WEBVTT - What's Ahead For Mortgage Rates 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day, we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.560 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.479 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:21.960 at Bloomberg dot com slash podcast. Now. There's been a 0:00:22.000 --> 0:00:24.799 lot of talk about housing lately, from the FED to 0:00:25.360 --> 0:00:28.120 David Rubinstein's interview with John Paulson. I want to bring 0:00:28.120 --> 0:00:32.959 in somebody who runs a closed and fund invest primarily 0:00:32.960 --> 0:00:36.880 and residential whole mortgages. Katherine Hawkins joins US portfolio manager 0:00:37.240 --> 0:00:42.800 and senior vice president Vertical Capital Income Fund. So, Catherine, UM, 0:00:42.840 --> 0:00:47.839 what kind of my main question is what kind of 0:00:47.960 --> 0:00:51.279 risk are you seeing here for the return that you're 0:00:51.280 --> 0:00:53.159 getting or what kind of return are you saying for 0:00:53.159 --> 0:00:57.560 the risk that you're taking? Sure? I mean, I think 0:00:57.560 --> 0:01:00.600 it really depends, you know, on what us A classes 0:01:00.640 --> 0:01:04.760 in the mortgage industry or investing in UM. Single family 0:01:04.840 --> 0:01:08.240 rentals right now are pretty hot. UM. They're producing the 0:01:08.600 --> 0:01:13.520 highest returns really UM, and that's with investors chasing yield 0:01:13.520 --> 0:01:17.160 and kind of this low rate environment. UM, you're still 0:01:17.240 --> 0:01:20.720 looking at a first lean on a residential mortgage. UM, 0:01:20.800 --> 0:01:24.039 so as far as you know the risk profile, UM, 0:01:24.040 --> 0:01:26.920 your first in line. We're in the business of buying 0:01:26.959 --> 0:01:29.319 the whole loans, so we're not investing in any pools 0:01:29.400 --> 0:01:32.280 or tranches. UM. We own the servicing rights as well. 0:01:32.440 --> 0:01:36.360 So UM, that's where we are focusing on really right 0:01:36.360 --> 0:01:38.200 now as a single family that that makes a lot 0:01:38.200 --> 0:01:41.440 of sense. And I could see UM single family rentals 0:01:41.480 --> 0:01:44.440 being a great investment when you step back and look 0:01:44.440 --> 0:01:48.600 at the whole market right now, how does it strike you? 0:01:48.680 --> 0:01:52.160 Because it seems like everyone wants to buy a house, 0:01:52.240 --> 0:01:55.200 Prices are going as high as they can and people 0:01:55.280 --> 0:02:00.520 are just paying as much as they can borrow. UM. Well, 0:02:00.560 --> 0:02:02.640 I don't know that I necessarily agree with all of 0:02:02.680 --> 0:02:06.200 that we have UM. You know, home ownership is actually 0:02:06.200 --> 0:02:09.120 down since two thousand nine, UM, and we've got we're 0:02:09.120 --> 0:02:12.640 seeing a lot more renters, especially in the younger generations 0:02:12.639 --> 0:02:16.560 and millennial generation. UM. And you're seeing that too in 0:02:16.600 --> 0:02:19.480 a start with covid UM and a surge of people 0:02:19.480 --> 0:02:22.280 wanting more space, not wanting to be in the multifamily housing. 0:02:22.360 --> 0:02:24.240 So you're seeing kind of people moving out of that 0:02:24.360 --> 0:02:28.919 live work play area and looking for single family renter 0:02:29.400 --> 0:02:34.560 rental homes. Catherine talks to us about the credit quality 0:02:34.600 --> 0:02:37.040 of the market that that you play in. What are 0:02:37.040 --> 0:02:40.160 you seeing now in terms of credit quality? Yeah, I 0:02:40.160 --> 0:02:42.639 think that's the big difference between kind of a surge 0:02:42.760 --> 0:02:46.120 right now and and back you know, subprime eras is 0:02:46.600 --> 0:02:50.160 really you're seeing seven hundred and above ficos um. You know, 0:02:50.160 --> 0:02:55.400 the credits guidelines and lending practices are tighter than they 0:02:55.400 --> 0:02:58.240 have been in a while. UM, So we're really we're 0:02:58.240 --> 0:03:01.560 looking at seven D seven fifty ficos um and generally 0:03:01.560 --> 0:03:05.720 like a sixty percent LTV on the property. What about 0:03:05.720 --> 0:03:09.440 the feds involvement here, the asset purchases that they've been making, 0:03:09.639 --> 0:03:14.440 Is it hurting your ability to provide more returns? It's 0:03:14.480 --> 0:03:17.280 really not so. Again, we're buying a whole loan. Um, 0:03:17.320 --> 0:03:20.920 we have a whole loan portfolio. The tapering, you know that, 0:03:20.960 --> 0:03:23.799 I think we're not going to see any significant um 0:03:24.080 --> 0:03:27.760 change in rate due to tapering, um, you know anytime soon. 0:03:27.840 --> 0:03:30.960 I think race will stay the same um, you know, 0:03:31.000 --> 0:03:32.800 And that's it's always going to drive you know, to 0:03:32.880 --> 0:03:36.839 kind of get creative on structure and leverage to find 0:03:36.880 --> 0:03:41.400 some yield and return. So I'm starting to hear I 0:03:41.400 --> 0:03:43.560 think maybe on the radio some of the return of 0:03:43.680 --> 0:03:48.520 zero down mortgages UM. That kind of gets my radar up. 0:03:48.560 --> 0:03:53.120 Having lived through the financial crisis, should we be concerned 0:03:53.160 --> 0:03:57.080 about for two and a half million, Yeah, yeah, UM, 0:03:57.280 --> 0:04:00.000 it concerns me to UM. Luckily, it's not a big 0:04:00.440 --> 0:04:04.200 program UM and very few groups are offering it. And 0:04:04.200 --> 0:04:06.960 then it is different than subprime, you know, than we 0:04:07.040 --> 0:04:10.119 saw kind of the nina UM you know, in subprime 0:04:10.160 --> 0:04:13.040 programs that were out there. The credit um is a 0:04:13.080 --> 0:04:16.760 lot higher. I think it's a seven sixty minimum credit 0:04:16.800 --> 0:04:22.080 limit to these, and it is basically an so you're 0:04:22.120 --> 0:04:25.760 really financing your down payment on those UM. One of 0:04:25.760 --> 0:04:27.800 the biggest differences that I take a little bit of 0:04:27.800 --> 0:04:30.960 comfort in is that these are fixed rate loans UM. 0:04:31.000 --> 0:04:33.479 They do not have a balloon payment uh and so 0:04:33.560 --> 0:04:34.800 there's not going to be any kind of or a 0:04:34.800 --> 0:04:36.920 pre payment penalty for that matter, and so there's not 0:04:36.960 --> 0:04:40.159 going to be a really a big payment shocked to 0:04:40.200 --> 0:04:42.960 any of the borrowers. I think it really weeds out 0:04:42.960 --> 0:04:45.240 some of the borrowers that are trying to get in 0:04:45.240 --> 0:04:47.680 in the beginning. What do you think about the way 0:04:47.680 --> 0:04:49.720 the fund has traded on the n Y s C. 0:04:49.920 --> 0:04:54.800 I mean, UM, it's obviously you don't expect to see 0:04:55.120 --> 0:04:58.720 much volatility in this kind of fund, and yet even 0:04:58.760 --> 0:05:01.560 with the pandemic you saw big drop. People took advantage 0:05:01.560 --> 0:05:04.280 of it quickly and its snapped almost back, but it's 0:05:04.279 --> 0:05:07.800 still it's got yet to come back to the two levels. 0:05:09.200 --> 0:05:11.680 That's right. We did see a pretty big drop in 0:05:11.720 --> 0:05:15.400 the stock price with UM the onset of COVID, which 0:05:15.440 --> 0:05:17.160 I think was kind of in line with all markets 0:05:17.360 --> 0:05:21.760 really in general. UM. And you know, the the volatility 0:05:21.760 --> 0:05:23.640 in our fund is that we're just it's not a 0:05:23.640 --> 0:05:26.599 big market share, right, so we've got a few and 0:05:26.680 --> 0:05:29.680 but UM institutional investors that trade in and trade out. 0:05:29.680 --> 0:05:33.400 It's really more of a long term play. What's the 0:05:33.400 --> 0:05:36.800 concerning your market, Catherine? Thirty seconds left here? Uh, if 0:05:36.920 --> 0:05:40.960 rates will in fact start to rise here, you know, 0:05:41.080 --> 0:05:44.240 for us, we're buy and hold, so we'd redeploy any 0:05:44.279 --> 0:05:47.000 capital that you know, we get back and remit. UM. 0:05:47.000 --> 0:05:49.320 We're starting to see a slowdown and re fis, but 0:05:49.400 --> 0:05:51.520 it's too early related to tell if that was just 0:05:51.600 --> 0:05:54.520 kind of a come down as the summer season. Um, 0:05:54.600 --> 0:05:57.680 and if that will really continue. Um, but really for 0:05:57.800 --> 0:06:02.400 us slow down and refisum real red just redeployed capital, 0:06:02.680 --> 0:06:05.440 you know, in the current rate environment. All right, Catherine, 0:06:05.440 --> 0:06:08.640 thank you so much for joining us. Katherine Hawkins, portfolio 0:06:08.680 --> 0:06:12.400 manager and Signior vice president of Vertical Capital Income Fund 0:06:12.800 --> 0:06:17.040 UH close and fund that invests primarily in residential whole 0:06:17.200 --> 0:06:21.040 mortgage loans and whole loan secured by deeds of trust. UH. 0:06:21.080 --> 0:06:23.880 The investment objective there is to seek income and for 0:06:23.920 --> 0:06:25.800 a lot of investors looking at a you know, one 0:06:25.800 --> 0:06:29.920 point three percent ten year yield, there is a need 0:06:30.000 --> 0:06:32.880 for income. There is a need for yield in this market, 0:06:33.360 --> 0:06:35.960 and clearly the mortage market is one place of interest. 0:06:36.080 --> 0:06:42.120 This is Bloomberg Honors. Harrison joins us right now, chief 0:06:42.120 --> 0:06:45.520 investment Officer of Global Fixed Income at NOEU VENE. They 0:06:45.560 --> 0:06:49.880 have one point to trillion dollars of assets firm wide 0:06:50.000 --> 0:06:54.960 and are based out of gorgeous Charlotte, North Carolina. UM 0:06:55.000 --> 0:06:57.240 and anders this is you know, obviously it's a personal 0:06:57.240 --> 0:06:59.800 issue for me COVID and what's happening in terms of 0:07:00.760 --> 0:07:06.400 travel restrictions, but it's got to affect um, the companies 0:07:06.400 --> 0:07:11.040 that you cover, as well as uh, you know, the 0:07:11.240 --> 0:07:16.480 the entire global economy. When you don't allow Americans to 0:07:16.520 --> 0:07:22.559 fly into Europe, it becomes a problem on so many levels. Yeah, 0:07:22.560 --> 0:07:25.440 thanks for having me. Yeah, No, certainly, it's it's it's 0:07:25.480 --> 0:07:31.120 a key the area that we were paying attention to. UM. Certainly, 0:07:31.400 --> 0:07:35.840 the trends ofthing concerning and the reopening kind of type 0:07:36.080 --> 0:07:39.440 uh trend that we've been seeing not just here in 0:07:39.480 --> 0:07:43.960 the US but also globally is certainly could could become impacted. 0:07:44.000 --> 0:07:47.840 And as you said, if if Europe starts becoming more 0:07:47.920 --> 0:07:51.440 strict on you know, uh, you know, a scissors or 0:07:51.480 --> 0:07:54.720 visitors in general, that certainly can have you know, both 0:07:54.760 --> 0:07:59.600 an economic impact and behavioral impact as well. But I 0:07:59.640 --> 0:08:01.960 would say, and when we take a quick step back 0:08:02.960 --> 0:08:05.600 year of late the economic activity at least in the 0:08:05.720 --> 0:08:09.040 US has not been quite as much affected on this 0:08:09.560 --> 0:08:12.240 latest wave on the on the delta side as we've 0:08:12.280 --> 0:08:15.520 seen in the past, and the high frequency data has 0:08:15.680 --> 0:08:19.840 has sort of been showing quite minimal impact of consuming 0:08:20.400 --> 0:08:24.080 consuming behavior so far, that could certainly change. And certainly 0:08:24.120 --> 0:08:27.120 we're keeping an eye on return to school and how 0:08:27.200 --> 0:08:30.400 that's going and even if they were delays to returning 0:08:30.440 --> 0:08:35.520 to the office. But at this point, so far that again, 0:08:35.600 --> 0:08:38.800 the high frequency data seems to be holding up quite well. 0:08:39.480 --> 0:08:41.880 Certainly we're keeping an eye on on case counts and 0:08:42.160 --> 0:08:45.559 hospitalizations around on around the US and around the world, 0:08:46.400 --> 0:08:50.120 where at least now we're seeing some of these desolation 0:08:50.240 --> 0:08:52.400 in the latest numbers. Not to say that we're out 0:08:52.440 --> 0:08:56.080 of the woods, far from it, but um, we're certainly 0:08:56.160 --> 0:08:59.839 monitoring this risk. But at this point COVID has not 0:09:00.240 --> 0:09:03.640 had a whole lot of impact on the fixed income 0:09:03.720 --> 0:09:07.880 side of things at least, so worth monitoring obviously on 0:09:07.880 --> 0:09:10.120 the top of mind for everybody, so that the company's 0:09:10.120 --> 0:09:15.679 wearing less than um, but so far it's necessarily minimal impact. 0:09:15.840 --> 0:09:18.600 We would say, just what was your takeaway from Jackson 0:09:18.679 --> 0:09:22.359 Hole last week? It's that, you know, the the signaling 0:09:22.480 --> 0:09:25.040 factor seems to be pretty good from the FED. What 0:09:25.160 --> 0:09:29.320 was your takeaway? Sure, yeah, I would say we would 0:09:29.559 --> 0:09:32.120 we would probably call it a bit of a non event. Obviously, 0:09:32.240 --> 0:09:34.439 it's felt like there was in line with what the 0:09:34.520 --> 0:09:38.120 market was expecting and kind of hoping for, perhaps a 0:09:38.280 --> 0:09:41.960 little disappointment of not getting more clarity around the actual 0:09:42.040 --> 0:09:46.199 tapering timing. But we actually feel like General Powell handled 0:09:46.240 --> 0:09:51.000 events very well, gave a little more assurance that tapering 0:09:51.200 --> 0:09:56.199 is coming, and we sort of clarified and reinforced that 0:09:56.600 --> 0:10:00.199 that there is a thought process of that likely that 0:10:00.280 --> 0:10:03.200 could start before the end of the year. But at 0:10:03.280 --> 0:10:06.920 the same time, he left himself with a lot of optionality, 0:10:07.800 --> 0:10:10.720 be it looking at some of this additional economic data 0:10:10.840 --> 0:10:14.240 coming up. Obviously jobs numbers on Friday would be quite key, 0:10:14.960 --> 0:10:16.800 and even you know, a better read into what we 0:10:16.920 --> 0:10:20.160 just mentioned about COVID and the delta variant potentially impact. 0:10:20.240 --> 0:10:23.360 So all in all, we we we felt like he 0:10:23.559 --> 0:10:26.600 handled well. I didn't really scoop the markets one way 0:10:26.640 --> 0:10:29.880 or another. Um I think it was kind of interesting 0:10:30.000 --> 0:10:33.079 to see that you had a lot of key speakers 0:10:33.240 --> 0:10:35.400 from from the FED come out in the past week 0:10:35.520 --> 0:10:38.559 or so with sort of a mix of views and 0:10:38.640 --> 0:10:42.600 discussion points. But in the end, I think this reinforced 0:10:42.679 --> 0:10:46.880 our view that you really, really mostly almost exclusively need 0:10:46.920 --> 0:10:50.640 to listen to to Powell or with maybe Clarenda Williams 0:10:50.679 --> 0:10:53.960 and Brainard, and those are the key people that are 0:10:54.040 --> 0:10:57.000 really setting the tone here. So interesting to get to 0:10:57.080 --> 0:11:00.199 take aways from other FED speakers, But ultimately power in 0:11:00.240 --> 0:11:02.920 this core team is what truly matters. Here are they 0:11:03.360 --> 0:11:07.480 are all the Hawks non voters. It's a bit of 0:11:07.559 --> 0:11:10.120 a mix to be fair. And then as you guys 0:11:10.200 --> 0:11:12.160 know it, kind of it's a moving target as well 0:11:12.240 --> 0:11:15.480 as those are moving around. But but the key players 0:11:16.960 --> 0:11:20.360 in our mind is again those kind of four power Clarada, 0:11:20.480 --> 0:11:23.440 William some brain art um. And that's not to say 0:11:23.480 --> 0:11:27.319 that everybody obviously has some influence and have views that 0:11:27.440 --> 0:11:30.959 can can frame things up. But at this point um, 0:11:31.480 --> 0:11:36.280 we cannot view this weekend's message from Powell in particular, 0:11:36.440 --> 0:11:40.600 particularly that it was sort of adubblished tapering message, meaning 0:11:41.280 --> 0:11:44.319 reinforced here what I said that it's on top of 0:11:44.440 --> 0:11:46.679 mind they have kind of the four end of the 0:11:46.760 --> 0:11:50.640 year time frame, but at the same time also reinforced 0:11:50.679 --> 0:11:54.360 that the tapering timing and the interest rate hiking timing 0:11:54.720 --> 0:11:58.000 or in completely supper timetable. So that had been some 0:11:58.240 --> 0:12:01.040 market speculation again part be I think because some of 0:12:01.080 --> 0:12:04.839 the other FED speakers being fairly aggressive and some of 0:12:04.920 --> 0:12:08.000 their sound bites, so there has been some speculation and 0:12:08.240 --> 0:12:11.760 maybe we can start reading into timing of the first 0:12:11.840 --> 0:12:15.480 hike around when tapering would wrap up. But again I 0:12:15.559 --> 0:12:18.679 think Powell came out he said it pretty clearly on 0:12:19.120 --> 0:12:22.079 that that that shouldn't be the case, and he's separating 0:12:22.160 --> 0:12:25.800 those two timetables completely. So again we kind of do 0:12:25.880 --> 0:12:29.400 it as a dobish tapering that message at this point 0:12:29.559 --> 0:12:32.719 and again gives them a lot of flexibility here and 0:12:32.760 --> 0:12:37.360 could easily posse ab bit before rate hikes start. Uh, 0:12:37.800 --> 0:12:40.839 and kind of wrapping up the tabling. All right, Anders, 0:12:40.880 --> 0:12:43.439 thank you so much for joining us as always unders 0:12:43.559 --> 0:12:47.439 person Chief Investment Officer of Global Fix Income at now 0:12:47.520 --> 0:12:55.040 Vene based in Charlotte, North Carolina. As we watch markets 0:12:55.120 --> 0:12:57.280 hit a new time a new all time high at 0:12:57.320 --> 0:13:03.679 least the SMP five after what we saw in Jackson Hole. Um, 0:13:03.880 --> 0:13:06.760 we should talk about what exactly that was pre a 0:13:06.800 --> 0:13:09.560 misrab joins us Managing Director and Global head of Great 0:13:09.600 --> 0:13:13.560 Strategy at t D Securities. Great having you on, Great 0:13:13.600 --> 0:13:16.880 talking to you again. Um, what did you think that was? 0:13:17.040 --> 0:13:19.880 Was that a dovish taper as it was sort of 0:13:19.920 --> 0:13:23.000 referred to on the day. Hi Matt, thanks for having 0:13:23.080 --> 0:13:26.280 me on. Yes, I think we heard not a new 0:13:26.400 --> 0:13:30.000 message from chair Power, but certainly a message that they 0:13:30.040 --> 0:13:33.079 are inching that the fat is inching towards taper, but 0:13:33.200 --> 0:13:36.480 that they don't feel urgency either on the inflation front 0:13:36.600 --> 0:13:39.280 on the labor market front to have to accelerate the base. 0:13:39.679 --> 0:13:42.079 We're also seeing very clear signs from the feather they're 0:13:42.080 --> 0:13:46.120 trying to disentangle um tapering from hiking. I think they're 0:13:46.160 --> 0:13:48.400 trying to prevent a taper tantrum. They've done a fantastic 0:13:48.520 --> 0:13:51.480 job so far. We're three months away potentially from a taper, 0:13:51.640 --> 0:13:54.880 at least in our foecast tapering happens in December, and 0:13:55.000 --> 0:13:58.120 yet the bond market is table, equities continue to go up. 0:13:58.120 --> 0:13:59.520 So I think what the FED is trying to say 0:13:59.559 --> 0:14:02.120 is the corner me strong. The FED is starting to 0:14:02.200 --> 0:14:04.040 take the punch pull away, but they're doing it in 0:14:04.120 --> 0:14:06.679 such a gradual pace that it doesn't threaten the recovery. 0:14:06.720 --> 0:14:09.599 I think that's the message we got on Friday, and 0:14:09.679 --> 0:14:11.760 now I would say it's much more important now what 0:14:11.880 --> 0:14:14.880 happens to the economy and the economic outlook rather than 0:14:14.920 --> 0:14:17.160 the FED reaction function. I think the FED is tried 0:14:17.240 --> 0:14:20.880 hard to clarify that back and holding through other FED messages. 0:14:21.200 --> 0:14:23.080 All right, for yourself, we are to look at the economy, 0:14:23.120 --> 0:14:27.000 presumably labor is a big, big part of that. So 0:14:27.120 --> 0:14:29.880 when we have obviously the jobs before coming up on Friday, 0:14:29.880 --> 0:14:32.360 how do you think the FED is looking at this 0:14:32.560 --> 0:14:34.360 labor market and what do you think they're kind of 0:14:34.520 --> 0:14:36.920 what clues do you think they're looking for? Ye, so 0:14:37.000 --> 0:14:40.240 I think they'd want to see the continued number of 0:14:40.400 --> 0:14:44.240 you know, non farm payroll numbers, so jobs created in 0:14:44.320 --> 0:14:46.320 the economy. I think they'd want to see that continuing 0:14:46.360 --> 0:14:48.760 to grow. We do expect to see that sign, but 0:14:48.800 --> 0:14:50.880 our economists do have a slowing in the pace, a 0:14:50.960 --> 0:14:54.760 pretty significant slowing. We've got four thousand pensylvan for Friday, 0:14:55.040 --> 0:14:57.240 so that is much weaker than close to a million 0:14:57.280 --> 0:14:59.160 that we saw last month. Some of it is a 0:14:59.240 --> 0:15:02.040 seasonal issue, some of it is high frequency data we're 0:15:02.080 --> 0:15:06.120 noticing is showing a deceleration in the job momentum. But 0:15:06.240 --> 0:15:08.760 I think the FED would want to see continued job 0:15:08.880 --> 0:15:11.800 growth plus people returning to the labor force. I think 0:15:11.840 --> 0:15:14.520 that's been a big open question. You know, is there 0:15:14.560 --> 0:15:17.080 a structure shift in the labor market or in our view, 0:15:17.200 --> 0:15:19.440 this is more a function of the fact that we 0:15:19.520 --> 0:15:23.400 have the extended unemployment benefits, or there's just lingering COVID 0:15:23.520 --> 0:15:26.280 fears or the fact that schools won't reopen. I don't 0:15:26.320 --> 0:15:28.800 think you get that sense from this report because this 0:15:28.960 --> 0:15:31.440 is still August report. Really, I would say September and 0:15:31.520 --> 0:15:35.400 October payroll report so released a month later, would be 0:15:35.480 --> 0:15:37.920 more important. On that, you know, structural component of the 0:15:38.000 --> 0:15:40.360 labor market. I think that will give the FED a 0:15:40.480 --> 0:15:43.480 sense of true labor market slack. As long as there 0:15:43.480 --> 0:15:45.080 a slack in the system, I think they want to 0:15:45.080 --> 0:15:48.040 be extremely accommodative. If there's science that people are not 0:15:48.280 --> 0:15:50.880 re entering the labor force, that they've left the labor 0:15:50.960 --> 0:15:53.920 force for good, you know, retirements or people just there's 0:15:54.000 --> 0:15:56.800 skills mismatch, I think then the FED may have to 0:15:56.880 --> 0:15:59.640 accelerate that piece of exit because I will mean beige 0:15:59.640 --> 0:16:02.800 in flame scan and sustainable price inflation will be on, 0:16:03.200 --> 0:16:06.120 you know, will be sooner than they expect. But our 0:16:06.200 --> 0:16:08.200 thought is that people do reent to the labor before. 0:16:08.280 --> 0:16:10.840 So we are looking for a weaker number this Friday, 0:16:10.840 --> 0:16:13.080 and I think that can make the market a little 0:16:13.080 --> 0:16:16.200 bit nervous here if the recovery is derailing a little bit. 0:16:16.640 --> 0:16:19.800 But we expect, you know, over the next couple of 0:16:19.880 --> 0:16:22.560 months numbers to remain strong and that will allow the 0:16:22.640 --> 0:16:25.560 fit to exit gradually. But I think that's really the 0:16:25.600 --> 0:16:27.880 critical one. Well, this is the end of summer. I 0:16:27.960 --> 0:16:30.960 mean you mentioned a high frequency data. We had a 0:16:31.040 --> 0:16:34.640 great story overnight by Steve Matthews and Jill Shaw just 0:16:34.720 --> 0:16:37.080 putting together a ton of charts from the data, and 0:16:37.120 --> 0:16:41.160 the one that caught my eye was um airline travel. 0:16:41.400 --> 0:16:43.680 It's just rolled over at the end of August. But 0:16:44.360 --> 0:16:46.920 you know, to be expected because you did hopefully some 0:16:47.120 --> 0:16:51.000 kind of vacation June July. Um. You know, unless you're 0:16:51.000 --> 0:16:54.160 Amy Morris who hasn't gone on vacations since May. Um. 0:16:54.960 --> 0:16:58.120 What about the beginning of school? Does that? Does back 0:16:58.200 --> 0:17:00.840 to school? You think push that day? The backup is 0:17:00.880 --> 0:17:03.600 back to school. Three more moms and dads to get 0:17:03.640 --> 0:17:06.280 out there and look for a job and obviously get 0:17:06.320 --> 0:17:09.920 one right away. It is back to school. Change the picture. Yeah. 0:17:09.960 --> 0:17:13.120 I think, particularly on the labor market front, in terms 0:17:13.160 --> 0:17:15.760 of labor force participation, we do think back to school 0:17:15.760 --> 0:17:18.560 will help because it will free up a lot of 0:17:18.600 --> 0:17:21.119 people to come back and look for jobs. The Jewels 0:17:21.160 --> 0:17:24.760 statu is suggesting the job openings are there, so you know, 0:17:24.920 --> 0:17:28.840 employers have the job requirements out there. The openings are there, 0:17:28.920 --> 0:17:31.560 we just haven't found the people willing to take it. Now, 0:17:31.600 --> 0:17:34.480 the big question is is there a skills mismatch the 0:17:34.640 --> 0:17:36.840 job openings out there versus the people that are re 0:17:37.000 --> 0:17:39.600 entering the labor force. Is there a skills mismatch, which 0:17:39.680 --> 0:17:41.560 is I think more concerning for the FED if that 0:17:41.680 --> 0:17:44.560 does emerge, But I think there's enough jobs looking at 0:17:44.560 --> 0:17:47.280 the Jewels Stata across the spectrum that if people re 0:17:47.480 --> 0:17:50.040 enter the labor force as schools reopen, and I think 0:17:50.119 --> 0:17:52.879 COVID does is a bit of a concern. If we 0:17:53.000 --> 0:17:56.800 continue to see COVID cases rising, that might delay some 0:17:56.960 --> 0:17:59.879 people re entering the labor force. But if we do it, 0:18:00.000 --> 0:18:02.320 spect over the next couple of months, people re entering 0:18:02.680 --> 0:18:04.920 these jobs getting filled, and that's a sign that there 0:18:05.000 --> 0:18:08.399 is underlying labor market slack beyond just what the unemployment 0:18:08.480 --> 0:18:12.960 rate shows. Thirty seconds, Um, I'm looking at the ten 0:18:13.040 --> 0:18:16.879 year here, you know, one point three. It just feels 0:18:16.880 --> 0:18:20.000 like we're range bound here. Is that kind of how 0:18:20.040 --> 0:18:21.560 we're gonna play out the rest of the year, do 0:18:21.640 --> 0:18:24.600 you think? I think in the near term, yes, I 0:18:24.640 --> 0:18:27.920 think we're in a one twenty five to fifty type range. 0:18:28.359 --> 0:18:30.840 We are looking for higher rates by your end because 0:18:30.880 --> 0:18:33.160 by then we think we'll have the evidence that people 0:18:33.200 --> 0:18:35.960 are returning to the to the labor market, that Delta 0:18:36.080 --> 0:18:39.399 maybe delayed the recovery but doesn't derail it, that the 0:18:39.480 --> 0:18:42.639 FED starts to exit, we get more fiscal So by 0:18:42.720 --> 0:18:44.880 year end we think we may be able to break 0:18:44.960 --> 0:18:47.360 out of this range. But in the next few months, 0:18:47.359 --> 0:18:49.879 while we still have questions about the economy and the 0:18:49.960 --> 0:18:52.720 impact of delta, and the FED is being patient, we 0:18:52.840 --> 0:18:55.320 think we stay fairly range bound on on the tenure. 0:18:55.880 --> 0:18:57.920 All right, pray, thank you so much. We appreciate that 0:18:58.359 --> 0:19:01.440 as always pre a Misraah, Manager, Director and Global head 0:19:01.480 --> 0:19:04.400 of rate Strategy at TV Securities. Again a ten year 0:19:04.440 --> 0:19:11.480 trading today about one point three zero percent. Well earlier 0:19:11.880 --> 0:19:15.000 we heard a discussion some tape between John Paulson and 0:19:15.600 --> 0:19:20.200 Mr Rubinstein uh in a discussion about Mr Paulson's view 0:19:20.240 --> 0:19:22.480 of the markets are including crypto, and I want to 0:19:22.520 --> 0:19:25.920 get Shannali Bastic's view on that. Chanale is the Wall 0:19:25.960 --> 0:19:28.400 Street border for Bloomberg News joinings here in our Bloomberg 0:19:28.400 --> 0:19:31.680 Interactive Broker Studios. So, Sally, I know you you saw 0:19:31.760 --> 0:19:34.840 the interview. You saw the comments from John Paulson. What's 0:19:34.840 --> 0:19:37.720 your takeaway there? Well, a few things. I covered Paulson 0:19:37.920 --> 0:19:40.680 very very closely when he was working with Carl Icon 0:19:41.000 --> 0:19:43.960 as an activist investor against a i G. It's like, 0:19:44.160 --> 0:19:46.680 since two thousand and eight, everybody was waiting for John 0:19:46.720 --> 0:19:49.879 Paulson's next big short, and we never really saw it. 0:19:50.280 --> 0:19:53.240 But this is a very rare interview. He doesn't do 0:19:53.520 --> 0:19:57.320 much public speaking at all. I've tried to doorstop him 0:19:57.400 --> 0:20:00.920 personally at E C n Y conferences, and so it 0:20:01.080 --> 0:20:03.080 is a rare kind of view into his world. One 0:20:03.080 --> 0:20:05.240 of my favorite things he told David Rubinstein, though, is 0:20:05.320 --> 0:20:08.480 that he didn't really love managing money for other people. 0:20:08.680 --> 0:20:12.440 Remember now he runs his own money. It's billions of dollars. 0:20:13.040 --> 0:20:15.480 But I thought I totally agree. I thought, um, it 0:20:15.640 --> 0:20:19.359 was super fascinating, especially for those of us who you know, 0:20:19.520 --> 0:20:23.200 lived through and covered the financial crisis or invested through 0:20:23.280 --> 0:20:27.639 it for our listeners. Um, so fascinating to hear from 0:20:27.760 --> 0:20:30.440 John Paulson. I did think that if you're a crypto investor, 0:20:30.880 --> 0:20:36.320 you probably you couldn't you couldn't care any less what 0:20:36.480 --> 0:20:41.400 he thinks about bitcoin, right, And he also hasn't made 0:20:41.440 --> 0:20:46.000 any big bets um other than gold and steinway that 0:20:46.119 --> 0:20:48.920 I know of. Is that wrong, Nale? Since since the 0:20:49.000 --> 0:20:52.000 Big Short? Well, remember I had said I covered the 0:20:52.040 --> 0:20:54.680 A G investment and so that was certainly a big 0:20:54.760 --> 0:20:56.800 deal when that was happening. But to your point, no, 0:20:57.000 --> 0:20:59.280 not like not like what he had done during two 0:20:59.320 --> 0:21:02.440 thousand and eight. Nothing, nothing like that. And so you know, 0:21:02.720 --> 0:21:05.360 John Paulson, who is he to a new generation? That's 0:21:05.400 --> 0:21:07.480 a great question to me because and what can you 0:21:07.600 --> 0:21:10.040 learn from what he's done? I think the reason I'm 0:21:10.080 --> 0:21:12.800 so interested in what he said about investing is that 0:21:13.119 --> 0:21:16.400 he said he didn't really like the business of business. 0:21:16.920 --> 0:21:19.840 And so can you make more money just by yourself 0:21:19.960 --> 0:21:22.959 day trading crypto and not working at a big investment 0:21:23.040 --> 0:21:27.440 fund or is investing the business of it still a 0:21:27.520 --> 0:21:30.160 good business? Well, I think that's a great takeaway, because, 0:21:30.880 --> 0:21:35.240 first of all, no one can ever reduce the enormity 0:21:35.560 --> 0:21:38.320 of what Paulson did. I mean, I remember when the 0:21:38.520 --> 0:21:42.400 Big Short came out, I expected it to be about Paulson, um, 0:21:42.880 --> 0:21:44.639 you know, and it turned out to be about some 0:21:44.720 --> 0:21:47.760 other players making similar bets. But I think even more 0:21:47.880 --> 0:21:51.720 fascinating was the way John Paulson went about making his bet. 0:21:51.960 --> 0:21:56.600 The people that he enlisted, they were kind of uh 0:21:57.040 --> 0:22:01.440 lone wolves or people who were, you know, maybe very 0:22:01.560 --> 0:22:07.680 smart and wouldn't necessarily need to be courting clients or 0:22:07.800 --> 0:22:12.680 going on UM conference calls or helping other people deal 0:22:12.760 --> 0:22:15.840 tax issues. I mean, this was this is about making 0:22:15.880 --> 0:22:18.960 a big bet yourself and for your group, right, and 0:22:19.080 --> 0:22:23.600 not really about Remember when he was starting out in 0:22:23.720 --> 0:22:25.800 the hedge fund world, hedge funds were not what they 0:22:25.880 --> 0:22:28.280 were today, right, It was a nascent industry, which is 0:22:28.320 --> 0:22:30.840