Bloomberg Audio Studios podcasts, radio, news. This is Masters in Business with Barry Ritholtz on Bloomberg Radio.
This week on the podcast, wow, what a fascinating conversation with a really interesting, intelligent guy. Mark Zandi has been the chief economist of Moody's Analytics for 20 years, co-founded a regional analytics shop in the '90s coming out of both Wharton and the University of Pennsylvania where he got his undergraduate and graduate degrees in economics.
He buys economy.com in the late '90s and builds out that really fascinating career, unique insight. You know, we live in a highly polarized, partisan world whether it's the Fed, inflation, labor, BLS, the economy. I love speaking to somebody who was an advisor to both the McCain campaign and the Obama White House.
He just looks at the world through a set of lenses that are data-driven, model-driven, and tries to provide the best analysis as to what's going on, where, and why. I thought this conversation was great and I think you will also. With no further ado, Moody's Analytics chief economist Mark Zandi.
Let's just start with your background. You get a bachelor's from Wharton, a doctorate in economics from the University of Pennsylvania. What was the original career plan?
None? Never thought about going into markets, economics, like a PhD in economics. Were you thinking academia or just...
Knew not academia. My father was a professor at Penn, and that's where we all went to Penn because of discounted tuition.
At that time, which is a long time ago.
Don't tell me it was free.
Tax-free. And you know, I have four siblings. In fact, he actually, he was a pretty smart guy. He bought a rowhouse at 42nd and Spruce, you know, just off campus, and we all lived in that rowhouse.
Amazing. All right, you come out of college and grad school with a deep background in economics. What inspired you to explore a career in economics?
Well, my work was very empirical. My thesis advisor was a guy named Larry Klein. He was a Nobel laureate. He got it as a result of all the work he did building macro models, US macro models. And I needed to make money when I was in school, so I worked part-time. His firm was called Wharton Econometrics, you know, after the Wharton School.
Hold on a sec. The school let him set up a program called Wharton Econometrics? A separate company apart from the school? That's what I'm asking.
Yeah, yeah. I don't know that, I'm sure there was some kind of financial arrangement. He must have paid some kind of royalty or something, but I'm not sure, you know. But I don't think you could get away with even paying royalties today. You couldn't set up MIT Economics or Stanford Econometrics.
Yeah. I mean, if you do certain research and you get a patent, they get a piece of it. But setting up a... like there is such a branding focus these days. I can't imagine a big school would let you do that, unless you paid a really big royalty or something. But anyway, so that was a firm, a business, an economic forecasting business.
And so I learned the business as a graduate student, you know, working there to earn money. And I also used their main... at that time it was a mainframe, and everyone was on... there was no PC. It was...
Was it still the punch cards?
Punch cards for trade. Yeah, you wanted to change the federal funds rate by 25 bips, you'd punch a card, you'd have a stack of cards, you would take it down to some guy who would put it into the mainframe. Yeah. Oh, it takes 12 hours. And if you messed up, if you hit the wrong button, then you had to wait another 12 hours to get the answer.
Well, how much was a quarter point increase in the funds rate going to do damage to the economy? That kind of thing. So what was your doctoral thesis on?
It was in regional economics. It was examining, fancy word, factor flows. So labor, capital, and the movement between regions in the country. And that was the basis for the firm I started in 1990 called Regional Financial Associates.
So you started your own firm pretty much right out of school.
Yeah, with my brother and my best friend. My best friend was also working, he was in the graduate program at Penn, and we were working at Wharton together. We could see there was a lot of problems, you know, with the way it was being run. It was mainframe oriented, and the PC was just coming out. So we were able to use the PC to do the things that we needed to do.
I remember in grad school using this pokey Mac Classic in 1988.
And the technology was just, ooh, look how advanced this was. Bear skins and stone knives, that's what it reminds me.
We bought IBMs at the time.
So you launched this, when does economy.com come along to Regional Economics?
Yeah, the internet boom really took off, what, '98, '99, 2000.
Like two years after the irrational exuberance speech is when it really became irrational exuberance.
Yeah, late '96. Yeah, Greenspan speech.
In fact, we bought the URL economy.com. This guy from Qwest, he was an executive at Qwest. Remember Qwest?
One of the baby bells that spun out of AT&T, headquartered in Denver, I believe.
Colorado, right? And he made it... he squatted on all these names. In fact, when we were negotiating the price for buying economy.com, he was on a yacht somewhere in the South Pacific. He made so much money on it squatting on it.
So, what did you end up paying for economy.com?
At the time it was a lot of money, 250k.
Yeah. That is a... and you 100x'd it eventually?
Yeah, it certainly was a good investment.
To say the very least.
Yeah. I know your thesis advisor was, you mentioned Lawrence Klein, a Nobel laureate. Was he an advisor to the firm when you were first building that out?
No, I thought that he was older at that point. And he was in... actually we were competitors now, right, to Wharton.
Oh, Wharton Econometrics.
I don't think he... I mean, we weren't really... You're doing a bunch of guys, right? Yeah, and we got the economy.com. I'm making this up, but we might have had 40, 50 employees, something like that.
Oh, really? So what was it like building out what essentially became a dot-com in the late '90s?
Oh, it was so much fun. I mean, I've been a startup, I've been a small business guy, and I've been part... and now obviously part of Moody's, a large multinational. So I've seen business from a lot of different angles. And I'll have to tell you, maybe because I was just young, I mean, I loved being a startup. It was just a lot of fun.
Especially if it's working, right? I can imagine.
And we got lucky, you know, the interstate banking happened, so all these banks needed to think about their footprint outside of their state. So they needed our data and information that we were providing. So if I were a bank in Connecticut and I was thinking about moving into Massachusetts, I now needed to understand the Massachusetts economy, and we would help. You know, Shawmut Bank, Connecticut Bank, that was one of our first clients back in the day.
So how you built this out in the late '90s, you survived the dot-com implosion, because although you were technically a dot-com, you weren't a frivolous clicks-and-eyeballs sort of company. It was a real company with real clients and real revenue. Kind of set you apart from pets.com of the world.
An economic forecasting firm masquerading as a dot-com.
Because we, you know, at that time dot-com, your valuations were a lot higher, and of course practically speaking we set up economy.com, right? That was our... when you came to our site, you came to economy.com, so it was a way to advertise where you go to get our information.
And today you go to economy.com and it forwards you to Moody's.
How did the relationship with Moody's come about five, six years later?
The CEO of Moody's Analytics was this fellow Mark Zandi, great guy. He is a Philly boy, Philly guy, and he and I worked together at Wharton Econometrics, which is Philly-based because of Klein. He was a data guy, he was in a cube next to me. I was this young economist working on models and data and forecasting, he was a data person.
And so we knew each other quite well, and he went on to Moody's, at that time was the rating agency, and he did extraordinarily well, became the CEO of Moody's Analytics when they formed Moody's Analytics. And he just knocked on the door and said, hey, are you interested in selling? And the answer was no, because we had no idea what it was worth.
Just serendipity, Fitch knocked on the door at roughly the same time, within a week or two. I can't connect the dots exactly.
No, it's nothing like a bidding war, right?
Exactly, so we were able to get a price, right?
And I do remember him saying to me, hey Mark, what price would it take for us to end this negotiation? To this day, I gave him a price, he took it right away, and I got two years too low.
Too low. Well, if you Google it, it says 27 million dollars, but I have no idea how accurate that is. Everything that I find through AI and search always seems to have a little asterisk with it. You don't know what's... especially private stuff like that.
So Moody's Analytics is a division of Moody's, the big rating company. It's a group within, is that right?
Yeah, there's the Moody's rating agency and then Moody's Analytics. More recently we've been moving together, but I'm still in the entity Moody's Analytics.
So what was it like going from a startup to a large multinational conglomerate?
I'll tell you it was great because we were allowed to remain independent in every respect, except for some of the back office kind of things, legal, HR.
No one wants to do anyway.
Yeah, sales, and that's the key reason why we sold, was because we were mostly US and we were trying to go global, and that's hard. It's very expensive. We set up an office in London and Sydney, and it was difficult. And they have a giant client base with clients all over the world.
Oh, they're everywhere. That has to be a huge benefit to a small startup.
It allows you to really supersize.
And they had a sales force all over the world, right? And you know, Moody's is a respected institution, but overseas it's highly respected. If you go into many emerging markets, right, rating debt, sovereign debt, is really, really critical. And so when a Moody's or an S&P says something, it really does move markets.
And so it helped us raise our credibility. We had no credibility overseas, and this allowed us to gain some credibility.
Right away. Yeah. Speaking about gaining credibility, in 2005 you wrote a piece, 'Where are the regulators? The runaway housing market needs tougher regulatory oversight.' Very prescient analysis warning about, hey, you can't just give mortgages to people regardless of their ability to actually service that debt. What drove that analysis? That was really the first time I became aware of you as an economist.
Yeah, I remember that piece. I'm a macro guy, but my area of expertise is housing and housing finance. I was watching the housing and mortgage finance markets very carefully at the time.
Which a lot of Wall Street didn't really seem to be paying much attention to.
No, no. My mom was a real estate agent. That's the only reason why I was paying attention to this space, and that's probably how I found you, because we were having regular conversations. And you know, so Regional Financial Associates, banks, regions, you know, obviously real estate and housing are kind of top of mind.
Totally, right. They write a lot of mortgages, they make HELOC loans and other things against it, and they were losing market share to these unregulated, non-bank lenders.
Label securities market, the credit market. And the regulators were my clients. So the FDIC for many, many years was my largest client by far and away.
Yeah. So I was looking at the space from the prism of housing, housing finance, and also from a regulatory perspective, and I could see this was, you know, a problem. So something was totally, totally afoot.
I did have... I had a number of periods of doubt in that lead-up to the crisis. One was the Fed under Greenspan asked me to come in and brief them on housing because I was a housing guy. And I give this talk, and it was pretty dark. And at the end of it, saying that we're going to have a problem. I didn't think we were going to have a problem to the degree we had the problem, but I knew there was a problem coming. That was the message of the talk, and when I finished, I didn't get a single question from one Fed member.
Really? Not one. So was there just a prosaic discussion, or would they have stunned them into silence?
I was confused by the whole thing. Even Greenspan... there was a guy, Ed Gramlich, who was...
Sure, 100%. He was a naysayer. Very much so. He was in the camp of, hey, you know, you have to be able to... the history of finance is not based on the securitizer's ability to sell their product. It's based on the borrower's ability to service the loan. If you take that step out, you're asking for trouble.
Yeah. So Gramlich very famously was the fly in the ointment, and also very right, passed away before everything blew up.
Yeah, that's right. That's right. But even he didn't say anything. So I walk out of that meeting and I'm going, ah, maybe I have this all wrong. So at points in time I had my doubt, but it became clearer by the day.
So after the crisis in '08, '09, or eventually post-financial crisis, you become an informal policy advisor to the Obama administration. Tell us how that came about. Outside, non-partisan economic advisor.
Well, that was the time when the administration was trying to figure out how do I respond. The Obama administration had just come... the crisis had occurred September '08, he was in office by January of '09. They used that period to try to figure out how do I respond to this mess? What do I do, you know, both from a fiscal policy perspective, from a regulatory perspective, from all angles.
And I had done a lot of work on estimating so-called multipliers of different policies. So if you do this, you know, what is the impact on the economy? If you do that, what is the impact on the economy? Now that's widespread, that kind of work. Lots of people do that work, do it much better than I do, but at the time there just really wasn't anyone looking at it that way and trying to estimate those multipliers. So they used those multipliers in trying to design the response, the so-called stimulus package that they put in place in January of 2009.
Arguably nowhere near large enough to drive a recovery in the economy quickly.
Well, yeah, and I think that's the lesson that the Biden administration took coming out of the pandemic, right? Even the Trump administration, the first CARES Act. There's two CARES Acts under President Trump.
Right. Biden gets into office, March of 2021, he passes the American Recovery Act, $2 trillion. Obviously it was very large, a lot of criticism. Even Larry Summers was all over it saying it's too large. But I think the Biden administration was looking back at the Obama administration and saying, hey, look, the Obama administration was, we will come up with this package and if we need more, we'll get it. They never got it. So the economy struggled for 10 years after the financial crisis. And so the Biden administration saw that and said, hey, we probably should go for a bigger bite of the apple because we may not get another bite, and therefore let's go for a bigger package.
Right. And that was over the next 10 years, and that came into the environment where the first CARES Act under President Trump was the largest fiscal stimulus since World War II, at least as a percentage of GDP. Then there was the CARES Act II under Trump, and then a whole bunch of... I think a CARES Act III, and then you come in with Biden. So CARES Act III was Biden, which was short-term and dropped, but most of the other legislation under Biden was over 10 years. The infrastructure bill, the Inflation Reduction Act, those are all 10-year legislations. So it feels very much like the 2010s was the era of monetary stimulus, and the 2020s seems to be the era of fiscal stimulus.
I hadn't thought of it that way, Barry, but that's a really good way of putting it. Yeah, exactly. I mean, the Fed had to work really hard back in the 2010s because they weren't getting any support from fiscal policy. That was government shutdowns,
Treasury debt limit battles. Fiscal policy was contractionary, and so the Fed had to step in and provide a lot of support.
Right. Congress did not, you know, they seem to have forgotten everything we had learned from Keynes. And they remembered it in 2020. It's kind of amazing because I recall being at a dinner with a number of people including some Nobel laureates in economics. And when I said, oh, I think they're trying to cause a recession, Congress, they are, they know how this works, they're just, you know, they want to submarine this administration, it was very much pooh-poohed by the people there. And then eventually it's like, oh, this has become much more partisan. And I was making a partisan argument. It was just an observation. Hey, we know how this works. We've done giant fiscal stimulus, whether it's tax cuts or spending. We know what the impact is. Refusing to do it, I can't come up with a better explanation other than we want to tank the economy.
The explanation at face value was of course deficits and debt, right? We want to rein that in.
Right. Except for giant tax cuts and big spending. Other than that, you know, everybody is a deficit hawk when they don't control the White House.
And it doesn't matter if you're a Republican or a Democrat. When your guy loses, suddenly the debt matters. And it's been going on my entire adult life. It's so transparently political.
So that's where we are on the deficit and debt. So I wanted to ask about your relationship with John McCain.
Because I find this both fascinating and hilarious.
Yeah, yeah. Well, perhaps equally as interesting, my friend Kevin Hassett asked me to come help out the McCain campaign. You know, now Kevin is the head of the National Economic Council under Donald Trump. He was at AEI, the American Enterprise Institute, at the time.
And a name consistently floated for potential future roles.
And this is well before Obama came on the scene. I didn't know President Obama at all, and I knew McCain. And I admired him mostly around foreign policy. That's obviously where his expertise was. But I also felt like they needed real help. The campaign needed real help on economics, and I was the guy who took all the incoming information about the economy and translated that into what does it mean for economic activity and how should the campaign respond to that. Well, I wasn't paid, I wasn't officially part of the campaign, but that's the kind of support I provided.
But you know, obviously when the crisis hit, Senator McCain, that wasn't his strong suit, right? Again, he was foreign policy, he wasn't economics. He kind of struggled across the finish line and never really grabbed on. I can recall briefing the campaign saying, we got a real problem here, this is going to be a mess, and there was, you know, complete kind of, no, there's not, everything will be okay. And so there was a little bit of tension at the end of that campaign.
It feels like he just encountered some unfortunate timing because between the war in Iraq and the crisis, I think the Bush administration had made any mainstream Republican unelectable in 2008. And the Democrats put up a charismatic guy.
Yeah. I don't think McCain would have been anything but a really good president.
Right. And in any other year, a really strong candidate.
Kind of shocking the way this plays out. But you're often painted as this, oh, that Zandi is a lib. Like he was an advisor to both McCain and Obama. That's more of someone trying to serve his country, not a partisan.
I have always provided advice when asked from both sides of the aisle. So, you know, sometimes more from the D side, at times more from the R side, but I've done both. Clearly the political center of gravity has shifted here, and even McCain, I'm not sure where that kind of lines up in the political spectrum. But yeah, I've always been non-partisan. I tried my very best to be non-partisan.
And even now, it's tough to talk about the economy as an economist given all of the things that are going on with economic policy, tariffs, and immigration, and DOGE. Generally when I address a group, I start by saying, I know I'm going to sound political, I don't mean to be political, I'm doing my very best not to be political, so please forgive me. And that's generally how people take it in, and you know, forgive me if I overstep in some way in their mind.
It's tough to be an honest criticizer of policy without people... It's kind of a lazy accusation to say, j'accuse, this is partisan. Well, no. We could talk about tariffs. We tried them in 1930, didn't work out great. Why do we think it's going to work out well this time?
Right. That's not partisan. That's just the factual situation. If you want to make an argument for why a consumption tax on consumers of imported goods is an efficient, effective way to either lower the deficit or raise capital or realign global trade, have at it. But understand there's a body of history that informs us what happened the last time we did it.
Totally. It's so interesting because on almost every issue, economists debate. And the debate is reasonable, right? Economists... reasonable people can disagree.
Oh, yeah. And economists think about the second, third, fourth, fifth order effects of these things and how they play out over time. So it's not at all unusual to have these knockout, drag-down fights between economists over issues. But on tariffs, broad-based tariffs, it's not much of a debate.
Right. There's a pretty big consensus. Hey, the world isn't flat.
Yeah. So I feel like I'm on pretty sound ground when I say I'm not a fan of these broad-based tariffs.
The phrase that always comes up with me on these sort of things, these accusations of partisanship, is the Overton window. You could be middle-of-the-road or, you know, maybe center-left or center-right, but when the entire framework shifts far to one way or another, it suddenly looks like you're an outlier even though you were kind of centrist. That's kind of how I feel.
Right. The wings have expanded and suddenly what seems like it's pretty middle-of-the-road isn't any longer.
Coming up, we continue our conversation with Mark Zandi, chief economist of Moody's Analytics, discussing what the firm is focusing on in the 2020s. I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio.
I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. My extra special guest this week is Mark Zandi. He's chief economist of Moody's Analytics. Previously, he co-founded economy.com and hosts the Inside Economics podcast.
Do you say that to all the economists? Everybody is my extra special guest.
I get grief about it because once I painted myself into that corner, hey, my ordinary guest is this bum. Let's talk about your Moody's experience. We talked earlier about your warnings on housing and home financing and what ended up happening with subprime securitization. Moody's was one of the biggest rating agencies. I criticized them in Bailout Nation. Tell us what it was like when you joined the firm in '05 and you're wagging a finger about these sort of things. Did you get any sort of pushback? What was it like stepping into a firm that indirectly was a focus of some of your analytical critiques?
Yeah, I got pushback. I did. Yeah, I mean, I wrote a paper on the subprime mortgage space and did everything but say, you know, these securities should be downgraded. House price declines, credit risk, defaults, foreclosure, these are the losses, but I didn't take it to the next step and say, okay, what does this mean for ratings? But I wrote that paper and it went to the CEO, a great guy, and the CEO...
CEO of Analytics or the CEO of Moody's?
Of full Moody's. Right. And this, of course, I just had sold my company to them. So this is all brand new. He didn't... Who is this guy? What's he doing?
Zandi. Zandi. That's the back of the alphabet. We never get to his stuff.
And he goes, why is he talking about subprime mortgage? What does that have to do about the economy? And at the time that was a reasonable question. The best thing that ever happened, Bernanke gave a speech called Contained Subprime Mortgage.
Right. I remember in that speech, and he said, don't worry, this is not a problem.
But because he wrote that speech, I could...
He said, look, this is what I'm talking about. Right. The head of the Fed is talking about it. I should be free to talk.
What was he, vice chair or just a governor back then? Or was that as chairman?
He was chair, I think, at the time. He was definitely chair. To the CEO's credit, he said, okay, you know, you publish it. And it's the best thing that ever happened to... well, one of the best things that happened to Moody's, because when the Financial Crisis Inquiry Commission... Remember the Financial Crisis Inquiry Commission?
And I have that book. It's like this thick, sitting on a shelf.
Yeah, yeah. I testified. I was the first panel of panelists, yeah. Amazing.
And of course the CEO was a later panel with Warren Buffett. Warren Buffett is a shareholder in Moody's. I think he still is a big shareholder. The lawmakers were questioning them, and the CEO could say, hey, look, here's the study.
Can I tell you something? A little self-awareness. Yeah.
So that... yeah, I've been there for 20 years. I love Moody's. And but that really helped a lot, right? In every respect, they helped my credibility, helped the company's credibility.
Yeah, helped the company's...
Established a set of ground rules that I'm able to write about, think about, talk about anything that I think is important about the economy. All that was established at that point. Now that's getting tested at different points in time as we move along here, and we're in a trying time now, but that was very, very important to my successful stay at Moody's for 20 years.
I wish I could remember who wrote a criticism in response to the Bernanke speech about subprime, because the line was, subprime is contained.
Yeah. And the response... It could have been Alan Abelson in Barron's. It could have been James Grant. Could have been Josh Rosner or Chris Whalen.
But it was, yes, subprime is contained to planet Earth. The rest of the solar system is safe. And it was one of those lines where I thought, damn, I wish I wrote that.
Yeah. It might have been Abelson or Grant, but...
That sounds like a Jim Grant.
Right? It very much does. It's sort of dry writing, Jim Grant? I think so.
Yeah, I kind of lost track.
Yeah, it happens, especially in this era of Substack where your inbox is just overflowed with content.
So you got some pushback, but they cleared it. I got to ask, what was your experience like at Moody's during the Great Financial Crisis? It had to be 24/7 work plus terrifying everything.
Oh, it was an amazing, scary... I can remember a few really scary moments in my mind. You know, when I got a call from a CEO of a major retailer saying that, you know, if we don't do something, he's not going to be able to make payroll, you know, and I'm thinking to myself, he's telling me this, we got a real problem.
Well, he wants you to tell...
Yeah, that's exactly what it was. That was exactly what it was.
Didn't the Bush administration, I don't remember if it was Hank Paulson or Bernanke, have conversations, maybe it was the CEO of Ford or GM, hey, we have money, but our credit facility is frozen. We can't get at our money to make payroll.
Right. Well, there were so many things going on. Remember this commercial paper market had frozen, completely frozen, and of course that's key to making payroll for a lot of these companies.
I have a buddy who was on a derivatives trading desk, and he always pushes back when I use the word frozen. He's like, hey, I don't know what you're talking about. We were trading billions of dollars a day in paper. It was just discounted 30, 40, 50%. So there was liquidity, but there was a haircut involved.
Well, also just trying to find out, was it 30 or was it 50 or was it 75?
You don't know. You really don't know.
That led to the line, there's no such thing as toxic paper, only toxic prices.
There you go. So yeah, absolutely. So that experience had to be just mind-blowing.
Well, also from a purely academic perspective for an economist, I mean, this was just an incredible time. Once every century you see something like this, and there's so much that you're learning while you're doing. And it was not only just economics, it was also political economy, you know, what should lawmakers do and how should they do it, and all the moving parts there. So it was a very amazing time.
And that's when I wrote that first book. It's not a great book, Barry, and I really did write a chapter, chapter seven, on the rating agencies, but I did not put it in because I was part of the rating agency and no one would believe me anyway.
Now you've been there 20 years, the financial crisis is more than 15 years in the rearview window. Tell us a little bit about what Moody's Analytics is doing here and now.
We're a very simple business. My part of Moody's is a very simple business. We produce economic forecasts and scenarios.
Yeah, but that's not really a simple thing to do. There is a lot of inputs and a lot of moving parts.
There is, but the actual business itself is very simple. And one of the things that has been kind of a tailwind to our work has been the regulatory environment, right? The financial institutions all over the globe need to do stress tests for capital planning. It's even now embedded in the loan loss provisioning. CECL here in the US is an accounting framework that requires forward-looking projections. IFRS 9 overseas, climate stress testing, all those things require a very disciplined, comprehensive approach to economic forecasting. And so that's really been key to the business here over the last 10-15 years.
So that's kind of interesting. Your clients, are they necessarily Wall Street investing firms? Are they government institutions or non-governmental agencies?
All of the above. All of the above.
When I think of climate stress testing, I just was involved in this silly debate about climate change. And my answer is, hey, my opinion is irrelevant. Go talk to an insurer if climate change is a hoax.
And what are your experiences doing climate stress tests? Look how hard it is to get insurance in places like Florida. Like, how significant is something like that to the sort of research you would sell to a private entity like insurance?
Critical. So, house prices. Go look at house prices in Florida. We're talking about the West Coast of Florida. They're falling, and they're falling because homeowners insurance costs are rising because of the cost of hurricanes and other storm damage. So the insurers take that all in, they raise homeowners insurance, and that depresses demand and price. And of course that has all kinds of implications for mortgage credit risk if you're a mortgage insurer, if you're in the mortgage business in any kind of respect. So that's a great example of where the kind of economic forecasting is really critical to what's going on in real life.
And in particular with climate, it's real. It's happening, and there's damage, and insurers are trying to figure that out, and they're now building that into their premiums, and it's having a real impact. And right now it's more concentrated in places like Florida and Texas and California, but it's going to become more of a problem in other parts of the country, you know, pretty quickly.
Huh. To say the very least, we've seen fires in California, we've seen flooding in the Mid-Atlantic states.
Let me give you a good factoid for you. Or I'll ask you. I'll ask you the... Guess which state has the highest homeowners insurance costs in the country.
So the two that come to mind immediately are Florida and California, but the question makes me think, are we talking about places like Texas or the Carolinas?
Nebraska? Because of tornadoes?
Well, yeah, and convective storms with the big thunderstorms that come along and they drop a lot of... that hail does tremendous damage.
Yeah. Yeah.
You know, we just had a mild storm and this little branch smashes the windshield of the truck and I'm waiting three weeks to replace it. And when I asked the — we have glass coverage and I asked the insurer about this, they're like, 'You've no idea how backed up everything is.' Yeah, delays in getting dumb things like windshields.
Right. So all that stuff plus all the pandemic shortage of automobiles and things like that, that's driven automobile insurance up.
I never would have guessed in Nebraska. That's an amazing — that interesting? And also, who's number two or three? I'm curious who's right behind them.
They're up, they're up, they're up, they're definitely up there. Yeah, top 10. The state that had the lowest — and this is, I'm sure, going to change when we get more up-to-date data — is Hawaii.
