Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Business Wait inside from the reporters and editors who bring you America's most trusted business magazine plus global business, finance and tech news. The Bloomberg Business Week Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
You folks, we are of course continuing to follow the latest on the accident at Baltimore's Francis Scott Keybridge. Six people are presumed dead after search officials just pointing that out press conference. So loss of life continues to be obviously top of mind. The bridge, as you know, collapsing in just a matter of seconds yesterday. But the consequence is tim the catastrophic consequences could be set to stretch out for weeks.
Yeah, as much as two point five million tons of coal, hundreds of cars made by Ford and General Motors, and lumber and gypsum are threatened with disruption. It's just another pot factor that may need to go into the US economic model or not if the logistical world can adapt quickly so that Carol is where we go now it is.
Let's get to our Key interview on this Wednesday back with US is Bloomberg News International Economics and Policy correspondent Mike McKee. He's here in our studio in New York City, along with Bloomberg News Global Economy reporter and occurr and he's out there in our Washington, DC bureau. First up, Mike, I do kind of want to start with you. You do put always everything that's happening in our world into
the economic context for us. Are we hearing anything from FED officials or from the economics community about the concern that this will have on supply chains or is it still kind of too early.
Nothink from the Fed yet? We have heard from economists on Wall Street who put pencil to paper and try to figure out what the impacts might be. And while this is a terrible tragedy in human terms, and it is going to have an economic impact, certainly on Baltimore for quite some time, it is not going to have a major impact on the overall UA economy. Tim brought up the idea of how quickly logistics can adapt, and we're being told by everybody in that business that they
can adapt fairly quickly. The biggest thing, as you mentioned, is that automobiles. It was the biggest port for import export of automobiles. They've got to get the port open for about half of it. BW and BMW are outside of the bridge, so they can still take in some cars, and we understand may take in other people's as well, and there are other ports. Savannah's built up a big what they call roll on roll off capability and so
they will take some as well. So it looks like they may be able to work this out relatively quickly now. Pete Buddha Judge was just briefing at the White House. He was asked how long it will take to get the port open, which is going to be the key economic question, and he said it's still too early to tell. They're trying to figure it out. It'll be up to how fast to the core of engineers can get Iron out of the way out of the harbor.
Right, hey, and come on in here, because Mike just went through some of those individual companies and what they could do to adapt. But as you and the team writing the Economics Daily newsletter out earlier today, the US economy is in a different position right now. It's in a much better position than it was a few years ago to handle a challenge such as this, do we have the pandemic to thank for this or is it something else?
Yeah, So anytime we got a kind of a supply chain scare, it's always benchmarked against what happened in the pandemic, which was such an unusual time. We had this year in the Red Sea crisis a you know, earlier part of this year, people were saying, is it going to be another global supply crunch? And of course now we have this disaster yesterday with the human tragedy first and foremost, with people asking what will this mean for the supply
chain story. I think, as Mike was saying, it's more benign this time around, because there are a couple of differences. There's a lot of capacity on international and shipping at the moment, a lot of spare containers, a lot of spare ships. Sure rates have gone up a bit, but it's there, it's available if needed.
That's number one. And number two.
Of course, demand for goods is not like it was during the pandemic. So one of the reasons that there was such a choke point at ports and in manufacturers around the world a few years ago was just the share demand by people in the US spending their money staying at home buying the stuff that they need. That's
not really there now. The hot side of the economy is more on the service side of things, So that's another reason why it's not expected to be, you know, the complete choke point that you might suggest on paper. And then as Mike's outlining, there's other options within the US. You got the West Coast for other alternative ports. There's road freight options to take some of this. So when
you stack it up, it's certainly a complication. It's certainly a major issue for the regional economy up there around Baltimore, but I don't think anyone's yet suggesting this is going to be a major, major supply choke for the US or the global economy.
One thing you just mentioned that Secretary of Budha Judge brought up as after the pandemic, the Biden administration set up a command post in the Transportation Department for logistics, and they're activating that now so that they can work with not just the UPS's and the Fedexes and the trucking companies in the area, but all the smaller companies in the area that need to coordinate getting in and
out and getting their stuff together. So he was suggesting that that might make it easier for particularly smaller companies to adjust.
Yeah.
Right, if you remember logistics, it's the big guys, but there's a lot of little players too that get all that stuff to us. Having said that, Mike, right during the pandemic, as and I was pointing out, we were buying so much stuff because we couldn't go anywhere. Now we just want to go anywhere. And in my house too, I'm like, I'm done with this stuff.
You don't need another couch. You're not going to need anything.
I hope you're not going to drive through Baltimore.
I'm not anytime soon.
Having said that, goods inflation it's come down way, like where are we And if we do see a little bit of pressure on the good side, can we afford that economy?
Yes, we could afford it. It was going down for months and months, and then in the last couple of months, goods inflation has gone up a little bit, and that is something the Fed is keeping an eye on because if it starts to if it continues to do that and picks up speed, then that's more of a concern. They did expect goods inflation to flatten out, and basically that's where we are with some minor increases. So we'll have to see if this does push any prices higher.
Probably not, because of the fact that the country is so big and this is such a small area in terms of prices that will be affected. New car prices have gone down, they're going down now, actually disinflating, and so even if this puts a little straight on auto inventories, shouldn't raise prices too much.
Might do we expect to hear from the FED at all on this?
Oh? I would imagine that FED officials who speak will get asked about it. I would imagine they will say this, Jaye, how.
Is are you talking on Friday?
Friday?
They will say the same thing that everybody else is saying. It All the officials at this point is we just don't know. We have to see how this plays out. Obviously, there are logistical issues around the world right now, from the Red Sea to Africa to.
Asia and so all that.
Will play into this, but it doesn't look like at this point it would be huge. But I don't think they have a good handle on it.
And another element to this is certainly the job market right we're essentially back at full employment. I mean, how does that so that if one other port somewhere needs more workers are sown and so forth to pick up the slack as a result of what's going on in Baltimore, that's a positive.
I'm assuming, well, that's the hopeful case that you know, people are back in the workforce, they are available, and the flexibility there. But you know, it depends, you know, if there was a real crunch on at the ports, remember the threat of labor action in some of the ports as well. You know, not benign to would be tested.
Because we know that broadly speaking, the jobs market's so strong and there are plenty of employers in America complaining that they can't get stuff so right here right now, as we heard the White House say yesterday, the jobs market is in good order. People are there and working. That's a plus when you have something like this happening. But of course it's not hard to see how the labor market will be stretched a bit thin if there was a further stress test.
One interesting aspect is that it will take time to get the port open, and the job's survey is taken during the week that includes the twelfth of the month. So if they're not open in two weeks, there's one hundred and forty thousand workers at the Port of Baltimore, and if they can't, they have stuff that's come in already that they're working and moving out. But if all that stuff moves out it isn't replaced, then you could have people who are laid off, and it could show
up in the April jobs report. I mean, hopefully it's only temporary, but one hundred and forty thousand a lot of people who wouldn't who might not be at.
It's not like, to Mike's point, those one hundred and forty thousand folks could pack up and go south to another port, or go north to the Port of New York and New Jersey. Is their capacity? You mentioned capacity on ships, but is there actual number of workers in capacity at the ports to accept more well.
As I say, one of the big concerns of the ports around the US at the moment is the threat of strike action. If that was to go ahead, that would potentially cause significant disruption. But I think beyond that, my understanding is that ports are pretty much handling capacity at the moment and even with the extra capacity that's
going to have to be spread out from Baltimore. Everyone I spoke to you yesterday said it can be absorbed into the system, but will just take a bit of reshuffling up and down the East coast and maybe across the West coast. I don't think that's going to be the primary concern. The bigger issue is going is I think effectively going to be on the port itself. How long will this block a germain? How long will it take to get that port reopened again, and how long,
of course will take the bridge to get built. Everyone I've spoken to say that the rest of the just six network should be able to absorb what's going to happen over to coin months.
All right, one thing I want to just kind of pivot. We've got about four minutes or so left here, and I'm thinking, Mike, certainly about the Friday inflation read. You guys are going to be here live reporting it out.
Yeah.
Jen Tecker was talking about people who get days off.
Oh, come on, you love this stuff. Jay Powell's going to speak a few hours after that inflation reading. What's top of mine? And then I want to kind of spin it to you and about kind of the global inflation picture, because I do feel like we focus on the US, but you know, we got to kind of think about what's happening around the globe. But let's talk about Friday's data.
Well, Friday is the income spending in PCEE numbers for the latest month for February, and it's it comes out much later than CPI, but the Fed follows the PCEE inflation numbers, so they're going to be very important, and they're expected to rise just a little bit the way that CPI did, but not as much as we saw in CPI, so there will be a lot of attention paid to those. We also get the income and spending numbers.
Retail sales we're not particularly great, so there'll be some focus on whether Americans are still spending once you fold in the services. I mean, you're taking your trips, you're doing services, you're not buying goods.
But we need to see some strength there.
The one thing we have seen on a regular basis is that incomes have been relatively strong, particularly when you look at wages and salaries, and if that continues, then you relax a little bit about the spending, and that you know that people can afford it. They tend to spend what they earn. So that's why we're looking at all that, and then of course we get almost a real time reaction from the chairman. I'm sure first question will probably be the inflation numbers that day, and so
we'll get a sort of set up. It's very early. They just met last week and we don't have another FED meeting till May first. First, so you have to kind of take anything. Jay pol says, not with a grain of salt. But obviously it's going to be a while. He could change his mind depending on what other data we get. But you know, the markets come Monday morning are all going to come in and react to it.
And if you get notes from the bond market people, they're not really happy that he's doing this on a day when the markets are closed.
You know, Josenthalen is you know, five things to watch every morning, and we all kind of read through it. And one of the things he was looking at is global inflation and a Canadian CPI for February grew less than expectations. You can flight inflation falling to its lowest level in over two years. Coming in also cooler than expected. I think Spain's preliminary harmonized CPI measure was less than
expected slightly. I mean, and as he writes, every economy has its own story, but we are seeing a lot of it feels like correlation between global economies and global inflation. What do we know about that, what's the importance of that and what it tells us maybe about what's going on more globally around the world when it comes to price pressures.
Carol, Absolutely, inflation's coming off right around the world. I heard an economists this morning actually make the point that in Europe inflation is going to come off much quicker than people anticipate, and that's going to clear away from mortgage rates, boring costs come down. Around the world, it's a very similar story. I mean, the US has had a bit of a scare earlier this year, as Mike was alluding to there, but broadly speaking is on track
everywhere else. Let's not forget that the world's number two economy, China, is battling deflation. They've never had the inflation outbreak to begin with, but the other are Plenty of analysts will tell you that when Shawn is battling deflation that will take pressure off the global prices as well. So everyone I speak to you and everything I read suggest that this remains the year of this inflation around the world.
Boring costs and industrates are going to come down. Switzerland has already moved, they had room to do so, of course, but several others are expected to follow suit, and I think once we get to midyear, you'll hear a loup more chatter around which major tuns of mind would be going first and by how much.
Mike's final thought, well, I think the one thing we want to watch, particularly because it's a political year here in the United States, gasoline prices. Oil prices have been going up. We're getting into the season where there's more oil demand and more gasoline demand, so that'll put some pressure on prices, which would push headline inflation higher. That is a certain concern to the FED because they look
at headline inflation. But it's also going to be a factor in probably the political races.
I care when I go to the pump.
Don't you care what everybody cares? That's everybody cares about the pump big time, all right.
Mike McKee, International Economics and Policy correspondent here at Bloomberg End occurrent Global Economy Reporter. Bloomberg Radio will be live Friday for that inflation read in of course Chair Powell and his comments and speech. This is Bloomberg.
You're listening to Bloomberg Business Week with Carol Messer and Tim Stenebeck on Bloomberg Radio and Television.
All right, everybody, Carol mass inctentic life here in our New York studio. So I got to say that this is something we talk a lot about, Tim, and that is how financial inclusion major issue around the world. McKinsey noting last year that nearly a billion and a half people living in emerging economies don't have access to formal savings and credit, and that while the overall global wealth and income graph has narrowed since the eighties, inequality has
actually increased within advanced economy. So it's not just emerging, it's advanced as well. YEH.
Needless to say, there's still a lot of work to be done. And Shamina Saying knows that she's the founder and president of MasterCard Center for Inclusive Growth. She's held senior positions in the White House and the House of Representatives, including appointments by President Obama. She joins us now from New York City. Welcome, Shamina, How are you doing well?
Thanks, thank you so much for having me.
Yeah, thanks so much for joining us on this. So a lot of your professional life, what you've done as an adult, has centered around the global economy that takes everyone into account. It's not something that is actually happening right now. What's the nut that needs to be cracked to break the great financial divide that we talk about so much?
Well, it's such an important point, and I think Carroll started off rather well, which is it really is about financial inclusion? You know, I think we take for granted that you know, sitting here in New York City certainly and a lot of times in the United States, you know, you have a phone that gives you access to a train ticket or a train or a bus ticket, or any kind of digital access that you need. That's just not true for many millions of people around the world.
But we're making progress. I mean, I think at MasterCard in the Center, we actually made a commitment to bring a billion people into the formal financial system by twenty twenty five, and we're almost there. We're at about eight hundred and seventy million, so we are well on our way to hitting that goal. But it's also important that we make sure that small business owners succeed in what's
increasingly becoming a digital economy. So we made a commitment there to ensure that we bring fifty million small business owners into the formal economy again by twenty twenty five, and we're almost there, that we're at forty eight million right now. But the final piece around small business and financial inclusion, to your point about closing that gap or cracking that nut, is to ensure that we include marginalized
communities in those small business ownerships. And so as part of our commitment, we wanted to make sure that at least twenty five million of our target were women owned or women led businesses. And I'm really happy to say today that we surpassed that target and are now on our way to even going further. So I think that.
What I want to one thing I want to ask you, and I think folks would applaud your efforts in the progress that you guys have made, and it seems like ahead of schedule. Having said that, I'm going to get a ton of hate mail if I don't ask you this,
and this is major credit card companies. To be fair, they are quick to amp up rates on customers, even good customers, but that may have a balance that maybe is growing a little bit unwieldy, if you will, but nonetheless maybe making their payments a way above the Fed Funds rate, way above the prime rate. I mean, I'm talking about what we've got a Fed funds rate I think at about five or five and a half percent here, and you're talking about rates that go to eighteen, nineteen,
twenty twenty eight percent so quickly on individuals. So what's the thinking around that to make it easier for more consumers and also for small business folks.
I think it's I mean, look, I think it's a really important point. We've seen rates around the world, especially in unregulated markets, climb way above even twenty percent, and.
Even in the US market, which is a regulated market, we see them climb and I know it's within the law, but nonetheless it seems many would argue, really not.
Fair, No exactly. I mean, the truth is that unless we're working on making sure that small business owners and those who are interested in participating in the digital economy
through regulated bank accounts, which is where we're focused. It's going to be really important that we also include responsible lending practices and the education that's required to ensure that once you join the formal financial system, you're operating within it in a way that helps you not only survive but thrive in the digital economy.
If parents don't teach their kids that stuff, where are they supposed to learn it?
So I think that's again it's a great point. As part of the work that we've been doing in the United States and in around the world, we've launched a program that we call Strive, which is a focus on small business owners. Like I said, in the United States and around the world. In the United States in particular, we're at a historic moment, and this is because there are literally billions of dollars coming out of the federal governments to the states to help support small business owners.
The problem is that but that money may or may not get to them directly, as we saw during COVID, and so part of our work with STRIVE is to ensure that we're helping those intermediaries, those organizations that are called community development finance institutions across the United States, they're closest to the small business owner, and they're really the ones who provide culturally competent and proximate education around financial lending,
the things that you're talking about. And so one of the things that we really encourage is that small business owners who are looking to capitalize on the enormous amount of money that's coming out of the government right now, they really connect with their local community development finance institution to get close to the education as well as the capital they need to start their business.
But you know, and I guess would I guess I would jump in and just say that for a lot of individuals, individuals are small business owners, they are responsible. I feel like Mohammed Yunis of the Gramin Bank and microlending have really taught us that these small entrepreneurs tend to be very very responsible with their money, whether it's especially in emerging in the emerging world, but also in
the developed world. And I guess it still seems like the difficulty of getting the access and that is still very very tricky. How do we open up that pipeline even more without all the kind of connections or higher costs that seem to go along with it.
I think you're one hundred percent right. I mean, you can look at one of our partners right here in the United States is actually grimen USA. Another partner is the acci On Opportunity Fund, the Community Reinvestment Fund. There are all sorts of again, they're called CDFI's in the United States. They're called microfinance institutions outside of the United States, but they're really the one. They're really organizations who are
working very closely with small business owners. And my view is, and what we've seen is a lot of small business owners don't actually know that these organizations exist. I can just give you one example in South Dakota of a woman who just opened her coffee shop and she had been using her own personal credit card, which many times small business owners do to borrow against that to kind of buy the things she needed to start start her business.
Once she was connected to an organization called Four Bands Financial Institution, which is a CDFI based in South Dakota, they worked with her over several years to not only ensure that her responsible her responsible perspective was supplemented with the educational components she needed, but they worked with her to get the actual capital she needed to open and run her business. And so this is not a multi
day strategy. This is a multi year strategy if we really want to make sure that small businesses not only have the on ramps, but the tools, education, capital, also access to digital that they need to succeed.
Heysh. I mean, if we think about your goals at the center here in the US, I want to specifically focus in the US before talking about the entire world. If we think about your goals here in the US when it comes to financial inclusion and closing the gap here, what's the biggest impediment out there right now? What's the biggest thing that holds people back?
Well, I think, you know, I think both you and Carol have mentioned it when we've done our research and uh and from you know, obviously personal experience. Being the daughter of immigrants, I've seen it firsthand. My parents tried to open a business when I was growing up in southern Virginia and many of my colleagues have as well.
And the real what what we have seen and what the research shows is that entrepreneurs aren't necessarily the ones that we see in Silicon Valley who are looking for that unicorn, who are looking for that that lightning bolt path to you know, multi billion dollar valuation. Most entrepreneurs that we have found are looking for stability. We call
them stability entrepreneurs. They want to make a good living, they want to hire good, good staff from them, and they want to grow in a consistent and responsible way. And that's a little bit of a different framework than I think folks think about when we think about entrepreneurs and small business owners. That's one big thing is our mindset. We need to meet them where they are, which is in a place of let's get this right, let's grow
over time, let's go responsibly. But then they also have to ensure that they get that access to capital so that they're not using their personal credit cards that are actually getting formal lending from CDFIs or banks. They go digital. We found that during COVID, if you weren't going, if you weren't in a position to go digital, were really
at a disadvantage for continuing your business. And finally, as we've talked about, they have to grow their networks in their know how so doing this in a way that is not only expanding their capabilities with the nuts and bolts of what you need to understand about interest rates and marketing and markets, but you also need to be able to access your peers who are on the journey
with you. And as Carol said, that's really about That's really what the Gremen model taught us is that your peer network is very important in your success.
All Right?
Can I leave it on that note, Shamina, thank you so much, appreciate some time with you on this Wednesday, shaminas saying she's founder and president at the MasterCard Center for Inclusive Growth. Joining us there in New York City.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from two to five pm Eastern Listen on Apple car Play and then brout Auto with a Bloomberg Business act or want us live on YouTube?
Well, time to share.
This is not the Kasso is a service that allows you to own a share of the vacation home instead of having to buy the whole thing. Like I said, maybe an eighth of a share of a skihouse in Park City or Breckinridge that'll set you back maybe seven hundred and fifty five thousand dollars, or an eighth of a share of a home in Malibu for under a million dollars. So it's not just that you own a
share of it. You share the costs that are associated with the home as well the other co owners, and then Picasso handles the maintenance and other management issues.
All right, and now it's looking the company to broaden it's appeal by offering shares at a lower price point. So let's get into it with Austin Allison. He's co founder and chief executive officer of Picasso. He joins us in our studio, but coming in from San Francisco. How are you.
I'm doing well. Thanks for having me today.
It's great to have you here. You know, before we got started, you said you guys were launched in twenty twenty, so you're coming up on your fourth year.
Yeah, three and a half years since launching. It's been a wild ride.
I bet it is, all right, So give us an idea of the trajectory. I mean, from when you started, and I mean I'm assuming that was kind of fast and furious and that there was a lot of demand or was there?
Yeah, it was a crazy time for sure. Let me just start with the mission and the vision of the company. The vision is about empowering more people to find their happy place through co ownership. And we started the company in twenty twenty in San Francisco. We've grown to now almost every market around the US, but until the week we were operating in about forty destinations around the US as well as Paris, London, and Mexico. And what we
do is very simple. We empower families to co own beautiful luxury vacation homes together and Picasso manages every detail, everything from design to furnishing to bill pay and maintenance.
Who determines the time that these families get to go spring break is oftentimes overlaps with other spring break of families.
Yeah, so this is the number one question that we get from prospective buyers. And the answer is we've created a proprietary scheduling tool that we call smart Stay. It's available from an app on your iPhone or Android, and smart Stay will ensure that you get your pro rat of time throughout the year. So if you own one eighth of a home, smart Stay will ensure that you get one eighth of the peak season, one eighth of the non peak season, and one eighth of the holidays.
All right, so when the plumbing goes everybody's got to chip in.
Well, yeah, and a lot of that is accounted for and planned and advanced. So as the manager of the home, Picasso is thinking about what things might break or what things may wear over time, and we're actually accruing in the budget so that there's funds available to repair some of those things when they occur.
Yeah, go ahead, Carl, No, no, no, no, no, go ahead.
So talk to us about the business. Because you guys sell you you buy the homes and then you resell them as shares. Is that correct?
Well, kind of. Usually the way that it works is we have thousands of listings on our website at Picasso dot com. You can also see them on our app, and consumers will go to our website and express interest in homes that meet their needs. Once we see enough interest in a particular home, then Picasso gets involved, works with the listing agent to get the home under contract, We do diligence on behalf of the ownership group, and then we convert it into a co owned Picasso home.
Fascinating. Talk to us about the ramp up and demand and types of sales. Just give us, give us some metrics. We're bloomberg as we all. Yeah, I'd love to know some of them else.
Yeah, Well, back to your question what it was like launching during the pandemic. The first couple of years were crazy. I mean, we grew from zero to We've done more than a billion dollars in revenue over the course of
the first three years of the company's history. We have thousands of owners and the way that our model works is when we aggregate an ownership group and identify the home, we make a service fee that's baked into the share price of the home, and then we provide a variety of services throughout the life of the relationship that we have with our customers. So that includes things like property management, financing. About seventy percent of people who buy a Picasso use financing,
and Picasso is the originator of those loans. We also help with resale, so when you buy an eighth or a quarter of a beautiful vacation home through Picasso, and someday you decide to sell, we help with that sales process as well, and it's really easy.
How long do people stay with their ownership, I'm curious about turnover.
Yeah, it depends on the owner, but we estimate that the average owner going to stay in their Picasso home for about five years because.
They are staying in I mean you're now three and a half years in, so the people.
Yeah, we're looking at cohort trends to estimate what we think the average life is going to be. A whole home somebody would typically stay in for you know, seven to eight years on average.
Okay, let's say I'm interested in home in the mountains in the winter, I want to ski there in the summer. I want a mountain bike there. Where do I leave my skis? Where do I leave my mountain bike? So the seven other families don't mess with my stuff?
Well, one of the best parts of owning a home is that you get to keep your stuff there. That's true of owning a Picasso as well. We outfit every Picasso home with eight owners closets, so when you show up at the home, you pull your stuff out of your owner's closet and you enjoy the home with none of the headaches or none of the hassle.
What are some of the common headaches that come up in this process.
Well, there aren't really any any headaches because we're taking on that burden as the manager of the property. But I would say the compromise associated with co ownership is that you don't own a undred percent of the home, which means you're not going to get one hundred percent of the calendar.
You can't say, hey, honey, let's just for the weekend, go up and.
You know, well, actually you can. You can, so as long as the home is available, you can. But basically, the main compromise with co ownership is that you're sharing the calendar with other people. So the way that most of our owners describe the calendar benefit is you're going to get about eighty percent of the dates that you want out of the calendar, and you're happy to make the trade off on the twenty percent that you're not
getting because you're saving so much money. It's about eighty five percent less expensive to own a picasso when compared to owning the whole home. It's about seventy five percent less expensive per night than renting a comparable Airbnb or short terminal. So it just makes a lot of sense financially, and it's a lot easier as well, because we manage the whole experience.
How do you make decisions that for personalization? For example, let's say, I want to get a hot tub at that mountain home, but you know the other families don't want a hot tub there. How do you do that?
It's like the co op, right kind of tested.
Yeah, it is analogous to the co op in some ways. But when owners buy into a Picasso, they're typically buying into the style of that home, the design of that home, which which we manage, and the amenities of that home. So if somebody wants to make a change, like let's say that you bought into a home without a pool, and later you decide you want a home with a pool, most people would just sell out of their Picasso without
a pool and sell into a new one. But it is possible for all the owners in a home to actually vote and make a change to a home such as a bedroom or a pool, and in that scenario, Picasso would facilitate the project on their behalf awestin I'm.
Curious though, if you buy fractional ownership into a particular piece of property and then you sell, do you sell at the price you bought into or you with the market bear? Like, how does that work? Because can you lose money on that initial investment?
Well, like any real estate purchase. Yes, you could lose money, but most real estate goes up in value over time, and that's certainly what's happened with our real estate. So people who have purchased a pic and later resold our customers have made on average a ten percent gain over what they paid. But it trans I mean with Picasso, you're buying a home. The only difference is you're buying a portion of it instead of the whole thing. So it trades just like the underlying real estate would if
you were selling the whole home. But we make the process easier by facilitating the share of part of the home.
There's a huge affordability problem in a lot of these towns, absolutely right. How do you handle pushback? I know that in some areas where you operate, for example in St. Helena, California, you had to reach a settlement with the town. How do you anticipate pushback on this model?
Yeah, well, the housing affordability problem is real and it's here to stay. You know, homes aren't going to get a whole lot cheaper into the future. So what we're seeing is consumers are resorting to co ownership as a way to make housing more affordable that could.
Also be said to price out locals from living there.
No, it actually has the opposite effect in a small town. So one of the challenges in a small vacation home community is that second home buyers are buying up a lot of the median price homes. The beauty of this model is it's kind of like car pulling, but for
second homes, where we're aggregating demand into fewer properties. So instead of having eight families in San Francisco buying median price homes in Napa just to have them sit empty ten months per year, our model concentrates those eight families into one home, so it actually creates more opportunity for the local workforce. But like any new category, it takes time to be understood.
Who's your typical buyer? Just got about thirty seconds.
Yeah, So the typical buyer ranges from a young family that's early in their career and maybe can't afford or can't justify owning the home of their dreams, all the way to a very established, you know, empty nester that's looking for a special happy place for the family.
Regat well that's the range. Just quickly, is there a bulk? Is it like people a certain demographic in terms of age, I.
Would say the sweet spot is like forty to sixty in terms of of age. And I would say seventy to eighty percent of people are looking for a home that's within a two to three hour commute from their primary home.
And just quickly, one last question ten seconds. Do you make money on every transaction? How does it do?
What's the business? We make money on the service fee upfront, and then we make money on the recurring services that we provide, including property management, financing and resale.
Really interesting, really cool stuff.
Thank you, Thank you so much.
Austin Allison, co founder a CEO of Picasso, joining us here in studio.
Come brother Marco a journal How about you let me drive?
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Honey?
Please, I'll do the gravels. Let's wait, I want to drive. It's good question.
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Dot com communing well, Bun Jelda Don on Bluebird Radio.
All right, everybody, just about eighteen minutes left in today's trading sessions. Some buying into the clothes. We got to pop to the pside, which is kind of interesting. I feel like in the last I don't know ten or fifteen minutes. So fascinating to see still just up, as John mentioned, about three tens of a percent on the Nasdaq one hundred up, about seven tens of a percent on the S and P five hundred, Dow up more than one percent. But it's a straight lineup, So I'm
not sure. We talk about volatility as we get near the end of the quarter, so maybe some of that is at play, but nonetheless certainly notable as I look at my Bloomberg and I look at the charts across the board.
Also a reminder Carol that this quarter we're toward the end of the quarter, but this quarter we're seeing the market serge close to ten percent.
Yeah, it's been quite great quarter.
Yeah, I seven on the S and P five Was it.
Just last week? We had the best week right for the four stocks here in twenty twenty four.
I want to think get an idea for what Mace McCain has to say about all this. Mace's chief investment officer at Frost Investment Advisors. They've got about five point one billion dollars in assets under management, Mace joining us from San Antonio, Texas. Mace, how are you very good?
Thank you for having me on today.
Yeah, good to have you with us. How are you looking at a year where the quarter has already sent shares hire by ten percent and we're not even three months into this yet.
Well, in the very near term, we're a little cautious in that, you know, measures of in semester sentiment are pretty extreme and look like they could be overbought in near term.
Of course, those conditions can stay over.
Oops, we're having a little technical difficulty, so we're going to see if we can get back and reconnect with Mace McCain over at Frost Investment Advisors.
Yeah.
Interesting about the sentiment, right.
Yeah, well, you know, quite a bounce, and I think a lot of it has to do with and we've talked about this right a lot about expectations in terms of global central banks finally saying okay, we're ready to start cutting rates. It's just it's not no longer. It's no longer. You know, if we're going to do it, it's just a case of time and when we're going to do it.
I don't know about that though, right We know that it's going to happen, We just don't know if there's actually going to be three this year from the Federal Reserve. We don't know if we've had or exactly we've had more and more folks come on our air lately and say, wait a second, we're looking you know the whoky said yesterday Carol, that the FED is looking for an excuse not to.
Cut exactly our guest that was in here. But it's interesting. I'm looking at what, as you said, the S and P five hundred since the beginning of the year, or at least in this quarter, up about eleven percent. We're looking at a Nasdaq one hundred that's up about fourteen percent, so pretty significant run. Hey, we're back with Mace McCain,
chief investment officer at Frost Investment Advisors. So Mace, you were talking a little bit about sentiment and what we're seeing and maybe what it means perhaps going forward from here.
Yes, we look to be a little overbought in the short term, but as I say, we could stay that way for a while. But I think that your points on the FED are very important. I mean, the FED risk is skewed at this time.
The FED is.
You know, not going to be raising rights if inflation stays sticky and comes in hot, we're just going to get higher for longer. But if they have the opportunity, they're going to start to cut later in the year. So we kind of skewed bed risk to towards cutting rather than raising.
So that's pretty supportive into markets.
But is it dangerous to rule out the idea that maybe the FED ultimately considering. I don't know. We were talking with Mike right a little bit about some of the weakness we're starting to see in data points, But you know, are we being still too enthusiastic when it comes to expectations about how many FED cuts we might get.
Well, I think that they're off the table for a while. And what's more important though, is, you know, we're in an environment where we seem to be having either a soft or no landing scenario. So people are figuring that we're going to have a rate cut eventually. But right now we're seeing a broadening of the market. We're seeing
mid caps and small caps a little bit better. And I think people's expectations for growth is gone, I know, and maybe we're going to get out of what has been a profits recession ast we look into the next year. So I think that the fundamental side, the earning side, the cop of corporate side, is strengthening, and so as long as that's going on for a while, it takes the FED out of the it becomes less important in the mix.
A means where do you not want to be right now?
The everything is run?
You know, we've seen junk bonds go up, credit credit go up, interest rates have really rallied off of this last falls highs and so.
On the credit market.
You know, we were looking at bonds and the basically the shorter end the value of the curve three to five years, looking to anticipate the FED easing. We also think once again that we're going to see a rally possibly in a mid cap and small cap if we continue to see the product market broadened and we continue to see growth surprise to the upside. So all that
is positive. It will probably take a little bit of the spotlight of the leading leaders on technology as we broaden the market, but that would be healthy to us.
Where don't you want to be in this market environment?
You know, we are concerned enough about sticky inflation that I wouldn't want to be buying out.
Beyond ten years in the bond market.
We think that inflation expectations could rise based mostly on the fact that we're going to we continue to be short labor. If we do see manufacturing continue to strengthen we're just going to.
See more demand for labor.
And unless we see workforce participation come up, we think that, you know, seeing significant progress towards our heads inflation targets could take a long time.
I'm curious about asset allocation in a market that's up ten percent on the year, that had a great year last year. If if somebody comes to you, a client comes to you, a new client comes to you with new money and says, you know, throw this money where you think it should go for the next few years, what does that asset allocation look like.
Well, you know, we had a great year last year in the stock market, but if you look at two years where it's not such great returns, So we borrowed a lot this year, you know, catching up from last year twenty three was based on a really four twenty two.
We're not at extreme valuations, very doubt believe. So we still like stocks and so we think that you know, the returns will be more modest because of valuations where they are and the pe ratios, but we do think that stocks will still be the best place to be as and as I said, if we do get some economic strength, we think that we could finally see some participation in the small and mid cap and so hopefully that'll out to market and help returns.
In the next year.
All Right, Mace, gonna leave it on that listen. Thank you so much, so appreciate it. Mace mccainey's chief investment officer at Frost Investment Advisors, as you mentioned earlier, about five point one billion in assets under management, and he was joining us there from San Antonio, Texas.
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