January 11, 2024 • 35 mins
We explore airline mergers, COVID boosters, and the impact of generational wealth. We also discuss how loyal customers are to their favorite restaurants. Columnists FD Flam, Brooke Sutherland, Allison Schrager, and Bobby Ghosh join. Amy Morris hosts.
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Speaker 1 (00:01):
You're listening to the Bloomberg Opinion podcast counts Saturdays at
one and seven pm Eastern on Bloomberg dot Com, the
iHeartRadio app, and the Bloomberg Business App, or listen on
demand wherever you get your podcasts.
Speaker 2 (00:15):
Welcome to Bloomberg Opinion. I'm Amy Morris. This week we
look at why so many smaller airlines are looking to
make big deals as M and A is turning into
a survival tool and then something a bit closer to
home home ownership. It's getting harder for gen z, so
where will that leave them? And if you like going
(00:37):
to a bar or a restaurant where everybody knows your
name and you receive service that's tailored to you, well,
you might be interested in a new trend customer loyalty programs.
But we begin with COVID boosters. They've over promised and
under delivered. We're learning more that parents would like to
give their kids RSV vaccines, but not COVID boosters. And
(00:59):
as for adult it's only eighteen percent of adults in
the US got the latest COVID shot that says of
mid December. Let's find out what's going on. Bloomberg Opinion
columnist Faith Lamb covers science and his host of the
follow the Science podcast, and she joins me, Now, Fay,
let's start with the headline of your column. Will want
to clarify something. It says boosters over promised and underdelivered.
(01:20):
But your column really is more about the work being
done to improve these boosters. Yeah.
Speaker 3 (01:26):
Yeah, I mean, I think that that people have become
sort of resigned to the situation that we have where
people are getting COVID you know, right and left, even
though a lot of people are getting boosted. And I
think that there is actually a lot of research out
there to try to figure out what's you know, why
(01:46):
the boosters and the COVID shots aren't protecting us better,
and even research on better ways to boost people or
vacciny people so that maybe it won't always be like this.
Speaker 2 (01:59):
So one of the big challenges is the lack of
a seasonal pattern. You explain this in your column, But
I wonder is the lack of a seasonal pattern with
covid like with the flu. Is it because COVID is
so mercurial and it keeps changing, or is it because
it hasn't really been around long enough to establish a
regular pattern. For us to pick up on.
Speaker 4 (02:21):
Yeah, I think it could be some of both. You know.
Speaker 3 (02:23):
One of the things I remember being surprised by covering
another story a long time ago on flu is that
scientists don't completely understand why flu the flu season is
when it is, you know, they sort of have some guesses. Well,
is because people gather more, they're inside more people are
inside most of the time in most places anyway, something
(02:45):
to do with humidity changes, something to do with sunlight
and the immune system. So scientists don't completely understand the
seasonal patterns that other viruses seem to have, and so
it may take a while before it's understood whether this
one will have a seasonal pattern eventually or not.
Speaker 2 (03:03):
And there's another issue that you brought up in your column,
and that is that there's a question about the quality
of the new boosters. They're not going to hurt you,
it's just perhaps they're not as strong as we had expected.
Speaker 3 (03:14):
What's the issue there, Well, one of the things is
just the vaccine. I mean, the virus keeps evolving really
quite fast. So this one was geared to fight a
version that's now pretty much extinct, and it's been replaced
by something else. It's a moving target. And so the
other problem is something called imprinting, by which the immune
(03:37):
system kind of gets stuck creating antibodies to what it
was originally vaccinated against, which is the original version. And
so people are creating antibodies to the parts of the
virus that the current version and the original version that
we were vaccinated against have in common. And when you
(03:58):
boost people, it seems to mostly increase the antibodies to
the original virus, not the you know, or this sort
of small cross section that they have in common. And
so that's that that imprinting problem is something that scientists
are still trying to understand. There was some sort of
good news out of China that if people had repeated
(04:23):
exposures to these newer omicron family of variants that we're
still seeing, the imprinting became less strong and they were
actually getting an immune response that was better matched to
what we're seeing.
Speaker 2 (04:36):
So wait to be exposed to the omicron variants. Then
would you actually have to get sick or can we
do that through a vaccine?
Speaker 3 (04:44):
It was both either either by getting by getting omicron right,
either way by getting a booster that was geared to omicron,
or by getting omicron, either would be considered an exposure,
So the more your immune system saw omicron, the more
it actually did start to mount an immune response, breakthrough
or override this imprinting effect. It's not clear that that's
(05:07):
working the same way. There's some papers showing it doesn't
seem to work as well with the mRNA vaccines as
it does with the vaccines they're using in China, which
are a whole different kind of vaccine called an activated virus.
Speaker 2 (05:19):
And we are talking with Bloomberg opinion columnist Faith Lamb
about the promise of COVID boosters and why perhaps they're
not gaining the traction that we would have expected. We
also pointed out in your column that Pfizer is seeing
the immediate results and effects of this, that people aren't
getting the boosters as they expected, and they're struggling.
Speaker 3 (05:39):
Some of it is that the main thing that the
booster shots do is protect people against getting severe disease,
and so the people who really should take them are
older people, people with the kinds of health problems that
put them at risk for severe disease. So one of
the questions that doesn't get asked enough is, well, eighteen
percent that actually could be really good if the people
(05:59):
that need it most are the ones getting it.
Speaker 4 (06:01):
But if there are people who.
Speaker 3 (06:02):
Are elderly and at risk and are not getting it,
then we have a bigger problem. But I think that
they may have counted on this being more like a
flu shot, and there are a couple of reasons why
it's never going to be like a flu shot. You know,
you can't the boosting effect apparently only last for about
four months, and so you'd need to time it to
(06:24):
when the season was and we don't really have this
well defined season, so it may be a challenge to
make it as effective. And people just know they you know,
they look around, their friends are getting it. Everybody's getting it,
people who got boosted or getting it, people who got
the last booster got it. So I think there's this
sort of feeling from experience that well, I'm not going
(06:48):
to get protection against getting COVID. I think there'd be
a lot more motivation to go get a booster if
you thought it was going to give you a, you know,
a really strong protection against just getting infected in the
first place, because people would still rather not get COVID
than get it, even if the disease is mild in them.
Speaker 2 (07:04):
Let me ask you this. I've always understood the boosters
from the very beginning weren't necessarily going to keep you
from getting COVID, but will keep you out of the hospital.
There's sort of like a seat belt. You're not going
to avoid the crash, but you're not necessarily going to
be terribly injured or killed because of it. Right, So
they're like a seat.
Speaker 3 (07:23):
Belt, Well, yes, a little likeacy belt, except that we
know that whereas it in your car. You know, anyone
could get killed in an auto accident. But it really
is certain high risk groups are likely to go to
the hospital, and other people are much less likely, especially
if they've already been vaccinated and exposed to the virus
have some immunity. That we're not seeing the hospital fill
(07:44):
up with twenty five year olds who have already had
two boosters and just didn't get a third one. You know,
it's really the elderly that need to be targeted.
Speaker 2 (07:54):
Do from your research, have you found if there is
a better booster coming. They're still working on this, they're
not done yet. Yeah.
Speaker 3 (08:01):
I mean I talked to Dan Barouche at Harvard and
he just has a paper out in the journal Nature
showing that in animal studies they can actually completely protect
against infection with an inhaled version of the vaccine. Whether
that's practical or not, I don't know, but it worked,
(08:22):
and so it is possible that sort of getting the
protection where people, you know, first, where the human body
first encounters the virus, seems to offer a pretty strong protection.
And people are looking at nasal that, you know, they're
looking at these as something that might actually just prevent
people from getting infected in the first place, and in
(08:42):
animals at least, it seems to work.
Speaker 2 (08:44):
So an inhaled version then would target specifically the lungs
and protect the lungs exclusively or especially yeah, or just.
Speaker 3 (08:52):
The upper respiratory tract. You know, it would sort of
get around your upper respiratory tract, which is where people
you know, are accumulating the viral particles. So, you know,
I don't know exactly why that worked so much better
than the nasal one. So the nasal one seemed to
work pretty well, but the inhaled one worked really well
in the animals, and I think they're still still working
out why that is and how this might be translated
(09:17):
into a human trial. There are already some apparently there
is a trial with an inhaled vaccine going on, So
there are human studies that have gotten started already.
Speaker 2 (09:28):
So they're trying to improve it to better match the variants,
and they're trying to improve it to better target the
upper respiratory tract. And they're trying to improve it. So
it's not necessarily always a needle.
Speaker 3 (09:39):
Yeah, And I think just to write so that people
don't keep getting mild infections, which then would mean that
they're less likely to infect spread the virus to more
vulnerable people, so that we would see a real end
to the deaths and the hospitalizations. That it's not necessarily
something that we would have to live with wherever that,
(10:00):
I think scientists are still trying to, you know, trying
to improve the tools we have, the vaccines we have,
so that we're not resigned to dealing with this situation
for all eternity.
Speaker 2 (10:13):
So what's your take home message from all of this? Wow?
Speaker 3 (10:16):
I mean, I guess just that I think that this
people haven't I don't think people have lost interest in COVID.
I think there's still a lot of interest. And I
think that that scientists who are doing this kind of
work should continue to get support, and I think it's
it's what they learn is going to be useful for
dealing with the next pandemic and other viruses as well.
So I think having this this you know, surge in
(10:40):
new research is really important and that we might see
some new things coming down the pipe. It's not all
doom and gloom.
Speaker 2 (10:49):
Faith Lamb is a Bloomberg Opinion columnist. She covers science
and his host of the Follow the Science podcast. Now
coming up will take a look at consolidations in the
airline industry and what is that ten you're listening to
Bloomberg Opinion.
Speaker 1 (11:12):
You're listening to the Bloomberg Opinion Podcast Contest Saturdays at
one and seven pm Eastern on Bloomberg dot Com, the
iHeartRadio app, and the Bloomberg Business App, or listen on
demand wherever you get your podcasts.
Speaker 2 (11:26):
You're listening to Bloomberg Opinion. I m Amy Morris. Antitrust
regulators have made no secret of their skepticism toward further
consolidation in the airline industry mergers at acquisitions, though, like
Alaska Air's nearly two billion dollar acquisition of Hawaiian holdings
didn't happen in a vacuum. And throughout the aerospace supply chain,
power is concentrated in the hands of just a few players.
(11:49):
So really the only way for companies to hold their
own is to get bigger. Let's learn more about this.
Bloomberg opinion columnist Brooks Sutherland covers deals in industrial companies.
She's been following this from the very beginning. She also
writes the Industrial Strength newsletter, and she joins me, now,
brook as always, thank you so much for taking the
time with me, And I want to start with what
(12:11):
you describe as a concentration of power up and down
the supply chain in the aerospace industry.
Speaker 5 (12:17):
What do you mean?
Speaker 4 (12:18):
Sure?
Speaker 5 (12:19):
And so I always think it's fascinating that these airline
deals tend to get so much public attention and so
much antitrust scrutiny. But there's been a number of combinations
that have happened elsewhere in the aerospace ecosystem that they
just don't attract the same level of scrutiny. And so,
for example, the former United Technologies Corp. Merged with Raytheon
(12:42):
to build up this aerospace and defense giant. They also
acquired Rockwell Collins, which itself had been on an acquisition spree.
You know, in terms of the airplanes themselves, you really
have Boeing an airbus and that's it as far as
you know, major commercial jetliners. And then there was a
consolidalidation that happened in the aircraft leasing space where ge
(13:03):
sold its aviation leasing business. And so I just think
it's interesting that, you know, there's so much fixation on
the airlines, and perhaps that's because we as consumers tend
to interact with them more than we do the aerospace
manufacturing side or the aircraft leasing side. But these deals
are part of that broader ecosystem. When we have so
much consolidation, it changes the negotiating dynamics because airlines they
(13:26):
lease planes, they buy planes, they have engines, they need
engine maintenance, and all of that sort of adds to
these pressures that airlines are facing.
Speaker 2 (13:34):
So how did we get here.
Speaker 5 (13:36):
Through a number of deals over the years. I mean,
you know, Boeing was created through a series of acquisitions,
and you know some of the deals that it just
described happened a lot more recently as well, and regulators
allowed those to go through. And so I think there
just needs to be a bigger conversation about what is
the actual competitive operating environment for these airlines.
Speaker 2 (14:00):
Transformative deals have a poor track record, and you talk
about that in your column on the Bloomberg terminal. So
would this then really be the only recourse that airlines
would have to hold their own or even grow a
little bit?
Speaker 5 (14:13):
I think it is. I mean, just when you think about,
you know, takeoff slots at airports, those are also restricted,
and so the only way that you can get more
is often by buying another company's positions at those airports
and so, and you know that labor is uh, there's
not a lot of labor to go around. There's long
waiting lists for airplanes, and so if you want to
(14:34):
go ahead and you know, get a bigger fleet very quickly,
one of the better ways to do it is by
buying somebody. And I just think that that needs to
be part of the conversation. It's not just the airlines
want to go in and consolidate in order to be
able to jack prices up for consumers. They have all
of these other pushes and pulls on their finances and
their ability to compete.
Speaker 2 (14:53):
Well, that's a good question. Then how does this impact
the consumer, the guy who's holding the ticket.
Speaker 5 (14:59):
Sure, I mean so right now. Actually, there are arguably
too many seats available domestically in the US, and you've
seen a number of carriers actually have to lower fares
in order to be able to fill those seats, and
they're often not doing so profitably because they're also, you know,
dealing with rising cost pressures, not just from labor and fuel,
(15:20):
but infrastructure constraints, supply chain, logjams, weather disruptions cost the
airlines money too, not just the flyer, their time and
their patients, and you know, it's it will be interesting
to see, you know. Jet Blue makes the argument that
buying Spirit will actually allow them to be more competitive
with the big four airlines, and that their goal is
(15:42):
not necessarily to raise prices. Now, part of their business
plan is to make the Spirit jets look more like
Jet Blue planes, and what that means is taking seats
out and making them a little bit more comfortable. But
when you have seats fewer seats, obviously that means, you know,
there's a little bit of a change in the price
dynamic and the fairs. So I mean it's difficult to
(16:02):
say exactly what would happen with the prices. But I
just think it's also important to think about, you know, han,
these airlines continue to survive and compete in a world
where they're sort of the odd man out on a
series of oligopolies.
Speaker 2 (16:16):
And we are talking with Bloomberg opinion columnist Brooks Sutherland
about the only real route for airlines to grow, and
that just might be M and A brooke. What has
to change then to give these smaller airlines a fighting chance?
Speaker 5 (16:31):
You know, I think it's difficult to really change anything
because a lot of this is structural. I mean, you
can't go back and unwind the deals that created Boeing.
And at this point, you know, we're not going to
go back and undo the takeovers that created what's now
known as RTX or any of the other consolidation that's
happened up and down the supply chain. And so I
think then that begs the question of Okay, well, then
(16:52):
do you have to allow the airline deals and so
that it's more of a level playing field. It's interesting
because there was also consolidation that happened in the railroad
industry were the two smallest players combined, and that is
a different regulator that's a specialized regulator that looks at
railroad deals. But they allowed that deal to go through
along the same argument as Jet Blue is making for
its Spirit deal, that basically, the market is what it
(17:15):
is and the only we can't go back and rewrite history,
and so the only way to introduce more competition now
is by letting these smaller players combine.
Speaker 2 (17:22):
So where is the government in all of this? Where
do the regulators come in? Are they turning a blind
eye to some but not others?
Speaker 5 (17:29):
So the dj has sued to block Jet blues combination
with Spirit. They just wrapped up closing arguments. We don't
have our ruling yet from the judge in that case,
and it's not exactly clear what the timing of that
decision will be. And then they also the DOJ did
successfully block Jet Blue's marketing alliance with American Airlines. But
I guess that gets back to my original point of
(17:50):
the regulators have taken a very tough stance on these
airline deals. That is just not happening to the same
degree in these other corners of the aerospace ecosystem, and
those deals have unique characteristics and unique qualities that need
to be assessed under by antitrust regulators, and they certainly
did look at those deals, but there's just not the
same amount of public uproar or scrutiny, And I just
(18:13):
wonder if that sort of shifts how these deals are
analyzed and they do matter.
Speaker 2 (18:20):
Like they'd pay more attention to those deals that we
you and I might pay more attention to because we're
the ones buying the ticket.
Speaker 5 (18:27):
Sure well, they certainly didn't try to block any of
those other deals, and they're blocking the airlineses deals, which
I just think is interesting. And you know, it's always
fascinating me, even taking a step beyond the aerospace sector,
that there's so much consternation about big tech and the
amount of power that the technology companies have, which is
certainly a very valid debate and one that we should
be having, but nobody talks as much about the consolidation
(18:50):
that's happening on the aerospace side. And so I do
think public perception and the things that we as consumers
pay attention to does sort of affect these conversations. But
it has to be because everything is interconnected. This is
all as we learn going through the supplis chain crisis
of the post pandemic period. Everything is interconnected and depends
on companies up and down the splashchaing.
Speaker 2 (19:11):
Right, And as you explained that there's no real way
to undo it. It's all been done, it's all intertwined.
So then how does this end? Because the way it's
described doesn't really seem sustainable, at least for some of
these airlines.
Speaker 5 (19:24):
Sure, and I think that's why you're seeing so many
of them try to do deals. I mean, if you
look at it just on face value, and you consider
the amount of scrutiny that Jet Blue has gotten for
its two endeavors, you would ask why in the world
would an airline try to do a deal right now?
And the fact that Alaska is going ahead with one
and trying to buy Hawaiian clearly they see somewhat of
(19:46):
a financial opportunity there as well, just given how beaten
down Hawaiian shares have been. But I think the fact
that they're going ahead with this deal at a time
when Jet Blue Spirit deal is still tied up in
the courts tells you how important you know, this industry
views consolidations.
Speaker 2 (20:01):
All right, Brook, thank you so much. We're going to
leave it there, and we're going to continue to watch
it with you. Now that we know a little bit
more about what we should be watching when we look
at these deals. Thanks so much for your time.
Speaker 5 (20:11):
Thank you.
Speaker 2 (20:12):
Brook Sutherland is a Bloomberg Opinion columnist who covers deals
in industrial companies. She is also the author of the
Industrial Strength newsletter. Don't forget. We're available as a podcast
on Apple, Spotify or your favorite podcast platform. This is
Bloomberg Opinion.
Speaker 1 (20:38):
You're listening to the Bloomberg Opinion podcast count Us Saturdays
at one and seven pm Eastern on Bloomberg dot Com,
the iHeartRadio app, and the Bloomberg Business App, or listen
on demand wherever you get your podcasts.
Speaker 2 (20:52):
This is Bloomberg Opinion. I Ami Morris. It is true
for every generation that becoming a financially secure adult is hard. Now.
A big part of that is home ownership, and last year,
Vice President Kamala Harris told Bowie State University students that
home ownership is good for the economy and that the
government is trying to make it easier for you to
(21:14):
own your own home.
Speaker 4 (21:15):
When we increase home ownership, it strengthens communities and it
strengthens our economy. Homeowners are more likely to put down.
Speaker 2 (21:27):
Roots, but establishing yourself in your career, securing a home,
starting a family, these are not easy things to do,
and maybe it's harder for some generations than others. Let's
talk about this. Bloomberg opinion columnist Alison Schrager joins me now,
and she covers economics. Alison, is it harder for some generations?
Speaker 4 (21:46):
I used to say no. I used to think, you know,
I think it's always hard. I think establishing yourself as
an adult is always a challenge, and everyone thinks it's
harder for them than anyone else. Anyway, I kind of
always thought it actually was getting a little bit easier
for everyone else. But millennials really did make a fine
point of it, and they did have a point when
(22:08):
it came to buying a house that it was more
expensive than it was for their parents, like the price,
but they also had way cheaper mortgages and also wanted
to buy bigger houses. So these things, I guess, you know,
even doubt and I always thought, you know, it's not
so bad, guys, but I think gen z might have
a legitimately harder time getting their first home.
Speaker 2 (22:30):
Now, let's get into that before we get to the
gen Z part. You had said that millennials have said
for years that they were priced out of the housing
market in part because of their student debt.
Speaker 4 (22:38):
That's true, but way more people go to college. And
also there's actually a positive correlation between your student debt
balance and the odds of home ownership. And that's because
the more student that you have, the more likely you
are to have like a graduate degree or something like
that that makes you get paid a lot more. So, actually,
the more student that you have, the more likely you
are to be a homeowner. And in fact, I was
(23:00):
digging into the data looking at home ownership rates with
different generations, and you know, Millennials did buy homes a
little later, and just the way that millennials grew up
a little bit later for a lot of reasons, some
of which were positive. But in the last say several years,
as they started to approach middle age, like other generations,
(23:22):
they bought homes a lot, and particularly their prime home
buying years were when interest rates really hit those record lows,
particularly mortgage rates, so they actually got a really good deal.
There is still lower home ownership for millennials than for
say baby boomers at their age, but I found that
was largely driven by mostly men who still live with
(23:44):
their parents, and most of them didn't go to a
college at all. So I think we know that population
is struggling, and I don't know if it's for home prices,
but I think we can agree it's for a lot
of reasons beyond that.
Speaker 2 (23:57):
And you had said in your column on the Bloomberg
Terminal that the last several years saw one of the
biggest increases in home ownership of any generation. Now does
that apply to millennials, gen Z, gen X? Who where
does that apply?
Speaker 4 (24:09):
I mean, and really for millennials because Gen X and
millennials already like roughly if you look at a generation,
like when they're like top out at home buying, it's
usually like maybe sixty five seventy percent, And you know,
not everyone is destined to buy a home. So Gen
X and boomers are pretty much already there. Like this
(24:30):
is like if you're gonna buy a home, you're gonna
buy a home. I mean, I guess it's rare to
buy your first home at sixty. I mean, I'm sure
it happens, but it's like if you're yeah, so so
I said, like there's just an age where people start
buying homes, and that tends to be as a little
later for millennials and other generations, but because they also
got married later and things like that. But it is
(24:51):
like your thirties and for them maybe a couple of
years later into their fir thirties, but that was also
the best time to buy a home, arguably because they've
now locked in cheap mortgage for as long as they want.
Speaker 2 (25:02):
We are talking with Bloomberg Opinion colonist Alison Schrager about
Generation Z getting a bad deal on housing, and Allison,
so far we've talked a lot about millennials and what
this leaves for gen Z. Where does this leave them
when it comes to home ownership.
Speaker 4 (25:19):
Well, legitimately hard spot because I said, like millennials did
to face higher prices but also super cheap mortgages, so
it kind of was a wash. But for gen Z
is facing both and not only that, because mortgage rates
were so low and then went up so fast, and
you know, while they might come down a little if
the Fed starts cutting, they're probably not going back to
those nice three sub three percent rates we used to
(25:42):
see unless there's some major policy push. So that means
millennials who maybe have their first starter home are probably
going to sit in that home unless they have to move,
because you know, who can afford to move now. And
that pretty much leaves gen z or shut out of
like the sort of buying housing market because they have
(26:02):
high prices and high mortgage rates.
Speaker 2 (26:05):
So because millennials were able to lock in those low rates,
they're not inclined to move. Nobody can afford to move
because they don't need to get a new mortgage with
a much higher rate.
Speaker 4 (26:15):
Yeah, and as I said, millennials are probably going to
sit on those for like a decade. I mean, I
bought during the pandemic for the first time, and like
I can, I can don't see how I can ever
afford to move.
Speaker 2 (26:25):
So when are gen z looking to buy these starter homes?
Are they already out there in the market. Are they
already starting to experience this issue or are they just
looking down the road?
Speaker 4 (26:35):
Probably the really keen ones are, but because I mean,
how old are gen z ers now, Like maybe mid twenties,
so it's a little early. But people are saying that
the housing market is going to be sort of really
inaccessible for maybe like another decade. So as they approached
that time, bar some like extraordinary things happening to mortgage
rates or a housing crash, which you know, I don't
(26:59):
know if it is that likely. Again, they're going to
face a tough time.
Speaker 2 (27:03):
Are they experiencing some similar inflationary pressures when it comes
to renting?
Speaker 4 (27:09):
Yeah, I mean that's the other thing. They are definitely
facing high rents. I mean, I live in New York,
and you know, every generation moves to New York is like,
it's so much more expensive, and it's it is always
more expensive. But oh my god, I mean I don't
even know how young people moving to New York now
afford it. I mean I was just reading the median
rent is like between four and five thousand dollars. I
(27:31):
mean that's I mean, if you're on a starting salary,
I mean, I don't know how you cope with that.
So the higher mortgage rates are creeping into higher rents too.
So it's just I think everyone complains every generation, and
I don't want to minimize that. I think it is
always hard making your way in the world, and I
think that's the bottom line. But I think it is
actually maybe harder for them. I mean, there are other
(27:54):
things that are legit hard about. Know, if they're harder
than they were for other generations.
Speaker 2 (27:57):
They're timing is just lousy timing.
Speaker 4 (27:59):
Is and well, I mean also they also had their
schooling disrupted by COVID, which probably also has social effects
and you know, I mean and a lot of social
unrest that certainly other generations didn't. But also to compound
their misery, now they're like, all right, world's back to normal.
I'm going to do that thing that young people do,
(28:20):
move to a big city, start my life. And they're
facing these just astronomical rents, and I think that's just
a function of the fact that you know, rates have
gone up before. They're not even that high by a
historical reasons, but what they did do is they were
very low and then now like something like more normal
historically normal, and that just happens like almost overnight for them.
So that just has all these weird knock on effects
(28:41):
for the economy on rent and housing prices. That makes
life harder for.
Speaker 2 (28:44):
Them now when you have those higher rates, though that
usually would mean less expensive homes, but that doesn't help
them in this case.
Speaker 4 (28:51):
Because there is that huge chump jump up that happened,
so suddenly I see and they were just I mean,
we've seen, certainly have seen mortgage rates higher than this,
and that brought down prices.
Speaker 6 (29:01):
But in the.
Speaker 4 (29:02):
Past, you weren't, like a year ago, at like historically
low rates that you know, the Fed engineered and the
government and just the market, all these forces came together
to bring rates like mortgage rates that just like, I mean,
a two and a half percent thirty year fixed mortgage
just shouldn't exist, but it did, and everyone like you know,
(29:23):
refinanced or bought a home.
Speaker 3 (29:25):
Then.
Speaker 4 (29:25):
So now we have this weird situation where no one
wants to move, and in the past it didn't really happen,
so that keeps prices high. You know, I said, gen
Z's had it rough. They never complained about the COVID thing.
In fact, they took having their college experience stolen from
them with actually quite quite graciously. So I feel like, yeah,
maybe they won't we won't be subjected to a million
(29:47):
think pieces of like my generations as it so are.
They'll just be like, yeah, this is our cross to
bear and we take it.
Speaker 2 (29:53):
Looking ahead with this, where does this wind up? I mean,
are they just going to be late homeowners. Are they
just going to be considered renters? Do we have a
crystal ball where we can see what happens next.
Speaker 4 (30:04):
There is a trend generally of people going becoming like
stable adults later, and that has nothing to do with housing.
It's the sociological things, like you know, Jane BIG's slower
lives this whole hypothesis, So probably they'll reverse some of
the trends we've seen. One of the reasons housing felt
so expensive to millennials is they also wanted to live
in bigger urban areas and have bigger houses. So maybe
(30:26):
they'll be a swing back to smaller houses and more
rural areas where they're cheaper.
Speaker 2 (30:30):
Bloomberg Opinion columnist Alison Schreger covers economics. You're listening to
Bloomberg Opinion. I'm Amy Morris. Restaurant tours have been struggling
with inflation and labor shortages, labor costs and consumer complaints,
and now there's a new push to help maintain customer loyalty.
Let's learn more about how this works with Bloomberg Opinion
columnists Bobby Gosh. He covers culture and Bobby, remember there
(30:52):
was a time when you could have a favorite restaurant
or a favorite bar cafe, and they'd know you. Like
back in the eighties, there was successful TV series you've
probably heard of it, cult Cheers. It was built on
that whole premise of everybody knowing your name.
Speaker 6 (31:06):
So what happened, particularly since the pandemic, the restaurant industry
as a whole has suffered acute shortages of people, particularly
weight staff. The pandemic was a sort of wake up
moment for a lot of people who worked in that
industry who realized, you know what, this is a terrible job.
They pay us very poorly. We had to depend on
(31:28):
the kindness of strangers, so to speak, with tips. There
are better jobs out there, and we're in an economy
where unemployment is low, so there are a lot of
other jobs out there. So the restaurant industry has been
losing the exact kind of people who would remember your name,
whould remember your favorite drink, remember the dishes you like,
would ask after your friends, would ask after your health.
(31:50):
All of that sort of human interaction that you could
rely upon is becoming much harder to assure these days.
Speaker 2 (31:59):
So how does a loyalty program help accomplish this? How
does this work well.
Speaker 6 (32:04):
So there's one loyalty program that's just been launched. It's
called Blackbird. It comes from a guy called Ben Levinthal
who also was responsible for Eater and for Rezi, the
reservation app, so he has a good track record in
using digital solutions. And the way it works is that
(32:26):
you sign up. Restaurants sign up and that allows sort
of restaurants to build a profile. Every time you go
to a restaurant, you make an order, it is recorded
and stored and that information is available to that restaurant
to other restaurants, so that when you go back the
moment you make the reservation, the maitre d at the
(32:48):
restaurant gets a little mini profile of you and says, okay,
this is Amy Morris. She's been coming here for a while.
She likes you know, a cosmopolitan. She likes her steak
medium rare. The last time she was here, you know,
she was not happy with the dessert, but she didn't
(33:08):
make a big fuss. And so he'll have he or
she will have all of this information and can design
and experience for you and they can act on this
information and say, okay, when you walk in the door,
there's the cosmopolitan waiting for you. They can say, you know,
we were really sorry, we messed up the last time.
This drink is on the house. These are the sort
(33:29):
of things that a really good Matred could do back
in the day.
Speaker 2 (33:34):
Would it cost more, No, it will.
Speaker 6 (33:36):
Cost you absolutely nothing, and in the trial stage it
will cost the restaurant only a few cents per reservation. Eventually,
if the system really takes off and restaurants respond to it, well,
then they'll they will be charged more by Blackbird. But
as a consumer, there's no expensity of it.
Speaker 2 (33:56):
Our customer's loyal Is this something that customers are kind
of no, unintended hungry for?
Speaker 6 (34:01):
Well, that's the other thing to consider, and that's not
a problem technology can solve. Lots of customers are not
as loyal as they used to be because they're more choices.
And after the pandemic, many of our favorite places closed down.
New places have opened up, so there's an excitement about
going and trying new things, and that is a challenge
to our old favorites and I'm not sure that can
(34:25):
be solved by technology. But ultimately we are, particularly those
who like to eat out, would like to experiment and
try new things. That's not something technology can solve.
Speaker 2 (34:36):
I don't think it's going to be interesting to see
how this works out. Thank you so much, Bobby for
filling us in.
Speaker 1 (34:41):
Thanks Amy, Thanks You want to go where everybody knows
your name?
Speaker 2 (34:48):
Bloomberg Opinion columnist Bobby goes. That does it for this
week's Bloomberg Opinion, and we're produced by Eric mollow You
can find all of these columns on the Bloomberg terminal,
and we're available as a podcast on Apple, Spotify, or
your favorite podcast platform. Stay with us. Today's top stories
and global business headlines are just ahead. I'm Amy Morris,
and this is Bloomberg.
Speaker 4 (35:09):
You want to go where everybody knows me
You're listening to the Bloomberg Opinion podcast counts Saturdays at
one and seven pm Eastern on Bloomberg dot Com, the
iHeartRadio app, and the Bloomberg Business App, or listen on
demand wherever you get your podcasts.
Speaker 2 (00:15):
Welcome to Bloomberg Opinion. I'm Amy Morris. This week we
look at why so many smaller airlines are looking to
make big deals as M and A is turning into
a survival tool and then something a bit closer to
home home ownership. It's getting harder for gen z, so
where will that leave them? And if you like going
(00:37):
to a bar or a restaurant where everybody knows your
name and you receive service that's tailored to you, well,
you might be interested in a new trend customer loyalty programs.
But we begin with COVID boosters. They've over promised and
under delivered. We're learning more that parents would like to
give their kids RSV vaccines, but not COVID boosters. And
(00:59):
as for adult it's only eighteen percent of adults in
the US got the latest COVID shot that says of
mid December. Let's find out what's going on. Bloomberg Opinion
columnist Faith Lamb covers science and his host of the
follow the Science podcast, and she joins me, Now, Fay,
let's start with the headline of your column. Will want
to clarify something. It says boosters over promised and underdelivered.
(01:20):
But your column really is more about the work being
done to improve these boosters. Yeah.
Speaker 3 (01:26):
Yeah, I mean, I think that that people have become
sort of resigned to the situation that we have where
people are getting COVID you know, right and left, even
though a lot of people are getting boosted. And I
think that there is actually a lot of research out
there to try to figure out what's you know, why
(01:46):
the boosters and the COVID shots aren't protecting us better,
and even research on better ways to boost people or
vacciny people so that maybe it won't always be like this.
Speaker 2 (01:59):
So one of the big challenges is the lack of
a seasonal pattern. You explain this in your column, But
I wonder is the lack of a seasonal pattern with
covid like with the flu. Is it because COVID is
so mercurial and it keeps changing, or is it because
it hasn't really been around long enough to establish a
regular pattern. For us to pick up on.
Speaker 4 (02:21):
Yeah, I think it could be some of both. You know.
Speaker 3 (02:23):
One of the things I remember being surprised by covering
another story a long time ago on flu is that
scientists don't completely understand why flu the flu season is
when it is, you know, they sort of have some guesses. Well,
is because people gather more, they're inside more people are
inside most of the time in most places anyway, something
(02:45):
to do with humidity changes, something to do with sunlight
and the immune system. So scientists don't completely understand the
seasonal patterns that other viruses seem to have, and so
it may take a while before it's understood whether this
one will have a seasonal pattern eventually or not.
Speaker 2 (03:03):
And there's another issue that you brought up in your column,
and that is that there's a question about the quality
of the new boosters. They're not going to hurt you,
it's just perhaps they're not as strong as we had expected.
Speaker 3 (03:14):
What's the issue there, Well, one of the things is
just the vaccine. I mean, the virus keeps evolving really
quite fast. So this one was geared to fight a
version that's now pretty much extinct, and it's been replaced
by something else. It's a moving target. And so the
other problem is something called imprinting, by which the immune
(03:37):
system kind of gets stuck creating antibodies to what it
was originally vaccinated against, which is the original version. And
so people are creating antibodies to the parts of the
virus that the current version and the original version that
we were vaccinated against have in common. And when you
(03:58):
boost people, it seems to mostly increase the antibodies to
the original virus, not the you know, or this sort
of small cross section that they have in common. And
so that's that that imprinting problem is something that scientists
are still trying to understand. There was some sort of
good news out of China that if people had repeated
(04:23):
exposures to these newer omicron family of variants that we're
still seeing, the imprinting became less strong and they were
actually getting an immune response that was better matched to
what we're seeing.
Speaker 2 (04:36):
So wait to be exposed to the omicron variants. Then
would you actually have to get sick or can we
do that through a vaccine?
Speaker 3 (04:44):
It was both either either by getting by getting omicron right,
either way by getting a booster that was geared to omicron,
or by getting omicron, either would be considered an exposure,
So the more your immune system saw omicron, the more
it actually did start to mount an immune response, breakthrough
or override this imprinting effect. It's not clear that that's
(05:07):
working the same way. There's some papers showing it doesn't
seem to work as well with the mRNA vaccines as
it does with the vaccines they're using in China, which
are a whole different kind of vaccine called an activated virus.
Speaker 2 (05:19):
And we are talking with Bloomberg opinion columnist Faith Lamb
about the promise of COVID boosters and why perhaps they're
not gaining the traction that we would have expected. We
also pointed out in your column that Pfizer is seeing
the immediate results and effects of this, that people aren't
getting the boosters as they expected, and they're struggling.
Speaker 3 (05:39):
Some of it is that the main thing that the
booster shots do is protect people against getting severe disease,
and so the people who really should take them are
older people, people with the kinds of health problems that
put them at risk for severe disease. So one of
the questions that doesn't get asked enough is, well, eighteen
percent that actually could be really good if the people
(05:59):
that need it most are the ones getting it.
Speaker 4 (06:01):
But if there are people who.
Speaker 3 (06:02):
Are elderly and at risk and are not getting it,
then we have a bigger problem. But I think that
they may have counted on this being more like a
flu shot, and there are a couple of reasons why
it's never going to be like a flu shot. You know,
you can't the boosting effect apparently only last for about
four months, and so you'd need to time it to
(06:24):
when the season was and we don't really have this
well defined season, so it may be a challenge to
make it as effective. And people just know they you know,
they look around, their friends are getting it. Everybody's getting it,
people who got boosted or getting it, people who got
the last booster got it. So I think there's this
sort of feeling from experience that well, I'm not going
(06:48):
to get protection against getting COVID. I think there'd be
a lot more motivation to go get a booster if
you thought it was going to give you a, you know,
a really strong protection against just getting infected in the
first place, because people would still rather not get COVID
than get it, even if the disease is mild in them.
Speaker 2 (07:04):
Let me ask you this. I've always understood the boosters
from the very beginning weren't necessarily going to keep you
from getting COVID, but will keep you out of the hospital.
There's sort of like a seat belt. You're not going
to avoid the crash, but you're not necessarily going to
be terribly injured or killed because of it. Right, So
they're like a seat.
Speaker 3 (07:23):
Belt, Well, yes, a little likeacy belt, except that we
know that whereas it in your car. You know, anyone
could get killed in an auto accident. But it really
is certain high risk groups are likely to go to
the hospital, and other people are much less likely, especially
if they've already been vaccinated and exposed to the virus
have some immunity. That we're not seeing the hospital fill
(07:44):
up with twenty five year olds who have already had
two boosters and just didn't get a third one. You know,
it's really the elderly that need to be targeted.
Speaker 2 (07:54):
Do from your research, have you found if there is
a better booster coming. They're still working on this, they're
not done yet. Yeah.
Speaker 3 (08:01):
I mean I talked to Dan Barouche at Harvard and
he just has a paper out in the journal Nature
showing that in animal studies they can actually completely protect
against infection with an inhaled version of the vaccine. Whether
that's practical or not, I don't know, but it worked,
(08:22):
and so it is possible that sort of getting the
protection where people, you know, first, where the human body
first encounters the virus, seems to offer a pretty strong protection.
And people are looking at nasal that, you know, they're
looking at these as something that might actually just prevent
people from getting infected in the first place, and in
(08:42):
animals at least, it seems to work.
Speaker 2 (08:44):
So an inhaled version then would target specifically the lungs
and protect the lungs exclusively or especially yeah, or just.
Speaker 3 (08:52):
The upper respiratory tract. You know, it would sort of
get around your upper respiratory tract, which is where people
you know, are accumulating the viral particles. So, you know,
I don't know exactly why that worked so much better
than the nasal one. So the nasal one seemed to
work pretty well, but the inhaled one worked really well
in the animals, and I think they're still still working
out why that is and how this might be translated
(09:17):
into a human trial. There are already some apparently there
is a trial with an inhaled vaccine going on, So
there are human studies that have gotten started already.
Speaker 2 (09:28):
So they're trying to improve it to better match the variants,
and they're trying to improve it to better target the
upper respiratory tract. And they're trying to improve it. So
it's not necessarily always a needle.
Speaker 3 (09:39):
Yeah, And I think just to write so that people
don't keep getting mild infections, which then would mean that
they're less likely to infect spread the virus to more
vulnerable people, so that we would see a real end
to the deaths and the hospitalizations. That it's not necessarily
something that we would have to live with wherever that,
(10:00):
I think scientists are still trying to, you know, trying
to improve the tools we have, the vaccines we have,
so that we're not resigned to dealing with this situation
for all eternity.
Speaker 2 (10:13):
So what's your take home message from all of this? Wow?
Speaker 3 (10:16):
I mean, I guess just that I think that this
people haven't I don't think people have lost interest in COVID.
I think there's still a lot of interest. And I
think that that scientists who are doing this kind of
work should continue to get support, and I think it's
it's what they learn is going to be useful for
dealing with the next pandemic and other viruses as well.
So I think having this this you know, surge in
(10:40):
new research is really important and that we might see
some new things coming down the pipe. It's not all
doom and gloom.
Speaker 2 (10:49):
Faith Lamb is a Bloomberg Opinion columnist. She covers science
and his host of the Follow the Science podcast. Now
coming up will take a look at consolidations in the
airline industry and what is that ten you're listening to
Bloomberg Opinion.
Speaker 1 (11:12):
You're listening to the Bloomberg Opinion Podcast Contest Saturdays at
one and seven pm Eastern on Bloomberg dot Com, the
iHeartRadio app, and the Bloomberg Business App, or listen on
demand wherever you get your podcasts.
Speaker 2 (11:26):
You're listening to Bloomberg Opinion. I m Amy Morris. Antitrust
regulators have made no secret of their skepticism toward further
consolidation in the airline industry mergers at acquisitions, though, like
Alaska Air's nearly two billion dollar acquisition of Hawaiian holdings
didn't happen in a vacuum. And throughout the aerospace supply chain,
power is concentrated in the hands of just a few players.
(11:49):
So really the only way for companies to hold their
own is to get bigger. Let's learn more about this.
Bloomberg opinion columnist Brooks Sutherland covers deals in industrial companies.
She's been following this from the very beginning. She also
writes the Industrial Strength newsletter, and she joins me, now,
brook as always, thank you so much for taking the
time with me, And I want to start with what
(12:11):
you describe as a concentration of power up and down
the supply chain in the aerospace industry.
Speaker 5 (12:17):
What do you mean?
Speaker 4 (12:18):
Sure?
Speaker 5 (12:19):
And so I always think it's fascinating that these airline
deals tend to get so much public attention and so
much antitrust scrutiny. But there's been a number of combinations
that have happened elsewhere in the aerospace ecosystem that they
just don't attract the same level of scrutiny. And so,
for example, the former United Technologies Corp. Merged with Raytheon
(12:42):
to build up this aerospace and defense giant. They also
acquired Rockwell Collins, which itself had been on an acquisition spree.
You know, in terms of the airplanes themselves, you really
have Boeing an airbus and that's it as far as
you know, major commercial jetliners. And then there was a
consolidalidation that happened in the aircraft leasing space where ge
(13:03):
sold its aviation leasing business. And so I just think
it's interesting that, you know, there's so much fixation on
the airlines, and perhaps that's because we as consumers tend
to interact with them more than we do the aerospace
manufacturing side or the aircraft leasing side. But these deals
are part of that broader ecosystem. When we have so
much consolidation, it changes the negotiating dynamics because airlines they
(13:26):
lease planes, they buy planes, they have engines, they need
engine maintenance, and all of that sort of adds to
these pressures that airlines are facing.
Speaker 2 (13:34):
So how did we get here.
Speaker 5 (13:36):
Through a number of deals over the years. I mean,
you know, Boeing was created through a series of acquisitions,
and you know some of the deals that it just
described happened a lot more recently as well, and regulators
allowed those to go through. And so I think there
just needs to be a bigger conversation about what is
the actual competitive operating environment for these airlines.
Speaker 2 (14:00):
Transformative deals have a poor track record, and you talk
about that in your column on the Bloomberg terminal. So
would this then really be the only recourse that airlines
would have to hold their own or even grow a
little bit?
Speaker 5 (14:13):
I think it is. I mean, just when you think about,
you know, takeoff slots at airports, those are also restricted,
and so the only way that you can get more
is often by buying another company's positions at those airports
and so, and you know that labor is uh, there's
not a lot of labor to go around. There's long
waiting lists for airplanes, and so if you want to
(14:34):
go ahead and you know, get a bigger fleet very quickly,
one of the better ways to do it is by
buying somebody. And I just think that that needs to
be part of the conversation. It's not just the airlines
want to go in and consolidate in order to be
able to jack prices up for consumers. They have all
of these other pushes and pulls on their finances and
their ability to compete.
Speaker 2 (14:53):
Well, that's a good question. Then how does this impact
the consumer, the guy who's holding the ticket.
Speaker 5 (14:59):
Sure, I mean so right now. Actually, there are arguably
too many seats available domestically in the US, and you've
seen a number of carriers actually have to lower fares
in order to be able to fill those seats, and
they're often not doing so profitably because they're also, you know,
dealing with rising cost pressures, not just from labor and fuel,
(15:20):
but infrastructure constraints, supply chain, logjams, weather disruptions cost the
airlines money too, not just the flyer, their time and
their patients, and you know, it's it will be interesting
to see, you know. Jet Blue makes the argument that
buying Spirit will actually allow them to be more competitive
with the big four airlines, and that their goal is
(15:42):
not necessarily to raise prices. Now, part of their business
plan is to make the Spirit jets look more like
Jet Blue planes, and what that means is taking seats
out and making them a little bit more comfortable. But
when you have seats fewer seats, obviously that means, you know,
there's a little bit of a change in the price
dynamic and the fairs. So I mean it's difficult to
(16:02):
say exactly what would happen with the prices. But I
just think it's also important to think about, you know, han,
these airlines continue to survive and compete in a world
where they're sort of the odd man out on a
series of oligopolies.
Speaker 2 (16:16):
And we are talking with Bloomberg opinion columnist Brooks Sutherland
about the only real route for airlines to grow, and
that just might be M and A brooke. What has
to change then to give these smaller airlines a fighting chance?
Speaker 5 (16:31):
You know, I think it's difficult to really change anything
because a lot of this is structural. I mean, you
can't go back and unwind the deals that created Boeing.
And at this point, you know, we're not going to
go back and undo the takeovers that created what's now
known as RTX or any of the other consolidation that's
happened up and down the supply chain. And so I
think then that begs the question of Okay, well, then
(16:52):
do you have to allow the airline deals and so
that it's more of a level playing field. It's interesting
because there was also consolidation that happened in the railroad
industry were the two smallest players combined, and that is
a different regulator that's a specialized regulator that looks at
railroad deals. But they allowed that deal to go through
along the same argument as Jet Blue is making for
its Spirit deal, that basically, the market is what it
(17:15):
is and the only we can't go back and rewrite history,
and so the only way to introduce more competition now
is by letting these smaller players combine.
Speaker 2 (17:22):
So where is the government in all of this? Where
do the regulators come in? Are they turning a blind
eye to some but not others?
Speaker 5 (17:29):
So the dj has sued to block Jet blues combination
with Spirit. They just wrapped up closing arguments. We don't
have our ruling yet from the judge in that case,
and it's not exactly clear what the timing of that
decision will be. And then they also the DOJ did
successfully block Jet Blue's marketing alliance with American Airlines. But
I guess that gets back to my original point of
(17:50):
the regulators have taken a very tough stance on these
airline deals. That is just not happening to the same
degree in these other corners of the aerospace ecosystem, and
those deals have unique characteristics and unique qualities that need
to be assessed under by antitrust regulators, and they certainly
did look at those deals, but there's just not the
same amount of public uproar or scrutiny, And I just
(18:13):
wonder if that sort of shifts how these deals are
analyzed and they do matter.
Speaker 2 (18:20):
Like they'd pay more attention to those deals that we
you and I might pay more attention to because we're
the ones buying the ticket.
Speaker 5 (18:27):
Sure well, they certainly didn't try to block any of
those other deals, and they're blocking the airlineses deals, which
I just think is interesting. And you know, it's always
fascinating me, even taking a step beyond the aerospace sector,
that there's so much consternation about big tech and the
amount of power that the technology companies have, which is
certainly a very valid debate and one that we should
be having, but nobody talks as much about the consolidation
(18:50):
that's happening on the aerospace side. And so I do
think public perception and the things that we as consumers
pay attention to does sort of affect these conversations. But
it has to be because everything is interconnected. This is
all as we learn going through the supplis chain crisis
of the post pandemic period. Everything is interconnected and depends
on companies up and down the splashchaing.
Speaker 2 (19:11):
Right, And as you explained that there's no real way
to undo it. It's all been done, it's all intertwined.
So then how does this end? Because the way it's
described doesn't really seem sustainable, at least for some of
these airlines.
Speaker 5 (19:24):
Sure, and I think that's why you're seeing so many
of them try to do deals. I mean, if you
look at it just on face value, and you consider
the amount of scrutiny that Jet Blue has gotten for
its two endeavors, you would ask why in the world
would an airline try to do a deal right now?
And the fact that Alaska is going ahead with one
and trying to buy Hawaiian clearly they see somewhat of
(19:46):
a financial opportunity there as well, just given how beaten
down Hawaiian shares have been. But I think the fact
that they're going ahead with this deal at a time
when Jet Blue Spirit deal is still tied up in
the courts tells you how important you know, this industry
views consolidations.
Speaker 2 (20:01):
All right, Brook, thank you so much. We're going to
leave it there, and we're going to continue to watch
it with you. Now that we know a little bit
more about what we should be watching when we look
at these deals. Thanks so much for your time.
Speaker 5 (20:11):
Thank you.
Speaker 2 (20:12):
Brook Sutherland is a Bloomberg Opinion columnist who covers deals
in industrial companies. She is also the author of the
Industrial Strength newsletter. Don't forget. We're available as a podcast
on Apple, Spotify or your favorite podcast platform. This is
Bloomberg Opinion.
Speaker 1 (20:38):
You're listening to the Bloomberg Opinion podcast count Us Saturdays
at one and seven pm Eastern on Bloomberg dot Com,
the iHeartRadio app, and the Bloomberg Business App, or listen
on demand wherever you get your podcasts.
Speaker 2 (20:52):
This is Bloomberg Opinion. I Ami Morris. It is true
for every generation that becoming a financially secure adult is hard. Now.
A big part of that is home ownership, and last year,
Vice President Kamala Harris told Bowie State University students that
home ownership is good for the economy and that the
government is trying to make it easier for you to
(21:14):
own your own home.
Speaker 4 (21:15):
When we increase home ownership, it strengthens communities and it
strengthens our economy. Homeowners are more likely to put down.
Speaker 2 (21:27):
Roots, but establishing yourself in your career, securing a home,
starting a family, these are not easy things to do,
and maybe it's harder for some generations than others. Let's
talk about this. Bloomberg opinion columnist Alison Schrager joins me now,
and she covers economics. Alison, is it harder for some generations?
Speaker 4 (21:46):
I used to say no. I used to think, you know,
I think it's always hard. I think establishing yourself as
an adult is always a challenge, and everyone thinks it's
harder for them than anyone else. Anyway, I kind of
always thought it actually was getting a little bit easier
for everyone else. But millennials really did make a fine
point of it, and they did have a point when
(22:08):
it came to buying a house that it was more
expensive than it was for their parents, like the price,
but they also had way cheaper mortgages and also wanted
to buy bigger houses. So these things, I guess, you know,
even doubt and I always thought, you know, it's not
so bad, guys, but I think gen z might have
a legitimately harder time getting their first home.
Speaker 2 (22:30):
Now, let's get into that before we get to the
gen Z part. You had said that millennials have said
for years that they were priced out of the housing
market in part because of their student debt.
Speaker 4 (22:38):
That's true, but way more people go to college. And
also there's actually a positive correlation between your student debt
balance and the odds of home ownership. And that's because
the more student that you have, the more likely you
are to have like a graduate degree or something like
that that makes you get paid a lot more. So, actually,
the more student that you have, the more likely you
are to be a homeowner. And in fact, I was
(23:00):
digging into the data looking at home ownership rates with
different generations, and you know, Millennials did buy homes a
little later, and just the way that millennials grew up
a little bit later for a lot of reasons, some
of which were positive. But in the last say several years,
as they started to approach middle age, like other generations,
(23:22):
they bought homes a lot, and particularly their prime home
buying years were when interest rates really hit those record lows,
particularly mortgage rates, so they actually got a really good deal.
There is still lower home ownership for millennials than for
say baby boomers at their age, but I found that
was largely driven by mostly men who still live with
(23:44):
their parents, and most of them didn't go to a
college at all. So I think we know that population
is struggling, and I don't know if it's for home prices,
but I think we can agree it's for a lot
of reasons beyond that.
Speaker 2 (23:57):
And you had said in your column on the Bloomberg
Terminal that the last several years saw one of the
biggest increases in home ownership of any generation. Now does
that apply to millennials, gen Z, gen X? Who where
does that apply?
Speaker 4 (24:09):
I mean, and really for millennials because Gen X and
millennials already like roughly if you look at a generation,
like when they're like top out at home buying, it's
usually like maybe sixty five seventy percent, And you know,
not everyone is destined to buy a home. So Gen
X and boomers are pretty much already there. Like this
(24:30):
is like if you're gonna buy a home, you're gonna
buy a home. I mean, I guess it's rare to
buy your first home at sixty. I mean, I'm sure
it happens, but it's like if you're yeah, so so
I said, like there's just an age where people start
buying homes, and that tends to be as a little
later for millennials and other generations, but because they also
got married later and things like that. But it is
(24:51):
like your thirties and for them maybe a couple of
years later into their fir thirties, but that was also
the best time to buy a home, arguably because they've
now locked in cheap mortgage for as long as they want.
Speaker 2 (25:02):
We are talking with Bloomberg Opinion colonist Alison Schrager about
Generation Z getting a bad deal on housing, and Allison,
so far we've talked a lot about millennials and what
this leaves for gen Z. Where does this leave them
when it comes to home ownership.
Speaker 4 (25:19):
Well, legitimately hard spot because I said, like millennials did
to face higher prices but also super cheap mortgages, so
it kind of was a wash. But for gen Z
is facing both and not only that, because mortgage rates
were so low and then went up so fast, and
you know, while they might come down a little if
the Fed starts cutting, they're probably not going back to
those nice three sub three percent rates we used to
(25:42):
see unless there's some major policy push. So that means
millennials who maybe have their first starter home are probably
going to sit in that home unless they have to move,
because you know, who can afford to move now. And
that pretty much leaves gen z or shut out of
like the sort of buying housing market because they have
(26:02):
high prices and high mortgage rates.
Speaker 2 (26:05):
So because millennials were able to lock in those low rates,
they're not inclined to move. Nobody can afford to move
because they don't need to get a new mortgage with
a much higher rate.
Speaker 4 (26:15):
Yeah, and as I said, millennials are probably going to
sit on those for like a decade. I mean, I
bought during the pandemic for the first time, and like
I can, I can don't see how I can ever
afford to move.
Speaker 2 (26:25):
So when are gen z looking to buy these starter homes?
Are they already out there in the market. Are they
already starting to experience this issue or are they just
looking down the road?
Speaker 4 (26:35):
Probably the really keen ones are, but because I mean,
how old are gen z ers now, Like maybe mid twenties,
so it's a little early. But people are saying that
the housing market is going to be sort of really
inaccessible for maybe like another decade. So as they approached
that time, bar some like extraordinary things happening to mortgage
rates or a housing crash, which you know, I don't
(26:59):
know if it is that likely. Again, they're going to
face a tough time.
Speaker 2 (27:03):
Are they experiencing some similar inflationary pressures when it comes
to renting?
Speaker 4 (27:09):
Yeah, I mean that's the other thing. They are definitely
facing high rents. I mean, I live in New York,
and you know, every generation moves to New York is like,
it's so much more expensive, and it's it is always
more expensive. But oh my god, I mean I don't
even know how young people moving to New York now
afford it. I mean I was just reading the median
rent is like between four and five thousand dollars. I
(27:31):
mean that's I mean, if you're on a starting salary,
I mean, I don't know how you cope with that.
So the higher mortgage rates are creeping into higher rents too.
So it's just I think everyone complains every generation, and
I don't want to minimize that. I think it is
always hard making your way in the world, and I
think that's the bottom line. But I think it is
actually maybe harder for them. I mean, there are other
(27:54):
things that are legit hard about. Know, if they're harder
than they were for other generations.
Speaker 2 (27:57):
They're timing is just lousy timing.
Speaker 4 (27:59):
Is and well, I mean also they also had their
schooling disrupted by COVID, which probably also has social effects
and you know, I mean and a lot of social
unrest that certainly other generations didn't. But also to compound
their misery, now they're like, all right, world's back to normal.
I'm going to do that thing that young people do,
(28:20):
move to a big city, start my life. And they're
facing these just astronomical rents, and I think that's just
a function of the fact that you know, rates have
gone up before. They're not even that high by a
historical reasons, but what they did do is they were
very low and then now like something like more normal
historically normal, and that just happens like almost overnight for them.
So that just has all these weird knock on effects
(28:41):
for the economy on rent and housing prices. That makes
life harder for.
Speaker 2 (28:44):
Them now when you have those higher rates, though that
usually would mean less expensive homes, but that doesn't help
them in this case.
Speaker 4 (28:51):
Because there is that huge chump jump up that happened,
so suddenly I see and they were just I mean,
we've seen, certainly have seen mortgage rates higher than this,
and that brought down prices.
Speaker 6 (29:01):
But in the.
Speaker 4 (29:02):
Past, you weren't, like a year ago, at like historically
low rates that you know, the Fed engineered and the
government and just the market, all these forces came together
to bring rates like mortgage rates that just like, I mean,
a two and a half percent thirty year fixed mortgage
just shouldn't exist, but it did, and everyone like you know,
(29:23):
refinanced or bought a home.
Speaker 3 (29:25):
Then.
Speaker 4 (29:25):
So now we have this weird situation where no one
wants to move, and in the past it didn't really happen,
so that keeps prices high. You know, I said, gen
Z's had it rough. They never complained about the COVID thing.
In fact, they took having their college experience stolen from
them with actually quite quite graciously. So I feel like, yeah,
maybe they won't we won't be subjected to a million
(29:47):
think pieces of like my generations as it so are.
They'll just be like, yeah, this is our cross to
bear and we take it.
Speaker 2 (29:53):
Looking ahead with this, where does this wind up? I mean,
are they just going to be late homeowners. Are they
just going to be considered renters? Do we have a
crystal ball where we can see what happens next.
Speaker 4 (30:04):
There is a trend generally of people going becoming like
stable adults later, and that has nothing to do with housing.
It's the sociological things, like you know, Jane BIG's slower
lives this whole hypothesis, So probably they'll reverse some of
the trends we've seen. One of the reasons housing felt
so expensive to millennials is they also wanted to live
in bigger urban areas and have bigger houses. So maybe
(30:26):
they'll be a swing back to smaller houses and more
rural areas where they're cheaper.
Speaker 2 (30:30):
Bloomberg Opinion columnist Alison Schreger covers economics. You're listening to
Bloomberg Opinion. I'm Amy Morris. Restaurant tours have been struggling
with inflation and labor shortages, labor costs and consumer complaints,
and now there's a new push to help maintain customer loyalty.
Let's learn more about how this works with Bloomberg Opinion
columnists Bobby Gosh. He covers culture and Bobby, remember there
(30:52):
was a time when you could have a favorite restaurant
or a favorite bar cafe, and they'd know you. Like
back in the eighties, there was successful TV series you've
probably heard of it, cult Cheers. It was built on
that whole premise of everybody knowing your name.
Speaker 6 (31:06):
So what happened, particularly since the pandemic, the restaurant industry
as a whole has suffered acute shortages of people, particularly
weight staff. The pandemic was a sort of wake up
moment for a lot of people who worked in that
industry who realized, you know what, this is a terrible job.
They pay us very poorly. We had to depend on
(31:28):
the kindness of strangers, so to speak, with tips. There
are better jobs out there, and we're in an economy
where unemployment is low, so there are a lot of
other jobs out there. So the restaurant industry has been
losing the exact kind of people who would remember your name,
whould remember your favorite drink, remember the dishes you like,
would ask after your friends, would ask after your health.
(31:50):
All of that sort of human interaction that you could
rely upon is becoming much harder to assure these days.
Speaker 2 (31:59):
So how does a loyalty program help accomplish this? How
does this work well.
Speaker 6 (32:04):
So there's one loyalty program that's just been launched. It's
called Blackbird. It comes from a guy called Ben Levinthal
who also was responsible for Eater and for Rezi, the
reservation app, so he has a good track record in
using digital solutions. And the way it works is that
(32:26):
you sign up. Restaurants sign up and that allows sort
of restaurants to build a profile. Every time you go
to a restaurant, you make an order, it is recorded
and stored and that information is available to that restaurant
to other restaurants, so that when you go back the
moment you make the reservation, the maitre d at the
(32:48):
restaurant gets a little mini profile of you and says, okay,
this is Amy Morris. She's been coming here for a while.
She likes you know, a cosmopolitan. She likes her steak
medium rare. The last time she was here, you know,
she was not happy with the dessert, but she didn't
(33:08):
make a big fuss. And so he'll have he or
she will have all of this information and can design
and experience for you and they can act on this
information and say, okay, when you walk in the door,
there's the cosmopolitan waiting for you. They can say, you know,
we were really sorry, we messed up the last time.
This drink is on the house. These are the sort
(33:29):
of things that a really good Matred could do back
in the day.
Speaker 2 (33:34):
Would it cost more, No, it will.
Speaker 6 (33:36):
Cost you absolutely nothing, and in the trial stage it
will cost the restaurant only a few cents per reservation. Eventually,
if the system really takes off and restaurants respond to it, well,
then they'll they will be charged more by Blackbird. But
as a consumer, there's no expensity of it.
Speaker 2 (33:56):
Our customer's loyal Is this something that customers are kind
of no, unintended hungry for?
Speaker 6 (34:01):
Well, that's the other thing to consider, and that's not
a problem technology can solve. Lots of customers are not
as loyal as they used to be because they're more choices.
And after the pandemic, many of our favorite places closed down.
New places have opened up, so there's an excitement about
going and trying new things, and that is a challenge
to our old favorites and I'm not sure that can
(34:25):
be solved by technology. But ultimately we are, particularly those
who like to eat out, would like to experiment and
try new things. That's not something technology can solve.
Speaker 2 (34:36):
I don't think it's going to be interesting to see
how this works out. Thank you so much, Bobby for
filling us in.
Speaker 1 (34:41):
Thanks Amy, Thanks You want to go where everybody knows
your name?
Speaker 2 (34:48):
Bloomberg Opinion columnist Bobby goes. That does it for this
week's Bloomberg Opinion, and we're produced by Eric mollow You
can find all of these columns on the Bloomberg terminal,
and we're available as a podcast on Apple, Spotify, or
your favorite podcast platform. Stay with us. Today's top stories
and global business headlines are just ahead. I'm Amy Morris,
and this is Bloomberg.
Speaker 4 (35:09):
You want to go where everybody knows me
Host
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