Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm
Speaker 1: Bloomberg Quick Takes Tim Stanovik. We're here every day bringing
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Speaker 1: Bloomberg Business Week and iTunes, SoundCloud, or Bloomberg dot Com.
Speaker 1: You can also listen to our radio show at two
Speaker 1: pm Eastern Time on the Bloomberg Radio or watch us
Speaker 1: on YouTube. Searched Bloomberg clovel News, Tim Stuck and Katie
Speaker 1: Graydfeld live in the Bloomberg Interactive Brokers studio in New York. Katie,
Speaker 1: you and I were talking just a few minutes ago
Speaker 1: about this one incentive that Mary Bill de Blasio is
Speaker 1: offering parents of students, I should say, five to eleven
Speaker 1: year olds Thursday at city run sites where kids are
Speaker 1: eligible to get their shots. Yeah, it's interesting that they're
Speaker 1: moving forward with in incentive. You know, there's a lot
Speaker 1: of opinions on both sides about whether to vaccinate children,
Speaker 1: and it's interesting to take see them taking the carrot approach.
Speaker 1: What about the incentive about mental health, because that's something
Speaker 1: that our next guest has a lot to talk about.
Speaker 1: Dr Tamar Mendelssohn as director of the Center for Adolescent
Speaker 1: Health at Johns Hopkins Bloomberg School of Public Health. The
Speaker 1: Johns Hopkins Bloomberg School of Public Health is supported by
Speaker 1: Michael R. Bloomberg, founder of Bloomberg LP and Bloomberg Philanthropies.
Speaker 1: Dr Mendelssohn, it's great to have you on the program.
Speaker 1: Can you talk a little bit about the connection between
Speaker 1: mental health and where we are in the pandemic, especially
Speaker 1: among the youngest and I would say argue among the
Speaker 1: most vulnerable people in our society. Yeah, well, hello, and
Speaker 1: thank you for having me. So clearly the pandemic has
Speaker 1: been a time of incredible stress for families, and that
Speaker 1: includes young people. We've seen the data that rates of
Speaker 1: depression and anxiety and suicide increased for young people during
Speaker 1: the COVID pandemic. So this is terrific news that we
Speaker 1: have this vaccine that's now going to be available for
Speaker 1: kids between the ages of five and eleven. Enough, around
Speaker 1: twenty eight million American children, So The hope now is
Speaker 1: that this vaccine can help us with more of a
Speaker 1: return to normalcy, can help reduce parents stress, and allow
Speaker 1: young people to have more in person interactions with family
Speaker 1: and friends, and hopefully that will help everybody's mental health.
Speaker 1: And I'm curious, you know, where do you think this
Speaker 1: has to come from? Because obviously Tim and I have
Speaker 1: been talking about the fact that New York City is
Speaker 1: offering one hundred dollar incentive to get kids vaccinated. I mean,
Speaker 1: would you expect to see more of those types of
Speaker 1: bonuses or incentives rolled out across the country. A is uh,
Speaker 1: you know, we try to improve vaccination rates among younger people.
Speaker 1: I think working to improve vaccine uptake for parents, um,
Speaker 1: and you know, sort of getting parents confident and comfortable
Speaker 1: vaccinating their children is a really really important thing. And
Speaker 1: I think a lot of us have been bombarded on
Speaker 1: social media was all kinds of misinformation, so people are confused,
Speaker 1: they're not may be sure that they have all the
Speaker 1: right information, and so I think it's really important for
Speaker 1: us to do the outreach, to do the work to
Speaker 1: answer questions and bust myths so that you know, parents
Speaker 1: feel confident. What's the right way to do that because
Speaker 1: I I shared this story last week, but I'll share
Speaker 1: it again for those who weren't listening. I was at
Speaker 1: the doctor speaking to a healthcare provider last week and
Speaker 1: we were just making small talk because I was about
Speaker 1: to get my blood drawn, which is something I just
Speaker 1: cannot stand to happen. And she was saying that she
Speaker 1: has kids who are between the ages of five and eleven.
Speaker 1: I said, Oh, you're so lucky, because they'll be able
Speaker 1: to get vaccinated soon. And she told me, and this
Speaker 1: is someone who works at a hospital, Oh, I'm not
Speaker 1: going to do it. I'm gonna wait, what would you
Speaker 1: say to her? So obviously it's a parent's personal decision.
Speaker 1: But all the data and all the infectious disease experts
Speaker 1: UM that I've interacted with have really highlighted the incredible
Speaker 1: benefits that the vaccine has to offer. And really, I'd
Speaker 1: be much more nervous as a parent not getting my
Speaker 1: child vaccinated. And so Dr Mendelssohn, I want to talk
Speaker 1: more about UM the mental health aspect of this, and
Speaker 1: child and adolescent mental health in terms of you know
Speaker 1: how obviously the pandemic has taken a toll on all
Speaker 1: of us mental health wise, but you know, particularly those
Speaker 1: young people, and I'm curious you know to your point
Speaker 1: that getting vaccinated the return to normal that could improve
Speaker 1: mental health. Um, I mean walk us through that link.
Speaker 1: Is that just because you know we'll be able to
Speaker 1: go out and socialize more. I think it can really
Speaker 1: reduce some of the stress that is affecting families because
Speaker 1: parents may be vaccinated while children below the age of
Speaker 1: twelve are not vaccinated, and this can create the anxiety
Speaker 1: around what kind of family gatherings can we have holidays?
Speaker 1: You know, how can I protect my children while still
Speaker 1: living life and trying to return to normal in some way.
Speaker 1: So I definitely think the vaccination can help families have
Speaker 1: that extra confidence. I also think that the more we
Speaker 1: can return to a semblance of normalcy across the board
Speaker 1: at schools and so forth, the more that children and
Speaker 1: teenagers can kind of get back to the business of
Speaker 1: their development and focus on, you know, socializing and growing
Speaker 1: emotionally and the things that really they need to do
Speaker 1: at this stage. Dr Mendelson My son was fourteen months
Speaker 1: when the pandemic hit. He's almost three now. He thinks
Speaker 1: everything is hand sanitizer and he knows how to put
Speaker 1: on a mask, and I just think to myself, this
Speaker 1: is like a pandemic baby. This is going these are
Speaker 1: going to be his earliest memories. What are long term
Speaker 1: thoughts on that? And just in the last thirty seconds
Speaker 1: that we have. Absolutely there's going to be a lot
Speaker 1: of shared generational experience with this pandemic. I do think
Speaker 1: young people are incredible and resilient, and you know they
Speaker 1: are going to be fine, but many young people have
Speaker 1: coped with serious trauma like losing a parent. So for
Speaker 1: those young people, we really do need to make sure
Speaker 1: that they have the mental health and emotional supports that
Speaker 1: they need to thrive. Dr Tamar Mendelssohn, director of the
Speaker 1: Center for Adolescent Health at the Johns Hopkins Bloomberg School
Speaker 1: of Health, joining us on the phone from Baltimore. The
Speaker 1: Johns Hopkins Bloomberg School of Public Health. It is supported
Speaker 1: by Michael R. Bloomberg, the founder of Bloomberg LP and
Speaker 1: Bloomberg philanthropist. Katie's something I've been thinking about a lot,
Speaker 1: just what it looks like on the other side of this,
Speaker 1: or if this is something we're just gonna continually be
Speaker 1: dealing with. Absolutely almost feels like we're in purgatory. Yeah,
Speaker 1: that's the way a lot of people think about it.
Speaker 1: I think this is Bloomberg Radio, and this is Bloomberg.
Speaker 1: This is Bloomberg Business Week with Carol Masser and Bloomberg
Speaker 1: Quick Takes Tim Stinovic on Bloomberg Radio. Well, it's Bloomberg's
Speaker 1: Big Take today, the very best of Bloomberg's in depth
Speaker 1: original reporting from around the globe. It's written by Jillian Tan,
Speaker 1: scenior reporter at Bloomberg News. She joins us here in
Speaker 1: the New York City Bureau. It's all about soft Bank's
Speaker 1: Masioshi's son. He cannot pay enough talent enough to keep
Speaker 1: Vision Fund talent so happy. As the Japanese company prepares
Speaker 1: to distribute profits in December, some of its key startup
Speaker 1: investors have headed for the door. Jillian joins us. Now, Jillian,
Speaker 1: before we get into what exactly is happening at SoftBank's
Speaker 1: Vision Fund, can you give us an idea of how
Speaker 1: venture capital venture capitalist partners are traditionally compensated. Yeah, so,
Speaker 1: just um also to just jump in, I worked on
Speaker 1: this with colleagues in Japan and on London. I don't
Speaker 1: want to take it away from them. I wasn't the
Speaker 1: only author, but capital partners are traditionally compensated with up carry,
Speaker 1: which is essentially a distribution of profits. So for example,
Speaker 1: let's say, way way back in the day, if you
Speaker 1: were to invest in the company let's say Facebook, UM,
Speaker 1: and it went public and your fun were to make
Speaker 1: X amounts, you would be entitled to roughly of those profits.
Speaker 1: And so what's different at soft bank and how they
Speaker 1: actually compensate their employees and why is that leading to
Speaker 1: these defections? Yes, so we have reported that since I
Speaker 1: think last March, there have been seven managing partner exits
Speaker 1: and the firm sole senior managing partner UM is set
Speaker 1: to exit by the end of this year. UM. One
Speaker 1: of the key reasons is they have an eccentric approach
Speaker 1: to pay and carry. And what we've reported in terms
Speaker 1: of the December distribution, that's the first carry payment that
Speaker 1: any of these folks or the folks who are left
Speaker 1: should I say, they're going to be receiving from the
Speaker 1: hundred billion Vision Fund vehicle. And if you think about it,
Speaker 1: these are names companies that have invested in include like Door,
Speaker 1: Dash Cooper, which is a big Korean company, h uber
Speaker 1: A Garden Health, which is a healthcare company that found public.
Speaker 1: Just you know, dozens and dozens of companies that have
Speaker 1: now gone public that these guys haven't seen, guys and
Speaker 1: girls haven't seen any profits from. And there have been
Speaker 1: some mrs too, though most notably we work, Yeah, we
Speaker 1: work and a little company called Greensill, which is a
Speaker 1: little bit of a disaster that obviously, you know, I
Speaker 1: think it's very clear and soft Bok reports this um
Speaker 1: the Vision Fund is in the green um. It just
Speaker 1: hasn't been really compensating. It's senior investment staff. Well, that's
Speaker 1: what I'm curious about. Whether this his you know, slowed
Speaker 1: soft bank down at all, because you know, I was
Speaker 1: saying to him, it feels like they have a footprint
Speaker 1: in everything. It still feels like every other week I
Speaker 1: see a headline about a new investment that they're making. Yeah,
Speaker 1: almost daily now sometimes it feels like honestly, um, but no,
Speaker 1: it hasn't slowed them down. They're now investing out of
Speaker 1: Vision Fund to which actually has no outside investors. One
Speaker 1: key seeing Vision Fund one was backed by sovereign wealth
Speaker 1: funds out of Saudi Arabia and Abu Dhabi. Or el
Speaker 1: Vision Fund, who was purely soft Bank capital, and then
Speaker 1: also Martha's Sons Capital, which is which is one of
Speaker 1: the reasons he justifies taking a large portion of returns
Speaker 1: from that right exactly, which is also why he you know,
Speaker 1: doesn't want to pay out out of self banks profits
Speaker 1: to staff is he obviously wants to retain that himself
Speaker 1: and also shareholders in the public company that is Self Bank. Okay,
Speaker 1: so what do compensation experts tell you about what's happening
Speaker 1: here and also where are these defectors going? Yes, so
Speaker 1: we spoke to a bunch of effects. That's obviously it's
Speaker 1: pretty clear if you don't pay enough, people aren't going
Speaker 1: to stick around. UM people going to various places. One
Speaker 1: managing Partners starting his own new firm. Another two went
Speaker 1: to Gore's Group where they invest in companies and they're
Speaker 1: sort of leading a spack effort across there. Another has left,
Speaker 1: I think to write a book and it's just you know,
Speaker 1: hasn't exactly said what they're up to next. And another
Speaker 1: one joined a company called Naspers, which is um a
Speaker 1: big South African based UM giant. And just finally in
Speaker 1: the last twenty seconds that we have with you, Jilian.
Speaker 1: It's not like they're not getting paid much if they're
Speaker 1: staying there, because junior and senior level salaries are high.
Speaker 1: They're five seven hundred thousand dollars. Yeah, I know, it's
Speaker 1: a regular table, like regular amrians, just like regular people
Speaker 1: around anywhere. Um, these aren't small salaries. Cash salaries obviously
Speaker 1: very high. It's just to carry you know, they would
Speaker 1: be expecting tens of millions that they're just really not
Speaker 1: getting at this point. Well, it's a great story. Jillian
Speaker 1: Tan co wrote it with two of our colleagues around
Speaker 1: the world. It's stays Bloomberg Big Take. Check it out
Speaker 1: on the Bloomberg terminal and of course at Bloomberg dot com.
Speaker 1: Jillian tan Senior reporter for Bloomberg News. You're listening to
Speaker 1: Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes
Speaker 1: Tim Stinovic on Bloomberg Radio. Well, it's the cover of
Speaker 1: the brand new edition of Bloomberg Business Week. It's available
Speaker 1: now on news stands and at Bloomberg dot com Slash
Speaker 1: business Week. The cover, jol is all about twenty three
Speaker 1: and me. It wants to use its customers genetic data
Speaker 1: to beat cancer. This story is by Well. This story
Speaker 1: is by Kristin Brown. And joining us now is Joel Webber,
Speaker 1: editor at Bloomberg Business with He's with us in the
Speaker 1: Bloomberg Interactive Broker studio. Tim and Nette one of the
Speaker 1: editors on the piece. He's on the US Healthcare team
Speaker 1: and he's US Healthcare Team leader for Bloomberg News. Joining
Speaker 1: us on the phone from New York City, Joel twenty
Speaker 1: three and me. A lot of people recognized the company
Speaker 1: found founded uh by headed by in Wachitzki as the
Speaker 1: company that you spit into a tube, you send it
Speaker 1: off and you understand more about your own ancestry, your
Speaker 1: own your own family history. Have you done it? I
Speaker 1: have not? And that was all, you know. The genius
Speaker 1: part of this business is, I think Kristen's story goes
Speaker 1: into is that a lot of people did, like millions
Speaker 1: of them. And when that project started ten plus years ago,
Speaker 1: it was just about like, hey, where did you come from?
Speaker 1: What's your what's in your d na um? And it
Speaker 1: seemed really you know, innoculus, But there was a master
Speaker 1: plan all along. What was that master planned? Tim? That
Speaker 1: was go ahead? Tim Andette? Yeah, sure, So the master
Speaker 1: plan was to become a pharmaceutical company. Right. Um, as
Speaker 1: we say in the story, UH and with just has
Speaker 1: sort of had this vision from the very beginning. She
Speaker 1: even wrote it down and one of her investors had
Speaker 1: it framed and they gave it to her later on.
Speaker 1: It's it's um you know, remarkable story of consistency in
Speaker 1: a lot of ways. You know, they sort of stuck
Speaker 1: to what their vision was. And now they are sort
Speaker 1: of in a position now that they have all of
Speaker 1: this data from all of those people who have been
Speaker 1: into those tubes to move forward with it. And so
Speaker 1: how does twenty three and me actually execute that vision?
Speaker 1: How do they go from you know, sort of a
Speaker 1: fun service you spent the two of you pay and
Speaker 1: you analyze your ancestry to you know, a full blown
Speaker 1: pharmaceutical company. Well, so it's a lot of science, right,
Speaker 1: just like any drug company, They're going to have to
Speaker 1: go into the laboratory and they're going to have to
Speaker 1: try a lot of things out. And as we know
Speaker 1: from UH pharmaceutical history, a lot of things that you've
Speaker 1: take into the lab don't work out. It's a little
Speaker 1: better than one in ten chance that any drug is
Speaker 1: going to get to the market from its initial conception.
Speaker 1: So twenty three and me is betting that they have
Speaker 1: all this this genetic data, and genetic data is very
Speaker 1: valuable because it can allow you to sort of take
Speaker 1: some shortcuts in that development process. You've got a lot
Speaker 1: of numbers you can crunch to try to find both
Speaker 1: things that you could possibly drug right, things that are
Speaker 1: you know, ailments or um defects that drugs could target,
Speaker 1: or you could find ways to use old drugs for
Speaker 1: new things. I don't think Tim that people who did
Speaker 1: this originally over the last decade realized that what they
Speaker 1: were doing was potentially contributing to a different vision of
Speaker 1: the company. And I'm wondering what the company says about
Speaker 1: that and how they reconcile that. Well. I think, you know,
Speaker 1: the thing that they say to people is that, you know,
Speaker 1: we're a healthcare company and we want to help you
Speaker 1: use the information that can be found in your genetic code,
Speaker 1: uh to make you well, to make you better, and uh,
Speaker 1: you know the I think the the other side of
Speaker 1: this is that, you know, thousands of people participate in
Speaker 1: clinical trials and everything. There are different um sort of
Speaker 1: you know, levels of consent with these things, um. But
Speaker 1: but you know, they they make the argument that we
Speaker 1: have this data and we can act on it, and
Speaker 1: we can get things to you faster than others might
Speaker 1: be able to. So this, this idea of using genetics
Speaker 1: to actually make drugs is basically untested. That they're the
Speaker 1: first company that will be kind of doing this. And
Speaker 1: what's their pipeline look like, Tim, Well, they've got up
Speaker 1: pretty pretty good pipeline for a company that's been you know,
Speaker 1: sort of not doing this for a terribly long time.
Speaker 1: Over the past year, they were able to sort of
Speaker 1: double the number of candidates they're working on. They've got
Speaker 1: about eighteen now. And bear mindus is at a time
Speaker 1: when you know, a lot of people were are not
Speaker 1: working in an office. You know, there are people were
Speaker 1: all spread out like many companies. And at the same time,
Speaker 1: a lot of drug companies were having trouble recruiting for
Speaker 1: clinical trials and stuff. So they've been able to sort
Speaker 1: of do a lot of this data work over the
Speaker 1: past year, even when other sciences slowed down. It seems like,
Speaker 1: I mean, you guys write about this in this story
Speaker 1: right the valley of death between the idea of getting
Speaker 1: something approved versus actually developing the drug. It seems like
Speaker 1: another avenue that could happen is twenty three and Me
Speaker 1: gets bought by a bigger pharmaceutical company, and then that
Speaker 1: bigger farma company can then use that data explain partnerships,
Speaker 1: how that's working, and how potentially some of the companies
Speaker 1: that it's partnering with could end up being competitors. Sure,
Speaker 1: so they have a notably, they have a partnership with
Speaker 1: Glacksow Smith Klein Um. That is, um, you know, these
Speaker 1: companies are working very closely together on treatments. But you know,
Speaker 1: in the competitive landscape of farma, as we all know,
Speaker 1: there are lots and lots of deals that happened, um
Speaker 1: you know, companies buying other companies, but also there's licensing deals,
Speaker 1: there are partnerships. There are many companies out there that
Speaker 1: remains freestanding companies but partner with rival companies on what
Speaker 1: are oftentimes their biggest selling drugs. Right, So, the commercial
Speaker 1: flavors of this to go in a lot of different directions.
Speaker 1: For twenty three and Me, I mean, twenty three and
Speaker 1: Me is still a relatively small company in the forming universe,
Speaker 1: right there, like a five billion dollar company right now.
Speaker 1: You know, a lot of the biggest companies in the
Speaker 1: in the space are you know, hundred billion plus in
Speaker 1: market cap. So UM, you know, they're a mino for sure,
Speaker 1: and they're gonna need help, but they're getting it from
Speaker 1: companies like black So that do have mass and do
Speaker 1: have commercial know how and and production know how and
Speaker 1: all of those things that you know, younger drunk companies
Speaker 1: really need when they're when they're starting and so still
Speaker 1: a small fish twenty three and me. But I'm curious,
Speaker 1: I mean, are there any other companies trying to do
Speaker 1: what they're trying to do and do they have the
Speaker 1: same huge database THEE and ME has. I mean, I
Speaker 1: did the company that has the most similar databases Ancestry
Speaker 1: right that they're not really doing this, um. There are
Speaker 1: lots of other companies out there that are using genetic
Speaker 1: therapies for different um therapeutic purposes, right Like You've got
Speaker 1: Maderna for example, that it's RNA technology is behind the
Speaker 1: COVID nineteen vaccine. UM. There are also companies out there
Speaker 1: doing things with gene editing with crisper Um. There's a
Speaker 1: really interesting technology called RNA interference that a company called
Speaker 1: al Nylum is a very big and so there are
Speaker 1: a lot of different kinds of sort of genetic technologies
Speaker 1: out there that companies are trying out. So, by the way,
Speaker 1: this Minno was a startup, a spit tube startup. Now
Speaker 1: it's a publicly traded company and went public via spack
Speaker 1: earlier this year. What do the market think about this?
Speaker 1: This company and Tim, we only have about thirty seconds.
Speaker 1: I mean they've been pretty well so far. Right, They've
Speaker 1: grown since they did the spac deel and and they're
Speaker 1: probably the shoot yeah, yeah, they're is more profitable. I
Speaker 1: mean they have a big commercial business, right that has
Speaker 1: like Super Bowl ads and stuff. So um, that's the
Speaker 1: thing a lot of drug companies don't have, is just
Speaker 1: some recognition. Well, it's a great story. It's written by
Speaker 1: Kristin V. Brown. It's the cover of the new issue
Speaker 1: of Bloomberg Business Week magazine. It's available now on newsstands
Speaker 1: and at Bloomberg dot com Slash business Week. A big
Speaker 1: thank you to Timinette, us healthcare team leader for Bloomberg News.
Speaker 1: He joined us on the phone from New York City.
Speaker 1: Also joining us in the flesh here, Innie Bloomberg and
Speaker 1: actor Broker Studios, Joe Webbert, editor at Bloomberg Business Week,
Speaker 1: you're listen to Bloomberg Radio and this is Bloomberg. This
Speaker 1: is Bloomberg Business Week with Carol Messer and Bloomberg Quick
Speaker 1: Takes Tim Stinovic from Bloomberg Radio. So on Tuesday, Zillo
Speaker 1: Stuck tumbled after It's stunned the real estate industry when
Speaker 1: it said it was shutting down its home flipping business
Speaker 1: after racking up losses. Katie had me thinking a lot
Speaker 1: about what that says about Zillo's model, Also if it
Speaker 1: says anything about what's happening with the residential real estate
Speaker 1: around the country. So a great time for us to
Speaker 1: check in with somebody who probably knows more about residential
Speaker 1: real estate than almost anyone. We talked to Dallas Tanner,
Speaker 1: the president and CEO of Invitation Homes. It has more
Speaker 1: than eighty thou homes. It's the largest owner of single
Speaker 1: family rental homes in the US. Right now, Dallas joins
Speaker 1: us on the phone from Dallas, Texas. Dallas, how are you.
Speaker 1: I'm doing great, Thanks for having me today. Yeah, thanks
Speaker 1: so much for joining us. Well, let's start with what
Speaker 1: happened with Zillo and perhaps how the invitation homes model
Speaker 1: is different. But what was your reaction when you saw
Speaker 1: that news from Zillo earlier this week? You know, candidly,
Speaker 1: I was surprised, um, given the fact that the I
Speaker 1: buyer space has continued to get more and more robust
Speaker 1: over time. Uh, you know some other competitors. I think
Speaker 1: you've done a really nice job managing inventory. And like, now,
Speaker 1: with that being said, I couldn't tell you. We don't
Speaker 1: know all the details as to what happened. And Zella
Speaker 1: has a pretty deeps business right in terms of some
Speaker 1: of the other services that they offer. So my guess
Speaker 1: is strategically internally, they're probably looking at, you know, where
Speaker 1: their strengths and weaknesses were and ultimately made the call
Speaker 1: that they did. But with that being said, the housing market,
Speaker 1: it's fundamentals, uh, you know the supply chain right now
Speaker 1: that the balance of supply that we have quite frankly
Speaker 1: relative to demand are all lending itself to you know,
Speaker 1: a market that feels really strong. And I think they
Speaker 1: said as much even in their in their earnings called.
Speaker 1: So you didn't see the Zillo news and you're, according
Speaker 1: to your own metrics and internal metrics that you see
Speaker 1: as any sort of canary in the coal mine about
Speaker 1: the housing market in the US. No, not for US.
Speaker 1: I mean you got to think about the volume. I
Speaker 1: I don't know their exact numbers in terms of how
Speaker 1: many of the homes they had on balance sheet. I'm
Speaker 1: sure somewhere between ten and twelve thousand or something like that.
Speaker 1: But that's such a small percentage of the six and
Speaker 1: a half million resales that we see every year UH
Speaker 1: in US single families. So no, I wouldn't look at
Speaker 1: it as a barometer of something that's going on the marketplace. Fact,
Speaker 1: I kind of think the opposite if you look at
Speaker 1: you know, some of their competitors, if you look at
Speaker 1: our business. You could look at anyone really in single family,
Speaker 1: if you're a home builder or a SFR operator like
Speaker 1: we are, or we're having record occupancy occupancy, record revenue
Speaker 1: growth because rents are so um in demand right now
Speaker 1: in terms of having that flexibility of lease, and so
Speaker 1: we're actually seeing the opposite in our business. And Dallas
Speaker 1: the company said that back in February that uh IT
Speaker 1: planned to spend at least one billion dollars buying properties
Speaker 1: this year. And you, I mean you touched on it
Speaker 1: that just if you look at the housing market, uh,
Speaker 1: the supply of homes, uh, it's it feels like it's
Speaker 1: really dwindled. And the housing market has just been on fire.
Speaker 1: So in terms of spending that one billion dollars, has
Speaker 1: that been difficult to even find houses to buy? In
Speaker 1: terms for our business invitation homes, you know, it's been interesting.
Speaker 1: We actually updated guidance this last quarter. We're gonna be
Speaker 1: somewhere between a billion seven and a billion eight this year,
Speaker 1: in turn is of new acquisitions, so we've actually outperformed
Speaker 1: what was our initial you know kind of targets. Now,
Speaker 1: with that being said, yes, the market has some supply challenges,
Speaker 1: there's no doubt about it. Although we are seeing supply
Speaker 1: creep back into the resale market um at a little
Speaker 1: bit better clip than we've seen historically. With that being said,
Speaker 1: it's still at an all time low. You have interest
Speaker 1: rates that are still I think I saw the day
Speaker 1: of the thirty year is that just north of three percent.
Speaker 1: That's still really cheap money, cheap availability of finance for
Speaker 1: those that can qualify for mortgage. So it's actually I
Speaker 1: think keeping the supply pretty tight because homebuyers. Again, those
Speaker 1: six and a half million resales we talked about those
Speaker 1: are still going. You know, those two end users would
Speaker 1: be my guests at the end of the day. So
Speaker 1: we pick our spots. Were very deliberate about where we
Speaker 1: invest capital and why we have partners with a number
Speaker 1: of different homebuilders we're helping bring new supply to the marketplace.
Speaker 1: So we've we've definitely kind of had to you know,
Speaker 1: be deliberate and and really anchoring on our different channels
Speaker 1: for acquiring product. But we've been able to do it,
Speaker 1: albeit it is a tough environment and we have to
Speaker 1: be you know, consistent in terms of our approach. Dallas,
Speaker 1: is there a time or a price where you see
Speaker 1: homes in the United States on a whole becoming so
Speaker 1: expensive that you're no longer in an acquiring mode. Well,
Speaker 1: there's always cycles, right so you could certainly see a
Speaker 1: you know, at some point there could be a cycle
Speaker 1: where homes get to price based on your investment criteria
Speaker 1: of where you want to invest capital. Why doesn't feel
Speaker 1: like that right now? We can still buy homes at
Speaker 1: a really attractive you know, what we do as our
Speaker 1: own cost of capital relative to the types of yields
Speaker 1: and things that we can find in the marketplace. Now
Speaker 1: will that last forever? Time will tell. Trees don't typically
Speaker 1: grow to the sky. But I think the difference in
Speaker 1: our business, it's very different from an eye buyer from
Speaker 1: somebody else, is that you know, our customers stays us
Speaker 1: for three plus years right now, They renew two or
Speaker 1: three times there at least with our with our business,
Speaker 1: and they actually love the service. They want to renew
Speaker 1: because they like the flexibility of the leaks. Totally different
Speaker 1: than a home flipper or somebody that's just in and
Speaker 1: out of a marketplace really quickly. That's not our mod.
Speaker 1: We're long term investors. We're making decisions for five, ten,
Speaker 1: fifteen year horizons and we want to make sure that
Speaker 1: we're offering a product that's sustainable. So the approach of
Speaker 1: the different business models are very different. And so Dallas,
Speaker 1: we have just about thirty seconds left. But you do
Speaker 1: have a big footprint in the Western United States, you know, Texas, Florida.
Speaker 1: Do you have any plans to expand outside of that
Speaker 1: great question. Yes, our revenue comes out of the West
Speaker 1: Coast and parts of the Sun Belt. Um, we love
Speaker 1: markets like Austin, you know Salt Lake City, Nashville that
Speaker 1: we don't currently have footprints in that could be potential
Speaker 1: markets for us to expand into over time. We'd have
Speaker 1: to have a really good entry point and find a
Speaker 1: way to get the scale that's meaningful for the way
Speaker 1: that we like to operate our business. Dallas Tanner, You've
Speaker 1: got to come back and spend some more time with us.
Speaker 1: A great conversation, President and CEO at Invitation Homes. The stock,
Speaker 1: by the way, Katie has been on a tear this year,
Speaker 1: higher by more than thirty seven percent. Dallas Tanner joining
Speaker 1: us by zoom from Dallas, Texas. This is Bloomberg Radio.
Speaker 1: You're listening to Bloomberg Business Week. Yeah, but you let
Speaker 1: me drive. Oh no, no, no no no, this is not
Speaker 1: a toy home. Please, I'll ride gravels. I want to
Speaker 1: drive the question. This is the Drive to the Globe
Speaker 1: on Bluebird Radio. Yes, indeed, under ten minutes away from
Speaker 1: the market closed on this Thursday, November four, Looking like
Speaker 1: we're headed for another record on SMP five hundred, higher
Speaker 1: by three tenths of one per cent. Right now, let's
Speaker 1: drive to the close with Eddie Perkin, Chief Equity Investment
Speaker 1: Officer for Equity Eddie and Vance joining us on the
Speaker 1: phone from Boston. Eddie, how are you good to be
Speaker 1: with you? Hey? Help us make sense of of what
Speaker 1: exactly is happening in the markets right now. It sort
Speaker 1: of seems like, based on what we saw yesterday in
Speaker 1: the bond market, in the equity market, Wealth Chair Power
Speaker 1: was speaking while that release came out that everything was
Speaker 1: kind of perfectly communicated by the FED. Yeah, you know,
Speaker 1: I do. I do my best lateral thinking when I'm exercising,
Speaker 1: and I was in the gym yesterday thinking about Matilda.
Speaker 1: Matilda is the world doll book from canad eight made
Speaker 1: into a movie by Danny DeVito and ninety six, and
Speaker 1: the girl, the title character in that has telekinetic powers
Speaker 1: that she can control objects. And I just thought, this
Speaker 1: is what the Fed's trying to do with the economy.
Speaker 1: They have this Matilda envy where they're trying to control
Speaker 1: every element of what's going on. It's such a complex
Speaker 1: adaptive system the the economy that I think there's a
Speaker 1: level of Huberts there that's concerning. And I think investors
Speaker 1: have a form of Stockholm syndrome where they're um happy
Speaker 1: to be Fed. Uh, this very explicit um direction of
Speaker 1: how the economy is going to go from uh from
Speaker 1: Chairman Powell, and the said and I worry about that
Speaker 1: a little bit because I don't think you can control
Speaker 1: something like the economy with that level of decision. Well, Eddie,
Speaker 1: one one message that chair Pal really is trying to
Speaker 1: control is that he's really trying to separate the tapering
Speaker 1: timeline from the rate hikes schedule that okay, pretty quick
Speaker 1: taper planned of their bond purchase program. Uh. He's trying
Speaker 1: to drive home the point that that doesn't imply any
Speaker 1: sort of timeline for the rate hike schedule. Do you
Speaker 1: believe him? And does the market believe him? I don't
Speaker 1: believe him, and the market definitely does not believe him.
Speaker 1: I mean, you look at the futures curve for FED
Speaker 1: funds to futures, and it's between two and three rate
Speaker 1: hikes in two. Given where inflation is running right now,
Speaker 1: it's hard to imagine they'll be able to taper without
Speaker 1: raising rates. Goldman was out with a call earlier in
Speaker 1: the week that they think there'll be two rate hikes
Speaker 1: in two. I mean, it could end up being more
Speaker 1: than that. It was always it was people like Bill Bedley,
Speaker 1: former New York uh head of the New York Fed,
Speaker 1: that who said that once they do start raising rates
Speaker 1: will have if you if you wait longer than you should,
Speaker 1: then you're gonna have to raise it's by more than
Speaker 1: you originally intended. So UM, I do think rate hikes
Speaker 1: are coming, and I think the equity market UM probably
Speaker 1: won't take that well. I mean, like we said a
Speaker 1: moment ago, the equity market investors, I think are happy
Speaker 1: to be spoon fed this talk from from the Fed.
Speaker 1: But once rates start going up, that's usually not good
Speaker 1: for equity prices. So what's the best way to be
Speaker 1: positioned here? I think you need an element of defensiveness.
Speaker 1: My favorite sector right now is consumer staples. I think
Speaker 1: they for the most part, not every company in that sector,
Speaker 1: but many have strong brand, strong pricing power, so as
Speaker 1: some of the input costs freight cost pressures move higher,
Speaker 1: they can pass that through to their customers and still
Speaker 1: maintain good margins. And then I think commodities are going
Speaker 1: to be beneficiaries of inflation. So oil, which everybody hates
Speaker 1: for all kinds of reasons, it's been the best performing
Speaker 1: sector this year and I think it continues to move higher. Um,
Speaker 1: you look at where, uh, the energy sector in the
Speaker 1: SMP right now is about two point eight percent of
Speaker 1: the index. If you go back to two thousand seven,
Speaker 1: two thousand eight, when the oil price was around the
Speaker 1: same level it is now, it was eleven percent of
Speaker 1: the SMP. So, Um, there's a long way to go
Speaker 1: to get back to where we've been historically on energy
Speaker 1: and it's a contribution to the global economy. And so Eddie,
Speaker 1: you are the chief investment officer for equity, but I
Speaker 1: want to hear how you factor in the bond market.
Speaker 1: If I think back to the beginning of this week,
Speaker 1: there was a lot of consternation about the fact that
Speaker 1: actually bond volatility it's pretty high right now. If you
Speaker 1: look at the move Index, especially compared to the VIX,
Speaker 1: which has basically been sleep walking. I mean, what signal
Speaker 1: do you take from that. It's always a little bit
Speaker 1: concerning when different asset classes are telling different stories. Particularly
Speaker 1: as an equity investor, we get concerned when hi high
Speaker 1: yield spreads widen out. You're not talking about that, You're
Speaker 1: talking about rates. But um, uh, you know, you look
Speaker 1: at what's happened in Australia, where the front end of
Speaker 1: the curves has moved up significantly in the last month,
Speaker 1: and you say, you know, maybe maybe the bond market
Speaker 1: is starting to get a whiff of higher rates, higher inflation.
Speaker 1: I'm still not convinced the long end of the curve
Speaker 1: has to move as high as everyone seems to think.
Speaker 1: I mean, most investors are convinced that the long end
Speaker 1: long treasuries have to have to go higher if you've
Speaker 1: got inflation. But people have been making that call for
Speaker 1: ten or fifteen years and it's been wrong. So I
Speaker 1: think you've got to respect the market a little bit
Speaker 1: and maybe you get inflation without the big move in
Speaker 1: government bond deals. M Okay, let's talk earnings, because we
Speaker 1: are in the midst of earning season and we are
Speaker 1: expecting certainly a slew of them after the bell E Speedy, Airbnb,
Speaker 1: uper Pelton, Pinterest, carbon A, Live Nation, Novavaccine, Square, just
Speaker 1: to name a few. What is the pattern that has
Speaker 1: emerged when it comes to equity, When it comes to
Speaker 1: earnings from the S and P five companies that we
Speaker 1: follow so closely, it's been a good earning season. After
Speaker 1: today will probably be about eighty five percent done in
Speaker 1: terms of the market cap that has reported. Uh, it's
Speaker 1: most companies have beat. In the US, companies stan really
Speaker 1: beat because they're very good at guiding conservatively so that
Speaker 1: they can beat UM. The interesting thing though, is the
Speaker 1: reaction of the market has been a little more mute
Speaker 1: did then in the past. So unless companies have been
Speaker 1: on both earnings and revenues they have, they've generally underperformed
Speaker 1: on the day of their earnings reports. So the market
Speaker 1: has been very strong over the past months while company
Speaker 1: has been reporting, but the specific individual companies that have
Speaker 1: reported have generally been met with at least a one
Speaker 1: day underperformance unless they've they've really blown numbers away. And
Speaker 1: how do you feel about big tech right now? Because
Speaker 1: thinking about the earning season ongoing, but I'm thinking about
Speaker 1: you know, Apple, Amazon, UH, disappointing on that front. It
Speaker 1: feels like it's been a tough go for the things.
Speaker 1: How are you thinking about that group? I think there
Speaker 1: are better opportunities in the market. I mean, those are
Speaker 1: all great companies obviously, but they're so well represented in
Speaker 1: the SMP in terms of their their market cap that
Speaker 1: they're you know, every time people put money into an
Speaker 1: index fund. They're buying those stocks. I think, you know,
Speaker 1: some of them are somewhat expensive despite being great companies.
Speaker 1: I do think, uh uh, you know, they are things
Speaker 1: that have have pricing power, have growth, and so um,
Speaker 1: they're they're good companies, but I think there's a better
Speaker 1: opportunity elsewhere from the evaluation perspective. Eddie Perkin, We're gonna
Speaker 1: have to leave it. Their chief investment officer for equity yet,
Speaker 1: Eaton Vance joining us on the phone from Boston. Eddie,
Speaker 1: thanks so much for taking the time and joining us
Speaker 1: on Bloomberg Business Week. Thanks for listening to Bloomberg Business Week.
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