WEBVTT - Fed Leadership Uncertainty And US Travel Requirements 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.560 --> 0:00:15.520 with essential market moving news. Find the Bloomberg Markets podcast 0:00:15.560 --> 0:00:18.479 called Copple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:23.200 at Bloomberg dot com slash podcast. Let's bring in uh 0:00:23.320 --> 0:00:27.200 Lisa Hornby. She is the head of US multisector fixed 0:00:27.240 --> 0:00:30.280 income over at Schroeder's and she can talk with us 0:00:30.320 --> 0:00:32.680 about UM. Well, first, awfully, so what do you make 0:00:32.680 --> 0:00:37.720 of the moves we're seeing today in sovereign bonds? You know, 0:00:38.720 --> 0:00:41.240 rates markets are always kind of funny, right You get 0:00:41.320 --> 0:00:45.199 a pp I print which admittedly is at expectations but 0:00:45.320 --> 0:00:49.320 still nearly nine percent, and you have you have US 0:00:49.479 --> 0:00:54.760 rates rallying and the curve actually flattening. UM. You know, 0:00:54.840 --> 0:00:57.600 I think the bottom line is that the FED has 0:00:57.640 --> 0:01:03.440 basically given markets the green light to um take a 0:01:03.440 --> 0:01:05.560 little bit of risk. Although admittedly we're not saying that 0:01:05.560 --> 0:01:08.280 in equity markets today, but in bond markets they're saying 0:01:08.319 --> 0:01:11.680 we're not doing anything for the foreseeable future. Some of 0:01:11.720 --> 0:01:14.240 the rate hikes that were discounted into markets a week 0:01:14.280 --> 0:01:17.399 ago have come out. Um, you're hearing a little bit 0:01:17.440 --> 0:01:20.399 more about Lele Brennard on the on the maybe more 0:01:20.440 --> 0:01:23.640 do a shide of the equation. Um. That's perhaps giving 0:01:23.640 --> 0:01:26.440 a little bit of a bid to rates markets. UM. 0:01:26.520 --> 0:01:30.320 And you know, just generally, I think the move to 0:01:30.520 --> 0:01:35.319 higher yield happened fairly quickly and perhaps um, perhaps a 0:01:35.319 --> 0:01:38.000 little too quickly for markets that I think we're just 0:01:38.000 --> 0:01:40.160 getting a bit of a reversal of that right now. 0:01:42.440 --> 0:01:45.320 At least. It's really interesting because early in the year 0:01:45.440 --> 0:01:48.480 or late last year, you made a prediction about inflation, 0:01:48.680 --> 0:01:51.640 and you made a prediction about how UH the Fed 0:01:51.760 --> 0:01:56.400 may need to start to move to control it. I'm 0:01:56.440 --> 0:01:59.080 wondering now as we head towards the end of twenty 0:01:59.240 --> 0:02:04.520 twenty one, on what you're expecting into next year. Yeah. 0:02:04.560 --> 0:02:08.120 So our view on inflation, particularly early this year and 0:02:08.200 --> 0:02:09.920 late last year, was that it was going to be 0:02:10.080 --> 0:02:13.520 much longer lasting than markets expected it to be. And 0:02:13.560 --> 0:02:15.720 I think we are getting, um, you know, some some 0:02:16.120 --> 0:02:21.680 satisfaction on that in that in that transitory is UH 0:02:21.880 --> 0:02:24.600 is not necessarily a number of months, but being measured 0:02:24.600 --> 0:02:28.800 in maybe years. UM. And and you know, our view 0:02:28.919 --> 0:02:31.640 is is still fairly consistent. We think some of the 0:02:31.680 --> 0:02:34.840 inflation we're seeing today will come off, some of these 0:02:34.840 --> 0:02:38.480 supply chain issues will certainly moderate UM, but inflation is 0:02:38.560 --> 0:02:41.639 probably still going to run higher for the next several 0:02:41.720 --> 0:02:45.280 years than it has done over the last several years UM. 0:02:45.320 --> 0:02:47.799 A number of reasons for that, you know, ranging from 0:02:47.840 --> 0:02:52.480 FED policy to the political environment that we're in too. Frankly, 0:02:52.919 --> 0:02:56.240 a lot of the efforts being made UM by by 0:02:56.280 --> 0:03:00.560 by governments to move towards more sustainable UH policies in 0:03:00.639 --> 0:03:03.799 terms of infrastructure and energy policy. I mean, those will 0:03:03.840 --> 0:03:07.000 require huge investments in commodities in our view that it's 0:03:07.000 --> 0:03:09.919 still UM need to be priced into markets. So this 0:03:09.960 --> 0:03:14.440 should be a fairly supportive environment for inflation. UM. Now 0:03:14.560 --> 0:03:17.000 that being said, we're still faced with the fact that 0:03:17.080 --> 0:03:23.080 that's FED is seemingly airing towards overweighting its employment side 0:03:23.080 --> 0:03:26.280 of its mandate versus the inflation side. And so I 0:03:26.320 --> 0:03:29.760 think that they are very cognizant of of of getting 0:03:29.760 --> 0:03:34.560 to full excuse me, full employment UM and letting inflation 0:03:34.639 --> 0:03:36.480 run a bit hotter than it has in the past. 0:03:36.520 --> 0:03:38.920 They've been fairly explicit about that and I think if 0:03:38.920 --> 0:03:41.800 Brainard is in fact the new FED chair um that 0:03:42.080 --> 0:03:44.400 you know, she will take an even more aggressive stance 0:03:44.440 --> 0:03:47.560 on that. Um. If that's true, then the market has 0:03:47.600 --> 0:03:50.800 gone went pretty far in discounting almost at one point 0:03:50.880 --> 0:03:54.520 three rate hikes into in our view, that was probably 0:03:54.520 --> 0:03:56.760 too aggressive. Maybe it should be done, but it's not 0:03:56.800 --> 0:03:59.760 necessarily what this FED is going to deliver. Um. So 0:03:59.800 --> 0:04:02.360 that to why we're you know, we are being we're 0:04:02.440 --> 0:04:05.680 we're more cognizant of a range trading environment in rates. Yes, 0:04:05.720 --> 0:04:07.720 we think tenure should probably be a bit higher than 0:04:07.720 --> 0:04:11.800 they are today. Um, but it's not necessarily can't can't 0:04:11.800 --> 0:04:13.840 get there all in one self swoop. I think we 0:04:13.880 --> 0:04:15.440 need to have a little bit of give and take 0:04:15.480 --> 0:04:18.120 in the markets. Lisa, what do you buy right now? 0:04:18.200 --> 0:04:20.240 I mean, you spent a decade in the trenches as 0:04:20.279 --> 0:04:23.080 a PM before you became the big boss as the 0:04:23.120 --> 0:04:30.120 head of US multi sector fixed income. It's probably not easy. Ah. Yeah, 0:04:30.200 --> 0:04:32.720 So that's sort of an understatement for the whole team, 0:04:32.760 --> 0:04:36.200 I'm sure. Um. You know, markets are are challenging right now. 0:04:36.240 --> 0:04:40.040 You look at valuations across particularly credit markets, and you 0:04:40.080 --> 0:04:42.800 see that they're in the bottom death stile of their 0:04:42.880 --> 0:04:47.080 historical ranges, so nothing really looks cheap, particularly on the 0:04:47.080 --> 0:04:50.000 corporate side, there is a little bit of opportunity opening 0:04:50.040 --> 0:04:52.039 up in our view. On the emerging market side, we 0:04:52.080 --> 0:04:55.760 have seen, um you know, some of these issuers underperform 0:04:55.800 --> 0:04:57.839 a bit as as the dollar has been fairly strong 0:04:57.880 --> 0:05:00.120 and that's been a headwind for them. UM So we 0:05:00.160 --> 0:05:02.120 are starting to take a little bit of a dip 0:05:02.200 --> 0:05:05.200 into into some of the e M names, particularly those 0:05:05.240 --> 0:05:08.039 with with strong capital accounts, those are that are more 0:05:08.120 --> 0:05:10.880 geared to the U S and global economic recovery, those 0:05:10.880 --> 0:05:15.479 geared to towards commodities, as um I mentioned earlier. UM 0:05:15.520 --> 0:05:18.240 you know, there's also perhaps some opportunity in some of 0:05:18.240 --> 0:05:22.080 the securitized markets as well. Um less so maybe on 0:05:22.160 --> 0:05:25.160 the agency space, but a little bit more on UM 0:05:25.160 --> 0:05:26.880 in areas like triple A c l o s that 0:05:26.920 --> 0:05:30.440 we still like that still look from evaluation perspective reasonable 0:05:30.600 --> 0:05:33.160 compared to the rest of the alternatives. They're floating rate 0:05:33.160 --> 0:05:36.400 in nature, their short duration um so where we can 0:05:36.400 --> 0:05:39.320 pick spread there. We like the we like the structure. 0:05:40.680 --> 0:05:43.240 Outside of that, it's really hard to make a compelling 0:05:43.320 --> 0:05:46.280 argument for fixed income. I mean if we're being completely frank. 0:05:47.400 --> 0:05:49.680 It's more of a carry environment at best. There's not 0:05:49.760 --> 0:05:52.200 a lot of potential in our view for further spread 0:05:52.200 --> 0:05:54.960 compression from here, so we're waiting for a little bit 0:05:55.000 --> 0:05:57.760 more volatility and markets to take advantage of that. Well, 0:05:57.800 --> 0:05:59.520 I hope we get to talk to you again, Lisa. 0:05:59.560 --> 0:06:01.960 Great to get some time with you. Thanks very much 0:06:02.000 --> 0:06:04.240 for joining us. Lisa Hornby is the head of US 0:06:04.360 --> 0:06:14.159 multisector fixed income over at Schroeder's. Let's get back to 0:06:14.720 --> 0:06:19.200 um uh more realistic corporate stories. Dream Hotel Group. I'm 0:06:19.200 --> 0:06:22.160 sure that j Stein wouldn't mind a two point for 0:06:22.440 --> 0:06:26.360 seven trillion dollar valuation, although it would probably be a 0:06:26.360 --> 0:06:28.120 lot more work. You have to hire a lot more people, 0:06:28.160 --> 0:06:31.880 and that's not easy in this economy. Jay Stein is 0:06:31.920 --> 0:06:34.440 the chief executive officer of the Dream Hotel Group. Jay, 0:06:34.800 --> 0:06:37.159 I want to start there with with hiring people, because 0:06:37.160 --> 0:06:40.839 when we talk to you here on Bloomberg Radio recently, 0:06:41.480 --> 0:06:45.039 you've pointed out that it's not easy to get employees in. 0:06:45.240 --> 0:06:49.719 Has that changed at all? Not much, unfortunately, Thanks for 0:06:49.720 --> 0:06:52.360 having me on. By the way, um, you know, it's 0:06:52.360 --> 0:06:56.280 still very difficult to to attract people to come back 0:06:56.279 --> 0:07:00.440 to work. Um. Also our industry, it's it's been difficult. 0:07:01.520 --> 0:07:04.880 People are opting to stay at home if they can, 0:07:05.279 --> 0:07:09.680 or maybe not come back into cities if they've vacated 0:07:09.720 --> 0:07:12.040 the city. So it's it's still a challenge. We're doing 0:07:12.040 --> 0:07:15.920 a lot of interesting things in our different hotels, uh, 0:07:15.960 --> 0:07:20.720 you know, offering incentives and offering parking and many different 0:07:20.720 --> 0:07:23.320 things to try and make it more comfortable for people 0:07:23.360 --> 0:07:25.920 to uh look at us as an opportunity. But it 0:07:26.240 --> 0:07:28.520 is still very difficult. Yeah, we've we've been wondering about this. 0:07:28.600 --> 0:07:31.040 What is keeping people from coming back? What can bring 0:07:31.120 --> 0:07:35.800 them back? Is it a matter of wages? Especially in hospitality, 0:07:35.880 --> 0:07:38.920 It's it's harder to be flexible in terms of working 0:07:38.960 --> 0:07:41.880 from home. I mean, what can you do to kind 0:07:41.880 --> 0:07:46.840 of support the demands of this workforce? Yeah, I agree 0:07:46.880 --> 0:07:48.920 with you, and I think part of it maybe immigration, right, 0:07:48.960 --> 0:07:51.880 Maybe we need more people in the country uh that 0:07:51.920 --> 0:07:54.360 are going to look to take jobs that other people 0:07:54.400 --> 0:07:56.800 are just don't want to take, and we need more 0:07:56.800 --> 0:08:00.560 more people available to work in the workforce. Uh. Um. 0:08:00.560 --> 0:08:03.200 Other than that, uh, you know, I said, you know, 0:08:03.280 --> 0:08:07.240 let's end the enhanced unemployment, and you know that that's ended. 0:08:07.760 --> 0:08:11.920 I think unemployment in general is going to start to uh, 0:08:12.000 --> 0:08:14.720 you know, stop for a number of people, and people 0:08:14.760 --> 0:08:16.680 are gonna, you know, realize that that they need to 0:08:16.720 --> 0:08:18.680 go back to work. But you know, I don't think 0:08:18.720 --> 0:08:21.320 that's really the answer. It's it's a it's a unique 0:08:21.320 --> 0:08:24.679 situation that we're in and a lot of the younger 0:08:24.720 --> 0:08:28.560 people are looking at life differently, and we're gonna have 0:08:28.600 --> 0:08:30.880 to find solutions. Because you said, my industry is dead 0:08:30.920 --> 0:08:34.520 without without worker is so well, the economists still tell 0:08:34.600 --> 0:08:38.280 us jay Um and the Federal Reserve will say, we're 0:08:38.280 --> 0:08:41.600 not at full employment yet. So before we start bringing 0:08:41.880 --> 0:08:45.120 new people into the country, we still have a lot 0:08:45.120 --> 0:08:47.199 of people that are out there looking for jobs, or 0:08:47.240 --> 0:08:49.800 could be looking for jobs, or should be looking for jobs. 0:08:50.520 --> 0:08:52.280 What do you think is keeping them on the sidelines. 0:08:52.840 --> 0:08:55.640 I think they have savings, and I think they started 0:08:55.640 --> 0:08:59.679 getting unemployment and uh, they're saying, you know, I want 0:08:59.679 --> 0:09:02.320 to do what I want to do. Um And until 0:09:02.720 --> 0:09:05.240 they're here, you know, out of unemployment and their savings 0:09:05.280 --> 0:09:08.040 are dwindling, they're staying on the sidelines. All right, Let's 0:09:08.080 --> 0:09:12.000 get back to the business of travel and leisure, the 0:09:12.040 --> 0:09:16.280 hotel business. As borders are opening up Um, I think 0:09:16.640 --> 0:09:20.160 yesterday was November eight, right, So, Um, Europeans are coming 0:09:20.160 --> 0:09:22.560 back into the US. Do you feel that have you 0:09:22.600 --> 0:09:27.240 seen already a big bump in reservations and occupancy? Yeah, 0:09:27.280 --> 0:09:30.960 we definitely see an increase. Um. I wouldn't say a 0:09:31.000 --> 0:09:34.240 big bump yet, it's it's gonna ramp up. Um. But 0:09:34.280 --> 0:09:36.360 I do think, um, you know, we're coming into the 0:09:36.360 --> 0:09:38.959 holiday season, we'll see a good impact. The UK is 0:09:39.000 --> 0:09:42.600 a great freedom market into the New York markets. Um. 0:09:42.760 --> 0:09:44.680 But what I am excited about is I think we'll 0:09:44.679 --> 0:09:47.920 see a bigger business coming through in January and February 0:09:47.920 --> 0:09:50.320 than we normally would because of all the pent up 0:09:50.360 --> 0:09:52.520 to Man, I think they'll be shoot flights coming over 0:09:52.559 --> 0:09:56.520 from Europe, and with Broadway open, and with restaurants open, 0:09:56.880 --> 0:10:01.240 with great you know, luxury type shopping reasonable here the 0:10:01.360 --> 0:10:05.080 niche typically in Europe. I do think you'll see uh 0:10:05.600 --> 0:10:08.480 better business coming in those months where it's usually slow 0:10:08.520 --> 0:10:12.079 for US. I mean, it's interesting because we talk about 0:10:12.080 --> 0:10:15.040 things about to reopen more. If you've walked through Times 0:10:15.040 --> 0:10:18.320 Square the theater district, you can't really walk far it's 0:10:18.400 --> 0:10:21.880 so crowded, And so I'm wondering, Jay, you know that 0:10:21.960 --> 0:10:24.720 for the people who are do have pricing pressure here 0:10:24.720 --> 0:10:27.360 are Is it getting more expensive? Is it going to 0:10:27.400 --> 0:10:30.440 become difficult very soon for people to get rooms when 0:10:30.440 --> 0:10:34.040 they're looking to travel. No, I don't think we're at 0:10:34.040 --> 0:10:37.079 that point yet. Our hotels. You know, we have five 0:10:37.080 --> 0:10:39.320 hotels here in New York. We just opened the Chatwell 0:10:39.400 --> 0:10:42.360 Hotel just last Monday. That was the last of our 0:10:42.400 --> 0:10:44.960 properties that was still closed, and that's our high end 0:10:45.040 --> 0:10:48.199 luxury property, and we have to dream hotels, uh, and 0:10:48.280 --> 0:10:50.840 the time that have all been open since May, and 0:10:50.960 --> 0:10:54.160 we're still not back to regular. Ocupency levels in the 0:10:54.200 --> 0:10:56.880 city runs higher than most areas we're typically close to, 0:10:58.000 --> 0:11:00.240 and we're still down and around the seventy percent range. 0:11:00.240 --> 0:11:03.319 So there's still a lot of rooms. Inflation for us 0:11:03.320 --> 0:11:06.400 to lifted the rates like we're seeing in other industries 0:11:06.440 --> 0:11:09.280 has not come to us yet uh in New York 0:11:09.320 --> 0:11:12.880 as as although I'm sure it will over the next year, 0:11:13.000 --> 0:11:15.040 and I think we'll hit the new highs in a 0:11:15.120 --> 0:11:17.040 d RS that we haven't seen you in the city. Yeah, 0:11:17.040 --> 0:11:20.480 I mean, I imagine that you're gonna have to lift 0:11:20.520 --> 0:11:23.120 prices at some point to get your margins back to normal, right, 0:11:23.160 --> 0:11:26.280 because you have to pay people exactly exactly. And I 0:11:26.280 --> 0:11:28.400 think I think the public just like you. You know, 0:11:28.400 --> 0:11:30.319 when we go out to eat now, you're paying probably 0:11:31.240 --> 0:11:33.400 more for an entree than you did a year and 0:11:33.400 --> 0:11:35.520 a half ago, but you know, you're still going out 0:11:35.559 --> 0:11:38.680 to dinner. And I think that instead of paying for 0:11:38.720 --> 0:11:41.120 a room and you're paying three seventy five and you're 0:11:41.160 --> 0:11:43.600 going for a weekend, uh, he'll be happy to pay 0:11:43.600 --> 0:11:46.760 it and stay in a great hotel. So I think that's, uh, 0:11:46.840 --> 0:11:49.160 you know, something that the industry actually has the opportunity 0:11:49.200 --> 0:11:51.000 to look forward to and be able to raise rates 0:11:51.280 --> 0:11:53.679 rates of staging for for a longer time. Right now, 0:11:53.960 --> 0:11:56.360 great to get your insight. Always appreciate having you on 0:11:56.400 --> 0:11:59.040 the program. Thanks so much for your time. J Stein 0:11:59.400 --> 0:12:02.720 is the chief executive officer of the Dream Hotel Group. 0:12:02.800 --> 0:12:09.840 Talking to us about employment, international travel, and inflation. Really important. UM. 0:12:09.920 --> 0:12:16.360 Insight there. Let's talk about a little bit more about 0:12:16.360 --> 0:12:18.760 what's going on in the labor market, especially from the 0:12:18.800 --> 0:12:23.600 perspective of the housing industry industry. UM. But I first 0:12:23.600 --> 0:12:25.480 want to tell you that Bloomberg Markets is brought to 0:12:25.480 --> 0:12:28.960 you by Commonwealth, supporting more than two thousand independent financial 0:12:28.960 --> 0:12:33.520 advisors with solutions they need to grow thriving business. Commonwealth 0:12:33.880 --> 0:12:37.600 go where you grow. Visit Commonwealth dot com to learn more. 0:12:38.480 --> 0:12:41.240 Now let's get to Jack Trong right now. Uh. He 0:12:41.440 --> 0:12:44.320 joins us at the CEO of James Hardy to talk 0:12:44.360 --> 0:12:50.520 about this market, this housing market and um, the difficulty 0:12:50.600 --> 0:12:55.080 in hiring people. Has it gotten any better? Jack? Um? 0:12:55.080 --> 0:13:01.240 Good morning, Matt U. Sertainly within the new construction the markets, Um, 0:13:01.440 --> 0:13:06.719 the it's still quite tenable. But but we also are 0:13:06.800 --> 0:13:10.679 exposed to the remodeling segments and um, and it's actually 0:13:11.160 --> 0:13:14.320 not as bad as in a new construction side. Well, 0:13:14.320 --> 0:13:18.040 I'm wondering how long this construction boom really goes on 0:13:18.120 --> 0:13:20.520 for you know, I know a lot of people who 0:13:20.640 --> 0:13:24.160 are looking to build a home right now facing so 0:13:24.240 --> 0:13:27.160 many delays, and I'm wondering if there's a point at 0:13:27.200 --> 0:13:31.840 which this starts to taper off, whether more people coming 0:13:31.920 --> 0:13:34.880 back into the workforce will start to ease some of 0:13:34.880 --> 0:13:39.640 that pain Porsonally, you know what new construction is already 0:13:39.840 --> 0:13:45.120 very quite a complex supply chain to build new homes, 0:13:45.160 --> 0:13:48.280 and I need you have the different different type of 0:13:48.280 --> 0:13:52.120 products and going to building home like with appliances, Wind windows, 0:13:52.240 --> 0:13:54.840 doors and so and so forth. So you have also 0:13:55.000 --> 0:13:59.480 have different skill laborers to complete the home. So we 0:13:59.480 --> 0:14:02.680 we don't see that it's gonna gonna be abated anytime soon. 0:14:03.280 --> 0:14:06.160 Um certainly at least within the next year or so. 0:14:07.000 --> 0:14:09.960 But where we see um really light at the end 0:14:10.000 --> 0:14:13.400 and tunnel, it's really in the remodelate side, where where 0:14:13.400 --> 0:14:18.320 there is a there's a uptick in in the remodeling 0:14:18.400 --> 0:14:21.880 of the big ticket items, big ticket project like the 0:14:22.000 --> 0:14:27.120 re residing, remodeling or fixing your the exterior of homes. 0:14:27.680 --> 0:14:30.280 UM that that's been growing. It's quite nicely in this 0:14:30.440 --> 0:14:34.800 past quarters where we grouped by Cote and Insinceance, the 0:14:35.560 --> 0:14:38.600 supply chain is not as complex and we do see 0:14:39.400 --> 0:14:44.840 the labor it's quite really available in that remodeling sector. 0:14:46.040 --> 0:14:49.720 So um, the remodeling is your focus. But it does 0:14:49.760 --> 0:14:53.560 seem like this market needs more new construction, it needs 0:14:53.600 --> 0:14:59.360 more supply. Um. How do you see that? Well, you know, 0:14:59.520 --> 0:15:02.760 so you new constructions to read about between six or 0:15:02.840 --> 0:15:05.920 eight percent of homes so to the how housing stock 0:15:05.960 --> 0:15:09.440 in America today, So we still a relatively small part 0:15:09.560 --> 0:15:14.720 of the housing availability in the US, UM. So UM 0:15:14.800 --> 0:15:18.280 in in the short term, Yeah, it's gonna be limited 0:15:18.360 --> 0:15:20.480 in terms of the new construction start. I think we 0:15:20.600 --> 0:15:23.520 kind of horror around one point one million single family 0:15:23.560 --> 0:15:27.600 new construction right now for several months now. And also 0:15:27.680 --> 0:15:30.480 because of that complex of blind chain as we always 0:15:30.520 --> 0:15:34.160 the lack of skill labor. We don't see that changing 0:15:34.200 --> 0:15:37.840 anytime soon. But where we see more and more that 0:15:37.960 --> 0:15:40.320 home owners are not going to move from their homes 0:15:40.920 --> 0:15:44.280 and there's more tendency now for the of all owners 0:15:44.280 --> 0:15:47.040 to stay where where they're at and then to put 0:15:47.080 --> 0:15:51.000 that money to our renovated and remodeling their homes. You're 0:15:51.000 --> 0:15:53.640 not gonna believe this guy's My parents actually moved to 0:15:53.680 --> 0:15:56.600 India for four months because their house is so far 0:15:56.680 --> 0:16:00.480 delayed being created and they had to sell. UM wondering 0:16:01.040 --> 0:16:04.920 about next year? Does it get better given that we're 0:16:04.960 --> 0:16:10.800 not going to see so much new supply so quickly. Yeah, 0:16:10.800 --> 0:16:14.200 I think I think the next next year we'll get better. 0:16:14.360 --> 0:16:18.280 That's thee that the industry work out of the complex 0:16:18.280 --> 0:16:22.720 supply chain for new construction. Um. But you know, but 0:16:22.960 --> 0:16:26.680 anything can can happen now to then and certainly uh, 0:16:26.720 --> 0:16:29.080 you know, with the interest rate continue to be lowest 0:16:29.200 --> 0:16:31.480 and this now and we were going to see that 0:16:31.640 --> 0:16:34.680 the demand will have housing that might start to rise. Um. 0:16:34.680 --> 0:16:36.400 We only have a minute or so left here. But 0:16:36.440 --> 0:16:39.760 what about climate change? You know, it's interesting because I'm 0:16:39.760 --> 0:16:43.120 wondering what you're doing to kind of prepare for bad 0:16:43.160 --> 0:16:46.640 weather into the winter and all of these crazy fires 0:16:46.640 --> 0:16:50.720 that we've been seeing as well or the soonality an accident. 0:16:50.800 --> 0:16:53.040 That's a very very good question. You know. We're we're 0:16:53.160 --> 0:16:56.240 very fortunated, James Hardy, that that we had a very 0:16:56.320 --> 0:17:00.560 unique technology that we're product to make them from our 0:17:00.600 --> 0:17:03.960 five cement technology. And not only that we deliver the 0:17:04.040 --> 0:17:07.919 different designs and and aesthetic to the to the homes, 0:17:07.920 --> 0:17:10.400 but they also protect the home from all the elements. 0:17:10.440 --> 0:17:14.880 You know, it's it's noncombustible UM. It's also do durable 0:17:14.960 --> 0:17:18.280 that we guarantee for filty years UM. And at the 0:17:18.320 --> 0:17:21.679 same time, it's uh it's rated for hurricanes. You know 0:17:21.720 --> 0:17:24.439 it's gonna be it can would stand when the up 0:17:24.480 --> 0:17:27.399 to two and twenty nine per hour UM. And it 0:17:27.720 --> 0:17:32.720 also rated by FEMA, say class five in the Class 0:17:32.760 --> 0:17:36.959 five flood zone. So it's quite uh moisture resistance. So 0:17:37.040 --> 0:17:43.119 our product is really um quite um well suited for 0:17:43.119 --> 0:17:46.360 for the changing climate right now. All right, Jack, thanks 0:17:46.359 --> 0:17:49.280 so much for joining us. Jack Trong there, chief executive 0:17:49.320 --> 0:17:52.280 officer at James Hardy talking to us about the housing 0:17:52.359 --> 0:18:00.800 market and um, the renovation situation right now. All right, 0:18:00.880 --> 0:18:04.720 let's talk about our big take story of the day. 0:18:04.880 --> 0:18:08.960 Reddit's latest obsession is the FEDS Reverse Repo Facility. Alex 0:18:09.000 --> 0:18:11.000 Harris wrote the story and he's here to talk about 0:18:11.040 --> 0:18:15.199 it with us. So, um, Alex, this is something that 0:18:16.200 --> 0:18:19.040 we are often obsessed with as well. And as you 0:18:19.080 --> 0:18:22.040 point out, money market traders are glued to the screen 0:18:22.080 --> 0:18:25.520 every day to see the results of the reverse repo agreement. 0:18:25.560 --> 0:18:29.600 Can you explain what it is to the layman? Yeah, 0:18:29.760 --> 0:18:32.760 So what has happened is, you know, when the Fed 0:18:32.840 --> 0:18:36.520 does these asset purchases, when the Treasury is holding onto 0:18:36.560 --> 0:18:39.679 a lot of cash um and they start sort of 0:18:39.680 --> 0:18:42.879 removing that or spending that down, that all goes into 0:18:42.920 --> 0:18:46.159 the into the financial system. And so what the FEDS 0:18:46.160 --> 0:18:49.040 Reverse Repo facility has been created to do is to 0:18:49.160 --> 0:18:53.560 actually mop up this so called excess liquidity that there's 0:18:53.560 --> 0:18:55.919 just there's too much out there, and so this facility 0:18:56.080 --> 0:18:59.560 has been designed to sort of you know, redirect some 0:18:59.720 --> 0:19:02.960 of it. So as to not overwhelm the financial system 0:19:02.960 --> 0:19:07.560 and financial market. So I don't understand why the everyday 0:19:07.600 --> 0:19:10.560 trader who's normally interested in the stock market, which they 0:19:10.600 --> 0:19:15.920 can actually participate in, is so obsessed with reverse repo 0:19:16.160 --> 0:19:22.240 which they have no exposure to. Yeah, initially it's a 0:19:22.280 --> 0:19:24.840 good question, and one even after this story and so 0:19:25.119 --> 0:19:28.680 asking myself a bit um just because they happened to 0:19:28.720 --> 0:19:31.560 glance at the at the comments on Reddit in response 0:19:31.600 --> 0:19:35.520 to the story. Um, you know, I think it's sort 0:19:35.560 --> 0:19:39.480 of almost like an instinctive thing when you see a 0:19:39.640 --> 0:19:42.560 number like this growing and then you start assigning sort 0:19:42.600 --> 0:19:45.919 of assize and scope to it. Um, there has to 0:19:45.960 --> 0:19:49.720 be some like absolutely insane reason as to why something 0:19:49.840 --> 0:19:51.880 is behaving the way it is when it when it's 0:19:51.920 --> 0:19:55.879 growing like this. Um, you know, and and really you know, 0:19:55.920 --> 0:19:59.080 the reverse repo facility like on it on its front. 0:19:59.119 --> 0:20:01.800 You know, people can say cool things for making repo fun. Again, 0:20:01.880 --> 0:20:04.800 it's just intended to be boring. It's intended to just 0:20:04.840 --> 0:20:07.320 clean up the market, you know. Well, but not at 0:20:07.320 --> 0:20:10.680 these levels, right, I mean, it's huge. This isn't something 0:20:10.680 --> 0:20:14.960 that's insignificant. It's not like, you know, move away. They're 0:20:14.960 --> 0:20:17.080 nothing to see here. There is something to see here. 0:20:17.840 --> 0:20:20.440 I mean, I think, if anything, and it's telling you 0:20:20.520 --> 0:20:23.760 that what the said and the Treasury did in response 0:20:23.880 --> 0:20:27.800 to the economic catastrophe that was the COVID pandemic in 0:20:28.160 --> 0:20:32.879 the early days of it, um was actually monumental. Because 0:20:32.920 --> 0:20:35.159 that's what essentially we're cleaning up right now, is that 0:20:35.160 --> 0:20:37.560 the remember the fact is still doing quantitative using, it's 0:20:37.560 --> 0:20:42.719 still purchasing treasuries, and it's still purchasing mortgage backed securities, um. 0:20:42.800 --> 0:20:45.680 You know, so it's still pumping cash into the system, 0:20:45.800 --> 0:20:48.120 and and it's quite a lot, you know. And we're 0:20:48.160 --> 0:20:51.359 also getting cash from the Treasury because they were holding 0:20:51.359 --> 0:20:54.040 at one point eight trillion dollar cash balance, which was 0:20:54.080 --> 0:20:58.080 just unprecedented as well. I mean, we hadn't had when 0:20:58.080 --> 0:21:00.840 the when the rest People facially was created in two 0:21:00.840 --> 0:21:04.520 thousand and thirteen, at first launched, we didn't have fiscal 0:21:04.560 --> 0:21:08.600 policy and monetary policy. Monetary policy. I think it was 0:21:08.960 --> 0:21:11.359 Chuck Schumer in the Senate had told Bed Bernaki was 0:21:11.400 --> 0:21:13.800 the only you know, they were the only game in town. 0:21:14.400 --> 0:21:18.199 And and so that's why you didn't sound now in 0:21:18.200 --> 0:21:22.359 a sense though that the explosion in the reverse repo 0:21:22.440 --> 0:21:29.040 facility is emblematic of um, the amount of cash going 0:21:29.080 --> 0:21:33.560 into things like game stock and uh bit dog right. 0:21:33.600 --> 0:21:36.640 I mean there's just so much cash out there with 0:21:36.720 --> 0:21:40.680 no place to go. Um, these big institutions are putting 0:21:40.720 --> 0:21:45.000 it at the RP, but Wall Street bets bros. Are 0:21:45.040 --> 0:21:49.600 putting it into a MC. You know, I think it 0:21:49.800 --> 0:21:52.040 is emblematical the fact that there is just too much 0:21:52.080 --> 0:21:54.840 cash out there period. You know, I think you know 0:21:54.880 --> 0:21:57.280 when you look at the you know, amount of money 0:21:57.440 --> 0:22:00.520 it costs for a used car, use phone. You know, 0:22:00.720 --> 0:22:03.560 yes it is. But you remember these are money market 0:22:03.560 --> 0:22:07.320 funds that are primarily using the reverse repo facility. Um. 0:22:07.359 --> 0:22:09.959 You know these aren't the banks. The banks have you know, 0:22:10.119 --> 0:22:13.720 interest on reserve balances that pay fifteen basis point for 0:22:13.880 --> 0:22:16.080 cash and this is this is money son. You make 0:22:16.160 --> 0:22:17.639 this other point in the story that I think is 0:22:17.640 --> 0:22:20.400 really important. It's really important for people to understand how 0:22:20.400 --> 0:22:25.679 the FED works, especially the most you know, basic things 0:22:25.760 --> 0:22:29.480 to keep the economy safe. Right. But you have said 0:22:29.480 --> 0:22:31.720 that there's a lot of FED miss run by a 0:22:31.840 --> 0:22:35.240 very dangerous man though according to well, let's not go there. 0:22:35.359 --> 0:22:38.320 But you know that there's a lot of FED misinformation 0:22:38.400 --> 0:22:40.639 spreading on Twitter you know, what are some of the 0:22:40.680 --> 0:22:44.960 misconceptions that people have about this that then need to 0:22:44.960 --> 0:22:48.760 be debunked, you know, I think because again it's so 0:22:48.960 --> 0:22:52.760 big and and you really have to, i think, want 0:22:52.800 --> 0:22:57.520 to understand exactly how the mechanics of the financial system works. 0:22:57.520 --> 0:22:59.239 And with that, you have to understand kind of how 0:22:59.280 --> 0:23:02.400