Transcription
welcome to the J Martin Show where we
dissect the greatest Minds in
geopolitics and finance my guest today
is Danielle D Martino Boo the CEO of Qi
intelligence and the author of fed up
and Danielle is coming to my conference
in Vancouver the Vancouver resource
investment conference January 19th and
20th alongside dozens of other keynote
speakers like David Rosenberg Robert
Kaki Dr pipa Momen Colonel Douglas
McGregor Grant Williams dozens dozens
more for 2 days in Vancouver BC January
19th and 20th hit the link right beneath
this to check out tickets and this
conversation today was an absolute
showstopper did you know that the
average age of home buyers in the United
States is now 56 years old that's
Bonkers today we cover the equity Market
the commercial real estate market and
the residential market forast and
expectations very insightful interview
with Danielle de Martino Booth enjoy
this is J
Martin all right here I am with Danielle
D Martino Booth Danielle it's great to
have you back on the program it's great
to be here can't wait to see you in
person soon as well it's coming up yeah
we're like seven weeks away from the VC
back in Vancouver I'm looking forward to
that glad you're coming back it's gon to
be a good one I'm excited I'm excited so
here's where I want to start today
there's a a handful of directions I want
to go uh let's begin just looking at the
market love to get your thoughts on
Market climate right now I'm I'm going
to attempt to paraphrase you from a
recent interview that you did hopefully
I get it relatively close you were
referencing some data that you recently
read that said there's been about 1% of
time in the entire existence of the US
Stock Exchange where equities have been
this overvalued relative to their
underlying assets did I capture that
correctly and if I did would you mind
expanding on that a little bit for me so
uh that is correct I mean
in the sense that in the in the sense
that that market strategists and I wear
another hat as an economist you know we
often look at the world in in a bell
curve and once you're so far out in the
tales of distribution and you're saying
gez there's only one other time in the
history of the financial markets that 1%
of other time in the history of the
financial markets it doesn't matter what
you're talking about you're talking
about you know in that particular
reference because the market is 40% more
overvalued on a price to sales ratio
than it was in 2000 but even on a price
tobook ratio it's more overvalued than
it was in 2000 in terms of Market
concentration that's higher than it was
in 1929 I mean I I think especially when
you're starting to see a lot of
long-term Bulls throw in the towel it's
not it's not so much a recognition of
the fact that that markets can stay
bubbly longer than than the the investor
can stay solvent I completely understand
that but you're in a surreal reality
you're in a which is an oxymoron right
you're you're in
surreality when you run out of
Precedence when you run out of means by
which to compare where we are and so
much of it right now is predicated on
the strength of the US
consumer and and and rightly so don't
get me wrong rightly so it's just even
even when you talk about the strength of
the US consumer then you have to talk
about a whole another set of
distributions and then you're once again
having a discussion macroeconomic that's
in the
Tails so predicated on the strength of
the US consumer you could you could ask
a lot of questions about that when you
look at things like uh reject rejections
of new credit applications credit card
delinquencies just like a study sort of
curve you know for a couple of years now
doesn't look like it's pointed in the
right direction so like pick that apart
you think that's where's where are we
lost on that connection between the
strength of the consumer the overvalued
equity and the reality so you know I I
was speaking with one of my
institutional clients about this today
and um you know I rightly get a lot of
push back because we're in such an
unusual situation where we continue to
see whether it's Cyber Monday sales
going up um there are several factors at
play and I think you have to take all of
them into
consideration um one of them is the
strength of of public sector job growth
and that is something that we know that
I I think around 56% of jobs in the last
year came out of the government sector
Health Care uh that's highly highly
highly unusual so in addition to in in
unprecedented levels of government
support for the job market public sector
job market creation you also have 40
million or so Americans who really
haven't been penalized for not paying
their student loans since March of
2020 I mean at some point you start to
say gee that's a long time and you know
if they say roughly half of us student
loan holders um are not pay their
student loans so call it 20 million 19
20 million sure so they have not been
reported to a TransUnion or an Experian
they've not been reported to these
Credit Agencies since March of 2020 and
they won't the the actual reports won't
hit until January of
2025 so by law they were just to start
paying their student loans back in
November of 2024 they won't get
penalized for not having done so until
the lack of payment in the fourth
quarter of 2024 is reported come
January
so it and we know backing up a step that
that covid era pandemic funding to
States and localities is over so the
strength that we've seen in job
creation the the fuel for that is going
in the opposite direction
just south of Vancouver the state of
Washington has put a hiring freeze on
and they've put a freeze on all salaries
so that's new this is going to add a
whole new Wrinkle in 2025 in addition to
that you're going to be penalized for
not paying your student loans in
addition to that you've got the Federal
Reserve uh anticipated to take interest
rates down an aggregate accumulative 100
bases points by the December the 18th
fomc
meeting so one of the pillars of
strength of US consumption us
consumption 70% of US GDP it's an
enormous I think it's I want to say it's
17 or 18 1718 percentage of global
GDP but one of the huge supports has
been interest
income because people have been
collecting five and a half 5% on their
cash just for sitting on the sidelines
and just watching the markets go by if
they're not up to their eyeballs in
Nvidia or Bitcoin well that is coming
off as we head into
2025 and one last thing I'll add and
again this was a long drawn out
discussion I had with one of our
institutional clients this morning and
that is buy now pay
later and byy now pay later really
didn't exist the last time the US went
into recession when uh a poll was
recently run what are you going to be
spending over the holiday
if somebody is going to be financing
their holidays on credit card spending
which is Gone Bananas they were planning
on spending rough numbers here 1,600
over the holidays yeah if somebody was
going to be using buy now pay later
their holiday budget was closer to
$1900 interesting and the reason I bring
this up is because buy now pay later is
not incorporated into your credit report
it's not reported to the banks it's not
reported to the Credit Agencies it's
completely
outside of if you were going to apply
for an auto loan or refinance your
mortgage or get a new credit card
whatever you're spending and buy out pay
later it doesn't show up so you look
like you're a lot better credit than you
actually are and yet even with buy out
pad you're you're planning on spending
more isn't that we don't know what we
don't know what the flip side of this
looks like and sorry there's a Fifth
Element here and that's the gig economy
okay so in Uber was born in in 2009 in
Paris the last time we went into
recession true recession in 2007 it
didn't exist so all of the full-time
jobs that have been lost in the last 12
months in the United States 1.4 million
jobs full-time jobs have been lost in
the United States in the last 12 months
that's a decent sized
number they've largely been absorbed by
a gig economy that didn't exist Does
that mean that the incomes are not real
no you can't discount somebody is making
$750 a week driving for Uber or
lft it's a real buffer to their
income but you're also by the same token
starting to hear now that we're pushing
10 million Uber drivers alone in the
United States now you're starting to
hear people say I need to get a new gig
to back up my gig because there's too
many people who have fallen into this
gig economy sure as regular layoffs in
the private sector continue to blow and
go which we've seen in revisions that
are nothing like we have precedent for
in the the year that ended June 30
2024 one revision told us that there
were actually 1.2 million fewer jobs
created than we had anticipated so when
when you're cutting job growth in half
in the private sector these are real
numbers the reason I bring all this up
is going into
2025 there are a lot of ticking time
bombs and a lot of sources of support
for consumer spending that drives the
world's largest economy that are
impaired you know I I might not have
made that correlation but it makes
absolute sense losing 1.4 million jobs
in the last two months directly
correlated to the oversaturation of Uber
drivers people got to seek out that
hobby income make it the full-time
income or increase the supplementation
whatever that looks like and eventually
yeah you got more drivers than you need
and and uh as many jobs as we lost I
mean those that have been have largely
been public sector jobs as as you
discussed what do you think the impacts
of the Department of government
efficiency will really have do you think
they're going to be able to make a dent
and and if so you'd assume it's only
going to contribute to worse jobs
numbers in the near term at least right
and that's why uh it's funny you bring
this up
because in my Bloomberg chat room today
I asked my institutional clients I'm
like what are the odds that that Donald
Trump is is committing in infantes side
I'm using the wrong word when you kill a
child yeah yeah okay um but what are the
you know what are the odds that he's
killing Doge and pretty quickly because
this massive source of support for the
US economy and he keys I me he he tends
to ascribe his value as a president to
the stock
market if you hear an increasing number
of companies and a lot of companies
during the third quarter earning season
we saying we're not missing on our
bottom line but we sure are missing on
our Top Line
so what if one of the biggest sources of
revenue for companies which is you get
the highest pay for the lowest level of
Education in a government job what
happens if that pillar of support starts
to Teeter if musk is remotely
successful and is is Trump Gonna Stand
By and let that happen as well as it
campaigns with the average American to
cut the waste cut the waste cut the
waste what happens when that starts to
manifest in a greater number of
companies missing their revenue targets
going forward because the private sector
job market has not recovered you you're
hearing huge amounts of confidence in
the
future I mean you've seen a complete
flip you now you've got most Republicans
in the United States saying you know we
see a pathway to sustainable private
sector growth in the United States a lot
of the oft surveys are are very
optimistic but you're not hearing CFOs
or CEOs or small business bankruptcies
for example you're not seeing any of the
blood letting stop you're still seeing
cost cutting going on factories being
closed small business is going bankrupt
you're still seeing it so you have to
cross the bridge between enthusiasm for
the future and delivering on that
enthusiasm by increasing your hiring
because you're Topline growth is
accelerating and we're not
there and if if we don't get there if
there's no Topline acceleration there's
no new job creation and this engine
doesn't get restarted do you think
there's a glut of bad news that maybe um
you know if you're at a position of
power it's you can manipulate the data
to an extent right do you think there's
a glut of bad news that we're probably
going to get on the heels of a changing
of establishment when sort of the rug
gets pulled and the curtains open up and
here's what the economy really looks
like
so here here's an Arcane reference so
the the Bureau of Labor
Statistics uh it resets its birth death
model that's imputed what a third 40% of
job creation over the last year or so
but it resets its birth death model
every five years okay so the last time
this happened was
2019 when the US economy was
pre-pandemic and prior to the bankruptcy
cycle now they're going to reset it five
years later and it's going to reveal a
lot less in the way of births because we
know that the bankruptcy cycle according
to standard and pors they put out a
report today that said bankruptcies are
running at the highest level in 14 years
that takes us back to the great
financial
crisis so we know when the BLS looks to
reset the pace at which companies have
been being born and the pace at which
companies have been dying that it's
going to be a lot less flattering of a
plug Factor month in and month out for
the next five years when they're
reporting non-farm payrolls every Friday
so rather than have the numbers skewed
to the positive and then you wait until
you get these annual revisions and then
you w you wash all of the the plug
factor that was positive out and you say
oh gee in the last year the private
sector actually created 1.2 million
fewer jobs in the last 12 months instead
we're going to start to see more quickly
realistic job
numbers and and we've got some massive
revisions coming up in the first quarter
of
20125 and there will be all manner of
people screaming to the hilltops gee you
know these these left lining bureaucrats
in Washington DC have released the
Kraken and and they're letting the data
finally fly that we know they were
hiding during the election
season so be it if that is how it's
perceived that won't make a difference
if the average American is all of a
sudden seeing instead of the
unemployment rate with a 4% handle a 5%
handle that's a bit of a reality
check and if it is you could logically
say this has got to impact the equity
Market but I mean that logic's been
wrong for a long time so the decoupling
is pretty real what's your take on a
incredibly overvalued Market in that
economic environment it's been enormous
and you know it hasn't hurt at all that
this Administration is all over
cryptocurrency ah I mean you can't have
a more you can't have a greater
validation for keeping the animal
spirits alive than have the government
itself come out and say we're going to
start a strategic reserve and buy it up
because whenever the government's buying
something they're price agnostic buyers
there's no better buyer in the world
whether it's the Federal Reserve buying
treasuries or mortgage back Securities
in the open market and they don't care
what the price is because they're
they're running a quantitative easing
program or whether it's Uncle Sam buying
Bitcoin that won't change though
the the reality check of a true increase
in the unemployment rate the
unemployment rate in November was
reported as
4246 so that's a matter of 7,100 jobs
in in a Workforce of 100 80 million so
if it was 7100 more jobs that were that
were calculated into the unemployment
rate it would have been 4.3% which
matches the high Which
is8 percentage points off of its lows us
has never not been in recession with
that kind of a move off the lows of 3.4%
to 4.3% where and we're effectively at
4.3% right so you keep going up with
this and the stock Market won't have a
choice but to he but right but things in
2024 have been it was an election year
and things have been as slow as molasses
in January or if you want to look at it
as as oil in the tar Sands in January
moving real slow and that's how the
unemployment rate has been rising but we
don't see any reason for the increase to
not keep going in 2025 given the number
of business closures bankruptcies and to
say nothing of mergers and Acquisitions
m&a is a
really polite way of saying we're going
to put together two huge companies and
fire a big chunk in the middle so that
we can realize synergies yeah yeah
whatever it is that all the Consultants
are paid too much
money to create when they suggest an m&a
okay so just because you mentioned it
the Strategic Bitcoin Reserve I'm really
curious uh is this signaling to win the
popular vote and nothing more or do you
think there's some substance to uh in uh
in investment in a strategic Bitcoin
Reserve moving forward for the American
establishment well I mean math is math
it doesn't matter if it's not a store of
value or medium of exchange if the
government's buying it government's
buying it okay so if all you're talking
about is the price of Bitcoin if you
have a bidder who doesn't care what the
price is price go up it's it's just
pretty simple math
so um you the question is are there
people who are going to be selling
alongside this and taking advantage
of of a buyer that is blind I don't know
I don't know but what I do know is that
the government sanctioning something is
not going to all of a sudden overnight
turn it into something that's turn it
into a medium of exchange or or a true
store of value that that's not a magic
wand that anybody can wave there has to
be practical real
world use not adoption not ownership but
use and we just saw in Nicaragua that
the IMF in order to provide the company
with the the country with sufficient
bailout made the country back away from
Bitcoin as a prerequisite so
again adopt adoption is not the same
thing as use and I think that that's
where the question remains to be
answered yeah Fair okay makes sense to
me uh I want to Pivot a little bit to do
you watch the commercial real estate
market much right now and uh like 133%
vacancy I think in the United States
right now but one of the hottest stocks
over the last few months this year has
been SL green which is the largest owner
of New York City office space now maybe
they're an outlier because they own you
know Ultra
high-end uh like one Vanderbilt building
for example right which is now at full
occupancy super high end but what's your
what's your take on Commercial Real
Estate exposure it was a big part of the
conversation nine months ago not that's
by the way that that's the old that's
the original Bear Sterns building by the
way um I didn't know that one Vander
bill right okay um yeah I think
interesting Trump is said he's not going
to fire Powell and why would I answer a
question about commercial real estate by
saying Trump is said he's not going to
fire Powell
mhm well a more Progressive type of fed
share might be am
meable uh with a really Progressive
treasury secretary to potentially craft
a bailout of the commercial real estate
market barring that and I don't think
you get that with with J Powell okay at
all but barring that we know from Tre
data that office delinquencies are now
north of
10% and that the delinquency rate
appears to be headed to the highest on
record we know from one retailer sorry
this is delinquent rent payments is that
what this is delinquent on the on the
office property mortgage okay got it got
it the delinquent on the loan
yeah uh and we know that that phenomenal
is not isolated to the office sector
anymore we're seeing quite rapid pickups
in um not in any particular order
lodging multif family
retail appreciable pickups in these
areas so you know the only kind of last
Bastion of strength has been data
centers has been
industrial but by the same token we're
seeing a lot of companies follow in
Walmart footprint of
saying you know rather than distribute
through a warehouse which which is
expensive I'm going to follow the
Walmart method and just distribute Out
My Back Door of the closest
store and that way I save on warehouse
space what I'm trying to say is that's
one of the biggest areas of that has
been one of the greatest areas of of
growth in commercial real estate now it
looks like it too is
overbuilt so what I've been telling my
commercial real estate clients because
this is something I write about with
probably second greatest frequency after
monetary policy what I've been telling
my commercial real estate clients is you
trade for the
dirt you're absolutely agnostic to what
the building is if it's not an SL green
one Vanderbilt A++ plus building that
can do your your laundry on the way up
to your office in the elevator for you
and whatever else you need for the
building to do if it's not a a
state-of-the-art smart building and
these are smart buildings we're talking
about that are commanding rents and here
in Dallas Texas where I sit today there
are seven large office properties being
built on one side of the main Highway
that goes through downtown Dallas and
there's a lot of empty buildings on the
other
side so what I continue to tell my
commercial real estate clients is trade
for the value of the dirt underneath the
building whether it's a mall that's no
longer occupied or a hotel that's no
longer sought after or an office
building that is no long that's not an
A+ office building that is that that's
not part of the 1.9% that can be
economically converted to multif family
or a hotel trade for the value of the
dirt underneath it yeah interesting okay
do you make much of this uh office to
residential conversion Trend and I don't
need even know if you'd call it a trend
yet but there's like again it's
1.9% that's what we've seen after a
sizable runup of conversions so it used
to be closer to 1% now it's closer to
1.9% because been so many communities
who have encouraged developers to to
push forward with these conversions but
even so even with a little bit of Subs
subsid from the public sector we've
still only seen that pick up to 1.9% the
reality is a lot of these AB Office
Buildings only have one Silo of Plumbing
that goes up the center of the building
and nobody wants to live in an apartment
with no windows so they can't
economically be converted so they're not
being converted yeah yeah it seems to be
the the older buildings that are getting
more narrow buildings smaller floor
plans all of this so This these are
office buildings that are being
repurposed as residential obviously call
uh um requires a massive overhaul and
construction like the flat IR build flat
iron building in New York City you know
that's going to be converted to to
Apartments that's a pre-war building
yeah pre-war is yeah and and and you can
you can go there especially when the
when the location of the property is as
Prime as the flat iron building of
course you can make that happen
but that tends to be the exception not
the rule or we'd have seen at least a
breaching of the 2% conversion rate but
we're not we're still talking about one
point something year okay I think the
the average age of home buyers in the US
is now around 50 you find 56 56 the
average age of home buyer that's Bonkers
okay I got some questions to spin out of
that but first of all what do you make
of that
stat well it's
depressing um you know I was reading a
story yesterday about how to not let
your children who move back in with you
you know eat away at your retirement
savings and and Method methods for being
a a a tougher parent when you've got
your adult child moving back in with you
um because they can't afford to be out
on their own or because they lose their
full-time job and they can only afford
so much with what they're making at
driving for Uber so they've got to move
back in with Mom and Dad um the
phenomena is very real and and it's
problematic because
economic Cycles feed off of themselves
when young couples get married and have
kids it's just the cycle of life you
know you start out in a in an apartment
and then you save up your 20% down and
then you buy your first home and then
you end up going oops we had a third kid
and then you've got to move up to a
bigger house and but these are all
cycles and they feed consumption of of
nurseries and then you know toddler beds
and and diapers
it again it's a 70%
consumption 70% of GDP is is consumption
but if you arrest these natural
demographic
Trends because an entity like the
Federal Reserve at its peak owned 39% of
the mortgage back Securities
market and you end up with artificially
high home prices you got a problem on
your hands and that's why you have so
many
multigenerational households being
formed in the United States that are
specifically being designed so that Mom
and Dad in their retirement years
they've got a nice little kitchenet in
the basement so they don't have to deal
with the kids on the top floor being in
a diaper that needs to be changed but
this hasn't typically been what we call
the American
way right you know the American way is
you grow up you get a
job apartment starter home move up
home and that's clearly not the case uh
and and in fact you're seeing a very
high percentage of homes not just
be
multi-generational information because
your adult children are moving back in
with parents but also the flip side of
that because healthc care is so crazy
expensive in the United States what
whatever it is
12,500 per capita compared
to 6100 in other developed economies
including Canada uh but but because
Health Care is so expensive and the
social safety net for long-term care is
so fragile and weak we're also seeing
20% of multigenerational household
formation results from parents being
forced to move back in with their adult
children so the flip side is also very
much at hand because nursing homes and
long-term care and assisted care
facilities in the United States are
prohibitively expensive I'm watching it
with with my best friend from growing up
we've been best friends since we were 13
you know it's not easy to Fork out
$10,000 a month for subpar
care no no I mean part of me wonders if
there's almost a silver lining to that
scenario and I I don't mean to downplay
the um the negative impact of not being
able to afford a home I mean having to
you know multigeneration of one house
but it's not the American way you're
absolutely right hasn't been the
American way but there's also a downside
to uh kids living so far from their
parents I mean there's a of a a
fracturing of community that we've also
experiened since like the 4050 you know
say um look I'm Italian and
um I'm a full believer and in fact you
know I'm a career woman with four kids
had my mom not been close enough by
proximity wise geographically speaking I
I I would have had to have altered my
career slowed my career path it was but
for the sake of my mom being close that
I had the freedom that I did and the
flexibility that I did on a professional
level right and I'm all over with the
cost of child care in the United States
gone
wild yes use the resources I mean my mom
just turned 78 years old she's and she
ain't planning on going anywhere anytime
soon um
so the Silver Lining is absolutely being
able to you know even if you're talking
about something as fundamental as having
another child we're talking about a
human being here but you know if you've
got your parents close by and that that
that support network then maybe you can
go from being a one to a two kid home or
a two to a three kid home because you
you're able to do so because you've got
that support I'm all over that but I'm
Italian but that's not gonna help the US
economy yeah yeah yeah I'm with you
there I'm with you there could help the
housing market I mean how many I mean
the number of uh like single resident
households has gone up a crazy amount in
the last 40 years as well is uh people
living alone is a new trend in the last
40 50 years and this depletes no no
absolutely and that is actually one of
the solutions if you will to the trend
that we saw in you know from 2000 and in
really in the 2000s 200000 to 2010 that
the trend of seeing these massive
mcmansions being constructed and now
you've got you know Grandma and Grandpa
living in them how to fill them up move
in the family yeah yeah yeah okay so
there's another Trend uh kind of on the
heels of housing uh in affordability
which is the build to rent model and
this is getting a lot of action from
private equity and real estate
investment firms um I was just looking
at a development in bave just outside of
Austin not too far in Texas far from you
know exactly where it is yeah you know
it so that was a $50 million development
that I think resulted in like 186 Town
Homes but there's you know billions
being invested into these build to rent
projects um my niece and her husband
with their 14-month-old living one right
outside of Austin I know exactly what
you're talking yeah yeah so this is
being called by some in that industry
like a brand new asset class that's how
real this is going to become what's your
take well if only the studs were to spec
if only the studs were to code okay um
and and the reason I I give you push
back is because we are seeing um that
the LIF span of a lot of these homes is
not what we would think it would
otherwise be because they are cutting
Corners when they build these homes and
I wouldn't know this unless my niece's
husband was a general contractor and he
saw that the studs were 24 inches apart
as opposed to code which is
18 in this build to rent homes so we're
not seeing the longevity of the
properties and at the same token by the
same token you're also seeing that the
rents for these homes are certainly
higher than they would be for an
apartment and then you get down
to who can afford to rent them because
it sounds to me like they're white
collar workers okay and that brings us
back to what started this whole
discussion and that is you know what is
the capacity of the US private sector to
restart the high engine MH that thereby
supports what the investment bankers
will happily tell you is the future for
these new asset classes but we're
actually seeing Invitation Homes we're
seeing a lot of these publicly traded
companies announce with their earnings
that they're having a very very hard
time increasing rents unlike 18 months
ago 24 months ago interesting okay so
interesting comment on the on the rents
uh you know I understood this asset
classes like this is if you can forego
participating in home equity this is a
way you can get into that four-bedroom
home in a community with maybe Community
amenities like pools and gyms and and
centers and all that stuff uh close to
schools that that's the biggest selling
point most the good schools yeah exactly
near the tier one school districts for a
fraction of the price you don't get to
participate in the equity but you get
the lifestyle you get the household what
what yeah it's it's it's the fraction to
the price part that kind of falls apart
ah because you end up being so close to
what a mortgage payment would be that
you end up becoming trapped yeah so
there's never the ability that there was
in the 80s and the 90s to rent an
apartment when you're newly married and
have enough leftover from paying that
rent to save up the 20% down payment to
eventually buy a home of your own you
end up being an effective indentured
servant so what's your forecast then on
this trend because you know you've
clearly blown some holes in the thesis
that this is just a brand new asset
class and it's the solution right to
those that can't afford a home there's
actually a lot of problems with that
thesis simultaneously uh housing is
still unaffordable and um and Out Of
Reach for most and for most people it's
a very frustrating scenario because the
home they couldn't afford last year is
far less affordable this year and it's
just continually Out Of Reach so you
know what if you were to project this
build to rent industry into the future
do you think it's got some Growing Pains
to sort out and then it has legs or
what's what's your take and is it a good
a positive outcome I mean the dystopian
future would be like you know uh 50% of
the US housing suppli is owned by you
know a dozen private Equity firms and
that's not a scenario that anybody wants
but what do you
think um you know I'm not one who's a
cheerleader for this new asset class by
any stretch and I think it's realistic
for us to have this conversation 12
months from now because of three very
big hurricanes that came plowing
through a an area of the country that
comprised 100,000 plus um single family
rentals which is a different asset class
technically speaking but uh I think 4%
of them had flood insurance where
hurricanes barrel and Helen and Milton
plowed a trail but they
were they happen to be cities in the
United States where a lot of money had
come from the east coast and the west
coast to buy up these investment
properties and thereby rent them out on
a weekly basis and support the mortgages
that way and you know people who
advertise on the radio you know you need
to you're you too are going to be a
landlord and a a multis zillionaire and
you can get into this this racket and
easily so now we see the delinquency
rates where these three hurricanes hit
going
bananas and a year from now now when
we've had this
inventory uh put back onto the market
and clear hands I think then we can have
a discussion about build a rent yeah
because there's been so much inventory
that's been held off the market by way
of investors buying it that is also
appropriate for the same family to
potentially buy and you're seeing my my
good friend Ivy zelman she's a housing
expert you you you are seeing continued
homeb Builder buy Downs of of rates to
get people into the homes you've got the
highest uh inventory of completed spec
homes since
2009 on the market you know home
builders have to sell these homes so a
lot of potential build to rent renters
are actually finding that they're able
to
using you know a buy down of the
mortgage rate from the home builder that
they're actually able to buy the home
and that inventory is going to be
competing with these Airbnb as I call
them these investors who begin to
liquidate their portfolios so I I I
don't think anybody can say with
certainty going back to whether or not
if if the private sector job creation
engine gets restarted then all of this
excess inventory the spec homes the
investors dumping their homes it'll all
get
absorbed if it doesn't we're going to
have a little bit more price disc
Discovery and that's why we're seeing
delinquencies rise where these
hurricanes barreled a a a trail and
delinquencies being at untenably high
levels typically leads to home prices
falling that's good news by the way this
is all good
news why
why well you don't want to have an
indenture I I don't want your dystopian
future yeah yeah yeah neither do I I'd
rather have the youngans buy the home
yeah and and buy the home at a lower
price and and and actually be able
to I'm I'm all over the sil lining of if
these three hurricanes washed a bunch of
investors out of the woodwork and
because they didn't have adequate
Insurance to repair their homes and
therefore had to sell them fine goodbye
yeah don't let the door hit your on the
way out
just so I don't mind that at all because
especially cities like talk about
anything in Asheville North Carolina a
gigantic chunk of of Florida Houston
Dallas San Antonio Austin
you you've got a lot of empty homes and
empty homes don't do an economy any good
they don't do an economy any good just
because sellers are holding out no that
doesn't do anybody any good get them
through the market bring the prices down
allow for Price Discovery to happen and
and get these young couples in new homes
and and owning them with a mortgage
instead of of of of renting them with
never a hope in Hell of being able to
save up a down payment because they're
spending so much in rent to be in that
right School District with a pool down
the street so if you were um speaking to
somebody in there say early 30s or it
doesn't matter they're looking to buy a
family home in the US right now uh talk
to me about what you may suggest in
terms of timing and location by state I
mean there's no um uh Federal real
estate market it's regional right so
Regional any thoughts you have on region
or state and then any thoughts you have
on now versus in a year timing
so you know I I think now is a time
especially if you're in your if you're
as you describe in your early 30s now is
the time to
be as flexible as your budget will
permit in terms of
location because if you can go to where
the excess inventory is and if you're
young enough in your career that you can
say you know what I'm young enough I can
start over and and you can find work
wherever there's an excess of inventory
then the math is gonna the math is going
to benefit you unless we're talking
about you know a home on on Knob Hill in
San Francisco that may never be
affordable right um or you know an
apartment in Manhattan but I'm talking
about flexibility in terms of where
these investors are going to be dumping
the homes and which that's the Sun Belt
and and and whether you can find a job
there that's my advice is to is to just
be as agnostic as you can about the
location or consider moving in with your
family you know think about being
Italian a little bit do whatever you can
because I I
think when I talk about buy now pay
later and people spending more money
because they have access to buy now pay
later and getting further and further
into debt just so that they can live for
the day that's that's not a formula for
long-term happiness and building a
family and I mean you know people ask me
all the time what's your life's greatest
accomplishments and I'm like William
Henry Carolyn and John Jr I mean that's
it so so understand that there you know
look over the horizon be as flexible as
you can whether you're talking about
living with your family or moving and
relocating to go where the home
Inventory is so that you can get the
best possible deal yeah and the Sun Belt
is where you might start looking right
away in terms of abundance of inventory
that's got to get put on the market at
some point I mean these are these are
investor homes and these investors like
I said only 4% of them were insured for
floods right so yeah something's got to
fix these homes sure
okay um last last bucket I want to jump
into with you we were kind of joking
about this before I hit record but um
president Trump and PR Minister Trudeau
had a dinner together and and uh the
conversation from that dinner has been
spread on online in a very humorous way
I think it's funny anyways as a Canadian
I kind of like that the president's poke
and fun at our prime minister um Canada
being the 501st state or we sto
subsidizing you what's your take on
these statements very Trump right let's
let's start it's it's extremely Trump
poke the bear poke the bear poke the
bear that's what he likes to do and he
was poking the bear specifically to say
don't mess with me and the tariffs that
I'm
threatening and you know before we
started recording I was just saying that
like the Nano weekly confidence survey
you know people's Canadians views of the
housing market are awful um and and
getting worse the inventory that's on
the market in Toronto is it's the stuff
of international news at this point
um without even discussing the dinner at
Mar Lago before we even go there I think
that we have to first tackle the fact
that Canada avoided a balance sheet
recession in 20078 and N they're not
avoiding it this time no so balance
sheet recessions take a very long time
to play out while households repair
their balance sheet that's a timec
consuming
process and the fact that we're having
this discussion the fact that the
unemployment rate is going up in in
Canada people are losing their jobs we
are talking about 50 basis point rate
cuts out of the Bank of
Canada to try and support the economy
um when you're having these types of
discussions the last thing you can do to
a resourcer country is impose tariffs
because then you've got a balance sheet
recession that becomes something worse
that I can't Define and I'm an
economist so I
think if there is a leadership vacuum in
Canada it needs to be
rectified
because just like Mexico and closing its
doors to modernizing
its energy sector under amlo's rule that
was devastating for the Mexican economy
when Mexico could have taken the
opportunity of the 2018 trade War to
build massive Supply chains with the
United States and that was largely
squandered don't get me wrong Mexico's
our Mexico is the United States largest
trading partner but it could have been
so much more rather than us
manufacturers saying fine we throw up
our hands we can't we're not getting a
warm reception Mexico will move that
Factory from China to Vietnam that was
an opportunity that was squandered For
Heaven's Sake don't let Canada go the
same
direction that would be a complete
disaster and you we we've now got the
opportunity to build the pipeline you
know finish it uh and all of that needs
to be capitalized and by the way now not
next year not theoretically not not in
in one year inauguration days is January
the
15th you know once Trump's appointees
out of the US House of Representatives
move into the
administration Mike Johnson's House of
Representatives can only lose one vote
one before the house is tied 216 to 216
so the margin of of the majority is
absolutely razor thin and the Democrats
every have every intention a year from
now
when they break for the holiday season
that that's going to be the green light
to start campaigning for the midterms
yeah so whatever is going to happen to
fortify and strengthen trade ties
between the United States and Canada
it's got to happen in the next 12 months
or at least the bulk of it that can't be
Unwound interesting so it's a now thing
it's not it's not a theoretical thing
it's right
now yeah yeah it'll man you know and you
touched on something that I think a lot
of Canadians don't realize is that we we
didn't get hit in 2008 right we we saw
it sou the Border kind of felt like it
happened to us but it didn't right we
came through with a healthier balance
sheet than any G7 Nation at that time
right and the Chinese just kept on
plowing more and more and more money um
from offshore into the Canadian economy
yeah you didn't have an immigration
crisis like we did in the United States
now you do but for an opposite reason
you went too far pendulums always swing
too far now there are too many people in
Canada who have moved there from other
countries who cannot afford anything in
terms of of what it cost to live in
Canada so the immigration trend went too
far in in Canada but yes you avoided
that balance sheet recession you're not
GNA avoid it now no no we're far over
our ski it's a very different country
than it was you know uh when Mr Harper
was running it right a very different
leadership style uh as mentioned before
I hit record Canada needs a dealmaker
that's it right it's a massive country
with very few people in it you know but
we're commodity Rich we're resource Rich
so getting product to Market needs to be
the focus for the federal leadership and
the Federal leader just needs to clear
the path for the provincial leaders to
get business done um and that's uh been
that is what we call long-term
prosperity and planning for it and
leading for long-term Prosperity because
you know it's it's fun to joke about the
51st
state but if I'm a proud Canadian you
know the joke wors then pretty quickly
given all these resources that you have
to tap well that's it talking about
lumber prices as well I mean think about
timber in Canada for God's sake it's
just it's not just a whale I mean
there's so much more there's ex
definitely definitely and and in terms
of being the bear that's getting poked
honestly I I welcome it because I think
the country needs a bit of a wakeup call
and yes the joke can wear thin very
quickly but also it's important that
it's heard
right and that this is this is the way
Canada is being presented right now with
our current leadership we are due for an
election inside of 12 months we need
that change to occur uh yeah I mean it
is it is very it's very much a known
known in the United States your average
working Joe and Jane know that there's a
leadership vacuum in Canada right that's
how bad it is because I mean when Harper
was running the show it I never thought
about him right but we know that Trudeau
is universally
disliked and has not done what what
needs he's not the leadership that
Canada needs no and you were at my
conference in January when prime
minister Harper was there I believe
right that was like 2002 I think yeah
he's not able to make it back this year
but uh but he's more involved than ever
in the Conservative Party of Canada I
mean since he left office he's he's not
been involved at all in any of the the
previous opposition leaders until uh Mr
Po is now the opposition leader and and
Mr Harper's very involved in the party
again which to me is like it's vote of
confidence because he has you know he
did steer the ship through the GFC and
did it very well but anyhow we need more
of that don't we we need more of that we
need more of that right you know I mean
on a at a higher level we also need that
for the United States we need somebody
who's strong enough
to
um to not kill the baby to not kill off
Doge even though you could be talking
about a really a more
severe recession in the United States
than it would be otherwise and that's
going to be a hard pill to swallow but
for the long-term prosperity of the
United States we do need a Department of
Education that actually works for our
children Co Illustrated demonstrated to
us that that the current public
education in the United States does not
work for the children there are some
radical things that can be done um that
will make a huge difference over the
long term but it's going to be ugly and
Trump's going to have to take that lump
we will see now do you think because
he's not running for uh you know a
second term in theory this is his second
term and so you know there's less reason
to to pump the breaks on some of these
big decisions when you look at his
appointments thus far when you consider
that he has the house the Senate the
popular vote he doesn't need to win
another term so he can go For Broke in
uh what's your optimism level that he
will charge forward as hard as he
campaigned you're asking me what the
probability is that Donald Trump is
going to enter the White House without
his
ego I guess I am yeah that's a pretty
difficult question to answer and I can
just say that some of the appointments
that he's made from his chief of staff
to the treasury secretary
um have been rational and they are
people uh in high ranked positions uh
you know ruota Secretary of State there
are some things that he's done that that
very well demonstrate that he's a much
more mature person a much more mature
leader than he was in 2016 so I'm not
discounting the the prospects for him
succeeding I want for him to succeed but
he's gonna have to
really be be the be the bigger man leave
the ego aside for the sake of the
American people which will actually
restore his
legacy but inadvertently he's got to
take it on the chin first probably and
deliver a bunch of bad news Embrace some
pain hopefully come out the other side
clean but that's a maybe yep and that's
a big because again the bureaucrats are
left leaning and they're in in they have
no Des to be in the crosshairs of Doge
so when you consider that that everybody
in the Bureau of Labor Statistics I
would say 90% of them are
Democrats if if they're GNA play defense
they're GNA play defense with the
data interesting
interesting um look Danielle it's always
a pleasure having you on the show I
appreciate your time today thank you for
coming on and I'm looking forward to
having you in Vancouver in like six and
a half short weeks January 9 think about
that right now because that's like a
next year thing and I've gotta through
the holidays first so don't say I'll see
you next year because that's like whoa
I've not finished Christmas shopping
however I'm looking most forward as well
yeah you know it's all I'm thinking
about right now we got six weeks out we
go but I'm looking forward to having you
back it's gonna be a banger of an event
uh attendance is looking very strong so
packed house and I'm excited for it
really excited to have you back joining
us on stage at the VC thanks so much for
your time today and if I don't chat to
you before I see you a lovely holiday
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