1
00:00:02,720 --> 00:00:15,840
Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

2
00:00:18,640 --> 00:00:22,079
Speaker 2: Hello and welcome to another episode of the Odd Lots podcast.

3
00:00:22,160 --> 00:00:24,400
Speaker 3: I'm Jolle Wisenthal and I'm Tracy Alloway.

4
00:00:24,520 --> 00:00:28,000
Speaker 2: Tracy, are you good about like frequent flyer miles and

5
00:00:28,040 --> 00:00:31,880
Speaker 2: hotel rewards and cash back and using your credit card

6
00:00:32,040 --> 00:00:34,360
Speaker 2: to get like good seats at the US Open like

7
00:00:34,400 --> 00:00:38,120
Speaker 2: all the dining? Are you good about maximizing that stuff?

8
00:00:38,280 --> 00:00:39,120
Speaker 3: Nope, I am not.

9
00:00:39,680 --> 00:00:42,520
Speaker 4: I'm trying to be better, you know, I'm finally signing

10
00:00:42,560 --> 00:00:44,720
Speaker 4: up to a bunch of frequent flyer programs and things

11
00:00:44,760 --> 00:00:48,960
Speaker 4: like that. But in general, I am not a points strategy.

12
00:00:49,200 --> 00:00:50,880
Speaker 4: Some people get really into it.

13
00:00:51,080 --> 00:00:51,239
Speaker 5: Now.

14
00:00:51,280 --> 00:00:53,800
Speaker 2: I do not have a very busy life. I do

15
00:00:53,840 --> 00:00:58,720
Speaker 2: not have mental energy towards, you know, maximizing points or

16
00:00:58,760 --> 00:01:01,000
Speaker 2: learning about the newest cars. It's like, oh's this card

17
00:01:01,000 --> 00:01:03,480
Speaker 2: worth a four hundred dollars fee because I can get

18
00:01:03,640 --> 00:01:06,640
Speaker 2: upgraded to Platinum faster this year. I do not want

19
00:01:06,680 --> 00:01:08,720
Speaker 2: to think about that stuff. I'm not that interested. But

20
00:01:08,800 --> 00:01:12,080
Speaker 2: I get the impression that means I'm probably paying for

21
00:01:12,120 --> 00:01:15,319
Speaker 2: someone who is or something like that, or maybe you know,

22
00:01:15,319 --> 00:01:17,720
Speaker 2: I'm paying these fees on my credit cards or these

23
00:01:17,720 --> 00:01:20,679
Speaker 2: interchange fees, et cetera. Maybe I'm leaving money on the

24
00:01:20,720 --> 00:01:22,039
Speaker 2: table by not doing it.

25
00:01:22,200 --> 00:01:22,440
Speaker 5: I don't know.

26
00:01:22,480 --> 00:01:24,399
Speaker 2: I find credit cards to be a weird business, Like

27
00:01:24,560 --> 00:01:27,240
Speaker 2: I don't really know what visa does relative to say,

28
00:01:27,240 --> 00:01:30,120
Speaker 2: the bank that issues a visa card, et cetera, to

29
00:01:30,120 --> 00:01:31,640
Speaker 2: know how they slice them. I don't know any about

30
00:01:31,640 --> 00:01:32,200
Speaker 2: credit cards.

31
00:01:32,520 --> 00:01:35,560
Speaker 4: It's a very opaque business, for sure, and it's a

32
00:01:35,600 --> 00:01:38,680
Speaker 4: weird business. I would say, like it's competitive, but also

33
00:01:38,760 --> 00:01:41,760
Speaker 4: it's like not, you know, like everyone's kind of doing

34
00:01:41,800 --> 00:01:44,960
Speaker 4: the same thing in many ways, so we should talk

35
00:01:44,959 --> 00:01:47,960
Speaker 4: about it. It's also, I imagine, kind of sticky, in

36
00:01:48,000 --> 00:01:50,360
Speaker 4: the same way that deposits at banks are sticky.

37
00:01:50,440 --> 00:01:52,960
Speaker 3: We spoke with Joe Obote about that a while back.

38
00:01:53,000 --> 00:01:56,160
Speaker 2: So I don't cycle through them a bunch and stuff

39
00:01:56,200 --> 00:01:59,040
Speaker 2: like that. And there's so much credit card advertising. I

40
00:01:59,040 --> 00:02:00,760
Speaker 2: don't know what's good, bad or whatever.

41
00:02:00,800 --> 00:02:01,000
Speaker 5: I know.

42
00:02:01,120 --> 00:02:03,520
Speaker 2: Yeah, Look, I use my credit card as a payments

43
00:02:03,520 --> 00:02:05,760
Speaker 2: card because I don't really I don't carry a balance

44
00:02:05,840 --> 00:02:07,480
Speaker 2: from month to month, so I don't I don't know,

45
00:02:07,480 --> 00:02:09,520
Speaker 2: I think my interest rates or whatever. I pay it

46
00:02:09,560 --> 00:02:11,960
Speaker 2: off at the end of every month because I just

47
00:02:11,960 --> 00:02:14,360
Speaker 2: basically use it for payments et cetera. So I just

48
00:02:14,400 --> 00:02:17,280
Speaker 2: don't know much about them, but they're a huge, major

49
00:02:17,320 --> 00:02:19,800
Speaker 2: consumer financing source. Yeah, and every want to talk about

50
00:02:19,800 --> 00:02:22,440
Speaker 2: fintech and BNPL and all these other things and stable

51
00:02:22,480 --> 00:02:24,880
Speaker 2: coins and all this other stuff, and it's like, yeah,

52
00:02:24,919 --> 00:02:26,600
Speaker 2: but the big one. Who's talking about the big one?

53
00:02:26,639 --> 00:02:27,200
Speaker 2: Credit cards?

54
00:02:27,200 --> 00:02:27,919
Speaker 3: Well that's the thing.

55
00:02:28,000 --> 00:02:31,960
Speaker 4: So points have become a bigger attractant, I guess, to

56
00:02:32,040 --> 00:02:34,919
Speaker 4: credit cards, and so people are spending more with their

57
00:02:34,960 --> 00:02:38,240
Speaker 4: credit cards and carrying a bigger balance, which means that

58
00:02:38,360 --> 00:02:40,200
Speaker 4: the rate that you're paying on the credit card is

59
00:02:40,200 --> 00:02:44,079
Speaker 4: actually more important potentially than something like your mortgage rate.

60
00:02:44,360 --> 00:02:47,880
Speaker 2: Totally well pleased to say. We do, in fact have

61
00:02:48,080 --> 00:02:52,000
Speaker 2: the perfect guests. Someone we've had on the podcast before.

62
00:02:52,480 --> 00:02:54,120
Speaker 2: I think the last time we were talking about red Q,

63
00:02:54,320 --> 00:02:57,280
Speaker 2: which is main lending in the seventies. I like his

64
00:02:57,440 --> 00:02:59,720
Speaker 2: work because he goes back to the simple things like

65
00:02:59,800 --> 00:03:01,799
Speaker 2: let's talk about how this works. Let's talk about how

66
00:03:01,800 --> 00:03:04,000
Speaker 2: this works, because I think we move on too quickly

67
00:03:04,040 --> 00:03:06,920
Speaker 2: without sort of understanding the basics. Maybe there are stones

68
00:03:07,000 --> 00:03:07,800
Speaker 2: left unturned.

69
00:03:08,200 --> 00:03:08,560
Speaker 5: Literally.

70
00:03:08,560 --> 00:03:11,200
Speaker 2: The perfect guest Itamar Drexler. He has a finance professor

71
00:03:11,240 --> 00:03:13,040
Speaker 2: at Warden and he was the co author of a

72
00:03:13,080 --> 00:03:16,880
Speaker 2: fairly recent paper sort of looking at the question of

73
00:03:17,120 --> 00:03:19,480
Speaker 2: why are credit card rates so high? Because if you

74
00:03:19,520 --> 00:03:21,640
Speaker 2: actually do borrow from them, sometimes the rates are like

75
00:03:21,639 --> 00:03:24,720
Speaker 2: twenty something percent. Seems way higher than any other sort

76
00:03:24,720 --> 00:03:27,640
Speaker 2: of lending. So itamar Thank you so much for coming

77
00:03:27,680 --> 00:03:28,959
Speaker 2: back on odd lots.

78
00:03:29,160 --> 00:03:31,040
Speaker 5: Thank you very much. It's really nice to be back.

79
00:03:31,040 --> 00:03:31,800
Speaker 5: Thank you for having me.

80
00:03:31,919 --> 00:03:34,280
Speaker 2: When I was doing some prep for this episode, there

81
00:03:34,400 --> 00:03:37,240
Speaker 2: is not a ton of actually like fresh academic work

82
00:03:37,640 --> 00:03:40,560
Speaker 2: on the credit card industry. There's not a ton of papers,

83
00:03:40,560 --> 00:03:42,000
Speaker 2: but it's this huge space.

84
00:03:42,440 --> 00:03:43,080
Speaker 5: Why did you.

85
00:03:43,200 --> 00:03:47,560
Speaker 2: See a reason to go back and revisit the sort

86
00:03:47,560 --> 00:03:51,280
Speaker 2: of basic simple question of looking at interest rates on

87
00:03:51,320 --> 00:03:51,960
Speaker 2: credit cards?

88
00:03:52,120 --> 00:03:55,080
Speaker 5: Yeah, so my interest is usually like we talked about

89
00:03:55,080 --> 00:03:57,680
Speaker 5: when I was here last time's monetary policy, macro and

90
00:03:57,760 --> 00:04:00,840
Speaker 5: out of banking and had some student to our co

91
00:04:00,920 --> 00:04:03,440
Speaker 5: authors now on this paper a couple of years ago,

92
00:04:03,440 --> 00:04:05,800
Speaker 5: I want to talk about fintech because fintech is a

93
00:04:05,920 --> 00:04:08,680
Speaker 5: very popular topic. And then I was thinking, well, how

94
00:04:08,680 --> 00:04:12,120
Speaker 5: do we analyze fintech and what's the potential room for

95
00:04:12,200 --> 00:04:15,840
Speaker 5: fintech to grow if we don't really understand how the

96
00:04:16,200 --> 00:04:19,960
Speaker 5: dominant incumbent players the credit card banks work. And then

97
00:04:19,960 --> 00:04:22,279
Speaker 5: we look at this and I was very surprised to

98
00:04:22,320 --> 00:04:25,000
Speaker 5: see something kind of simple, which is that the return

99
00:04:25,040 --> 00:04:27,839
Speaker 5: on assets for credit card banks are just way higher

100
00:04:27,880 --> 00:04:32,200
Speaker 5: than the average bank. So bank ROAs are typically you know,

101
00:04:32,279 --> 00:04:34,960
Speaker 5: one one point two percent, they move a couple basis

102
00:04:34,960 --> 00:04:39,400
Speaker 5: points are very exciting. Credit card banks ROAs and you know,

103
00:04:39,440 --> 00:04:41,760
Speaker 5: most banks are not just credit cards, so it's actually

104
00:04:41,760 --> 00:04:43,560
Speaker 5: even higher than this, are in the three and a

105
00:04:43,600 --> 00:04:46,520
Speaker 5: half often four percent. So it's very shocked by this.

106
00:04:46,800 --> 00:04:48,680
Speaker 5: How come it's so high when it's so hard to

107
00:04:48,680 --> 00:04:51,280
Speaker 5: squeeze out a couple basis points. And then one of

108
00:04:51,320 --> 00:04:53,560
Speaker 5: the reasons is just they you charge really high rates,

109
00:04:53,680 --> 00:04:55,240
Speaker 5: Like okay, how did they get away with this? You

110
00:04:55,240 --> 00:04:58,120
Speaker 5: know what is going on here? Just very simple question

111
00:04:58,200 --> 00:05:00,719
Speaker 5: about how to decompose that rate into the pieces and

112
00:05:00,800 --> 00:05:02,160
Speaker 5: kind of what's left over at the end.

113
00:05:02,400 --> 00:05:05,279
Speaker 4: In the spirit of starting at basics, walk us through

114
00:05:05,920 --> 00:05:09,520
Speaker 4: the revenue that credit card issuers or credit card banks

115
00:05:09,560 --> 00:05:12,960
Speaker 4: are actually earning, the different types and who the players

116
00:05:12,960 --> 00:05:13,960
Speaker 4: are in the system.

117
00:05:14,120 --> 00:05:18,120
Speaker 5: Yeah, so let's separate first into two categories. One are

118
00:05:18,200 --> 00:05:21,640
Speaker 5: people who revolve their balance, and that's what most of

119
00:05:21,680 --> 00:05:23,880
Speaker 5: the papers about it I think that's the more interesting

120
00:05:24,080 --> 00:05:26,800
Speaker 5: part and there's more details, and it's kind of the

121
00:05:26,839 --> 00:05:28,960
Speaker 5: banking part of it. And there are actually a lot

122
00:05:28,960 --> 00:05:31,679
Speaker 5: of people who revolve often. I find people are surprised

123
00:05:31,680 --> 00:05:34,279
Speaker 5: to hear this, but about sixty percent of the credit

124
00:05:34,320 --> 00:05:37,400
Speaker 5: card users actually revolve, so meaning that they don't pay

125
00:05:37,400 --> 00:05:38,839
Speaker 5: in the grace period at the end of the month,

126
00:05:38,839 --> 00:05:42,440
Speaker 5: and so they're hit with these very high usually interest charges.

127
00:05:42,680 --> 00:05:45,440
Speaker 5: And then the other part are what people call transactors,

128
00:05:45,480 --> 00:05:48,800
Speaker 5: so they're the kind that do pay during the grace periods,

129
00:05:48,800 --> 00:05:52,320
Speaker 5: so they're not paying interest. Okay, So for the revolvers,

130
00:05:52,640 --> 00:05:55,760
Speaker 5: there's again multiple parts, so you pay interest on the

131
00:05:55,760 --> 00:05:58,360
Speaker 5: balance that you have. But before then there's the part

132
00:05:58,360 --> 00:06:01,200
Speaker 5: which applies both to the transactor and revolvers. When you

133
00:06:01,240 --> 00:06:05,920
Speaker 5: swipe the card, then there's immediately a percentage taken. People

134
00:06:05,960 --> 00:06:09,200
Speaker 5: call it the swipe fee, and that is split up

135
00:06:09,200 --> 00:06:12,120
Speaker 5: into a bunch of pieces. The ones that I used

136
00:06:12,120 --> 00:06:13,720
Speaker 5: to be aware of that most people are aware of is

137
00:06:13,760 --> 00:06:18,400
Speaker 5: the card network like Visa, MasterCard, Amex. There was Discover

138
00:06:18,600 --> 00:06:21,200
Speaker 5: which is now part of Capital One, and that's there's

139
00:06:21,240 --> 00:06:25,479
Speaker 5: a whole menu, but basically it's like fifteen twenty basis points. Okay, okay,

140
00:06:25,680 --> 00:06:27,800
Speaker 5: it doesn't sound like a lot, but there's like ten

141
00:06:27,839 --> 00:06:31,400
Speaker 5: trillion dollars of purchases between debit and credit cards. Turns

142
00:06:31,400 --> 00:06:34,040
Speaker 5: out when you take twenty basis points of ten trillion

143
00:06:34,080 --> 00:06:35,120
Speaker 5: dollars kind of adds.

144
00:06:34,960 --> 00:06:36,880
Speaker 3: Up nice business if you can get it.

145
00:06:36,880 --> 00:06:39,480
Speaker 5: It's really nice. Actually, be surprised that usually Visa and

146
00:06:39,560 --> 00:06:43,760
Speaker 5: JP Morgan are the two most valuable financial services firms.

147
00:06:43,800 --> 00:06:47,160
Speaker 5: They change who's number one, So Visa's, you know, been

148
00:06:47,200 --> 00:06:50,560
Speaker 5: worth over six hundred billion dollars. It's a lot, yea

149
00:06:50,760 --> 00:06:54,400
Speaker 5: and MasterCards is gigantic too, so there's that. Then the

150
00:06:54,480 --> 00:06:58,280
Speaker 5: majority of that swipe fee, the majority of that remain there,

151
00:06:58,320 --> 00:07:01,000
Speaker 5: actually goes to the bank that issued the card to

152
00:07:01,040 --> 00:07:05,000
Speaker 5: the consumer. So that's called interchange fee. And again they

153
00:07:05,040 --> 00:07:07,240
Speaker 5: don't make this like very easy to tell, but in

154
00:07:07,279 --> 00:07:10,040
Speaker 5: our data it's a little over one point eight percent

155
00:07:10,080 --> 00:07:12,840
Speaker 5: on average. I think it's largely been trending up over

156
00:07:12,880 --> 00:07:15,600
Speaker 5: time slowly. So the bank gets that, it actually gets

157
00:07:15,720 --> 00:07:18,560
Speaker 5: the vast majority of that, and then they pay your

158
00:07:18,600 --> 00:07:20,800
Speaker 5: rewards and things. From that, a lot of that goes

159
00:07:20,800 --> 00:07:23,720
Speaker 5: to just pass through to the rewards and things, and

160
00:07:23,800 --> 00:07:26,400
Speaker 5: they keep a small portion of it for themselves. But

161
00:07:26,520 --> 00:07:29,720
Speaker 5: the big part of their business where most of the

162
00:07:29,800 --> 00:07:32,720
Speaker 5: money comes from that we analyze here is all these

163
00:07:32,720 --> 00:07:35,080
Speaker 5: people that revolved. They pay an interest rate, and that

164
00:07:35,160 --> 00:07:38,640
Speaker 5: interest rate now is on average twenty three percent, which

165
00:07:38,680 --> 00:07:40,600
Speaker 5: is just like a shockingly high number. I mean, I

166
00:07:40,600 --> 00:07:42,560
Speaker 5: guess I've seen that. It just when you work on

167
00:07:42,600 --> 00:07:44,440
Speaker 5: assets and like, you know, think the kind of things

168
00:07:44,480 --> 00:07:47,720
Speaker 5: you guys talk about bonds and bonds pay you know whatever,

169
00:07:47,760 --> 00:07:51,960
Speaker 5: five percent investment grades spread is not even eighty basis points. Now,

170
00:07:52,000 --> 00:07:54,840
Speaker 5: on top of it, high yield spreads under three percent, Like,

171
00:07:54,880 --> 00:07:56,840
Speaker 5: how the hell do we get to twenty three percent?

172
00:07:57,720 --> 00:08:01,840
Speaker 2: When you hear this number twenty three percent and you

173
00:08:01,920 --> 00:08:04,640
Speaker 2: think about the fact that credit card users can be

174
00:08:04,760 --> 00:08:10,600
Speaker 2: decomposed into transactors and revolvers, my first instinct would be, well,

175
00:08:11,080 --> 00:08:13,600
Speaker 2: the transactors are very on the ball. They're like, not

176
00:08:13,720 --> 00:08:17,760
Speaker 2: credit risks. I've always been just a transactor. I've never revolved.

177
00:08:18,600 --> 00:08:23,280
Speaker 2: How much of that increase spread can just be explained

178
00:08:23,400 --> 00:08:28,400
Speaker 2: by likelihood of default from the revolvers, which I presume

179
00:08:28,480 --> 00:08:31,760
Speaker 2: are perhaps a little more you know, financially precurious and

180
00:08:31,800 --> 00:08:33,479
Speaker 2: maybe less financially sophisticated.

181
00:08:33,800 --> 00:08:35,600
Speaker 5: Right, So I think, if like me, you didn't know

182
00:08:35,679 --> 00:08:37,719
Speaker 5: much about this, your assumption. If I think, if you

183
00:08:37,760 --> 00:08:40,680
Speaker 5: ask most financial economists, the first thing they would think is, well,

184
00:08:40,800 --> 00:08:44,800
Speaker 5: must be that most of the remainders is a charge offs, right, defaults,

185
00:08:45,360 --> 00:08:48,400
Speaker 5: And that's not true. So you can find that pretty easily.

186
00:08:48,679 --> 00:08:52,280
Speaker 5: So the average charge off rate on the revolvers, okay,

187
00:08:52,320 --> 00:08:53,640
Speaker 5: so when you look at it, let's say you look

188
00:08:53,640 --> 00:08:56,440
Speaker 5: it up online, you'll see kind of, you know, relative

189
00:08:56,440 --> 00:08:58,920
Speaker 5: to the whole balance sheets includes both groups, and like

190
00:08:58,960 --> 00:09:02,320
Speaker 5: you're saying, by definition, transactors don't borrow, so they can't default.

191
00:09:02,440 --> 00:09:04,319
Speaker 5: That kind of makes it go down a little bit.

192
00:09:04,360 --> 00:09:06,880
Speaker 5: But the majority our revolvers, So if we kind of

193
00:09:06,880 --> 00:09:10,320
Speaker 5: clean that out, then on average in our sample it's

194
00:09:10,679 --> 00:09:14,440
Speaker 5: five point seventy five percent of bounces are charged off,

195
00:09:14,720 --> 00:09:17,680
Speaker 5: So it's not trivial by any means. That's a high number.

196
00:09:17,840 --> 00:09:20,200
Speaker 5: But again we were talking about eighteen percent spread, so

197
00:09:20,240 --> 00:09:22,400
Speaker 5: if you think, oh, it must be about eighteen percent

198
00:09:22,520 --> 00:09:25,280
Speaker 5: charge us, it's not even close. And it's like never

199
00:09:25,320 --> 00:09:27,320
Speaker 5: been that high, So you might think, well, maybe it's

200
00:09:27,440 --> 00:09:30,160
Speaker 5: just that's on average, but sometimes it'll spike to be

201
00:09:30,280 --> 00:09:33,720
Speaker 5: ridiculous numbers it does spike, but not for very long

202
00:09:33,760 --> 00:09:36,000
Speaker 5: periods of time. So the bottom line is it's a

203
00:09:36,040 --> 00:09:38,120
Speaker 5: substantial chunk of it, but not even close to a

204
00:09:38,160 --> 00:09:40,520
Speaker 5: majority of it. So you know people default, but they

205
00:09:40,520 --> 00:09:42,120
Speaker 5: don't default that much.

206
00:09:42,920 --> 00:09:45,440
Speaker 4: Can I ask one more question on APR and the

207
00:09:45,520 --> 00:09:48,760
Speaker 4: average there? Did you observe any trend over time? Like

208
00:09:48,880 --> 00:09:51,560
Speaker 4: did the rate actually get higher as time went on?

209
00:09:51,920 --> 00:09:54,320
Speaker 5: So that's something we haven't spent a lot of time

210
00:09:54,360 --> 00:09:56,360
Speaker 5: on in this paper. But the answer to your question

211
00:09:56,480 --> 00:09:59,160
Speaker 5: is this is obviously yes. So if you look at it.

212
00:09:59,200 --> 00:10:01,440
Speaker 5: I think what can be found online is again it's

213
00:10:01,600 --> 00:10:04,079
Speaker 5: I think there's something a little misleading there, but that

214
00:10:04,200 --> 00:10:06,600
Speaker 5: has trended up pretty strongly. I think not as much

215
00:10:06,600 --> 00:10:08,800
Speaker 5: as somebody you know goes to their computer and looks up.

216
00:10:09,040 --> 00:10:11,680
Speaker 5: I'll say, Fred from the Call reports, what is the

217
00:10:11,679 --> 00:10:13,719
Speaker 5: average APR? It looks crazy. It looks like it's gone

218
00:10:13,760 --> 00:10:16,839
Speaker 5: up ten percent. It's gone up. We're gonna get to

219
00:10:16,880 --> 00:10:18,559
Speaker 5: the bottom of like exactly how much I think it's

220
00:10:18,559 --> 00:10:21,880
Speaker 5: gone up substantially since ten years ago. Let's say that

221
00:10:21,920 --> 00:10:23,600
Speaker 5: trend is clear. I don't think it's as much as

222
00:10:23,640 --> 00:10:26,079
Speaker 5: it looks like there, but yeah, it's been going up.

223
00:10:26,120 --> 00:10:30,560
Speaker 4: Actually, okay, so you've established default rates for credit cards,

224
00:10:30,880 --> 00:10:34,200
Speaker 4: and as you said, like this business is about volume, right,

225
00:10:34,240 --> 00:10:37,080
Speaker 4: so is there an argument to be made that maybe

226
00:10:37,840 --> 00:10:41,240
Speaker 4: if the world, you know, falls apart, then you have

227
00:10:41,640 --> 00:10:45,360
Speaker 4: lots and lots and lots of consumers who are defaulting,

228
00:10:45,520 --> 00:10:47,800
Speaker 4: but you know, potentially at a low rate of the total.

229
00:10:47,840 --> 00:10:50,280
Speaker 4: But the volume makes it meaningful for banks.

230
00:10:50,320 --> 00:10:52,120
Speaker 5: I mean, we are already looking at as a percentage

231
00:10:52,120 --> 00:10:55,480
Speaker 5: of assets, so that kind of like valuates, it takes

232
00:10:55,520 --> 00:10:58,680
Speaker 5: it all into consideration. I think the question, like in

233
00:10:58,720 --> 00:11:02,319
Speaker 5: our minds was at first, you know, maybe in a crisis,

234
00:11:02,800 --> 00:11:06,079
Speaker 5: something extreme happens. In a sense, it does, but this

235
00:11:06,120 --> 00:11:08,880
Speaker 5: is already the average default rates so usually it's lower,

236
00:11:08,920 --> 00:11:10,679
Speaker 5: and then you kind of include this in there, so

237
00:11:11,080 --> 00:11:13,200
Speaker 5: we'll talk I guess a little bit about risk premium,

238
00:11:13,240 --> 00:11:16,079
Speaker 5: which it turns out to be very clear here and important,

239
00:11:16,520 --> 00:11:18,560
Speaker 5: but it's you know, just the average default rate is

240
00:11:18,600 --> 00:11:20,680
Speaker 5: what it is, so it's not in expected defaults again

241
00:11:20,720 --> 00:11:23,320
Speaker 5: they're it's surprising. But at the same time, if you

242
00:11:23,400 --> 00:11:26,520
Speaker 5: just look at where banks actually suffer default losses in

243
00:11:26,559 --> 00:11:29,319
Speaker 5: an average year, not a crisis year, something like fifty

244
00:11:29,360 --> 00:11:33,120
Speaker 5: percent of banks default losses are actually coming from credit cards.

245
00:11:33,240 --> 00:11:35,320
Speaker 5: The thing is is that they're not surprising, they're not

246
00:11:35,400 --> 00:11:38,960
Speaker 5: unexpected losses. They're kind of the expected, but it's still

247
00:11:38,960 --> 00:11:41,439
Speaker 5: really big. And the reason for that is even though

248
00:11:41,440 --> 00:11:44,000
Speaker 5: credit cards only take up about five percent of banks

249
00:11:44,000 --> 00:11:47,760
Speaker 5: balance sheet, the charge offs or the defaults on average

250
00:11:47,840 --> 00:11:49,800
Speaker 5: bank assets is very low. I mean, you know, we

251
00:11:49,840 --> 00:11:52,840
Speaker 5: have this impression of banks as being these like crazy,

252
00:11:53,080 --> 00:11:55,839
Speaker 5: like risk taking lunatic to actually, I think the right

253
00:11:56,000 --> 00:11:58,080
Speaker 5: way to look at them is that their average asset

254
00:11:58,120 --> 00:12:00,560
Speaker 5: is extremely boring and low risk. They do take a

255
00:12:00,559 --> 00:12:03,400
Speaker 5: lot of leverage, which is only possible because the average

256
00:12:03,400 --> 00:12:06,440
Speaker 5: asset is extremely boring and low risk. But even after

257
00:12:06,520 --> 00:12:09,800
Speaker 5: all that, their amount of defaults is not really that high.

258
00:12:09,840 --> 00:12:13,120
Speaker 5: So if your average asset has about forty basis points

259
00:12:13,160 --> 00:12:16,000
Speaker 5: average charge off and this thing has over five percent,

260
00:12:16,240 --> 00:12:18,320
Speaker 5: then even if it's only five percent of the balance sheet,

261
00:12:18,400 --> 00:12:20,720
Speaker 5: it can act like it's fifty percent of the charge of.

262
00:12:36,679 --> 00:12:40,520
Speaker 2: Other forms of consumer borrowing. Right, Like, people are very

263
00:12:40,559 --> 00:12:44,040
Speaker 2: assiduous about making their car payments making I don't know

264
00:12:44,080 --> 00:12:49,079
Speaker 2: if up until recently, until recently, but historically the perception

265
00:12:49,280 --> 00:12:53,559
Speaker 2: was people really prioritize car payments, right because that's essential

266
00:12:53,600 --> 00:12:56,360
Speaker 2: to live and you can't have your car repossessed. Home

267
00:12:56,400 --> 00:13:01,080
Speaker 2: mortgages obviously for obvious reason. I imagine that a stretched

268
00:13:01,200 --> 00:13:06,520
Speaker 2: household will miss credit card payments are more inclined to

269
00:13:06,640 --> 00:13:08,200
Speaker 2: if they're going to have to miss a payment, it's

270
00:13:08,200 --> 00:13:10,559
Speaker 2: going to be there versus some of these other popular

271
00:13:10,559 --> 00:13:11,720
Speaker 2: areas are borrowing.

272
00:13:11,600 --> 00:13:14,520
Speaker 5: Totally, so the other ones are secured, and this is unsecured.

273
00:13:14,679 --> 00:13:18,400
Speaker 5: So in that sense, this is an actual asset that's

274
00:13:18,600 --> 00:13:21,360
Speaker 5: kind of risky and interesting for my vantage point, and

275
00:13:21,440 --> 00:13:26,200
Speaker 5: that it's unsecured lending to normal people. All the rest

276
00:13:26,200 --> 00:13:29,200
Speaker 5: of the stuff is secured, Like homes are obviously very important,

277
00:13:29,200 --> 00:13:32,320
Speaker 5: collateral cars pretty much so the rates on those are

278
00:13:32,400 --> 00:13:35,720
Speaker 5: much much lower. In these, they're nowhere near you know,

279
00:13:35,760 --> 00:13:37,920
Speaker 5: the spread, there's nowhere near as juicy. I mean, when

280
00:13:37,920 --> 00:13:39,800
Speaker 5: I teach students, we go through, like you know, the

281
00:13:39,880 --> 00:13:43,480
Speaker 5: hierarchy of borrowing that the vast majority of borrowing is secured.

282
00:13:43,880 --> 00:13:45,880
Speaker 5: You have to think it's crazy for a bank to

283
00:13:45,920 --> 00:13:49,160
Speaker 5: come to somebody with the medium or lower credit score

284
00:13:49,200 --> 00:13:51,280
Speaker 5: and say here have the line of credit of like

285
00:13:51,360 --> 00:13:54,760
Speaker 5: five ten thousand dollars and you can default on it.

286
00:13:54,960 --> 00:13:56,880
Speaker 5: You don't get shot for that. It's it's part of

287
00:13:56,880 --> 00:13:58,160
Speaker 5: the law, it's part of the game.

288
00:13:58,360 --> 00:13:58,960
Speaker 1: Yeah.

289
00:13:59,040 --> 00:14:02,040
Speaker 4: I was reading an art from life in nineteen seventy

290
00:14:02,080 --> 00:14:04,520
Speaker 4: where they were talking about how credit cards are becoming

291
00:14:04,559 --> 00:14:06,360
Speaker 4: a big thing, and oh my god, these credit card

292
00:14:06,440 --> 00:14:10,240
Speaker 4: companies are just mailing out applications to Americans. It's like

293
00:14:10,320 --> 00:14:13,840
Speaker 4: giving sugar to diabetics. That was their analogy, speaking of

294
00:14:13,960 --> 00:14:18,640
Speaker 4: unsecured versus secured. I'm also looking right now at a

295
00:14:18,679 --> 00:14:22,800
Speaker 4: website that claims to have invented the first credit card

296
00:14:23,480 --> 00:14:27,080
Speaker 4: that's based on your stock portfolio, So borrowing against your.

297
00:14:26,920 --> 00:14:29,360
Speaker 3: Stock portfolio with the card. I gotta say, the card

298
00:14:29,440 --> 00:14:32,800
Speaker 3: does look pretty nice. It's made of glass. Maybe that

299
00:14:32,920 --> 00:14:35,800
Speaker 3: tells you something intentional metaphor yeah, exactly.

300
00:14:36,360 --> 00:14:38,880
Speaker 4: Okay, So if it's not about risk premiums, if the

301
00:14:38,960 --> 00:14:42,680
Speaker 4: rate isn't compensating for something like default, could it be

302
00:14:42,840 --> 00:14:48,040
Speaker 4: compensating for all the points and benefits that customers are accruing.

303
00:14:48,160 --> 00:14:51,480
Speaker 5: So it's not just compensation for expected default. I want

304
00:14:51,520 --> 00:14:53,120
Speaker 5: I want to separate them from the risk premium. The

305
00:14:53,200 --> 00:14:56,280
Speaker 5: risk premium is kind of the competition for unexpected default,

306
00:14:56,280 --> 00:14:58,640
Speaker 5: which turns out to be pretty big here. But let's

307
00:14:58,680 --> 00:15:00,600
Speaker 5: go back and talk about the point and stuff. So

308
00:15:00,880 --> 00:15:03,400
Speaker 5: I find that people are more excited to talk about

309
00:15:03,400 --> 00:15:07,480
Speaker 5: points than anything. The term rewards was really a marketing flourish.

310
00:15:07,920 --> 00:15:12,040
Speaker 5: So yeah, So in total number of dollars this interchange was,

311
00:15:12,280 --> 00:15:14,800
Speaker 5: I mean, again you have to look at fine exact numbers,

312
00:15:14,800 --> 00:15:16,720
Speaker 5: but for credit cards alone, I think it was over

313
00:15:16,800 --> 00:15:19,520
Speaker 5: one hundred and fifty billion dollars. So, like the GDP

314
00:15:19,680 --> 00:15:24,040
Speaker 5: of a medium sized country gets transferred as interchange, and

315
00:15:24,160 --> 00:15:26,600
Speaker 5: we find that about eighty five percent of that gets

316
00:15:26,640 --> 00:15:30,200
Speaker 5: transferred through as rewards, you could wonder, I think it'd

317
00:15:30,240 --> 00:15:32,440
Speaker 5: be natural to say, what is the point of this?

318
00:15:32,640 --> 00:15:36,160
Speaker 5: Why charge people one point eight percent and then pass

319
00:15:36,240 --> 00:15:39,760
Speaker 5: through one point five to seven percent as rewards? Where well,

320
00:15:39,760 --> 00:15:41,560
Speaker 5: at least some people like I guess you and I

321
00:15:41,760 --> 00:15:44,320
Speaker 5: Joe don't pay that much attention. I think I have

322
00:15:44,520 --> 00:15:46,960
Speaker 5: enormous amounts of United Miles I'm never going to use

323
00:15:47,280 --> 00:15:49,960
Speaker 5: because I have to actually travel to whatever place to

324
00:15:50,040 --> 00:15:52,720
Speaker 5: use them. So why is that? I mean, I think

325
00:15:52,720 --> 00:15:55,080
Speaker 5: a good economic question, and people have tackled this. I

326
00:15:55,080 --> 00:15:57,480
Speaker 5: do think it creates a very strong network effect, so

327
00:15:57,600 --> 00:16:00,960
Speaker 5: you are not actually seeing a charge for this. It's

328
00:16:00,960 --> 00:16:03,760
Speaker 5: the retailer that has to eat it, and if you

329
00:16:03,840 --> 00:16:06,520
Speaker 5: do not use a card that gives rewards, you're not

330
00:16:06,600 --> 00:16:08,960
Speaker 5: going to get in most cases a lower price. So

331
00:16:09,080 --> 00:16:11,720
Speaker 5: there's a whole series of litigation and fights over the

332
00:16:11,800 --> 00:16:17,000
Speaker 5: years amazing about what retailers can do to discriminate prices

333
00:16:17,040 --> 00:16:19,320
Speaker 5: based people who using cards and hurt And I thought

334
00:16:19,360 --> 00:16:21,200
Speaker 5: a couple of years ago. The last couple years, I'm

335
00:16:21,200 --> 00:16:24,080
Speaker 5: seeing more restaurants give you back a percentage or not

336
00:16:24,160 --> 00:16:26,520
Speaker 5: charge you a percentage if you didn't do that. But

337
00:16:26,680 --> 00:16:29,080
Speaker 5: it's a little bit beyond my legal expertise to sometimes

338
00:16:29,160 --> 00:16:31,560
Speaker 5: understand these because for the longest time, I think you

339
00:16:31,600 --> 00:16:35,280
Speaker 5: could give people a discount, but you couldn't do a searcharge.

340
00:16:35,640 --> 00:16:38,600
Speaker 5: There was some like legal discrimination between those things. And

341
00:16:38,640 --> 00:16:41,560
Speaker 5: as a result, people mostly don't pay attention to that

342
00:16:41,680 --> 00:16:44,160
Speaker 5: kind of thing, and so you really want to stay

343
00:16:44,200 --> 00:16:46,560
Speaker 5: inside the network and it kind of keeps you there.

344
00:16:46,600 --> 00:16:48,200
Speaker 5: Even if at the end it would be a total

345
00:16:48,240 --> 00:16:51,680
Speaker 5: pass through, it still helps for them to keep this business.

346
00:16:52,160 --> 00:16:55,200
Speaker 2: You know, it's interesting. There's this crypto company. Have you

347
00:16:55,240 --> 00:16:57,960
Speaker 2: heard of a Blackbird. Yeah, it's a crypto thing and

348
00:16:57,960 --> 00:16:59,640
Speaker 2: they have a bunch of restaurants. You sign up and

349
00:16:59,640 --> 00:17:01,400
Speaker 2: you're like pay in a coin. I don't know exactly

350
00:17:01,480 --> 00:17:05,040
Speaker 2: how it works, but I think that they have to

351
00:17:05,160 --> 00:17:08,040
Speaker 2: in some way because in theory would be nice, like

352
00:17:08,160 --> 00:17:10,199
Speaker 2: maybe we'll get a little bit in the stable coins.

353
00:17:10,240 --> 00:17:11,960
Speaker 2: It's like a payments rail in the future or in

354
00:17:12,000 --> 00:17:13,840
Speaker 2: this conversation, and think it would be a nice way

355
00:17:13,880 --> 00:17:17,760
Speaker 2: to like circumvent this. But even they, I think implicitly

356
00:17:17,880 --> 00:17:21,000
Speaker 2: have to reinvent the rewards model to do it. Maybe

357
00:17:21,000 --> 00:17:24,119
Speaker 2: you get premium seeds or you get reservations, et cetera.

358
00:17:24,600 --> 00:17:27,120
Speaker 2: In order to sort of like bootstrap a new network,

359
00:17:27,920 --> 00:17:30,639
Speaker 2: you start end up having to reinvent a lot of

360
00:17:30,640 --> 00:17:33,280
Speaker 2: the rebates and the benefits, et cetera that come up

361
00:17:33,320 --> 00:17:35,560
Speaker 2: the old network. Maybe we'll get into crypto a little

362
00:17:35,560 --> 00:17:37,480
Speaker 2: bit more, but talk to us a little bit more

363
00:17:37,520 --> 00:17:42,320
Speaker 2: then about like the persistence of this spread that can't

364
00:17:42,320 --> 00:17:43,960
Speaker 2: fully be explained by defaults.

365
00:17:44,040 --> 00:17:46,280
Speaker 5: Yes, so the default, like I said, is like a

366
00:17:46,320 --> 00:17:49,600
Speaker 5: little under six percent, then I'll just I'll mention it.

367
00:17:49,640 --> 00:17:52,600
Speaker 5: So defaults that do spike in bad times. So we estimate,

368
00:17:52,720 --> 00:17:55,360
Speaker 5: using kind of the cross section of different Fyco scores,

369
00:17:55,720 --> 00:17:58,399
Speaker 5: how much extra compensation you get as you go to

370
00:17:58,680 --> 00:18:01,280
Speaker 5: lower and lower Fyco scores in terms of extra APR

371
00:18:01,920 --> 00:18:04,760
Speaker 5: net of the defaults. So we estimate that the risk

372
00:18:04,800 --> 00:18:08,439
Speaker 5: premium there is accounting for about similar sized piece. So

373
00:18:08,800 --> 00:18:11,760
Speaker 5: there's a risk preum about five percent on average, which

374
00:18:11,840 --> 00:18:14,040
Speaker 5: is much smaller. For let's say you're an eight hundred

375
00:18:14,080 --> 00:18:16,840
Speaker 5: FICHO borrower, there's not that much risk premium. But if

376
00:18:16,880 --> 00:18:19,479
Speaker 5: you're a six hundred Fyco borrower, the risk preum goes

377
00:18:19,560 --> 00:18:22,240
Speaker 5: up to, like, you know, nine percent. So I think

378
00:18:22,240 --> 00:18:24,160
Speaker 5: it's means something very important. I think the person who's

379
00:18:24,160 --> 00:18:27,439
Speaker 5: borrowing there may not realize that they are paying a

380
00:18:27,560 --> 00:18:30,800
Speaker 5: very large risk bemum. So if you're a low Fyco

381
00:18:30,920 --> 00:18:34,240
Speaker 5: borrower and you aren't going to default like you know

382
00:18:34,280 --> 00:18:36,919
Speaker 5: you're not, you're paying a very high risk premium. And

383
00:18:37,000 --> 00:18:40,240
Speaker 5: that is because other people default in bad times. Even

384
00:18:40,280 --> 00:18:42,280
Speaker 5: if you do think you're going to default. Sometimes I

385
00:18:42,280 --> 00:18:44,520
Speaker 5: think one should realize how much of a risk premium

386
00:18:44,520 --> 00:18:46,800
Speaker 5: you're actually paying for this. So but now let's go

387
00:18:46,840 --> 00:18:49,000
Speaker 5: back to something else before we maybe talk more about

388
00:18:49,040 --> 00:18:51,840
Speaker 5: that is the other pieces of this. So we talked

389
00:18:51,880 --> 00:18:54,800
Speaker 5: about interchange and rewards. It's not zero. They do earn

390
00:18:54,800 --> 00:18:57,159
Speaker 5: a little bit from it. Most of the transactors what

391
00:18:57,160 --> 00:18:59,920
Speaker 5: they make off transactors. Is that difference because transactors spend,

392
00:19:00,400 --> 00:19:03,040
Speaker 5: you know, recurringly a lot. Borrowers tend to kind of

393
00:19:03,040 --> 00:19:04,960
Speaker 5: accumulate and they don't have that much more room to

394
00:19:05,000 --> 00:19:07,320
Speaker 5: spend because they've borrowed. So that's not a big portion

395
00:19:07,440 --> 00:19:10,240
Speaker 5: of the revenues there. Then there's fees that's another couple

396
00:19:10,240 --> 00:19:13,439
Speaker 5: percent is actually making the puzzle worse. And then the

397
00:19:13,480 --> 00:19:15,800
Speaker 5: part that turned out to be really big that surprised

398
00:19:15,880 --> 00:19:20,159
Speaker 5: us is operating expenses, of which marketing you mentioned, this

399
00:19:20,480 --> 00:19:22,600
Speaker 5: turns out to be really big, and.

400
00:19:23,160 --> 00:19:24,960
Speaker 3: Yeah, this is the thing that I don't get.

401
00:19:25,080 --> 00:19:27,240
Speaker 4: So there is so much marketing for credit cards, and

402
00:19:27,240 --> 00:19:30,280
Speaker 4: as I said, like they're all kind of similar in

403
00:19:30,320 --> 00:19:33,520
Speaker 4: many ways. And I remember this was often the blockage

404
00:19:33,600 --> 00:19:36,760
Speaker 4: for new entrants from the fintech space trying to get

405
00:19:36,760 --> 00:19:39,800
Speaker 4: into this business. I remember talking to Lending Club about

406
00:19:39,800 --> 00:19:42,160
Speaker 4: this back when they were a thing. They were spending

407
00:19:42,280 --> 00:19:46,560
Speaker 4: so much money on mail advertisements, and I just don't

408
00:19:46,560 --> 00:19:50,080
Speaker 4: get why that's the primary acquisition channel and why it

409
00:19:50,119 --> 00:19:52,480
Speaker 4: seems to be so important to the business model.

410
00:19:52,600 --> 00:19:54,879
Speaker 5: It's a really interesting question. Maybe the answer would be,

411
00:19:55,000 --> 00:19:57,600
Speaker 5: like people listening this will be like I knew that,

412
00:19:58,040 --> 00:20:01,119
Speaker 5: which is the reason you do it. Because it works,

413
00:20:01,240 --> 00:20:04,159
Speaker 5: which means which I wish. I mean, this goes back

414
00:20:04,160 --> 00:20:06,680
Speaker 5: to Joe's question. I think you can see we look,

415
00:20:06,720 --> 00:20:08,720
Speaker 5: we do this analysis there that if you spend more

416
00:20:08,720 --> 00:20:12,800
Speaker 5: on operating expenses, which I think largely means additional marketing

417
00:20:12,840 --> 00:20:16,119
Speaker 5: because the actual operational side of this apparently is very expensive.

418
00:20:16,160 --> 00:20:19,960
Speaker 5: But there's big differences across these guys in operating expenses,

419
00:20:20,000 --> 00:20:22,040
Speaker 5: and I don't think it's because their systems are like

420
00:20:22,160 --> 00:20:24,639
Speaker 5: much more and we actually see no relation between that

421
00:20:24,720 --> 00:20:26,960
Speaker 5: and defaults. So it's once you control for fighters. So

422
00:20:26,960 --> 00:20:29,520
Speaker 5: it's not about screening people for better borrowers. But what

423
00:20:29,560 --> 00:20:32,480
Speaker 5: it is it's an effective, apparently at the margin, customer

424
00:20:32,480 --> 00:20:35,679
Speaker 5: acquisition strategy. So think the following thought process. You could say, well,

425
00:20:35,720 --> 00:20:38,600
Speaker 5: why don't somebody just cut all this marketing out and

426
00:20:38,760 --> 00:20:41,520
Speaker 5: just charge a lower rate and that'll get people.

427
00:20:41,600 --> 00:20:44,520
Speaker 3: Yeah, that's that's your acquisition advertising, right.

428
00:20:45,080 --> 00:20:48,120
Speaker 5: Apparently it doesn't work. So so people are not are

429
00:20:48,119 --> 00:20:51,160
Speaker 5: not rate sensitive, which is a recurring theme I'm starting to,

430
00:20:51,240 --> 00:20:53,320
Speaker 5: you know, learn when we talked about we talk about

431
00:20:53,320 --> 00:20:57,000
Speaker 5: banks and bank deposit rates. People are They're not completely

432
00:20:57,000 --> 00:20:59,880
Speaker 5: insensitive obviously, but they're not that sensitive to the rates

433
00:21:00,040 --> 00:21:01,880
Speaker 5: get paid, and they're not that sensitive to the rates

434
00:21:01,880 --> 00:21:05,040
Speaker 5: that get charged on this, so there are actually this

435
00:21:05,119 --> 00:21:07,880
Speaker 5: is a surprising thing. The CFPP has a spreadsheet, well,

436
00:21:08,280 --> 00:21:09,800
Speaker 5: when there are people still working there. They used to

437
00:21:09,880 --> 00:21:12,680
Speaker 5: have a spreadsheet that they updated with essentially every single

438
00:21:12,760 --> 00:21:14,879
Speaker 5: card there is and what the rate on it. And

439
00:21:15,240 --> 00:21:19,200
Speaker 5: all the cheapest cards are credit unions, and they're significantly cheaper,

440
00:21:19,320 --> 00:21:23,560
Speaker 5: much cheaper than your average credit card. But I'm sure

441
00:21:23,560 --> 00:21:26,080
Speaker 5: almost nobody's accept their customers have heard about them, and

442
00:21:26,119 --> 00:21:29,720
Speaker 5: it's because they don't advertise much. And so you say, well,

443
00:21:29,760 --> 00:21:32,000
Speaker 5: if their rates are so cheap, why don't people go there.

444
00:21:32,119 --> 00:21:33,880
Speaker 5: It's like they haven't heard about them and they don't

445
00:21:33,920 --> 00:21:36,680
Speaker 5: care that much about the rate. Is my inference from this.

446
00:21:36,760 --> 00:21:39,120
Speaker 5: So the more you pay for marketing and operating expenses

447
00:21:39,160 --> 00:21:41,400
Speaker 5: and the data, the higher is the average amount you're

448
00:21:41,440 --> 00:21:42,879
Speaker 5: able to charge this for very funny.

449
00:21:43,440 --> 00:21:46,760
Speaker 2: Does some of the stuff repel the brain of the

450
00:21:46,840 --> 00:21:50,800
Speaker 2: academic economists, No, for real, like this idea that the

451
00:21:50,840 --> 00:21:53,639
Speaker 2: borrower wouldn't be raided sensitive, the idea that we're actually

452
00:21:53,680 --> 00:21:56,960
Speaker 2: paying more to be advertised to et cetera. Because this

453
00:21:57,040 --> 00:21:59,840
Speaker 2: is their cost, the idea that their lower cost options

454
00:22:00,040 --> 00:22:01,680
Speaker 2: out there and all we have to do is search

455
00:22:01,680 --> 00:22:02,760
Speaker 2: for them and they're available.

456
00:22:03,040 --> 00:22:07,239
Speaker 4: Like well, also for macro economists specifically, right, because we

457
00:22:07,280 --> 00:22:10,560
Speaker 4: talk about benchmark rates and the importance of how those

458
00:22:10,600 --> 00:22:13,320
Speaker 4: feed into the economy, and here we are talking about

459
00:22:13,359 --> 00:22:16,160
Speaker 4: the credit card rate, which is actually potentially more important.

460
00:22:16,240 --> 00:22:19,199
Speaker 2: Like I'm serious though, Like rates are high because to

461
00:22:19,240 --> 00:22:22,000
Speaker 2: some extent consumers just aren't paying attention to them, et cetera.

462
00:22:22,400 --> 00:22:24,800
Speaker 2: Do counter people who think, no, there must be something,

463
00:22:24,800 --> 00:22:28,120
Speaker 2: There must be some variable you're missing, because we're rational

464
00:22:28,160 --> 00:22:29,480
Speaker 2: and we would take out the lower rate.

465
00:22:29,760 --> 00:22:32,680
Speaker 5: I want to talk to people like you're saying, I

466
00:22:32,720 --> 00:22:34,640
Speaker 5: haven't really held up the chance, because you know, when

467
00:22:34,640 --> 00:22:38,000
Speaker 5: you pitch this to a finance audience, not macro people,

468
00:22:38,000 --> 00:22:40,280
Speaker 5: and I have a finance president, then they're more open.

469
00:22:40,359 --> 00:22:42,440
Speaker 5: I mean, credit cards is the thing in finance. People

470
00:22:42,560 --> 00:22:44,679
Speaker 5: like credit cards. But I think the interaction with macro

471
00:22:44,800 --> 00:22:48,439
Speaker 5: and monetary is really interesting, so it doesn't bother me.

472
00:22:48,600 --> 00:22:51,080
Speaker 5: I think it's interesting. I mean, I think it's kind

473
00:22:51,080 --> 00:22:52,800
Speaker 5: of bad that a lot of people who are usually

474
00:22:52,840 --> 00:22:55,840
Speaker 5: not in the best shape are essentially adding six percent

475
00:22:56,320 --> 00:22:58,720
Speaker 5: rate to their credit card because they're paying for the

476
00:22:58,760 --> 00:23:02,600
Speaker 5: advertising that they responded to. But you know that's you know,

477
00:23:02,720 --> 00:23:04,720
Speaker 5: you could get it if you didn't respond to the advertising,

478
00:23:04,840 --> 00:23:07,479
Speaker 5: responded to the rate, they would do that instead, but

479
00:23:07,600 --> 00:23:10,240
Speaker 5: they don't, So you know, think about you know, you

480
00:23:10,240 --> 00:23:12,840
Speaker 5: guys often talk about the FED lowering or hiking rates.

481
00:23:13,280 --> 00:23:16,639
Speaker 5: At the risk of sounding heretical here, I am not

482
00:23:16,960 --> 00:23:20,800
Speaker 5: a huge believer that consumers at all are very sensitive

483
00:23:20,840 --> 00:23:23,360
Speaker 5: to these changes in the policy rate and the FED

484
00:23:23,440 --> 00:23:26,359
Speaker 5: funds rate, even though the standard model works through their

485
00:23:26,720 --> 00:23:29,560
Speaker 5: inner temporal consumption savings decision. I think most of the

486
00:23:29,560 --> 00:23:31,679
Speaker 5: events is very weak that they care about that. And

487
00:23:31,720 --> 00:23:33,479
Speaker 5: then the credit card, I think on top of that

488
00:23:33,600 --> 00:23:36,399
Speaker 5: is really makes this clear because if you're paying twenty

489
00:23:36,440 --> 00:23:38,560
Speaker 5: three percent and you are the kind of person that

490
00:23:38,800 --> 00:23:42,320
Speaker 5: wants to borrow, I mean, obviously because you've borrowed, how

491
00:23:42,400 --> 00:23:44,359
Speaker 5: much is a half of percent going to matter to you?

492
00:23:44,440 --> 00:23:46,640
Speaker 5: If the FED hikes plus you could have been getting

493
00:23:46,680 --> 00:23:48,840
Speaker 5: a much cheaper rate anyway, and that didn't compel you

494
00:23:48,880 --> 00:23:51,720
Speaker 5: to go looking for it. So I think it kind

495
00:23:51,760 --> 00:23:55,000
Speaker 5: of puts a big question mark over whether that's really

496
00:23:55,040 --> 00:23:57,560
Speaker 5: the channel, which which is a lot of people have

497
00:23:57,640 --> 00:23:59,520
Speaker 5: said that, but it's still kind of the main way

498
00:23:59,560 --> 00:24:00,879
Speaker 5: with those things.

499
00:24:01,119 --> 00:24:03,760
Speaker 4: Can we talk a little bit more about competition and

500
00:24:04,080 --> 00:24:06,840
Speaker 4: why doesn't someone just come in with a lower rate

501
00:24:07,119 --> 00:24:09,120
Speaker 4: and disrupt the entire business.

502
00:24:09,640 --> 00:24:12,880
Speaker 5: Let's give you another example, personal lines of credit. These

503
00:24:12,880 --> 00:24:15,159
Speaker 5: were all new things to me. I find this. I

504
00:24:15,160 --> 00:24:17,840
Speaker 5: think where you've put retail people with the financial sector,

505
00:24:17,840 --> 00:24:20,080
Speaker 5: you actually get a lot of explosions. They're like weird stuff.

506
00:24:20,080 --> 00:24:22,840
Speaker 5: So that's the place where sort of academics should go looking,

507
00:24:22,840 --> 00:24:25,000
Speaker 5: and many do, but it's not the place where I

508
00:24:25,200 --> 00:24:27,440
Speaker 5: kind of having worked at like hedge fund market maker,

509
00:24:27,480 --> 00:24:29,080
Speaker 5: ever thought about these things you want to think about,

510
00:24:29,119 --> 00:24:31,880
Speaker 5: like the fancy people, like the people who are sophisticated

511
00:24:31,960 --> 00:24:33,880
Speaker 5: do all the math, but they kind of cancel each

512
00:24:33,880 --> 00:24:35,840
Speaker 5: other out. Where the real fireworks are is when you

513
00:24:35,880 --> 00:24:37,760
Speaker 5: get into the retail sector. And if you look at

514
00:24:37,800 --> 00:24:40,919
Speaker 5: personal lines of credit from the same companies at the

515
00:24:40,960 --> 00:24:44,199
Speaker 5: same FICO, they're substantially cheaper, plus you get all the

516
00:24:44,200 --> 00:24:47,399
Speaker 5: money up front. That's something it's still very puzzling that

517
00:24:47,440 --> 00:24:50,119
Speaker 5: there is almost no marketing there. You don't get marketed

518
00:24:50,119 --> 00:24:52,200
Speaker 5: a lot on personal lines of credit, and the people

519
00:24:52,200 --> 00:24:54,840
Speaker 5: who discover them do use them to consolidate these debts

520
00:24:54,960 --> 00:24:57,080
Speaker 5: and pay them off in one shot at a lower interester.

521
00:24:57,200 --> 00:24:59,600
Speaker 5: It's a very I think, very logical thing to do

522
00:25:00,160 --> 00:25:01,960
Speaker 5: don't do, but I mean, just to get back to

523
00:25:01,960 --> 00:25:03,840
Speaker 5: I think we see them over and over and you're

524
00:25:03,840 --> 00:25:06,560
Speaker 5: talking about BNPL and stuff. This idea of how do

525
00:25:06,560 --> 00:25:10,480
Speaker 5: you acquire customers in what role the rate actually has

526
00:25:10,520 --> 00:25:14,800
Speaker 5: there is just keep seeing it. It's like a movie.

527
00:25:14,840 --> 00:25:17,840
Speaker 5: I've seen this before. It's more effective at the margin

528
00:25:18,200 --> 00:25:21,359
Speaker 5: than lowering the rates, and it explains a lot. I

529
00:25:21,400 --> 00:25:25,359
Speaker 5: think of how the finance sector interacts with retail, which

530
00:25:25,400 --> 00:25:28,200
Speaker 5: is not just like canceling out. So that's the issues, Like, oh, well,

531
00:25:28,400 --> 00:25:30,840
Speaker 5: they spend five percent of assets on marketing, then they

532
00:25:30,840 --> 00:25:33,080
Speaker 5: add five percent to the cost. I guess there's no

533
00:25:33,160 --> 00:25:35,879
Speaker 5: harm in that. Well not really, because what people have

534
00:25:35,960 --> 00:25:38,960
Speaker 5: done is paid the five percent in order to get

535
00:25:38,960 --> 00:25:40,760
Speaker 5: the marketing. So if you really like the commercials, you

536
00:25:40,760 --> 00:25:42,600
Speaker 5: should be really happy. But I don't think most people

537
00:25:42,600 --> 00:25:43,399
Speaker 5: would sign up for that.

538
00:25:59,480 --> 00:26:02,399
Speaker 4: I'm just I've still stunned that the advertising actually works,

539
00:26:02,400 --> 00:26:04,920
Speaker 4: because like, I get the mail and I just throw

540
00:26:05,000 --> 00:26:06,199
Speaker 4: it out without looking at it.

541
00:26:06,280 --> 00:26:07,560
Speaker 3: Maybe I should be looking at it.

542
00:26:08,160 --> 00:26:11,280
Speaker 4: On the disruption front, you mentioned BNPL, and we've done

543
00:26:11,440 --> 00:26:14,080
Speaker 4: at least one episode on it. We should probably do

544
00:26:14,240 --> 00:26:17,639
Speaker 4: more at some point. Is that the big disruptor, you know,

545
00:26:17,680 --> 00:26:20,719
Speaker 4: if they're plugged into websites and some of them are

546
00:26:20,760 --> 00:26:24,560
Speaker 4: getting rewarded for being plugged into those websites by retailers,

547
00:26:24,880 --> 00:26:28,920
Speaker 4: then they bypass the high acquisition costs. And presumably it

548
00:26:29,000 --> 00:26:33,240
Speaker 4: can still acquire customers because you see them everywhere online.

549
00:26:33,359 --> 00:26:35,240
Speaker 5: So I do think that has a lot to do

550
00:26:35,359 --> 00:26:38,240
Speaker 5: with what their angle is, is it gets in front

551
00:26:38,280 --> 00:26:40,960
Speaker 5: of you in that way. I listened to a recent

552
00:26:41,000 --> 00:26:44,040
Speaker 5: episode of Yours. I think you guys were talking about BNPL,

553
00:26:44,160 --> 00:26:47,080
Speaker 5: SOO I wasn't going back to a much earlier episode.

554
00:26:47,080 --> 00:26:51,399
Speaker 5: But I don't think the economics of the BNPL beyond

555
00:26:51,440 --> 00:26:53,919
Speaker 5: that aspect of it, are that different from the credit cards,

556
00:26:54,280 --> 00:26:57,240
Speaker 5: and there still is very high operating and acquisition cost

557
00:26:57,320 --> 00:27:00,680
Speaker 5: if you look at like BNPL companies also then don't

558
00:27:00,720 --> 00:27:02,879
Speaker 5: really make money, and so I think they're still in

559
00:27:02,880 --> 00:27:05,119
Speaker 5: that stage where they're building up to it. And you

560
00:27:05,240 --> 00:27:09,080
Speaker 5: mentioned lending club bunding club didn't make money now it

561
00:27:09,160 --> 00:27:11,960
Speaker 5: did not, It didn't, so because I think you want

562
00:27:12,000 --> 00:27:14,159
Speaker 5: to grab these juicy customers but they respond to the

563
00:27:14,200 --> 00:27:16,560
Speaker 5: marketing and just to go even back to that, so

564
00:27:16,680 --> 00:27:19,760
Speaker 5: Amex is one of It's really hard to find aggregate

565
00:27:19,880 --> 00:27:23,320
Speaker 5: marketing numbers across companies, but from lists I've seen, Amex

566
00:27:23,440 --> 00:27:25,400
Speaker 5: might even be it's definitely, I think a top ten

567
00:27:25,840 --> 00:27:28,159
Speaker 5: marketer in the whole country. It might even be in

568
00:27:28,240 --> 00:27:30,240
Speaker 5: top five. I'm not sure, along with some of the

569
00:27:30,560 --> 00:27:33,080
Speaker 5: It spends over six billion dollars a year on marketing.

570
00:27:33,119 --> 00:27:35,040
Speaker 5: And this is not including the lounges and all this,

571
00:27:35,160 --> 00:27:38,200
Speaker 5: which has been like articles about how everybody's like investing

572
00:27:38,280 --> 00:27:40,080
Speaker 5: like millions of dollars in these lines. That's that's a

573
00:27:40,080 --> 00:27:44,000
Speaker 5: separate category. And Capital one spends over four billion dollars

574
00:27:44,040 --> 00:27:46,240
Speaker 5: a year. So I looked it up, and amics is

575
00:27:46,280 --> 00:27:49,680
Speaker 5: bigger than Nike and Coke and marketing, and you think

576
00:27:49,720 --> 00:27:52,240
Speaker 5: of like those being the ones that got to be

577
00:27:52,359 --> 00:27:55,320
Speaker 5: like the gigantic ones, and Capital one's about as big.

578
00:27:55,440 --> 00:27:58,679
Speaker 2: Wait, a personal line of credit, Yeah, that's just a

579
00:27:58,680 --> 00:28:01,640
Speaker 2: good classic is the product. I've never looked into one

580
00:28:01,640 --> 00:28:04,960
Speaker 2: of those. An unsecured loan from the bank.

581
00:28:05,040 --> 00:28:06,000
Speaker 5: It's an unsecure line.

582
00:28:06,040 --> 00:28:08,240
Speaker 2: But this is just like classic bank borrowing. I go

583
00:28:08,280 --> 00:28:09,840
Speaker 2: to the bank, guys, they can um borrow some money.

584
00:28:10,000 --> 00:28:12,879
Speaker 5: Surprisingly that the I mean you can make you can

585
00:28:12,920 --> 00:28:15,120
Speaker 5: look it up even like it's so easy to look

586
00:28:15,160 --> 00:28:17,399
Speaker 5: it up. They offer you it's a relatively large amount

587
00:28:17,400 --> 00:28:21,760
Speaker 5: compared to a credit card, and you put in your fight. Oh,

588
00:28:21,800 --> 00:28:24,240
Speaker 5: they give you a rate. The rate's almost for sure

589
00:28:24,280 --> 00:28:27,720
Speaker 5: always lower than the credit card. I don't get it either,

590
00:28:27,800 --> 00:28:29,720
Speaker 5: but you know, you know, and.

591
00:28:29,680 --> 00:28:31,359
Speaker 2: One could use these to payoff of all.

592
00:28:31,560 --> 00:28:33,800
Speaker 5: That's mostly what people do, which they should. I had

593
00:28:33,800 --> 00:28:35,560
Speaker 5: a journalist ask me about this, and I was like,

594
00:28:36,160 --> 00:28:37,760
Speaker 5: this is a great idea, Like I should look this

595
00:28:37,840 --> 00:28:39,760
Speaker 5: up and talk about this. I mean, there's no you know,

596
00:28:40,080 --> 00:28:41,840
Speaker 5: how do you explain this spread? I mean, I think

597
00:28:41,960 --> 00:28:44,000
Speaker 5: largely it's got a lot of this less of this

598
00:28:44,080 --> 00:28:47,040
Speaker 5: retail focus to it. But yeah, it's the same companies too.

599
00:28:47,160 --> 00:28:50,040
Speaker 5: If you go to amex MS lineup credit Discover offers

600
00:28:50,040 --> 00:28:52,760
Speaker 5: a discovered line of credit capital one capital one line

601
00:28:52,760 --> 00:28:54,080
Speaker 5: of credit. It's the same thing.

602
00:28:54,160 --> 00:28:56,200
Speaker 3: It's so strange, this whole conversation.

603
00:28:57,480 --> 00:29:02,080
Speaker 2: It edges into some frankly like slightly uncomfortable territory in

604
00:29:02,120 --> 00:29:06,880
Speaker 2: my opinion, because you write, because especially when you characterize something,

605
00:29:06,880 --> 00:29:09,840
Speaker 2: it's like you're kind of end up paying a lot

606
00:29:10,120 --> 00:29:12,040
Speaker 2: for them to advertise to you, and you apparently like

607
00:29:12,080 --> 00:29:14,600
Speaker 2: the advertisement because that's you responded to it, et cetera.

608
00:29:15,520 --> 00:29:18,720
Speaker 2: Like you edge into this territory where it's like these

609
00:29:18,760 --> 00:29:23,120
Speaker 2: are not like it must be not the most sophisticated base, right,

610
00:29:23,280 --> 00:29:27,280
Speaker 2: It's like, why do Nigerian email scams have all kinds

611
00:29:27,320 --> 00:29:31,200
Speaker 2: of typos, et cetera. And the theory is because they

612
00:29:31,240 --> 00:29:34,800
Speaker 2: want to select for people who will be foolish enough

613
00:29:34,840 --> 00:29:36,720
Speaker 2: to respond to them, because if you go down the chain,

614
00:29:36,760 --> 00:29:38,800
Speaker 2: they don't want you to be too savvy and asking questions.

615
00:29:38,880 --> 00:29:41,160
Speaker 2: So like, let's just get all the savvy customers out

616
00:29:41,160 --> 00:29:43,600
Speaker 2: of the way who would instantly recognize a scam email,

617
00:29:43,960 --> 00:29:46,080
Speaker 2: and then you like get there. It's right, Like it's

618
00:29:46,120 --> 00:29:46,720
Speaker 2: a little.

619
00:29:46,520 --> 00:29:49,000
Speaker 5: Saying that the Nigerian princess don't pay you back.

620
00:29:50,200 --> 00:29:53,120
Speaker 2: I'm just saying like it seems like there's a filtration

621
00:29:53,320 --> 00:29:55,960
Speaker 2: process going on where you end up with the base

622
00:29:56,040 --> 00:29:58,240
Speaker 2: of revolvers where all this money is made, where it's

623
00:29:58,360 --> 00:30:01,840
Speaker 2: clearly not that because otherwise they would be doing the

624
00:30:01,840 --> 00:30:03,760
Speaker 2: personal line of credit or not doing these things, or

625
00:30:03,880 --> 00:30:05,840
Speaker 2: looking for that credit union credit card.

626
00:30:05,880 --> 00:30:09,400
Speaker 5: Well, I'll say something about marketing, and I mean we

627
00:30:09,440 --> 00:30:11,360
Speaker 5: all do respond that. You know, you guys are you

628
00:30:11,400 --> 00:30:14,640
Speaker 5: guys are very not elitist here and every anti elitist.

629
00:30:14,760 --> 00:30:18,640
Speaker 5: So marketing is just a huge industry. Is As a

630
00:30:18,680 --> 00:30:21,360
Speaker 5: finance person, I'm like, we do have a marketing department

631
00:30:21,520 --> 00:30:24,200
Speaker 5: at the business school, and I'm like, wow, there's a

632
00:30:24,240 --> 00:30:26,959
Speaker 5: reason because you look at let's say you look at

633
00:30:27,000 --> 00:30:31,400
Speaker 5: Alphabet and Meta. Meta's revenues are almost one hundred percent

634
00:30:31,840 --> 00:30:35,280
Speaker 5: from marketing, and Google's are like close to eighty percent.

635
00:30:35,320 --> 00:30:38,360
Speaker 5: We're talking hundreds of billions of dollars a year and

636
00:30:38,520 --> 00:30:40,680
Speaker 5: all the very sophisticated stuff. And at the end, it's

637
00:30:40,680 --> 00:30:42,200
Speaker 5: to sell, you sell, you advertise.

638
00:30:42,280 --> 00:30:45,120
Speaker 2: It works and I've I've certainly been taken I get

639
00:30:45,200 --> 00:30:46,960
Speaker 2: taken in by marketing all the time.

640
00:30:47,560 --> 00:30:47,760
Speaker 1: Just say.

641
00:30:48,280 --> 00:30:49,960
Speaker 5: One of the thing is I think the reason that

642
00:30:50,120 --> 00:30:53,240
Speaker 5: because the ros here are high, when we decompose this

643
00:30:53,320 --> 00:30:55,480
Speaker 5: at the end, it sort of does most If you

644
00:30:55,520 --> 00:30:57,520
Speaker 5: take the alpha of this, think of this as alpha

645
00:30:57,600 --> 00:30:59,640
Speaker 5: relative to the average bank asset. We get that it's

646
00:30:59,640 --> 00:31:02,000
Speaker 5: about of percent, So how do you get down two percent?

647
00:31:02,040 --> 00:31:04,680
Speaker 5: So the risk premium here is quite big. We compare

648
00:31:04,680 --> 00:31:06,640
Speaker 5: it to the risk premium on bonds. You have to

649
00:31:06,640 --> 00:31:09,320
Speaker 5: compare it to high old corporate bonds, and it looks

650
00:31:09,360 --> 00:31:12,960
Speaker 5: similar for all but the lowest FIICO bonds versus let's

651
00:31:12,960 --> 00:31:16,120
Speaker 5: say triple C rated bonds, where the lowest FYCO seems

652
00:31:16,160 --> 00:31:17,880
Speaker 5: to have a big chunk the risk cream over and

653
00:31:17,880 --> 00:31:20,200
Speaker 5: above the bonds. I'd actually see the bonds look low

654
00:31:20,520 --> 00:31:23,160
Speaker 5: relative to that because it's the risk premum on credit

655
00:31:23,160 --> 00:31:25,360
Speaker 5: cards that kind of rises linearly and it's the bonds

656
00:31:25,360 --> 00:31:28,600
Speaker 5: that kind of don't. But for the not so bad credits,

657
00:31:28,640 --> 00:31:31,560
Speaker 5: it's pretty similar risk premium to highyield bond market. So

658
00:31:31,640 --> 00:31:34,160
Speaker 5: that sense doesn't look it's big, but it doesn't look crazy,

659
00:31:34,520 --> 00:31:36,080
Speaker 5: but it should, say you know, Goldman, I think they

660
00:31:36,080 --> 00:31:38,160
Speaker 5: when they got in before they got into credit cards

661
00:31:38,200 --> 00:31:40,080
Speaker 5: and it did not work out, it's apparently it is

662
00:31:40,240 --> 00:31:42,600
Speaker 5: competitive in that sense. I think they were eyeing this

663
00:31:42,760 --> 00:31:45,000
Speaker 5: and saying this is a good business. You see the

664
00:31:45,080 --> 00:31:47,560
Speaker 5: highest roe's by far of all the you know, if

665
00:31:47,560 --> 00:31:50,080
Speaker 5: you go look through the banks ten k's, you know,

666
00:31:50,120 --> 00:31:51,880
Speaker 5: some of them break this out. I think JP Morgan

667
00:31:51,880 --> 00:31:53,880
Speaker 5: for example, and you see like that's got the highest

668
00:31:53,960 --> 00:31:56,480
Speaker 5: roe by far, that it's bigger than the you know,

669
00:31:56,520 --> 00:31:58,360
Speaker 5: all the other parts of the bank. So I think

670
00:31:58,400 --> 00:32:00,320
Speaker 5: they were thinking that now it got into it paid

671
00:32:00,400 --> 00:32:03,600
Speaker 5: very high operating costs and had higher defaults than other

672
00:32:03,600 --> 00:32:05,520
Speaker 5: ones that didn't obviously did not work out because they

673
00:32:05,600 --> 00:32:06,400
Speaker 5: turned away from it.

674
00:32:06,840 --> 00:32:10,000
Speaker 4: Do you see any signs of rates eventually coming down?

675
00:32:10,280 --> 00:32:12,440
Speaker 4: It sounds like it's probably not going to be through

676
00:32:12,480 --> 00:32:15,720
Speaker 4: competition or new entrance like FinTechs. But could it be

677
00:32:15,800 --> 00:32:19,520
Speaker 4: something like regulation. I have vague memories of the Credit

678
00:32:19,560 --> 00:32:22,800
Speaker 4: Card Act doing something on this front, but could it

679
00:32:22,840 --> 00:32:23,600
Speaker 4: be something.

680
00:32:23,320 --> 00:32:25,560
Speaker 5: Like that the Credit Card Act? There are tons of

681
00:32:25,560 --> 00:32:27,920
Speaker 5: papers on it when it came out, mostly limited your

682
00:32:27,960 --> 00:32:32,160
Speaker 5: ability to increase rates on existing borrowing, and it sort

683
00:32:32,200 --> 00:32:34,680
Speaker 5: of put caps on all kinds of fees and charges,

684
00:32:34,720 --> 00:32:37,720
Speaker 5: and then people were looking for whether banks would move

685
00:32:37,760 --> 00:32:40,080
Speaker 5: that to something else. I think in the long run

686
00:32:40,120 --> 00:32:42,040
Speaker 5: the answer is yes. I don't know if they move

687
00:32:42,120 --> 00:32:44,959
Speaker 5: that or just something else. But I mean, so far

688
00:32:45,120 --> 00:32:47,440
Speaker 5: rates if you could just plot it on fred even

689
00:32:47,440 --> 00:32:49,640
Speaker 5: though I think it's like a little bit distorted, it's

690
00:32:49,640 --> 00:32:51,400
Speaker 5: been going up and up, I mean before it starts

691
00:32:51,440 --> 00:32:53,680
Speaker 5: going down because I got to stop going up. So

692
00:32:53,720 --> 00:32:56,560
Speaker 5: they're in pretty strong position. But there is this by

693
00:32:56,600 --> 00:32:59,720
Speaker 5: now pay later, there were lending club kind of things

694
00:32:59,680 --> 00:33:04,440
Speaker 5: A largely crashed and burned, and payments in general. I mean,

695
00:33:04,480 --> 00:33:06,680
Speaker 5: you know these companies for payments are huge is because

696
00:33:06,720 --> 00:33:09,320
Speaker 5: there is this you know PayPal A these guys, this

697
00:33:09,400 --> 00:33:11,120
Speaker 5: is just to take off a little bit off the

698
00:33:11,160 --> 00:33:14,000
Speaker 5: top of this swipe fee and then we're gonna get

699
00:33:14,040 --> 00:33:16,040
Speaker 5: to the interest rates on this borrowing. I mean, I

700
00:33:16,040 --> 00:33:19,080
Speaker 5: think that there is constantly like movement in this space,

701
00:33:19,120 --> 00:33:22,880
Speaker 5: but it has not been to drive down things, driven

702
00:33:22,960 --> 00:33:26,360
Speaker 5: up acquisition costs more than just driven down the actual rates.

703
00:33:27,240 --> 00:33:31,000
Speaker 2: Unrelated macro question. One of the reasons I like your work.

704
00:33:31,440 --> 00:33:34,200
Speaker 2: They're sort of revisiting some of these like basic questions,

705
00:33:34,240 --> 00:33:36,360
Speaker 2: which I think is useful. And of course when we

706
00:33:36,400 --> 00:33:38,480
Speaker 2: talked to a couple of years ago, it was like,

707
00:33:38,680 --> 00:33:40,680
Speaker 2: let's revisit some of what we thought we knew about

708
00:33:40,680 --> 00:33:43,040
Speaker 2: the seventies and say if that inflation story is a

709
00:33:43,080 --> 00:33:46,640
Speaker 2: little bit different, just on the big macro question. These

710
00:33:46,720 --> 00:33:52,160
Speaker 2: days rates where they are inflation sort of persistently warm,

711
00:33:52,440 --> 00:33:53,520
Speaker 2: A lot of people are like, I got to talk

712
00:33:53,560 --> 00:33:56,160
Speaker 2: about our star must be therefore higher than it otherwise

713
00:33:56,160 --> 00:33:58,640
Speaker 2: would have been. What do you think we've learned? You know,

714
00:33:58,680 --> 00:34:01,360
Speaker 2: we had this very fast rate gig cycle twenty twenty

715
00:34:01,400 --> 00:34:04,760
Speaker 2: one through twenty twenty three. I would say many economists

716
00:34:04,760 --> 00:34:07,240
Speaker 2: would have expected the unemployment rate to rise a lot

717
00:34:07,280 --> 00:34:09,000
Speaker 2: more given that rate hike cycle it has.

718
00:34:08,960 --> 00:34:11,680
Speaker 3: And spending to go down, you're spending.

719
00:34:11,360 --> 00:34:15,120
Speaker 2: To go down, et cetera. But I personally am rarely

720
00:34:15,200 --> 00:34:18,160
Speaker 2: satisfied by the stories that people tell about how in

721
00:34:18,239 --> 00:34:21,839
Speaker 2: fact those raid hikes translated into lower inflation. Have you

722
00:34:21,840 --> 00:34:25,600
Speaker 2: yourself sort of learned anything interesting in the last I

723
00:34:25,600 --> 00:34:27,600
Speaker 2: don't know, three or four years, five years of this

724
00:34:27,680 --> 00:34:29,800
Speaker 2: macro experiment that we have post pandemic.

725
00:34:30,040 --> 00:34:32,799
Speaker 5: I think it's a great topic in question. My inference

726
00:34:33,200 --> 00:34:36,120
Speaker 5: was that the cycle. I'm in the group that thought

727
00:34:36,160 --> 00:34:39,360
Speaker 5: that this was largely a supply shock issue. That COVID

728
00:34:39,600 --> 00:34:43,040
Speaker 5: disrupted supply chains tremendously. I mean, we saw that, and

729
00:34:43,120 --> 00:34:45,000
Speaker 5: I think if you look like the New York Fed

730
00:34:45,080 --> 00:34:48,560
Speaker 5: has this index that they put together on supply disruptions,

731
00:34:49,040 --> 00:34:52,359
Speaker 5: this predicted the trajectory of inflation with a three month

732
00:34:52,440 --> 00:34:55,000
Speaker 5: lead very well. I think we had a period where

733
00:34:55,160 --> 00:34:58,240
Speaker 5: we saw that there was increased employment and yet output

734
00:34:58,360 --> 00:35:01,120
Speaker 5: was going down. So usually when we talk about productivity

735
00:35:01,120 --> 00:35:03,520
Speaker 5: and things, there's all these compositional issues. Do you fire

736
00:35:03,760 --> 00:35:07,800
Speaker 5: at least productive people, so productivity goes up for mechanical reasons.

737
00:35:07,880 --> 00:35:10,399
Speaker 5: But when you have more people being employed and yet

738
00:35:10,440 --> 00:35:12,640
Speaker 5: outputs going down, as it did for several quarters, that

739
00:35:12,680 --> 00:35:15,000
Speaker 5: can't be the reason. So I took away from it.

740
00:35:15,280 --> 00:35:18,040
Speaker 5: You know, there's harsh arguments about this, that this was

741
00:35:18,120 --> 00:35:21,160
Speaker 5: largely supply driven, and how it relates to the seventies

742
00:35:21,200 --> 00:35:23,799
Speaker 5: is our argument there, for different reasons, was that it

743
00:35:23,880 --> 00:35:26,680
Speaker 5: was supply driven due to credit crunches and things. So

744
00:35:27,280 --> 00:35:29,600
Speaker 5: I tend to think that a lot of the business

745
00:35:29,640 --> 00:35:32,600
Speaker 5: cycle things and the inflations we've seen, like after wars,

746
00:35:32,600 --> 00:35:35,120
Speaker 5: were often switching the kind of production that you do,

747
00:35:35,160 --> 00:35:37,080
Speaker 5: which is a supply thing. I'm very much in the

748
00:35:37,520 --> 00:35:41,440
Speaker 5: supply camp, and I think the reason that employment held

749
00:35:41,520 --> 00:35:44,480
Speaker 5: up and spending held up because I don't think that

750
00:35:44,680 --> 00:35:47,680
Speaker 5: this was happening through decreasing demand and getting people fired

751
00:35:47,680 --> 00:35:50,239
Speaker 5: and so forth. I think it was products, you know,

752
00:35:50,280 --> 00:35:52,839
Speaker 5: components could ship again and so people could be more

753
00:35:52,880 --> 00:35:56,120
Speaker 5: productive with the labor they had. So to me, I'm

754
00:35:56,120 --> 00:35:58,200
Speaker 5: sure some people very very highly disagreed. To me, that

755
00:35:58,239 --> 00:35:59,480
Speaker 5: looked like a pretty clear story.

756
00:36:00,120 --> 00:36:02,960
Speaker 4: So if you're at Jerome pal and you're worried about

757
00:36:03,000 --> 00:36:05,440
Speaker 4: inflation going up, and I should just mention we are

758
00:36:05,560 --> 00:36:06,400
Speaker 4: recording this.

759
00:36:06,480 --> 00:36:07,920
Speaker 2: On October twenty nine.

760
00:36:08,040 --> 00:36:11,719
Speaker 3: Yeah, FED, which is why we expect it to be

761
00:36:11,760 --> 00:36:15,440
Speaker 3: a cut, right, but you know, inflation is still, you know,

762
00:36:15,680 --> 00:36:16,319
Speaker 3: somewhat warm.

763
00:36:16,400 --> 00:36:19,080
Speaker 4: As Joe said, if you're worried about it, should you

764
00:36:19,160 --> 00:36:23,040
Speaker 4: be looking at credit card rates versus you know, mortgage

765
00:36:23,120 --> 00:36:25,840
Speaker 4: rates or benchmark rates or things like that. How should

766
00:36:25,880 --> 00:36:29,160
Speaker 4: policy makers actually think about this problem between those?

767
00:36:29,200 --> 00:36:32,919
Speaker 5: I think mortgage rates that people you know do seem

768
00:36:33,000 --> 00:36:36,000
Speaker 5: very much to respond to, it is a much bigger amount.

769
00:36:36,239 --> 00:36:39,920
Speaker 5: Maybe they are more sophisticated sensitive. It lasts with you

770
00:36:39,960 --> 00:36:42,239
Speaker 5: for a long time. I mean, I think that's much

771
00:36:42,280 --> 00:36:45,080
Speaker 5: more important the shifts in those spreads for the macro

772
00:36:45,160 --> 00:36:47,640
Speaker 5: economy than well, the credit card rates is just not

773
00:36:47,760 --> 00:36:50,439
Speaker 5: much movement. I mean, they are literally tacked on top

774
00:36:50,480 --> 00:36:53,120
Speaker 5: of the Fed Funds rates, so that's completely mechanical. Didn't

775
00:36:53,160 --> 00:36:55,000
Speaker 5: used to be the case thirty years ago. But the

776
00:36:55,000 --> 00:36:56,879
Speaker 5: spread will move one for one with the Fed Funds,

777
00:36:57,200 --> 00:36:59,480
Speaker 5: except when they expand it by issuing new cards and

778
00:36:59,520 --> 00:37:02,759
Speaker 5: making rates hire. So I think the mortgage market's much

779
00:37:02,800 --> 00:37:05,520
Speaker 5: more important for macro kind of stuff. I mean, I

780
00:37:05,560 --> 00:37:09,640
Speaker 5: don't envy, you know, Pal's job. It's a very hard job. Now,

781
00:37:09,680 --> 00:37:13,279
Speaker 5: I'm not sure. Last time was at the FED. I

782
00:37:13,320 --> 00:37:14,880
Speaker 5: was in the elevator when he got in, but I

783
00:37:14,920 --> 00:37:16,520
Speaker 5: didn't didn't want to bug in, so I didn't say

784
00:37:16,520 --> 00:37:18,520
Speaker 5: anything to him. But I got to see him in person.

785
00:37:19,080 --> 00:37:23,640
Speaker 2: Drove our stars fake real good. Going back to you know,

786
00:37:23,640 --> 00:37:26,960
Speaker 2: you're talking about fintech et cetera, I personally like, I

787
00:37:26,960 --> 00:37:29,000
Speaker 2: actually think stable coins are going to be a very

788
00:37:29,000 --> 00:37:31,800
Speaker 2: big deal. I do not necessarily think they're going to

789
00:37:31,840 --> 00:37:34,920
Speaker 2: be a big deal for consumer transaction. It's not obvious

790
00:37:34,960 --> 00:37:36,920
Speaker 2: to me. My guess is that they'll open up new

791
00:37:36,920 --> 00:37:39,480
Speaker 2: transactions that we aren't thinking of right now, but not

792
00:37:39,600 --> 00:37:42,520
Speaker 2: for like buying coffee or buying you know whatever. But

793
00:37:42,600 --> 00:37:46,200
Speaker 2: from your research, whether into cards, et cetera, how would

794
00:37:46,239 --> 00:37:50,160
Speaker 2: that inform your or other fintech how would that inform

795
00:37:50,400 --> 00:37:54,960
Speaker 2: your thinking about the trajectory of the stable coin industry.

796
00:37:55,160 --> 00:37:58,160
Speaker 5: It's stable coin. It's interesting, and I've heard you mentioned

797
00:37:58,200 --> 00:38:00,080
Speaker 5: this kind of view, which I think is not and

798
00:38:00,120 --> 00:38:03,359
Speaker 5: i'd considered I was thinking a lot about consumers. I'll

799
00:38:03,360 --> 00:38:06,359
Speaker 5: say this, I think for me and something I talk

800
00:38:06,400 --> 00:38:09,160
Speaker 5: to my co author's stable coin are they're like a

801
00:38:09,160 --> 00:38:11,839
Speaker 5: puzzle in the sense that maybe not all stable coin,

802
00:38:11,920 --> 00:38:14,759
Speaker 5: but the ones that have been around are kind of

803
00:38:14,800 --> 00:38:17,080
Speaker 5: like a money market fund that doesn't pay you interest.

804
00:38:17,320 --> 00:38:20,080
Speaker 5: That's how I would summarize them, because and that's why

805
00:38:20,360 --> 00:38:23,839
Speaker 5: I think these are some like the most profitable companies

806
00:38:23,960 --> 00:38:27,600
Speaker 5: ever per employee, because they don't do anything. So if

807
00:38:27,680 --> 00:38:30,000
Speaker 5: you give them a bunch of billion dollars, they just

808
00:38:30,040 --> 00:38:33,520
Speaker 5: take the whole interest. There's some advertising there too, but

809
00:38:33,560 --> 00:38:36,359
Speaker 5: not a tremendous amount compared to that, and people are

810
00:38:36,360 --> 00:38:39,400
Speaker 5: happy with that. I don't really get it, but you know,

811
00:38:39,480 --> 00:38:42,000
Speaker 5: now they've, like you mentioned, they've started to learn the

812
00:38:42,040 --> 00:38:44,279
Speaker 5: sort of tricks of the trade. They're going to do rewards.

813
00:38:44,400 --> 00:38:47,160
Speaker 5: It's better than paying people actual interests. You give them rewards.

814
00:38:47,680 --> 00:38:50,719
Speaker 5: So from the point of view consumers, it is kind

815
00:38:50,719 --> 00:38:52,840
Speaker 5: of a mystery. I mean, I would love to start

816
00:38:53,000 --> 00:38:55,440
Speaker 5: a money market fund and not pay anybody any interest.

817
00:38:55,880 --> 00:38:58,799
Speaker 5: Life economically, when you don't pay any interest on a dollar, ever,

818
00:38:58,960 --> 00:39:01,160
Speaker 5: you've taken the whole dollar. That's what the dollar does.

819
00:39:01,239 --> 00:39:03,520
Speaker 5: It pays you interest. So the net present value of

820
00:39:03,520 --> 00:39:05,719
Speaker 5: all the interest of a dollar is the dollar. So

821
00:39:05,719 --> 00:39:07,560
Speaker 5: if they never pay you and you stay there forever,

822
00:39:08,000 --> 00:39:11,480
Speaker 5: then if they have eight billion dollars, they've captured eight

823
00:39:11,480 --> 00:39:12,200
Speaker 5: billion dollars.

824
00:39:12,320 --> 00:39:15,280
Speaker 3: Again, nice business, if you yeah, that's a great business.

825
00:39:15,320 --> 00:39:17,200
Speaker 5: It's it's weird, but it's a great business.

826
00:39:17,239 --> 00:39:18,640
Speaker 3: What's your next research project?

827
00:39:18,840 --> 00:39:21,960
Speaker 5: So I think from this credit card stuff, there's definitely

828
00:39:22,000 --> 00:39:24,840
Speaker 5: interesting things to think about, you know, how people default

829
00:39:25,360 --> 00:39:28,920
Speaker 5: and how much this marketing stuff affects them. From another

830
00:39:29,000 --> 00:39:31,359
Speaker 5: point of view is one of my co authors in here,

831
00:39:31,360 --> 00:39:33,839
Speaker 5: a former student of mine. We have a bunch of

832
00:39:34,000 --> 00:39:38,120
Speaker 5: work on adjustable rate mortgages and why they kind of disappeared.

833
00:39:38,480 --> 00:39:40,200
Speaker 5: So they used to be a big thing and they've

834
00:39:40,280 --> 00:39:43,160
Speaker 5: kind of disappeared, and I think we kind of understand why.

835
00:39:43,640 --> 00:39:45,239
Speaker 5: So that's uh, you know, there's been a lot of

836
00:39:45,280 --> 00:39:47,880
Speaker 5: discussion about that for mortgages. Why is the US in

837
00:39:47,960 --> 00:39:51,040
Speaker 5: one camp and many other countries in another camp? But

838
00:39:51,080 --> 00:39:52,880
Speaker 5: the US kind of used to be in the adjustable

839
00:39:52,920 --> 00:39:56,240
Speaker 5: mortgage rate camp at least pre crisis and stuff.

840
00:39:56,280 --> 00:39:59,520
Speaker 2: I remember when the rate hike, when we started surging.

841
00:39:59,560 --> 00:40:04,720
Speaker 2: Do popular theory that monetary policy would have more teeth

842
00:40:04,760 --> 00:40:08,479
Speaker 2: in countries like Canada, Australia, the UK because so many

843
00:40:08,480 --> 00:40:12,879
Speaker 2: more households would be more sensitive to faster resets. Has

844
00:40:12,880 --> 00:40:15,880
Speaker 2: that actually been born out? It sounds great, it's like

845
00:40:15,920 --> 00:40:18,680
Speaker 2: a theory. Intuitively that makes a lot of sense, I do.

846
00:40:18,800 --> 00:40:21,759
Speaker 2: I guess Canadian unemployment has trended higher than American but

847
00:40:22,440 --> 00:40:25,600
Speaker 2: the inflation trajectories I think have been roughly the same,

848
00:40:25,880 --> 00:40:30,040
Speaker 2: and those other Anglophone countries versus the US where they hit.

849
00:40:30,160 --> 00:40:32,360
Speaker 2: I don't know, like how strong effect was that, do

850
00:40:32,360 --> 00:40:32,600
Speaker 2: you know.

851
00:40:32,719 --> 00:40:34,759
Speaker 5: I don't know exactly, but I don't get the impression

852
00:40:34,920 --> 00:40:38,920
Speaker 5: that it was tremendously different. I think it has impacted consumers.

853
00:40:38,920 --> 00:40:41,680
Speaker 5: One thing I should note, though, is there's two senses

854
00:40:41,719 --> 00:40:44,640
Speaker 5: in which monetary policy can have an effect. One is

855
00:40:44,680 --> 00:40:46,440
Speaker 5: that it makes people have to spend a lot of

856
00:40:46,480 --> 00:40:48,880
Speaker 5: money on that, so it's expensive for them. But the

857
00:40:48,920 --> 00:40:51,399
Speaker 5: other one is that here and I don't think that's

858
00:40:51,440 --> 00:40:53,640
Speaker 5: the effect we were going for, but people have just

859
00:40:53,840 --> 00:40:56,799
Speaker 5: you know, stopped taking out as many mortgages and don't move.

860
00:40:57,280 --> 00:40:59,839
Speaker 5: It was a negative effect. I'm just not sure it's

861
00:40:59,840 --> 00:41:04,560
Speaker 5: anti inflationary effect. So it's like if you're gonna have

862
00:41:04,600 --> 00:41:07,399
Speaker 5: floating rate stuff, and that's like the case with credit cards,

863
00:41:07,400 --> 00:41:09,919
Speaker 5: and it shouldn't affect the volume of it that much

864
00:41:09,960 --> 00:41:12,839
Speaker 5: into of producing it, but it's kind of people. It's

865
00:41:12,880 --> 00:41:15,439
Speaker 5: expensive for them, and then on the fixed rate one

866
00:41:15,840 --> 00:41:17,439
Speaker 5: they just stick to the old stuff and we don't

867
00:41:17,560 --> 00:41:19,759
Speaker 5: you know, mortgage credits really dried up in a way,

868
00:41:20,120 --> 00:41:23,319
Speaker 5: but it's not affecting the existing bar wars, only to

869
00:41:23,320 --> 00:41:24,640
Speaker 5: the extent that you don't want to move, which is

870
00:41:24,640 --> 00:41:25,399
Speaker 5: actually a big deal.

871
00:41:26,560 --> 00:41:29,440
Speaker 2: Drexler, thank you so much for coming back on odd low.

872
00:41:29,440 --> 00:41:31,319
Speaker 2: It's always a trade. And next time you have a

873
00:41:31,360 --> 00:41:33,960
Speaker 2: new report out, let's talking let's talk arms next time.

874
00:41:34,080 --> 00:41:36,000
Speaker 5: Okay, great, thank you very much having me.

875
00:41:48,600 --> 00:41:52,480
Speaker 2: Tracy. I found that conversation to be fascinating. I have

876
00:41:52,560 --> 00:41:55,239
Speaker 2: to admit, like, yeah, like credit cards are the sort

877
00:41:55,280 --> 00:41:57,399
Speaker 2: of black box to me in many respects. I don't

878
00:41:57,400 --> 00:41:59,799
Speaker 2: really understand the business because I don't actually use them

879
00:41:59,800 --> 00:42:02,920
Speaker 2: for revolving purposes or borrowing against them. I don't think

880
00:42:02,920 --> 00:42:06,440
Speaker 2: I quite realized how crazy the numbers are. And I

881
00:42:06,480 --> 00:42:09,719
Speaker 2: certainly knew that there's tons of advertising, including direct mail

882
00:42:09,760 --> 00:42:11,919
Speaker 2: on credit cards, but the idea that this is so

883
00:42:11,960 --> 00:42:14,440
Speaker 2: substantial that a big part of what people are paying

884
00:42:14,520 --> 00:42:18,560
Speaker 2: for here is the advertising that was all very novel

885
00:42:18,600 --> 00:42:18,799
Speaker 2: to me.

886
00:42:19,000 --> 00:42:20,239
Speaker 3: It's very surprising.

887
00:42:20,360 --> 00:42:23,760
Speaker 4: My main takeaway is that people, I guess are not rational,

888
00:42:23,800 --> 00:42:25,759
Speaker 4: at least when it comes to credit cards. Right, the

889
00:42:25,800 --> 00:42:26,799
Speaker 4: marketing seems to work.

890
00:42:26,880 --> 00:42:29,400
Speaker 2: Yeah, no, totally. I'm not rational because I don't take

891
00:42:29,400 --> 00:42:31,360
Speaker 2: advantage of all the points that I could, and I

892
00:42:31,400 --> 00:42:33,799
Speaker 2: don't like optimize the way I could. And when I,

893
00:42:33,920 --> 00:42:36,680
Speaker 2: like buy a plane ticket, only part of the time

894
00:42:36,760 --> 00:42:38,360
Speaker 2: do I think about is this the airlines?

895
00:42:38,400 --> 00:42:40,719
Speaker 4: Well, you could also argue that it's rational to like

896
00:42:40,840 --> 00:42:43,560
Speaker 4: factor in the time and spend on doing that.

897
00:42:43,760 --> 00:42:46,000
Speaker 2: Sorry, I justify all of this money left on the

898
00:42:46,040 --> 00:42:48,680
Speaker 2: tech's right by saying I make it irrational. My time

899
00:42:48,800 --> 00:42:53,200
Speaker 2: is valuable, Yeah, my time is valuable. It's but you know,

900
00:42:53,360 --> 00:42:55,839
Speaker 2: if there are all these other borrowing products out there

901
00:42:55,920 --> 00:42:59,560
Speaker 2: that are cheaper, et cetera, it does feel like someone

902
00:43:00,160 --> 00:43:02,240
Speaker 2: must be able to come along and make a product.

903
00:43:02,480 --> 00:43:04,239
Speaker 5: And yeah, that is, let's going to.

904
00:43:04,239 --> 00:43:06,200
Speaker 2: Compete on raid or you're gonna be able to borrow achiever.

905
00:43:06,320 --> 00:43:08,080
Speaker 2: I don't know, maybe b NPL will achieve that. I

906
00:43:08,080 --> 00:43:08,400
Speaker 2: don't know.

907
00:43:08,480 --> 00:43:10,920
Speaker 3: I'm going to go take out a personal finance loan

908
00:43:11,000 --> 00:43:11,560
Speaker 3: right now.

909
00:43:11,400 --> 00:43:11,920
Speaker 5: Go for it.

910
00:43:12,080 --> 00:43:13,680
Speaker 3: Shall we leave it there, let's leave it there. This

911
00:43:13,719 --> 00:43:16,880
Speaker 3: has been another episode of the Audthlots podcast. I'm Tracy Alloway.

912
00:43:16,920 --> 00:43:19,120
Speaker 3: You can follow me at Tracy Alloway.

913
00:43:18,760 --> 00:43:21,440
Speaker 2: And I'm Jill Wisenthal. You can follow me at the Stalwart.

914
00:43:21,480 --> 00:43:25,200
Speaker 2: Follow our guest Itamar Drexler. He's at Idres. Follow our

915
00:43:25,200 --> 00:43:28,880
Speaker 2: producers Carmen Rodriguez at Carman Arman, Dashel Bennett at Dashbot,

916
00:43:28,920 --> 00:43:31,759
Speaker 2: and kill Brooks at Kilbrooks. More odd Lots content go

917
00:43:31,800 --> 00:43:33,840
Speaker 2: to Bloomberg dot com slash odd lots. We have a

918
00:43:33,920 --> 00:43:36,480
Speaker 2: daily newsletter and all of our episodes, and you can

919
00:43:36,600 --> 00:43:38,560
Speaker 2: chet about all of these topics twenty four to seven

920
00:43:38,600 --> 00:43:42,120
Speaker 2: in our discord discord do gg slash odd lots.

921
00:43:42,160 --> 00:43:44,400
Speaker 4: And if you enjoy ad lots, if you like it

922
00:43:44,520 --> 00:43:48,360
Speaker 4: when we talk about the very profitable business of credit cards,

923
00:43:48,560 --> 00:43:51,800
Speaker 4: then please leave us a review on your favorite podcast platform.

924
00:43:52,080 --> 00:43:54,600
Speaker 3: And remember, if you are a Bloomberg.

925
00:43:54,080 --> 00:43:58,640
Speaker 4: Subscriber and you enjoy getting benefits and rewards, then please

926
00:43:59,040 --> 00:44:01,919
Speaker 4: check out the Bloomberg channel on Apple Podcasts. You could

927
00:44:01,920 --> 00:44:05,840
Speaker 4: listen to all of our episodes absolutely ad free. Just

928
00:44:05,840 --> 00:44:08,560
Speaker 4: find the Bloomberg channel on Apple Podcasts and follow the

929
00:44:08,600 --> 00:44:09,399
Speaker 4: instructions there.

930
00:44:09,719 --> 00:44:10,560
Speaker 3: Thanks for listening