Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
Speaker 1: my co host Matt Miller. Every business day we bring
Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
Speaker 1: with essential market moving news on the Bloomberg Markets Podcast,
Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
Speaker 1: at Bloomberg dot com slash podcast. All right, the Inflation
Speaker 1: Reduction Act. Matt and I talked about it a lot,
Speaker 1: as it relates to E s G, As it relates
Speaker 1: to taxes, as it relates to climate. But the title
Speaker 1: Inflation Reduction Act, as I read through it, I'm like
Speaker 1: my hands around it. Is it reducing inflation? I don't know. Say.
Speaker 1: Yesterday we talked with Sadequaba right from I Squared Capital
Speaker 1: Infrastructure at Morgan Stanley. This guy is super plugged in
Speaker 1: and way smarter than me, like exponentially smarter, and he
Speaker 1: said it is longer term going to have a serious
Speaker 1: impact inflation. All right, Good for him. Carol Murphy's CEO
Speaker 1: of Kestro Holdings, joins us today. Carol, what do you
Speaker 1: what's your read of this Inflation Reduction Act? How should
Speaker 1: we think about it? Here? Well, I have to say,
Speaker 1: I'm with you, guys, and I think the title is
Speaker 1: a very clever piece of marketing, so kudos to whoever
Speaker 1: came up with the name. But I agree once you
Speaker 1: dig in, I mean, this is really about climate change policy.
Speaker 1: It's about access to healthcare. It's not about inflation. The
Speaker 1: thing that I mean, I understand why they named it
Speaker 1: that right got to it. They're selling it, and I
Speaker 1: don't even know how smart it was, because when you
Speaker 1: look at the details, you start to think this has
Speaker 1: nothing to do with inflation. But what gets me is
Speaker 1: they left in the carried interests tax loophole for you know,
Speaker 1: rich pe guys. And good for those rich pe guys.
Speaker 1: I'm not, you know, knocking them, but it just doesn't
Speaker 1: sound like something that Democrats would do. Then they didn't
Speaker 1: put the salt deduction in, which hurts middle class people
Speaker 1: like me, you know, and that seems like something the
Speaker 1: Democrats would want to I understand how this is a
Speaker 1: Democratic bill. Frankly on the tax side of things. Yeah,
Speaker 1: I have to agree, And it's a disappointment that those
Speaker 1: two got you know, left on the cutting room floor.
Speaker 1: I think those those are those have been objectives of
Speaker 1: you know, Democrats and others for quite some time now.
Speaker 1: They did get in the corporate minimum tax, which has
Speaker 1: been a goal and attack on share repurchases. So you know,
Speaker 1: that gets a little bit more to turn the screws
Speaker 1: on some companies in a way that you know supports
Speaker 1: democratic policy goals. UM. But I think you know, some
Speaker 1: of those other things that were left out were disappointed.
Speaker 1: What do you think about that? I mean, are they
Speaker 1: throwing a big giant blanket over all large corporations and saying,
Speaker 1: you know, these companies are all from now, I'm gonna
Speaker 1: pay minimum No. I mean when we look at the numbers,
Speaker 1: it's really just on the margin. I mean, it's a
Speaker 1: handful of companies that are going to be very impacted
Speaker 1: by that corporate minimum tax UM. And I think politically
Speaker 1: it plays very well to write this idea that very large,
Speaker 1: very profitable companies are able to avoid paying any taxes
Speaker 1: does not fit well with a lot of Americans. So
Speaker 1: I think it helps to kind of close the loophole,
Speaker 1: but really isn't going to impact all that many company
Speaker 1: me Karrot, we we've got somebody here at Bloomberg govin Signarelli.
Speaker 1: He's a strategist force here, and he spent his career
Speaker 1: on Wall Street trading UH currencies and bonds and all
Speaker 1: that kind of stuff. He kind of says, this focused
Speaker 1: by the FED on inflation is misplaced. He kind of
Speaker 1: feels like inflation is kind of taking care of itself.
Speaker 1: And I only look at you know, I look at
Speaker 1: gasolene prices three dollar for regular a gallant? Thank you?
Speaker 1: Did I say bar a gallant? I do that all
Speaker 1: the time. Okay, So that's for a regular unletted. So
Speaker 1: what's you're calling inflation here? So it's interesting because we've
Speaker 1: sort of been in that same camp, and that for
Speaker 1: good prices at least, it's pretty easy to follow the
Speaker 1: pig and the python and see how these inflationary pressures
Speaker 1: are working themselves out, and you know, things like container prices, subsiding,
Speaker 1: commodity prices easing. The harder part is on the services side.
Speaker 1: Those are prices that tend to move around a lot
Speaker 1: less and have still seen a lot of inflation. Um
Speaker 1: those prices tend to be very closely aligned with the
Speaker 1: labor market. So cooling the labor market is going to
Speaker 1: be really key to bringing that down. And we started
Speaker 1: to see some anecdotal evidence that the labor marketed cooling,
Speaker 1: but that typically takes a lot longer, so I think
Speaker 1: that will be the more difficult objective. Well, and not
Speaker 1: even um really anecdotal anymore. Yesterday I saw a survey
Speaker 1: from Price Waterhouse Coopers and they talked to more than
Speaker 1: seven US executives and board members across a range of industries.
Speaker 1: They said are They found that half of respondents said
Speaker 1: they're reducing headcount or planned to, fifty two percent have
Speaker 1: implemented hiring freezes. Um more than four and ten are
Speaker 1: ascending job offers. This is These are some real storm
Speaker 1: clouds on the horizon, yeah, for sure, and those will
Speaker 1: start to work their way into the actual numbers over
Speaker 1: the next couple of months. So I think this will be,
Speaker 1: you know, a big headwind. And I've been warning folks
Speaker 1: who are sort of newer to the job market that
Speaker 1: this is not a normal job market. This is so
Speaker 1: much easier to get a job than we often see
Speaker 1: during cycles. So I think folks who have only been
Speaker 1: in the job market for a couple of years really
Speaker 1: need to brace themselves. But Karen, can I ask you
Speaker 1: about something completely different here? Looking through your resume Um,
Speaker 1: I'm guessing you fell in love with Prague at some
Speaker 1: point and decided to stay there for a while. Do
Speaker 1: they not have the best beer in the world? I
Speaker 1: have never in all of my travels, and I drink
Speaker 1: beer everywhere I go, have better beer, had better beer
Speaker 1: than in the Czech Republic. It is so true. And
Speaker 1: the tech pride themselves on drinking the largest amount of
Speaker 1: beer per capita. And there's a reason that's great. So alright, So, Karen,
Speaker 1: I mean, you know, it's interesting in this economy here
Speaker 1: we focus on the consumer. The consumer seems like in
Speaker 1: pretty decent shape. It seems like the consumer has been
Speaker 1: so confounding because you're absolutely right, you know, job we
Speaker 1: we talked about the job market slowing, but right now
Speaker 1: it's very very strong. Wages are up, consumer balance sheets
Speaker 1: are very strong, but consumer confidence continues to look really poor.
Speaker 1: I mean, it's among the lowest that we've had in
Speaker 1: quite a number of years. So consumers are spending money
Speaker 1: like they feel good, but they're telling us that they
Speaker 1: don't feel good. And I'm worried that's going to fall
Speaker 1: off a cliff here when this when this job news
Speaker 1: comes home to roost and savings are down. I know
Speaker 1: that data is a little bit sketchy, but um credit
Speaker 1: card uses going up at some point, I'm worried consumer. Right,
Speaker 1: all right, Karen, thank you so much for joining us.
Speaker 1: Kara Murphy, c IO of Chestra Holdings here. She has
Speaker 1: a master's International Relationship University of Chicago and it be
Speaker 1: as an international politics from Georgetown. That's pretty darn good.
Speaker 1: I mean, you go to Georgetown, you're thinking about public service,
Speaker 1: you know, going into government, all that kind of good stuff.
Speaker 1: And then she gets a masters in Chicago. Not bad.
Speaker 1: Looking at bitcoin off eight point four seventy five four
Speaker 1: bitcoin and we can talk bitcoin because Tom Keen is
Speaker 1: not here. It's generally during surveillance. It is a bitcoin
Speaker 1: free studio. But Everett Millman East, chief markets analyst at
Speaker 1: Gainesville Coins. You look at precious metals at Gainesville Coins. Everett,
Speaker 1: but we also like talking to you about bitcoin. Any
Speaker 1: thoughts here about what we're seeing? Is this just a
Speaker 1: trading thing that isn't because of the FED? It's because
Speaker 1: of the Fed? Right? Yeah, I guess you're right. I
Speaker 1: guess you're right. What do you what do you have
Speaker 1: for us effort? Well? Sure, I think basically across markets
Speaker 1: right now, pointing to the FED is going to be
Speaker 1: the correct answer more often than not. But really, what
Speaker 1: I look at with the cryptocurrency market as it stands
Speaker 1: is it's caught in a bit of a catch twenty two. UM.
Speaker 1: The lack of a regulatory one of my favorites. The
Speaker 1: lack of a regulatory framework UM is certainly hampering adoption
Speaker 1: of bitcoin and other cryptos. But on the other hand,
Speaker 1: tight regulation really is antithetical to the core principles of
Speaker 1: bitcoin and many other cryptos, which is to say that, um,
Speaker 1: they're the entire animust behind bitcoin is to have completely
Speaker 1: private and largely anonymous transactions through a decentralized network. So
Speaker 1: the more that regulation comes in, the less likely that
Speaker 1: is to be the case. But again, I think almost
Speaker 1: anyone involved in the crypto space wants to see some
Speaker 1: sort of regulation to kind of put some people's fears
Speaker 1: to rest. Well, it's exactly the people who are selling
Speaker 1: you know, the picks and uh wheelbarrows that they want
Speaker 1: to see regulation because that's how they make their money
Speaker 1: on on the whole gold rush, not actually the gold
Speaker 1: The people who are into um bitcoin for real don't
Speaker 1: want to see UM censorship, government censorship allowed on money right.
Speaker 1: I talked to UM, the CEO of Cracking, a couple
Speaker 1: of days ago, and I thought it was really interesting
Speaker 1: because he's kind of torn. Cracking is one of the
Speaker 1: biggest crypto exchanges. Jesse Powell is the CEO, and he's you.
Speaker 1: And what you talked to him, you can see he's
Speaker 1: clearly torn because on the one hand, he has this business,
Speaker 1: he employs a ton of people, he wants to make money,
Speaker 1: and regulation and working with the government is he goes
Speaker 1: hand in hand with that. On the other hand, he's
Speaker 1: clearly like an early stage bitcoiner who wants who has
Speaker 1: the kind of libertarian viewpoint, and you just can't reconcile
Speaker 1: those two things. I tend to agree. I think the
Speaker 1: the idealism behind bitcoin, as he said, to have this
Speaker 1: sort of libertarian bent to being sound money and being
Speaker 1: censorship resistant UM. Even on a personal level, that was
Speaker 1: one of the main reasons that I got interested in
Speaker 1: bitcoin early on. But as we see, there really does
Speaker 1: need to be some establishment backing UM, and you know,
Speaker 1: some regulation would certainly spur that. We've seen that over
Speaker 1: the past year. A lot of major US corporations have
Speaker 1: been rather enthusiastic investors in crypto startups, but it's still
Speaker 1: on the order of about a billion dollars over a
Speaker 1: twelve month period. UM. That's being held back because again,
Speaker 1: if they make those investments, they start businesses and then
Speaker 1: here comes Washington with a hammer to crush all of
Speaker 1: those businesses. Well, that's um, that's that's a reason to
Speaker 1: not invest. That's the reasons shy away. So we're still
Speaker 1: seeing that playoff. Well, I mean every I tend to
Speaker 1: see it like this. There does need to be regulation,
Speaker 1: and there has to be a framework for bitcoin to
Speaker 1: work with governments around the world. If you wanted to
Speaker 1: trade trade for twenty dollars, right, if you want a
Speaker 1: bitcoin to cost ten tho dollars, if you need it
Speaker 1: to cost five grand for bitcoin, then yes, but not
Speaker 1: if you don't care about that, Not if you're someone
Speaker 1: who wants to use bitcoin just within the community of
Speaker 1: people who all have the same principles, Because if you
Speaker 1: open it up to regulation, as we've seen with um,
Speaker 1: the Russian invasion of Ukraine, they're gonna censor it. They're
Speaker 1: going to tell exchanges you can't trade with anybody who
Speaker 1: has a Russian residence, which I mean you can have
Speaker 1: your own view on what Vladimir Putin does, but certainly
Speaker 1: random dude you know in in the uh suburban or
Speaker 1: urban areas or rural areas of Russia has little to
Speaker 1: do with that, correct. And and that is a constant
Speaker 1: threat um, not just from censorship, but from the idea
Speaker 1: that uh, you know, governments and central banks would sort
Speaker 1: of co opt the idea with central bank digital currencies.
Speaker 1: That would because their government money, they would be very um,
Speaker 1: they would have no resistance to to censorship. Um. And
Speaker 1: we're still obviously although bitcoin has been around about a decade,
Speaker 1: we're still these early stages where the the pass forward
Speaker 1: is not entirely clear. And then we have to also
Speaker 1: take into account that it is not like bitcoin against
Speaker 1: one central enemy. Um. You have governments all over the
Speaker 1: world with their own individual interests that are kind of
Speaker 1: attacking this problem from their own angles. So I think
Speaker 1: that does create a although a very kind of wild
Speaker 1: West dynamic. Um, it is still fertile ground for some
Speaker 1: growth and experimentation with how how best to tackle is
Speaker 1: from a regulatory standpoint, Where is Lutz, Florida, Ah, So
Speaker 1: it was just north of Tampa. It's in the Tampa
Speaker 1: Bay area. That's where uh you guys, that's for your base, right, Yes,
Speaker 1: that's where Gainesville Coins headquarters. Of the name is a
Speaker 1: holdover from where we were founded. Um, but we do
Speaker 1: also have offices internationally, um in London and one in Singapore. Alright,
Speaker 1: So Gainesville is what's Gainesville? Isn't that the Gators? Is that?
Speaker 1: The University of Florida? Yeah, the University of Florida in
Speaker 1: the central part of the state. Alright, awesome, all right?
Speaker 1: And then Tallahassee's Florida State. I'm just getting my because
Speaker 1: you think about Florida, you know, you know, I just
Speaker 1: kind of think South Florida. But you gotta you gotta
Speaker 1: go to tahas for Florida State. Well, personally, I love
Speaker 1: the Panhandle the best, the best beaches, literally, folks listening
Speaker 1: around the world, you want to go to the best
Speaker 1: beaches in the US destin Florida and that kind of panhandles. Awesome?
Speaker 1: All right, Everett, thanks so much for joining us. We
Speaker 1: always appreciate talking to you. Everett Millman. He's a chief
Speaker 1: market analyst at Gainesville Coins. Located and beautiful Lut's Florida,
Speaker 1: just north of Tampa, Matt. I spend a lot of
Speaker 1: time in the central California coast, and I tell you,
Speaker 1: you know, like around Selina's you look as far as
Speaker 1: the eye can see literally our farms, and it's like
Speaker 1: we're most It just seems like most of our countries
Speaker 1: fruits and veggies come from. I mean, they're just everywhere
Speaker 1: for Aunt, miles and miles and miles and miles and miles.
Speaker 1: And one of the big companies there in Watsonville, uh
Speaker 1: is Drift Calls Thinks Strawberries, fresh strawberries. Those are the
Speaker 1: folks that bring you that kind of stuff so sore
Speaker 1: and boring. He's a president of Drift Calls of the America's.
Speaker 1: They are in fact based in Watsonville, California, near my
Speaker 1: crib in Carmel. Uh sore and thanks so much for
Speaker 1: joining us here. Talk to us about your business here.
Speaker 1: How's it from both a supply you know, in terms
Speaker 1: of the farms, the the environment, all that type of stuff,
Speaker 1: as well as the demand for your products. Yeah, and
Speaker 1: for the most part, I would say these things have
Speaker 1: been pretty good. Um. I think the reality is there's
Speaker 1: more people work from home and had to get a
Speaker 1: mid morning snack on afternoon snack. You know, they went
Speaker 1: to varies very frequently. And so the demand side in
Speaker 1: officiness has been very strong the last couple of years,
Speaker 1: and we actually don't really see that ending as we're
Speaker 1: sort of coming out on the other side. And so
Speaker 1: I think the demand side has been very good. Production
Speaker 1: is way more challenged. M We certainly had some pretty
Speaker 1: significant weather events, and an inflation, of course, is hitting us.
Speaker 1: I mean, we are planning next year's crop right now,
Speaker 1: and we are doing that with a cost structure that
Speaker 1: that we've never seen before. So what so inflation is
Speaker 1: gonna be with us? I can think of a few
Speaker 1: ways in which inflation would hit you. One of the
Speaker 1: stories we've been seeing a lot lately is the water
Speaker 1: shortage in California. Is that an issue for you? I
Speaker 1: mean a different issue in the long run. I think
Speaker 1: the reality is we have it off water today to
Speaker 1: grow up the crops we have, but we are several
Speaker 1: places where we're getting rationed down to sort of the
Speaker 1: minimum level where that we need. And if we get
Speaker 1: rationed anymore, then then some of the crops will not
Speaker 1: be combiable. So if you get rationed anymore. You can't say,
Speaker 1: all right, well we'll spend another ten There's there's little
Speaker 1: you can do, right, Yeah, I mean typically the way
Speaker 1: it it gets allocated out is like on a per
Speaker 1: acre basis, and we need about two and a half
Speaker 1: a computer water to grow strawberry crop. And if our
Speaker 1: allocation goes below that, you're just not going to have
Speaker 1: a product to crop. Right. So, and we are right
Speaker 1: there on the on the edge of that in a
Speaker 1: couple of districts in southern California. So and talk to
Speaker 1: us about your labor situation. We hear about it, you know,
Speaker 1: across almost every single industry, uh, you know, over the
Speaker 1: less several years, a labor shortage, and of course your
Speaker 1: labor uh you know market is a little bit unique.
Speaker 1: It's a lot of immigrants, legal and illegal. Talk to
Speaker 1: us about your labor supply kind of what you're doing there. Yeah,
Speaker 1: I mean I think that what's happening in California now,
Speaker 1: it's we're finally seeing a significant increase in the agricultural
Speaker 1: labor coming in under the age to a guest worker program.
Speaker 1: Really not something that you saw very much in California.
Speaker 1: Is much more common on the East Coast and that
Speaker 1: wasn't needed to supplement the shortage that we have. Without that,
Speaker 1: we we simply couldn't pick the crops. And we expect
Speaker 1: that to increase year after yearfter year going forward. So
Speaker 1: even if you're bringing in workers from other countries, I'm
Speaker 1: assuming um wage costs are still going up. There must
Speaker 1: be some pressure there with the inflation that everyone's seeing. Yeah,
Speaker 1: and I think on top of that, you know, California
Speaker 1: has passed, you know, a number of pieces of legislation
Speaker 1: that's made labor costs a lot more expensive. So even
Speaker 1: before you know, the general economy start feeling inflation, we've
Speaker 1: been feeling inflation for quite a long time. I would
Speaker 1: say for almost ten years. Labor costs has been going
Speaker 1: up twice the rate of inflation. And so we've been
Speaker 1: dealing this for a long time. And so efficiencies and
Speaker 1: increasing productivity has been a major focus of ours for
Speaker 1: you know, I would say the last six seven years.
Speaker 1: So our consumers willing to pay um the boost in prices.
Speaker 1: You know, every time I go to the grocery store,
Speaker 1: I throw a couple of boxes of strawberries and blueberries
Speaker 1: in the cart without looking. But my wife says, wait
Speaker 1: a second, those are ten dollars a box. You know,
Speaker 1: I don't know where we're shopping, but you get my
Speaker 1: you get my point. Yeah, absolutely, So yeah, I think
Speaker 1: the good nurses and it's that consumers are willing to
Speaker 1: pay for really good fruits. Okay, that's you know, if
Speaker 1: consumers are not going to trade down to cheaper, lower
Speaker 1: quality strawberries. I think that the evidence of that is
Speaker 1: very clear. Our company has historically done well and there's
Speaker 1: been an economic downturn because consumers may trade down their
Speaker 1: car or the vacation or not eat out as much,
Speaker 1: but they're not they're never trading down the quality of
Speaker 1: their berries when they eat them at home. So so
Speaker 1: that's definitely we believe that that's here to stay. And
Speaker 1: that's how that makes sense. Right. This is a relatively
Speaker 1: cheap indulgence and there's really no reason to go off
Speaker 1: to the three dollars strawberries when you can get better
Speaker 1: for dollar strawberries. So dry schools again, I know the
Speaker 1: Brandon listeners. Go google it. You'll you'll recognize the brand immediately.
Speaker 1: When when when you see it, Um, who does the
Speaker 1: average California strawberry? Who does that? Who? Does it compete
Speaker 1: with you know, I think we we like to think
Speaker 1: that we compete against you know, there's snacking alternatives, right,
Speaker 1: and that's what we've seen throughout the pandemic. We're not
Speaker 1: really competing against the other fruits. We really mean competing
Speaker 1: for a share the consumer stomach. And so we are
Speaker 1: really focused on going outside and looking to bring consumers
Speaker 1: into coming in from other categories and and make them,
Speaker 1: you know, make a healthier choice and eat fresh berries instead.
Speaker 1: I was wondering what the cheaper I guess the cheaper
Speaker 1: alternative would just be old and yuckier, as my daughter
Speaker 1: would say, strawberries. So you're obviously going to pick the
Speaker 1: best looking box that you can find at the store,
Speaker 1: right what what what you don't You don't compete with bananas,
Speaker 1: You don't compete with Kiwi's or blueberries. I mean, in
Speaker 1: the end, there's only so much fruit that ends up
Speaker 1: in the shopping basket. So of course there is some
Speaker 1: of that going on and um, but your strawberries is
Speaker 1: by far the number one category in produce and is
Speaker 1: the fastest growing category, has been so for ten years.
Speaker 1: It's not twice the size, So the the second biggest
Speaker 1: fruit category, which would be apples, and uh, you know,
Speaker 1: bananas is not growing that much and hasn't really grown
Speaker 1: for a long time. And I think it's just it's
Speaker 1: the versatility of berries, is the health benefits of berries.
Speaker 1: It is the indulgence of berries, right, I mean, not
Speaker 1: too many categories to sort of check all the boxes.
Speaker 1: And we're very fortunate our stars so so. And just
Speaker 1: you know, I spent a lot of time in the
Speaker 1: Central Valley. I see the folks picking the berries. So
Speaker 1: my question is what the time between the barry getting
Speaker 1: picked in Watsonville or Salinas and getting to a supermarket
Speaker 1: in New Jersey. That's not expensive. It's got an expensi
Speaker 1: cificate against the truck across. I mean, well over ten
Speaker 1: thousand dollars would be typical to get that truck across.
Speaker 1: We will have it there in three to four days, right,
Speaker 1: and then it gets to a distribution center in New
Speaker 1: Jersey and then out to the store, right, And so
Speaker 1: you know, New Jersey consumers probably realistically I can get
Speaker 1: their hands on the berries in six to seven maybe
Speaker 1: eight days, depending on you know, exective way it's at.
Speaker 1: So you know it's pretty fast. Yeah, that's the kind
Speaker 1: of trucking I want to do. That's when I get
Speaker 1: my CDL. That's what I want to Watsonville. I'm not
Speaker 1: doing these little hundred mile John's. Yeah, I want to
Speaker 1: go across country in three to four days. All right.
Speaker 1: It's good stuff. I'm telling you, folks. You go to
Speaker 1: Central Valley, California, and it is amazing. And we're gonna
Speaker 1: go back to Central Valley. We're gonna go back to
Speaker 1: California just a little bit. You know why Why because
Speaker 1: we're gonna talk to the CEO of Lamborghini. He's a
Speaker 1: pebble beach. He's a pebble beach. All right, that's how
Speaker 1: far away? How far away are you staring from pebble Beach.
Speaker 1: I'm twenty miles away, okay. And I saw all the
Speaker 1: cars yesterday. So there you got all right, good stuff.
Speaker 1: So in boring the president of Driscoll's of the America's
Speaker 1: think strawberries, blueberries, all that kind of stuff. And I
Speaker 1: tell you, it's just all inspiring to see these huge,
Speaker 1: huge vegetable and fruit farms in the Central Valley of California,
Speaker 1: truly feeding the rest of the country. Truly cool stuff.
Speaker 1: Carmendo Royal joins us. She's a credit reporter for Bloomberg News.
Speaker 1: She's got an article out today showing the banks are retreating,
Speaker 1: some banks like even Wells far especially Wells Fargo. That's
Speaker 1: the one because that's where I had my mortgage. When
Speaker 1: I had my mortgage for about fifteen minutes, I got
Speaker 1: my mortgage from Wells Fargo. Carmen, How can a banks,
Speaker 1: how can the banking industry like like a Wells Fargo
Speaker 1: pulled back even slightly from the mortgage market. Isn't that
Speaker 1: what they're job is. Yes, of course that's that's what
Speaker 1: they do. But they do certain types of mortgages, especially
Speaker 1: after early um, before I wait, they did all kinds
Speaker 1: of mortgages. They did, like the risk here ones, the
Speaker 1: ones that work that are now backed by the government.
Speaker 1: But right now they've kind of retreated. They do only
Speaker 1: more like Freddie and Sandy Mac mortgages, which has left
Speaker 1: like a lot of space from non bank lenders to
Speaker 1: kind of grow in this risk here parts of the
Speaker 1: mortgage world. Um, and now that's becoming an issue with
Speaker 1: like basically no business coming in, rates really high and
Speaker 1: the whole change in the rate cycle. Yeah, so the
Speaker 1: rate cycle is basically killing this business. Is regulation also
Speaker 1: a part of that? I mean, the rates is something
Speaker 1: Carmen that we can very easily see. You look at
Speaker 1: the mortgage rates and they're up over five some I've
Speaker 1: seen as high as six UM, and so I understand
Speaker 1: consumers are going to be turned away by by that,
Speaker 1: having been used to very low rates for the last decade.
Speaker 1: What about regulations is that a part of the problem
Speaker 1: right now? Right like regulation was kind of part of
Speaker 1: the problem after early and a lot of banks retreated them.
Speaker 1: Right now, the cost of class of that is at
Speaker 1: right now basically um two thirds at the top twenty
Speaker 1: lenders are non bank lenders, whereas before the crisis, it
Speaker 1: was about a third of the top top twenty lenders
Speaker 1: were independent firms. And that's kind of the problem, the
Speaker 1: fact that this non non bank lenders have much less
Speaker 1: capital to kind of maneuver compared to banks, and they
Speaker 1: also don't have a lot of factcess to emergency funding
Speaker 1: or other lines of credit like that. So how bad
Speaker 1: is going to be for these uh, non bank mortgage lenders?
Speaker 1: I mean, it's again, as you mentioned, they don't have
Speaker 1: the capital, they don't have a lot of the support. Well,
Speaker 1: everybody's pulling out, wells Fargo is shrinking, and the non
Speaker 1: bank lenders can't participate. Who's going to be around to
Speaker 1: give us mortgages? Someone will be there, but not everyone's
Speaker 1: going to disappear, but it's certainly going to consolidate a
Speaker 1: little bit. They were, especially in this prescure space, there
Speaker 1: were which was basically only independent non banks UM there.
Speaker 1: That's where most of the pain is going to come
Speaker 1: from UM because that they don't have that government backing,
Speaker 1: so the loans drop in value. They can't really go
Speaker 1: to the g s c s to kind of get
Speaker 1: funding from them, and that's why we've seen like some
Speaker 1: bankruptcies and they've been mostly focused on this space. So
Speaker 1: you know, I'm looking at the uh the story here
Speaker 1: and there's a couple of names sprout mortgage, first guarantee, mortgage.
Speaker 1: I mean, I'm not even tried go for a mortgage
Speaker 1: with one of these people, but the rage right, you're
Speaker 1: gonna do it, I guess. But who goes to these
Speaker 1: types of mortgage players? So there is usually more for
Speaker 1: non qualified mortgages, which is, for instance, if you don't
Speaker 1: have like W two's or basically if you're not eligible
Speaker 1: for mortgages that are backed by Fannie and Freddy or Jinny. Um.
Speaker 1: So you that's the type of mortgages that are mostly
Speaker 1: done by non bank lenders. Uh, and that banks kind
Speaker 1: of retreated from after eight because they were the riskiest ones,
Speaker 1: and they were the ones that are kind of like
Speaker 1: got a little bit more regulated. First guarantees owned by Pimco. Yeah,
Speaker 1: that got my I mean, what are they doing in
Speaker 1: that business? All right? Good stuff interesting here? I mean
Speaker 1: it's uh, you don't think about it as much, but
Speaker 1: as you know, interest rates go up and maybe some challenges.
Speaker 1: I think about it. You don't think about it so
Speaker 1: much because you just sold your house and you never
Speaker 1: had a mortgage to begin with note dumped it. I
Speaker 1: think about it because it took me months to get
Speaker 1: a mortgage. It was a painful, painful process. Why you're
Speaker 1: you're a good credit right right? Well, well I did
Speaker 1: get a good rate, but I still had to, you know,
Speaker 1: show all of these documents. I had no idea where
Speaker 1: they are and with keep stuff. But you're a star
Speaker 1: on television that you just didn't say, Hey, go see
Speaker 1: me on TV tomorrow, And that's good enough. I said,
Speaker 1: you know what cable news fame, and they were like,
Speaker 1: who are you again? All right, Carmen Royo, credit reporter
Speaker 1: for Bloomberg News, with that story out today and her
Speaker 1: team looking at the kind of the the mortgage market,
Speaker 1: but not from some of the mortgage players you might
Speaker 1: think about. Thanks for listening to the Bloomberg Markets podcast.
Speaker 1: You can subscribe and listen to interviews with Apple Podcasts
Speaker 1: or whatever podcast platform you for her. I'm Matt Miller.
Speaker 1: I'm on Twitter at Matt Miller en seventy three. On
Speaker 1: Fall Sweeney, I'm on Twitter at pt Sweeney. Before the podcast.
Speaker 1: You can always catch us worldwide at Bloomberg Radio