Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
Speaker 1: my co host Matt Miller. Every business day, we bring
Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
Speaker 1: at Blueberg dot com slash podcast. Boy, I'm looking at
Speaker 1: w t I crude oil pushing a hundred twenty bucks
Speaker 1: a barrel. It's pretty unbelievable. Pretty bike, that's that's the
Speaker 1: way to go. Yeah, I'm the e bike is the
Speaker 1: way to go, all right, Tom Johnston, he's a partner
Speaker 1: Blue Horizon. I'm sorry, Tim Johnson, Thank you very much,
Speaker 1: Tim Johnson, partner Blue Horizon. Blue Horizon b n E
Speaker 1: E t F is listed on the NASDAC. I'm sorry.
Speaker 1: N y s E b n E is the ticker
Speaker 1: Blue Horizon New Energy Economy. I want to talk new
Speaker 1: energy because I think about oil barrel, I'm thinking about solar,
Speaker 1: I'm thinking about when I'm thinking about e bikes. Tim,
Speaker 1: thanks so much for joining us here. Talk to us
Speaker 1: about what you're doing Blue Horizon New Energy Economy. What
Speaker 1: is the e t F that you guys have and
Speaker 1: kind of what's the focus. Yeah, thank you for having me.
Speaker 1: So we have an index e t F, as you said,
Speaker 1: which is called Blue Horizon New Energy Economy one Index,
Speaker 1: and what we do is we cover five key segments
Speaker 1: across the new energy thematic, which we then subdivide into
Speaker 1: twenty five sub segments with a hundred name holding And
Speaker 1: what we're trying to do is actually reflect this transition
Speaker 1: you just talked about w t I and what's going
Speaker 1: on and what we would consider the old energy world.
Speaker 1: But we all know, as you said, we were transitioning
Speaker 1: into this new energy economy. The bikes is one part
Speaker 1: of of that, but of course there's a whole range
Speaker 1: of different things including solar and generation all the way
Speaker 1: through to how we consume that energy that we see
Speaker 1: as being an important investment thematic going forward for the
Speaker 1: decade become and beyond. So who are the holdings here, um,
Speaker 1: in this e t F And are they all public companies? Um?
Speaker 1: Are they all you know, clean energy? What are we
Speaker 1: talking about? Yeah? Absolutely so they're all public companies. We
Speaker 1: have a rigorous process where we go by, uh, these
Speaker 1: five sub segments which cover emobility, energy storage, performance materials,
Speaker 1: energy distribution, and energy generation. And what we do is
Speaker 1: we have a team that we've brought together from industry
Speaker 1: with expertise in these different various backgrounds. And what we
Speaker 1: do is we evaluate companies that are listed not just
Speaker 1: in North America but but around the world to first
Speaker 1: of all, evaluate them from first principle's perspective, to understand
Speaker 1: the underlying principles of their business and to be able
Speaker 1: to rate them accordingly. But then we also look at
Speaker 1: things like liquidity and other aspects which are important to
Speaker 1: build together effectively. What it is a fund that reflects
Speaker 1: this new energy transition in a in a very comprehensive way.
Speaker 1: All right, So, Tim, I'm all in on new energy,
Speaker 1: alternative energy. You know, I get it. But boy, it's
Speaker 1: six dollars a gallon for gas. I'm like, crank up
Speaker 1: the the drills, crank up the refineries. Let's get some
Speaker 1: more supply on the market. You can't do it that fast,
Speaker 1: I guess. So are you sensing you know, in this
Speaker 1: environment where now, Tim, with with these higher energy prices
Speaker 1: a greater incentive for companies for consumers to embrace alternative
Speaker 1: how are you thinking about that because wait for me,
Speaker 1: it kind of goes both ways. Yeah, no, absolutely, and
Speaker 1: it is a cyclical cycle. Right with with any new
Speaker 1: technology or emerging industries, you're going to have waves where
Speaker 1: you're seeing the growth of these segments across the economies
Speaker 1: around the world. And so what we see is, you know,
Speaker 1: you know, over the last couple of years, we've seen
Speaker 1: a real portion terms of all let's say, the old
Speaker 1: energy We've had a lot of background issues associated with
Speaker 1: the conflicts, but also the broader things that are affecting
Speaker 1: the economy around COVID, etcetera. That have put pressure on pricing,
Speaker 1: which includes the old energy commodities. But what we know
Speaker 1: is that the world is shifting. The world is shifting
Speaker 1: away from this old energy economy to this new energy economy,
Speaker 1: and it's happening right now. It's happening under our feet.
Speaker 1: And so what we see is that whilst the old
Speaker 1: energy economy is is important and relevant today and we're
Speaker 1: seeing high prices as you said, in the oil sector,
Speaker 1: we do believe that this will all swing back and
Speaker 1: it will come back to favor these new energy companies
Speaker 1: that are really going to benefit from our entire shift
Speaker 1: in terms of how this economy works. What do you
Speaker 1: make of the recent moves in the price. I mean
Speaker 1: we're looking at right now, be any um, but we
Speaker 1: ban up at thirty in the thirties, but almost thirty
Speaker 1: four at the beginning of last year. What's going on
Speaker 1: with price? Yeah? Absolutely so. One of the benefits of
Speaker 1: having this broad range hundred name index is if you
Speaker 1: look across our volatility across the segment against the piers,
Speaker 1: but if you also look at the maximum draw down,
Speaker 1: you'll see that we generally outperform out piers in this sector.
Speaker 1: And so what we say is that this is a
Speaker 1: great part of your long term portfolio. This isn't something
Speaker 1: that we recommend people trade in and out on on
Speaker 1: on a regular basis. It's more about if you believe
Speaker 1: in this transition to this new energy world, this new
Speaker 1: energy economy, then this is a great cornerstone for your
Speaker 1: for your portfolio as you look to transition through different
Speaker 1: segments and different macro backdrops. Tim just real quick thirty seconds.
Speaker 1: I'm heading down to Texas next week. Is the US
Speaker 1: ahead or behind kind of the rest of the world
Speaker 1: in terms of some of these new energy initiatives? Yeah,
Speaker 1: The US is desperately trying to catch up, and so
Speaker 1: they've made you quite good strides. Over the last couple
Speaker 1: of years, we've seen an increase in regionalization of supply chains,
Speaker 1: and that will continue to benefit the US. The US,
Speaker 1: of course, is a major consumer of these materials and
Speaker 1: consumer of the end products which which rely on these materials,
Speaker 1: and so we see that the US will continue to
Speaker 1: enhance its position, but they still have a long way
Speaker 1: to go to catch up with other parts of the world.
Speaker 1: All right, Tim, Thanks very much, Tim Johnson, their partner
Speaker 1: at Blue Horizon. The E t F ticker is B
Speaker 1: and E and you can check it out listed on
Speaker 1: the n y C and find out the details on
Speaker 1: your Bloomberg. Well, we're gonna get some CPI data Friday,
Speaker 1: and I think the question or the issue for many
Speaker 1: investors is is just going to show us that inflation
Speaker 1: has or maybe is peeking. And that's kind of what
Speaker 1: I think some folks are looking for. Our next guess
Speaker 1: isn't so sure and a want chief US economists for
Speaker 1: Bloomberg Economics, uh, and I think so much for joining
Speaker 1: us here. When we see the CPI data on Friday,
Speaker 1: what do you expect to see. Are you looking for
Speaker 1: signs of of peak inflation? Yeah, so I'm looking for
Speaker 1: signs that services inflation is slowing and that core good
Speaker 1: inflation is um at zero or even um you know negative,
Speaker 1: because in order for inflation you're a year to be
Speaker 1: peaking soon. We really need to see the core that's
Speaker 1: inflation coming down nearly fat otherwise are my team's expectation
Speaker 1: is that we likely could see at the new peak
Speaker 1: in July and potentially another new peak in September. Wow,
Speaker 1: that's is that consensus. I just got a message from
Speaker 1: every core I s I that says, um, you know,
Speaker 1: after a spike in inflation that goes down as fast
Speaker 1: as it went up. Yeah, I mean right now, the
Speaker 1: inflationary pictures fairly mixed. It's very difficult to read because
Speaker 1: from one hand you have core versus headline issues. So
Speaker 1: headline is not speaking because gasoline prices are surging right
Speaker 1: now and food prices continue to search. Services inflation continued
Speaker 1: to search. But then uh, core inflation, the good on
Speaker 1: the good side, we see see thanks flowing. You know,
Speaker 1: targets earning yesterday tells earning forecasts yesterday tells you that
Speaker 1: demand for for good, it's cooling rapidly. And then on
Speaker 1: the other hand, you also have the pc EU deflator,
Speaker 1: which is the FED Preferred inflation indicator, and that is
Speaker 1: even cooling faster than the c p I, the core
Speaker 1: PC I mean, because they have smaller weights on a
Speaker 1: lot of stuff that's driving those fast the CPI inflation
Speaker 1: like shelter, like gasoline and used cars, right, which we
Speaker 1: all we all three categories we expect to be driving
Speaker 1: CPI inflation in the next few months. So and you know,
Speaker 1: for the headline number, which I think a lot of
Speaker 1: people obviously will focus on, I mean, it's driven by
Speaker 1: the stuff that just consumers have to deal with every day,
Speaker 1: as you mentioned, rising gasoline prices, rising prices at the supermarket,
Speaker 1: and there's really nothing that the Federal Reserve can do
Speaker 1: to really impact those areas, is that right? Yeah, But
Speaker 1: the such objective right now is to pre empt inflation
Speaker 1: expectations to an anchor, because if expectations an anchored, then
Speaker 1: they're going to have to high create way higher in
Speaker 1: order to generate the same amount of this inflation compared
Speaker 1: to when expectations is not an anchored, and unfortunately often
Speaker 1: times it is gasoline places in food prices that dry expectations. Furthermore,
Speaker 1: another thing that the FED should be trying to preempt
Speaker 1: is the wage price spiral, and that could be generated
Speaker 1: by indexation of cost of living to CPILE. It's tied
Speaker 1: to CPI, not PCD and and that so what they're
Speaker 1: trying to do is not to lower those immediately lower
Speaker 1: those prices, gas and food prices. Indeed, it's really to
Speaker 1: pre empt expectations from it. Okay, by the way, Anna,
Speaker 1: the FED is just one piece, and I know the
Speaker 1: Biden administration would like us to believe that it's totally
Speaker 1: the FED responsibility and only the FED can deal with inflation.
Speaker 1: But clearly there are some things government can do. Gina
Speaker 1: Armando was talking about lifting some tariffs recently. What do
Speaker 1: you think Washington can and should do to help fight
Speaker 1: rising prices? Yeah, I think one immediate policy or that
Speaker 1: they could do is to make any more policy mistake.
Speaker 1: And this is about to come across a palace, but
Speaker 1: I think the student debt forgiveness, for example, the ten
Speaker 1: thousand dollars student net forgiveness, is going to be inflationary
Speaker 1: if they do so, especially as it's going to be
Speaker 1: universal and only capping a couple of making three hundred k.
Speaker 1: I estimated that, based on the advantised stations schedule of
Speaker 1: the students loan, that that it could generate an extra
Speaker 1: seventeen hundred dollars perpetually each year for a couple of
Speaker 1: making you know, uh, three k. Um, it's um, it's
Speaker 1: it's huge amount. But it won't it won't. It won't
Speaker 1: be given to any couples make making more than three k. Right.
Speaker 1: And these people who we think of as um, you know,
Speaker 1: rich people, although we've seen surveys lately showing that a
Speaker 1: lot of them are still living paycheck to paycheck. They
Speaker 1: have the highest student debt, right, but also they have
Speaker 1: been earning a lot more. These are we're talking about
Speaker 1: lawyers and PhD in economic and you know, people who
Speaker 1: could who could pay off. And I estimate that this um,
Speaker 1: this the student death forgiveness, could be contributing an additional
Speaker 1: of newer point five percentage point to inflation and this
Speaker 1: year or next year, this year to next year. So
Speaker 1: given where inflation is at right now, we certainly don't
Speaker 1: need another you know, fifty basis points higher inflation. Well,
Speaker 1: at least you've got the uh, uh, the the rescinding
Speaker 1: of the salt tax acting in the opposite direction, right,
Speaker 1: because a lot of these people live in Connecticut, New
Speaker 1: Jersey and California, and uh they're getting hit hard by
Speaker 1: state and local taxes which they can no longer deduct. Well,
Speaker 1: but that that effect had been in trains and it
Speaker 1: still hurts Anna. I limit that E shows Yeah, so Anna,
Speaker 1: you know one of the things that you know, I
Speaker 1: need to remind myself of as we think about inflation
Speaker 1: is this really is a global issue. It's not just
Speaker 1: the U S issue. And there's true is that typical
Speaker 1: anda do we typically see when the US is in
Speaker 1: a significantly inflationary environment that we see it in the
Speaker 1: rest of the world as well. Well. The things that
Speaker 1: the fact that all all many countries are seeing inflationary pressure,
Speaker 1: it means there's a common shock across the world, and
Speaker 1: that is the supply shock. But the issue is that
Speaker 1: US inflation is uniquely high um before the war in Ukraine,
Speaker 1: the US inflation is running about three percentage point higher
Speaker 1: than the rest of the advanced economy UH in the O, E,
Speaker 1: C D countries, which means that in US there's a
Speaker 1: specific demand component to the cost of our high inflation,
Speaker 1: which the Europe does not have for example. All right, Anna,
Speaker 1: thank you so much for joining us. Really appreciated. Annawan,
Speaker 1: chiefs economist for Bloomberg Economics. Check out this resume. I
Speaker 1: was just gonna say, I mean, PhD from the Economics
Speaker 1: and University of chicagoy're pretty good. They're pretty good. They
Speaker 1: have a pretty good program, and they like numbers. There
Speaker 1: be an economics and statistics statistics from Berkeley also pretty
Speaker 1: good where she worked before Bloomberg. Former Federal Reserve Principal economist,
Speaker 1: former Chief International Economist on White House Council of Economic Yeah,
Speaker 1: that's not bad. Former Deputy Director in the Office of
Speaker 1: International Economic Analysts at the U. S. Treasury, and former
Speaker 1: international economists. I also I love reading your research, So
Speaker 1: thank you very much for joining us, and I hope
Speaker 1: next time you come into New York City that join
Speaker 1: us in the studio here at seven thirty one Lexington Avenue,
Speaker 1: because we are so happy that you are working for
Speaker 1: us and along chief US economist for Bloomberg LP. Here's
Speaker 1: the story going across the Bloomberg Manley call is pretty cool.
Speaker 1: Mike Novigrats, the founder and chief executive of Galaxy Digital
Speaker 1: Holdings says that two thirds of the hedge funds that
Speaker 1: invest in cryptocurrencies will fail as a consequence of the
Speaker 1: current market downtown downturn. Not very bullish on the crypt
Speaker 1: on our next guest and you and he says, and
Speaker 1: we can get into this with our guests, but it's
Speaker 1: because the Central Bank has taken the punch bowl away.
Speaker 1: They have, I know, and that's kind of gonna be
Speaker 1: an issue on our next guest. I think might have
Speaker 1: some thoughts on that time. Or Hyatt, CEO of PGM.
Speaker 1: That's the investment arm of Prudential Insurance Company. They Prudential
Speaker 1: is a lifelong resident New Jersey. They are the pride
Speaker 1: of Newark, New Jersey. We love to folks at Prudential
Speaker 1: there and what they do in Jersey time or thanks
Speaker 1: so much for joining it at PGIM. What do you
Speaker 1: guys think about crypto? What are you doing there? So
Speaker 1: you know, I think I agree with Agravats, but I think,
Speaker 1: but I think there is probably some money to be
Speaker 1: made by quantitage funds in alpha generation because there is
Speaker 1: so much speculative fear of missing out retail money flowing
Speaker 1: into crypto currencies that if you on the other side
Speaker 1: of that, you can generate alpha. Uh. And maybe it's
Speaker 1: only one third of hedge funds to do that, But
Speaker 1: we've taken more of a lens, just a cold hard
Speaker 1: look at the data because there's just so much mythology
Speaker 1: and uh and you know social media frenzy around this.
Speaker 1: We took a cold hard look at the data and said,
Speaker 1: if you take bitcoins now a teenager, it's been around
Speaker 1: for over twelve years. If you look at the data,
Speaker 1: particularly the last four years, you know, early early entrance
Speaker 1: had a great chance to make a lot of money
Speaker 1: with this. What does the data say And as a
Speaker 1: long term investment, should you hold cryptocurrencies in your portfolio
Speaker 1: as an institutional, as a sophisticated investor, Our answer is no.
Speaker 1: The data speaks volumes against that idea based on everything
Speaker 1: we see to date and what's going to happen in
Speaker 1: the near future. Why, you know, one of the encouraging
Speaker 1: things for crypto balls has been UM adoption by institutional
Speaker 1: investors and more and more banks are opening trading desks,
Speaker 1: more and more banks are looking at custody UM and
Speaker 1: it seems like the ratio of retail to institutional continues
Speaker 1: to be bullish. Do you think that that's going to
Speaker 1: turn around? Now? I think it's going to turn around.
Speaker 1: You know. Again, the trick here to be a good
Speaker 1: active investor is to look at the data. I will
Speaker 1: say yesterday we were looking at the e t f
Speaker 1: s and year to date, among the entire universe of
Speaker 1: e t s, which is a big universe. Now, um
Speaker 1: crypto e t s are the second biggest losers with
Speaker 1: draw downs. The only e t s that have lost
Speaker 1: more are Russia e t f s. So if you
Speaker 1: go all the way back to even twenty nineteen and
Speaker 1: you look at the risk adjusted return of cryptocurrency is,
Speaker 1: given the draw down, given the volatility, given all the
Speaker 1: turbulence that they have, they aren't better than bonds and stocks.
Speaker 1: If you look at the correlations, which is what institutional
Speaker 1: investors do, Is it giving me diversified return with equities,
Speaker 1: with real estate, with go old? Definitely not. It's not,
Speaker 1: you know for the first five seven years. It did
Speaker 1: for the last five years. It is giving you risk
Speaker 1: on levered access to the same risk you're getting elsewhere.
Speaker 1: You're not getting un correlated returns. Is it a safe
Speaker 1: haven you know, gold has five thousand years of history
Speaker 1: and intrinsic uses in industry and jewelry that does make
Speaker 1: it a decent long term inflation head never a great
Speaker 1: shot term, but a good long term inflation hedge in
Speaker 1: the only incidence of inflation, and we boy, we have
Speaker 1: it in spades. Now Bitcoin is moving in the opposite
Speaker 1: direction to infish, and it's not acting as a safe haven.
Speaker 1: It's not acting as a hedge. It didn't act as
Speaker 1: a safe haven in in COVID, so it's not really
Speaker 1: playing the digital goal role. It's not really But maybe
Speaker 1: that's just now. I mean, if you look at maybe
Speaker 1: four thousand, nine hundred and ninety three years ago, gold
Speaker 1: had like a five year spot of correlation. So it's
Speaker 1: always easier to say that these are the sort of
Speaker 1: early pangs of a new asset class, and you know
Speaker 1: it's going to be volatile and it's going to stabilize.
Speaker 1: But twelve years is a long time guy. So there's
Speaker 1: a lot of data now that that's showing it's not true.
Speaker 1: And I think I see two other headwinds coming down
Speaker 1: the road. One is regulators are getting smart around this
Speaker 1: and finally catching up. You know, regulation lags by several years.
Speaker 1: We've seen it in tech, we're now seeing it with cryptocurrency.
Speaker 1: They're gonna be big regulatory headwinds from China all the way.
Speaker 1: They can just ban it and they have, you know,
Speaker 1: the mining of cryptocurrency. But regulators around the world are
Speaker 1: catching up on this and that's going to be a
Speaker 1: big headwind. And second, I think maybe it's two three
Speaker 1: years down the road, maybe it's five. But when you
Speaker 1: have the digital dollar, the digital or the digital staring
Speaker 1: and all those stuffs are working CBDCs, why would I
Speaker 1: Why would I buy a stable coin that has liquidity risk,
Speaker 1: that has credit risks with unclear reserves when I can
Speaker 1: buy the digital dollar. Now all the infrastructure that cryptocurrencies
Speaker 1: have built, that is going to be where I think
Speaker 1: the value is. It's in the picks and the shovels,
Speaker 1: not in the goal. Cd d C is central bank
Speaker 1: digital currency. Okay, shown off? Now all right, so Matt,
Speaker 1: we've been calling out some of the resumes of some
Speaker 1: of our guests today. Listen to this guy, Tamar PhD
Speaker 1: in economics from Oxford University. They're pretty good, but they're
Speaker 1: pretty good. Right now, he's in a radio station talking bitcoin,
Speaker 1: how the mighty have fallen? I mean when you look
Speaker 1: at like a I guess when I think about it,
Speaker 1: and I spent so long on the Wall Street and
Speaker 1: I figured it like if Wall streets into it, then
Speaker 1: it's kind of real, you know. And uh, And I
Speaker 1: just don't see the Jamie Diamonds of the world embracing crypto.
Speaker 1: He hates it. He hates it. And I don't see
Speaker 1: a crypto trading desk on Goldman Sacts. They might have one,
Speaker 1: I don't know, but I have one in the works.
Speaker 1: And look, it doesn't matter if Jamie Diamond and Warren
Speaker 1: Buffett and everybody else over you know five doesn't like crypto.
Speaker 1: That's not necessarily speaking that that's the question. How do
Speaker 1: you do you need the validation of Greater Wall Street
Speaker 1: too for the class you know as as you know,
Speaker 1: we manage over one point for treating and asclets, we
Speaker 1: don't need their validation. But but we do look for
Speaker 1: certain things in any new asset class. Right First, is
Speaker 1: there a stable correlation without their asset classes? B? Is
Speaker 1: there a source of value that has some sort of
Speaker 1: intrinsic purpose beyond speculation and speculation could continue you know,
Speaker 1: retail investor. Scan might make money for a while, but
Speaker 1: is there a true source of value and that is
Speaker 1: there a stable regulatory regime or the regulatory headwinds. Bitcoin
Speaker 1: and other cryptocurrencies don't meet any of that. But we
Speaker 1: are bullish because I don't want to end on a
Speaker 1: variation note. We are bullish around the innovations that accidentally
Speaker 1: happened in the creation of bitcoin. And I'm talking technology
Speaker 1: with the blockchain, blockchains, smart contracts, tokenization of real assets.
Speaker 1: I told you that real value. You're preaching to the
Speaker 1: choir here, tam or Matt has been all over this
Speaker 1: team or high thank you so much for joining us.
Speaker 1: He's the CEO of p Jim joining us in our
Speaker 1: Bloomberg and our actor Broker studio, talking crypto as it
Speaker 1: continues to evolve as potentially an ASI class for some.
Speaker 1: All right, let's talk real estate, residential real estate again.
Speaker 1: Matt's been in the market. I am now out of
Speaker 1: the market. I prefer my position. But let's talk to
Speaker 1: someone who does this stuff for I mean Kenneth Leone,
Speaker 1: research director at CFR A. Ken has housing in this country,
Speaker 1: has it peaked? So there's an incredible housing shortage. We're
Speaker 1: talking millions since the housing crisis over ten years ago.
Speaker 1: That's not going to go away. And housing probably has
Speaker 1: peaked near term because of the pressure from rising interest
Speaker 1: rates mortgage rates above five it's hurting the product categories
Speaker 1: of entry level home buyers also move up categories. And
Speaker 1: the only areas on the recent National Association Realtors Existing
Speaker 1: inventory sales that was positive was the seven hundred fifty
Speaker 1: twill a million dollar category and above a million. So
Speaker 1: we are seeing moderation. Yes, I think we've seen a peak.
Speaker 1: So uh. By the way, Ken, we've been giving people's
Speaker 1: resumes out today. So you were imaging direct to a
Speaker 1: bear Stearns Senior VP at Lehman Brothers. Um, you were, uh,
Speaker 1: the global director of Equity Research at McGraw hill Financial.
Speaker 1: You know what you're doing, You know what you're talking about.
Speaker 1: What do you expect from mortgage rates going forward? Because
Speaker 1: we're hearing about a FED that could raise at fifty
Speaker 1: basis point increments, you know, possibly for three or four meetings.
Speaker 1: Maybe they're gonna raise uh, they're gonna raise rates like
Speaker 1: by three percent by the time they're done here. What
Speaker 1: are we gonna see in terms of mortgage rates. Yeah,
Speaker 1: it's a it's a great question. And and most importantly,
Speaker 1: the mortgage market is dan about sixty on originations, whether
Speaker 1: it's purchased or refi refights debt, and the FED quantitative
Speaker 1: tightening the mortgage back securities. You know they're gonna be
Speaker 1: peeling off thirty five billion in September, half of that
Speaker 1: starting in June. That's the macro to your reference to
Speaker 1: Peers Sterns or Lehman. But you know, generally the markets
Speaker 1: will stay liquid, and I think for mortgage rates, h
Speaker 1: it's likely that uh not even the Mortgage Bankers Association,
Speaker 1: which is the bowl case for mortgage rates, is going
Speaker 1: above five point two in either two or twenty three.
Speaker 1: To answer your question, I think we're gonna see five
Speaker 1: and a half six percent on a mortgage rate. Can
Speaker 1: you mentioned supply of homes and kind of what I've
Speaker 1: heard really over the years is the housing industry there.
Speaker 1: I mean, the homebuilders are really good at building those McMansions.
Speaker 1: There's big profit margins in for the builders there on
Speaker 1: those types of homes. But what they have not been
Speaker 1: building it's kind of the entry level home here. Is
Speaker 1: that changing at all? Do you think it has changed,
Speaker 1: but you know, again, the backdrop how this market is
Speaker 1: different than when we hit the housing crisis back in
Speaker 1: OH eight or O nine is that UM, home builders
Speaker 1: learn their balances are strong, they have debt maturities that
Speaker 1: really becomes more measurable two or three years out on maturities,
Speaker 1: and uh, they have great liquidity, so they're not speculating.
Speaker 1: They also change the mix of their land inventory to
Speaker 1: be about six to seventy option, which means they can
Speaker 1: cancel it for a small fee and the rest is
Speaker 1: own lot. Totally different picture than the spectacltive side, both
Speaker 1: from the home builders as well as home buyers that
Speaker 1: were subprime. PYCO scores are very high today, UM, and
Speaker 1: that's why I use the word moderation from the peak
Speaker 1: for the housing market. All right, Ken, great, great stuff.
Speaker 1: We appreciate getting your thoughts. Can we own research directored
Speaker 1: cfr fr A. Thanks for listening to the Bloomberg Markets podcast.
Speaker 1: You can subscribe and listen to interviews with Apple Podcasts
Speaker 1: or whatever podcast platform you prefer. I'm Matt Miller. I'm
Speaker 1: on Twitter at Matt Miller three on Fall Sweeney, I'm
Speaker 1: on Twitter at pt Sweeney before the podcast. You can
Speaker 1: always catch us worldwide at Bloomberg Radio