WEBVTT - Corporate Boards Are Shirking Responsibility On #MeToo Crises 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm Pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Bramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:33.559 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Following 0:00:33.600 --> 0:00:37.280 the New Yorker article by Ronan Pharaoh accusing Less moon 0:00:37.400 --> 0:00:41.519 Ves of unrequested approaches to a variety of women over 0:00:41.560 --> 0:00:45.080 the past few decades, the board of CBS is meeting today. 0:00:45.240 --> 0:00:49.800 We're talking about the future of its leader, and there's 0:00:49.840 --> 0:00:52.200 a lot of questions about whether he will be removed 0:00:52.479 --> 0:00:56.600 what this does with CBS versus Viacom. Sherry Redstone is 0:00:56.720 --> 0:00:59.200 the majority owner of CBS. Joining us now to talk 0:00:59.240 --> 0:01:01.760 about all this is Richard chamber As President and Chief 0:01:01.760 --> 0:01:06.320 executive officer of the Institute of Internal Auditors based in 0:01:06.880 --> 0:01:09.680 uh in, Florida. Richard, thank you so much for joining us. 0:01:10.600 --> 0:01:12.600 What do you think they're going to talk about in 0:01:12.640 --> 0:01:16.080 this meeting and what do you think they're gonna do? Well? 0:01:16.160 --> 0:01:18.440 Thanks thanks for having me on. You know it's always 0:01:18.440 --> 0:01:21.160 hard to know exactly how boards are going to respond 0:01:21.880 --> 0:01:24.759 when these sorts of things happened. I know we've been 0:01:24.800 --> 0:01:27.720 looking at this from the Institute of Internal Auditors over 0:01:27.760 --> 0:01:30.640 the past few months, and the one thing that strikes 0:01:30.720 --> 0:01:36.039 us is just how often boards um sort of overlooks 0:01:36.040 --> 0:01:39.440 this risk. In fact, eighty five percent of the companies 0:01:39.520 --> 0:01:42.760 that we surveyed said that they just didn't consider sexual 0:01:42.800 --> 0:01:45.760 mis contic to be a top risk. And so it 0:01:45.920 --> 0:01:49.320 just all too often seems that when these uh, when 0:01:49.320 --> 0:01:51.760 these things happen, everyone sort of looks at each other 0:01:51.760 --> 0:01:57.760 with a blank stare. Well. Mr Moonvess has said that 0:01:58.040 --> 0:02:03.000 many times in the past, perhaps he displayed behavior that 0:02:03.120 --> 0:02:05.560 people might not like, but that he never used his 0:02:06.080 --> 0:02:11.160 position to affect anyone's career. When when does an investigation 0:02:11.960 --> 0:02:18.320 of behavior that's disconnected from an actual job or position, 0:02:18.720 --> 0:02:23.280 When does that investigation cross the line? You know, I 0:02:23.320 --> 0:02:27.080 think what has to happen is, you know, when what's 0:02:27.120 --> 0:02:31.799 allegations are made and often there has a case here, 0:02:31.800 --> 0:02:35.080 there multiple sides to the story. You know, at that 0:02:35.120 --> 0:02:39.320 point it's really too late for boards and for companies 0:02:39.360 --> 0:02:43.320 to uh take the reins and in terms of making 0:02:43.360 --> 0:02:45.840 sure that they have the right policies in place, the 0:02:45.960 --> 0:02:51.720 right procedures for investigating allegations of misconduct to meet those 0:02:51.760 --> 0:02:56.160 things have to be played in place well beforehand, and 0:02:56.160 --> 0:03:00.400 and the policies need to include how will investigation of 0:03:00.680 --> 0:03:04.160 allegations against senior executives to be handled? At what point 0:03:04.240 --> 0:03:07.760 do they do they get elevated to the board. In fact, 0:03:07.800 --> 0:03:11.080 I would suggest anytime there's an allegation against the CEO, 0:03:12.040 --> 0:03:14.040 that the board or at least the chairman of the 0:03:14.080 --> 0:03:16.720 board is immediately made aware of it. So I think 0:03:16.760 --> 0:03:19.520 that a lot of it really comes down to sort 0:03:19.520 --> 0:03:23.079 of acknowledging and recognizing that this is a key risk 0:03:23.280 --> 0:03:25.680 that companies face and making sure you got all the 0:03:25.840 --> 0:03:28.520 right controls in place to mitigate that risk. So, Richard, 0:03:28.560 --> 0:03:31.400 you raise an interesting point, which is, you know, how 0:03:31.480 --> 0:03:34.560 much should the board be aware of some of these 0:03:34.600 --> 0:03:38.040 allegations and some of these cultural issues that are emerging 0:03:38.280 --> 0:03:40.840 across a slew of companies. I mean, we're we're pinpointing 0:03:40.880 --> 0:03:43.480 CBS because that's where the news is, but you can 0:03:43.520 --> 0:03:45.840 pick a lot of other companies that have also been 0:03:45.880 --> 0:03:51.320 having uh ME to movement movements represented there. Should the 0:03:51.360 --> 0:03:54.960 board be responsible? Should it be there their responsibility to 0:03:55.000 --> 0:03:58.360 go out and investigate some of the culture issues to 0:03:58.400 --> 0:04:01.920 make sure that things are on the up and up. Absolutely, 0:04:02.040 --> 0:04:05.920 to me, uh, you know, it's a shame that American 0:04:06.000 --> 0:04:09.640 boards are buying large shirking their responsibilities when it comes 0:04:10.160 --> 0:04:13.440 to oversight of this critical risk. They have an obligation, 0:04:13.640 --> 0:04:17.159 even even in in statutes in the US, they have 0:04:17.279 --> 0:04:21.400 obligations to maintain oversight of the way risks are managed 0:04:21.440 --> 0:04:24.200 in a company. And there's no risk, as we're seeing 0:04:24.279 --> 0:04:26.799 from a lot of the headlines over the last few weeks, 0:04:26.960 --> 0:04:30.160 there's no risk that's greater than having a high profile 0:04:30.200 --> 0:04:34.200 allegation against senior executives of this nature. And so to me, 0:04:34.400 --> 0:04:37.719 the board, as part of its oversight of risk management, 0:04:38.080 --> 0:04:40.479 needs to monitor the culture of the company, and that 0:04:40.600 --> 0:04:43.880 starts with the tone at the top. How is the company? 0:04:44.000 --> 0:04:46.040 How is the tone in the company being set by 0:04:46.080 --> 0:04:49.880 the senior CEO and senior executive. So the board absolutely 0:04:49.920 --> 0:04:52.920 has a responsibility, and I would tell you without equivocation 0:04:52.960 --> 0:04:57.039 that boards are by and large not fulfilling that obligation. Okay, So, Richard, 0:04:57.120 --> 0:04:59.560 given that, given the fact that CBS is that their 0:04:59.640 --> 0:05:03.120 board is now meeting, how able are they to actually 0:05:03.200 --> 0:05:07.000 handle this situation appropriately since they also are part of 0:05:07.000 --> 0:05:10.960 the problem. According to you, well, I and I can't 0:05:10.960 --> 0:05:12.880 really speak to the CBS board because I don't know 0:05:12.960 --> 0:05:14.960 what accents they may have been taking along the way. 0:05:15.240 --> 0:05:18.520 I would say that whole boards need to have some 0:05:18.640 --> 0:05:21.640 kind of a sense of what is the what is 0:05:21.680 --> 0:05:24.440 the help of the corporate culture. There are lots of 0:05:24.440 --> 0:05:26.359 ways they can gather that. One of the ways that 0:05:26.400 --> 0:05:29.520 we obviously recommend is to turn to the internal auditors 0:05:29.520 --> 0:05:32.120 of the company and ask the internal auditors to give 0:05:32.160 --> 0:05:35.600 them some kind of assurance about what UH controls are 0:05:35.640 --> 0:05:40.320 in place within the company to handle these kinds of allegations, 0:05:40.400 --> 0:05:43.840 what kind of UH codes of conduct or there, and 0:05:43.880 --> 0:05:47.719 what kind of mechanisms do people have to report allegations. 0:05:48.200 --> 0:05:51.520 And internal auditors are out there every day in you know, 0:05:51.680 --> 0:05:55.520 under uncovering issues in the company. They usually have a 0:05:55.520 --> 0:05:59.080 pretty keen grasp of what the culture of the company is. 0:05:59.120 --> 0:06:02.160 And boards how the direct access to these folks, so 0:06:02.160 --> 0:06:04.720 they should be asking them what's going on, what kind 0:06:04.760 --> 0:06:07.000 of culture do we have? Because it's a little late. 0:06:07.120 --> 0:06:10.520 Once that culture, if it is toxic once, it really 0:06:10.760 --> 0:06:13.520 kind of tarnishes the company. It's a little bit late 0:06:13.600 --> 0:06:18.159 for everybody to start acknowledging them that there were cultural issues. Richard, 0:06:18.200 --> 0:06:21.120 How does that happen when the president the chief executive 0:06:21.160 --> 0:06:23.359 of a company also happens to be the chairman of 0:06:23.360 --> 0:06:27.640 the board. That's the case at CBS. Well, that's why 0:06:27.680 --> 0:06:30.000 it's so I think that's why it's so powerful that 0:06:30.200 --> 0:06:32.960 internal auditors report to the audit committee, and the audit 0:06:33.000 --> 0:06:36.640 committees are shaired not by corporate executives but by independent 0:06:36.680 --> 0:06:39.760 board members. And it's those independent board members who chair 0:06:40.279 --> 0:06:43.000 the board, the audio committee of the board, who have 0:06:43.560 --> 0:06:47.600 the responsibility to turn to internal audit to look at 0:06:47.600 --> 0:06:51.520 other sources, um to get the answers. In fact, the 0:06:51.600 --> 0:06:54.800 survey I mentioned earlier showed that nearly three quarters of 0:06:54.839 --> 0:06:58.520 corporate boards almost had made no move to bring in 0:06:58.560 --> 0:07:02.080 any experts or the internal auditors to look at sexual 0:07:02.120 --> 0:07:07.200 harassment misconduct risks. In the case of CBS, the chairman 0:07:07.240 --> 0:07:11.640 of that board the audit committee is Gary Countryman. He's 0:07:11.720 --> 0:07:18.280 the former chairman of Liberty Mutual. Should they have a 0:07:18.320 --> 0:07:23.560 regular investigation or process to vet the chairman of the 0:07:23.600 --> 0:07:28.280 board or the chief executive for this very issue, Well, 0:07:28.320 --> 0:07:30.760 I would think there is there should be it again 0:07:30.800 --> 0:07:33.400 back to my back to my earlier point, I think 0:07:33.440 --> 0:07:37.240 audit committees have an ongoing responsibility to have the kind 0:07:37.240 --> 0:07:40.240 of dialogue with internal audit. They have executive sessions, usually 0:07:40.240 --> 0:07:43.080 with the internal auditors with nobody else from the executive 0:07:43.080 --> 0:07:48.120 management around. They have an ongoing opportunity to probe these 0:07:48.200 --> 0:07:51.120 kind of areas, to ask these kind of questions. There 0:07:51.160 --> 0:07:56.520 should be a clear expectations set with the legal counsel 0:07:56.680 --> 0:07:59.400 of the of the company to make sure that any 0:07:59.400 --> 0:08:02.880 allegation are brought to their attention as they involve the 0:08:03.440 --> 0:08:06.800 CEO or some other senior executives. To me, this is 0:08:06.840 --> 0:08:10.680 just a simple matter, not simple really, but certainly a 0:08:10.800 --> 0:08:14.760 matter of risk management. Companies face a litany of risks. 0:08:14.840 --> 0:08:17.160 To you know, we we we talked every day about 0:08:17.480 --> 0:08:22.520 operational risk, strategic risks, technology risk. This is another risk. 0:08:22.640 --> 0:08:27.400 And to me, smart boards, boards that are fully engaged 0:08:27.440 --> 0:08:30.360 in experting their responsibility will have the right risk management 0:08:30.360 --> 0:08:31.960 in place. We've got to leave it there. I want 0:08:31.960 --> 0:08:34.600 to thank you very much Richard Chambers, chief executive of 0:08:34.640 --> 0:08:39.840 the Institute of Internal Auditors, on how CBS could handle 0:08:39.880 --> 0:08:59.439 accusations against chief executive and chairman less Moonvest. Getting ready 0:08:59.480 --> 0:09:02.520 for a back to school a shopping parents are faced, 0:09:02.520 --> 0:09:05.920 perhaps with a variety of new items. Everyone needs an 0:09:05.960 --> 0:09:09.360 ear phone holder as well as washy tape. Here to 0:09:09.400 --> 0:09:12.760 tell us more about the industry is Punamgyal, our senior 0:09:12.840 --> 0:09:17.640 retail analyst for Bloomberg Intelligence. Punam what kinds of back 0:09:17.679 --> 0:09:21.320 to school shopping can we expect this season? Yeah? You know, 0:09:21.400 --> 0:09:23.480 I think the back to school season this year will 0:09:23.480 --> 0:09:26.360 be interesting. Estimates are for a down one percent top 0:09:26.400 --> 0:09:29.560 to present, depending on who's look, but I think consumers. 0:09:29.920 --> 0:09:32.520 What I found very interesting is that apparel, you know, 0:09:32.679 --> 0:09:35.280 a key category for back to school, is going to 0:09:35.320 --> 0:09:37.840 see some momentum this year, which votes really well for 0:09:38.000 --> 0:09:40.720 the retailers that I cover department stores and apparel stores. 0:09:41.040 --> 0:09:43.880 And within that, I think Denham, which has made a 0:09:43.880 --> 0:09:47.720 strong comeback um, is going to be feeling that shar game. 0:09:48.760 --> 0:09:50.920 So people are going to be buying lots of genes 0:09:50.960 --> 0:09:54.000 as they head back to school. That's what we're seeing, Yes, 0:09:54.200 --> 0:09:56.440 I mean that's what the sur ratio. Are they going 0:09:56.480 --> 0:09:59.360 to be buying them through Amazon or their local store? 0:10:00.120 --> 0:10:02.560 So sets questions. I think Amazon will get some of 0:10:02.600 --> 0:10:05.000 that share. If no matter where I look and how 0:10:05.040 --> 0:10:08.120 I look, Amazon has been growing it's private label business, 0:10:08.240 --> 0:10:11.200 especially in apparel. We saw that on Prime Day and 0:10:11.240 --> 0:10:13.720 I think we'll continue to see that over the course 0:10:13.840 --> 0:10:16.559 of back to school and even into holidays. But that said, 0:10:16.600 --> 0:10:20.280 there are some very strong apparel players in Denham. When 0:10:20.280 --> 0:10:23.280 you look at, for example, American Eagle, I think you 0:10:23.320 --> 0:10:25.280 know that's one retailer that stands out and that will 0:10:25.320 --> 0:10:28.559 continue to do well in the standard genes Um category, 0:10:28.640 --> 0:10:31.560 which is forecasted to be up for point five percent 0:10:31.720 --> 0:10:34.319 for this year, and then Old Navy. When you look 0:10:34.360 --> 0:10:37.959 at Economy jenes Um at the lower price points UM, 0:10:38.000 --> 0:10:40.320 Amazon is probably somewhere in between those two, so I 0:10:40.320 --> 0:10:43.439 think they'll also continue to gain share, not more people 0:10:43.520 --> 0:10:46.120 pay more for the same products this year. Will they 0:10:46.160 --> 0:10:48.800 see inflation at the store? I don't think so. No. 0:10:48.960 --> 0:10:51.760 While retailers would love to see inflation UM, but I 0:10:51.760 --> 0:10:53.400 think if you look at a like to like item, 0:10:53.400 --> 0:10:55.839 I don't think you'll see the price move up. That said, 0:10:55.920 --> 0:10:59.719 if you enhance the material UM, if there's more stretchability 0:10:59.800 --> 0:11:02.520 to it, if it's you know, better quality UM, then 0:11:02.559 --> 0:11:05.000 the price points there could go up from last year. 0:11:05.480 --> 0:11:08.080 So when you tell when you start to think about 0:11:08.160 --> 0:11:11.079 what to expect for the back to school season, how 0:11:11.160 --> 0:11:16.080 much you're looking at the spending ability of consumers the economy. 0:11:16.240 --> 0:11:18.559 I mean, what sort of factors in for you. I mean, 0:11:18.559 --> 0:11:21.160 the economy definitely matters, right, because at the end of 0:11:21.160 --> 0:11:24.280 the day, if the consumer isn't feeling that they are 0:11:24.320 --> 0:11:26.480 in a healthy position to spend, you're going to see 0:11:26.480 --> 0:11:28.680 a pullback. I don't see that this year. I didn't 0:11:28.679 --> 0:11:31.240 see that last year. Um. You know, we have consumer 0:11:31.240 --> 0:11:34.400 confidence still at near all time highs, unemployment rate as well, 0:11:34.760 --> 0:11:38.480 and the housing market queer frankly is still good. So um, 0:11:38.840 --> 0:11:41.720 we haven't seen consumers start to trade down or anything yet, 0:11:41.760 --> 0:11:45.280 which helps back to school spending. That said, you know, 0:11:45.400 --> 0:11:47.880 last year, um, if you look back at three Q, 0:11:48.120 --> 0:11:51.800 which in retail it's August Tember October, August was very strong, 0:11:52.160 --> 0:11:55.600 which which encompassed most of back to school, so they're 0:11:55.640 --> 0:11:58.960 up against some very tough comparisons for just back to school. 0:11:59.320 --> 0:12:02.440 But then when you forward in the quarter into September October, 0:12:02.559 --> 0:12:05.760 it was very very weak last year if you recall 0:12:05.800 --> 0:12:09.120 the hurricanes and storms that we had and warm temperatures. 0:12:09.160 --> 0:12:12.640 So we think the opportunity for retail and three que 0:12:12.679 --> 0:12:15.280 back to school will be good, But the real opportunity 0:12:15.320 --> 0:12:18.679 is going to come in the latter half if temperatures 0:12:18.720 --> 0:12:20.760 are cooler than they were last year and we don't 0:12:20.760 --> 0:12:23.680 have as many storms. I'm just a little bit more 0:12:23.720 --> 0:12:27.920 on denom. Does each item if it has more holes 0:12:28.000 --> 0:12:32.600 and rips, doesn't cost more? Sometimes Yes, Um, depends on 0:12:32.600 --> 0:12:35.640 where you're shopping, you know, um in premium genes yes, 0:12:36.160 --> 0:12:40.359 and standard genes Uh. I'd say the rips don't necessarily 0:12:40.480 --> 0:12:43.920 dictate the price, but the fabrication of the denom does. 0:12:44.280 --> 0:12:47.240 So if there is more stretchability, fits softer, yes, it'll 0:12:47.240 --> 0:12:50.720 cost more. Then why would American Eagle, for example, be 0:12:50.840 --> 0:12:54.680 offering thirty off if you buy three pairs of genes? 0:12:54.880 --> 0:12:57.400 Is it just because their cost is so low that 0:12:58.559 --> 0:13:01.160 off still means that making a decent an amount of money. Yeah. 0:13:01.160 --> 0:13:03.760 You know, most of those formation promotions are typically built in, 0:13:03.880 --> 0:13:06.199 so I wouldn't consider them last leading. Yet if you 0:13:06.240 --> 0:13:08.440 saw seventy percent off, I would be a little concerned, 0:13:08.520 --> 0:13:11.160 or even fifty percent off. So I think those are 0:13:11.200 --> 0:13:13.679 built in, and it's really just to drive the customer 0:13:13.720 --> 0:13:16.720 into the store and hoping that they also transact into 0:13:16.760 --> 0:13:19.160 adjacent categories, whether they pick up a top while there 0:13:19.160 --> 0:13:23.280 there are something else that built the basket. I honestly say, pim. 0:13:23.320 --> 0:13:26.680 There have been some advertisements that are sheer parity, where 0:13:26.720 --> 0:13:30.480 you basically have these genes that are are all holes 0:13:30.520 --> 0:13:33.439 except for a couple of lines of denim, and they 0:13:33.440 --> 0:13:35.720 cost like two hundred dollars. There's one post I'm thinking 0:13:35.720 --> 0:13:39.680 of particular, and it was widely widely mocked online. Yes, 0:13:39.760 --> 0:13:42.480 the look on your face does say it all. Tim, Well, 0:13:42.520 --> 0:13:46.680 maybe there's a market for patches, all right, there's got 0:13:46.679 --> 0:13:48.679 to be more than apparel, right, I mean, are we 0:13:48.760 --> 0:13:52.560 going to see big spending on technology? Yes? Absolutely. I 0:13:52.559 --> 0:13:55.400 mean that's always a key category, whether it's laptops, you know, 0:13:55.480 --> 0:13:59.440 I've had iPhones, whatever it maybe um shoppers needs back 0:13:59.440 --> 0:14:02.560 to school for flies. Those are definitely top categories. If 0:14:02.559 --> 0:14:04.560 I look at just a survey that we pulled up 0:14:04.559 --> 0:14:07.040 and it was done by Deloitte, you know, total back 0:14:07.080 --> 0:14:10.480 to school spending the estimate twenty seven point six billion dollars, 0:14:10.480 --> 0:14:14.080 the lion shares, apparel fifteen billion dollars, Computer and hardware 0:14:14.360 --> 0:14:18.760 to your Technology UM point and electronic gadgets add up 0:14:18.760 --> 0:14:21.680 to anywhere near three point seven and two point eight, 0:14:21.680 --> 0:14:25.800 So you're looking at about six billion dollars starting to 0:14:25.840 --> 0:14:27.760 talk about real money. Put Hum Goyle. Thank you so 0:14:27.840 --> 0:14:29.600 much for being with us. Put Him Goyle. See your 0:14:29.680 --> 0:14:33.160 US retail analyst for Bloomberg Intelligence, Pimm. Do you buy 0:14:33.160 --> 0:14:36.800 clothes online? No? I don't really do a lot of 0:14:36.800 --> 0:14:40.760 buying well, and you're the one who accuses me. I'm 0:14:40.760 --> 0:14:45.320 not actually buying enough things, you know at my stage, 0:14:45.600 --> 0:14:50.360 and there's no it's it's not an option. I don't know. 0:14:50.440 --> 0:14:51.960 It's hit or miss for me. I mean there have 0:14:52.000 --> 0:14:54.360 been some big wins, but some big seven and a 0:14:54.440 --> 0:14:57.360 half billion that's what they're predicting for. That's what Putnam 0:14:57.440 --> 0:15:01.400 says for spending for back to school and a half billions. 0:15:01.520 --> 0:15:19.440 A lot of pencils. So as the US housing market 0:15:19.520 --> 0:15:22.680 heating up or slowing down, here to talk with us 0:15:22.720 --> 0:15:26.720 is Logan Motor Shami, senior loan officer for a MC Lending. 0:15:26.760 --> 0:15:29.040 Thank you so much for joining us. Logan. It's really 0:15:29.120 --> 0:15:32.560 been an interesting couple of months for the US housing market. 0:15:32.800 --> 0:15:35.920 We got a bunch of negative data or sort of 0:15:36.240 --> 0:15:39.040 seeming to paint the market with a pessimistic brush and 0:15:39.040 --> 0:15:42.200 then today we got this good report at US petting 0:15:42.240 --> 0:15:44.880 home sales increased for the first time in three months. 0:15:45.040 --> 0:15:47.080 So can you be just sort of take a step back, 0:15:47.320 --> 0:15:49.680 take stock? Where are we with the US housing market 0:15:49.760 --> 0:15:55.000 right now? The US housing market looks exactly perfect where 0:15:55.000 --> 0:15:57.760 it should be today. Um. I think the problem we 0:15:57.840 --> 0:16:01.640 have here is that we have an institution of housing 0:16:01.680 --> 0:16:04.320 and housing economists that have told the story that we 0:16:04.400 --> 0:16:08.080 have record breaking demand vocifer strong, and all we need 0:16:08.200 --> 0:16:11.560 is more inventory and once more inventory comes, sales will grow. 0:16:12.640 --> 0:16:14.600 What we saw an existing home sales last week was 0:16:14.680 --> 0:16:17.920 inventory rows, sales are down. This is the same thing 0:16:17.920 --> 0:16:20.440 that happened in now We've got twice now in the 0:16:20.520 --> 0:16:23.160 cycle where we were told we have record breaking demand, 0:16:23.200 --> 0:16:26.280 but inventory rises and demand doesn't fall through with it. 0:16:26.520 --> 0:16:30.320 So it's confusing and people get nervous because we're later 0:16:30.320 --> 0:16:33.320 in the cycle. Home prices are rising, so people just 0:16:33.360 --> 0:16:35.560 want to make sure that you know, they're not, you know, 0:16:35.600 --> 0:16:38.440 in a situation where prices are going to collapse, and 0:16:38.520 --> 0:16:40.680 that's not going to be the case in this cycle either. 0:16:40.760 --> 0:16:44.320 So I think the extreme housing bowls and extreme housing 0:16:44.360 --> 0:16:48.240 bears are going to be terribly frustrated for the upcoming 0:16:48.320 --> 0:16:51.680 years because I truly believe they're not correctly reading the 0:16:51.800 --> 0:16:55.760 data right and because of that, it creates confusion instead 0:16:55.800 --> 0:16:59.040 of instead of a housing cycle that looks exactly where 0:16:59.040 --> 0:17:02.320 it should be. Okay, well, logan, well, based on your 0:17:02.400 --> 0:17:06.520 reading of the data, what do you conclude and help 0:17:06.600 --> 0:17:09.240 Lisa out here give us a little picture into the future. 0:17:09.880 --> 0:17:12.480 Purchase applications are at cycle highs. We've had year over 0:17:12.600 --> 0:17:15.919 year growth every week. Basically, cash buyers are faulting as 0:17:15.960 --> 0:17:18.919 a percentage of sales. So because of that, you're going 0:17:18.960 --> 0:17:22.159 to need more mortgage demand to get growth from these levels. 0:17:22.200 --> 0:17:24.000 This is the same thing kind of what happened last 0:17:24.080 --> 0:17:25.959 year as well. We're kind of a flat to negative 0:17:26.000 --> 0:17:30.919 sales trends, but purchase applications are still only as so 0:17:31.000 --> 0:17:34.160 we're not we're not bearing some very strong economic cycle 0:17:34.160 --> 0:17:36.639 where builders have to build out more homes. So the 0:17:36.720 --> 0:17:39.840 inventory channels from the builders are actually looks pretty pretty 0:17:39.840 --> 0:17:41.840 in line. Because new home sales are still growing, they're 0:17:41.840 --> 0:17:45.359 actually better than than than I anticipated. So it's just 0:17:45.440 --> 0:17:49.240 a very slow and steady housing cycle. So there's there's 0:17:49.280 --> 0:17:53.000 not this There shouldn't be this very extremembarrassed theme with 0:17:53.040 --> 0:17:55.880 the data that came in last week, or an extreme 0:17:55.960 --> 0:17:58.400 bullish theme for all the data that has been out 0:17:58.440 --> 0:18:00.600 here for years. With housing, it's just a very slow 0:18:00.680 --> 0:18:04.080 and steady housing cycle. But it confuses people when they 0:18:04.119 --> 0:18:07.639 see inventory increased year over year and demand go down. 0:18:07.680 --> 0:18:11.000 And I think that's I think that's the miscommunication with 0:18:11.119 --> 0:18:13.919 the housing community to the public because the public was 0:18:13.920 --> 0:18:16.800 always told if we get more inventory, sales will take off, 0:18:17.240 --> 0:18:19.720 and twice now in the cycle it has not happened. 0:18:19.920 --> 0:18:22.720 Look in your uniquely positioned to give us insight and 0:18:22.840 --> 0:18:26.440 how much the increase in mortgage rates has affected demand 0:18:26.800 --> 0:18:32.720 for home loans. What has it been like. Well, even today, 0:18:32.960 --> 0:18:35.879 purchase applications are up the year over year, so we 0:18:35.960 --> 0:18:39.600 can we can assume that higher mortgage rates with higher 0:18:39.600 --> 0:18:43.560 home prices might impact the rate of growth of housing. 0:18:43.600 --> 0:18:48.760 But this isn't like was very evident mortgage rates rose late, 0:18:49.760 --> 0:18:53.240 purchased applications were down year over year from the majority 0:18:53.280 --> 0:18:55.880 of the year. We don't see that this year. So today, 0:18:56.080 --> 0:19:00.160 even now, higher mortgage rates have not impacted stay else 0:19:00.200 --> 0:19:03.439 in the sense that, uh, we're creating a negative trend. 0:19:03.520 --> 0:19:06.000 But it's impacting I would say, the rate of growth 0:19:06.400 --> 0:19:10.560 out here. But also it's harder to move up when 0:19:10.600 --> 0:19:13.159 you're when interest rates are higher, you know, and I 0:19:13.200 --> 0:19:15.840 know there's a lockdown rate theory, but higher home prices 0:19:15.880 --> 0:19:18.520 make it harder for the move a buyer to buy 0:19:18.560 --> 0:19:21.439 that expensive house. And we see this in the housing 0:19:21.480 --> 0:19:24.080 tenure data. That housing tenure is at all time highs 0:19:24.160 --> 0:19:27.119 right now. And this is a situation why builders aren't 0:19:27.119 --> 0:19:29.680 building more homes. They know there's a massive amount of 0:19:29.720 --> 0:19:32.520 supply that is out there that is cheaper, smaller, and 0:19:32.600 --> 0:19:35.639 has a geographical advantage over them. So one thing that 0:19:35.680 --> 0:19:37.879 I'm trying to understand, perhaps some of the confusion is 0:19:37.920 --> 0:19:42.000 stemming from a bifurcation in the US market where certain 0:19:42.040 --> 0:19:46.280 big cities that enjoyed massive booms in their housing markets 0:19:46.280 --> 0:19:49.120 are seeing uh sort of market slowdowns. I mean, I'm thinking, 0:19:49.240 --> 0:19:52.160 for example of San Francisco, do market, but you're starting 0:19:52.160 --> 0:19:55.040 to see a plateauing and dipping in prices, and certainly 0:19:55.320 --> 0:19:58.080 in New York. How much is that part of the narrative. 0:19:59.040 --> 0:20:01.000 Here's here's here's the interesting. This is what I could 0:20:01.040 --> 0:20:02.960 see in SoCal and I even took a bunch of 0:20:02.960 --> 0:20:06.640 photos of price reduction homes. What I saw in June 0:20:06.920 --> 0:20:10.760 and July was aggressive selling prices from real estate agents 0:20:11.040 --> 0:20:14.000 and these homes drawn for thirty days and more. And 0:20:14.040 --> 0:20:16.159 it's late July, and if you need to sell the 0:20:16.200 --> 0:20:19.120 house before the you know, the school the school time 0:20:19.160 --> 0:20:22.560 it comes in, you saw aggressive price cuts, you know, 0:20:22.680 --> 0:20:24.840 as I saw price cuts of four or five, six, 0:20:24.880 --> 0:20:28.360 seven percent even to sell the house. Okay, So there 0:20:28.520 --> 0:20:31.600 is limits to what you could put onto the marketplace. 0:20:32.240 --> 0:20:34.919 And that's what I'm seeing this summer, is that you 0:20:34.960 --> 0:20:38.560 saw aggressive selling prices, thinking that it would just be 0:20:38.680 --> 0:20:42.560 soaked up because inventory is monthly supply. Is that near 0:20:42.600 --> 0:20:45.639 cyclothes And it didn't happen. And then you know, the 0:20:45.720 --> 0:20:48.680 sales are delayed out because the price cuts are coming 0:20:48.720 --> 0:20:50.640 in and most likely that all the buyers will pick 0:20:50.640 --> 0:20:52.919 it up then. But that is what I That was 0:20:52.960 --> 0:20:55.639 what I'm assuming is going is what we're seeing in 0:20:55.720 --> 0:20:58.840 other places, that there's limits to how much price increases 0:20:58.880 --> 0:21:02.480 you could get out of the house. Logan just quickly, 0:21:02.520 --> 0:21:05.040 and I just want to mention you've got a great website, Logan, 0:21:05.640 --> 0:21:10.560 your Financial Truth website where you put out your economic 0:21:10.640 --> 0:21:14.000 and housing predictions. Just twenty seconds. Would you change anything 0:21:14.040 --> 0:21:17.879 that you've described earlier this year? Absolutely not. It looks 0:21:18.040 --> 0:21:20.800 perfect Because I talked about existing home sales will be 0:21:20.840 --> 0:21:24.680 flat and negative, but inventory will increase and people shouldn't 0:21:24.680 --> 0:21:27.200 panic about that. That was my exact line I used 0:21:27.680 --> 0:21:30.840 UH in there. This is uh. This year looks exactly correct, 0:21:30.880 --> 0:21:34.360 and new home sales are actually still outperforming my sales estum. 0:21:34.359 --> 0:21:35.680 I though I was only looking for two to five 0:21:35.680 --> 0:21:39.040 percent growth, were a little bit higher than that. Median 0:21:39.160 --> 0:21:42.480 sales prices falling. That is actually a good thing. That 0:21:42.520 --> 0:21:44.959 means lower home prices are coming in the market. We've 0:21:44.960 --> 0:21:46.600 got to leave it there, but thanks very much for 0:21:46.680 --> 0:21:49.479 being with a slogan Matsa Shami. He is the senior 0:21:49.640 --> 0:21:53.880 loan officer for a MC Lending, giving us his perspective 0:21:54.000 --> 0:21:57.840 on housing data, more good applications, and the housing market. 0:22:11.800 --> 0:22:14.280 Joining us now in studio Car Wreca Donna, chief US 0:22:14.320 --> 0:22:21.240 economist for Bloomberg Intelligence. Carl, gotta ask you about Kansas 0:22:21.240 --> 0:22:25.160 City and Esther George, head of the Kansas City FED. 0:22:25.760 --> 0:22:28.000 You're shaking your head. You're giving me this smile. This 0:22:28.080 --> 0:22:32.480 means Esther George is going to vote, isn't she? Yes? 0:22:32.600 --> 0:22:37.359 She will be voting in the absence of San Francisco 0:22:37.520 --> 0:22:41.040 FED having a replacement for John Williams, who moved to 0:22:41.200 --> 0:22:43.080 was the president at the San fran FED, who was 0:22:43.119 --> 0:22:46.200 now the president at the New York FED. And what's 0:22:46.200 --> 0:22:49.480 a little bit of of musical chair I mean esther 0:22:49.800 --> 0:22:54.880 George is known as pretty hawkish. More than pretty hawkish, 0:22:54.920 --> 0:22:58.560 she is one of the most resolute hawks on the committee. 0:22:58.640 --> 0:23:02.879 So uh, A one vote can't can't slave the committee. 0:23:02.920 --> 0:23:06.320 So you know, I don't think this materially will change 0:23:06.480 --> 0:23:11.879 the discussion for economics UH and policy setting at the effect, 0:23:12.000 --> 0:23:14.879 but nonetheless it will be a hawkish voice who counts 0:23:14.880 --> 0:23:19.280 as a vote, not just not just an opposition. Carl U. 0:23:19.520 --> 0:23:22.760