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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside

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Speaker 1: my co host Matt Miller. Every business day we bring

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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along

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Speaker 1: with essential market moving news on the Bloomberg Markets Podcast,

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Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and

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Speaker 1: at Bloomberg dot com slash podcast. All right, the Inflation

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Speaker 1: Reduction Act. Matt and I talked about it a lot,

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Speaker 1: as it relates to E s G, As it relates

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Speaker 1: to taxes, as it relates to climate. But the title

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Speaker 1: Inflation Reduction Act, as I read through it, I'm like

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Speaker 1: my hands around it. Is it reducing inflation? I don't know. Say.

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Speaker 1: Yesterday we talked with Sadequaba right from I Squared Capital

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Speaker 1: Infrastructure at Morgan Stanley. This guy is super plugged in

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Speaker 1: and way smarter than me, like exponentially smarter, and he

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Speaker 1: said it is longer term going to have a serious

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Speaker 1: impact inflation. All right, Good for him. Carol Murphy's CEO

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Speaker 1: of Kestro Holdings, joins us today. Carol, what do you

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Speaker 1: what's your read of this Inflation Reduction Act? How should

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Speaker 1: we think about it? Here? Well, I have to say,

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Speaker 1: I'm with you, guys, and I think the title is

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Speaker 1: a very clever piece of marketing, so kudos to whoever

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Speaker 1: came up with the name. But I agree once you

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Speaker 1: dig in, I mean, this is really about climate change policy.

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Speaker 1: It's about access to healthcare. It's not about inflation. The

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Speaker 1: thing that I mean, I understand why they named it

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Speaker 1: that right got to it. They're selling it, and I

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Speaker 1: don't even know how smart it was, because when you

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Speaker 1: look at the details, you start to think this has

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Speaker 1: nothing to do with inflation. But what gets me is

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Speaker 1: they left in the carried interests tax loophole for you know,

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Speaker 1: rich pe guys. And good for those rich pe guys.

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Speaker 1: I'm not, you know, knocking them, but it just doesn't

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Speaker 1: sound like something that Democrats would do. Then they didn't

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Speaker 1: put the salt deduction in, which hurts middle class people

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Speaker 1: like me, you know, and that seems like something the

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Speaker 1: Democrats would want to I understand how this is a

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Speaker 1: Democratic bill. Frankly on the tax side of things. Yeah,

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Speaker 1: I have to agree, And it's a disappointment that those

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Speaker 1: two got you know, left on the cutting room floor.

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Speaker 1: I think those those are those have been objectives of

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Speaker 1: you know, Democrats and others for quite some time now.

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Speaker 1: They did get in the corporate minimum tax, which has

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Speaker 1: been a goal and attack on share repurchases. So you know,

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Speaker 1: that gets a little bit more to turn the screws

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Speaker 1: on some companies in a way that you know supports

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Speaker 1: democratic policy goals. UM. But I think you know, some

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Speaker 1: of those other things that were left out were disappointed.

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Speaker 1: What do you think about that? I mean, are they

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Speaker 1: throwing a big giant blanket over all large corporations and saying,

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Speaker 1: you know, these companies are all from now, I'm gonna

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Speaker 1: pay minimum No. I mean when we look at the numbers,

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Speaker 1: it's really just on the margin. I mean, it's a

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Speaker 1: handful of companies that are going to be very impacted

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Speaker 1: by that corporate minimum tax UM. And I think politically

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Speaker 1: it plays very well to write this idea that very large,

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Speaker 1: very profitable companies are able to avoid paying any taxes

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Speaker 1: does not fit well with a lot of Americans. So

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Speaker 1: I think it helps to kind of close the loophole,

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Speaker 1: but really isn't going to impact all that many company

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Speaker 1: me Karrot, we we've got somebody here at Bloomberg govin Signarelli.

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Speaker 1: He's a strategist force here, and he spent his career

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Speaker 1: on Wall Street trading UH currencies and bonds and all

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Speaker 1: that kind of stuff. He kind of says, this focused

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Speaker 1: by the FED on inflation is misplaced. He kind of

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Speaker 1: feels like inflation is kind of taking care of itself.

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Speaker 1: And I only look at you know, I look at

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Speaker 1: gasolene prices three dollar for regular a gallant? Thank you?

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Speaker 1: Did I say bar a gallant? I do that all

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Speaker 1: the time. Okay, So that's for a regular unletted. So

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Speaker 1: what's you're calling inflation here? So it's interesting because we've

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Speaker 1: sort of been in that same camp, and that for

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Speaker 1: good prices at least, it's pretty easy to follow the

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Speaker 1: pig and the python and see how these inflationary pressures

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Speaker 1: are working themselves out, and you know, things like container prices, subsiding,

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Speaker 1: commodity prices easing. The harder part is on the services side.

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Speaker 1: Those are prices that tend to move around a lot

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Speaker 1: less and have still seen a lot of inflation. Um

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Speaker 1: those prices tend to be very closely aligned with the

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Speaker 1: labor market. So cooling the labor market is going to

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Speaker 1: be really key to bringing that down. And we started

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Speaker 1: to see some anecdotal evidence that the labor marketed cooling,

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Speaker 1: but that typically takes a lot longer, so I think

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Speaker 1: that will be the more difficult objective. Well, and not

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Speaker 1: even um really anecdotal anymore. Yesterday I saw a survey

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Speaker 1: from Price Waterhouse Coopers and they talked to more than

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Speaker 1: seven US executives and board members across a range of industries.

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Speaker 1: They said are They found that half of respondents said

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Speaker 1: they're reducing headcount or planned to, fifty two percent have

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Speaker 1: implemented hiring freezes. Um more than four and ten are

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Speaker 1: ascending job offers. This is These are some real storm

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Speaker 1: clouds on the horizon, yeah, for sure, and those will

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Speaker 1: start to work their way into the actual numbers over

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Speaker 1: the next couple of months. So I think this will be,

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Speaker 1: you know, a big headwind. And I've been warning folks

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Speaker 1: who are sort of newer to the job market that

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Speaker 1: this is not a normal job market. This is so

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Speaker 1: much easier to get a job than we often see

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Speaker 1: during cycles. So I think folks who have only been

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Speaker 1: in the job market for a couple of years really

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Speaker 1: need to brace themselves. But Karen, can I ask you

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Speaker 1: about something completely different here? Looking through your resume Um,

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Speaker 1: I'm guessing you fell in love with Prague at some

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Speaker 1: point and decided to stay there for a while. Do

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Speaker 1: they not have the best beer in the world? I

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Speaker 1: have never in all of my travels, and I drink

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Speaker 1: beer everywhere I go, have better beer, had better beer

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Speaker 1: than in the Czech Republic. It is so true. And

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Speaker 1: the tech pride themselves on drinking the largest amount of

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Speaker 1: beer per capita. And there's a reason that's great. So alright, So, Karen,

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Speaker 1: I mean, you know, it's interesting in this economy here

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Speaker 1: we focus on the consumer. The consumer seems like in

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Speaker 1: pretty decent shape. It seems like the consumer has been

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Speaker 1: so confounding because you're absolutely right, you know, job we

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Speaker 1: we talked about the job market slowing, but right now

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Speaker 1: it's very very strong. Wages are up, consumer balance sheets

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Speaker 1: are very strong, but consumer confidence continues to look really poor.

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Speaker 1: I mean, it's among the lowest that we've had in

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Speaker 1: quite a number of years. So consumers are spending money

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Speaker 1: like they feel good, but they're telling us that they

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Speaker 1: don't feel good. And I'm worried that's going to fall

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Speaker 1: off a cliff here when this when this job news

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Speaker 1: comes home to roost and savings are down. I know

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Speaker 1: that data is a little bit sketchy, but um credit

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Speaker 1: card uses going up at some point, I'm worried consumer. Right,

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Speaker 1: all right, Karen, thank you so much for joining us.

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Speaker 1: Kara Murphy, c IO of Chestra Holdings here. She has

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Speaker 1: a master's International Relationship University of Chicago and it be

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Speaker 1: as an international politics from Georgetown. That's pretty darn good.

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Speaker 1: I mean, you go to Georgetown, you're thinking about public service,

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Speaker 1: you know, going into government, all that kind of good stuff.

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Speaker 1: And then she gets a masters in Chicago. Not bad.

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Speaker 1: Looking at bitcoin off eight point four seventy five four

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Speaker 1: bitcoin and we can talk bitcoin because Tom Keen is

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Speaker 1: not here. It's generally during surveillance. It is a bitcoin

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Speaker 1: free studio. But Everett Millman East, chief markets analyst at

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Speaker 1: Gainesville Coins. You look at precious metals at Gainesville Coins. Everett,

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Speaker 1: but we also like talking to you about bitcoin. Any

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Speaker 1: thoughts here about what we're seeing? Is this just a

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Speaker 1: trading thing that isn't because of the FED? It's because

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Speaker 1: of the Fed? Right? Yeah, I guess you're right. I

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Speaker 1: guess you're right. What do you what do you have

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Speaker 1: for us effort? Well? Sure, I think basically across markets

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Speaker 1: right now, pointing to the FED is going to be

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Speaker 1: the correct answer more often than not. But really, what

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Speaker 1: I look at with the cryptocurrency market as it stands

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Speaker 1: is it's caught in a bit of a catch twenty two. UM.

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Speaker 1: The lack of a regulatory one of my favorites. The

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Speaker 1: lack of a regulatory framework UM is certainly hampering adoption

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Speaker 1: of bitcoin and other cryptos. But on the other hand,

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Speaker 1: tight regulation really is antithetical to the core principles of

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Speaker 1: bitcoin and many other cryptos, which is to say that, um,

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Speaker 1: they're the entire animust behind bitcoin is to have completely

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Speaker 1: private and largely anonymous transactions through a decentralized network. So

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Speaker 1: the more that regulation comes in, the less likely that

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Speaker 1: is to be the case. But again, I think almost

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Speaker 1: anyone involved in the crypto space wants to see some

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Speaker 1: sort of regulation to kind of put some people's fears

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Speaker 1: to rest. Well, it's exactly the people who are selling

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Speaker 1: you know, the picks and uh wheelbarrows that they want

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Speaker 1: to see regulation because that's how they make their money

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Speaker 1: on on the whole gold rush, not actually the gold

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Speaker 1: The people who are into um bitcoin for real don't

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Speaker 1: want to see UM censorship, government censorship allowed on money right.

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Speaker 1: I talked to UM, the CEO of Cracking, a couple

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Speaker 1: of days ago, and I thought it was really interesting

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Speaker 1: because he's kind of torn. Cracking is one of the

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Speaker 1: biggest crypto exchanges. Jesse Powell is the CEO, and he's you.

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Speaker 1: And what you talked to him, you can see he's

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Speaker 1: clearly torn because on the one hand, he has this business,

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Speaker 1: he employs a ton of people, he wants to make money,

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Speaker 1: and regulation and working with the government is he goes

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Speaker 1: hand in hand with that. On the other hand, he's

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Speaker 1: clearly like an early stage bitcoiner who wants who has

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Speaker 1: the kind of libertarian viewpoint, and you just can't reconcile

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Speaker 1: those two things. I tend to agree. I think the

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Speaker 1: the idealism behind bitcoin, as he said, to have this

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Speaker 1: sort of libertarian bent to being sound money and being

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Speaker 1: censorship resistant UM. Even on a personal level, that was

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Speaker 1: one of the main reasons that I got interested in

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Speaker 1: bitcoin early on. But as we see, there really does

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Speaker 1: need to be some establishment backing UM, and you know,

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Speaker 1: some regulation would certainly spur that. We've seen that over

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Speaker 1: the past year. A lot of major US corporations have

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Speaker 1: been rather enthusiastic investors in crypto startups, but it's still

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Speaker 1: on the order of about a billion dollars over a

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Speaker 1: twelve month period. UM. That's being held back because again,

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Speaker 1: if they make those investments, they start businesses and then

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Speaker 1: here comes Washington with a hammer to crush all of

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Speaker 1: those businesses. Well, that's um, that's that's a reason to

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Speaker 1: not invest. That's the reasons shy away. So we're still

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Speaker 1: seeing that playoff. Well, I mean every I tend to

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Speaker 1: see it like this. There does need to be regulation,

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Speaker 1: and there has to be a framework for bitcoin to

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Speaker 1: work with governments around the world. If you wanted to

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Speaker 1: trade trade for twenty dollars, right, if you want a

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Speaker 1: bitcoin to cost ten tho dollars, if you need it

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Speaker 1: to cost five grand for bitcoin, then yes, but not

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Speaker 1: if you don't care about that, Not if you're someone

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Speaker 1: who wants to use bitcoin just within the community of

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Speaker 1: people who all have the same principles, Because if you

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Speaker 1: open it up to regulation, as we've seen with um,

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Speaker 1: the Russian invasion of Ukraine, they're gonna censor it. They're

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Speaker 1: going to tell exchanges you can't trade with anybody who

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Speaker 1: has a Russian residence, which I mean you can have

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Speaker 1: your own view on what Vladimir Putin does, but certainly

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Speaker 1: random dude you know in in the uh suburban or

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Speaker 1: urban areas or rural areas of Russia has little to

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Speaker 1: do with that, correct. And and that is a constant

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Speaker 1: threat um, not just from censorship, but from the idea

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Speaker 1: that uh, you know, governments and central banks would sort

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Speaker 1: of co opt the idea with central bank digital currencies.

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Speaker 1: That would because their government money, they would be very um,

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Speaker 1: they would have no resistance to to censorship. Um. And

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Speaker 1: we're still obviously although bitcoin has been around about a decade,

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Speaker 1: we're still these early stages where the the pass forward

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Speaker 1: is not entirely clear. And then we have to also

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Speaker 1: take into account that it is not like bitcoin against

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Speaker 1: one central enemy. Um. You have governments all over the

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Speaker 1: world with their own individual interests that are kind of

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Speaker 1: attacking this problem from their own angles. So I think

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Speaker 1: that does create a although a very kind of wild

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Speaker 1: West dynamic. Um, it is still fertile ground for some

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Speaker 1: growth and experimentation with how how best to tackle is

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Speaker 1: from a regulatory standpoint, Where is Lutz, Florida, Ah, So

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Speaker 1: it was just north of Tampa. It's in the Tampa

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Speaker 1: Bay area. That's where uh you guys, that's for your base, right, Yes,

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Speaker 1: that's where Gainesville Coins headquarters. Of the name is a

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Speaker 1: holdover from where we were founded. Um, but we do

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Speaker 1: also have offices internationally, um in London and one in Singapore. Alright,

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Speaker 1: So Gainesville is what's Gainesville? Isn't that the Gators? Is that?

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Speaker 1: The University of Florida? Yeah, the University of Florida in

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Speaker 1: the central part of the state. Alright, awesome, all right?

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Speaker 1: And then Tallahassee's Florida State. I'm just getting my because

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Speaker 1: you think about Florida, you know, you know, I just

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Speaker 1: kind of think South Florida. But you gotta you gotta

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Speaker 1: go to tahas for Florida State. Well, personally, I love

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Speaker 1: the Panhandle the best, the best beaches, literally, folks listening

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Speaker 1: around the world, you want to go to the best

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Speaker 1: beaches in the US destin Florida and that kind of panhandles. Awesome?

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Speaker 1: All right, Everett, thanks so much for joining us. We

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Speaker 1: always appreciate talking to you. Everett Millman. He's a chief

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Speaker 1: market analyst at Gainesville Coins. Located and beautiful Lut's Florida,

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Speaker 1: just north of Tampa, Matt. I spend a lot of

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Speaker 1: time in the central California coast, and I tell you,

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Speaker 1: you know, like around Selina's you look as far as

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Speaker 1: the eye can see literally our farms, and it's like

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Speaker 1: we're most It just seems like most of our countries

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Speaker 1: fruits and veggies come from. I mean, they're just everywhere

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Speaker 1: for Aunt, miles and miles and miles and miles and miles.

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Speaker 1: And one of the big companies there in Watsonville, uh

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Speaker 1: is Drift Calls Thinks Strawberries, fresh strawberries. Those are the

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Speaker 1: folks that bring you that kind of stuff so sore

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Speaker 1: and boring. He's a president of Drift Calls of the America's.

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Speaker 1: They are in fact based in Watsonville, California, near my

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Speaker 1: crib in Carmel. Uh sore and thanks so much for

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Speaker 1: joining us here. Talk to us about your business here.

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Speaker 1: How's it from both a supply you know, in terms

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Speaker 1: of the farms, the the environment, all that type of stuff,

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Speaker 1: as well as the demand for your products. Yeah, and

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Speaker 1: for the most part, I would say these things have

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Speaker 1: been pretty good. Um. I think the reality is there's

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Speaker 1: more people work from home and had to get a

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Speaker 1: mid morning snack on afternoon snack. You know, they went

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Speaker 1: to varies very frequently. And so the demand side in

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Speaker 1: officiness has been very strong the last couple of years,

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Speaker 1: and we actually don't really see that ending as we're

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Speaker 1: sort of coming out on the other side. And so

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Speaker 1: I think the demand side has been very good. Production

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Speaker 1: is way more challenged. M We certainly had some pretty

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Speaker 1: significant weather events, and an inflation, of course, is hitting us.

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Speaker 1: I mean, we are planning next year's crop right now,

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Speaker 1: and we are doing that with a cost structure that

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Speaker 1: that we've never seen before. So what so inflation is

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Speaker 1: gonna be with us? I can think of a few

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Speaker 1: ways in which inflation would hit you. One of the

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Speaker 1: stories we've been seeing a lot lately is the water

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Speaker 1: shortage in California. Is that an issue for you? I

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Speaker 1: mean a different issue in the long run. I think

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Speaker 1: the reality is we have it off water today to

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Speaker 1: grow up the crops we have, but we are several

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Speaker 1: places where we're getting rationed down to sort of the

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Speaker 1: minimum level where that we need. And if we get

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Speaker 1: rationed anymore, then then some of the crops will not

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Speaker 1: be combiable. So if you get rationed anymore. You can't say,

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Speaker 1: all right, well we'll spend another ten There's there's little

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Speaker 1: you can do, right, Yeah, I mean typically the way

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Speaker 1: it it gets allocated out is like on a per

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Speaker 1: acre basis, and we need about two and a half

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Speaker 1: a computer water to grow strawberry crop. And if our

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Speaker 1: allocation goes below that, you're just not going to have

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Speaker 1: a product to crop. Right. So, and we are right

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Speaker 1: there on the on the edge of that in a

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Speaker 1: couple of districts in southern California. So and talk to

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Speaker 1: us about your labor situation. We hear about it, you know,

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Speaker 1: across almost every single industry, uh, you know, over the

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Speaker 1: less several years, a labor shortage, and of course your

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Speaker 1: labor uh you know market is a little bit unique.

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Speaker 1: It's a lot of immigrants, legal and illegal. Talk to

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Speaker 1: us about your labor supply kind of what you're doing there. Yeah,

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Speaker 1: I mean I think that what's happening in California now,

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Speaker 1: it's we're finally seeing a significant increase in the agricultural

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Speaker 1: labor coming in under the age to a guest worker program.

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Speaker 1: Really not something that you saw very much in California.

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Speaker 1: Is much more common on the East Coast and that

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Speaker 1: wasn't needed to supplement the shortage that we have. Without that,

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Speaker 1: we we simply couldn't pick the crops. And we expect

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Speaker 1: that to increase year after yearfter year going forward. So

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Speaker 1: even if you're bringing in workers from other countries, I'm

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Speaker 1: assuming um wage costs are still going up. There must

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Speaker 1: be some pressure there with the inflation that everyone's seeing. Yeah,

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Speaker 1: and I think on top of that, you know, California

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Speaker 1: has passed, you know, a number of pieces of legislation

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Speaker 1: that's made labor costs a lot more expensive. So even

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Speaker 1: before you know, the general economy start feeling inflation, we've

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Speaker 1: been feeling inflation for quite a long time. I would

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Speaker 1: say for almost ten years. Labor costs has been going

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Speaker 1: up twice the rate of inflation. And so we've been

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Speaker 1: dealing this for a long time. And so efficiencies and

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Speaker 1: increasing productivity has been a major focus of ours for

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Speaker 1: you know, I would say the last six seven years.

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Speaker 1: So our consumers willing to pay um the boost in prices.

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Speaker 1: You know, every time I go to the grocery store,

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Speaker 1: I throw a couple of boxes of strawberries and blueberries

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Speaker 1: in the cart without looking. But my wife says, wait

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Speaker 1: a second, those are ten dollars a box. You know,

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Speaker 1: I don't know where we're shopping, but you get my

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Speaker 1: you get my point. Yeah, absolutely, So yeah, I think

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Speaker 1: the good nurses and it's that consumers are willing to

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Speaker 1: pay for really good fruits. Okay, that's you know, if

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Speaker 1: consumers are not going to trade down to cheaper, lower

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Speaker 1: quality strawberries. I think that the evidence of that is

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Speaker 1: very clear. Our company has historically done well and there's

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Speaker 1: been an economic downturn because consumers may trade down their

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Speaker 1: car or the vacation or not eat out as much,

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Speaker 1: but they're not they're never trading down the quality of

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Speaker 1: their berries when they eat them at home. So so

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Speaker 1: that's definitely we believe that that's here to stay. And

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Speaker 1: that's how that makes sense. Right. This is a relatively

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Speaker 1: cheap indulgence and there's really no reason to go off

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Speaker 1: to the three dollars strawberries when you can get better

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Speaker 1: for dollar strawberries. So dry schools again, I know the

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Speaker 1: Brandon listeners. Go google it. You'll you'll recognize the brand immediately.

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Speaker 1: When when when you see it, Um, who does the

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Speaker 1: average California strawberry? Who does that? Who? Does it compete

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Speaker 1: with you know, I think we we like to think

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Speaker 1: that we compete against you know, there's snacking alternatives, right,

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Speaker 1: and that's what we've seen throughout the pandemic. We're not

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Speaker 1: really competing against the other fruits. We really mean competing

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Speaker 1: for a share the consumer stomach. And so we are

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Speaker 1: really focused on going outside and looking to bring consumers

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Speaker 1: into coming in from other categories and and make them,

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Speaker 1: you know, make a healthier choice and eat fresh berries instead.

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Speaker 1: I was wondering what the cheaper I guess the cheaper

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Speaker 1: alternative would just be old and yuckier, as my daughter

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Speaker 1: would say, strawberries. So you're obviously going to pick the

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Speaker 1: best looking box that you can find at the store,

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Speaker 1: right what what what you don't You don't compete with bananas,

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Speaker 1: You don't compete with Kiwi's or blueberries. I mean, in

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Speaker 1: the end, there's only so much fruit that ends up

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Speaker 1: in the shopping basket. So of course there is some

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Speaker 1: of that going on and um, but your strawberries is

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Speaker 1: by far the number one category in produce and is

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Speaker 1: the fastest growing category, has been so for ten years.

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Speaker 1: It's not twice the size, So the the second biggest

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Speaker 1: fruit category, which would be apples, and uh, you know,

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Speaker 1: bananas is not growing that much and hasn't really grown

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Speaker 1: for a long time. And I think it's just it's

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Speaker 1: the versatility of berries, is the health benefits of berries.

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Speaker 1: It is the indulgence of berries, right, I mean, not

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Speaker 1: too many categories to sort of check all the boxes.

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Speaker 1: And we're very fortunate our stars so so. And just

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Speaker 1: you know, I spent a lot of time in the

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Speaker 1: Central Valley. I see the folks picking the berries. So

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Speaker 1: my question is what the time between the barry getting

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Speaker 1: picked in Watsonville or Salinas and getting to a supermarket

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Speaker 1: in New Jersey. That's not expensive. It's got an expensi

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Speaker 1: cificate against the truck across. I mean, well over ten

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Speaker 1: thousand dollars would be typical to get that truck across.

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Speaker 1: We will have it there in three to four days, right,

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Speaker 1: and then it gets to a distribution center in New

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Speaker 1: Jersey and then out to the store, right, And so

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Speaker 1: you know, New Jersey consumers probably realistically I can get

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Speaker 1: their hands on the berries in six to seven maybe

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Speaker 1: eight days, depending on you know, exective way it's at.

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Speaker 1: So you know it's pretty fast. Yeah, that's the kind

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Speaker 1: of trucking I want to do. That's when I get

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Speaker 1: my CDL. That's what I want to Watsonville. I'm not

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Speaker 1: doing these little hundred mile John's. Yeah, I want to

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Speaker 1: go across country in three to four days. All right.

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Speaker 1: It's good stuff. I'm telling you, folks. You go to

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Speaker 1: Central Valley, California, and it is amazing. And we're gonna

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Speaker 1: go back to Central Valley. We're gonna go back to

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Speaker 1: California just a little bit. You know why Why because

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Speaker 1: we're gonna talk to the CEO of Lamborghini. He's a

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Speaker 1: pebble beach. He's a pebble beach. All right, that's how

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Speaker 1: far away? How far away are you staring from pebble Beach.

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Speaker 1: I'm twenty miles away, okay. And I saw all the

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Speaker 1: cars yesterday. So there you got all right, good stuff.

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Speaker 1: So in boring the president of Driscoll's of the America's

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Speaker 1: think strawberries, blueberries, all that kind of stuff. And I

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Speaker 1: tell you, it's just all inspiring to see these huge,

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Speaker 1: huge vegetable and fruit farms in the Central Valley of California,

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Speaker 1: truly feeding the rest of the country. Truly cool stuff.

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Speaker 1: Carmendo Royal joins us. She's a credit reporter for Bloomberg News.

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Speaker 1: She's got an article out today showing the banks are retreating,

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Speaker 1: some banks like even Wells far especially Wells Fargo. That's

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Speaker 1: the one because that's where I had my mortgage. When

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Speaker 1: I had my mortgage for about fifteen minutes, I got

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Speaker 1: my mortgage from Wells Fargo. Carmen, How can a banks,

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Speaker 1: how can the banking industry like like a Wells Fargo

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Speaker 1: pulled back even slightly from the mortgage market. Isn't that

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Speaker 1: what they're job is. Yes, of course that's that's what

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Speaker 1: they do. But they do certain types of mortgages, especially

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Speaker 1: after early um, before I wait, they did all kinds

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Speaker 1: of mortgages. They did, like the risk here ones, the

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Speaker 1: ones that work that are now backed by the government.

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Speaker 1: But right now they've kind of retreated. They do only

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Speaker 1: more like Freddie and Sandy Mac mortgages, which has left

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Speaker 1: like a lot of space from non bank lenders to

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Speaker 1: kind of grow in this risk here parts of the

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Speaker 1: mortgage world. Um, and now that's becoming an issue with

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Speaker 1: like basically no business coming in, rates really high and

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Speaker 1: the whole change in the rate cycle. Yeah, so the

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Speaker 1: rate cycle is basically killing this business. Is regulation also

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Speaker 1: a part of that? I mean, the rates is something

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Speaker 1: Carmen that we can very easily see. You look at

427
00:22:37,720 --> 00:22:41,440
Speaker 1: the mortgage rates and they're up over five some I've

428
00:22:41,480 --> 00:22:45,040
Speaker 1: seen as high as six UM, and so I understand

429
00:22:45,560 --> 00:22:47,639
Speaker 1: consumers are going to be turned away by by that,

430
00:22:48,000 --> 00:22:50,880
Speaker 1: having been used to very low rates for the last decade.

431
00:22:51,119 --> 00:22:53,359
Speaker 1: What about regulations is that a part of the problem

432
00:22:54,600 --> 00:22:56,879
Speaker 1: right now? Right like regulation was kind of part of

433
00:22:56,960 --> 00:22:59,680
Speaker 1: the problem after early and a lot of banks retreated them.

434
00:23:00,200 --> 00:23:02,199
Speaker 1: Right now, the cost of class of that is at

435
00:23:02,280 --> 00:23:05,440
Speaker 1: right now basically um two thirds at the top twenty

436
00:23:05,880 --> 00:23:08,720
Speaker 1: lenders are non bank lenders, whereas before the crisis, it

437
00:23:08,840 --> 00:23:11,320
Speaker 1: was about a third of the top top twenty lenders

438
00:23:11,359 --> 00:23:14,320
Speaker 1: were independent firms. And that's kind of the problem, the

439
00:23:14,400 --> 00:23:17,160
Speaker 1: fact that this non non bank lenders have much less

440
00:23:17,240 --> 00:23:20,080
Speaker 1: capital to kind of maneuver compared to banks, and they

441
00:23:20,080 --> 00:23:23,159
Speaker 1: also don't have a lot of factcess to emergency funding

442
00:23:23,600 --> 00:23:27,120
Speaker 1: or other lines of credit like that. So how bad

443
00:23:27,240 --> 00:23:30,520
Speaker 1: is going to be for these uh, non bank mortgage lenders?

444
00:23:30,560 --> 00:23:32,399
Speaker 1: I mean, it's again, as you mentioned, they don't have

445
00:23:32,480 --> 00:23:34,640
Speaker 1: the capital, they don't have a lot of the support. Well,

446
00:23:34,680 --> 00:23:37,480
Speaker 1: everybody's pulling out, wells Fargo is shrinking, and the non

447
00:23:37,560 --> 00:23:39,960
Speaker 1: bank lenders can't participate. Who's going to be around to

448
00:23:40,000 --> 00:23:44,840
Speaker 1: give us mortgages? Someone will be there, but not everyone's

449
00:23:44,880 --> 00:23:47,760
Speaker 1: going to disappear, but it's certainly going to consolidate a

450
00:23:47,800 --> 00:23:51,159
Speaker 1: little bit. They were, especially in this prescure space, there

451
00:23:51,200 --> 00:23:55,960
Speaker 1: were which was basically only independent non banks UM there.

452
00:23:56,359 --> 00:23:58,440
Speaker 1: That's where most of the pain is going to come

453
00:23:58,520 --> 00:24:01,879
Speaker 1: from UM because that they don't have that government backing,

454
00:24:01,960 --> 00:24:04,040
Speaker 1: so the loans drop in value. They can't really go

455
00:24:04,200 --> 00:24:06,080
Speaker 1: to the g s c s to kind of get

456
00:24:06,119 --> 00:24:09,080
Speaker 1: funding from them, and that's why we've seen like some

457
00:24:09,240 --> 00:24:12,480
Speaker 1: bankruptcies and they've been mostly focused on this space. So

458
00:24:13,680 --> 00:24:16,159
Speaker 1: you know, I'm looking at the uh the story here

459
00:24:16,200 --> 00:24:19,680
Speaker 1: and there's a couple of names sprout mortgage, first guarantee, mortgage.

460
00:24:20,200 --> 00:24:24,439
Speaker 1: I mean, I'm not even tried go for a mortgage

461
00:24:24,520 --> 00:24:26,600
Speaker 1: with one of these people, but the rage right, you're

462
00:24:26,640 --> 00:24:29,199
Speaker 1: gonna do it, I guess. But who goes to these

463
00:24:29,240 --> 00:24:33,359
Speaker 1: types of mortgage players? So there is usually more for

464
00:24:33,520 --> 00:24:37,160
Speaker 1: non qualified mortgages, which is, for instance, if you don't

465
00:24:37,200 --> 00:24:40,040
Speaker 1: have like W two's or basically if you're not eligible

466
00:24:40,080 --> 00:24:43,439
Speaker 1: for mortgages that are backed by Fannie and Freddy or Jinny. Um.

467
00:24:43,680 --> 00:24:46,840
Speaker 1: So you that's the type of mortgages that are mostly

468
00:24:46,960 --> 00:24:50,000
Speaker 1: done by non bank lenders. Uh, and that banks kind

469
00:24:50,000 --> 00:24:53,080
Speaker 1: of retreated from after eight because they were the riskiest ones,

470
00:24:53,119 --> 00:24:54,440
Speaker 1: and they were the ones that are kind of like

471
00:24:54,520 --> 00:24:59,280
Speaker 1: got a little bit more regulated. First guarantees owned by Pimco. Yeah,

472
00:24:59,400 --> 00:25:01,639
Speaker 1: that got my I mean, what are they doing in

473
00:25:01,680 --> 00:25:03,800
Speaker 1: that business? All right? Good stuff interesting here? I mean

474
00:25:03,880 --> 00:25:05,800
Speaker 1: it's uh, you don't think about it as much, but

475
00:25:05,880 --> 00:25:08,320
Speaker 1: as you know, interest rates go up and maybe some challenges.

476
00:25:08,600 --> 00:25:10,359
Speaker 1: I think about it. You don't think about it so

477
00:25:10,480 --> 00:25:12,399
Speaker 1: much because you just sold your house and you never

478
00:25:12,480 --> 00:25:14,399
Speaker 1: had a mortgage to begin with note dumped it. I

479
00:25:14,520 --> 00:25:16,080
Speaker 1: think about it because it took me months to get

480
00:25:16,119 --> 00:25:19,880
Speaker 1: a mortgage. It was a painful, painful process. Why you're

481
00:25:20,080 --> 00:25:22,080
Speaker 1: you're a good credit right right? Well, well I did

482
00:25:22,160 --> 00:25:24,760
Speaker 1: get a good rate, but I still had to, you know,

483
00:25:25,119 --> 00:25:27,560
Speaker 1: show all of these documents. I had no idea where

484
00:25:27,560 --> 00:25:29,240
Speaker 1: they are and with keep stuff. But you're a star

485
00:25:29,359 --> 00:25:31,520
Speaker 1: on television that you just didn't say, Hey, go see

486
00:25:31,600 --> 00:25:33,600
Speaker 1: me on TV tomorrow, And that's good enough. I said,

487
00:25:33,640 --> 00:25:36,159
Speaker 1: you know what cable news fame, and they were like,

488
00:25:36,240 --> 00:25:40,000
Speaker 1: who are you again? All right, Carmen Royo, credit reporter

489
00:25:40,080 --> 00:25:42,760
Speaker 1: for Bloomberg News, with that story out today and her

490
00:25:42,800 --> 00:25:46,600
Speaker 1: team looking at the kind of the the mortgage market,

491
00:25:46,640 --> 00:25:48,280
Speaker 1: but not from some of the mortgage players you might

492
00:25:48,440 --> 00:25:54,119
Speaker 1: think about. Thanks for listening to the Bloomberg Markets podcast.

493
00:25:54,560 --> 00:25:57,680
Speaker 1: You can subscribe and listen to interviews with Apple Podcasts

494
00:25:57,920 --> 00:26:01,359
Speaker 1: or whatever podcast platform you for her. I'm Matt Miller.

495
00:26:01,640 --> 00:26:05,200
Speaker 1: I'm on Twitter at Matt Miller en seventy three. On

496
00:26:05,320 --> 00:26:08,400
Speaker 1: Fall Sweeney, I'm on Twitter at pt Sweeney. Before the podcast.

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00:26:08,480 --> 00:26:10,960
Speaker 1: You can always catch us worldwide at Bloomberg Radio