In short
This Bloomberg Business Week Daily episode mixes macroeconomics, retail earnings, Fed expectations, and consumer-credit/real-estate themes. Economist Stuart Paul says November ADP layoffs and weakening employment/new orders point to a slowing economy, giving the Fed room for a December 25 bps cut; he expects a “robust coalition” of voters and more dissent in the December dot plot for 2026. He also argues Canada is waiting on US-Mexico trade/border disputes under USMCA, with negotiations likely to surface in Q2 2026. Retail coverage: Macy’s shares fell on a cautious profit forecast but later rose; Dollar Tree and others benefit as consumers “trade down” for value.
Guests
Stuart Paul (Bloomberg Economics U.S./Canada economist), Emily Cohen (Bloomberg News consumer team leader), Scott Sanborn (LendingClub CEO), Herman Chan (Bloomberg Intelligence senior analyst for U.S. regional banks), Amy Rubenstein (Clear Investment Group CEO). Key claims/examples: tariff pass-through is slow and squeezes producer profits; LendingClub targets “middle majority” borrowers and says it outperforms on delinquencies/fraud; it pays credit cards directly and cites ~23% credit-card rates.
Written by AI. May contain mistakes. Listen to the episode to check what was said.
Chapters
Tap a time to open that second in VOAnalyzing Upcoming Fed Decisions
1:00 to 1:30
Discussion about the Fed's upcoming rate cut and its implications.
“When you own your own business, you own every decision.”
Analyzing Upcoming Fed Decisions
2:46 to 4:07
Discussion about the Fed's upcoming rate cut and its implications.
“economy is doing, we've got Bloomberg Economics, U.S.”
Trade Relations and USMCA
4:07 to 6:00
Exploration of trade relations between the US, Canada, and Mexico under USMCA.
“and a lot of division among the committee.”
Retail Earnings Insights
6:00 to 8:00
Insights into recent retail earnings and consumer behavior.
“Okay, so just a realistic timeline for what that could be?”
Consumer Spending Trends
8:00 to 10:25
Analysis of consumer spending habits and economic impacts.
“But I do think it comes on the backdrop of really strong performance this year.”
Future Fed Policies and Leadership
10:25 to 14:01
Discussion on future Fed policies and potential leadership changes.
“hearing, even from retailers that do well, right?”
Nomination Speculations: Kevin Hassett as Fed Chair
14:01 to 17:06
Discussion on the potential nomination of Kevin Hassett as the next Fed chair and market reactions.
“Are we nuts to be thinking or for traders and investors to be assuming that Kevin Hassett is the next Fed chair?”
Nomination Speculations: Kevin Hassett as Fed Chair
17:43 to 18:58
Discussion on the potential nomination of Kevin Hassett as the next Fed chair and market reactions.
“The thing about AI for business, it may not automatically fit the way your business works.”
Nomination Speculations: Kevin Hassett as Fed Chair
19:05 to 19:22
Discussion on the potential nomination of Kevin Hassett as the next Fed chair and market reactions.
“Brokered services by Public Investing, member FINRA SIPC.”
Nomination Speculations: Kevin Hassett as Fed Chair
19:23 to 20:16
Discussion on the potential nomination of Kevin Hassett as the next Fed chair and market reactions.
“When you own your own business, you own every decision.”
Show all 20 chapters
Insights from Lending Club's CEO
20:27 to 28:00
Interview with Scott Sanborn, CEO of Lending Club, about their customer base and strategies.
“You're listening to the Bloomberg Business Week Daily Podcast.”
Understanding Credit Card Interest Rates
28:00 to 28:34
Learn about consumer behavior regarding credit card interest rates and the impact of the Card Act.
“Half of the people don't revolve on the card.”
Lending Club's Loan Strategies and Market Insights
28:50 to 31:47
Explore Lending Club's strategies for increasing loan originations and adapting to market conditions.
“getting some breaking news too on Apple.”
Consumer Resilience and Economic Outlook
31:47 to 33:13
Discuss the resilience of consumers and the economic landscape affecting their spending.
“I'd say the consumer we serve is demonstrating themselves to be remarkably resilient.”
Consumer Resilience and Economic Outlook
33:17 to 34:31
Discuss the resilience of consumers and the economic landscape affecting their spending.
“Sample prompts are for illustrative purposes only, not investment advice.”
Introduction to Amy Rubenstein and Real Estate Trends
36:08 to 36:49
Revisit the conversation with Amy Rubenstein on opportunistic real estate investments.
“You're listening to the Bloomberg Business Week Daily Podcast.”
Market Analysis and Tenant Challenges
36:49 to 42:00
Discuss the K-shaped economy's impact on tenants and investment opportunities in real estate.
“It's a Chicago-based firm that specializes in opportunistic real estate investments, specifically in the distressed, mid-sized multifamily sector in mostly secondary and tertiary markets around the U.S.”
Understanding Landlord-Tenant Dynamics
42:00 to 44:28
Explore the complexities of landlord-tenant relationships and their impact on rental markets.
“It's a matter of can that have an effect?”
Opportunities in Real Estate Investment
44:28 to 45:02
Learn about the current real estate markets and investment strategies in various states.
“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.”
Conclusion of Real Estate Insights
46:08 to 46:38
Wrap-up thoughts from Amy Rubenstein on real estate opportunities and trends.
“For midsize and large companies, risk can affect multiple parts of the organization at once, from property and liability to cyber and regulatory challenges.”
Transcript
Automatic transcript. May contain errors.0:00Carol Massar:What if data didn't sit still? What if intelligence moved with us? Not buried in reports, but activated in real time, where lives are being shaped, where decisions are being made. It all starts with a question. Where is the potential? Cotality turns data into clarity, intelligence into insight, insight into action. Because when intelligence moves, we all move forward. Cotality. Intelligence beyond bounds. So there's a lot of noise about AI, but time's too tight for more promises. So let's talk about results. At IBM, we work with our employees to integrate technology right into the systems they need.
0:41Now, a global workforce of 300 ,000 can use AI to fill their HR questions, resolving 94 % of common questions. Not noise. Proof of how we can help companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business. IBM.
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2:15Carol Massar: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 news as it happens. The Bloomberg Business Week Daily Podcast. with Carol Masser and Tim Stenebeck on Bloomberg Radio. For more with us on how the U.S. economy is doing, we've got Bloomberg Economics, U.S. and Canada economist, Stuart Paul. He joins us here in the Bloomberg Business Week studio. So Stuart, we are one week out from the last FOMC decision by the Fed this year.
2:57The 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 25 basis point rate cut? I don't think that it'll do anything to change whether or not we will get a cut. But 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 a prize to the upside, but it's a prize because of slowing supply chains, like a very peculiar reason for ISM to surprise to the upside.
3:32We 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 cuts because tariff pass through is slow. And the final thing that we saw was September's industrial production numbers with manufacturing output basically flat. 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.
4:11Carol Massar:You know, we've been talking to Joe 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 an important economy for Canada, excuse me. So how are you thinking also, too, about where trade is kind of settling between what has been really important trading partners for the United States? Well, I think that the thing that's most important to 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 should be deploying to the US southern border before Canada actually gets to come to the table to discuss its own trade relationship.
5:07Right now, the average effective tariff rate on Canadian exports to the U.S. is in the low single digits, you know, three to four percent because of how many carve outs there are. And because of, you know, the importance of the U.S. as an energy export market for Canada, all the energy just flows through the United States. Canada is right 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 glimmer of hope there.
5:41Right now, it seems as though trade is sort of normalizing. Of course, the second quarter was really, really rough. And so we saw an outperformance in the third quarter. But trade balances are starting to normalize. and any sort of negotiation is just going to be on hold until the U.S. and Mexico can sort out their differences. Okay, so just a realistic timeline for what that could be? I think that in earnest, we're going to start seeing some important talking points rolled out in the second quarter of 2026. Of course, any sort of negotiation can be sped up by, let's say, Prime Minister Carney visiting the White House.
6:21He's already been to the U.S. now, I think, twice so far since he took the leadership role. But right now, I'm expecting to see some more definitive deal points getting rolled out in the second quarter of next year.
6:35Carol Massar: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 kind of 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. Nation's retail company is continuing to report out earnings amid the holiday shopping season now underway. Stuart's going to stay with us. Want to get to, though, Tim, some of the earnings we got today. Yeah, let's bring in Emily Cohen. She's Bloomberg News Consumer Team Leader. She joins us here in 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.
7:07But now we're seeing them up 2%. What's going on with Macy's? What did we learn?
7:11Carol Massar:I mean, Macy's 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, 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 their stocks up 34 percent this year. So I think anything a little bit disappointing might be a bad percent swing from high to low.
7:53Carol Massar:It's a lot. It's a lot. It's like a confusing investor or a confused investor. Right. Yeah. A little bit. Yeah. Yeah. But I do think it comes on the backdrop of really strong performance this year. Just throw Dollar Tree. They reported better than expected profit. They also raised their full year earnings outlook. And we saw that stock rallying in today's session. So a good report. And what does it say about what type of consumer? Yeah, 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.
8:25Carol Massar:That's good news for a store like this. And it continues to paint this picture that we saw last week and the week before, which is this split screen picture of how the consumer is doing. Consumers are still spending, but they're looking for value and they're looking for places where the price is right. And Dollar Tree definitely fits in that better category. So Stuart, come on back in here and just give us your take on how the U.S. consumer is doing in the context of the retail earnings that we continue to hear about. To Emily's point, consumers trading down, higher end consumers trading down, that's good news in an environment such as this for a company like Dollar Tree.
9:01We had Dana Telsey in earlier this week, and she basically said, listen, 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? It's interesting. So, of course, I think about the economy mostly from the top down, and I enjoy when I get to participate in a roundtable 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 to the price sensitivity of consumers.
9:37And then when we look at some of the more macroeconomic data, we see that firms are struggling to pass through some of the cost 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. When you have consumers that are especially price sensitive, it's just sort of a tenuous balance that you're walking in the economy. Now, it's no wonder why 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.
10:20But right now, it's just characteristic of a sort of tenuous balance in the broader macro economy.
10:24Carol Massar:Yeah, I also feel a 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? 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.
10:56Carol Massar:Those are the people who they're seeing pull back, be extra cautious. And I think that's right. 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? We did. 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. So more dollars. Ulta, right, too, I think. Ulta, exactly, PVH.
11:33Carol Massar:Today, yeah. So we're still, the retail earnings season really never stops. 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 Cohn with the latest on 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 2026? And does it really matter? Because Fetcher J. Powell, we assume, will be on his way out.
12:05Yeah, I think that the 25 basis point cut in December is a done deal. When I think back to October, we only had one dissent in favor of holding 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 a 25 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 a December cut. You know that Governor Myron is going to vote in favor of more than 25 basis points in December.
12:46What's going to be a little bit peculiar, and we've seen this, we saw this last year in particular, 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 dissents among FOMC participants who are not voting, who would have preferred rates to not be lowered in December, even though the actual voters decide to lower by 25. 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 of their public comments.
13:34They 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 2026, I expect there is going to be a pretty wide distribution. I expect that the incoming cohort of FOMC voters from the regional banks are actually going to be quite a bit more hawkish in 2026 than they have been this year.
14:01Carol Massar:Are we nuts to be thinking or for traders and investors to be assuming that Kevin Hassett is the next Fed chair? Because it does seem like all roads are leading, all Fed roads are leading to him at this point. It looks like that's going to be the case. It looks like it's going to be a Hassett 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 market investors and the White House, some folks expressed concern.
14:36But then you look at the price action when the trial balloon was floated last week with Kevin Hassett's name. And he 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 clear go ahead. 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? 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 coalesced and there is a broader coalition that is in support of President Trump's agenda.
15:18And so the division between the Senate Republicans, for example, and the White House is pretty narrow. There is not a lot of dissent among Senate 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 in the Senate Banking Committee pretty easily. And then it'll be mostly a party lines 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 going to have some pretty dramatic headlines when he gets questions from, let's say, Senator Warren from Massachusetts.
16:01It's 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 he gets he gets his shot if that's what the White House ultimately decides to do. And speaking of Senator, she's been outspoken. She wants lower rates. Yeah. That's right. This is what's tricky is that sometimes 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 when it comes to policy.
16:40Carol Massar:It's just the Fed. All of it around the Fed. I mean, you had Treasury Secretary Scott Besson 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. 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 of 2025. Stuart Paul, Bloomberg Economics, U.S. and Canada economist. Stay with us. More from Bloomberg Businessweek Daily coming up after this.
17:12Carol Massar:What if data didn't sit still? What if intelligence moved with us? Not buried in reports, but activated in real time. Where lives are being shaped. Where decisions are being made. It all starts with a question. Where is the potential? Cotality turns data into clarity. Intelligence into insight. Insight into action. Because when intelligence moves, we all move forward. Cotality, intelligence beyond bounds. The thing about AI for business, it may not automatically fit the way your business works. At IBM, we've seen this firsthand. But by embedding AI across HR, IT, and procurement processes, we've reduced costs by millions, slash repetitive tasks, and freed thousands of hours for strategic work.
18:03Now we're helping companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business, IBM. Support for the show comes from Public. Public is an investing platform that offers access to stocks, options, bonds, and crypto. And they've also integrated AI with tools that can assist investors in building customized portfolios. One of these tools is called Generated Assets. It allows you to turn your ideas into investable indexes. So let's say you're interested in something specific like biotech companies with high R &D spend. small cap stocks with improving operating margins, or the S &P 500 minus high debt companies.
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20:37Carol Massar:Listen on Apple CarPlay and Android Auto with the Bloomberg Business app. Or watch us live on YouTube. We promised you that we were going to continue on the U.S. economy and really the U.S. consumer. The online lending marketplace and platform for loans, credit cards, deposit accounts, insurance and more. We're talking about Lending Club. They announced a$100 million share buyback just about one month ago. It was about 50, not 50, nearly 5 % of the company's market value on the day of the announcement. 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.
21:12Carol Massar:The company posted third quarter results that beat 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. Yeah, it is. shares of the$2.1 billion market cap company, about 14%, up more than 12 % since reporting those earnings back on October 22nd. Delighted to have with us Scott Sanborn, CEO of Lending Club, also CEO for close to a decade at Lending Club for 15 years now. Also with us here in the Bloomberg Businessweek studio, Herman Chan, Bloomberg Intelligence Senior Analyst for U.S. Regional Banks.
21:43He helped bring all of this together. Scott, 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. 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 credit. So there's this middle group that are high income, heavy users of credit.
22:17So 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. It's a really big customer base. It represents about a third of the U.S. population, but it's close to half of the credit wallet. So they are more likely than average to have every form of credit. And that credit is, with the exception of mortgages, also larger than average. That's who we serve.
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22:39Carol Massar:How much do these people usually make? Our average, and obviously misleading, average is going to be misleading, but average is about$125 ,000. But you can think of it of ranging between, call it$80 ,000 in individual income to about$200 ,000 is where we really over-index. Great. One of the real highlights of your recent Investor Day 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 aligning performance expectations, partnering with better operators. Are you seeing that with the private credit space?
23:19Yeah, we do. So, you know, we were born as a marketplace. Initially, everything we originated, we sold. When we acquired the bank in 21, we started to hold a portion of our loans on our balance sheet that both gives us a stronger and more resilient earnings profile. Also allows us to do other things, innovate using our balance sheet. Right. 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.
23:57Because 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. You own 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 so that's visible in our results across every aspect of underwriting. So lower delinquencies than the rest of the industry, 30 or 40 percent below lower roll rates, higher recovery rates, lower prepayments, lower fraud, literally every aspect that you can measure of credit we're outperforming on.
24:38Has 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? Yeah. So that's been consistent for, you know, we released four years of data we put out there. And so it's remained consistent. But, you know, 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 at Investor Day is at any given time, we have more than 200 tests in the market where we're evaluating price points, changes to the credit.
25:16So we're constantly adjusting to reflect what's happening with the consumer. And that's what's giving us the consistent results.
25:24Carol Massar:Well, so that to me says you're very picky about who you lend to. That's true. 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. Yeah. So we're pretty good at selecting who we want to have in our portfolio and reaching out to those people. And then both delivering the price 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$20 ,000 because I'm going to do whatever.
26:07My kid needs braces or I'm moving cross country. Great. But unless I'm paying the orthodontist, I don't actually know that that's what you're using it for. So we 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, most notably, which at this point, more than half of all Americans are carrying. They're carrying it at really high rates, 23 percent interest rate. It's highest they've ever been in history. And we say, great, you should do this instead.
26:43It takes less than five minutes. We're going to save you 700 basis points. Oh, 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 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 not just saying you're going to pay off your credit card debt and taking out more money. We are paying it off for you. Benefit for you is, you know, you've consolidated everything into one bill. Other benefit is your FICO score usually goes up by 30, 35 points because you've lowered your utilization.
27:15Carol Massar:How much can you lower? I've got 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. Yeah, no, it's a great question. 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. Yeah, there's a lot to unpack in that. Sorry. No, no, it's a great question. And, you know, there's a number of questions underneath. But I'd say the biggest thing is if you think about how people choose credit cards, it is not based on the interest rate.
27:52Carol Massar:Yeah. Right. it's my SkyMiles card or my whatever, my retail store card. I'm going to get rewards for this. 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, 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 what their rates are. The research we've done is half of all customers don't say they don't know the interest rate on their credit cards.
28:24And the half that say they do, more than half of them are wrong. They think they know their rate, but they don't. And so cards have been able, and one of the big resets with the cards was driven by the Card Act, which limited how much cards could increase rates. So they factored in higher rates. I just want to jump in real quick. We are speaking with Scott Sanborn, CEO of 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 a major coup. This is the most prominent design executive at Apple.
29:01This underscores a push by the social networking giant into AI-equipped consumer devices. We also have here with us Herman Chan. He's Bloomberg Intelligence Senior Analyst for U.S. Regional Banks. Thanks. I wanted to follow up with you, Scott, on some of the medium-term expectations you laid out in Investor Day. You talked about doubling loan originations. We're talking about$18 to$20 billion 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. And how do you maintain solid credit quality as you ramp up that volume?
29:35And home improvement is something you're getting into, right? That's right. Yep. So first and foremost is, as I mentioned, refining people out of their credit card debt into a fixed rate, lower rate loan is number one use case. It's about 80 % of what we do. That market is the largest it's ever been. There's 1.3 trillion in credit.
29:55Carol Massar:80 % of what you do is that? Wow. Go ahead. Sorry. So that is 1.3 trillion in balances priced at really, really high rates. 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 on marketing channels that we had turned off. And then the other areas, personal loans can be used literally for anything, right? And before credit cards came around and came to be, they were the dominant way consumers accessed credit for everyday needs.
30:35So we have a major purchase finance business that's growing today, call it 50 plus percent year on year that's allowing things like elective medical procedures uh you know lasix braces for your kid um you know all kinds of procedure fertility treatments teeth implants so things that insurance doesn't pay for but you want to do and you want to do right away um private school education that's another one so home improvement is sort of a next adjacency people right now are staying in their homes longer, you know, 75 % of Americans, their mortgage rate is under 5%. They're not going anywhere. And the homes are getting older.
31:16So the homes need to be invested in, they need to be improved. So effectively enabling home improvement through an unsecured loan, where again, we are controlling the use of proceeds, we can pay the supplier, we can pay the contractor, we've got the capability through an acquisition we announced to, you know, disperse this in phases to multiple parties. So we're really excited to kick that off.
31:43Carol Massar:We've only got like 30 seconds left here. Consumer doing okay? I'd say the consumer we serve is demonstrating themselves to be remarkably resilient. I hear that a lot. It's a drinking game now. But we'll acknowledge the sentiment isn't great. Okay. Yeah. Come back soon. I have to tell you that I think we're all like, I want to go. I want to go, please come back late because I think you have a great vantage and view into what's going on in the economy. We'd love to. Okay, we would too. Scott Sanborn, Chief Executive Officer of Lending Club, our amazing Herman Chan, Bloomberg Intelligence Senior Analyst for U.S.
32:19Carol Massar:Regional Banks. Stay with us. More from Bloomberg Businessweek Daily coming up after this.
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36:08Carol Massar:You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from 2 to 5 Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business App. or watch us live on YouTube. 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 Eliasoff, founder and managing director over at Northwind Group. And then yesterday with Louise Phillips Forbes of Brown Harris Stevens. Our focus with them, really what's been happening in New York City and what will happen in New York City.
36:41We want to take a different look, another look, at a different type of real estate and kind of go further afield. Back with us is Amy Rubenstein. 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-sized multifamily sector in mostly secondary and tertiary markets around the U.S. She joins us once again here in our Bloomberg Interactive Brokers Studio. Welcome back.
37:04Carol Massar:Thank you so much. So it has been a little over a month since you were last with us. It was actually during the government shutdown. A lot has happened since then. We've gotten some data. 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? 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 is... More so than two months ago? Well, not so much more so than two months ago, but we're really feeling that K-shaped economy that everybody's talking about, where some of these lower income tenants are struggling a little bit on expenses.
37:37Carol Massar: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? And I think that's a product of deportations and a product of not having a great immigration policies right now. What are you thinking? 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. Yeah. Construction is a little bit tough. So what type of construction specifically?
38:11Carol Massar:We talked a lot about any kind of rehab, any sort of it could be anywhere from ground up construction where developers struggling a little bit on prices, both from inflation and also from lack of labor. And then also just on the on the rehab in general. That lack of labor is really because of immigration. No doubt about it. That's what we're seeing. Yeah, we're seeing it. 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.
38:44Carol Massar:We happen to be buying a lot right now. We're in the middle of a fundraise on a fund because there is so much to buy. There's opportunity. So much great 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 NOI. And if you can find stuff, where the fundamentals are strong, and the NOI is fixable, but not quite there, then you really have a great opportunity for buying. Michaela in our control room, one of our producers reminding us that just a couple of weeks ago, we spoke to Christina Stemble of Farm Girl Flowers.
39:19And they bought a farm to grow flowers on a small portion of their flowers. But she said that she was hearing about a hard time with labor.
39:28Carol Massar:Right, and we know that, right? The farm industry is another one. You mentioned NOI, net operating income. Help me understand something though. when you are finding lots of opportunities because there's distress out there, when things aren't going so well, that's actually a good environment for you guys? True. I will say, is there a little bit of a balance? There's different kinds of distress. 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.
40:03Carol Massar: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 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. And so there's more to it than just that. There's layers of distress there. How are tenants doing? So I think that, you know, I think we see a little bit of both ends, right? We're back to that K-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.
40:40Is it manifesting in the operators needing to offer concessions? Are you seeing delays in rent? What are you seeing?
40:47Carol Massar: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. So just try to help keep people on track a little bit. It's fascinating. We just had a long, deep conversation with the CEO of LendingTree and the same thing. Am I saying it right? Yeah, Lending Club. Oh, Lending Club. Sorry, Lending Club. Forgive me. Lending Club. But the same thing in terms of when they are giving loans, they want to know where it's going.
41:19Carol Massar:And if it's to pay off credit card debt, they will make those payments directly and really kind of teaching some financial responsibility. And how big a part of that is what you guys do? You know, 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. How can we be partners with these tenants as opposed to the people that are forcing them to pay their rent? Why are you doing it? Is it just business sense? It's a win-win for everybody.
41:52Carol Massar: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 that have an effect? Can we be effective enough to help shape that? Do the tenants feel like they're being partnered with? I mean, there's this idea of an adversarial relationship when it comes to landlord and tenant. Sure. I think there can be. And I think you get a little bit more of that in places, I would say, a place like New York, where you've got rent control and the landlord and the tenant are not really aligned because they're not both choosing that rental rate.
42:35I can think of some landlords I've had in my day where I was not completely aligned with Carol. What about you?
42:42Carol Massar:Anybody who's lived in New York. You know what's interesting? Of all the places that we rented, that I rented in New York, one landlord who was good. Really? Yeah. Nobody ever talks about their good landlord. Out of four. Out of four. Yeah. What? Yeah, that was pretty good. 25%. That's not bad. She was unique. Okay. Yeah. Let's see again. Unique. Unique. Yeah. Your properties, remind me, because I think initially you guys were in Chicago. We're based out of Chicago. Right now we have properties in Ohio, Louisiana, Alabama. A lot in California. Not anymore. Not anymore. There just is not cash flow in California.
43:18Carol Massar:It's a little more like New York City where everything's just based on appreciation. If California builds more, would you go back? You know, we look for stabilized cash flow, not for incoming cash flow. We actually don't care about the NOI in place when we purchase things. We actually look for negative NOI because we want to be able to fix that NOI and that's how we add that value. Better opportunity, right? But we want to eventually get to strong, strong cash flow. Best places in terms of geography right now for you guys? I think there's tons of opportunity in Atlanta. We keep looking over there.
43:49Carol Massar:Lots in the Midwest. We love it. 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 are people looking a lot in Cincinnati. There's lots of places to go there. I know we talked, we go kind of all over with you, But when we talk about affordable 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 40 seconds. Solve a problem that has plagued us for a long time.
44:25Carol Massar:I think different markets are going to have different answers. Okay. 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. For us, we see the opportunity in existing assets that just need to lift back up. But then again, you gotta be willing to buy something that's a negative cash flowing in the beginning. And most of those assets are gonna be outside the major cities or in the major cities? Not necessarily.
44:56Carol Massar: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 me. We love real estate. Amy Rubenstein, CEO of Clear Investment. group. This is the Bloomberg Business Week Daily podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live weekday afternoons from 2 to 5 p.m. Eastern on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.
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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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