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Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside my co host Matt Miller.
Every business day, we bring you interviews from CEOs, market pros, and Bloomberg experts, along with essential market movin news.
Find the Bloomberg Markets Podcast on Apple Podcasts or wherever you listen to podcasts, and at Bloomberg dot Com slash podcast. All right, so we're here at the Bloomberg Sustainable Business sum A part of that is financial inclusions. To find what financial inclusion is, how we measured Kara who Canson joins a senior vice president and head of workplace Benefits at Benefits and Protection Principle. Kara, thanks so much for joining us.
Here.
We appreciate you coming here to Bloomberg. What is financial inclusion and how do you measure it?
So, financial inclusion is about giving more people access to tools, products, services that enable them to ultimately the goal is achieve financial security, and so making sure that a much broader group than today has access to all that they need in order to make those decisions and achieve financial success.
You know, it is partly about measuring the access the number of people that do have access to those products and services, but then it's also about their degree of comfort and security long term, which is a bit subjective because that's going to look different for everybody. But we have a huge opportunity ahead of us to make sure that just that access is taken care of. Principle created an index called the Global Financial Inclusion Index last year.
We just this week released our second edition of that and it measures financial inclusion across forty.
Two different markets, markets in terms of countries.
Countries, forty two different countries, and really looks at the role of three pillars in each of those countries, the government, the financial system itself, and the role of employers. And so we can measure each of those pillars by country and then aggregate that to determine kind of relativeness around
financial inclusion. One of the things that this year's particular index showed is that those countries that are making the biggest progress in terms of financial inclusion are the ones that are making investments to digitally enable access us to products and services think mobile banking, real time payments, those types of solutions, which inherently because so many of us and an ever greater percentage every day, have access to those computers we hold in our hands, and so that's
a really important component of financial inclusion, the tools at people's fingertips.
So I imagine we were just talking about holistic systems, and this isn't something that you're doing because necessarily you feel sorry for the people who aren't included. It's not about charity, right, I mean, in some senses maybe, but really it should be good for the entire society if you include more people. So do you see a correlation between those markets that are more financially inclusive and say, you know, stronger more sustainable growth.
Absolutely? So great, astute question. So not only did we develop this index, but beyond that, we compare that index to different indicators of overall economic progress, and there is a strong correlation there. Countries that have greater financial inclusion are more resilient, whether it's resilience to climate change, whether
it's resilience to geopolitical risks. They ultimately are more ethical economies and that leads to happier, more excuse me, more food secure individuals, and brighter prospects for the future.
How does the US rank on your index?
So the US actually currently ranks number four, sure, four. We actually dropped a couple of spots from last year's rankings, and there were a variety of factors that went into that, one of which is, you know, just consumer sentiment is an underlying consideration in this research, and consumer sentiment is changing given you know, all the different factors, whether it's the economy and concerns related to that, politics, the news cycle, all of that feeding into overall consumer sentiment.
Who's number one?
Yeah, Singapore is number one. Surprised, Yes, very strong and on all three.
Pillars, so much easier though it's almost unfair, right, I mean it's a much smaller market, it is, Yeah.
But there's also been a lot of intentionality around how those three different pillars all pull their own weight in order to create a very financially inclusive.
And they have I think a much. I mean, it's easier with a centrally controlled economy, right, It's probably more difficult with totally chaotic and broken democracy like they have here in the US.
There are definitely different sets of challenges when not all the ores are rowing in the same direction.
What are some of the countries that are, you know, maybe making big gains or maybe have some real challenges.
In front of them, you know, I would say back to the comments around you know, digitally enabling, you know, place is like Taiwan and Vietnam are making some pretty significant gains because of the infrastructure investments that they are making to enable their citizens to access financial products and services, and beyond that, it's also the education that goes with the use of those products and services.
Are there any big laggards that surprised you, any countries that you think should be making more headway.
Not specifically country by country. I think, you know, it's probably not a surprise that developed markets that have more resources to support their citizens generally rank higher on the index, and you know, emerging markets tend to fall lower on the index. But again, the digital component and investing in infrastructure to support digitization is really key, and those countries doing that are making the most progress year over year.
I bet for women, I'm not sure if it's just us or just kind of what generally your findings are women? Do they feel more or less inclusive relative that maybe the general population?
Sure, So the short answer to that is they feel less included, they have less less confidence, and their perceptions around money management and investing are are different than men. This is there's recent research that principal did with her money that just reaffirm that. I think there's very few people that would say they wouldn't benefit from additional education and advice, but in particular, women will significantly benefit.
Well, here's a good little story just from yesterday. I had lunch with my twenty seven year old daughter. We spent most of lunch talking about investing, like she would, you know, and you know, she's got that Marcus savings account and.
She's got a high interest rate there.
Yeah, she's got a high interest rate there. She's just kind of asking a lot of questions about kind of what to do, and you know that's great. Yeah, So I was like.
Nice, and she's listening to da.
Exactly exactly exactly, probably has a head start compared to most other women in the world, though, right, That is.
Very, very true, and that often is one of the issues is just this overwhelming feeling of where to start. They may you know, a lot of people don't have a dad that can talk with them, you know, over a meal to you know, answer those questions. And if you do a search on whatever your browser of choices, you know, the amount of information that is at someone's fingertips doesn't make that process easier.
All right, Carols, thanks so much for joining us. Kiro really appreciate it. Caro Hugginson, she's a senior vice president and head of workplace benefits at the firm is principal correct correct, Awesome. So we got it there. So we're just talking about the financial inclusion. They've got a cool index there that kind of measures that the US is ranked num.
Beerfore, we got a little work to do there, folks. Let's get out there and get it done.
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We got sun beating down on us right coming through the window here at seven thirty one, like snab we should use it. We should perfect time. What a great solar panel. Let's put up a solar let's talk solar energy. Abigail Ross Cooper joins us. She's a president and CEO of the Solar Energy Industries Association s E. I A for the folks in the note. Abigail, thanks for joining us here talk to us about solar energy. I gotta think it's a big beneficiary of the you know, the
looking at the green transition. Yeah, the green transition, the inflation reduction.
Right, We've seen peaks and troughs in terms of investor interests, but I'm sure the amount of panels out there just continues to grow to record after record.
Yeah. I mean, first of all, it is hot right here. Yes, so let's just have a moment. It's working, okay, if anyone wonder, the technology.
Works, the sun works, Global warming feels real.
It's really real right now. Yeah, it is a ptty exciting time to be in the solar industry. Our projections tell us that this year our industry is going to grow by about fifty two percent, which you were talking about something growing in half as I was walking up here. We're going to double, which is an exciting Uh, it's it's pretty.
We were talking about thirty year treasuries. Yeah, typically a very safe investment. Yeah, it's been a over the last.
Three not not so exciting. So, yeah, solar is gonna uh the installations.
What the backlash that Paul has been talking about. You know, it's become a very political issue ESG in general, the pain transition obviously, and even though we probably see more solar panels in Texas than anywhere else in the country, you've had, especially those people down south, like really pushing back against ESG.
Yeah. So that's why you're never going to hear those letters or those come out of my mouth. But you know what you are going to hear come out of my mouth at lower prices. Yep, Because yes, it is true that California is the state with the most solar in the country.
Right now, California has more than Texas.
Texas and Florida are two and three, and over the course of the next few years, it's really a race for which one is going to be number one. Texas and Florida are not known for their big d politics, right, but what they are known for is wanting the lowest energy prices and competitive energy markets. And so that's really why people are going solar. And when I say people,
I shouldn't say people, I should say customers. And customers are utilities, customers are corporations, and customers are homeowners, right, apartment owners, warehouse owners, utilities, co ops, kind of anyone that wants low energy prices, which is pretty much every person and every company in the United States talk to.
Us about the efficiency of solar energy versus the other sources, and sure, and kind of how that I guess maybe the Eternal mind investment works.
Yeah, So so you sort of ask two different questions, like breaking news, you guys, the sun does not shine twenty four hours a day, okay, And so if your only source of energy is you like unplug from the grid and you do not have any kind of backup power, not gonna have power twenty four hours a day. So
you have two choices. You can either not unplug from the grid and rely on your electric distribution utility for the other hours of the day, or you can have a backup battery system, you can have some combination of those. So we talk about the efficiency or sort of the capacity factor of a solar system being about you know, somewhere between twenty and thirty percent. But that's like a known feature. That's not like shocking news. In terms of
your investment. There's it's a payback period right like it's and it depends on what your energy prices are to the payback period. In a high where are we now New York, your energy prices are a tad bit higher than Wyoming, right or then South Dakota, and so your payback period is going to be shorter because your prices are higher than in those places. So it might be seven years here, it might be more years in a lower cost place. It depends a.
Lot many years, is what the payback for you're talking about. I guess the average family putting solar on that if you.
Put solar on your roof exactly, you know, lots of lots of factors, but that's around ish.
But how power viewed versus wind nuclear gas.
So so interesting. You know, you can't actually put wind usually on your home, and you can't have your personal nuke power.
Right, So those you live in South Dakota.
True, True, and you asked the SMR guys, right, they're going to tell you could have your own personal SMR. But so so solar is unique in that you can have your own like it's scalable in a way that a lot of other technologies are not. But utilities, right, they have a choice of different energy prices or energy technologies. Solar is the number one, number one new energy source in the country, and it has been for the last few years. So utilities that are putting on RFPs for
new energy sources, oh sorry, requests for proposals. So they're saying, hey, you know, we have new load, we have new customers, we have new towns that are being built, we have new subdivisions, we have new electric vehicles. Like we are, we are retiring some assets. We need new capacity to fuel our system. So we got we were putting out a request of proposals to build some new electricity. So
who's the best option? And they'll get a whole bunch of different proposals, and over and over they are choosing solar and building solar because it's the lowest price and it's making the most economic sense.
Also, I guess it's easier in places like South Dakota or Texas right where there's just so much space. Right, You're not going to build a solar farm in Westchester County, for example, because everybody is like right next to the goodness, the Princeton campus for Bloomberg has a massive solar arrangement down there and everywhere. So does Dennis University's campus. Just looking at it Grandvillow.
But but your version of massive.
That's you're exactly exactly So do you still see growth in those big, massive solar farms.
Yes, So the massive version in the West is like, uh, thousands of acres, thousands of acres. The massive version in west is some acres.
All right, Abigail, thanks so much for joining us. Abigail Ross Hooper Hopper, Hopper, hop hopper.
I got that.
I'm sorry, I have to p's a typo here, uh, President and CEO of the Solar Energy Industries Association. Bring this up to date here on the powers of solar energy. We're gonna more coming up.
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Let's take the discussion of interest rates over to the world of real estate. You can do that, Soma Hep, chief economist at core Logic. She can talk about to fed the rates and the real estate market in general. Selma, thanks so much for joining us. I just popped up on the Bloomberg terminal the Bank Greade thirty year fixed mortgage seven point eight eight percent.
Wow.
What does that mean for the residential real estate market?
Yeah, I mean, unfortunately, housing market is really in a low. We're sitting on a bottom in many ways. When look at home sales activity, we're at the lowest that we've been since at least going back to year two thousand and what's even more sad is that we are lower than we were coming out of the Great Recession for the housing market, and that was a really low period
for the housing market. In terms of mortgage activity too, we are at some forty year low, so we're really sitting at this bottom right now, trying to figure our way out. At least now in terms of home sales activity, what seems to be a little bit of a saving grace is that we do have a little bit more
of cash sales going on. So cash share has been on a rise, and that's a function of you know, baby boomers having more equid in their homes and also to some extent more investors in the market, particularly smaller investors in the market. Also in international buyers seem to be back, so that's helping market a little bit. But nothing to rave about this point.
Yeah, you know, it's I guess we go back and look at the last thirty forty fifty years. A seven percent mortgage market is not the craziest thing. We've seen that many many times. But I guess the question here, or the issue here for a lot of folks is, boy, we moved up in mortgage rates from the really really quickly, more than doubling, you know, in the space of a year. That shock presumably will take some time for you know, kind of the market to absorb.
I guess, yeah, absolutely, I think really for a lot of buyers it is the shock. I mean affordability, like I said, is at forty year low, but there are buyers out there, and there are buyers now even at the percent rate, you know, first time buyers for example, So there are folks out that there. They are very interesting. But you know, it's something we've talked a lot about before, is lack of inventory. So it's not even just the rates at this point, but you know, rates, higher rates
are locking in potential sellers. Inventories at the lowest level we've seen historically, so really, you know, it's it's it's a quagmire. It's it's we're just you know, there's nothing it's something you know, at least we need to see a lower mortgage rate at some point for something to change.
So you know, it's I kind of feel like the next issue that somebody has to get a handle on is what is the rate or is there a rate that kind of frees up the market, clears out the market that would make you know, it would be sellers say, okay, yes, I'm getting out of my three or four percent mortgage, but the rates are i don't know, five percent or
six percent, so it's not that bad. Do you guys in the industry have a feeling like where interest rates have to go down to before we start to see some of these sellers come back into the market.
Yeah, I think if we get back to about six percent, slightly below six percent, I mean that five handle is very magical in many ways, but even at six percent, I mean if you recall earlier this year when mortgage rates came down to six point two six point three, we had quite a bit of activity in a market and even more and inven inventory was picking up to some extent at that point. At this point we're just seeing nothing, you know. So I think it would really help to get richs down to six.
Percent because I guess one of the questions is the new housing market give its just a sense of what percent? Like, how big is a new housing market? Can that deal with some of the demand out there? Where are we like new housing as percentage of total housing in terms of supply, right?
I mean it has been increasing, especially now as existing home sales are frozen and inventory is frozen, So new home sales is a share of total sales have been on a rise historically. I think we've seen about eleven percent of sales being new home sales. Now we are closer to fifteen sixteen percent of home sales, new home
sales contributing to overall sales activity. Now, the issue too at this point is that, you know, with mortgage atees approaching eight percent, now that's freezing new home market as well. And on the other hand, new home sales are really concentrated in parts of the country where the inventory issues are not as large. So, you know, so it's the other parts of the country that continue to suffer as a result of low inventory and higher mortgage rates.
Yeah, because it seems like here in the Greater Metro area during the pandemic, we had a great exodus of people for you know, states like Texas and Florida and some of the other maybe Sun belt states. Is a supplied demand imbalance even more pronounced than some of the those faster growth market or are the new home builders kind of trying they're there meeting that demand?
Well, I think they're ramping up. I'm not sure that they're necessarily meeting demand just simply given how many people are moving to those areas, but they're ramping up, and they are, you know, trying to And you know, one thing to keep in mind is that's it's less restrictive to building those areas and less costly, so they are in a sense providing that more affordable inventory and smaller homes and all these features that the incoming buyers are
looking to looking for. So that is helping the market. But again I think overall, you know, we're still severely undersupplied. If you look at the existing homes for sale right for example, we are now at about a million, you know, it depends on a month. But to get in a more balanced market, we would need at least double that, at least one point eight million. Same thing for new home sales. I mean new homes are now below below
about seven hundred thousand. I want to say we would need to at least increase that by fifty percent to get some relief in terms of pressure on home prices and overall affordability and just just better, better balanced housing market.
All right, So let's let let's say I'm able to stomach the seven to eight thirty year fixed mortgage. If I go into my bank or my mortgage worker, can.
I get a loan? Here?
Can I get a mortgage? Well?
I think so, I mean, I think the lenders are really trying to get buyers in. At this point, given just how many have fallen out with higher mortgage rates, it sounds like income qualifying incomes are now an issue because of debt to income ratio, given how much higher the mortgage rates are. But I mean, you know, lenders
are being innovative. They are trying to find ways to qualify folks, you know, and for sample, in a new home market, there is still a lot of homebuilders and developers that are offering mortgage rate buydown programs, which is helping with that affordability at least in the first couple of years of home ownership.
All Right, So I guess talk to us about the rental market then, I mean, if I decide I can't really stomach of seven or eight percent mortgage, I got to continue to rent or go out and rent versus buy is what we see in the rental market, right.
I mean, there's two different stores in a rental market. There is a single family rental market and there is a multi family rental market. And we've seen quite a bit of a new construction going on in multifamily on a multi family side, which is putting pressure lower on rent increases. And in some markets we have now at this point seen decline in rents, especially in these markets that were really high growth, high rent growth during the pandemic.
You know, think of Austin, Phoenix, Vegas. Uh, this is really Miami for example. This is really high growth markets during the pandemic. But on a single family side, we are seeing rents plateau, rent growth at least plateau. And actually the markets where we are seeing a lot of increases in rent or relatively higher increase in rent growth.
Are these Midwest more affordable you know, sort of easy as it goes kind of markets seeing loos for example, tops are lists, you know, so it's it's different dynamics going on, but people definitely who cannot afford our pivoting to single family rental markets.
Hey Sam, thank you, thanks so much for joining us. Really appreciate it. Soma Help, chief economist at Core Longa talking about the real estate business.
Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller nineteen seventy three and on Faul Sweeney.
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