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- [00:02]
Host 1
When patients have a disease and the cause is known, it usually ends up needing a specific solution. On the podcast targeting the toughest diseases, we explore the innovative tools, methods and unique philosophy Vertex Pharmaceuticals is using to search for treatments for some of humanity's most challenging diseases. Subscribe today wherever you listen to podcasts.
- [00:30]
Katie Hubbard
Foreign.
- [00:36]
Host 1
From iShares, you get access to both monthly income and growth potential in one simple ETF. It's the best of both worlds. Discover Bali iShares Large Cap Premium Income Active ETF iShares the market is yours. Visit www.ishares.com to view perspectives for investment objectives, risks, fees, expenses and other information that you should read and consider carefully before investing. Risks include principal loss and the use of derivatives, which could increase risks and volatility. Monthly income is not guaranteed. Prepared by BlackRock Investments ll introducing the.
- [01:02]
Host 2
All new Adobe Acrobat Studio now With AI powered PDF spaces do more with PDFs than you ever thought possible. Need AI to turn 100 pages of market research into 5 insights with a click. Do that with Acrobat. Need templates for a sales proposal that'll close that deal. Do that with Acrobat. Need an AI specialist to tailor the tone of your market report to sound real smart in real time. Do that with the all new Adobe Acrobat Studio. Learn more@adobe.com do that with Acrobat the Chase Inc. Business Premier card is a painful card with flexibility made for business owners who make things happen. Earn a total of 2.5% cash back on every purchase of $5,000 or more, plus earn unlimited 2% cash back on every other purchase, giving you unlimited earned potential to invest cash back into your business. Inc. Business Premier is part of a suite of credit cards from Chase for.
- [01:55]
Ally McCartney
Business designed to meet your needs every.
- [01:57]
Host 2
Step along the way. Learn more@chase.com businesscard Chase for Business make more of what's Yours Accounts subject to credit approval restrictions and limitations apply.
- [02:08]
Ally McCartney
Cards are issued by JPMorgan Chase Bank.
- [02:10]
Host 2
NA member FDIC Bloomberg Audio Studios podcasts radio news this is Bloomberg Businessweek daily reporting from the magazine that helps global leaders stay ahead with insight on the people, companies and trends shaping today's complex economy. Plus global business, finance and tech news as it happens. The Bloomberg businessweek Daily Podcast with Carol Massar and Tim Stanweck on Bloomberg Radio. All right, so let's talk about the next era of the US Central bank and more. Here with us once again in studio, Matt Lizetti. He's chief U.S. economist, head of U.S. economic research over at Deutsche Bank Good to have you back with us.
- [02:55]
Matt Lizardi
Good to be back.
- [02:56]
Host 2
It does feel like we're trying to figure out who's next. You do actually write specifically about Awash nomination and what it would mean for the Fed. Does it really matter who ultimately will be as Fed Chair? Since it is one vote, an important vote.
- [03:09]
Matt Lizardi
Yeah. So, you know, we've had to, as this news evolves of.
- [03:12]
Ally McCartney
Right.
- [03:12]
Matt Lizardi
Just about everybody that's a front runner. So we wrote a Hasset piece before, you know, months ago, I think we were talking about Governor Waller and why we thought he could have been a very good candidate, candidate for Fed Chair. But so the question of does it, does it matter? I mean, the market is pricing it like it does matter. There's a premium in the June FOMC meeting. We're building in more rate cuts at that meeting than the surrounding meeting. So the market is pricing something happening as that transition takes place. I think we're a little bit more skeptical of how much it can matter. You know, clearly I think Chair Powell has mattered recently. I think you don't get the December rate cut without Chair Powell essentially pushing it through what is a very hawkish committee at this point in time. But I think he built up that confidence, the credibility within the committee over a period of time. Just somebody coming in from the outside with a more dovish view is not going to be able to get this hawkish leaning committee to cut rates aggressively.
- [03:59]
Host 1
Up front of the candidates. Who are the reported frontrunners. Is there one who would send a signal to you or maybe send a signal to the markets that the Fed's independence is at stake?
- [04:11]
Matt Lizardi
Yeah, I think that there's lots of questions around this. I think when you kind of see surveys, Kevin Hassett raises some of the most concerns around Fed independence and kind of commitment to get inflation back down to target. And I think that's somewhat quite natural. I mean, he's been been in the President's orbit for a period of time here. He's been an economic adviser for the President. He's been calling for aggressive rate cuts at this point in time. All these candidates are doing so at this point, as we heard from Governor Waller recently. And so I think whoever it is, the next Fed Chair is going to have to earn the market's trust that they are going to commit it to bring inflation back down to target. And I expect the market to challenge that a little bit.
- [04:49]
Host 2
Hey, Matt, you know the New York Times writes, next Fed Chair in a no win scenario. A selection process draws to a close and they go on to say the person picked to replace Jerome Powell will be thrust into a credibility problem that will be difficult to escape. Is that the case? And I also wonder, you know, sometimes you get into a position and you realize the weight of a position. And we know what the Fed does means a lot, not just to the US Markets, but to global markets.
- [05:14]
Matt Lizardi
Yeah. So, you know, I think it is the case that there's going to be a challenge for this, this next Fed chair coming in. They come in almost with a mandate to cut rates meaningfully. The President has called for the Fed funds rate to be down close to 1%, near the lowest in the world. And yet, even though Governor Waller said that inflation is under control, core PC inflation is at 2.8%. It's still 80 basis points above their target. We're now four and a half years and well above target inflation. And all the market's pretty sanguine about the inflation outlook. You know, we do have a stronger growth outlook next year. We have fiscal stimulus that's coming through the pipeline.
- [05:47]
Host 2
Sounds pretty good.
- [05:48]
Matt Lizardi
It actually looks like a pretty good outlook from a growth perspective. And then a question of, does that feed through into higher inflation pressures?
- [05:54]
Host 1
What about the labor market, in your view? We got some data yesterday. It was weird to say jobs Tuesday over and over. It's partial data and we'll get some inflation data tomorrow. But the jobs market, how does it look into you?
- [06:05]
Ally McCartney
So.
- [06:05]
Matt Lizardi
So the way we've been describing it, and I think yesterday was another case of this. It's a Rorschach test for how you think about the labor market. Each of these reports has good elements and bad elements. I think yesterday's report had strong job gains. It had a broadening out of job growth. We've seen the private sector rebound. We had negative job gains in June. Past three months have been 75,000 plus in terms of private sector job growth. So that's all quite solid. The weakness was in the household survey. You saw the unemployment rate rise to 4.6%. Broader measures of labor market slack actually picked up more. I think, importantly, at the December meeting, Chair Powell highlighted why we should discount that data. It's coming right around the government shutdown. We thought that there's going to be distortions to that household survey. So Fed pricing hasn't really moved all that much on the data. I think far more important will be the December jobs report that we get in early January.
- [06:53]
Host 2
So the worst case scenario is we've got inflation, inflationary pressures which sound like they could be coming in the new year because of some of the stimulus measures that we're certainly getting from the White House, Matt. But if we have more inflationary pressures, but we continue, if we get some confirmation, the December numbers that, that yes, indeed, there is job weakness and maybe it's continuing, that's a tough predicament.
- [07:15]
Matt Lizardi
It is, I think it's, you know, a direction of travel towards stagflationary type impulses for the economy. It is what most economists and we thought you would get out of very large tariff increases. And so I think it is beginning to work its way through the economy. I think what we've learned though, however, is, you know, this Fed under chair Powell and undoubtedly I think the next Fed, if you have weakness in the labor market, they will respond. They've responded last year by cutting by 100 basis points. They responded this year by cutting by 75 basis points. Are base cases that the labor market stabilizes enough over the next several months. The Fed does not cut in the first half of the year. But look, if you get confirmation that the unemployment rate is 4.6% or above, I think the Fed cuts in the first quarter.
- [07:55]
Host 2
All right, good stuff. Getting ready for 2026.
- [07:57]
Host 1
Come hang out with us in the first quarter.
- [07:59]
Matt Lizardi
I would love to come back.
- [08:00]
Host 2
We would love to have you back. Matt, thank you so much.
- [08:02]
Matt Lizardi
Thank you.
- [08:03]
Host 2
Happy holidays. Happy New year. Matt Lizardi, he's chief U.S. economist, head of U.S. economic research for Deutsche Bank.
- [08:10]
Host 1
Stay with us. More from Bloomberg businessweek Daily Coming up after this. When patients have a disease and the cause is known, it usually ends up needing a specific solution. On the podcast targeting the toughest diseases, we explore the innovative tools, methods and unique philosophy of Vertex Pharmaceuticals is using to search for treatments for some of humanity's most challenging diseases. Subscribe today. Wherever you listen to podcasts. These days, it seems like AI agents are just about everywhere you turn every field and every function. But without identity, you can't trust they'll serve your business instead of jeopardizing it. Fortunately, Okta helps you get identity right by securing your AI agents identities, giving you a single layer of control, a single standard of trust. So whether an AI agent supports a single user or your entire enterprise, with Okta you'll turn risk into opportunity. Secure every agent, secure any agent. Okta secures AI Support for the show.
- [09:21]
Matt Lizardi
Comes from public on public. You can build a multi asset portfolio of stocks, bonds, options, crypto and now generated assets which allow you to turn any idea into an investable index. With AI it all starts with your prompt from renewable energy companies with high free cash flow to semiconductor suppliers growing revenue over 20% year over year. You can literally type any prompt and put the AI to work. It screens thousands of stocks, builds a one of a kind index and lets you back test it against the S&P 500. Then you can invest in a few clicks. Generated assets are completely customizable and based on your thesis, not someone else's. Go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market paid for by Public.
- [10:10]
Host 1
Investing Brokerage Services by Open to the Public Investing Inc. Member FINRA and SIPC Advisory Services by Public Advisors llc. SEC Registered Advisor Generated Assets is an interactive analysis tool. Output is for informational purposes only and.
- [10:23]
Matt Lizardi
Is not an investment recommendation or advice.
- [10:25]
Host 1
Complete Disclosures available at public.comDisclosures Foreign. From iShares you get access to both monthly income and growth potential in one simple ETF. It's the best of both worlds. Discover Bali iShares Large Cap Premium Income Active ETF iShares the market is yours. Visit www.ishares.com to view a perspective for investment objectives, risks, fees, expenses and other information that you should read and consider carefully before investing. Risks include principal loss and the use of derivatives, which could increase risks and volatility. Monthly income is not guaranteed. Prepared by BlackRock Investments, LLC.
- [10:59]
Host 2
You're listening to the Bloomberg Businessweek Daily podcast. Catch us live weekday afternoons from 2 to 5 Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube.
- [11:13]
Host 1
So we just talked release Deutsche Banks Is Matt Lizardi all about the Federal Reserve and his view on what the next Fed chair has in front of him or her? Depending on who it is. I'm guessing our next guest has some thoughts on the Fed and what it means for financial markets. Back with us, Ally McCartney, managing director of Wealth Management and private Wealth Advisor with alignment partners at UBS. Just over $1 billion in assets under management. She joins us here in the studio. We're going to talk about the markets and today's moves and sort of big picture what you're looking at. But we got to start just with the Fed and how you're thinking about the next Fed chair.
- [11:47]
Ally McCartney
Next year and the Fed is going to depend all about it's going to be policy and politics, right? I'm not sure which comes first. Market seems to be about 5050 on whether we have a cut in January. We think you see two cuts next year, one in the first half of the year, one in the second, I think it will be largely dependent on who's in charge, what the inflation is that we see coming into the market, whether it's from health care. We were talking in makeup chairs about the increase in cost of health care for average people going up almost 100%, as well as, as tariffs push through from, like later this year. But it is, in a sense, it is anyone's guess. The markets seem to be pricing and playing as if they know there are further cuts. It's just not clear when or how profound. You know, if you look at the last Federal Reserve dot plot, you could sort of drive a truck through whatever neutral is. I think it was 2 to 4% was a bit of a range, you know, so I think you basically have tailwinds that are. We know that earnings are going to be decent to good. We know those are going to broaden out a lot just from the IT trade. So that's, you know, one of the things, fiscal policy, especially in the first quarter, is going to be major as a result of both income tax sort of rebates as well as corporate spending initiatives and accounting issues that are going to propel both earnings and cash on balance sheets. And then again, you know, the Fed will be part of this for sure.
- [13:23]
Host 2
Ali, when you look at 2026, and I just think about, I want to think about this year, like how we thought things were going to go initially when President Trump came back to the White House, how it played out, April Liberation Day, like, I think we were all whipsawed in terms of our expectations and ultimately kind of how it all laid out. And I think we thought this was going to be a disastrous year. And yet I look at the major equity averages, not so shabby, certainly, again, if you're a bull in this market. So, I mean, I don't know, is this a reminder that it's going to be maybe hard again next year to make calls, or is it different?
- [14:00]
Ally McCartney
Well, was it hard to make calls this year? So you had to get two things right. You had to understand two things. You had to understand what AI was going to become in terms of a movement from the chief constraint being chips to the chief constraint where we now sit. And I think what's moving the market today, which is energy and land for data centers, and you had to get Trump right.
- [14:27]
Host 2
So, okay, those are difficult.
- [14:29]
Ally McCartney
Those are very difficult. You also could have simply been long beta on the concept of earnings, meaning.
- [14:36]
Host 1
You just throw money in the s.
- [14:37]
Ally McCartney
And P500, meaning exactly. And you're good tough moments, but you.
- [14:41]
Host 2
Would have done well.
- [14:41]
Ally McCartney
Exactly. Next year I think it becomes, I think actually if I'm thinking back to where I was a year ago, it becomes a little easier in the following. While I can't say that I or we can get Trump right, I think we can get directionality and maybe short term volatility we can dampen because we know it largely leads to what he wants he gets, which is mid or longer term markets up.
- [15:12]
Host 2
I think he does care about market direction.
- [15:14]
Ally McCartney
He does care very much about market direction. I think, you know, the craziest thing about getting Trump right or wrong was he told us exactly what he was going to do. You know, he told us via press conferences, via other people, via, you know, social media. And so if you went with him, you got things right. I think this year things are going to be a little, so I think they're going to be a little easier in the broadening out of earnings. Right. So if you look at for example the S&P 500 or the NASDAQ this year, what you got was the trade contributed to about 75% or 80% of what ultimately became the upside. So if you look at the next best contributor is financials at 1.7% right. Next year I think you're going to get some broadening in that. I think industrials, materials, financials, health care are going to play into that.
- [16:08]
Host 1
What happens if the promise of AI doesn't come to pass?
- [16:13]
Ally McCartney
That's the biggest risk case. I think the biggest risk case for next year is for investors or economists or policymakers is that we got AI wrong. The infrastructure, it's not if you build it, they will come. It's not that we start to democratize and deepen.
- [16:28]
Host 1
It's a big bet.
- [16:29]
Ally McCartney
It's a big bet. And today that bet in terms of what's been coming out around Blue Owl and financing. Because one of my, my biggest takeaway from a four day AI conference two weeks ago that UBS threw is that this is all about debt financing. There is not enough private debt and there is not enough capital on the balance sheets of the non hyperscalers to get us where we need to be in terms of AI. And so it has to be debt, capital markets.
- [17:00]
Host 1
Oracle is exhibit A.
- [17:02]
Ally McCartney
This is so to me this is, I literally left there going, oh, I understand what the constraint is now. I understand the difference between a, let's say a core weave and how they talk about how they finance, right. Asset backed, you know, triple A companies and how the market has been responding to that finance. I understand the private debt market and the private equity market saying we can only do so much in terms of what's needed. And so capital markets and public individuals have to come in. And so I do think that's the biggest risk. But I can also tell you from that conference and the conversations I've been having that this is truly revolutionary and moving to the bottom line in a way we've never seen before. And, and that whether it's creativity in the financial markets, in the structural markets, that the, the productivity increases and the changes to both costs and revenue generation are, you know, we really are at inflection point. That can support different multiples.
- [18:05]
Host 2
And the Oracle story is Oracle's financing for data center in Michigan progressing. But Blue Owl Capital, which has been a longtime partner in Oracle's rapid air infrastructure buildout, opted not to contribute equity. So it's.
- [18:20]
Ally McCartney
So that's exactly what we're talking about right now. It is a closed, finite ecosystem.
- [18:26]
Host 2
Right.
- [18:26]
Ally McCartney
And in order to get where we need to be going, it has to get much bigger.
- [18:29]
Host 2
Allie McCartney, managing director of wealth management and private wealth advisor for Alignment partners over at ubs, thank you so much.
- [18:37]
Host 1
Stay with us. More from Bloomberg businessweek Daily coming up after this. This is the Bloomberg Business Week daily podcast. Listen live each weekday starting at 2pm Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa. Play Bloomberg 11:30.
- [19:05]
Host 2
All right, everybody, another IPO. Getting it in just under the deadline of 2025. I mean, the end of the year. It's the biggest initial public offering of this year. We're talking about Medline. It makes and distributes medical supplies such as gloves, gowns, exam tables. You've all worn them probably at one time or another. It's used by hospitals and doctors. I mean, it's just kind of like plain vanilla in terms of a company.
- [19:28]
Host 1
Yeah. But this one is widely anticipated. The stock just surging in its first day of trading. It was up earlier more than 20%, Carol. Now 31% higher.
- [19:36]
Host 2
Yeah, like out, like just out of the gates, you know, here. So we wanted to talk a little bit about it. There you can see the real trade, 32% to the upside. Bloomberg News equities reporter Natalia Kenny Javich is with us. Why were investors just so interested in this ipo? I mean, it was oversubscribed, according to those in the know, many times over.
- [19:56]
Ally McCartney
Exactly. I think like every IPO. Most of IPOs are oversupplied, subscribed. But this one in particular shows that investors really want to see established businesses with clear profitability. Of course, it is a profitable business. It's been here for a while. The company was founded in 1966. So yes, it was oversubscribed. Demand was really strong across long only investors as well. And the company marketed shares between 26 and $30 priced at 29. Now it is trading 37. It is a pretty successful story.
- [20:29]
Host 1
Yeah. A lot of big name Wall street firms, private equity investors involved in this one. The backers and firms who are involved. It's pretty much everybody.
- [20:40]
Ally McCartney
Exactly. Yes. And this is also a very good signal for 2026 because many people expect more private equity backed companies going public. Again, of course it depends on stock market volatility and other factors. But this is a very good signal for the stock Market and IPO for 20.
- [20:58]
Host 2
You know who hopes that those firms go public? Private equity firms. Right. Because they have been trying to exit for a while. Natalia staying with us. Let's bring in Mike Bellon. He's the U.S. iPO leader at PwC. He joins us from Denver. Mike, good to have you here. The IPO year overall, give us some numbers, how we're ending up and how it compares to years past. Because I think the peaks are back in what, 2020, 2021. Back in the pandemic days.
- [21:24]
Mike Bellon
Yeah, well, thanks for having me. And I would say 2025 was the first true reopening of the IPO window in several years, but it was a selective one year. To date we've seen about 75 IPOs, including the one you were just talking about. That sounds good compared to the 62, 35 and 28 IPOs that we've seen in 24, 23 and 22 respectively. But a good IPO year in the US is anywhere between 100 and 150 IPOs. So we're well behind that. But overall 2025, we've, we've been largely in line with expectations and in some areas it's exceeded them. We've seen activity spread across sectors rather than concentrated in just one area. That kind of dispersion is a strong sign and speaks to improving investor confidence. I would say the performance has been differentiated. Higher quality companies like the one you're just talking about, with strong fundamentals, solid revenue growth past the profitable or a path to profitability, reasonable leverage and a compelling long term story have generally performed well in this market. On the flip side, IPOs with higher debt loads, more aggressive pricing, they've struggled in this market, especially in a volatile macro environment. So that outcome has not been surprising, but it reinforced how selective investors are right now.
- [22:39]
Host 1
Okay, Mike, everyone just wants to talk about with regard to 2026, Space X and what that IPO could look like if, if the company decides to go public next year, does that make or break 2026?
- [22:53]
Mike Bellon
Well, look, I think we look at the IPO pipeline for 2026, we see over 200 potential issuers in line that could go public in 2026. The SEC shutdown that took place in October, November pushed a lot of companies that may have had the opportunity to issue in 25 into 26. So number one, I think there's a deep pipeline of quality companies that are looking to go. In addition to some of the big names, for example, I think, I think we read them all in the headlines. Some of the hyperscalers that are out there supporting the strong markets. In addition to those, there's a lot of backed companies that the one today, they got a lot of attention. They priced one well, they're trading well, as you noted. And I think that the backlog of PE backed companies, sponsor backed companies in the market is as stronger than ever. They have been a quieter part of the IPO cohort for the last couple of years. So I think 2026 is ripe for strong sponsor backed companies that have been creating value in the background through M and a, through scaling, etc. So I think we'll have a very active IPO market in 2020, 2026.
- [23:59]
Ally McCartney
Mike, if we look at performance of IPOs in 2025, it was really mixed.
- [24:04]
Katie Hubbard
And overall people think that AI names.
- [24:08]
Ally McCartney
Or crypto names have the biggest kind of the best case for success for 2026. What kinds of sectors you think would benefit, where you see the biggest potential? If we set aside some fundamentals or leverage. Like what, where do you think investors should focus on?
- [24:28]
Mike Bellon
I think it's going to pretty wide, wide sector representation in 2026 you mentioned. I think that entire ecosystem, despite the last few weeks or a month where there's been some pressure against it, there's a deep pipeline of strong companies in that area from a data center, from a fiber perspective and then just broader. The ecos, the energy ecosystem that's required to power the data centers and we need to catch up in that area, I think that's going to be very active as we look to 2026. Insurance. Insurance was an active asset in 2025. Dependable cash flows which investors like in a volatile market, we'll continue to see strong performing cash generating companies like an insurance company go well. And then I think other areas you mentioned, crypto, fintech, with the rise of digital assets and some healthy regulation, the tailwinds in that sector, we expect that to continue to move forward a lot. So again I think to be a broad sector representation which to me represents a really strong IPO market.
- [25:29]
Host 2
All right, so strong IPO market maybe to come in 2026. I looked at the IPO index and I think it was up 5, 6, 7%. I mean it's definitely underperforming the broader market. I mean we had dismal debuts of StubHub, Navin, Gemini Space Station. And so they have all contributed to IPOs underperforming as an asset class. Certainly compared to something like the S&P 500. You know, it kind of sits with the notion that companies that go public are supposed to have cheaper valuations than their listed peers. Getting pricing like will be key in 2026.
- [26:05]
Mike Bellon
I'm with you. When you look at the cohort of 2025, about 50% of the IPOs priced at the top end or above the range those initially set. So some pretty aggressive pricing there. I think many of the companies that have struggled in 2025 are companies with debt that's above 4 times EBITDA leverage, which is tough in a dynamic environment when there is uncertainty still in the marketplace. So I do think companies that are going out in 26 have to be conservative on valuations. They have to look at their debt loads going in. And some of those key metrics that I mentioned earlier around revenue growth, customer growth, some of those key metrics that really show a powerful return will be important when you look at Again the of 2025, 65% of the companies that went out had positive cash flows. That's a stark difference than we back up over the last five years. So the quality is definitely being raised.
- [27:00]
Host 2
Hey Mike, 10 seconds. SpaceX going to happen in the first half of the year. Do we even know? Have we heard anything? Do you hear anything quickly?
- [27:08]
Mike Bellon
I see the same things you see in the headlines. I think 26 will continue to be an exciting year and hopefully we'll see some really big names.
- [27:14]
Host 2
Go Mike Bell and US IPO leader over at PwC. Bloomberg News equities reporter Natalia Kenny Javich, thank you so much.
- [27:22]
Host 1
Stay with us. More from Bloomberg businessweek Daily coming up after this.
- [27:29]
Ally McCartney
Did you know Tide has been upgraded to provide an even better clean in cold water. Tide is specifically designed to fight any stain you throw at it, even in cold butter. Yep. Chocolate ice cream.
- [27:41]
Host 1
Sure thing.
- [27:42]
Ally McCartney
Barbecue sauce. Tide's got you covered. You don't need to use warm water. Additionally, Tide pods let you confidently fight tough stains with new coldzyme technology. Just remember, if it's gotta be clean, it's gotta be tied.
- [27:57]
Host 1
These days it seems like AI agents are just about everywhere you turn every field and every function. But without identity, you can't trust they'll serve your business instead of jeopardizing it. Fortunately, Okta helps you get identity right by securing your AI agents identities, giving you a single layer of control, a single standard of trust. So whether an AI agent supports a single user or your entire enterprise, with Okta Okta you'll turn risk into opportunity. Secure every agent, secure any agent. Okta secures AI support for the show comes from public.
- [28:30]
Matt Lizardi
On Public you can build a multi asset portfolio of stocks, bonds, options, crypto and now generated assets which allow you to turn any idea into an investable index. With AI, it all starts with your prompt. From renewable energy companies with high free cash flow to semiconductor suppliers growing revenue over 20% year over year, you can literally type any prompt and put the AI to work. It screens thousands of stocks, builds a one of a kind index and lets you back test it against the S&P 500. Then you can invest in a few clicks. Generated assets are completely customizable and based on your thesis, not someone else's. Go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market paid for by Public.
- [29:18]
Host 1
Investing Brokerage Services by Open to the Public Investing Inc. Member FINRA and SIPC Advisory Services by Public Advisors, llc. SEC Registered Advisor Generated Assets is an interactive analysis tool. Output is for informational purposes only and.
- [29:32]
Matt Lizardi
Is not an investment recommendation or advice.
- [29:34]
Host 1
Complete disclosures available at public.com disclosures. With volley from iShares. You get access to both monthly income and growth potential in one simple ETF. It's the best of both worlds. Discover Bali iShares Large Cap Premium Income Active ETF iShares the market is yours. Visit www.ishares.com to view perspectives for investment objectives, risks, fees, expenses and other information that you should read and consider carefully before investing. Risks include principal loss and the use of derivatives, which could increase risks and volatility. Monthly income is not guaranteed. Prepared by BlackRock Investments, LLC.
- [30:08]
Host 2
You're listening to the Bloomberg Business Week Daily Podcast. Catch Us Live Weekday afternoon Sunday from 2 to 5 Eastern, listen on Apple CarPlay and Android Auto with the Bloomberg business app or watch us live on YouTube.
- [30:21]
Host 1
Well, our shares lower today, down right now by 4.8%. This after the homebuilder reported adjusted earnings per share for the fourth quarter. That missed the average analyst estimate. Dr. Horton Pulte Group, Toll Brothers also lower in after hours trading.
- [30:36]
Host 2
Yeah, we're seeing the homebuilders as a whole. Most names in that index are down today. I'm just looking at the index. It's down about 1.8% in today's session. So that Lennar news, no doubt about it, Tim. Definitely dragging down the trade.
- [30:49]
Host 1
Yeah, so that was like, that was the write up last night, like down and after hours down today too. Like that can carrying over today's trade.
- [30:56]
Host 2
Yeah, totally.
- [30:57]
Host 1
Also I mentioned this. Aspiring home buyer should find the US housing market slightly more affordable in 2020, even without the benefit of lower mortgage rates. We're going to bring in Katie Hubbard. She's president of US Capital Markets over at Walton Global. It's the privately owned asset and real estate investment company. More than four and a half billion dollars of land assets under management and administration and more than 89,000 acres of land under ownership and management throughout North America. Close to 89% located here in the U.S. remember Walton Global, they operate in retail, industrial and commercial sectors. Katie joins us this afternoon. Katie, good to have you on the program. How are you?
- [31:32]
Katie Hubbard
I'm doing well, thanks. Great to be here.
- [31:34]
Host 1
I don't know if it's too early to say Happy New Year.
- [31:36]
Host 2
Happy New Year. Point never to be New Year. Happy New Year.
- [31:39]
Host 1
You know, so the first question I always like to ask you is, is like are things better or worse than we last spoke to you in terms of, you know, and we do get to check in with you every couple of months and we're grateful you take the time to do that. Are they better in your world than they were a couple months ago?
- [31:54]
Katie Hubbard
Yeah. Speaking of, you know, Lennar's earnings that you guys opened up with, I mean the market read their headline financials as a profit and margin miss Although they have a revenue beat and as you saw, their stock dropped 5%. And the demand is there. So are things better or worse? The demand is still there, but while at a much lower profitability. And as we see from their earnings, their Q4 earnings came in at 490 million and same quarter last year they were at 1.1 billion. However, they delivered more homes this year and the reason that their earnings are down so much is because they are having to offer major incentives. So are things better? It's really the same where in order to get the volume for the top builders, they're having to offer incentives and drop their prices.
- [32:40]
Host 2
So, okay, so what does that mean then? I don't know. How do you describe in the housing market, is it good, is it bad? Is it still kind of trying to find its way? Struggling a little bit, Yeah.
- [32:52]
Katie Hubbard
I mean, the overall fundamentals are there where people want to own homes and demand is there. So the builders that are able to meet buyers where they're at and offer the incentives, the mortgage rate, buy downs, building smaller homes, they're doing fine. So the housing market's doing well there. However, it's just, it's an affordability constraint problem right now, as Lennar talked about quite a bit on the earnings call, affordability is the challenge. The mortgage payment for people has increased 82% since 2020, while income's only up 26%. So people are really sensitive to those monthly payments. And if the builders can get those down, then, then they're doing fine and they're able to sell the homes. On the resale market, 75% of mortgages are still locked in at 5% or lower. Well, Katie, percent of people, that's where.
- [33:38]
Host 2
I have a hard time. Like, I have family members and I remember working with someone who's like, listen, I remember the 70s and my mortgage rate, it was like a 17%, you know, something high. I have a sister who often talks about like her first mortgage in the teens. So what's different? Because it is still historically low. Huh? Okay.
- [33:59]
Katie Hubbard
Income has not kept up with that.
- [34:02]
Host 1
And everything else has gotten more expensive too. Like if you were to look at the cost of health care back then, the cost of educating or paying student loans, or like what it cost to actually get a four year degree, all those costs have gone up too.
- [34:16]
Katie Hubbard
Exactly. So it's just, it's really affordability where people are spending 40% of their income on their, on their mortgage payments. And that's just, it's keeping a lot of people out of the market. If we could get rates to 5%, that would mean an additional 8 million people could afford a $400,000 house, which is just about what the average of the median new home price is.
- [34:35]
Host 1
I don't.
- [34:36]
Matt Lizardi
Was it what.
- [34:37]
Host 1
Who, who was on our program this week? It might have been. It might. I don't want to say a name because I don't want to get it wrong, but we were talking about high prices. And economists and an economist said, well, we like to hear about high prices because then it'll bring in more people into the, into the market. And Mike McGlone, Bloomberg Intelligence always likes to, he always likes to say the cure for high prices is high prices. But that's not necessarily the case when it comes to home.
- [35:00]
Katie Hubbard
Right.
- [35:01]
Host 2
Like Uber, the whole metric is when prices start to go up for rides. Right. You bring more drivers in.
- [35:05]
Host 1
Exact.
- [35:05]
Host 2
Yeah, it's that concept kind of ish.
- [35:07]
Host 1
But the problem is in, in real estate. And Katie, you can, you know, correct me where I'm wrong. It's such a local issue that has to do with, with zoning. It has to do with finding people to actually do the building. It has to do with materials costs. I mean if housing, we have such a shortage, why isn't it being solved by the free market?
- [35:28]
Katie Hubbard
And so what is happening is people are moving to, moving to secondary markets and builders are moving to secondary markets. So if you're in Austin, you're going to San Antonio. If you're in Denver, you might go to Colorado Springs. Springs here in San Francisco you'll go to Sacramento because the housing is significantly cheaper there. And so that is one of the solutions is to go further out. And so it's not like the, the end all solution but going to where the governments are pro development and houses are more affordable, it's making it palpable for some people to be able to buy homes.
- [35:58]
Host 2
Katie, one of the things I wanted to ask you and Ally McCartney who we just had on over at a lot of and partners at ubs, she talked about kind of the land grab for data centers versus I think homebuilders. Is that part of the problem, part of the issue?
- [36:14]
Katie Hubbard
I would not say that's really an issue because in order to have land for a data center you have to have a significant size of land, but you also have to have extreme amount of energy and a substantial amount of water, which most people don't think about. So to find the land that fits the data center model, that has the energy and the water. Water and it's far enough that you're not going to have the NIMBY mentality that they don't want the data centers. It's a limited, there's limited resources for data center sites. Walton has some sites that are allocated for data centers, but it's not really the same land that would necessarily be alternatively for residential housing.
- [36:50]
Host 1
That's, I mean that's a good thing.
- [36:51]
Host 2
Well, you open the door though. So the land demand for data centers, is there any kind of trailing off or weakness that you're seeing?
- [37:01]
Katie Hubbard
No, we are getting calls every day from people that are wanting to look at the land that we have earmarked for data centers. So I think the demand is there. Whether it's, you know, a bubble and what we're going to see from the fallout of that, you know, there is definitely the demand for the land is there because it takes a long time to get the zoning and the infrastructure in place. The local government, municipalities, utilities, everything in line. That can take years. So people that are starting now are not going to have data centers on those sites for, you know, probably four plus years.
- [37:29]
Ally McCartney
Wow.
- [37:30]
Host 1
If you can get them hooked up to the grid.
- [37:32]
Host 2
If you can get it, yeah.
- [37:33]
Host 1
That's the key.
- [37:34]
Host 2
Well, it might take four years to build out the grid and have the.
- [37:36]
Host 1
Power there, or they could be done and just sitting there like those in Silicon Valley.
- [37:40]
Host 2
Unbelievable. Katie, always get some insight when you join us. Thank you so much. Happy holidays, Happy New Year and look forward to continuing our conversations with you into 2026. Katie Hubbard, President of US Capital Markets over at Walton Global.
- [37:54]
Host 1
I'm looking at shares of Nvidia down more than 3% right now, kind of dragging mega caps lower, down more than 17% from those all time highs back in October.
- [38:02]
Host 2
Yeah, there's definitely been kind of a rewrite when it comes to some of these plays. Don't go anywhere this is Bloomberg Businessweek Daily. This is the Bloomberg Businessweek Daily podcast available on Apple, Spotify and anywhere else you get. Your podcasts listen live weekday afternoons from 2 to 5pm Eastern on Bloomberg.com, the iHeartRadio app, TuneIn and the Bloomberg Business app. You can also watch us live Every weekday on YouTube and always on the Bloomberg terminal.
- [38:40]
Host 1
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Host 2
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Ally McCartney
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Host 2
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Ally McCartney
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Host 2
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Ally McCartney
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Host 2
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Ally McCartney
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Host 1
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