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Find the Bloomberg Markets Podcast on Apple Podcasts or wherever you listen to podcasts, and at Bloomberg dot com slash podcast. Nick Ackerman joins us. This is former Assistant Special Watergate prosecutor Nick As one of our Bloomberg opinion columnists wrote this morning, this is the big one for former President Trump. How do you think this will play out?
Oh? I think it is absolutely a devastating indictment. You just read through the facts. It tells the entire story of what Donald Trump did after the election straight up until January sixth, to try and stay in power illegally. It is definitely a big one, but keep in mind
the other indictments are serious also. If you do look at the District Attorney's indictment in Manhattan, even though it has to do with falsifying business records, the indictment alleges that he did so basically to defraud voters so that they wouldn't know about his payments of hush money to Stormy Daniels prior to the twenty sixteen election. This particular indictment relates to his efforts to lie to voters in order to keep himself in power after the twenty twenty elections.
So both of these indictments really make neat bookends. And of course the whole indictment relating to classified documents is really separate and apart from the voters and the elections.
Nick tell us about the timing of this and how it relates to the twenty twenty four election and if you know, winning the presidency again, if that's really Trump's best possible defense here, it kind of seems like that get out of jail free card.
Well, no question is to get out of jail card free here, But you're going to look at a couple things on timing. The reason that Jack Smith brought this case just against Donald Trump is to keep the case lean and mean and simple so that he can get this case to trial somewhere around the seventy day period
required by the Speedy Trial Act. I think realistically he could get this case to trial in January or February, prior to the DA investigation in the trial that's scheduled for March, So I think that is part of what he's looking to do to get a verdict, a guilty
verdict prior to March. Secondly, in terms of the politics of this entire matter, one indictment coming down after another indictment sooner or later, Republican Senator House members, people who are running for governor and the Republican ticket have got to ask themselves do they really want to expose themselves to having the head of their ticket under indictment, which will ultimately in the next ten to fifteen days will be about four times And do they really want to
answer questions that are going to be based on specific facts in all of these indictments that are absolutely devastating for Donald Trump and will be devastating for the Republican Party members to try to deal with over the course of the next election.
Not that he doesn't have enough on his plate already from a legal perspective, but what do we know about what may happen from the Georgia Court in terms of timing, because that's also another big election issue for him.
Well exactly, and that one, unlike the one that was just just came down yesterday, is likely to include a whole number of defendants. Fannie Willis, who is a expert in the Georgia Rico Statute, which simply allows her to bring in many crimes as one crime and be able to tell the entire story of Trump's efforts to undermine
the vote in Georgia. I think is going to be a real blockbuster in the sense that a lot of the people that were named as unindicted co conspirators in this most recent indictment are going to be named as defendants in the Fulton County indictment. It's kind of interesting because I know that I think that Fannie Willis has said that she has not communicated with doj or Jack Smith on this indictment. But this is not a typical of what happens sometimes where certain defendants in certain matters
are divided up. And I think what you're going to have here is this federal indictment that goes after Donald Trump himself. Maybe there'll be other federal indictment, but certainly the Georgia indictment is going to include a lot of these same unindicted co conspirators and more and cover more Georgia centric types of activities.
Hey, Nick, you know, when I look at the legal representation for former President Trump, I don't see a lot of white shoe law firms that names that I recognize. Who are his attorneys? Are they any good? What do we know about them? Can he mount in all of these various cases? Can he mount the reasonable defense?
Well? I mean that's a real problem for him. I mean, his big problem is that attorneys don't like to sign on with Donald Trump, especially big law firms, don't want their names besmirched. Every attorney that's been connected with Donald Trump in some way has fallen into the mud with Donald Trump. Secondly, he doesn't pay his billsop, And that
is a huge problem. If you're a lawyer and you've got to devote the amount of time you need to vote to a case like this, you don't want to do it as a charity case.
You know, you had mentioned, Nick about the idea of keeping this lean and mean and just focused on Trump. I was poking around on I guess we'll call it X now not Twitter, and saw that Ginny Thomas was trending this morning as possibly one of the unnamed co conspirators. Wonder if you would venture to, you know, think out loud here of who the others might be, or if she could, if there's a case that she could be one of them.
I don't think so. I mean I went through the list in pretty much. I mean, Rudy Giuliani is clearly co conspirator one, the Sydney Powell is I think co conspirator three. You've got John Eastman, who I think is co conspirator number two. I don't see Ginny Thomas being in the list there of people that are part of this. I mean, she was on the pariah free of this.
I don't think she was a major player. She had put in her two cents with Mike Mark Meadows, Donald Trump's chief of staff, but no, I would be surprised if she turns out to be a big player in this indictment.
Anything about Clarence.
I don't think so. I mean, there is a reference there where they tried to get One of their plans was to try and get an order from the Supreme Court at some point, and we know that what they were trying to do was set this up so Clarence Thomas I would issue an order that would give them some kind of credibility in terms of what they were doing. So I think that's going to come into play here.
But again I don't think Clarence Thomas is going to be a big player and somebody to be watching it in this case.
Now people to watch are really.
Mark Meadows and others, the lawyers who were the in house counsel, Mike Penn. I mean, keep in mind, the witnesses in this case are all going to be Donald Trump employees and people that work for Donald Trump. These are not left wing crazy ATIFA people. This is Donald Trump's own courtrey of people. I mean, these are his pals that are testifying against him.
Nick, great stuff. As always, I'm not sure there's a better voice on this than Nick Ackerman, former assistant Special Watergate prosecutor. Nick Ackerman, Thank you so much for your time for this unfolding issue, and it just seems like it's a never ending There are so many layers it's
hard to keep track of. I find some of the helpful reporting, at least for me, when I kind of spend my time looking at this stuff, it's just reminding kind of what's out there, where are we what stage are we at in these various things?
It's so hard to keep track of and to think that this is somebody who might be elected president in a little over a year from now, and try to keep track of all the charges against him. I'm just as lost as you are.
I will keep up with it. This is Bloomberg.
You're listening to the Team Kenshar Live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg dot Com, the iHeartRadio app, and the Bloomberg Business App, or listen on demand wherever you get your podcasts.
When I saw the news that Fitch downgraded the US government, I was surprised. It just didn't seem very patriotic to me. But I'll tell you who was not surprised, and that's Ira Jersey and his team. IRA's the chief rate strategist at Bloomberg Intelligence. He wrote back on May twenty fifth that quote political partisanship causing a rolling debt ceiling crisis and continued deficits well over three percent of GDP doesn't suggest that a triple A rating is warranted. Iraight, you
were so right here. I mean, what's fitched. I mean they're joining some other rating ahgs that have already done it. But that doesn't seem very patriotic. What's going on out there?
Yeah, well, so it's been to years since SMP downgraded the US from Triple A to double A plus and almost of the week actually because that was Honor about
August sixth that that SMP did it. So I think they just they saw the Treasury borrowing estimate from Monday night that came out at three o'clock, where the Treasury Department said, hey, we're going to borrow over a trillion dollars just this quarter, just this current quarter, and uh, and we expect to have to borrow a lot more later so and Fitch between that and between the you know, another debt sealing crisis that you know was averted again at the last minute back in June, you know, they
just felt that the US is not yet is not triple A anymore. And quite frankly, I can't blame them because under you know, when you look at all of the triple A rated countries around the world, there's not that many, and you know, the US debt burden doesn't look anything like Germany's, for example, which is one of the one of the only triple A rated sovereigns left
in the in the world. So you know, maybe if if we were willing to get rid of this debt ceiling problem that that we keep on having to do every two years, maybe Fitch would have had a different opinion. But you know, I can't say that it's a huge surprise that had happened. You know, maybe the timing a little bit we expected it to happen, maybe after this morning's announcement, but you know, it's still not a huge not a huge surprise. I don't think markets care very
much about that. I think there the market, the treasury market is reacting a lot more to the higher supply that was announced just this morning.
Right.
That seems like the timing is really the biggest question mark around all this on the in terms of the market reaction that we're seeing. And so you had flagged in your note I or that just came out that the treasury coupons being a bit of a factor in this. I was even wondering too, when when credit agencies issue of ratings watch those are typically resolved in what three to six months, So I guess we're kind of coming
up on that period. So what do you think was really the principal driver in the timing here.
Yeah, so sixty ish ninety. I think it was really the fiscal outlook that kind of drove Fitch over the edge. Obviously they were thinking about it for a while, and it's not unusual for the rating agencies to come out with their new sovereign ratings over the summer, you know. Again, like SMP downgraded the US right around the debt ceiling issue that we had in twenty eleven, but this is also the time when they were fresh their rating, so
their annual review of sovereign debt ratings. So again, like, I don't think the precise timing was a little bit of a surprise, but I think the general timing not quite as much. Right, So sixty days ish after they initiated their watches, isn't that that surprising? The market reaction to your issue about talking about coupons, you know, the ten year started to sell off and a lot of the treasury started to sell off after the stronger than
expected ADP report. But some of the details of the treasury refunding announcement were interesting in that the government decided that it was going to increase the amount of ten yere bombs ten year notes that it's going to issue by three billion dollars this month, just next week. That was a little bit more than I think most people
were expecting. We were all expecting increases everywhere. We knew that the government was going to have to do that, but they chose specifically to increase the ten year more than they did the thirty year, for example. And I think that's one of the reasons why you're seeing ten year yields sell off a little bit more than other places along the yield curve.
So Ira Liz McCormick a Bloomberg News is reporting this morning that the Treasury said it will sell one hundred and three billion dollars of longer term securities that it's so called quarterly refunding auctions next week. And I got to tell you, Ira, if I get a phone call from the Treasury asking me to pony up, I'm going to pass. I gotta tell you a little tapped out here. But my question to you is, given this downgrade, will that change who shows up next week to bid on these government bonds?
Yeah, it probably won't, you know. I think that the single one of the biggest fallacies that I've been talking with customers about this morning is that there's this idea that there's a lot of mandates and people who own treasuries because their triple A. So most mandates say US government securities, securities of agency of US government agencies, so Fanny May, Freddie Mack, and the home loan banks, and
investment grade corporate bonds. So even the triple A that can only own triple A or double A mandates, they still specify treasuries and agency mortgages as their own asset class. So the ratings are relevant for those for those particular instruments. Now, you know, if the US were to be rated to double B or something, maybe that would change the way
that people change their outlook. But when you look at a country like Japan, for example, they have a much higher debt to GDP ratio than the US, they are slightly lower rated, and their yields on their bonds are significantly lower. Now big part of that is because the Bank of Japan has been buying a lot of bonds, but they still probably even without the Bank of Japan and the market probably wouldn't have yields at five percent
or four and a half percent. And you know, similar to parts of the US curve.
So Ara, I know that when credit agencies are what they're rating is the credit worthiness of the borrower.
And it's just.
Coming at an interesting time here, when the economy is doing really well and you're hearing all these more calls that more people are optimistic that we're going to avert a recession. The soft landing case has never looked better. You know, to someone who maybe is having a tough time squaring the two, what would you say to them.
Well, I think there's two pieces to this. On the fiscal side of things. I think one is we've seen pretty massive wage gains by the household sector when you go back and you look at what happened in twenty twenty two and to so far in twenty twenty three, but that has not really translated into significantly higher tax revenues.
And so, because you still have fiscal spending from the Inflation Reduction Act as well, still a little bit of the twenty twenty one stimulus still being pushed into the system, you have still deficits that are over one and a half trillion dollars a year and probably will be in fiscal twenty twenty four as well. So unless you wind up unless that good economy really winds up pushing up tax revenue significantly, you're going to continue to have a
pretty not a good fiscal situation. On top of that, you have more and more baby boomers retiring. That's forcing more and more money out of the social security system. The social security now has to be funded. So whereas you know, just a couple of years ago, your social Security taxes went to the people who were retired, that's not the case anymore. It just doesn't cover it. The soci security taxes that we're collecting today doesn't cover one
hundred percent of the outflows of that program. So we have to figure out some way either to raise taxes or to raise government debt. Those are the only two ways to get those mandates fully funded.
Ye I'm starting to pay a little bit more attention to that whole social security discussion than maybe I did a few years ago. I don't know, Maybe it's just me Ira. So when we have these auctions next week, the government's gonna have to pay up more. Well, I guess my question is will they have to pay more than they did, say yesterday before the downgrade.
Well, assuming yield stay where they are right now, the answer is yes, and I think that that's one of the reasons you're seeing the sell off today is just this idea that you know, yeah, maybe a little bit on Fitch, but just the idea that we are going to have more supply, you know, next year. Next week we get the three year auction, ten year, and thirty year, and that's a lot of duration. So that's a lot of market risk that investors have to absorb. Now, we've
seen reasonably decent auctions. They've been you know, somewhat mixed, but we saw a pretty good ten year auction last month. So the question is will that relate today this week. Keep in mind, too, is that you have old ten year notes maturing on the fifteenth of the month that were issued ten years ago, so those so people who own some of those and held them to maturity might think about reinvesting some of that into the current ten
year notes. So refunding auctions tend to be a somewhat different animal than the auctions that you get in the subsequent couple of months. And obviously this three billion dollar larger size I think could have an effect. So I think your risk, Paul, is that you wind up we'll see some of higher yields at next week's auction because of the excess supply.
All right, Ira, good stuff as always, Ira Jersey, chief US Interest rates strategist for Bloomberg Intelligence, chief soccer strategist for Bloomberg LP. Real Central, New Jersey is his club. As they say, you're listening to the tape.
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Smith, Paul Sweeney here in our Bloomberg Interactive Brookers Studio also doing that YouTube thing, so just head over to YouTube. And I've been in the search Bloomberg Global News in that old Bloomberg Global Markets or bloom Bloomberg Global News. I think gets it to you. That'll bring it to the feed there. So you know, I recently closed on the Jersey Shore estate the compound, if you will, and my mortgage had a six handle and I was not happy.
Now I'm looking at the bank rate thirty year mortgage rate seven point three one percent.
You got a deal.
I got a deal, I gotta deal. You got closed a victory, Yes, exactly. Now, now what do we do? I mean, what's this market doing. Nobody wants to get out of their house here, some he chief economist of core Logic, joins us. Some give us a lay of the land, of the kind of the residential real estate market today in a world where a thirty year fixes seven point three percent.
Yeah, like you said, nobody wants to move at the moment. And so residential housing market is really suffering, particularly the existing market, because on the new home side, builders and developers can they can step in and provide some mortgage rate buydown offers. So there's sort of a story of two markets still one where there is no inventory because existing inventory is locked up, and the other one where there is much more movement. And that's where where there's more new home construction.
Yeah, so we had a story the other day. I was taking a survey from Zillow and looking at kind of pegging five percent as the mortgage rate. That's the tipping point of if you're below five percent, you're twice as likely to hold on to your home. But if you're above five percent, that's more when you're likely to sell. I mean, do you have you kind of drawn a line in the sand of where you see people as more likely to lean one way or the other?
Yeah, I mean I've seen surveys, a couple of surveys to that extent showing that five and a half percent is the magic rate at which you know, there's there would be more people would be more willing to move. So you know, I mean think about it this way. You know, six ninety six percent of existing mortgages are below six percent, So that's you know, such a special mark.
Excuse me, that makes me special being in that fort.
Yeah right, Well, I myself locked in at six point three in March of this year, and I was very unhappy about it.
So what does new construction need to do here? I mean, it is just simply a situation where this is an industry that requires more inventory. We need more housing.
Well, yes, that's definitely the case. I mean, when you look at the you know, trend in terms of new home construction over the last couple of decades, it peaked right into going into the Great Recession, and then it dropped. You know, some seventy percent, and there was trending very very very gradually for the next decade, and it didn't really pick up to the pace that it was pre Great Recession until the pandemic started. So we have sort
of accumulated this almost two three four million. I mean, it depends on what the estimate are looking at a supply shortage until now that we're just trying to backfill at this point.
And now we're seeing prices come back up again as well. So even though people don't want to move home, prices are still going up.
Yeah, I mean, so this is the thing. You know, sellers are sitting still, but buyers are out there, you know, and you know, we knew first time home buyers are going to be active, particularly you know, those that are the huge cohort that's coming on first time home buying age. So they are out there, and we do still see investor activity. We still see baby boomers wanting to migrate at this point after they're retired. So the buyers are
out there and there is no inventory. So in our latest Choo Logical Home Price Index, which was actually released yesterday, it showed pivoting of that home price deceleration. So in in February of last or the spring of last year, home price growth peaked at over twenty percent, and it dropped very quickly to one percent rate of growth a
couple of months ago. And now at this point it's pivoting back up, and we're seeing home prices now for four straight months accelerating on a monthly basis at a faster pace than they usually do in spring home buying season. So buyers are definitely putting pressure on home prices because there's more of them out there than their sellers.
So I hate to ask this question because I've got a bunch of them in my family. What did first time home buyers do? What do the young folks do these days?
Well, yeah, I mean it's very challenging for them. I think, you know a lot of them are seeking places where there is inventory. So hence we are seeing more home sales activity in those markets with new home construction, and those would be the markets in southeast and South. You know, Texas always ranks among the top markets with in terms of new construction. There is a lot of activity in Midwest, for example, and now at this point northleast as well
as people are coming back into the office. But I think what they're doing is they're buying, you know, wherever they can. It may be further from the offices, further from downtowns, but that's okay now because we can work sort of, you know, we don't have to go in every day, so we can work further from the office. So, you know, I think people are buying wherever they can at this point.
And Sama, where are you seeing the demand? Is it more in the single family space or the apartments and the multi family side?
Well, yes, so, I mean we always see more interest in single family particular as people as households grow, you know, there's more, there's kids, and you know, two persons or three person households, so there's always more demand for single family homes. But what's interesting is that attached housing, so that would be condos, are now appreciating at the faster pace than detached homes. And that's because during the pandemic, there was not a lot of the demand for attached homes.
The people didn't want to be in density and close to each other. So now a lot of the home prices for condo type housing is appreciating at a faster pace. It's catching up to all the growth that single families saw during the pandemic.
In terms of new home construction, is anybody building starter homes because it feels like when I drive around and I do see homes being built, they're kind of the McMansion and the builders tell me, well, that's where the profit margin is, right.
Yeah, I mean that's a difficult one because you know, we talked about this before. It's it's it's very costly to build a home at this point. Land is more expensive, materials are more expensive, labor is more expensive, so you know, builders have to find profit margins where they can. But I think there is a genuine effort and given that the demand is concentrated in starter homes for you know, for starter families, I think they're genuinely trying to create
that type of housing. And so now there is a lot more interest in you know, duplexis two to four units or you know, row housing and stuff like that. So I do see effort happening in that for that type of housing.
Yeah.
All right, Salma, thank you so much for joining us once again. I always appreciate getting your thoughts and perspective on the residential housing market. So I'm a HEP chief economist for Core Logic.
You're listening to the Team Ken's Are Live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg dot Com, the iHeartRadio app, and the Bloomberg Business App, or listen on demand wherever you get your podcasts.
Want to head down to Joe Matthew here. He's Bloomberg's host of Sound On on radio and Bloomberg's Balance of Power on television. He's in DC. He talks to everybody that's down in DC. He's got his finger on the pulse here, Joe, Yesterday was a big day for former President Trump. This is federal. This is why in DC. Is there any kind of growing sense of how this might play out?
It's really difficult to tell.
Tomorrow is going to be a big day when he is expected to show up and face the magistrate. But it's interesting, you know that there's a model for this because since this is number three now, which is remarkable, but there does seem to be a feeling here in the Capitol and on the campaign trail when you talk to people that this one just feels a little bit different. You know, we've talked a lot about indictment fatigue, But when you read through these charges obstruction of an official proceeding,
conspiracy to defraud the government, it's remarkable stuff. I've got the indictment right in front of me here, and it's worth actually reading the document. There's a lot of great reporting on the terminal, and our reporters have been amazing trying to decode everything and kind of unpack everything in here.
But the line that jumps out to me, as it did when this first dropped yesterday, each of these conspiracies, I'm reading directly from the text here targeted a bedrock function of the US federal government, the nation's process of collecting, counting, and certifying the results of the presidential election. That is a remarkable thing to imagine that a former president of the United States is facing this charge even as he runs for reelection.
And Joe, I guess one of the big issues that I think we probably all like to get some handle on is timing. Is this something that can go to trial before the election or after the election. You know, there's some different opinions out there.
Yeah, we just don't know it.
Look, I'm sure the Special Council would like to see this done before the election. But if there's one hallmark, one strategy that is associated with Donald Trump's legal teams plural.
It's delay, delay, delay.
He's going to be approaching all of these indictments the same way, knowing that we likely have another to come from Fulton County, Georgia. So you know, it's really difficult to tell what's going to happen as they still are arguing over the trial date for the classified documents case, now this and then another and also so how do you run a presidential campaign when you're trying to manage
all of these legal angles. One thing we do know is his campaign is helping to pay for those legal teams who are awfully busy right now, and he's going to have to hire a lot more lawyers.
Another thing about his campaign, Joe, it's polling very well, like very much ahead of the fact here. So, I mean, do you see that it seems like, you know, every time that a new charge comes about, this really emboldens the Trump base. You see that. Yeah, you think that trend's going to continue.
Here probably, I mean, it's hard to see where this ends. If history is any guide, You're right, he's going to gain some polling points, and he's going to make money on this. There are a couple of different ways to look at it, though there's clearly a short term benefit for him. I mean, the next in line would be Ron DeSantis, and he's trailing Donald Trump by twenty to
thirty points depending on the poll here. So look, unless something big happens, unless there really is a concern among the MAGA base about this, and there's no reason for us to believe that Donald Trump may well be the nominee.
The long term.
Implications, though, when you put him in a general election matchup against Joe Biden, become a little bit different here, and there are a lot of concerns about how the four potential indictments and other legal action that he's facing is going to fly here in a general election. It's not a good way to pick up independent voters or
expand your own base. But I'll point you back to the poll we got this week from the New York Times in Siena College, twenty percent of those Republicans who support Donald Trump, the real core of the MAGA base, say they would still vote for him for president if you were convicted of federal crimes.
So this is just another day.
Why not, Joe, How should or how do you think the other plethora of Republican candidates are going to kind of position these various legal issues for the president in the months ahead. I mean, is this something that they want to make front and center. We can't have this as our candidate, this person's candidate. Are they going to try to maybe stay with sidelines.
It's funny because you've got the people who are running against him who are afraid to criticize him, even at this incredible moment of what would be apparent weakness. And you've got different shades. It depends on the Chris Christie's and Will Hurd's of the worlds are going to demonize him for this. Tim Scott, though I was kind of amazed.
I have all other statements in front of me. Here what we see today are two different tracks of justice, one for political opponents, another for the son of the current president. He's going straight to Hunter Biden on that. Look at Mike Pence, though, this was the most interesting to me. And Mike Pence is not doing very well. He can't even get on the debate stage yet as far as we know. But look, Mike Pence has a lot to do with this case, and he testified in it.
Today's indictment, he writes, serves as an important reminder anyone who puts himself over the Constitution should.
Never be president of the United States.
Let's see how these evolve over time. If they smell blood in the water, it'll get a lot.
More severe and anything Joe that you're expecting from mister Joe Biden. He's also stayed pretty quiet on a lot of these headlines.
Yeah, I think that he'll likely stay that way. They've kept a real distance or certainly tried to build the appearance of having distance between the Justice Department and then even further distance between the Special Council.
So I would not suspect that he's going to weigh in on this.
It is remarkable, though, when you consider the day that Donald Trump had yesterday, knowing that Joe Biden was on vacation at the beach and went to see Oppenheimer last night.
So it's kind of two different worlds exactly.
So one of the interesting aspects of this January sixth indictment is it's in Washington, DC.
Joe.
Yes, that's a different animal than South Florida, who said, what's the expectation here about how that will Will the president be able to get a jury of his peers?
Ronda Santis doesn't think so, And that's another reaction that we heard from the field. He says, Washington is a swamp and it's unfair to have if anyone stand trial before a jury, that's reflective of swamp mentality. But look, you know, Washington's pretty good at this kind of stuff actually, and I suspect that they're going to have this together pretty quickly. It's the former present and it won't have much say in that, although his legal team will try
to slow this down in terms of their strategy. We're you know, we're hearing a lot about the first amendments today, which is interesting, even though the indictment is clearly about his actions more than the things.
That he said.
When you say, pretty quickly, is that before or after the twenty twenty four.
Election, great question. We just don't know.
I mean, the Special Council, the Department of Justice, I think will make every effort to get this done before then. We'll hear a trial date soon. Whether that moves again is another question. They've already moved the date on the last indictment over the classified documents, so I suspect that'll be a moving target for a bit.
Joe Sound On with Joe Matthew coming up at one pm Wall Street Time. I got to think this is still in flux for you guys here as we sit here at eleven to fifteen. I mean, maybe how you guys can try to approach this.
Well, you know, we're always building the plane in flight here.
Yeah, but well, one thing that's consistent unsound on is our great panel or We're going to have Rick Davis with us today and Matt Bennett, the Democrat from Third Way to kind of get both sides of this to help sort of flesh out what's going on in this case.
And we're gonna have some smart legal minds. In fact, I heard just a short time ago that coming up at two o'clock the second hour of sound On, we're gonna be talking to John Dean of Watergate fame and be curious to get his historical perspective on this too.
And Joe, this is the dumb question of the day, but as we think about the twenty twenty four election, on the other side, is the Democratic Party are they okay with Joe Biden. Are they this is our guy or is it just just be too ugly to try to do anything else?
I think this is our guy is the idea right now. He's got a thirty nine percent approval rating in that New New York Times poll this week.
That's up from thirty three a year ago. It's still way underwater.
Ye half of the Democrats in that poll say they wish they had somebody else. There's a lot of talk about his age, but let's see where those numbers are when there's a real matchup.
Everything right now is hypothetical.
And look, Gavin Newsom's not coming to the rescue anytime soon.
Okay, Joe, Matthew Bloomberg sound on on radio. You can get that at the one pm Wall Street time and then Bloomberg's Balance of Power on Bloomberg Television. Lots to talk about there always seems to be done in DC, and now with all these various indictments against the former president and o election next year.
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Let's bring on a next guest here because we want to get a sense of kind of what the economic situation. We've got a lot of economic data coming out this week and next week. Sonya Meskin joins us here. She's an investment strategist, head of US macroeconomic Analysis at BNY Mellon. Sonia, thanks so much for joining us here. I don't know. I mean, let's start with Fitch. It's not every day that you know your government and the finances of your
government get downgraded. As an economist, how do you feel about this?
It's understandable Fisch had told us in advance they would be doing this, and it is reminiscent of what the SMP did in twenty eleven, and even in terms of
the timing, it's not that different now. Of course, it's less of an event that I believe the SMP downgrade was in twenty eleven, and the main reason being that investment mandates have since then been adjusted to allow for not only AA the ULTIPLA rated securities for majority at least type of mandates, but for US government rating or the equivalent, and so I think this will be less of a have less of an impact on the market
than the twenty eleven development did. But that said, it's important to keep in mind why Fitch is doing this and all the ra reasons that they cited in their downgrade are very valid and certainly a longer term concern for investors.
And we're looking at right now sony and economy that's doing pretty well here that a FED that might still high rate, so you know, one more time, maybe even more than that in this cycle. Does this play into the Fed's calculus at all? You think?
I think that in the near term not so much, because you haven't seen a strong impact in the markets. I would say, I think maybe the refunding announcement, the larger you know, auction sizes, that is probably more impactful for the treasures near term. But for the FED, the biggest concern is uh, you know, inflation, inflation outlook, price stability, and employment. So they're going to be paying more attention to those indicators.
I would say, Sonya, we're gonna get some important jobs data from the government on Friday, but we're gonna have ADP print today. ADP employment change came in well above expectations yet again, what are your thoughts on this labor market? For a lot of folks, it's showing surprising resiliency.
Yes, and I.
Agree, and I think a lot of this has to do with the structural shortfall of supply relative to demand, which may have been exacerbated with the COVID dynamics. It also has to do with a very strong consumer. So, for example, you can see that the consumer is really resilient through and has been through the last couple of years.
So you know, ATP numbers are very very strong. I wouldn't expect the Montauan cour pass through to excuse me if they're not from pay rolls this Friday, but it is indicative of the trend.
You're right, and you know, we're getting a lot of more people saying here now, Sonia that the soft landing argument is looking a lot better these days. Where are you in that camp or do you think there's even a risk here that potentially people are maybe declaring victory a little too soon and that the economy could even reaccelerate.
I do think there's a risk of that that is underappreciated by the markets today. I think that the probability of a Selt landing may have resen since the last few months, but it's not one hundred percent. And I think that those scales of either reacceleration or a more pronounced slowdown are underappreciated by the market today.
You know, you talked about the timing of the Fitch downgrade. We also heard from the Treasury about some auctions coming up to fund our government. And I mean, boy, interest rates are so much higher and the deficit continues to climb, When does that become a problem for I don't know, I guess politicians. You know, we know, economics has been calling out this risk here of the you know, the budget, of the growing debt and the budget deficits every year.
But now interest rate a lot higher, so it's a lot more expensive to fund that.
Sure, it's more expensive for the government to fund itself, and it's going to be increasingly more expensive for the private sector to fund itself, both because more corporates are going to have to refinance into a high rate environment and because there may be some crowding out effect from larger government issues as well.
So, Sonya, I wanted to come back to this idea of inflation and the economy potentially re accelerating and what that means that, you know, for the FED, if they're going to have to get more aggressive again, and how that fits in with all these people now dropping their recession calls. Do you think maybe more delaying the call is the right move?
Yes, I would agree with that. Well, you know, it kind of always goes through fluctuations. A recession at some point in time is almost inevitable, but the timing may have been pushed out relative.
To you know, earlier this year.
But I do think we're certainly seeing the seeds of all slow down, potentially just the delayed landing.
So Sonya, I mean, I'm probably in the camp like I've in. So many people ask me my economic forecast, so I feel like I have to give it. But you know, like a couple of weeks ago, I said, I'm taking recession off the table, but I recognize that it's still out there. But inflation, you know, I'm just looking at some of the inflation measures they were trend They are trending in the right direction, but one that's not is just kind of oil and energy and gasoline
and things like that. And I know that's something that the Biden administration pays attention to because people feel that, you know, immediately in their pocketbooks. Are you concerned that inflation may have another leg up?
Perhaps, I'm concerned that it would stay sticky, especially core pc versus CPI in the next towards the end of the year, I would say, And that is because rents, which are sort of rent metrics, feed through to the CPI measure with the delay and rent you know, rent prices started to accelerate last year and we're seeing the effect this year. And I think that is a bigger component of the CPI measure than the PCEE measure, which
the Fed pays traditionally more attention to the latter. And I do think energy prices are structurally important because even as though the Fed pays attention to core inflation, if any prices stay elevated over time, that is an input cost that is going to affect the prices of goods and services.
Sonia, thanks so much for joining us. Appreciate getting your perspective. Sonya Meskin, Investment Strategists, Head of US Macroeconomic Analysis at BNY Mellon Bank of New York address of B and Y Yes, Bank of New York.
Uh, it's down in the financial.
Number one Wall Street, the best address on Wall Street. Look at that financial services.
You're listening to the tape. Can's are live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com, and the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa playing Bloomberg eleven thirty.
Add it to the height of us.
It's so bad.
Gets some books A good times there, all right. Brian Egger joins us here senior Gaming and Lodging analyst for Bloomberg Intelligence. He has the career I wanted. But I had media, which is pretty good. So I got to go to a lot of movie premieres and theme parks. But this guy goes to casinos, cruise ships, hotels. I mean, it's a scam and he gets paid for it.
Unbelievable.
We're out of this thing, all right, Brian. We had let's start with the theme the cruise business Norwegian. The stock guy just crushed. Was it yesterday they had some results? I thought people were still going crazy on the cruise ships. What's going on?
I mean, they really are. I mean I think, if anything, the words were a bit more on the cost side. Bookings are strong, people are booking longer, cruises, longer in advance. Basically two thirds of the imatur for this year's already sold, so most of the bookings taken a place now are for twenty four to twenty five. I think maybe there's a little caution on fuel and operating expenses going forward. There's going to be because most of the cruises are
sold out for this year. There may be more dependent on what happens with on board spending. If anything, they were too good with revenue management booking cruises up front. So I think overall this just maybe hope they might raise guidance, but you know, in terms of demand it's there.
So I mean, here's some of your research. More than seventy percent of bookings in the last ninety days for Norwegian are for twenty four, twenty twenty four and twenty twenty five departures, pointing to a longer bookings league time and four cores four Q fair gains of ten percent versus twenty nineteen. Man, that's healthy, it seems like, right.
Yeah, I mean we're we're certainly back at a strong point and they've booked most of this year, right so.
And what kind of I mean, how much do you when you're booking that far out? Surely you've got to put down some kind of a deposit first, like there, But are people really even paying for these all the way up front? Or how does that look from a cash flow situation.
You can try advanced deposits and advance and those have been really strong and healthy. I mean, the demand is there with people booking both longer cruises and longer in advance you know, Auckemens and peak out a little bit, well the last peak because they're booking these longer immersive itineraries. But you know, the demand is demonstrable.
Boy, I'm just looking at the FA function on the Bloomberg terminal for just Norwegian Cruise lines and you can I had to forget a little bit how hard hit they were in the pandemic. And I know we talked to you a lot during the beginning of the pandemic because you know, cruise ships are like the last place you want to be during the pandemic. But you know, in twenty nineteen one point nine billion of Ebathad, a nice healthy company. Right twenty twenty they lost one point
one billion dollars of cash. Twenty twenty one they lost one point eight billion and started to come back last year a loss of six hundred and eighty. This year they're gonna make ibadad. You know, they're gonna have one point nine billion, and then next year two point three
billion is consensus. So boy, there's an industry that really got hit touch to us about the balance sheets of this company, because one of the things I remember from the pandemic, one of the first weeks or two weeks of the pandemic, these guys hit the bond market, the industry.
I mean, the balance sheets are much stronger. What are my credit account of our Jody Worrie to speak to the specifics, but you know, they definitely are back in much better shape. They certainly did tap the afpuity markets during the downturn when they were not cruising at all, but they're back too much healthier position, and all those positive YEAL comparisons are versus twenty nineteen sort of kind of above water where we were back pre pandemic, and.
I remember I was actually covering credit before I had switched over to the economy team during the pandemic, talked to Jody among others. And you know, it was amazing because we saw companies like Carnival, like Norwegian come to the bond market and had to always do secured issuance. There's no way you were getting a deal done without collateral. And I think Norwegian even put up an island at the time to secure his collateral. And I see Carnival
now is doing secured debt issuance. Is that still really necessary that they can't go unsecured at this point?
So again, all they're fur Jody and a lot of that, But you know, they've got attractive forms of financing. Generally, they have access to export credit financing. They generally are in a good free casual position now that they're back and cruising. And so we've gotten past that point wherehere they were negative EBITDA, we're now we're now in a much better course.
All right, let's talk my favorite business, casino's baby MGM Resorts, which, by the way, I remember that when MGYM Resorts opened up in Atlantic City back in the seventies, wasn't eighty I don't know way back in the day anyway, that I was up forty eight or forty six percent year to date? Did MGM. Did they sell the Mirage?
Yeah, so they sold the Mirage. They bought the Cosmopolitan. Was on our next.
Door the Mirage. When I started really going to Vegas for business back in the early nineties, the Mirage was the bomb. That was the place to go. They sold it.
Built in eighty nine, it's now, you know, not the newest kid on the block anymore. But you know, they also sold Treasure out at one point. But you know, they bought the Cosmopolitan, So really they're kind of integrating. Yeah, I think I think they're assembly a more maybe slightly younger.
Is the Cosmopolitan part of the new place?
Yeah, it's it's adjacent to the city center, and it almost feels like it's part of that complex anyway, So that made a lot of sense as a as a transaction.
All right.
I haven't been to Vegas in a while. I don't know how the Strip is surviving without me, But how are things in Vegas? Is that the business of Vegas? How is it these days.
Yeah, if you'll get like the second quarter, which we just got some numbers for recently, those gaming revenues are up overall twenty eight percent versus the comparable period of twenty nineteen, so we're you know, we're flat year over year, but last year was a big year of recovery.
So Vegas is really.
Back in a significant way. Convention bookings are strong, you know, a long way off the bottom.
You know.
It's so interesting we're looking into this on the economy side that apparently the Las Vegas has one of the highest employment rate unemployment rates of any metro area in the US right now six percent national average. It's like three five three six right now. We'll see on Friday with the latest look at that, is you have any insight into that.
Generally speaking, in particular the Vegas local markets where Boyd and Red Rock operate, they benefit from a lot of the resort adjacent economy, whether it's resorts themselves or construction activity. So a lot of things I think will be constructed for that economy going forward, whether it's new resort construction although that's at a solar pace, or the building or the a's the a's moving to Vegas at the former
Tropic Caana site. I think all those things like the Allegiant Stadium where the Raiders play, the A's moving there, you know, the sports new constructional.
Help, what's sports betting done too? And I can pull up an app anytime and lately down a bet. How has that impacted kind of the casino companies said that the gaming companies say that you follow.
I mean historically, for well, the brick and mortar part of the business, historically, sports betting is only two percent of that business. It's it's principally Don Barney by casinos.
The online business, although Nevada is certainly not the biggest state in that regard, it's it's been I don't think it's really taken share away from brick and mortar gaming per se, although the vast majority of sports betting revenue that's generated in states with both brick and mortar and online is coming from online.
Can you give us over here, Brian, just a quick outlook on the hotel space, and that's also in your purview.
Yeah, So we had Marriott earlier this week, We'll have Hygatt tomorrow. I mean, what we're really kind of seeing here is domestic leisure travel still strong, but you know,
China is coming back in a big way. If anything, international revenue prevailable room is now growing more quickly than the US, and even within the US, we're seeing some shift away from domestic leisure travel, which has been monstrously strong, to a little bit of a tilt towards people traveling overseas Europe and Asia and within China in country travels back.
So we're kind of seeing the leadership maybe perhaps in pricing and revenue shift to a little more towards the upscale luctory side and more towards non US and China. US still strong, but you know, I think with the travel restrictions being relieved in China, that's coming back to.
And one of the areas to see that, I know it is also in your purview, which is the Macau and that is the gaming driver glow believe what's going on in mccau.
You know, So Macau you look at like the second quarter also, you know, it's down still pretty sharply versus pre pandemic, like thirty eight percent in the second quarter. That's that's largely because we're the travel restrictions in Macau China eased more slowly than North America, and the vip junk at credit business was pretty much banned, if you will. So now we're relying more on the mass business. It is coming back. Mass is down a lot less than before,
and the business there was getting stronger. It's just going to take longer because the travel restrictions were in place for a while.
What's the play there if I want to get a play on macaw as the Las Vegas Sands.
So you know, there's the companies that are traded in and purely exposed there, and then within the North American companies that I cover, among degrees of exposure, you know, Sands has got like the most properties and the most exposure one with when MGM is a slightly smaller percentage of his casual but all the big three MGM stands and when I have exposure there.
Look at this stocks for those I mean they're all for trailing twelve months, they're all up kind of fifty sixty percent Las Vegas Sands win. Yeah, So interesting stuff, all right, Brian Eger, thank you so much. We can talk about anything with this guy. I mean, hotels, crews, the whole nine yards. He's got to cover all the fun stuff Brian Nagger covers, and he's not really a gambler either. That's what's really fun. Even we've gone through all to Vegas, they know I'm coming.
Thanks for listening to the Bloomberg Markets podcasts. 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.
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