1 00:00:00,800 --> 00:00:04,040 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 2 00:00:04,040 --> 00:00:06,920 Speaker 1: my co host Matt Miller. Every business day, we bring 3 00:00:06,960 --> 00:00:11,520 Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along 4 00:00:11,520 --> 00:00:15,600 Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast 5 00:00:15,600 --> 00:00:18,439 Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and 6 00:00:18,480 --> 00:00:24,120 Speaker 1: at Bloomberg dot com. Slash podcast now on Bloomberg Markets. 7 00:00:24,120 --> 00:00:29,640 Speaker 1: Focus on fixed income with Iron Jersey bloom Focus on 8 00:00:29,680 --> 00:00:32,159 Speaker 1: fixed income is brought to you by Pimco, a global 9 00:00:32,240 --> 00:00:35,360 Speaker 1: leader and active fixed income. Learned how Pimco creates opportunities 10 00:00:35,400 --> 00:00:38,519 Speaker 1: for investors at pimco dot Com slash bonds. All investments 11 00:00:38,560 --> 00:00:41,400 Speaker 1: contain risk and may lose value of con Consult your 12 00:00:41,479 --> 00:00:45,400 Speaker 1: investment professional before investing. All right, Ira, before we get 13 00:00:45,400 --> 00:00:47,280 Speaker 1: to the soccer discussion here, I think we've got a 14 00:00:47,320 --> 00:00:49,720 Speaker 1: FED meeting tomorrow. Some people here are telling me that's 15 00:00:49,800 --> 00:00:51,560 Speaker 1: kind of important that I should talk to you about 16 00:00:51,880 --> 00:00:54,040 Speaker 1: what the FED is gonna do. All I know is 17 00:00:54,080 --> 00:00:56,920 Speaker 1: because I go like an inch deep on this FED stuff. 18 00:00:56,920 --> 00:00:59,880 Speaker 1: But I know guys like you go way way deep. 19 00:01:00,480 --> 00:01:02,920 Speaker 1: Is it fifty basis points or SEVENTI five basis points? 20 00:01:02,920 --> 00:01:04,440 Speaker 1: Is that what I need to focus on tomorrow. What 21 00:01:04,480 --> 00:01:06,960 Speaker 1: should I really be looking at when we hear from 22 00:01:07,000 --> 00:01:09,679 Speaker 1: the feder Reserve chairman. Yeah, so I think in the 23 00:01:09,760 --> 00:01:12,680 Speaker 1: statement it's not going to be much of anything. I 24 00:01:12,720 --> 00:01:14,760 Speaker 1: think it would be pretty surprising if they didn't go 25 00:01:15,319 --> 00:01:18,959 Speaker 1: fifty basis points as the market expects. But the press 26 00:01:18,959 --> 00:01:21,560 Speaker 1: conference afterward could have a lot of interesting detail that 27 00:01:21,920 --> 00:01:24,840 Speaker 1: could really move a short term interest rate markets quite 28 00:01:24,840 --> 00:01:28,240 Speaker 1: a lot, because if j Powell hints that, hey, if 29 00:01:28,280 --> 00:01:31,080 Speaker 1: inflation stays at seven percent or six and a half percent, 30 00:01:31,120 --> 00:01:33,240 Speaker 1: which is very likely to do in the near term 31 00:01:33,760 --> 00:01:35,880 Speaker 1: on a year on ear basis, then we might go 32 00:01:36,000 --> 00:01:38,640 Speaker 1: seventy five basis points. That's when you're going to see 33 00:01:38,680 --> 00:01:42,160 Speaker 1: some fireworks potentially in in the pricing for future moves. 34 00:01:42,200 --> 00:01:44,600 Speaker 1: So so I think it's that nuance that you're gonna 35 00:01:44,600 --> 00:01:47,960 Speaker 1: have to listen for it at the press conference. Or 36 00:01:48,000 --> 00:01:49,560 Speaker 1: do you think the market is going to react more 37 00:01:49,880 --> 00:01:52,559 Speaker 1: perhaps to the balance sheet and any indication on what 38 00:01:52,640 --> 00:01:56,240 Speaker 1: that actually looks like in the exercising of what shrinking 39 00:01:56,240 --> 00:01:59,640 Speaker 1: the balance sheet actually looks like. Well. So, so it's 40 00:01:59,640 --> 00:02:02,520 Speaker 1: interesting because the Federal Reserve, and I think this was 41 00:02:02,560 --> 00:02:05,000 Speaker 1: missed pile a lot of folks. The Federal Reserve basically 42 00:02:05,000 --> 00:02:07,200 Speaker 1: pre announced exactly what they're going to do, So the 43 00:02:07,240 --> 00:02:09,280 Speaker 1: only thing that they really need to say tomorrow is 44 00:02:09,560 --> 00:02:10,880 Speaker 1: are we going to start in May, are we going 45 00:02:10,919 --> 00:02:12,440 Speaker 1: to start in June, or we're gonna start in July. 46 00:02:12,680 --> 00:02:14,880 Speaker 1: But they basically told us almost all of the other 47 00:02:14,919 --> 00:02:18,239 Speaker 1: relevant details. So we know this size that they're going 48 00:02:18,280 --> 00:02:20,480 Speaker 1: to start to shrink. We know that they're going to 49 00:02:20,600 --> 00:02:24,359 Speaker 1: use T bills to make a sixty billion dollar runoff 50 00:02:24,360 --> 00:02:27,560 Speaker 1: of treasuries possible every month, so it's that's both a 51 00:02:27,600 --> 00:02:30,160 Speaker 1: floor and a cap uh and also the size of 52 00:02:30,200 --> 00:02:33,080 Speaker 1: the mortgage runoff. So so so we know all of 53 00:02:33,080 --> 00:02:35,880 Speaker 1: those details already except the start date. So so that's 54 00:02:35,880 --> 00:02:39,280 Speaker 1: gonna be the only relevant information. Um, there is I 55 00:02:39,280 --> 00:02:43,240 Speaker 1: think a big misconception in the market that runoff is 56 00:02:43,240 --> 00:02:45,920 Speaker 1: going to mean that you get higher longer term interest 57 00:02:46,000 --> 00:02:50,400 Speaker 1: rates because the Federal Reserve is selling long term assets. Um, 58 00:02:50,440 --> 00:02:54,040 Speaker 1: that's wrong. They are not. The Treasury Department is going 59 00:02:54,080 --> 00:02:56,960 Speaker 1: to make the decision on what to sell. And so 60 00:02:57,000 --> 00:02:59,160 Speaker 1: I think while yeah, you might get a little weakness, 61 00:02:59,160 --> 00:03:00,800 Speaker 1: and I think the knee you are reaction might be 62 00:03:00,880 --> 00:03:02,480 Speaker 1: for the yield curve to steep in a little bit 63 00:03:02,480 --> 00:03:05,120 Speaker 1: on the announcement. I think you fade that because it's 64 00:03:05,160 --> 00:03:08,200 Speaker 1: not going to persist for very long. But it hasn't 65 00:03:08,800 --> 00:03:11,360 Speaker 1: been made clear, right, I mean it, correct me if 66 00:03:11,360 --> 00:03:13,120 Speaker 1: I'm wrong, Ira, and I very well could be here 67 00:03:13,160 --> 00:03:15,799 Speaker 1: the expert here. But there's two ways that a balance 68 00:03:15,800 --> 00:03:17,679 Speaker 1: sheet can can be run off, right, You just don't 69 00:03:17,680 --> 00:03:21,880 Speaker 1: reinvest the funds of or you actively sell it on 70 00:03:21,919 --> 00:03:24,240 Speaker 1: the market. Are you saying that the actively selling part 71 00:03:24,320 --> 00:03:26,480 Speaker 1: is off the table? They're they're not going to be 72 00:03:26,480 --> 00:03:29,000 Speaker 1: actively selling. They've already told us that actually, and they 73 00:03:29,000 --> 00:03:31,160 Speaker 1: told us that in January when they get their principles, 74 00:03:31,160 --> 00:03:33,400 Speaker 1: and then they reiterated it at the last meeting when 75 00:03:33,720 --> 00:03:35,800 Speaker 1: at the March meeting when they mentioned that they were 76 00:03:35,840 --> 00:03:37,400 Speaker 1: going to do sixty billion dollars, it was going to 77 00:03:37,480 --> 00:03:40,800 Speaker 1: be passive runoff. Um. Eventually they might sell, particularly in 78 00:03:40,840 --> 00:03:42,800 Speaker 1: the mortgage sector. I don't think that they'll ever sell 79 00:03:42,800 --> 00:03:45,360 Speaker 1: a treasury, but in the mortgage sector, at some point 80 00:03:45,400 --> 00:03:48,200 Speaker 1: in a year, eighteen months, two years, they might end 81 00:03:48,240 --> 00:03:51,120 Speaker 1: up selling some mortgages because as interest rates are so high, 82 00:03:51,520 --> 00:03:54,520 Speaker 1: you don't get the pre payments of mortgages that maybe 83 00:03:54,560 --> 00:03:56,800 Speaker 1: the FED wants, in fact, that thirty five billion dollar 84 00:03:56,880 --> 00:03:59,640 Speaker 1: mortgage number is never going to get hit, um at 85 00:03:59,720 --> 00:04:02,840 Speaker 1: least not until interest rates go down another hundred or 86 00:04:02,880 --> 00:04:05,040 Speaker 1: hundred and fifty basis points. So it is going to 87 00:04:05,120 --> 00:04:07,640 Speaker 1: be passive. So so we know that. So so that's where, 88 00:04:08,080 --> 00:04:10,480 Speaker 1: um eight thirty tomorrow morning we get probably the more 89 00:04:10,520 --> 00:04:13,040 Speaker 1: relevant information for the yield curve, and that's when the 90 00:04:13,080 --> 00:04:16,200 Speaker 1: Treasury Department announces what they're going to be selling over 91 00:04:16,240 --> 00:04:19,080 Speaker 1: the next three months in terms of notes and bonds 92 00:04:19,160 --> 00:04:21,960 Speaker 1: and and even T bills. So so that's gonna be 93 00:04:22,080 --> 00:04:24,640 Speaker 1: kind of almost a pre announcement. And now that we 94 00:04:24,680 --> 00:04:26,200 Speaker 1: know that the FED is at some point in the 95 00:04:26,240 --> 00:04:28,400 Speaker 1: near future going to be running off its balance sheet, 96 00:04:28,640 --> 00:04:31,800 Speaker 1: the Treasury Department basically has to increase sales to the 97 00:04:31,839 --> 00:04:35,320 Speaker 1: public um more than that than they would have had 98 00:04:35,320 --> 00:04:38,320 Speaker 1: to otherwise. So um, so, so it's all going to 99 00:04:38,400 --> 00:04:41,040 Speaker 1: be very mechanical. Uh. The market reaction, I think is 100 00:04:41,560 --> 00:04:44,320 Speaker 1: maybe going to be the wrong market reaction initially until 101 00:04:44,320 --> 00:04:45,960 Speaker 1: people kind of realize it's not as big of a 102 00:04:45,960 --> 00:04:48,320 Speaker 1: deal as they think. Hey, I when the when the 103 00:04:48,320 --> 00:04:51,200 Speaker 1: FED announced their pivot becoming more hawk is several months ago, 104 00:04:51,240 --> 00:04:54,400 Speaker 1: it was kind of like three rate hikes in two Now, 105 00:04:55,040 --> 00:04:58,080 Speaker 1: as I look at my w I RP GO function 106 00:04:58,080 --> 00:05:00,880 Speaker 1: on the Bloomberg Trumoral World Interest Rate Ability, Yes, there 107 00:05:00,920 --> 00:05:03,640 Speaker 1: is a function for that. I'm looking at ten, maybe 108 00:05:03,640 --> 00:05:06,479 Speaker 1: eleven rate hikes through February of next year. Does that 109 00:05:06,520 --> 00:05:10,080 Speaker 1: seem reasonable to you? Yeah? So, so it's it's not 110 00:05:10,120 --> 00:05:11,840 Speaker 1: the number of hikes, that's how much they hike at 111 00:05:11,839 --> 00:05:13,920 Speaker 1: each of those meetings, right. But but yeah, I mean 112 00:05:13,920 --> 00:05:16,440 Speaker 1: we're talking about another you know, two hundred and fifty 113 00:05:16,480 --> 00:05:20,520 Speaker 1: to three hundred basis points of interest rate increases. So um, So, 114 00:05:20,600 --> 00:05:23,800 Speaker 1: using the w I RP function, what you'll note is 115 00:05:23,800 --> 00:05:27,520 Speaker 1: eleven eleven hikes or cuts really means you have around 116 00:05:27,560 --> 00:05:31,680 Speaker 1: two two seventy five bases points of hikes and and 117 00:05:31,720 --> 00:05:34,040 Speaker 1: you know that's pretty significant. I mean, we haven't seen 118 00:05:34,080 --> 00:05:37,200 Speaker 1: that pace of hiking really since the nineteen since the 119 00:05:37,279 --> 00:05:42,320 Speaker 1: nineteen eighties. So, um, these were very good to me. Yeah, 120 00:05:42,360 --> 00:05:43,800 Speaker 1: they were good for me too. It was it was 121 00:05:43,839 --> 00:05:45,400 Speaker 1: a good year for music. It was a good decade 122 00:05:45,400 --> 00:05:48,360 Speaker 1: for music as well. All right, So here's important stuff. 123 00:05:49,080 --> 00:05:51,640 Speaker 1: I'm knee deep in the Yankee baseball I got NBA 124 00:05:51,760 --> 00:05:54,080 Speaker 1: playoffs and then I've got one of my favorite sporting 125 00:05:54,080 --> 00:05:57,159 Speaker 1: events of the year, which is a Kentucky Derby Saturday. 126 00:05:57,200 --> 00:05:59,440 Speaker 1: If I do manage to find some free time in 127 00:05:59,480 --> 00:06:03,240 Speaker 1: my sports viewing schedule, what football slash soccer match should 128 00:06:03,279 --> 00:06:05,600 Speaker 1: I be watching? Oh? I think you gotta go with 129 00:06:06,000 --> 00:06:09,560 Speaker 1: Liverpool Tottenham? Which will happen? Which will be taking place? 130 00:06:09,560 --> 00:06:13,280 Speaker 1: Actually fight during the Kentucky Derby. Um So, Liverpool is 131 00:06:13,320 --> 00:06:15,440 Speaker 1: still fighting to try to win the Premier League and 132 00:06:15,480 --> 00:06:18,359 Speaker 1: Tottenham needs to win in order to uh have hopes 133 00:06:18,400 --> 00:06:20,360 Speaker 1: to make the Champions League and stay in the top four. 134 00:06:20,400 --> 00:06:22,080 Speaker 1: So that that's gonna be one heck of a match, 135 00:06:22,279 --> 00:06:24,159 Speaker 1: all right. I know Tom will be onto that. Tom 136 00:06:24,400 --> 00:06:26,839 Speaker 1: Keene is a big Tottenham fan. How that came about? 137 00:06:26,880 --> 00:06:29,359 Speaker 1: I have no idea Ire Jersey, chief US interest rate 138 00:06:29,440 --> 00:06:33,120 Speaker 1: strategists for Bloomberg Intelligence, also our go to person on 139 00:06:33,200 --> 00:06:35,560 Speaker 1: all things soccer. You gotta get that in there because 140 00:06:35,720 --> 00:06:38,240 Speaker 1: it's big. Um So, we'll see. But the I were 141 00:06:38,279 --> 00:06:42,320 Speaker 1: talking about the FED tomorrow reporting, you know their meeting today. 142 00:06:42,360 --> 00:06:44,760 Speaker 1: They're meeting tomorrow, will have the announcement two pm. Wall 143 00:06:44,800 --> 00:06:49,320 Speaker 1: Street Time, Bloomberg TV coverage and radio starting at one o'clock. 144 00:06:49,360 --> 00:06:52,440 Speaker 1: That full coverage of that, So we will be all 145 00:06:52,440 --> 00:06:54,640 Speaker 1: over that. And again the question for this Feller Reserve 146 00:06:54,760 --> 00:06:58,560 Speaker 1: is how restive does it need to be to fight uh, 147 00:06:58,600 --> 00:07:02,040 Speaker 1: this persistent inflation that we're seeing in this economy. What 148 00:07:02,160 --> 00:07:04,880 Speaker 1: can they do and how should they achieve that? So 149 00:07:04,920 --> 00:07:07,080 Speaker 1: we'll be all over that tomorrow. Plus we've got jobs 150 00:07:07,120 --> 00:07:15,920 Speaker 1: later in the week. This is Bloomer. All right, let's 151 00:07:15,920 --> 00:07:17,760 Speaker 1: head down to Washington right now. I want to check 152 00:07:17,760 --> 00:07:19,200 Speaker 1: them with Joe Matthew. I said, we gotta talk to 153 00:07:19,280 --> 00:07:20,840 Speaker 1: Joe because he knows what's going on down there. He's 154 00:07:20,920 --> 00:07:24,480 Speaker 1: watching it. Corresponding and host of Bloomberg Sound on that's 155 00:07:24,480 --> 00:07:27,280 Speaker 1: a weekdays at five pm, All Street time, Joe. This 156 00:07:27,360 --> 00:07:30,680 Speaker 1: Supreme Court, the United States Supreme Court generally doesn't leak stuff, 157 00:07:30,760 --> 00:07:32,960 Speaker 1: does it. What's going on today with you folks down 158 00:07:32,960 --> 00:07:35,040 Speaker 1: in Washington. Well, you know, it's it's interesting when you 159 00:07:35,080 --> 00:07:38,680 Speaker 1: see the reaction from Democrats versus Republicans. You can imagine 160 00:07:38,720 --> 00:07:42,720 Speaker 1: the Democratic reaction. Outraged. Senator Schumer just on the floor 161 00:07:42,760 --> 00:07:45,240 Speaker 1: called this a dark and disturbing day for America. But 162 00:07:45,320 --> 00:07:50,920 Speaker 1: Republicans are are demanding an investigation into who leaked this. 163 00:07:51,120 --> 00:07:54,000 Speaker 1: You know, they're about three dozen clerks in the Supreme Court, 164 00:07:54,080 --> 00:07:57,440 Speaker 1: the justices themselves. Not many people have access to a 165 00:07:57,520 --> 00:08:01,360 Speaker 1: document like this. My goodness, the pdf is published right online. So, uh, 166 00:08:01,720 --> 00:08:04,920 Speaker 1: at some point you can expect hearings into this. Uh. 167 00:08:05,040 --> 00:08:07,600 Speaker 1: We heard from Senator Mitch McConnell in a written statement 168 00:08:07,600 --> 00:08:11,320 Speaker 1: a short time ago. He's even talking about possible criminal charges. 169 00:08:11,360 --> 00:08:13,480 Speaker 1: He says, the Chief Justice must get to the bottom 170 00:08:13,520 --> 00:08:16,440 Speaker 1: of it. The Department of Justice must pursue criminal charges 171 00:08:16,800 --> 00:08:20,840 Speaker 1: if applicable. That's coming from the Republican leader in the Senate, Joe. 172 00:08:20,920 --> 00:08:25,240 Speaker 1: So I take from that that maybe the the idea 173 00:08:25,320 --> 00:08:28,200 Speaker 1: that's forming within the Beltway today is that perhaps this 174 00:08:28,320 --> 00:08:32,600 Speaker 1: was leaked to benefit the Democrats. Well, look, that's certainly 175 00:08:32,640 --> 00:08:34,800 Speaker 1: how Republicans might look at it. Not not only that, 176 00:08:34,840 --> 00:08:36,840 Speaker 1: but just to kind of up end, you know, the 177 00:08:36,880 --> 00:08:39,880 Speaker 1: balance here in Washington, to turn another institution around. It's 178 00:08:39,880 --> 00:08:42,240 Speaker 1: hard to tell what the motivation would be, because a 179 00:08:42,280 --> 00:08:44,960 Speaker 1: lot of people do lead themselves to think that this 180 00:08:45,000 --> 00:08:48,560 Speaker 1: would help Democrats in the midterm elections. Uh. Certainly could 181 00:08:48,559 --> 00:08:51,360 Speaker 1: be a motivating principle, could mean a very different level 182 00:08:51,400 --> 00:08:53,880 Speaker 1: of turnout for Democrats. But there's gonna be a legislative 183 00:08:53,880 --> 00:08:58,160 Speaker 1: answer to this, potentially even before November, we heard from 184 00:08:58,240 --> 00:09:00,079 Speaker 1: Chuck Schumer that he wants to bring this to a 185 00:09:00,160 --> 00:09:02,880 Speaker 1: vote UH in the Senate. He just said that a 186 00:09:02,920 --> 00:09:07,000 Speaker 1: short time ago. UH will need more pro choice senators, 187 00:09:07,040 --> 00:09:09,720 Speaker 1: says President Biden, and a pro choice majority in the 188 00:09:09,760 --> 00:09:14,640 Speaker 1: House to adopt legislation that codifies ROW, which Joe Biden 189 00:09:14,679 --> 00:09:16,720 Speaker 1: says he will work to pass and sign into law. 190 00:09:17,080 --> 00:09:19,360 Speaker 1: So it'll be interesting to see how quickly this could happen. 191 00:09:19,360 --> 00:09:21,800 Speaker 1: Of course, it's not likely they have the votes in 192 00:09:21,920 --> 00:09:25,480 Speaker 1: the United States Senate, but members will be called to 193 00:09:26,080 --> 00:09:28,160 Speaker 1: say up or down on this. They will have to, 194 00:09:28,360 --> 00:09:31,880 Speaker 1: likely before the midterms, let the world know how they 195 00:09:31,920 --> 00:09:35,520 Speaker 1: would vote on abortion. Well, as I was gonna ask next, Joe, 196 00:09:36,160 --> 00:09:38,640 Speaker 1: do we expect anything to change the result in terms 197 00:09:38,679 --> 00:09:41,800 Speaker 1: of next steps? Well, look, we have to remember that 198 00:09:41,840 --> 00:09:43,600 Speaker 1: this is a draft. It is not a ruling. We 199 00:09:43,640 --> 00:09:47,040 Speaker 1: will get one, we expect by July. So it's frequent 200 00:09:47,280 --> 00:09:51,520 Speaker 1: that these change. They evolve dramatically between the draft stage 201 00:09:51,559 --> 00:09:54,640 Speaker 1: and a final ruling. The thing is, we're talking about 202 00:09:54,720 --> 00:09:57,840 Speaker 1: Roe v. Wade, and if you're in the legal community, 203 00:09:57,960 --> 00:10:01,079 Speaker 1: never mind as Supreme Court justice, you probably know how 204 00:10:01,120 --> 00:10:03,560 Speaker 1: you feel about this. So it's not like we're going 205 00:10:03,600 --> 00:10:07,880 Speaker 1: into this with with undecided justices or justices that may 206 00:10:07,880 --> 00:10:10,400 Speaker 1: be compelled to change their minds. That's probably less likely 207 00:10:10,440 --> 00:10:13,720 Speaker 1: in this case. Uh. And and if this is what 208 00:10:13,760 --> 00:10:16,679 Speaker 1: it appears to be, we're about to see a major 209 00:10:16,760 --> 00:10:20,400 Speaker 1: change in this court. What's the feeling Joe down in 210 00:10:20,720 --> 00:10:25,880 Speaker 1: Washington as to timing? I mean, I guess you could say, boy, 211 00:10:25,920 --> 00:10:28,959 Speaker 1: this is you know, we've got the midterm elections coming 212 00:10:29,040 --> 00:10:31,320 Speaker 1: up and it's tied to that. And any sense of 213 00:10:31,360 --> 00:10:34,760 Speaker 1: why now this came out? No, Uh, we certainly can't 214 00:10:34,760 --> 00:10:36,080 Speaker 1: tell you that if we don't know who did it. 215 00:10:36,120 --> 00:10:39,160 Speaker 1: But uh, I will also remind you though that people 216 00:10:39,320 --> 00:10:42,160 Speaker 1: knew that this could happen, This was likely gonna come. 217 00:10:42,400 --> 00:10:46,000 Speaker 1: We've had oral arguments over the Mississippi law back in December. 218 00:10:46,400 --> 00:10:50,120 Speaker 1: This was drawn up in February. It's just it's different 219 00:10:50,240 --> 00:10:53,360 Speaker 1: when you actually see it in writing. It just feels 220 00:10:53,400 --> 00:10:55,800 Speaker 1: different this morning because a lot of folks, I think, 221 00:10:55,800 --> 00:10:58,960 Speaker 1: probably didn't want to believe what their what their brains 222 00:10:59,000 --> 00:11:03,320 Speaker 1: might have been telling them. I mean, it's still shocking 223 00:11:03,360 --> 00:11:05,480 Speaker 1: to me in terms of that this was even leaked. 224 00:11:05,520 --> 00:11:07,720 Speaker 1: And I have to ask, is there any precedent for 225 00:11:07,840 --> 00:11:10,680 Speaker 1: something like this. There's not on this level a creaty 226 00:11:10,679 --> 00:11:14,280 Speaker 1: where you've actually got a document dump. But we have 227 00:11:14,440 --> 00:11:18,280 Speaker 1: had leaks from the court, and ironically or coincidentally, it 228 00:11:18,400 --> 00:11:21,560 Speaker 1: was in fact Roe v. Wade. It was in two 229 00:11:22,080 --> 00:11:26,400 Speaker 1: when the Washington Post had had sources reporting on discord 230 00:11:26,440 --> 00:11:29,200 Speaker 1: within the Court that justices were wrangling over this, struggling 231 00:11:29,240 --> 00:11:32,920 Speaker 1: to come to a final ruling. But you know, this 232 00:11:33,000 --> 00:11:36,600 Speaker 1: is a whole other level, This is Pentagon papers level, 233 00:11:37,200 --> 00:11:40,880 Speaker 1: uh leak here where you've got the document with names people, uh, 234 00:11:40,920 --> 00:11:44,840 Speaker 1: their actual language written out very clearly. It's ninety eight 235 00:11:44,840 --> 00:11:47,079 Speaker 1: pages and it doesn't leave a lot to the imagination. 236 00:11:47,200 --> 00:11:49,000 Speaker 1: All right, Joe, good stuff. Thank you so much for 237 00:11:49,080 --> 00:11:51,079 Speaker 1: taking a time Joe to join us. Give us the 238 00:11:51,160 --> 00:11:54,320 Speaker 1: latest from Washington, d C. Again, this news bombshell this 239 00:11:54,360 --> 00:11:57,360 Speaker 1: morning that we all woke up to and including our 240 00:11:57,360 --> 00:12:01,720 Speaker 1: folks down on Washington, about this leaked document purportedly from 241 00:12:01,760 --> 00:12:04,960 Speaker 1: the Supreme Court as it relates to uh Roe v. Wade. 242 00:12:05,000 --> 00:12:08,199 Speaker 1: And obviously it's got everybody talking about and certainly the 243 00:12:08,200 --> 00:12:11,840 Speaker 1: folks in Washington demanding some action there. Joe, Matthew, Washington corresponded. 244 00:12:12,040 --> 00:12:15,360 Speaker 1: He's hosted Bloomberg Sound on weekdays at five pm Wall 245 00:12:15,400 --> 00:12:21,120 Speaker 1: Street Time on Bloomberg Radio. You think about the economics 246 00:12:21,120 --> 00:12:23,480 Speaker 1: of this country, you look at the labor market. Very 247 00:12:23,520 --> 00:12:26,120 Speaker 1: interesting story that we're gonna get some labor numbers later 248 00:12:26,200 --> 00:12:28,760 Speaker 1: this week, but we're near a fifty three year low 249 00:12:28,840 --> 00:12:31,040 Speaker 1: of three point six percent in terms of unemployment. About 250 00:12:31,040 --> 00:12:34,520 Speaker 1: the labor force participation rate is still below its pre 251 00:12:34,640 --> 00:12:38,000 Speaker 1: pandemic levels at sixty two point four and far off 252 00:12:38,360 --> 00:12:41,160 Speaker 1: the peak of sixty seven point three percent in two thousand. 253 00:12:41,480 --> 00:12:44,480 Speaker 1: U Matt Winkler, editor in Chief emeritus, more importantly the 254 00:12:44,640 --> 00:12:48,200 Speaker 1: founder of Bloomberg News, the whole kit and caboodle. He 255 00:12:48,280 --> 00:12:50,560 Speaker 1: joined us here in our Bloomberg and after Broker Studio. Matt, 256 00:12:50,559 --> 00:12:53,640 Speaker 1: you sat down with the Commerce Secretary Gina Ramondo recently. 257 00:12:55,080 --> 00:12:57,440 Speaker 1: What did she have to say about kind of how 258 00:12:57,520 --> 00:12:59,960 Speaker 1: they in the administration are viewing this economy, maybe the 259 00:13:00,080 --> 00:13:03,800 Speaker 1: messaging around what is going on about current economic conditions. 260 00:13:03,800 --> 00:13:09,560 Speaker 1: Well as the former treasurer, former governor, and first venture 261 00:13:09,600 --> 00:13:13,240 Speaker 1: capitalist of Rhode Island, she would say born out of 262 00:13:13,280 --> 00:13:16,360 Speaker 1: experience and also looking at data that we've compiled at 263 00:13:16,400 --> 00:13:25,080 Speaker 1: Bloomberg that UM. Childcare, daycare UM are investments UM, and 264 00:13:25,200 --> 00:13:31,320 Speaker 1: they're not as many politicians assert social programs. And the 265 00:13:31,480 --> 00:13:37,120 Speaker 1: data that shows that is in fact true is when 266 00:13:37,120 --> 00:13:41,160 Speaker 1: you look at states that have invested in child care 267 00:13:41,240 --> 00:13:45,680 Speaker 1: specifically UH and embraced say the medicaid expansion of the 268 00:13:45,720 --> 00:13:50,320 Speaker 1: Affordable Care Act, those states have actually generated greater job 269 00:13:50,360 --> 00:13:55,320 Speaker 1: growth UM, higher labor participation rates, and higher rates of 270 00:13:55,360 --> 00:13:59,040 Speaker 1: personal income, whereas the states that have done nothing with 271 00:13:59,120 --> 00:14:05,520 Speaker 1: job care UH sorry, childcare or healthcare UM have inferior 272 00:14:06,160 --> 00:14:10,680 Speaker 1: rates of job growth and similarly with personal income. And 273 00:14:10,720 --> 00:14:15,160 Speaker 1: then again she would look at businesses that disclose annually 274 00:14:15,400 --> 00:14:18,960 Speaker 1: what they're doing with their workforce, making it more diverse, 275 00:14:19,400 --> 00:14:24,920 Speaker 1: providing more childcare uh extensions of medical care beyond the 276 00:14:24,960 --> 00:14:28,880 Speaker 1: Affordable Care Act, and those companies actually outperform the companies 277 00:14:28,880 --> 00:14:33,040 Speaker 1: that do nothing or disclose nothing UM in terms of 278 00:14:33,160 --> 00:14:37,680 Speaker 1: share performance and lower volatility. So that's the data, and 279 00:14:37,760 --> 00:14:40,560 Speaker 1: so her mantra would be, UH, this is all good 280 00:14:40,560 --> 00:14:42,320 Speaker 1: for the economy and we should be doing it. And 281 00:14:42,360 --> 00:14:45,480 Speaker 1: if we do it, then the labor participation rate will 282 00:14:45,520 --> 00:14:49,480 Speaker 1: improve accordingly. And it kind of makes sense if you 283 00:14:49,560 --> 00:14:52,040 Speaker 1: think about it, because if women don't have to worry 284 00:14:52,120 --> 00:14:54,840 Speaker 1: about things like childcare, which they always have to do 285 00:14:54,880 --> 00:15:00,400 Speaker 1: because they're usually the ones who are saddled with that responsibility. UM, 286 00:15:00,440 --> 00:15:03,480 Speaker 1: and also healthcare for that matter. Uh, you're gonna get 287 00:15:03,480 --> 00:15:06,560 Speaker 1: a higher labor participation rate. And this is coming out 288 00:15:06,560 --> 00:15:09,320 Speaker 1: of time when you have an extremely tight jobs market. 289 00:15:09,360 --> 00:15:11,200 Speaker 1: I expect to term of how to speak about that 290 00:15:11,240 --> 00:15:13,960 Speaker 1: tomorrow as well. But not the only issue, uh, specifically 291 00:15:14,000 --> 00:15:17,640 Speaker 1: for the American economy inflation, chip shortages, and Gina Vermondo 292 00:15:17,680 --> 00:15:21,400 Speaker 1: has been very vocal about that as well. Yeah, Unfortunately 293 00:15:21,440 --> 00:15:25,200 Speaker 1: she doesn't have a magic wand that everybody would like 294 00:15:25,240 --> 00:15:28,840 Speaker 1: her to have. However, she did uh do a few 295 00:15:28,880 --> 00:15:32,479 Speaker 1: things at commerce that are a departure from a predecessor. 296 00:15:32,560 --> 00:15:37,200 Speaker 1: She created uh, you know, challenge programs that are public 297 00:15:37,240 --> 00:15:43,040 Speaker 1: private partnerships to get business incentivized to do things that 298 00:15:43,080 --> 00:15:45,200 Speaker 1: maybe they otherwise wouldn't do it. One of those things, 299 00:15:45,200 --> 00:15:47,200 Speaker 1: by the way, is you know, she's a big proponent 300 00:15:47,360 --> 00:15:51,600 Speaker 1: of getting Congress to provide fifty billion dollars UH to 301 00:15:52,480 --> 00:15:56,480 Speaker 1: create chip manufacturing, computer chip manufacturing in the United States. 302 00:15:57,040 --> 00:15:59,760 Speaker 1: And her argument would be looked, this is good for everybody, 303 00:16:00,240 --> 00:16:02,520 Speaker 1: it's good for the local economies, it's good for the 304 00:16:02,560 --> 00:16:06,760 Speaker 1: businesses that have a shortage of chips right now. Uh 305 00:16:06,800 --> 00:16:09,960 Speaker 1: so everything we can do in a public private uh 306 00:16:10,120 --> 00:16:13,240 Speaker 1: partnership would go a long way to improving the problem. 307 00:16:13,280 --> 00:16:15,880 Speaker 1: Having said that, she also says this isn't something that's 308 00:16:15,920 --> 00:16:19,760 Speaker 1: going to be solved overnight or in six months or 309 00:16:19,800 --> 00:16:23,800 Speaker 1: you know, the end of next year, because the demand 310 00:16:23,840 --> 00:16:29,840 Speaker 1: for chips today is inexorable, meaning everything that we do 311 00:16:29,920 --> 00:16:32,760 Speaker 1: in the twenty one century economy depends on chips, and 312 00:16:32,760 --> 00:16:34,640 Speaker 1: we just don't have enough of them. Yeah, and that's 313 00:16:34,640 --> 00:16:36,840 Speaker 1: a whole another story. I still don't understand how this 314 00:16:37,040 --> 00:16:40,600 Speaker 1: industry did not foresee this and how they missed it. 315 00:16:40,800 --> 00:16:43,240 Speaker 1: So and I haven't gotten a great answer, but um, 316 00:16:43,280 --> 00:16:45,440 Speaker 1: because we'll have to see. But one of the issues, 317 00:16:45,960 --> 00:16:49,000 Speaker 1: Matt is just you know, when you think about this, 318 00:16:49,080 --> 00:16:51,480 Speaker 1: it might be a messaging problem for the Democratic Party 319 00:16:51,480 --> 00:16:53,640 Speaker 1: because when you talk about some of these social programs, 320 00:16:53,960 --> 00:16:58,440 Speaker 1: programs childcare, Republicans might frame and in context of spending, 321 00:16:59,000 --> 00:17:01,840 Speaker 1: whereas the Democrats probably preferred to frame it in the 322 00:17:01,920 --> 00:17:05,919 Speaker 1: context of investment in the economy. But your column shows 323 00:17:06,000 --> 00:17:09,760 Speaker 1: the data supports these investments. It seems like that might 324 00:17:09,840 --> 00:17:13,280 Speaker 1: be something that this Commerce secretary, maybe the administration we 325 00:17:13,359 --> 00:17:18,040 Speaker 1: want to think about. You know, Uh, Clinton's great political strategist, 326 00:17:18,119 --> 00:17:22,600 Speaker 1: Jim carverl you know, said it's the economy stupid. And 327 00:17:22,840 --> 00:17:27,520 Speaker 1: that's one thing that Gena Romundo has always gotten. And 328 00:17:27,680 --> 00:17:30,160 Speaker 1: she's gotten it because she started out, as I said, 329 00:17:30,200 --> 00:17:34,040 Speaker 1: as a venture capitalist. She's no stranger by the way 330 00:17:34,119 --> 00:17:39,440 Speaker 1: to poverty and all the issues associated with broken families 331 00:17:39,480 --> 00:17:42,880 Speaker 1: and childcare. I mean, she worked in these programs before 332 00:17:42,880 --> 00:17:45,920 Speaker 1: she went to Yale Law School. But what she did 333 00:17:45,960 --> 00:17:49,040 Speaker 1: show when she was Treasurer of Rhode Island and then 334 00:17:49,160 --> 00:17:54,480 Speaker 1: governor is that if you can frame what ails us 335 00:17:54,600 --> 00:17:57,600 Speaker 1: in the context of this is what we need to 336 00:17:57,640 --> 00:18:00,920 Speaker 1: do to solve it. And sometimes it's not a happy message, 337 00:18:00,920 --> 00:18:03,400 Speaker 1: but it's a very accurate message, and you just need 338 00:18:03,480 --> 00:18:05,600 Speaker 1: to say it again and again. And that's what she's done. 339 00:18:05,600 --> 00:18:09,239 Speaker 1: And I suspect that there aren't as many Democrats with 340 00:18:09,280 --> 00:18:14,120 Speaker 1: her experience or her knowledge of the economy and business. Uh. 341 00:18:14,160 --> 00:18:16,399 Speaker 1: You know, she brought thirty companies to Rhode Island to 342 00:18:16,480 --> 00:18:20,600 Speaker 1: create jobs in the unemployment rate dropped to a record low, 343 00:18:20,680 --> 00:18:23,680 Speaker 1: I think three point four percent in Rhode Island by 344 00:18:23,720 --> 00:18:26,399 Speaker 1: the time she left to become Calmerce secretary. So she 345 00:18:26,480 --> 00:18:29,480 Speaker 1: knows her way around data, she knows her way around 346 00:18:30,560 --> 00:18:34,280 Speaker 1: the politics of the economy, and she can frame those 347 00:18:34,320 --> 00:18:39,240 Speaker 1: politics in a way that is understandable but also you know, compelling, 348 00:18:39,600 --> 00:18:43,000 Speaker 1: because if it is true according to the data, then 349 00:18:43,119 --> 00:18:45,960 Speaker 1: why shouldn't we go along with it? And not every 350 00:18:46,119 --> 00:18:49,320 Speaker 1: politician has her experience or knowledge. Matt, while we've got 351 00:18:49,359 --> 00:18:52,000 Speaker 1: here in our studio, would need to get the benefit 352 00:18:52,040 --> 00:18:54,639 Speaker 1: of your wisdom, your experience. Falling, Washington, d C. What 353 00:18:54,680 --> 00:18:57,000 Speaker 1: did you make of the news this morning about this 354 00:18:57,119 --> 00:19:01,520 Speaker 1: Supreme Court potential ruling that has been leaked to the world. 355 00:19:01,520 --> 00:19:05,760 Speaker 1: Weare initial take, Well, uh, we've never seen a leak, 356 00:19:06,560 --> 00:19:10,200 Speaker 1: at least in our time modern times. We've never seen 357 00:19:10,240 --> 00:19:15,480 Speaker 1: a leak of a Supreme Court pending decision. So that's 358 00:19:15,520 --> 00:19:20,359 Speaker 1: the first, uh, if you like stunning surprise. The second, 359 00:19:20,359 --> 00:19:24,600 Speaker 1: of course, is what was written itself, which um, I 360 00:19:24,680 --> 00:19:28,080 Speaker 1: have to say, if it is the law, if it 361 00:19:28,160 --> 00:19:31,120 Speaker 1: becomes a Supreme Court decision in June, uh, it will 362 00:19:31,160 --> 00:19:33,120 Speaker 1: take us all the way back to dread. Scott. We're 363 00:19:33,119 --> 00:19:36,600 Speaker 1: not just talking about abortion. We're talking about reproductive rights. 364 00:19:36,640 --> 00:19:40,560 Speaker 1: We're talking about contraception, We're talking about gay rights, gay marriage, 365 00:19:41,000 --> 00:19:45,119 Speaker 1: the whole package. That's what this decision says to America 366 00:19:45,280 --> 00:19:48,680 Speaker 1: right now. It takes us back more than a century. Interesting, 367 00:19:48,720 --> 00:19:50,680 Speaker 1: all right, We'll have to put that in context and 368 00:19:50,680 --> 00:19:52,840 Speaker 1: will be a lot more reporting on this as we 369 00:19:52,920 --> 00:19:55,000 Speaker 1: go forward, and clearly it will be an issue if 370 00:19:55,040 --> 00:19:58,760 Speaker 1: these upcoming midterm elections. Matt Winkler, editor in chief Bloomberg News. 371 00:19:58,840 --> 00:20:03,560 Speaker 1: Check out his columns. They're really fascinating talking about Gina Ramundo, 372 00:20:03,640 --> 00:20:07,280 Speaker 1: the Commerce Secretary, and the benefits of investing in some 373 00:20:07,320 --> 00:20:15,280 Speaker 1: of these social programs for the economy. Katherine Hawkins joins 374 00:20:15,359 --> 00:20:17,879 Speaker 1: us you, Sup, portfolio manager and senior vice president at 375 00:20:17,920 --> 00:20:21,199 Speaker 1: Baringer UM. Katherine, I want to talk a little bit 376 00:20:21,240 --> 00:20:24,760 Speaker 1: about housing with you because I take since the beginning 377 00:20:24,800 --> 00:20:28,000 Speaker 1: of this pandemic, I've been so pleasantly surprised, I think 378 00:20:28,040 --> 00:20:31,159 Speaker 1: is the way to frame it, how strong the housing 379 00:20:31,240 --> 00:20:34,120 Speaker 1: market has been. And yes, we've had tremendously low interest rates, 380 00:20:34,119 --> 00:20:36,359 Speaker 1: and we've got a change in how people think about 381 00:20:36,359 --> 00:20:40,440 Speaker 1: their work uh life balance. As we step back today 382 00:20:40,480 --> 00:20:43,520 Speaker 1: with rising interest rates, how do you view this housing 383 00:20:43,600 --> 00:20:48,040 Speaker 1: marketing United States? Hi, Paul, thanks for having me back 384 00:20:48,080 --> 00:20:50,560 Speaker 1: on UM. I think that's a great question. I mean, 385 00:20:50,600 --> 00:20:53,600 Speaker 1: we have seen a strong housing market, you know, despite 386 00:20:53,600 --> 00:20:58,480 Speaker 1: the pandemic, and actually in the face of it becomes stronger, UM. 387 00:20:58,520 --> 00:21:00,720 Speaker 1: And I think that there's a big concerned that that 388 00:21:00,840 --> 00:21:02,479 Speaker 1: is going to lead to another bust that we all 389 00:21:02,520 --> 00:21:05,600 Speaker 1: remember in the two thousands. UM. I think the biggest 390 00:21:05,640 --> 00:21:08,760 Speaker 1: difference of this market and kind of the two thousands 391 00:21:08,760 --> 00:21:13,520 Speaker 1: that everyone is really scared about, is that the difference 392 00:21:13,800 --> 00:21:17,480 Speaker 1: is from what happened fifteen years ago. These high home 393 00:21:17,520 --> 00:21:20,800 Speaker 1: prices were then driven by really loose lending practices and 394 00:21:20,920 --> 00:21:23,600 Speaker 1: rampant investors speculation in the market. There was a lot 395 00:21:23,640 --> 00:21:26,760 Speaker 1: of financial engineering taking place and putting borrowers in homes 396 00:21:26,800 --> 00:21:29,760 Speaker 1: that they really couldn't afford, um. And then we're hit 397 00:21:29,880 --> 00:21:35,240 Speaker 1: with some you know, interest rate hikes. Today, those housing 398 00:21:35,440 --> 00:21:39,560 Speaker 1: the housing prices ingres increase is really driven by supply 399 00:21:39,600 --> 00:21:41,800 Speaker 1: and demand rate. Throughout the all time record low, like 400 00:21:41,840 --> 00:21:44,040 Speaker 1: you mentioned, Um, you had more people wanting to buy 401 00:21:44,080 --> 00:21:47,200 Speaker 1: a home than you had homes. So these rising rates 402 00:21:47,240 --> 00:21:49,719 Speaker 1: over the next several years should slow down that demand 403 00:21:49,720 --> 00:21:52,800 Speaker 1: on home purchases. UM. And when that demand slows, I 404 00:21:52,840 --> 00:21:55,920 Speaker 1: think we will see prices that the home prices will balance. 405 00:21:57,440 --> 00:22:00,679 Speaker 1: So you mentioned potentially waiting for a bust. Is it 406 00:22:00,840 --> 00:22:05,960 Speaker 1: fair or what precedent makes this rally or this boom 407 00:22:06,160 --> 00:22:07,800 Speaker 1: look kind of like a bubble? What do you think? 408 00:22:08,840 --> 00:22:10,880 Speaker 1: I don't think it looks like a bubble. I think 409 00:22:10,920 --> 00:22:13,959 Speaker 1: that the I think it's because of what is driving 410 00:22:14,000 --> 00:22:17,120 Speaker 1: those home prices UM is so different than what we've 411 00:22:17,119 --> 00:22:22,239 Speaker 1: seen previously. Again it's a demand on homes with a 412 00:22:22,280 --> 00:22:24,480 Speaker 1: low supply of homes that are available. Is really with 413 00:22:24,600 --> 00:22:29,399 Speaker 1: driving housing prices up here where UM previously it was 414 00:22:29,600 --> 00:22:34,359 Speaker 1: inflated inflated underwriting practices UM and just you know, you 415 00:22:34,440 --> 00:22:39,159 Speaker 1: had incentives for UM the the appraisals to come in 416 00:22:39,280 --> 00:22:41,119 Speaker 1: higher than they were, so you didn't really have a 417 00:22:41,119 --> 00:22:43,760 Speaker 1: lot of equity in the home to begin with. And 418 00:22:43,800 --> 00:22:46,440 Speaker 1: that's not what we see now. We see right now 419 00:22:46,480 --> 00:22:48,920 Speaker 1: that borrowers have strong equity in the home. They're in 420 00:22:48,960 --> 00:22:52,719 Speaker 1: a home that they can afford UM. The research right 421 00:22:52,720 --> 00:22:55,200 Speaker 1: now was really showing that borrows have stronger equity positions 422 00:22:55,200 --> 00:22:58,640 Speaker 1: and household income UM and savings. So I think any 423 00:22:58,720 --> 00:23:01,560 Speaker 1: correction or moderation and that we are going to see 424 00:23:01,640 --> 00:23:04,000 Speaker 1: won't be on the same scale as we experienced in 425 00:23:04,000 --> 00:23:06,480 Speaker 1: two thousands seven to two thousand nine, and I just 426 00:23:06,480 --> 00:23:09,679 Speaker 1: don't see that being a recipe for a bust, you know, Catherine. 427 00:23:09,680 --> 00:23:11,359 Speaker 1: What I've learned over the last so we're speaking to 428 00:23:11,400 --> 00:23:14,960 Speaker 1: people like you and and and developers is that one 429 00:23:15,000 --> 00:23:17,360 Speaker 1: of the challenges in this country is not so much 430 00:23:17,600 --> 00:23:20,560 Speaker 1: the number of units being built, but the type of 431 00:23:20,600 --> 00:23:23,760 Speaker 1: housing being built. I e. A lot of McMansions are 432 00:23:23,800 --> 00:23:27,440 Speaker 1: being built, um, but not a lot of entry level housing, 433 00:23:27,440 --> 00:23:29,320 Speaker 1: and that's where the demand is, and that's where there's 434 00:23:29,320 --> 00:23:32,399 Speaker 1: a problem in this real estate economy. How do you 435 00:23:32,520 --> 00:23:35,639 Speaker 1: view that? Is that changing at all? I think that 436 00:23:35,800 --> 00:23:39,679 Speaker 1: is changing. I think because those entry level houses really um, 437 00:23:39,720 --> 00:23:41,399 Speaker 1: you know, if you look towards the millennials are the 438 00:23:41,440 --> 00:23:45,479 Speaker 1: ones that are driving kind of that increase there, and 439 00:23:45,600 --> 00:23:48,560 Speaker 1: right now we're seeing that they don't want to um 440 00:23:48,720 --> 00:23:51,240 Speaker 1: purchase a home. That's kind of where the single family 441 00:23:51,240 --> 00:23:54,399 Speaker 1: rental market is continuing to boom. Those are you know, 442 00:23:54,480 --> 00:23:58,400 Speaker 1: kind of your your uh more similar track homes. Um. 443 00:23:58,440 --> 00:24:01,240 Speaker 1: They're bigger than apartments, they have more privacy than apartments, 444 00:24:01,240 --> 00:24:04,600 Speaker 1: they have a yard, um you know, for whatever pet 445 00:24:04,720 --> 00:24:08,199 Speaker 1: that they want, but they're more on the affordability scale 446 00:24:08,320 --> 00:24:11,960 Speaker 1: for those millennials, um, that are really priced out of 447 00:24:11,960 --> 00:24:15,040 Speaker 1: a seller dominated market right now. So I agree with you. 448 00:24:15,080 --> 00:24:16,600 Speaker 1: I think that you know, we're going to see a 449 00:24:16,680 --> 00:24:19,920 Speaker 1: jump from that single family rental, you know, into kind 450 00:24:19,920 --> 00:24:24,439 Speaker 1: of the more um McMansion, if you will. But but 451 00:24:24,480 --> 00:24:27,639 Speaker 1: I think that that's the millennials are driving that boom, 452 00:24:27,640 --> 00:24:30,320 Speaker 1: and right now they're just not purchasing homes. Paul, I 453 00:24:30,359 --> 00:24:32,720 Speaker 1: gotta say, I cannot wait to buy a house. I'm 454 00:24:32,720 --> 00:24:35,880 Speaker 1: so excited. I live in a studio right now. There's 455 00:24:35,920 --> 00:24:38,720 Speaker 1: no backyard for my puppy. I just we need room. 456 00:24:39,320 --> 00:24:40,960 Speaker 1: We need room. I just sold a house. I could 457 00:24:40,960 --> 00:24:42,280 Speaker 1: have sold it to you. You could have sold it 458 00:24:42,359 --> 00:24:44,479 Speaker 1: to me. I would have traded your bag chips for it. 459 00:24:44,520 --> 00:24:47,160 Speaker 1: Thank you. That's all I can afford at the moment. Catherine. 460 00:24:47,280 --> 00:24:50,000 Speaker 1: Let's spend it ahead to tomorrow. We're expecting an FMC 461 00:24:50,200 --> 00:24:53,879 Speaker 1: decision tomorrow, of course, fifty basis point rate hike. Of 462 00:24:53,880 --> 00:24:56,920 Speaker 1: course that has implications for the mortgage rates as well. 463 00:24:57,280 --> 00:25:00,560 Speaker 1: I'm curious about just how much damage higher mortgage rates 464 00:25:00,560 --> 00:25:03,719 Speaker 1: are going to do to this housing market. Yeah, I 465 00:25:03,720 --> 00:25:07,080 Speaker 1: think when you really, you know, at Vertical, our business 466 00:25:07,160 --> 00:25:10,840 Speaker 1: is purchasing mortgages on the secondary market. UM. So right 467 00:25:10,880 --> 00:25:12,760 Speaker 1: now when we're investing, what we have to keep in 468 00:25:12,800 --> 00:25:16,200 Speaker 1: mind is that anything we purchase right now is going 469 00:25:16,240 --> 00:25:19,800 Speaker 1: to be less valuable going forward. Right if we purchase 470 00:25:19,840 --> 00:25:23,000 Speaker 1: that current market interest rates now, in six months, when 471 00:25:23,040 --> 00:25:25,720 Speaker 1: current interest rates are higher, what we purchase now is 472 00:25:25,720 --> 00:25:28,240 Speaker 1: going to be less valuable. Um. We're also we have 473 00:25:28,320 --> 00:25:32,720 Speaker 1: to take in mind, uh, the duration. So when interest 474 00:25:32,840 --> 00:25:35,320 Speaker 1: rates are rising, borrowers stay in their home for a 475 00:25:35,359 --> 00:25:37,920 Speaker 1: lot longer. In a low rate environment of borrow where 476 00:25:37,960 --> 00:25:41,200 Speaker 1: typically holds their mortgage for four to five years before 477 00:25:41,240 --> 00:25:43,560 Speaker 1: they refinance or pay it off to move into a 478 00:25:43,560 --> 00:25:47,199 Speaker 1: bigger home, or you know, they get relocated. But in 479 00:25:47,280 --> 00:25:50,440 Speaker 1: a rising rate environment, the borrowers are going to stay put. 480 00:25:50,480 --> 00:25:53,160 Speaker 1: So we see the duration of a of a mortgage 481 00:25:53,280 --> 00:25:55,199 Speaker 1: really go from four to five years to seven to 482 00:25:55,240 --> 00:25:57,639 Speaker 1: eight years. UM. So it will have an effect on 483 00:25:57,840 --> 00:26:01,000 Speaker 1: you know, especially on the secondary market. We saw this 484 00:26:01,119 --> 00:26:04,199 Speaker 1: in the last few months to where you have origination 485 00:26:04,240 --> 00:26:09,040 Speaker 1: groups that have pipelines full of low rate UM loans 486 00:26:09,080 --> 00:26:12,080 Speaker 1: that they have committed to close and then you know 487 00:26:12,119 --> 00:26:14,960 Speaker 1: they by the time those get sixty days later get 488 00:26:15,000 --> 00:26:17,399 Speaker 1: to close. You know, the current market rates a lot higher, 489 00:26:17,480 --> 00:26:20,800 Speaker 1: so they're selling those off in a secondary market at 490 00:26:20,840 --> 00:26:24,000 Speaker 1: a pretty steep discount, which is what we had seen, 491 00:26:24,320 --> 00:26:26,280 Speaker 1: you know, probably three or four years ago. Um, and 492 00:26:26,280 --> 00:26:27,760 Speaker 1: we're going to start seeing that come back. So the 493 00:26:27,840 --> 00:26:31,320 Speaker 1: spread bowl wine in the secondary market as U interest 494 00:26:31,400 --> 00:26:34,119 Speaker 1: rates rise. Katherine Hawkins, thank you so much for joining us. 495 00:26:34,119 --> 00:26:37,560 Speaker 1: Always appreciate getting your thoughts on the real estate market. 496 00:26:37,640 --> 00:26:41,960 Speaker 1: Katherine Hawkins, portfolio manager, Senior vice President, Vertical Capital Income Fund, 497 00:26:42,320 --> 00:26:44,960 Speaker 1: the New York Stock Exchange Fund Traded Fund v c 498 00:26:45,280 --> 00:26:48,800 Speaker 1: i F is a symbol. We appreciate chatting with Katherine here. 499 00:26:49,000 --> 00:26:51,600 Speaker 1: And it's interesting we're seeing interesting mortgage rates move up. 500 00:26:51,640 --> 00:26:54,920 Speaker 1: I know Matt just bought a house a few months ago, 501 00:26:55,080 --> 00:26:57,360 Speaker 1: and I think he was saying his mortgage was three 502 00:26:57,359 --> 00:26:58,920 Speaker 1: and a half percent or something. Now we've got mortgage 503 00:26:59,000 --> 00:27:00,960 Speaker 1: rates a little bit more to five percent here. So 504 00:27:01,040 --> 00:27:03,639 Speaker 1: just in that timeframe, hemplaining a lot. He's like, oh, 505 00:27:03,680 --> 00:27:05,400 Speaker 1: I just bought a house, and now he's like, guys, 506 00:27:05,520 --> 00:27:08,040 Speaker 1: I bought a house. This total tone change in terms 507 00:27:08,080 --> 00:27:11,400 Speaker 1: of him bragging about exactly, don't be interesting to see 508 00:27:11,440 --> 00:27:13,919 Speaker 1: where mortgage RAITs need to go before you start to 509 00:27:13,920 --> 00:27:16,800 Speaker 1: see it really impacting the demand side, which has been 510 00:27:16,920 --> 00:27:20,600 Speaker 1: so strong over the last several years. Thanks for listening 511 00:27:20,600 --> 00:27:24,080 Speaker 1: to the Bloomberg Markets podcast. You can subscribe and listen 512 00:27:24,119 --> 00:27:28,399 Speaker 1: to interviews with Apple Podcasts or whatever podcast platform you prefer. 513 00:27:28,800 --> 00:27:33,320 Speaker 1: I'm Matt Miller. I'm on Twitter at Matt Miller. Put 514 00:27:33,400 --> 00:27:36,000 Speaker 1: on fal Sweey. I'm on Twitter at pt Sweeney. Before 515 00:27:36,000 --> 00:27:39,400 Speaker 1: the podcast, you can always catch us worldwide at Bloomberg Radio.