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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along

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Speaker 1: with Jonathan Farrell and Lisa Brownwitz Jay Ley. We bring

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Speaker 1: you insight from the best and economics, finance, investment, and

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Speaker 1: international relations. Find Bloomberg Surveillance on Apple podcast, SoundCloud, Bloomberg

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Speaker 1: dot com, and of course on the Bloomberg Terminal. Gary Gunsler,

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Speaker 1: SEC Chairman and someone of uncommon academic acuity, someone even

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Speaker 1: the Republicans have said, boy, does this seem to be

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Speaker 1: the right guy at the right time. Interviewed by the

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Speaker 1: Gentleman from Baltimore, David Rubinstein peer to peer interview and

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Speaker 1: the gentleman from Baltimore joins us, sound did you guys

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Speaker 1: know each other? Did you know the families years ago?

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Speaker 1: We grew up in the same part of northwest Baltimore,

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Speaker 1: but he's younger than me and so I really didn't

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Speaker 1: know him. It's uh, it's interesting to see the path

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Speaker 1: of Gary Gensler now to this point, David of an

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Speaker 1: SEC facing absolutely stunning innovation. It is just mind boggling

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Speaker 1: to me, the challenges ahead. What did you learn about

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Speaker 1: Gensler's approach to these innovative challenges? Gary Gensler for those

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Speaker 1: who don't know him, is a really really smart person,

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Speaker 1: an academic superstar at at Penn, but also professor at

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Speaker 1: M I T and also a very young partner at Goldman.

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Speaker 1: Sachs previously headed the CFTC, now the SEC. The real

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Speaker 1: challenge he has is does he need to go to

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Speaker 1: Congress to get additional authority to regulate things like cryptocurrencies

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Speaker 1: or can he do it with the existing authority? And

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Speaker 1: I suspect he will use existing authorities because trying to

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Speaker 1: get legislative approval for some of the things he wants

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Speaker 1: is going to take forever, and the markets may move

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Speaker 1: well past what Congress already decides to do. So I

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Speaker 1: think he's going to do things administratively and see what

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Speaker 1: the impact is. David tom was framing innovation as a positive.

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Speaker 1: Does Gary Gensler view it as largely a positive that

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Speaker 1: you do have so much money going into crypto assets? Well,

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Speaker 1: I think he thinks that innovation is good. But you

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Speaker 1: have to make certain that the SEC's job is to

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Speaker 1: make make it clear to everybody what the facts are.

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Speaker 1: They're not saying this is a good investment or this

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Speaker 1: is a bad investment. They're saying here's all the facts

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Speaker 1: you should have before you make a decision. But sometimes

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Speaker 1: now people are not being quite accurate in his view

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Speaker 1: about what the facts are, or technology is pushing people

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Speaker 1: to make certain investment decisions they might not otherwise make

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Speaker 1: if they really knew all the facts. So that's what

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Speaker 1: his concern is. How do you police this at a

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Speaker 1: time when the technology is moving more quickly than often

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Speaker 1: regulators can keep up, and frankly, when the brightest minds

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Speaker 1: are attracted to the biggest paychecks, seeing more in Silicon

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Speaker 1: Valley or Wall Street than in Washington, d C. That's

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Speaker 1: a real good question. There's no great answer for it,

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Speaker 1: because the truth is you can make staggering sums on

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Speaker 1: the outside out winning the regulators, and the regulators are

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Speaker 1: playing catch up. So I think all you can really

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Speaker 1: do is make a couple of examples of people who

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Speaker 1: have made some mistakes and hope that will trickle down

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Speaker 1: to other people. But it's impossible to catch all the

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Speaker 1: innovations that are going on that probably the SEC isn't

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Speaker 1: happy with. David an overarching question, and I say this

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Speaker 1: with immense affection for say a Screenberg Bear Sterns with

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Speaker 1: the buy tickets in one pocket in the cell tickets

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Speaker 1: in the other pocket were now to robin hood and

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Speaker 1: all have we gone too far? Have we gone too

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Speaker 1: far in a search for depth of market and very

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Speaker 1: narrow spreads. It maybe benefits some, but our mothers too

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Speaker 1: early to say. There's no doubt that younger people are

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Speaker 1: coming into the market and trading day traders, our traders

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Speaker 1: and minute traders, and I don't know that they're fully

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Speaker 1: informed about what they're doing. But also there haven't been

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Speaker 1: gigantic losses for many people yet because the markets have

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Speaker 1: been very robust. Now if if all of a sudden

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Speaker 1: the markets go down, we'll see as as Warren Buffett

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Speaker 1: likes to say, who's swimming without a bathing suit on? Well,

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Speaker 1: tell me again about what Ginstler's approach is just in

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Speaker 1: the next twelve months to dool Is the immediacy for

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Speaker 1: his slow Motion agency. He's asking his staff to come

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Speaker 1: up with ideas and the words. The way he operates

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Speaker 1: at the CFTC and that the SEC is he has

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Speaker 1: a lot of smart staff people. He asked them to

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Speaker 1: deal with the challenges he asked him to deal with

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Speaker 1: and come back with the recommendations. So he's waiting for recommendations,

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Speaker 1: but I suspect at some point he will deal with

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Speaker 1: some of the challenges like cryptocurrency. Most recently, after my

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Speaker 1: interview with him, he made a speech about private equity,

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Speaker 1: indicating that he thought there were some issues that have

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Speaker 1: to be dealt with with the disclosure of private equity

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Speaker 1: fees and so forth, and we'll see whether he regulates

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Speaker 1: in that area. There's no doubt that he has a

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Speaker 1: lot of authority. There's no doubt he's very smart and

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Speaker 1: determined to do something as you did at the CFCC,

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Speaker 1: So I suspect his tenure at the SEC will be

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Speaker 1: one of activism. And there's no doubt that he's highly

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Speaker 1: respected in the White House and highly respected in Congress.

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Speaker 1: I have to say, David tom was talking about younger

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Speaker 1: traders going into crypto assets, and I got a text

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Speaker 1: for my twelve year old son this morning saying, Mom,

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Speaker 1: we should buy some ethereum. It's going up fast and

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Speaker 1: we'll continue. I do wonder, David Rubinstein, in your tenure

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Speaker 1: in the markets, in your decades, do you think that

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Speaker 1: investing has gotten more or less treacherous for investors. Well,

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Speaker 1: the example you just gave as an example of reminds

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Speaker 1: one of Joe Kennedy when he was getting his shoes

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Speaker 1: shine and the the person shining his shoes was talking

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Speaker 1: about stock tips. That's when he realized too many people

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Speaker 1: in the market and he sold everything. When you're twelve

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Speaker 1: year old is dealing with stock market uh gyrations. You

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Speaker 1: have to wonder whether that's the top of the market,

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Speaker 1: but there's no doubt that, uh the market is much

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Speaker 1: more complicated today than it ever was, and technology is

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Speaker 1: giving people certain advantages over other people and when they trade,

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Speaker 1: and what the SEC is trying to do is to

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Speaker 1: make sure and everybody has an equal playing field. It's

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Speaker 1: not easy to do because the technology is changing hour

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Speaker 1: by hour. So I think people have to really know

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Speaker 1: what they're doing when they trade in the markets and

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Speaker 1: recognize that it's great time to make money recently. But

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Speaker 1: at some point the markets do go down and then

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Speaker 1: they're gonna be some losses, and I suspect at that

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Speaker 1: point you'll see investigations. David, Thank you so much, David

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Speaker 1: Rubinstein with us, of course, and it is a pure

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Speaker 1: to pure conversation. They've been wonderfully eclectic this year. Jordan

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Speaker 1: Rochester joins us here on G ten, G five, maybe

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Speaker 1: even G three Foreign exchange, of course, and number Jordan,

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Speaker 1: let me get the dollar out of the way, because

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Speaker 1: Pharrell's focused on the sterling, because he's got to get

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Speaker 1: on the golf stream and come home. Jordan, I want

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Speaker 1: to on the dollar. There's a persistency here. Are we

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Speaker 1: at key levels of dollars strength or do we need

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Speaker 1: to go ever stronger to find a critical point? Well,

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Speaker 1: the question is do you think more can be priced

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Speaker 1: into the FED? Do you think US inflation keeps rising?

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Speaker 1: Do you think US growth out performance keeps going? Does

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Speaker 1: the consumer, does the services p M I is the

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Speaker 1: I M S in U s keep going up and

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Speaker 1: stay at these high levels. And so far all of

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Speaker 1: those things keep happening, whilst the rest of the world,

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Speaker 1: especially China, having a slowdown to and that feeds through

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Speaker 1: to Europe, and that leads to a European manufacturing slowdown,

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Speaker 1: which we're seeing as well. Until those things change, I

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Speaker 1: don't see a reason why the dollars should weaken, and

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Speaker 1: so that's why we're still along the dollars here, expecting

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Speaker 1: more of this appreciation to go. So Jordan's help out

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Speaker 1: a lot of people with this one. The Bank of

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Speaker 1: England seems to be on track to hike before the

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Speaker 1: Federal Reserve, yet sterling isn't doing much. In fact, you're

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Speaker 1: short sterling. Can you make sense of that for our audience?

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Speaker 1: Jordan's It depends who you're selling sterling against. So I'm

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Speaker 1: doing against the dollar because I think it's a nice

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Speaker 1: trade off between the US and the UK both kind

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Speaker 1: of about performing with inflation rising, with both both have

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Speaker 1: central banks looking to raise rates. But I think the

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Speaker 1: FED could have a bit more priced in than the

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Speaker 1: Bank of England in the medium to long run because

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Speaker 1: the UK has got a few problems with Brexit ahead.

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Speaker 1: When it comes to the Euro, because the European central Bank,

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Speaker 1: they've had so pretty much ten years of low interest rates,

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Speaker 1: quantitative easing, low yields, they're unlikely to move as fast

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Speaker 1: with the ination that's going on right now, and so

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Speaker 1: that's why the pound can strengthen against the Euro because

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Speaker 1: that currency doesn't have a center bank willing to take

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Speaker 1: action against this inflation, where against the dollar it's tip

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Speaker 1: for tap. The US pricing for the two year on

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Speaker 1: the FED is pretty much the same for the Bank

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Speaker 1: of England and until that changes, until there's more priced

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Speaker 1: in for medium to long term growth and higher interest

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Speaker 1: rates in the UK, I don't see a reason why

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Speaker 1: cable should material go higher, Jordan. This is what I

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Speaker 1: struggle with. I talked about this at the top of

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Speaker 1: the AD, the growth inflation mix in the UK. If

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Speaker 1: you ask people about it. TV Securities wrote about it

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Speaker 1: in their outlook. There's a feeling that it's worse than

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Speaker 1: the UK than the U S. But I look at

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Speaker 1: the year ahead calls for inflation, for growth for unemployment,

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Speaker 1: John and they're very very similar. What do you make

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Speaker 1: of the growth inflation mix in either country. Well, in

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Speaker 1: the US you've got all of the excess savings. The

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Speaker 1: UK also has those excess savings, so it is quite

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Speaker 1: finely balanced. But if you look at the data for

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Speaker 1: the UK, there are there are problems with the supply

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Speaker 1: chain that are on top of the global situation. So

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Speaker 1: getting around ten to fifteen percent less ships arriving at

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Speaker 1: UK ports because of the checks involved with Brexit, you're

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Speaker 1: having all of the damage done from that sort of side.

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Speaker 1: And then when it comes to the UK, consumer retail

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Speaker 1: cells in the UK haven't gone up anywhere, nothing like

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Speaker 1: the U S. So US retail sales have been much

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Speaker 1: much stronger than the pre pandemic trend. UK not so

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Speaker 1: much so until that dynamic changes, until we see reasons

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Speaker 1: for the UK consumer to go out and shop a bargain.

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Speaker 1: I don't think you've got to see that change that

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Speaker 1: narrative between the UK and the US. Jordan's this is

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Speaker 1: a fascinating moment at a time when Steve Rattan and

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Speaker 1: we were talking about his New York Times out ed.

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Speaker 1: Basically he was saying, nobody should be surprised that modern

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Speaker 1: monetary theory essentially ended up with inflation. However, is what

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Speaker 1: you're saying, that perhaps some of the stimulus in the

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Speaker 1: United States actually gave consumers the spending power to keep

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Speaker 1: the dollars strong, to basically keep the currency underpinned by

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Speaker 1: economic momentum at a time when other nations, particularly the

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Speaker 1: United Kingdom, is not seeing that well. To begin with,

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Speaker 1: the plan was for FX markets all that all that

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Speaker 1: stimulus was debt induced, so lots of issuance from the U. S. Treasury.

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Speaker 1: The world had way more dollars, and we saw massive

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Speaker 1: dollar weakness last year. Remember going to queue four your

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Speaker 1: a dollar really went higher, but that was on the

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Speaker 1: idea from all the U S economists that the FED

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Speaker 1: wouldn't consider raising rates aggressively. That's changing, and I think

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Speaker 1: once you introduce rate hikes into the equation in the

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Speaker 1: future pricing of the curve, that sort of balance of

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Speaker 1: payments argument for dollar weakness just fell through because investors

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Speaker 1: seek yield, and the yields rising US much faster than Europe,

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Speaker 1: So that's been part of that driver. And with monetary theory,

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Speaker 1: if you get taxes, sorry, if you get inflation, the

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Speaker 1: way to do it is taxes. And because of Congress,

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Speaker 1: because of the sort of type line with mention of cinema,

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Speaker 1: the idea of big tax rising in the US have

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Speaker 1: really softened as well. So that's why we're seeing more

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Speaker 1: being priced in for inflation, more being priced in for

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Speaker 1: rate hikes. Jordan's what do you make of Terry Wiseman's

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Speaker 1: an argument that a perceived politicization of the Federal Reserve

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Speaker 1: chair nominee will actually weaken the dollar potentially lose credibility

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Speaker 1: in the US Central Bank. The Fed's not gonna lose credibility,

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Speaker 1: but it's kind of been political all along. So the

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Speaker 1: US president has always had a choice of the FED chair,

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Speaker 1: so that is that element. And remember President Trump used

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Speaker 1: to tweet about Janet Ellen, so that there's always been

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Speaker 1: that element of politics involved all central banks that we're

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Speaker 1: talking about here. The FED included our independence, so it

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Speaker 1: doesn't erode their credibility. They are trying to do the

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Speaker 1: job right. But yeah, there is an element of politics

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Speaker 1: when it comes to the choice of FED chair, and

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Speaker 1: we can't ignore that it's chosen by a politician. Jordan

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Speaker 1: found a question. What's more likely Askton Fella avoids relegation

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Speaker 1: or the Bank of englond heights interest rates next month?

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Speaker 1: They're both, They're both likely. Come on, that's really unfair

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Speaker 1: the villa. The villa is going to survive and you

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Speaker 1: think we get it hi next month. To Jordan's we

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Speaker 1: definitely get a hike. I think they mean it's pretty

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Speaker 1: much priced, so that's not really a big call. The

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Speaker 1: question is do we see more rate hikes than what's

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Speaker 1: priced him for the rest of the year, And that's

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Speaker 1: getting tough. That's why we're short sterling because there's a

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Speaker 1: hundred and fifteen basis points of rate hikes pretty much

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Speaker 1: every quarter. You get a twenty five basis point rate

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Speaker 1: hike in that FX curve. That's kind of that's kind

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Speaker 1: of okay, but any anything more I doubt it. So

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Speaker 1: that's why the risk reward is the bank thing might

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Speaker 1: do less. Later on, Jordan, thank you sir as always.

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Speaker 1: Jordan Rochester joining us now to kick off the equity

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Speaker 1: conversation is Ben Laidler, global market strategist. That eat out

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Speaker 1: of London, Ben, Santa came early this year? Is that

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Speaker 1: your take? Absolutely? November December generally the strongest months of

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Speaker 1: the year, but so called sort of Santa rally, we've

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Speaker 1: been here. We are the middle of November. We're up

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Speaker 1: from or nearly from the sell off in in September.

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Speaker 1: So I think this has been very frontloaded U And

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Speaker 1: you know, we the year and we never thought we

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Speaker 1: were going to get here, was sitting on our card already,

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Speaker 1: So you know, I I think markets are very well supported.

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Speaker 1: I see, you know, got upside for next year. I

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Speaker 1: would just you know, caution that, you know, maybe we're

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Speaker 1: not just going to keep rallying h inexorably here. I

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Speaker 1: mean we've we've I think we've already had the Saints

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Speaker 1: rally and we're sitting on great gains and we I

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Speaker 1: would take a little bit of consolidation the modest Ben Laidler,

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Speaker 1: let me make clear, folks, No one and Global Wall

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Speaker 1: Street called for three years of double digit return like

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Speaker 1: Ben Laylor, He's not surprised we're up twenty five. Ben,

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Speaker 1: what is the double digit call for two thousand twenty

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Speaker 1: two or do we finally get to a single digit reality.

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Speaker 1: I think we're gonna come pretty close to double digits.

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Speaker 1: And just to put that in perspective, I mean, that

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Speaker 1: would be your fourth straight year, and I think you've

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Speaker 1: only ever seen that once in the last sort of

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Speaker 1: fifty or sixty years, So it really we're heading into

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Speaker 1: uncharted territory. But I think it's very very doable, and

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Speaker 1: I think you know, the to drive us here, I

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Speaker 1: think earning his expectations is just just still far too low.

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Speaker 1: You know, in the US A globally there's seven eight

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Speaker 1: cent for next year. I think you probably get double

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Speaker 1: that when all is said and done. I think, m

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Speaker 1: you know, GDP growth is nearly double long term averages.

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Speaker 1: I think we're seeing the resilience of corporate margins. We

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Speaker 1: have a lot of sectors, a lot of these reopening

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Speaker 1: sectors that still have a long way to bounce back here,

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Speaker 1: and and I think valuations are going to come down

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Speaker 1: a bit, but I still think they're going to stay

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Speaker 1: white higher than sort of long term averages. I think

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Speaker 1: bond deals are going to go up a bit, but

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Speaker 1: there's still a fraction of you know, previous some previous recoveries.

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Speaker 1: And you've still got this huge text tech sector which

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Speaker 1: just you know, deserves to have very high valuations. Then

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Speaker 1: you said, take consolidation and a little bit around the edges.

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Speaker 1: Given the fact that we've already front loaded this rally,

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Speaker 1: where are you taking consolidation right now? You know, I

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Speaker 1: think our you know, tech, I guess would be the

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Speaker 1: obvious place. I mean when neutral tech X time sort

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Speaker 1: of very well here. I mean, we had this sort

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Speaker 1: of everything rally, which you know, I take a lot

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Speaker 1: of comfort from, right because I think, you know, it's

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Speaker 1: not the sort of one legged stool we had sort

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Speaker 1: of last year. But you know, I've been sort of

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Speaker 1: putting back a little bit on tech. I think that

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Speaker 1: I think the near term story is this very strong

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Speaker 1: growth reacceleration that that we're having. I mean, you've you've

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Speaker 1: seen it in the payrolls numbers. You sat in the

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Speaker 1: retail sales numbers yesterday, You've seen it in the I

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Speaker 1: S M. I mean, you look at the FED now

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Speaker 1: cast GENP now cast for the fourth quarter is nearly

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Speaker 1: nine percent growth. We had two percent last quarter. Uh So,

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Speaker 1: I think, you know, you need to be sort of

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Speaker 1: pulling back on on sort of defensive things that aren't

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Speaker 1: exposed to that and really focusing on the you know,

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Speaker 1: the sort of cyclicals, the commodities, the industrials, the segments

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Speaker 1: of the market, the reopeners that are really sensitive to

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Speaker 1: this this very strong growth recovery that we're seeing. And

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Speaker 1: I would also just say the markets past this huge

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Speaker 1: stress test. I mean, we're all worried about inflation, we're

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Speaker 1: all worried about the FED tapering, We're all worried about

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Speaker 1: interest rates, and we've just had tapering an ouse when

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Speaker 1: we've had a big repricing of the FED, and markets

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Speaker 1: are you know, markets are yawning and many Your position

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Speaker 1: for a repeat of Q one this year is that

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Speaker 1: it is that the playbook. I think so, yes, I mean,

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Speaker 1: I think you know, it's small cap, it's it's the

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Speaker 1: reopening stocks, it's the sort of more cyclical side of

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Speaker 1: the economy. You know, who's got the most sensitivity to

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Speaker 1: this growth rebound that we're seeing. And I, you know,

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Speaker 1: I still don't think it's priced. I mean, just more broadly,

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Speaker 1: I mean the earning ex numbers are just far, far

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Speaker 1: too low. You know, even after what is it the

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Speaker 1: fourth quarter of you know, very strong earning speaks. We've

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Speaker 1: just had the optimism of Ben Laidler of et O. Ben,

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Speaker 1: thank you, sir. Right now, Sarah House joins us for

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Speaker 1: senior economist at Wells ferg and we're going to rip

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Speaker 1: up the script and get her in trouble. Sarah is

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Speaker 1: family formation a dominant changer within the American economy. So

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Speaker 1: I think the demographics are absolutely important to the overall

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Speaker 1: housing outlook. So we see millennials are just entering their

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Speaker 1: prime home buying years. You couple it with the pandemic

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Speaker 1: and it sets us up for a strong demand to

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Speaker 1: remain in train for years, especially just given the state

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Speaker 1: of overall household balance sheets. You know, the excess saving

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Speaker 1: that we've seen over the past year, that that helps

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Speaker 1: a lot of millennials pay down debt, getting a better

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Speaker 1: position for home buying. So it's absolutely important to the

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Speaker 1: housing now look going forward, nicely done, but if they

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Speaker 1: can't afford the damn house because of down payment, is

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Speaker 1: more money than that? God, what do they do? How

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Speaker 1: do you perceive house prices reacting that most of America

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Speaker 1: can't find an entry point? So I think what we're

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Speaker 1: seeing is is that this that the onslaught of activity

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Speaker 1: that we're seeing. Okay, so maybe we didn't see a

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Speaker 1: jump and starts this particular month, but you do have

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Speaker 1: more homes under construction than at any time we've seen

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Speaker 1: since nineteen four. You still have more permits coming down

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Speaker 1: the pike, and so yes, we're seeing construction activity can

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Speaker 1: change right right now by supply, but there is supply

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Speaker 1: coming down the pipeline in in subsequent years, and so

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Speaker 1: I think that's going to help the affordability pictures for

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Speaker 1: for home buyers in the coming year. So, yes, the

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Speaker 1: prices recently have gotten I think, away from many households,

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Speaker 1: but I do think that we'll see some some greater

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Speaker 1: balance over over the next year or two that should

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Speaker 1: help that household formation and help that home buy an activity.

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Speaker 1: On the flip side, Sarah, it's been really cheap to

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Speaker 1: get a mortgage. It's been really cheap to borrow money

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Speaker 1: for consumers, especially with longer term rate expectations as low

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Speaker 1: as they are. You pointed to this, and you think

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Speaker 1: that this is an aberration, that this is wrong, the

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Speaker 1: market is getting this incorrectly. Are you seeing a material

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Speaker 1: increase in the policy rate? The end policy rate akin

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Speaker 1: to what we heard from Bill Dudley of three to

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Speaker 1: four percent. So that's not our base case right now.

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Speaker 1: So we do think that the Fed will begin raising

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Speaker 1: the Fed funds rate by the third quarter of next year.

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Speaker 1: I think the fact that they get going a little

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Speaker 1: earlier than they have sketched out, I think that will

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Speaker 1: help prevent that terminal rate perhaps reaching as as high. So,

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Speaker 1: of course, the sooner the Fed gets started, that has

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Speaker 1: the potential where they won't have to ultimately raise policy

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Speaker 1: to such a restrictive stance. So right now, in our

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Speaker 1: forecast that goes out through three we have about a

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Speaker 1: hundred basis points of tightening. Now, given what happens with inflation,

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Speaker 1: how tight the labor market gets, that that could obviously change,

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Speaker 1: But for right now, um, given the mix of demand

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Speaker 1: and what we see happening with that mix of spending

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Speaker 1: going forward and the path of inflation. We think that

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Speaker 1: the FED still doesn't have to be too aggressive in

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Speaker 1: this environment, or at least they won't be too aggressive

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Speaker 1: Sarah if they don't raise rates. Though until the beginning

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Speaker 1: of is Morgan Stanley and TV Securities has been saying,

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Speaker 1: is that a policy error? It's hard to say, because

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Speaker 1: you know, while we I think everyone's pretty familiar with

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Speaker 1: the risks in terms of if inflation does stay at

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Speaker 1: the current levels and we don't get the moderation that

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Speaker 1: I think many people many people still expect. But again,

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Speaker 1: we have this, uh, we have a great likelihood that

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Speaker 1: you're going to see demand slow over next year, that

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Speaker 1: the mix is going to shift more towards services. That's

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Speaker 1: going to relieve a lot of the pressure that we're

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Speaker 1: seeing in goods inflation, which has really been the aberration

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Speaker 1: in this environment where goods inflation is out of forty

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Speaker 1: year high, services inflation is still well within its its

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Speaker 1: range of the past thirty years. And so I think

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Speaker 1: that mix is going to help. So the FED to

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Speaker 1: to the extent that they get going too soon, they

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Speaker 1: might overcool demand which which is already set set to

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Speaker 1: slow and help alleviate some of these inflation pressures. Sir,

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Speaker 1: Maybe an unfair question, but I want to take a chance.

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Speaker 1: With the dynamics of this economy. How do you model

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Speaker 1: when we flip to actual inflation adjusted wage growth? Where

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Speaker 1: is that? Where is that soon quarters years out? So

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Speaker 1: it's probably going to be somewhere in the back half

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Speaker 1: of two. So we have inflation saying pretty elevated through

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Speaker 1: the first half of next year. So we actually have

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Speaker 1: CPI hitting seven percent in the first quarter. So's eye

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Speaker 1: popping as that six percent handle was. It's it's going

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Speaker 1: to get worse before it gets better. But I think

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Speaker 1: by the time you get to the second half of

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Speaker 1: the year again, inflatian comes down. I think wage growth

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Speaker 1: remains fairly strong. Given that on net we're going to

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Speaker 1: see a tighter labor market than I think the FED

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Speaker 1: and many others expected. That's going to keep wage growth

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Speaker 1: fairly strong and help those real earnings turn positive again. Sarah,

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Speaker 1: I want to end the conversation where we began it

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Speaker 1: talking about the housing market and the incredible growth in

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Speaker 1: the supply of homes that will be coming online, and

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Speaker 1: it raises a question about I don't want to say bubbles,

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Speaker 1: but this question of froth and whether perhaps this period

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Speaker 1: has ignited not only supply in the pipeline, but also

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Speaker 1: just elevation, elevated valuations that cannot be sustainable. Can we

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Speaker 1: avoid a crash? Can we avoid a policy error? That

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00:21:54,040 --> 00:21:55,639
Speaker 1: is what a lot of people are worried about with

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00:21:55,680 --> 00:21:59,920
Speaker 1: the FED. So I think in terms of the housing markets,

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00:22:00,040 --> 00:22:03,160
Speaker 1: so the price the rate of price increases we've seen

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00:22:03,160 --> 00:22:06,400
Speaker 1: over the past year, or they're up nearly it certainly

436
00:22:06,600 --> 00:22:08,760
Speaker 1: is concerning when we just look at it in a

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00:22:08,800 --> 00:22:11,920
Speaker 1: sure sheer price growth, you know, so it's it's surpassing

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00:22:11,960 --> 00:22:14,720
Speaker 1: the rate of growth that we saw in the bubble years.

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00:22:14,920 --> 00:22:19,080
Speaker 1: But I think the quality of buyers is very different

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00:22:19,080 --> 00:22:20,720
Speaker 1: when you look at the credit scores, and so I

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00:22:20,760 --> 00:22:23,399
Speaker 1: think that helps this picture. You mentioned the low rates.

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00:22:23,440 --> 00:22:26,480
Speaker 1: That helps in terms of raising the actual prices of

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00:22:26,560 --> 00:22:29,480
Speaker 1: these homes because it helps mitigate that the effect of

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00:22:29,520 --> 00:22:32,280
Speaker 1: that on on payments and so um, you know, I

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00:22:32,280 --> 00:22:35,399
Speaker 1: think there's there's definitely some some concerns out there in

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00:22:35,440 --> 00:22:37,800
Speaker 1: the housing market, but I think is um, you know,

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00:22:37,880 --> 00:22:40,680
Speaker 1: we're we're not at this point thinking that it's it's

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00:22:40,720 --> 00:22:42,760
Speaker 1: going to add and in the ugly way that we

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00:22:42,800 --> 00:22:45,760
Speaker 1: saw maybe in in the in the mid two thousand's

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00:22:45,920 --> 00:22:48,679
Speaker 1: Sarah tremendous as a white Senter house there of Wells Fargo.

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Speaker 1: It could get worse before it gets bets out. This

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00:22:52,440 --> 00:22:56,159
Speaker 1: is the Bloomberg Surveillance Podcast. Thanks for listening. Join us

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00:22:56,280 --> 00:22:59,960
Speaker 1: live weekdays from seven to ten AMI Eastern on Bloomberg

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Speaker 1: Radio and on Bloomberg Television each day from six to

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Speaker 1: and international relations. And subscribe to the Surveillance podcast on

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Speaker 1: Apple podcast, SoundCloud, Bloomberg dot com, and of course on

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Speaker 1: the terminal. I'm Tom keene In. This is Bloomberg