Speaker 1: This is Bloomberg Wall Street Week. We turn our attention
Speaker 1: to the markets this week.
Speaker 2: USCPI Nembers reinforcing concerns about inflation, the.
Speaker 1: Financial stories that shape.
Speaker 2: Our worth a really different reaction to Mark. Some more
Speaker 2: indications of just how hot the US economy really is
Speaker 2: through the eyes of the most influential voices. Katherine Keating,
Speaker 2: CEO of B and Y Moan, Ryan Winnahan, a Bank
Speaker 2: of America, Sam Zell, Chairman and founder of Equity Group Investment.
Speaker 3: Bloomberg Wall Street Week with David Weston from Bloomberg Radio.
Speaker 2: All Eyes on Washington, on the drama over the federal debt,
Speaker 2: on whether the FED can take a break from raising raids,
Speaker 2: and on the two men who are running for president again.
Speaker 2: This is Boobert Wall Street Week. I'm David Weston. This
Speaker 2: week Blair Ephron is Center View Partners on the appetite
Speaker 2: for big deals despite all the uncertainty we.
Speaker 4: Are in uncharted complicated waters.
Speaker 2: Former FED Vice chair Randall Quarrels on what went wrong
Speaker 2: with Silicon Valley Bank, and former BBC and New York
Speaker 2: Times head Mark Thompson on what streaming and AI mean
Speaker 2: for the business of news.
Speaker 5: The news is going through a revolution. That's what's going on.
Speaker 1: This week.
Speaker 2: Global Wall Streets spent a lot of its time trying
Speaker 2: to look around corners like the corner of the debt
Speaker 2: ceiling and whether it will keep the government from paying
Speaker 2: the debts it is already run up. The speaker McCarthy
Speaker 2: traveling to the White House for what may or may
Speaker 2: not the negotiations.
Speaker 1: I was very clear with the President we have now
Speaker 1: just two weeks to go.
Speaker 2: And the issue followed Treasure sector yell onto the G
Speaker 2: seven finance ministers meeting in Nigata, Japan at the end
Speaker 2: of the week.
Speaker 6: If Congress fails to do that, it really impairs our
Speaker 6: credit rating. We have to default on some obligation, whether
Speaker 6: it's treasuries or payments to Social Security.
Speaker 2: The presidential election may still be eighteen months away, but
Speaker 2: the two meeting candidates each had his own take on
Speaker 2: the debt ceialing issue, with President Biden saying it wasn't
Speaker 2: just the United States that is in the crosshairs.
Speaker 7: If we default on our debt, the whole world isn't
Speaker 7: Trump this is a manufactured crisis.
Speaker 2: But on the other hand, former President Trump appeared on
Speaker 2: CNN and said, maybe a default isn't that big a deal.
Speaker 7: I say that the Republicans out there, Congressman, senators, if
Speaker 7: they don't give you massive cuts, you're going to have
Speaker 7: to do a default.
Speaker 2: And in the meantime, consumer price index numbers came in
Speaker 2: this week as predicted.
Speaker 8: The month over month changed for both the headline and
Speaker 8: the core comes in exactly as forecast at four tenths
Speaker 8: of a percent. That's up on a headline basis over
Speaker 8: what we saw last month.
Speaker 2: Which is like vince Reinhardt to doubt that they would
Speaker 2: do anything to change the Fed's path.
Speaker 8: Was today's print disqualifying for FED action in June fifteens ers?
Speaker 2: No, The markets this week were relatively calm, with the
Speaker 2: S and P five hundred off just three tenths percent,
Speaker 2: the Nasdaq up for ten hund percent, and the yield
Speaker 2: and the ten yere up less than two basis points,
Speaker 2: ending the week at three point four to six six.
Speaker 2: To take us through what we saw this week, we
Speaker 2: welcome now Liz Ann Saunders back to Wall Street week.
Speaker 2: She's Chief Investment Strategies at Charles Schwab and Kristen Britterally,
Speaker 2: she is head of North America Investments at Citygroup Global Markets.
Speaker 2: So welcome to both of you. Great you have you, Kristen,
Speaker 2: thank you for coming to Wall Street. We really good
Speaker 2: to have you here.
Speaker 1: It's great to be here.
Speaker 9: Thank you.
Speaker 1: Let's start with you.
Speaker 2: In the equity markets, they seem to be relatively calm,
Speaker 2: despite that talk about maybe some kerfuffle down in Washington.
Speaker 9: Yeah, this is really interesting, and I think it's one
Speaker 9: of the most frequently asked questions that we're getting from
Speaker 9: our investors. Why has volatility muted? Why are we not
Speaker 9: seeing any stresses within the equity markets? And I think
Speaker 9: there's a couple of explanations for this. So the first
Speaker 9: one is, when you look at the breadth of the
Speaker 9: equity market rally that we've seen, it's really only seven
Speaker 9: stocks are driving eighty percent of the year today gains.
Speaker 9: So this is very concentrated. This is very idiosyncratic. Another
Speaker 9: way to look at it is you have about ten
Speaker 9: companies that are driving twenty five percent of the free
Speaker 9: cashlow generation within the US market. So this is a
Speaker 9: story about the companies that are really well run as
Speaker 9: opposed to a breadth and depth of this rally.
Speaker 2: So LU say, what about that does that narrowness of
Speaker 2: the rally, if we can call it that in the
Speaker 2: stock market, does that make you nervous?
Speaker 10: Well, it doesn't suggest as healthy a market as if
Speaker 10: you had the soldiers at the front line and not
Speaker 10: just the generals at the front line. I think there's
Speaker 10: a little bit of muscle memory in a knee jerk
Speaker 10: move that goes back into names like this when people
Speaker 10: think back to those that group of stocks, many of
Speaker 10: the same ones represented almost a defensive place to go
Speaker 10: during the worst part of the pandemic. But of course
Speaker 10: what it represented fundamentally at that time was those represented
Speaker 10: the only ecosystems in which we were living when everything
Speaker 10: was shut down. I think this time it's a bit different.
Speaker 10: Chris talked about the large size and liquidity and cash
Speaker 10: generation of these companies. You can also see the dominance
Speaker 10: of their outperformance really kick into high gear when we
Speaker 10: saw the failure of SVB Bank and the ripple effects,
Speaker 10: So I think that really was the push there. You
Speaker 10: can have an environment like that last a while and
Speaker 10: it doesn't necessarily have to be calamitous. There are times
Speaker 10: where you can see some catched down by the big
Speaker 10: dominant names. While you're seeing improving breadth and better participation
Speaker 10: on the way back up. That's a bit of what
Speaker 10: was going on last fall when the market had its low.
Speaker 10: But I think concentration risk in terms of what is
Speaker 10: the manifestation actually for investors, I think investors should be
Speaker 10: mindful of not chasing that and ending up with too
Speaker 10: much concentration risk.
Speaker 2: So the equity markets can't get too far away from earnings.
Speaker 2: And we're well into earnings now towards the end of
Speaker 2: this season, and we looked act to our elves. You
Speaker 2: know that we have twenty four l's of which we
Speaker 2: have one from City actually, and they're protecting overall I
Speaker 2: think two hundred six dollars at the end of the
Speaker 2: year earnings for share, which is down about eight percent
Speaker 2: from last year.
Speaker 1: Where are you on that projection?
Speaker 9: We're very much aligned to that that we started this
Speaker 9: year about looking at about a ten percent earnings contraction.
Speaker 9: We're now in the ballpark of about eight to ten percent.
Speaker 9: And I think when we look at Q one earnings,
Speaker 9: they were certainly better than feared, which is why we
Speaker 9: could see some reduction of that number. But I think
Speaker 9: what we have to keep in mind is when we
Speaker 9: look at the US equity market, we have seven out
Speaker 9: of eleven sectors that are already in a profits recession.
Speaker 9: When we look at what the FED has done already,
Speaker 9: the five hundred basis points of great hikes, the quantitative tightening,
Speaker 9: the stresses in the banking sector that are going to
Speaker 9: lead to tightening of credit conditions, this is something that
Speaker 9: has us very cautious. It's more difficult for companies to
Speaker 9: be profitable in this environment. It's more challenging on the consumer,
Speaker 9: and the idea that this isn't going to flow through
Speaker 9: to corporate earnings in a more material way is something
Speaker 9: that we just don't believe. So playing a little defense
Speaker 9: here and expecting some downside is what we're advising our investors.
Speaker 2: We're either in or rapidly approaching a federal debt crisis,
Speaker 2: as the so called X DAYE when the government runs
Speaker 2: out of money is just over two weeks away now.
Speaker 2: With a default, something most everyone agrees would be a catastrophe.
Speaker 2: And there are some indications in the T bill and
Speaker 2: the CDs markets that at least some investors are starting
Speaker 2: to get worried, but you couldn't really tell that from
Speaker 2: the equity markets. This is not the first time we
Speaker 2: have been here, and we asked our colleague Michael McKee
Speaker 2: to compare what we're seeing now with what we saw
Speaker 2: in twenty eleven when we had a similar close brush
Speaker 2: with disaster.
Speaker 8: Industrious David would rather hope that history doesn't repeat or rhyme.
Speaker 8: For some time, we've been told that nothing's going to
Speaker 8: happen on the debt ceiling until we get to the
Speaker 8: last minute or until Wall Street melts down, and it
Speaker 8: does seem we're getting close on both counts. Here's what
Speaker 8: JP Morgan Chase CEO Jamie Diamond told us just a
Speaker 8: few days ago.
Speaker 11: Actual default that is potentially catastrophic, and you can go
Speaker 11: through a million ways, but everyone, anyone's anyone knows that
Speaker 11: Cass Tropick and I don't think it's going to happen
Speaker 11: because it gets cash Rowberick, and the close you get
Speaker 11: to it, you will have panic. Markets get volatile, maybe
Speaker 11: there's Doc mar go down. The treasury markets will have
Speaker 11: their own problems.
Speaker 1: It's amazing. You already have certain T bills.
Speaker 11: Trading three percent and right next to one five percent.
Speaker 1: This is not good.
Speaker 8: We have seen this movie before the debt ceiling taken
Speaker 8: hostage for spending cuts a number of times over the
Speaker 8: past couple of decades. Twenty and eleven is one time
Speaker 8: when investors don't want history to rhyme. They went down
Speaker 8: to the wire as President Obama fought the idea of
Speaker 8: giving in to extortion on the debt ceiling. Then markets collapsed.
Speaker 8: The S and P five hundred went down about twenty
Speaker 8: percent and stayed down for quite some time before starting
Speaker 8: to go back up again.
Speaker 2: Losenne Sanders, Charles Schwab, and Chrissian Bitterly of City are
Speaker 2: still with us, and let me go to you on this.
Speaker 2: Why aren't we seeing more reaction in the equity markets
Speaker 2: than we have so far in the dead ceiling.
Speaker 10: I hope it's not just complacency and a correct assumption
Speaker 10: that although they can will probably inevitably kick to the
Speaker 10: eleventh hour fifty nine minute. That's just the way things
Speaker 10: are done, particularly on this subject. But so my guess
Speaker 10: is just complacency and an assumption that something will get done.
Speaker 10: I'd hate to think we have to go down the
Speaker 10: same path of twenty eleven, which is also a kin
Speaker 10: for different reasons of what happened in two thousand and
Speaker 10: eight with ultimately the passage of TARP, you needed that
Speaker 10: riot moment in markets. I think I agree with Jamie Diamond.
Speaker 10: I think it would be cataclysmic. I don't think anybody
Speaker 10: should be cavalier about letting it happen, whether it's for
Speaker 10: you know, political gain or whatever reason. My concern with
Speaker 10: regard to twenty eleven macro conditions are very different. We
Speaker 10: were on an upswing in the economy, having come out
Speaker 10: of the global financial crisis. We weren't dealing with an
Speaker 10: inflation problem or having come out of the most aggressive
Speaker 10: tightening cycle in forty years. And then there's certainly more
Speaker 10: vitriol right now. So I think we all should be
Speaker 10: worried about it, but I think ultimately something will get done.
Speaker 2: Okay, thank you so very much to Leazenne Sanders or
Speaker 2: Charles schwa for being back with us, and Kristin Bitterly
Speaker 2: for coming to us from city. Partisan fights over the
Speaker 2: dead ceiling are nothing new for Wall Street those Rockeiser
Speaker 2: talked about it in March of nineteen ninety six when
Speaker 2: Congress ended up with a short term stop gap spending
Speaker 2: bill to keep the US from defaulting. Back then, if
Speaker 2: you remember the top movie in the country was Mike
Speaker 2: Nichols The Bird Cage. Coming up, Where have all those
Speaker 2: deals gone and are they coming back? We're going to
Speaker 2: ask Blair Effron, a center of your partners, about whether
Speaker 2: it has to do with credits tightening or whether they're
Speaker 2: bigger factors such as, for example, what's going on Washington
Speaker 2: on the debt ceiling. All of that is coming up
Speaker 2: next on Wall Street Week, and we are on Bloomberg.
Speaker 3: This is Bloomberg Wall Street Week with David Weston from
Speaker 3: Bloomberg Radio.
Speaker 2: Credit it's what makes the financial world go round, and
Speaker 2: that world is concerned there may be less credit available.
Speaker 3: One of the big questions will be to what extent
Speaker 3: does credit titan and you know, if that is material
Speaker 3: that will have a drag on the economy.
Speaker 2: With CEO's mentions of credit tightening spiking this earning season,
Speaker 2: the series of regional bank shocks made matters only worse
Speaker 2: as bankers struggling to stay afloat, had little appetite to
Speaker 2: take on the risk of extending credit.
Speaker 12: A banking system which has government guarantees where people put their.
Speaker 8: Money in a trust relationship if they suffer significant losses,
Speaker 8: that's what causes concern.
Speaker 2: But as important as credit is, it's just that hard
Speaker 2: sometimes to get a handle on it in real time.
Speaker 2: The fed's backward looking numbers on bank commercial and industrial
Speaker 2: loans fell sharply in January and February, but started to
Speaker 2: recover in March, only to turn down again in April.
Speaker 2: And the forward looking Senior Loan Officer Opinion survey Or
Speaker 2: SLUICE numbers this week pointed to further tightening, which FED
Speaker 2: Chair J. Powell got a peak at last week and
Speaker 2: told us in advance was in line with what they expected.
Speaker 4: In mid size banks have some of them had been
Speaker 4: tightening their lending standards.
Speaker 9: Banking data will show that lending has continued to grow,
Speaker 9: but the pace has.
Speaker 1: Been slowing really since the second.
Speaker 2: Half of last year. And to take us through the
Speaker 2: world of credit and what it may or may not
Speaker 2: be doing to the deal pace, we turned out of
Speaker 2: somebody who really knows that space awfully well.
Speaker 1: He's Blair Efron.
Speaker 2: He is a partner and co founder of Centerview Partner.
Speaker 2: So welcome back to Walter.
Speaker 4: Great to have you see.
Speaker 1: Okay, let's start with credit.
Speaker 2: Because it was one thing that does affect the pace
Speaker 2: of deals. Is it affecting it from your point view
Speaker 2: right now?
Speaker 4: Absolutely, it's getting better. Still constrained fourth quarter of twenty two,
Speaker 4: you had nothing. Today, you actually have the markets loosening
Speaker 4: up for the right deals, ignishing data point. For example,
Speaker 4: the largest LBO in the past six seven eight months
Speaker 4: was a deal with Blackstone and Emerson for their climate business,
Speaker 4: fourteen billion dollar deal. No bank that was available. The
Speaker 4: private direct lending market stepped in firms like Apollo, Blackstone,
Speaker 4: KKR Areas that did five and a half billion of
Speaker 4: financing to see it through. Half of that has been
Speaker 4: replaced in the past week by the banks. So it
Speaker 4: really depends on the credit and it depends on what
Speaker 4: the deal is, but there is absolutely credit available. Obviously,
Speaker 4: the key is it's much more expensive. You should assume
Speaker 4: for a private equity transaction it's five hundred basis points
Speaker 4: or so higher than it would have been a year
Speaker 4: and a half ago, and for a corporate deal two
Speaker 4: hundred one hundred fifty basis points. And that leads to
Speaker 4: the next issue, which is how you price an asset
Speaker 4: for sale. And obviously with multiple staying high and elevated
Speaker 4: and at eighteen times PE, it's the same as it
Speaker 4: was last year, same as it was in twenty one,
Speaker 4: But yet your returns in any transaction are more difficult.
Speaker 4: So you have to think about how to get the
Speaker 4: buyer and the seller to come to agreement. Not easy.
Speaker 2: As I recalled center of you might have had something
Speaker 2: to do with the Emerson deals like we did.
Speaker 4: You can give us a plug, I won't.
Speaker 1: Okay, we'll do that.
Speaker 2: So let's go to that question of buyers and sellers
Speaker 2: and where they think the price is. Because some of
Speaker 2: those prices are coming down. Valuations are affected by interest
Speaker 2: rates and also some slowing of the economy in some places,
Speaker 2: have the sellers gotten their heads around the fact that
Speaker 2: their price may be lower.
Speaker 4: They finally starting to do that, which is actually why
Speaker 4: I think there's more discussion. You don't see it yet
Speaker 4: in terms of announcements, but you see companies thinking more
Speaker 4: about M and A as part of their thinking in
Speaker 4: twenty three, and I would venture to say that as
Speaker 4: we exit the year twenty three and get into twenty four,
Speaker 4: you'll see activity actually start to pick up quite a bit.
Speaker 2: So you think it will come back? Do you think
Speaker 2: we'll reach the levels we had before? Because we have
Speaker 2: some record levels.
Speaker 4: Oh boy, that was high. You think about a five
Speaker 4: trillion dollars peak market, that probably unlikely. But the idea
Speaker 4: that you'll have a stable global M and a market
Speaker 4: of four trillion dollars or so every year, I think absolutely.
Speaker 4: And what you find out generally about M and A
Speaker 4: David now is it's less prone to cyclicality. It's part
Speaker 4: of a company's core strategy. Most companies are actually very
Speaker 4: good at it. And when you're thinking about new avias
Speaker 4: and growth new areas for your business, you're thinking about
Speaker 4: the pace of disruption and how you combat that. It
Speaker 4: becomes important for most companies to want to consider.
Speaker 2: When you've been on with us before, you've emphasized Blair
Speaker 2: that uncertainty is one of the biggest factors in determining
Speaker 2: whether companies want to do deals or not. Where are
Speaker 2: we uncertain? Because there seems to be a lot of
Speaker 2: uncertainty around right now.
Speaker 4: We are in uncharted complicated words starting with obviously the
Speaker 4: dead ceiling, which way to come back to the banking
Speaker 4: environment more generally, and whether you think we're a slow
Speaker 4: down or something more severe in the coming months. I
Speaker 4: happen to be in a slow down camp. I think
Speaker 4: there's a lot of resiliency that we don't account for.
Speaker 4: It's a lot of tailwind that will lead stability. But
Speaker 4: that uncertainty clearly is an issue when you think about
Speaker 4: doing a transaction. And remember you want to be able
Speaker 4: to think of a dead transaction when there's a macrotail wind,
Speaker 4: because it covers up some of your assumptions that may
Speaker 4: not pan out. It's just people do better in a
Speaker 4: growth environment. Any company does, so clearly an issue. And
Speaker 4: I think until the dead ceiling situation resolves, and that's
Speaker 4: with the question mark, I hope it'll be weighing pretty heavily.
Speaker 1: We've had this dead ceiling situation before.
Speaker 2: Two thousand eleven was the time we had a downgrade
Speaker 2: actually from it, and we have a lot of people,
Speaker 2: the president of that States as well as Mitch will Connell
Speaker 2: agreeing we can't have a default. We actually had formed
Speaker 2: person tru I'm saying this week, well, maybe it wouldn't
Speaker 2: be that bad a thing. Well, how does it figure
Speaker 2: in the minds of people doing deals, CEOs and others
Speaker 2: thinking about deals? Are they taking into account? Do they
Speaker 2: take it seriously?
Speaker 4: So everybody's takend seriously let's get away from the deal
Speaker 4: market for a second. Let's talk about a company's performance.
Speaker 4: I think the debt situation, the debt ste situation already
Speaker 4: is having a big impact. If you think about driving
Speaker 4: a car, you're a passenger and the driver goes ninety
Speaker 4: miles an hour and then slows down, you're gonna think
Speaker 4: twice about getting back in the car, which you have
Speaker 4: already Simply the spectra of its probably hit GDP growth
Speaker 4: thirty basis points. It's probably hit jobs two hundred and
Speaker 4: fifty thousand, according to CEA, the Council of Economic Advisors,
Speaker 4: and then you start to think about what the impact
Speaker 4: is if you go over and have a default that
Speaker 4: is measured in days and weeks. The fact of the
Speaker 4: matter is that's a half a million jobs, that's a
Speaker 4: half a point of GDP growth, and that's before you
Speaker 4: start to think of the absolutely urgent consequences of something
Speaker 4: that's protracted.
Speaker 2: We also have regulatory uncertainty, particularly in the antitrust area,
Speaker 2: both for the FTC and from the Justice Department. Bloomberg
Speaker 2: actually had a piece this week saying that that really
Speaker 2: is deterring or some of the CEOs from moving forward
Speaker 2: because you're not sure whether we're going to approve, but
Speaker 2: even more than that, how long it will take. There's
Speaker 2: a lot of uncertainty running. Are you dealing with that
Speaker 2: as you advise.
Speaker 4: Absolutely, David, And if you just it shows up in
Speaker 4: the numbers. Year to date we have I think fourteen
Speaker 4: deals over ten billion dollars versus last year was twenty
Speaker 4: four deals. But you account for that in your thinking.
Speaker 4: If it's going to take eighteen months for a transaction
Speaker 4: to close, you spend a lot of time thinking about
Speaker 4: how both the acquired business and the acquiring company manage
Speaker 4: their own businesses, keep the base business performing well, and
Speaker 4: try to minimize uncertainty for all the employees. You can
Speaker 4: think about different structures. If you stock, for example, in
Speaker 4: a transaction, the selling company has more of a vested interest,
Speaker 4: if you will, more of a meeting the minds in
Speaker 4: terms of what it takes to do well. And I'd
Speaker 4: also say you think about the whole question of synergy
Speaker 4: in a different way. I think that you need to
Speaker 4: be more conservative, certainly on cost, and you need to
Speaker 4: be more aggressive and absolutely committed to the idea that
Speaker 4: the transaction leads to better growth, which leads to job creation,
Speaker 4: which leads to potentially better outcomes for consumers. All this
Speaker 4: factors into the thinking. I would also finally say that
Speaker 4: it's much more the administration using a megaphone than actually
Speaker 4: litigating that people are attentive to. But all that said,
Speaker 4: smart deals are still happening and they will continue to happen.
Speaker 2: Blair, it's great to have you back on Walshiver. Thank
Speaker 2: you so much for having me, David. That's Blair Efron
Speaker 2: a Center View Partners.
Speaker 1: Coming up.
Speaker 2: Generative AI just the latest challenge to the news business model.
Speaker 2: We talk with the man who led the BBC and
Speaker 2: then the New York Times, Mark Thompson, about whether there
Speaker 2: is a way to make a serious business out of
Speaker 2: serious news.
Speaker 1: That's next on Wall Street Week on Bloomberg.
Speaker 3: This is Bloomberg Wall Street Week with David Weston from
Speaker 3: Bloomberg Radio.
Speaker 1: This is Wall Street. I'm David Weston.
Speaker 2: We're all trying to figure out what to make of
Speaker 2: generative AI and what it will do to all of
Speaker 2: our lives for those engaged in the business of gathering
Speaker 2: and reporting news. It's just the latest and a series
Speaker 2: of innovations that have also posed challenges. Things like streaming
Speaker 2: video and social media and even the Internet itself. Mark
Speaker 2: Thompson is someone who has spent his career addressing these
Speaker 2: changes and figuring out how to make them tools instead
Speaker 2: of threats. He was Director General of the BBC and
Speaker 2: then President and CEO of The New York Times. Is
Speaker 2: now chairman of Ancestry, that is the largest for profit
Speaker 2: genealogy company in the world.
Speaker 1: And we're welcome now back to Bloomberg. Mark, great to
Speaker 1: have you here.
Speaker 2: Good to see that is so this week we're struck
Speaker 2: by the fact that at the same time we have
Speaker 2: BuzzFeed going out of business, we have Eural Chap New
Speaker 2: York Times starting a.
Speaker 1: Really big deal with Google for cash.
Speaker 5: What is going on, Well, the news is going through
Speaker 5: a revolution, That's what's going on. And the revolution's full
Speaker 5: of surprises. When I got to the New York Times
Speaker 5: in twenty twelve, so just over ten years ago, everyone
Speaker 5: told me the BuzzFeed was going to become the New
Speaker 5: York Times or the Huffington Post was going to become
Speaker 5: the New York Times. A decade on, the game's really changed.
Speaker 5: It's changed both in the legacy players, some of the
Speaker 5: legacy players, at least the Times The All Street Journal,
Speaker 5: the Washington Post might be examples of that kind of
Speaker 5: got their act together and began to think hard about
Speaker 5: digital and I think in the early twenty twenties look
Speaker 5: pretty secure. Whereas the insurgents, the new guys who had
Speaker 5: no legacy hang ups, they had no print or broadcast
Speaker 5: TV to worry about. They've kind of got into trouble.
Speaker 5: It's turned out to be much much harder than they
Speaker 5: thought to build a brand, to keep your audience, and
Speaker 5: above all, to figure out ways of turning big audiences
Speaker 5: billions of clicks into dollars. That's proven very hard for them.
Speaker 2: What does that say about incumbency when it comes to
Speaker 2: I'm talking about real news? Now, there are things that
Speaker 2: call themselves and news says befo. We're talking about real reporting.
Speaker 2: What does it say because in fact, there are all
Speaker 2: of those things that you've mentioned and more that really
Speaker 2: sprang up. We thought they were going to be a
Speaker 2: great new thing, and they've gone now. And yet we
Speaker 2: do have New York Times, although I'll say Financial Times
Speaker 2: in Wall Street Journal, who soon you're doing quite well?
Speaker 1: Thank you?
Speaker 12: That's right.
Speaker 5: Well, I think it's a few things to say. I mean,
Speaker 5: what one question is when was the last time in
Speaker 5: the free world we saw the creation of a global
Speaker 5: news brand. Are truly global news brand, not a specialist
Speaker 5: business led news brand. Bloomberg is a really good example
Speaker 5: of that, but a kind of global general news brand.
Speaker 5: It's CNN in the early eighties. So it's really really
Speaker 5: hard to do, and in a great continental country like
Speaker 5: the United States, even to become a national news brand.
Speaker 5: So legacy in terms of brand and trust and name
Speaker 5: recognition is fantastically valuable. But it's not enough. It's like
Speaker 5: you know, it's it's necessary, but not sufficient, it seems,
Speaker 5: because you always have to work out the economics of
Speaker 5: a very different media environment. And what's interesting is I
Speaker 5: would say that the big TV brands in this country,
Speaker 5: tv news brands to include CNN, have yet to figure
Speaker 5: that out, and that their business, their legacy business, still
Speaker 5: very profitable, is dying.
Speaker 1: It's dying, and it's not.
Speaker 5: Yet clear that they've got credible plans yet for the
Speaker 5: news ship that's going to take over when the old
Speaker 5: ship sinks.
Speaker 2: So talking about video news for a moment, which I
Speaker 2: know more about. We had obviously the broadcast networks and
Speaker 2: there were licensed by the government, there was this motor
Speaker 2: on your business because you needed a license. That gave
Speaker 2: rise to cable and people were terribly afraid of cable.
Speaker 2: That gave rise to CNN. Actually, and then we went
Speaker 2: on beyond that. Now we have streaming video, so there's
Speaker 2: more out of it available out there. What does streaming
Speaker 2: video potentially mean for news? Is that a risk and
Speaker 2: opportunity both?
Speaker 8: Well.
Speaker 5: I think if we just talk as kind of as newspeople,
Speaker 5: some stories are best consumed as video. And actually even
Speaker 5: newspapers like the New York Times and realized that you'll
Speaker 5: see a lot of video on the New York Times. Obviously,
Speaker 5: short form video, which is kind of specially designed for
Speaker 5: smartphones and is very snackable, has taken over the world.
Speaker 5: I think for the big the big players, if you'll
Speaker 5: see an end for example, if you're Bloomberg, the question
Speaker 5: of whether you want to offer users snackable little pieces
Speaker 5: forty five seconds, a minute, a minute and a half,
Speaker 5: or whether you want to try and somehow port the
Speaker 5: longer the show ten to fifteen minutes, the anchor, the conversation,
Speaker 5: whether that has a streaming role is unproven.
Speaker 1: And now i'd have all that we have generative AI. Yeah,
Speaker 1: and what that means.
Speaker 2: You saw Buri Dealer's remarks recently saying he thinks they
Speaker 2: could really pose a substantial threat to news. What do
Speaker 2: you make of general AI or is it just too
Speaker 2: early to know?
Speaker 5: It's I think, I mean, I think it's too early
Speaker 5: to know. It is extraordinary though. I was at a
Speaker 5: board meeting branches to yesterday and what our engineers had
Speaker 5: used GPT for to hack the beginnings of a version
Speaker 5: of the answersty product where you can ask it questions.
Speaker 5: You can say, tell the story of my grandfather and
Speaker 5: it will create either a thousand words of pros or
Speaker 5: it will create a slideshow with actually frankly astonishingly convincing
Speaker 5: captions like that in seconds two and three seconds. So
Speaker 5: I think if it's an immense opportunity to solve some
Speaker 5: problems for us, you know, at Ancestry trying to bring
Speaker 5: these family trees to life into human stories with pictures
Speaker 5: and seals, and where a machine is doing it, you know,
Speaker 5: in a fairly safe environment. You know, it's all fairly formulaic.
Speaker 5: That's very exciting. Clearly, there are threats, though, and I
Speaker 5: would say one real hope for us is that AI,
Speaker 5: both generitive and other forms of AI, Machine learning and
Speaker 5: other forms of AI will really help us solve that problem.
Speaker 1: If I'm a.
Speaker 5: Consumer of how do I find the media I want?
Speaker 5: It's Friday evening. I want something entertaining, you know I
Speaker 5: wanted Pg. Thirteen. I don't want too much of violence.
Speaker 1: What have you got?
Speaker 5: What have you got? And actually even the very best
Speaker 5: screams in the world don't do a good job of
Speaker 5: telling me in my view, and I need to bring
Speaker 5: friends and go through reviews and rested to work out.
Speaker 5: I think that business of whether it's finding a new
Speaker 5: story on a smartphone or what you want to watch
Speaker 5: in the evening, AI can really help us with that.
Speaker 5: But a threat. Imagine an algorithm which could every morning
Speaker 5: at seven ingest all of the news in the world
Speaker 5: and then turn it into we could use your voice
Speaker 5: David Western, and you the consumer could ask your smartphone
Speaker 5: in the kitchen to ask David what's happened today? And
Speaker 5: David's not quoting the New York Times or the Washington
Speaker 5: Post or CNN or MSNBC. David is ingesting it all,
Speaker 5: paraphrasing it all, and is ready to interact with you.
Speaker 5: What's happening in Ukraine? What are they? Did the Russians
Speaker 5: retreat at the backmotor say what happened?
Speaker 1: Why?
Speaker 5: What does that mean? And David can answer all those
Speaker 5: questions and like they'll pay you a good they'll pay
Speaker 5: you a good fee.
Speaker 1: Well. But like every powerful tool, it can be used
Speaker 1: for a good or for ill.
Speaker 5: And will be used for both. Yeah, I mean, I
Speaker 5: think when people talk about slowing it down, we must,
Speaker 5: you know, we must have a debate about how does
Speaker 5: that work? I mean there are national security implications here
Speaker 5: about I mean, this is the technology which is I
Speaker 5: think almost certainly going to and probably has to be
Speaker 5: developed and explored. It will happen. It's happening now very quickly.
Speaker 5: I want to say, as a species, we're very adaptable too.
Speaker 5: People who predicted the end of all jobs and the
Speaker 5: end of everything with previous you know, the Industrial Revolution
Speaker 5: and everything since have always been proven wrong because human
Speaker 5: beings adapt and generally economic history suggests you get more jobs,
Speaker 5: you get more wealth as the results of these things.
Speaker 5: So although I can certainly think of very dark nightmass
Speaker 5: from any like everyone else, I want to remain basically
Speaker 5: optimistic about AI and news AI and medium more generally.
Speaker 2: So I'll buy that optimism was always good. Thank you
Speaker 2: so much to Mark Thompson of Ancestry.
Speaker 13: So this was the week when the entire economic world
Speaker 13: seemed to be coming down with a severe case of
Speaker 13: mad cow disease. In Washington, there was you might say,
Speaker 13: utter confusion. Congress and the White House, whose most conspicuous
Speaker 13: accomplishment this year had been blaming each other for lack
Speaker 13: of progress, failed once again to reach agreement on a
Speaker 13: budget for fiscal nineteen ninety six, a year that's.
Speaker 1: Already half over.
Speaker 13: So they approve, would you believe it, one more so
Speaker 13: called stop gap spending bill to keep the government going
Speaker 13: for another twenty six days.
Speaker 1: And that's no. This is Wall Street Week. On Bloomberg.
Speaker 1: This is Wall Street Week.
Speaker 2: I'm David weston the failure of Silicon Valley Bank sent
Speaker 2: shockwaves through the banking system and rattled the markets. The
Speaker 2: dust is really still settling, but the forensics on what
Speaker 2: went wrong are well underway, with the FED Vice Chair
Speaker 2: for Bank Supervision Michael barr issuing report calling for stronger
Speaker 2: supervision and stronger regulation. For his perspective on what went
Speaker 2: wrong at SVB, we welcome. Now mister Barr's predecessor as
Speaker 2: FED Vice Chair, he is Randall Corrals now executive chair
Speaker 2: of the Synature Group, So welcome. It's great to have you,
Speaker 2: mister Corals. So there's been a lot of back and
Speaker 2: forth about what happened what didn't happen. I must say,
Speaker 2: mister Barr and thinks that this is a textbook example
Speaker 2: of bank mismanagement out of Silicon Valley Bank.
Speaker 1: I think everyone.
Speaker 2: Agrees with that. Well, are there things that actually the
Speaker 2: regulators or the supervisors could have done to make it better?
Speaker 12: It obviously was a text bookcase of mismanagement. But I
Speaker 12: think that explanations are usually most penetrating when they don't
Speaker 12: assume that the people involved were either fools or crooks.
Speaker 12: And so the question is, how could some of these
Speaker 12: decisions have been made, both by the bank management, by
Speaker 12: the FED itself in supervising the bank, And there I
Speaker 12: think you have to look at the behavior of the
Speaker 12: uninsured deposits in Silicon Valley Bank and in the other
Speaker 12: banks that have failed over the course of the last
Speaker 12: two months, Signature Bank, First Republic, and the uninsured deposits
Speaker 12: at these institutions moved away from the bank with speed
Speaker 12: and out of volume that we had never seen before.
Speaker 12: I mean, the largest amounts that had ever run from
Speaker 12: a bank in the previously largest bank failures in the
Speaker 12: country's history had been and I think eighteen billion dollars
Speaker 12: over the course of almost a month. And in Silicon
Speaker 12: Valley Banks case, forty two billion dollars left the bank
Speaker 12: in a day, and the bank was getting ready to
Speaker 12: open the next day with the expectation that another one
Speaker 12: hundred billion dollars would have left the bank. You'd have
Speaker 12: one hundred and forty two billion dollars leaving the bank
Speaker 12: in the course of twenty four hours.
Speaker 2: Finally, one more thought sold to the highest bidder, the
Speaker 2: sound of the gavel coming down, the thrill of victory
Speaker 2: over all those who couldn't or wouldn't bid up the
Speaker 2: price one last time. There's just about nothing quite as
Speaker 2: dramatic as competition measured in money, and that's why auctions
Speaker 2: are so exciting. No matter what's being sold, be it fine.
Speaker 13: Art, ladies and gentlemen, it gives me great pleasure to
Speaker 13: present Look two hundred and thirty.
Speaker 2: One or Premier League football clubs like Manchester United.
Speaker 8: And Manchester United sores amid rapports that the Qataris are
Speaker 8: bidding for the world famous football club.
Speaker 2: Or failing banks like First Republic. We've had a good
Speaker 2: look before, and now the Inflation Reduction Act has introduced
Speaker 2: a whole new level of auctions, not just billions, but
Speaker 2: hundreds of billions of dollars in federal money at state
Speaker 2: for those investing in green energy or in semiconductors.
Speaker 14: The whole point of this is to increase innovation, research
Speaker 14: and development in the industry, not you know, we're not
Speaker 14: giving you taxpayer money to fluff your pillow and increase
Speaker 14: your profit and give it away to your shareholders.
Speaker 2: And the bidders in these auctions aren't wealthy individuals or
Speaker 2: a large corporations. Their states and even countries offering concessions
Speaker 2: to get companies to invest in manufacturing with them rather
Speaker 2: than with their rivals, as Canada's stepped up to historic
Speaker 2: incentives to get volksag and to build its battery plant
Speaker 2: in Ottawa rather than across the border.
Speaker 15: Yes, the IRA is something that we've had to step
Speaker 15: up to to make sure we're competitive, but we're going
Speaker 15: to be a lot more strategic about how we pick
Speaker 15: and choose the right investments. We can't just do a
Speaker 15: blanket like the US can.
Speaker 1: Not to be outdone.
Speaker 2: This week, over fifty states and territories on this side
Speaker 2: of the border gathered together in Washington at the Select
Speaker 2: USA event. That's all to bid against one another for
Speaker 2: the foreign investors who are trying to get their share
Speaker 2: of the three hundred and sixty nine billion dollars in
Speaker 2: green subsidies and the seventy six billion dollars in grants
Speaker 2: and tax credits for semiconductor manufacturing. But maybe, just maybe
Speaker 2: this is not the end of it, but instead only
Speaker 2: the preliminary round in what could become the biggest bidding
Speaker 2: war in history, the United States against China for the
Speaker 2: grand prize of global technological leadership.
Speaker 7: And we seek competition, not conflict. But I will make
Speaker 7: no apologies that we're investing in to make America stronger.
Speaker 7: Investing in American innovation and industries will define the future
Speaker 7: that China intends to be dominating.
Speaker 2: Whatever happened to all that criticism of China putting its
Speaker 2: heavy thumb on the economic scales, Well maybe you can't
Speaker 2: beat them, you just join them. That does it for
Speaker 2: this edition of Bloomberg Wall Street Week. If you missed
Speaker 2: any part of today's program, you can listen on demand
Speaker 2: with our Wall Street Week podcast. Find that on Apple, Spotify,
Speaker 2: or anywhere else you get your podcasts. I'm David Weston.
Speaker 2: Stay with us. Today's top stories and global business headlines
Speaker 2: are coming up right now