WEBVTT - Drug Prices, FDIC Rules, VinFast, and CoreLogic (Podcast) 0:00:00.120 --> 0:00:03.520 You want to turn next to the Bloomberg Markets Podcast 0:00:03.560 --> 0:00:05.800 alongside my co host joining. 0:00:05.760 --> 0:00:09.720 Every business day, we bring you interviews from CEOs, market crows, 0:00:09.760 --> 0:00:17.079 and Bloomberg experts, along with essential market news. 0:00:14.840 --> 0:00:19.440 Market podcast podcast or wherever Bloomberg. 0:00:19.079 --> 0:00:23.599 Dot com and obviously fed and bond related. Now, walk 0:00:23.680 --> 0:00:26.239 us through the latest that what we've been seeing in 0:00:26.320 --> 0:00:29.960 the treasury market, and especially ahead of a number of 0:00:30.080 --> 0:00:32.800 key data reports that are coming up as we know 0:00:33.240 --> 0:00:35.800 when it comes to obviously the jobs report later this week, 0:00:35.840 --> 0:00:38.280 as well as that PCE indicator that's coming on Thursday. 0:00:39.040 --> 0:00:39.240 Yeah. 0:00:39.280 --> 0:00:42.040 So obviously, like you said, we have these key data 0:00:42.080 --> 0:00:45.320 points in a reasonably a liquid market time right now. 0:00:45.840 --> 0:00:48.199 You look at this morning's data and obviously you had 0:00:48.240 --> 0:00:51.319 the Jolts data Uh myss to the downside, which is 0:00:51.360 --> 0:00:53.960 you know, FED friendly for sure. Uh, you had consumer 0:00:54.040 --> 0:00:56.480 confidence lower, and now you have two year yields rallying 0:00:56.520 --> 0:00:59.000 by thirteen bases points. That's you know, that that's not 0:00:59.080 --> 0:01:02.320 showing that that the market is is liking this data 0:01:02.320 --> 0:01:05.479 and certainly pricing out at least a little bit of 0:01:05.680 --> 0:01:08.640 the hikes that we had the hike in November that 0:01:08.760 --> 0:01:11.120 was starting to be priced into the market. So I 0:01:11.120 --> 0:01:13.520 think the market's still looking for some direction. It's still 0:01:13.560 --> 0:01:16.919 looking for exactly, you know, what the what the path 0:01:16.959 --> 0:01:19.120 of the US economic environment is going to be and 0:01:19.880 --> 0:01:22.880 how that might influence the Fed Reserve and their actions 0:01:22.880 --> 0:01:25.720 on a going forward basis. So so I think you're 0:01:25.760 --> 0:01:27.959 are going to see a lot of volatility, you know, 0:01:28.080 --> 0:01:30.680 ten basis point moves in the five and ten year 0:01:31.600 --> 0:01:34.480 sectors of it would not be complete surprise depending on 0:01:34.920 --> 0:01:36.800 you know, how weak or how strong the data is 0:01:36.800 --> 0:01:37.920 compared to expectations. 0:01:38.720 --> 0:01:40.680 Now we have jobs numbers coming out at the end 0:01:40.680 --> 0:01:45.119 of the week. Is is that the ultimate decisive bit 0:01:45.160 --> 0:01:47.120 of data or you know, is it CPI? 0:01:47.280 --> 0:01:47.320 What? 0:01:47.480 --> 0:01:50.800 What? What do we what's your like top data point 0:01:50.880 --> 0:01:53.160 that you're considering as we look ahead to kind of 0:01:53.160 --> 0:01:54.640 mid September, next FED meeting. 0:01:55.480 --> 0:01:57.960 Yeah, so, so next month's CPI report, I think is 0:01:58.040 --> 0:02:01.000 going to be the really the key to whether or 0:02:01.080 --> 0:02:03.120 not the market is going to price for a November hike. 0:02:03.160 --> 0:02:04.800 I mean, so September I think at this point is 0:02:04.840 --> 0:02:07.960 off the table. You keep seeing very mixed data and 0:02:08.000 --> 0:02:11.320 that's not going to entice the Federal Reserve to need 0:02:11.360 --> 0:02:14.200 to increase interest rates again. But I think as we 0:02:14.240 --> 0:02:16.840 get toward towards the September meeting, where you get a 0:02:16.840 --> 0:02:20.320 new summary of economic projections, you'd get a new dot plot, 0:02:20.360 --> 0:02:23.119 you know, will the what will the Fed members think 0:02:23.200 --> 0:02:25.919 they're going to hike rates to or cut rates to 0:02:26.080 --> 0:02:29.880 in twenty twenty four based on changes in their economic outlook. 0:02:30.639 --> 0:02:33.320 That's where the data from now until the next meeting 0:02:33.320 --> 0:02:37.079 I think will be more impactful. So the two data 0:02:37.120 --> 0:02:40.160 points from this later this week is the month over 0:02:40.200 --> 0:02:44.919 month PC numbers, particularly those core PC numbers that Jay 0:02:44.960 --> 0:02:47.800 Powell has mentioned on several occasions as being important to 0:02:47.840 --> 0:02:50.760 their outlook. So if we do get an expectator, if 0:02:50.760 --> 0:02:54.040 we do get as expected zero point two percent on 0:02:54.120 --> 0:02:56.200 the core PC deflator, I think that's actually a good 0:02:56.200 --> 0:03:00.520 thing because that's implying that inflation on a trend basis 0:03:00.560 --> 0:03:01.280 is coming down. 0:03:01.560 --> 0:03:02.919 And then it's not so much. 0:03:02.800 --> 0:03:05.959 The headline payrolls number, you know, unless it really goes 0:03:06.040 --> 0:03:08.480 gets crazy one way or the other. But the wage 0:03:08.560 --> 0:03:11.880 data I think is the most important piece of Friday's 0:03:11.880 --> 0:03:15.320 payroll report that I'll be focused on. So, so it's 0:03:15.400 --> 0:03:18.239 aggregate labor income. So we do we continue to see 0:03:18.440 --> 0:03:22.840 you know, point four month over month increases in wages. 0:03:23.639 --> 0:03:26.240 That that's I think going to be key, because wages 0:03:26.280 --> 0:03:28.480 are one of the things that's keeping spending his eyes, 0:03:28.520 --> 0:03:31.880 it is number one and number two. It's also companies 0:03:31.880 --> 0:03:34.000 are trying to at least pass some of the higher 0:03:34.080 --> 0:03:37.360 labor costs along to consumers in the services sector. And 0:03:37.400 --> 0:03:40.520 because of that, you know that is there is a 0:03:40.520 --> 0:03:42.800 little bit of a wage push inflation, regardless of whether 0:03:42.880 --> 0:03:45.200 or not members of the FED will admit it or not. 0:03:45.480 --> 0:03:47.480 AIRA What about something else that's going on in the 0:03:47.480 --> 0:03:49.840 background when we're talking about the balance sheet and the 0:03:49.880 --> 0:03:52.120 runoff there because we talk so much about when it 0:03:52.160 --> 0:03:55.400 comes to interest rates, but what about that aspect of 0:03:55.400 --> 0:03:58.400 it and when investors are concerned about lack of liquidity 0:03:58.400 --> 0:03:59.160 in the marketplace. 0:04:00.480 --> 0:04:02.520 Yes, so I don't think that the lack of liquidity 0:04:02.600 --> 0:04:05.680 right now is really an issue. There's still a lot 0:04:05.760 --> 0:04:10.640 of reserves above what the banking sector needs for liquidity 0:04:10.680 --> 0:04:14.440 purposes and to meet capital requirements. So the way that 0:04:14.560 --> 0:04:17.880 I look at the Fed's balance sheet and how small 0:04:17.920 --> 0:04:20.640 it needs to get or can get, really has to 0:04:20.680 --> 0:04:25.800 do with how banks are complying with different vasal capital regulations. 0:04:26.400 --> 0:04:29.200 So the single biggest one is the liquidity coverage ratio, 0:04:29.640 --> 0:04:34.920 and assuming that banks get down to just above their 0:04:35.800 --> 0:04:40.200 minimum requirements for those capital ratios, we estimate that the 0:04:40.240 --> 0:04:42.520 balance sheet that the Fed balancee could decline about another 0:04:42.520 --> 0:04:45.880 six hundred billion, seven hundred billion dollars or so. You know, 0:04:45.960 --> 0:04:48.800 others use aggregate data. We don't think that that's the 0:04:48.800 --> 0:04:52.039 best way to look at it because the challenge with 0:04:52.160 --> 0:04:55.200 liquidity in the bond market and the repurchase agreement market 0:04:55.240 --> 0:04:57.839 and all of the things that created the repo hiccup 0:04:57.839 --> 0:05:01.839 in September of twenty nineteen, a single institution that doesn't 0:05:01.880 --> 0:05:05.560 have enough liquidity that winds up switching us over the 0:05:05.560 --> 0:05:08.919 tipping point and requiring more reserves to be added to 0:05:08.960 --> 0:05:11.080 the system. And that's what you saw in September of 0:05:11.080 --> 0:05:15.839 twenty nineteen. So you know, once that gets tripped, I 0:05:15.839 --> 0:05:18.440 think that's a signal that the Federal Reserve is probably 0:05:18.480 --> 0:05:23.480 going to think about reducing its balance or reducing quantitative tightening, 0:05:24.200 --> 0:05:26.800 or even ending it and allowing the market to kind 0:05:26.800 --> 0:05:30.120 of catch up to the new liquidity environment that we have. 0:05:31.400 --> 0:05:34.920 I want to get your take on how housing prices 0:05:34.960 --> 0:05:39.440 are going to play into the Federal reserves calculus. Jpewell 0:05:39.480 --> 0:05:41.799 was talking about how he sees shelter costs coming down. 0:05:41.880 --> 0:05:44.440 But you know, we got data out this morning the 0:05:44.520 --> 0:05:49.279 FHFA House Price Index rising again zero point three percent. Mitally, 0:05:49.360 --> 0:05:52.760 this was a little bit less than anticipated, but you know, 0:05:53.880 --> 0:05:58.960 prices across all twenty major market areas surveyed by S 0:05:58.960 --> 0:06:02.560 and B. Dow Jones in Disease says prices are going up. 0:06:03.240 --> 0:06:05.400 Does this play into the calculus or is this such 0:06:05.400 --> 0:06:09.000 a structural problem that the Fed just kind of puts 0:06:09.000 --> 0:06:09.480 it aside. 0:06:10.800 --> 0:06:13.480 Yeah, well, I think the Federal Reserve is, you know, 0:06:13.520 --> 0:06:15.960 certainly looking at you know, the cost of everything. 0:06:15.960 --> 0:06:16.680 I think housing. 0:06:18.240 --> 0:06:20.960 Housing obviously is important to the Federal Reserve, but it's 0:06:20.960 --> 0:06:24.960 only one component. It's it's really the cost of housing. 0:06:25.040 --> 0:06:28.360 So things like rent rents and owner's equivalent rent that 0:06:28.440 --> 0:06:32.719 make up the measures that we look at for for 0:06:32.800 --> 0:06:35.560 how much housing's going up. And interestingly, if you think 0:06:35.600 --> 0:06:39.479 about even if house prices had stayed constant and you 0:06:39.520 --> 0:06:42.200 wound up with mortgage rates going up towards seven percent, 0:06:42.240 --> 0:06:45.520 which Erica Adelberg, who's our mortgage strategist here at Bloomberg Intelligence, 0:06:45.839 --> 0:06:51.000 looks at every day, you'd still have higher rents right, 0:06:51.040 --> 0:06:53.800 So it would still cost more to rent a house 0:06:53.920 --> 0:06:57.680 because you know the new mortgages that you receive are 0:06:58.000 --> 0:06:59.720 are going to be higher, But that takes a long 0:06:59.720 --> 0:07:02.040 time to filter into the overall economy. I think the 0:07:02.320 --> 0:07:05.200 bigger issue with what's going on now in the housing 0:07:05.200 --> 0:07:08.040 market is it's lack of supply, right, people with very 0:07:08.040 --> 0:07:11.120 low mortgage rates. People with mortgage rates well below four percent, 0:07:11.400 --> 0:07:13.440 they're not going to be refinancing and looking for a 0:07:13.480 --> 0:07:16.760 new home unless they have to relocate for their jobs. 0:07:16.840 --> 0:07:17.560 So because of. 0:07:17.440 --> 0:07:19.720 That, you just don't have a lot of supply on 0:07:19.760 --> 0:07:22.120 the market, and that's one of the things that's driving 0:07:22.400 --> 0:07:26.000 home prices a bit higher, although that has stabilized quite 0:07:26.000 --> 0:07:27.480 a lot when you look at the month on month. 0:07:27.560 --> 0:07:30.120 All right, Ira, it's great always getting your perspective on 0:07:30.160 --> 0:07:33.160 all things, Ira Jersey, Chief US Interest Rate Strategies for 0:07:33.160 --> 0:07:34.240 Bloomberg Intelligence. 0:07:35.320 --> 0:07:38.720 You're listening to the team Ken's a live program Bloomberg 0:07:38.760 --> 0:07:42.120 Markets weekdays at ten am Eastern on Bloomberg dot com, 0:07:42.200 --> 0:07:45.360 the iHeartRadio app, and the Bloomberg Business app, or listen 0:07:45.440 --> 0:07:47.560 on demand wherever you get your podcasts. 0:07:50.120 --> 0:07:52.880 I know this is something you've been watching very closely 0:07:52.920 --> 0:07:55.480 smoon when it comes to what's been happening with these 0:07:55.480 --> 0:07:58.320 pharmaceutical giants and the ruling when it does come to 0:07:58.480 --> 0:08:01.320 President Biden's push to bargain with these drug makers to 0:08:01.360 --> 0:08:03.400 lower the cost of medicare. So I want to get 0:08:03.400 --> 0:08:06.800 straight to Dwayne and Bright, senior government analysts with Bloomberg 0:08:06.800 --> 0:08:10.360 Intelligence joining us to talk the drug pricing negotiations. Duane, 0:08:10.520 --> 0:08:12.200 thanks so much for joining us. We knew some of 0:08:12.200 --> 0:08:14.520 this was coming. Walk us through what the latest news 0:08:14.600 --> 0:08:15.440 is when it comes to this. 0:08:16.600 --> 0:08:18.200 Yes, we knew this was coming. 0:08:18.800 --> 0:08:23.320 The IRA passed twenty twenty two and the government had 0:08:23.440 --> 0:08:26.480 a deadline of September one to release the list of 0:08:27.000 --> 0:08:30.800 ten high expenditure drugs. Those drugs would be subject to 0:08:31.640 --> 0:08:36.439 government negotiation. In other words, the government would negotiate prices 0:08:36.640 --> 0:08:40.080 for those drugs that would be anywhere from twenty five 0:08:40.200 --> 0:08:43.520 to sixty percent lower than they are now, and those 0:08:43.559 --> 0:08:47.360 prices would become effective beginning January one, twenty twenty six. 0:08:47.920 --> 0:08:49.280 We're starting with a list of ten. 0:08:50.120 --> 0:08:52.920 That number of drugs will go up from ten to 0:08:53.040 --> 0:08:56.520 fifteen in twenty twenty seven, in twenty twenty eight, and 0:08:56.559 --> 0:08:58.600 there'll be twenty drugs per year. 0:08:58.679 --> 0:09:02.360 Thereafter point, why these specific drugs. 0:09:02.400 --> 0:09:03.080 Do you think. 0:09:04.520 --> 0:09:09.880 The law requires that Medicare focuses on these drugs, So 0:09:10.800 --> 0:09:15.080 we're not focused on price alone. We're focused on those 0:09:15.200 --> 0:09:18.080 drugs that have high expenditures. So you may see some 0:09:18.240 --> 0:09:22.400 drugs on this list that are low cost drugs, but 0:09:22.440 --> 0:09:25.160 they're used by quite a number of people, so Eloquists, 0:09:25.160 --> 0:09:28.840 for example, the data CMS provided this morning shows that 0:09:28.920 --> 0:09:32.679 three million people used Eloquists. But you have another drug, 0:09:32.679 --> 0:09:37.280 Stallara from Johnson and Johnson. Twenty two thousand people use 0:09:37.360 --> 0:09:41.040 the drug, but it's very expensive. So Democrats when they 0:09:41.040 --> 0:09:43.240 came up with a spill, really wanted to focus on 0:09:43.320 --> 0:09:48.520 those drugs that are really high cost, high expenditure drugs, 0:09:48.600 --> 0:09:51.120 not just those that are high priced drugs. 0:09:51.320 --> 0:09:54.199 When you're looking across the spectrum, especially in Washington, was 0:09:54.280 --> 0:09:56.640 this more of a broad based issue when you're talking 0:09:56.640 --> 0:09:59.080 about Republicans and Democrats or was it more geared toward 0:09:59.120 --> 0:10:00.000 the Democratic side. 0:10:01.320 --> 0:10:05.559 This has been a Democratic goal since the Clinton administration, 0:10:05.720 --> 0:10:10.000 So for the last twenty years, UH, Democrats UH were 0:10:10.120 --> 0:10:13.360 longer Democrats have been trying to find a way to 0:10:13.440 --> 0:10:17.079 inject the government or provide a government role in price 0:10:17.120 --> 0:10:20.960 setting for these drugs. Now they've failed, and in fact, 0:10:21.120 --> 0:10:24.600 UH when the Party law passed in two thousand three, 0:10:24.880 --> 0:10:29.439 there was a an explicit prohibition against the government UH 0:10:29.520 --> 0:10:32.880 dictating or setting prices. And that's largely because when that 0:10:32.960 --> 0:10:36.760 law passed, it was passed by a Republican Congress and 0:10:36.880 --> 0:10:38.640 signed by a Republican president. 0:10:38.720 --> 0:10:40.679 Now, granted, Democrats voted. 0:10:40.440 --> 0:10:43.040 For that bill, UH, but it did set up the framework, 0:10:43.080 --> 0:10:46.360 but it also included UH more of a free market 0:10:46.720 --> 0:10:50.760 uh approach to price setting. Over the past couple of years, 0:10:50.880 --> 0:10:55.040 Democrats tried to advance similar legislation but failed because they 0:10:55.040 --> 0:10:59.479 didn't have enough control. Now that they had uh the 0:10:59.480 --> 0:11:01.719 full control of Congress and the White House, they were 0:11:01.800 --> 0:11:04.680 able to pass some version of what they wanted to 0:11:04.720 --> 0:11:08.880 do in terms of injecting government a government role for 0:11:09.000 --> 0:11:09.600 price setting. 0:11:10.080 --> 0:11:15.559 Well, the argument from pharmaceutical companies against call it negotiations 0:11:15.600 --> 0:11:18.080 clent price setting has always been, you know, they spend 0:11:18.120 --> 0:11:22.280 a lot of money developing these drugs. They feel that 0:11:22.320 --> 0:11:25.920 they deserve them monopoly that they get in terms of 0:11:25.960 --> 0:11:31.880 selling these drugs to consumers. Does this really put a 0:11:31.920 --> 0:11:35.840 weight on the kind of innovation that they will do? 0:11:35.840 --> 0:11:37.760 Do you think that's a long term shift or is 0:11:37.840 --> 0:11:40.240 this something that these former companies are going to complain 0:11:40.240 --> 0:11:41.920 about for a while, but you know, it's not really 0:11:41.960 --> 0:11:43.800 going to affect their overall behavior. 0:11:45.000 --> 0:11:49.360 I think there's some weight to their argument. It's definitely 0:11:49.400 --> 0:11:53.679 going to change the way they pursue drugs moving forward. 0:11:54.480 --> 0:11:57.600 They're going to think about what kind of indications they 0:11:57.640 --> 0:11:58.320 come forward with. 0:11:58.480 --> 0:12:01.800 First. They're gonna look at some. 0:12:01.800 --> 0:12:06.679 Of those uh uh, those those areas where commercial commercialization 0:12:06.800 --> 0:12:10.920 prospects are better. They'll maybe slow down those indications where 0:12:10.920 --> 0:12:15.000 the commercializa commercialization aspects are probably lower. 0:12:15.600 --> 0:12:16.320 Uh. 0:12:16.400 --> 0:12:19.520 Keep in mind though, that these drugs, uh that the 0:12:19.800 --> 0:12:23.600 administration released today, the list released today. These are a 0:12:23.600 --> 0:12:25.520 list of ten drugs that have been on the market 0:12:25.559 --> 0:12:27.120 for at least seven years. 0:12:27.679 --> 0:12:27.839 Uh. 0:12:27.880 --> 0:12:32.000 They don't have a generic competition or a bisimilar competition, 0:12:33.920 --> 0:12:37.000 and and so, uh, we're really talking about those high 0:12:37.080 --> 0:12:42.040 cost drugs where there isn't an alternative, and so there 0:12:42.120 --> 0:12:47.080 will still be an opportunity for these manufacturers to perhaps 0:12:47.360 --> 0:12:50.400 raise the prices when they go to the market for 0:12:50.440 --> 0:12:53.880 that first year. In fact, the govern Congressional Budget Office, 0:12:53.920 --> 0:12:57.840 which scores legislation, in other words, how much is it 0:12:57.880 --> 0:12:58.360 gonna cost. 0:12:58.400 --> 0:12:59.480 How much is it going to save? 0:13:00.200 --> 0:13:05.920 Anticipates that pharmaceutical companies will pursue higher launch prices to 0:13:05.960 --> 0:13:08.400 make up for the fact that in some of those 0:13:08.480 --> 0:13:12.680 outer years later years, they won't be able to charge 0:13:12.720 --> 0:13:15.240 the prices that they would otherwise charge. 0:13:15.480 --> 0:13:18.720 What other potential legislation could be on the horizon. 0:13:19.880 --> 0:13:23.760 In the drug pricing space. I think we're looking less 0:13:23.880 --> 0:13:31.800 at legislation targeting drug manufacturers, potentially targeting pharmacy benefit managers, 0:13:31.840 --> 0:13:35.480 and they were left out of the Inflation Reduction Act 0:13:35.480 --> 0:13:38.560 for a handful of policy and technical reasons when Democrats 0:13:38.640 --> 0:13:41.840 passed the bill. We could see as part of that 0:13:42.400 --> 0:13:48.360 how PBMs are profiting from rebate dollars rebase they get 0:13:48.360 --> 0:13:51.040 from manufacturers that are supposed to go to health plans 0:13:51.160 --> 0:13:54.640 or even the employees in the individuals. 0:13:55.160 --> 0:13:57.160 We could see some additional. 0:13:56.640 --> 0:14:01.040 Regulatory efforts by this administration as it leads to TRUK pricing. 0:14:01.760 --> 0:14:06.680 They Dibinding administration released a white paper earlier this year 0:14:07.280 --> 0:14:11.839 focused on some other avenues which it can use to 0:14:12.400 --> 0:14:17.080 lower the price of some drugs. They're targeting those drugs 0:14:17.080 --> 0:14:21.600 approved through an Accelerated Approval pathway, which is a pathway 0:14:21.640 --> 0:14:25.200 that allows manufacturers to get drugs on the market faster 0:14:25.320 --> 0:14:29.800 and a level of safety and efficacy data. But in 0:14:29.840 --> 0:14:35.480 many cases these acceleratate approval drugs still go through some 0:14:35.640 --> 0:14:39.520 additional confirmatory trials. They actually work, so we could see 0:14:39.560 --> 0:14:41.680 some more regulatory efforts. 0:14:41.280 --> 0:14:43.560 There, right, Jane, thanks so much for joining us. That's 0:14:43.600 --> 0:14:46.440 doing Wright, senior government analysts at Bloomberg Intelligence. 0:14:46.440 --> 0:14:46.640 Perce. 0:14:46.760 --> 0:14:49.840 You're listening to the tape cats are live program Bloomberg 0:14:49.920 --> 0:14:53.480 Markets weekdays at ten am Eastern on Bloomberg Radio, the 0:14:53.560 --> 0:14:56.760 tune in app, Bloomberg dot Com, and the Bloomberg Business App. 0:14:56.840 --> 0:14:59.600 You can also listen live on Amazon Alexa from our 0:14:59.640 --> 0:15:04.040 flagsh New York station. Just say Alexa play Bloomberg eleven thirty. 0:15:05.760 --> 0:15:08.120 You want to get straight to our next guest, Elliott Stein, 0:15:08.240 --> 0:15:11.520 senior litigation analyst with Bloomberg Intelligence. As someone you know, 0:15:11.520 --> 0:15:13.600 we were talking about the US court paving the way 0:15:13.840 --> 0:15:16.480 for the first bitcoin ETF and this gray scale ruling. 0:15:16.520 --> 0:15:19.600 If you're looking at the reaction in ETFs, here are 0:15:19.600 --> 0:15:22.520 actually if you're just looking specifically in bitcoin, it's up 0:15:22.520 --> 0:15:25.480 almost six percent, so now it's trading above the twenty 0:15:25.560 --> 0:15:28.440 seven thousand level. I want to bring in Elliott Stein. 0:15:28.760 --> 0:15:31.200 So Elliott walk us through the latest news that we 0:15:31.280 --> 0:15:32.760 got from this. What do we know so far? 0:15:33.840 --> 0:15:37.080 Yeah, So this morning we got a decision from the 0:15:37.160 --> 0:15:40.200 DC Circuit Court of Appeals, which is the court that 0:15:40.400 --> 0:15:44.080 was hearing gray Scale's challenge to the SEC's rejection of 0:15:44.160 --> 0:15:48.960 gray Scale's application for a spot bitcoin ETF. The SEC 0:15:49.080 --> 0:15:52.840 rejected it last year, they rejected that application. Gray Scale 0:15:52.920 --> 0:15:58.040 sued the case was arguing to march. You know, people 0:15:58.080 --> 0:16:02.600 on Twitter in particular, and vestors, crypto investors interested in 0:16:02.640 --> 0:16:05.200 bitcoin and GBTC, the Great Scale Bitcoin traice. So they 0:16:05.240 --> 0:16:08.960 have been waiting for this decision anxiously for some time, 0:16:09.080 --> 0:16:12.880 and we finally got it today and the court vacated 0:16:12.920 --> 0:16:19.160 the SEC's rejection, saying that the SEC's decision to reject 0:16:19.200 --> 0:16:22.400 the application was arbitrary and caprecious and wasn't well reasoned 0:16:23.240 --> 0:16:25.600 and sort of left it there. So next steps are 0:16:25.640 --> 0:16:28.160 a little unclear, and I haven't even read the decision yet, 0:16:28.680 --> 0:16:29.920 but that's where we are right now. 0:16:30.400 --> 0:16:33.800 Elliott. We're broadly speaking, I mean, what's the thinking on 0:16:33.840 --> 0:16:38.040 the part of the judges. You know, they had grilled 0:16:38.040 --> 0:16:41.800 I believe the SEC about its decision back and hearing 0:16:41.840 --> 0:16:44.360 in the case on marsh what's their thinking. What's the 0:16:44.520 --> 0:16:45.880 rationale do you think? 0:16:46.800 --> 0:16:50.360 Yeah, oh sorry, didn't mean to cut you off, but yeah, 0:16:50.480 --> 0:16:56.600 the rationale is that the SEC previously approved too bitcoin 0:16:56.720 --> 0:17:01.120 futures et F and so so you know, Gray Scales 0:17:01.200 --> 0:17:05.919 argument was that the SEC was treating similar products differently 0:17:06.119 --> 0:17:11.720 and arbitrarily because the risk of manipulation and fraud is 0:17:11.800 --> 0:17:14.919 essentially the same in both the futures bitcoin market and 0:17:15.000 --> 0:17:18.040 the spot bitcoin market, and so if the SEC was 0:17:18.040 --> 0:17:22.320 concerned about fraud in the spot bitcoin market, that didn't 0:17:22.359 --> 0:17:25.360 really make much sense because it had already approved these 0:17:25.400 --> 0:17:28.560 futures bitcoin ETFs, and so as a result, to treat 0:17:28.640 --> 0:17:32.719 similar products similarly, they had to after having already approved 0:17:32.720 --> 0:17:35.760 the futures bitcoin ETFs, they had to then approve the 0:17:35.800 --> 0:17:37.000 spot bitcoin ETF. 0:17:37.480 --> 0:17:39.560 And when we're looking at bitcoin, we did mention up 0:17:39.640 --> 0:17:42.159 five percent. What do you think the reaction to investors 0:17:42.200 --> 0:17:44.040 to this, because this is something that has been really 0:17:44.119 --> 0:17:45.880 highly anticipated for months now. 0:17:46.800 --> 0:17:49.639 Yeah, I mean, you know, that reaction seems to make sense, right, 0:17:49.720 --> 0:17:53.600 I mean this, you know, this does seem like it's 0:17:54.280 --> 0:17:58.760 another step on the path to getting spot bitcoin ETFs approved, 0:17:58.760 --> 0:18:01.120 which will just make it eat here for investors both 0:18:01.119 --> 0:18:06.080 retail and institutional, I think, to get exposure to bitcoin. 0:18:06.280 --> 0:18:10.320 And another interesting number to look at is the discount 0:18:10.320 --> 0:18:14.560 for GBTC. You know, the discount meaning that the shares 0:18:14.600 --> 0:18:18.000 in GBTC were trading at the time the case was 0:18:18.080 --> 0:18:20.480 argued roughly forty percent lower than the value of the 0:18:20.680 --> 0:18:23.800 underlying bitcoin that's the trust held Right now, I'm looking 0:18:23.840 --> 0:18:25.760 at that number and it's about ten point six percent, 0:18:25.800 --> 0:18:27.600 So that discount has dropped dramatically. 0:18:27.880 --> 0:18:30.280 Yeah, it dropped dramatically just in the past couple since 0:18:30.280 --> 0:18:32.720 the last close. It looks like I want to bring 0:18:32.760 --> 0:18:34.960 in here. We have Matt Siegel, the head of digital 0:18:35.000 --> 0:18:39.600 assets research at Van Eck. Matt, give me your thoughts 0:18:39.640 --> 0:18:43.080 as well. We've just been discussing this with Elliott Stein 0:18:43.119 --> 0:18:48.199 from Bloomberg Intelligence. What's the broader impact that we expect 0:18:48.440 --> 0:18:52.520 to see from this decision moving forward? Does this just 0:18:52.680 --> 0:18:56.200 become the first ETF of many? 0:18:58.880 --> 0:19:02.000 I think the broader impact is that the government has 0:19:02.119 --> 0:19:07.439 brought a range of lawsuits against this industry and using 0:19:07.480 --> 0:19:11.600 their enforcement stick to try to chill activity stateside. And 0:19:11.640 --> 0:19:14.439 now we've seen the second major court case that the 0:19:14.480 --> 0:19:17.960 SEC has lost in as many months ripple and now 0:19:18.080 --> 0:19:22.040 this great go. So we think the tide is turning 0:19:22.080 --> 0:19:25.200 that when the facts play out in court, the law 0:19:25.400 --> 0:19:28.560 is more ambiguous than the SEC is making it that 0:19:28.640 --> 0:19:36.200 their logic and denying these applications was haphazard illogical, and 0:19:36.280 --> 0:19:39.760 the judge was very clear in rejecting that logic. 0:19:39.880 --> 0:19:42.440 So it's a vindication for the industry. Matt. 0:19:42.480 --> 0:19:45.320 We do know the SEC has cited its opposition when 0:19:45.320 --> 0:19:48.159 it comes to these prior proposals for bigcnytfs and for 0:19:48.240 --> 0:19:52.040 the spot price crypto exchanges. What other moves could the 0:19:52.080 --> 0:19:53.439 SEC have from here? 0:19:55.840 --> 0:19:58.080 Well, it's important to note that the judge in this 0:19:58.240 --> 0:20:02.200 case cannot approve the bitcoin ETF. So the judge has 0:20:02.240 --> 0:20:06.240 sent the case back to the SEC to revise their logic. 0:20:07.160 --> 0:20:11.040 So we'll see, you know, if they capitulate or if 0:20:11.080 --> 0:20:15.160 they present new logic. But you know, the best case, 0:20:15.200 --> 0:20:18.840 here's the base case here, is that the chances of 0:20:18.880 --> 0:20:24.400 a spot bitcoin ETF have risen quite substantially. It will 0:20:24.440 --> 0:20:26.560 take a fair bit of logistics to get all these 0:20:26.560 --> 0:20:28.879 applications in order. We'll see if they are all allowed 0:20:28.920 --> 0:20:31.040 to go effective at the same time or if there 0:20:31.080 --> 0:20:34.040 is some privileged positions that are that are given. 0:20:34.680 --> 0:20:37.080 Now is the thinking that there really would be a 0:20:37.160 --> 0:20:43.560 substantial amount of inflows into these sort of ETFs it 0:20:43.800 --> 0:20:46.880 provided that they can move forward, that that this would 0:20:46.880 --> 0:20:49.080 suddenly bring in the retail investors that we've been missing. 0:20:52.119 --> 0:20:54.480 I don't think just retail, I think institutional like the 0:20:54.680 --> 0:21:00.159 the ETF structure is time proven way to get exposure 0:21:00.400 --> 0:21:03.800 in a cost effective and liquid manner to all types 0:21:03.920 --> 0:21:07.600 of commodities and security. So you know, this could be 0:21:07.600 --> 0:21:11.800 the biggest ETF launch ever. We think both institutions and 0:21:12.080 --> 0:21:17.600 retail investors will like the exposure to regulated custodians that 0:21:17.680 --> 0:21:19.840 it will provide at good spreads. 0:21:20.359 --> 0:21:22.719 Lots of different entities will want to hold this product, 0:21:22.760 --> 0:21:23.120 we think. 0:21:23.359 --> 0:21:25.640 Ellie, I want to bring you back into this conversation 0:21:25.720 --> 0:21:29.119 and get your thoughts on what the timetable could potentially 0:21:29.160 --> 0:21:31.520 be if this does come back into the SEC's hands 0:21:31.560 --> 0:21:33.639 and where this could move forward, because obviously, like you 0:21:33.680 --> 0:21:36.080 mentioned earlier, there's still a lot of uncertainty here, right. 0:21:37.240 --> 0:21:39.240 Yeah, it's a great question, and you know, before we 0:21:39.320 --> 0:21:44.080 even get there, the SEC, if they want, can ask 0:21:44.160 --> 0:21:48.040 the full DC Circuit Court of appeals called called an 0:21:48.040 --> 0:21:53.480 on bunk proceeding. They can ask for that that that's 0:21:53.600 --> 0:21:55.720 up to the court to grant it. It's not automatic, 0:21:55.760 --> 0:21:59.080 it's discretionary. But you know, that would be like in 0:21:59.119 --> 0:22:01.439 terms of the litigation, the first step for the SEC. 0:22:01.680 --> 0:22:05.920 They would have I believe sixty days to ask for that. 0:22:06.720 --> 0:22:06.840 Uh. 0:22:07.119 --> 0:22:09.160 And then you know, beyond that, they could also ask 0:22:09.160 --> 0:22:12.040 for a Supreme Court review, although I doubt that, you know, 0:22:12.119 --> 0:22:14.160 I really doubt it's going to go to the Supreme Court. 0:22:14.720 --> 0:22:16.400 But then you know, put in the court aside. Yeah, 0:22:16.440 --> 0:22:18.879 then it's like I said, you know, it's it's a 0:22:18.920 --> 0:22:22.560 little unclear what happens next because the court you know, 0:22:22.800 --> 0:22:27.080 didn't order the SEC right to do anything beyond vacating 0:22:27.119 --> 0:22:31.199 the previous rejection. It is a court can't and didn't 0:22:31.400 --> 0:22:36.560 order the SEC to approve an application. So it's a 0:22:36.600 --> 0:22:39.720 little unclear what happens next. Interestingly, you know, I think 0:22:39.760 --> 0:22:42.200 Grayscale sent a letter at some points of the SEC 0:22:42.680 --> 0:22:45.080 asking the SEC to sort of just approve all the 0:22:45.160 --> 0:22:49.720 various applications at once. I think I think, you know, 0:22:49.720 --> 0:22:52.119 knowing that this kind of decision was going to come down, 0:22:52.520 --> 0:22:54.320 and fearing that it might sort of be at the 0:22:54.440 --> 0:22:56.679 end of the line at this point in terms of, 0:22:56.800 --> 0:22:59.000 you know, having to go through the application process again, 0:22:59.359 --> 0:23:01.679 whereas up until this decision it was sort of at 0:23:01.680 --> 0:23:02.760 the front of the line. 0:23:03.119 --> 0:23:05.359 Matt, your thoughts, I mean, do you think the SEC 0:23:05.520 --> 0:23:10.040 will just sort of throw in the towel here? Say, okay, bitgoing, yeah, 0:23:10.119 --> 0:23:12.800 let's basically deah, let's go. 0:23:15.359 --> 0:23:16.080 It's a tough call. 0:23:16.480 --> 0:23:20.080 This is political set at the very hot top of 0:23:20.119 --> 0:23:23.360 the administration with the President's executive order to use all 0:23:23.440 --> 0:23:25.640 for the agencies, to use all tools to crack down 0:23:25.680 --> 0:23:29.359 on this industry. So like be curious to see what 0:23:29.400 --> 0:23:31.639 type of logic they would employ, because we haven't found 0:23:32.080 --> 0:23:35.800 any of it particularly compelling. You know, it could end 0:23:35.800 --> 0:23:37.800 with Barry Gensler out of the SEC. That is not 0:23:37.960 --> 0:23:41.800 uncommon for chair persons to leave after they've faced embarrassing losses. 0:23:41.840 --> 0:23:45.440 They've now been two and two months, so. 0:23:45.400 --> 0:23:47.280 We only have about a minute left. But I wanted 0:23:47.280 --> 0:23:49.240 to get both of y'all's final thoughts here. I'll start 0:23:49.240 --> 0:23:51.160 off with you, Elliott. As far as the next immediate 0:23:51.200 --> 0:23:55.040 thing that you're going to be watching for on this, a. 0:23:55.000 --> 0:23:57.840 Couple of things, I guess, well, first of all. I 0:23:57.840 --> 0:24:02.760 think there's a bunch of other bitcoin ETF applications that's 0:24:02.800 --> 0:24:05.440 sort of not you know, in the courts, right, that's 0:24:05.440 --> 0:24:09.840 with the SEC. So we'll see if the SEC punts 0:24:09.880 --> 0:24:12.479 on those further or if they grant them, and if 0:24:12.520 --> 0:24:14.600 they grant them, you know, if they grant a whole 0:24:14.600 --> 0:24:17.760 bunch of mass or just do them one at a time, 0:24:18.320 --> 0:24:20.639 and then I'll be interesting to see any statements from 0:24:20.640 --> 0:24:22.679 the SEC as to whether they're going to ask for 0:24:23.000 --> 0:24:26.560 on block review and also sort of like what the 0:24:26.640 --> 0:24:28.840 next steps would be just in terms of the grayscale 0:24:28.840 --> 0:24:30.600 application if they go back to the SEC. 0:24:30.800 --> 0:24:32.560 Right, yeah, Matt, very quickly, Yeah, what do you what 0:24:32.600 --> 0:24:33.040 do you watch? 0:24:33.080 --> 0:24:34.240 Like twenty seconds left? 0:24:35.080 --> 0:24:38.280 Well, let's watch ethereum now, right, because the SEC is 0:24:38.320 --> 0:24:42.800 poised to approve ethereum futures ETFs according to this ruling, 0:24:42.840 --> 0:24:45.280 they would then have to prove SPOT So I'm sure 0:24:45.280 --> 0:24:47.280 you're tend to be on the lookout for those filings, 0:24:47.320 --> 0:24:47.920 all right. 0:24:48.080 --> 0:24:51.600 Matt Siegel from Vanik along with Elliott Stein's senior litigation 0:24:51.640 --> 0:24:55.080 analysts with Bloomberg Intelligence, walking us through what's going on 0:24:55.200 --> 0:24:57.600 with this US core paving the way for the first 0:24:57.640 --> 0:24:58.720 bitcoin ETF. 0:25:00.000 --> 0:25:03.760 You're listening to the Team Can't Live program Bloomberg Markets 0:25:03.800 --> 0:25:06.879 weekdays at ten am eastering on Bloomberg dot com, the 0:25:06.960 --> 0:25:10.080 iHeartRadio app and the Bloomberg Business App, or listen on 0:25:10.160 --> 0:25:12.160 demand wherever you get your podcasts. 0:25:15.040 --> 0:25:19.440 Well, I want to talk about a name. Well, I'll 0:25:19.480 --> 0:25:21.480 just give you a sense of what's happened to these 0:25:21.520 --> 0:25:25.359 shares in the past. Couple of wild wild Ride. Okay, 0:25:25.400 --> 0:25:29.119 last Tuesday, up over one hundred percent, up over thirty 0:25:29.160 --> 0:25:33.600 percent on Thursday, forty on Friday. Now we're down just 0:25:33.680 --> 0:25:38.280 about thirty percent today. The name then fast Auto and unprofitable, 0:25:38.280 --> 0:25:45.240 thinly traded and yes, it went, just went, just made 0:25:45.280 --> 0:25:49.840 its debut as a spacklisting on August fifteenth, and now 0:25:50.000 --> 0:25:52.840 is the world's third most valuable car company. I don't 0:25:52.840 --> 0:25:55.040 know if that holds up given the fall today, but 0:25:55.119 --> 0:25:56.040 it's something like that. 0:25:57.400 --> 0:25:59.720 Yeah, it's bigger than the market cap. If you're combining 0:25:59.720 --> 0:26:00.760 GM and Forward. 0:26:01.040 --> 0:26:05.120 It's nuts, a little nuts. Well, to sort this out 0:26:05.119 --> 0:26:09.479 for us, we have Stephanie Brindley. She's Associate director of 0:26:09.560 --> 0:26:13.800 Research and Analysis at SMP Global's gonna tell us what 0:26:14.040 --> 0:26:17.680 is going on with this company? And the wild ride 0:26:17.720 --> 0:26:19.560 that we have seen in stocks over the past or 0:26:19.640 --> 0:26:21.000 in the stock over the past couple of days. 0:26:22.240 --> 0:26:24.880 Good morning, how are you guys today, Good? 0:26:25.000 --> 0:26:26.480 Thank you, thanks for joining us. 0:26:27.119 --> 0:26:30.440 Good thanks, thanks for having me. Vin Fast is a 0:26:30.560 --> 0:26:34.840 really interesting company to watch. They've just started to launch 0:26:35.040 --> 0:26:38.600 in the US and Canada. What if you kind of 0:26:38.720 --> 0:26:41.920 look at the background of that company. The founder has 0:26:42.119 --> 0:26:47.200 has a mission of creating a manufacturing base out of 0:26:47.280 --> 0:26:52.080 Vietnam and and becoming growing their own auto company. Part 0:26:52.160 --> 0:26:55.600 of doing that includes manufacturing targets for the US and 0:26:55.760 --> 0:26:58.160 for being in the US and Europe and in China 0:26:58.200 --> 0:27:00.720 as well. It's a it's a very very long term 0:27:00.840 --> 0:27:04.920 look for him. And what you're seeing too from that 0:27:05.040 --> 0:27:07.639 company is is somebody with a with a will and 0:27:07.720 --> 0:27:10.520 a mission that that kind of goes beyond what happens 0:27:10.520 --> 0:27:12.159 in the next two or three years. So this is 0:27:12.200 --> 0:27:13.560 a really one build. 0:27:13.680 --> 0:27:16.159 Right, This is a Vietnamese ev maker. Give us some 0:27:16.320 --> 0:27:19.760 context into the space of how this company. Obviously, when 0:27:19.800 --> 0:27:22.280 you're thinking about the context you were just talking about this, 0:27:22.359 --> 0:27:24.600 Simona and I're having a market cap larger than GM 0:27:24.680 --> 0:27:27.680 and Ford. But when you're looking at this particular industry 0:27:27.840 --> 0:27:29.680 where it sits at and how it's been able to 0:27:29.760 --> 0:27:31.600 sort of get to where it is at this point. 0:27:32.920 --> 0:27:36.840 It's it's interesting looking at market caps, which isn't ast 0:27:36.840 --> 0:27:40.680 one hundred percent in my area. But electric vehicles, aside 0:27:40.720 --> 0:27:43.439 from from Tesla, and it took them ten or ten 0:27:43.520 --> 0:27:47.720 or fifteen years to get there, aren't profitable. So we've 0:27:47.760 --> 0:27:50.360 got we've got market caps that are that are betting. 0:27:50.240 --> 0:27:53.640 That ultimately these vehicles will be because today they're not yet. 0:27:53.840 --> 0:27:56.480 And is that wrong? Is it wrong? 0:27:56.640 --> 0:27:58.359 Oh jeez, that's a good question. 0:28:00.400 --> 0:28:04.359 We're really talking long term, really long term, because for 0:28:04.760 --> 0:28:07.600 the vehicles ebs to be profitable, they will be eventually. 0:28:07.960 --> 0:28:09.879 Part of it is scale, part of it is a 0:28:09.960 --> 0:28:12.560 broader piece of the market. Part of it is all 0:28:12.560 --> 0:28:16.240 the regulations that are driving various markets to push thev's 0:28:16.480 --> 0:28:20.320 internal combustion engines. But we're talking about a ten to 0:28:20.400 --> 0:28:23.160 fifteen to twenty year transition. We aren't talking about something 0:28:23.200 --> 0:28:24.120 that's happening in our. 0:28:24.080 --> 0:28:26.000 Five so a couple decades. We'll see a lot more 0:28:26.080 --> 0:28:26.560 growth in. 0:28:26.680 --> 0:28:28.560 Five but we aren't going to get to an ev 0:28:28.760 --> 0:28:33.879 dominant world. It's a long, long term vision for electric 0:28:34.000 --> 0:28:38.960 vehicles being profitable and being transitioning froms or from internal 0:28:39.000 --> 0:28:41.920 combustion engines to electric vehicles, and then Fast is in 0:28:42.000 --> 0:28:44.640 this space trying to make a name for itself and 0:28:44.720 --> 0:28:48.160 trying to build an industry for its country as well. 0:28:48.840 --> 0:28:51.360 Yeah, I guess the distinguishing factor that you know, so 0:28:51.520 --> 0:28:56.240 much of the exposure is to Asia. You know, admittedly 0:28:56.240 --> 0:29:00.640 there are players in China that could potentially get in 0:29:00.720 --> 0:29:02.600 the way. I suppose. I mean, we had Neo out 0:29:02.640 --> 0:29:06.080 with its earnings today, but just I guess the idea 0:29:06.120 --> 0:29:09.800 that it's in Vietnam is something a little bit special. 0:29:11.000 --> 0:29:12.320 It's a little bit special. 0:29:12.360 --> 0:29:16.400 I mean, they're younger as a company, they're younger, they're 0:29:16.560 --> 0:29:20.480 learning as they go, and you see that in changes 0:29:20.520 --> 0:29:22.280 that they've made and how they're going to market in 0:29:22.320 --> 0:29:25.200 the US and in other places. They initially they were 0:29:25.240 --> 0:29:29.240 talking about a battery leasing process where you would basically 0:29:29.400 --> 0:29:32.520 lease by the vehicle, but lease the battery, and how 0:29:32.560 --> 0:29:35.760 many miles a year that you drove would impact that 0:29:35.960 --> 0:29:39.800 lease price. And the idea was that after the battery 0:29:39.880 --> 0:29:42.560 got to maybe seventy percent usage, you would swap it 0:29:42.640 --> 0:29:45.960 out and take away the concern from a consumer about 0:29:45.960 --> 0:29:47.840 how long your battery is going to last because you'd 0:29:47.920 --> 0:29:49.280 lease it and they would put a new one in 0:29:49.440 --> 0:29:50.920 and you would pay your lease and it would go. 0:29:51.760 --> 0:29:55.720 That concept is proving a little bit difficult for American 0:29:56.000 --> 0:29:57.960 consumers to kind of get their heads around, and so 0:29:58.040 --> 0:30:01.360 they've stepped away from that. Initially, the pricing was going 0:30:01.440 --> 0:30:04.360 to be a little bit lower, so the idea is 0:30:04.400 --> 0:30:06.640 you had luxury at a at A at a more 0:30:06.680 --> 0:30:09.960 affordable price. But their prices that came out for the 0:30:10.320 --> 0:30:13.920 for the VF nine are really on par with with 0:30:14.800 --> 0:30:15.840 sort of the premium and. 0:30:16.480 --> 0:30:20.560 Lower lower luxury, and so they're not really coming in 0:30:20.960 --> 0:30:22.640 at at A at. 0:30:22.520 --> 0:30:25.280 A more accessible price point. They're really in the mix 0:30:25.440 --> 0:30:26.800 with everybody else that's out there. 0:30:26.960 --> 0:30:27.960 So they keep making. 0:30:27.840 --> 0:30:30.120 Changes as they go and as they learn how they're 0:30:30.160 --> 0:30:32.800 going to come to market. Initially they were focusing on 0:30:32.960 --> 0:30:36.440 direct selling. Now they're talking about having distributors and dealers 0:30:37.200 --> 0:30:40.640 in the US and Canada. So that all of those 0:30:40.840 --> 0:30:46.400 changes really reflect a company that's willing to evolve and 0:30:46.960 --> 0:30:49.800 find its way because there's there's a kind of a 0:30:49.880 --> 0:30:51.600 map and there isn't really They have to they have 0:30:51.640 --> 0:30:53.440 to find their own space, and I think that's going 0:30:53.520 --> 0:30:55.920 to make it complicated and it's going to make it 0:30:55.960 --> 0:30:58.680 a rough ride for some points, but also it's what 0:30:58.760 --> 0:31:01.480 they're going to need to do in order to find 0:31:01.520 --> 0:31:02.000 their space. 0:31:02.200 --> 0:31:03.960 I think it'd be challenging. You know, this is such 0:31:04.000 --> 0:31:07.440 a cash flow intensive sort of business to just be 0:31:07.600 --> 0:31:10.800 kind of changing tune all the time. 0:31:11.520 --> 0:31:13.800 It is, and they haven't changed as much about the 0:31:13.840 --> 0:31:16.120 product in and of itself. It's more about how they're 0:31:16.160 --> 0:31:19.160 taking it to market, and the product is the investment. 0:31:19.240 --> 0:31:21.600 Theres is improving it and making it better. The first 0:31:22.080 --> 0:31:26.120 the first reviews from US media weren't fantastic on the 0:31:26.200 --> 0:31:27.680 car and needed some more work. 0:31:27.600 --> 0:31:31.960 To get there. But relative to their funding and their ability, 0:31:32.880 --> 0:31:33.520 they are. 0:31:34.120 --> 0:31:38.000 They're still related to group, and Vin Group has money, 0:31:38.840 --> 0:31:42.840 and the founder has access to money. So I believe 0:31:42.880 --> 0:31:44.520 that he's put sort of a cap and said this 0:31:44.680 --> 0:31:46.040 is as far as I'm going to go for the 0:31:46.120 --> 0:31:49.400 moment in terms of investing. But that's one of the 0:31:49.440 --> 0:31:51.920 strengths that it has is one way or another, the 0:31:52.800 --> 0:31:55.880 Vin Group can find a way to give infest and 0:31:55.920 --> 0:31:58.560 more money if this is what they're really dedicated to achieving. 0:31:59.280 --> 0:32:01.640 And again, you know, when you have a company that 0:32:01.880 --> 0:32:03.880 has that kind of will and that kind of mission, 0:32:04.040 --> 0:32:05.000 different things happen. 0:32:05.320 --> 0:32:08.080 That's where Tesla sort of started. Tesla had a mission 0:32:08.600 --> 0:32:11.400 more than yeah, of course you want to make money. 0:32:11.400 --> 0:32:13.440 Of course you want to be profitable and successful, but 0:32:13.560 --> 0:32:17.480 the mission was about getting people off fossil fuels. Vin 0:32:17.600 --> 0:32:22.280 Fast has a mission of creating an automotive manufacturing industry 0:32:22.640 --> 0:32:25.160 within Vietnam and growing and becoming. 0:32:24.920 --> 0:32:28.560 A global player. So you've got a mission driven company 0:32:28.800 --> 0:32:30.760 and along the way they make some different choices. 0:32:31.040 --> 0:32:33.960 Could you consider to be some of their main rivals 0:32:34.280 --> 0:32:37.400 in competitors, It really it's I mean. 0:32:37.360 --> 0:32:38.320 It's everyone right now. 0:32:39.000 --> 0:32:43.320 Are so unknown around for US customers, and they've brought 0:32:43.360 --> 0:32:46.600 over a few thousand vehicles, mostly there in California right now, 0:32:47.040 --> 0:32:50.320 so they really have to break through kind of everyone. Really, 0:32:51.480 --> 0:32:55.400 they should be more going as kind of a Volkswagen brands, 0:32:56.440 --> 0:32:59.360 maybe a Buick brand, Chevrolet would be more of the 0:32:59.480 --> 0:33:01.440 brands that they should be going against. 0:33:02.640 --> 0:33:06.080 But right now, it's really anyone. It's everyone just to 0:33:06.320 --> 0:33:08.280 get and we're having the conversation now. 0:33:08.320 --> 0:33:10.520 They're popping up in the news a lot more, but 0:33:10.600 --> 0:33:14.120 there's a distance between this conversation and a consumer trying 0:33:14.480 --> 0:33:15.800 to go find one on the street. 0:33:16.440 --> 0:33:18.760 Through I believe June they only had one hundred and 0:33:18.840 --> 0:33:22.920 thirty seven registered in the United States. Right, that speaks 0:33:23.000 --> 0:33:24.440 to availability and awareness. 0:33:25.360 --> 0:33:27.760 With respect to awareness, I mean, does it hurt a 0:33:27.840 --> 0:33:30.600 company to be identified, you know, with these sort of 0:33:30.680 --> 0:33:33.280 wild swings in the stock price or is that something 0:33:33.360 --> 0:33:38.640 that you know, investors can kind of look as scancer, sorry, 0:33:38.720 --> 0:33:41.280 look aside from and just quickly here because we only 0:33:41.320 --> 0:33:43.480 have about thirty seconds, you know. 0:33:43.600 --> 0:33:46.320 For car buyers, I'm not sure how much of a 0:33:46.400 --> 0:33:49.120 difference it makes for investors. They're looking at things a 0:33:49.160 --> 0:33:50.920 little bit differently and I'm not going to predict what 0:33:50.960 --> 0:33:51.400 they're going to do. 0:33:51.600 --> 0:33:53.920 So a car buyer, I'm not sure that it makes. 0:33:53.760 --> 0:33:55.280 A huge difference. They need to have faith that the 0:33:55.320 --> 0:33:57.000 company is going to be there. That's probably what the 0:33:57.040 --> 0:33:59.640 car buyer needs most from a new car company. 0:34:00.840 --> 0:34:03.800 That's so interesting. Seventy Thank you so much for taking 0:34:03.880 --> 0:34:06.800 us through. I'll be honest, I've seen the major swings 0:34:06.840 --> 0:34:10.920 in this company share price. They've been wild, they've been exciting, 0:34:12.200 --> 0:34:15.560 but I haven't known exactly what they do or why 0:34:15.920 --> 0:34:19.720 or why someone would buy a van fast vehicle, nor 0:34:19.880 --> 0:34:23.480 less that it's part of much a much larger conglomerate. 0:34:23.840 --> 0:34:26.920 You're listening to the tape cats are live program Bloomberg 0:34:27.000 --> 0:34:30.560 Markets weekdays at ten am Eastern on Bloomberg Radio, the 0:34:30.680 --> 0:34:33.839 tune in app, Bloomberg dot Com, and the Bloomberg Business App. 0:34:33.920 --> 0:34:36.719 You can also listen live on Amazon Alexa from our 0:34:36.760 --> 0:34:41.160 flagship New York station. Just say Alexa play Bloomberg eleven thirty. 0:34:42.320 --> 0:34:45.879 I'll go straight to our next guest, Fernando Valley. He's 0:34:45.920 --> 0:34:49.520 a senior analyst with Bloomberg Intelligence. He's joining us in studio, 0:34:49.680 --> 0:34:52.160 which is exciting. Always great to have people here with 0:34:52.280 --> 0:34:54.880 us to talk with us about the impact of possible 0:34:54.920 --> 0:34:58.280 strikes at Chevron in Australia and obviously other global energy 0:34:58.360 --> 0:35:00.920 markets and pressures and issues. Let's start off with what's 0:35:01.000 --> 0:35:02.680 going on with Chevron kind of set the scene for 0:35:02.800 --> 0:35:04.440 us about what's happening here and what we need to know. 0:35:04.800 --> 0:35:08.120 Sure, so, there are two big projects that Chevron is 0:35:08.200 --> 0:35:11.840 the operator in Western Australia, Gorgon and Wheatstone. They are 0:35:11.960 --> 0:35:16.000 very large projects. They contribute about call it fifteen billion 0:35:16.000 --> 0:35:20.319 dollars in total revenues a year at today's prices for LNG. 0:35:21.160 --> 0:35:25.160 Chevron has call it about half of that in ownership 0:35:25.520 --> 0:35:30.560 between those two projects. So they're very significant projects and 0:35:30.640 --> 0:35:33.520 they contribute a lot to the overall energy security, and 0:35:33.560 --> 0:35:37.359 they are exploited to both Asia and excess cargoes can 0:35:37.440 --> 0:35:38.719 be exploited to Europe as well. 0:35:39.280 --> 0:35:39.400 Well. 0:35:39.440 --> 0:35:43.080 We've seen some weird moves in gas prices back and 0:35:43.200 --> 0:35:47.239 forth essentially reacting to this. You know, the thing that 0:35:47.440 --> 0:35:50.520 I wonder given that we had all these concerns about 0:35:50.520 --> 0:35:53.840 a potential energy crisis in Europe last year, but supplies 0:35:53.920 --> 0:35:57.359 like storage facilities are pretty close to full at this point, 0:35:57.640 --> 0:36:03.920 if not completely full. How does how do energy issues 0:36:04.080 --> 0:36:07.880 in Australia factor in. We're still at the end of summer, 0:36:08.040 --> 0:36:10.279 you know, we're not in the key heating season. How 0:36:10.320 --> 0:36:15.600 does that play into what we may see given these 0:36:15.600 --> 0:36:16.360 production challeges. 0:36:16.600 --> 0:36:18.440 Yes, sure, I think it's you know, if you know 0:36:18.560 --> 0:36:21.600 the story of the cicada that prepares for winter, this 0:36:21.800 --> 0:36:23.640 is what we do now, and this is the filling 0:36:23.719 --> 0:36:26.359 season when we prepare for the winter ahead of time, 0:36:26.920 --> 0:36:31.960 and we are, as you mentioned, close to the technical 0:36:32.360 --> 0:36:35.560 limits on inventories in Europe. The issue is that those 0:36:35.640 --> 0:36:39.080 technical inventories don't get us through the winter if it 0:36:39.239 --> 0:36:42.960 is a normal to cold winter, so the if we 0:36:43.120 --> 0:36:46.440 have demand for that, we will drain them and then 0:36:46.480 --> 0:36:49.120 the prices will impact that. So if there's a shortage 0:36:49.200 --> 0:36:53.560 on LNG, that will affect it, because we can't rely 0:36:53.719 --> 0:36:57.920 on those storage alone, especially considering Belgium has closed all 0:36:57.960 --> 0:37:00.719 their nuclear, Germany has closed all their nuclear, and we 0:37:00.840 --> 0:37:04.560 no longer have supply coming from Europe from Russia rather 0:37:04.960 --> 0:37:07.239 even in the case of a dire need. 0:37:07.760 --> 0:37:11.239 So it's my understanding that a potential strike could begin 0:37:11.320 --> 0:37:16.120 as early as September seventh, I believe, or is it 0:37:16.239 --> 0:37:20.600 maybe the September seventh, but you know there is time 0:37:20.800 --> 0:37:24.160 between which between now and when Europe needs to start 0:37:24.200 --> 0:37:26.399 drawing down it supplies. I mean, if you didn't okay, 0:37:26.400 --> 0:37:29.640 if you saw a strike, for example, it goes on 0:37:29.760 --> 0:37:33.080 for a week, how much of an impact is that 0:37:33.640 --> 0:37:35.760 to Europe's energy situation. 0:37:35.719 --> 0:37:39.239 To Europe will be nearly none. It will be more 0:37:39.280 --> 0:37:42.759 of an impact to the owners of those projects. You 0:37:42.840 --> 0:37:46.000 can't really store l and g DAD easily, so it 0:37:46.120 --> 0:37:49.360 needs to be regassified and as we said, near technical limits. 0:37:49.719 --> 0:37:53.480 So it's not important as of now. What I think 0:37:53.640 --> 0:37:58.960 it gives you is two factors First, you're seeing cost inflation, 0:37:59.200 --> 0:38:01.799 and cost inflation is here to stay and that will 0:38:01.920 --> 0:38:04.520 impact not just energy, but that will impact everything that 0:38:04.560 --> 0:38:07.520 depends on energy, i e. The whole world and all 0:38:07.600 --> 0:38:11.680 of our economy. And the second part is the frailty 0:38:12.040 --> 0:38:15.839 of our supply chain on the energy side. So again 0:38:16.080 --> 0:38:19.760 the strikes, they are also going to keep the assets running. 0:38:19.760 --> 0:38:22.200 It doesn't require a lot of people to do it. 0:38:22.719 --> 0:38:25.560 But the strikes show that a energy costs are still 0:38:25.600 --> 0:38:28.640 going to go up because our lifting costs, the costs 0:38:28.640 --> 0:38:30.760 to get it off the ground, are going up as 0:38:30.800 --> 0:38:34.840 well as labor. And then b we are we have 0:38:35.160 --> 0:38:37.880 lost a lot of the redundancy that gives us the 0:38:38.040 --> 0:38:40.600 energy security and stability that we require. 0:38:40.840 --> 0:38:43.200 When you talk about energy costs going up, obviously my 0:38:43.280 --> 0:38:45.920 ears are going to prick up because covering a reserve 0:38:46.040 --> 0:38:48.800 and macro and all things. When it comes to obviously inflation, 0:38:48.960 --> 0:38:51.319 what that could impact for the economy, how much when 0:38:51.360 --> 0:38:53.440 you're looking at your space with energy, do you think 0:38:53.480 --> 0:38:57.040 that could translate into maybe some more broader issues when 0:38:57.040 --> 0:39:00.000 you're talking about inflation and what obviously central banks are 0:39:00.120 --> 0:39:01.399 trying to fight at this point. 0:39:02.200 --> 0:39:05.400 I think that's the central tenet of our case in 0:39:05.520 --> 0:39:08.600 oil because we think Oatpak is essentially trying to fight 0:39:08.680 --> 0:39:12.080 the FED by raising prices and by creating the supply 0:39:12.239 --> 0:39:15.239 shortage and everything. The central banks are trying to fight 0:39:15.320 --> 0:39:20.280 against the inflation that you mentioned, and we're seeing gasoline 0:39:20.320 --> 0:39:23.080 prices in the US much higher over three seventy on 0:39:23.200 --> 0:39:28.160 average a gallon right now, and that all will impact 0:39:29.160 --> 0:39:32.200 the inflation metrics. Remember, energy is part of the core, 0:39:32.680 --> 0:39:36.640 is very central to everything that we do. We think 0:39:36.719 --> 0:39:40.000 ultimately the demand side will win, which is what the 0:39:40.120 --> 0:39:43.600 FED wants. And we're seeing things break, especially in China 0:39:43.640 --> 0:39:48.120 and their real estate, and that will impact oil prices 0:39:48.520 --> 0:39:51.480 and to us that's the determinating factor for the second 0:39:51.520 --> 0:39:54.080 half of the year. Over the long term, we see 0:39:54.120 --> 0:39:57.719 a short fall of supply, but in the meantime, the 0:39:57.840 --> 0:39:59.840 FED is likely to win. They have a much bigger 0:39:59.840 --> 0:40:00.880 b balance sheet that OPAC. 0:40:01.120 --> 0:40:03.120 Yeah, one point, sorry to cut you. I was just 0:40:03.200 --> 0:40:05.319 curious as far as when we'll see it translate into 0:40:05.440 --> 0:40:07.640 some of these CPI numbers. I know analog over at 0:40:07.640 --> 0:40:10.319 Bloomberg Economics is thinking that potentially if we're looking at 0:40:10.320 --> 0:40:13.080 the month over month core numbers, obviously it strips out 0:40:13.080 --> 0:40:14.880 food and energy, but if you're taking some of that 0:40:14.960 --> 0:40:17.000 in with energy, potentially could take higher here. 0:40:17.600 --> 0:40:17.799 Yeah. 0:40:17.920 --> 0:40:21.080 I think if you just think about the pass through right, 0:40:21.200 --> 0:40:23.720 it takes about thirty to forty five days for oil 0:40:24.080 --> 0:40:26.359 to get to refine products, and then it will take 0:40:26.680 --> 0:40:29.320 another couple of months, so it could be anywhere between 0:40:29.360 --> 0:40:31.720 three to six months for if they really have an impact, 0:40:32.400 --> 0:40:32.719 you can. 0:40:32.640 --> 0:40:36.360 Talk about OPEK fighting the FED. One of the ways 0:40:36.360 --> 0:40:38.680 I guess they're trying to do this is Saudi Arabia 0:40:39.360 --> 0:40:43.080 has some voluntary cuts in play, but it looks it 0:40:43.120 --> 0:40:45.839 looks like they're now considering or we're wondering if they're 0:40:45.840 --> 0:40:50.399 considering extending those for another month. When would we get 0:40:50.440 --> 0:40:53.480 some sort of decision there. What kind of immediate impact, 0:40:53.680 --> 0:40:54.920 if any, would it have? 0:40:56.239 --> 0:41:01.239 I think limited short term impacts. You're seeing massive draw 0:41:01.320 --> 0:41:04.759 downs in US inventories and Saudi extend it through September, 0:41:05.120 --> 0:41:07.280 so they would probably have to give you an update 0:41:07.320 --> 0:41:09.359 in the next two to three weeks if they're going 0:41:09.400 --> 0:41:14.359 to extend through October. But ultimately, the price of oil 0:41:14.440 --> 0:41:17.040 is telling you we don't really care about supply. We 0:41:17.160 --> 0:41:19.920 care about demand, we care about Evergrande, we care about 0:41:20.480 --> 0:41:24.279 US economic activity. We care about Europe and we again 0:41:24.560 --> 0:41:27.239 that's where we think we'll set oil prices for the 0:41:27.280 --> 0:41:28.000 remainder of the year. 0:41:28.120 --> 0:41:30.560 How much does seasonality also factor into it when you 0:41:30.600 --> 0:41:33.720 think about the fall. Obviously you have different spectrums within energy, 0:41:33.800 --> 0:41:36.080 but where you think potentially that pattern can fall there. 0:41:36.840 --> 0:41:40.000 Well, on the oil side, mostly gasoline margins tend to 0:41:40.120 --> 0:41:43.440 come down. There's a seasonal effect because our busy season 0:41:43.600 --> 0:41:46.319 is during the summer. We're starting to see that now 0:41:47.239 --> 0:41:51.120 that may help affordability, but crack spreads are less than 0:41:51.200 --> 0:41:54.280 thirty percent of the overall price of gasoline, so oil 0:41:54.760 --> 0:41:59.960 is the foremost impact. And then on the natural gas side, 0:42:00.320 --> 0:42:03.360 it's quite the opposite. We think we're going to the 0:42:03.400 --> 0:42:07.080 crux of the issue the winter. And as a reminder, 0:42:07.200 --> 0:42:09.960 this past winter was the warmest in fifty years in 0:42:10.000 --> 0:42:13.319 the northern hemisphere. So if we have a normal winter, 0:42:13.880 --> 0:42:16.480 that could really spell trouble for not just natural gas 0:42:16.560 --> 0:42:18.720 but diesel. We use a lot of diesel for heating 0:42:19.160 --> 0:42:20.360 in New England, for example. 0:42:21.520 --> 0:42:21.719 Yeah. 0:42:21.800 --> 0:42:24.279 Interesting because natural gas prices have been so pressured for 0:42:24.360 --> 0:42:27.440 such a long time in the United States, whereas the 0:42:27.520 --> 0:42:31.800 European picture is just a little bit different. And I 0:42:31.840 --> 0:42:35.560 should mention today oil prices up a little bit on 0:42:35.680 --> 0:42:38.680 both WTI as well as Brent up about half a percent. 0:42:39.200 --> 0:42:39.359 Yeah. 0:42:39.440 --> 0:42:42.920 Fernando Valley, senior analysts with Bloomberg Intelligence, join us in 0:42:43.080 --> 0:42:45.640 studio to talk about the latest impact of possible strikes 0:42:45.680 --> 0:42:48.960 at Chevron in Australia. Always a pleasure chatting with you, Fernando, 0:42:49.000 --> 0:42:52.080 so thanks so much for joining Simoon and myself this morning. 0:42:52.400 --> 0:42:55.480 You're listening to the tape. Catch our live program Bloomberg 0:42:55.600 --> 0:42:59.120 Markets weekdays at ten am Eastern on Bloomberg Radio, to 0:42:59.239 --> 0:43:02.439 tune in app Bloomberg dot Com and the Bloomberg Business App. 0:43:02.520 --> 0:43:05.279 You can also listen live on Amazon Alexa from our 0:43:05.360 --> 0:43:09.720 flagship New York station. Just say Alexa play Bloomberg eleven thirty. 0:43:11.480 --> 0:43:14.279 We have talked so much about the jolt state of 0:43:14.320 --> 0:43:17.400 this morning consumer confidence, but also according to the latest 0:43:17.719 --> 0:43:20.880 case Shiller data, US home prices were flat over the 0:43:20.960 --> 0:43:23.239 twelve months that did just end in June. And then 0:43:23.280 --> 0:43:26.080 also prices are up at an annualized rate of just 0:43:26.200 --> 0:43:28.480 over five percent in twenty twenty three. But the catch there, 0:43:28.520 --> 0:43:30.960 the rate shock of the past year has resulted in 0:43:31.080 --> 0:43:34.239 just two months of year year home price declined so 0:43:34.360 --> 0:43:36.040 far if you can imagine that, simoon. So I want 0:43:36.080 --> 0:43:40.080 to bring in our next guest, Mollie Basil, principal economists 0:43:40.080 --> 0:43:42.600 at core Logic, joining us on zoom to discuss the 0:43:42.719 --> 0:43:46.799 latest findings in core Logic's case Shiller Home price Index. MOLLI, 0:43:46.880 --> 0:43:48.879 thank you so much for joining us. Walk us through 0:43:49.200 --> 0:43:50.600 this latest data that you found. 0:43:51.640 --> 0:43:54.840 Yeah, so, our case Shiller index in June saw that 0:43:54.920 --> 0:43:57.239 prices were even from a year ago. But as you 0:43:57.320 --> 0:44:00.800 alluded to, you know, while as zero change from a 0:44:00.880 --> 0:44:02.920 year ago doesn't sound like a big deal, it's really 0:44:03.000 --> 0:44:05.440 signaling a market ship because that comes off of a 0:44:05.560 --> 0:44:08.279 few months of declines in your over year prices. So 0:44:08.400 --> 0:44:10.839 we're seeing prices go even and we expect that they'll 0:44:11.600 --> 0:44:13.279 gain a little bit through the end of the year. 0:44:14.280 --> 0:44:18.520 Yeah, where are you seeing this trend most pronounced? I 0:44:18.520 --> 0:44:20.920 should also should point out, I know we have a 0:44:21.000 --> 0:44:23.200 radio audience here, but I'm looking at our case show index. 0:44:23.480 --> 0:44:26.360 We are like almost exactly the same level that we 0:44:26.480 --> 0:44:29.880 were in June of twenty twenty two, and that was 0:44:29.920 --> 0:44:33.200 a high on the chart. So where were we seeing 0:44:33.239 --> 0:44:34.280 most of this strength? 0:44:34.360 --> 0:44:34.600 Lie? 0:44:35.719 --> 0:44:37.960 Yeah, so places like you might not expect places that 0:44:38.040 --> 0:44:42.160 hadn't seen large increases in the past, Chicago, Cleveland, though 0:44:42.200 --> 0:44:44.440 I'm going to throw Miami in there that has seen 0:44:44.520 --> 0:44:49.239 some large increases, just areas that were had lower increases. 0:44:49.320 --> 0:44:52.240 But also we're relatively cheaper than the rest of the country. 0:44:52.640 --> 0:44:55.200 You know, we're seeing the strength there, but we're still 0:44:55.239 --> 0:44:58.200 seeing weaknesses in parts of the country that saw really 0:44:58.280 --> 0:45:02.680 outsized gains in twenty twenty two, like Denver, Phoenix, and 0:45:03.040 --> 0:45:04.280 San Francisco and Seattle. 0:45:04.840 --> 0:45:07.719 We know that tight inventory was clearly an issue well 0:45:07.840 --> 0:45:12.840 before the pandemic, which particular regions across the country, or 0:45:12.960 --> 0:45:14.960 when it comes to home buyers trying to battle it 0:45:15.000 --> 0:45:17.800 out to try and and find some of these houses 0:45:18.160 --> 0:45:20.200 or having it harder more so than others. 0:45:21.480 --> 0:45:23.920 You know, it's really an asia life phenomenon. And you 0:45:24.000 --> 0:45:27.440 can think of mortgage rates are really what's driving that. 0:45:27.920 --> 0:45:32.640 You've got the majority, probably about ninety five or more 0:45:32.760 --> 0:45:36.920 percent of current owners have a mortgage rate that it's 0:45:37.120 --> 0:45:40.200 really well below what the current rate is. So they 0:45:40.440 --> 0:45:42.800 just aren't willing to give up their mortgage rates unless 0:45:42.800 --> 0:45:44.560 they have to, and they're not putting their homes on 0:45:44.680 --> 0:45:47.160 the market, So that's really hitting the entire country. 0:45:47.480 --> 0:45:50.279 What I'm curious about is how much will that benefit homebuilders, 0:45:50.280 --> 0:45:52.680 which really we're struggling after the housing crisis. But when 0:45:52.719 --> 0:45:54.640 you're thinking about especially those stocks have been on a 0:45:54.719 --> 0:45:57.560 tear this year with those anticipation from poorly managers that 0:45:57.560 --> 0:46:00.279 they're going to continue to have to build. There about 0:46:00.280 --> 0:46:03.640 the dynamic when you're looking at particular builders, say maybe 0:46:03.719 --> 0:46:05.960 like a deor Horton or Lenar, maybe they're catering to 0:46:06.200 --> 0:46:09.399 a particular type of income demographic, whereas what about maybe 0:46:09.520 --> 0:46:10.799 lower income households. 0:46:11.920 --> 0:46:13.600 Well, one of the things that the builders have going 0:46:13.680 --> 0:46:16.400 for them that's that's helping what you said, have their 0:46:16.880 --> 0:46:19.799 stocks on a tear is they're able to buy down 0:46:19.840 --> 0:46:22.799 mortgage rates for buyers, so they have some flexibility there 0:46:23.200 --> 0:46:25.920 and can charge buyers a lower rate where you know 0:46:26.440 --> 0:46:29.080 resales you're just not going to get that same phenomenon. 0:46:29.880 --> 0:46:32.760 Yeah, I think you look at Lenar, d R Horton, 0:46:33.000 --> 0:46:36.279 they're offering five five and a half percent thirty year 0:46:36.360 --> 0:46:38.319 fixed rates, I mean, and then and then you look 0:46:38.360 --> 0:46:41.880 at the average Freddie mac right for a thirty year 0:46:42.000 --> 0:46:46.280 fix to seven point two three last week, it's just nuney, 0:46:46.320 --> 0:46:49.120 I mean, I wonder if there is any inconsistency in 0:46:49.280 --> 0:46:51.800 that sort of data, just because so much of the 0:46:51.880 --> 0:46:54.799 purchasing is really happening in the new home front rather 0:46:54.880 --> 0:46:58.320 than the existing home. You know, should we believe the 0:46:58.400 --> 0:47:01.080 seven point two three rate that we're we're seeing Molly. 0:47:02.600 --> 0:47:04.480 Yeah, I think when they're reporting those rates, that's what 0:47:04.560 --> 0:47:05.920 they are generally offering. 0:47:06.800 --> 0:47:08.799 It's not necessarily what people are taking up. 0:47:08.920 --> 0:47:11.279 So that's the rate that's offered out there. And if 0:47:11.320 --> 0:47:13.719 builders are able to buy that down by one two 0:47:13.800 --> 0:47:16.960 percentage coins, it sounds like then they're going to gain 0:47:17.000 --> 0:47:18.880 a relatively a large share of this market. 0:47:19.640 --> 0:47:22.040 You know, what also surprises me is just how much 0:47:23.120 --> 0:47:26.839 household formation there is that these people feel that they 0:47:26.920 --> 0:47:31.200 need to take advantage of or just need to go 0:47:31.800 --> 0:47:36.680 and shell out for these seven plus percent fixed mortgage. 0:47:37.000 --> 0:47:39.880 What do you watch for their any any trends you 0:47:40.160 --> 0:47:43.399 can tell us about across the people that just are 0:47:43.440 --> 0:47:45.160 simply making that decision to go buy homes. 0:47:45.960 --> 0:47:48.480 Well, the thing is, while we do have these really 0:47:48.560 --> 0:47:51.200 high mortgage rates, you know what's driving that. That's inflation, 0:47:51.360 --> 0:47:55.840 and what's helping drive up inflation, but really great job growth. 0:47:56.440 --> 0:47:58.719 And that's why you see people who are still willing 0:47:58.760 --> 0:48:01.120 to go out there and buy homes at these mortgage rates. 0:48:01.360 --> 0:48:02.839 You know, if they're able to find what they want 0:48:02.920 --> 0:48:05.279 where they want it, they could see that mortgage rates 0:48:05.320 --> 0:48:07.839 will most likely come down in the next couple of years. 0:48:08.400 --> 0:48:10.319 And you know, we keep talking about the thirty year 0:48:10.400 --> 0:48:12.200 fix rate, but you know they might be opting for 0:48:12.600 --> 0:48:15.920 an adjustable rate mortgage, which we keep their monthly payments 0:48:15.960 --> 0:48:16.520 down as well. 0:48:16.880 --> 0:48:18.759 What's the level when you're looking at the rates, whether 0:48:18.880 --> 0:48:21.480 you're looking at fifteen thirty year here as far as 0:48:21.520 --> 0:48:23.479 when you think it might be a potential breaking point 0:48:23.600 --> 0:48:25.279 for Americans. 0:48:27.120 --> 0:48:28.680 A lot of them are at that breaking point now. 0:48:28.760 --> 0:48:31.200 I mean we've seen that's part of the reason why 0:48:31.320 --> 0:48:35.520 home prices were so weak last year through most of 0:48:35.600 --> 0:48:39.120 twenty twenty two and into twenty twenty three. That has 0:48:39.200 --> 0:48:41.319 to do with the high martgage rates when somebody's trying 0:48:41.360 --> 0:48:44.759 to get in. And you know, previously, when rates are 0:48:44.800 --> 0:48:48.719 around three percent, you know, housing was pretty affordable, even 0:48:48.760 --> 0:48:51.080 though you have home prices shooting up. But you know 0:48:51.200 --> 0:48:53.680 that just all came to a halt last year when 0:48:53.800 --> 0:48:55.000 margage rates started going up. 0:48:55.560 --> 0:48:58.360 You know, it was interesting to hear J Powell talking 0:48:58.440 --> 0:49:03.360 about how he expects shelter costs to fall. And you know, 0:49:03.480 --> 0:49:05.800 even though a lot of this is rents, if you 0:49:05.880 --> 0:49:09.080 have high home prices, you're gonna have higher rents, right 0:49:09.640 --> 0:49:11.040 or is there something I'm not seeing here? 0:49:11.960 --> 0:49:14.480 Well, so that does you know, that does get into 0:49:14.560 --> 0:49:19.000 a kind of a technical detail of the way inflation's measured, 0:49:19.120 --> 0:49:22.520 and that is as a lag. Right, That's right, that's right, 0:49:22.600 --> 0:49:26.160 that's prices exactly. There's about a one year lag. So 0:49:26.280 --> 0:49:29.400 we we do measure rents as well core logic, and 0:49:29.520 --> 0:49:31.880 we saw rents coming down about a year ago, and 0:49:32.000 --> 0:49:32.600 you are now. 0:49:32.600 --> 0:49:35.759 Starting to see that shelter index start to come down. 0:49:35.880 --> 0:49:39.200 So they know that those those decreases from last year 0:49:39.200 --> 0:49:41.880 are going to flow in through the inflation numbers this year. 0:49:42.239 --> 0:49:44.120 But it's not necessarily good news for people who want 0:49:44.120 --> 0:49:45.320 to go out and rent an apartment. 0:49:46.440 --> 0:49:49.120 No, just because you saw things come down year to year, 0:49:49.560 --> 0:49:53.600 there's still quite a bit from twenty twenty, so we're 0:49:53.640 --> 0:49:57.080 not you know, with home prices coming you know, seeing 0:49:57.160 --> 0:50:00.919 declines last year. Rent saw some declines last year. They're 0:50:01.080 --> 0:50:02.520 just not going to get down to that level we 0:50:02.560 --> 0:50:03.600 saw before the pandemic. 0:50:03.719 --> 0:50:05.560 So we only have about a minute left. But when 0:50:05.560 --> 0:50:08.160 you're looking at this latest data that you have with 0:50:08.239 --> 0:50:11.560 home prices, Chicago still remained in the top spot there. 0:50:12.280 --> 0:50:12.880 Why is that. 0:50:14.560 --> 0:50:17.400 You just have some It's like you see in the 0:50:17.480 --> 0:50:20.680 ones the places fall off that had the really outsized 0:50:20.719 --> 0:50:23.640 games last year, and you just seeing the metros on 0:50:23.719 --> 0:50:26.160 there that just keep plugging away at the kind of 0:50:26.600 --> 0:50:29.880 relatively moderate rate of fourty five percent. So it's more 0:50:29.920 --> 0:50:32.719 that everyone else is falling off than they're seeing the resurgence. 0:50:34.160 --> 0:50:37.919 All right, Mollie Basil, Principal Economy is at core Logic, 0:50:38.040 --> 0:50:40.239 joining us on zoom to discuss the latest findings in 0:50:40.360 --> 0:50:43.080 that Core Logic Key Shuler Home Price Index. It's always 0:50:43.080 --> 0:50:44.879 a pleasure speaking with you, Molly. 0:50:47.480 --> 0:50:50.560 Thanks for listening to the Bloomberg Markets podcast. You can 0:50:50.600 --> 0:50:54.360 subscribe and listen to interviews at Apple Podcasts or whatever 0:50:54.480 --> 0:50:58.120 podcast platform you prefer. I'm Matt Miller. I'm on Twitter 0:50:58.400 --> 0:51:00.200 at Matt Miller nineteen seventy. 0:51:00.760 --> 0:51:03.160 And I'm Fall Sweeney. I'm on Twitter at pt Sweeney. 0:51:03.280 --> 0:51:05.920 Before the podcast, you can always catch us worldwide at 0:51:05.960 --> 0:51:06.719 Bloomberg Radio.