Speaker 1: Welcome to the Bloomberg Penel podcast. I'm Paul swing you,
Speaker 1: along with my co host Lisa Brahma wits. Each day
Speaker 1: we bring you the most noteworthy and useful interviews for
Speaker 1: you and your money, whether at the grocery store or
Speaker 1: the trading floor. Find a Bloomberg Penil podcast on Apple
Speaker 1: Podcast or wherever you listen to podcasts, as well as
Speaker 1: at Bloomberg dot com. We have seen news across the
Speaker 1: Bloomberg termoil seems for years now, but maybe maybe even
Speaker 1: more so in twenty nineteen about big job cuts across
Speaker 1: Wall Street and the city in London. But there's indications
Speaker 1: that there might be pockets of growth actually and job
Speaker 1: growth in the financial services industry. To help us put
Speaker 1: it on perspective, we welcome a good Fred yeaman on
Speaker 1: iran senior finance writer for Bloomberg News, joining us here
Speaker 1: in our Bloomberg Interactor Brooker Studio. So yeah, m give
Speaker 1: us a sense of Again, we've seen a ton of
Speaker 1: reporting about job cuts. Morgan Stanley News out this week,
Speaker 1: we heard city maybe doing some things. What's your reporting showing?
Speaker 1: So you know, I I try to look at their
Speaker 1: actual numbers at the end of every quarter. And I've
Speaker 1: been tracked in this for about twelve years now, since
Speaker 1: the crisis. I started the first job spreadsheets during the crisis,
Speaker 1: because you know, during the crisis it was big. And
Speaker 1: a few years after our crisis, Europe went to the crisis,
Speaker 1: and then they were big. But then it kind of
Speaker 1: started slowing down into the fourteen fifteen. UM started reversing
Speaker 1: in sixteen um And and I still look at the
Speaker 1: actual numbers of employees the banks higher and the last
Speaker 1: time I took was what looked was the middle of
Speaker 1: the year. And and actually several banks they're up from
Speaker 1: where they were during the crisis. So in other words,
Speaker 1: they cut a big chunk, then they started adding. JP
Speaker 1: Morgan is pretty much even uh bamp Party, but pretty
Speaker 1: much even UM And and many banks, after many years
Speaker 1: of cutting, have stopped and started adding slowly, not not
Speaker 1: too much. But there are still those that need to
Speaker 1: keep cutting, like doa Bank. And if you look at
Speaker 1: today's story, the top bank cutting is dotche Bank. It's
Speaker 1: it wants to cut eighteen thou it also has a
Speaker 1: terrible record of job cuts, has announced ten thousand job
Speaker 1: cuts three years ago. How many cut three in three
Speaker 1: years so so, and they kept talking about that ten
Speaker 1: thousand and they managed to cut three. Now they say eighteen,
Speaker 1: so with that same rate, maybe they'll cut five if
Speaker 1: they can. They're they're really bad. Uning Credit, which is
Speaker 1: the biggest Italian bank, is also on the list. They
Speaker 1: said eight. They have a better record. They actually have
Speaker 1: cut a lot since the crisis. A lot of it
Speaker 1: is not necessarily Italy, but they un Credit has also
Speaker 1: gotten out of countries where where they just don't think
Speaker 1: they're core it's their core business anymore. So Italian and
Speaker 1: French banks have done that, um, getting out of markets
Speaker 1: that they don't think they really need to be in.
Speaker 1: UH and that reduces the headcount when you're no longer
Speaker 1: don't have a subsidiary there, but really has a terrible,
Speaker 1: terrible It's hard. I mean, I understand it's harder for
Speaker 1: European banks to cut people than it is for US banks.
Speaker 1: Some of the laws over there is that a challenge.
Speaker 1: It is anyway to get it. I know, like in
Speaker 1: Germany when they're talking about maybe merging with the Torch
Speaker 1: back with Commerce Bank, the big issue was how many
Speaker 1: employees of the merged bank would be cut, and that
Speaker 1: was one of the reasons I think that that, I
Speaker 1: mean they have they have labor laws that are much tougher.
Speaker 1: H France and Germany and Italy, they all have a
Speaker 1: tougher labor laws. Politically, it's very challenging. Um. I mean,
Speaker 1: Germany is the strongest economy in the world. How can
Speaker 1: you then go say I'm cutting thousands of jobs when
Speaker 1: you should be hiring thousands of people. Yet Germany is overbanked.
Speaker 1: It has too many banks. Um of them should be
Speaker 1: shut down. And I've been saying this, you know, for
Speaker 1: about ten years now. The whole chapter in my book
Speaker 1: that came out in two thousands eleven was about this,
Speaker 1: and and German um advisors, analysts, professors have been saying
Speaker 1: the same thing for twenty years, that they have too
Speaker 1: many banks, they need to cut them down, and they
Speaker 1: can't do it because politically it's a rich, economically doing
Speaker 1: great country. So they can't do it. So they there's
Speaker 1: always pressure not to. So Germany, not just labor laws,
Speaker 1: but politics also works against it. How about some of
Speaker 1: the big US investment banks, the JP Morgan's of the world,
Speaker 1: the banks of America. You know, as you walk on
Speaker 1: those trading floors, I grew up on a trading floor
Speaker 1: from a generation ago, where they're just packed massive floors,
Speaker 1: packed with people, people yelling, buying, selling all kinds of stuff.
Speaker 1: You go on a trading floor, it's a lot different way.
Speaker 1: Way fewer people, I guess, replaced with technology. So if
Speaker 1: these US investment banks and you're reporting our adding jobs,
Speaker 1: where are they? So they they are, You're right, trading
Speaker 1: floors are very quiet. For one thing, even if there
Speaker 1: are people, they're using instant chat programs instead of yelling
Speaker 1: at each other. Right that there's a big difference. I
Speaker 1: remember the days when you could go and people were yelling.
Speaker 1: But it's it's not it's been gone for a while.
Speaker 1: But they add they've been in many areas well. For
Speaker 1: one thing, banks need to invest in in programmers, technology
Speaker 1: people that's we can actually do the I mean. And
Speaker 1: and technology has become so important to every industry, including
Speaker 1: finance um and to compete with all these new fintech
Speaker 1: companies that could be a threat to them, big banks
Speaker 1: have been buying those some of those companies, really increasing
Speaker 1: the number of people who do technology for them so
Speaker 1: they can stay on top of the technology spectrum. And
Speaker 1: compliance has been a big boon for employment at Wall
Speaker 1: Street firms around the world, but especially as firms on
Speaker 1: the pressure from the FED to comply with new regulations
Speaker 1: which were even harsher than the rest of the world,
Speaker 1: added thousands and thousands of people to make sure compliance
Speaker 1: was really tip top. And now it is. But and
Speaker 1: and maybe Dave's stopped hiring more, but that really compensated
Speaker 1: for a lot of people who were leaving the trading
Speaker 1: rooms and and other sale positions other things. So those
Speaker 1: areas have have really made the difference interesting. Uh, yeaman
Speaker 1: on An thank you so much for your reporting here.
Speaker 1: Yamen is a senior finance writer for Bloomberg News. Joinings
Speaker 1: here in our Bloomberg Interact. Their broker studio continues to
Speaker 1: be a big story on Wall Street. The head count
Speaker 1: issues when there's pressure on lower interest rates and on
Speaker 1: fees um one of the areas, uh, you know, obviously
Speaker 1: that banks can look at is their head count. That
Speaker 1: is one of their biggest costs, and it walks in
Speaker 1: and out of the door every day their biggest assets.
Speaker 1: So when there is fee pressure, we certainly see time
Speaker 1: and time again the big investment banks and big financial
Speaker 1: institutions look to the head count none, you know, more
Speaker 1: so than in Europe, as you Yeaman was just reporting
Speaker 1: Deutsche Bank. You know, clearly it's been reported that they
Speaker 1: have a lot of cost cutting to do there and
Speaker 1: again they have to take a very hard look at
Speaker 1: headcount and we'll see how that plays out in Well,
Speaker 1: what a difference a year makes. You think back to
Speaker 1: a year ago, almost to the day markets were in
Speaker 1: a free fall, setting many setting lows on Christmas Eve.
Speaker 1: Compared that to this year where most asset classes, certainly
Speaker 1: on the risky side, have put up some stellar, stellar performance.
Speaker 1: Let's get a sense trying to put all of that
Speaker 1: in perspective. We welcome my next guest, Jim Vogel. He's
Speaker 1: an interest rate strategist for FT and Financial based in Memphis, Tennessee.
Speaker 1: Joining us on the phone. Jim, thanks so much for
Speaker 1: joining us, help us, you know, put into perspective what
Speaker 1: really the last twelve months have meant to the markets,
Speaker 1: starting with that free fall we saw back in you know,
Speaker 1: almost a little more than a year ago, to where
Speaker 1: we are today. How do you put that in perspective? Well,
Speaker 1: that was an enormous wake up call, not only for
Speaker 1: investors but also for the Federal Reserve, and so they
Speaker 1: responded almost immediately, and it really set the tone for
Speaker 1: all of two thousand and nineteen where the FED no
Speaker 1: longer was wed to a particular forecast, was prepared to
Speaker 1: react throughout the year. It's interesting, so as we think
Speaker 1: about it here today, how would your characterize kind of
Speaker 1: where we are in terms of the economy, in terms
Speaker 1: of the interest rate environment. How constructive are you kind
Speaker 1: of on the markets here? Given kind of this performance
Speaker 1: we've seen, we're looking for more of the same. In particular,
Speaker 1: um the um increases that we've seen in stocks should
Speaker 1: start moving to emerging market classes as well as the
Speaker 1: FED and the other sent large central banks stay on hold.
Speaker 1: That's very important. Meantime, we've got the possibility that that
Speaker 1: long term interest rates also stay within a band and
Speaker 1: that we don't get the kind of increase you would
Speaker 1: typically see as other risk assets begin to recover and
Speaker 1: continue to set new highs. It's interesting you think you
Speaker 1: talk about emerging markets as you know it's still I
Speaker 1: would say, kind of an a sector and asset class
Speaker 1: that a lot of folks are kind of split on.
Speaker 1: What makes you think about going that far out on
Speaker 1: the risk parameter, the risk curve, if you will, and
Speaker 1: think about emerging markets. The reason to consider is that
Speaker 1: UM investors are too focused on difficulties and individual markets
Speaker 1: and individual regions when they should be thinking about a
Speaker 1: five to six year horizon that allows a look for
Speaker 1: those to begin to catch up, become less commodity dependent,
Speaker 1: become more uh in terms of putting into work their workforce.
Speaker 1: That's going to be prized as developed markets continue to
Speaker 1: see a particular tight labor pool. How about it. It's
Speaker 1: interesting we think about the bond market again, another asset
Speaker 1: class had just a fantastic year. When we think about
Speaker 1: the credit markets, how do you think about allocation between
Speaker 1: perhaps investment grade, high yield, maybe even going out that
Speaker 1: you know, kind of the leverage loans side of the business.
Speaker 1: We've got an awful lot of forecasts by people on
Speaker 1: Wall Street that the leverage loan market is going to
Speaker 1: get a little thinner in terms of performance this year
Speaker 1: as they again focus on specific assets. But overall, there's
Speaker 1: an awful lot of money still waiting to go into
Speaker 1: that market and find bargains as they can, and we
Speaker 1: think that provides support both for leverage loans and for
Speaker 1: high yield debt as well. Then investment grade is all
Speaker 1: going to be a question of supply, and right now
Speaker 1: our forecasts are for modest growth and supply. But if
Speaker 1: we see large um corporations tapping the market consistently, you'll
Speaker 1: see investment grade begin to widen. How about the menus
Speaker 1: of a bond market, just to take it one step further,
Speaker 1: that there's a market where we've seen tremendous inflows of capital.
Speaker 1: We've seen you know, you know, all in returns of
Speaker 1: you know, proximately seven percent this year, which for the
Speaker 1: mini bond markets fantastic. Here is that a healthy move
Speaker 1: for this market? You think that market may have got
Speaker 1: in a little bit ahead of itself. It's a little
Speaker 1: bit of head but it's also it benefits an awful
Speaker 1: lot from uh tax policy, tax policy uncertainty in an
Speaker 1: election year, and we'll see that, of course continue in
Speaker 1: And also you've got an awful lot of domestic savings
Speaker 1: that wants to stay in fixed income because they realize
Speaker 1: that there's a after the last couple of years, there's
Speaker 1: a possibility that some of their big equity gains could
Speaker 1: pull back a little bit, and they want that core
Speaker 1: holding and fixed income as something of an anchor on
Speaker 1: the portfolio and that just hasn't changed for municipals at all,
Speaker 1: and nor should it next year. So, Jim, you've been
Speaker 1: in the markets a long time. You've seen these cycles,
Speaker 1: whether they're economic cycles and also political cycles. As you mentioned,
Speaker 1: this is a presidential election year we're coming into. How
Speaker 1: are you kind of factoring that into kind of your
Speaker 1: view about how much risk you may you want to
Speaker 1: take or what sectors you may want to have exposure
Speaker 1: to where you just kind of play that out and
Speaker 1: really don't pay too much attention to the uh clitical aspect. Well,
Speaker 1: the political aspect is important because right now the market's
Speaker 1: not focused on it, and if you look at two
Speaker 1: thousand and nineteen, it was a year when things sort
Speaker 1: of did not things did definitely did not go to plan,
Speaker 1: but then we recovered with moves by the Fed, by
Speaker 1: the ECB, and then investors sort of recalibrated. One of
Speaker 1: the things that's difficult to recalibrate for our political surprises
Speaker 1: and could bring that and if it ends up where
Speaker 1: you have a Democrat in the White House and a
Speaker 1: democrat Um controlled Senate, then you've got the possibility for
Speaker 1: a surprise that the markets simply not thinking about. And
Speaker 1: although policies may move slowly, investor fears can develop quite quickly. Absolutely, Jim, Jim,
Speaker 1: thanks so much for sharing us, sharing with us your
Speaker 1: thoughts here. Jim is an interestrate strategist for f TN
Speaker 1: Financial based in Memphis, Tennessee, joining us on the phone
Speaker 1: today giving us his thoughts kind of us asset classes.
Speaker 1: That sounds like Jim Vogel continues to be pretty constructive
Speaker 1: on the markets here, uh, in terms of taking uh
Speaker 1: you know, kind of being out there on the risk curve,
Speaker 1: not pulling back, trying to get a sense across uh,
Speaker 1: you know, strategist, fund managers, economist kind of their view.
Speaker 1: For time to check in with Bloomberg Opinion, we're joined
Speaker 1: by opinion columnist Tera La Chapelle. She covers entertainment and telecommunication.
Speaker 1: She joins us here on a Bloomberg Interactive broker's studio,
Speaker 1: and she is out with a stellar column today. It's
Speaker 1: really awesome. If you want to get a sense and
Speaker 1: really get a primer for the streaming business and what
Speaker 1: it's done to Hollywood, I highly recommend you read Terrorist
Speaker 1: Calm on the terminal end on Bloomberg dot com. So
Speaker 1: Tera again. I followed the media industry for about thirty years,
Speaker 1: and by far the biggest disruption that I've seen has
Speaker 1: been Netflix and the whole streaming concept, because it really
Speaker 1: changed the way people consume media, and Hollywood is trying
Speaker 1: in the media industries trying to react. Tell us what
Speaker 1: comes some of the key findings in your column. So
Speaker 1: I think what you know consumers see is how it's
Speaker 1: changed their own habits, how it's changed us some of
Speaker 1: our entertainment, the way we watch TV, the way creative
Speaker 1: decisions are made. But in the business world, what's been
Speaker 1: really interesting is it's driven multi billions of dollars worth
Speaker 1: of mergers. So you saw Disney and twenty one century
Speaker 1: Fox combined. So now Disney owns those studios. A T
Speaker 1: and T bought Time Warner and HBO via Common CBS
Speaker 1: have gotten together Charter the cable company about Time Warner Cable.
Speaker 1: So it just goes on and on and on, and
Speaker 1: you know, little by little, when you see one of
Speaker 1: those deals piece by piece, it doesn't really seem like
Speaker 1: that much of a transformation. But I think when you
Speaker 1: look at the long list of what's happened in the
Speaker 1: last decade, you start to see how drastically it really
Speaker 1: has changed, and how it's really because of kind of
Speaker 1: like one company, Netflix causing all of this. Yeah, there's
Speaker 1: a great graphic that you have in your column that
Speaker 1: it's called Disappearing Act, and basically it just compares the
Speaker 1: kind of the big media companies that were in the
Speaker 1: marketplace in two verses today and the list is almost
Speaker 1: half of what it was, you know, back in the day.
Speaker 1: So is there any sense of whether any of these
Speaker 1: media companies can really compete against Netflix? Well, it's funny
Speaker 1: because I was looking at the market caps for I
Speaker 1: think it was the ten biggest media giants right now,
Speaker 1: and all of those combined are still smaller than Apple.
Speaker 1: For example, Apple has got an over a trillion dollar
Speaker 1: market cap. So I think that tells you right there
Speaker 1: that the scale. It kind of puts it into perspective
Speaker 1: that even Disney, after doing all these deals, is still
Speaker 1: small compared to the tech giants. On the other hand,
Speaker 1: I think Disney is one of the sort of the
Speaker 1: best equipped to weather this, and maybe you feel the same.
Speaker 1: You know, they have the Disney Plus app, which had
Speaker 1: a really good launch. A lot of people seem to
Speaker 1: like it. They're really investing in content for streaming, more
Speaker 1: so than I would have expected for a company that
Speaker 1: has its profits so tied to traditional television. So I
Speaker 1: think some of these companies they do have a lot
Speaker 1: to prove, But when it comes to content, you know, HBO, Disney,
Speaker 1: they know great content and it's going to come down
Speaker 1: to that. So I think we'll see, you know, what
Speaker 1: happens over the next year. Maybe Netflix starts to feel
Speaker 1: some pressure of that. You mentioned a big tech and
Speaker 1: UM interested in what your sources are telling you, because
Speaker 1: we we've seen big technology comanies, whether it's Amazon or
Speaker 1: Apple or you know, Google with Facebook kind of I
Speaker 1: would car, you know, argues just kind of dipping their
Speaker 1: toe in the content business, in the video business. Is
Speaker 1: there any sense that maybe will see them really jump
Speaker 1: into the deep end of the pools relates to video programming. Yeah,
Speaker 1: I'm really curious to see what Apple does specifically, because
Speaker 1: I think right now it's been really vague. You know,
Speaker 1: It's like they have the Apple TV Plus app. The
Speaker 1: content didn't really get rave reviews, but they're spending a
Speaker 1: lot of money, but on the other hand, there's not
Speaker 1: really enough on there, you know, to replace television. For instance.
Speaker 1: You know, when you go onto Netflix, there's just a
Speaker 1: load of an endless scroll of things you and watch,
Speaker 1: whether you like all the content or not. Apple had
Speaker 1: like a handful of shows you could watch. So I
Speaker 1: think it'll be interesting to see, you know, if if
Speaker 1: this is successful for them and getting more people to
Speaker 1: buy Apple devices, maybe they go out and buy a studio.
Speaker 1: I know some other people disagree and think this is
Speaker 1: just sort of a loss leader for them, is a
Speaker 1: way to get more iPhones and iPads into people's homes.
Speaker 1: So I guess we'll see. But I always tend to
Speaker 1: air on the side of these companies like to do
Speaker 1: deals and it seems really important to them, and I
Speaker 1: think we're going to see more of those, any idea.
Speaker 1: One of the pet peeves that Tom Keene has is
Speaker 1: he thinks he's subscribing to like ten or eleven different
Speaker 1: streaming services. How many streaming services do you think the
Speaker 1: market can bear? Maybe? Yeah, I think that's going to
Speaker 1: have to change. I mean, most people can't afford to
Speaker 1: subscribe to multiple apps, you know, more than a handful.
Speaker 1: They get very expensive and especially with the cost of Internet,
Speaker 1: and I think what we'll see happen as companies like
Speaker 1: Comcast and Charter, for example, we'll try to bundle some
Speaker 1: of these services. I think they see that this is
Speaker 1: a big consumer pain point, and when there is something
Speaker 1: like that, there's opportunity of business opportunities. So I think
Speaker 1: some of these companies, including Amazon and Apple, will look
Speaker 1: to try to bundle these you know, not just put
Speaker 1: them all in one place where you can subscribe to them,
Speaker 1: but also pay in one spot and maybe pay one
Speaker 1: bill every month and not have to subscribe to them
Speaker 1: individually to get all the content you need. That kind
Speaker 1: of sounds like a cable company exactly. We're bringing that cable,
Speaker 1: but we're still seeing court cutting. We had Craig moffatt
Speaker 1: on from off at Nathanson on a couple of weeks
Speaker 1: ago when he was out with his research showing the
Speaker 1: court cutting is not only continuing, exection actually accelerating. So
Speaker 1: kind of it goes to your point, Tara, the move
Speaker 1: towards streaming it is in full force and probably accelerating.
Speaker 1: In Tara La Chapelle Entertainment and Telecommunications columns for Bloomberg Opinion,
Speaker 1: joining us here on a Bloomberg Interactive broker studio. You
Speaker 1: can read more on this and other stories from Bloomberg Opinion.
Speaker 1: They have great stuff every day. Really makes you think
Speaker 1: you can go to Bloomberg dot com slash opinion, or
Speaker 1: you can go to the terminal by typing in O, P,
Speaker 1: I N GO. And I think the real issue is
Speaker 1: Tara pointed out in her column, is streaming wars are
Speaker 1: heating up. They really kind of art in earnest arguably
Speaker 1: in twenty nineteen. But they're really going to accelerate here. Uh,
Speaker 1: We're gonna see how Disney plays it out. We're gonna
Speaker 1: see Time Warner, A T and T time Warner come
Speaker 1: to the marketplace with a more robust product, Comcast with
Speaker 1: their peacocks. So it's only going to get more aggressive
Speaker 1: out there. So get ready. Take a look at the
Speaker 1: housing market here is a really been fairly strong over
Speaker 1: the years, and you would expect that with interest rates
Speaker 1: so low. Get a sense of kind of how things
Speaker 1: are playing out across the country in the housing market.
Speaker 1: We welcome a good friend. Logan Mohatshami, senior loan officer
Speaker 1: for AMC Lending Group based in Irvine, California. So Logan,
Speaker 1: just give us a kind of a snapshot of kind
Speaker 1: of what you're seeing in the housing market right here
Speaker 1: as we end, well, lower mortgage rates did the or thing.
Speaker 1: Um you know, last year, you know, we had a
Speaker 1: monthly supply spike in new home UH, in new homesale sector.
Speaker 1: People were thinking housing might have peaked. But as soon
Speaker 1: as the tenure yield started going down, really by May
Speaker 1: of this year, the housing market just got back to
Speaker 1: its normal traditional cycle trend, very slow and steady. The
Speaker 1: existing home sales market, even though it's going to be
Speaker 1: slightly negative year to day, has been keeping sales above
Speaker 1: five million for some time now. But really the most
Speaker 1: important factor for twenty nineteen going into twenty is that
Speaker 1: the monthly supply for new home sales have come back down.
Speaker 1: New home sales are up. That's good for the economy.
Speaker 1: That's good for housing. That means housing starts construction job.
Speaker 1: That right there was really the story for twenty nine
Speaker 1: and it should continue into as long as the ten
Speaker 1: year yield doesn't get near two point six or higher. UH,
Speaker 1: the new home sales sector and the and the existing
Speaker 1: home sales sector should have legs for slow and steady growth,
Speaker 1: look and give us a sense of new home struction.
Speaker 1: And we've heard there's some some reports that it's just
Speaker 1: not that much supply, uh, kind of at the lower
Speaker 1: end of the market. Is that something that you're seeing.
Speaker 1: Here's what I disagree with everybody in America. What is
Speaker 1: an affordable house that a builder can build? Right? If
Speaker 1: an affordable house is either a rental, multi family construction
Speaker 1: or a condo. Because if you're asking for the builders
Speaker 1: to build affordable housing, they'll never do it right because
Speaker 1: they're a bigger, more expensive home. So I'm not a
Speaker 1: big fan of this wall they have to build for
Speaker 1: the lower end. Anything they build on the single family
Speaker 1: sign is going to be more expensive. So the builders
Speaker 1: have long term issues in terms of are they going
Speaker 1: to be able to provide a product that the home
Speaker 1: buyer can afford or is willing to pay for? And
Speaker 1: I think that's a multi decade issue for them out here.
Speaker 1: So I'm not a big fan of using the wall.
Speaker 1: They're just don't build enough lower end. Anything they build
Speaker 1: on an apple to apples basis is going to be
Speaker 1: more expensive than this massive existing homesale market that just
Speaker 1: has more. So why cheaper homes and more spread out geographically.
Speaker 1: But as long as new home sales can grow because
Speaker 1: housing starts are low, and new home sales so you
Speaker 1: can get that slow and steady growth and that's good
Speaker 1: for the economy because it just means more construction jobs,
Speaker 1: means more domestic spending out here. But it all revolves
Speaker 1: around can new home sales grow from this level on?
Speaker 1: So give us a sense, logan, any regional changes are
Speaker 1: areas that we should be concerned about because we think about,
Speaker 1: you know, going back to the financial crisis and the
Speaker 1: kind of the O seven period, O six oh seven period,
Speaker 1: and we really saw some real estate markets that you know,
Speaker 1: even you know obviously with hindsight, you know, whether it's
Speaker 1: Miami or you know, Las Vegas really kind of feeling
Speaker 1: seriously overheated. Do we have any of those issues in
Speaker 1: the marketplace here? Here's the thing. Price doesn't necessarily mean
Speaker 1: it overheated housing sector. I mean, you can look at California.
Speaker 1: California is always considered a hot housing market. Sales have
Speaker 1: gone nowhere for ten years. Really if you look at
Speaker 1: the data when interest rates rise, those areas, the coastal areas,
Speaker 1: the high cost metros, those are the areas that only
Speaker 1: get hit. We saw this in We saw this in
Speaker 1: nineteen except every single time the ten year old has
Speaker 1: gone lower, lower mortgage rates bring those demand back up
Speaker 1: to par. So you always want to be careful of
Speaker 1: hot coastal priced areas out here. But if you look
Speaker 1: at the housing bubble, existing home sales was at five
Speaker 1: point seven two million, or excuse me, seven point two
Speaker 1: six million, and then new home sales were over a
Speaker 1: million back then. So we have no overheated demand markets
Speaker 1: out there in America right now. Purchase application data is
Speaker 1: only a levels here. But we're always gonna have an
Speaker 1: issue that when mortgage rates get the four point seven,
Speaker 1: five or five percent, the high cost areas do get hit,
Speaker 1: supply increases and the market slows down a little bit.
Speaker 1: It's just not enough velocity to be a crash. Nothing,
Speaker 1: nothing like that should happen in so Loogan. Give us
Speaker 1: a sense of what's going on in the residential mortgage
Speaker 1: market in terms of quality. Are we seeing, you know,
Speaker 1: still a focus on quality, because again, another concern coming
Speaker 1: out of the financial crisis was, you know, the lenders
Speaker 1: had a role to play in kind of the overheating
Speaker 1: housing market. Where are we in kind of underwriting standards
Speaker 1: right now? In credit quality? Would you say the best
Speaker 1: home loan profile ever in US history? You know, that's
Speaker 1: that's that's the one benefit that we got from the
Speaker 1: financial crisis that we just lend to the capacity for
Speaker 1: people to own the debt. It's not a tight people
Speaker 1: think a lending is tight. Americans, absolutely not. It's still
Speaker 1: very liberal. But the people that get homes actually make money,
Speaker 1: they can handle the debt payments. All it is is
Speaker 1: late cycle lending will happen at some point. Just means that,
Speaker 1: you know, people that buy homes late in the year
Speaker 1: for a very low down payment, when they go into
Speaker 1: a recession and they lose their jobs, those are the
Speaker 1: only at risk homeowners when the next recession happens. But
Speaker 1: everything else looks excellent, fixed flow debt payments, a lot
Speaker 1: of nested equity, and there's no exotic debt structures left
Speaker 1: in the system, not once they all kind of went
Speaker 1: away in So we have a decade as absolute decade
Speaker 1: of quality homeowners. And now we're going into the biggest
Speaker 1: and most prominent demographic patch ever recorded in US history.
Speaker 1: Ages thirty two are the biggest right now in America,
Speaker 1: first time median home buyer age at thirty three, So
Speaker 1: you have replacement buyers in this decade where we were
Speaker 1: just working through that level from two thousand to two
Speaker 1: thousand nineteen. So the fundamentals of housing look solid. It's
Speaker 1: just not going to be a record breaking booming hot
Speaker 1: cycle that some people might forecast. But you've got the
Speaker 1: demographics and you've got the quality homeowners this time, two
Speaker 1: things that weren't with us in two thousand. Hey, Logan,
Speaker 1: thanks so much for journeys. We appreciate it. Logan Logan
Speaker 1: Multi Shami, Senior loan Officer for AMC Lennon Group based
Speaker 1: in Irvine, California, giving us a a very constructive view
Speaker 1: of the US housing market. Thanks for listening to the
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