Higher-End Housing In U.S. Could See 30-50% Price Drop (Podcast)

raising a red flag. You know, perhaps things are not as good as raising a red flag from the roof, from the roof, from the housing, from the house, from the housing market. Joining us now to discuss that and everything else under the sun. Genie Wyatt. She's Chief executive Officer and chief investment Officer at South Texas Money Management in the beautiful San Antonio, but she joins us here

in our eleven three oh studios. She manages about a three point three billion dollars has been three point seven three point seven billion. Excuse me, please forgive me um. So grateful that you're here. I want to ask you about the housing market and how you're viewing it because we have gotten a slowdown in sales. Some areas have seen even declines in certain prices. Are we at the beginning of this Yes, good morning lista good morning PIM. Now I do not think, um, we're at only the beginning.

I think this will be a long time UH sector challenge for anything housing related. The mortgage bankers, UM, the service providers to housing, and obviously the builders. UH. Not only is it the interest rate increase and the FED likely especially with these trade talks, is likely to stay on a tightening track because our economy the outlook now is to continue to have positive GDP, so interest rates

will likely continue to rise. But the challenge with housing that I think is not fully appreciated is land prices are now so expensive and UM owners of homes no longer get the full tax benefit of the taxes that they pay, which really penalizes them in states like New York, like California, and so the affordability net net, the affordability of housing now it's just no longer a value proposition.

That's the challenge. I'm wondering if you could just step back and speak to the issue that investing is not something that you should enjoy. Well, you should not be emotional about your investing, but you must invest because stocks are the best investment you can make. Because stocks reflect UM growth in corporate earnings. It's not mysterious. Stocks reflect UH growth and corporate earnings, which are amazing this year,

continue to be strong. And corporate earnings have a natural UM, a natural UM succession plan because if if companies don't produce good earnings, they will go away. So there's a lot of pressure on managements to be competitive and to succeed and to have good corporate earnings and thus their stocks. Stocks overall broadly do very well long term, and they're liquid. I just wanted for a second go back to the housing issue just for one second. I'm curious you're saying

that the value proposition isn't there. Does that mean that prices are going to tank or does it just mean that it's going to go sideways? Well, um, I think there's downside. There's downside for the home builders stocks or for house prices. Are both for both? How much downside? Well, again, we're in a um a good economic environment, so I

would say ten to fift downside on home prices. Now, of course the lower priced homes probably have more downside protection because there's huge demand across the country for homes priced three hundred thousand dollars or less. But the higher priced homes, I would say the downside there again, some states, some counties could be as much as thirty including New York. Yes, some some counties. Yes, that's got your attentions. That's daunting clients in some areas in the Northeast. But that's only

if you can move very high priced. If it's a very high priced home, and the taxes have been very high and no longer can you ride off all of those taxes. I want to turn your attention out of something that maybe benefit benefiting from all this, which is that you can work anywhere, live anywhere. Microsoft is one of the stocks Microsoft. Microsoft has been so kind to us. UM we started putting money into Microsoft. We buy both

value and growth stocks. So we started buying Microsoft in two thousand twelve as a value stock, and it's up over three since that point in time. But we still get really good upside in Microsoft from this point. So we're still putting new money in Microsoft and we get over the next twelve to twenty four months upside and Microsoft with the dividend, and that's as their cloud revenue is accelerating. Microsoft Office is still performing well and um,

it's just being very very well managed. This today's Microsoft again because of their cloud success there they are almost as large of UH provider of servers as Amazon. So um, we think again there's a lot of good upside remaining in Microsoft. You're also buying General Electric? Right? Um? No, no, are you not? So? Microsoft today is now a growth stock for us. We borrowed his value, it succeeded, so now is growth of value stock we are putting new

money into today. Is General Motors, General Motors one of those beaten up G something so General motors, but not General Electric, not in electric Okay, we have not been in General Electric for years. For GM. You like love GM? Love GM? Of course you know the broad market is up today, but there's so much hype about we're at peak auto sales. And yes, we're probably at a near term cyclical peak and auto sales, but um, and a lot of that is the millennials are saying they're not

going to buy cars. But millennials grow up, they form families and and autos will become more important to them. But really the story there for future auto sales is the self driving vehicles, and GM has strong conviction in this. In fact, they just moved their president, um Dan Ammand to become head of Crews, which is the autonomous vehicle area of GM. GM today has about three dred self

driving vehicles in San Francisco. I think we will all, all of us, whether we're millennials or we're octagenarians, we will love autonomous vehicles. Well, we'll be looking forward to taking a trip in one of them with you. Thank you very much. Genie Wyatt, Chief executive Officer, chief investment officer, South Texas Money Management, based in San Antonio. We are broadcasting live from the Bloomberg Interactive Broker's studios. After the worst month in more than a decade, four crewed, we're

seeing a rebound today. Perhaps it's because of the trade truce, the trade war truce that I guess was struck between a President Trump and President Jijim Ping of China. But there also are other as next to a joining US. Now. Dr ellen Wald, president of Transversal Consulting, also a non resident Senior Fellow with the Atlantic Council's Global Energy Center in a Bloomberg Opinion contributor. Dr Wall thank you so much for joining us. I want to just to ask

you why do you think oil is rallying today? Is it because of a more positive backdrop geopolitically or is it because of OPEC and the likely cuts that they will implement to output later this week. I think it's a combination of OPEX likely cuts, but also we have an announcement from the premiere of Alberta that they're going to be taking some pretty extraordinary measures to cut oil production in Canada so as to relieve the incredible strain on their stored oil, and that that has really helped

the price of Canadian oil rebound today. Dr Wald, do you believe that the change at OPEC with the announcement that Qatar wants to leave, will change the politics of oil. I think it's possible that we could see um the beginning of something important. And one of the interesting things that we noticed is that after Qatar announced that it is planning to leave the organization, and I think it does make sense for Qatar. It's really had a lot

of problems politically with Saudi Arabia. Clearly they are under an economic embargo from Saudi Arabia, and it probably feels that it makes no sense politically domestically as well to sit in meetings and be compelled to go along with Saudi decisions when there's so much animosity focused on them from Saudi Arabia, combined with the fact that they're really a fairly small oil producer and they're big focus is

natural gas. However, this could kind of signal a maybe a larger sense of unhappiness amongst these smaller oil producers within OPEQUE. And if enough of them get together and say, hey, we don't feel we're being we don't feel that the larger producers like Saudi Arabia, UH and Iraq are really taking our concerns into UH into consideration. If a bunch of them leaves, that could really affect OPEC's ability to

play a role in the market. Well at this point, I mean, perhaps perhaps it was emblematic that the Vladimir Putin and the Saudi Arabian Prince greeted each other with the happiest of hands, laps and and you know, smiles over the weekend at the G twenty meeting in Buenos Aires. I mean, is it does it sort of matter more now the alliance between Russia and Saudi Arabia than even OPEC.

That is absolutely a big concern here because Saudi Arabia and Russia are really the big players in this new OPEC plus alliance, and Putin made this announcement that Russia

is planning to continue its participation in this alience. Now, that doesn't indicate that Russia is necessarily on board with whatever cut Saudi Arabia wants to make, but it does indicate that they are interested in pursuing this partnership, and that puts the rest of OPEC that really diminishes their influence and importance UH in terms of OPEC going forward. Dr walts, should we make a distinction between the natural gas market and the oil market. I think we really

do need to in this case. And Cutter is particularly influential in the liquefied natural gas markets, so it's not quite the same as the United States, where natural gas is very inexpensive and cheap. Cutter makes a lot of money from its its natural gas and that's really where it wants to focus its efforts going forward. And that's very interesting because Saudi Arabia is also announced plans that it wants to focus on its developing its natural gas resources.

That's mostly though, for Saudi internal use, for domestic use. But still they have indicated they're interested in maybe becoming an exporter of natural gas, and so Cutter may may see that as a little bit threatening to their position. So I'm just wondering from your perspective, if, as expected on Thursday, OPAQ plus agrees to an output cut in order to bolster prices and reduce supplies, how much do you think oil prices could go up or do you

think that this is sort of false hope. Well, I think it really depends on how much oil we see. They could end up increasing production as much as UH or sorry, cutting production as much as one and a half million barrels per day, and that's not an insignificant amount, and it could send prices rallying maybe for the rest of the year. That The issue though, is we're still you know, down in the brand in the low sixties, not even yet hitting sixty one, and with w t

I is still UH fifty two. So I'm not really sure that there's enough to really get us back into the seventies before the end of the year. And it does depend open may not be able to cut as much as they think that they can. I want to thank you very much for spending time with us. Dr ellen Wald is the President of Transversal Consulting, nonresident Senior Fellow at the Atlantic Council's Global Energy Center, also a

contributor to Bloomberg Opinion. Joining us now to tell us all about the world of economics and particularly how it's linked to trade is none other than Mike McDonagh. Michael McDonagh is the chief economist for Financial Products for Bloomberg LP, and he joins us here in studio. Mike, it's always a pleasure. Thanks for coming in. Um, what happened last week at the G twenty and over the weekend? Did Did we really solve something or we just kind of

punted a little bit. Not that that's bad. If we want to go with trade war analogies, I'd call it a ceasefire. So I mean it's it's buying a little time to try to come to a deal that's that's sustainable. It takes the risk January one off of the tariff level being escalated, so buyas time. Now we have to see what happens with the time. Why why was there

such a softening in tone from President Trump? It probably depends on who you asked, But my personal view on this is, um, when you look at how markets have been performing recently, UM, there's also, at the same time been some signs of weakness uh in US economic growth at least it might have been going in a direction

they don't want to see it go. Uh. And really, when you have to ask yourself why, I mean, there is an argument to be made that maybe the FED was looking like they might be a little bit too aggressive. But the big, other, other big uncertainty was trade with China, right, and that these two things combined, Uh, we're reducing sentiment

a bit, and it pointed to potential. So you know, so I guess that My other question then would be has anything materially changed from the Chinese point of view with respect to what they're offering as far as you can tell, or is it just a willingness to make a deal on President Trump side? You know, it's hard

to say. I I don't know a lot about what they had been offering, but you know, we we saw the agreement on the opioid exports fentanyl, Uh, that's something that the president could hang his hat on and say. You know, when you look at where President Trump is on a lot of his agenda, I would say the opioid wars arguably someplace where he's further behind than in other areas. So this is something he could say, Look, this is a win for us. This is something new.

I don't think that had really been discussed before. That's there. Then there's the announcement today about auto tariffs. I believe China had announced that they were reducing auto tariff from fiftent back in May for everyone, but then they increased it in retaliation of the US, I think, and now they're saying, okay, we're gonna get rid of them entirely. That's something. And when look at every deal President Trump has done so far, autos has been involved, as has agriculture,

so the soybean part of it. So you know there is something there. The question is, what will you know President Trump's appetite? B Right, The issues we have with China aren't really the deficit, uh, it's the you know, openness of the Chinese economy to US companies. It's the intellectual property theft. And these aren't easy things to fix, Like, this isn't something trying to could just turn a switch on and say okay, you invest in anything and we'll stop,

you know, the technology transfer. Uh So, it's hard to see how you resolve a lot of this in ninety days. Just to give the detail about the opioid and fencenel issue, it has to do with China reclassifying them as a controlled substance, right. Yeah, I don't know the details of it personally, but it sounded yeah, it would sound it sounded like it would make it illegal for Chinese distributors

to sell into the US. Yeah, that's the goal. Okay, Um, how many products do you think that Chinese will have to buy in order to be able to enable the administration to declare victory and to have some kind of come together moment. I think it's the difference is how many do they say they'll need to buy and how

many they actually have to buy. I think that right, um, soybean sales to China have basically gone to zero at this point in time, So I think that you could pretty quickly see those go back up, uh to two levels that we had seen you know, last year before these sars and that would be important because I think that the soybean farmers are probably being hit most by

what's happening. So I think that, you know, I think there will be promises of reducing I think I think the promise of reducing the tariffs on auto and leveling the playing field will go a long way. It's hard to say how much will actually buy. The Europeans sell a lot more cars in the China than the US does, so I'll have to see They'll definitely be buying uh more soybean because they've gone to zero so that they have to I think you could see more purchase is

of airplanes, etcetera. But really, when you when you look at trade with China, we actually run a surplus when it comes to services. Uh So I think that part of this would be making it a bit easier, if not removing all restrictions for US companies to do business in China. That would actually go a long way, right. That doesn't show up in the the goods trade deficit, but it shows often the overall transfer between the two countries.

So I mean, if you have more US companies in China providing services, that could go a long way towards off setting the goods balance, which everyone talks about a lot. So how important is it that Lightheiser is in charge of these negotiations? Now that's that's interesting because like when you look at um, you know who tends to be more hawkish and debbish. Uh In Trump's administration, Lighthouser tends to be on the more hawkish side. So he's now

running these negotiations. Uh So I guess, like I said, we have ninety days, we really need to be watching these headlines. Uh So that it's not surprising. He is a trade you know, negotiator, That's that's what he does. So it will be interesting to see who he's working with. What is rhetorick is like how frequently are they meeting, who's meeting, what's coming out of the deals or the meetings that they have Over the next ninety days, I think there'll be a lot of signals. You were called.

The last time we were in this position, Um, there were instances where they had meetings planned and then they said, well, there's nothing we're going to agree on, so we're not going to meet. So we'll have to read the tea leaves for a while. Over the next ninety days, and then we're going to read them again for the following ninety days when it gets us further down. There's two things we need to look at, China and the fit,

and we have Pal on Wednesday. Would be interesting to see if he mimics his comments from last Wednesday, that would be good and let's see what happens with China. Mike McDonough, thank you so much for being with us. As always, your perspective is always insightful and valuable. Mike mcdonaldh's chief economist for financial Products at Bloomberg LP, talking about the latest I guess easing or perhaps just kicking the can down the road. We're broadcasting from the Bloomberg

Interactor Broker's studios. Let's turn our attention now to entrepreneurs who make products that people seemingly want to buy, because boy, this company, Califia Farms, is doing about a hundred million dollars worth of business at least a year. It is founded and run by Greg Stoulton Pole, who many in the food and natural food market no as the one of the founders of Odwallah, and he joins us here in studio. Greg, thank you very much for being here.

I was reading a little bit about your background and I can we connect your interest in juice and in pressed uh drinks to your father and his love of the world of citrus. What is that story? Well, you're going way back. So um, my dad love to live around orange trees and orange blossom California, Southern California. We moved to California when I was seven, and we had to keep moving because as the development of southern California grew, they kept plowing down the orange groves and we had

to keep moving further and further towards the hills. So anyway, I grew up with the romance of living in orange grove and uh, just the smell of all those blossoms and everything. So it goes pretty deep in my roots. And we had to start every day with a glass of fresh squeezed juice, which evolved into a juice company, Odwalla, which you sold and then at Califia, which focuses on

plant based beverages almond milk, soy, etcetera. So I'm curious, given the fact that you've sort of been part of this evolution of the health foods in the in the juice movement, where are we in that. I mean, is it expanding or are we kind of hitting a plateau where people are saying, forget this, come on, let's just do whole milk or raw milk or whatever. Right. Well, there's lots of different things going on, but um, underneath it all, there's huge shifts in the food industry at large,

which I think are driving this. But what's driving those shifts are really massive changes in the consumer and where the consumer's head is at, and knowledge on the part of the consumer, and also globalization of this kind of gen zennial phenomena where you really have trends moving simultaneously.

When I started Duella back in the eighties, you know, things would start on the West coast and in places like Santa Cruz and San Francisco, and then you know, takes some years to get to the East coast, and then take a decade or longer to get to the middle part of the country, and then other parts of the world may take twenty thirty years. Now it's really happening. A trend that can happen in natural products can spread

globally within a few years. So uh, now a consumer is really driving the need for change and the industry is behind where you know, more than thirty years ago. When I got started, it was mainly like visionary people like myself and my friends who were coming up with these unique ideas and trying to convince people that this was the right thing to do. Tell people about how you're borrowing from other cultures in order to bring different types of drinks to the public. And I'm thinking here

about Latino culture, Mexican culture, and horg Chatta. Right. Well, first of all, our name, Califia Farms is named after the origin of the state of California, which many Californias don't even know, right, And even earlier, there was a novelist, a Spanish novelist in the late fourteen hundreds who wrote a book and created this character, Queen Califia, who was the inspiration for the Spanish coming here. And she was a beautiful black queen who was rumored to have tons

of gold. So nothing to motivate a conquistador more than beautiful women in lots of gold, right. So anyway, the romance of California spread to the agricultural heritage, and so it's it's actually not that foreign, and uh, that influence has always been in California, and California is now the largest producer of almonds in the world, produces over eighties

something per cent. So that became the basis of our first large commodity, so Odwalla was acquired by Coca Cola in two thousand and one, I believe for a lot hundred eighty one million dollars. But you've said that you would never sell Califia and then entrepreneurs should not sell their creations. Why well, I haven't actually said then I can never sell because it's not just up to me, and I'm unfortunately liam No not saying that at all.

But I also can't make a blanket statement. But but I have been very verbal about what I've thought the long term effect on O'dwalla's mission and vision were after Coke acquired it. And I think it can be fairly said that acquiring especially natural product food, the foods that are coming out of a craft type movement by large multinational corporations, there's not of extremely long history of success in keeping the mission alive and keeping the purity of

those products first and foremost. So we're embarking on a strategy and continuating strategy of trying to remain independent, and in fact, we're the last fully independent plant based company of any size left today, and we're one of the only independent coffee companies of any scale today. So we hope we can keep it that way, and the spirit of that independence is I think important for the categories. Actually, if we went to your factory, your facility in Bakersfield,

what would we see. Uh, It's it's a bit like Willy Wonka, and that we do a lot of things there in a pretty compressed amount of space. All of a sudden imagined, you know, rivers of soy milk or almond milk, and well, we we process a lot of type of milk based commodities. So it's not just almonds. We do ods, Uh, we do p We we do other grains, and a lot of coconut, a lot of chocolate, the hor chatta spices and and a lot of things

that go in our cold brew coffees. So the smells are always changing and there's a constant different stream and we have flexible path packaging lines, so we'll be doing uh ice cold nitro brew on one line while we're running the mainstream on sweet and almond on another line. And chocolate chip coconut over on another one. So it's

pretty fun. It's um fairly automated, so we've dispensed from our manufacturing and having a centralized control room, so everybody's running around with iPads and I watches and keeping an eye on all the machines. So it's a lot of fun to have your own manufacturing. I'm just my imaginations going wild. I'm just picturing the scene and Willy Wonka the chocolate fountain. Greg Steals and Paul, thank you so much for being with us. Really a pleasure having you on.

Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm pim Fox. I'm on Twitter at pim Fox. I'm on Twitter at abramoids one. Before the podcast, you can always catch us worldwide on Bloomberg Radio.