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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg

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Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern

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Speaker 1: on Apple CarPlay or Android Auto with the Bloomberg Business App,

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Speaker 1: Listen on demand wherever you get your podcasts, or watch

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Speaker 1: us live on YouTube.

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Speaker 2: We have a perfect guest to speak of our equity.

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Speaker 2: Conversation of the day is stephenoth He is with Federated

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Speaker 2: him as we're thrilled that he could join us here

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Speaker 2: this morning. Just as a general statement, and it goes

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Speaker 2: back to the day you and I looked at AOL

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Speaker 2: Time Warner and said, really, did these deals work out?

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Speaker 2: My answers, No, there's no evidence they're a value.

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Speaker 3: Add They haven't added a lot of value.

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Speaker 2: Tom. It's gotta go longer than nasty, but it's not TV.

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Speaker 2: You gotta have longer.

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Speaker 3: This is an interesting deal though, I mean, you know,

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Speaker 3: Netflix getting ahold of these studios.

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Speaker 2: I think it's it.

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Speaker 3: Could really I've been the whole Hollywood industry.

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Speaker 2: I think that's what can create profit where Federated can

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Speaker 2: invest in it.

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Speaker 3: We're not in Netflix. Well, we're in all these stocks,

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Speaker 3: but we're not heavy there. You know, we we'd rather

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Speaker 3: on on these mag seven names. We kind of play

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Speaker 3: relative value, and for us right now, Amazon is maybe

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Speaker 3: a better value if you will. I mean, people talk

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Speaker 3: about a bubble, but you can buy Amazon at eighteen

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Speaker 3: times cash flows. It's really not bad for a company

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Speaker 3: that we look at it and say to you, you're

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Speaker 3: you're getting aws AI and you're kind of getting the

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Speaker 3: retail business for free.

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Speaker 2: Yep.

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Speaker 4: See twenty twenty five. It has been a really wonderful

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Speaker 4: year for investors. I mean, fifteen percent in the S

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Speaker 4: and P twenty percent in the NASTAC fixed income, high

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Speaker 4: single digit returns. What's kind of the setup for twenty

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Speaker 4: twenty six for you guys?

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Speaker 2: We think it's pretty good.

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Speaker 3: We've got a two year target of eighty six hundred,

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Speaker 3: we've got seventy eight hundred for next year, and really

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Speaker 3: driven by earnings growth. At this stage, we've got earnings

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Speaker 3: at yeah, three ninety out three years, and you know

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Speaker 3: Stock's eight nominal GDP growth. Nominal GDP growth looks really

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Speaker 3: good to us. You've got the AI revolution driving earnings,

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Speaker 3: You've got enormous productivity. We've got GDP next year up

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Speaker 3: three percent. I think the consensus is two we've been

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Speaker 3: on the high side along, we've been more right than

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Speaker 3: wrong on that. But you know, you've got a lot

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Speaker 3: of stimulus coming next year that we think could get

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Speaker 3: you a surprise on the upside, and with the job

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Speaker 3: market relatively stable, that means a big boost in productivity,

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Speaker 3: which is a big boost in earning. So I think

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Speaker 3: the setup looks pretty good.

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Speaker 2: Paul, SPX eighty six hundred, I'm all in is Dow

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Speaker 2: sixty thousand?

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Speaker 4: Yeah, a forty eight.

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Speaker 2: I've never done that. I've never done That's the first.

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Speaker 4: Again, what sectors kind of screen well for you guys, Steve,

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Speaker 4: because we've had tech has been such a start for

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Speaker 4: so long, and then the AI story over the last

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Speaker 4: two or three years has been the star.

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Speaker 5: What sectors screenwall.

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Speaker 3: Right, So what we're trying to do is we don't

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Speaker 3: want to be out of this AI trade because it's

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Speaker 3: the driver, but we're just modestly overweight those stocks and

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Speaker 3: again playing relative value within there, and we think the

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Speaker 3: big picture next year is finally this broadening out happens.

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Speaker 3: The FED cutting helps the interest rates sensitive parts of

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Speaker 3: the economy that have been suffering, so that starts to

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Speaker 3: live housing, regional banks, emerging markets actually had a good

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Speaker 3: year this year off of very low levels. We think

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Speaker 3: that's a really interesting place. So we are playing this

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Speaker 3: broadening out trade, but not going underweight or avoiding. The

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Speaker 3: drivers of the same witch are the tech stocks, but

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Speaker 3: we think they're kind of they're going to becoming a

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Speaker 3: relative value play within there. We don't really see them

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Speaker 3: as necessarily leading the market forward next year.

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Speaker 2: Help us with the gloom that's out there. Three years

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Speaker 2: of double digit return. People are modeling a fourth year

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Speaker 2: of double digit return. It's like three times Paul. Since

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Speaker 2: World War Two, we've had this oddity. How should people cautious,

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Speaker 2: including clients have federated, How should they be enthusiastic if

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Speaker 2: they don't feel that way.

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Speaker 3: Well, what we've been saying, Tom, is we're in a

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Speaker 3: secular bull market here. This is only the third one

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Speaker 3: in the last hundred years. They happen after you've had

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Speaker 3: a fifteen year bear where everyone is lost a lot

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Speaker 3: of money, which they did between ninety nine and thirteen,

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Speaker 3: and they're forever cautious for a generation.

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Speaker 2: The scar that's what it's like. Depression, be right, That's.

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Speaker 3: What drives the bull and that's why here you know,

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Speaker 3: as soon as we get a little bit of a pop,

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Speaker 3: everyone's talking about bubbles. We put out on our website

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Speaker 3: earlier this week a bubble monitor, because in our experience,

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Speaker 3: you've got to look at bubbles from the perspective of

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Speaker 3: several different dementi that tend to happen kind of in

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Speaker 3: conjunction with one another, not just one. So overinvestment one

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Speaker 3: people talk a lot about. But excess liquidity, we're not there. Actually,

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Speaker 3: the Fed's probably too tight regulatory errors.

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Speaker 2: We're not there. You know.

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Speaker 3: Over investment you could sort of make the case maybe,

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Speaker 3: but if you look at the levels of investment relative

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Speaker 3: to GDP in this phase, it's still below what you

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Speaker 3: saw in the other big industrial revolutions, and it's being

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Speaker 3: funded by cash excess debt, we're not there. And over evaluations,

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Speaker 3: we just went through the story on Amazon. I don't

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Speaker 3: think we're there yet either. So we've got a few

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Speaker 3: things for lashing y'all. A little bit of fraud out

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Speaker 3: there that's never good. But you know, we think generally

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Speaker 3: we're early. Before you start calling for a bubble.

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Speaker 2: To get your Wednesday started. Stephen off with this, he's

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Speaker 2: a federal inter mens here Inequity's got a real equity show.

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Speaker 2: We'll do some bonds with Irig Jersey later, and we'll

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Speaker 2: do some real estate as well. We're doing commodities today,

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Speaker 2: we can do that. We'll do commodities as well. Paulstrading

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Speaker 2: and Time Keen. The way you listen to us, Thank you,

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Speaker 2: ninety ninety one FM, Nathan Hager Radio in Washington, ninety

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Speaker 2: two nine FM in Boston, Bloomberg eleven three zero here,

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Speaker 2: and of course on YouTube. Subscribe. The way you do

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Speaker 2: is somebody asked me the other day, how do I

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Speaker 2: get you on YouTube? Okay, here's the way you go.

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Speaker 2: On Bloomberg Podcasts. Up comes Bloomberg Podcasts. We do the

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Speaker 2: live show every morning. Subscribe to Bloomberg Podcasts on YouTube

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Speaker 2: to see handsome Steve Off.

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Speaker 4: Yeah, just click a button. There you go, Steve. How

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Speaker 4: about US equities versus maybe rest of world equities. We

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Speaker 4: had a little bit of a migration earlier in the

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Speaker 4: year out of the US maybe into Europe and some

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Speaker 4: other markets. How do you think about that?

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Speaker 3: Yeah, I mean those markets were really cheap, and a

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Speaker 3: lot of it was actually a currency place. Okay, yeah,

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Speaker 3: because you know that was a big move I just

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Speaker 3: came back in September. I was out in Japan with

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Speaker 3: our Japanese analysts and just came back last week from

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Speaker 3: a long trip out to Europe talking to folks out there,

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Speaker 3: so I'm a little fresh on that. And I would

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Speaker 3: say this, if you look at EFA, which is a

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Speaker 3: technical term for basically the developed world outside the USA,

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Speaker 3: Europe looks okay to US. You know, it's not as

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Speaker 3: cheap as it used to be relative to US, it's

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Speaker 3: still relatively inexpensive, and the downside isn't really there the

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Speaker 3: econ you know, the governments are spending more money thanks

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Speaker 3: to President Trump on defense, but on the other hand,

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Speaker 3: there's not a lot of upside and there's not a

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Speaker 3: lot of AI technology in Europe, so it's kind of backstage.

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Speaker 3: We think it's okay. Japan is really interesting. It's it's

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Speaker 3: you know, restructuring, first time the real estate markets finally

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Speaker 3: come back after thirty years. Tom you probably remember the

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Speaker 3: days when Tokyo real estate was more expensive than all

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Speaker 3: of the United States, et cetera. But it's starting to

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Speaker 3: really come back now. So we think that's interesting. But

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Speaker 3: basically the way we're staged here is we're modestly overweight

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Speaker 3: so called EFA Developed because of Japan. We're overweight EM

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Speaker 3: because emerging markets is the only place outside the US

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Speaker 3: where you can get technology stocks basically in Asia, and

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Speaker 3: we think that looks interesting. We think Latin America next

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Speaker 3: year looks pretty interesting. So we're overweight there, but our

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Speaker 3: big overweights remain in the US because that's where you know,

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Speaker 3: this is the leaders here in this industrial revolution.

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Speaker 4: Right, I mean, evaluation here is just extraordinary, isn't it.

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Speaker 3: Well, As I said earlier, I think on the max

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Speaker 3: seven in some cases it is are, but there's other

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Speaker 3: ones in there that look pretty valuable and pretty cheap.

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Speaker 3: And then on the other side of it, the rest

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Speaker 3: of the broader market actually is inexpensive. So we think

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Speaker 3: in the US the big story next year is finally

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Speaker 3: this broadening out trade. It's going to benefit from these

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Speaker 3: raid cuts from the FED, the regional banks, the housing sector,

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Speaker 3: the industrials.

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Speaker 2: So you know, we're.

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Speaker 3: Playing the broadening out trade in the US, hanging in

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Speaker 3: there with the US tech stocks but trading relative value

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Speaker 3: and then looking outside for more attack in Asia.

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Speaker 2: Let's go William Priest here, what is the Steve Off?

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Speaker 2: What is a steve ofth process to identify quality free

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Speaker 2: cash flow growth.

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Speaker 3: Right, So you know people talk about quality and I

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Speaker 3: had never met a PM in my life who didn't

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Speaker 3: say he buys quality stocks. So you know, you got

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Speaker 3: to define it so that we start with a management

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Speaker 3: team that we believe in and has a track record

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Speaker 3: of growth. The second is we look at cash flows

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Speaker 3: being generated by the business in a business position that

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Speaker 3: can sustain and protect those cash flows. And we want

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Speaker 3: to see cash flows. We want to see pretty good,

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Speaker 3: solid balance sheets. We don't want to see people playing

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Speaker 3: around with fake earnings.

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Speaker 2: Because the time I got to bring this up, folks,

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Speaker 2: this is so important what you're hearing here. This is

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Speaker 2: like the mistakes that are made out there. The fundamental

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Speaker 2: outlaw underlying of quality free cash flow is the partial

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Speaker 2: differential of revenue growth. What you started with anominal yeah

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Speaker 2: GDP absolutely, if you don't have a revenue growth beeps

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Speaker 2: above norm however you want, you know, fan distribution whatever.

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Speaker 2: If you don't have revenue growth, you can't get down

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Speaker 2: to the bottom of the feld.

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Speaker 3: You can't get cash flaw.

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Speaker 2: Yeah, it's just that simple part. I can't say nominal

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Speaker 2: GDP is where I am.

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Speaker 4: Steve, we said the biggest IPO of the year, price

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Speaker 4: less name Medline.

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Speaker 2: I missed this.

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Speaker 4: What is it? I mean, six point three billion dollar IPO.

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Speaker 4: That's going to be kind of a bullish sign, right,

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Speaker 4: I mean, I mean it just seems like if you're

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Speaker 4: raising that kind of capital in this market for a

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Speaker 4: traditional healthcare company, what do you make of that?

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Speaker 3: The middle syllable economy is confidence.

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Speaker 5: YEP.

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Speaker 3: So you're absolutely rightful with that question. It's something when

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Speaker 3: I review everything's going on with our board every quarter,

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Speaker 3: our clients. I look at IPO activity M and a

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Speaker 3: activity of late. I found myself kind of as the

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Speaker 3: reception a Federal Hermes after five pm when the regular

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Speaker 3: staff goes home and you've got these road shows coming through. Uh,

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Speaker 3: and it's you know, Steve is introducing me able to you.

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Speaker 3: But you know there's a lot of activity there. We're

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Speaker 3: never not nowhere near back the bubble days, if you will,

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Speaker 3: when things are really popping through lunches.

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Speaker 2: Yeah.

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Speaker 3: I love to see this activity because to me, it

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Speaker 3: is a sign that animal spirits are coming back into

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Speaker 3: the economy, and that's what drives everything else.

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Speaker 2: Medline MDL and thank you Paul, I miss this completely.

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Speaker 2: Did you get your eight thousand shares?

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Speaker 6: Yes?

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Speaker 2: Sure, absolutely, I just want to be sure we're taking

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Speaker 2: care of But this is like, Paul, this is like

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Speaker 2: the way it used to be. I mean, and you said.

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Speaker 4: We're seeing some M and A activity out there, We're

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Speaker 4: seeing some IPO activity out there. A lot of that

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Speaker 4: boats I mean, or suggests that the market's pretty comfortable

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Speaker 4: with where things are right here. So get that thing.

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Speaker 2: Steve, wonderful to have you in. Thank you. Likewise, stranger

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Speaker 2: Stephen a legend at Princeton Federated amazild that he could

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Speaker 2: come in stay with us. More from Bloomberg Surveillance coming

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Speaker 2: up after this.

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Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us Live

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Speaker 1: weekday afternoons from seven to ten am Eastern Listen on

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Speaker 1: Applecarplay and Android Otto with the Bloomberg Business app, or

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Speaker 1: watch us live on YouTube.

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Speaker 2: One of my great inventions is the phrase chart paragraph. Charter.

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Speaker 2: Came out of Bear Stearns and Golden Sex years ago,

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Speaker 2: John Writing's work. David Malpasses worked on Ossius and Dudley

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Speaker 2: and the team there carrying on that tradition. Eric Winnigrad

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Speaker 2: is brilliant at Alliance Bernstein doing the chart paragraph thing.

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Speaker 2: I want to get to aggregate paycheck in a moment.

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Speaker 2: Steve Authur new Guests just came in with a wild

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Speaker 2: two year optimism on the equity market and the equivalent

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Speaker 2: Dow is now fifty nine sixty thousand, and he pins

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Speaker 2: it off nominal GDP gus current GDP, real GDP plus

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Speaker 2: the inflation component. What do you see out two years?

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Speaker 7: Well, so I think that's the important part of that

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Speaker 7: is the inflation component. Right, A nominal GDP has been

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Speaker 7: elevated this year because inflation has been sticking. With inflation

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Speaker 7: still running three percent, nominal GDP is going to be higher,

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Speaker 7: and Steve is right, equities benefit from higher nominal GDP.

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Speaker 5: So that all makes sense.

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Speaker 7: The question on a forward basis is, if inflation comes down,

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Speaker 7: as we expect that it will, what does real GDP do?

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Speaker 7: What does real growth do? And I think the jury's

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Speaker 7: out on that. You can tell optimistic stories around AI

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Speaker 7: and the booster productivity history tells you it usually takes

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Speaker 7: longer than a year or two for these technological advances

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Speaker 7: to really manifest themselves in terms of massive productivity growth.

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Speaker 7: So we share the idea that the economy will continue

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Speaker 7: to expand. I would say that we are not quite

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Speaker 7: as optimistic as Steve seems to be. I'm an economist,

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Speaker 7: or sort of. I lose my guild card if I'm

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Speaker 7: too optimistic about anything.

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Speaker 2: I switch Deceber. We're asking the economists what the market

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Speaker 2: will do, and we're asking strategists and managers what the

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Speaker 2: economy will do.

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Speaker 4: Well, Eric, what do you make of the economy The

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Speaker 4: labor data we got yesterday?

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Speaker 7: So I don't think the labor market data really changed

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Speaker 7: our picture of the economy, right.

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Speaker 4: The labor market is certainly.

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Speaker 7: A lot slower than it was six nine months ago,

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Speaker 7: where we're in a low higher, low fier economy.

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Speaker 4: I think people are aware of that.

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Speaker 7: I think that it is I would phrase it as

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Speaker 7: sort of precariously balanced, in the sense that labor supply

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Speaker 7: has been constrained by migration policy, and labor demand has

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Speaker 7: been constrained by a variety of different factors, and so

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Speaker 7: we're sort of sitting close to a neutral ish level

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Speaker 7: at a lower level of hiring. What I do take

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Speaker 7: information from, though, is that it is only close to balanced.

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Speaker 7: The unemployment rate has gone up for several months in

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Speaker 7: a row. Now is at a new cycle high. And

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Speaker 7: that's tells you that labor demand is falling faster than

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Speaker 7: labor supply. It's not a lot faster, but it is faster,

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Speaker 7: and to me, that's the primary driver of why I

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Speaker 7: expect the FED to cut as we move through next year.

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Speaker 4: We're going to get some inflation data tomorrow. There, how

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Speaker 4: do you view that? What do you expecting to see tomorrow? Again?

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Speaker 7: You know, the evidence that we have, and this is

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Speaker 7: the first week that we've gotten data since the government

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Speaker 7: shutdown ended. The evidence that we have from private sector sources,

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Speaker 7: from other places is that the economy didn't change meaningfully

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Speaker 7: during the shutdown. I expect the inflation data to show that,

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Speaker 7: which is to say that it's going to be sticky.

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Speaker 7: You know, I don't think we should expect a dramatic

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Speaker 7: change from where we were before. Goods prices are elevated

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Speaker 7: because of tariffs. Services prices are coming down, but only slowly.

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Speaker 7: We're still stuck sort of around three percent, and it

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Speaker 7: won't be until next year that we see real progress

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Speaker 7: on that.

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Speaker 2: A lot of good analysis yesterday is really really valuable.

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Speaker 2: A lot on LinkedIn and Twitter, Eric Uinigrette, I love

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Speaker 2: your phrase aggregate paycheck. That's sort of how each and

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Speaker 2: every house listening and watching the show feels. There's like

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Speaker 2: the aggregate paycheck into the house. Do we risk a

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Speaker 2: negative real aggregate paycheck.

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Speaker 7: We've been close at different times this year. You know,

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Speaker 7: that's where inflation really starts to bite, because salaries adjust,

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Speaker 7: but they don't adjust as quickly as prices do. And

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Speaker 7: so you have at various times this year been dancing

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Speaker 7: with the idea of households losing ground in aggregate. Right,

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Speaker 7: so this doesn't mean every household, but some households losing

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Speaker 7: ground relative to where prices are. Right now, we're sitting

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Speaker 7: on a six month annualized basis just above zero, and

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Speaker 7: to me, that's the primary driver of the economy. We

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Speaker 7: can talk about capecs, investment, we can talk about AI

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Speaker 7: and all that. At the end of the day, this

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Speaker 7: is still a consumer driven economy. And if the household

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Speaker 7: paycheck doesn't stay above water, things start to look pretty

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Speaker 7: pretty dangerous.

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Speaker 2: Then in Dartmouth College, when you looked at this, you

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Speaker 2: bring it over to the political mandate. If we have

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Speaker 2: flat real wages, a crushing aggregate paycheck in America. That

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Speaker 2: really drives a central bank to a more accommodative strategy.

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Speaker 4: Right, Well, it should do, right.

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Speaker 7: You know, it's a challenge for the central bank because

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Speaker 7: if the reason that the paycheck is running close to

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Speaker 7: zero is that inflation is too high, it's not clear

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Speaker 7: that they're supposed to cut rates, right. Maybe they're supposed

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Speaker 7: to stay tight and address it through the inflation side

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Speaker 7: of the mandate. I think Chair Powell's been eloquent in

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Speaker 7: talking about this and saying that the FED is being

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Speaker 7: pulled away from its mandate in both directions. That's why

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Speaker 7: you see the discord within the Fed. That's why you

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Speaker 7: see the sense in both directions there is some evidence

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Speaker 7: of economic weakness. There is also evidence of inflation stickiness,

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Speaker 7: and so it's not clear what they're supposed to do.

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Speaker 7: But Tom, when you say, you know, this brings up

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Speaker 7: the political side of things. We have not had to

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Speaker 7: think about this for a while, but we will as

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Speaker 7: the year progressive. We're rolling toward midterm elections, and you know,

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Speaker 7: with affordability looking likely to be one of the primary issues,

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Speaker 7: it's not clear how the American public will react in

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Speaker 7: a political sense if the paycheck were to fall into

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Speaker 7: negative territory, or if they were to feel that things

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Speaker 7: are deteriorating.

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Speaker 4: You say that the run rate of hiring has clearly

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Speaker 4: slowed this year and remains weak by historical standards. Why

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Speaker 4: is that so? I think there's a couple of aspects

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Speaker 4: to that.

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Speaker 7: One is that labor supply has slowed, there are fewer

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Speaker 7: workers available. Another part of it is that businesses have

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Speaker 7: gotten a little fat on labor. I think that people

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Speaker 7: hired and you know, rewind a few years when we

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Speaker 7: were here talking about labor shortages and businesses couldn't find people.

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Speaker 7: As a result, once they found them, they've been very

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Speaker 7: reluctant to let them go. So businesses have been running

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Speaker 7: at full staff for a while, which diminishes their hiring needs.

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Speaker 7: But the primary driver I think has been economic uncertainty.

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Speaker 7: Businesses have not wanted to hire in an environment where

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Speaker 7: they don't know the policy regime. The month, if you

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Speaker 7: have to pick a month where hiring really deteriorated the

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Speaker 7: most and moved into this lower trajectory, it was April,

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Speaker 7: right after the tariffnounce And I don't know that that's

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Speaker 7: a reaction to tariff specifically so much as it is

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Speaker 7: a reaction to the uncertainty.

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Speaker 2: We do our Eric winnigred audible here folks on China

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Speaker 2: with his work at Dartmouth and their acclaimed Asian studies

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Speaker 2: program Dembra eight can publish out of London today for

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Speaker 2: Bloomberg on luxury and there's a basic idea that the

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Speaker 2: three cities in China that do luxury Shanghai, Hong Kong vision.

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Speaker 2: I guess it will come back. I'm reading Bloomberg News

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Speaker 2: on the fiscal structure of the Xi administration, the GI government,

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Speaker 2: and I'm seeing some real stress there. How do you

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Speaker 2: received China for Americans in the next year.

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Speaker 7: So from an American perspective, you know, China is not

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Speaker 7: as relevant as it was before because of the tariff policy.

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Speaker 7: There's been a redirection of exports. If you look at China,

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Speaker 7: their trade surplus has hit a record this year, even

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Speaker 7: as their trade into the US has diminished because of

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Speaker 7: tariff policy. They are exporting more to Europe, they are

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Speaker 7: exporting more within Asia, they are exporting more to South America.

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Speaker 7: They have to continue exporting because in order to keep

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Speaker 7: growth positive, they have to continue producing and domestic demand

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Speaker 7: in China. As we've talked about before is very weak.

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Speaker 7: So if they're going to produce it and people in

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Speaker 7: China won't buy it and they can't sell it to

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Speaker 7: the US, they have to find somewhere else to sell it,

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Speaker 7: and they have. And I find it a little bit

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Speaker 7: ironic that in the US we're talking about the affordability crisis,

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Speaker 7: China is essentially exporting deflation everywhere else in the world

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Speaker 7: because we won't let them export it here anymore.

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Speaker 2: So you know, look, that's brilliant, Lisa, write that down.

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Speaker 2: Place that was brilliant not to import their price decline.

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Speaker 7: Yeah, and look, there may be sound political reasons for that.

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Speaker 7: You know, we've talked about wanting to reshore manufacturing and

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Speaker 7: all of these already.

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Speaker 2: Now it's the manufacturing jobs and the jobs report, Paul,

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Speaker 2: there's no evidence we're not yet.

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Speaker 7: And again this goes back to business uncertainty. We might

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Speaker 7: at some point. Part of our forecast for next year

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Speaker 7: is the idea that you'll get a little bit more

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Speaker 7: capex in the US as uncertainty fades. But there's a

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Speaker 7: reason that we were producing stuff offshore in the first place,

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Speaker 7: which is that it's a whole lot cheaper. And if

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Speaker 7: you can produce it a lot cheaper, then you can

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Speaker 7: sell it a lot cheaper. And so you know, this

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Speaker 7: idea that you can just sort of cut China out

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Speaker 7: of our production chain and not have an impact prices

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Speaker 7: doesn't make any sense, and we're seeing that.

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Speaker 2: Eric, Thank you so much Alliance Producing. Eric winnigred I

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Speaker 2: can't say enough about his work. He's a chief US

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Speaker 2: economist is thrilled to get his perspective. Stay with us.

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Speaker 2: More from Bloomberg Surveillance. Coming up after this.

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Speaker 1: Is the Bloomberg Surveillance Podcast. Listen live each weekday starting

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Speaker 1: at seven am Eastern on Applecarplay and Android Auto with

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Speaker 1: Amazon Alexa from our flagship New York station, Just say

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Speaker 1: Alexa play Bloomberg eleven thirty.

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Speaker 2: Stephen Kim is Withley, I didn't know you were. How

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Speaker 2: did you end up in Evercore? Does? Did ed Heyman

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Speaker 2: call up and say please?

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Speaker 5: Now? It was fortuitous? It was really it was really

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Speaker 5: a great move on my part because so much of

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Speaker 5: my sector is dominated by or influenced by macro And

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Speaker 5: what better macro shop on the planet is?

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Speaker 2: How do you read ed Heymen? How does a guy

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Speaker 2: like you own the high ground in American housing? What

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00:21:42,200 --> 00:21:44,800
Speaker 2: do you read in ed Heyman where you lean forward?

438
00:21:45,000 --> 00:21:49,800
Speaker 5: Well, I think ed Heiman has phenomenal contacts, and so

439
00:21:49,920 --> 00:21:55,919
Speaker 5: he hears so much about what people are thinking across

440
00:21:56,040 --> 00:22:00,280
Speaker 5: pretty much every sector that gives him an ed. I

441
00:22:00,320 --> 00:22:02,399
Speaker 5: think that nobody else can mas the.

442
00:22:02,440 --> 00:22:06,440
Speaker 2: FED bet as we get disinflation and they's tight about

443
00:22:06,560 --> 00:22:12,080
Speaker 2: multifamily housing, signal family housing everywhere but where Paul Sweeney lives. Okay,

444
00:22:12,359 --> 00:22:15,399
Speaker 2: do you get just as a beginning conversation, do you

445
00:22:15,520 --> 00:22:20,160
Speaker 2: agree that housing prices in housing inflation will dampen this year?

446
00:22:21,320 --> 00:22:24,600
Speaker 5: My view is that actually you could see existing home

447
00:22:24,640 --> 00:22:28,280
Speaker 5: prices go retreat a bit, you know, one to two percent.

448
00:22:28,320 --> 00:22:33,159
Speaker 5: I don't think it'll be palpable, because you don't. I

449
00:22:33,200 --> 00:22:35,720
Speaker 5: think that would be very problematic. But I think you

450
00:22:35,720 --> 00:22:38,760
Speaker 5: could see prices down one to two percent this year

451
00:22:39,119 --> 00:22:44,000
Speaker 5: next year on the exist in the existing market, and

452
00:22:44,359 --> 00:22:47,240
Speaker 5: I think actually that would be you know, positively received.

453
00:22:48,520 --> 00:22:51,000
Speaker 5: And I think that really what would drive that is

454
00:22:52,359 --> 00:22:56,200
Speaker 5: homeowners who have been wanting to sell finally saying, you

455
00:22:56,240 --> 00:22:58,360
Speaker 5: know what, we're going to make the move and I'm

456
00:22:58,400 --> 00:23:00,720
Speaker 5: willing to take a little bit of a lower price

457
00:23:00,800 --> 00:23:04,080
Speaker 5: because I still have significant amounts of home equity. I

458
00:23:04,080 --> 00:23:06,840
Speaker 5: think that's something to really watch for in twenty twenty six.

459
00:23:07,160 --> 00:23:09,320
Speaker 4: Tom, You know, Steve's a player. He does not have

460
00:23:09,400 --> 00:23:12,639
Speaker 4: to schlep into the evercore Isi offices in York City.

461
00:23:12,960 --> 00:23:15,520
Speaker 4: He hangs a shingle in Raleigh, North Oh. Yeah, one

462
00:23:15,520 --> 00:23:18,080
Speaker 4: of the most beautiful parts of the country down there,

463
00:23:18,080 --> 00:23:19,919
Speaker 4: and he's right next to my duke, so you can

464
00:23:19,920 --> 00:23:21,840
Speaker 4: go over there anytime he wants to see some good basketball.

465
00:23:22,119 --> 00:23:22,520
Speaker 5: Stephen.

466
00:23:23,119 --> 00:23:26,119
Speaker 4: We have Lenar reported today. It's some disappointing numbers that

467
00:23:26,240 --> 00:23:28,600
Speaker 4: last night, some disappointing numbers here. Talked to us about

468
00:23:28,720 --> 00:23:32,000
Speaker 4: Lenar and what these home building companies are telling you

469
00:23:32,040 --> 00:23:32,680
Speaker 4: guys these days.

470
00:23:32,720 --> 00:23:34,760
Speaker 5: Well, the first thing to say upfront is that Lenar

471
00:23:34,920 --> 00:23:39,480
Speaker 5: has a lot of idiosyncratic aspects to it. Right now,

472
00:23:39,800 --> 00:23:42,320
Speaker 5: it's very, very fascinating, but there's no question there is

473
00:23:42,320 --> 00:23:45,359
Speaker 5: a read across They are the second largest home builder

474
00:23:45,680 --> 00:23:49,320
Speaker 5: in the country and it is tough out there. And

475
00:23:49,680 --> 00:23:52,280
Speaker 5: what they told you was that even though mortgage rates

476
00:23:52,320 --> 00:23:56,119
Speaker 5: have you know, trended down, it has not stimulated an

477
00:23:56,119 --> 00:24:00,960
Speaker 5: improvement in home buying demand that was anywhere near what

478
00:24:01,000 --> 00:24:03,880
Speaker 5: they were hoping for. Okay, so that's certainly an important

479
00:24:03,920 --> 00:24:07,720
Speaker 5: read across it generally confirms frankly, what I think most

480
00:24:07,760 --> 00:24:12,320
Speaker 5: folks you know, would have gleaned if they if they,

481
00:24:12,600 --> 00:24:14,679
Speaker 5: you know, just we're sort of paying attention to what

482
00:24:14,720 --> 00:24:15,720
Speaker 5: the builders have been saying.

483
00:24:15,960 --> 00:24:16,239
Speaker 2: All right.

484
00:24:16,280 --> 00:24:19,000
Speaker 4: As a former director of research, this stuck out of me, Steve,

485
00:24:19,280 --> 00:24:22,399
Speaker 4: you cover fourteen stocks, You've got fourteen holds.

486
00:24:22,480 --> 00:24:23,120
Speaker 5: I do right now.

487
00:24:23,160 --> 00:24:23,840
Speaker 2: I have going on.

488
00:24:23,960 --> 00:24:27,360
Speaker 5: We used to have. We used to be the permeable,

489
00:24:28,119 --> 00:24:31,679
Speaker 5: you know, And a couple of months ago we said

490
00:24:32,720 --> 00:24:35,959
Speaker 5: we still like the long term potential, but we basically

491
00:24:36,040 --> 00:24:38,720
Speaker 5: hit the pause button. We said this group cannot be owned.

492
00:24:39,280 --> 00:24:42,840
Speaker 5: And there was a lot of uncertainty, not only because

493
00:24:42,960 --> 00:24:47,040
Speaker 5: the market was not responding to the lower rates that

494
00:24:47,080 --> 00:24:50,640
Speaker 5: we saw coming into September, but also because the government

495
00:24:50,720 --> 00:24:55,560
Speaker 5: was becoming increasingly interested in and proactive or talking like

496
00:24:55,560 --> 00:24:57,200
Speaker 5: they were going to be proactive, and it was very

497
00:24:57,240 --> 00:25:02,360
Speaker 5: difficult to determine what exactly they might do. Their initial commentary,

498
00:25:02,400 --> 00:25:05,879
Speaker 5: mostly communicated through Bill Poulty of the FHFA, was not

499
00:25:06,040 --> 00:25:10,000
Speaker 5: looking good to me and or investors. Right now, Bill

500
00:25:10,080 --> 00:25:12,639
Speaker 5: Poulty has sort of taken a step back, but it

501
00:25:12,680 --> 00:25:15,199
Speaker 5: is still very uncertain what the government is going to do.

502
00:25:15,280 --> 00:25:18,359
Speaker 5: And so in that kind of environment, I was, I said,

503
00:25:18,480 --> 00:25:23,199
Speaker 5: we can't really make a convicted call with conviction. You know,

504
00:25:23,280 --> 00:25:25,520
Speaker 5: a couple of months I've transpired. We're thinking about a

505
00:25:25,560 --> 00:25:27,480
Speaker 5: few things. So you know, we'll see what twenty twenty

506
00:25:27,520 --> 00:25:29,520
Speaker 5: six looks like. But that's the explanation of what's going

507
00:25:29,560 --> 00:25:30,800
Speaker 5: on right now with the ratings.

508
00:25:30,520 --> 00:25:33,119
Speaker 2: Across America this morning. The way you listen to us

509
00:25:33,200 --> 00:25:37,480
Speaker 2: Stephen Kim, he is the evercore ISI on American housing,

510
00:25:37,560 --> 00:25:40,400
Speaker 2: the research ones. I can't say enough about the acuity. Okay,

511
00:25:40,480 --> 00:25:43,440
Speaker 2: let's start with this scam. What's a buydown?

512
00:25:44,520 --> 00:25:48,400
Speaker 5: So a mortgage rate buydown is an innovation that has

513
00:25:48,480 --> 00:25:52,480
Speaker 5: actually has its genesis from many, many years ago. We're

514
00:25:52,480 --> 00:25:56,680
Speaker 5: simply put anytime that any of us had gotten a mortgage,

515
00:25:56,680 --> 00:25:58,720
Speaker 5: at some point we were actually asked, well, what kind

516
00:25:58,720 --> 00:26:00,159
Speaker 5: of how many points do you want to put down?

517
00:26:00,200 --> 00:26:02,040
Speaker 5: How much money do you want to put down upfront

518
00:26:02,440 --> 00:26:05,119
Speaker 5: to get a little bit of a lower rate? You know,

519
00:26:05,240 --> 00:26:08,399
Speaker 5: generally speaking, you know, you put one percent down or

520
00:26:08,520 --> 00:26:11,040
Speaker 5: one point they call it one, you know, one percent down,

521
00:26:11,080 --> 00:26:12,639
Speaker 5: and you can buy down the mortgage rate, call it

522
00:26:12,720 --> 00:26:15,240
Speaker 5: twenty twenty five basis points. You know, it depends on

523
00:26:15,320 --> 00:26:16,880
Speaker 5: you know, what's happening with the bond market at the time.

524
00:26:16,880 --> 00:26:19,399
Speaker 5: But something like that, you know, people put one or

525
00:26:19,440 --> 00:26:22,000
Speaker 5: two points down. There's a couple of wrinkles though. One

526
00:26:22,040 --> 00:26:26,199
Speaker 5: is the seller can sometimes pay for that instead of

527
00:26:26,200 --> 00:26:29,480
Speaker 5: the buyer. And so these home builders who are sellers, right,

528
00:26:30,040 --> 00:26:32,359
Speaker 5: have been doing that so that they can offer a

529
00:26:32,359 --> 00:26:35,199
Speaker 5: lower rate. But they're not just buying down one or

530
00:26:35,200 --> 00:26:38,359
Speaker 5: two percent, you know, to putting one or two points in.

531
00:26:38,480 --> 00:26:42,199
Speaker 5: They're actually sometimes putting down ten points and you know,

532
00:26:42,520 --> 00:26:45,720
Speaker 5: ten percent of the loan amount and buying down the

533
00:26:45,720 --> 00:26:49,360
Speaker 5: mortgage rate like one hundred and fifty two hundred basis points.

534
00:26:49,760 --> 00:26:51,600
Speaker 5: This sort of thing. That's what's been going on for

535
00:26:51,720 --> 00:26:53,040
Speaker 5: most of the last two years.

536
00:26:53,480 --> 00:26:57,480
Speaker 2: To keep the business going. Why don't they just cut

537
00:26:57,720 --> 00:27:00,000
Speaker 2: price and affect a clean trendsaction.

538
00:27:00,400 --> 00:27:03,600
Speaker 5: So here's the important thing to understand. If you pay

539
00:27:03,800 --> 00:27:07,280
Speaker 5: four percent of effectively the home price, you can buy

540
00:27:07,359 --> 00:27:10,720
Speaker 5: down the rate one hundred basis points. Right. That takes

541
00:27:10,760 --> 00:27:13,399
Speaker 5: let's say the mortgage rate down from let's say seven

542
00:27:13,480 --> 00:27:15,080
Speaker 5: percent down to six.

543
00:27:15,160 --> 00:27:18,480
Speaker 8: Sweeney's taking notes, I'm taking all right, that's like a

544
00:27:18,520 --> 00:27:22,960
Speaker 8: twelve percent reduction in the mortgage payment, roughly ten to

545
00:27:22,280 --> 00:27:25,280
Speaker 8: ten to twelve percent reduction in the mortgage payment.

546
00:27:25,800 --> 00:27:27,800
Speaker 5: Well, how would you affect that if you didn't change

547
00:27:27,840 --> 00:27:30,399
Speaker 5: the rate and you just you know, lowered the home price,

548
00:27:30,880 --> 00:27:32,800
Speaker 5: it would be a twelve hundred basis point hit. Right,

549
00:27:32,840 --> 00:27:35,760
Speaker 5: you have to lower the price twelve twelve percent to

550
00:27:35,800 --> 00:27:38,480
Speaker 5: get a reduction, right if the rate was the same. Right, So,

551
00:27:38,480 --> 00:27:41,280
Speaker 5: so which would you rather do? Give up four hundred

552
00:27:41,320 --> 00:27:43,400
Speaker 5: basis points a margin or give up twelve hundred basis

553
00:27:43,400 --> 00:27:45,280
Speaker 5: points in margin. They'll just said, you know what, I

554
00:27:45,320 --> 00:27:46,960
Speaker 5: can do that math, I'm going to go with the

555
00:27:46,960 --> 00:27:49,639
Speaker 5: buy down. It'll cost me less, the buyer is happy,

556
00:27:49,680 --> 00:27:51,920
Speaker 5: the payment gets reduced the same to tyebo.

557
00:27:51,720 --> 00:27:54,720
Speaker 2: On is this is legal? What's going on? So?

558
00:27:54,800 --> 00:27:55,600
Speaker 5: It is legal?

559
00:27:56,040 --> 00:27:56,320
Speaker 2: Right?

560
00:27:56,840 --> 00:27:59,960
Speaker 5: Beak but there, but but there's a button. It's legal,

561
00:28:00,520 --> 00:28:04,720
Speaker 5: but the government has set certain limits to how much

562
00:28:04,840 --> 00:28:07,920
Speaker 5: the seller can pay, and those limits are generally depending

563
00:28:07,920 --> 00:28:11,560
Speaker 5: on the mortgage type, six percent, six points or three points.

564
00:28:11,600 --> 00:28:13,120
Speaker 5: But I just told you that the builders were doing

565
00:28:13,200 --> 00:28:15,800
Speaker 5: ten points sometimes even more. How do they do that?

566
00:28:15,960 --> 00:28:18,640
Speaker 5: Because there's a loophole if you do your buy down

567
00:28:18,640 --> 00:28:21,720
Speaker 5: a certain way called the forward purchase commitment. It's exempt,

568
00:28:22,760 --> 00:28:26,560
Speaker 5: and with a stroke of a pen, that exemption could

569
00:28:26,600 --> 00:28:30,120
Speaker 5: be modified or removed. And so we point out this

570
00:28:30,200 --> 00:28:34,840
Speaker 5: as a potential vulnerability that the builders should think about

571
00:28:35,040 --> 00:28:37,400
Speaker 5: as we look into twenty twenty six and twenty twenty cent.

572
00:28:37,640 --> 00:28:39,960
Speaker 4: Interesting, we're talking to Stephen Kim, head of housing research

573
00:28:40,000 --> 00:28:41,160
Speaker 4: at Evercore is side is.

574
00:28:41,320 --> 00:28:42,360
Speaker 2: Enough inside baseball?

575
00:28:42,360 --> 00:28:46,719
Speaker 4: That was some theme stuff the mortgage back Mortgage Bankers

576
00:28:46,720 --> 00:28:49,959
Speaker 4: Association thirty or fixture rates like six point three percent

577
00:28:50,040 --> 00:28:53,160
Speaker 4: or something. Is there a rate that's going to prompt

578
00:28:53,640 --> 00:28:56,600
Speaker 4: sellers to say, all right, I'm ready to like sell

579
00:28:56,600 --> 00:28:59,400
Speaker 4: my house, move down to Florida wherever I'm going to go,

580
00:28:59,440 --> 00:29:02,440
Speaker 4: and move down to Raleigh to the Triangle, And is

581
00:29:02,480 --> 00:29:05,640
Speaker 4: there a rate that will clear this market because nobody's.

582
00:29:05,280 --> 00:29:07,960
Speaker 5: Putting their house up for sale. I think that we

583
00:29:08,040 --> 00:29:10,000
Speaker 5: get that question all the time. As you might imagine, right,

584
00:29:10,000 --> 00:29:12,680
Speaker 5: there's this locked in effect of low mortgage rates. Somebody's

585
00:29:12,680 --> 00:29:14,480
Speaker 5: got like a three and a half percent or three

586
00:29:14,480 --> 00:29:17,800
Speaker 5: percent mortgage rates. They loving it, you know, because prevailing,

587
00:29:17,840 --> 00:29:19,720
Speaker 5: as you said, is six point three This is great.

588
00:29:20,000 --> 00:29:23,800
Speaker 5: And so people have asked people initially said, well, all

589
00:29:23,800 --> 00:29:25,520
Speaker 5: those people are going to like die in their homes.

590
00:29:25,520 --> 00:29:29,000
Speaker 5: They're never going to move, right, that's a little simplistic.

591
00:29:29,800 --> 00:29:33,640
Speaker 5: The reason why one moves. Some of it's financial, a

592
00:29:33,680 --> 00:29:35,719
Speaker 5: lot of it ain't, yep. A lot of it is,

593
00:29:35,760 --> 00:29:39,400
Speaker 5: you know what, mom's getting older, you know, we really

594
00:29:39,440 --> 00:29:41,120
Speaker 5: need to go see her, or we're not seeing their

595
00:29:41,120 --> 00:29:46,040
Speaker 5: grandkids enough, or I'm retiring. There's all kinds of reasons

596
00:29:46,080 --> 00:29:48,560
Speaker 5: why the house that was good for you ten years

597
00:29:48,560 --> 00:29:51,719
Speaker 5: ago is not really that great for you anymore. And

598
00:29:51,880 --> 00:29:54,760
Speaker 5: I would say that given the incredibly low amount of

599
00:29:54,760 --> 00:29:57,520
Speaker 5: housing turnover that we've seen, it is very clear that

600
00:29:57,720 --> 00:30:01,080
Speaker 5: millions of people we estimate about four million people right now,

601
00:30:01,640 --> 00:30:05,040
Speaker 5: would normally have moved in the last few years but

602
00:30:05,160 --> 00:30:08,560
Speaker 5: have not yet. Now the impetus for them to want

603
00:30:08,600 --> 00:30:11,480
Speaker 5: to move has not gone away. Those things that I

604
00:30:11,560 --> 00:30:14,120
Speaker 5: just retirement, being close to the kids, being close to

605
00:30:14,120 --> 00:30:16,960
Speaker 5: the aging parents, you know, those those are itches that

606
00:30:17,000 --> 00:30:19,440
Speaker 5: do not go away unless they are scratched, and until

607
00:30:19,480 --> 00:30:22,000
Speaker 5: they are scratched. So we think there's a significant penuptimend.

608
00:30:22,480 --> 00:30:25,360
Speaker 5: Now that's not a rate thing, though, right, that's a

609
00:30:25,480 --> 00:30:28,360
Speaker 5: steady pressure that's building building, and it's going to keep

610
00:30:28,360 --> 00:30:32,000
Speaker 5: building until they actually move. I think therefore that we

611
00:30:32,000 --> 00:30:35,920
Speaker 5: should think about the unlock with respect to rates is

612
00:30:36,040 --> 00:30:39,160
Speaker 5: it's not binary. There's not like a magic rate, but

613
00:30:39,280 --> 00:30:41,160
Speaker 5: certainly rates go on and the lower makes it a

614
00:30:41,200 --> 00:30:43,240
Speaker 5: little bit easier. You leave a little less money on

615
00:30:43,240 --> 00:30:46,320
Speaker 5: the table. But meanwhile, it's really these life factors that

616
00:30:46,360 --> 00:30:47,240
Speaker 5: I think are more important.

617
00:30:47,280 --> 00:30:49,920
Speaker 2: Well, and it's unfair to you. You know have record,

618
00:30:49,960 --> 00:30:51,880
Speaker 2: you know you're looking at national and you've got all

619
00:30:51,960 --> 00:30:54,880
Speaker 2: your list of companies, and that if you had a

620
00:30:54,920 --> 00:30:57,520
Speaker 2: cup of coffee right now with a new mayor in

621
00:30:57,560 --> 00:31:00,360
Speaker 2: New York City or with the governor of New York,

622
00:31:00,400 --> 00:31:03,880
Speaker 2: the governors of the tri state area, this American housing

623
00:31:03,960 --> 00:31:10,760
Speaker 2: crisis is tangible. What's the Stephen Kim's solution? Yeah, for Queens,

624
00:31:11,240 --> 00:31:15,560
Speaker 2: what's the solution for Kansas City, what's the solution for

625
00:31:15,880 --> 00:31:17,280
Speaker 2: la Well.

626
00:31:17,320 --> 00:31:21,080
Speaker 5: One of the reasons why I'm not in politics. There

627
00:31:21,120 --> 00:31:23,320
Speaker 5: are many, by the way, but one of the reasons

628
00:31:23,400 --> 00:31:26,320
Speaker 5: is because I don't think that the housing market is

629
00:31:26,480 --> 00:31:30,720
Speaker 5: really really lends itself to a quick fix. There are fixes,

630
00:31:31,160 --> 00:31:35,040
Speaker 5: but the fix comes from supply. You need to increase supply,

631
00:31:35,800 --> 00:31:38,640
Speaker 5: and if you do that, you will put some downward

632
00:31:38,640 --> 00:31:42,120
Speaker 5: pressure on pricing. However, if pricing goes negative full retreat,

633
00:31:42,640 --> 00:31:44,520
Speaker 5: you're going to kill demand because who wants to buy

634
00:31:44,560 --> 00:31:47,680
Speaker 5: a leveraged you know, get themselves into a significantly lever

635
00:31:47,760 --> 00:31:50,080
Speaker 5: transaction when prices are going down, right, your home equity

636
00:31:50,120 --> 00:31:53,320
Speaker 5: is the first hit, right, So that's why I say

637
00:31:53,400 --> 00:31:57,000
Speaker 5: I would say Goldilocks is a price reduction across the

638
00:31:57,000 --> 00:32:01,680
Speaker 5: market one to two percent, adding supply, and you're going

639
00:32:01,760 --> 00:32:03,680
Speaker 5: to work yourself out of this thing eventually. But it's

640
00:32:03,680 --> 00:32:07,800
Speaker 5: not a quick fix Research Triangle Park. It's Raleigh, Durham

641
00:32:07,920 --> 00:32:09,400
Speaker 5: Chapel Hill, North Carolina.

642
00:32:09,520 --> 00:32:12,480
Speaker 4: It's been a great, great market for forty years.

643
00:32:12,880 --> 00:32:16,720
Speaker 5: Yes, how is it today? It's very good. You have

644
00:32:16,920 --> 00:32:19,600
Speaker 5: a lot of in migration from places like New York,

645
00:32:19,600 --> 00:32:22,240
Speaker 5: but much more so I would say the DC market.

646
00:32:22,280 --> 00:32:23,920
Speaker 5: Most of the people that I run into are generally

647
00:32:23,960 --> 00:32:28,240
Speaker 5: from DC, some Chicago, some California. There's a lot of tech,

648
00:32:28,240 --> 00:32:32,440
Speaker 5: there's a diversified employment based there's also the state capitol

649
00:32:32,560 --> 00:32:36,479
Speaker 5: y you have the three major universities, NC, State, UNC

650
00:32:36,640 --> 00:32:39,040
Speaker 5: and Duke that are there. So it's a great market.

651
00:32:39,600 --> 00:32:42,240
Speaker 2: We're the CEO of Cornyn Steers in earlier what's it

652
00:32:42,280 --> 00:32:45,080
Speaker 2: real estate to hear something and you know, I talked

653
00:32:45,080 --> 00:32:48,320
Speaker 2: about the culture of management, so to go to Stephen

654
00:32:48,400 --> 00:32:52,600
Speaker 2: Kim single best Buy, I assume that's wrapped around management

655
00:32:52,720 --> 00:32:57,920
Speaker 2: as well, which is the superior operating officer of homebuilders right.

656
00:32:57,840 --> 00:33:00,800
Speaker 5: Now, I think in the home building area, I think

657
00:33:00,800 --> 00:33:04,720
Speaker 5: it's it's pretty clear that Dr. Horton has an exceptional

658
00:33:04,760 --> 00:33:06,800
Speaker 5: management team. They demonstrated that what's.

659
00:33:06,640 --> 00:33:08,320
Speaker 2: Their distinction, what are you different?

660
00:33:08,680 --> 00:33:11,600
Speaker 5: Well, it's a good, really good question, because it's not

661
00:33:11,640 --> 00:33:17,920
Speaker 5: just one thing, but through decades of managing their company,

662
00:33:18,000 --> 00:33:23,280
Speaker 5: they have successfully migrated from being sort of a scrappy

663
00:33:23,440 --> 00:33:27,400
Speaker 5: entrepreneurial kind of company to being a more large scale

664
00:33:27,960 --> 00:33:32,000
Speaker 5: but still entrepreneurial company. And they have made some very

665
00:33:32,040 --> 00:33:36,280
Speaker 5: savvy bets without necessarily dictating it just from the top.

666
00:33:36,360 --> 00:33:38,760
Speaker 5: So their their skill is in homebuilding, so much of

667
00:33:38,800 --> 00:33:41,640
Speaker 5: the decision making has to happen locally, and they've been

668
00:33:41,680 --> 00:33:45,800
Speaker 5: able to incentivize their people interesting and empower those people

669
00:33:45,960 --> 00:33:47,840
Speaker 5: to make really good that's hard.

670
00:33:47,960 --> 00:33:51,760
Speaker 2: Paul ten year track record, eighteen point nine percent per year.

671
00:33:52,000 --> 00:33:56,240
Speaker 2: It's trained like Apple comput exactly. I think they nailed two,

672
00:33:56,320 --> 00:33:57,280
Speaker 2: but forced.

673
00:33:57,800 --> 00:34:00,320
Speaker 4: I'll tell you the nail gun Tom. That is revolutionized

674
00:34:00,320 --> 00:34:02,640
Speaker 4: the home building. I see these frame people frame up

675
00:34:02,640 --> 00:34:05,640
Speaker 4: a house in like fifteen minutes. Now, it was unbelievable.

676
00:34:05,640 --> 00:34:07,800
Speaker 2: I mean a construction site. As a kid, they gave

677
00:34:07,840 --> 00:34:12,000
Speaker 2: me a hammer, Tom, go to lud Suirley. That was

678
00:34:12,040 --> 00:34:12,799
Speaker 2: the assumption.

679
00:34:13,200 --> 00:34:16,040
Speaker 4: Good stuff real quickly. Cost of building a house is

680
00:34:16,120 --> 00:34:18,400
Speaker 4: lumber going? I mean, where are we just the cost

681
00:34:18,400 --> 00:34:19,640
Speaker 4: of building a house these days?

682
00:34:19,680 --> 00:34:22,560
Speaker 5: So you know, we certainly have had seen some material

683
00:34:22,600 --> 00:34:25,760
Speaker 5: inflation of how wherever lumber has actually been very well contained,

684
00:34:25,840 --> 00:34:29,040
Speaker 5: and labor has also been surprisingly well contained. Going into

685
00:34:29,040 --> 00:34:30,320
Speaker 5: the year, we thought, all my goodness, you know, with

686
00:34:30,360 --> 00:34:32,440
Speaker 5: all the deportations and all that rhetoric, that we were

687
00:34:32,440 --> 00:34:35,080
Speaker 5: going to see a lot of the laborers disappear, and

688
00:34:35,120 --> 00:34:36,520
Speaker 5: that didn't happen.

689
00:34:37,080 --> 00:34:39,440
Speaker 4: Actually, why didn't that happen because I that was always

690
00:34:39,440 --> 00:34:40,239
Speaker 4: called out here in it.

691
00:34:40,239 --> 00:34:42,720
Speaker 5: It was. One of the things is that the multifamily

692
00:34:42,880 --> 00:34:46,600
Speaker 5: starts dropped significantly because you had had kind of a

693
00:34:47,840 --> 00:34:49,680
Speaker 5: boom there like a few years ago, and then that

694
00:34:49,680 --> 00:34:51,920
Speaker 5: came down and a lot of the same workers, you know,

695
00:34:52,040 --> 00:34:54,480
Speaker 5: who are there's no there's no multi family. Well then

696
00:34:54,520 --> 00:34:55,920
Speaker 5: they go to single family. So that's part of it.

697
00:34:55,960 --> 00:34:58,319
Speaker 5: And the second of all, you know the guys, you know,

698
00:34:58,400 --> 00:35:01,520
Speaker 5: the guys who might be afraid I shows up. Yeah,

699
00:35:01,560 --> 00:35:03,600
Speaker 5: that keeps them away for a couple of days or something.

700
00:35:03,600 --> 00:35:05,920
Speaker 5: But you know what if they don't work, they don't eat. Yeah, right,

701
00:35:05,960 --> 00:35:07,319
Speaker 5: so they're very tenacious.

702
00:35:07,400 --> 00:35:10,200
Speaker 2: All right, Stephen, thank you so much for coming on.

703
00:35:10,719 --> 00:35:14,239
Speaker 2: Kim has head pausing research at ever court is I

704
00:35:14,680 --> 00:35:25,959
Speaker 2: stay with us. More from Bloomberg Surveillance coming up after this.

705
00:35:25,960 --> 00:35:29,840
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

706
00:35:29,880 --> 00:35:32,880
Speaker 1: starting at seven am Eastern on Apple Corplay and Android

707
00:35:32,920 --> 00:35:35,960
Speaker 1: Auto with the Bloomberg Business App. You can also listen

708
00:35:36,040 --> 00:35:39,320
Speaker 1: live on Amazon Alexa from our flagship New York station,

709
00:35:39,840 --> 00:35:44,000
Speaker 1: Just say Alexa, Play Bloomberg eleven thirty Paul Stunian Time.

710
00:35:43,880 --> 00:35:46,680
Speaker 2: Keep Paul like Wednesday before the holidays, you know, and

711
00:35:47,000 --> 00:35:48,560
Speaker 2: Lisa's got the party dresser?

712
00:35:48,760 --> 00:35:48,960
Speaker 5: Yep?

713
00:35:49,080 --> 00:35:51,640
Speaker 2: I mean you can't see the Bloomberg. Is it two

714
00:35:51,760 --> 00:35:53,280
Speaker 2: or three parties tonight?

715
00:35:53,719 --> 00:35:54,239
Speaker 4: It's two?

716
00:35:54,600 --> 00:35:55,600
Speaker 2: Yes? Okay?

717
00:35:55,680 --> 00:36:00,280
Speaker 9: Dress was a steal. Okay, so the newspaper okay, speaking

718
00:36:00,280 --> 00:36:00,680
Speaker 9: of a steal.

719
00:36:00,680 --> 00:36:00,879
Speaker 4: Okay.

720
00:36:00,920 --> 00:36:02,839
Speaker 6: You know how I always talk about the Costco hot dog,

721
00:36:02,960 --> 00:36:06,160
Speaker 6: you know, dollar fifty deal. Okay, but the Wall Street

722
00:36:06,239 --> 00:36:09,480
Speaker 6: Journal says you have to check out their vacation deals.

723
00:36:09,520 --> 00:36:11,279
Speaker 9: I'm telling you, I almost.

724
00:36:11,040 --> 00:36:14,839
Speaker 6: Booked my trip to Greece through Costco because of the offers.

725
00:36:15,160 --> 00:36:17,440
Speaker 6: It's actually been around for a while, like Costco started

726
00:36:17,440 --> 00:36:18,959
Speaker 6: babbling about twenty five years ago.

727
00:36:19,040 --> 00:36:19,279
Speaker 4: Yeah.

728
00:36:19,360 --> 00:36:19,560
Speaker 5: Yeah.

729
00:36:19,560 --> 00:36:21,920
Speaker 9: You walk out and there's huge advertisements everywhere.

730
00:36:22,480 --> 00:36:25,480
Speaker 6: It has like eight hundred in house agents, thirteen buyers,

731
00:36:25,480 --> 00:36:28,719
Speaker 6: five call managers. I mean they it's multimillion dollars. It's

732
00:36:28,760 --> 00:36:32,279
Speaker 6: not just booking in vacation packages, but it's cruises, it's

733
00:36:32,400 --> 00:36:33,240
Speaker 6: rental cars.

734
00:36:33,360 --> 00:36:37,160
Speaker 4: It's like the whole I didn't notice the thing. Yeah

735
00:36:37,440 --> 00:36:38,520
Speaker 4: my rental cars through there.

736
00:36:39,239 --> 00:36:43,080
Speaker 9: Yeah yeah yeah, but saving money I am because.

737
00:36:42,800 --> 00:36:45,600
Speaker 6: I compared it. I mean, granted, I'm paying for the membership,

738
00:36:45,719 --> 00:36:47,240
Speaker 6: and that's the thing. You have to be a member

739
00:36:47,280 --> 00:36:50,279
Speaker 6: in order to get the vacation. It comes with a

740
00:36:50,320 --> 00:36:53,240
Speaker 6: few It's not Expedia, it's not booking dot Com. It's

741
00:36:53,280 --> 00:36:56,960
Speaker 6: not that big. But you get like airline tickets through

742
00:36:56,960 --> 00:36:58,640
Speaker 6: a package, so you don't get to kind of choose

743
00:36:58,680 --> 00:37:01,400
Speaker 6: the exact airline like you It's kind of like Costco.

744
00:37:01,440 --> 00:37:02,880
Speaker 6: You go there and you get what you get. And

745
00:37:02,880 --> 00:37:04,680
Speaker 6: you don't get upset. You know, as my mom used

746
00:37:04,719 --> 00:37:05,360
Speaker 6: to say.

747
00:37:05,680 --> 00:37:11,560
Speaker 2: We should say, folks surveillance. Lisa Mattea is not have

748
00:37:11,640 --> 00:37:15,799
Speaker 2: a business affiliation with Costco now, except I want your

749
00:37:15,840 --> 00:37:17,480
Speaker 2: record number shopping carts.

750
00:37:18,160 --> 00:37:21,399
Speaker 9: It's one in half, one and a half three.

751
00:37:22,080 --> 00:37:24,960
Speaker 2: You got radar, you've got red lights in the back.

752
00:37:25,040 --> 00:37:27,680
Speaker 2: One here, so you don't take someone out in vegetables.

753
00:37:28,040 --> 00:37:29,320
Speaker 9: Next it gets dangerous.

754
00:37:29,840 --> 00:37:32,480
Speaker 6: Okay, global coffee prices, right, we've been talking about it.

755
00:37:32,480 --> 00:37:35,440
Speaker 6: They've been going higher and higher for that cup of coffee.

756
00:37:35,560 --> 00:37:37,400
Speaker 6: But I mean, let's face it, you can't kick the

757
00:37:37,440 --> 00:37:40,160
Speaker 6: caffeine habit, right, So what Bloomberg has this article in

758
00:37:40,160 --> 00:37:42,759
Speaker 6: the terminal. It says what more people are doing to

759
00:37:42,800 --> 00:37:45,640
Speaker 6: make the cup more affordable? So they say drinkers are

760
00:37:46,120 --> 00:37:49,240
Speaker 6: kind of trading down, like they're choosing the cheaper drive

761
00:37:49,320 --> 00:37:53,160
Speaker 6: through options. Maybe they're going to convenience store coffee instead.

762
00:37:53,520 --> 00:37:54,439
Speaker 4: Don't knock the wah wah.

763
00:37:54,480 --> 00:37:57,240
Speaker 6: They have really good coffee, cutting back on the number

764
00:37:57,239 --> 00:37:58,839
Speaker 6: of times they make the coffee run too.

765
00:37:58,880 --> 00:38:01,200
Speaker 9: That's another thing. And then you have the real like.

766
00:38:01,280 --> 00:38:04,680
Speaker 6: Die hard coffee fans who are going for they're binding

767
00:38:04,719 --> 00:38:06,880
Speaker 6: the grind, they're buying the grinders, right, they're buying the

768
00:38:06,920 --> 00:38:07,520
Speaker 6: drip coffee.

769
00:38:07,520 --> 00:38:08,120
Speaker 4: Make sure you're.

770
00:38:07,960 --> 00:38:11,960
Speaker 9: Buying the fancy espresso machine. Yes, that fill the counter space.

771
00:38:13,239 --> 00:38:16,080
Speaker 6: Yes, they say it's pricey, you know, upfront, but it's

772
00:38:16,080 --> 00:38:18,319
Speaker 6: worth it because you say, even having to go, you know,

773
00:38:18,360 --> 00:38:19,040
Speaker 6: to the store every day.

774
00:38:19,120 --> 00:38:21,359
Speaker 2: I mean, I got the charge. And Bloomberg folks just

775
00:38:21,360 --> 00:38:24,960
Speaker 2: just grat in commodities. Will Kennedy driving that forward for

776
00:38:25,160 --> 00:38:28,520
Speaker 2: us pretty much is the bottom of COVID and all

777
00:38:28,600 --> 00:38:32,040
Speaker 2: that Paul ready, yep, up three hundred and sixty seven percent,

778
00:38:32,480 --> 00:38:35,719
Speaker 2: twenty seven percent per year. That on a quick look

779
00:38:35,760 --> 00:38:37,080
Speaker 2: at the commodity coffee.

780
00:38:37,200 --> 00:38:39,480
Speaker 4: My double short Moca on Saturday when I'm out doing

781
00:38:39,480 --> 00:38:42,759
Speaker 4: the errands, five dollars and sixty cents and then I

782
00:38:42,760 --> 00:38:44,719
Speaker 4: tip a buck. So there you go. That's my six

783
00:38:44,800 --> 00:38:48,680
Speaker 4: dollars and sixty cents for a double short Moca. Some

784
00:38:48,760 --> 00:38:50,560
Speaker 4: people do that, do it once a week. That's kind

785
00:38:50,600 --> 00:38:52,799
Speaker 4: of mine. Once a week. Sure, that's your thing, all right,

786
00:38:53,560 --> 00:38:56,480
Speaker 4: because we've got we've got again seven thousand different varieties

787
00:38:56,480 --> 00:38:58,760
Speaker 4: of coffee up on the sixth floor here. That's Bloomberg

788
00:38:59,239 --> 00:39:01,440
Speaker 4: from all parts, very good, they are very good. I

789
00:39:01,480 --> 00:39:04,279
Speaker 4: do have to say, next, okay.

790
00:39:04,080 --> 00:39:04,759
Speaker 9: This next one.

791
00:39:04,880 --> 00:39:07,879
Speaker 6: It's it's it's how more moms are taking over their

792
00:39:08,000 --> 00:39:12,359
Speaker 6: kids adult kids dating profiles. And this is like the

793
00:39:12,440 --> 00:39:14,440
Speaker 6: kid's request. So the kids are saying, you know what,

794
00:39:14,640 --> 00:39:16,880
Speaker 6: I'm tired, I'm burnt out. This is in the journal

795
00:39:17,120 --> 00:39:20,920
Speaker 6: they're saying. They're saying, mom, take over my profile.

796
00:39:21,040 --> 00:39:21,560
Speaker 4: Okay.

797
00:39:21,920 --> 00:39:24,560
Speaker 6: And it's not just mom, it's dads, it's the brothers

798
00:39:24,560 --> 00:39:25,080
Speaker 6: and sisters.

799
00:39:25,120 --> 00:39:27,240
Speaker 4: Even grandma's getting in on the action. Okay.

800
00:39:27,280 --> 00:39:30,640
Speaker 6: They're redoing their profiles. They're you know, getting them a

801
00:39:30,680 --> 00:39:34,120
Speaker 6: little bit better. They say it can bring some new perspectives.

802
00:39:34,120 --> 00:39:37,759
Speaker 6: But there's some challenges too, because family members have different opinions, right,

803
00:39:37,920 --> 00:39:40,239
Speaker 6: I mean, you know some people go for certain things.

804
00:39:40,360 --> 00:39:42,560
Speaker 4: You're not doing this for others. I never did.

805
00:39:42,600 --> 00:39:45,680
Speaker 9: They didn't have this when I was dating that my

806
00:39:45,760 --> 00:39:46,279
Speaker 9: son does.

807
00:39:46,400 --> 00:39:48,880
Speaker 4: Yeah, okay, he did. It didn't lead to anything.

808
00:39:48,920 --> 00:39:51,600
Speaker 6: He found his other kids girlfriend by through a friend

809
00:39:51,680 --> 00:39:52,919
Speaker 6: you know, at school.

810
00:39:53,080 --> 00:39:54,600
Speaker 5: Yeah, very good.

811
00:39:54,719 --> 00:39:55,120
Speaker 2: I don't know.

812
00:39:55,200 --> 00:39:55,839
Speaker 5: I think it's God.

813
00:39:56,280 --> 00:39:59,360
Speaker 2: I think the most intelligent thing, ladies, the most intelligent

814
00:39:59,440 --> 00:40:02,879
Speaker 2: thing I heard the newspapers today was just.

815
00:40:02,880 --> 00:40:06,359
Speaker 4: Go to a bar, exactly exactly the old fashioned way.

816
00:40:06,560 --> 00:40:08,919
Speaker 6: Go to a bar, talk to somebody, You actually talk

817
00:40:09,080 --> 00:40:10,239
Speaker 6: to someone I know.

818
00:40:10,400 --> 00:40:11,120
Speaker 5: Put the phone.

819
00:40:10,920 --> 00:40:14,520
Speaker 2: Dinversation at home yesterday? Is there a way to get

820
00:40:14,600 --> 00:40:18,600
Speaker 2: rid of Nintendo? Switch is easy?

821
00:40:18,680 --> 00:40:19,600
Speaker 4: For no?

822
00:40:20,480 --> 00:40:23,839
Speaker 2: They threw a tantrum the newspapers a Lisa Manteo, thank

823
00:40:23,880 --> 00:40:24,800
Speaker 2: you so much.

824
00:40:25,000 --> 00:40:29,799
Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify,

825
00:40:29,920 --> 00:40:34,240
Speaker 1: and anywhere else you get your podcasts. Listen live each weekday,

826
00:40:34,360 --> 00:40:37,839
Speaker 1: seven to ten am Eastern on Bloomberg dot com, the

827
00:40:37,880 --> 00:40:41,920
Speaker 1: iHeartRadio app, tune In, and the Bloomberg Business app. You

828
00:40:41,960 --> 00:40:45,319
Speaker 1: can also watch us live every weekday on YouTube and

829
00:40:45,520 --> 00:40:47,240
Speaker 1: always on the Bloomberg terminal