WEBVTT - It's Still a Goldilocks Environment, Meyer Says 0:00:06.320 --> 0:00:12.960 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm term Keene 0:00:13.480 --> 0:00:17.560 jay Leye. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:32.600 Bloomberg dot Com, and of course, on the Bloomberg. The 0:00:32.720 --> 0:00:36.120 story it comes from China retaliating said it would levy 0:00:36.120 --> 0:00:39.640 in additional tariff on imports of one hundred and six 0:00:39.720 --> 0:00:43.720 U S products including soybeans, automobiles, chemicals, and aircraft. This 0:00:43.840 --> 0:00:48.240 in response to proposed American duties on Chinese high tech goods. 0:00:48.280 --> 0:00:50.280 All of this in the last twenty four hours. To 0:00:50.360 --> 0:00:52.919 draw a distinction, a line between what is the proposal 0:00:52.960 --> 0:00:55.480 and what is actually policy, Chris Rapki joins us now 0:00:55.720 --> 0:00:59.720 MFUG Union Bank chief financial economist, Chris, Let's drain the 0:00:59.760 --> 0:01:02.080 draft just for a moment and look at what's on 0:01:02.120 --> 0:01:05.560 the table. Is this a negotiation or the first shot 0:01:05.640 --> 0:01:09.360 of a trade war? Yeah, I mean it sounded like 0:01:09.440 --> 0:01:12.200 China was just putting this out here, this is what 0:01:12.240 --> 0:01:14.720 they could do, but they didn't announce the date of 0:01:15.280 --> 0:01:19.119 enacting these tariffs, So it sounds like both sides are 0:01:19.520 --> 0:01:23.039 hitting each other pretty hard. In terms of rhetoric. But 0:01:23.240 --> 0:01:27.640 we're aways away from finding that exports between the two 0:01:27.680 --> 0:01:30.000 countries are going to slow down. Here, well, let's go, 0:01:30.160 --> 0:01:32.040 let's go into what's on the table to The United 0:01:32.080 --> 0:01:35.960 States has unveiled proposals for tariffs. They will be discussed 0:01:35.959 --> 0:01:38.080 over the next sixty days, and the Chinese have said, 0:01:38.200 --> 0:01:40.720 here are proposals, and in sixty days, if you implement 0:01:40.760 --> 0:01:44.560 these tariffs as policy, we will respond and this proposal 0:01:44.680 --> 0:01:48.120 will become policy. This seems to me, Chris like high 0:01:48.200 --> 0:01:51.080 stake negotiations for the next sixty days. Would that be 0:01:51.080 --> 0:01:53.160 an accurate description of what it is? Yeah, it is 0:01:53.240 --> 0:01:56.360 high stakes, I guess one of the one of the 0:01:56.400 --> 0:01:59.760 problems is that the president and his trade advisors have 0:02:00.040 --> 0:02:02.200 have drawn a line in the sand. It's almost a 0:02:02.240 --> 0:02:05.160 campaign promise that he's not going to back off of 0:02:05.240 --> 0:02:08.320 the president and that is they there's a three seventy 0:02:08.600 --> 0:02:13.000 billion dollar deficit in goods trade deficit in goods between 0:02:13.120 --> 0:02:15.120 US in China. He wants to cut that by a 0:02:15.200 --> 0:02:18.919 hundred billion. Well that a hundred billion out of three 0:02:19.040 --> 0:02:21.600 seventy five. That's a big, big number. I don't think 0:02:21.639 --> 0:02:24.200 he's gonna get that, So that's problem one. The other 0:02:24.240 --> 0:02:27.560 thing that disturbs me that may make this story have 0:02:27.720 --> 0:02:32.000 some legs besides just people pounding the table is the 0:02:32.080 --> 0:02:36.160 intellectual property idea. The fact that the administration seems to 0:02:36.200 --> 0:02:40.760 be going to bat for US companies doing business over there, 0:02:40.800 --> 0:02:44.160 doing joint ventures that they don't own, giving up their 0:02:44.320 --> 0:02:49.360 technology secrets to China production secrets for the goods they produce, 0:02:49.680 --> 0:02:53.520 and then walking away and getting nothing. That is more intractable. 0:02:53.600 --> 0:02:56.360 I don't know how they're going to resolve that, because 0:02:56.400 --> 0:03:00.360 that's like a thirty year trend towards that. How how 0:03:00.360 --> 0:03:02.000 are they going to reverse that? I don't know how. 0:03:02.000 --> 0:03:05.560 That's good. We can get into the China made proposals 0:03:05.600 --> 0:03:07.560 a little bit later with you, I'm sure for me, 0:03:07.639 --> 0:03:10.079 what's on the table from the Chinese was was a 0:03:10.120 --> 0:03:13.079 little bit of a heightened rhetoric kind of move from 0:03:13.080 --> 0:03:16.480 the Chinese themselves by bringing soybeans into the conversation. That's 0:03:16.520 --> 0:03:20.240 an escalation politically speaking for the United States. What's ironic 0:03:20.240 --> 0:03:22.200 about this whole situation is for the United States, they 0:03:22.200 --> 0:03:26.080 are reciprocating their own move from the Chinese tariffs of 0:03:26.080 --> 0:03:28.240 their own and the Chinese are saying well, it's only 0:03:28.240 --> 0:03:31.000 polite for us to reciprocate. The irony of that is 0:03:31.000 --> 0:03:33.239 is that it's the United States doing the reciprocating here 0:03:33.400 --> 0:03:36.560 and it's the Chinese escalating things. Would that be Would 0:03:36.560 --> 0:03:38.280 that be a decent read of what's happening here? This 0:03:38.360 --> 0:03:41.040 is an escalation from the Chinese, perhaps more from the 0:03:41.120 --> 0:03:43.680 United States to bring soybeans into the conversation. Yes, and 0:03:43.760 --> 0:03:47.560 it happened so quickly. It happened very very quickly. And 0:03:47.640 --> 0:03:50.080 I think what they're doing is they're reading the political 0:03:50.120 --> 0:03:53.280 tea leaves for the president and saying, you know, the 0:03:53.320 --> 0:03:58.040 heartland of the country year supporters produced soybeans, and they're 0:03:58.040 --> 0:04:00.920 going to go out of business if you can't offload 0:04:01.000 --> 0:04:03.360 these crops to somewhere else in the world, which of 0:04:03.400 --> 0:04:06.840 course they can't. So I think they're needling the president directly. 0:04:07.440 --> 0:04:09.520 I mean, John Farrell, I thought your data check was great, 0:04:09.520 --> 0:04:11.720 and yes I'm watching doll again as well, John, One 0:04:11.760 --> 0:04:16.599 of six eighteen is really not correlated with no In fact, 0:04:16.640 --> 0:04:18.479 you know what my take is this morning something the 0:04:18.560 --> 0:04:21.480 real price action is just sort of isolated into equities. 0:04:21.520 --> 0:04:25.920 It's an equity volume selected a real risk of story 0:04:26.080 --> 0:04:28.160 broad based risk off would be a big bit at 0:04:28.160 --> 0:04:29.920 the front end of the tracery curve and a market 0:04:29.920 --> 0:04:32.880 deciding that we're going to price out hikes right and 0:04:33.000 --> 0:04:35.480 see that right or wrong? John, What I've emphasized this 0:04:35.520 --> 0:04:38.440 morning is the complexities that are out there. Chris Repki 0:04:38.520 --> 0:04:42.720 Michael McKee had a brilliant observation that the China US 0:04:42.800 --> 0:04:45.760 back and forth on soybeans. Good morning all of you 0:04:45.839 --> 0:04:50.160 on serious SEXEMP Channel one nineteen in Iowa is Argentina 0:04:50.200 --> 0:04:54.520 because at the margin, I believe Argentina's the number two 0:04:55.640 --> 0:05:00.000 exporter to China on soybeans. So there's a game theory 0:05:00.080 --> 0:05:04.760 read to this that Dr Navarro and President Trump seemed 0:05:04.800 --> 0:05:08.720 to downplay. Where are you on the game theory the 0:05:08.760 --> 0:05:12.120 tip for tip of trade, I mean, it's a proven fact. 0:05:12.400 --> 0:05:15.880 There's a game theory, right, yeah. I guess what it 0:05:15.920 --> 0:05:19.320 illustrates is that there, you know, it's very difficult to 0:05:19.360 --> 0:05:22.000 be a winner in this environment. I mean, if you 0:05:22.040 --> 0:05:25.560 go back, didn't we slap some trade tariffs on I 0:05:25.600 --> 0:05:29.240 believe it was steel in the Bush administration which ended 0:05:29.279 --> 0:05:32.360 up coming back off. I think the problem is that 0:05:32.839 --> 0:05:35.120 it looks good that you can pound the table and 0:05:35.160 --> 0:05:38.960 put on a tariff, but it doesn't work like you 0:05:39.200 --> 0:05:42.880 thought it would. And and again, by trying to do this, 0:05:43.080 --> 0:05:47.120 you're trying to interrupt a trend towards globalization that has 0:05:47.240 --> 0:05:50.760 taken place over three decades. You can't pound the table 0:05:50.800 --> 0:05:54.279 and say we want to change it now. It's you 0:05:54.320 --> 0:05:57.000 don't reverse something in one day that's been a thirty 0:05:57.080 --> 0:06:00.320 year story. The problem is though, it's the Chinese haven't 0:06:00.320 --> 0:06:03.840 been liberalizing here, Chris, and at some point someone has 0:06:03.880 --> 0:06:06.240 to stand up and say enough is enough. The Maid 0:06:06.320 --> 0:06:09.280 in China program, and I promise that we would get 0:06:09.320 --> 0:06:12.440 there is a very very transparent program of the Chinese 0:06:12.520 --> 0:06:14.120 to say to the rest of the world, here the 0:06:14.160 --> 0:06:18.480 industries that by we want to dominate. Now. I think 0:06:18.480 --> 0:06:20.120 it would be pretty naive for the rest of the 0:06:20.160 --> 0:06:23.880 world to stand idly by and talk about glorious globalization 0:06:23.960 --> 0:06:27.359 and free trade while the Chinese keep their protectionist barriers 0:06:27.400 --> 0:06:30.480 to entry up and say, look, guys, in five we're 0:06:30.480 --> 0:06:33.360 going to dominate all of these industries. Enjoy your free trade, 0:06:33.640 --> 0:06:37.360 enjoy your globalism, and in your wake up and we'll 0:06:37.360 --> 0:06:39.719 be leading the world. Why should you stand by and 0:06:39.760 --> 0:06:42.440 just let that happen? Chris? Well, I guess that's what 0:06:42.480 --> 0:06:45.159 we're seeing happen. By the way that the way you painted, 0:06:45.200 --> 0:06:47.640 it's almost frightening, isn't it. It's kind of it's the 0:06:47.640 --> 0:06:50.280 battle of who's going to be great again? Are we 0:06:50.360 --> 0:06:53.359 going to make America great again? Is China going to 0:06:53.440 --> 0:06:57.839 become great? There has been a completely naive, naivety about 0:06:57.880 --> 0:06:59.920 the administration has gone by in the United States from 0:07:00.000 --> 0:07:02.480 America for the last twenty years about this Chris. There 0:07:02.520 --> 0:07:05.440 has been a wish, some optimism that the Chinese would 0:07:05.440 --> 0:07:09.000 wake up and be more like America and be more 0:07:09.080 --> 0:07:11.240 like Europe. And the message of the last few years 0:07:11.320 --> 0:07:13.680 is that is just not going to happen. Isn't the 0:07:13.680 --> 0:07:17.120 president onto something here? Yeah he is, but don't forget 0:07:17.320 --> 0:07:19.080 it's going to be very They can say they want 0:07:19.080 --> 0:07:23.200 to dominate certain industries, but it's not necessarily going to happen. 0:07:23.240 --> 0:07:25.600 There's a lot of cars coming in from South Korea 0:07:25.720 --> 0:07:29.280 right now. I don't see that changing. Um you know, 0:07:29.400 --> 0:07:32.520 I know China wants to develop to develop their own 0:07:33.280 --> 0:07:37.840 car industry like trucks and try and export those goods 0:07:37.840 --> 0:07:39.760 to the rest of the world. But it just saying 0:07:39.800 --> 0:07:42.720 it doesn't mean it's going to happen, So I don't know. 0:07:42.800 --> 0:07:46.600 I mean, I wouldn't go too far with the story 0:07:46.720 --> 0:07:48.960 on the part of China taking over the world. John Ferrell, 0:07:49.000 --> 0:07:51.280 how far did you grow up from Lancashire? Is that 0:07:51.280 --> 0:07:56.160 the said it right? They have a small team that 0:07:56.360 --> 0:07:59.680 was Red Liverpool. Well, now that's what you've got to 0:07:59.720 --> 0:08:02.720 live up. And then you've got Manchester United. Manchester United 0:08:02.840 --> 0:08:05.480 is in Lancashire, Mancha Manchester United is more of a 0:08:05.560 --> 0:08:07.800 Lancashire type of club. I did not know that it's 0:08:07.800 --> 0:08:10.360 more than Northern. You probably have more money. United supports that. 0:08:10.440 --> 0:08:12.360 I just pronounced it like John Lennon because of the 0:08:12.440 --> 0:08:15.720 son Chris roski Let's lecture Mr Farrell on the Great 0:08:15.760 --> 0:08:19.800 Debate here and John brings up an absolute classical economics 0:08:19.840 --> 0:08:23.800 take we all learned from William Stanley Jevons of Lancashire, 0:08:23.840 --> 0:08:28.560 England a million years ago about marginalia. How does the 0:08:28.680 --> 0:08:35.439 inherent Washington Trade Group explained to the president the marginale 0:08:35.559 --> 0:08:39.480 of William Stanley Jevons that the next action is more 0:08:39.520 --> 0:08:44.800 important than John's good idea of getting the marginal trade 0:08:44.840 --> 0:08:48.840 dynamics work right. Yeah, I mean, well, I mean to 0:08:48.920 --> 0:08:52.240 me this just shows you how what a slow process 0:08:52.440 --> 0:08:54.760 this is going to be. And if you know, there's 0:08:54.760 --> 0:08:57.400 nothing slow about the president at John's point, I know, 0:08:57.520 --> 0:09:00.560 but he wants that. But it's just, yeah, it's going 0:09:00.600 --> 0:09:04.840 to be very slow in occurring putting these tariffs on, 0:09:05.080 --> 0:09:08.640 seeing if it adjusts the trade flows. I mean in 0:09:08.679 --> 0:09:13.120 a certain fashion. I mean, uh, tariff, maybe that's not 0:09:13.120 --> 0:09:16.199 going to slow the exports coming in as much as 0:09:16.200 --> 0:09:18.120 you think as well, we don't. We don't know. There's 0:09:18.160 --> 0:09:21.040 so many unknowns here, Chris Rocky, We've got to leave 0:09:21.040 --> 0:09:23.160 it there. But great have you with a semifug Union 0:09:23.160 --> 0:09:40.960 Bank chief financial economists. Let's just raise the question why 0:09:41.040 --> 0:09:43.880 is BMW starting production in China? Should I tell you why? 0:09:44.200 --> 0:09:46.400 Because you have to produce in China. Otherwise, if you 0:09:46.440 --> 0:09:50.839 import those BMW's into China, you face significant tariffs for 0:09:50.920 --> 0:09:55.359 bringing luxury autos into China. It's because they have significant 0:09:55.360 --> 0:09:58.679 barriers to entry that many of these manufacturers have to 0:09:58.720 --> 0:10:01.720 actually produce in China. And this goes to the heart 0:10:01.760 --> 0:10:04.880 of the debate. Tom in Washington, d C. The heart 0:10:04.880 --> 0:10:08.160 of the debate is that the Chinese needs to open up, 0:10:08.440 --> 0:10:11.839 and this is what is happening Michelle Meyer with No 0:10:12.320 --> 0:10:16.120 Bank of America, Mary Lynch on international economics and really 0:10:16.120 --> 0:10:17.959 how it folds back into the g d P of 0:10:18.000 --> 0:10:21.600 the United States of America. Michelle, you're expert on American housing, 0:10:21.640 --> 0:10:24.240 but you do a lot lot more for Mr Harris 0:10:24.360 --> 0:10:29.080 and company. Do you change g DP models off of 0:10:29.320 --> 0:10:34.480 nasty trade tip for tat Eventually you do. UM, It 0:10:34.559 --> 0:10:39.240 just depends on how severe it gets. So for right now, 0:10:39.400 --> 0:10:43.520 our simulations of what's been put into effect thus far 0:10:43.920 --> 0:10:47.920 suggests a very small impact on the aggregate numbers UM. 0:10:48.080 --> 0:10:51.360 So it is a bit more inflationary, but um, you know, 0:10:51.520 --> 0:10:55.280 we're assuming somewhat limited paths through to overall consumer spending 0:10:56.200 --> 0:11:00.640 from this increase in in in and import prices UM. 0:11:00.760 --> 0:11:03.280 And then in terms of aggregate trade flows, again, it's 0:11:03.360 --> 0:11:05.680 not a huge number that's going to move the needle 0:11:05.800 --> 0:11:09.040 very much. So potentially it's light drag to GDP growth, 0:11:09.040 --> 0:11:12.200 potentially a slight increase in inflation UM. But where it 0:11:12.240 --> 0:11:15.920 becomes obviously a lot more problematic if it persists, if 0:11:15.920 --> 0:11:19.920 we continue to see this back and forth, is retaliation UM, 0:11:20.080 --> 0:11:22.160 where we put something in place, trying to put something 0:11:22.200 --> 0:11:24.840 in places other economies put UM some some sort of 0:11:24.840 --> 0:11:28.640 trade specifications in place, and it also ripples through the 0:11:28.679 --> 0:11:32.280 financial markets, and then we have a whole different ball games, Michelle, 0:11:32.480 --> 0:11:35.200 assuming these proposals actually get put in place and they 0:11:35.200 --> 0:11:38.080 actually become policy, I'm going to ask that really horrible 0:11:38.160 --> 0:11:41.680 question that economists have to answer, the percentage chance that 0:11:41.760 --> 0:11:44.839 actually these proposals become policy. Do you have any idea 0:11:44.920 --> 0:11:48.280 right now? Michelle, we don't. We don't, and luckily, as 0:11:48.440 --> 0:11:52.320 you know, as economists, obviously we have to do different scenarios. UM. 0:11:52.360 --> 0:11:55.040 But my approach in this environment where there's just been 0:11:55.080 --> 0:11:59.040 so many political unknowns is that I wait until policies 0:11:59.040 --> 0:12:02.000 have actually been implement did before we put them explicitly 0:12:02.000 --> 0:12:05.720 in our forecasts. Because there's so many moving parts. The 0:12:05.760 --> 0:12:08.880 headlines are changing a daily basis, so trying to calibrate 0:12:08.920 --> 0:12:14.240 your forecasts UM in real time is just virtually impossible. Well, ultimately, Michelle, 0:12:14.240 --> 0:12:15.960 you'd be kind of righting your forecast at a risk 0:12:16.200 --> 0:12:19.199 of something happening. Does the risk of something happening damage 0:12:19.360 --> 0:12:21.960 risk appetite in any way? Does it damage the economy 0:12:22.120 --> 0:12:25.080 as opposed to the reality of something happening. Well, again, 0:12:25.120 --> 0:12:28.720 that goes into the linkages and and the risk factors 0:12:28.720 --> 0:12:32.720 would be shown through financial conditions rather than the real economy. 0:12:32.760 --> 0:12:35.160 So until the policies are put in place, for the 0:12:35.240 --> 0:12:38.720 most part, economic actors are not going to change their 0:12:38.760 --> 0:12:41.440 their models. Maybe you have an uncertainty shock, you have 0:12:41.640 --> 0:12:45.040 some draw down in terms of production, or some concern 0:12:45.080 --> 0:12:48.640 in terms of how how companies are are are allocating 0:12:48.679 --> 0:12:51.960 their capital um. But really, until you have the actual 0:12:51.960 --> 0:12:53.960 policies and you have the clarity on what those policies 0:12:54.000 --> 0:12:56.160 look like, it's hard to say that you're going to 0:12:56.240 --> 0:12:58.640 see a reaction in the real economy. And your micro 0:12:58.880 --> 0:13:04.959 analysis was the first quarter we're getting huge invariable opinions. Yeah, well, 0:13:04.960 --> 0:13:08.000 the first quarter is plagued by residual seasonality and that's 0:13:08.000 --> 0:13:10.520 what's happening now too. So GDP growth is tracking sub 0:13:10.559 --> 0:13:14.080 two percent um. We're talking about one point seven percent 0:13:14.120 --> 0:13:18.480 for GDP growth UM, and that's not so surprising because 0:13:18.520 --> 0:13:20.640 we've seen it year after year, and you continue to 0:13:20.679 --> 0:13:24.280 have this divergence between what the GDP numbers are saying 0:13:24.600 --> 0:13:27.760 versus job growth. Job growth is very strong and GDP 0:13:27.880 --> 0:13:29.920 is very weak, which means productivity growth in the first 0:13:29.960 --> 0:13:34.200 quarter was John I saw residual seasonality open for Elison 0:13:34.280 --> 0:13:40.200 Crows there there were outstanding You're but honestly you're out 0:13:40.200 --> 0:13:42.920 of control this morning, Michelle mar you talk about GDP 0:13:43.080 --> 0:13:44.960 track and staff of two percent. What's your base case 0:13:44.960 --> 0:13:46.360 for the rest of the year. Because a lot of 0:13:46.360 --> 0:13:48.959 people would talk about this firm macro backdrop and that 0:13:49.080 --> 0:13:53.040 the fundamentals are still okay relative to expectations, things weren't 0:13:53.400 --> 0:13:56.800 okay through Q one. Does Q two look better? It 0:13:56.840 --> 0:13:59.839 does a little better in our opinion. How does it 0:14:00.000 --> 0:14:02.959 look better? I'll tell that we're looking for a rebound 0:14:02.960 --> 0:14:05.440 to mid three percent pace on for the following reasons. 0:14:05.960 --> 0:14:08.920 UM one is we do anticipate the consumer bounces back 0:14:08.920 --> 0:14:11.600 in the second quarter, and I think that generally speaking, 0:14:11.600 --> 0:14:14.960 conditions are favorable for the consumer. We've had strong job worth, 0:14:15.040 --> 0:14:18.760 we've had hints of wage growth UM consumer confidence measures 0:14:18.760 --> 0:14:21.520 are at very strong levels, and tax cuts kicked in 0:14:22.160 --> 0:14:25.960 UM in in their early spring, so UM that should 0:14:26.000 --> 0:14:30.040 then further boost consumer spending. They've already brought back their 0:14:30.040 --> 0:14:32.160 savings rate to a bit of a higher level, so 0:14:32.560 --> 0:14:35.120 I think to get that strong rebound in the second quarter, 0:14:35.240 --> 0:14:38.000 the onus is on the consumer UM and for right now, 0:14:38.000 --> 0:14:42.520 our expectation is that the consumer will show through goldilocks growth, Michelle, 0:14:42.680 --> 0:14:45.560 Is it over the story of low inflation and really 0:14:45.640 --> 0:14:48.400 stable output numbers out swhere? Were we're gonna be talking 0:14:48.400 --> 0:14:52.800 about that Friday? Um? You know, I think it's still 0:14:54.240 --> 0:14:57.240 largely an environment of goldilocks growth in that I don't 0:14:57.320 --> 0:15:02.080 think we're going to see big inflationary press sure's this year? Um? 0:15:02.240 --> 0:15:06.320 So you know, again to find goldilocks, is it three growth, 0:15:06.320 --> 0:15:08.920 three and a half percent growth or something softer? Um? 0:15:08.960 --> 0:15:10.640 I think it will end up seeing something a bit 0:15:10.720 --> 0:15:14.520 softer than that. So, yes, momentum will still be there. 0:15:14.600 --> 0:15:17.480 We will still see output improved. Um. And I don't 0:15:17.520 --> 0:15:19.800 think we're going to have a real inflation scare the 0:15:19.840 --> 0:15:22.920 next few months. Though very importantly we should note the 0:15:22.920 --> 0:15:26.120 base effects are favorable for core inflation, so we're going 0:15:26.200 --> 0:15:28.200 to see core inflation trend up on a year of 0:15:28.280 --> 0:15:30.560 year basis. But I don't think we're going to see 0:15:30.640 --> 0:15:33.880 signs of consecutive months and months surprises. Let me go 0:15:33.920 --> 0:15:35.600 to let me Michelle, let me go to what made 0:15:35.640 --> 0:15:38.800 you famous, which is housing dynamics. What is the elasticity 0:15:38.920 --> 0:15:42.400 or responsiveness of the thirty year fixed mortgage rate. Is 0:15:42.440 --> 0:15:46.040 that a fossil study or do you get value in 0:15:46.200 --> 0:15:51.120 gaming American housing by looking at what happens when we 0:15:51.160 --> 0:15:54.360 have higher thirty year fixed mortgage? I mean, I think 0:15:54.360 --> 0:15:56.480 you have to look at mortgage rates when you're analyzing 0:15:56.480 --> 0:15:59.360 the housing market. It's an important input as this um 0:15:59.440 --> 0:16:03.600 income creation and expectations for future income creation and where 0:16:03.640 --> 0:16:06.000 you are in terms of evaluation. Home price is relative 0:16:06.040 --> 0:16:09.240 to income and rent. So mortgage rates certainly a factor, 0:16:09.360 --> 0:16:11.360 and that is certainly a factor that said it higher, 0:16:11.360 --> 0:16:14.480 and it's it's potentially, you know, weighing on affordability. Now. 0:16:14.520 --> 0:16:16.800 I do think there are offsets from the fact that 0:16:16.920 --> 0:16:20.360 income creation has been stronger and that confidence generally speaking 0:16:20.360 --> 0:16:23.080 around housing has been strong An important fact when you 0:16:23.120 --> 0:16:26.080 think about home price appreciation and how mortgage rates are 0:16:26.080 --> 0:16:28.800 going to feed into that is the supply side. We 0:16:28.960 --> 0:16:32.400 still have a very thin market in terms of housing supply, 0:16:32.960 --> 0:16:35.760 so even an environmental mortgage rates are heading higher, it's 0:16:35.920 --> 0:16:38.360 obvious that's going to curb home price appreciation when you 0:16:38.400 --> 0:16:42.320 have such limited supply out there for the majority of 0:16:42.360 --> 0:16:45.680 the country. Michelle Ma, great to have you on the programs. 0:16:45.720 --> 0:17:02.200 Thank you for for Bank American maror Lynche. It is 0:17:02.240 --> 0:17:06.879 great to see a Bloomberg people go viral is Shira 0:17:06.960 --> 0:17:10.639 overdate did two days ago where they're brilliant work on 0:17:10.720 --> 0:17:15.960 Spotify and on their interesting transaction. Everybody picked you up, Shira, 0:17:16.119 --> 0:17:18.880 Mike Gallen over to a CEOs, gave you major face time. 0:17:19.440 --> 0:17:23.680 What was the distinction of the way you approached this 0:17:23.920 --> 0:17:28.480 novel transaction? What set your gad flight coverage apart from 0:17:28.480 --> 0:17:31.440 all the other bladder that was out there. I appreciate 0:17:31.480 --> 0:17:34.360 the compliment. That was very flattering. Uh So, look, one 0:17:34.400 --> 0:17:37.760 thing that really struck me yesterday as everybody was declaring 0:17:38.119 --> 0:17:41.920 victory about this unusual not I p O stock listing 0:17:41.960 --> 0:17:46.720 from Spotify, is just how few shares traded out of 0:17:46.760 --> 0:17:50.600 the gate. So normally, if you have a conventional ip O, 0:17:50.880 --> 0:17:54.239 companies look to sell, you know, a healthy percentage of 0:17:54.320 --> 0:18:00.280 their total shares, something like and Spotify. Again, it's not 0:18:00.359 --> 0:18:02.240 a conventional I p O. So these rules are a 0:18:02.280 --> 0:18:04.440 little bit different, but at least out of the gate, 0:18:04.520 --> 0:18:08.720 Spotify sold fewer than six million shares on Tuesday, which 0:18:08.760 --> 0:18:12.200 was about three percent of total shares that standing. I 0:18:12.240 --> 0:18:14.240 get the idea that the tech people are playing by 0:18:14.520 --> 0:18:16.720 their own rules. It's like class A, class being A, 0:18:17.000 --> 0:18:19.560 it's like Class A class Z. There's all sorts of 0:18:19.600 --> 0:18:21.639 stuff we go into. But the heart of the matter 0:18:21.680 --> 0:18:24.600 is Wall Street was boxed out of a traditional transaction, 0:18:25.040 --> 0:18:27.080 and yet you, in a select group of others say, 0:18:27.160 --> 0:18:30.280 wait a minute, they weren't. Goldman, Sachs, Alan and Company 0:18:30.280 --> 0:18:33.199 and others were actually involved. How can you have it 0:18:33.280 --> 0:18:36.360 both ways? Yeah, I agree with you that the narrative 0:18:36.400 --> 0:18:39.200 about this not I p O right, was that Spotify, 0:18:39.880 --> 0:18:43.160 uh defied conventional wisdom. They cut out Wall Street, cut 0:18:43.160 --> 0:18:45.600 out Lloyd Blank find right. They had three of the 0:18:45.680 --> 0:18:50.360 most prominent tech financial advisors working on this transaction, as 0:18:50.359 --> 0:18:52.840 you said, Allan and Company, Golden Sacks, Morgan Stanley, and 0:18:52.840 --> 0:18:54.879 they paid them thirty five million dollars, which is a 0:18:54.920 --> 0:18:56.760 lot of money. Yeah, but that's what Farrell gets for 0:18:56.760 --> 0:19:00.800 a week er review. I want to understand. This is critical. 0:19:00.920 --> 0:19:03.840 This is the dirt of the industry the way it works. 0:19:03.720 --> 0:19:06.359 As you call a black Rock, pim Cone, Fidelity and 0:19:06.480 --> 0:19:08.680 six other victims, and you say, what do you want 0:19:08.720 --> 0:19:12.560 for this dog? They set the price? Did that really 0:19:12.840 --> 0:19:18.200 happen here? Even though we're all pretending it didn't. Sort 0:19:18.240 --> 0:19:20.400 of so, I mean, I thought there was a really 0:19:20.440 --> 0:19:24.680 interesting details in our colleagues. Alex brinca story yesterday which 0:19:24.760 --> 0:19:29.760 was basically the bankers spent many weeks before the not 0:19:30.000 --> 0:19:34.359 the stock listing of Spotify calling up both owners existing 0:19:34.359 --> 0:19:38.160 owners of Spotify shares and potential buyers of Spotify shares 0:19:38.720 --> 0:19:42.600 to see at what price sellers might sell, and and 0:19:42.720 --> 0:19:45.840 took canvas for potential buyers. The real breaking news head 0:19:45.840 --> 0:19:48.680 at Tom Kane has stood up for this conversation in 0:19:48.720 --> 0:19:51.879 the studio. This is the first time I've seen you 0:19:51.960 --> 0:19:55.399 stand up for a story. There's a quality of lunch 0:19:55.480 --> 0:19:59.560 at the road shows, and Touch companies are notorious for 0:19:59.640 --> 0:20:03.080 not to mean like a real lunch. You always leave hungry. 0:20:03.119 --> 0:20:05.679 But John, what she just said is critical, which is 0:20:05.680 --> 0:20:08.880 there was really a pricing discovery going on, even though 0:20:08.880 --> 0:20:12.640 everybody was standing around outside of the price discovery share. 0:20:12.680 --> 0:20:14.919 The real story here, for me, at least from my 0:20:14.960 --> 0:20:17.199 own perspective, is that it was another tech company that 0:20:17.240 --> 0:20:19.520 didn't actually need to raise capital because they've been so 0:20:19.600 --> 0:20:22.480 well shounded in private markets. Isn't that the future here? 0:20:23.520 --> 0:20:27.439 We'll see? So A, I'm not sure that Spotify did 0:20:27.440 --> 0:20:30.520 itself any favors by not raising money. So this is 0:20:30.520 --> 0:20:33.920 a company that, yes, they have been cash flow positive, 0:20:34.119 --> 0:20:38.359 but they have ambitious plans to branch into new businesses 0:20:38.520 --> 0:20:41.560 that's going to require investment. So I do wonder if 0:20:41.600 --> 0:20:43.840 down the road it's going to look like a mistake 0:20:43.880 --> 0:20:46.080 that they didn't choose to raise money when they could 0:20:46.119 --> 0:20:48.600 have in a in an I p O um. But 0:20:48.720 --> 0:20:52.639 you're right that. I'm sure other tech companies that you know, 0:20:52.760 --> 0:20:55.600 like to defy conventional wisdom, or like to pretend that 0:20:55.640 --> 0:20:58.760 they defy conventional wisdom, will look at Spotify's direct listing 0:20:58.760 --> 0:21:00.800 and want to do the same. But the fact is, 0:21:01.040 --> 0:21:06.080 there aren't that many prominent tech companies, private tech companies 0:21:06.400 --> 0:21:12.000 that have healthy enough financials to go public without raising money. 0:21:12.040 --> 0:21:18.360 So Uber, you know, notoriously wildly unprofitable, you can't do 0:21:18.440 --> 0:21:21.200 a non I p O kind of event. Assume there's 0:21:21.200 --> 0:21:23.240 no rush for them to come to the public market 0:21:23.280 --> 0:21:27.040 to raise capital, because despite Uber's problems, sure you've you've 0:21:27.040 --> 0:21:29.240 picked up on this many a time, people throw money 0:21:29.240 --> 0:21:31.520 at them. Absolutely, and I think that is true of 0:21:32.040 --> 0:21:36.640 you know, a small elite category of private tech companies. 0:21:36.720 --> 0:21:39.439 They don't need the public markets to raise money, Sure Overday. 0:21:39.440 --> 0:21:41.480 It's been great to catch up with you. Some tremendous, 0:21:41.560 --> 0:21:45.000 tremendous columns coming out of Bloomberg, Gadfly and Shara in 0:21:45.080 --> 0:21:46.600 front of the Pack For me and Tom, I have 0:21:46.640 --> 0:21:48.480 to say, I've never seen Tom Kane stand up for 0:21:48.480 --> 0:21:51.000 a story in the Student. I'll take it as a compliment. 0:21:51.119 --> 0:21:56.400 I've never seen that baroness over date. You gotta shure 0:21:56.560 --> 0:21:58.880 some credit. I mean, folks, this is what it's like. 0:21:58.920 --> 0:22:01.480 I mean, shares in the wrenches on this thing. And 0:22:01.560 --> 0:22:05.239 she gets global pickup of you know, amid all the 0:22:05.280 --> 0:22:07.560 eighties seven other articles that were out there, which is 0:22:07.680 --> 0:22:10.880 very good. Sure of a Day on Spotify as well. 0:22:25.840 --> 0:22:28.000 It is good to get a calm and reason voice 0:22:28.000 --> 0:22:30.200 in here with the tumult that we see in economics 0:22:30.200 --> 0:22:34.679 in the markets. Stephen Friedman is with BMP Perry. But Stephen, 0:22:34.680 --> 0:22:35.919 I want to go back to a meeting I had 0:22:35.960 --> 0:22:39.639 over a decade ago in Beijing where the senior management 0:22:39.640 --> 0:22:41.800 of Paris be and p Perry bout Line being up 0:22:41.800 --> 0:22:44.879 with one of your chief representatives in China, and it 0:22:44.960 --> 0:22:50.080 was a private and scintillating conversation on the new capitalism 0:22:50.200 --> 0:22:53.160 of China. B mp Perry bid has an absolutely unique 0:22:53.880 --> 0:22:56.680 China view that really goes back more than two even 0:22:56.720 --> 0:23:00.200 three decades as well. What does your Asian death USK 0:23:00.720 --> 0:23:05.480