Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Joining us now Meredith Whitney here for too short a
Speaker 2: conversation this morning. Meredith, I want to go with all
Speaker 2: of the acclaim of what you and I did years ago.
Speaker 2: The golden goose keeps delivering for finance companies. All my
Speaker 2: radars up on private equity, private credit. I'm hearing the
Speaker 2: same phrases you and I heard in two thousand and six.
Speaker 2: Am I off the mark?
Speaker 1: It reminds me more of nineteen ninety four, nineteen ninety six,
Speaker 1: to the extent that you see so much specialized demand
Speaker 1: for consumer loan products duration consumer loan products. So when
Speaker 1: the securitization market expanded from mortgage to this is in
Speaker 1: the nineties and democratization of credit, they called it into
Speaker 1: auto loans to home equity. Home equity is a very
Speaker 1: new product in terms of it had been around a
Speaker 1: lot with household and beneficial but in terms of the expansion,
Speaker 1: it went from zero to sixty really quickly. And you're seeing,
Speaker 1: I mean, home equity has exploded over the.
Speaker 3: Path past year.
Speaker 1: And that is after seventeen year contraction. Private credit cannot
Speaker 1: get enough supply to meet its demand.
Speaker 2: Let's come back with Meredith threatening thrilled she's with us
Speaker 2: for this good conversation this morning to get the markets open. Here,
Speaker 2: huge upmoves in the markets two hours ago. It was
Speaker 2: still up right now, but it's not going to be
Speaker 2: the enthusiasm of seven am as well. Right now. The
Speaker 2: dough up thirty eight points on first print. We'll look
Speaker 2: to the NASDAK to settle out here. In the last
Speaker 2: couple minutes, SI helped me here with Intel. What's the
Speaker 2: symbol right now?
Speaker 1: It she?
Speaker 2: You know, I did I nail that? Okay, all of it.
Speaker 2: I'm just nervous meritis here and you know up twenty
Speaker 2: five thirty one is Meredith whitning with us this morning.
Speaker 2: You have a paragraph in here which you know, I
Speaker 2: think a lot of people aren't aware of seniors owned
Speaker 2: nearly sick. This is classic Meredith. Seniors owned sixty percent
Speaker 2: of all homes. They have seventy nine percent of on
Speaker 2: their homes. Seventy six percent of those home owners have
Speaker 2: no three quarters of the seniors have no mortgages. They're
Speaker 2: the golden goose for consumers. How do you play it?
Speaker 3: They're the golden goose for consumer lenders? Excuse me?
Speaker 1: Sorry, how you play it is their so SOFI has
Speaker 1: been a rocket ship. Rocket mortgage has been a rocket ship.
Speaker 1: Sorry for the for the pun. But here's what's interesting.
Speaker 1: Ice Mortgage Monitor came out and said that seventy percent
Speaker 1: of cash out refinances were at higher rates than people
Speaker 1: had on their first mortgages so they could access cash.
Speaker 1: So seniors are taking out first mortgages. That seventy six
Speaker 1: percent of seniors with no mortgage, I expect to go down.
Speaker 1: And they're taking out there all these products that are
Speaker 1: catering to seniors interest.
Speaker 3: It's it's a real estate.
Speaker 1: Interest only product for seniors that exists in the UK,
Speaker 1: retirement interest only.
Speaker 3: Excuse me, that exists only in the UK. That's coming
Speaker 3: to the US.
Speaker 1: All of these lenders, and I think a lot of
Speaker 1: these companies are private that it will soon be going
Speaker 1: public because a lot of these companies are funded by
Speaker 1: private equity and their loans are funded by private credit.
Speaker 4: Meredith, you talked to and investors all over the world.
Speaker 4: What are they asking you most about these days?
Speaker 1: I think they're asking what the next shoe to drop
Speaker 1: in terms of credit is and yeah, how well, okay?
Speaker 3: The two things.
Speaker 1: There's an incredible interest over the government getting out of
Speaker 1: Fanny Freddy, when that will happen, how what that will
Speaker 1: look like, and you know what structure will happen, and
Speaker 1: and then what's going on with student debt? And then
Speaker 1: also what's going on with with.
Speaker 3: Home equity and private credit?
Speaker 1: Because one thing, I mean, you know, one of the
Speaker 1: biggest thesis that we've had has been on names like
Speaker 1: Rocket and so far because of this originate and cell
Speaker 1: model to a certain extent, Upstart and others.
Speaker 3: What else are they asking.
Speaker 4: Is Fanny and Freddy talk to us about that, because
Speaker 4: that could be a monster deal for a Wall Street,
Speaker 4: for b the US government, see I guess homeowners.
Speaker 1: It will be a monster deal for the US government.
Speaker 1: So in the vein of how the US government was
Speaker 1: great after this Intel deal, how the US government looked
Speaker 1: great after the Mountain Pass MP materials deal, how the
Speaker 1: administration will look great after Fanny Freddy, I mean, it
Speaker 1: is a no brainer for Fanny Freday.
Speaker 2: I got to get this in and you did a
Speaker 2: PG at Lawrence phil You show up in Brown to
Speaker 2: get a history degree, and then you said to me
Speaker 2: you must have been like twenty four years old. Hey,
Speaker 2: stupid by Visa. Who's the new Meredith Whitney Visa up
Speaker 2: to twenty three per year?
Speaker 3: I mean this year it's been rocket and so far.
Speaker 2: Yeah, but for the next five years, ten years, who's
Speaker 2: the new Visa? Just buy more Visa.
Speaker 1: That's a tough one because Visa was effectively a demutualization,
Speaker 1: so there are very few number crudentials. Like all those
Speaker 1: insurance companies were demusualization. It's hard to have an exact fit.
Speaker 1: That's a moment in time. Visa MasterCard, this is the
Speaker 1: same extent. But it's hard for me to go out.
Speaker 1: I look at names, like, you know, there was a
Speaker 1: name that is not in my sector, Axon, which is
Speaker 1: the original taser company that has been just an unbelievable name,
Speaker 1: and you think about police enforcement, I think that's just
Speaker 1: maybe an Axon.
Speaker 2: Yeah, Meredith, with this, let me squeeze this in and
Speaker 2: I want you to stay over for one more section
Speaker 2: with this as well. Meredith, you're on Park Avenue, the
Speaker 2: new rebuilt Park Avenue, James Diamond's Fortress Diamond Citadels above
Speaker 2: a fancy restaurant at the Waldorf's reopen. What's a symbolism
Speaker 2: for New York of Park Avenue as redo.
Speaker 1: I think it's incredible, but those are long term projects.
Speaker 1: Those are long, long live projects. The symbol to me,
Speaker 1: I'm mixed. Look, I've loved New York. New York has
Speaker 1: given me an incredible opportunity. It's really exciting to look
Speaker 1: at at those it seems like a vestige from their PASTOK.
Speaker 2: We continue with Meredith Whitney, just iconic on Wall Street
Speaker 2: forever for me with OpCo, but with many others. And
Speaker 2: she retired for a cup of coffee or something like that.
Speaker 2: She's in Washington now we say good morning ninety nine
Speaker 2: one FM Nathan Hager Radio in Washington. What is it
Speaker 2: like being financial person in Washington? Is there any legit
Speaker 2: financial literacy down there? Or are they just worried about
Speaker 2: what the cook political reports said this morning?
Speaker 1: I think they're certainly at the Treasury, they're very smart
Speaker 1: people at the Commerce Department. There's some very smart people
Speaker 1: at the different You know, everybody has a vested interest
Speaker 1: outside of politics to be inside of politics. So it's
Speaker 1: almost like everybody's on, you know, getting something out of somewhere.
Speaker 1: So there's you know, their their pundits all over the place.
Speaker 1: It's it's nerdy to be sure, but it's not like
Speaker 1: there's only one New York and there's nothing, nothing that
Speaker 1: compares to being.
Speaker 2: Okay within the deregulation milieu that mister Trump is invented.
Speaker 2: Do you look at it as continuing or is it
Speaker 2: just simply a one off to whatever the outcome of
Speaker 2: the next time.
Speaker 1: Here's what I hear inside the Beltway, which is the
Speaker 1: the departments that have been incredibly successful. So the Treasury
Speaker 1: has gotten a tremendous amount done so far.
Speaker 3: Trump is throwing.
Speaker 1: More their way, so whatever they they've accomplished, they're doing more.
Speaker 1: So the Genius Act was effectively written before Ump came
Speaker 1: into office, so a lot of the stuff they're putting
Speaker 1: out was already was already done.
Speaker 3: So now they're working on new things.
Speaker 1: So people are not sleeping and are trying to get
Speaker 1: this agenda passed as quickly as there's a lot to
Speaker 1: do in terms of deregulation. Michelle Bouman has still not
Speaker 1: come out with her new guideline guideline, so that's something
Speaker 1: in terms of supervision, so that's something we're waiting on
Speaker 1: and that's going to be a big deal for the banks.
Speaker 4: That's where I wanted to go one of the when
Speaker 4: President Trump was elected the second time. You know, one
Speaker 4: of the calls on Wall Street was by the banks
Speaker 4: because this administration is really going to be pulled back
Speaker 4: as much as they can some of the regulatory yoke
Speaker 4: from a great financial crisis. So my question to you
Speaker 4: is is that happening? Do you think it's going to happen?
Speaker 4: Is that a real thing?
Speaker 1: Well, I can just tell you P and C that
Speaker 1: made an acquisition a couple of weeks ago, said that
Speaker 1: they don't dem TEK spoke last week, I believe, and
Speaker 1: said that he doesn't expect any big bank mergers to happen,
Speaker 1: but they will have capital relief and buying the banks.
Speaker 1: It has all been a financial engineering play. So they
Speaker 1: bought backstock, they've increased their dividend. It's not really sexy stuff.
Speaker 1: What is happening that is very sexy is the IPO
Speaker 1: pipeline is wide open and I don't think that's going
Speaker 1: to change. So I don't know how long it takes
Speaker 1: for Bowman to come out with new supervisory guidelines set.
Speaker 1: She's already told the market what she's planning on doing.
Speaker 1: You know, the three quarters of the banks or two
Speaker 1: thirds of the banks had unsatisfactory ratings on the banks
Speaker 1: so they couldn't do anything. So lifting those and those
Speaker 1: a lot of those writings were subjective management governments governments.
Speaker 1: Lifting those will should put a lot in terms of
Speaker 1: consolidation in the banks. The outside of the bank systems.
Speaker 1: The system like the traditional banks have done better. So
Speaker 1: my pure play model lines have done better than the banks,
Speaker 1: even City that's up a bunch this year. But the
Speaker 1: underwriting pip pipeline should be underrestivated the.
Speaker 2: Heart of the matter. Good morning, Jillian Ted, writing at
Speaker 2: the ft is zillion years ago, gave me the phrase
Speaker 2: cdo squared. I'm hearing the same language now. I got
Speaker 2: so angry at something the other day. I started doing
Speaker 2: a trunch analysis on air, which is like major folks pot.
Speaker 2: It's like sort of complicated. But are we reliving five
Speaker 2: oh six where we're we're living securitized jargon that's going
Speaker 2: to lead us to upset down the road.
Speaker 3: I don't see it. I don't I don't see it.
Speaker 1: Certainly not in the mortgage and the mortgage space has
Speaker 1: been dead for two years, so there's no market debt
Speaker 1: market big art.
Speaker 2: Sorry, come on, asset back AI is.
Speaker 1: Coming right right right, I don't see it because also
Speaker 1: I don't expect the housard market to improve anytime time soon.
Speaker 1: So outside of whatever they're going to do with government,
Speaker 1: I mean, I don't think you're going to have a
Speaker 1: yeah ten years.
Speaker 2: Lisa, can we blow up the interview?
Speaker 3: Okay?
Speaker 2: Here, I saw a bar chart yesterday. I'm upset. Two
Speaker 2: thirds of the nation is flat under back. Then there's
Speaker 2: like New York and Milwaukee's doing well. And right at
Speaker 2: the bottom of the chart, you too, is Summit New Jersey.
Speaker 2: I mean, Summit Jersey is killing it. Right now. You're
Speaker 2: telling me housing prices in Summit, New Jersey are at risk.
Speaker 3: Oh, I don't know that.
Speaker 1: I'm saying deal activity is the lowest it's been in
Speaker 1: over twenty five years. Housing prices are staying high because
Speaker 1: there's so little activity and the high end that can
Speaker 1: get it qualified for mortgages or pay cash.
Speaker 3: That's where the transactions.
Speaker 4: Summit never goes down.
Speaker 2: Bro for the beach.
Speaker 4: The beach and spring Lake never goes down.
Speaker 2: Forget it.
Speaker 4: I picked two of the most expensive places in the
Speaker 4: world to live, right.
Speaker 1: But it's yeah, it's worth that the big box on
Speaker 1: Wall Street, Right, Yeah, it used to be Big Bucks.
Speaker 4: So you mentioned City, one of the many banks I
Speaker 4: used to work at. Arguably the greatest trade of my
Speaker 4: life is the day I left City. I sold everything
Speaker 4: literally before I got out the door, which was a
Speaker 4: great trade. Stocks of forty five percent this year. Has
Speaker 4: Jane Fraser found the secret sauce to finally turn SUP around?
Speaker 2: Do you think?
Speaker 1: Okay, let's take that into contact. So what banks have
Speaker 1: done incredibly well, The European banks have done unbelievably well.
Speaker 1: A lot of that is because of the infrastructure and
Speaker 1: investment plans, and there's going to be a huge revival
Speaker 1: in those stocks. But they were all trading below book,
Speaker 1: and they were all trading a blow tangible book, and
Speaker 1: so it's a reversion to the mean, and things weren't
Speaker 1: getting worse, and so the reason why the stock is
Speaker 1: up is because it was the cheapest.
Speaker 3: Going into the year.
Speaker 1: I'm not taking anything away from the execution, but there's
Speaker 1: a lot to do.
Speaker 3: And is it still.
Speaker 4: Too big of a bank, too sprawling of the bank.
Speaker 4: They kind of do everything for everybody everywhere. That's kind
Speaker 4: of been in one of the critiques, and I think
Speaker 4: Jane Fraser is trying to get some focus there, but it.
Speaker 3: Just takes a long time to move a ship.
Speaker 1: But the fact of what she had in her, you know,
Speaker 1: she looks like she looks very good because of the
Speaker 1: stock performance is a novalidate whether it's deserved or not.
Speaker 1: Her performance it was just cheap going into the year.
Speaker 2: You're at the Hey Adams Hotel. You have lunch four
Speaker 2: times a week. The Secretary of treasure walks in. You're
Speaker 2: sitting with mister Bessett. What's your number one advice to him?
Speaker 2: Right now?
Speaker 1: Ooh, I think I think deal with Fanny Fridday. It's
Speaker 1: you know, the fisticuffs fight between Poulty and Bassett. I
Speaker 1: think is all over Fanny Freddy. So I think that's
Speaker 1: what the market's waiting for.
Speaker 2: I can't give you my opinion. I can't give you
Speaker 2: my opinion right now. Let's go there then. I mean,
Speaker 2: this is really sensitive stuff and we don't do rumor
Speaker 2: and speculation. Your whole career has been fact based as well.
Speaker 2: He's going to prosecute what the privatization of these two
Speaker 2: great mortgage companies and push aside the pretenders. Is that
Speaker 2: what you're saying push aside the pretenders.
Speaker 1: I don't know that anyone gets pushed in political types.
Speaker 1: Oh oh, oh oh, I see what you mean. It's look,
Speaker 1: it's a knife fight down John and DC. And so
Speaker 1: it's like, you know, I don't believe like it's a
Speaker 1: zero S game in politics. So whoever comes out ahead,
Speaker 1: it's I think it's yes.
Speaker 4: With the Federal Reserve, we had the you know, their
Speaker 4: decision cutting twenty five basis points. How do you think
Speaker 4: that the Federal Reserve is kind of how do you
Speaker 4: think they're performing these days? Are they behind the curve
Speaker 4: do you think? Or are they kind of dealing with
Speaker 4: the data as those come up.
Speaker 1: Well, they're not saying the S word, right, which is stagflation,
Speaker 1: which it seems we're you know, very very close to
Speaker 1: from a from a growth standpoint. It's I hope I'm wrong,
Speaker 1: but it's hard to see from an inflation standpoint. You
Speaker 1: don't see it in the hard numbers, but you see
Speaker 1: it in anecdotal And I think what you do see
Speaker 1: is homeowners insurance. I think insurance costs are going to
Speaker 1: go up. So they're two. They're a couple of factors.
Speaker 1: Number one, you know, auto insurance and homeowners insurance AUTO,
Speaker 1: and so our homeowners insurance has gone up close to
Speaker 1: seventy percent in the last five years, and that's been
Speaker 1: a real sticking point in terms of affordability for seniors,
Speaker 1: and that's why they're tapping into home equity. Auto insurance
Speaker 1: has also gone up tremendously, tell me so, yeah, So
Speaker 1: I think you're seeing sticky points. There's all this also
Speaker 1: things that happen in terms of the American Rescue Act,
Speaker 1: which subsidized healthcare premiums for everyone who's self insured. Fifty
Speaker 1: plus percent of Americans who are self insured. The ends
Speaker 1: at the end of the year, so healthcare premiums will
Speaker 1: spike at the end of the year. So I think
Speaker 1: the Fed's got to be really, really careful. I mean,
Speaker 1: they probably did cut yesterday to save face and risk management,
Speaker 1: because they'd get in trouble if they didn't.
Speaker 3: They'd be blamed if they didn't.
Speaker 4: But TVD, Meredith and your coverage. What's most interesting to
Speaker 4: you these days? Is it the new fintech just broadly defined,
Speaker 4: or is something else specifically you're looking at.
Speaker 1: There are a lot of things that I think are interesting.
Speaker 1: I think that I always think that the consumer's incredibly interesting.
Speaker 1: The consumer had been bifurcated. I think the consumer gets
Speaker 1: even more segmented in terms of the strength I think
Speaker 1: student debt. So the Department of Education is now going
Speaker 1: to start garnish as August is going to start garnishing
Speaker 1: wages to fifteen percent of salaries. That's going to put
Speaker 1: a sting serious delinquencies or over almost eleven percent, and
Speaker 1: that's rising quickly. So I think you're going to see
Speaker 1: I've always the most interested in the consumers of the data,
Speaker 1: so granular, I think you're going to see different strains
Speaker 1: on the consumer. The very high end will continue just
Speaker 1: you're you know, you're some in New Jersey, where I
Speaker 1: was born, is going to still spend robustly and carry
Speaker 1: the economy.
Speaker 2: So Meredith, we're going to have to leave it there.
Speaker 2: We've got news in England as well. Thank you so much, generous,
Speaker 2: so much.
Speaker 3: I'm such a man.
Speaker 2: If we come down to Washington, we got a first guest.
Speaker 2: I mean, you know, Secretary Treasurer here, Meredith Whitney, who
Speaker 2: do you take first? I mean, it's all there was
Speaker 2: to it. Meredith Whitney, thank you so much for being
Speaker 2: with some important perspective here on the ebbs and flows
Speaker 2: of our finance