December 3, 2025 • 36 mins
Watch Carol and Tim LIVE every day on YouTube: http://bit.ly/3vTiACF.
US companies shed payrolls in November by the most since early 2023, adding to concerns about a more pronounced weakening in the labor market.
Private-sector payrolls decreased by 32,000, according to ADP Research data released Wednesday. Payrolls have now fallen four times in the last six months. The median estimate in a Bloomberg survey of economists called for a 10,000 gain.
Wednesday’s weak ADP report risks heightening concerns of a more rapid deterioration in the labor market ahead of the Federal Reserve’s final policy meeting of the year next week. It could hold more sway than usual as one of the few up-to-date reports officials will have by then, as the shutdown delayed the government’s November jobs report.
Policymakers have been torn as to whether they’ll cut interest rates for a third straight meeting as they attempt to balance the slowdown in the job market with still-elevated inflation. Investors, however, widely expect the Fed to lower borrowing costs next week.
Today's show features:
- Bloomberg Economics US and Canada Economist Stuart Paul on the latest ADP jobs data and near-term expectations for Federal Reserve leadership and policy, and Bloomberg News Consumer Team Leader Emily Cohn on earnings from Macy’s and Dollar Tree, as well as the health of the US consumer
- Scott Sanborn, Chief Executive Officer of LendingClub, and Bloomberg Intelligence Senior Analyst for US Regional Banks Herman Chan, on the company’s expansion into home improvement financing and the outlook for US monetary policy
- Amy Rubenstein, CEO of Clear Investment Group, on the distressed real estate market
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg business
Week Daily reporting from the magazine that helps global leaders
stay ahead with insight on the people, companies, and trends
shaping today's complex economy, plus global business, finance and tech
(00:23):
news as it happens. The Bloomberg Business Week Daily Podcast
with Carol Masser and Tim Stenebek on Bloomberg Radio.
Speaker 2 (00:32):
For more with us on how the US economy is doing,
We've got Bloomberg Economics US and Canada economist Stort Paul.
He joins us here in the Bloomberg Business Week Studio.
So start, we are one week out from the last
FMC decision by the FED this year. The data that
we're getting now, the data that we get between now
and then, will it do anything to change the thinking
about an expected twenty five basis point great cut.
Speaker 3 (00:51):
I don't think that it'll do anything to change whether
or not we will get a cut. I think that
the only thing that it can change is what the
coalition of voters looks like. Basically, all of the data
that we got today was pretty bad. We had layoffs
as reported by ADP in the month of November. We
saw ism services yes, it's surprise to the upside, but
it's surprised because of slowing supply chains, like a very
(01:14):
peculiar reason for ISM to surprise to the upside. We
saw new orders that were weakening, employment that continued to decline.
In the ISM Services report, we saw import prices that
were flat basically, so that gives a little bit of
room for the FED to consider cut because tariff passed
through is slow. And the final thing that we saw
was September's industrial production numbers with manufacturing output basically flat,
(01:39):
and so all of it just sort of points to
this final FED decision for the year looking like it's
going to be made by a pretty robust coalition. In
my view, when we get the summary of Economic projections
in December, that's where I expect to see a lot
of dissent and a lot of division among the committee.
Speaker 4 (01:58):
You know, we've been talking to Matthew on Balance of
Power about USMCA, the trade deal that replaced NAFTA. You
obviously follow the Canadian economy. I mean, in the past
this has been an important economy for the US, US
has been important economy for the for Canada. Excuse me, so,
how are you thinking also too about where trade is
(02:18):
kind of settling between what has been really important trading
partners for the United States.
Speaker 3 (02:24):
Well, I think that the thing that most important remember
from the Canadians perspective in the context of USMCA, is
that Canadian negotiators are basically going to be waiting for
the US and Mexico to sort out trade and border disputes,
trade and border deals. For example, how much security Mexico
(02:44):
should be deploying to the US southern border before Canada
actually gets to come to the table to discuss its
own trade relationship. Right now, the average effective TARIF rate
on Canadian exports to the US is in the low
single digits, you know, three to four. Yeah, because of
how many carve outs there are, and because of you know,
the importance of the US as an energy export market
(03:07):
for Canada. All the energy just flows through the United States.
Speaker 5 (03:10):
Canada is right.
Speaker 3 (03:10):
Now relatively content just to wait. The bigger issue for
Canada right now is dealing with pretty lackluster domestic output
and domestic demand. The labor market has softened materially over
the summer. It looks like there's a little bit of
a glimber of hope there right now, it seems as though,
excuse me, trade is sort of normalizing. Of course, you know,
(03:35):
the second quarter was really really rough. Yeah, and so
we saw an outperformance in the third quarter. But trade
balances are starting to normalize, and any sort of negotiation
is just gonna be on hold until the US and
Mexico can sort out their differences.
Speaker 2 (03:47):
Okay, So just a realistic timeline for what that could be.
Speaker 3 (03:52):
I think that in earnest we're going to start seeing
some important talking points rolled out in the second quarter
of twenty twenty six. Of course, there are if any
sort of negotiation can be sped up by let's say,
Carney Prime Minister Karney visiting the White House. He's already
been to the US now I think twice so far
since he took the leadership role. But right now I'm
(04:14):
expecting to see some more definitive deal points getting rolled
out in the second.
Speaker 2 (04:20):
Quarter next year.
Speaker 4 (04:21):
It's just kind of wild. I thought we were kind
of we're not done with trade. I know we're not
done with trade, but it just keeps creeping back. One
of the other things that we've been talking a lot
about are retail earnings this week and over the last
couple of weeks. Nations retail companies continuing to report out
earnings amid the holiday shopping season now under ray too.
It's going to stay with us. Want to get to
tim some of the earnings we got today.
Speaker 2 (04:42):
Yeah, let's bring in Emily Cone. She's Bloomberg News Consumer
team leader. She joins us here in a studio. So
I'm a little confused about what's going on with Macy's
because shares initially fell after the company reported earnings forecasts
that disappointed investors. But now we're seeing them up two percent.
What's going on with Macy's. What do we learn?
Speaker 6 (04:57):
I mean, macy has basically had a good report, solid
lead up to the holiday season. I think the shares
are volatile. I think the thing that brought shares down
initially this morning was a disappointing profit forecast, and I
think that that speaks to we had the CEO tell
us this morning a cautious consumer, so they're being, you know,
(05:21):
a little bit conservative with their forecast. I think that
initially disappointed investors, but all in all, it is a
pretty good report for the company. I think they're also
they're stocks up thirty four percent this year, so I
think anything a little bit disappointing, might.
Speaker 4 (05:36):
Be two percent swaying from high to low. It's a lot,
it's a lot.
Speaker 7 (05:40):
It's like a.
Speaker 4 (05:40):
Confusing investor or a confused investor.
Speaker 6 (05:43):
Right, yeah, a little bit, yeah, yeah, But I do
think it comes on the backdrop of really strong performance
this year.
Speaker 4 (05:51):
Just throw Dollartry. They reported better than expected profit. They
also raised their full year earnings outlook, and we saw
that stock ralling in today's session. So a good report.
And what does it say about what type of consumer?
Speaker 5 (06:03):
Yeah?
Speaker 6 (06:03):
For sure, I mean this is the kind of store
that does well in this kind of economy. Right. They
said on their earnings call they're seeing middle to high
income shoppers trading down to Dollar Tree. That's good news
for a store like this, And it continues to paint
this picture that we saw last week in the week before,
which is this split screen picture of how the consumer
is doing. Consumers are still spending, but they're looking for
(06:24):
value and they're looking for places where the price is
right and Dollar Tree definitely fits in that better category.
Speaker 2 (06:31):
So Stuart, come on back in here and just give
us your take on how the US consumer is doing
and the context of the retail earnings that we continue
to hear about. To Emily's point, consumers trading down higher
and consumers trading down, that's good news in an environment
such as this for a company like dollar Tree. We
had Dana Telsa in earlier this week and she basically said, listen,
(06:51):
if you're offering something unique to the consumer, like if
you're a Levi's for example, if you have a marketing
campaign that is unique, you're still able to bring in consumers.
How do you characterize the environment.
Speaker 3 (07:02):
It's interesting when I read so. Of course, I think
about the economy mostly from the top down, and I
enjoy when I get to participate in a round table
with somebody like Emily who provides some insight about the
broader economy from the bottom up. And what's interesting is
when I see rotation to a lower end retailer like
dollar Tree, it speaks of the price sensitivity of consumers.
(07:24):
And then when we look at some of the more
macroeconomic data, we see that firms are struggling to pass
through some of the costs of tariffs. A lot of
firms are reporting that they're getting squeezed in terms of profitability. Again,
this is when I zoom out to the macroeconomic level,
we're seeing squeezed profits in the aggregate data because a
lot of the cost of tariffs are sitting with those producers.
(07:46):
When you have consumers that are especially price sensitive, it's
just sort of a tenuous balance that you're walking in
the economy.
Speaker 5 (07:53):
Now. It's no wonder why.
Speaker 3 (07:55):
Policymakers are going to be pushing for a rate cut,
because you're hoping that looser credit conditions will help to
alleviate some of the pressure that consumers are feeling so
that you can continue to have that expansion. But right now,
it's just characteristic of a sort of tenuous balance in
the broader macroeconomy.
Speaker 7 (08:11):
Yeah.
Speaker 4 (08:11):
I also feel like characteristic and Emily come on back
in here, is that we are constantly hearing, even from
retailers that do well, right, I think even Walmart, that
there's like a cautious consumer out there, I mean cautious consumers.
So they're spending, but they're being careful, they're being cautious,
they're making choices, they're trading down. Is that a fair
narrative takeaway?
Speaker 6 (08:30):
I think that's exactly right, and I think that's what
we heard from Tony Spring this morning where you know,
Macy's generally it's a middle to high income shopper, but
around the holidays they have more aspirational shoppers come in.
Those are the people who they're seeing pull back be
extra cautious, and I think that's right.
Speaker 4 (08:48):
So, you know, before we wrap up, just kind of
on the specifics, Emily, just real quickly, who else are
we done from the retailers, And didn't we just have
like a pretty impressive Black Friday and Cyber Monday?
Speaker 5 (09:00):
We did?
Speaker 6 (09:01):
We had, we had an interesting Black Friday Cyber Monday.
We don't really know the full results yet, and I
think we'll see that. We have some more retailers reporting
the rest of the week. We have Kroger tomorrow. Five
below are right too, I think exactly PVH. Yeah, so
we're still the retail earning season really never steps.
Speaker 4 (09:23):
Yeah, all right, and then we'll get into the holiday results. Emily,
thank you so much, really appreciate it. Bloomberg News Consumer
team leader Emily Cone with the latest don retailers. Stuart
Paul still with us talking about economics. I mean, there's
a lot going on, and I guess we are just
so focused about the FED meeting next week. Is it
all but done? Another quarter point cut? And is it
all then about what kind of color we get on
(09:46):
twenty twenty six? And does it really matter because Fetcher J. Powell,
we assume will be on his way out.
Speaker 3 (09:52):
Yeah, I think that the twenty five basis point cut
in December is a done deal. When I think back
to October, we only had one descent in favor of
hole rates steady and that was from Kansas City FED
President Jeffrey Schmid. So when, of course the Beige book
came out, I was particularly interested to know what's going
on in Kansas City. Is it possible that he would
join the coalition of voters come December who would favor
(10:15):
a twenty five basis point cut? And Kansas City conditions
looked quite a bit worse in the last Fed Beige Book,
So I expect that there is this broader coalition forming
for December cut. You know that Governor Myron is going
to vote in favor of more than twenty five basis
points in December. What's going to be a little bit peculiar,
And we've seen this. We saw this last year. In particular,
(10:38):
is that when the Summary of Economic projections comes out
with the dot plot, I would not be surprised to
see other FOMC participants keeping their dots a quarter point
higher than where we end the year. That's to say,
there are sort of shadowed descents among FOMC participants who
are not voting, who would have preferred rates to not
(10:59):
be a low in December, even though the actual voters
decide to lower by twenty five. Explain why, because we
have other FOMC participants who are not voters, and among
those people are Cleveland FED President Beth Hammock, Dallas FED
President Lori Logan, Folks like that who are going to
be voters next year, who were more hawkish in all
(11:20):
of their public comments. They don't get a vote this time,
but we expect that they would try to send a
signal to the rest of the world, Hey, we're not
going to be moving at the same pace next year.
And so when we see dots for twenty twenty six,
I expect there is going to be a pretty wide distribution.
I expect that the incoming cohort of FMC voters from
(11:42):
the regional banks are actually going to be quite a
bit more hawkish in twenty twenty six than they have
been this year.
Speaker 4 (11:47):
Are we nuts to be thinking? Are for traders and
investors to be assuming that Kevin Hassett is the next
FED share because it does seem like all roads are leading,
all FED roads are leading to him.
Speaker 3 (11:58):
At this point, it looks like that's going to be
the case. It looks like it's going to be a
Hasset nomination. President Trump was alluding to Kevin Hassett being
the nominee when he had a press conference. I guess
just yesterday, there was a story from the Financial Times
today that apparently in one on one conversations between bond
(12:18):
market investors and the White House, some folks expressed concern.
But then you look at the price action when the
trial balloon has floated last week with Kevin Hassetts name,
and he passed the financial markets test with flying colors.
And so I'm less concerned about what folks are saying
to the White House than what the market is saying
to the White House. And the market is giving a
(12:38):
clear go ahead.
Speaker 2 (12:39):
I don't want to put the cart before the horse,
but if you're saying the market is giving the clear
go ahead, then what does the Senate confirmation process look like.
Speaker 3 (12:46):
I think that what's different between let's say the Senate
confirmation process for Trump's nominees this time versus in his
first term is that I guess you could say the
MAGA movement has last. Then there is a broader coalition
that is in support of President Trump's agenda, and so
(13:06):
the division between the Senate Republicans, for example, and the
White House is pretty narrow. There is not a lot
of a descent among Centerate Republicans in the White House.
Every now and then you see somebody pop up like
Mitch McConnell who has their own voice. But I expect
that somebody like Kevin Hassett should make it through the
confirmation process and the Senate Banking Committee pretty easily, and
(13:27):
then it'll be mostly a party lion's vote when it
actually gets to the Senate itself, to the Senate floor.
So I don't think that it's going to be an
easy process. I think that it's going to be one
where you're gonna have some pretty dramatic headlines when he
gets questions from let's say Senator Warren from Massachusetts. It's
(13:48):
going to be a pretty ugly back and forth. But
when it comes time to actually counting the votes. I
think you just get party lines votes and gets he
gets his shot if that's what the White House ultimately
decide to do.
Speaker 2 (14:00):
And speaking of Spoke, she wants lower rates.
Speaker 5 (14:03):
Yeah, that's right.
Speaker 2 (14:04):
This is what's tricky is.
Speaker 5 (14:05):
That sometimes sometimes.
Speaker 3 (14:09):
Political partisans find a way to make sort of funny bedfellows.
And yes, she does want lower rates, but does it
come at a cost of politicizing the FED as an institution.
I think she's going to try to make it more
difficult for him, even though they both might want the
same thing.
Speaker 4 (14:25):
When it comes to policy, it's just the Fed, all
of it around the FED. I mean, you had Treasury
Secretary Scott best And today saying he's going to push
for this new rule that regional FED presidents must have
lived in that district for the last three years. For
the last three years, I just feel like there's just
so many things going on. You're going to come back.
We will continue the Fed conversation, but keep in mind,
one week from today we will have the last decision
(14:46):
of twenty twenty five. Stuart Paul Bloomberg Economics, US and
Canada economists.
Speaker 2 (14:52):
Stay with us. More from Bloomberg Business Week Daily coming
up after.
Speaker 1 (14:55):
This listening to the Bloomberg Business Week Daily Podcast. Catch
US live weekday afternoons from two to five eas during
Listen on Applecarplay and Android Auto with the Bloomberg Business app,
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Speaker 4 (15:13):
We promised you that we were going to continue on
the US economy and really the US consumer, the online
lending marketplace and platform for loans, credit cards, deposit accounts, insurance,
and where we're talking about Lending Club. They announced one
hundred million dollars share buy back just about one month ago.
It was about fifty not fifty, nearly five percent of
the company's market value on the day of the announcement.
(15:33):
Now Atlas have been raising their price targets on the
stock this year, most recently again raising them since the
company reported earnings late October. The company posted third quarter
results that be estimates. They provided a guidance range for
new fourth quarter originations with a midpoint above estimates. And
the stock it's actually up this year.
Speaker 2 (15:51):
Yeah, it is. Shares of the two point one billion
dollar market cap company about fourteen percent of more than
twelve percent since reporting those earnings back on October twenty second,
delighted to have with us. Scott Sanborn, CEO of Lending Club,
also CEO for close to a decade at Lending Club
for fifteen years now, also with us here in the
Bloomberg BusinessWeek studio Herman Chant Bloomberg Intelligence senior analysts for
US regional banks. He helped bring all of this together. Scott,
(16:14):
I want to start with you and just give us
some size and scope of the business, the consumers that
you're working with, who's interacting with the platform.
Speaker 8 (16:22):
Yeah, So we serve a customer base we call the
middle majority. They are if you think about credit, which
we are a credit centric bank. If you've got a
lot of money, you don't need a lot of access
to credit, You pay cash for car, you save up
to send your kids to college. If you're on the
other end of the spectrum, you can't really access credits.
So there's this middle group that are high income, heavy
(16:45):
users of credit.
Speaker 5 (16:46):
So they can afford a car, they can afford to
send their kids to school, but they need to use
credit to do it. That's who we serve.
Speaker 8 (16:53):
It's a really big customer base that represents about a
third of the US population, but it's close.
Speaker 5 (16:58):
To half of the credit wallets.
Speaker 8 (17:00):
They are more likely than average to have every form
of credit, and that credit is with the exception mortgages
also larger than average.
Speaker 5 (17:07):
That's what we starve.
Speaker 4 (17:07):
How much do these people usually make our average?
Speaker 8 (17:10):
And you know, obviously misleading averages can be misleading, but
average is about one hundred and twenty five thousand dollars.
Speaker 5 (17:15):
But you can think of it of ranging between call
it eighty.
Speaker 8 (17:18):
Thousand dollars in individual income to about two hundred thousand
is where we really over index.
Speaker 2 (17:25):
Great.
Speaker 7 (17:25):
One of the real highlights of your recent investor day
last week last month was the panel discussion with Marketplace Investors,
and we talked about this earlier before your appearance here
on radio. One of the panelists talked about being aligning
performance expectations partnering with better operators. Are you seeing that
with the private private credit space, Yeah, we do so.
Speaker 8 (17:49):
You know, we were born as a marketplace. Initially, everything
we originated we sold. When we acquired the bank in
twenty one, we started to hold a portion of our
loans on our balance sheet.
Speaker 5 (18:00):
That both gives us a stronger and more resilient earnings.
Speaker 8 (18:04):
Profile also allows us to do other things innovate using
our balance sheet, and what we found is just by
aligning our interest with our loan buyers, we're the largest
eater of our own cooking. We're the largest holder of
lending club loans. We care very deeply about the performance
of the credit, and credit is always evolving. It's very dynamic.
(18:26):
Because we have a balance sheet, what we can do
is when we want to test something new, we test
it on our balance sheet. Let's try longer duration, let's
try a larger loan size, let's try a new marketing channel.
We hold that first, we see it, we own it,
we make sure it performs the way we expect, and
then we release that to the marketplace. If you don't
have a balance sheet, you can't really do that. And
(18:47):
so that's visible in our results across every aspect of underwriting.
So lower delinquencies than the rest of the industry, thirty
or forty percent below, lower roll rates, covery rates, lower prepayments,
lower fraud, literally every aspect that you can measure of credit.
Speaker 5 (19:06):
We're out performing on.
Speaker 2 (19:07):
Has that remained consistent this year, in recent months, in
recent weeks, like you have a great real time view
of the consumer in the form of how well they
are doing in terms of paying back their loans. That's right,
still looking good.
Speaker 8 (19:20):
Yeah, so that's been consistent for you know, we release
four years of data we put out there and so
it's remained consistent. But you know it's not it's kind
of like a duck on a pond. It's remained consistent
because we're doing a lot of work underneath the cover.
So you know, something that we shared an investor Day
is at any given time we have more than two
hundred tests in the market where we're evaluating price points,
(19:43):
changes to the credit. So we're constantly adjusting to reflect
what's happening with the consumer, and that's what's giving us
the consistent results.
Speaker 4 (19:53):
Well, so that to me says you're very picky about
who you lend to.
Speaker 5 (19:56):
That's true.
Speaker 4 (19:57):
We are so in terms of your test, So tell
me what it is I mean, and how many of
people who apply or want to access your platform. You're like,
I'm out.
Speaker 8 (20:07):
Yeah, So we're pretty good at selecting who we want
to have in our portfolio and reaching out to those people.
Speaker 5 (20:14):
And then both delivering the price.
Speaker 8 (20:16):
And product experience, but also let's call it the user
experience that gets them all the way through. So we
look for areas where, for example, we can control the
use of the fund proceeds. If you come to me
and say i want twenty thousand dollars because I'm going
to do whatever my kid needs braces or I moving
(20:38):
cross country, great, But unless I'm paying the orthodontists, I
don't actually know that that's what you're using it for.
Speaker 5 (20:45):
Yeah, So we.
Speaker 8 (20:46):
Try to set ourselves up so that we are in
some ways controlling the use of proceeds and then making
the experience such that it makes it really easy. So
our largest use cases for people who already have debt,
credit card debt, notably, which at this point more than
half of all Americans are carrying. They're carrying it at
really high rates twenty three percent interest rate. It's highest
(21:07):
they've ever been in history. And we say, great, you
should do this instead. It takes less than five minutes.
We're going to save you seven hundred basis points. And
by the way, check all the credit cards that you
have that you want us to pay off, like we
see you have Chase or a cap One. Great, check
those and we're going to pay them directly, so we
know you are paying off your credit card debt. You're
(21:28):
not just saying you're going to pay off your credit
card debt and.
Speaker 5 (21:31):
Taking out more money. We are paying it off for you.
Speaker 8 (21:33):
Benefit for you is you know you've consolidated everything into
one bill. Other benefit is your FYCO score usually goes
up by thirty thirty five points, right because you've lowered,
you know, your utilization.
Speaker 4 (21:44):
How much can you lower? Like I going to tell you,
credit card rates just blow my mind about how high
they are. And I'm just curious, why are they so high?
Are people so bad? Is it to cover? No, I'm curious.
Speaker 5 (21:54):
Yeah, No, it's a great question.
Speaker 4 (21:55):
It just seems like it's out of control, and I
think it prevents people from becoming financially solvent or creating,
you know, kind of getting ahead of the game if
you will.
Speaker 5 (22:06):
Yeah, there's a lot to unpack in that it is.
Speaker 8 (22:08):
No, No, it's a great question, and you know there's
a number of questions underneath.
Speaker 5 (22:13):
But I'd say the biggest thing is.
Speaker 8 (22:16):
If you think about how people choose credit cards, it
is not based on the interest rate. Yeah right, it's
my Skymiles card or whatever, my retail store card.
Speaker 5 (22:26):
I'm going to get rewards for this.
Speaker 8 (22:28):
They don't even know what the interest rate is, or
it's a promotional rate that resets, So that's one they
don't choose based on that. Half of the people don't
revolve on the card. They're collecting these rewards. Yeah, but
they're not carrying a balance. Well, guess who's paying for that.
All the people that are carrying a balance, those people
don't know.
Speaker 5 (22:46):
What their rates are.
Speaker 8 (22:47):
The research we've done is half of all customers don't
say they don't know the interest rate on their credit cards,
and half that say they do. More than half of
them are wrong, right. They think they know their rate,
but they don't, right. And so cards have been able
and one of the big resets with the cards was
was driven by the Card Act, which limited how much
(23:08):
cards could increase rates, so they factored in higher rates.
Speaker 2 (23:12):
I just want to jump in real quick. We are
speaking with Scott Sanborn, CEO of a lending club. He's
been CEO for close to a decade. We're also just
getting some breaking news too on Apple. Apple's design executive
Alan Dye poached by Meta in at Major coup This
is the most prominent design executives executive at Apple. This
underscore is a push by the social networking giant into
(23:32):
AI equipped consumer devices. We also have here with us
Herman Chan. He's Bloomberg Intelligence Senior analyst for US regional banks.
Speaker 4 (23:40):
Thanks.
Speaker 7 (23:40):
I wanted to follow up with you, Scott on some
of the medium term expectations you laid out an investor Day.
You talked about doubling loan originations. We're talking about eighteen
to twenty billion dollars a year. What are some of
the levers to get you to that level? You mentioned
use cases. Maybe talk about home improvement as a use case,
(24:00):
and how do you maintain solid credit quality as you
ramp up that?
Speaker 4 (24:03):
And home improvement is something you're getting into, right.
Speaker 5 (24:05):
That's right, yep.
Speaker 8 (24:06):
So first and foremost is as I mentioned, you know,
credit card refining people out of their credit card debt
into a fixed rate.
Speaker 5 (24:14):
Lower rate loan is number one use case.
Speaker 8 (24:16):
It's it's about eighty percent of what we do. That
market is the largest it's ever been. There's one point three.
Speaker 4 (24:23):
Trillion eighty percent of what you do.
Speaker 1 (24:25):
Is that? Wow?
Speaker 4 (24:25):
Go ahead?
Speaker 2 (24:26):
Sorry?
Speaker 8 (24:26):
So that is you know one point three trillion in
balance is priced at really really high rates. We you know,
when the rate environment shifted and the inflationary pressure shifted,
we pulled back on a lot of our marketing. So
we're currently running today at sort of below our historical volumes.
So we're just going back into that market, turning back
(24:49):
on marketing channels that we had turned off, and then
the other areas. You know, personals can be used literally
for anything, right and before credit cards came around and
came to be, we're the dominant way consumers accessed you know,
credit for everyday need. So we have a major purchase
finance business that's growing today, call it fifty plus percent
(25:10):
year on year. That's allowing things like elective medical procedures,
you know, lay six races for your kid, you know,
all kinds of procedure of fertility treatments, teeth implants, so
things that insurance doesn't pay for but you want to.
Speaker 5 (25:27):
Do and you want to do right away.
Speaker 8 (25:30):
Private school education it's another one. So home improvement is
sort of an next adjacency. People right now are staying
in their homes longer. You know, seventy five percent of
Americans their mortgage rate is under five percent. They're not
going anywhere, and the homes are getting older, so the
homes need to be invested in they need to be improved,
so effectively enabling home improvement through an unsecured loan, where
(25:55):
again we are controlling the use of proceeds. We can
pay the supplier, we can pay the con tractor. We've
got the capability through an acquisition we announced to you know,
disperse this in phases to multiple parties.
Speaker 5 (26:08):
So we're really excited to kick that off.
Speaker 4 (26:12):
We've only got like thirty seconds left here. Consumer doing okay.
Speaker 8 (26:16):
I'd say the consumer we serve is demonstrating themselves to
be remarkably resilient.
Speaker 1 (26:23):
That a lot.
Speaker 8 (26:24):
It's a drinking game, but we'll acknowledge the sentiment isn't great.
Speaker 4 (26:30):
Yeah, come back soon. I have to tell you that
I think we're all like I want to go.
Speaker 2 (26:33):
I want to go.
Speaker 4 (26:34):
Please come back late, because I think you have a
great advantage and view into what's going on in the economy.
We'd love to Okay, we would too. Scott Sandborn, chief
executive Officer of Lending Club. Are amazing. Herman Chin, Bloomberg Intelligence,
Senior analyst for US regional Banks.
Speaker 2 (26:49):
Stay with us. More from Bloomberg Business with Daily coming
up after this.
Speaker 1 (26:57):
You're listening to the Bloomberg Business Week Daily Podcast. Catch
us live weekday afternoons from two to five y's during
Listen on Apple Karplay and Android Otto with the Bloomberg
Business app, or watch us live on YouTube.
Speaker 2 (27:11):
If you've been listening or watching us the past couple
of days, you know we've spent a couple of days
talking about residential real estate. We did that with Ron Eliosov,
founder and managing director over at north Wind Group, and
then yesterday with Louise Phillips Forbes of Brown Harris Stevens
are focused with them, really what's been happening in New
York City and what will happen in New York City.
We want to take a different look, another look at
(27:31):
a different type of real estate and kind of go
further Afield. Back with us is Amy Rubinstein. She's CEO
of Clear Investment Group. It's a Chicago based firm that
specializes in opportunistic real estate investments, specifically in the distressed
mid size multi family sector in mostly secondary and tertiary
markets around the US. She joins us once again here
in our Bloomberg Interactive Brokers Studio. Welcome back, Thank you
(27:52):
so much so it has been a little over months
since you were last with us. It was actually during
the government shutdown. Yes, a lot has happened since then.
We've gotten some day, we've gotten some delayed data. An
update on just how things are looking in your world,
and remind everybody what markets you focus on.
Speaker 9 (28:06):
Yeah, we're seeing definitely two ends of the spectrum right now.
So we are seeing some struggles that operators are having.
I guess what we're really looking at more than two
months ago, well, not so much more so than.
Speaker 4 (28:17):
Two months ago, but we're really feeling that.
Speaker 9 (28:19):
Key shaped economy that everybody's talking about where some of
these lower income tenents are struggling a little bit on expenses.
We are still feeling inflationary pricing, and we're feeling a
little bit of a lack of labor. And I think
that that is something that is starting to grow. Is
really looking more towards where does this construction labor come from?
(28:40):
And I think that's a product of deportations and a
product of not having a great immigration policies right now,
are you think you.
Speaker 2 (28:46):
Yeah, I was trying to remember who I was talking
to about this just in the last couple of days,
talking about how they are having a hard time finding
people to do the work right now.
Speaker 4 (28:55):
Yeah, construction is a little bit tough.
Speaker 2 (28:57):
So what type of construction specifically, Just talk about any kind.
Speaker 9 (29:01):
Of of rehab, any sort of It could be anywhere
from ground up construction where developer as struggling a little
bit on prices, both from inflation and also from lack
of labor, and then also just on the rehab in general.
Speaker 4 (29:12):
Just like Flamer is really because of immigration, no doubt
about it. That's what we're seeing. Yeah, we're seeing it.
Speaker 9 (29:18):
A lot of people don't show up to work, even
if they do have a legal status. People are a
little bit scared. On the flip side, you are seeing
incredible opportunities right now for investments because there is a
lot of distress.
Speaker 4 (29:32):
We happen to be buying a lot right now.
Speaker 9 (29:34):
We're in the middle of a fundraise on a fund
because there is so much to buy.
Speaker 4 (29:38):
There's opportunity, much great.
Speaker 9 (29:39):
Opportunity out there, and not a ton of competition because
right now lenders and investors are really not pricing in performa.
They want in place cash flow, in place NI. And
if you can find stuff where the fundamentals are strong,
but and the NI is fixable but not quite there.
Then you really have a great opportunity for buy.
Speaker 2 (30:00):
Mikayla and our control room one of our producers reminding
us that just a couple of weeks ago we spoke
to Christina Stambul of farm Girl Flowers and they bought
a farm to grow flowers on a small portion of
their flowers. She said they were having She was hearing
about a hard time.
Speaker 4 (30:15):
With labor, right, and we know that right. The farm
industry is another one you mentioned ni net operating income.
Help me understand something though, when you are finding lots
of opportunities because there's distress out there, it's when things
aren't going so well that's actually a good environment for
you guys. I will say, is there a little bit
of a balance. There's different kinds of distress.
Speaker 9 (30:36):
You feel some people that are really being strained by
higher interest rates, by higher expenses, by higher delinquencies, and
so you feel some strain and what that could cause
is definitely some pricing adjustments as people are trying to sell.
I do think, as you were talking about before, interest
rates are going to start to give a little bit
of wind to cap rate compression, and so you'll start
(30:57):
to get buyers and sellers coming together more. But that's
not the type of distress that I'm talking about. I'm
talking about distress that's even deeper than that, where operators
maybe didn't have a lot of experience and overextended themselves.
Speaker 4 (31:10):
And so there's.
Speaker 9 (31:11):
More to it than just that there's layers of distress
there our tenants doing so I think that, you know,
I think we see a little bit of both ends, right,
We're back to that cay shape where you see the
higher end tenants doing very very well and you see
some of your lower income tenants that are struggling a
bit more.
Speaker 2 (31:28):
Is it manifesting in the operators needing to offer concessions?
Are you seeing delays in rent? What are you saying?
Speaker 9 (31:35):
So we've tried to start getting creative on different ways
to help tenants keep up with their rent and help
them with budgeting, teaching budgeting classes, trying to pull out
their rent in different stages during the month as their
paychecks come in.
Speaker 4 (31:49):
So just try to help keep people on track a
little bit.
Speaker 5 (31:52):
It's fascinating.
Speaker 4 (31:53):
We just had a long, deep conversation with the CEO
of lending Tree, and the same thing I see here. Yeah,
lending club, Oh, lending club, sorrylending club, forgive me lending club.
But the same thing in terms of when they are
giving loans, like they want to know where it's going,
and if it's to pay off credit card debt, they
will make those payments directly and really kind of teaching
(32:13):
some financial responsibility and how big a part of that
is what you guys do.
Speaker 8 (32:18):
Know.
Speaker 9 (32:18):
It's really interesting because this is a new trend for us.
This wasn't something that we were doing five years ago
helping tenants learn about budgeting and finances, and it's something
that now we're starting to really look into.
Speaker 4 (32:29):
How can we be partners with these tenants.
Speaker 9 (32:32):
As opposed to the people that are forcing them to
pay their rent?
Speaker 4 (32:35):
Why are you doing it? Is it just business sense?
It's a win win for everybody.
Speaker 9 (32:40):
Okay, If people can prioritize their finances and get their
rent paid and stay in their houses, it's better for us,
we don't lose the income, we don't have to go
through evictions. It's better for them they don't have to
be relocated. So it's a win win for everybody. It's
a matter of can can that have an effect? Can
we be effective enough to help shape that.
Speaker 2 (33:00):
Do you do the tenants feel like they're they're being
partnered with? I mean, there's this idea of an adversarial
relationship when it comes to landlord and tenant.
Speaker 9 (33:10):
Sure, I think there can be, and I think you
get a little bit more of that in places.
Speaker 4 (33:15):
I would say a place like New York, where you've.
Speaker 9 (33:17):
Got rent control and the landlord and the tenant are
not really aligned because they're not both choosing that rental rate.
Speaker 5 (33:24):
I think of.
Speaker 2 (33:24):
Some landlords I've had in my day where I was
not completely aligned with Carrol.
Speaker 5 (33:30):
Anybody who's lived in New York. You know what's interesting.
Speaker 2 (33:34):
Of all the places that we rented that I rented
in New York, one landlord who was good. Really yeah, no.
Speaker 4 (33:41):
One ever talks about their good landlord. Four out of.
Speaker 2 (33:44):
Four Yeah, well yeah, that was pretty good. Twenty five percent.
That's not bad.
Speaker 4 (33:47):
She was unique. Okay, yeah, what's you again? Unique?
Speaker 5 (33:51):
Unique?
Speaker 4 (33:52):
Your properties remind me because I think initially you guys
were in Chicago.
Speaker 9 (33:57):
We're based out of Chicago, but right now we have
properties and Louisianaia not anymore.
Speaker 4 (34:03):
Not anymore. There just is not cash flow in California.
Speaker 9 (34:06):
It's a little more like New York City where everything's
just based on appreciation.
Speaker 2 (34:10):
Do you will if California builds more, would you go back?
Speaker 9 (34:14):
You know, we look for stabilized cash flow, not for
incoming cash flow. We actually don't care about the n
OI in place when we purchase things. We actually look
for negative NI because we want to be able to
fix that NI and that's how we.
Speaker 4 (34:25):
Add better opportunity.
Speaker 9 (34:26):
Right, but we want to eventually get to strong, strong
cash flow.
Speaker 4 (34:30):
Best places in terms of geography right now, for you guys.
Speaker 9 (34:33):
I think there's tons of opportunity in Atlanta, Atlanta, we
keep looking over there.
Speaker 4 (34:37):
Lots in the Midwest, we love it.
Speaker 9 (34:38):
We love Ohio and Indiana. Right now we're buying in Alabama.
We have a deal under contract in Illinois. We're in Ohio,
we're in Columbus. We really like Cleveland as well, So
there there are you know, people are looking a lot
in Cincinnati.
Speaker 4 (34:53):
There's lots of lots of places to go there. I
know we talked we go kind of all over with you.
But when we talk about afforda housing, what is the answer,
which is something that we have talked about for decades, right,
what do you think is the answer. And forgive me,
I'm only giving you about forty seconds solve a problem
that is. I think different.
Speaker 9 (35:13):
Markets are going to have different answers. I think generally speaking,
it's easier for us. We see a better opportunity in
rehabbing and rehabilitating as opposed to ground up construction where
you need a lot of government subsidies or some sort
of incentives to be able to get it done. Us
we see the opportunity in existing assets that just need
(35:35):
to lift back up. But then again, you've got to
be willing to buy something that's negative CASHLNG in the beginning.
Speaker 4 (35:40):
And most of those assets are going to be outside
the major cities or in the major city, not necessarily.
You know, we own in DC, so it can be
all over the place. Great stuff. Thank you for coming
by again. Thank you for having right the real estate.
Speaker 2 (35:54):
Amy Rubinstein, the CEO of a Clear Investment Group.
Speaker 1 (35:57):
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(00:23):
news as it happens. The Bloomberg Business Week Daily Podcast
with Carol Masser and Tim Stenebek on Bloomberg Radio.
Speaker 2 (00:32):
For more with us on how the US economy is doing,
We've got Bloomberg Economics US and Canada economist Stort Paul.
He joins us here in the Bloomberg Business Week Studio.
So start, we are one week out from the last
FMC decision by the FED this year. The data that
we're getting now, the data that we get between now
and then, will it do anything to change the thinking
about an expected twenty five basis point great cut.
Speaker 3 (00:51):
I don't think that it'll do anything to change whether
or not we will get a cut. I think that
the only thing that it can change is what the
coalition of voters looks like. Basically, all of the data
that we got today was pretty bad. We had layoffs
as reported by ADP in the month of November. We
saw ism services yes, it's surprise to the upside, but
it's surprised because of slowing supply chains, like a very
(01:14):
peculiar reason for ISM to surprise to the upside. We
saw new orders that were weakening, employment that continued to decline.
In the ISM Services report, we saw import prices that
were flat basically, so that gives a little bit of
room for the FED to consider cut because tariff passed
through is slow. And the final thing that we saw
was September's industrial production numbers with manufacturing output basically flat,
(01:39):
and so all of it just sort of points to
this final FED decision for the year looking like it's
going to be made by a pretty robust coalition. In
my view, when we get the summary of Economic projections
in December, that's where I expect to see a lot
of dissent and a lot of division among the committee.
Speaker 4 (01:58):
You know, we've been talking to Matthew on Balance of
Power about USMCA, the trade deal that replaced NAFTA. You
obviously follow the Canadian economy. I mean, in the past
this has been an important economy for the US, US
has been important economy for the for Canada. Excuse me, so,
how are you thinking also too about where trade is
(02:18):
kind of settling between what has been really important trading
partners for the United States.
Speaker 3 (02:24):
Well, I think that the thing that most important remember
from the Canadians perspective in the context of USMCA, is
that Canadian negotiators are basically going to be waiting for
the US and Mexico to sort out trade and border disputes,
trade and border deals. For example, how much security Mexico
(02:44):
should be deploying to the US southern border before Canada
actually gets to come to the table to discuss its
own trade relationship. Right now, the average effective TARIF rate
on Canadian exports to the US is in the low
single digits, you know, three to four. Yeah, because of
how many carve outs there are, and because of you know,
the importance of the US as an energy export market
(03:07):
for Canada. All the energy just flows through the United States.
Speaker 5 (03:10):
Canada is right.
Speaker 3 (03:10):
Now relatively content just to wait. The bigger issue for
Canada right now is dealing with pretty lackluster domestic output
and domestic demand. The labor market has softened materially over
the summer. It looks like there's a little bit of
a glimber of hope there right now, it seems as though,
excuse me, trade is sort of normalizing. Of course, you know,
(03:35):
the second quarter was really really rough. Yeah, and so
we saw an outperformance in the third quarter. But trade
balances are starting to normalize, and any sort of negotiation
is just gonna be on hold until the US and
Mexico can sort out their differences.
Speaker 2 (03:47):
Okay, So just a realistic timeline for what that could be.
Speaker 3 (03:52):
I think that in earnest we're going to start seeing
some important talking points rolled out in the second quarter
of twenty twenty six. Of course, there are if any
sort of negotiation can be sped up by let's say,
Carney Prime Minister Karney visiting the White House. He's already
been to the US now I think twice so far
since he took the leadership role. But right now I'm
(04:14):
expecting to see some more definitive deal points getting rolled
out in the second.
Speaker 2 (04:20):
Quarter next year.
Speaker 4 (04:21):
It's just kind of wild. I thought we were kind
of we're not done with trade. I know we're not
done with trade, but it just keeps creeping back. One
of the other things that we've been talking a lot
about are retail earnings this week and over the last
couple of weeks. Nations retail companies continuing to report out
earnings amid the holiday shopping season now under ray too.
It's going to stay with us. Want to get to
tim some of the earnings we got today.
Speaker 2 (04:42):
Yeah, let's bring in Emily Cone. She's Bloomberg News Consumer
team leader. She joins us here in a studio. So
I'm a little confused about what's going on with Macy's
because shares initially fell after the company reported earnings forecasts
that disappointed investors. But now we're seeing them up two percent.
What's going on with Macy's. What do we learn?
Speaker 6 (04:57):
I mean, macy has basically had a good report, solid
lead up to the holiday season. I think the shares
are volatile. I think the thing that brought shares down
initially this morning was a disappointing profit forecast, and I
think that that speaks to we had the CEO tell
us this morning a cautious consumer, so they're being, you know,
(05:21):
a little bit conservative with their forecast. I think that
initially disappointed investors, but all in all, it is a
pretty good report for the company. I think they're also
they're stocks up thirty four percent this year, so I
think anything a little bit disappointing, might.
Speaker 4 (05:36):
Be two percent swaying from high to low. It's a lot,
it's a lot.
Speaker 7 (05:40):
It's like a.
Speaker 4 (05:40):
Confusing investor or a confused investor.
Speaker 6 (05:43):
Right, yeah, a little bit, yeah, yeah, But I do
think it comes on the backdrop of really strong performance
this year.
Speaker 4 (05:51):
Just throw Dollartry. They reported better than expected profit. They
also raised their full year earnings outlook, and we saw
that stock ralling in today's session. So a good report.
And what does it say about what type of consumer?
Speaker 5 (06:03):
Yeah?
Speaker 6 (06:03):
For sure, I mean this is the kind of store
that does well in this kind of economy. Right. They
said on their earnings call they're seeing middle to high
income shoppers trading down to Dollar Tree. That's good news
for a store like this, And it continues to paint
this picture that we saw last week in the week before,
which is this split screen picture of how the consumer
is doing. Consumers are still spending, but they're looking for
(06:24):
value and they're looking for places where the price is
right and Dollar Tree definitely fits in that better category.
Speaker 2 (06:31):
So Stuart, come on back in here and just give
us your take on how the US consumer is doing
and the context of the retail earnings that we continue
to hear about. To Emily's point, consumers trading down higher
and consumers trading down, that's good news in an environment
such as this for a company like dollar Tree. We
had Dana Telsa in earlier this week and she basically said, listen,
(06:51):
if you're offering something unique to the consumer, like if
you're a Levi's for example, if you have a marketing
campaign that is unique, you're still able to bring in consumers.
How do you characterize the environment.
Speaker 3 (07:02):
It's interesting when I read so. Of course, I think
about the economy mostly from the top down, and I
enjoy when I get to participate in a round table
with somebody like Emily who provides some insight about the
broader economy from the bottom up. And what's interesting is
when I see rotation to a lower end retailer like
dollar Tree, it speaks of the price sensitivity of consumers.
(07:24):
And then when we look at some of the more
macroeconomic data, we see that firms are struggling to pass
through some of the costs of tariffs. A lot of
firms are reporting that they're getting squeezed in terms of profitability. Again,
this is when I zoom out to the macroeconomic level,
we're seeing squeezed profits in the aggregate data because a
lot of the cost of tariffs are sitting with those producers.
(07:46):
When you have consumers that are especially price sensitive, it's
just sort of a tenuous balance that you're walking in
the economy.
Speaker 5 (07:53):
Now. It's no wonder why.
Speaker 3 (07:55):
Policymakers are going to be pushing for a rate cut,
because you're hoping that looser credit conditions will help to
alleviate some of the pressure that consumers are feeling so
that you can continue to have that expansion. But right now,
it's just characteristic of a sort of tenuous balance in
the broader macroeconomy.
Speaker 7 (08:11):
Yeah.
Speaker 4 (08:11):
I also feel like characteristic and Emily come on back
in here, is that we are constantly hearing, even from
retailers that do well, right, I think even Walmart, that
there's like a cautious consumer out there, I mean cautious consumers.
So they're spending, but they're being careful, they're being cautious,
they're making choices, they're trading down. Is that a fair
narrative takeaway?
Speaker 6 (08:30):
I think that's exactly right, and I think that's what
we heard from Tony Spring this morning where you know,
Macy's generally it's a middle to high income shopper, but
around the holidays they have more aspirational shoppers come in.
Those are the people who they're seeing pull back be
extra cautious, and I think that's right.
Speaker 4 (08:48):
So, you know, before we wrap up, just kind of
on the specifics, Emily, just real quickly, who else are
we done from the retailers, And didn't we just have
like a pretty impressive Black Friday and Cyber Monday?
Speaker 5 (09:00):
We did?
Speaker 6 (09:01):
We had, we had an interesting Black Friday Cyber Monday.
We don't really know the full results yet, and I
think we'll see that. We have some more retailers reporting
the rest of the week. We have Kroger tomorrow. Five
below are right too, I think exactly PVH. Yeah, so
we're still the retail earning season really never steps.
Speaker 4 (09:23):
Yeah, all right, and then we'll get into the holiday results. Emily,
thank you so much, really appreciate it. Bloomberg News Consumer
team leader Emily Cone with the latest don retailers. Stuart
Paul still with us talking about economics. I mean, there's
a lot going on, and I guess we are just
so focused about the FED meeting next week. Is it
all but done? Another quarter point cut? And is it
all then about what kind of color we get on
(09:46):
twenty twenty six? And does it really matter because Fetcher J. Powell,
we assume will be on his way out.
Speaker 3 (09:52):
Yeah, I think that the twenty five basis point cut
in December is a done deal. When I think back
to October, we only had one descent in favor of
hole rates steady and that was from Kansas City FED
President Jeffrey Schmid. So when, of course the Beige book
came out, I was particularly interested to know what's going
on in Kansas City. Is it possible that he would
join the coalition of voters come December who would favor
(10:15):
a twenty five basis point cut? And Kansas City conditions
looked quite a bit worse in the last Fed Beige Book,
So I expect that there is this broader coalition forming
for December cut. You know that Governor Myron is going
to vote in favor of more than twenty five basis
points in December. What's going to be a little bit peculiar,
And we've seen this. We saw this last year. In particular,
(10:38):
is that when the Summary of Economic projections comes out
with the dot plot, I would not be surprised to
see other FOMC participants keeping their dots a quarter point
higher than where we end the year. That's to say,
there are sort of shadowed descents among FOMC participants who
are not voting, who would have preferred rates to not
(10:59):
be a low in December, even though the actual voters
decide to lower by twenty five. Explain why, because we
have other FOMC participants who are not voters, and among
those people are Cleveland FED President Beth Hammock, Dallas FED
President Lori Logan, Folks like that who are going to
be voters next year, who were more hawkish in all
(11:20):
of their public comments. They don't get a vote this time,
but we expect that they would try to send a
signal to the rest of the world, Hey, we're not
going to be moving at the same pace next year.
And so when we see dots for twenty twenty six,
I expect there is going to be a pretty wide distribution.
I expect that the incoming cohort of FMC voters from
(11:42):
the regional banks are actually going to be quite a
bit more hawkish in twenty twenty six than they have
been this year.
Speaker 4 (11:47):
Are we nuts to be thinking? Are for traders and
investors to be assuming that Kevin Hassett is the next
FED share because it does seem like all roads are leading,
all FED roads are leading to him.
Speaker 3 (11:58):
At this point, it looks like that's going to be
the case. It looks like it's going to be a
Hasset nomination. President Trump was alluding to Kevin Hassett being
the nominee when he had a press conference. I guess
just yesterday, there was a story from the Financial Times
today that apparently in one on one conversations between bond
(12:18):
market investors and the White House, some folks expressed concern.
But then you look at the price action when the
trial balloon has floated last week with Kevin Hassetts name,
and he passed the financial markets test with flying colors.
And so I'm less concerned about what folks are saying
to the White House than what the market is saying
to the White House. And the market is giving a
(12:38):
clear go ahead.
Speaker 2 (12:39):
I don't want to put the cart before the horse,
but if you're saying the market is giving the clear
go ahead, then what does the Senate confirmation process look like.
Speaker 3 (12:46):
I think that what's different between let's say the Senate
confirmation process for Trump's nominees this time versus in his
first term is that I guess you could say the
MAGA movement has last. Then there is a broader coalition
that is in support of President Trump's agenda, and so
(13:06):
the division between the Senate Republicans, for example, and the
White House is pretty narrow. There is not a lot
of a descent among Centerate Republicans in the White House.
Every now and then you see somebody pop up like
Mitch McConnell who has their own voice. But I expect
that somebody like Kevin Hassett should make it through the
confirmation process and the Senate Banking Committee pretty easily, and
(13:27):
then it'll be mostly a party lion's vote when it
actually gets to the Senate itself, to the Senate floor.
So I don't think that it's going to be an
easy process. I think that it's going to be one
where you're gonna have some pretty dramatic headlines when he
gets questions from let's say Senator Warren from Massachusetts. It's
(13:48):
going to be a pretty ugly back and forth. But
when it comes time to actually counting the votes. I
think you just get party lines votes and gets he
gets his shot if that's what the White House ultimately
decide to do.
Speaker 2 (14:00):
And speaking of Spoke, she wants lower rates.
Speaker 5 (14:03):
Yeah, that's right.
Speaker 2 (14:04):
This is what's tricky is.
Speaker 5 (14:05):
That sometimes sometimes.
Speaker 3 (14:09):
Political partisans find a way to make sort of funny bedfellows.
And yes, she does want lower rates, but does it
come at a cost of politicizing the FED as an institution.
I think she's going to try to make it more
difficult for him, even though they both might want the
same thing.
Speaker 4 (14:25):
When it comes to policy, it's just the Fed, all
of it around the FED. I mean, you had Treasury
Secretary Scott best And today saying he's going to push
for this new rule that regional FED presidents must have
lived in that district for the last three years. For
the last three years, I just feel like there's just
so many things going on. You're going to come back.
We will continue the Fed conversation, but keep in mind,
one week from today we will have the last decision
(14:46):
of twenty twenty five. Stuart Paul Bloomberg Economics, US and
Canada economists.
Speaker 2 (14:52):
Stay with us. More from Bloomberg Business Week Daily coming
up after.
Speaker 1 (14:55):
This listening to the Bloomberg Business Week Daily Podcast. Catch
US live weekday afternoons from two to five eas during
Listen on Applecarplay and Android Auto with the Bloomberg Business app,
or watch US Live on YouTube.
Speaker 4 (15:13):
We promised you that we were going to continue on
the US economy and really the US consumer, the online
lending marketplace and platform for loans, credit cards, deposit accounts, insurance,
and where we're talking about Lending Club. They announced one
hundred million dollars share buy back just about one month ago.
It was about fifty not fifty, nearly five percent of
the company's market value on the day of the announcement.
(15:33):
Now Atlas have been raising their price targets on the
stock this year, most recently again raising them since the
company reported earnings late October. The company posted third quarter
results that be estimates. They provided a guidance range for
new fourth quarter originations with a midpoint above estimates. And
the stock it's actually up this year.
Speaker 2 (15:51):
Yeah, it is. Shares of the two point one billion
dollar market cap company about fourteen percent of more than
twelve percent since reporting those earnings back on October twenty second,
delighted to have with us. Scott Sanborn, CEO of Lending Club,
also CEO for close to a decade at Lending Club
for fifteen years now, also with us here in the
Bloomberg BusinessWeek studio Herman Chant Bloomberg Intelligence senior analysts for
US regional banks. He helped bring all of this together. Scott,
(16:14):
I want to start with you and just give us
some size and scope of the business, the consumers that
you're working with, who's interacting with the platform.
Speaker 8 (16:22):
Yeah, So we serve a customer base we call the
middle majority. They are if you think about credit, which
we are a credit centric bank. If you've got a
lot of money, you don't need a lot of access
to credit, You pay cash for car, you save up
to send your kids to college. If you're on the
other end of the spectrum, you can't really access credits.
So there's this middle group that are high income, heavy
(16:45):
users of credit.
Speaker 5 (16:46):
So they can afford a car, they can afford to
send their kids to school, but they need to use
credit to do it. That's who we serve.
Speaker 8 (16:53):
It's a really big customer base that represents about a
third of the US population, but it's close.
Speaker 5 (16:58):
To half of the credit wallets.
Speaker 8 (17:00):
They are more likely than average to have every form
of credit, and that credit is with the exception mortgages
also larger than average.
Speaker 5 (17:07):
That's what we starve.
Speaker 4 (17:07):
How much do these people usually make our average?
Speaker 8 (17:10):
And you know, obviously misleading averages can be misleading, but
average is about one hundred and twenty five thousand dollars.
Speaker 5 (17:15):
But you can think of it of ranging between call
it eighty.
Speaker 8 (17:18):
Thousand dollars in individual income to about two hundred thousand
is where we really over index.
Speaker 2 (17:25):
Great.
Speaker 7 (17:25):
One of the real highlights of your recent investor day
last week last month was the panel discussion with Marketplace Investors,
and we talked about this earlier before your appearance here
on radio. One of the panelists talked about being aligning
performance expectations partnering with better operators. Are you seeing that
with the private private credit space, Yeah, we do so.
Speaker 8 (17:49):
You know, we were born as a marketplace. Initially, everything
we originated we sold. When we acquired the bank in
twenty one, we started to hold a portion of our
loans on our balance sheet.
Speaker 5 (18:00):
That both gives us a stronger and more resilient earnings.
Speaker 8 (18:04):
Profile also allows us to do other things innovate using
our balance sheet, and what we found is just by
aligning our interest with our loan buyers, we're the largest
eater of our own cooking. We're the largest holder of
lending club loans. We care very deeply about the performance
of the credit, and credit is always evolving. It's very dynamic.
(18:26):
Because we have a balance sheet, what we can do
is when we want to test something new, we test
it on our balance sheet. Let's try longer duration, let's
try a larger loan size, let's try a new marketing channel.
We hold that first, we see it, we own it,
we make sure it performs the way we expect, and
then we release that to the marketplace. If you don't
have a balance sheet, you can't really do that. And
(18:47):
so that's visible in our results across every aspect of underwriting.
So lower delinquencies than the rest of the industry, thirty
or forty percent below, lower roll rates, covery rates, lower prepayments,
lower fraud, literally every aspect that you can measure of credit.
Speaker 5 (19:06):
We're out performing on.
Speaker 2 (19:07):
Has that remained consistent this year, in recent months, in
recent weeks, like you have a great real time view
of the consumer in the form of how well they
are doing in terms of paying back their loans. That's right,
still looking good.
Speaker 8 (19:20):
Yeah, so that's been consistent for you know, we release
four years of data we put out there and so
it's remained consistent. But you know it's not it's kind
of like a duck on a pond. It's remained consistent
because we're doing a lot of work underneath the cover.
So you know, something that we shared an investor Day
is at any given time we have more than two
hundred tests in the market where we're evaluating price points,
(19:43):
changes to the credit. So we're constantly adjusting to reflect
what's happening with the consumer, and that's what's giving us
the consistent results.
Speaker 4 (19:53):
Well, so that to me says you're very picky about
who you lend to.
Speaker 5 (19:56):
That's true.
Speaker 4 (19:57):
We are so in terms of your test, So tell
me what it is I mean, and how many of
people who apply or want to access your platform. You're like,
I'm out.
Speaker 8 (20:07):
Yeah, So we're pretty good at selecting who we want
to have in our portfolio and reaching out to those people.
Speaker 5 (20:14):
And then both delivering the price.
Speaker 8 (20:16):
And product experience, but also let's call it the user
experience that gets them all the way through. So we
look for areas where, for example, we can control the
use of the fund proceeds. If you come to me
and say i want twenty thousand dollars because I'm going
to do whatever my kid needs braces or I moving
(20:38):
cross country, great, But unless I'm paying the orthodontists, I
don't actually know that that's what you're using it for.
Speaker 5 (20:45):
Yeah, So we.
Speaker 8 (20:46):
Try to set ourselves up so that we are in
some ways controlling the use of proceeds and then making
the experience such that it makes it really easy. So
our largest use cases for people who already have debt,
credit card debt, notably, which at this point more than
half of all Americans are carrying. They're carrying it at
really high rates twenty three percent interest rate. It's highest
(21:07):
they've ever been in history. And we say, great, you
should do this instead. It takes less than five minutes.
We're going to save you seven hundred basis points. And
by the way, check all the credit cards that you
have that you want us to pay off, like we
see you have Chase or a cap One. Great, check
those and we're going to pay them directly, so we
know you are paying off your credit card debt. You're
(21:28):
not just saying you're going to pay off your credit
card debt and.
Speaker 5 (21:31):
Taking out more money. We are paying it off for you.
Speaker 8 (21:33):
Benefit for you is you know you've consolidated everything into
one bill. Other benefit is your FYCO score usually goes
up by thirty thirty five points, right because you've lowered,
you know, your utilization.
Speaker 4 (21:44):
How much can you lower? Like I going to tell you,
credit card rates just blow my mind about how high
they are. And I'm just curious, why are they so high?
Are people so bad? Is it to cover? No, I'm curious.
Speaker 5 (21:54):
Yeah, No, it's a great question.
Speaker 4 (21:55):
It just seems like it's out of control, and I
think it prevents people from becoming financially solvent or creating,
you know, kind of getting ahead of the game if
you will.
Speaker 5 (22:06):
Yeah, there's a lot to unpack in that it is.
Speaker 8 (22:08):
No, No, it's a great question, and you know there's
a number of questions underneath.
Speaker 5 (22:13):
But I'd say the biggest thing is.
Speaker 8 (22:16):
If you think about how people choose credit cards, it
is not based on the interest rate. Yeah right, it's
my Skymiles card or whatever, my retail store card.
Speaker 5 (22:26):
I'm going to get rewards for this.
Speaker 8 (22:28):
They don't even know what the interest rate is, or
it's a promotional rate that resets, So that's one they
don't choose based on that. Half of the people don't
revolve on the card. They're collecting these rewards. Yeah, but
they're not carrying a balance. Well, guess who's paying for that.
All the people that are carrying a balance, those people
don't know.
Speaker 5 (22:46):
What their rates are.
Speaker 8 (22:47):
The research we've done is half of all customers don't
say they don't know the interest rate on their credit cards,
and half that say they do. More than half of
them are wrong, right. They think they know their rate,
but they don't, right. And so cards have been able
and one of the big resets with the cards was
was driven by the Card Act, which limited how much
(23:08):
cards could increase rates, so they factored in higher rates.
Speaker 2 (23:12):
I just want to jump in real quick. We are
speaking with Scott Sanborn, CEO of a lending club. He's
been CEO for close to a decade. We're also just
getting some breaking news too on Apple. Apple's design executive
Alan Dye poached by Meta in at Major coup This
is the most prominent design executives executive at Apple. This
underscore is a push by the social networking giant into
(23:32):
AI equipped consumer devices. We also have here with us
Herman Chan. He's Bloomberg Intelligence Senior analyst for US regional banks.
Speaker 4 (23:40):
Thanks.
Speaker 7 (23:40):
I wanted to follow up with you, Scott on some
of the medium term expectations you laid out an investor Day.
You talked about doubling loan originations. We're talking about eighteen
to twenty billion dollars a year. What are some of
the levers to get you to that level? You mentioned
use cases. Maybe talk about home improvement as a use case,
(24:00):
and how do you maintain solid credit quality as you
ramp up that?
Speaker 4 (24:03):
And home improvement is something you're getting into, right.
Speaker 5 (24:05):
That's right, yep.
Speaker 8 (24:06):
So first and foremost is as I mentioned, you know,
credit card refining people out of their credit card debt
into a fixed rate.
Speaker 5 (24:14):
Lower rate loan is number one use case.
Speaker 8 (24:16):
It's it's about eighty percent of what we do. That
market is the largest it's ever been. There's one point three.
Speaker 4 (24:23):
Trillion eighty percent of what you do.
Speaker 1 (24:25):
Is that? Wow?
Speaker 4 (24:25):
Go ahead?
Speaker 2 (24:26):
Sorry?
Speaker 8 (24:26):
So that is you know one point three trillion in
balance is priced at really really high rates. We you know,
when the rate environment shifted and the inflationary pressure shifted,
we pulled back on a lot of our marketing. So
we're currently running today at sort of below our historical volumes.
So we're just going back into that market, turning back
(24:49):
on marketing channels that we had turned off, and then
the other areas. You know, personals can be used literally
for anything, right and before credit cards came around and
came to be, we're the dominant way consumers accessed you know,
credit for everyday need. So we have a major purchase
finance business that's growing today, call it fifty plus percent
(25:10):
year on year. That's allowing things like elective medical procedures,
you know, lay six races for your kid, you know,
all kinds of procedure of fertility treatments, teeth implants, so
things that insurance doesn't pay for but you want to.
Speaker 5 (25:27):
Do and you want to do right away.
Speaker 8 (25:30):
Private school education it's another one. So home improvement is
sort of an next adjacency. People right now are staying
in their homes longer. You know, seventy five percent of
Americans their mortgage rate is under five percent. They're not
going anywhere, and the homes are getting older, so the
homes need to be invested in they need to be improved,
so effectively enabling home improvement through an unsecured loan, where
(25:55):
again we are controlling the use of proceeds. We can
pay the supplier, we can pay the con tractor. We've
got the capability through an acquisition we announced to you know,
disperse this in phases to multiple parties.
Speaker 5 (26:08):
So we're really excited to kick that off.
Speaker 4 (26:12):
We've only got like thirty seconds left here. Consumer doing okay.
Speaker 8 (26:16):
I'd say the consumer we serve is demonstrating themselves to
be remarkably resilient.
Speaker 1 (26:23):
That a lot.
Speaker 8 (26:24):
It's a drinking game, but we'll acknowledge the sentiment isn't great.
Speaker 4 (26:30):
Yeah, come back soon. I have to tell you that
I think we're all like I want to go.
Speaker 2 (26:33):
I want to go.
Speaker 4 (26:34):
Please come back late, because I think you have a
great advantage and view into what's going on in the economy.
We'd love to Okay, we would too. Scott Sandborn, chief
executive Officer of Lending Club. Are amazing. Herman Chin, Bloomberg Intelligence,
Senior analyst for US regional Banks.
Speaker 2 (26:49):
Stay with us. More from Bloomberg Business with Daily coming
up after this.
Speaker 1 (26:57):
You're listening to the Bloomberg Business Week Daily Podcast. Catch
us live weekday afternoons from two to five y's during
Listen on Apple Karplay and Android Otto with the Bloomberg
Business app, or watch us live on YouTube.
Speaker 2 (27:11):
If you've been listening or watching us the past couple
of days, you know we've spent a couple of days
talking about residential real estate. We did that with Ron Eliosov,
founder and managing director over at north Wind Group, and
then yesterday with Louise Phillips Forbes of Brown Harris Stevens
are focused with them, really what's been happening in New
York City and what will happen in New York City.
We want to take a different look, another look at
(27:31):
a different type of real estate and kind of go
further Afield. Back with us is Amy Rubinstein. She's CEO
of Clear Investment Group. It's a Chicago based firm that
specializes in opportunistic real estate investments, specifically in the distressed
mid size multi family sector in mostly secondary and tertiary
markets around the US. She joins us once again here
in our Bloomberg Interactive Brokers Studio. Welcome back, Thank you
(27:52):
so much so it has been a little over months
since you were last with us. It was actually during
the government shutdown. Yes, a lot has happened since then.
We've gotten some day, we've gotten some delayed data. An
update on just how things are looking in your world,
and remind everybody what markets you focus on.
Speaker 9 (28:06):
Yeah, we're seeing definitely two ends of the spectrum right now.
So we are seeing some struggles that operators are having.
I guess what we're really looking at more than two
months ago, well, not so much more so than.
Speaker 4 (28:17):
Two months ago, but we're really feeling that.
Speaker 9 (28:19):
Key shaped economy that everybody's talking about where some of
these lower income tenents are struggling a little bit on expenses.
We are still feeling inflationary pricing, and we're feeling a
little bit of a lack of labor. And I think
that that is something that is starting to grow. Is
really looking more towards where does this construction labor come from?
(28:40):
And I think that's a product of deportations and a
product of not having a great immigration policies right now,
are you think you.
Speaker 2 (28:46):
Yeah, I was trying to remember who I was talking
to about this just in the last couple of days,
talking about how they are having a hard time finding
people to do the work right now.
Speaker 4 (28:55):
Yeah, construction is a little bit tough.
Speaker 2 (28:57):
So what type of construction specifically, Just talk about any kind.
Speaker 9 (29:01):
Of of rehab, any sort of It could be anywhere
from ground up construction where developer as struggling a little
bit on prices, both from inflation and also from lack
of labor, and then also just on the rehab in general.
Speaker 4 (29:12):
Just like Flamer is really because of immigration, no doubt
about it. That's what we're seeing. Yeah, we're seeing it.
Speaker 9 (29:18):
A lot of people don't show up to work, even
if they do have a legal status. People are a
little bit scared. On the flip side, you are seeing
incredible opportunities right now for investments because there is a
lot of distress.
Speaker 4 (29:32):
We happen to be buying a lot right now.
Speaker 9 (29:34):
We're in the middle of a fundraise on a fund
because there is so much to buy.
Speaker 4 (29:38):
There's opportunity, much great.
Speaker 9 (29:39):
Opportunity out there, and not a ton of competition because
right now lenders and investors are really not pricing in performa.
They want in place cash flow, in place NI. And
if you can find stuff where the fundamentals are strong,
but and the NI is fixable but not quite there.
Then you really have a great opportunity for buy.
Speaker 2 (30:00):
Mikayla and our control room one of our producers reminding
us that just a couple of weeks ago we spoke
to Christina Stambul of farm Girl Flowers and they bought
a farm to grow flowers on a small portion of
their flowers. She said they were having She was hearing
about a hard time.
Speaker 4 (30:15):
With labor, right, and we know that right. The farm
industry is another one you mentioned ni net operating income.
Help me understand something though, when you are finding lots
of opportunities because there's distress out there, it's when things
aren't going so well that's actually a good environment for
you guys. I will say, is there a little bit
of a balance. There's different kinds of distress.
Speaker 9 (30:36):
You feel some people that are really being strained by
higher interest rates, by higher expenses, by higher delinquencies, and
so you feel some strain and what that could cause
is definitely some pricing adjustments as people are trying to sell.
I do think, as you were talking about before, interest
rates are going to start to give a little bit
of wind to cap rate compression, and so you'll start
(30:57):
to get buyers and sellers coming together more. But that's
not the type of distress that I'm talking about. I'm
talking about distress that's even deeper than that, where operators
maybe didn't have a lot of experience and overextended themselves.
Speaker 4 (31:10):
And so there's.
Speaker 9 (31:11):
More to it than just that there's layers of distress
there our tenants doing so I think that, you know,
I think we see a little bit of both ends, right,
We're back to that cay shape where you see the
higher end tenants doing very very well and you see
some of your lower income tenants that are struggling a
bit more.
Speaker 2 (31:28):
Is it manifesting in the operators needing to offer concessions?
Are you seeing delays in rent? What are you saying?
Speaker 9 (31:35):
So we've tried to start getting creative on different ways
to help tenants keep up with their rent and help
them with budgeting, teaching budgeting classes, trying to pull out
their rent in different stages during the month as their
paychecks come in.
Speaker 4 (31:49):
So just try to help keep people on track a
little bit.
Speaker 5 (31:52):
It's fascinating.
Speaker 4 (31:53):
We just had a long, deep conversation with the CEO
of lending Tree, and the same thing I see here. Yeah,
lending club, Oh, lending club, sorrylending club, forgive me lending club.
But the same thing in terms of when they are
giving loans, like they want to know where it's going,
and if it's to pay off credit card debt, they
will make those payments directly and really kind of teaching
(32:13):
some financial responsibility and how big a part of that
is what you guys do.
Speaker 8 (32:18):
Know.
Speaker 9 (32:18):
It's really interesting because this is a new trend for us.
This wasn't something that we were doing five years ago
helping tenants learn about budgeting and finances, and it's something
that now we're starting to really look into.
Speaker 4 (32:29):
How can we be partners with these tenants.
Speaker 9 (32:32):
As opposed to the people that are forcing them to
pay their rent?
Speaker 4 (32:35):
Why are you doing it? Is it just business sense?
It's a win win for everybody.
Speaker 9 (32:40):
Okay, If people can prioritize their finances and get their
rent paid and stay in their houses, it's better for us,
we don't lose the income, we don't have to go
through evictions. It's better for them they don't have to
be relocated. So it's a win win for everybody. It's
a matter of can can that have an effect? Can
we be effective enough to help shape that.
Speaker 2 (33:00):
Do you do the tenants feel like they're they're being
partnered with? I mean, there's this idea of an adversarial
relationship when it comes to landlord and tenant.
Speaker 9 (33:10):
Sure, I think there can be, and I think you
get a little bit more of that in places.
Speaker 4 (33:15):
I would say a place like New York, where you've.
Speaker 9 (33:17):
Got rent control and the landlord and the tenant are
not really aligned because they're not both choosing that rental rate.
Speaker 5 (33:24):
I think of.
Speaker 2 (33:24):
Some landlords I've had in my day where I was
not completely aligned with Carrol.
Speaker 5 (33:30):
Anybody who's lived in New York. You know what's interesting.
Speaker 2 (33:34):
Of all the places that we rented that I rented
in New York, one landlord who was good. Really yeah, no.
Speaker 4 (33:41):
One ever talks about their good landlord. Four out of.
Speaker 2 (33:44):
Four Yeah, well yeah, that was pretty good. Twenty five percent.
That's not bad.
Speaker 4 (33:47):
She was unique. Okay, yeah, what's you again? Unique?
Speaker 5 (33:51):
Unique?
Speaker 4 (33:52):
Your properties remind me because I think initially you guys
were in Chicago.
Speaker 9 (33:57):
We're based out of Chicago, but right now we have
properties and Louisianaia not anymore.
Speaker 4 (34:03):
Not anymore. There just is not cash flow in California.
Speaker 9 (34:06):
It's a little more like New York City where everything's
just based on appreciation.
Speaker 2 (34:10):
Do you will if California builds more, would you go back?
Speaker 9 (34:14):
You know, we look for stabilized cash flow, not for
incoming cash flow. We actually don't care about the n
OI in place when we purchase things. We actually look
for negative NI because we want to be able to
fix that NI and that's how we.
Speaker 4 (34:25):
Add better opportunity.
Speaker 9 (34:26):
Right, but we want to eventually get to strong, strong
cash flow.
Speaker 4 (34:30):
Best places in terms of geography right now, for you guys.
Speaker 9 (34:33):
I think there's tons of opportunity in Atlanta, Atlanta, we
keep looking over there.
Speaker 4 (34:37):
Lots in the Midwest, we love it.
Speaker 9 (34:38):
We love Ohio and Indiana. Right now we're buying in Alabama.
We have a deal under contract in Illinois. We're in Ohio,
we're in Columbus. We really like Cleveland as well, So
there there are you know, people are looking a lot
in Cincinnati.
Speaker 4 (34:53):
There's lots of lots of places to go there. I
know we talked we go kind of all over with you.
But when we talk about afforda housing, what is the answer,
which is something that we have talked about for decades, right,
what do you think is the answer. And forgive me,
I'm only giving you about forty seconds solve a problem
that is. I think different.
Speaker 9 (35:13):
Markets are going to have different answers. I think generally speaking,
it's easier for us. We see a better opportunity in
rehabbing and rehabilitating as opposed to ground up construction where
you need a lot of government subsidies or some sort
of incentives to be able to get it done. Us
we see the opportunity in existing assets that just need
(35:35):
to lift back up. But then again, you've got to
be willing to buy something that's negative CASHLNG in the beginning.
Speaker 4 (35:40):
And most of those assets are going to be outside
the major cities or in the major city, not necessarily.
You know, we own in DC, so it can be
all over the place. Great stuff. Thank you for coming
by again. Thank you for having right the real estate.
Speaker 2 (35:54):
Amy Rubinstein, the CEO of a Clear Investment Group.
Speaker 1 (35:57):
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Are You A Charlotte?
In 1997, actress Kristin Davis’ life was forever changed when she took on the role of Charlotte York in Sex and the City. As we watched Carrie, Samantha, Miranda and Charlotte navigate relationships in NYC, the show helped push once unacceptable conversation topics out of the shadows and altered the narrative around women and sex. We all saw ourselves in them as they searched for fulfillment in life, sex and friendships. Now, Kristin Davis wants to connect with you, the fans, and share untold stories and all the behind the scenes. Together, with Kristin and special guests, what will begin with Sex and the City will evolve into talks about themes that are still so relevant today. "Are you a Charlotte?" is much more than just rewatching this beloved show, it brings the past and the present together as we talk with heart, humor and of course some optimism.
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.