Has rallied higher. I will give you comments from former treasury secretary Larry Summers. He spoke to david westin about a much higher rate. Bloomberg dollar index continues to gain ground. It has been a lot of strength of the past four weeks as the yields get higher they are more attractive to Foreign Investors who needed to buy dollars to access that. Crude, very interesting traded today. We have inventories a little bit light. Nonetheless, we see nymex crude below 80 a barrel. West texas intermediate going for 79. 84. I want to talk about the housing sector first. 30year Mortgage Rates have top 7 , a threshold double impact affordability, sales, and refinancing activity. Here is Reade Pickert to explain. What do we know about what the 7 mortgage is going to do to the Housing Market, which already seems like it is in a deadlock since home wonders dont want to give up cheaper mortgages they have . Thats exec the right. We have data that shows that the 30year contract rate on a mortgage went up to 7. 16 , matching the highest now since 2001. What we are expecting is a twopart situation. One is that when you see higher Mortgage Rates, that restricts demand. On the upside, on the flip side, it leads people to not want to list their homes. The reason we have had headwinds for the housing sector more generally is because people look around and they know they have their 2 , 3 mortgage rate, and they dont want to trade at in. The lack of inventory has been what is keeping existing home sales down. It is part of the reason that we have seen home prices start to pick back up again. What is interesting is how this will impact builders. We saw yesterday that Homebuilder Sentiment declined for the first time this year in part due to this pickup in Mortgage Rates we are seeing. It will be interesting to see if we continue to have builders go out there and continue to build to try to meet this demand when inventories in the new home new Housing Market is already pretty elevated. Matt you can imagine that if people arent going to give of existing homes, new inventory is the only way to tackle the problem. On the other hand, as you said, sentiment fell and Building Permits came in pretty light. We were inspecting a jump of 1. 5 . They came up only 0. 1 . At the same time, Housing Starts month over month work up 3. 9 . How do you rectify that diverging data . Reade so it is important to get under the headline numbers today, especially in that Housing Starts data. When you look under that permits data, really what you saw is in a singlefamily housing, use permits rise but the most you saw permits rise by the most in over a year. It was the multifamily housing component that was dragging down the number and led to the tepid gain in permits. When you look at the picture, at least what we got today is there is still this pipeline that builders are looking to keep building. It will be interesting to see if that continues, as we look later into the year. Housing has been a drag on the u. S. Economy for a long time now. But its turnaround is something that a lot of economists have been looking to as a reason the u. S. May avoid a recession, this rebound. It will be interesting to see if this new headwind of higher Mortgage Rates hits housing back down, or if it can hold and keep its footing. Matt reade, thanks so much for joining us. Reade pickert talking to us about the housing picture out of washington, d. C. Former u. S. Treasury secretary Larry Summers says the recent runup in 10year yields may have further to go here is what he told david westin for wall street week. Larry you take 2. 5 for inflation, you take 1. 5, which isnt specially aggressive, for real rates, and you take 75 basis points, which is lower the history for term premiums, you are looking at 4. 75 on the 10year. It could end up being higher than that. Nobody knows, but it seems to me we are in a very different era than the arrow we are in in the aftermath of the financial crisis. Matt here with more is david westin can the host of wall street week. Larry summers coming out really bearish on treasuries and even topping yield forecasts from the bills, dudley and gross. David exactly. One of the interesting things about larry is he goes to the math. 1. 5 is historically low for real Interest Rates. That adds up to 4. 75. He did say that it could go higher. We will have to be spending more on defense given to political situations, and our borrowing costs are going up. We will pay interest on all that debt. Matt what else did he ever say about the effects of this . We just talked to reade about Mortgage Rates. Typically Mortgage Rates are about 2 above the 10year yield. That is right where we are now. David exactly. It does not say anything happy about people getting mortgages for it says something happy for people who already have mortgages. That may be part of the reason why some people say maybe economy is a little less sensitive to interestrate changes right now because people have longer term debt they are enjoying and there is a shift in services. You have to anticipate the possibility we will have a tougher time. But you know this, matt, we are in an artificial period. You dont have negative real rates for an extended time. Money was free. It is not going to be free anymore. Matt it does show optimism on his part in terms of the inflation outlook. He things we will be 2. 5 over a long period. David one of the things he said to us is he no longer things a recession is likely this year. Before he was saying it is more than 50 likely. It might happen in 2024. One of the interesting points he makes is if you dont have a recession, the fed will not be cutting rates. You cant have it both ways. Matt very interesting interview. David westin, host of wall street week. Catch that program 6 00 p. M. New york time on bloomberg television. American securities ceo michael fish on the state of private equity today. This is bloomberg. upbeat music awww. Awww. Awww. Nope. Constant Contact delivers the Marketing Tools your Small Business needs to keep up, excel, and grow. Constant contact. Helping the small stand tall. Matt this is bloomberg markets. Im matt miller. Markets are fluctuating ahead of the fed minutes. They come out at 2 00 p. M. , and then we will get a better sense of why officials are showing optimism for a soft landing. That said, Interest Rates remain high, and that is impacting private markets. Thats get a read on the private equity space with Michael Fisch, ceo of americans agrees, as well as sonali basak, our wall street reporter. Michael, thanks for coming into the program. We talk so much about higher rates. I did a story on Mortgage Rates over 7 . We heard from Larry Summers, who think the 10year will average 4. 75 the next decade. How does that affect your business . Michael it affects it a lot. It is very important to plan for rates. Its not catastrophic for private equity. Deal flow is down 40 from last year, 60 from the year before. That means half the deals are getting done. Rates matter. When you plan for and what you expect 40 years ago senior debt was 14. 5 . The private equity business was exploding then and it is doing well now. But if you bought Companies Planning for lower rates and didnt hedge add, that is a problem. The cost of your image was complete europe because of supply chain problems and inflation, is another problem. In a projected earnings dont come in, management has to be nimble. Sonali curious about the inflation store and how that is reading through your portfolio still. What are the sticky problems you are seeing resting on . Michael we try to focus on the market share leader. The market share leader almost always gets at least its fair share of scarce product and scarcity of product leads to inflation. Market share leaders tend to do well. Smaller players cant have products, and so their sales are down, or cant pass along products wasnt as in many situations, being bigger here is good. Sonali what about the idea of exits . On one hand Interest Rates of impact the cost of financing, but the others that it is hard to sell into public markets. Sales of started to come back slowly. What does it look like out there . Michael it is the reverse of the new deal market. Sales are still possible. Volume is half of what it was. Sellers and sources are less ipo but more taking Public Companies private, buying corporate carveouts. That is an active an increasing percentage of our deal flow. Matt interested to hear about your Portfolio Companies, because you say you focus on the market leaders. What are examples of Portfolio Companies that are doing best for you . Michael 60 of our investment or industrial companies. Industrials are often misunderstood. They have grown for 20 years faster than u. S. Gdp and are still growing and many of them are noncyclical. If youre in the used truck parts business, that is a good place. If you are making orthopedic shoulders, that is a good place to become unrelated to gdp cycles. If you have consumer businesses with aggressive forecasts, that has been more challenging over the last six months. Sonali lets talk more about that because you have interesting businesses in consumer retail, restaurants potbelly, conair. What concerns of a bigger slowdown do you have ahead . Michael we try to capitalize committees to have revenue in good times and market share in bad times. Conair is an example of a company that is doing fine on revenues. Hopefully all over your kitchens with cuisinart products. Belfour is in the Disaster Recovery space, so it is un correlated to cycles. Matt you know, we see so many disasters i just heard a Bloomberg Intelligence analyst say that wildfires have gone up 400 this century. Of course we see it in hawaii, we see it in canada. Does that company get more business as Climate Change increasing natural disasters . Michael hawaii and the wildfires and we had that in new york, very sad. Our heart goes out to people in maui. Belfour is antifragile. Its more fragile to water. Hurricanes, big rainstorms, you have got to fix it or youre going to lose her house. Belfour is there with minimum to solve a problem when a hurricane comes. Sonali where else are you looking to areas to deploy First Capital . Fresh capital . Michael we are always looking for industries that may have a tailwind. In upanddown times there is always something growing. We are the largest solar epc in the country. There was exploding demand for green energy, clean energy, and solar. We are always looking at water because water is a great place to be. There is a lot of companies that help process more and more food and make Food Production more efficient because there is a growing number of people and a food shortage exacerbated by these climate issues that you were talking about. Matt matt i was living in berlin the last six years, it was wonderful. I would go to the super return conference, at which i would be quoted an everincreasing number for the dry powder out there. 1. 7 trillion, then 2 trillion, then 2. 7 trillion. Is there really that much cash availability in private equity . Michael yes. Write out a corny to one consulting firm, 3. 7 trillion of dry powder, and about 1 trillion of that is private equity, or socalled bios. The rest is infrastructure and other things. That is a big number, but what i always think is more important is what percentage of the ecosystem that is. One way to express that is how many years of investment current pacing is that. Typically it is between two and five years, now 3. 4 years. It is where it has always been. It grows because the industry keeps growing. Sonali but is one of the problem that there is too much money chasing too few deals . The sheer amount of money seems like it could be a problem ahead. Michael one could think that. The first time i heard tmmctfd was 1987. Too much money chasing too few deals. Now it just depends on your space. In the middle market, there is Enormous Growth and very little capital. In some places there is tons of money and smaller numbers of deals. It just depends. Back to your point about Interest Rates, in the large deal space, the lack of syndicated Debt Financing market for the last 12 to 18 months constrained the ability for large deals. Not so, market space, where credit is readily available. Matt you and the firm you founded, you mentioned the Portfolio Companies you are in, industrials, cuisinart, truck parts, potbelly sonali mentioned potbelly. Sonali chicago girl, what are you going to do . Matt not a lot of tech. Are you pivoting away from tech . Michael it is a great space, and a lot of smart people pursuing that space. We are focused on industrial businesses for 30 years. It is 60 of what we invested in. We services and consumer. We are bringing tech because it is everywhere. We are bringing into these old economy companies. We are not investing in tech per se. Sonali what about ai . Do you think jobs will be impacted by evolving technology . Michael no question about it. There is a Large Investment Bank which came out with a study synchrony 5 of jobs are going to be displaced through ai. On the one hand that could be very problematic if it is your job and how we retrain this people is going to be a big issue. The bulls would say that is more efficiency and higher productivity. We are seeing it across all of our companies now, a lot of ai projects going on to read document and process consumer issues faster, to locate new restaurants if it was potbelly, a former investment, or new Service Enters for truck parts, ai is everywhere and everyone is figuring out how to adopt it. Matt great having you here and we hope we get more time with you in the future. Michael fisch is the ceo and founder of american securities, and our star wall street reporters nelly wasik, thanks as always reporter sonali basak, thanks as always. Highpotency marijuana has lawmakers we thinking regulation. This is bloomberg. Todays the day you graduate from Southern New Hampshire university. Ive been waiting for this day my whole life. The fact that i get to walk across the stage and get my degree, its honestly unreal. Dont ever stop. Keep on believing in yourself. It is never too late. If youre out there to wonder if you could be an snhu graduate today is the day to find out. Visit snhu. Edu. Matt this is bloomberg markets. Im matt miller. Todays big cake looks at the Recreational Marijuana industry, which is pouring money into products with high thc levels, of course. Earlytolegalize states are possibly rethinking their laws because of extremely highthc products causing health problems. Tiffany, it is important to point out that not everybody using weed is doing dabs, these incredibly concentrated thc gooey products that are practically smoked out of a crack pipe. But those who are have had issues. Thats right, there is a huge range of marijuana product from old flash and, people who roll into joints, edibles, vapes. With vapes and concentrates, ghc is not only 60 and up, but can be sometimes 90 and up. That is where we are starting to see people complain of these health issues. Matt is there any regulation inside saying you can sell flower, gummies, edibles, but we have a problem with butter or dabs . Tiffany we have seen some states debate is. Vermont is one state where it has become an issue. I focused on colorado and washington because they were the earliest states to have recreational cells and they say we see them sold out the back door sometimes to kids. They are trying to come up with regulations but seeing his pushback from the industry saying, look, maybe medical patients need these products. You cannot just cap thc, that would wipe out a huge swath of the marijuana industrys products. Matt but there are parallels with the alcohol industry. You can buy beers and wines between 4 and 14 alcohol, and then you have hard liquor, 40, 5 0 , and then everclear, which in a lot of states is illegal, more like 95 . Why cant they do Something Like that . Tiffany its really interesting analogy. There is an analogy with tobacco where we have seen cigarettes have been sold for so long, and then there is controversy over vaped which has higher nicotine levels and accusations that those levels were used to addict people. Only now, a century into people smoking, regulators are talking about putting nicotine caps in tobacco. With cannabis, the science is so much younger than it is with either alcohol or tobacco. Matt right recently saw stork i recently saw a story that ohio is putting Recreational Use on the ballot, or trying to get it on the ballot, in their respective vision that that might sway sherrod brown, head of the Senate Banking committee, to push safe banking. Have you heard about the safe banking act in any progress there . That is one of the big problems for the burgeoning industry. Tiffany it has been, and it has continued to fail to get traction. It is hard to say when there is been so much hope for so long and it keeps getting pushed off to what the prospects really are. Matt problems like this, people who are using incredibly high concentrates and doing damage to the health, dont really help. Tiffany i dont think it helps the indus