February 12, 2025 • 45 mins
Watch Carol and Tim LIVE every day on YouTube: http://bit.ly/3vTiACF.
Zillow CEO Jeremy Wacksman joins to discuss company earnings and US housing outlook. Tim Sullivan, CEO of New Jersey Economic Development, breaks down the impact of NYC's congestion pricing plan on New Jersey commuters. FICO Chief Analytics Officer Scott Zoldi talks about using AI to detect, mitigate, and prevent financial fraud. Aurora James, Founder of the 15 Percent Pledge, discusses efforts to combat the current anti-DEI movement. And we Drive to the Close with Leo Kelly, CEO at Verdence Capital Advisors.
Hosts: Carol Massar and Tim Stenovec. Producer: Sara Livezey.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg business
Week Insight from the reporters and editors that bring you
America's most trusted business magazine, plus global business, finance and
tech news. The Bloomberg Business Week Podcast with Carol Masser
(00:23):
and Tim Stenebeck on Bloomberg Radio.
Speaker 2 (00:27):
All Right, want to get to a name that is
certainly on our radar. Shares of Zillo down the most
to nearly one year. The stock off more than nine percent.
Was down seventeen percent at its low. Today, the online
real estate firm delivered a revenue forecast for the first
quarter that fell short of the average analyst estimate. Meantime,
the company expects twenty twenty five to be its first
profitable year since twenty twelve. Keep in mind it posted
(00:49):
a net loss of one hundred and twelve million back
in twenty twenty four.
Speaker 3 (00:52):
With more on the business and the US housing market
with us as Zillo CEO, Jeremy Waxman joining us from Seattle. Jeremie,
thanks for joining us today. Likely I would imagine a
tough day when the stock is down as much as
seventeen percent, down nine percent right now. The housing market
it just hasn't recovered in the way that you want
to see. What's the biggest thing holding it up?
Speaker 4 (01:15):
Thanks for having me. The housing market remains challenged. It
was challenged in twenty twenty four, and we're expecting it
to be so again in twenty twenty five. Zillo reported
great results yesterday. Q four revenue up seventeen percent, and
we hit our goals of growing revenue double digits last
year and expanding our margins, and we also guided yesterday
that we expect to continue to do that again this year,
(01:36):
with revenue growth in the low to mid teens, more
margin expansion, and positive GAT and income for the first
time in a long time. And as you said, that's
against a persistently challenged housing market. So we're able to
grow and gain share both in twenty four and we
plan do it again in twenty twenty five, while the
market remains depressed for volume and challenging for buyers.
Speaker 2 (01:57):
Jeremy, do you think investors have it wrong in tern
terms of pushing your share price down a lot in
reaction to what they got on the quarter and the outlook.
Speaker 4 (02:08):
We don't really focus on the day to day voting
machine of the stock market. If you zoom out and
look over the long the long couple quarters a couple
of years, we've made great progress on our integrated super
apps strategy. We're growing revenue nicely, We're out growing the
category and we can plan to continue to do that
in twenty twenty five and so over time the stockcacre
of itself. The company grows in value as we really
(02:29):
deliver on our promise of helping more buyers and sellers
get home. That's really our goal at Zillo is to
help more of our audience turn into transactions.
Speaker 2 (02:38):
Yeah, and I will point out the stock was up
about twenty eight percent last year and up about almost
eighty percent and twenty twenty three. In terms of the
stress though, or maybe you're you know, kind of cautious
outlook in terms of the housing market, is it all
about mortgage rates and higher mortgage rates?
Speaker 4 (02:54):
Youah, the challenge or the housing market starts with mortgage rates,
but it's really about availability and supply. We are expecting
flat ish total dollar value housing marketing Q one and
load to mid single digit growth for the year. And
as you said, if you look, it's not like twenty
twenty four was that much better from a volume standpoint.
The real challenge is with mortgage rates. Staying hi affordability
(03:14):
is a challenge for buyers, but that really locks a
lot of sellers into their homes as well. Right a
seller is thinking about do they want to trade out
of that mortgage? Do they feel locked into that mortgage?
And many are foregoing listing their home and making that move.
So you're seeing still very low inventory. Inventory is up
eighteen percent from last year, but it's still downs sharply
(03:35):
from pre pandemic norms, and so lack of supply really
makes it challenging for buyers. And then you add elevated
rates and what they can afford of what there is
to buy.
Speaker 3 (03:44):
Jemmy, the cost of housing certainly a theme in last
year's presidential race. I'm wondering if you think that the
federal government will be able to achieve bringing more supply
of housing online. This came up the Vice presidential when
Jade Vance talked about using federal lands to build homes.
(04:04):
Do you think the federal government will have a meaningful
effect on housing supply?
Speaker 4 (04:10):
The real challenge was supply. We talked about existing home
inventory and what sellers are doing, but we are chronically
under built right we Zilo estimates about four and a
half million homes have not been built to keep up
with the demand needed since the global financial crisis, And
the solution of those problems really is at the state
and local level. You need things like permitting reform and
(04:32):
removing red tape in the process to get starts done quickly.
You need tax incentives and financing options so that builders
can get their projects online more quickly. So the totality
of the problem, you know, all nearly five million homes
that we need to catch up on. We're not going
to do that overnight, but slow and steady will definitely
bring more supply to the market.
Speaker 2 (04:50):
I do wonder though, too, you know, Jeremy, how much
the YEP I get that, the permitting I mean, these
are problems that have plagued certainly the housing market I
feel like forever in terms of so apply. But having
said that, how much too? Is there some cautiousness on
the part of homebuilders who still everybody still remembers two
thousand and eight and the over bills. So is there
also a part of that as some of the components
(05:13):
in terms of supply.
Speaker 4 (05:16):
Well, you're seeing places where it works well, right. I
mean Austin, Texas is one good example that we've highlighted
where a lot of multi family inventory and the rental
market has come online. And you've actually seen rent prices
come down even with the population growth in Austin. And so,
you know, you have to remember if you zoom out,
there are still the counter forces of for sale and
rentals working together. And you know, when folks can't get
(05:37):
it done and find the home to buy, they end
up re renting. And you're seeing you know, rental inventory,
you know, grow to satisfy that demand as well. So
it is, as you said, it's a local issue, but
there are places where it's working well, and there are
places where it can work even better.
Speaker 3 (05:52):
We got a hotter than expected CPI print earlier today,
and my question is about how that changes the outlook
for rates for the year, and then in turn, how
that affects your business. Does you OUTLOK for twenty twenty
five change if rates don't come down.
Speaker 5 (06:08):
No.
Speaker 4 (06:08):
Our outlook that we put out yesterday assumes a pretty
lousy housing market, and I think today's print probably just
kind of confirms that fact. Right, we are expecting flatish
housing market in Q one and load of mid single
digits for the year, and I think we were maybe
a little bit more embarrassed than most heading into the
year on how the housing market's going to do. Now,
the good news for Zillo is we're out growing the
category and we're gaining share. We did that in twenty
(06:30):
twenty four and we expected it again in twenty twenty five.
And that's in our for sale business, where we're helping
more buyers meet their agents, we're helping originate more mortgages.
That's also when our rentals business. Our rentals business grew
twenty five percent in Q four and we expect that
to accelerate in Q one as we bring more rental
inventory to more renters across slow Hey.
Speaker 2 (06:50):
One thing I do wonder in our conversation coming off
of the hot CPI print Jeremy, is that maybe we
so certainly the rates market, the US rates market, the
treasury mark market react and move up today, but now
the talk has moved to maybe even the next move,
we need to start thinking about the Fed raising rates.
If we see the FED start to raise rates, what
(07:11):
does that do in your view to the housing market,
and how might that impact your business.
Speaker 4 (07:17):
Well, as I said, we're kind of near all time
lows on volume right, We're down to basically folks who
have to move and can get it done, get it done.
And that's the thing about this market. Long term real
estate is a growth industry. You see volumes and total
value grow. Right now, you're seeing depressed volumes because of
all the challenges, especially in the financial market with affordability
(07:37):
for buyers. But folks are getting it done and they
will get it done. And what we're here at Zilla
to do is help them. Right buyers who need to buy,
many of them are starting that conversation with financing rather
than just dreaming. We now see about as many buyers
start with what can I afford and can I even
buy right now as they do dreaming, shopping and going
media and agent. So we've brought online tools like Buyability
(08:00):
to help them truly understand their personalized payment information, what
can they actually afford for themselves given their financial information,
so they can have confidence to go get a pre
approval letter, to actually go make an offer and win
a house. So it is tough out there, it will
remain challenging in twenty twenty five, but folks can get
it done. We're there to help and that's exactly what's
driving the results you saw from us in Q four
(08:21):
and why we expect to continue to grow and not
go the category in twenty twenty five.
Speaker 2 (08:24):
Jeremy, you mentioned those buyability tools that you guys have
on your platform. What does that show you about? Is
it the first time home buyer that continues to find
it really difficult, is it the trade up home buyer?
What does it tell you about kind of the home
buyer and in essence, the US consumer out there when
it comes to buying a house.
Speaker 4 (08:41):
Yeah, I mean the demand and desire to buy a
home still persists and exists across all demographics. You're seeing
folks having to wait longer, save up more to make
that down payment, and so it gets tougher. But you
see the strong desire to buy home really persist across
all demographics, and we see that in folks who are
using Zillo. Again, as I said, one of the things
that is interesting to us is how much more financing
(09:03):
and total cost of ownership is front and center for
a buyer before they even start. You know, five ten
years ago, everyone wanted to start by shopping, by touring
by virtual touring, by going into open houses. And now
it's kind of a balance as many folks want to
start in that state, as they want to start with
just the reality of what's my budget look like? How
do I set my budget and work with an agent
(09:24):
to make sure the homes I fall in love with
the ones I can actually buy.
Speaker 5 (09:28):
Hey.
Speaker 3 (09:28):
One thing we also learned recently from you guys is
that Redfinn is teaming up with Zillo for rental listings.
This partnership to me, it sort of looks like frenemies
teaming up, Like you guys are competitors here. Redfinn's market
cap is about two billion dollars year, about eighteen billion
dollars Do you end up buying redfin at a certain point.
Speaker 4 (09:50):
We're really excited about this partnership we just announced with Redfinn.
It's a big step in our overall rental strategy. It's
important to zoom out and remember, unlike the for sale market,
there's no national database for rentals. The big challenge a
renter has is they can't find all the supply. They
have a very short timeframe to find a place to rent,
and so they scour the internet, They scour offline looking.
(10:11):
So that's zilla strategy. Can we organize more and more
of the rental listings out there nationwide so that renters
on Zilo and on our partner sites can find them.
That strategy is working great. That's what's driving having the
leading audience and growing audience of renters, and that's bringing
more property managers to Zillo and our partner sites to
want to advertise that audience. So this partnership with Redfin
(10:33):
to power their rentals business is just the next step
in that strategy. Adding on to this great partnership we
forged with real to dot com last year, it allows
advertisers to come to Zilo and get advertising in front
of Zillo sites, Redfin sites and realtor sites to reach
an even bigger set of renters. And then renters get
more choice, right, they see more inventory, which, again, as
I started, that's the big problem in rentals is you
(10:54):
cannot find all the inventory.
Speaker 3 (10:56):
And forgive me that redfinn market cap about one point
one billion dollars, so shy of of two billion dollars.
I didn't hear a yes or a no and no
answer to my question about whether or not.
Speaker 4 (11:04):
Oh no, no, plans, no, no plans. We're very excited
about the partnership. We've worked with them on some other
things before, and we love how culturally aligned they are
and just digitizing the transaction in real estate.
Speaker 2 (11:14):
Well, along those lines, how are real estate companies holding
up through this extended housing market trough? I mean, any
opportunities for you guys to do some acquisitions as a result,
along maybe the lines of I don't know, partnerships, but
maybe even acquisitions.
Speaker 4 (11:28):
Yeah, the bright side of a challenge real estate market
is it really allows the best professionals to gain share.
Right when it's rainy and cloudy outside, those that do
best sometimes come out ahead. And what's great about that
is that aligns so nicely with Zillo strategy, right. Zilo
strategy is to partner with the best agents and agent
teams in the industry. Eighty percent of the agents that
(11:49):
we partner with are in that top twenty percent of
producers nationwide. So these are the folks that are operating
businesses at scale, training great agent teams to help delight customers.
So even when there's less transactions to do, and even
when it's a challenging conversation with many buyers and sellers,
those folks command great price, hold share, and grow their business.
(12:09):
And so in some ways having a choppier or a
depressed housing market can advantage some of the best professionals.
Speaker 3 (12:15):
Hey, we're asking every CEO we talked to these days
a couple of different questions about politics about AI. Politics
is where I want to go and just hear from
you about how you view this new Trump administration in
terms of changes that you've made at the company as
a result, or what it means for you as a business.
Speaker 4 (12:35):
One of the things you will focuses a lot on
is AI and AI as it comes to the list industry, right,
both for us as employees, but more so for our
customers and our partners, our agents, our loan officers. And
we've been investing in and innovating around AI for decades
and so now as generator of AI comes to the forefront,
you know, we've been really advocating for responsible regulation around
(12:58):
AI that encourages and supple sports innovation so that companies
like Zilo can continue to innovate on behalf of the customer.
So one thing we're very excited about is to continued
progress on the ability to progress with AI and AI
for US is a feature. It is a tool for
our customers, for our employees, But in the realist industry,
it's really about making the professionals more efficient and effective.
Speaker 5 (13:19):
Right.
Speaker 4 (13:20):
There's so much wasted work, busy work, paperwork, back office work,
and when you talk to a great real estate agent
or a great loan officer, that's not what they want
to be doing. They want to be delighting customers, they
want to be winning more business, they want to be
getting more transactions done. So we're really excited about the
ability to continue to lean in and innovate, not just
on our tech platform generally, but on AI specifically, to
(13:42):
really bring more of this transaction into your smartphone, make
it more delightful and faster for the customer.
Speaker 2 (13:47):
All right, Jeremy, one last question is also a question
we are asking too, heads of company CEOs and the like,
anything that could come out of Washington and the new
administration that could help or hurt your business. And just
got about thirty seconds.
Speaker 4 (14:03):
Zillo is really focused on ensuring that real estate stays
accessible for the customer. At We've outlined our principles for
the consumer, which are around transparency, access, and affordability, and
any policies that come, we look to help make sure
they push forward and ensure that consumers have access to
all the information that's out there, have access to great professionals,
(14:25):
and have better education on how the real estate industy works.
Real estate is one of the largest industries that there
is and it's the single biggest decision that most individuals
are going to make. So making sure that people understand
how it works, making sure that they have access to
hiring the best professionals, that's one of the things we're
very focused on Zilla, and we continue we will continue
to be so.
Speaker 2 (14:44):
You're hopeful that the administration the policies will be supportive
of the housing market.
Speaker 4 (14:47):
Just quickly, Yeah, we want to. We've been around for
twenty years and have been fortunate to work with both
both administrations. And again, as we talked about earlier, one
of the real challenges in our industry is so much
is done at the state and the low level to
make sure that real estate can flow for the benefit
of the buyer and seller.
Speaker 2 (15:05):
Really good point, Jeremy, Thank you for all this time.
Jeremy Waxman, he's chief executive officer of Zillo, joining us
on this Wednesday.
Speaker 1 (15:12):
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Speaker 6 (15:28):
Well.
Speaker 3 (15:28):
For a look more closely at how that spending freeze
could effect states, we welcome Tim Sullivan, CEO of the
New Jersey Economic Development Authority, also known as the NJEDA.
It's a state agency responsible for economic growth and development
in New Jersey. Tim joins us from New Jersey. Tim,
good to have you back with us. New Jersey is
a state that is part of this coalition. North Jersey
(15:48):
dot Com reporting that Governor Phil Murphy says this freed
freeze could cost New Jersey up to twenty seven and
a half billion dollars. Is the money flowing now?
Speaker 7 (16:00):
So yeah, the Governor, I think correctly highlighted what a
big potential deal this is for Jersey and lots of
other states.
Speaker 8 (16:05):
You know, obviously this is a subject of ongoing.
Speaker 7 (16:06):
Litigation that our Attorney General, Matt Plackett is leading and
certainly would have a huge impact. I think that's why
you've seen the governor in the Attorney General standing up
and saying this is this can't happen.
Speaker 2 (16:17):
Yeah, I mean, you know, we want to get move
on to some other things, but I mean, what kind
of an impact this is some serious spending would it
mean for the state of New Jersey in terms of
its economy? Yeah?
Speaker 7 (16:28):
Again that you know, when you start talking about tens
of billions, twenty to thirty billion dollars, that's a huge impact.
New Jersey's a big state with a six hundred or
so billion dollars GDP. We're a big state, but that's
a lot of money and a lot of people rely
on it, both for economical and purposes that me and
my colleagues care a lot about. But throughout the state,
whether that's education or human services or any number of
things that could have a huge potential impact.
Speaker 2 (16:50):
Tim, are you and the team and the governor already
thinking about Okay, in case this does go away, we've
got to start thinking about different ways that are going
to drive growth within the New Jersey the economy full disclosure,
my home economy.
Speaker 7 (17:05):
Yeah, it's a think about how we grow the economy
is something we do all the time, no matter you know,
no matter what's going on in Washington, no matter what's
going on, you know, with federal policy changes, and so
you know, certainly if there was a dramatic shift in
federal policy on any number of funding streams, there'd have
to be a course correction.
Speaker 8 (17:21):
And you know that's well above my pay grade.
Speaker 7 (17:23):
But you know, in terms of things that we're trying
to do to grow the economy, you know, we're going
to continue to focus on the things that Governor has
been focused on for seven plus years now, which is,
you know, growing new industries, supporting small business, supporting innovation,
trying to grow you know, more new young companies that
grow and scale and add you know, ten thousands of jobs.
Speaker 3 (17:40):
Can you tell us where the federal funding goes versus
where state funding goes? Like, where would this money if
it were frozen? Where would people in New Jersey feel that?
Speaker 7 (17:52):
Well, this is a bit outside my lane. So I
don't I want to hesitate to comment too broadly. Obviously,
you know, the governor put out sort of a report
on our federal funding earlier this week or late last week.
It's pretty broad and deep I can take you. With
regard to economic development, you know we have you know,
significant programs that are funded around environmental remediation. We have
(18:13):
programs that are funded around supported around small business. Uh,
the big, big slug of funding that came from the
American Rescue Plan support small business funding.
Speaker 8 (18:22):
And so you know, the ramifications could be could be
really really significant.
Speaker 3 (18:27):
Hey, let's go to congestion pricing, because we haven't had
a chance to catch up with you since that.
Speaker 2 (18:30):
I paid my first congestion pricing this quickly.
Speaker 3 (18:33):
Did you get into the city yesterday, Carol?
Speaker 2 (18:35):
I got fairly quickly, but I don't know. It was
pretty early in the morning, so typically I don't see
a lot of traffic. Well, but I don't know.
Speaker 3 (18:41):
I think we spoke to Bill Maloney yesterday who said,
even early in the morning, he's getting in huge difference. Yeah,
huge difference, huge difference on New Jersey. Yeah, what does
it mean for New Jersey? What does it mean for you?
Speaker 5 (18:52):
Yeah?
Speaker 7 (18:52):
So this is something the governor has been pretty clear on,
and this is also the subjects of some ongoing litigations.
Speaker 8 (18:57):
I got to be mindful of how I how I
comment here.
Speaker 7 (19:00):
But you know, the congestion pricing, you know, the Governor's
not opposed to it in any form, It just doesn't
doesn't think the way it's been approached here is the
right way to do it, because we yeah, we don't
have a complete data set based on anything I've seen
of whether folks have switched how they're getting into the
city or what roads they're taking, or whether they're rerouting
and trucks and trucks and cars have different options with
(19:21):
regard to mode shifts, and so you know, whether that
means pollution in you know, Hudson and Burden Counties, whether
that means uh, you know, different impacts on our traffic
on our side of the river. And I think there's
been enough data yet to make to reach too many conclusions.
But the the the governor has been clear that this,
the current framework doesn't work for Jersey and that's where
we stand on it.
Speaker 2 (19:38):
Well, and I guess what we're really more interested in
terms of your review, Tim, Like, what do you do
to say, all right, folks, you don't want to pay
the congestion tax, come on and set up shop here
in New Jersey.
Speaker 7 (19:49):
Yeah, we've got we've got some ads running both on
taxi toppers and a few billboards through the city and
digital making that exact point of you know, even if
it can just get a little better.
Speaker 8 (19:58):
It's still it's still a slog in and out of
the the city every day.
Speaker 7 (20:00):
But if you're driving and you know, why why not
avoid that and avoid that and come to Jersey and
set up shop?
Speaker 3 (20:07):
Is it working?
Speaker 8 (20:08):
You know, we've had a number of incentives programs. One
of the which that.
Speaker 7 (20:11):
Is being highlighted by those ads is called Rise, which
basically is for folks who are remote working, if you
classify as Jersey employees, we'll give you an incentive to
do so in the state, benefits from a tax perspective,
stay in New Jersey, And so that's one of the
programs we're pushing on that front.
Speaker 3 (20:25):
I know it's only been a little over a month
since congestion pricing went into effect, but is that ad
campaign working? Do you have any data you can point
us to.
Speaker 7 (20:33):
Early days for obviously congestion pricing in for that campaign.
You know, we've seen an uptaken interest in the program
that we're marketing for sure, and I think folks are
you know, evaluating the implications of what congestion pricing means
for their workforce, both you know, big businesses and small businesses,
and you know, the message we want to send is
Jerseys open for business, and you know, we're we're eager
to help you know, more businesses locate here. Hey.
Speaker 2 (20:55):
You know, one of the things I'm always curious about, Tim,
and we just talked about this a lot coming off
of the Super Bowl and just the building of stadiums
around the nation and what that means for a local economy.
And often, you know, you tap the muni market to
pay for some of this or a lot of it,
something like the Prudential Center or MetLife Stadium, like these
(21:15):
kinds of facilities.
Speaker 4 (21:16):
What does it do?
Speaker 2 (21:17):
What kind of economic might does it give to the
New Jersey economy?
Speaker 7 (21:22):
They're incredibly important and sports and entertainment broadly speaking, are
incredibly important economic drivers, not just for Jersey but all
around the country.
Speaker 2 (21:28):
Is it the top, like one of the top drivers
of economic growth.
Speaker 8 (21:33):
It's certainly one of the big ones, you know.
Speaker 7 (21:34):
You know, New Jersey's blessed with lots of drivers or
economic growth, including things like the farmer industry and the
booming film and television sector that's taking root in Jersey.
Speaker 8 (21:41):
So we've got a lot of contributors to the growth story.
Speaker 7 (21:43):
But when you look at things on the forward radar,
things like the World Cup in twenty twenty six, the
Jersey will host the final and.
Speaker 8 (21:51):
I think eight games.
Speaker 7 (21:52):
You know, the projected economic impact from that alone is
ranges from two to three billion dollars.
Speaker 5 (21:59):
You've worked.
Speaker 3 (22:00):
That's yeah, a.
Speaker 7 (22:01):
Straordinary and we've got the Club World Cup coming up
as sort of a dry run for that this coming summer. Then,
you know, when you think you think about the Prudential
Center all that, not only the Devil's and Seaton Hall
of Places basketball there, but you've got some of the
best concert offerings anywhere in the world Comes through Comes
Through the Rock, and that's one of the top performing
(22:22):
UH concert.
Speaker 8 (22:23):
Venues anywhere in America. And so it's a huge driver
for Newark.
Speaker 7 (22:25):
And it means it's great when there's you know, hot
concerts in town or whatever. But it means a lot
for small businesses in Newark that restaurants and you know,
pubs and bars and everything else that supports UH activities
like that.
Speaker 3 (22:37):
How much of an economic driver is Bruce Springsteen.
Speaker 5 (22:41):
It's hard to.
Speaker 7 (22:41):
Put a value on on the Boss.
Speaker 8 (22:44):
I'm a huge fans.
Speaker 7 (22:45):
You're you're you're attempting me to sort of geek out
on various things I might say about the boss, But yeah, no,
it's he's he's he's critical to our economy. He's a
state treasure.
Speaker 8 (22:55):
We have Bruce Springsteen Day officially in law about.
Speaker 4 (23:00):
The housewives of New Jersey.
Speaker 2 (23:01):
I'm only kidding. I'm only kidding. I'm not going to
ask for the economy impact of that. Tim, so glob
we got some.
Speaker 4 (23:06):
Time with you.
Speaker 2 (23:07):
Tim Sullivan, as chief executive Officer of New Jersey Economic
Development Authority, joining us from the Great Garden State, my home.
Speaker 3 (23:14):
State, oldest Georgia.
Speaker 4 (23:17):
You're bidast No, I'm not.
Speaker 2 (23:19):
I speak the truth.
Speaker 4 (23:20):
I'm a journalist.
Speaker 2 (23:22):
I can make the distinction.
Speaker 5 (23:24):
It's incredible.
Speaker 9 (23:25):
This is Bloomberg.
Speaker 1 (23:30):
This is the Bloomberg Business Week Podcast. Listen live each
weekday starting at two pm Eastern on Applecarflay, 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 eleven thirty.
Speaker 3 (23:48):
For a check on how consumers are faring in this economy,
we bring in this Scott Zoldi, chief analytics officer over
at FIKO, It's the analytics and credit rating company. He
joins us here in the Bloomberg Interactive at Brokers Studio.
You see a lot of data, you comb through a
lot of data. How are consumers doing?
Speaker 9 (24:06):
So consumers, you know, there's definitely still a lot of
sort of focus on you know, prices and inflation right
in terms of how they are transacting with their payment cards.
You know, we primarily look at consumers with respect to
fraud detection, and so as part of that, we look
at what are those patterns, how are they changing in
terms of whether or not they are being susceptible to fraud,
(24:26):
and we use machine learning to do that to make
a determination and whether or not they are experiencing fraud
or not fraud in these difficult.
Speaker 4 (24:33):
Times, how often is that happening?
Speaker 9 (24:36):
So essentially, with each and every transaction that occurs, there's
a decision that gets made with one of these machine
learning models that will make a decision between you know,
fraud or not fraud, and it's automated, so every time
you swipe your card, the decision gets made.
Speaker 10 (24:49):
And these are technologies that we develop.
Speaker 9 (24:51):
More than thirty years ago and they continue to serve
well in basically that infrastructure protecting payment cards, where.
Speaker 3 (24:57):
Do you play in the ecosystem. For example, if I
use my American Express, if I use my Chase card,
are you there behind the scenes.
Speaker 9 (25:05):
So we're behind the scenes for many of those banks, right,
And so essentially.
Speaker 10 (25:09):
The way it works is that we develop. We're an
analytics software company.
Speaker 9 (25:11):
We have pioneered the use of machine learning more than
thirty years ago in the detection of fraud, and we
operationalize AIS, which is a really difficult problem today in
this sort of golden age of AI actually making it
practical and usable.
Speaker 10 (25:24):
We build those.
Speaker 9 (25:25):
In all network models, and then we install our software
at many of the banks, and then the banks use
that score, which goes from one to nine nine nine.
The higher the score, more likely it is fraud in
a strategy in terms of whether a block a transaction,
and for suspected.
Speaker 2 (25:39):
Fraud, we've all been there, right. We get a call
and they're like, hey, is this you? We want to
check like a fraud alert. Hey Scott, what I do wonder?
Speaker 5 (25:46):
How did you.
Speaker 3 (25:46):
Spend you know, one thousand dollars on those two dozen
eggs that you have at home.
Speaker 8 (25:49):
Listen.
Speaker 2 (25:50):
Sometimes it's like I'm like, honey, is this you?
Speaker 3 (25:52):
And I'm like ohop, it's.
Speaker 2 (25:54):
Fraud, hey Scott. One thing I do wonder is in
an economy, wondering when things are going well, is there
less fraud or more fraud an economy that might be
see consumers pulling back as they're less fraud.
Speaker 6 (26:08):
I'm just curious.
Speaker 10 (26:09):
Yeah, I mean, fraud is essentially always there, right, and
I think more level of it.
Speaker 3 (26:14):
I'm curious the level will.
Speaker 9 (26:15):
Generally increase right when we see sort of harder, more
difficult times, and so like there'll be more people that
will take advantage of fraud and so they may play
a role in the fraud. We call that mewling, where
you know, someone will transfer money in terms of a
fraud event, and so definitely it's it's makes for harder
times people will turn to crime. Now, with that said,
(26:35):
most of the fraud is committed by sort of organized
data science teams, very specialized individuals, but they're always looking
for recruits, and those recruits will help facilitate that fraud
where they'll capture details or they'll allow money to pass
through their accounts to the eventual beneficiary who is a
fraudstre behind the scenes.
Speaker 3 (26:51):
How are you doing with recruits? Everybody wants people who
work in AI right now.
Speaker 10 (26:56):
Yeah, we're doing We're doing really well. Fortunately.
Speaker 9 (26:58):
You know, I think Fiico has a has a great
reputation as an AI and machine learning leader, and we
operationalize those models so instead of having an academic conversation
about the use of AI, it's actually deployed. And so
most of our staff have been here for you know,
more than ten some twenty years.
Speaker 3 (27:14):
Well, you said that you've been doing this. This technology
has been developed, you know for decades. How much has
it changed in the last couple of years since we've
seen the huge jump that chat GPT at open ai
was able to make. You've seen the development of Anthropic
these other lms and the rise of in videos. Well,
how much that has that improved your AI models?
Speaker 9 (27:36):
So, you know, this is an area where you constantly
have your adversary, the frousters, with their own AI models,
and they're trying their own innovations to steal better. You know,
for Fiico, we have more than one hundred patents in
AI machine learning.
Speaker 10 (27:49):
That we've evolved over the last thirty years.
Speaker 9 (27:52):
When it comes to like things like transformer technology, we're
constantly evaluating bringing that in to improve the technology but
the amount of energy that we spend on innovation is immense, right,
because it's basically an arms of war between those you know,
data scientists on the dark side and those on the
light side. Things like Navidia and transformers. These are opportunities,
(28:13):
opportunities to try new technology and layer it into what
has already been working and working well behind the scenes.
Speaker 2 (28:18):
Scott, One thing I do wonder and with fraudsters, I've
heard that you know, they'll basically try a small charge
and see if it goes through and then amp it up.
But what is the typical pattern or do they just
go for a big spend?
Speaker 10 (28:28):
How does it work?
Speaker 2 (28:29):
Carol's trying to do some crimes and no, no, I
mean the one thing we wanted. It was like somebody
bought tickets to a Vegas show and I'm like.
Speaker 3 (28:36):
I haven't been to Vegas, honey, have you been? And
he's like no, So it's but I'm.
Speaker 2 (28:39):
Just curious, like how do they how do they do
it so they can get it through?
Speaker 9 (28:43):
So they're going to try to take a transaction that
is not obvious, right, so they're not going to necessarily
go for the big, big ticket item at the jewelry
store or something else.
Speaker 10 (28:51):
That's kind of MH bag or something correct, so they
might slowly ramp it up.
Speaker 9 (28:55):
And so we're looking for are things that are out
of pattern for a cardholder. So we maintain a profile
of use for each and every card holder. We understand
what they're likely to do and what they're expected next
transaction is. And so when we see something off, we
measure it and we calculate it and they'll slowly ramp up.
Now with that said, if you wanted to get into fraud,
the very best way to do that, Carol is I.
Speaker 10 (29:14):
Don't okay, you.
Speaker 3 (29:18):
Tell us how to fraud.
Speaker 2 (29:20):
I'm like, I'm just curious how they do it.
Speaker 3 (29:22):
That's what That's what somebody who wanted to do fraud
would say, Carol. Yeah.
Speaker 9 (29:25):
So, but but here's the thing I want to say,
But I'm on air, so that the more heinous sort
of crime is actually called scams, and scam is where
I trick you to sending me money. So I don't
have to steal your information. I can social engineer you people.
Speaker 3 (29:39):
I just I just I get texted every day, but
you don't bite. Okay, Well today I got one that
actually said Tim okay, yeah, I didn't bite, but it's
getting better.
Speaker 2 (29:49):
People.
Speaker 10 (29:50):
Really it's a huge problem.
Speaker 9 (29:51):
So for example, like they target the elderly, those are
a little less speciscated, and and they're very successful. And
what's what's really damaging, and sometimes they can empty out
entire bank accounts, right, and so it's.
Speaker 10 (30:01):
A really really heinous sort of crime. So we all
have to be on guard.
Speaker 9 (30:04):
And that's why, you know, we detect scams, and we
have technology that tries to understand human behavior, use that
machine learning, make predictions and just you know, give the
banks financial institutions tools to protect consumers.
Speaker 2 (30:16):
All right, so go ahead, thirty seconds? Are scores going up?
Our scores going down? I've got to ask you. You
see the analytics are people like stressed. It's a great
indicator of the economy.
Speaker 9 (30:27):
We're seeing drops in the number of transactions, so like
in terms of the number of sort of discretionary transactions
that are occurring. So I think there is the stress
and we're seeing that in the payment data.
Speaker 2 (30:37):
All right, we knew we'd get there. Thank you so much.
Speaker 10 (30:39):
I love the data.
Speaker 2 (30:40):
Did you want to say something.
Speaker 5 (30:41):
No, go ahead?
Speaker 10 (30:42):
You sure?
Speaker 5 (30:42):
Yeah?
Speaker 3 (30:42):
Yeah, I am not a scammer.
Speaker 2 (30:44):
I'm not looking to do it. I'm just curious like
how people think about it because there's so many systems
in place.
Speaker 10 (30:51):
Just wait till we are off air.
Speaker 3 (30:53):
Stetfic I am.
Speaker 5 (30:54):
I can't wait.
Speaker 3 (30:55):
It's got Zoldi as Chief Analytics Officer over at fight Go,
joining us here in the studio.
Speaker 1 (31:00):
Listening to the Bloomberg Business Week podcast. Catch us live
weekday afternoons from two to five e's during Listen on
Applecarplay and Android Auto with the Bloomberg Business app, or
watch us live on YouTube.
Speaker 3 (31:14):
Some news today, McKenzie pledging to prioritize diversity across its workforce.
This despite US President Donald Trump ordering his government to
push private firms to scrap DEI policies. Carol McKenzie seems
like it's in the minority right now, and I think
that's why this is news. Check out some recent headlines.
You just go to Jeff Green's biopage, who covers diversity
(31:34):
here at Bloomberg, And here's some of the stories that
he's had a hand in. Shareholder Advisor ISS, Institutional Shaholder
Services Kills, diversity criteria for boards, Booz Allen scraps DEI
programs and reaction to Trump orders Goldman Scrap's diversity rule
for IPOs and latest DEI retreat accenture abandons diversity targets
citing Trump's orders.
Speaker 2 (31:55):
Yeah, we definitely have seen a trend in terms of organizations, companies,
institutions like really just you know, kind of rolling back
their DEI efforts or at least publicly saying that they are.
Speaker 3 (32:04):
Aura James is the founder of the fifteen Percent Pledge.
It's the organization that works with companies, at least in
its own words, to quote, implement meaningful change and create
greater equity for black businesses, including designating fifteen percent of
their shelf space for black owned brands. We've spoken to
her before. She's back with us from Los Angeles, Aurora.
Speaker 5 (32:22):
How are you.
Speaker 6 (32:24):
I'm so well, how are you guys?
Speaker 3 (32:26):
Do we're doing really well? I'm wondering your reaction to
what companies are doing. I read some of the headlines
right then. It seems like a real sea change from
the conversation we would have been having with you about
four years ago.
Speaker 6 (32:39):
Yeah, I mean, it's really disappointing to see a lot
of these major corporations like do these what I kind
of like to think of as pr rollbacks, you know,
Target and Walmart. I don't think that they're necessarily you know,
the places that we always think about as being that diverse.
That being said, like, it's disappointing when we hear any
major corporation want to roll back back diversity, equity, and inclusion.
Speaker 5 (33:02):
I think, you know.
Speaker 6 (33:03):
The thing that I know to be true is that
consumer sentiment and consumer values haven't changed over the past
four years. Like, we still know that people are more
interested than ever in shopping with their values. And so
I think every corporation that we've partnered with at the
fifteen percent pledge, whether it's Sephora or Nordstrum, are really
proud to continue with these commitments.
Speaker 3 (33:24):
How do we know that, What are the data that
we have that say that people that customers actually care
about this stuff.
Speaker 5 (33:32):
Yeah, there's a lot of data.
Speaker 6 (33:33):
Actually, you mentioned McKenzie earlier, and they did a lot
of consumer studies a couple of years ago, and so
I really urged people to look up that information because
I think there's a misconception that everyone that voted for
Donald Trump doesn't believe that you know, differently abled people
or women or diverse people's like shouldn't get a shot,
(33:55):
And I think for me, I truly believe that every
one just deserves a chance at the American dream. You
guys have all heard this saying before the talent is
distributed equally, but opportunity and access is not. I think
deiprograms are just making that everyone gets a chance.
Speaker 2 (34:13):
You So, I am curious, Aurora, do you think that
companies are saying one thing and still maybe doing something
different internally. I'm just curious if you've been able to
do kind of a temperature check on things, because I
think we're trying to figure it out. Is it just
a case of publicly saying, okay, this is kind of
what seems to be the mood certainly out of the
(34:35):
federal government, but we're going to still do this internally?
Speaker 4 (34:39):
What are you hearing?
Speaker 2 (34:39):
What are you seeing?
Speaker 11 (34:42):
Yeah?
Speaker 6 (34:43):
I mean I know that they are to be honest
with you. You know, we just had our big annual
fundraiser that happened. It was our most successful one to date.
We had a lot of major corporations in the room,
including a lot of people who you know, we're also
represented at the inauguration, and I think at the end
(35:03):
of the day, Like, we know that we need to
have diverse voices at a table so that we can
do the best business right. Like, the consumer base is
broad all across America, all across the world. If we
only have a singular point of view, we're going to
be missing the opportunity to reach billions of people around
the world. So I think really smart leaders know that
(35:25):
that's the reality of the situation. I think that there's
a lot of people that are kind of, you know,
saying what they need to say in order to appease
certain groups of people, especially if they have government contracts.
Speaker 2 (35:36):
Well, I guess I guess what I want to ask
you is, you know, the train has left the station, right.
We've been talking about DEI efforts for a long long
time and have seen you know, companies, organizations put them
into effect. You know, you can take down websites, you
can say you're not going to have official programs. But
do you think that the momentum, you know, kind of
continues that. I think organizations leaders think about diversity because
(35:58):
it is you know mckensey has it's good for institutions,
it's good for organizations, it's good for the financial bottom line.
Speaker 6 (36:07):
Yeah. I mean, we've worked with Mackenzie for a really
long time and I've always believed. In my very first
day that I launched the Pledge, I explained to people
that I think not only is it the right thing
to do, I think that it's really smart for business,
and that's what we've been proving out. So to be
honest with you guys, I think there's a lot of
people that looked at DEI as like a twenty twenty
bandage and we're never really committed to figuring it out right.
(36:31):
And I think that those who worked really hard to
figure it out, like Saphora, have seen a lot of
success and are unwilling to back down from that success.
And I think that Mackenzie is the exact same situation, right, So,
I think it's all about implementation, just like it is
with any other system that happened in the corporate that
happens within the corporate environment.
Speaker 2 (36:50):
All Right, We're going to leave it on that note. RORA,
thank you so much of Ora James as the founder
of the fifteen percent Pledge joining us from Los Angeles.
Speaker 11 (36:57):
Probably can you let me drive?
Speaker 10 (37:00):
Oh no, no, no, no, this is not a toy who's.
Speaker 2 (37:03):
Going to judge?
Speaker 4 (37:04):
Honey?
Speaker 3 (37:05):
Please?
Speaker 10 (37:06):
How did the ride gravels?
Speaker 4 (37:08):
Let's mate, I want to drive.
Speaker 3 (37:11):
It's a good question for good time.
Speaker 4 (37:16):
This is the drive to the clothes.
Speaker 8 (37:19):
Songs for music.
Speaker 5 (37:19):
Well, Briar Kelvin Don on Bloomberg Radio.
Speaker 2 (37:23):
All right, everybody, just about eighteen nineteen minutes to go
until we wrap up the trade on this Wednesday, February twelfth.
Carol Masser, Timstead OFIC live in our Bloomberg Interactive Broker studio.
You're Charlie breaking down the trade here. It's been relatively
quiet on the equity front. What's been interesting, certainly today
coming off that hot quote unquote hot inflation print, has
been the move up that we've seen along the US
(37:43):
Treasury curve right now, that ten year nite with the
old to four to sixty three to year note shorter
and four thirty five. So interesting there. Let's see what
Leo Kelly has to say. He's founder and CEO at
Verdan's Capital Advisors, joining us once again from Hunt Valley, Maryland.
Speaker 4 (37:58):
Leo, how are you?
Speaker 5 (38:00):
I'm well, Carol, how are you hanging in there?
Speaker 2 (38:02):
A lot coming at us, a lot coming at investors,
you know, one of the things I keep wondering is
for those who manage money for clients, do you kind
of sit tight and wait for the dust to settle,
or if you've got you know, are you putting money
actively to work?
Speaker 5 (38:18):
You always have money at work.
Speaker 11 (38:19):
First of all, I think this concept of money goes
in or goes out because of any specific moment. Now
you do underweight and overweight based on valuation, based on
macroeconomic expectations, et cetera. And so where we are at
the moment, we're slightly overweight equity, but we are underweighting
these what I would consider highly valued growth names, and
(38:43):
we're definitely underweight fixed income. And so holding more cash
really allow of dry powder on the sidelines ready to
put to work. I do think a fair amount of
volatility is inevitable here coming up in the next several months.
Speaker 3 (38:58):
What's it going to take for you to use that
dry powder? Like how much do you need to see
stocks fall in order to say okay, now is the
moment to pounce?
Speaker 11 (39:06):
Well, you know, first of all, because that dry power
is coming from the fixed income markets, we could be
more patient with it.
Speaker 5 (39:13):
We're fully invested in equity.
Speaker 3 (39:15):
But does go to fix. Does it go to fixed income, It.
Speaker 5 (39:19):
Could go to equity.
Speaker 11 (39:20):
If we get to pull back an equity right then
the naturally the allocations start to come down and we'll
put money to work. I think if we take a
step back and we look at where we are. You
know this, We've We've said this over and over again
on your show. People become overly optimistic about inflation coming down.
Speaker 5 (39:36):
We think this inflation story.
Speaker 11 (39:38):
Is a long story and we've got a long way
to go. So we're not really excited about the fixed
income markets right now. We are starting to see some
extraordinarily elevated valuations in the big tech names, the AI.
Speaker 5 (39:51):
I've said this before.
Speaker 11 (39:52):
It can go anywhere, but it sure is starting to
feel like two thousand and What I think people have
to remember is in two thousand and two thousand and one,
the Nasdaq was falling precipitously, but the rest of the
market actually you could make money in, and so we are.
Speaker 5 (40:09):
We have broadened out our exposure.
Speaker 11 (40:11):
We put a lot of money to work internationally at
the end of last year. That's worked out so far
this year. So there's plenty of places to put money
to work where evaluations are much better than these hot
stock market names.
Speaker 2 (40:24):
You know, it's interesting a couple of things. First of all,
I feel like when we you know, kind of look
for gainers and decliners every day, it's interesting to see
it's not just your mag seven, I mean, CBS, You've
got Gillyad and some others. It's just interesting you do
seek a broading out. The thing that I want to
seize upon is you putting money to work overseas. We
(40:44):
had a lot of people I feel like, at the
end of last year saying Europe, Europe, Europe, look overseas,
other opportunities, and you've actually seen if you look at
some of the European market's a pretty strong start to
the year and perhaps better than even what we're seeing
here in the US market. Where are you putting money
to work overseas?
Speaker 5 (41:00):
Yeah, we are in Europe.
Speaker 11 (41:02):
Japan looks interesting as well, but Europe looks looks really
interesting to US. I think it's really just evaluation play right.
Those companies are going to experience the same uplift from
AI productivity, from the US economy gaining strength, et cetera.
But we're talking about we started to touch around a
three standard deviation valuation spread between the US SP five
(41:26):
hundred and the European main markets driven by this mass
evaluation the and the top handful of names in the
SP five hundred. When you start to get gaps that wide,
historically that works out very well if you're a long
term investor, if you put the money to work and
let that play out.
Speaker 2 (41:43):
Hey, what in terms of LEO, what's coming from Washington?
I mean, it's been an interesting couple of weeks in
terms of what's going on out of Washington. And you know,
we watch because the markets react certainly off of you know, tariff,
expectations of tariff even talk of tariffs or talk terrors,
but delay in teriffs. What in terms of policies do
(42:04):
you think ultimately become a reality and that we'll have
to be what investors take into account and trade off of.
Speaker 11 (42:11):
Yeah, the terror conversation is actually a pretty interesting conversation
because we keep we're hearing now is that the putting
tariffs in is going to is going to add to inflation.
We have been continue to be under the opinion that
we continue to try to look for solutions to inflation
from through areas that don't affect the inflation at least
(42:33):
not in this market, right, Moving interest rates around really
isn't a solution. Lowering energy prices, which is what Trump's
saying is going to happen, isn't really going to be
the solution. The supply of money is just dramatically too large.
M two grew at a stunning rate of forty percent
over a couple of years. And if you look at
the correlation between inflation and money supply, you'll see a
(42:54):
pretty pretty accurate correlation. As inflation dropped last year, money
supply had dropped. It was going down by five percent.
And now we're starting to see inflation get hot. Well,
guess what M two is up about five percent. So
I think you have to you have to separate the
noise of the tariffs with the with the true impact. Now,
in terms of the tariffs themselves, anybody who's filed Donald
(43:16):
Trump for more than a day knows that he's a negotiator,
and so his goal many times is to move the goalpost.
Speaker 5 (43:24):
Right.
Speaker 11 (43:24):
If you're negotiating in the middle, well, then the way
to get the middle move is move both goalposts, and
these tariffs are in many cases his way to create
a new negotiated middle it's been effective so far. It
was with with Mexico and Canada. We'll see if this continues.
And so I do think right now we're in that
(43:47):
early stage of of him trying to punch the goalpost
into another direction. So we I think we have to
be patient and see what actual tariffs hit versus.
Speaker 5 (43:59):
What are justociation tactics.
Speaker 11 (44:00):
I think it's still too early to make any dramatic assumptions,
but we are keeping our eye on it. As a
matter of fact, one of our analysts is specifically looking
at each teraror threat and then as they come to
fruition what it means to our portfolios.
Speaker 3 (44:14):
Hey, Leo, we only have about a minute left here,
but we were watching Elon Musk in the Oval Office
yesterday talking about Doge. Do you anticipate any impact from
any success that he has cutting cutting government spending at Doge?
Speaker 11 (44:29):
I think he has the I think he has the
opportunity to. I think if you think about this, this
is common sense. It's what everybody's wanted for a long time.
It doesn't matter if you're a Democrat or Republican. I
think if we take a step back, cutting unnecessarily spending
makes a lot of sense. I do think they need
more structure. I do think that they have to come
up with a more let's call it stable, structural way
(44:52):
to go about this, and I do think they will
do that. So I am hopeful that they are going
to cut spending. Going back to the that inflation issue, right,
the supply of money is impacted both by the FED
and by federal spending, So reducing federal spending and getting
the FED to calm down a little bit with money
supply growth might actually be the solution inflation, not just
(45:14):
cutting a short term rate by fifty basis points.
Speaker 2 (45:17):
As always a great take on our environment, Leo, Thank
you so much. Leo Kelly. He is founder and chief
executive officer Verden's Capital Advisors.
Speaker 1 (45:25):
This is the Bloomberg Business Week podcast, available on Apple, Spotify,
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(45:45):
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(00:23):
and Tim Stenebeck on Bloomberg Radio.
Speaker 2 (00:27):
All Right, want to get to a name that is
certainly on our radar. Shares of Zillo down the most
to nearly one year. The stock off more than nine percent.
Was down seventeen percent at its low. Today, the online
real estate firm delivered a revenue forecast for the first
quarter that fell short of the average analyst estimate. Meantime,
the company expects twenty twenty five to be its first
profitable year since twenty twelve. Keep in mind it posted
(00:49):
a net loss of one hundred and twelve million back
in twenty twenty four.
Speaker 3 (00:52):
With more on the business and the US housing market
with us as Zillo CEO, Jeremy Waxman joining us from Seattle. Jeremie,
thanks for joining us today. Likely I would imagine a
tough day when the stock is down as much as
seventeen percent, down nine percent right now. The housing market
it just hasn't recovered in the way that you want
to see. What's the biggest thing holding it up?
Speaker 4 (01:15):
Thanks for having me. The housing market remains challenged. It
was challenged in twenty twenty four, and we're expecting it
to be so again in twenty twenty five. Zillo reported
great results yesterday. Q four revenue up seventeen percent, and
we hit our goals of growing revenue double digits last
year and expanding our margins, and we also guided yesterday
that we expect to continue to do that again this year,
(01:36):
with revenue growth in the low to mid teens, more
margin expansion, and positive GAT and income for the first
time in a long time. And as you said, that's
against a persistently challenged housing market. So we're able to
grow and gain share both in twenty four and we
plan do it again in twenty twenty five, while the
market remains depressed for volume and challenging for buyers.
Speaker 2 (01:57):
Jeremy, do you think investors have it wrong in tern
terms of pushing your share price down a lot in
reaction to what they got on the quarter and the outlook.
Speaker 4 (02:08):
We don't really focus on the day to day voting
machine of the stock market. If you zoom out and
look over the long the long couple quarters a couple
of years, we've made great progress on our integrated super
apps strategy. We're growing revenue nicely, We're out growing the
category and we can plan to continue to do that
in twenty twenty five and so over time the stockcacre
of itself. The company grows in value as we really
(02:29):
deliver on our promise of helping more buyers and sellers
get home. That's really our goal at Zillo is to
help more of our audience turn into transactions.
Speaker 2 (02:38):
Yeah, and I will point out the stock was up
about twenty eight percent last year and up about almost
eighty percent and twenty twenty three. In terms of the
stress though, or maybe you're you know, kind of cautious
outlook in terms of the housing market, is it all
about mortgage rates and higher mortgage rates?
Speaker 4 (02:54):
Youah, the challenge or the housing market starts with mortgage rates,
but it's really about availability and supply. We are expecting
flat ish total dollar value housing marketing Q one and
load to mid single digit growth for the year. And
as you said, if you look, it's not like twenty
twenty four was that much better from a volume standpoint.
The real challenge is with mortgage rates. Staying hi affordability
(03:14):
is a challenge for buyers, but that really locks a
lot of sellers into their homes as well. Right a
seller is thinking about do they want to trade out
of that mortgage? Do they feel locked into that mortgage?
And many are foregoing listing their home and making that move.
So you're seeing still very low inventory. Inventory is up
eighteen percent from last year, but it's still downs sharply
(03:35):
from pre pandemic norms, and so lack of supply really
makes it challenging for buyers. And then you add elevated
rates and what they can afford of what there is
to buy.
Speaker 3 (03:44):
Jemmy, the cost of housing certainly a theme in last
year's presidential race. I'm wondering if you think that the
federal government will be able to achieve bringing more supply
of housing online. This came up the Vice presidential when
Jade Vance talked about using federal lands to build homes.
(04:04):
Do you think the federal government will have a meaningful
effect on housing supply?
Speaker 4 (04:10):
The real challenge was supply. We talked about existing home
inventory and what sellers are doing, but we are chronically
under built right we Zilo estimates about four and a
half million homes have not been built to keep up
with the demand needed since the global financial crisis, And
the solution of those problems really is at the state
and local level. You need things like permitting reform and
(04:32):
removing red tape in the process to get starts done quickly.
You need tax incentives and financing options so that builders
can get their projects online more quickly. So the totality
of the problem, you know, all nearly five million homes
that we need to catch up on. We're not going
to do that overnight, but slow and steady will definitely
bring more supply to the market.
Speaker 2 (04:50):
I do wonder though, too, you know, Jeremy, how much
the YEP I get that, the permitting I mean, these
are problems that have plagued certainly the housing market I
feel like forever in terms of so apply. But having
said that, how much too? Is there some cautiousness on
the part of homebuilders who still everybody still remembers two
thousand and eight and the over bills. So is there
also a part of that as some of the components
(05:13):
in terms of supply.
Speaker 4 (05:16):
Well, you're seeing places where it works well, right. I
mean Austin, Texas is one good example that we've highlighted
where a lot of multi family inventory and the rental
market has come online. And you've actually seen rent prices
come down even with the population growth in Austin. And so,
you know, you have to remember if you zoom out,
there are still the counter forces of for sale and
rentals working together. And you know, when folks can't get
(05:37):
it done and find the home to buy, they end
up re renting. And you're seeing you know, rental inventory,
you know, grow to satisfy that demand as well. So
it is, as you said, it's a local issue, but
there are places where it's working well, and there are
places where it can work even better.
Speaker 3 (05:52):
We got a hotter than expected CPI print earlier today,
and my question is about how that changes the outlook
for rates for the year, and then in turn, how
that affects your business. Does you OUTLOK for twenty twenty
five change if rates don't come down.
Speaker 5 (06:08):
No.
Speaker 4 (06:08):
Our outlook that we put out yesterday assumes a pretty
lousy housing market, and I think today's print probably just
kind of confirms that fact. Right, we are expecting flatish
housing market in Q one and load of mid single
digits for the year, and I think we were maybe
a little bit more embarrassed than most heading into the
year on how the housing market's going to do. Now,
the good news for Zillo is we're out growing the
category and we're gaining share. We did that in twenty
(06:30):
twenty four and we expected it again in twenty twenty five.
And that's in our for sale business, where we're helping
more buyers meet their agents, we're helping originate more mortgages.
That's also when our rentals business. Our rentals business grew
twenty five percent in Q four and we expect that
to accelerate in Q one as we bring more rental
inventory to more renters across slow Hey.
Speaker 2 (06:50):
One thing I do wonder in our conversation coming off
of the hot CPI print Jeremy, is that maybe we
so certainly the rates market, the US rates market, the
treasury mark market react and move up today, but now
the talk has moved to maybe even the next move,
we need to start thinking about the Fed raising rates.
If we see the FED start to raise rates, what
(07:11):
does that do in your view to the housing market,
and how might that impact your business.
Speaker 4 (07:17):
Well, as I said, we're kind of near all time
lows on volume right, We're down to basically folks who
have to move and can get it done, get it done.
And that's the thing about this market. Long term real
estate is a growth industry. You see volumes and total
value grow. Right now, you're seeing depressed volumes because of
all the challenges, especially in the financial market with affordability
(07:37):
for buyers. But folks are getting it done and they
will get it done. And what we're here at Zilla
to do is help them. Right buyers who need to buy,
many of them are starting that conversation with financing rather
than just dreaming. We now see about as many buyers
start with what can I afford and can I even
buy right now as they do dreaming, shopping and going
media and agent. So we've brought online tools like Buyability
(08:00):
to help them truly understand their personalized payment information, what
can they actually afford for themselves given their financial information,
so they can have confidence to go get a pre
approval letter, to actually go make an offer and win
a house. So it is tough out there, it will
remain challenging in twenty twenty five, but folks can get
it done. We're there to help and that's exactly what's
driving the results you saw from us in Q four
(08:21):
and why we expect to continue to grow and not
go the category in twenty twenty five.
Speaker 2 (08:24):
Jeremy, you mentioned those buyability tools that you guys have
on your platform. What does that show you about? Is
it the first time home buyer that continues to find
it really difficult, is it the trade up home buyer?
What does it tell you about kind of the home
buyer and in essence, the US consumer out there when
it comes to buying a house.
Speaker 4 (08:41):
Yeah, I mean the demand and desire to buy a
home still persists and exists across all demographics. You're seeing
folks having to wait longer, save up more to make
that down payment, and so it gets tougher. But you
see the strong desire to buy home really persist across
all demographics, and we see that in folks who are
using Zillo. Again, as I said, one of the things
that is interesting to us is how much more financing
(09:03):
and total cost of ownership is front and center for
a buyer before they even start. You know, five ten
years ago, everyone wanted to start by shopping, by touring
by virtual touring, by going into open houses. And now
it's kind of a balance as many folks want to
start in that state, as they want to start with
just the reality of what's my budget look like? How
do I set my budget and work with an agent
(09:24):
to make sure the homes I fall in love with
the ones I can actually buy.
Speaker 5 (09:28):
Hey.
Speaker 3 (09:28):
One thing we also learned recently from you guys is
that Redfinn is teaming up with Zillo for rental listings.
This partnership to me, it sort of looks like frenemies
teaming up, Like you guys are competitors here. Redfinn's market
cap is about two billion dollars year, about eighteen billion
dollars Do you end up buying redfin at a certain point.
Speaker 4 (09:50):
We're really excited about this partnership we just announced with Redfinn.
It's a big step in our overall rental strategy. It's
important to zoom out and remember, unlike the for sale market,
there's no national database for rentals. The big challenge a
renter has is they can't find all the supply. They
have a very short timeframe to find a place to rent,
and so they scour the internet, They scour offline looking.
(10:11):
So that's zilla strategy. Can we organize more and more
of the rental listings out there nationwide so that renters
on Zilo and on our partner sites can find them.
That strategy is working great. That's what's driving having the
leading audience and growing audience of renters, and that's bringing
more property managers to Zillo and our partner sites to
want to advertise that audience. So this partnership with Redfin
(10:33):
to power their rentals business is just the next step
in that strategy. Adding on to this great partnership we
forged with real to dot com last year, it allows
advertisers to come to Zilo and get advertising in front
of Zillo sites, Redfin sites and realtor sites to reach
an even bigger set of renters. And then renters get
more choice, right, they see more inventory, which, again, as
I started, that's the big problem in rentals is you
(10:54):
cannot find all the inventory.
Speaker 3 (10:56):
And forgive me that redfinn market cap about one point
one billion dollars, so shy of of two billion dollars.
I didn't hear a yes or a no and no
answer to my question about whether or not.
Speaker 4 (11:04):
Oh no, no, plans, no, no plans. We're very excited
about the partnership. We've worked with them on some other
things before, and we love how culturally aligned they are
and just digitizing the transaction in real estate.
Speaker 2 (11:14):
Well, along those lines, how are real estate companies holding
up through this extended housing market trough? I mean, any
opportunities for you guys to do some acquisitions as a result,
along maybe the lines of I don't know, partnerships, but
maybe even acquisitions.
Speaker 4 (11:28):
Yeah, the bright side of a challenge real estate market
is it really allows the best professionals to gain share.
Right when it's rainy and cloudy outside, those that do
best sometimes come out ahead. And what's great about that
is that aligns so nicely with Zillo strategy, right. Zilo
strategy is to partner with the best agents and agent
teams in the industry. Eighty percent of the agents that
(11:49):
we partner with are in that top twenty percent of
producers nationwide. So these are the folks that are operating
businesses at scale, training great agent teams to help delight customers.
So even when there's less transactions to do, and even
when it's a challenging conversation with many buyers and sellers,
those folks command great price, hold share, and grow their business.
(12:09):
And so in some ways having a choppier or a
depressed housing market can advantage some of the best professionals.
Speaker 3 (12:15):
Hey, we're asking every CEO we talked to these days
a couple of different questions about politics about AI. Politics
is where I want to go and just hear from
you about how you view this new Trump administration in
terms of changes that you've made at the company as
a result, or what it means for you as a business.
Speaker 4 (12:35):
One of the things you will focuses a lot on
is AI and AI as it comes to the list industry, right,
both for us as employees, but more so for our
customers and our partners, our agents, our loan officers. And
we've been investing in and innovating around AI for decades
and so now as generator of AI comes to the forefront,
you know, we've been really advocating for responsible regulation around
(12:58):
AI that encourages and supple sports innovation so that companies
like Zilo can continue to innovate on behalf of the customer.
So one thing we're very excited about is to continued
progress on the ability to progress with AI and AI
for US is a feature. It is a tool for
our customers, for our employees, But in the realist industry,
it's really about making the professionals more efficient and effective.
Speaker 5 (13:19):
Right.
Speaker 4 (13:20):
There's so much wasted work, busy work, paperwork, back office work,
and when you talk to a great real estate agent
or a great loan officer, that's not what they want
to be doing. They want to be delighting customers, they
want to be winning more business, they want to be
getting more transactions done. So we're really excited about the
ability to continue to lean in and innovate, not just
on our tech platform generally, but on AI specifically, to
(13:42):
really bring more of this transaction into your smartphone, make
it more delightful and faster for the customer.
Speaker 2 (13:47):
All right, Jeremy, one last question is also a question
we are asking too, heads of company CEOs and the like,
anything that could come out of Washington and the new
administration that could help or hurt your business. And just
got about thirty seconds.
Speaker 4 (14:03):
Zillo is really focused on ensuring that real estate stays
accessible for the customer. At We've outlined our principles for
the consumer, which are around transparency, access, and affordability, and
any policies that come, we look to help make sure
they push forward and ensure that consumers have access to
all the information that's out there, have access to great professionals,
(14:25):
and have better education on how the real estate industy works.
Real estate is one of the largest industries that there
is and it's the single biggest decision that most individuals
are going to make. So making sure that people understand
how it works, making sure that they have access to
hiring the best professionals, that's one of the things we're
very focused on Zilla, and we continue we will continue
to be so.
Speaker 2 (14:44):
You're hopeful that the administration the policies will be supportive
of the housing market.
Speaker 4 (14:47):
Just quickly, Yeah, we want to. We've been around for
twenty years and have been fortunate to work with both
both administrations. And again, as we talked about earlier, one
of the real challenges in our industry is so much
is done at the state and the low level to
make sure that real estate can flow for the benefit
of the buyer and seller.
Speaker 2 (15:05):
Really good point, Jeremy, Thank you for all this time.
Jeremy Waxman, he's chief executive officer of Zillo, joining us
on this Wednesday.
Speaker 1 (15:12):
You're listening to the Bloomberg Business Week podcast. Catch US
Live weekday afternoons from two to five e's during listen
on Applecarplay and Android Auto with the Bloomberg Business app,
or watch US Live on YouTube.
Speaker 6 (15:28):
Well.
Speaker 3 (15:28):
For a look more closely at how that spending freeze
could effect states, we welcome Tim Sullivan, CEO of the
New Jersey Economic Development Authority, also known as the NJEDA.
It's a state agency responsible for economic growth and development
in New Jersey. Tim joins us from New Jersey. Tim,
good to have you back with us. New Jersey is
a state that is part of this coalition. North Jersey
(15:48):
dot Com reporting that Governor Phil Murphy says this freed
freeze could cost New Jersey up to twenty seven and
a half billion dollars. Is the money flowing now?
Speaker 7 (16:00):
So yeah, the Governor, I think correctly highlighted what a
big potential deal this is for Jersey and lots of
other states.
Speaker 8 (16:05):
You know, obviously this is a subject of ongoing.
Speaker 7 (16:06):
Litigation that our Attorney General, Matt Plackett is leading and
certainly would have a huge impact. I think that's why
you've seen the governor in the Attorney General standing up
and saying this is this can't happen.
Speaker 2 (16:17):
Yeah, I mean, you know, we want to get move
on to some other things, but I mean, what kind
of an impact this is some serious spending would it
mean for the state of New Jersey in terms of
its economy? Yeah?
Speaker 7 (16:28):
Again that you know, when you start talking about tens
of billions, twenty to thirty billion dollars, that's a huge impact.
New Jersey's a big state with a six hundred or
so billion dollars GDP. We're a big state, but that's
a lot of money and a lot of people rely
on it, both for economical and purposes that me and
my colleagues care a lot about. But throughout the state,
whether that's education or human services or any number of
things that could have a huge potential impact.
Speaker 2 (16:50):
Tim, are you and the team and the governor already
thinking about Okay, in case this does go away, we've
got to start thinking about different ways that are going
to drive growth within the New Jersey the economy full disclosure,
my home economy.
Speaker 7 (17:05):
Yeah, it's a think about how we grow the economy
is something we do all the time, no matter you know,
no matter what's going on in Washington, no matter what's
going on, you know, with federal policy changes, and so
you know, certainly if there was a dramatic shift in
federal policy on any number of funding streams, there'd have
to be a course correction.
Speaker 8 (17:21):
And you know that's well above my pay grade.
Speaker 7 (17:23):
But you know, in terms of things that we're trying
to do to grow the economy, you know, we're going
to continue to focus on the things that Governor has
been focused on for seven plus years now, which is,
you know, growing new industries, supporting small business, supporting innovation,
trying to grow you know, more new young companies that
grow and scale and add you know, ten thousands of jobs.
Speaker 3 (17:40):
Can you tell us where the federal funding goes versus
where state funding goes? Like, where would this money if
it were frozen? Where would people in New Jersey feel that?
Speaker 7 (17:52):
Well, this is a bit outside my lane. So I
don't I want to hesitate to comment too broadly. Obviously,
you know, the governor put out sort of a report
on our federal funding earlier this week or late last week.
It's pretty broad and deep I can take you. With
regard to economic development, you know we have you know,
significant programs that are funded around environmental remediation. We have
(18:13):
programs that are funded around supported around small business. Uh,
the big, big slug of funding that came from the
American Rescue Plan support small business funding.
Speaker 8 (18:22):
And so you know, the ramifications could be could be
really really significant.
Speaker 3 (18:27):
Hey, let's go to congestion pricing, because we haven't had
a chance to catch up with you since that.
Speaker 2 (18:30):
I paid my first congestion pricing this quickly.
Speaker 3 (18:33):
Did you get into the city yesterday, Carol?
Speaker 2 (18:35):
I got fairly quickly, but I don't know. It was
pretty early in the morning, so typically I don't see
a lot of traffic. Well, but I don't know.
Speaker 3 (18:41):
I think we spoke to Bill Maloney yesterday who said,
even early in the morning, he's getting in huge difference. Yeah,
huge difference, huge difference on New Jersey. Yeah, what does
it mean for New Jersey? What does it mean for you?
Speaker 5 (18:52):
Yeah?
Speaker 7 (18:52):
So this is something the governor has been pretty clear on,
and this is also the subjects of some ongoing litigations.
Speaker 8 (18:57):
I got to be mindful of how I how I
comment here.
Speaker 7 (19:00):
But you know, the congestion pricing, you know, the Governor's
not opposed to it in any form, It just doesn't
doesn't think the way it's been approached here is the
right way to do it, because we yeah, we don't
have a complete data set based on anything I've seen
of whether folks have switched how they're getting into the
city or what roads they're taking, or whether they're rerouting
and trucks and trucks and cars have different options with
(19:21):
regard to mode shifts, and so you know, whether that
means pollution in you know, Hudson and Burden Counties, whether
that means uh, you know, different impacts on our traffic
on our side of the river. And I think there's
been enough data yet to make to reach too many conclusions.
But the the the governor has been clear that this,
the current framework doesn't work for Jersey and that's where
we stand on it.
Speaker 2 (19:38):
Well, and I guess what we're really more interested in
terms of your review, Tim, Like, what do you do
to say, all right, folks, you don't want to pay
the congestion tax, come on and set up shop here
in New Jersey.
Speaker 7 (19:49):
Yeah, we've got we've got some ads running both on
taxi toppers and a few billboards through the city and
digital making that exact point of you know, even if
it can just get a little better.
Speaker 8 (19:58):
It's still it's still a slog in and out of
the the city every day.
Speaker 7 (20:00):
But if you're driving and you know, why why not
avoid that and avoid that and come to Jersey and
set up shop?
Speaker 3 (20:07):
Is it working?
Speaker 8 (20:08):
You know, we've had a number of incentives programs. One
of the which that.
Speaker 7 (20:11):
Is being highlighted by those ads is called Rise, which
basically is for folks who are remote working, if you
classify as Jersey employees, we'll give you an incentive to
do so in the state, benefits from a tax perspective,
stay in New Jersey, And so that's one of the
programs we're pushing on that front.
Speaker 3 (20:25):
I know it's only been a little over a month
since congestion pricing went into effect, but is that ad
campaign working? Do you have any data you can point
us to.
Speaker 7 (20:33):
Early days for obviously congestion pricing in for that campaign.
You know, we've seen an uptaken interest in the program
that we're marketing for sure, and I think folks are
you know, evaluating the implications of what congestion pricing means
for their workforce, both you know, big businesses and small businesses,
and you know, the message we want to send is
Jerseys open for business, and you know, we're we're eager
to help you know, more businesses locate here. Hey.
Speaker 2 (20:55):
You know, one of the things I'm always curious about, Tim,
and we just talked about this a lot coming off
of the Super Bowl and just the building of stadiums
around the nation and what that means for a local economy.
And often, you know, you tap the muni market to
pay for some of this or a lot of it,
something like the Prudential Center or MetLife Stadium, like these
(21:15):
kinds of facilities.
Speaker 4 (21:16):
What does it do?
Speaker 2 (21:17):
What kind of economic might does it give to the
New Jersey economy?
Speaker 7 (21:22):
They're incredibly important and sports and entertainment broadly speaking, are
incredibly important economic drivers, not just for Jersey but all
around the country.
Speaker 2 (21:28):
Is it the top, like one of the top drivers
of economic growth.
Speaker 8 (21:33):
It's certainly one of the big ones, you know.
Speaker 7 (21:34):
You know, New Jersey's blessed with lots of drivers or
economic growth, including things like the farmer industry and the
booming film and television sector that's taking root in Jersey.
Speaker 8 (21:41):
So we've got a lot of contributors to the growth story.
Speaker 7 (21:43):
But when you look at things on the forward radar,
things like the World Cup in twenty twenty six, the
Jersey will host the final and.
Speaker 8 (21:51):
I think eight games.
Speaker 7 (21:52):
You know, the projected economic impact from that alone is
ranges from two to three billion dollars.
Speaker 5 (21:59):
You've worked.
Speaker 3 (22:00):
That's yeah, a.
Speaker 7 (22:01):
Straordinary and we've got the Club World Cup coming up
as sort of a dry run for that this coming summer. Then,
you know, when you think you think about the Prudential
Center all that, not only the Devil's and Seaton Hall
of Places basketball there, but you've got some of the
best concert offerings anywhere in the world Comes through Comes
Through the Rock, and that's one of the top performing
(22:22):
UH concert.
Speaker 8 (22:23):
Venues anywhere in America. And so it's a huge driver
for Newark.
Speaker 7 (22:25):
And it means it's great when there's you know, hot
concerts in town or whatever. But it means a lot
for small businesses in Newark that restaurants and you know,
pubs and bars and everything else that supports UH activities
like that.
Speaker 3 (22:37):
How much of an economic driver is Bruce Springsteen.
Speaker 5 (22:41):
It's hard to.
Speaker 7 (22:41):
Put a value on on the Boss.
Speaker 8 (22:44):
I'm a huge fans.
Speaker 7 (22:45):
You're you're you're attempting me to sort of geek out
on various things I might say about the boss, But yeah, no,
it's he's he's he's critical to our economy. He's a
state treasure.
Speaker 8 (22:55):
We have Bruce Springsteen Day officially in law about.
Speaker 4 (23:00):
The housewives of New Jersey.
Speaker 2 (23:01):
I'm only kidding. I'm only kidding. I'm not going to
ask for the economy impact of that. Tim, so glob
we got some.
Speaker 4 (23:06):
Time with you.
Speaker 2 (23:07):
Tim Sullivan, as chief executive Officer of New Jersey Economic
Development Authority, joining us from the Great Garden State, my home.
Speaker 3 (23:14):
State, oldest Georgia.
Speaker 4 (23:17):
You're bidast No, I'm not.
Speaker 2 (23:19):
I speak the truth.
Speaker 4 (23:20):
I'm a journalist.
Speaker 2 (23:22):
I can make the distinction.
Speaker 5 (23:24):
It's incredible.
Speaker 9 (23:25):
This is Bloomberg.
Speaker 1 (23:30):
This is the Bloomberg Business Week Podcast. Listen live each
weekday starting at two pm Eastern on Applecarflay, 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 eleven thirty.
Speaker 3 (23:48):
For a check on how consumers are faring in this economy,
we bring in this Scott Zoldi, chief analytics officer over
at FIKO, It's the analytics and credit rating company. He
joins us here in the Bloomberg Interactive at Brokers Studio.
You see a lot of data, you comb through a
lot of data. How are consumers doing?
Speaker 9 (24:06):
So consumers, you know, there's definitely still a lot of
sort of focus on you know, prices and inflation right
in terms of how they are transacting with their payment cards.
You know, we primarily look at consumers with respect to
fraud detection, and so as part of that, we look
at what are those patterns, how are they changing in
terms of whether or not they are being susceptible to fraud,
(24:26):
and we use machine learning to do that to make
a determination and whether or not they are experiencing fraud
or not fraud in these difficult.
Speaker 4 (24:33):
Times, how often is that happening?
Speaker 9 (24:36):
So essentially, with each and every transaction that occurs, there's
a decision that gets made with one of these machine
learning models that will make a decision between you know,
fraud or not fraud, and it's automated, so every time
you swipe your card, the decision gets made.
Speaker 10 (24:49):
And these are technologies that we develop.
Speaker 9 (24:51):
More than thirty years ago and they continue to serve
well in basically that infrastructure protecting payment cards, where.
Speaker 3 (24:57):
Do you play in the ecosystem. For example, if I
use my American Express, if I use my Chase card,
are you there behind the scenes.
Speaker 9 (25:05):
So we're behind the scenes for many of those banks, right,
And so essentially.
Speaker 10 (25:09):
The way it works is that we develop. We're an
analytics software company.
Speaker 9 (25:11):
We have pioneered the use of machine learning more than
thirty years ago in the detection of fraud, and we
operationalize AIS, which is a really difficult problem today in
this sort of golden age of AI actually making it
practical and usable.
Speaker 10 (25:24):
We build those.
Speaker 9 (25:25):
In all network models, and then we install our software
at many of the banks, and then the banks use
that score, which goes from one to nine nine nine.
The higher the score, more likely it is fraud in
a strategy in terms of whether a block a transaction,
and for suspected.
Speaker 2 (25:39):
Fraud, we've all been there, right. We get a call
and they're like, hey, is this you? We want to
check like a fraud alert. Hey Scott, what I do wonder?
Speaker 5 (25:46):
How did you.
Speaker 3 (25:46):
Spend you know, one thousand dollars on those two dozen
eggs that you have at home.
Speaker 8 (25:49):
Listen.
Speaker 2 (25:50):
Sometimes it's like I'm like, honey, is this you?
Speaker 3 (25:52):
And I'm like ohop, it's.
Speaker 2 (25:54):
Fraud, hey Scott. One thing I do wonder is in
an economy, wondering when things are going well, is there
less fraud or more fraud an economy that might be
see consumers pulling back as they're less fraud.
Speaker 6 (26:08):
I'm just curious.
Speaker 10 (26:09):
Yeah, I mean, fraud is essentially always there, right, and
I think more level of it.
Speaker 3 (26:14):
I'm curious the level will.
Speaker 9 (26:15):
Generally increase right when we see sort of harder, more
difficult times, and so like there'll be more people that
will take advantage of fraud and so they may play
a role in the fraud. We call that mewling, where
you know, someone will transfer money in terms of a
fraud event, and so definitely it's it's makes for harder
times people will turn to crime. Now, with that said,
(26:35):
most of the fraud is committed by sort of organized
data science teams, very specialized individuals, but they're always looking
for recruits, and those recruits will help facilitate that fraud
where they'll capture details or they'll allow money to pass
through their accounts to the eventual beneficiary who is a
fraudstre behind the scenes.
Speaker 3 (26:51):
How are you doing with recruits? Everybody wants people who
work in AI right now.
Speaker 10 (26:56):
Yeah, we're doing We're doing really well. Fortunately.
Speaker 9 (26:58):
You know, I think Fiico has a has a great
reputation as an AI and machine learning leader, and we
operationalize those models so instead of having an academic conversation
about the use of AI, it's actually deployed. And so
most of our staff have been here for you know,
more than ten some twenty years.
Speaker 3 (27:14):
Well, you said that you've been doing this. This technology
has been developed, you know for decades. How much has
it changed in the last couple of years since we've
seen the huge jump that chat GPT at open ai
was able to make. You've seen the development of Anthropic
these other lms and the rise of in videos. Well,
how much that has that improved your AI models?
Speaker 9 (27:36):
So, you know, this is an area where you constantly
have your adversary, the frousters, with their own AI models,
and they're trying their own innovations to steal better. You know,
for Fiico, we have more than one hundred patents in
AI machine learning.
Speaker 10 (27:49):
That we've evolved over the last thirty years.
Speaker 9 (27:52):
When it comes to like things like transformer technology, we're
constantly evaluating bringing that in to improve the technology but
the amount of energy that we spend on innovation is immense, right,
because it's basically an arms of war between those you know,
data scientists on the dark side and those on the
light side. Things like Navidia and transformers. These are opportunities,
(28:13):
opportunities to try new technology and layer it into what
has already been working and working well behind the scenes.
Speaker 2 (28:18):
Scott, One thing I do wonder and with fraudsters, I've
heard that you know, they'll basically try a small charge
and see if it goes through and then amp it up.
But what is the typical pattern or do they just
go for a big spend?
Speaker 10 (28:28):
How does it work?
Speaker 2 (28:29):
Carol's trying to do some crimes and no, no, I
mean the one thing we wanted. It was like somebody
bought tickets to a Vegas show and I'm like.
Speaker 3 (28:36):
I haven't been to Vegas, honey, have you been? And
he's like no, So it's but I'm.
Speaker 2 (28:39):
Just curious, like how do they how do they do
it so they can get it through?
Speaker 9 (28:43):
So they're going to try to take a transaction that
is not obvious, right, so they're not going to necessarily
go for the big, big ticket item at the jewelry
store or something else.
Speaker 10 (28:51):
That's kind of MH bag or something correct, so they
might slowly ramp it up.
Speaker 9 (28:55):
And so we're looking for are things that are out
of pattern for a cardholder. So we maintain a profile
of use for each and every card holder. We understand
what they're likely to do and what they're expected next
transaction is. And so when we see something off, we
measure it and we calculate it and they'll slowly ramp up.
Now with that said, if you wanted to get into fraud,
the very best way to do that, Carol is I.
Speaker 10 (29:14):
Don't okay, you.
Speaker 3 (29:18):
Tell us how to fraud.
Speaker 2 (29:20):
I'm like, I'm just curious how they do it.
Speaker 3 (29:22):
That's what That's what somebody who wanted to do fraud
would say, Carol. Yeah.
Speaker 9 (29:25):
So, but but here's the thing I want to say,
But I'm on air, so that the more heinous sort
of crime is actually called scams, and scam is where
I trick you to sending me money. So I don't
have to steal your information. I can social engineer you people.
Speaker 3 (29:39):
I just I just I get texted every day, but
you don't bite. Okay, Well today I got one that
actually said Tim okay, yeah, I didn't bite, but it's
getting better.
Speaker 2 (29:49):
People.
Speaker 10 (29:50):
Really it's a huge problem.
Speaker 9 (29:51):
So for example, like they target the elderly, those are
a little less speciscated, and and they're very successful. And
what's what's really damaging, and sometimes they can empty out
entire bank accounts, right, and so it's.
Speaker 10 (30:01):
A really really heinous sort of crime. So we all
have to be on guard.
Speaker 9 (30:04):
And that's why, you know, we detect scams, and we
have technology that tries to understand human behavior, use that
machine learning, make predictions and just you know, give the
banks financial institutions tools to protect consumers.
Speaker 2 (30:16):
All right, so go ahead, thirty seconds? Are scores going up?
Our scores going down? I've got to ask you. You
see the analytics are people like stressed. It's a great
indicator of the economy.
Speaker 9 (30:27):
We're seeing drops in the number of transactions, so like
in terms of the number of sort of discretionary transactions
that are occurring. So I think there is the stress
and we're seeing that in the payment data.
Speaker 2 (30:37):
All right, we knew we'd get there. Thank you so much.
Speaker 10 (30:39):
I love the data.
Speaker 2 (30:40):
Did you want to say something.
Speaker 5 (30:41):
No, go ahead?
Speaker 10 (30:42):
You sure?
Speaker 5 (30:42):
Yeah?
Speaker 3 (30:42):
Yeah, I am not a scammer.
Speaker 2 (30:44):
I'm not looking to do it. I'm just curious like
how people think about it because there's so many systems
in place.
Speaker 10 (30:51):
Just wait till we are off air.
Speaker 3 (30:53):
Stetfic I am.
Speaker 5 (30:54):
I can't wait.
Speaker 3 (30:55):
It's got Zoldi as Chief Analytics Officer over at fight Go,
joining us here in the studio.
Speaker 1 (31:00):
Listening to the Bloomberg Business Week podcast. Catch us live
weekday afternoons from two to five e's during Listen on
Applecarplay and Android Auto with the Bloomberg Business app, or
watch us live on YouTube.
Speaker 3 (31:14):
Some news today, McKenzie pledging to prioritize diversity across its workforce.
This despite US President Donald Trump ordering his government to
push private firms to scrap DEI policies. Carol McKenzie seems
like it's in the minority right now, and I think
that's why this is news. Check out some recent headlines.
You just go to Jeff Green's biopage, who covers diversity
(31:34):
here at Bloomberg, And here's some of the stories that
he's had a hand in. Shareholder Advisor ISS, Institutional Shaholder
Services Kills, diversity criteria for boards, Booz Allen scraps DEI
programs and reaction to Trump orders Goldman Scrap's diversity rule
for IPOs and latest DEI retreat accenture abandons diversity targets
citing Trump's orders.
Speaker 2 (31:55):
Yeah, we definitely have seen a trend in terms of organizations, companies,
institutions like really just you know, kind of rolling back
their DEI efforts or at least publicly saying that they are.
Speaker 3 (32:04):
Aura James is the founder of the fifteen Percent Pledge.
It's the organization that works with companies, at least in
its own words, to quote, implement meaningful change and create
greater equity for black businesses, including designating fifteen percent of
their shelf space for black owned brands. We've spoken to
her before. She's back with us from Los Angeles, Aurora.
Speaker 5 (32:22):
How are you.
Speaker 6 (32:24):
I'm so well, how are you guys?
Speaker 3 (32:26):
Do we're doing really well? I'm wondering your reaction to
what companies are doing. I read some of the headlines
right then. It seems like a real sea change from
the conversation we would have been having with you about
four years ago.
Speaker 6 (32:39):
Yeah, I mean, it's really disappointing to see a lot
of these major corporations like do these what I kind
of like to think of as pr rollbacks, you know,
Target and Walmart. I don't think that they're necessarily you know,
the places that we always think about as being that diverse.
That being said, like, it's disappointing when we hear any
major corporation want to roll back back diversity, equity, and inclusion.
Speaker 5 (33:02):
I think, you know.
Speaker 6 (33:03):
The thing that I know to be true is that
consumer sentiment and consumer values haven't changed over the past
four years. Like, we still know that people are more
interested than ever in shopping with their values. And so
I think every corporation that we've partnered with at the
fifteen percent pledge, whether it's Sephora or Nordstrum, are really
proud to continue with these commitments.
Speaker 3 (33:24):
How do we know that, What are the data that
we have that say that people that customers actually care
about this stuff.
Speaker 5 (33:32):
Yeah, there's a lot of data.
Speaker 6 (33:33):
Actually, you mentioned McKenzie earlier, and they did a lot
of consumer studies a couple of years ago, and so
I really urged people to look up that information because
I think there's a misconception that everyone that voted for
Donald Trump doesn't believe that you know, differently abled people
or women or diverse people's like shouldn't get a shot,
(33:55):
And I think for me, I truly believe that every
one just deserves a chance at the American dream. You
guys have all heard this saying before the talent is
distributed equally, but opportunity and access is not. I think
deiprograms are just making that everyone gets a chance.
Speaker 2 (34:13):
You So, I am curious, Aurora, do you think that
companies are saying one thing and still maybe doing something
different internally. I'm just curious if you've been able to
do kind of a temperature check on things, because I
think we're trying to figure it out. Is it just
a case of publicly saying, okay, this is kind of
what seems to be the mood certainly out of the
(34:35):
federal government, but we're going to still do this internally?
Speaker 4 (34:39):
What are you hearing?
Speaker 2 (34:39):
What are you seeing?
Speaker 11 (34:42):
Yeah?
Speaker 6 (34:43):
I mean I know that they are to be honest
with you. You know, we just had our big annual
fundraiser that happened. It was our most successful one to date.
We had a lot of major corporations in the room,
including a lot of people who you know, we're also
represented at the inauguration, and I think at the end
(35:03):
of the day, Like, we know that we need to
have diverse voices at a table so that we can
do the best business right. Like, the consumer base is
broad all across America, all across the world. If we
only have a singular point of view, we're going to
be missing the opportunity to reach billions of people around
the world. So I think really smart leaders know that
(35:25):
that's the reality of the situation. I think that there's
a lot of people that are kind of, you know,
saying what they need to say in order to appease
certain groups of people, especially if they have government contracts.
Speaker 2 (35:36):
Well, I guess I guess what I want to ask
you is, you know, the train has left the station, right.
We've been talking about DEI efforts for a long long
time and have seen you know, companies, organizations put them
into effect. You know, you can take down websites, you
can say you're not going to have official programs. But
do you think that the momentum, you know, kind of
continues that. I think organizations leaders think about diversity because
(35:58):
it is you know mckensey has it's good for institutions,
it's good for organizations, it's good for the financial bottom line.
Speaker 6 (36:07):
Yeah. I mean, we've worked with Mackenzie for a really
long time and I've always believed. In my very first
day that I launched the Pledge, I explained to people
that I think not only is it the right thing
to do, I think that it's really smart for business,
and that's what we've been proving out. So to be
honest with you guys, I think there's a lot of
people that looked at DEI as like a twenty twenty
bandage and we're never really committed to figuring it out right.
(36:31):
And I think that those who worked really hard to
figure it out, like Saphora, have seen a lot of
success and are unwilling to back down from that success.
And I think that Mackenzie is the exact same situation, right, So,
I think it's all about implementation, just like it is
with any other system that happened in the corporate that
happens within the corporate environment.
Speaker 2 (36:50):
All Right, We're going to leave it on that note. RORA,
thank you so much of Ora James as the founder
of the fifteen percent Pledge joining us from Los Angeles.
Speaker 11 (36:57):
Probably can you let me drive?
Speaker 10 (37:00):
Oh no, no, no, no, this is not a toy who's.
Speaker 2 (37:03):
Going to judge?
Speaker 4 (37:04):
Honey?
Speaker 3 (37:05):
Please?
Speaker 10 (37:06):
How did the ride gravels?
Speaker 4 (37:08):
Let's mate, I want to drive.
Speaker 3 (37:11):
It's a good question for good time.
Speaker 4 (37:16):
This is the drive to the clothes.
Speaker 8 (37:19):
Songs for music.
Speaker 5 (37:19):
Well, Briar Kelvin Don on Bloomberg Radio.
Speaker 2 (37:23):
All right, everybody, just about eighteen nineteen minutes to go
until we wrap up the trade on this Wednesday, February twelfth.
Carol Masser, Timstead OFIC live in our Bloomberg Interactive Broker studio.
You're Charlie breaking down the trade here. It's been relatively
quiet on the equity front. What's been interesting, certainly today
coming off that hot quote unquote hot inflation print, has
been the move up that we've seen along the US
(37:43):
Treasury curve right now, that ten year nite with the
old to four to sixty three to year note shorter
and four thirty five. So interesting there. Let's see what
Leo Kelly has to say. He's founder and CEO at
Verdan's Capital Advisors, joining us once again from Hunt Valley, Maryland.
Speaker 4 (37:58):
Leo, how are you?
Speaker 5 (38:00):
I'm well, Carol, how are you hanging in there?
Speaker 2 (38:02):
A lot coming at us, a lot coming at investors,
you know, one of the things I keep wondering is
for those who manage money for clients, do you kind
of sit tight and wait for the dust to settle,
or if you've got you know, are you putting money
actively to work?
Speaker 5 (38:18):
You always have money at work.
Speaker 11 (38:19):
First of all, I think this concept of money goes
in or goes out because of any specific moment. Now
you do underweight and overweight based on valuation, based on
macroeconomic expectations, et cetera. And so where we are at
the moment, we're slightly overweight equity, but we are underweighting
these what I would consider highly valued growth names, and
(38:43):
we're definitely underweight fixed income. And so holding more cash
really allow of dry powder on the sidelines ready to
put to work. I do think a fair amount of
volatility is inevitable here coming up in the next several months.
Speaker 3 (38:58):
What's it going to take for you to use that
dry powder? Like how much do you need to see
stocks fall in order to say okay, now is the
moment to pounce?
Speaker 11 (39:06):
Well, you know, first of all, because that dry power
is coming from the fixed income markets, we could be
more patient with it.
Speaker 5 (39:13):
We're fully invested in equity.
Speaker 3 (39:15):
But does go to fix. Does it go to fixed income, It.
Speaker 5 (39:19):
Could go to equity.
Speaker 11 (39:20):
If we get to pull back an equity right then
the naturally the allocations start to come down and we'll
put money to work. I think if we take a
step back and we look at where we are. You
know this, We've We've said this over and over again
on your show. People become overly optimistic about inflation coming down.
Speaker 5 (39:36):
We think this inflation story.
Speaker 11 (39:38):
Is a long story and we've got a long way
to go. So we're not really excited about the fixed
income markets right now. We are starting to see some
extraordinarily elevated valuations in the big tech names, the AI.
Speaker 5 (39:51):
I've said this before.
Speaker 11 (39:52):
It can go anywhere, but it sure is starting to
feel like two thousand and What I think people have
to remember is in two thousand and two thousand and one,
the Nasdaq was falling precipitously, but the rest of the
market actually you could make money in, and so we are.
Speaker 5 (40:09):
We have broadened out our exposure.
Speaker 11 (40:11):
We put a lot of money to work internationally at
the end of last year. That's worked out so far
this year. So there's plenty of places to put money
to work where evaluations are much better than these hot
stock market names.
Speaker 2 (40:24):
You know, it's interesting a couple of things. First of all,
I feel like when we you know, kind of look
for gainers and decliners every day, it's interesting to see
it's not just your mag seven, I mean, CBS, You've
got Gillyad and some others. It's just interesting you do
seek a broading out. The thing that I want to
seize upon is you putting money to work overseas. We
(40:44):
had a lot of people I feel like, at the
end of last year saying Europe, Europe, Europe, look overseas,
other opportunities, and you've actually seen if you look at
some of the European market's a pretty strong start to
the year and perhaps better than even what we're seeing
here in the US market. Where are you putting money
to work overseas?
Speaker 5 (41:00):
Yeah, we are in Europe.
Speaker 11 (41:02):
Japan looks interesting as well, but Europe looks looks really
interesting to US. I think it's really just evaluation play right.
Those companies are going to experience the same uplift from
AI productivity, from the US economy gaining strength, et cetera.
But we're talking about we started to touch around a
three standard deviation valuation spread between the US SP five
(41:26):
hundred and the European main markets driven by this mass
evaluation the and the top handful of names in the
SP five hundred. When you start to get gaps that wide,
historically that works out very well if you're a long
term investor, if you put the money to work and
let that play out.
Speaker 2 (41:43):
Hey, what in terms of LEO, what's coming from Washington?
I mean, it's been an interesting couple of weeks in
terms of what's going on out of Washington. And you know,
we watch because the markets react certainly off of you know, tariff,
expectations of tariff even talk of tariffs or talk terrors,
but delay in teriffs. What in terms of policies do
(42:04):
you think ultimately become a reality and that we'll have
to be what investors take into account and trade off of.
Speaker 11 (42:11):
Yeah, the terror conversation is actually a pretty interesting conversation
because we keep we're hearing now is that the putting
tariffs in is going to is going to add to inflation.
We have been continue to be under the opinion that
we continue to try to look for solutions to inflation
from through areas that don't affect the inflation at least
(42:33):
not in this market, right, Moving interest rates around really
isn't a solution. Lowering energy prices, which is what Trump's
saying is going to happen, isn't really going to be
the solution. The supply of money is just dramatically too large.
M two grew at a stunning rate of forty percent
over a couple of years. And if you look at
the correlation between inflation and money supply, you'll see a
(42:54):
pretty pretty accurate correlation. As inflation dropped last year, money
supply had dropped. It was going down by five percent.
And now we're starting to see inflation get hot. Well,
guess what M two is up about five percent. So
I think you have to you have to separate the
noise of the tariffs with the with the true impact. Now,
in terms of the tariffs themselves, anybody who's filed Donald
(43:16):
Trump for more than a day knows that he's a negotiator,
and so his goal many times is to move the goalpost.
Speaker 5 (43:24):
Right.
Speaker 11 (43:24):
If you're negotiating in the middle, well, then the way
to get the middle move is move both goalposts, and
these tariffs are in many cases his way to create
a new negotiated middle it's been effective so far. It
was with with Mexico and Canada. We'll see if this continues.
And so I do think right now we're in that
(43:47):
early stage of of him trying to punch the goalpost
into another direction. So we I think we have to
be patient and see what actual tariffs hit versus.
Speaker 5 (43:59):
What are justociation tactics.
Speaker 11 (44:00):
I think it's still too early to make any dramatic assumptions,
but we are keeping our eye on it. As a
matter of fact, one of our analysts is specifically looking
at each teraror threat and then as they come to
fruition what it means to our portfolios.
Speaker 3 (44:14):
Hey, Leo, we only have about a minute left here,
but we were watching Elon Musk in the Oval Office
yesterday talking about Doge. Do you anticipate any impact from
any success that he has cutting cutting government spending at Doge?
Speaker 11 (44:29):
I think he has the I think he has the
opportunity to. I think if you think about this, this
is common sense. It's what everybody's wanted for a long time.
It doesn't matter if you're a Democrat or Republican. I
think if we take a step back, cutting unnecessarily spending
makes a lot of sense. I do think they need
more structure. I do think that they have to come
up with a more let's call it stable, structural way
(44:52):
to go about this, and I do think they will
do that. So I am hopeful that they are going
to cut spending. Going back to the that inflation issue, right,
the supply of money is impacted both by the FED
and by federal spending, So reducing federal spending and getting
the FED to calm down a little bit with money
supply growth might actually be the solution inflation, not just
(45:14):
cutting a short term rate by fifty basis points.
Speaker 2 (45:17):
As always a great take on our environment, Leo, Thank
you so much. Leo Kelly. He is founder and chief
executive officer Verden's Capital Advisors.
Speaker 1 (45:25):
This is the Bloomberg Business Week podcast, available on Apple, Spotify,
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afternoons from two to five pm Eastern on Bloomberg dot Com,
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(45:45):
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