.760 complications of doing that. He has been ambitious about what 0:16:31.760 --> 0:16:33.240 he hoped to raise, raised a little less than I 0:16:33.240 --> 0:16:35.520 think what he wanted to the very beginning here. But 0:16:35.560 --> 0:16:38.560 I think of a hedge fund starting in this environment 0:16:38.600 --> 0:16:41.480 in particular, how complicated that must be, how difficult it 0:16:41.560 --> 0:16:43.080 must be the line of the talent, of the technology 0:16:43.120 --> 0:16:44.160 infrastructure to do all of this. 0:16:44.480 --> 0:16:48.240 Absolutely, it's very challenging in this fundraising environment too. His 0:16:48.360 --> 0:16:52.480 thinking is that it's more efficient when you start a 0:16:52.560 --> 0:16:55.040 firm of the size doing these many different types of things. 0:16:55.080 --> 0:16:57.560 If you build the infrastructure from the ground up ready 0:16:57.600 --> 0:17:00.200 for all the different parts, then you're less likely to 0:17:00.200 --> 0:17:03.800 have duplicate costs, duplicate talent. It's going to be more efficient. 0:17:03.920 --> 0:17:07.040 Every system will have everything it needs in order to 0:17:07.080 --> 0:17:09.600 get going, and you don't need to add on things 0:17:09.640 --> 0:17:13.840 later and then double over on expenses and everything. He 0:17:13.920 --> 0:17:16.320 also was trying to build a system where even if 0:17:16.359 --> 0:17:19.240 in the future, he adds more talent and has more 0:17:19.280 --> 0:17:22.000 money to invest that the cost of operating the business 0:17:22.080 --> 0:17:23.560 don't scale proportionally to that. 0:17:24.240 --> 0:17:24.920 Talk to us more. 0:17:24.880 --> 0:17:28.840 About the asset raising environment right now. In some of 0:17:28.840 --> 0:17:32.080 the top challenges, it's really tough out there to be 0:17:32.160 --> 0:17:32.680 raising money. 0:17:32.760 --> 0:17:34.800 So five point three is a good amount of change 0:17:34.960 --> 0:17:36.840 to be starting a hedge fund with it. It's the 0:17:36.840 --> 0:17:39.639 second biggest launch that we've seen in years, is the 0:17:39.640 --> 0:17:43.399 biggest launch we've seen this year. But the environment is 0:17:43.440 --> 0:17:47.760 tricky for a few reasons. Firstly, investors are not getting 0:17:47.800 --> 0:17:51.359 as much money back from private equity from distributions as 0:17:51.359 --> 0:17:53.359 they have been in the past, and so that limits 0:17:53.359 --> 0:17:55.400 how much money they have to put to work, though 0:17:55.440 --> 0:17:58.320 also a lot more cautious about every dollar they want 0:17:58.359 --> 0:18:01.600 to put to work. You have an option, You have 0:18:01.640 --> 0:18:05.760 optionality between the hot private credit markets or a multishat fund, 0:18:06.000 --> 0:18:11.320 and they've been so somewhat underperforming recently. You're seeing a 0:18:11.320 --> 0:18:14.240 lot of questions over should we even invest in hedge 0:18:14.240 --> 0:18:16.639 funds or do we put it someplace else? With each dollar? 0:18:16.680 --> 0:18:18.600 Do we want to take the day one risk in 0:18:18.600 --> 0:18:20.760 investing in a brand new manager and a new fund 0:18:21.000 --> 0:18:23.760 versus a tried and true option. So LP's a weighing 0:18:23.800 --> 0:18:27.159 all of these things, and every dollar is harder to 0:18:27.160 --> 0:18:29.040 get these days than it has been in some time. 0:18:29.400 --> 0:18:33.080 The piece opens with a meal a pitch at the 0:18:33.080 --> 0:18:36.360 seafood restaurant at the Breakers in South Florida. Bobby Jaen 0:18:36.440 --> 0:18:39.359 making this overture to a Middle East sovereign wealth fund 0:18:39.920 --> 0:18:42.000 I believe ultimately ponies up. I think about close to 0:18:42.040 --> 0:18:44.720 a billion dollars to the fund. How has he made 0:18:44.760 --> 0:18:48.360 that pitch? How is he trying to convince investors, yes, 0:18:48.480 --> 0:18:50.280