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Speaker 1: You want to turn next to the Bloomberg Markets Podcast

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Speaker 1: alongside my co host joining.

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Speaker 2: Every business day, we bring you interviews from CEOs, market crows,

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Speaker 2: and Bloomberg experts, along with essential market news.

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Speaker 3: Market podcast podcast or wherever Bloomberg.

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Speaker 1: Dot com and obviously fed and bond related. Now, walk

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Speaker 1: us through the latest that what we've been seeing in

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Speaker 1: the treasury market, and especially ahead of a number of

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Speaker 1: key data reports that are coming up as we know

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Speaker 1: when it comes to obviously the jobs report later this week,

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Speaker 1: as well as that PCE indicator that's coming on Thursday.

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Speaker 4: Yeah.

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Speaker 5: So obviously, like you said, we have these key data

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Speaker 5: points in a reasonably a liquid market time right now.

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Speaker 5: You look at this morning's data and obviously you had

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Speaker 5: the Jolts data Uh myss to the downside, which is

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Speaker 5: you know, FED friendly for sure. Uh, you had consumer

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Speaker 5: confidence lower, and now you have two year yields rallying

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Speaker 5: by thirteen bases points. That's you know, that that's not

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Speaker 5: showing that that the market is is liking this data

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Speaker 5: and certainly pricing out at least a little bit of

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Speaker 5: the hikes that we had the hike in November that

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Speaker 5: was starting to be priced into the market. So I

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Speaker 5: think the market's still looking for some direction. It's still

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Speaker 5: looking for exactly, you know, what the what the path

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Speaker 5: of the US economic environment is going to be and

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Speaker 5: how that might influence the Fed Reserve and their actions

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Speaker 5: on a going forward basis. So so I think you're

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Speaker 5: are going to see a lot of volatility, you know,

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Speaker 5: ten basis point moves in the five and ten year

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Speaker 5: sectors of it would not be complete surprise depending on

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Speaker 5: you know, how weak or how strong the data is

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Speaker 5: compared to expectations.

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Speaker 3: Now we have jobs numbers coming out at the end

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Speaker 3: of the week. Is is that the ultimate decisive bit

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Speaker 3: of data or you know, is it CPI?

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Speaker 6: What?

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Speaker 3: What? What do we what's your like top data point

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Speaker 3: that you're considering as we look ahead to kind of

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Speaker 3: mid September, next FED meeting.

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Speaker 5: Yeah, so, so next month's CPI report, I think is

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Speaker 5: going to be the really the key to whether or

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Speaker 5: not the market is going to price for a November hike.

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Speaker 5: I mean, so September I think at this point is

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Speaker 5: off the table. You keep seeing very mixed data and

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Speaker 5: that's not going to entice the Federal Reserve to need

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Speaker 5: to increase interest rates again. But I think as we

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Speaker 5: get toward towards the September meeting, where you get a

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Speaker 5: new summary of economic projections, you'd get a new dot plot,

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Speaker 5: you know, will the what will the Fed members think

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Speaker 5: they're going to hike rates to or cut rates to

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Speaker 5: in twenty twenty four based on changes in their economic outlook.

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Speaker 5: That's where the data from now until the next meeting

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Speaker 5: I think will be more impactful. So the two data

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Speaker 5: points from this later this week is the month over

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Speaker 5: month PC numbers, particularly those core PC numbers that Jay

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Speaker 5: Powell has mentioned on several occasions as being important to

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Speaker 5: their outlook. So if we do get an expectator, if

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Speaker 5: we do get as expected zero point two percent on

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Speaker 5: the core PC deflator, I think that's actually a good

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Speaker 5: thing because that's implying that inflation on a trend basis

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Speaker 5: is coming down.

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Speaker 7: And then it's not so much.

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Speaker 5: The headline payrolls number, you know, unless it really goes

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Speaker 5: gets crazy one way or the other. But the wage

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Speaker 5: data I think is the most important piece of Friday's

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Speaker 5: payroll report that I'll be focused on. So, so it's

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Speaker 5: aggregate labor income. So we do we continue to see

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Speaker 5: you know, point four month over month increases in wages.

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Speaker 5: That that's I think going to be key, because wages

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Speaker 5: are one of the things that's keeping spending his eyes,

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Speaker 5: it is number one and number two. It's also companies

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Speaker 5: are trying to at least pass some of the higher

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Speaker 5: labor costs along to consumers in the services sector. And

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Speaker 5: because of that, you know that is there is a

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Speaker 5: little bit of a wage push inflation, regardless of whether

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Speaker 5: or not members of the FED will admit it or not.

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Speaker 1: AIRA What about something else that's going on in the

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Speaker 1: background when we're talking about the balance sheet and the

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Speaker 1: runoff there because we talk so much about when it

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Speaker 1: comes to interest rates, but what about that aspect of

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Speaker 1: it and when investors are concerned about lack of liquidity

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Speaker 1: in the marketplace.

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Speaker 5: Yes, so I don't think that the lack of liquidity

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Speaker 5: right now is really an issue. There's still a lot

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Speaker 5: of reserves above what the banking sector needs for liquidity

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Speaker 5: purposes and to meet capital requirements. So the way that

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Speaker 5: I look at the Fed's balance sheet and how small

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Speaker 5: it needs to get or can get, really has to

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Speaker 5: do with how banks are complying with different vasal capital regulations.

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Speaker 5: So the single biggest one is the liquidity coverage ratio,

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Speaker 5: and assuming that banks get down to just above their

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Speaker 5: minimum requirements for those capital ratios, we estimate that the

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Speaker 5: balance sheet that the Fed balancee could decline about another

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Speaker 5: six hundred billion, seven hundred billion dollars or so. You know,

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Speaker 5: others use aggregate data. We don't think that that's the

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Speaker 5: best way to look at it because the challenge with

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Speaker 5: liquidity in the bond market and the repurchase agreement market

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Speaker 5: and all of the things that created the repo hiccup

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Speaker 5: in September of twenty nineteen, a single institution that doesn't

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Speaker 5: have enough liquidity that winds up switching us over the

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Speaker 5: tipping point and requiring more reserves to be added to

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Speaker 5: the system. And that's what you saw in September of

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Speaker 5: twenty nineteen. So you know, once that gets tripped, I

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Speaker 5: think that's a signal that the Federal Reserve is probably

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Speaker 5: going to think about reducing its balance or reducing quantitative tightening,

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Speaker 5: or even ending it and allowing the market to kind

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Speaker 5: of catch up to the new liquidity environment that we have.

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Speaker 3: I want to get your take on how housing prices

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Speaker 3: are going to play into the Federal reserves calculus. Jpewell

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Speaker 3: was talking about how he sees shelter costs coming down.

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Speaker 3: But you know, we got data out this morning the

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Speaker 3: FHFA House Price Index rising again zero point three percent. Mitally,

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Speaker 3: this was a little bit less than anticipated, but you know,

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Speaker 3: prices across all twenty major market areas surveyed by S

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Speaker 3: and B. Dow Jones in Disease says prices are going up.

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Speaker 3: Does this play into the calculus or is this such

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Speaker 3: a structural problem that the Fed just kind of puts

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Speaker 3: it aside.

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Speaker 5: Yeah, well, I think the Federal Reserve is, you know,

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Speaker 5: certainly looking at you know, the cost of everything.

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Speaker 7: I think housing.

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Speaker 5: Housing obviously is important to the Federal Reserve, but it's

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Speaker 5: only one component. It's it's really the cost of housing.

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Speaker 5: So things like rent rents and owner's equivalent rent that

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Speaker 5: make up the measures that we look at for for

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Speaker 5: how much housing's going up. And interestingly, if you think

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Speaker 5: about even if house prices had stayed constant and you

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Speaker 5: wound up with mortgage rates going up towards seven percent,

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Speaker 5: which Erica Adelberg, who's our mortgage strategist here at Bloomberg Intelligence,

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Speaker 5: looks at every day, you'd still have higher rents right,

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Speaker 5: So it would still cost more to rent a house

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Speaker 5: because you know the new mortgages that you receive are

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Speaker 5: are going to be higher, But that takes a long

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Speaker 5: time to filter into the overall economy. I think the

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Speaker 5: bigger issue with what's going on now in the housing

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Speaker 5: market is it's lack of supply, right, people with very

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Speaker 5: low mortgage rates. People with mortgage rates well below four percent,

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Speaker 5: they're not going to be refinancing and looking for a

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Speaker 5: new home unless they have to relocate for their jobs.

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Speaker 8: So because of.

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Speaker 5: That, you just don't have a lot of supply on

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Speaker 5: the market, and that's one of the things that's driving

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Speaker 5: home prices a bit higher, although that has stabilized quite

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Speaker 5: a lot when you look at the month on month.

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Speaker 1: All right, Ira, it's great always getting your perspective on

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Speaker 1: all things, Ira Jersey, Chief US Interest Rate Strategies for

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Speaker 1: Bloomberg Intelligence.

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Speaker 4: You're listening to the team Ken's a live program Bloomberg

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Speaker 4: Markets weekdays at ten am Eastern on Bloomberg dot com,

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Speaker 4: the iHeartRadio app, and the Bloomberg Business app, or listen

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Speaker 4: on demand wherever you get your podcasts.

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Speaker 1: I know this is something you've been watching very closely

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Speaker 1: smoon when it comes to what's been happening with these

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Speaker 1: pharmaceutical giants and the ruling when it does come to

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Speaker 1: President Biden's push to bargain with these drug makers to

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Speaker 1: lower the cost of medicare. So I want to get

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Speaker 1: straight to Dwayne and Bright, senior government analysts with Bloomberg

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Speaker 1: Intelligence joining us to talk the drug pricing negotiations. Duane,

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Speaker 1: thanks so much for joining us. We knew some of

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Speaker 1: this was coming. Walk us through what the latest news

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Speaker 1: is when it comes to this.

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Speaker 7: Yes, we knew this was coming.

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Speaker 9: The IRA passed twenty twenty two and the government had

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Speaker 9: a deadline of September one to release the list of

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Speaker 9: ten high expenditure drugs. Those drugs would be subject to

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Speaker 9: government negotiation. In other words, the government would negotiate prices

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Speaker 9: for those drugs that would be anywhere from twenty five

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Speaker 9: to sixty percent lower than they are now, and those

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Speaker 9: prices would become effective beginning January one, twenty twenty six.

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Speaker 7: We're starting with a list of ten.

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Speaker 9: That number of drugs will go up from ten to

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Speaker 9: fifteen in twenty twenty seven, in twenty twenty eight, and

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Speaker 9: there'll be twenty drugs per year.

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Speaker 3: Thereafter point, why these specific drugs.

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Speaker 6: Do you think.

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Speaker 9: The law requires that Medicare focuses on these drugs, So

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Speaker 9: we're not focused on price alone. We're focused on those

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Speaker 9: drugs that have high expenditures. So you may see some

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Speaker 9: drugs on this list that are low cost drugs, but

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Speaker 9: they're used by quite a number of people, so Eloquists,

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Speaker 9: for example, the data CMS provided this morning shows that

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Speaker 9: three million people used Eloquists. But you have another drug,

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Speaker 9: Stallara from Johnson and Johnson. Twenty two thousand people use

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Speaker 9: the drug, but it's very expensive. So Democrats when they

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Speaker 9: came up with a spill, really wanted to focus on

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Speaker 9: those drugs that are really high cost, high expenditure drugs,

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Speaker 9: not just those that are high priced drugs.

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Speaker 1: When you're looking across the spectrum, especially in Washington, was

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Speaker 1: this more of a broad based issue when you're talking

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Speaker 1: about Republicans and Democrats or was it more geared toward

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Speaker 1: the Democratic side.

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Speaker 9: This has been a Democratic goal since the Clinton administration,

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Speaker 9: So for the last twenty years, UH, Democrats UH were

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Speaker 9: longer Democrats have been trying to find a way to

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Speaker 9: inject the government or provide a government role in price

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Speaker 9: setting for these drugs. Now they've failed, and in fact,

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Speaker 9: UH when the Party law passed in two thousand three,

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Speaker 9: there was a an explicit prohibition against the government UH

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Speaker 9: dictating or setting prices. And that's largely because when that

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Speaker 9: law passed, it was passed by a Republican Congress and

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Speaker 9: signed by a Republican president.

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Speaker 7: Now, granted, Democrats voted.

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Speaker 9: For that bill, UH, but it did set up the framework,

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Speaker 9: but it also included UH more of a free market

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Speaker 9: uh approach to price setting. Over the past couple of years,

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Speaker 9: Democrats tried to advance similar legislation but failed because they

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Speaker 9: didn't have enough control. Now that they had uh the

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Speaker 9: full control of Congress and the White House, they were

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Speaker 9: able to pass some version of what they wanted to

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Speaker 9: do in terms of injecting government a government role for

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Speaker 9: price setting.

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Speaker 3: Well, the argument from pharmaceutical companies against call it negotiations

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Speaker 3: clent price setting has always been, you know, they spend

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Speaker 3: a lot of money developing these drugs. They feel that

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Speaker 3: they deserve them monopoly that they get in terms of

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Speaker 3: selling these drugs to consumers. Does this really put a

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Speaker 3: weight on the kind of innovation that they will do?

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Speaker 3: Do you think that's a long term shift or is

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Speaker 3: this something that these former companies are going to complain

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Speaker 3: about for a while, but you know, it's not really

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Speaker 3: going to affect their overall behavior.

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Speaker 9: I think there's some weight to their argument. It's definitely

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Speaker 9: going to change the way they pursue drugs moving forward.

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Speaker 9: They're going to think about what kind of indications they

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Speaker 9: come forward with.

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Speaker 7: First. They're gonna look at some.

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Speaker 9: Of those uh uh, those those areas where commercial commercialization

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Speaker 9: prospects are better. They'll maybe slow down those indications where

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Speaker 9: the commercializa commercialization aspects are probably lower.

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Speaker 7: Uh.

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Speaker 9: Keep in mind though, that these drugs, uh that the

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Speaker 9: administration released today, the list released today. These are a

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Speaker 9: list of ten drugs that have been on the market

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Speaker 9: for at least seven years.

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Speaker 8: Uh.

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Speaker 9: They don't have a generic competition or a bisimilar competition,

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Speaker 9: and and so, uh, we're really talking about those high

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Speaker 9: cost drugs where there isn't an alternative, and so there

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Speaker 9: will still be an opportunity for these manufacturers to perhaps

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Speaker 9: raise the prices when they go to the market for

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Speaker 9: that first year. In fact, the govern Congressional Budget Office,

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Speaker 9: which scores legislation, in other words, how much is it

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Speaker 9: gonna cost.

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Speaker 7: How much is it going to save?

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Speaker 9: Anticipates that pharmaceutical companies will pursue higher launch prices to

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Speaker 9: make up for the fact that in some of those

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Speaker 9: outer years later years, they won't be able to charge

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Speaker 9: the prices that they would otherwise charge.

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Speaker 1: What other potential legislation could be on the horizon.

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Speaker 9: In the drug pricing space. I think we're looking less

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Speaker 9: at legislation targeting drug manufacturers, potentially targeting pharmacy benefit managers,

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Speaker 9: and they were left out of the Inflation Reduction Act

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Speaker 9: for a handful of policy and technical reasons when Democrats

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Speaker 9: passed the bill. We could see as part of that

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Speaker 9: how PBMs are profiting from rebate dollars rebase they get

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Speaker 9: from manufacturers that are supposed to go to health plans

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Speaker 9: or even the employees in the individuals.

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Speaker 7: We could see some additional.

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Speaker 9: Regulatory efforts by this administration as it leads to TRUK pricing.

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Speaker 9: They Dibinding administration released a white paper earlier this year

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Speaker 9: focused on some other avenues which it can use to

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Speaker 9: lower the price of some drugs. They're targeting those drugs

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Speaker 9: approved through an Accelerated Approval pathway, which is a pathway

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Speaker 9: that allows manufacturers to get drugs on the market faster

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Speaker 9: and a level of safety and efficacy data. But in

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Speaker 9: many cases these acceleratate approval drugs still go through some

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Speaker 9: additional confirmatory trials. They actually work, so we could see

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Speaker 9: some more regulatory efforts.

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Speaker 1: There, right, Jane, thanks so much for joining us. That's

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Speaker 1: doing Wright, senior government analysts at Bloomberg Intelligence.

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Speaker 6: Perce.

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Speaker 4: You're listening to the tape cats are live program Bloomberg

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Speaker 4: Markets weekdays at ten am Eastern on Bloomberg Radio, the

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Speaker 4: tune in app, Bloomberg dot Com, and the Bloomberg Business App.

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Speaker 4: flagsh New York station. Just say Alexa play Bloomberg eleven thirty.

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Speaker 1: You want to get straight to our next guest, Elliott Stein,

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Speaker 1: senior litigation analyst with Bloomberg Intelligence. As someone you know,

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Speaker 1: we were talking about the US court paving the way

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Speaker 1: for the first bitcoin ETF and this gray scale ruling.

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Speaker 1: If you're looking at the reaction in ETFs, here are

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Speaker 1: actually if you're just looking specifically in bitcoin, it's up

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Speaker 1: almost six percent, so now it's trading above the twenty

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Speaker 1: seven thousand level. I want to bring in Elliott Stein.

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Speaker 1: So Elliott walk us through the latest news that we

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Speaker 1: got from this. What do we know so far?

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Speaker 8: Yeah, So this morning we got a decision from the

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Speaker 8: DC Circuit Court of Appeals, which is the court that

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Speaker 8: was hearing gray Scale's challenge to the SEC's rejection of

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Speaker 8: gray Scale's application for a spot bitcoin ETF. The SEC

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Speaker 8: rejected it last year, they rejected that application. Gray Scale

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Speaker 8: sued the case was arguing to march. You know, people

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Speaker 8: on Twitter in particular, and vestors, crypto investors interested in

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Speaker 8: bitcoin and GBTC, the Great Scale Bitcoin traice. So they

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Speaker 8: have been waiting for this decision anxiously for some time,

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Speaker 8: and we finally got it today and the court vacated

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Speaker 8: the SEC's rejection, saying that the SEC's decision to reject

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Speaker 8: the application was arbitrary and caprecious and wasn't well reasoned

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Speaker 8: and sort of left it there. So next steps are

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Speaker 8: a little unclear, and I haven't even read the decision yet,

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Speaker 8: but that's where we are right now.

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Speaker 3: Elliott. We're broadly speaking, I mean, what's the thinking on

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Speaker 3: the part of the judges. You know, they had grilled

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Speaker 3: I believe the SEC about its decision back and hearing

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Speaker 3: in the case on marsh what's their thinking. What's the

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Speaker 3: rationale do you think?

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Speaker 8: Yeah, oh sorry, didn't mean to cut you off, but yeah,

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Speaker 8: the rationale is that the SEC previously approved too bitcoin

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Speaker 8: futures et F and so so you know, Gray Scales

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Speaker 8: argument was that the SEC was treating similar products differently

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Speaker 8: and arbitrarily because the risk of manipulation and fraud is

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Speaker 8: essentially the same in both the futures bitcoin market and

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Speaker 8: the spot bitcoin market, and so if the SEC was

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Speaker 8: concerned about fraud in the spot bitcoin market, that didn't

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Speaker 8: really make much sense because it had already approved these

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Speaker 8: futures bitcoin ETFs, and so as a result, to treat

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Speaker 8: similar products similarly, they had to after having already approved

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Speaker 8: the futures bitcoin ETFs, they had to then approve the

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Speaker 8: spot bitcoin ETF.

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Speaker 1: And when we're looking at bitcoin, we did mention up

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Speaker 1: five percent. What do you think the reaction to investors

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Speaker 1: to this, because this is something that has been really

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Speaker 1: highly anticipated for months now.

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Speaker 8: Yeah, I mean, you know, that reaction seems to make sense, right,

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Speaker 8: I mean this, you know, this does seem like it's

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Speaker 8: another step on the path to getting spot bitcoin ETFs approved,

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Speaker 8: which will just make it eat here for investors both

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Speaker 8: retail and institutional, I think, to get exposure to bitcoin.

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Speaker 8: And another interesting number to look at is the discount

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Speaker 8: for GBTC. You know, the discount meaning that the shares

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Speaker 8: in GBTC were trading at the time the case was

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Speaker 8: argued roughly forty percent lower than the value of the

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Speaker 8: underlying bitcoin that's the trust held Right now, I'm looking

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Speaker 8: at that number and it's about ten point six percent,

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Speaker 8: So that discount has dropped dramatically.

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Speaker 3: Yeah, it dropped dramatically just in the past couple since

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Speaker 3: the last close. It looks like I want to bring

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Speaker 3: in here. We have Matt Siegel, the head of digital

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Speaker 3: assets research at Van Eck. Matt, give me your thoughts

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Speaker 3: as well. We've just been discussing this with Elliott Stein

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Speaker 3: from Bloomberg Intelligence. What's the broader impact that we expect

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Speaker 3: to see from this decision moving forward? Does this just

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Speaker 3: become the first ETF of many?

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Speaker 10: I think the broader impact is that the government has

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Speaker 10: brought a range of lawsuits against this industry and using

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Speaker 10: their enforcement stick to try to chill activity stateside. And

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Speaker 10: now we've seen the second major court case that the

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Speaker 10: SEC has lost in as many months ripple and now

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Speaker 10: this great go. So we think the tide is turning

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Speaker 10: that when the facts play out in court, the law

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Speaker 10: is more ambiguous than the SEC is making it that

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Speaker 10: their logic and denying these applications was haphazard illogical, and

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Speaker 10: the judge was very clear in rejecting that logic.

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Speaker 6: So it's a vindication for the industry. Matt.

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Speaker 1: We do know the SEC has cited its opposition when

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Speaker 1: it comes to these prior proposals for bigcnytfs and for

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Speaker 1: the spot price crypto exchanges. What other moves could the

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Speaker 1: SEC have from here?

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Speaker 10: Well, it's important to note that the judge in this

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Speaker 10: case cannot approve the bitcoin ETF. So the judge has

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Speaker 10: sent the case back to the SEC to revise their logic.

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Speaker 10: So we'll see, you know, if they capitulate or if

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Speaker 10: they present new logic. But you know, the best case,

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Speaker 10: here's the base case here, is that the chances of

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Speaker 10: a spot bitcoin ETF have risen quite substantially. It will

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Speaker 10: take a fair bit of logistics to get all these

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Speaker 10: applications in order. We'll see if they are all allowed

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Speaker 10: to go effective at the same time or if there

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Speaker 10: is some privileged positions that are that are given.

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Speaker 3: Now is the thinking that there really would be a

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Speaker 3: substantial amount of inflows into these sort of ETFs it

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Speaker 3: provided that they can move forward, that that this would

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Speaker 3: suddenly bring in the retail investors that we've been missing.

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Speaker 10: I don't think just retail, I think institutional like the

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Speaker 10: the ETF structure is time proven way to get exposure

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Speaker 10: in a cost effective and liquid manner to all types

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Speaker 10: of commodities and security. So you know, this could be

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Speaker 10: the biggest ETF launch ever. We think both institutions and

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Speaker 10: retail investors will like the exposure to regulated custodians that

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Speaker 10: it will provide at good spreads.

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Speaker 6: Lots of different entities will want to hold this product,

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Speaker 6: we think.

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Speaker 1: Ellie, I want to bring you back into this conversation

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Speaker 1: and get your thoughts on what the timetable could potentially

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Speaker 1: be if this does come back into the SEC's hands

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Speaker 1: and where this could move forward, because obviously, like you

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Speaker 1: mentioned earlier, there's still a lot of uncertainty here, right.

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Speaker 8: Yeah, it's a great question, and you know, before we

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Speaker 8: even get there, the SEC, if they want, can ask

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Speaker 8: the full DC Circuit Court of appeals called called an

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Speaker 8: on bunk proceeding. They can ask for that that that's

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Speaker 8: up to the court to grant it. It's not automatic,

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Speaker 8: it's discretionary. But you know, that would be like in

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Speaker 8: terms of the litigation, the first step for the SEC.

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Speaker 8: They would have I believe sixty days to ask for that.

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Speaker 1: Uh.

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Speaker 8: And then you know, beyond that, they could also ask

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Speaker 8: for a Supreme Court review, although I doubt that, you know,

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Speaker 8: I really doubt it's going to go to the Supreme Court.

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Speaker 8: But then you know, put in the court aside. Yeah,

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Speaker 8: then it's like I said, you know, it's it's a

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Speaker 8: little unclear what happens next because the court you know,

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Speaker 8: didn't order the SEC right to do anything beyond vacating

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Speaker 8: the previous rejection. It is a court can't and didn't

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Speaker 8: order the SEC to approve an application. So it's a

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Speaker 8: little unclear what happens next. Interestingly, you know, I think

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Speaker 8: Grayscale sent a letter at some points of the SEC

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Speaker 8: asking the SEC to sort of just approve all the

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Speaker 8: various applications at once. I think I think, you know,

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Speaker 8: knowing that this kind of decision was going to come down,

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Speaker 8: and fearing that it might sort of be at the

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Speaker 8: end of the line at this point in terms of,

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Speaker 8: you know, having to go through the application process again,

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Speaker 8: whereas up until this decision it was sort of at

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Speaker 8: the front of the line.

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Speaker 3: Matt, your thoughts, I mean, do you think the SEC

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Speaker 3: will just sort of throw in the towel here? Say, okay, bitgoing, yeah,

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Speaker 3: let's basically deah, let's go.

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Speaker 6: It's a tough call.

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Speaker 10: This is political set at the very hot top of

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Speaker 10: the administration with the President's executive order to use all

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Speaker 10: for the agencies, to use all tools to crack down

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Speaker 10: on this industry. So like be curious to see what

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Speaker 10: type of logic they would employ, because we haven't found

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Speaker 10: any of it particularly compelling. You know, it could end

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Speaker 10: with Barry Gensler out of the SEC. That is not

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Speaker 10: uncommon for chair persons to leave after they've faced embarrassing losses.

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Speaker 6: They've now been two and two months, so.

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Speaker 1: We only have about a minute left. But I wanted

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Speaker 1: to get both of y'all's final thoughts here. I'll start

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Speaker 1: off with you, Elliott. As far as the next immediate

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Speaker 1: thing that you're going to be watching for on this, a.

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Speaker 8: Couple of things, I guess, well, first of all. I

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Speaker 8: think there's a bunch of other bitcoin ETF applications that's

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Speaker 8: sort of not you know, in the courts, right, that's

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Speaker 8: with the SEC. So we'll see if the SEC punts

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Speaker 8: on those further or if they grant them, and if

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Speaker 8: they grant them, you know, if they grant a whole

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Speaker 8: bunch of mass or just do them one at a time,

441
00:24:18,320 --> 00:24:20,639
Speaker 8: and then I'll be interesting to see any statements from

442
00:24:20,640 --> 00:24:22,679
Speaker 8: the SEC as to whether they're going to ask for

443
00:24:23,000 --> 00:24:26,560
Speaker 8: on block review and also sort of like what the

444
00:24:26,640 --> 00:24:28,840
Speaker 8: next steps would be just in terms of the grayscale

445
00:24:28,840 --> 00:24:30,600
Speaker 8: application if they go back to the SEC.

446
00:24:30,800 --> 00:24:32,560
Speaker 3: Right, yeah, Matt, very quickly, Yeah, what do you what

447
00:24:32,600 --> 00:24:33,040
Speaker 3: do you watch?

448
00:24:33,080 --> 00:24:34,240
Speaker 1: Like twenty seconds left?

449
00:24:35,080 --> 00:24:38,280
Speaker 10: Well, let's watch ethereum now, right, because the SEC is

450
00:24:38,320 --> 00:24:42,800
Speaker 10: poised to approve ethereum futures ETFs according to this ruling,

451
00:24:42,840 --> 00:24:45,280
Speaker 10: they would then have to prove SPOT So I'm sure

452
00:24:45,280 --> 00:24:47,280
Speaker 10: you're tend to be on the lookout for those filings,

453
00:24:47,320 --> 00:24:47,920
Speaker 10: all right.

454
00:24:48,080 --> 00:24:51,600
Speaker 1: Matt Siegel from Vanik along with Elliott Stein's senior litigation

455
00:24:51,640 --> 00:24:55,080
Speaker 1: analysts with Bloomberg Intelligence, walking us through what's going on

456
00:24:55,200 --> 00:24:57,600
Speaker 1: with this US core paving the way for the first

457
00:24:57,640 --> 00:24:58,720
Speaker 1: bitcoin ETF.

458
00:25:00,000 --> 00:25:03,760
Speaker 4: You're listening to the Team Can't Live program Bloomberg Markets

459
00:25:03,800 --> 00:25:06,879
Speaker 4: weekdays at ten am eastering on Bloomberg dot com, the

460
00:25:06,960 --> 00:25:10,080
Speaker 4: iHeartRadio app and the Bloomberg Business App, or listen on

461
00:25:10,160 --> 00:25:12,160
Speaker 4: demand wherever you get your podcasts.

462
00:25:15,040 --> 00:25:19,440
Speaker 3: Well, I want to talk about a name. Well, I'll

463
00:25:19,480 --> 00:25:21,480
Speaker 3: just give you a sense of what's happened to these

464
00:25:21,520 --> 00:25:25,359
Speaker 3: shares in the past. Couple of wild wild Ride. Okay,

465
00:25:25,400 --> 00:25:29,119
Speaker 3: last Tuesday, up over one hundred percent, up over thirty

466
00:25:29,160 --> 00:25:33,600
Speaker 3: percent on Thursday, forty on Friday. Now we're down just

467
00:25:33,680 --> 00:25:38,280
Speaker 3: about thirty percent today. The name then fast Auto and unprofitable,

468
00:25:38,280 --> 00:25:45,240
Speaker 3: thinly traded and yes, it went, just went, just made

469
00:25:45,280 --> 00:25:49,840
Speaker 3: its debut as a spacklisting on August fifteenth, and now

470
00:25:50,000 --> 00:25:52,840
Speaker 3: is the world's third most valuable car company. I don't

471
00:25:52,840 --> 00:25:55,040
Speaker 3: know if that holds up given the fall today, but

472
00:25:55,119 --> 00:25:56,040
Speaker 3: it's something like that.

473
00:25:57,400 --> 00:25:59,720
Speaker 1: Yeah, it's bigger than the market cap. If you're combining

474
00:25:59,720 --> 00:26:00,760
Speaker 1: GM and Forward.

475
00:26:01,040 --> 00:26:05,120
Speaker 3: It's nuts, a little nuts. Well, to sort this out

476
00:26:05,119 --> 00:26:09,479
Speaker 3: for us, we have Stephanie Brindley. She's Associate director of

477
00:26:09,560 --> 00:26:13,800
Speaker 3: Research and Analysis at SMP Global's gonna tell us what

478
00:26:14,040 --> 00:26:17,680
Speaker 3: is going on with this company? And the wild ride

479
00:26:17,720 --> 00:26:19,560
Speaker 3: that we have seen in stocks over the past or

480
00:26:19,640 --> 00:26:21,000
Speaker 3: in the stock over the past couple of days.

481
00:26:22,240 --> 00:26:24,880
Speaker 11: Good morning, how are you guys today, Good?

482
00:26:25,000 --> 00:26:26,480
Speaker 3: Thank you, thanks for joining us.

483
00:26:27,119 --> 00:26:30,440
Speaker 12: Good thanks, thanks for having me. Vin Fast is a

484
00:26:30,560 --> 00:26:34,840
Speaker 12: really interesting company to watch. They've just started to launch

485
00:26:35,040 --> 00:26:38,600
Speaker 12: in the US and Canada. What if you kind of

486
00:26:38,720 --> 00:26:41,920
Speaker 12: look at the background of that company. The founder has

487
00:26:42,119 --> 00:26:47,200
Speaker 12: has a mission of creating a manufacturing base out of

488
00:26:47,280 --> 00:26:52,080
Speaker 12: Vietnam and and becoming growing their own auto company. Part

489
00:26:52,160 --> 00:26:55,600
Speaker 12: of doing that includes manufacturing targets for the US and

490
00:26:55,760 --> 00:26:58,160
Speaker 12: for being in the US and Europe and in China

491
00:26:58,200 --> 00:27:00,720
Speaker 12: as well. It's a it's a very very long term

492
00:27:00,840 --> 00:27:04,920
Speaker 12: look for him. And what you're seeing too from that

493
00:27:05,040 --> 00:27:07,639
Speaker 12: company is is somebody with a with a will and

494
00:27:07,720 --> 00:27:10,520
Speaker 12: a mission that that kind of goes beyond what happens

495
00:27:10,520 --> 00:27:12,159
Speaker 12: in the next two or three years. So this is

496
00:27:12,200 --> 00:27:13,560
Speaker 12: a really one build.

497
00:27:13,680 --> 00:27:16,159
Speaker 1: Right, This is a Vietnamese ev maker. Give us some

498
00:27:16,320 --> 00:27:19,760
Speaker 1: context into the space of how this company. Obviously, when

499
00:27:19,800 --> 00:27:22,280
Speaker 1: you're thinking about the context you were just talking about this,

500
00:27:22,359 --> 00:27:24,600
Speaker 1: Simona and I're having a market cap larger than GM

501
00:27:24,680 --> 00:27:27,680
Speaker 1: and Ford. But when you're looking at this particular industry

502
00:27:27,840 --> 00:27:29,680
Speaker 1: where it sits at and how it's been able to

503
00:27:29,760 --> 00:27:31,600
Speaker 1: sort of get to where it is at this point.

504
00:27:32,920 --> 00:27:36,840
Speaker 12: It's it's interesting looking at market caps, which isn't ast

505
00:27:36,840 --> 00:27:40,680
Speaker 12: one hundred percent in my area. But electric vehicles, aside

506
00:27:40,720 --> 00:27:43,439
Speaker 12: from from Tesla, and it took them ten or ten

507
00:27:43,520 --> 00:27:47,720
Speaker 12: or fifteen years to get there, aren't profitable. So we've

508
00:27:47,760 --> 00:27:50,360
Speaker 12: got we've got market caps that are that are betting.

509
00:27:50,240 --> 00:27:53,640
Speaker 11: That ultimately these vehicles will be because today they're not yet.

510
00:27:53,840 --> 00:27:56,480
Speaker 8: And is that wrong? Is it wrong?

511
00:27:56,640 --> 00:27:58,359
Speaker 11: Oh jeez, that's a good question.

512
00:28:00,400 --> 00:28:04,359
Speaker 12: We're really talking long term, really long term, because for

513
00:28:04,760 --> 00:28:07,600
Speaker 12: the vehicles ebs to be profitable, they will be eventually.

514
00:28:07,960 --> 00:28:09,879
Speaker 12: Part of it is scale, part of it is a

515
00:28:09,960 --> 00:28:12,560
Speaker 12: broader piece of the market. Part of it is all

516
00:28:12,560 --> 00:28:16,240
Speaker 12: the regulations that are driving various markets to push thev's

517
00:28:16,480 --> 00:28:20,320
Speaker 12: internal combustion engines. But we're talking about a ten to

518
00:28:20,400 --> 00:28:23,160
Speaker 12: fifteen to twenty year transition. We aren't talking about something

519
00:28:23,200 --> 00:28:24,120
Speaker 12: that's happening in our.

520
00:28:24,080 --> 00:28:26,000
Speaker 11: Five so a couple decades. We'll see a lot more

521
00:28:26,080 --> 00:28:26,560
Speaker 11: growth in.

522
00:28:26,680 --> 00:28:28,560
Speaker 12: Five but we aren't going to get to an ev

523
00:28:28,760 --> 00:28:33,879
Speaker 12: dominant world. It's a long, long term vision for electric

524
00:28:34,000 --> 00:28:38,960
Speaker 12: vehicles being profitable and being transitioning froms or from internal

525
00:28:39,000 --> 00:28:41,920
Speaker 12: combustion engines to electric vehicles, and then Fast is in

526
00:28:42,000 --> 00:28:44,640
Speaker 12: this space trying to make a name for itself and

527
00:28:44,720 --> 00:28:48,160
Speaker 12: trying to build an industry for its country as well.

528
00:28:48,840 --> 00:28:51,360
Speaker 3: Yeah, I guess the distinguishing factor that you know, so

529
00:28:51,520 --> 00:28:56,240
Speaker 3: much of the exposure is to Asia. You know, admittedly

530
00:28:56,240 --> 00:29:00,640
Speaker 3: there are players in China that could potentially get in

531
00:29:00,720 --> 00:29:02,600
Speaker 3: the way. I suppose. I mean, we had Neo out

532
00:29:02,640 --> 00:29:06,080
Speaker 3: with its earnings today, but just I guess the idea

533
00:29:06,120 --> 00:29:09,800
Speaker 3: that it's in Vietnam is something a little bit special.

534
00:29:11,000 --> 00:29:12,320
Speaker 11: It's a little bit special.

535
00:29:12,360 --> 00:29:16,400
Speaker 12: I mean, they're younger as a company, they're younger, they're

536
00:29:16,560 --> 00:29:20,480
Speaker 12: learning as they go, and you see that in changes

537
00:29:20,520 --> 00:29:22,280
Speaker 12: that they've made and how they're going to market in

538
00:29:22,320 --> 00:29:25,200
Speaker 12: the US and in other places. They initially they were

539
00:29:25,240 --> 00:29:29,240
Speaker 12: talking about a battery leasing process where you would basically

540
00:29:29,400 --> 00:29:32,520
Speaker 12: lease by the vehicle, but lease the battery, and how

541
00:29:32,560 --> 00:29:35,760
Speaker 12: many miles a year that you drove would impact that

542
00:29:35,960 --> 00:29:39,800
Speaker 12: lease price. And the idea was that after the battery

543
00:29:39,880 --> 00:29:42,560
Speaker 12: got to maybe seventy percent usage, you would swap it

544
00:29:42,640 --> 00:29:45,960
Speaker 12: out and take away the concern from a consumer about

545
00:29:45,960 --> 00:29:47,840
Speaker 12: how long your battery is going to last because you'd

546
00:29:47,920 --> 00:29:49,280
Speaker 12: lease it and they would put a new one in

547
00:29:49,440 --> 00:29:50,920
Speaker 12: and you would pay your lease and it would go.

548
00:29:51,760 --> 00:29:55,720
Speaker 12: That concept is proving a little bit difficult for American

549
00:29:56,000 --> 00:29:57,960
Speaker 12: consumers to kind of get their heads around, and so

550
00:29:58,040 --> 00:30:01,360
Speaker 12: they've stepped away from that. Initially, the pricing was going

551
00:30:01,440 --> 00:30:04,360
Speaker 12: to be a little bit lower, so the idea is

552
00:30:04,400 --> 00:30:06,640
Speaker 12: you had luxury at a at A at a more

553
00:30:06,680 --> 00:30:09,960
Speaker 12: affordable price. But their prices that came out for the

554
00:30:10,320 --> 00:30:13,920
Speaker 12: for the VF nine are really on par with with

555
00:30:14,800 --> 00:30:15,840
Speaker 12: sort of the premium and.

556
00:30:16,480 --> 00:30:20,560
Speaker 11: Lower lower luxury, and so they're not really coming in

557
00:30:20,960 --> 00:30:22,640
Speaker 11: at at A at.

558
00:30:22,520 --> 00:30:25,280
Speaker 12: A more accessible price point. They're really in the mix

559
00:30:25,440 --> 00:30:26,800
Speaker 12: with everybody else that's out there.

560
00:30:26,960 --> 00:30:27,960
Speaker 11: So they keep making.

561
00:30:27,840 --> 00:30:30,120
Speaker 12: Changes as they go and as they learn how they're

562
00:30:30,160 --> 00:30:32,800
Speaker 12: going to come to market. Initially they were focusing on

563
00:30:32,960 --> 00:30:36,440
Speaker 12: direct selling. Now they're talking about having distributors and dealers

564
00:30:37,200 --> 00:30:40,640
Speaker 12: in the US and Canada. So that all of those

565
00:30:40,840 --> 00:30:46,400
Speaker 12: changes really reflect a company that's willing to evolve and

566
00:30:46,960 --> 00:30:49,800
Speaker 12: find its way because there's there's a kind of a

567
00:30:49,880 --> 00:30:51,600
Speaker 12: map and there isn't really They have to they have

568
00:30:51,640 --> 00:30:53,440
Speaker 12: to find their own space, and I think that's going

569
00:30:53,520 --> 00:30:55,920
Speaker 12: to make it complicated and it's going to make it

570
00:30:55,960 --> 00:30:58,680
Speaker 12: a rough ride for some points, but also it's what

571
00:30:58,760 --> 00:31:01,480
Speaker 12: they're going to need to do in order to find

572
00:31:01,520 --> 00:31:02,000
Speaker 12: their space.

573
00:31:02,200 --> 00:31:03,960
Speaker 3: I think it'd be challenging. You know, this is such

574
00:31:04,000 --> 00:31:07,440
Speaker 3: a cash flow intensive sort of business to just be

575
00:31:07,600 --> 00:31:10,800
Speaker 3: kind of changing tune all the time.

576
00:31:11,520 --> 00:31:13,800
Speaker 12: It is, and they haven't changed as much about the

577
00:31:13,840 --> 00:31:16,120
Speaker 12: product in and of itself. It's more about how they're

578
00:31:16,160 --> 00:31:19,160
Speaker 12: taking it to market, and the product is the investment.

579
00:31:19,240 --> 00:31:21,600
Speaker 12: Theres is improving it and making it better. The first

580
00:31:22,080 --> 00:31:26,120
Speaker 12: the first reviews from US media weren't fantastic on the

581
00:31:26,200 --> 00:31:27,680
Speaker 12: car and needed some more work.

582
00:31:27,600 --> 00:31:31,960
Speaker 11: To get there. But relative to their funding and their ability,

583
00:31:32,880 --> 00:31:33,520
Speaker 11: they are.

584
00:31:34,120 --> 00:31:38,000
Speaker 12: They're still related to group, and Vin Group has money,

585
00:31:38,840 --> 00:31:42,840
Speaker 12: and the founder has access to money. So I believe

586
00:31:42,880 --> 00:31:44,520
Speaker 12: that he's put sort of a cap and said this

587
00:31:44,680 --> 00:31:46,040
Speaker 12: is as far as I'm going to go for the

588
00:31:46,120 --> 00:31:49,400
Speaker 12: moment in terms of investing. But that's one of the

589
00:31:49,440 --> 00:31:51,920
Speaker 12: strengths that it has is one way or another, the

590
00:31:52,800 --> 00:31:55,880
Speaker 12: Vin Group can find a way to give infest and

591
00:31:55,920 --> 00:31:58,560
Speaker 12: more money if this is what they're really dedicated to achieving.

592
00:31:59,280 --> 00:32:01,640
Speaker 12: And again, you know, when you have a company that

593
00:32:01,880 --> 00:32:03,880
Speaker 12: has that kind of will and that kind of mission,

594
00:32:04,040 --> 00:32:05,000
Speaker 12: different things happen.

595
00:32:05,320 --> 00:32:08,080
Speaker 11: That's where Tesla sort of started. Tesla had a mission

596
00:32:08,600 --> 00:32:11,400
Speaker 11: more than yeah, of course you want to make money.

597
00:32:11,400 --> 00:32:13,440
Speaker 12: Of course you want to be profitable and successful, but

598
00:32:13,560 --> 00:32:17,480
Speaker 12: the mission was about getting people off fossil fuels. Vin

599
00:32:17,600 --> 00:32:22,280
Speaker 12: Fast has a mission of creating an automotive manufacturing industry

600
00:32:22,640 --> 00:32:25,160
Speaker 12: within Vietnam and growing and becoming.

601
00:32:24,920 --> 00:32:28,560
Speaker 11: A global player. So you've got a mission driven company

602
00:32:28,800 --> 00:32:30,760
Speaker 11: and along the way they make some different choices.

603
00:32:31,040 --> 00:32:33,960
Speaker 1: Could you consider to be some of their main rivals

604
00:32:34,280 --> 00:32:37,400
Speaker 1: in competitors, It really it's I mean.

605
00:32:37,360 --> 00:32:38,320
Speaker 11: It's everyone right now.

606
00:32:39,000 --> 00:32:43,320
Speaker 12: Are so unknown around for US customers, and they've brought

607
00:32:43,360 --> 00:32:46,600
Speaker 12: over a few thousand vehicles, mostly there in California right now,

608
00:32:47,040 --> 00:32:50,320
Speaker 12: so they really have to break through kind of everyone. Really,

609
00:32:51,480 --> 00:32:55,400
Speaker 12: they should be more going as kind of a Volkswagen brands,

610
00:32:56,440 --> 00:32:59,360
Speaker 12: maybe a Buick brand, Chevrolet would be more of the

611
00:32:59,480 --> 00:33:01,440
Speaker 12: brands that they should be going against.

612
00:33:02,640 --> 00:33:06,080
Speaker 11: But right now, it's really anyone. It's everyone just to

613
00:33:06,320 --> 00:33:08,280
Speaker 11: get and we're having the conversation now.

614
00:33:08,320 --> 00:33:10,520
Speaker 12: They're popping up in the news a lot more, but

615
00:33:10,600 --> 00:33:14,120
Speaker 12: there's a distance between this conversation and a consumer trying

616
00:33:14,480 --> 00:33:15,800
Speaker 12: to go find one on the street.

617
00:33:16,440 --> 00:33:18,760
Speaker 11: Through I believe June they only had one hundred and

618
00:33:18,840 --> 00:33:22,920
Speaker 11: thirty seven registered in the United States. Right, that speaks

619
00:33:23,000 --> 00:33:24,440
Speaker 11: to availability and awareness.

620
00:33:25,360 --> 00:33:27,760
Speaker 3: With respect to awareness, I mean, does it hurt a

621
00:33:27,840 --> 00:33:30,600
Speaker 3: company to be identified, you know, with these sort of

622
00:33:30,680 --> 00:33:33,280
Speaker 3: wild swings in the stock price or is that something

623
00:33:33,360 --> 00:33:38,640
Speaker 3: that you know, investors can kind of look as scancer, sorry,

624
00:33:38,720 --> 00:33:41,280
Speaker 3: look aside from and just quickly here because we only

625
00:33:41,320 --> 00:33:43,480
Speaker 3: have about thirty seconds, you know.

626
00:33:43,600 --> 00:33:46,320
Speaker 12: For car buyers, I'm not sure how much of a

627
00:33:46,400 --> 00:33:49,120
Speaker 12: difference it makes for investors. They're looking at things a

628
00:33:49,160 --> 00:33:50,920
Speaker 12: little bit differently and I'm not going to predict what

629
00:33:50,960 --> 00:33:51,400
Speaker 12: they're going to do.

630
00:33:51,600 --> 00:33:53,920
Speaker 11: So a car buyer, I'm not sure that it makes.

631
00:33:53,760 --> 00:33:55,280
Speaker 12: A huge difference. They need to have faith that the

632
00:33:55,320 --> 00:33:57,000
Speaker 12: company is going to be there. That's probably what the

633
00:33:57,040 --> 00:33:59,640
Speaker 12: car buyer needs most from a new car company.

634
00:34:00,840 --> 00:34:03,800
Speaker 3: That's so interesting. Seventy Thank you so much for taking

635
00:34:03,880 --> 00:34:06,800
Speaker 3: us through. I'll be honest, I've seen the major swings

636
00:34:06,840 --> 00:34:10,920
Speaker 3: in this company share price. They've been wild, they've been exciting,

637
00:34:12,200 --> 00:34:15,560
Speaker 3: but I haven't known exactly what they do or why

638
00:34:15,920 --> 00:34:19,720
Speaker 3: or why someone would buy a van fast vehicle, nor

639
00:34:19,880 --> 00:34:23,480
Speaker 3: less that it's part of much a much larger conglomerate.

640
00:34:23,840 --> 00:34:26,920
Speaker 4: You're listening to the tape cats are live program Bloomberg

641
00:34:27,000 --> 00:34:30,560
Speaker 4: Markets weekdays at ten am Eastern on Bloomberg Radio, the

642
00:34:30,680 --> 00:34:33,839
Speaker 4: tune in app, Bloomberg dot Com, and the Bloomberg Business App.

643
00:34:33,920 --> 00:34:36,719
Speaker 4: You can also listen live on Amazon Alexa from our

644
00:34:36,760 --> 00:34:41,160
Speaker 4: flagship New York station. Just say Alexa play Bloomberg eleven thirty.

645
00:34:42,320 --> 00:34:45,879
Speaker 1: I'll go straight to our next guest, Fernando Valley. He's

646
00:34:45,920 --> 00:34:49,520
Speaker 1: a senior analyst with Bloomberg Intelligence. He's joining us in studio,

647
00:34:49,680 --> 00:34:52,160
Speaker 1: which is exciting. Always great to have people here with

648
00:34:52,280 --> 00:34:54,880
Speaker 1: us to talk with us about the impact of possible

649
00:34:54,920 --> 00:34:58,280
Speaker 1: strikes at Chevron in Australia and obviously other global energy

650
00:34:58,360 --> 00:35:00,920
Speaker 1: markets and pressures and issues. Let's start off with what's

651
00:35:01,000 --> 00:35:02,680
Speaker 1: going on with Chevron kind of set the scene for

652
00:35:02,800 --> 00:35:04,440
Speaker 1: us about what's happening here and what we need to know.

653
00:35:04,800 --> 00:35:08,120
Speaker 13: Sure, so, there are two big projects that Chevron is

654
00:35:08,200 --> 00:35:11,840
Speaker 13: the operator in Western Australia, Gorgon and Wheatstone. They are

655
00:35:11,960 --> 00:35:16,000
Speaker 13: very large projects. They contribute about call it fifteen billion

656
00:35:16,000 --> 00:35:20,319
Speaker 13: dollars in total revenues a year at today's prices for LNG.

657
00:35:21,160 --> 00:35:25,160
Speaker 13: Chevron has call it about half of that in ownership

658
00:35:25,520 --> 00:35:30,560
Speaker 13: between those two projects. So they're very significant projects and

659
00:35:30,640 --> 00:35:33,520
Speaker 13: they contribute a lot to the overall energy security, and

660
00:35:33,560 --> 00:35:37,359
Speaker 13: they are exploited to both Asia and excess cargoes can

661
00:35:37,440 --> 00:35:38,719
Speaker 13: be exploited to Europe as well.

662
00:35:39,280 --> 00:35:39,400
Speaker 10: Well.

663
00:35:39,440 --> 00:35:43,080
Speaker 3: We've seen some weird moves in gas prices back and

664
00:35:43,200 --> 00:35:47,239
Speaker 3: forth essentially reacting to this. You know, the thing that

665
00:35:47,440 --> 00:35:50,520
Speaker 3: I wonder given that we had all these concerns about

666
00:35:50,520 --> 00:35:53,840
Speaker 3: a potential energy crisis in Europe last year, but supplies

667
00:35:53,920 --> 00:35:57,359
Speaker 3: like storage facilities are pretty close to full at this point,

668
00:35:57,640 --> 00:36:03,920
Speaker 3: if not completely full. How does how do energy issues

669
00:36:04,080 --> 00:36:07,880
Speaker 3: in Australia factor in. We're still at the end of summer,

670
00:36:08,040 --> 00:36:10,279
Speaker 3: you know, we're not in the key heating season. How

671
00:36:10,320 --> 00:36:15,600
Speaker 3: does that play into what we may see given these

672
00:36:15,600 --> 00:36:16,360
Speaker 3: production challeges.

673
00:36:16,600 --> 00:36:18,440
Speaker 13: Yes, sure, I think it's you know, if you know

674
00:36:18,560 --> 00:36:21,600
Speaker 13: the story of the cicada that prepares for winter, this

675
00:36:21,800 --> 00:36:23,640
Speaker 13: is what we do now, and this is the filling

676
00:36:23,719 --> 00:36:26,359
Speaker 13: season when we prepare for the winter ahead of time,

677
00:36:26,920 --> 00:36:31,960
Speaker 13: and we are, as you mentioned, close to the technical

678
00:36:32,360 --> 00:36:35,560
Speaker 13: limits on inventories in Europe. The issue is that those

679
00:36:35,640 --> 00:36:39,080
Speaker 13: technical inventories don't get us through the winter if it

680
00:36:39,239 --> 00:36:42,960
Speaker 13: is a normal to cold winter, so the if we

681
00:36:43,120 --> 00:36:46,440
Speaker 13: have demand for that, we will drain them and then

682
00:36:46,480 --> 00:36:49,120
Speaker 13: the prices will impact that. So if there's a shortage

683
00:36:49,200 --> 00:36:53,560
Speaker 13: on LNG, that will affect it, because we can't rely

684
00:36:53,719 --> 00:36:57,920
Speaker 13: on those storage alone, especially considering Belgium has closed all

685
00:36:57,960 --> 00:37:00,719
Speaker 13: their nuclear, Germany has closed all their nuclear, and we

686
00:37:00,840 --> 00:37:04,560
Speaker 13: no longer have supply coming from Europe from Russia rather

687
00:37:04,960 --> 00:37:07,239
Speaker 13: even in the case of a dire need.

688
00:37:07,760 --> 00:37:11,239
Speaker 3: So it's my understanding that a potential strike could begin

689
00:37:11,320 --> 00:37:16,120
Speaker 3: as early as September seventh, I believe, or is it

690
00:37:16,239 --> 00:37:20,600
Speaker 3: maybe the September seventh, but you know there is time

691
00:37:20,800 --> 00:37:24,160
Speaker 3: between which between now and when Europe needs to start

692
00:37:24,200 --> 00:37:26,399
Speaker 3: drawing down it supplies. I mean, if you didn't okay,

693
00:37:26,400 --> 00:37:29,640
Speaker 3: if you saw a strike, for example, it goes on

694
00:37:29,760 --> 00:37:33,080
Speaker 3: for a week, how much of an impact is that

695
00:37:33,640 --> 00:37:35,760
Speaker 3: to Europe's energy situation.

696
00:37:35,719 --> 00:37:39,239
Speaker 13: To Europe will be nearly none. It will be more

697
00:37:39,280 --> 00:37:42,759
Speaker 13: of an impact to the owners of those projects. You

698
00:37:42,840 --> 00:37:46,000
Speaker 13: can't really store l and g DAD easily, so it

699
00:37:46,120 --> 00:37:49,360
Speaker 13: needs to be regassified and as we said, near technical limits.

700
00:37:49,719 --> 00:37:53,480
Speaker 13: So it's not important as of now. What I think

701
00:37:53,640 --> 00:37:58,960
Speaker 13: it gives you is two factors First, you're seeing cost inflation,

702
00:37:59,200 --> 00:38:01,799
Speaker 13: and cost inflation is here to stay and that will

703
00:38:01,920 --> 00:38:04,520
Speaker 13: impact not just energy, but that will impact everything that

704
00:38:04,560 --> 00:38:07,520
Speaker 13: depends on energy, i e. The whole world and all

705
00:38:07,600 --> 00:38:11,680
Speaker 13: of our economy. And the second part is the frailty

706
00:38:12,040 --> 00:38:15,839
Speaker 13: of our supply chain on the energy side. So again

707
00:38:16,080 --> 00:38:19,760
Speaker 13: the strikes, they are also going to keep the assets running.

708
00:38:19,760 --> 00:38:22,200
Speaker 13: It doesn't require a lot of people to do it.

709
00:38:22,719 --> 00:38:25,560
Speaker 13: But the strikes show that a energy costs are still

710
00:38:25,600 --> 00:38:28,640
Speaker 13: going to go up because our lifting costs, the costs

711
00:38:28,640 --> 00:38:30,760
Speaker 13: to get it off the ground, are going up as

712
00:38:30,800 --> 00:38:34,840
Speaker 13: well as labor. And then b we are we have

713
00:38:35,160 --> 00:38:37,880
Speaker 13: lost a lot of the redundancy that gives us the

714
00:38:38,040 --> 00:38:40,600
Speaker 13: energy security and stability that we require.

715
00:38:40,840 --> 00:38:43,200
Speaker 1: When you talk about energy costs going up, obviously my

716
00:38:43,280 --> 00:38:45,920
Speaker 1: ears are going to prick up because covering a reserve

717
00:38:46,040 --> 00:38:48,800
Speaker 1: and macro and all things. When it comes to obviously inflation,

718
00:38:48,960 --> 00:38:51,319
Speaker 1: what that could impact for the economy, how much when

719
00:38:51,360 --> 00:38:53,440
Speaker 1: you're looking at your space with energy, do you think

720
00:38:53,480 --> 00:38:57,040
Speaker 1: that could translate into maybe some more broader issues when

721
00:38:57,040 --> 00:39:00,000
Speaker 1: you're talking about inflation and what obviously central banks are

722
00:39:00,120 --> 00:39:01,399
Speaker 1: trying to fight at this point.

723
00:39:02,200 --> 00:39:05,400
Speaker 13: I think that's the central tenet of our case in

724
00:39:05,520 --> 00:39:08,600
Speaker 13: oil because we think Oatpak is essentially trying to fight

725
00:39:08,680 --> 00:39:12,080
Speaker 13: the FED by raising prices and by creating the supply

726
00:39:12,239 --> 00:39:15,239
Speaker 13: shortage and everything. The central banks are trying to fight

727
00:39:15,320 --> 00:39:20,280
Speaker 13: against the inflation that you mentioned, and we're seeing gasoline

728
00:39:20,320 --> 00:39:23,080
Speaker 13: prices in the US much higher over three seventy on

729
00:39:23,200 --> 00:39:28,160
Speaker 13: average a gallon right now, and that all will impact

730
00:39:29,160 --> 00:39:32,200
Speaker 13: the inflation metrics. Remember, energy is part of the core,

731
00:39:32,680 --> 00:39:36,640
Speaker 13: is very central to everything that we do. We think

732
00:39:36,719 --> 00:39:40,000
Speaker 13: ultimately the demand side will win, which is what the

733
00:39:40,120 --> 00:39:43,600
Speaker 13: FED wants. And we're seeing things break, especially in China

734
00:39:43,640 --> 00:39:48,120
Speaker 13: and their real estate, and that will impact oil prices

735
00:39:48,520 --> 00:39:51,480
Speaker 13: and to us that's the determinating factor for the second

736
00:39:51,520 --> 00:39:54,080
Speaker 13: half of the year. Over the long term, we see

737
00:39:54,120 --> 00:39:57,719
Speaker 13: a short fall of supply, but in the meantime, the

738
00:39:57,840 --> 00:39:59,840
Speaker 13: FED is likely to win. They have a much bigger

739
00:39:59,840 --> 00:40:00,880
Speaker 13: b balance sheet that OPAC.

740
00:40:01,120 --> 00:40:03,120
Speaker 1: Yeah, one point, sorry to cut you. I was just

741
00:40:03,200 --> 00:40:05,319
Speaker 1: curious as far as when we'll see it translate into

742
00:40:05,440 --> 00:40:07,640
Speaker 1: some of these CPI numbers. I know analog over at

743
00:40:07,640 --> 00:40:10,319
Speaker 1: Bloomberg Economics is thinking that potentially if we're looking at

744
00:40:10,320 --> 00:40:13,080
Speaker 1: the month over month core numbers, obviously it strips out

745
00:40:13,080 --> 00:40:14,880
Speaker 1: food and energy, but if you're taking some of that

746
00:40:14,960 --> 00:40:17,000
Speaker 1: in with energy, potentially could take higher here.

747
00:40:17,600 --> 00:40:17,799
Speaker 8: Yeah.

748
00:40:17,920 --> 00:40:21,080
Speaker 13: I think if you just think about the pass through right,

749
00:40:21,200 --> 00:40:23,720
Speaker 13: it takes about thirty to forty five days for oil

750
00:40:24,080 --> 00:40:26,359
Speaker 13: to get to refine products, and then it will take

751
00:40:26,680 --> 00:40:29,320
Speaker 13: another couple of months, so it could be anywhere between

752
00:40:29,360 --> 00:40:31,720
Speaker 13: three to six months for if they really have an impact,

753
00:40:32,400 --> 00:40:32,719
Speaker 13: you can.

754
00:40:32,640 --> 00:40:36,360
Speaker 3: Talk about OPEK fighting the FED. One of the ways

755
00:40:36,360 --> 00:40:38,680
Speaker 3: I guess they're trying to do this is Saudi Arabia

756
00:40:39,360 --> 00:40:43,080
Speaker 3: has some voluntary cuts in play, but it looks it

757
00:40:43,120 --> 00:40:45,839
Speaker 3: looks like they're now considering or we're wondering if they're

758
00:40:45,840 --> 00:40:50,399
Speaker 3: considering extending those for another month. When would we get

759
00:40:50,440 --> 00:40:53,480
Speaker 3: some sort of decision there. What kind of immediate impact,

760
00:40:53,680 --> 00:40:54,920
Speaker 3: if any, would it have?

761
00:40:56,239 --> 00:41:01,239
Speaker 13: I think limited short term impacts. You're seeing massive draw

762
00:41:01,320 --> 00:41:04,759
Speaker 13: downs in US inventories and Saudi extend it through September,

763
00:41:05,120 --> 00:41:07,280
Speaker 13: so they would probably have to give you an update

764
00:41:07,320 --> 00:41:09,359
Speaker 13: in the next two to three weeks if they're going

765
00:41:09,400 --> 00:41:14,359
Speaker 13: to extend through October. But ultimately, the price of oil

766
00:41:14,440 --> 00:41:17,040
Speaker 13: is telling you we don't really care about supply. We

767
00:41:17,160 --> 00:41:19,920
Speaker 13: care about demand, we care about Evergrande, we care about

768
00:41:20,480 --> 00:41:24,279
Speaker 13: US economic activity. We care about Europe and we again

769
00:41:24,560 --> 00:41:27,239
Speaker 13: that's where we think we'll set oil prices for the

770
00:41:27,280 --> 00:41:28,000
Speaker 13: remainder of the year.

771
00:41:28,120 --> 00:41:30,560
Speaker 1: How much does seasonality also factor into it when you

772
00:41:30,600 --> 00:41:33,720
Speaker 1: think about the fall. Obviously you have different spectrums within energy,

773
00:41:33,800 --> 00:41:36,080
Speaker 1: but where you think potentially that pattern can fall there.

774
00:41:36,840 --> 00:41:40,000
Speaker 13: Well, on the oil side, mostly gasoline margins tend to

775
00:41:40,120 --> 00:41:43,440
Speaker 13: come down. There's a seasonal effect because our busy season

776
00:41:43,600 --> 00:41:46,319
Speaker 13: is during the summer. We're starting to see that now

777
00:41:47,239 --> 00:41:51,120
Speaker 13: that may help affordability, but crack spreads are less than

778
00:41:51,200 --> 00:41:54,280
Speaker 13: thirty percent of the overall price of gasoline, so oil

779
00:41:54,760 --> 00:41:59,960
Speaker 13: is the foremost impact. And then on the natural gas side,

780
00:42:00,320 --> 00:42:03,360
Speaker 13: it's quite the opposite. We think we're going to the

781
00:42:03,400 --> 00:42:07,080
Speaker 13: crux of the issue the winter. And as a reminder,

782
00:42:07,200 --> 00:42:09,960
Speaker 13: this past winter was the warmest in fifty years in

783
00:42:10,000 --> 00:42:13,319
Speaker 13: the northern hemisphere. So if we have a normal winter,

784
00:42:13,880 --> 00:42:16,480
Speaker 13: that could really spell trouble for not just natural gas

785
00:42:16,560 --> 00:42:18,720
Speaker 13: but diesel. We use a lot of diesel for heating

786
00:42:19,160 --> 00:42:20,360
Speaker 13: in New England, for example.

787
00:42:21,520 --> 00:42:21,719
Speaker 6: Yeah.

788
00:42:21,800 --> 00:42:24,279
Speaker 3: Interesting because natural gas prices have been so pressured for

789
00:42:24,360 --> 00:42:27,440
Speaker 3: such a long time in the United States, whereas the

790
00:42:27,520 --> 00:42:31,800
Speaker 3: European picture is just a little bit different. And I

791
00:42:31,840 --> 00:42:35,560
Speaker 3: should mention today oil prices up a little bit on

792
00:42:35,680 --> 00:42:38,680
Speaker 3: both WTI as well as Brent up about half a percent.

793
00:42:39,200 --> 00:42:39,359
Speaker 10: Yeah.

794
00:42:39,440 --> 00:42:42,920
Speaker 1: Fernando Valley, senior analysts with Bloomberg Intelligence, join us in

795
00:42:43,080 --> 00:42:45,640
Speaker 1: studio to talk about the latest impact of possible strikes

796
00:42:45,680 --> 00:42:48,960
Speaker 1: at Chevron in Australia. Always a pleasure chatting with you, Fernando,

797
00:42:49,000 --> 00:42:52,080
Speaker 1: so thanks so much for joining Simoon and myself this morning.

798
00:42:52,400 --> 00:42:55,480
Speaker 4: You're listening to the tape. Catch our live program Bloomberg

799
00:42:55,600 --> 00:42:59,120
Speaker 4: Markets weekdays at ten am Eastern on Bloomberg Radio, to

800
00:42:59,239 --> 00:43:02,439
Speaker 4: tune in app Bloomberg dot Com and the Bloomberg Business App.

801
00:43:02,520 --> 00:43:05,279
Speaker 4: You can also listen live on Amazon Alexa from our

802
00:43:05,360 --> 00:43:09,720
Speaker 4: flagship New York station. Just say Alexa play Bloomberg eleven thirty.

803
00:43:11,480 --> 00:43:14,279
Speaker 1: We have talked so much about the jolt state of

804
00:43:14,320 --> 00:43:17,400
Speaker 1: this morning consumer confidence, but also according to the latest

805
00:43:17,719 --> 00:43:20,880
Speaker 1: case Shiller data, US home prices were flat over the

806
00:43:20,960 --> 00:43:23,239
Speaker 1: twelve months that did just end in June. And then

807
00:43:23,280 --> 00:43:26,080
Speaker 1: also prices are up at an annualized rate of just

808
00:43:26,200 --> 00:43:28,480
Speaker 1: over five percent in twenty twenty three. But the catch there,

809
00:43:28,520 --> 00:43:30,960
Speaker 1: the rate shock of the past year has resulted in

810
00:43:31,080 --> 00:43:34,239
Speaker 1: just two months of year year home price declined so

811
00:43:34,360 --> 00:43:36,040
Speaker 1: far if you can imagine that, simoon. So I want

812
00:43:36,080 --> 00:43:40,080
Speaker 1: to bring in our next guest, Mollie Basil, principal economists

813
00:43:40,080 --> 00:43:42,600
Speaker 1: at core Logic, joining us on zoom to discuss the

814
00:43:42,719 --> 00:43:46,799
Speaker 1: latest findings in core Logic's case Shiller Home price Index. MOLLI,

815
00:43:46,880 --> 00:43:48,879
Speaker 1: thank you so much for joining us. Walk us through

816
00:43:49,200 --> 00:43:50,600
Speaker 1: this latest data that you found.

817
00:43:51,640 --> 00:43:54,840
Speaker 14: Yeah, so, our case Shiller index in June saw that

818
00:43:54,920 --> 00:43:57,239
Speaker 14: prices were even from a year ago. But as you

819
00:43:57,320 --> 00:44:00,800
Speaker 14: alluded to, you know, while as zero change from a

820
00:44:00,880 --> 00:44:02,920
Speaker 14: year ago doesn't sound like a big deal, it's really

821
00:44:03,000 --> 00:44:05,440
Speaker 14: signaling a market ship because that comes off of a

822
00:44:05,560 --> 00:44:08,279
Speaker 14: few months of declines in your over year prices. So

823
00:44:08,400 --> 00:44:10,839
Speaker 14: we're seeing prices go even and we expect that they'll

824
00:44:11,600 --> 00:44:13,279
Speaker 14: gain a little bit through the end of the year.

825
00:44:14,280 --> 00:44:18,520
Speaker 3: Yeah, where are you seeing this trend most pronounced? I

826
00:44:18,520 --> 00:44:20,920
Speaker 3: should also should point out, I know we have a

827
00:44:21,000 --> 00:44:23,200
Speaker 3: radio audience here, but I'm looking at our case show index.

828
00:44:23,480 --> 00:44:26,360
Speaker 3: We are like almost exactly the same level that we

829
00:44:26,480 --> 00:44:29,880
Speaker 3: were in June of twenty twenty two, and that was

830
00:44:29,920 --> 00:44:33,200
Speaker 3: a high on the chart. So where were we seeing

831
00:44:33,239 --> 00:44:34,280
Speaker 3: most of this strength?

832
00:44:34,360 --> 00:44:34,600
Speaker 6: Lie?

833
00:44:35,719 --> 00:44:37,960
Speaker 14: Yeah, so places like you might not expect places that

834
00:44:38,040 --> 00:44:42,160
Speaker 14: hadn't seen large increases in the past, Chicago, Cleveland, though

835
00:44:42,200 --> 00:44:44,440
Speaker 14: I'm going to throw Miami in there that has seen

836
00:44:44,520 --> 00:44:49,239
Speaker 14: some large increases, just areas that were had lower increases.

837
00:44:49,320 --> 00:44:52,240
Speaker 14: But also we're relatively cheaper than the rest of the country.

838
00:44:52,640 --> 00:44:55,200
Speaker 14: You know, we're seeing the strength there, but we're still

839
00:44:55,239 --> 00:44:58,200
Speaker 14: seeing weaknesses in parts of the country that saw really

840
00:44:58,280 --> 00:45:02,680
Speaker 14: outsized gains in twenty twenty two, like Denver, Phoenix, and

841
00:45:03,040 --> 00:45:04,280
Speaker 14: San Francisco and Seattle.

842
00:45:04,840 --> 00:45:07,719
Speaker 1: We know that tight inventory was clearly an issue well

843
00:45:07,840 --> 00:45:12,840
Speaker 1: before the pandemic, which particular regions across the country, or

844
00:45:12,960 --> 00:45:14,960
Speaker 1: when it comes to home buyers trying to battle it

845
00:45:15,000 --> 00:45:17,800
Speaker 1: out to try and and find some of these houses

846
00:45:18,160 --> 00:45:20,200
Speaker 1: or having it harder more so than others.

847
00:45:21,480 --> 00:45:23,920
Speaker 14: You know, it's really an asia life phenomenon. And you

848
00:45:24,000 --> 00:45:27,440
Speaker 14: can think of mortgage rates are really what's driving that.

849
00:45:27,920 --> 00:45:32,640
Speaker 14: You've got the majority, probably about ninety five or more

850
00:45:32,760 --> 00:45:36,920
Speaker 14: percent of current owners have a mortgage rate that it's

851
00:45:37,120 --> 00:45:40,200
Speaker 14: really well below what the current rate is. So they

852
00:45:40,440 --> 00:45:42,800
Speaker 14: just aren't willing to give up their mortgage rates unless

853
00:45:42,800 --> 00:45:44,560
Speaker 14: they have to, and they're not putting their homes on

854
00:45:44,680 --> 00:45:47,160
Speaker 14: the market, So that's really hitting the entire country.

855
00:45:47,480 --> 00:45:50,279
Speaker 1: What I'm curious about is how much will that benefit homebuilders,

856
00:45:50,280 --> 00:45:52,680
Speaker 1: which really we're struggling after the housing crisis. But when

857
00:45:52,719 --> 00:45:54,640
Speaker 1: you're thinking about especially those stocks have been on a

858
00:45:54,719 --> 00:45:57,560
Speaker 1: tear this year with those anticipation from poorly managers that

859
00:45:57,560 --> 00:46:00,279
Speaker 1: they're going to continue to have to build. There about

860
00:46:00,280 --> 00:46:03,640
Speaker 1: the dynamic when you're looking at particular builders, say maybe

861
00:46:03,719 --> 00:46:05,960
Speaker 1: like a deor Horton or Lenar, maybe they're catering to

862
00:46:06,200 --> 00:46:09,399
Speaker 1: a particular type of income demographic, whereas what about maybe

863
00:46:09,520 --> 00:46:10,799
Speaker 1: lower income households.

864
00:46:11,920 --> 00:46:13,600
Speaker 14: Well, one of the things that the builders have going

865
00:46:13,680 --> 00:46:16,400
Speaker 14: for them that's that's helping what you said, have their

866
00:46:16,880 --> 00:46:19,799
Speaker 14: stocks on a tear is they're able to buy down

867
00:46:19,840 --> 00:46:22,799
Speaker 14: mortgage rates for buyers, so they have some flexibility there

868
00:46:23,200 --> 00:46:25,920
Speaker 14: and can charge buyers a lower rate where you know

869
00:46:26,440 --> 00:46:29,080
Speaker 14: resales you're just not going to get that same phenomenon.

870
00:46:29,880 --> 00:46:32,760
Speaker 3: Yeah, I think you look at Lenar, d R Horton,

871
00:46:33,000 --> 00:46:36,279
Speaker 3: they're offering five five and a half percent thirty year

872
00:46:36,360 --> 00:46:38,319
Speaker 3: fixed rates, I mean, and then and then you look

873
00:46:38,360 --> 00:46:41,880
Speaker 3: at the average Freddie mac right for a thirty year

874
00:46:42,000 --> 00:46:46,280
Speaker 3: fix to seven point two three last week, it's just nuney,

875
00:46:46,320 --> 00:46:49,120
Speaker 3: I mean, I wonder if there is any inconsistency in

876
00:46:49,280 --> 00:46:51,800
Speaker 3: that sort of data, just because so much of the

877
00:46:51,880 --> 00:46:54,799
Speaker 3: purchasing is really happening in the new home front rather

878
00:46:54,880 --> 00:46:58,320
Speaker 3: than the existing home. You know, should we believe the

879
00:46:58,400 --> 00:47:01,080
Speaker 3: seven point two three rate that we're we're seeing Molly.

880
00:47:02,600 --> 00:47:04,480
Speaker 14: Yeah, I think when they're reporting those rates, that's what

881
00:47:04,560 --> 00:47:05,920
Speaker 14: they are generally offering.

882
00:47:06,800 --> 00:47:08,799
Speaker 11: It's not necessarily what people are taking up.

883
00:47:08,920 --> 00:47:11,279
Speaker 14: So that's the rate that's offered out there. And if

884
00:47:11,320 --> 00:47:13,719
Speaker 14: builders are able to buy that down by one two

885
00:47:13,800 --> 00:47:16,960
Speaker 14: percentage coins, it sounds like then they're going to gain

886
00:47:17,000 --> 00:47:18,880
Speaker 14: a relatively a large share of this market.

887
00:47:19,640 --> 00:47:22,040
Speaker 3: You know, what also surprises me is just how much

888
00:47:23,120 --> 00:47:26,839
Speaker 3: household formation there is that these people feel that they

889
00:47:26,920 --> 00:47:31,200
Speaker 3: need to take advantage of or just need to go

890
00:47:31,800 --> 00:47:36,680
Speaker 3: and shell out for these seven plus percent fixed mortgage.

891
00:47:37,000 --> 00:47:39,880
Speaker 3: What do you watch for their any any trends you

892
00:47:40,160 --> 00:47:43,399
Speaker 3: can tell us about across the people that just are

893
00:47:43,440 --> 00:47:45,160
Speaker 3: simply making that decision to go buy homes.

894
00:47:45,960 --> 00:47:48,480
Speaker 14: Well, the thing is, while we do have these really

895
00:47:48,560 --> 00:47:51,200
Speaker 14: high mortgage rates, you know what's driving that. That's inflation,

896
00:47:51,360 --> 00:47:55,840
Speaker 14: and what's helping drive up inflation, but really great job growth.

897
00:47:56,440 --> 00:47:58,719
Speaker 14: And that's why you see people who are still willing

898
00:47:58,760 --> 00:48:01,120
Speaker 14: to go out there and buy homes at these mortgage rates.

899
00:48:01,360 --> 00:48:02,839
Speaker 14: You know, if they're able to find what they want

900
00:48:02,920 --> 00:48:05,279
Speaker 14: where they want it, they could see that mortgage rates

901
00:48:05,320 --> 00:48:07,839
Speaker 14: will most likely come down in the next couple of years.

902
00:48:08,400 --> 00:48:10,319
Speaker 14: And you know, we keep talking about the thirty year

903
00:48:10,400 --> 00:48:12,200
Speaker 14: fix rate, but you know they might be opting for

904
00:48:12,600 --> 00:48:15,920
Speaker 14: an adjustable rate mortgage, which we keep their monthly payments

905
00:48:15,960 --> 00:48:16,520
Speaker 14: down as well.

906
00:48:16,880 --> 00:48:18,759
Speaker 1: What's the level when you're looking at the rates, whether

907
00:48:18,880 --> 00:48:21,480
Speaker 1: you're looking at fifteen thirty year here as far as

908
00:48:21,520 --> 00:48:23,479
Speaker 1: when you think it might be a potential breaking point

909
00:48:23,600 --> 00:48:25,279
Speaker 1: for Americans.

910
00:48:27,120 --> 00:48:28,680
Speaker 14: A lot of them are at that breaking point now.

911
00:48:28,760 --> 00:48:31,200
Speaker 14: I mean we've seen that's part of the reason why

912
00:48:31,320 --> 00:48:35,520
Speaker 14: home prices were so weak last year through most of

913
00:48:35,600 --> 00:48:39,120
Speaker 14: twenty twenty two and into twenty twenty three. That has

914
00:48:39,200 --> 00:48:41,319
Speaker 14: to do with the high martgage rates when somebody's trying

915
00:48:41,360 --> 00:48:44,759
Speaker 14: to get in. And you know, previously, when rates are

916
00:48:44,800 --> 00:48:48,719
Speaker 14: around three percent, you know, housing was pretty affordable, even

917
00:48:48,760 --> 00:48:51,080
Speaker 14: though you have home prices shooting up. But you know

918
00:48:51,200 --> 00:48:53,680
Speaker 14: that just all came to a halt last year when

919
00:48:53,800 --> 00:48:55,000
Speaker 14: margage rates started going up.

920
00:48:55,560 --> 00:48:58,360
Speaker 3: You know, it was interesting to hear J Powell talking

921
00:48:58,440 --> 00:49:03,360
Speaker 3: about how he expects shelter costs to fall. And you know,

922
00:49:03,480 --> 00:49:05,800
Speaker 3: even though a lot of this is rents, if you

923
00:49:05,880 --> 00:49:09,080
Speaker 3: have high home prices, you're gonna have higher rents, right

924
00:49:09,640 --> 00:49:11,040
Speaker 3: or is there something I'm not seeing here?

925
00:49:11,960 --> 00:49:14,480
Speaker 14: Well, so that does you know, that does get into

926
00:49:14,560 --> 00:49:19,000
Speaker 14: a kind of a technical detail of the way inflation's measured,

927
00:49:19,120 --> 00:49:22,520
Speaker 14: and that is as a lag. Right, That's right, that's right,

928
00:49:22,600 --> 00:49:26,160
Speaker 14: that's prices exactly. There's about a one year lag. So

929
00:49:26,280 --> 00:49:29,400
Speaker 14: we we do measure rents as well core logic, and

930
00:49:29,520 --> 00:49:31,880
Speaker 14: we saw rents coming down about a year ago, and

931
00:49:32,000 --> 00:49:32,600
Speaker 14: you are now.

932
00:49:32,600 --> 00:49:35,759
Speaker 11: Starting to see that shelter index start to come down.

933
00:49:35,880 --> 00:49:39,200
Speaker 14: So they know that those those decreases from last year

934
00:49:39,200 --> 00:49:41,880
Speaker 14: are going to flow in through the inflation numbers this year.

935
00:49:42,239 --> 00:49:44,120
Speaker 3: But it's not necessarily good news for people who want

936
00:49:44,120 --> 00:49:45,320
Speaker 3: to go out and rent an apartment.

937
00:49:46,440 --> 00:49:49,120
Speaker 14: No, just because you saw things come down year to year,

938
00:49:49,560 --> 00:49:53,600
Speaker 14: there's still quite a bit from twenty twenty, so we're

939
00:49:53,640 --> 00:49:57,080
Speaker 14: not you know, with home prices coming you know, seeing

940
00:49:57,160 --> 00:50:00,919
Speaker 14: declines last year. Rent saw some declines last year. They're

941
00:50:01,080 --> 00:50:02,520
Speaker 14: just not going to get down to that level we

942
00:50:02,560 --> 00:50:03,600
Speaker 14: saw before the pandemic.

943
00:50:03,719 --> 00:50:05,560
Speaker 1: So we only have about a minute left. But when

944
00:50:05,560 --> 00:50:08,160
Speaker 1: you're looking at this latest data that you have with

945
00:50:08,239 --> 00:50:11,560
Speaker 1: home prices, Chicago still remained in the top spot there.

946
00:50:12,280 --> 00:50:12,880
Speaker 1: Why is that.

947
00:50:14,560 --> 00:50:17,400
Speaker 14: You just have some It's like you see in the

948
00:50:17,480 --> 00:50:20,680
Speaker 14: ones the places fall off that had the really outsized

949
00:50:20,719 --> 00:50:23,640
Speaker 14: games last year, and you just seeing the metros on

950
00:50:23,719 --> 00:50:26,160
Speaker 14: there that just keep plugging away at the kind of

951
00:50:26,600 --> 00:50:29,880
Speaker 14: relatively moderate rate of fourty five percent. So it's more

952
00:50:29,920 --> 00:50:32,719
Speaker 14: that everyone else is falling off than they're seeing the resurgence.

953
00:50:34,160 --> 00:50:37,919
Speaker 1: All right, Mollie Basil, Principal Economy is at core Logic,

954
00:50:38,040 --> 00:50:40,239
Speaker 1: joining us on zoom to discuss the latest findings in

955
00:50:40,360 --> 00:50:43,080
Speaker 1: that Core Logic Key Shuler Home Price Index. It's always

956
00:50:43,080 --> 00:50:44,879
Speaker 1: a pleasure speaking with you, Molly.

957
00:50:47,480 --> 00:50:50,560
Speaker 2: Thanks for listening to the Bloomberg Markets podcast. You can

958
00:50:50,600 --> 00:50:54,360
Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever

959
00:50:54,480 --> 00:50:58,120
Speaker 2: podcast platform you prefer. I'm Matt Miller. I'm on Twitter

960
00:50:58,400 --> 00:51:00,200
Speaker 2: at Matt Miller nineteen seventy.

961
00:51:00,760 --> 00:51:03,160
Speaker 6: And I'm Fall Sweeney. I'm on Twitter at pt Sweeney.

962
00:51:03,280 --> 00:51:05,920
Speaker 2: Before the podcast, you can always catch us worldwide at

963
00:51:05,960 --> 00:51:06,719
Speaker 2: Bloomberg Radio.