WEBVTT - Higher-End Housing In U.S. Could See 30-50% Price Drop (Podcast) 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 --> 0:00:33.480 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. You know, Pim, 0:00:33.680 --> 0:00:36.760 we're getting a risk on rally today, but there's one 0:00:36.880 --> 0:00:40.360 sector that just keeps nagging at everyone. It's kind of 0:00:40.440 --> 0:00:42.839 raising a red flag. You know, perhaps things are not 0:00:42.920 --> 0:00:45.320 as good as raising a red flag from the roof, 0:00:45.720 --> 0:00:48.159 from the roof, from the housing, from the house, from 0:00:48.200 --> 0:00:50.640 the housing market. Joining us now to discuss that and 0:00:50.840 --> 0:00:53.880 everything else under the sun. Genie Wyatt. She's Chief executive 0:00:53.880 --> 0:00:57.280 Officer and chief investment Officer at South Texas Money Management 0:00:57.320 --> 0:00:59.680 in the beautiful San Antonio, but she joins us here 0:01:00.000 --> 0:01:02.280 in our eleven three oh studios. She manages about a 0:01:02.520 --> 0:01:05.280 three point three billion dollars has been three point seven 0:01:05.360 --> 0:01:09.600 three point seven billion. Excuse me, please forgive me um. 0:01:09.640 --> 0:01:11.920 So grateful that you're here. I want to ask you 0:01:11.959 --> 0:01:14.480 about the housing market and how you're viewing it because 0:01:14.520 --> 0:01:19.080 we have gotten a slowdown in sales. Some areas have 0:01:19.160 --> 0:01:21.920 seen even declines in certain prices. Are we at the 0:01:21.959 --> 0:01:25.040 beginning of this Yes, good morning lista good morning PIM. 0:01:25.040 --> 0:01:27.880 Now I do not think, um, we're at only the beginning. 0:01:27.959 --> 0:01:31.560 I think this will be a long time UH sector 0:01:31.720 --> 0:01:36.640 challenge for anything housing related. The mortgage bankers, UM, the 0:01:36.680 --> 0:01:43.319 service providers to housing, and obviously the builders. UH. Not 0:01:43.520 --> 0:01:47.080 only is it the interest rate increase and the FED 0:01:47.200 --> 0:01:50.360 likely especially with these trade talks, is likely to stay 0:01:50.440 --> 0:01:55.040 on a tightening track because our economy the outlook now 0:01:55.200 --> 0:01:59.320 is to continue to have positive GDP, so interest rates 0:01:59.360 --> 0:02:02.800 will likely continue to rise. But the challenge with housing 0:02:03.280 --> 0:02:07.000 that I think is not fully appreciated is land prices 0:02:07.040 --> 0:02:12.920 are now so expensive and UM owners of homes no 0:02:13.040 --> 0:02:16.720 longer get the full tax benefit of the taxes that 0:02:16.800 --> 0:02:21.080 they pay, which really penalizes them in states like New York, 0:02:21.240 --> 0:02:26.400 like California, and so the affordability net net, the affordability 0:02:26.480 --> 0:02:30.440 of housing now it's just no longer a value proposition. 0:02:30.760 --> 0:02:33.920 That's the challenge. I'm wondering if you could just step 0:02:33.919 --> 0:02:37.240 back and speak to the issue that investing is not 0:02:37.520 --> 0:02:44.120 something that you should enjoy. Well, you should not be 0:02:44.240 --> 0:02:51.119 emotional about your investing, but you must invest because stocks 0:02:51.200 --> 0:02:57.399 are the best investment you can make. Because stocks reflect 0:02:58.400 --> 0:03:03.239 UM growth in corporate earnings. It's not mysterious. Stocks reflect 0:03:04.000 --> 0:03:08.600 UH growth and corporate earnings, which are amazing this year, 0:03:08.760 --> 0:03:15.440 continue to be strong. And corporate earnings have a natural UM, 0:03:15.440 --> 0:03:23.079 a natural UM succession plan because if if companies don't 0:03:23.200 --> 0:03:26.960 produce good earnings, they will go away. So there's a 0:03:27.000 --> 0:03:30.640 lot of pressure on managements to be competitive and to 0:03:30.760 --> 0:03:35.320 succeed and to have good corporate earnings and thus their stocks. 0:03:35.520 --> 0:03:40.160 Stocks overall broadly do very well long term, and they're liquid. 0:03:40.800 --> 0:03:42.520 I just wanted for a second go back to the 0:03:42.560 --> 0:03:46.360 housing issue just for one second. I'm curious you're saying 0:03:46.360 --> 0:03:48.760 that the value proposition isn't there. Does that mean that 0:03:48.800 --> 0:03:50.360 prices are going to tank or does it just mean 0:03:50.360 --> 0:03:56.280 that it's going to go sideways? Well, um, I think 0:03:56.320 --> 0:04:00.440 there's downside. There's downside for the home builders stocks or 0:04:00.480 --> 0:04:06.280 for house prices. Are both for both? How much downside? Well, again, 0:04:06.320 --> 0:04:10.600 we're in a um a good economic environment, so I 0:04:10.600 --> 0:04:16.440 would say ten to fift downside on home prices. Now, 0:04:16.440 --> 0:04:21.080 of course the lower priced homes probably have more downside 0:04:21.120 --> 0:04:24.920 protection because there's huge demand across the country for homes 0:04:24.960 --> 0:04:28.960 priced three hundred thousand dollars or less. But the higher 0:04:29.000 --> 0:04:34.480 priced homes, I would say the downside there again, some states, 0:04:35.400 --> 0:04:43.800 some counties could be as much as thirty including New York. Yes, 0:04:44.000 --> 0:04:50.000 some some counties. Yes, that's got your attentions. That's daunting 0:04:51.160 --> 0:04:54.200 clients in some areas in the Northeast. But that's only 0:04:54.200 --> 0:04:58.880 if you can move very high priced. If it's a 0:04:59.000 --> 0:05:03.479 very high priced home, and the taxes have been very 0:05:03.560 --> 0:05:06.760 high and no longer can you ride off all of 0:05:06.800 --> 0:05:11.039 those taxes. I want to turn your attention out of 0:05:11.880 --> 0:05:15.720 something that maybe benefit benefiting from all this, which is 0:05:15.760 --> 0:05:19.640 that you can work anywhere, live anywhere. Microsoft is one 0:05:19.680 --> 0:05:25.640 of the stocks Microsoft. Microsoft has been so kind to us. 0:05:26.080 --> 0:05:31.320 UM we started putting money into Microsoft. We buy both 0:05:31.400 --> 0:05:35.120 value and growth stocks. So we started buying Microsoft in 0:05:35.120 --> 0:05:39.880 two thousand twelve as a value stock, and it's up 0:05:40.040 --> 0:05:44.159 over three since that point in time. But we still 0:05:44.200 --> 0:05:48.159 get really good upside in Microsoft from this point. So 0:05:48.240 --> 0:05:51.440 we're still putting new money in Microsoft and we get 0:05:51.480 --> 0:05:57.400 over the next twelve to twenty four months upside and 0:05:57.480 --> 0:06:01.919 Microsoft with the dividend, and that's as their cloud revenue 0:06:02.040 --> 0:06:10.040 is accelerating. Microsoft Office is still performing well and um, 0:06:10.080 --> 0:06:14.240 it's just being very very well managed. This today's Microsoft 0:06:14.600 --> 0:06:20.720 again because of their cloud success there they are almost 0:06:21.080 --> 0:06:29.000 as large of UH provider of servers as Amazon. So um, 0:06:29.120 --> 0:06:32.360 we think again there's a lot of good upside remaining 0:06:32.400 --> 0:06:37.640 in Microsoft. You're also buying General Electric? Right? Um? No, no, 0:06:38.040 --> 0:06:43.480 are you not? So? Microsoft today is now a growth 0:06:43.520 --> 0:06:46.800 stock for us. We borrowed his value, it succeeded, so 0:06:46.839 --> 0:06:50.720 now is growth of value stock we are putting new 0:06:50.720 --> 0:06:54.680 money into today. Is General Motors, General Motors one of 0:06:54.680 --> 0:06:58.760 those beaten up G something so General motors, but not 0:06:58.800 --> 0:07:03.039 General Electric, not in electric Okay, we have not been 0:07:03.080 --> 0:07:08.239 in General Electric for years. For GM. You like love GM? 0:07:08.560 --> 0:07:11.240 Love GM? Of course you know the broad market is 0:07:11.320 --> 0:07:15.240 up today, but there's so much hype about we're at 0:07:15.360 --> 0:07:19.880 peak auto sales. And yes, we're probably at a near 0:07:20.040 --> 0:07:24.840 term cyclical peak and auto sales, but um, and a 0:07:24.880 --> 0:07:27.880 lot of that is the millennials are saying they're not 0:07:27.920 --> 0:07:31.480 going to buy cars. But millennials grow up, they form 0:07:31.640 --> 0:07:36.040 families and and autos will become more important to them. 0:07:36.080 --> 0:07:40.800 But really the story there for future auto sales is 0:07:40.840 --> 0:07:46.160 the self driving vehicles, and GM has strong conviction in this. 0:07:46.320 --> 0:07:50.560 In fact, they just moved their president, um Dan Ammand 0:07:51.520 --> 0:07:55.320 to become head of Crews, which is the autonomous vehicle 0:07:56.360 --> 0:08:00.560 area of GM. GM today has about three dred self 0:08:00.680 --> 0:08:05.440 driving vehicles in San Francisco. I think we will all, 0:08:05.800 --> 0:08:10.760 all of us, whether we're millennials or we're octagenarians, we 0:08:10.920 --> 0:08:14.840 will love autonomous vehicles. Well, we'll be looking forward to 0:08:14.920 --> 0:08:16.760 taking a trip in one of them with you. Thank 0:08:16.800 --> 0:08:20.760 you very much. Genie Wyatt, Chief executive Officer, chief investment officer, 0:08:20.920 --> 0:08:39.160 South Texas Money Management, based in San Antonio. We are 0:08:39.160 --> 0:08:43.640 broadcasting live from the Bloomberg Interactive Broker's studios. After the 0:08:43.679 --> 0:08:47.440 worst month in more than a decade, four crewed, we're 0:08:47.480 --> 0:08:52.040 seeing a rebound today. Perhaps it's because of the trade truce, 0:08:52.160 --> 0:08:54.800 the trade war truce that I guess was struck between 0:08:54.880 --> 0:08:58.320 a President Trump and President Jijim Ping of China. But 0:08:58.360 --> 0:09:01.080 there also are other as next to a joining US. Now. 0:09:01.200 --> 0:09:04.920 Dr ellen Wald, president of Transversal Consulting, also a non 0:09:05.040 --> 0:09:07.679 resident Senior Fellow with the Atlantic Council's Global Energy Center 0:09:07.679 --> 0:09:10.640 in a Bloomberg Opinion contributor. Dr Wall thank you so 0:09:10.720 --> 0:09:13.240 much for joining us. I want to just to ask 0:09:13.280 --> 0:09:16.640 you why do you think oil is rallying today? Is 0:09:16.679 --> 0:09:20.840 it because of a more positive backdrop geopolitically or is 0:09:20.880 --> 0:09:24.160 it because of OPEC and the likely cuts that they 0:09:24.160 --> 0:09:28.000 will implement to output later this week. I think it's 0:09:28.000 --> 0:09:32.840 a combination of OPEX likely cuts, but also we have 0:09:32.960 --> 0:09:36.080 an announcement from the premiere of Alberta that they're going 0:09:36.160 --> 0:09:40.640 to be taking some pretty extraordinary measures to cut oil 0:09:40.640 --> 0:09:45.000 production in Canada so as to relieve the incredible strain 0:09:45.120 --> 0:09:48.840 on their stored oil, and that that has really helped 0:09:49.440 --> 0:09:53.920 the price of Canadian oil rebound today. Dr Wald, do 0:09:54.000 --> 0:09:59.280 you believe that the change at OPEC with the announcement 0:09:59.320 --> 0:10:04.680 that Qatar wants to leave, will change the politics of oil. 0:10:05.920 --> 0:10:09.240 I think it's possible that we could see um the 0:10:09.280 --> 0:10:12.840 beginning of something important. And one of the interesting things 0:10:12.880 --> 0:10:16.560 that we noticed is that after Qatar announced that it 0:10:16.920 --> 0:10:19.440 is planning to leave the organization, and I think it 0:10:19.520 --> 0:10:22.800 does make sense for Qatar. It's really had a lot 0:10:22.840 --> 0:10:26.400 of problems politically with Saudi Arabia. Clearly they are under 0:10:26.400 --> 0:10:29.560 an economic embargo from Saudi Arabia, and it probably feels 0:10:29.600 --> 0:10:34.000 that it makes no sense politically domestically as well to 0:10:34.040 --> 0:10:37.000 sit in meetings and be compelled to go along with 0:10:37.040 --> 0:10:41.240 Saudi decisions when there's so much animosity focused on them 0:10:41.280 --> 0:10:43.839 from Saudi Arabia, combined with the fact that they're really 0:10:44.000 --> 0:10:47.079 a fairly small oil producer and they're big focus is 0:10:47.200 --> 0:10:52.680 natural gas. However, this could kind of signal a maybe 0:10:52.720 --> 0:10:57.679 a larger sense of unhappiness amongst these smaller oil producers 0:10:57.720 --> 0:11:01.040 within OPEQUE. And if enough of them get together and say, hey, 0:11:01.120 --> 0:11:03.319 we don't feel we're being we don't feel that the 0:11:03.400 --> 0:11:07.760 larger producers like Saudi Arabia, UH and Iraq are really 0:11:07.760 --> 0:11:12.600 taking our concerns into UH into consideration. If a bunch 0:11:12.640 --> 0:11:16.240 of them leaves, that could really affect OPEC's ability to 0:11:16.720 --> 0:11:19.760 play a role in the market. Well at this point, 0:11:19.840 --> 0:11:25.559 I mean, perhaps perhaps it was emblematic that the Vladimir 0:11:25.800 --> 0:11:29.319 Putin and the Saudi Arabian Prince greeted each other with 0:11:29.840 --> 0:11:35.840 the happiest of hands, laps and and you know, smiles 0:11:35.880 --> 0:11:39.400 over the weekend at the G twenty meeting in Buenos Aires. 0:11:39.640 --> 0:11:41.360 I mean, is it does it sort of matter more 0:11:41.440 --> 0:11:45.079 now the alliance between Russia and Saudi Arabia than even OPEC. 0:11:46.320 --> 0:11:50.000 That is absolutely a big concern here because Saudi Arabia 0:11:50.080 --> 0:11:52.520 and Russia are really the big players in this new 0:11:52.520 --> 0:11:57.200 OPEC plus alliance, and Putin made this announcement that Russia 0:11:57.320 --> 0:12:00.440 is planning to continue its participation in this alience. Now, 0:12:00.480 --> 0:12:03.520 that doesn't indicate that Russia is necessarily on board with 0:12:03.559 --> 0:12:06.360 whatever cut Saudi Arabia wants to make, but it does 0:12:06.400 --> 0:12:11.000 indicate that they are interested in pursuing this partnership, and 0:12:11.080 --> 0:12:15.240 that puts the rest of OPEC that really diminishes their 0:12:15.320 --> 0:12:19.640 influence and importance UH in terms of OPEC going forward. 0:12:20.200 --> 0:12:22.680 Dr walts, should we make a distinction between the natural 0:12:22.720 --> 0:12:26.280 gas market and the oil market. I think we really 0:12:26.320 --> 0:12:28.920 do need to in this case. And Cutter is particularly 0:12:28.960 --> 0:12:32.439 influential in the liquefied natural gas markets, so it's not 0:12:32.520 --> 0:12:35.000 quite the same as the United States, where natural gas 0:12:35.080 --> 0:12:39.040 is very inexpensive and cheap. Cutter makes a lot of 0:12:39.040 --> 0:12:42.400 money from its its natural gas and that's really where 0:12:42.559 --> 0:12:46.040 it wants to focus its efforts going forward. And that's 0:12:46.280 --> 0:12:49.080 very interesting because Saudi Arabia is also announced plans that 0:12:49.120 --> 0:12:53.359 it wants to focus on its developing its natural gas resources. 0:12:53.400 --> 0:12:57.880 That's mostly though, for Saudi internal use, for domestic use. 0:12:58.040 --> 0:13:02.040 But still they have indicated they're interested in maybe becoming 0:13:02.080 --> 0:13:05.920 an exporter of natural gas, and so Cutter may may 0:13:05.960 --> 0:13:08.319 see that as a little bit threatening to their position. 0:13:08.800 --> 0:13:12.359 So I'm just wondering from your perspective, if, as expected 0:13:12.480 --> 0:13:16.480 on Thursday, OPAQ plus agrees to an output cut in 0:13:16.600 --> 0:13:20.760 order to bolster prices and reduce supplies, how much do 0:13:20.800 --> 0:13:23.320 you think oil prices could go up or do you 0:13:23.400 --> 0:13:26.640 think that this is sort of false hope. Well, I 0:13:26.679 --> 0:13:30.680 think it really depends on how much oil we see. 0:13:30.800 --> 0:13:34.160 They could end up increasing production as much as UH 0:13:34.280 --> 0:13:36.920 or sorry, cutting production as much as one and a 0:13:36.920 --> 0:13:41.959 half million barrels per day, and that's not an insignificant amount, 0:13:42.040 --> 0:13:45.520 and it could send prices rallying maybe for the rest 0:13:45.520 --> 0:13:48.520 of the year. That The issue though, is we're still 0:13:48.559 --> 0:13:52.120 you know, down in the brand in the low sixties, 0:13:52.200 --> 0:13:55.719 not even yet hitting sixty one, and with w t 0:13:55.880 --> 0:13:58.520 I is still UH fifty two. So I'm not really 0:13:58.559 --> 0:14:02.040 sure that there's enough to really get us back into 0:14:02.080 --> 0:14:05.120 the seventies before the end of the year. And it 0:14:05.160 --> 0:14:07.400 does depend open may not be able to cut as 0:14:07.480 --> 0:14:10.959 much as they think that they can. I want to 0:14:11.000 --> 0:14:13.280 thank you very much for spending time with us. Dr 0:14:13.320 --> 0:14:18.360 ellen Wald is the President of Transversal Consulting, nonresident Senior 0:14:18.400 --> 0:14:23.320 Fellow at the Atlantic Council's Global Energy Center, also a 0:14:23.360 --> 0:14:39.040 contributor to Bloomberg Opinion. Joining us now to tell us 0:14:39.080 --> 0:14:42.160 all about the world of economics and particularly how it's 0:14:42.160 --> 0:14:46.000 linked to trade is none other than Mike McDonagh. Michael 0:14:46.080 --> 0:14:49.680 McDonagh is the chief economist for Financial Products for Bloomberg LP, 0:14:50.360 --> 0:14:52.560 and he joins us here in studio. Mike, it's always 0:14:52.560 --> 0:14:56.600 a pleasure. Thanks for coming in. Um, what happened last 0:14:56.640 --> 0:14:58.840 week at the G twenty and over the weekend? Did 0:14:58.960 --> 0:15:01.160 Did we really solve something or we just kind of 0:15:01.160 --> 0:15:04.280 punted a little bit. Not that that's bad. If we 0:15:04.320 --> 0:15:06.280 want to go with trade war analogies, I'd call it 0:15:06.320 --> 0:15:11.120 a ceasefire. So I mean it's it's buying a little 0:15:11.160 --> 0:15:14.000 time to try to come to a deal that's that's sustainable. 0:15:14.040 --> 0:15:18.120 It takes the risk January one off of the tariff 0:15:18.200 --> 0:15:20.320 level being escalated, so buyas time. Now we have to 0:15:20.320 --> 0:15:24.320 see what happens with the time. Why why was there 0:15:24.360 --> 0:15:28.120 such a softening in tone from President Trump? It probably 0:15:28.160 --> 0:15:30.480 depends on who you asked, But my personal view on 0:15:30.520 --> 0:15:33.160 this is, um, when you look at how markets have 0:15:33.280 --> 0:15:36.160 been performing recently, UM, there's also, at the same time 0:15:36.200 --> 0:15:39.760 been some signs of weakness uh in US economic growth 0:15:39.800 --> 0:15:41.720 at least it might have been going in a direction 0:15:41.760 --> 0:15:43.880 they don't want to see it go. Uh. And really, 0:15:43.880 --> 0:15:45.760 when you have to ask yourself why, I mean, there 0:15:45.840 --> 0:15:47.640 is an argument to be made that maybe the FED 0:15:47.800 --> 0:15:50.160 was looking like they might be a little bit too aggressive. 0:15:50.440 --> 0:15:54.080 But the big, other, other big uncertainty was trade with China, right, 0:15:54.080 --> 0:15:57.760 and that these two things combined, Uh, we're reducing sentiment 0:15:57.800 --> 0:16:00.480 a bit, and it pointed to potential. So you know, 0:16:00.720 --> 0:16:03.080 so I guess that My other question then would be 0:16:03.320 --> 0:16:07.680 has anything materially changed from the Chinese point of view 0:16:07.960 --> 0:16:10.120 with respect to what they're offering as far as you 0:16:10.160 --> 0:16:12.560 can tell, or is it just a willingness to make 0:16:12.600 --> 0:16:15.640 a deal on President Trump side? You know, it's hard 0:16:15.680 --> 0:16:18.520 to say. I I don't know a lot about what 0:16:18.600 --> 0:16:21.160 they had been offering, but you know, we we saw 0:16:21.360 --> 0:16:25.960 the agreement on the opioid exports fentanyl, Uh, that's something 0:16:26.000 --> 0:16:27.840 that the president could hang his hat on and say. 0:16:27.960 --> 0:16:30.600 You know, when you look at where President Trump is 0:16:30.600 --> 0:16:32.000 on a lot of his agenda, I would say the 0:16:32.000 --> 0:16:35.360 opioid wars arguably someplace where he's further behind than in 0:16:35.400 --> 0:16:37.880 other areas. So this is something he could say, Look, 0:16:37.920 --> 0:16:39.960 this is a win for us. This is something new. 0:16:40.000 --> 0:16:42.400 I don't think that had really been discussed before. That's there. 0:16:42.800 --> 0:16:46.120 Then there's the announcement today about auto tariffs. I believe 0:16:46.280 --> 0:16:49.600 China had announced that they were reducing auto tariff from 0:16:50.680 --> 0:16:54.120 fiftent back in May for everyone, but then they increased 0:16:54.120 --> 0:16:56.280 it in retaliation of the US, I think, and now 0:16:56.320 --> 0:16:58.280 they're saying, okay, we're gonna get rid of them entirely. 0:16:58.640 --> 0:17:01.680 That's something. And when look at every deal President Trump 0:17:01.720 --> 0:17:05.920 has done so far, autos has been involved, as has agriculture, 0:17:05.960 --> 0:17:09.600 so the soybean part of it. So you know there 0:17:09.680 --> 0:17:12.399 is something there. The question is, what will you know 0:17:12.520 --> 0:17:15.760 President Trump's appetite? B Right, The issues we have with 0:17:15.840 --> 0:17:19.280 China aren't really the deficit, uh, it's the you know, 0:17:19.359 --> 0:17:22.240 openness of the Chinese economy to US companies. It's the 0:17:22.240 --> 0:17:26.080 intellectual property theft. And these aren't easy things to fix, Like, 0:17:26.160 --> 0:17:28.160 this isn't something trying to could just turn a switch 0:17:28.160 --> 0:17:31.080 on and say okay, you invest in anything and we'll stop, 0:17:31.280 --> 0:17:34.280 you know, the technology transfer. Uh So, it's hard to 0:17:34.280 --> 0:17:37.920 see how you resolve a lot of this in ninety days. 0:17:37.960 --> 0:17:42.919 Just to give the detail about the opioid and fencenel issue, 0:17:43.040 --> 0:17:46.080 it has to do with China reclassifying them as a 0:17:46.119 --> 0:17:49.639 controlled substance, right. Yeah, I don't know the details of 0:17:49.680 --> 0:17:51.720 it personally, but it sounded yeah, it would sound it 0:17:51.760 --> 0:17:55.760 sounded like it would make it illegal for Chinese distributors 0:17:55.800 --> 0:18:00.720 to sell into the US. Yeah, that's the goal. Okay, Um, 0:18:00.840 --> 0:18:03.119 how many products do you think that Chinese will have 0:18:03.200 --> 0:18:06.919 to buy in order to be able to enable the 0:18:07.040 --> 0:18:10.720 administration to declare victory and to have some kind of 0:18:11.000 --> 0:18:13.680 come together moment. I think it's the difference is how 0:18:13.680 --> 0:18:15.159 many do they say they'll need to buy and how 0:18:15.160 --> 0:18:18.160 many they actually have to buy. I think that right, um, 0:18:18.359 --> 0:18:22.560 soybean sales to China have basically gone to zero at 0:18:22.600 --> 0:18:24.320 this point in time, So I think that you could 0:18:24.359 --> 0:18:27.680 pretty quickly see those go back up, uh to two 0:18:27.800 --> 0:18:30.280 levels that we had seen you know, last year before 0:18:30.320 --> 0:18:31.879 these sars and that would be important because I think 0:18:31.920 --> 0:18:35.880 that the soybean farmers are probably being hit most by 0:18:35.960 --> 0:18:38.560 what's happening. So I think that, you know, I think 0:18:38.760 --> 0:18:41.040 there will be promises of reducing I think I think 0:18:41.040 --> 0:18:44.119 the promise of reducing the tariffs on auto and leveling 0:18:44.160 --> 0:18:46.800 the playing field will go a long way. It's hard 0:18:46.840 --> 0:18:49.320 to say how much will actually buy. The Europeans sell 0:18:49.359 --> 0:18:51.520 a lot more cars in the China than the US does, 0:18:51.840 --> 0:18:54.600 so I'll have to see They'll definitely be buying uh 0:18:54.800 --> 0:18:57.320 more soybean because they've gone to zero so that they 0:18:57.320 --> 0:19:00.199 have to I think you could see more purchase is 0:19:00.280 --> 0:19:03.600 of airplanes, etcetera. But really, when you when you look 0:19:03.600 --> 0:19:06.960 at trade with China, we actually run a surplus when 0:19:06.960 --> 0:19:10.120 it comes to services. Uh So I think that part 0:19:10.160 --> 0:19:13.320 of this would be making it a bit easier, if 0:19:13.320 --> 0:19:17.119 not removing all restrictions for US companies to do business 0:19:17.160 --> 0:19:19.159 in China. That would actually go a long way, right. 0:19:19.200 --> 0:19:23.400 That doesn't show up in the the goods trade deficit, 0:19:23.480 --> 0:19:26.520 but it shows often the overall transfer between the two countries. 0:19:26.560 --> 0:19:29.119 So I mean, if you have more US companies in 0:19:29.240 --> 0:19:32.280 China providing services, that could go a long way towards 0:19:32.280 --> 0:19:35.359 off setting the goods balance, which everyone talks about a lot. 0:19:35.680 --> 0:19:38.600 So how important is it that Lightheiser is in charge 0:19:38.640 --> 0:19:41.880 of these negotiations? Now that's that's interesting because like when 0:19:41.880 --> 0:19:44.639 you look at um, you know who tends to be 0:19:44.680 --> 0:19:48.760 more hawkish and debbish. Uh In Trump's administration, Lighthouser tends 0:19:48.760 --> 0:19:50.560 to be on the more hawkish side. So he's now 0:19:50.640 --> 0:19:53.680 running these negotiations. Uh So I guess, like I said, 0:19:53.680 --> 0:19:55.879 we have ninety days, we really need to be watching 0:19:55.880 --> 0:19:59.359 these headlines. Uh So that it's not surprising. He is 0:19:59.440 --> 0:20:02.240 a trade you know, negotiator, That's that's what he does. 0:20:02.280 --> 0:20:04.320 So it will be interesting to see who he's working with. 0:20:04.640 --> 0:20:07.480 What is rhetorick is like how frequently are they meeting, 0:20:07.800 --> 0:20:10.520 who's meeting, what's coming out of the deals or the 0:20:10.560 --> 0:20:12.399 meetings that they have Over the next ninety days, I 0:20:12.400 --> 0:20:14.000 think there'll be a lot of signals. You were called. 0:20:14.000 --> 0:20:16.320 The last time we were in this position, Um, there 0:20:16.320 --> 0:20:18.800 were instances where they had meetings planned and then they said, well, 0:20:18.800 --> 0:20:20.240 there's nothing we're going to agree on, so we're not 0:20:20.280 --> 0:20:22.120 going to meet. So we'll have to read the tea 0:20:22.200 --> 0:20:24.320 leaves for a while. Over the next ninety days, and 0:20:24.320 --> 0:20:26.479 then we're going to read them again for the following 0:20:26.560 --> 0:20:31.440 ninety days when it gets us further down. There's two 0:20:31.440 --> 0:20:33.040 things we need to look at, China and the fit, 0:20:33.160 --> 0:20:35.399 and we have Pal on Wednesday. Would be interesting to 0:20:35.400 --> 0:20:37.760 see if he mimics his comments from last Wednesday, that 0:20:37.760 --> 0:20:39.800 would be good and let's see what happens with China. 0:20:39.920 --> 0:20:41.639 Mike McDonough, thank you so much for being with us. 0:20:41.680 --> 0:20:45.160 As always, your perspective is always insightful and valuable. Mike 0:20:45.240 --> 0:20:49.880 mcdonaldh's chief economist for financial Products at Bloomberg LP, talking 0:20:49.920 --> 0:20:53.840 about the latest I guess easing or perhaps just kicking 0:20:53.840 --> 0:21:09.000 the can down the road. We're broadcasting from the Bloomberg 0:21:09.200 --> 0:21:13.520 Interactor Broker's studios. Let's turn our attention now to entrepreneurs 0:21:14.000 --> 0:21:18.320 who make products that people seemingly want to buy, because boy, 0:21:18.320 --> 0:21:22.040 this company, Califia Farms, is doing about a hundred million 0:21:22.080 --> 0:21:25.080 dollars worth of business at least a year. It is 0:21:25.400 --> 0:21:29.720 founded and run by Greg Stoulton Pole, who many in 0:21:29.800 --> 0:21:33.600 the food and natural food market no as the one 0:21:33.600 --> 0:21:36.280 of the founders of Odwallah, and he joins us here 0:21:36.320 --> 0:21:38.480 in studio. Greg, thank you very much for being here. 0:21:38.760 --> 0:21:40.719 I was reading a little bit about your background and 0:21:40.760 --> 0:21:45.280 I can we connect your interest in juice and in 0:21:45.760 --> 0:21:50.600 pressed uh drinks to your father and his love of 0:21:50.680 --> 0:21:54.600 the world of citrus. What is that story? Well, you're 0:21:54.600 --> 0:21:59.879 going way back. So um, my dad love to live 0:22:00.320 --> 0:22:04.840 around orange trees and orange blossom California, Southern California. We 0:22:04.880 --> 0:22:08.200 moved to California when I was seven, and we had 0:22:08.240 --> 0:22:12.080 to keep moving because as the development of southern California grew, 0:22:12.520 --> 0:22:15.000 they kept plowing down the orange groves and we had 0:22:15.040 --> 0:22:18.720 to keep moving further and further towards the hills. So anyway, 0:22:18.760 --> 0:22:21.760 I grew up with the romance of living in orange 0:22:21.760 --> 0:22:25.240 grove and uh, just the smell of all those blossoms 0:22:25.280 --> 0:22:27.639 and everything. So it goes pretty deep in my roots. 0:22:27.680 --> 0:22:29.840 And we had to start every day with a glass 0:22:29.840 --> 0:22:33.560 of fresh squeezed juice, which evolved into a juice company, Odwalla, 0:22:33.600 --> 0:22:36.959 which you sold and then at Califia, which focuses on 0:22:37.200 --> 0:22:41.879 plant based beverages almond milk, soy, etcetera. So I'm curious, 0:22:42.400 --> 0:22:44.359 given the fact that you've sort of been part of 0:22:44.359 --> 0:22:47.080 this evolution of the health foods in the in the 0:22:47.160 --> 0:22:50.080 juice movement, where are we in that. I mean, is 0:22:50.119 --> 0:22:52.720 it expanding or are we kind of hitting a plateau 0:22:52.760 --> 0:22:55.359 where people are saying, forget this, come on, let's just 0:22:55.400 --> 0:22:58.440 do whole milk or raw milk or whatever. Right. Well, 0:22:58.440 --> 0:23:02.280 there's lots of different things going on, but um, underneath 0:23:02.280 --> 0:23:06.879 it all, there's huge shifts in the food industry at large, 0:23:06.960 --> 0:23:10.920 which I think are driving this. But what's driving those 0:23:10.920 --> 0:23:15.400 shifts are really massive changes in the consumer and where 0:23:15.440 --> 0:23:18.640 the consumer's head is at, and knowledge on the part 0:23:18.640 --> 0:23:23.600 of the consumer, and also globalization of this kind of 0:23:23.680 --> 0:23:29.800 gen zennial phenomena where you really have trends moving simultaneously. 0:23:30.160 --> 0:23:33.239 When I started Duella back in the eighties, you know, 0:23:33.440 --> 0:23:36.320 things would start on the West coast and in places 0:23:36.359 --> 0:23:38.840 like Santa Cruz and San Francisco, and then you know, 0:23:39.160 --> 0:23:41.159 takes some years to get to the East coast, and 0:23:41.160 --> 0:23:43.919 then take a decade or longer to get to the 0:23:43.960 --> 0:23:46.840 middle part of the country, and then other parts of 0:23:46.880 --> 0:23:51.119 the world may take twenty thirty years. Now it's really happening. 0:23:52.280 --> 0:23:55.840 A trend that can happen in natural products can spread 0:23:55.960 --> 0:24:00.720 globally within a few years. So uh, now a consumer 0:24:00.840 --> 0:24:04.800 is really driving the need for change and the industry 0:24:04.840 --> 0:24:08.960 is behind where you know, more than thirty years ago. 0:24:09.040 --> 0:24:12.919 When I got started, it was mainly like visionary people 0:24:13.080 --> 0:24:16.280 like myself and my friends who were coming up with 0:24:16.320 --> 0:24:19.080 these unique ideas and trying to convince people that this 0:24:19.160 --> 0:24:22.120 was the right thing to do. Tell people about how 0:24:22.160 --> 0:24:26.520 you're borrowing from other cultures in order to bring different 0:24:26.520 --> 0:24:30.160 types of drinks to the public. And I'm thinking here 0:24:30.240 --> 0:24:36.359 about Latino culture, Mexican culture, and horg Chatta. Right. Well, 0:24:37.160 --> 0:24:41.359 first of all, our name, Califia Farms is named after 0:24:41.720 --> 0:24:44.959 the origin of the state of California, which many Californias 0:24:45.000 --> 0:24:50.000 don't even know, right, And even earlier, there was a novelist, 0:24:50.119 --> 0:24:53.720 a Spanish novelist in the late fourteen hundreds who wrote 0:24:53.720 --> 0:24:57.280 a book and created this character, Queen Califia, who was 0:24:57.359 --> 0:25:00.840 the inspiration for the Spanish coming here. And she was 0:25:01.400 --> 0:25:06.480 a beautiful black queen who was rumored to have tons 0:25:06.480 --> 0:25:10.120 of gold. So nothing to motivate a conquistador more than 0:25:10.240 --> 0:25:13.280 beautiful women in lots of gold, right. So anyway, the 0:25:13.440 --> 0:25:19.119 romance of California spread to the agricultural heritage, and so 0:25:19.359 --> 0:25:24.080 it's it's actually not that foreign, and uh, that influence 0:25:24.200 --> 0:25:27.159