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Moody's Talks - Inside Economics

Episode 36
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December 10, 2021

Big Inflation and Baby Bubbles

Mark, Ryan, and Cris discuss the November consumer price index. The big topic is whether stock prices, housing, and crypto are in the midst of a bubble.

Full Episode transcript.

Slides referenced in the episode can be found here.

Mark Zandi:                      Welcome to Inside Economics. I'm Mark Zandi, the chief economist of Moody's Analytics. I'm getting pretty good at saying that aren't I, Ryan?

Ryan Sweet:                      You're doing really good.

Mark Zandi:                      We started these podcasts back in April of this year, so I think this is going to be our 36th episode. I was-

Cris deRitis:                       Wow.

Mark Zandi:                      And that's Cris deRitis. Cris is the deputy chief economist, of course, Ryan's the director of real time economics, my trustee sidekicks. Well, that diminishes your role I would say. We are co-hosts I would say, on this podcast.

Cris deRitis:                       Oh, that's an upgrade.

Ryan Sweet:                      It is.

Mark Zandi:                      Is that an upgrade?

Cris deRitis:                       Oh yeah, for sure.

Mark Zandi:                      Well deserved though, for sure. I'm the laggard here for sure, but it's good to see you guys. Are you guys on Twitter? Do you have a handle? Ryan, do you have a handle?

Ryan Sweet:                      Sara convinced me to start one this week.

Mark Zandi:                      Sara Rodriguez?

Ryan Sweet:                      Mm-hmm (affirmative).

Mark Zandi:                      That's the person who's helped me out for, I don't know, 10, 15 years. She's great.

Ryan Sweet:                      She was very convincing, so we'll see how this goes. I'm afraid I'm going to end up going on rabbit holes.

Mark Zandi:                      I know. That's what I was saying today, because the CPI number came out, the consumer price index, and we'll talk about that in just a second, but did a little bit of tweeting and that just can take you down the rabbit hole as you say.

Ryan Sweet:                      Mm-hmm (affirmative).

Mark Zandi:                      Really. And Cris, are you on Twitter?

Cris deRitis:                       I did set up a handle years ago, but I never use it.

Mark Zandi:                      Well, are you following me? You're not following me, oh my gosh. You need to follow me, Cris. At the very least, go up there. I don't care if you follow Ryan, I don't care about that. You got to follow me.

Cris deRitis:                       All right, got to find the password.

Mark Zandi:                      Well, of course. Are you @RyanSweet? Is that your...?

Ryan Sweet:                      No, actually I don't know what I picked. I'll let you know.

Mark Zandi:                      You sound pretty nonchalant about this whole thing.

Ryan Sweet:                      I'm just not a social media person, but now more I think about it, there's no place you can hide now. So I can subtweet you on Twitter all the time.

Mark Zandi:                      Hey, and don't mess up Ryan. We've got a lot of people reading these tweets. I don't mean to make you nervous, but [crosstalk 00:02:33]

Ryan Sweet:                      That makes me really nervous. But next time you tweet out that we're in the midst of a correction, I'll be right there to tell you.

Mark Zandi:                      Very good. I was going to say something... Oh, I'm @MarkZandi.

Ryan Sweet:                      There we go.

Cris deRitis:                       Wow, record.

Mark Zandi:                      That was relatively quick, wasn't it? It took about all of the three minutes for me to tout my handle. There you go.

Cris deRitis:                       Right out the gate.

Mark Zandi:                      Please, sign up, follow. That's what this is all about apparently, so please do. All right, let's get to business. Well, obviously, today the number that we need to be focused on is the CPI, the consumer price index. Ryan, why don't you describe what the number, describe what happened here with the consumer price inflation?

Ryan Sweet:                      I don't think there was a lot of surprises. Energy was a big contributor to the increase. We had rising oil prices, heating costs have gone up. The good news is recently they come back down in quite a bit, so we'll get some relief in December. So I think we've talked about this on the podcast. I think November is likely the worst of the inflationary pressures we're going to experience now, but prices rose across the board. Food prices were up, take out food and energy, which are very volatile, so looking at core prices, which, what's underlying inflation running at, and that still was up five tenths month over month, and is up nearly 5% year over year. So inflation's high, but I think as we've talked about, it's only going to get better from here.

Mark Zandi:                      So you think November CPI inflation was up year over year, 6.8%, the highest since the early '80s, so a long time ago, you're saying that, that's the peak, you think?

Ryan Sweet:                      Yep. And I have a good number. I got a good number for the game-

Mark Zandi:                      Oh, for the game? Good.

Ryan Sweet:                      ... to highlight this.

Mark Zandi:                      By the way, that's what I tweeted, exactly what you just said, that November was ugly. I used the word ugly, but that was the peak, that we're going to see improving inflation going forward. And the most obvious thing to point to most immediately is this decline in oil price, which is now translating into lower gasoline prices, which is key. And natural gas prices are down, right?

Ryan Sweet:                      They're down a ton, and retail gasoline prices, they've edged lower recently. They're about to drop a lot in the next couple weeks.

Mark Zandi:                      Where are we now on the gallon of regular [inaudible 00:04:56] Wawa? Do you know?

Cris deRitis:                       356, this morning.

Mark Zandi:                      356?

Ryan Sweet:                      Yeah, that will get down to three [crosstalk 00:05:04]

Cris deRitis:                       At least my Wawa.

Mark Zandi:                      Well, nationwide I think it's an average of three. We pay a little bit more here in suburban Philly, but I think it's three, last I looked, 335 nationwide. And the peak was a few weeks ago, $3.50. And with oil now trading closer to $70 a barrel on West Texas Intermediate, you are saying we're going below $3 a gallon?

Ryan Sweet:                      Yeah, and it's more, I think you tweeted out the chart, the wholesale gasoline prices. They lead retail by a couple weeks, and they point to retail gasoline prices a little bit north of $3 per gallon for the national average.

Mark Zandi:                      Can I, you may not know the answer to this, but I'm guessing you might, and hopefully this isn't what you were going to do for the game but, so say take-

Ryan Sweet:                      Oh no, you're going down that road?

Mark Zandi:                      Really?

Ryan Sweet:                      Take out energy.

Mark Zandi:                      Well, maybe let me ask it this way. So let's say the target inflation rate, let's say the Federal Reserve wants CPI inflation, consumer price inflation to be, let's say it's 2.5%, I think that's reasonable target. We're now sitting, let's round up to seven. So seven minus 2.5 is 4.5 percentage points, that's what we're above target. Of that 4.5 percentage points, how much of that do you think is energy? And that's gasoline, home heating, the whole shooting match. Do you have a sense of that?

Ryan Sweet:                      Yeah, it's 2.5 percentage points.

Mark Zandi:                      2.5 percentage points?

Ryan Sweet:                      Mm-hmm (affirmative), in November.

Mark Zandi:                      So if energy wasn't adding, was just flat, energy prices were just flat, inflation would be, what's that? That would be 4.5%?

Ryan Sweet:                      Yeah, 4.5.

Mark Zandi:                      And in all likelihood, energy price are going to fall. Well, we know they're going to fall, so it's going to actually, it's going to weigh on it even more.

Ryan Sweet:                      It's going to be disinflationary.

Mark Zandi:                      Let me ask you this then, and hopefully this isn't what you had planned for the game.

Ryan Sweet:                      It definitely is.

Mark Zandi:                      Oh really?

Ryan Sweet:                      It's all right. Go ahead. This is a good one. I'll come up with a new number.

Mark Zandi:                      I'm sorry about that.

Ryan Sweet:                      This is good. This is, I thought it was important.

Mark Zandi:                      4.5 percentage points, 2.5 percentage points. 4.5 is the delta, the difference between inflation today and where everybody would want it to be, broadly. And 2.5 of the 4.5 is energy, check.

Ryan Sweet:                      Correct.

Mark Zandi:                      That's going away.

Ryan Sweet:                      That's temporary.

Mark Zandi:                      Temporary.

Ryan Sweet:                      Energy price is-

Mark Zandi:                      In fact is going to go the other direction here.

Ryan Sweet:                      Exactly.

Mark Zandi:                      That leaves you with what, two percentage points to explain, right?

Ryan Sweet:                      Mm-hmm (affirmative).

Mark Zandi:                      So of the two percentage points, how much of that is vehicle prices?

Ryan Sweet:                      Oh, I didn't do that. So what I did is, I looked at all supply constraint components. So that's new and used vehicle prices, that's all audio equipment. So when we add up all that, and most of it is used car prices, that in November added 1.8 percentage points, so my number was going to be 2.5. And that's the year over year increase in the CPI, if you exclude supply chain issues and energy. And 2.5 is exactly where the Fed would want the CPI to be.

Mark Zandi:                      Oh, so you're saying that all of the difference between where we are today and, I ran with just seven, but actually it's six, eight, so you were more precise. So you're saying six, eight versus 2.5. that can be explained by two things. One is, the energy prices, gasoline prices, home heating primarily, and the other is prices for those products that have been disrupted by the global supply chain issues that the Delta variant kicked off back in the summer.

Ryan Sweet:                      And to be completely transparent, here's the list of supply constraint components that I used. New vehicle prices, used vehicle prices, motor vehicle parts and equipment, motor vehicle maintenance and repair, audio and video, supporting goods and furniture.

Mark Zandi:                      All right. So man, I listen to that and I say, what's the big, why isn't this transitory? I guess, you can say the ironing out the supply chains sufficiently is going to take time. It's not, in the vehicle industry it's all about getting chips from Asia, so that the vehicle manufacturers here can produce more, get more on dealer lots and get those prices down, and that's a process, so that's not transitory. That's not next month, it may not even be next quarter, mid next year. Certainly by this time, next year you would think that, that would be our year, unless something really goes off the rails with the pandemic.

Ryan Sweet:                      Correct.

Mark Zandi:                      So in my mind from a, if I guess, we'll get into semantics about what's transitory, not transitory, but if you define transitory as not, that it should not affect the conduct of monetary policy, then would you consider this, what we're observing now as transitory, or non transitory, or more persistent? Maybe that's a dumb question, I guess.

Ryan Sweet:                      No, I think it's good. I'll let Cris go first.

Mark Zandi:                      All right. Is this in your mind transitory or not, Cris? What we're observing. In my mind, this feels like transitory, it doesn't feel like this is a persistent problem with inflation. It's going to last a little bit longer, but that's because of the disruptions that occurred. It's not something, inherently, fundamentally lifting the underlying rate of inflation here on a consistent basis. Rank growth, that's a different story.

Ryan Sweet:                      That's coming.

Cris deRitis:                       That's where I was going to go.

Mark Zandi:                      That's already here, right?

Ryan Sweet:                      No, not all.

Cris deRitis:                       It's not all there.

Ryan Sweet:                      No, it's not all there. It's really coming. [crosstalk 00:10:56]

Cris deRitis:                       That's where going to go. I think the part that Ryan has identified is transitory, and a couple quarters it'll subside, but I see that rent tsunami coming. It's not backed in the numbers fully, so I think that is going to persist for quite a while. [crosstalk 00:11:14]

Ryan Sweet:                      But when that comes, we're going to have a massive disinflationary force from supply chains.

Cris deRitis:                       Agreed. So you have some offsetting.

Ryan Sweet:                      We have a lot of offset there, so things are going to settle back down to the Feds target.

Cris deRitis:                       By the end of next year, that's fair.

Mark Zandi:                      That's what I'm saying. [crosstalk 00:11:33]. And I think the risks are pretty symmetric here. You could construct a scenario where rents accelerate more and the disinflation for these supply disrupted vehicles, audio equipment, don't fall quite as much, but you can also construct a scenario where the risks are that you get lower inflation. That the disinflation, deflation, it's not even disinflation, it's outright deflation, vehicle prices are stratosphere. They're going to come crashing back down. How do you like that for a metaphor crashing back?

Ryan Sweet:                      That was impressive.

Mark Zandi:                      Is that a metaphor? That's not a metaphor. I don't know, but you get-

Ryan Sweet:                      That's a zandism.

Mark Zandi:                      That's zandism.

Cris deRitis:                       A zandism, that's [crosstalk 00:12:10]

Ryan Sweet:                      But you're right. If you extract what trend growth is in new vehicle prices, used vehicle prices, pre pandemic, and just extend that forward and look at where we are now, we are miles higher. So those prices are mean reverting, maybe we don't get all the way back, but even if we retrace half of it, that's a lot of disinflation.

Mark Zandi:                      Deflation.

Ryan Sweet:                      I don't like using the word deflation.

Mark Zandi:                      Oh, you mean disinflation in the aggregate sense?

Ryan Sweet:                      Yeah.

Mark Zandi:                      Deflation is in the sense that [crosstalk 00:12:43]

Ryan Sweet:                      Oh, yes, you're right.

Mark Zandi:                      On the rent side, you didn't explain Cris, and we took it for granted, I guess, but for the listener, what's the deal on rents? Why are they rising so quickly?

Cris deRitis:                       Largely has to do with measurement, and how the BLS accounts for changes in rents over time. So prices, as we know, house prices have been rising, but asset values don't go into the CPI. And so, it's some type of user cost of those properties. So the BLS measures either the rent that people are paying, if you're renting a property, what's the change in that rent over time, so there's one category for that, that went up 3% on your [inaudible 00:13:29] basis.

                                             They also try to impute something called owner's equivalent rent, which is how much would you have to pay to, if you are a homeowner, how much do you estimate you would have to pay to live in your home? What would the equivalent rent be to live there? That went up a little bit faster, 3.5%, perhaps because homeowners are accounting for the fact that home prices have risen that might be working to their calculus. So assumption is that these changes, rents tend to be sticky, so those contracts don't get renewed every month. It may take six months or a year to actually catch up with the changing house price environment. So for that reason, we may continue to see additional rent increases feed into the CPI over the next year or so.

Mark Zandi:                      That's all good information. Actually, I was asking slightly [crosstalk 00:14:22] but I let you go, because that's all right too.

Cris deRitis:                       All right, fine.

Mark Zandi:                      Not really answering my question, but that's okay. That was still very good information.

Cris deRitis:                       What's the question?

Mark Zandi:                      Why are rents rising so fast? Fundamentally, what's going on out there that's [crosstalk 00:14:35]?

Cris deRitis:                       It's supply and demand issue. There's a lot more demand than supply, just like everything else.

Mark Zandi:                      And why isn't that going to be solved anytime in the near future?

Cris deRitis:                       Because, it's very difficult to build homes. There are supply issues there. Price of lumber is, well, okay.

Ryan Sweet:                      Back over a thousand.

Cris deRitis:                       Well, there was my statistic, but... [crosstalk 00:14:56]. I gave it away. I couldn't keep it in the bag. It's back over a thousand.

Mark Zandi:                      You haven't got in mine yet, so good. I'm still good.

Cris deRitis:                       I got others though, don't worry, got some backup. So, I think the costs are continuing to rise when it comes to new homes, and supply of existing homes remains very low. People are sitting on their properties, not willing to sell at this point.

Mark Zandi:                      So for a lot of this energy supply disrupted products, those prices are going to come in quickly. Energy's already coming in. The supply chains are going to iron themselves out, and those vehicle prices, and other supply disrupted products are going to see prices fall. But, the one place where we're going to see continued strong inflation and actually, and you're arguing an acceleration in inflation here over the next year or two is on rents. And that goes to this very severe shortage of homes, rental property. And actually, the shortage is even greater in the market for home ownership. If you look at the vacancy rate for homes for sale, that's at a all time record low. And, of course, a lot more people are renting single family homes as opposed to renting apartments, so that's going to be more persistent.

                                             The way I characterize that though is that, that's the way the Fed gets from pushing inflation below their target, which is where we were pre pandemic for really all the expansion since the financial crisis to the pandemic, to its target, which is now higher. They raised their target because we were so low for so long. They want inflation to be a little bit higher for a longer period of time, and the way you get there, the arithmetic is higher rent growth. That's where it's going to come from, that's how I viewed it.

Cris deRitis:                       That's certainly a part of it. You don't ascribe anything to wage, persistent wage inflation? You think the [inaudible 00:16:53]

Mark Zandi:                      This is interesting. I don't get, understand this completely, because wage growth is up, no doubt. But, all of that wage growth acceleration has been in the low part of the wage distribution. These are, and I know this from the Atlanta Fed wage track. Atlanta Fed tracks the same individuals over time, so it's highly, it's the best wage data because it's not messed up by compositional issues, industries and occupations, that kind of thing. And it shows that all of the wage acceleration that we've observed at least so far has been in the bottom quartile of the wage distribution. And that's lesser skilled, younger people, folks that work in industries that got nailed by the pandemic, leisure, hospitality, retail, restaurants, bars, personal services, that kind of thing.

                                             And those are the places where people are most worried about. That's, they're more likely to get sick, because they're interfacing with people more than anybody else. They're not like you and I, sitting in our back deck or, I'm in my bedroom right now, and I talk to one person outside when I have to get Wawa coffees. That's the only contact I had, and probably the only contact I will have today with somebody. Now, I'm getting my booster shot. Now, I'm going to get my booster shot later this afternoon, so I'll have two interactions.

                                             And also, these are the folks that more reasonably are fearful of getting sick. And they're younger, and they probably have, many of them have kids and getting childcares ready. So I guess, my point is that's where the labor shortage had been most severe again, as a result of the pandemic, and then as the pandemic recedes and these folks start coming back in, and by the way, you could see that happening in November, labor force participation for people with a high school degree surged in the month. Now, maybe it overstates the case, it's volatile monthly data, but nonetheless, and so I would argue that wage growth is going slow, decelerate. And the other thing I'd say is, productivity growth is up, and it's not only about the wage growth. When you think about inflation, it's not only about-

Ryan Sweet:                      Oh, it's up Cris, it's up.

Mark Zandi:                      Oh, it's up. Come on.

Ryan Sweet:                      Oh, you can try to hang your hat on one quarter. So we actually did [crosstalk 00:19:05].

Cris deRitis:                       I'm the optimist. I'm still the opt-

Ryan Sweet:                      Oh, you're the opt-

Cris deRitis:                       I'm the optimist, but that last data point is...

Ryan Sweet:                      So we did have some listener feedback, and they did want us to talk about productivity, so Mark, perfect segway.

Cris deRitis:                       [crosstalk 00:19:16] to do it. Go ahead.

Ryan Sweet:                      So there was a big drop in the third quarter, and a big upper revision to unit labor costs. And what I told the listener was that-

Mark Zandi:                      Unit labor cost, define what that means? Unit labor cost.

Ryan Sweet:                      It's cost per unit of labor.

Mark Zandi:                      It's labor [crosstalk 00:19:36]

Ryan Sweet:                      It's proxy for wages, compensation, things like that.

Mark Zandi:                      It's not self-evident.

Ryan Sweet:                      I thought you were you're quizzing me there.

Mark Zandi:                      [crosstalk 00:19:43] what that is.

Ryan Sweet:                      All right.

Mark Zandi:                      All right, there you go.

Ryan Sweet:                      So that data is really volatile, even quarter to quarter, even year to year, subject to big revisions. And one reason we didn't talk about it a lot is that, you got to look more at the trend in productivity growth and unit labor costs. And the trend is up.

Mark Zandi:                      But, well, in this quarter productivity's going to be way up, right?

Ryan Sweet:                      Oh, yeah.

Mark Zandi:                      Because, GDP is going to come surging back as Delta is going down. I saw our tracking estimate for Q4 is now 8.7% annualized growth in GDP, right?

Ryan Sweet:                      Correct.

Mark Zandi:                      So, and job growth is if anything, it is what it is, 500,000 per month, which is strong, but no acceleration. So if anything, we're going to get a bounce up, back up in Q4 productivity growth. And that's neither here nor there really, when you're thinking about what it means for inflation. It's really about the longer running trend here.

Ryan Sweet:                      Exactly.

Mark Zandi:                      And you can see productivity growth has definitively started to move higher, if you look over the last five years, for example, just to smooth out some of the quarterly volatility in the data to get to the underlying trend, it's definitively accelerating at this point. Pretty much almost back to the 2% that's prevailed since world war II, which is quite surprising if you believe it. All right, anything else on the CPI number that we should call out? I know you dig real deep into the bowels of these reports. Anything, or you may want to save that for the game, which we're going to go to next.

Ryan Sweet:                      Yeah, we can save it. I got to come up with another number.

Mark Zandi:                      I'm going to go first, because mine is very apropo.

Ryan Sweet:                      Oh, boy.

Mark Zandi:                      And it's another, oh, I'm not going to give you this hint, because it might give it away. But here's, it's two numbers. You're ready?

Cris deRitis:                       University of Michigan.

Mark Zandi:                      Is that it?

Cris deRitis:                       [inaudible 00:21:31] expectation?

Mark Zandi:                      No, I don't go back to that well very often. You see how he does, he's guilty of this. And now he's making me feel guilty. Don't do this. [inaudible 00:21:44]

Cris deRitis:                       There's nothing wrong.

Ryan Sweet:                      Cris' second number is something housing related.

Mark Zandi:                      Cris, [crosstalk 00:21:50].

Cris deRitis:                       I already gave you the second. I already gave you the number.

Mark Zandi:                      Two numbers.

Cris deRitis:                       All right.

Mark Zandi:                      And actually, I better check these numbers before. Because, there's so many numbers in these reports. Ready?

Cris deRitis:                       Yeah.

Ryan Sweet:                      Mm-hmm (affirmative).

Mark Zandi:                      You got to tell me what these two numbers represent, 5% and 3.3%. And this is very important to the outlook for inflation as well.

Cris deRitis:                       Jolts.

Ryan Sweet:                      Jolts, no.

Mark Zandi:                      This is not Jolts. Jolts is job opening and labor turnover survey, which was, that came out this week too, and that was pretty interesting. Let's not go down that path.

Cris deRitis:                       No.

Mark Zandi:                      [inaudible 00:22:30] Although, there were 11 million, close to a record number of open job positions.

Ryan Sweet:                      The difference between the number of job openings and the number of unemployed is at a record high?

Mark Zandi:                      I saw that. I'm a little surprised that wasn't your number for the game here we're playing. And by the way, everyone knows this game, right? I just give a statistic, we each give a statistic, and the other guys got to guess it. As you can see, these guys are stalling because they have no.

Ryan Sweet:                      Are you going down the median, CPI and trimmed? No, the trimmed piece [crosstalk 00:23:01].

Mark Zandi:                      No-

Cris deRitis:                       No.

Mark Zandi:                      ... but I could have done that.

Ryan Sweet:                      You could have. Is it the change in the CPI over the last two years?

Mark Zandi:                      Oh, you got it. Core CPI.

Ryan Sweet:                      Core CPI.

Mark Zandi:                      All right, let me explain. But you definitely, you got it. You deserve credit for this. So 5% is the year over year growth in core consumer price inflation, core being excluding food and energy. By the way, for folks out there that go, well, why do you keep stripping stuff out? Why are we doing that? And the reason is, because there's been a lot of research that shows that the core CPI is the best predictor of near term inflation, so out six, 12 months from now. Because, the energy prices that we've been discussing and food prices, go up and down and all around in a given month. So you don't get any information about where we're headed if you look at overall CPI. But, if you want to forecast the future for inflation, the best measure to start with is the core CPI, because it gets rid of that volatility in energy and food.

                                             And that was up 5% year over year through November, which that's, again, that's high, that's double where you'd want it to be. Again, the target here is 2.5%, so you're double. And the 3.3%, the second number I gave is the annualized growth and core CPI over the past two years through November. And this highlights a very important point, and that is another reason why inflation is so high today, is what economists called base effects. That is, inflation was really, really low last year at this time, because of the negative consequences of the pandemic. This was before the vaccines, businesses weren't shut down in the same way as they were earlier in the year, but the economy was still struggling. I remember back, we were talking about possibility of going back into recession in December of last year. In fact, the economy lost jobs in December of last year, because it was really struggling.

                                             It hadn't gotten any additional fiscal support from Congress and the Trump administration, so it was really struggling. But, if you look over the past two years, you abstract from those base effects, so November of 2021 versus November of 2019, I look at the annualized growth. That says, well, abstracting from the weak inflation of a year ago, those base effects it's three, threes. Three, three is high. It's higher than 2.5. Again, that's your target.

Ryan Sweet:                      But not that high.

Mark Zandi:                      Not that high. And by the way, this is the other point why inflation could be really low a year from now, because the base effects are going to go in the other direction, right?

Ryan Sweet:                      Exactly.

Mark Zandi:                      Now, it's six, eight on core. I'm at 5%, right? 5% year over year through November. So, that's going to make it much easier than inflation. And here I'm going to go so far to say, I talked about the risks to inflation. I think there's a reasonable probability, inflation is actually going to be close to zero, top line inflation going to be close to zero, next year, this time because of these base effects that we just talked about. All right, now what I gave was a good statistic, why? Because, it wasn't too hard. Ryan, eventually got it. It took him a little while, but he eventually got it. It wasn't too easy, it'd be too easy if Cris got it, then that would've been [inaudible 00:26:10]

Ryan Sweet:                      Cris is lumber pricing, would've been-

Mark Zandi:                      And it's relevant to the conversation. That is a beautiful statistic. Would you agree or disagree?

Ryan Sweet:                      I would agree.

Cris deRitis:                       Absolutely. That's a good one.

Ryan Sweet:                      A little self-promotion, pat on the back.

Mark Zandi:                      By the way, @MarkZandi, I'm just saying.

Cris deRitis:                       Got to tweet that one out.

Mark Zandi:                      I'm feeling too giddy. It feels like it's already nine o'clock at night.

Ryan Sweet:                      It's Friday.

Mark Zandi:                      Anyway, who wants to go next? Oh, though, Ryan, you had something you wanted to say, I interrupted you. I wouldn't let you.

Ryan Sweet:                      I wasn't going to say anything.

Mark Zandi:                      All right.

Ryan Sweet:                      I just agree with you. Oh, I was going to say, are you coming closer to my inflation forecast?

Mark Zandi:                      No, that's a point forecast, that isn't...

Ryan Sweet:                      All right.

Cris deRitis:                       I don't know.

Ryan Sweet:                      Look at him. You starting to drift.

Cris deRitis:                       He's inching.

Mark Zandi:                      Who wants to go next [crosstalk 00:27:05].

Ryan Sweet:                      Cris, or I'll just go.

Cris deRitis:                       Sure.

Mark Zandi:                      Good.

Cris deRitis:                       3%.

Mark Zandi:                      On the nose?

Cris deRitis:                       On the nose. 3.0.

Mark Zandi:                      3.0. Is this related to the CPI number?

Cris deRitis:                       No.

Ryan Sweet:                      Jolts?

Cris deRitis:                       No.

Mark Zandi:                      It's not Jolts, it's not CPI. Umich came out today. No, that was...

Ryan Sweet:                      Is that one year inflation expectations?

Cris deRitis:                       Oh, you're so close, 3%.

Ryan Sweet:                      12 year, or 12 month.

Cris deRitis:                       No.

Ryan Sweet:                      Long term inflation? It's got to be one of these.

Cris deRitis:                       Five year. [crosstalk 00:27:35]

Mark Zandi:                      Is that ours?

Cris deRitis:                       No, it's the Umich.

Mark Zandi:                      Oh, Umich. University of Michigan survey did come out, and it's 3% over the next five years.

Cris deRitis:                       3% over the next five years unchanged. Pretty much unchanged all year. It's bounced around a little bit, but-

Mark Zandi:                      That's interesting.

Cris deRitis:                       I point to that just because of the expectations aspect that we've talked about in the past being so important, we got a little volatility here now, but in terms of those longer term projections, I do agree with you that we're not going in this hyperinflationary environment.

Mark Zandi:                      That's a good one.

Cris deRitis:                       Consumers seem to agree.

Mark Zandi:                      That's interesting. If you thought anyone would be a little spooked by the inflation, it would reflect in their inflation expectations, it would be consumers, but you don't see it in the University of Michigan survey.

Cris deRitis:                       Even the one year, it's 4.9%, but that's unchanged as well.

Mark Zandi:                      Is that right?

Cris deRitis:                       Yeah.

Mark Zandi:                      Well, the other inflation expectations measures all look pretty good. The ones that I tend to follow more are those that come out of the bond market, five year, five year forwards, the breakeven inflation from treasury, inflation protected securities. They all look pretty good right, Ryan?

Ryan Sweet:                      They do.

Mark Zandi:                      They don't show any [crosstalk 00:28:46]

Ryan Sweet:                      They do. I'm sure any sign of getting dislodged or, the Fed would have to panic. And we talked about this in the past, the Fed can be patient as long as inflation expectations remain anchored and all signs are that they are.

Mark Zandi:                      And of course, economists' expectations is measured by the Philly Fed survey, which we participate in, that's right on, it's moved up. It's moved up largely because, the way the question is asked, and I know this because I answered the question is, what's your average annual inflation rate over the next five, 10 years? And just simply doing your arithmetic, inflation is high right now that you're going to provide a higher number than you otherwise would. If you asked me, what is inflation a year from now or two years from now, it'd be right back down to, low, 2.25%, 2.5%. So economists inflation expectations are right on target as well. So, no sign of inflation expectations are coming untethered here, at least [crosstalk 00:29:46]. That's a good one.

Ryan Sweet:                      I got a couple client questions asking me, now I want to pick your brains, see if I went too confident with this one. What's the probability of hyperinflation in the U.S.? What percent would you [crosstalk 00:30:04]. Basically to think about the doubling of prices every year, that's hyperinflation

Mark Zandi:                      You mean like Germany, [inaudible 00:30:11]

Cris deRitis:                       Venezuela.

Ryan Sweet:                      Venezuela. So I had a couple client questions. What would you put the probability of that happening in the U.S.? I said zero.

Cris deRitis:                       Zero.

Ryan Sweet:                      All right. I didn't mention-

Cris deRitis:                       The Fed's going to clamp down.

Mark Zandi:                      What would happen exactly, under what...?

Ryan Sweet:                      Usually it happens when you have a loss of confidence in the currency, and the central bank's just printing money left and right.

Mark Zandi:                      That's the only way, right?

Ryan Sweet:                      I can't think of any other way.

Mark Zandi:                      But I'm asking in the current context that, in which we live in the United States of America in, December 10th, 2021, what's the scenario?

Ryan Sweet:                      I couldn't come up with one, that's why I said 0%.

Mark Zandi:                      I agree with you. I'd say, I don't, zero.

Ryan Sweet:                      Usually, as economists you want to say there's absolutely no probability of something happening, but this one I'm pretty confident for not happening.

Mark Zandi:                      Well, okay. I'll take that back. Let's say a media lands in the middle of the Central Valley of California, I could [inaudible 00:31:12] hyperinflation in that scenario [crosstalk 00:31:15]

Cris deRitis:                       A small media, or...? What's the dimension of the [inaudible 00:31:18]

Mark Zandi:                      That would be a pretty sizable supply side disruption I'd say.

Ryan Sweet:                      So 0.1%.

Mark Zandi:                      There you go.

Ryan Sweet:                      All right.

Mark Zandi:                      Of course, apparently we have technology to push meters off track to hit us. Did you see that? [inaudible 00:31:35].

Cris deRitis:                       They're testing it.

Mark Zandi:                      They're testing it. All right. That was a good one though, Cris. All right, Ryan, have you [crosstalk 00:31:43].

Ryan Sweet:                      I came up with a new one.

Mark Zandi:                      You ame up with a new one? Fire away.

Ryan Sweet:                      219,000.

Mark Zandi:                      It's not initial in unemployment insurance claims, because that came in unbelievable, 188, 188,000.

Ryan Sweet:                      The lowest since the 1960s.

Mark Zandi:                      Actually, I'm a little nervous that it's too low now.

Cris deRitis:                       Well, that's going to be refined.

Mark Zandi:                      I don't know. It's been like that for a few weeks now, [inaudible 00:32:08]

Ryan Sweet:                      Week to week, you have to ignore jobless claims, those are all seasonal factors. So the seasonal [crosstalk 00:32:13] factor anticipated roughly 100,0000 increase in new filings. We got a 60,000 increase, so the seasonal adjustment factor just crushed the number that was reported.

Mark Zandi:                      So what's reality, where are we?

Ryan Sweet:                      That's my number.

Cris deRitis:                       That's why I went with the four week moving average.

Ryan Sweet:                      There you go, Cris, four week moving average.

Mark Zandi:                      Hold on, wait a second. Then, don't I get credit for this somehow? I'm the one that brought [crosstalk 00:32:35] attention to the UI claims. Come on, I was getting there, no?

Ryan Sweet:                      No. Cris jumped in.

Mark Zandi:                      Oh, I didn't hear him.

Ryan Sweet:                      You can get partial credit.

Cris deRitis:                       We can share, we'll share, I'll share.

Mark Zandi:                      We'll share, you'll share.

Cris deRitis:                       All right.

Mark Zandi:                      And I did it so gracefully too. I didn't even take credit. I just started talking about it.

Cris deRitis:                       [inaudible 00:32:55] But you asked for credit afterwards.

Mark Zandi:                      Which wasn't very graceful. That's a good point, actually. I should have just let it lie. Let it sink in. Everyone would realize, oh-

Cris deRitis:                       That's Sandy guy, but now...

Mark Zandi:                      But now, oh my gosh, what a ego. You got to get credit for everything. There's truth to that though, all right.

Ryan Sweet:                      219.

Mark Zandi:                      219 is the four week moving average, and that's reality?

Cris deRitis:                       [crosstalk 00:33:32] That's closer to reality. 184s.

Mark Zandi:                      What's reality? Who do you think we are? Where are we on UI claims? Initial claims from unemployment insurance, this is layoffs.

Ryan Sweet:                      230. 225, 230.

Mark Zandi:                      That's back.

Ryan Sweet:                      That's low.

Mark Zandi:                      That's the employment rate.

Cris deRitis:                       For sure.

Mark Zandi:                      You don't think we're full employment though?

Ryan Sweet:                      No, prime age.

Mark Zandi:                      Prime age, EPOP, employment to population.

Ryan Sweet:                      It's encouraging. It's not surprising that we're getting very low levels of claims, because businesses aren't laying off workers, people are quitting left and right, but layoffs are very, very low.

Mark Zandi:                      Hey, it's almost like we could call the podcast right here. It was a pretty darn good podcast, but we should move on, don't you think? You thought I was serious. We could, but we should keep going, I think.

Cris deRitis:                       Our listeners have become accustomed to one, two hour dialogues.

Mark Zandi:                      Well, we've already been talking for 45 minutes or something.

Ryan Sweet:                      Are we?

Mark Zandi:                      I think so.

Ryan Sweet:                      Wow. Time flies.

Mark Zandi:                      That's okay. We're going to push forward. So the topic that we're going to tackle, as you know we do the statistics check, and then the game check, and then the big topic. And the big topic is the deep dive. In this week I thought we dive into bubbles, asset markets. And it just feels like a lot of pieces of information, data out there that signaling that these, that asset markets. When I say an asset market, that's stocks, that's that's bonds, that's housing, that's crypto, if you can call that an asset, which we can debate, but some people view it as an asset.

Ryan Sweet:                      Cris would.

Mark Zandi:                      Cris would obviously. Commercial real estate, commodities to some degree, anything that people attach a value to and is a "store of value" that's an asset. And asset prices, the price for, you pick it, pretty much everything. It has gone completely skyward here, and the question is on the table, is it a bubble? And first, to answer that question, is it a bubble? And of course, if it's a bubble, that's not a good thing, because bubbles often burst, and that means prices fall, and people lose money, and that has economic implications. The housing bubble burst and that created the financial crisis. And of course, we had the Y2K bubble that was the internet bubble in the equity market back in the late '90s, early 2000s, that blew. That did less damage, because that was equity, not debt, which we can talk about the distinction there, but nonetheless, bubbles generally end badly, so it's an important question.

Cris deRitis:                       They have to end. It's [crosstalk 00:36:28] it's not a bubble.

Mark Zandi:                      Is that right? Is that true? Can't they [crosstalk 00:36:32] I have this metaphor of a bubble and I can take the air out, can I? And doesn't [crosstalk 00:36:38]

Ryan Sweet:                      Can you think of an example where that happened, where we deflated a bubble without it popping? I can't.

Mark Zandi:                      Well, there's only, I can only think of two historical examples of bubbles. One is the housing bubble, and the other is the Y2K bubble. Are there any other, I'm thinking about in the U.S. context, I'm sure there's cases overseas that I'm not thinking about.

Cris deRitis:                       So for when oil prices skyrocket and then they come down, do you consider that a deflation?

Mark Zandi:                      That is a...

Cris deRitis:                       Is that a bubble that deflates or how would you characterize that?

Mark Zandi:                      That's a good question.

Cris deRitis:                       I remember a few days or years ago, we had this huge run up in prices, and then the economy didn't actually collapse or anything.

Mark Zandi:                      That's a good point. Oil is an asset. And it goes up and down in price, and it can be subject to speculation because it's prices determined in financial market, so I think you would consider that. So that rose and then burst. Well, that's deflated, that might be the example.

Cris deRitis:                       That's my example.

Mark Zandi:                      Is that what you're saying?

Cris deRitis:                       Yeah, but I don't consider that a bubble. It's just...

Mark Zandi:                      Oh, you don't.

Ryan Sweet:                      Would you say [crosstalk 00:37:58].

Cris deRitis:                       For me a bubble has to cause damage.

Mark Zandi:                      Let's know now, because I don't know.

Cris deRitis:                       Well, that's my definition.

Mark Zandi:                      Really?

Cris deRitis:                       Let's agree on the definition here.

Mark Zandi:                      All right. How would you define it? I'll hold mine in reserve, but how would you define a bubble?

Cris deRitis:                       I would define a [crosstalk 00:38:16]. A bubble, I would define as a situation where prices are outstripping fundamental values, and they are followed by a significant or sharp correction back towards that level. They may overshoot or they may land close to the fundamental value, but it's not a gradual return to equilibrium.

Ryan Sweet:                      I would include speculation. I think speculation has to be part of a bubble.

Mark Zandi:                      Exactly.

Cris deRitis:                       Well, I guess, that's what I mean by outstripping fundamental value.

Mark Zandi:                      You can have a, I'd say markets right now are outstripping fundamentals, but I'm not sure they're a bubble.

Cris deRitis:                       You don't think they're speculative?

Ryan Sweet:                      Oh, I'm getting closer to saying [crosstalk 00:38:58]

Mark Zandi:                      Well, that's why we're talking about it, because we moving in that direction.

Cris deRitis:                       But, I guess, it depends which asset we're talking about.

Mark Zandi:                      It depends on which asset we're talking about. But you would say then, a bubble is a asset that is overvalued one, that it's prices outstripped its underlying source of value, corporate earning stocks, rents, housing, crypto who the hell knows, that's why it might be a bubble, that kind of thing. Second criteria is that there's speculation. Define speculation, what does that mean?

Ryan Sweet:                      Oh, I would describe it as just people buying something because the price is going up.

Mark Zandi:                      So I'm going to buy toady-

Ryan Sweet:                      You're just chasing.

Mark Zandi:                      ... because I think I can flip it. That would be the terminology in the housing market. I can flip it and make a quick buck. That's the only reason I'm buying this. There's nothing other than I'm going to find the greater fool, the bigger fool than me, and I'm smart enough to get out of this quicker than anybody else before it goes down. So you need overvaluation, you need speculation. What else would define a bubble? Anything else to define a bubble?

Cris deRitis:                       There's always the question about leverage.

Ryan Sweet:                      That's a good one.

Mark Zandi:                      Does it have to have leverage though?

Cris deRitis:                       I don't think it has to, but I don't think it's a necessary condition, but certainly it's supportive.

Mark Zandi:                      So the idea there, leverage, you mean the buyer of the asset goes borrows money to buy the asset?

Cris deRitis:                       Correct. Fueling that speculation.

Mark Zandi:                      And if that happens, and that bubble blows, and the price falls, of course, the value, the amount of debt owed doesn't decline, it's still the same amount of debt, that's the prescription for the borrower, the buyer of that asset not paying back that debt, and then you got a financial crisis, then you got a financial problem. Because, all those creditors, all those banks and everyone, finance companies who ever extended the credit now got a problem. And then that reverberates around the, it hurts everybody, because everyone is going to be affected by that, because even good people, good credits can't get credit to do whatever they want to do. So it's overvaluation, it's speculation. Leverage definitely is a tell, but it's not a necessary condition for a bubble that's what we're saying, right?

Ryan Sweet:                      I would agree.

Mark Zandi:                      It's generally an element of a bubble, generally.

Cris deRitis:                       And then there's the, so I guess our-

Mark Zandi:                      It has to blow.

Cris deRitis:                       The correction, is that necessary or I guess, that's where we differ in the definition. I'm saying it does, but...

Mark Zandi:                      Because there's, a bubble can burst and prices, meaning go crashing down, or the bubble can deflate, meaning prices go flat and stay where they are, and let the underlying source of value, earnings or rents catch up, right?

Ryan Sweet:                      Mm-hmm (affirmative).

Mark Zandi:                      I would say, my sense is that, that's the possibility. Bubbles can burst and they do burst and we've seen that, but that isn't a necessary condition. Because, you only know, then you're saying, I only know a bubble X post. I'd see it first, it's a bubble.

Ryan Sweet:                      But that's partially true.

Mark Zandi:                      I don't believe that to be the case.

Ryan Sweet:                      That's partially true though. It's really difficult to identify bubbles in real time.

Mark Zandi:                      I'm pretty good at it actually. I'm pretty good at it.

Cris deRitis:                       I think the challenge is the fundamental value. What is value, that's always been the challenge.

Mark Zandi:                      Actually our models, by the way, help us with this.

Ryan Sweet:                      Correct.

Mark Zandi:                      They really help us.

Cris deRitis:                       They do.

Mark Zandi:                      Because the way we, you want to describe how we model, Cris or Ryan, how we model asset prices? It's actually, I think it's a pretty cool way of modeling things, I think. I don't think it's that novel, but it's very interesting. And I think it's a useful way of... By the way, I don't think as economists you can talk about the economy and the prospects for the economy without talking about asset prices, particularly when asset prices are significantly high relative to their underlying source of value or very, very low relative to their source of value.

                                             Generally we don't talk about stock prices, or bond prices, or housing values, unless that's the case, unless values are very high or very low. And then that becomes a, that's a macroeconomic issue. That's an issue for policy makers. Asset prices are in the reaction function of the Fed explicitly. The Fed is saying, hey, this is part of what I look at when I make a decision around interest rates. So this, you can't put your head in the sand here. You got to have a view, and you have to forecast these asset prices.

Ryan Sweet:                      Well, for the Fed it's financial stability. They're not necessarily saying, oh, we want the S&P 500 to be X. They're not aiming for a certain level for the S&P. They just want financial stability. And that's why they're concerned and they put out that financial stability report, I think twice a year, that they're seeing signs of [inaudible 00:44:04] in a number of asset markets.

Mark Zandi:                      Well, that's interesting. So, if you said to me we had a bubble, overvaluation, speculation, but no leverage, therefore if that bubble bursts it's not a financial system problem, they would not be worried about it. They would not be considering that.

Ryan Sweet:                      There's got to be some contagion component to it.

Mark Zandi:                      Well, I guess that's reasonable. But again, we think leverage is a, if it's not a necessary condition, it's pretty close, for a bubble.

Cris deRitis:                       I guess, there could be indirect leverage, right?

Mark Zandi:                      Oh yeah, for sure.

Cris deRitis:                       So there could still certainly be concerned about a market blowing up if the counterparties then are, have leverage elsewhere.

Mark Zandi:                      Or I'm using the asset to buy other stuff, and leverage that stuff up.

Cris deRitis:                       Exactly. That's my collateral.

Mark Zandi:                      That's your point. That makes a lot of sense. All right, so we've had two in recent modern history, two bubbles, because that checks all the boxes. The equity market bubble, the Y2K bubble in 2000, and the housing bubble that led to the financial crisis. Any differences in those bubbles? Things that are important in the context of identifying a bubble, or in terms of the implications of the bubble bursts for the economy and for the financial system from this [crosstalk 00:45:35]

Ryan Sweet:                      Speculation was in both of them. So you think of Y2K, everyone was buying tech stocks, anything that had .com attached to it. I also know someone that started a business with a.com in there around that time.

Mark Zandi:                      Oh, yes, economy.com

Ryan Sweet:                      You're a little slow on the trigger there.

Mark Zandi:                      I was like, that's a long time ago.

Cris deRitis:                       Overhanded.

Mark Zandi:                      I paid a lot for that URL. Well, we paid a lot for that URL, economy.com, although I think we got a pretty good return out of it, I think.

Ryan Sweet:                      It's still around. We still have it.

Mark Zandi:                      We sold it to Moody's, and they paid for it, so they paid a pretty price for it. So I think we [crosstalk 00:46:16]

Ryan Sweet:                      But, back then you had, what was it? Pets.com, and it was all these tech speculation. People were buying anything that was tech related, created a big asset bubble.

Mark Zandi:                      Well, what's the big difference? There's a, in my mind, this is a quiz. In my mind, there's a big difference with between the Y2K bubble and the housing market bubble, circa, 2005, 2006, at least in terms of its implications for the economy.

Cris deRitis:                       Oh, well, in terms of, I see lots of differences, but in terms of implications is just the, I would say the scope, who holds stocks versus who owns a home.

Mark Zandi:                      That's a good one.

Cris deRitis:                       So that certainly, you hit housing, you're hitting a lot of people versus a relatively small group of stock [crosstalk 00:47:01]

Mark Zandi:                      I think home ownership is what, two thirds roughly, give or take. And stock ownership broadly defined as about 50% of the population, and there's a big chunk of those that don't own much stock at all. It's really [crosstalk 00:47:16]

Cris deRitis:                       Concentrated.

Mark Zandi:                      25%. And that's the other big difference. You're talking about very wealthy individuals compared to middle income Americans.

Ryan Sweet:                      When you say contagion was a lot different. When the tech bubble burst that was isolated to people that own stocks. When the housing bubble burst, banks were holding these worthless assets and that just caused a financial crisis.

Mark Zandi:                      Well, the way I would frame that or to say that is, the big difference between the two is one was the bursting of the equity bubble. It's equity, it's not debt. There was some debt, margin debt presumably, because people can borrow to buy stocks, but that was relatively limited small amount of margin debt.

Cris deRitis:                       And that was an accelerator then, as we talked about.

Mark Zandi:                      Housing, that was all, that was leveraged. People borrowed a boatload of money, two years exploding subprime arms. And also, there was a lot of fraud as we know, certainly in hindsight, in those mortgages. People were lying. They weren't owner investors, they were investors, they weren't owners. They lied about their income. They lied about-

Cris deRitis:                       The appraisals were biased.

Mark Zandi:                      So very, very different. So the fallout from the bursting of the Y2K bubble was we had a recession, but here I'd say this, we wouldn't have had a recession after the Y2K bubble, if not for 9/11. 9/11 is what did us in, and ultimately, and that's how we got the recession. It would've been a tough period after the Y2K bubble burst, but I don't think we'd had a recession. Of course, after the bursting of the housing bubble, that was a mess. We paying the price 10 years later until the pandemic. So I view that as a big difference. Oh, let's go back. I asked the question and I don't think we answered it. How do we model asset prices? You want to describe that?

Cris deRitis:                       Sure. So we use an error correction framework, which is very intuitive in the sense it follows that process you just described in terms of assessing what is a fundamental value of an asset. So first we'll, in a first age of an error correction model we consider what is the underlying, what are the under fundamental drivers of an asset? So if we're talking about housing, we might look at different supply and demand factors, population, or other factors that might influence how much housing really need to support a particular economy. So after we establish what the fundamental value is, we then project how those values might change over time. So we might look at different ratios, like a price to rent ratio or a price to income ratio. We might assume that in the equilibrium house prices should grow at the rate of income growth to maintain an equilibrium type of relationship.

                                             And then we, as a second stage, we model the difference between where the prices are at any given point in time and this fundamental value, and how quickly or, and by which process should prices change to, to converge to that longer run equilibrium. So it's those two stages in which I think is a really nice mental device, if you will. Because, first you think about, what is the value? What should the value of this asset be? And then as a second stage is, how do I get there? And the speed at which you get there can vary depending on the asset. So if we talk about stocks, for example, you might assume prices can adjust really quickly. They're fairly liquid, established markets. With housing, you have a lot of transaction costs, may take a longer time to actually adjust to those longer term values.

Mark Zandi:                      So that's a good description.

Cris deRitis:                       In a nutshell.

Mark Zandi:                      It does beg the question of, you can't have a bursting of the bubble in our models. That doesn't happen. The model isn't going to say an asset market that's overvalued and speculative is going to burst. It'll basically say you're going to have prices come back down in a reasonably orderly way to where they should be given the underlying thing that drives the value of that asset.

Cris deRitis:                       Yes and no. You couldn't have swings, the model certainly can generate. You could have a fundamental value, and if you are well above that fundamental value the model could have you swing around, could induce a cycle on [crosstalk 00:51:46]

Mark Zandi:                      Model's really, and I don't mean this as any criticism, because we built the model. It's pretty hard to design, to estimate a model that's going to give you that kind of correction, the error correction process, getting back down to the equilibrium value so to speak. Here's the other thing I'd say is, if you look at our forecast, when we're in a market, that's significantly overvalued and you look at our forecast, it always shows the price of that, let's say stocks, for example, or housing, basically going flat, maybe down a little bit over time to let earnings catch up or let rents catch up to that value.

                                             That forecast can actually look silly for periods of time, because by definition a bubble keeps going. It's not a bubble unless it keeps going. And it gets bigger and it bigger and bigger and it finally sucks everybody in, and once everyone's in, then it blows. So you could look stupid along the way, because you'll keep saying, oh, this market's overvalued. It's going to correct. Price is going to go flat, come down, but no, it keeps going. But, you even become more convinced that the market's going to go down. Am I making any sense at all?

Cris deRitis:                       So it's difficult to model the discontinuity, the sudden jump. At what point do we decide to correct? Why was it that particular black Friday and not a Monday before?

Mark Zandi:                      Well, you look at our stock price forecast. Whatever value it is when we do the forecast, that's the peak. Because, the model says that it's overvalued, [crosstalk 00:53:26] But of course, then it goes up the next quarter, and then the same thing happens. So the, someone looking at the forecast goes, are you guys idiots? What the hell are you doing? But that's the reality of a bubble. You have to have the courage of your convictions. And you're saying, actually I'm even more confident that this thing's going down than I was a quarter ago. It's just, you're the dumb one for buying into it.

                                             This is what happened in the housing bubble. For two, three years leading up the housing bubble we were saying, housing's overvalued, we got a problem. Housing's overvalued, we got a problem. Prices kept going up. And then people say, well, what are you guys thinking? What are you guys doing? And it affects, it has impacts, that's a bubble. That's when everyone is sucked in, that's by definition a bubble. Fortunately, we didn't get sucked into that housing bubble. We stood our ground. Same with the Y2K bubble, by the way, go back and take a look.

Cris deRitis:                       So maybe another criteria is the justifications. Once the justifications get out of whack, I remember during the housing bubble, [crosstalk 00:54:32], there was nesting, and people don't want to travel anymore because of 9/11, therefore they're going to invest in their home. So you can start to come up with all kinds of ideas to justify why values can hold at this level. So, maybe it's a [crosstalk 00:54:49]

Mark Zandi:                      The other anecdotal thing is you, the infamous one, I get into a taxi cab and the taxi cab driver's saying, oh, I was just buying, pets.com or oh, I just bought my fifth house on Long Island, and that's the kind of crypto, well, that gets us to brass tax here. So the listener's now saying, enough already, are these markets bubbles? What's going on? So let's take them one at a time. Which one do you want to start with? And then let's do stocks, because we could do this forever. Let's do stocks. Let's do single family housing obviously. And let's do crypto. Anything else we should be doing, you think? Is that enough?

Ryan Sweet:                      I think that's lot.

Mark Zandi:                      Again, all the asset markets are pretty highly valued here.

Cris deRitis:                       Or bonds to throw in Ryan's 10 year.

Mark Zandi:                      Spreads in the bond market, oh, the 10 year, you want to talk about interest rates in general. By the way, people get a little confused here, but low rates means high prices, high bond prices. So the lower the rates are, the higher bond prices. And by the way, that's also another way of thinking about overvaluation, which I think we'll get to in, excuse me, just a second. So you want to talk about bonds as well?

Cris deRitis:                       Then we got the whole personal finance

Mark Zandi:                      10 year treasury yield. We go back to that debate.

Ryan Sweet:                      The discussion around crypto should be really quick.

Mark Zandi:                      Oh, because it's-

Ryan Sweet:                      It is a bubble.

Cris deRitis:                       It's clearly a bubble.

Ryan Sweet:                      So, there you go.

Mark Zandi:                      Well, Cris is going to take the other side of this. All right, [crosstalk 00:56:24].

Cris deRitis:                       Maybe the Zandi coin is in a bubble.

Mark Zandi:                      All right.We're going to do stocks. We're going to do housing, and we're going to then do crypto. Because we got to crypto. When I say crypto, that's now becoming a catchall for all kinds of wacko stuff, Non fungible tokens, and stable coin and so forth and so on.

Ryan Sweet:                      It's just a matter of time until Mark has a NFT.

Mark Zandi:                      I know.

Cris deRitis:                       You're on Twitter, maybe on TikTok soon.

Mark Zandi:                      He created an NFT with something. I can't remember what it was. I don't know if they sold it or not, but he was telling me about it anyway. Stocks, S&P 500. I'm looking at it today. I'm going to pull it up here just to see where it is. I'm guessing the S&P 500 is around 4,700. It's 4,696, there you go. And I think that's within spitting. That's pretty close to a record high. We're up, I don't know, 20% this year, at least on the S&P and that's after multiple years of, whatever rising price. Our model, going back to our model that says this market's overvalued by 15%, E even at these low interest rates, by the way, that's an important point. Asset can be high and they should be high when interest rates are low. And obviously interest rates are very low. So asset prices should be very high, but we're saying is here, they're higher than even you, you would think they would be given these low interest rates. Correct. So, okay. With that as backdrop is the stock market a bubble?

Cris deRitis:                       Yes, it's overvalued.

Mark Zandi:                      Well, no.

Ryan Sweet:                      It can be overvalued, but not a bubble.

Mark Zandi:                      It can be overvalued. Remember, overvalued check, I think we all agree on that. Meaning, it's outstripped where it should be given where interest rates are in the source of that is corporate earnings at the end of the day. And they're okay. They're pretty strong. So again, you would expect stock prices to be high, but it's overvalued. We're saying it's even higher than you would expect given rates and given corporate earnings, roughly speaking.

Cris deRitis:                       Use the [inaudible 00:58:39] PE for-

Mark Zandi:                      I haven't looked at that recently.

Cris deRitis:                       But in terms of overvaluation, that's my gauge. It's not just the level, it's relative to earnings.

Ryan Sweet:                      That says [crosstalk 00:58:51]

Mark Zandi:                      True measures evaluation. And you're saying, what is the [inaudible 00:58:54] PE? That's like a long run PE, right?

Cris deRitis:                       Cyclically adjusted price earnings ratio. And I think it's just, all the PEs are elevated, certainly. Choose whatever you want, [crosstalk 00:59:08].

Mark Zandi:                      What's that?

Ryan Sweet:                      You have the [inaudible 00:59:11] indicator, which is the total value of stock or equities as a share of nominal GDP.

Mark Zandi:                      That's the one I like. Or even more than that, I like the value of all publicly traded stocks and enumerator and the denominator, corporate GDP. The BEA, Bureau of Economic Analysis, calculates GDP produced by corporate entities that are, publicly traded.

Ryan Sweet:                      That's a good one.

Mark Zandi:                      No, not publicly traded, all corporate entities, but the bulk of that are public traded company. And that is, if you look at it, got a nice chart of it. It's very, very close to the peak during the Y2K bubble. So, overvaluation, check. We got that one. What about speculation?

Ryan Sweet:                      See, this is where I changed my view. I was like, it's overvalued but not a bubble. It's a bubble.

Mark Zandi:                      What kind of speculation are you focused on? When you say that, speculation that's more of an anecdotal generally kind of thing. So what are you thinking about?

Ryan Sweet:                      I'm going to share a chart. Now, people who are listening on the podcast won't see it, but on YouTube you can see it. And I'm sure I can send it to you and you can tweet it out.

Mark Zandi:                      We'll do it. So you're going to pull a chart?

Ryan Sweet:                      Yep. So this is the value, I think we talked about last week, the value of margin accounts that brokers and dealers, and just look at what's happened recently.

Mark Zandi:                      Well, this gets to the leverage.

Ryan Sweet:                      This is leverage. And, but also when you, this part is speculation.

Mark Zandi:                      Speculation, you're saying.

Ryan Sweet:                      You got to finance, buying your meme stock somehow.

Cris deRitis:                       So meme stock is what I pointed at.

Mark Zandi:                      [crosstalk 01:00:51] high was around Y2K. That was consistent with the Y2K bubble, right?

Ryan Sweet:                      Mm-hmm (affirmative).

Mark Zandi:                      It's lower. Back in 2000, obviously the economy was a lot smaller, so we should probably deflate this with something, right?

Ryan Sweet:                      You can look at it, probably a share of GDP or something. I can come up something, but even so it's double in a few quarters.

Mark Zandi:                      To me, so you're saying it's going from 300 billion. This is debt. This is what people borrow in their brokerage accounts to go out and buy stock.

Ryan Sweet:                      Correct.

Mark Zandi:                      You're saying it's doubled since the pandemic hit?

Ryan Sweet:                      Correct.

Mark Zandi:                      300 billion to 600 billion.

Ryan Sweet:                      So this could be an accelerator to a correction. So a correction starts, you start to get more margin calls. If you don't have the cash to bring up your accounts, you're going to have to sell that asset. And then you start this cycle where, we get a bigger drop in stock prices because of any of these margin calls.

Mark Zandi:                      Is there any other benign explanation for this Ryan? What else could hap be explaining this other than people are starting to lose their minds?

Ryan Sweet:                      Well, I go to that one that people have lost their minds.

Mark Zandi:                      Cris, do you know any other explanation for that surge in margin debt? No. [crosstalk 01:02:01].

Ryan Sweet:                      Can you by crypto on margin?

Mark Zandi:                      On that margin debt, that would be interesting. Well, I guess there's other signs of, that's a really good one, Ryan. I guess, there's other signs of speculation, I guess meme stocks. Game Stop, good example. They're just picking a stock and just buying it just to do it. Drive hedge funds that have shorted it crazy. I guess, that was Game Stop.

Cris deRitis:                       I guess options activity is another.

Mark Zandi:                      Oh, I haven't looked at that. Have you looked at that recently?

Cris deRitis:                       Just at a high level, I understand that options activity is through the roof. People are actually buying and selling more options than underlying stocks, so the speculation is...

Mark Zandi:                      I'd love to see that data. I haven't seen that data. That would be interesting.

Cris deRitis:                       Do you have something, Ryan? We can track it down.

Ryan Sweet:                      I can track it. There is an indicator. I don't remember exactly. It's like, you look at the share of puts versus calls, something like that. And it's like a bearish signal or a bullish signal, so I can take a look at it.

Mark Zandi:                      I guess, specs would also be another sign of froth at least. Those are special purpose acquisition companies, I think. So these are shells of corporate entities that have been established to go out and, instead of IPOing, you can create a spec and put assets into it and create a company. I think, I guess that might be a sign of froth. Well, so Ryan thinks this is a bubble. We've now reached the threshold for a bubble, overvalued speculative and leverage.

Ryan Sweet:                      Correct.

Mark Zandi:                      Cris, would you say it's a bubble?

Cris deRitis:                       It's a bubble now, but you have to wait for the correction. That's the...

Ryan Sweet:                      Well, it's coming. The stock market corrects every, on average, every...

Cris deRitis:                       There's a high probability this is a bubble, if you want me to put it that way.

Mark Zandi:                      I'd say it's a baby bubble. That comes [crosstalk 01:04:01] off the tongue, baby bubble.

Ryan Sweet:                      Baby bubble, [crosstalk 01:04:06] I think we got the title of our podcast.

Mark Zandi:                      That's the title of the podcast, somehow some way, baby bubbles [crosstalk 01:04:12]. It's a baby bubble, because it feels like a bubble, but it's not quite big enough to really be a bad bubble, big, bad bubble. I love that. That's even better. Big, bad-

Ryan Sweet:                      Baby bubble. Ben signed off, he's he's out.

Mark Zandi:                      Signed off, big, bad bubble. I'm going to write about big, bed, big, oh, Jesus, big, bad bubble this weekend. That's what I'm going to write about.

Ryan Sweet:                      That's your COVID 19 update.

Mark Zandi:                      Oh, did I tell you guys, @MarkZandi, did I tell you that today? @MarkZandi. I'm having way too much fun.

Ryan Sweet:                      There's your viral tweet?

Mark Zandi:                      I'm having way too much fun.

Cris deRitis:                       Something in the Wawa coffee this morning.

Mark Zandi:                      Oh geez. All right, let's stocks. We concluded that if stock prices rise another 20% in the coming year, I think we got a problem. Especially if margin debt goes from 600 billion to 800 billion, we to a problem.

Cris deRitis:                       Or a trillion.

Mark Zandi:                      So keep your eye on that one baby. All right, single family housing. All right, Cris, you got to lead the way on this one. What do you say?

Cris deRitis:                       It a bubble?

Mark Zandi:                      Do the checklist.

Cris deRitis:                       All right, overvaluation, yes.

Mark Zandi:                      Big time check, right?

Cris deRitis:                       Yes. Price to income, price to rent ratios, take your pick. They're all.

Mark Zandi:                      Well, you did a really cool chart though, Cris. I don't know if you can pull it up, Ryan. The percent of metropolitan areas across the country, there's 400 plus MSAs, Metropolitan statistical areas, that have had house price growth of over 10% in the past year is 80% of them. 80% of the MSAs have experienced double digit price growth. And 25% of them have experienced 20% plus year over year growth. And of course, [crosstalk 01:06:18] rents haven't risen that fast.

Cris deRitis:                       And it was 50% during the housing bubble.

Mark Zandi:                      So by this, if you looked at that measure, you say, what we're in now is even worse than the bubble we were in back in the mid 2000s, right?

Cris deRitis:                       That's right. All right, so overvaluation that does get the check. Problem, I would say not no problem.

Mark Zandi:                      Well, if someone might argue, Cris, just to press you on that one a little bit, remember the affordable housing shortage we talked about. So, hey guys, there's no supply, why do you think it's overvalued? And then, by the way, fixed mortgage rates are 3%, so why shouldn't house prices? And we've got remote work, meaning all these New Yorkers are moving into Atlanta and driving up prices, or Bay area residents moving into Boise and driving up prices. So isn't that account for the high house price growth we're observing?

Cris deRitis:                       So I would say the prices right now are disconnected from fundamentals today. Price to income ratio is out of whack, price to rent ratio's out of whack. But, so if you wanted to claim that in the future, incomes are going to rise faster, or rents are going to rise faster and restore that balance. Sure, it's possible, but I don't see it. I don't see incomes screaming ahead to compensate.

Mark Zandi:                      All right. Overvalued, speculative.

Cris deRitis:                       At a national level, I don't see it. Some markets certainly look frothy, but at a national level, I don't see what we saw during the housing bubble.

Mark Zandi:                      Flippers, guys coming in, people coming in buying and then quickly selling for a quick buck. You don't see that.

Cris deRitis:                       A quick buck, that's right. HGTV.

Mark Zandi:                      You see investors, but they're longer term.

Cris deRitis:                       That's right. So you do see investors coming in. I think that's motivated by the lower interest rates. They're looking for yield, but they seem to be more of the buy and hold variety. I'm going to buy this property. I'm going to rent it out. Income generating. I'm not looking to flip it right away. A lot of these investors are coming in with cash. I guess, this goes to number three, which is the leverage. They're coming in with cash, so they're too, they're not going to flee necessarily at the first sign of a small decline in prices. So I don't see the investor leverage, and even on the homeowners side, we also see mortgage standards are pretty tight. So overall leverage doesn't look that concerning, but it's starting to get concerning. Mortgage debt is growing at a accelerated pace now, about 9% year over year versus 5%.

Mark Zandi:                      Have you dug into that at all, that acceleration, and the growth and mortgage debt outstanding, and what is driving that? Do you have any sense of that? And we get this nice data from Equifax, the bureau, so we can look at it by score band, we can look at by region, we can look at it in lots of different ways. Have you noticed anything in particular in that data? Is it broad based, what's going on?

Cris deRitis:                       It's fairly broad based. So it's not that I don't see subprime. I don't see that we're lending, a lot more lending in 620. But if I look at the Fannie Mae, Fred Mac reports, and they do show some loosening of the standards there. So again, it's not all the way back to those crazy levels, but you do see more folks with higher debt to income ratios, or debt to income ratio above 43% that is growing the fraction of loans that are to put people with less than a 680 credit score also growing. So there are some signs of concerns, so I would say not a bubble right now, but if we keep at this for another year then I'm concerned, then that's the red flag.

Mark Zandi:                      And house prices are up, I don't know, 15 to 20%, depending on which house price measure you look at, over the past year through, let's say October. And what I'm hearing you say is, the housing market is overvalued, but it's not a bubble yet. If house prices rise another say 15 to 20% between now and this time next year, you'll probably be saying, this is a bubble.

Cris deRitis:                       Yeah.

Ryan Sweet:                      A little bit about some rational behavior, people buying houses and dropping the appraisal or home inspections.

Mark Zandi:                      That's an interesting point. That's going back to size of [crosstalk 01:10:47].

Ryan Sweet:                      So this is just a very, one house down the street from us. Sold on the first day. Someone put an all cash offer, no contingencies, never even saw the house.

Mark Zandi:                      When I think a lot of people, you know the statistics better than I, Cris, but I think a pretty high percent of all sales are site on scene or they look on the [inaudible 01:11:07]. And you've got some pretty good technology, LIDAR technology to take a look at what's going on in a lot of these homes, but that can't replace actually going to see the home, can't be, right?

Cris deRitis:                       That's right. So there's certainly signs there. That's why I think they're good to be cautious here and concerned, but I don't know that we're in for a sudden crash, and I hang my hat on demographics. I think the demographic trends are still very favorable. We have all these 30 year olds, so even at the first sign of prices coming down, there's quite a bit of demand there.

Mark Zandi:                      I'm just going to say, millennials will save the day here. That's weird to say actually, but okay.

Cris deRitis:                       They always do.

Mark Zandi:                      Oh, by the way, [inaudible 01:11:58], I don't know if we ever talked about this, but as you can tell, we do a lot of modeling. We model at a Metro level, even lower than that. But at a Metro level, metropolitan area level, we can use that modeling methodology, Cris, described to identify which markets are overvalued, undervalued and to what degree. And I think in the last we were doing this work a few weeks ago, I think we saw Vero Beach, Florida as being the most overvalued market in the country, I believe.

Cris deRitis:                       I think that's [inaudible 01:12:31]

Mark Zandi:                      That's critical, because I have a home in Vero Beach, Florida, so concerned me a little bit. But it goes to some, another issue in a lot of the modeling, it's helpful, but it's not proof positive. Because, everything you need to go, it's really saying, hey, go look at me, what's going on? In the case of Vero, you got a lot outside money coming in, so cushions your thinking about how over or undervalued it is. So no, it's not a bubble.

Cris deRitis:                       Not a national bubble. There might be some local.

Mark Zandi:                      Local bubbles, Phoenix might be a bubble, Boise might be a bubble.

Cris deRitis:                       Idaho.

Mark Zandi:                      Ryan's neighborhood could be a bubble, who the hell knows.

Cris deRitis:                       But not his house.

Ryan Sweet:                      Every house there is overvalued.

Mark Zandi:                      Not his house. Definitely not a bubble at his house. Ryan, you agree with that? I agree with that.

Ryan Sweet:                      I agree.

Mark Zandi:                      So stocks, baby bubble, housing, not a bubble yet. And by the way, I have a Washington post oped coming up shortly on. Did I send this to you guys on bubbles, housing bubbles?

Ryan Sweet:                      Mm-mm (negative)

Cris deRitis:                       No.

Mark Zandi:                      Oh, I'll send it to you. Because, this is where I land in the piece, on this the oped, same place we just landed. Let's now quickly talk about the other market we want to talk about, crypto markets, Bitcoin, Ethereum, Stable Coin, let's throw in NFTs. Is this a bubble? Let's do the checklist. Ryan, you want to go through the checklist?

Ryan Sweet:                      We can just skip the checklist. It's a bubble. This is like the poster child of a bubble. There's a lot of leverage.

Mark Zandi:                      I guess, the question becomes well, where's the value?

Ryan Sweet:                      Well, what is the value? I don't know what the, exactly.

Mark Zandi:                      Well, hold on. Let me push back a little bit.

Cris deRitis:                       What's the intrinsic value of a...?

Mark Zandi:                      The value is that it serves as a payment system for places where the payment system's broken down. I am an immigrant working in the Central Valley, California. I want to send money back to my family in El Salvador. Right now I got to go down to Western Union. Give them my cash, they turn it into a wire. Three days later, it ends up in El Salvador. They have a big vigor on top of that. And I'm now nervous that my family members come to get Western Union in El Salvador is going to get robbed on the way out. That's really pretty bad. But if I have Bitcoin, or Ethereum, or whatever it is, I can do this. I'm taking some risk here with the value, but I'd much rather take that risk than the risk getting robbed. For the sure thing of handing over some big chunk of cash to Western Union to, and I don't mean to pick on Western Union, although I think I should be picking on Western Union. They do charge a pretty hefty fee for the service. So there's value there, right?

Cris deRitis:                       Well, there's value in the service certainly. But the coin itself, [inaudible 01:15:39] is...

Ryan Sweet:                      Exactly. And if you look the volatility of Bitcoin or these cryptocurrencies, they're extremely volatile.

Mark Zandi:                      Well, no, that's not fair, because think about a dollar. If I hold a dollar bill in my hand, that's an asset. Although, why would that appreciate in value relative to everything? It can appreciate, but not like this has been appreciating. But the dollar has value because it serves us as a stable source of medium of exchange, and is this store of value, it's going to hold its value, but I get your point. So it's definitely overvalued, because we can't really figure out what the value is.

Ryan Sweet:                      The value is zero.

Mark Zandi:                      The value is zero. Speculation.

Ryan Sweet:                      A lot of speculation. You would've to assume. You can check that one off.

Mark Zandi:                      Check that one off.

Ryan Sweet:                      Here's another. I went to the gas station and there is a Bitcoin ATM next to the regular ATM.

Mark Zandi:                      Where's this?

Ryan Sweet:                      Right here in Westchester.

Mark Zandi:                      No way. Really?

Ryan Sweet:                      Mm-hmm (affirmative).

Cris deRitis:                       Not at Wawa.

Ryan Sweet:                      Not at Wawa.

Mark Zandi:                      No, hold on.

Cris deRitis:                       ATMs are free of charge at Wawa.

Mark Zandi:                      So how does that work? I can stick in my bank card and get Bitcoin come out.

Ryan Sweet:                      I don't know. I'm not touching that thing.

Cris deRitis:                       There's nothing coming out.

Mark Zandi:                      It's $50,000 per Bitcoin. What are they...?

Ryan Sweet:                      People are buying fractions of Bitcoin.

Mark Zandi:                      Fractions of Bitcoin.

Ryan Sweet:                      I'll take a picture next time I'm there.

Mark Zandi:                      I'd like to see that.

Ryan Sweet:                      It's fascinating. I'm surprised, Cris wasn't there.

Cris deRitis:                       I haven't seen that.

Mark Zandi:                      This is a side business now. Did you see deRitis on the side of the ATM? Look for the [crosstalk 01:17:16]

Ryan Sweet:                      deRitis coin.

Cris deRitis:                       Only on one side.

Mark Zandi:                      Actually, that has a nice ring to it. So, overvalued, speculative, leverage. This, I don't know. There must be, but we saw that big swing in Bitcoin prices, Ethereum prices last weekend around something wacko going and derivatives related to crypto. So I'm sure there's leverage here. No one's measuring it as far as I can tell. Someone might be, but I don't know about it.

Cris deRitis:                       I hear rumors about people using their credit cards and taking out consumer loans, kind of what happened during the .com. Remember that? Home equity loans and...

Ryan Sweet:                      Mm-hmm (affirmative)

Mark Zandi:                      But that can't be that big a deal, because, or maybe all that increase in mortgage debt going into the crypto market. Oh, no, that's a conspiracy theory. All right, so we come to the conclusion this is a bubble, and that it will therefore high probability of a crash here. This is not going to end, it's hard to see how this ends well. We've come to that conclusion.

Ryan Sweet:                      We could be wrong, but...

Mark Zandi:                      Could be wrong.

Cris deRitis:                       But the technology has value. I want to emphasize that.

Ryan Sweet:                      That's true.

Mark Zandi:                      And maybe that's the value, and that's what has to catch up to the price. They figure out new ways to improve the technology, so that it truly does solve some of the underlying inherent problems as a medium of exchange and store of value. Becomes truly a currency more broadly.

Cris deRitis:                       Or the technology gets applied to other problems.

Mark Zandi:                      But that doesn't help Bitcoin out though, does it?

Cris deRitis:                       No, [inaudible 01:19:07]

Mark Zandi:                      To help Bitcoin out, the problems inherent in Bitcoin, like the volatility and all the other things that make it unlikely to become a widely used currency certainly in the developed world, that could happen, I suppose,.

Ryan Sweet:                      And you see some signs of irrational behavior. If Moody's came to you and said, we're going to pay you in crypto, would you say, yes?

Cris deRitis:                       He has to think about it. He's taking a pause, wow.

Ryan Sweet:                      I thought it was an immediate, no.

Mark Zandi:                      No.

Ryan Sweet:                      All right, Cris?

Cris deRitis:                       No.

Mark Zandi:                      I'm only getting tired, that's why it took me a little bit longer to respond. I'm running out of juice here.

Cris deRitis:                       Can I get you a Wawa coffee?

Mark Zandi:                      I was on a high, as you could tell, 15 minutes ago. Now, I'm crashing.

Ryan Sweet:                      Because, you see, some professional athletes are getting paid in crypto.

Mark Zandi:                      Is that right?

Cris deRitis:                       Is that right?

Mark Zandi:                      There's another sign.

Cris deRitis:                       Well, they're risk takers by nature.

Mark Zandi:                      All right, so I think we concluded housing, not a bubble, but let's watch it. The current rate off price growth if sustained that could be a problem. Stocks, a baby bubble, the early stages of a bubble. If that rock keeps rising in price, then that's going to be a problem. Crypto, big time bubble, don't know when that's going down, but it feels like it's going down. All right, very good. I thought that was a very useful conversation. There's other assets to consider, maybe we'll do that down the road. We'll come back and reevaluate, but clearly a good discussion. And I think, our very first podcast back in April, which I mentioned earlier was around bubbles, right?

Ryan Sweet:                      It was.

Mark Zandi:                      I don't know where we landed then, but I think we-

Cris deRitis:                       I think pretty much the same place.

Mark Zandi:                      Same place. All right, very good. Anything else before we call it a podcast? No.

Cris deRitis:                       Your Twitter account is not a bubble, I take it.

Mark Zandi:                      No.

Cris deRitis:                       People should subscribe.

Mark Zandi:                      Are you kidding me? It's undervalued, big time. There's a lot of value there, just listen to my tweets. I am though worried that Ryan's going to crowd me out.

Ryan Sweet:                      Did you just say listen to my tweets?

Mark Zandi:                      Did I say that?

Ryan Sweet:                      Yeah. We want to rewind the tape. We could do a podcast [crosstalk 01:21:16].

Cris deRitis:                       Did you just say tape?

Ryan Sweet:                      Oh, yeah.

Mark Zandi:                      That would be a good one for the blooper reel. All right, I'm tired.

Ryan Sweet:                      All right.

Mark Zandi:                      We're going to call this the podcast. Hey, everyone. Thank you so much for listening in, talk to you next week. Take care now.