Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: This is Bloomberg Business Week Insight from the reporters and
Speaker 2: editors that bring you America's most trusted business magazine, plus
Speaker 2: global business finance and tech news. The Bloomberg Business Week
Speaker 2: Podcast with Carol Masser and Tim Stenovek on Bloomberg Radio.
Speaker 3: The rally that we're seeing in the big bank stocks
Speaker 3: really up as a whole. If you look at the
Speaker 3: KBW Bank Index, JP Morgan, Goldman, City, Wells, the KBW
Speaker 3: Bank index is up about four percent.
Speaker 4: All the names have been higher in the index.
Speaker 3: City and Wells up more than six percent, Goldman up
Speaker 3: around five percent, JP Morgan a gate of nearly two percent. Tim,
Speaker 3: we have definitely seen this group just outperforming here, all right,
Speaker 3: as somebody who has certainly been all over the stories.
Speaker 5: Bloomberg News Finance reporter Cat Toorty. She joins us here
Speaker 5: in the studio. First Upcat, as Carol mentioned that group
Speaker 5: of bank stocks absolutely rallying today, many of the names
Speaker 5: outperforming the broader equity trade. Even that we're seeing as
Speaker 5: markets are higher across the board as a whole, a
Speaker 5: very strong quarter for the banks.
Speaker 6: Absolutely.
Speaker 7: I would say that this is their second most profitable year,
Speaker 7: twenty twenty four, and that's compared to twenty twenty one,
Speaker 7: which is the most profitable. So we're ending on a
Speaker 7: high note. And what's also interesting is the commentary around
Speaker 7: the year ahead. There's just so much positive momentum that
Speaker 7: the executives.
Speaker 6: Were referencing on the earnings calls today.
Speaker 7: So not only is it a look back and kind
Speaker 7: of a nice bow on twenty twenty four, but it's.
Speaker 6: A lot of full steam ahead.
Speaker 7: We're expecting more deals, We're expecting a lot more volatility
Speaker 7: in the markets, and if twenty twenty five can look,
Speaker 7: it's going to be tough. But twenty twenty four was
Speaker 7: certainly a positive end.
Speaker 3: Was there any common narratives, I mean, every bank is
Speaker 3: a little bit different, right in terms of exposure and
Speaker 3: so on and so forth. Was it volatility and trading like,
Speaker 3: was there any kind of common themes that you could
Speaker 3: kind of string across all of them.
Speaker 7: So with trading the volatility, it has to do with
Speaker 7: both the rate cuts, so there's a lot of repositioning.
Speaker 7: There was a lot of repositioning also around the US election,
Speaker 7: So those two things really benefited the fourth quarter.
Speaker 6: The last three months of the year.
Speaker 7: Then when you look at investment banking, deals are coming
Speaker 7: back in a more meaningful way. But this is compared
Speaker 7: to a pretty muted twenty twenty three, So I wouldn't
Speaker 7: say that this is every the floodgates have opened and
Speaker 7: we've seen a significant when you compare it to let's
Speaker 7: say twenty twenty one or twenty twenty two, when there
Speaker 7: really was a peak in deal activity. But there is momentum,
Speaker 7: and that was the common narrative across the board.
Speaker 5: Okay, one more momentum and then we're going to get
Speaker 5: into the particulars of some of the banks, because we
Speaker 5: got quite a few results earlier today. Kat momentum is
Speaker 5: it as a result of optimism over regulatory changes? What's the momentum,
Speaker 5: what's the optimism coming from?
Speaker 7: I would say that was the phrase that is repeated
Speaker 7: the most this morning, was that there's an expected easing
Speaker 7: of regulatory burdens that these bank executives have been complaining.
Speaker 6: About for years.
Speaker 7: For example, so the capital rules, the capital requirements that
Speaker 7: they were anticipating having to put aside more money to
Speaker 7: abide by those capital rules. Now the expectation is those
Speaker 7: rules will not be as stringent.
Speaker 4: And yet they've done okay, if not okay.
Speaker 7: And they've always said that they are in an okay position.
Speaker 7: That was, there was never a question of whether or
Speaker 7: not they were going to be able to abide by
Speaker 7: higher capital rules. It's just that when you have the
Speaker 7: higher capital rules, there's less that they can do, there's
Speaker 7: less wiggle rules.
Speaker 4: They've done well, and they've.
Speaker 7: Done quite well, really well, but they haven't also faced
Speaker 7: You know, these capital rules are meant to be in
Speaker 7: the times of highest stress. So I wouldn't say there
Speaker 7: were times of stress. You had the regional banking crisis.
Speaker 7: We've had a lot of geopolitical tensions, so there's been
Speaker 7: a lot of volatility, and the banks have held up.
Speaker 7: But I don't think that we've reached let's say the
Speaker 7: highest point of stress that these stress tests are are.
Speaker 7: Really they're prepared preparing these banks for.
Speaker 5: Okay, but remind everyone why those capital requirements are in place.
Speaker 5: I mean, like you said, during times of stress, they
Speaker 5: need to make sure that these banks remain operable.
Speaker 3: We're waiting for all the emails to come and say, well,
Speaker 3: remember when we bailed them out exactly.
Speaker 7: No, this is after the financial crisis two thousand and eight,
Speaker 7: two thousand and nine. This is the These have been
Speaker 7: the rebuilding years. But what's been interesting it's this is
Speaker 7: way past rebuilding. Now we're in the full on growth
Speaker 7: stage and you're seeing that. I mean, JP Morgan passed
Speaker 7: their fifty billion annual profit.
Speaker 4: That's huge.
Speaker 6: Yeah, and so they're in a different those capital requirements.
Speaker 7: Even with those capital requirements, but again, the capital requirements
Speaker 7: that they were complaining about were the next phase, so.
Speaker 6: It was going to be even higher.
Speaker 7: Now they've been able to handle their capital requirements that
Speaker 7: they currently have, the question was will they get worse?
Speaker 7: And now the expectation, going back to this theme of
Speaker 7: regulatory burdens, is that they don't expect those capital requirements
Speaker 7: to be as high as they originally were proposed.
Speaker 3: Before you go, because I feel like we should mention City.
Speaker 3: That's a twenty billion dollars buy back, which is I
Speaker 3: feel like they're still going through a transformation, right, and
Speaker 3: what do we need to know about City?
Speaker 7: They are They lowered one of their profit, their expected
Speaker 7: profits that they have been guiding to.
Speaker 3: So I know that in tangible common equity, right, tangible
Speaker 3: common equity.
Speaker 7: The profitability. But I would say that their performance today
Speaker 7: was it was positive.
Speaker 6: I three.
Speaker 7: I think the stats were three of their four or
Speaker 7: five business lines were records or higher than expected. And
Speaker 7: so I think that when there's this question of can
Speaker 7: Jane Fraser turn around this bank into a growth stage,
Speaker 7: that that's still very much an open question. But we
Speaker 7: didn't see, for example, the shares react in a super
Speaker 7: negative way to that profit metric being brought down.
Speaker 3: They're up seven percent of this second performer in the
Speaker 3: KBW Bank Index.
Speaker 8: It is gonna be one of your gainers today.
Speaker 4: It is the whole group.
Speaker 5: Okay, when you can't choose one, you choose them all.
Speaker 5: Cap before we let you go, give us one highlight
Speaker 5: from Goldman and one from Wells.
Speaker 7: Uh Goldman, I would say it's it was like the
Speaker 7: the Trump Parade. It was a very raw raw here
Speaker 7: we go. We're expecting twenty twenty five to be our year.
Speaker 7: And that was a lot of what Solomon said JP
Speaker 7: Morgan was a lot about their strength and trading and continuing.
Speaker 7: But there were some questions too about leadership under Diamond
Speaker 7: and what happens next that was.
Speaker 4: Five more years.
Speaker 7: I don't think it's going to be five more years,
Speaker 7: and he's he's basically he has been saying that, and
Speaker 7: that was reiterated on today's call. There will be a transition.
Speaker 7: It's just a matter of what happens. Is that transition
Speaker 7: a year, two three, it's definitely not five, but definitely
Speaker 7: there's still the question.
Speaker 3: It was some of the news this week in terms
Speaker 3: of the suite over JP Morgan, great rundown, great overview.
Speaker 3: Cat Dougherty, she's finance reporter at Bloomberg News. Be sure
Speaker 3: to check out all of her stuff at Bloomberg Dot.
Speaker 3: Comment on the Bloomberg All right.
Speaker 5: Well stick in with a bank earnings. I want to
Speaker 5: bring in Cheryl Paid, senior portfolio manager angel Oakcapital Advisors.
Speaker 5: They've got eighteen point seven billion dollars in assets under management.
Speaker 5: Cheryl is portfolio manager and the Dynamic Financial Strategies Income
Speaker 5: Team Trust. It's a closed in fund that invests Carol
Speaker 5: in debts issued by finance firm.
Speaker 8: She joins us this afternoon from Atlanta.
Speaker 3: All right, Cheryl, so pick up the baton from Cat Dougherty,
Speaker 3: who just laid out kind of that great overview on
Speaker 3: the big banks today, and it seems like they are
Speaker 3: firing on pretty much all cylinders. Anything in the results
Speaker 3: that really stood out for you and that you think
Speaker 3: should be maybe a catalyst for a buy or sell
Speaker 3: or hold or whatever in today's environment.
Speaker 9: Yeah, no, I think I agree with a lot of
Speaker 9: what Kat said. You know, we're pretty bold up on
Speaker 9: banks here as well. I think twenty twenty five is
Speaker 9: setting up to be one of the best opportunities that
Speaker 9: we seen in recent years, and there's a lot of
Speaker 9: things that are that are going right. I think we
Speaker 9: saw that with earnings this morning, not just strong beats
Speaker 9: across the board, but also better guidance as expected. But
Speaker 9: where that really plays in, I think is if you've
Speaker 9: got margin expansion starting to happen. We do expect lone
Speaker 9: growth will tick up over the year. Credit is holding
Speaker 9: in well, and valuations are still cheap. We've given up
Speaker 9: a lot of the games we saw that came out
Speaker 9: of the new administration in November, and so I think
Speaker 9: that reset, coupled with the CPI numbers this morning, really
Speaker 9: sets the stage nicely for not just earnings growth, but
Speaker 9: multiple expansion over the coming year.
Speaker 5: I know it's hard to pick your favorite child, but
Speaker 5: if you were to take the companies that reported today,
Speaker 5: including Wells, Fargo, JP Morgan, Goldman, Sachs, and City, Which
Speaker 5: one would you say was the was the standout of
Speaker 5: the group?
Speaker 9: I think City is really what we're doing as the
Speaker 9: best positioned relative to expectations, and so we sort of
Speaker 9: think about it, you know, two different lenses. Number one,
Speaker 9: you know, what did they report, what did they.
Speaker 4: Beat on guidance?
Speaker 9: Moving up? I think the buy back authorization is a
Speaker 9: big part of the outperformance today. If we look at
Speaker 9: City sitting on roughly seventeen billion of excess capital, it's
Speaker 9: highly accretive for them to be buying back below book
Speaker 9: value in this environment, so that I think, you know,
Speaker 9: given where their valuation is, drives the biggest change at
Speaker 9: the margin in terms of you know, outperformance relative analysts
Speaker 9: expectations and the new guidance. I think there's probably the
Speaker 9: most upside to estimates to come out of Wells. We
Speaker 9: think there's probably about seven percent upside coming, you know,
Speaker 9: based on results today and forward guidance, but sort of
Speaker 9: two to seven percent upside you know, across the board
Speaker 9: sets up. I think pretty nicely.
Speaker 3: What about JP Morgan, right, I feel like, you know,
Speaker 3: when they report they're the kickoff to so much, and
Speaker 3: they are I think it's safe to say the closely
Speaker 3: or most closely watched bank across the United States and
Speaker 3: certainly on Wall Street.
Speaker 4: Anything from them.
Speaker 3: That gives you kind of broader clues about not just
Speaker 3: their business, but also what's going on in the overall economy.
Speaker 3: And and you know, I am curious if you have
Speaker 3: any thoughts about succession for them as well.
Speaker 9: Yeah, No, I think Number one Capital Markets. I think
Speaker 9: that's one of our key themes that we're looking at
Speaker 9: for the next year. We think there'll be a strong rebound.
Speaker 9: I think that was very clearly seen today, especially at
Speaker 9: JP Morgan Expenses. We've been looking for some moderation there
Speaker 9: as inflation comes down, you know, over the course of
Speaker 9: the year. I think there's a read through on credit
Speaker 9: card that we saw at JP Morgan. We saw acceleration
Speaker 9: and debit card and credit card spending charge offs or
Speaker 9: holding in well, a little bit of an uptick and guidance,
Speaker 9: but nothing more than normal as a that we would expect.
Speaker 9: And then on commercial real estate, you know, I think
Speaker 9: it was nice that that was not really a theme today.
Speaker 9: Again points to I think that the credit environment is
Speaker 9: getting better with rates coming down. But I think that's
Speaker 9: a good read through for a lot of the you know,
Speaker 9: super regional regional space as well. So we always look
Speaker 9: to JP Morgan as sort of the bell weather and
Speaker 9: the read through that we see to sort of the
Speaker 9: broader group there. In terms of succession planning, I think,
Speaker 9: you know, I don't think it's a next year or
Speaker 9: this year problem.
Speaker 10: Again.
Speaker 9: I don't think we go out as five years, is
Speaker 9: it two years, is it three years? I think there
Speaker 9: are you know, the three potential CEO candidates that have
Speaker 9: been highlighted numerous places, but could there be other ones?
Speaker 9: I think that was alluded to on the call this morning,
Speaker 9: so you know, probably still some work to be done there,
Speaker 9: but I think they typically do a great job of
Speaker 9: handling that, and you know, I think we'll get more
Speaker 9: clarity as we go potentially through this year, but maybe
Speaker 9: more of twenty six.
Speaker 5: Yeah, that's definitely the question that's going to be asked,
Speaker 5: I think quite a bit over the next stuff few quarters.
Speaker 5: At this point, Hey, we only have about a minute left,
Speaker 5: but you mentioned JP Morgan's read through with on the
Speaker 5: credit side and on the consumer side, we get Bank
Speaker 5: of America tomorrow. Help us look forward to what we
Speaker 5: could see from Bank of America and what we could expect.
Speaker 9: Yeah, I think what we've seen and what we're sort
Speaker 9: of looking for here again the commentary around where credit
Speaker 9: goes and particularly areas like credit card and auto finance.
Speaker 9: I think what we've seen obviously with rates coming down,
Speaker 9: that puts the consumer in a better position, and spending
Speaker 9: seems to be holding in quite well. So I would
Speaker 9: look for similar type trends in that acceleration of spending
Speaker 9: to hit velocity of credit card, but also guidance. We're
Speaker 9: not looking for significant shift upwards on credit card delinquencies
Speaker 9: or charge offs. I think it'll be a little bit
Speaker 9: more of the same as what we expec You're instant
Speaker 9: twenty four, maybe towards the higher end of the range
Speaker 9: on the front half of the year, and then improving
Speaker 9: as we move through twenty twenty five.
Speaker 3: All right, great stuff, so appreciated, Cheryl Page. She's senior
Speaker 3: portfolio manager at angel Oak Capital Advisors. That bank group
Speaker 3: continuing to rally Today.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: live weekday afternoons from two to five these during this
Speaker 1: listen on Applecarplay and Android Auto with the Bloomberg Business app,
Speaker 1: or watch us live on YouTube.
Speaker 3: I got to say there was a Stuart tim and
Speaker 3: I it was kind of on our radar yesterday. It
Speaker 3: was by Bloomberg opinion columnist Alison Schrager, and she wrote
Speaker 3: in a recent column that private equity does not belong
Speaker 3: in your four oh one k, noting that the risk
Speaker 3: involved in private assets and the lack of liquidity and
Speaker 3: transparency means they are safe for more transparent ways for
Speaker 3: the vast majority of investors to invest in.
Speaker 5: Tim Well next guest in the alternative alternative investment space
Speaker 5: and is here to make the case for including them
Speaker 5: in your portfolio, with focus on private real estate and
Speaker 5: state debt. Let's get to Tony david Ou, Senior Alternatives
Speaker 5: Investment Strategies at Franklin Templeton Institute. It's the research arm
Speaker 5: of one of the world's largest asset managers, Franklin Templeton,
Speaker 5: about one point five trillion dollars in assets under management.
Speaker 5: Tony joins us here in the Bloomberg Business Week Studio. Tony,
Speaker 5: good to see you, Welcome back to New York. The
Speaker 5: base case for having alternatives in your portfolio. Why do
Speaker 5: you think it belongs.
Speaker 11: Yeah, I would just say broadly, private markets, private equity,
Speaker 11: private credit, private real estate have historically delivered access, return,
Speaker 11: higher income, diversification, all the attributes that you would want
Speaker 11: to have in a diversified portfolio.
Speaker 5: But at a price. And that price is a lack
Speaker 5: of liquidity. Lack of liquidity absolutely.
Speaker 4: And a lack of transparency and.
Speaker 11: A lack of transparency. But you know, in the long run,
Speaker 11: I think you're handsomely rewarded for it, So why would
Speaker 11: you exclude it? And if you think of the largest
Speaker 11: defined benefit planned, you see large allocations to those investments
Speaker 11: because they see the best opportunities in the private market.
Speaker 11: So again, I think it's kind of a we're looking
Speaker 11: view to think about should they have a place in
Speaker 11: four one K plans and target date funds? And I'd
Speaker 11: argue they should, But I think to your point, we
Speaker 11: want to make sure that people understand the risk associated
Speaker 11: with them. We want to make sure they understand that
Speaker 11: these are long term investments. But I think a small
Speaker 11: portion of your portfolio allocated to private markets absolutely makes sense.
Speaker 3: Is it akin to what if you say a small
Speaker 3: portion like give us an idea. You know, we all
Speaker 3: know the traditional sixty forty in terms of the equity
Speaker 3: bond mix or our fixed income mixed.
Speaker 4: So what would you say, How small a portion.
Speaker 3: Would you say that people should allocate? Yeah, it's certainly
Speaker 3: and you're saying for everybody, every retail investor could do this.
Speaker 11: No, I think we should definitely slow down on that.
Speaker 11: I think the reality is what we want to do
Speaker 11: is we want to make sure that people make better
Speaker 11: informed decisions about allocating to things that they're unfamiliar with
Speaker 11: private markets in particular, and then determine what is the
Speaker 11: appropriate amount of investment that can afford to be illiquid.
Speaker 11: We're invested for the long run, and I think depending
Speaker 11: on the individual, it might be a five percent allocation.
Speaker 11: It might be for high net worth or alterra high
Speaker 11: in it worth families. It could be thirty percent. But
Speaker 11: it's really understanding the role that it plays, understanding some
Speaker 11: of the structural trade offs. They are long term in nature,
Speaker 11: they're illiquid, and we should think of them as illoquid investments.
Speaker 11: But I think if we can get individual investors and
Speaker 11: advisors comfortable with it, they absolutely have a role in
Speaker 11: cline portfolios, but.
Speaker 3: Stick with a credit investor, so people of a certain
Speaker 3: net worth, if you will correct.
Speaker 11: I think they're generally available to credit investors. Some are
Speaker 11: available below that threshold. I think the discussion of four
Speaker 11: o one K plans is taking a bit farther, and
Speaker 11: I think that is one of the challenges I think
Speaker 11: for the regulators. They want to get comfortable that individual investors,
Speaker 11: who may make these decisions on their own, are making
Speaker 11: it in an inform way, and I'm all for that.
Speaker 11: I think that's the right way to think about it.
Speaker 5: When you say, you know, alternatives are a huge umbrella.
Speaker 5: We could talk private credit, we could talk real estate,
Speaker 5: we could talk venture capital, private equity. How are you
Speaker 5: thinking about which of those or others belonging portfolio?
Speaker 11: Is so broadly the way we think about alternative investments.
Speaker 11: We think of private markets, private equity, private credit, private
Speaker 11: real state infrastructure. Those are private markets. We think they
Speaker 11: make sense. Alternatives could also include things like hedge fund strategies,
Speaker 11: but we don't view alternatives that catch all for everything. Again,
Speaker 11: maybe just taking a little bit of a step back,
Speaker 11: you know, my role is really focused on educating advisors
Speaker 11: and underlying investors about the merits of these strategies, so
Speaker 11: we don't say just buy it blindly. We want to
Speaker 11: make sure they understand what the underlying investment is designed
Speaker 11: to do, how it works in client portfolios, with the
Speaker 11: historical data has shown us, and then ultimately, if we
Speaker 11: think about adding it, what should we expect to achieve
Speaker 11: by adding it to our portfolio. I would say the
Speaker 11: biggest interest in the market today is around private markets,
Speaker 11: and that's where we spend most of our time. I
Speaker 11: think those are relatively new to the advisor community and
Speaker 11: to the individual investor community.
Speaker 3: So when investors okay, so all right, we just kind
Speaker 3: of did the umbrella private markets. Is there a certain
Speaker 3: aspect of it that you think it's a really opportune
Speaker 3: time for certain investors to be looking at within the
Speaker 3: private market space?
Speaker 11: We do. We do from an investment perspective. Looking forward,
Speaker 11: we think the most attractive opportunities are private equity, secondaries,
Speaker 11: real estate broadly recognizing there's some challenges in the office sector,
Speaker 11: and then real estate debt kind of a different way
Speaker 11: of playing the real estate space, being a lender of
Speaker 11: choice rather than owning the underlying asset. We think those
Speaker 11: three investments look really attractive on a going forward basis.
Speaker 11: Why secondaries are a direct beneficiary of some of the
Speaker 11: concern that has happened with so much money going into
Speaker 11: the private equity space. Secondary managers provide liquidity and diversification.
Speaker 11: They actually help the institutions provide that liquidity. The underlying
Speaker 11: investor benefits from the fact that you shorten the J
Speaker 11: curve the way that assets are invested over time.
Speaker 3: But isn't it also speaking to private equity having a
Speaker 3: hard time kind of cashing out right, you know, returning
Speaker 3: money to investors. So the secondary market certainly helps out,
Speaker 3: but I do wonder does it help prop up some
Speaker 3: valuations that maybe shouldn't be propped up.
Speaker 11: Well, the reality is secondaries are typically available at a discount,
Speaker 11: So you think about that concern in the private equity
Speaker 11: market with so much money going in there. Secondary managers
Speaker 11: are able to step in negotiate favorable pricing, your buying
Speaker 11: assets at a discount, right, and then the underlying investor
Speaker 11: ultimately benefits because they get a really prized asset that
Speaker 11: is matured a litle bit, they get it at a discount.
Speaker 11: It's in a diversified portfolio. So I'm not making a
Speaker 11: single bet. I'm actually diversifying my holdings across the GPS,
Speaker 11: the vintage geography and partnership.
Speaker 4: Yeah.
Speaker 11: Yeah, So we think it's a really smart way for
Speaker 11: individual investors to get exposure to the private equity space.
Speaker 5: Carol brings up a really good point, and it's the
Speaker 5: idea that maybe there aren't enough buyers for everything that's
Speaker 5: owned by private equity out there. That's a criticism that's
Speaker 5: come up over the last couple of years, especially as
Speaker 5: rates have been high. Companies haven't gone public as quickly
Speaker 5: as people thought they would. Who is out there to
Speaker 5: buy some of these private equity owned companies get that
Speaker 5: return for the investors.
Speaker 10: Yeah.
Speaker 11: So, I think one of the things you're referring to
Speaker 11: is we have seen a slow down of exits, right,
Speaker 11: so we're not seeing MNA activity and we're not seeing
Speaker 11: the level of IPOs and we think part of that
Speaker 11: has been driven by the environment. I think if you
Speaker 11: think about the environment we're in now, we actually think
Speaker 11: that we'll start to see an acceleration of MMEA activity.
Speaker 11: I think we've started to see it year to date.
Speaker 11: We think the current administration or the future administration will
Speaker 11: be more pro business friendly, little lighter on regulation, which
Speaker 11: would be more conducive for M and A activity picking up.
Speaker 11: We think IPOs. We think some of these companies will
Speaker 11: come to the profit public markets. But I think the
Speaker 11: other reality is that we have to kind of take
Speaker 11: a step back and think about, which is that a
Speaker 11: lot of these private companies will remain private. They're remaining
Speaker 11: private longer now because they have an abundance of capital.
Speaker 11: They don't need to come to the public markets. That
Speaker 11: got capital, and a lot of them like the freedom
Speaker 11: of actually executing a long term strategy as opposed to
Speaker 11: being behold into quarterly earnings.
Speaker 5: Is that okay with their private equity owners? I think so,
Speaker 5: because you're not getting that big return. Yes, you might
Speaker 5: be getting some cash flows, but you're not getting that
Speaker 5: big exit.
Speaker 11: I think you're not maybe getting that immediate exit. But
Speaker 11: I think what you're getting is when that company is
Speaker 11: ready to go to the public markets that are much
Speaker 11: mature state of time and they're getting that return on investment.
Speaker 4: Tony twenty seconds left.
Speaker 3: Though, with that abundance of capital that's out there that
Speaker 3: allows companies to stay private longer, though, do we end
Speaker 3: up seeing maybe potentially a propping up once again of
Speaker 3: a company that maybe continues to need money and that
Speaker 3: might ultimately not ever pay off. So propping up maybe
Speaker 3: something that shouldn't.
Speaker 11: Be Yeah, I'm not sure we say it that way.
Speaker 11: We think those companies are going to flourish in the
Speaker 11: private markets. We think a lot of them will stay private.
Speaker 11: We think a lot of those companies will come to
Speaker 11: the public markets when it makes sense for them. But again,
Speaker 11: having the freedom to execute a long term strategy which
Speaker 11: really unlocks value, I think that's important.
Speaker 3: All right, Good, leave there, Tony, Thank you so much
Speaker 3: interesting stuff, Tony David Douo over at Franklin Templeton Institute.
Speaker 1: This is the Bloomberg Business Week podcast, live each weekday
Speaker 1: starting at two pm Eastern on Apple, Cocklay and Android
Speaker 1: Auto with the Bloomberg Business App. You can also listen
Speaker 1: live on Amazon Alexa from our flagship New York station,
Speaker 1: Just say Alexa play Bloomberg eleven thirty.
Speaker 5: President Biden tonight, Carol will likely make this part of
Speaker 5: his farewell address. He'll probably mention it. He'll also likely
Speaker 5: take a victory lap when it comes to the economy.
Speaker 3: Yeah, and probably a good reason. Remember the jobs report
Speaker 3: that we just got on the economy. Some news to
Speaker 3: in the world of AI. New York will be the
Speaker 3: first state to require notifications by businesses of AI related
Speaker 3: job losses under an executive action that Governor Hokel Kathy
Speaker 3: Hochel announced last night in her State of the State address,
Speaker 3: the governor touting the potential economic benefits from the technology
Speaker 3: while resisting efforts by state lawmakers to impose restrictions aimed
Speaker 3: at preventing possible abuses.
Speaker 4: I'm thinking our next guest might have some thoughts on.
Speaker 8: All of this.
Speaker 12: Yeah.
Speaker 5: Dan Shapiro is COO of LinkedIn. He joins us from Sunnyvale, California. Dan,
Speaker 5: you over at LinkedIn have got a new report about
Speaker 5: how AI has changed in the way that we work.
Speaker 5: We're going to talk about that in just a minute,
Speaker 5: but before we get there, at LinkedIn, you've got a
Speaker 5: great view on the economy, specifically on the job market.
Speaker 5: Who's hiring, who's not hiring?
Speaker 8: What are you seeing? How would you characterize it?
Speaker 10: Well, we're coming off of a roller coaster of a
Speaker 10: labor mark over the last few years. You know, right
Speaker 10: out after COVID you saw one of the tightest labor
Speaker 10: markets that any of us can remember, and as interest
Speaker 10: rates rose that led to deceleration. We're now in a
Speaker 10: much more stable place, but it is by no means
Speaker 10: as tight and competitive as it was just a few
Speaker 10: years ago. So I think by historical standards, the labor
Speaker 10: market is healthy in the jobs market, but you know,
Speaker 10: it is very much a reset from the environment that
Speaker 10: we felt, you know, just back in twenty twenty two.
Speaker 3: Any interesting nuances in terms of today's jobs market that
Speaker 3: you show that shows just some changes and maybe some
Speaker 3: lasting changes starting to happen.
Speaker 10: Sure. Well. One of the facts that I think is
Speaker 10: most interesting is if you look at the jobs today
Speaker 10: in the US, twenty percent of the roles are with
Speaker 10: titles that didn't exist in the year two thousand and
Speaker 10: So it's just a reminder of how fluid the labor
Speaker 10: market can be, particularly when you're talking about new technology.
Speaker 10: Some of the roles are related to AI, security, sustainability,
Speaker 10: and so things are always changing. What's unique about the
Speaker 10: environment we're in right now is that if you look forward,
Speaker 10: the idea is that AI is going to change how
Speaker 10: just about every job gets done. You know, in the past,
Speaker 10: when we've had new technologies, they'll change some roles. But
Speaker 10: whether you're a marketer, you're in finance, you're a salesperson,
Speaker 10: you're a lawyer, AI is in some way is going
Speaker 10: to change how you do your work on a day
Speaker 10: to day basis. So one one to think about it is,
Speaker 10: you know, although you know your title may not change,
Speaker 10: for sure your job is going to change.
Speaker 5: How is your job going to change? That's what I'm
Speaker 5: still trying to figure out.
Speaker 8: I can't use, I can't use.
Speaker 5: We have really some really cool we've been doing doing
Speaker 5: AI at Bloomberg for years.
Speaker 8: We have been really cool.
Speaker 5: Absolutely AI features on the Bloomberg terminal. But and I'm
Speaker 5: using those to the extent that like, I'm get to
Speaker 5: read news really quickly with the help of Bloomberg automation.
Speaker 8: But my day to day work hasn't changed.
Speaker 10: But still very early. And I think what most companies
Speaker 10: are facing this year is the shift from an environment
Speaker 10: of piloting new technologies to rolling them out at scale.
Speaker 10: That's really what twenty twenty five is going to be about,
Speaker 10: is scaling the adoption of AI in different roles. But
Speaker 10: I'll give you a few examples. You know, one of
Speaker 10: the products that we built at LinkedIn helps recruiters use
Speaker 10: AI to write automated personalized messages to candidates. You know,
Speaker 10: it takes a lot of time to write a personalized message,
Speaker 10: but it makes a big difference to whether people reply
Speaker 10: or not. And because AI understands a bit about the
Speaker 10: candidate and the job that they're hiring for, AI generated
Speaker 10: messages get forty percent higher response rates. And so that's
Speaker 10: a very specific, tangible example where recruiters days are now
Speaker 10: using AI to change how they do what they've done
Speaker 10: for a long period of time, which is communicate with candidates,
Speaker 10: and ultimately what they're able to do as a result
Speaker 10: of that is spend more time with candidates that really
Speaker 10: allow them to build human to human connection. So I
Speaker 10: think it's an example of where the tactics of how
Speaker 10: jobs get done change, even if the job overall has
Speaker 10: not changed.
Speaker 3: How do you think it's going to change what kids
Speaker 3: study in school and college in particular.
Speaker 8: I think it's going to change a lot.
Speaker 10: I think that AI makes it much easier in the
Speaker 10: way that the Internet dead did, but maybe in a
Speaker 10: much larger way to access information and to synthesize information.
Speaker 10: So I think schools are going to work through a
Speaker 10: period of time where teaching kids how to use AI
Speaker 10: to be more effective in their studies and how to
Speaker 10: do that in the way where people are still learning
Speaker 10: skills is going to be a big topic of conversation.
Speaker 10: You know. One of the ways that employers are talking
Speaker 10: about this is how do I really know what someone
Speaker 10: knows in an interview process? You know, if they can
Speaker 10: go to a tool and generate a resume that looks perfect,
Speaker 10: that may or may not be the clearest signal anymore
Speaker 10: to whether they can do the job. So how do
Speaker 10: I assess them in a more in person way where
Speaker 10: I can see the difference between what the AI contributed
Speaker 10: and what the person contributed.
Speaker 8: I'm seriously conned I think that. Well, go ahead, I.
Speaker 10: Was to say, I think ultimately the most interesting job
Speaker 10: question of twenty twenty five will continue to be tell
Speaker 10: me an example of how you used AI to do
Speaker 10: your job. Because employers want professionals that are comfortable with AI.
Speaker 10: They see it as one of the important change management
Speaker 10: efforts they're gonna have to go through, and so comfort
Speaker 10: with AI is a very critical skill.
Speaker 8: Are you used to.
Speaker 3: I'm just gonna say, yeah, I was, like I got
Speaker 3: to make dinner tonight, Like what am I going to do?
Speaker 8: You know what? Then we were not doing really good
Speaker 8: lunch at work. So that's how I use it to
Speaker 8: make my job.
Speaker 4: In a you know, interview, it might not go over
Speaker 4: so well.
Speaker 8: I not go over so well.
Speaker 5: Hey I do the interviewing here. Okay, I know, hey Dan,
Speaker 5: before we let you go. This school thing really freaks
Speaker 5: me out as the parent of young kids. I mean,
Speaker 5: you could go to one of these llms and type
Speaker 5: in just the last thirty seconds we have type in,
Speaker 5: you know, like turn paper prompt. How do you control
Speaker 5: for that?
Speaker 10: I do think that the way that schools give homework,
Speaker 10: the way that they assessed competence, it's really going to
Speaker 10: have to change, both in terms of being able to
Speaker 10: understand what people really know, but also how to teach
Speaker 10: our students how to use AI to do things more effectively.
Speaker 10: Like in a job market, we're knowing how to use
Speaker 10: AI as one of the core skills. We need an
Speaker 10: education system that embraces AI while understanding of how it
Speaker 10: changes how perhaps you really understand skills.
Speaker 3: Yeah, it's like not the same of you know, Okay,
Speaker 3: all of a sudden, you have a calculator, you know,
Speaker 3: how to do like the algebra two trig test.
Speaker 4: Like, I don't think it's the same as having that.
Speaker 8: No, it's totally in your test. It's so much more. Yeah,
Speaker 8: I'm more concerned about homework than tests. Yeah, there's like
Speaker 8: you can't have a phone during tests.
Speaker 4: Right, yeah, a phone?
Speaker 8: Yeah, I don't think so. I don't know, like I
Speaker 8: know the answer that TBD.
Speaker 4: Dan Shapiro, thank you so much. Coo over at LinkedIn.
Speaker 10: Mac.
Speaker 9: I'll bet you let me drive.
Speaker 1: Oh no, no, no, no, this is not a tin jug honey.
Speaker 4: Please, I'll do the driving gravels.
Speaker 8: Let's wait, I want to drive.
Speaker 2: It's a good question.
Speaker 8: This is the drive to the clothes.
Speaker 7: Plunk for me.
Speaker 2: Effeck Well b Don on Bloomberg Radio.
Speaker 3: All right, everybody, we've got just about eighteen minutes left
Speaker 3: in today's trading session, and we definitely have a rally underway,
Speaker 3: just rolling over the best levels of the session, but
Speaker 3: nonetheless up about two percent, as you heard from Charlie
Speaker 3: Bill Maloney, up about two percent on the S and
Speaker 3: P five hundred, one point seven percent higher on the
Speaker 3: Dow Jones Industrial average, and you're looking at the Nasdaq
Speaker 3: one hundred, really outperforming a gain of two point four percent,
Speaker 3: but most names, tim if I look at the Big
Speaker 3: Cap Index, are higher in today's session.
Speaker 5: Hey, we got Rick Pitcaren with us, chief investment officer
Speaker 5: of the Pitcairen Family Office. The family office is more
Speaker 5: than one hundred years old. It traces its roots back
Speaker 5: to John Pitcare and the co founder of what today
Speaker 5: is called PPG Industries. It's the twenty seven billion dollar
Speaker 5: market cab maker of paints, coatings and specialty materials. The
Speaker 5: firm Pitcare Family Office that is, has nine billion in
Speaker 5: assets under management. We got Rick back with us here
Speaker 5: in the Bloomberg Interactive Brokers studio. It's been almost two
Speaker 5: years since we've seen you. Welcome back.
Speaker 8: How are you great? How are you guys? We're to
Speaker 8: be here. We're doing pretty well.
Speaker 5: Hey, I went through all that history, but there's a
Speaker 5: lot more history, can you. You know, the family assets
Speaker 5: are still a big part of the Pitcare and Family Office,
Speaker 5: but the growth that you've seen outside of the actual
Speaker 5: family has been pretty big. Give us some context on
Speaker 5: where you are today. What's part of the family assets,
Speaker 5: what's outside the family? Who are the other families involved
Speaker 5: in the family office.
Speaker 8: That sort of thing.
Speaker 12: Well, the vast majority of what we do is with
Speaker 12: other families. You know, our family's been the core family,
Speaker 12: and we still have a meaningful amount of that nine
Speaker 12: billion dollars that we serve, but we serve one hundred families.
Speaker 12: We serve twenty seven single family offices. And really what
Speaker 12: we're trying to do is just bring, you know, the
Speaker 12: multi generational perspective that we have how to make that
Speaker 12: wealth lest how to actually have a family that stays
Speaker 12: cohesives and moves that money across the generations. And in
Speaker 12: today's world, as you know, decisions get quicker and quicker,
Speaker 12: and everything goes faster and faster. I think people are
Speaker 12: really resonating with that idea of how to step back
Speaker 12: and give it some thought and do it in a
Speaker 12: little different way.
Speaker 3: You know, I feel like the roots of your company,
Speaker 3: whether it was the glass market, whether it was manufacturing,
Speaker 3: whether it was chemicals, whether it was sugar, you know,
Speaker 3: some of the kind of those basic core industries, if
Speaker 3: you will. When you look at the investment in environment today,
Speaker 3: where you know, certainly financial investment investments have gotten so
Speaker 3: much more sophisticated. We talk about AI technology and so
Speaker 3: much more what's interesting to you guys, Where do you
Speaker 3: see the opportunities.
Speaker 12: Well, we've always seen the opportunity and equity and growth,
Speaker 12: and it couldn't be a more exciting time for markets
Speaker 12: right now. There's obviously a lot of pitfalls out there,
Speaker 12: but I'll tell you, even when you look back to
Speaker 12: my great grandfather, you know, and you say, well, it
Speaker 12: was just sort of glass in these industrial materials. They
Speaker 12: were really the private equity guys.
Speaker 8: At the day.
Speaker 12: He was running with Rockefeller, he was running with Carnegie.
Speaker 12: They were young, they got an immense amount of weals
Speaker 12: by taking market share, not unlike these tech entrepreneurs we
Speaker 12: see today. And so it's sort of been to me
Speaker 12: just a promise of the recycle of this idea of
Speaker 12: building capital and taking ideas and what we do in
Speaker 12: America the best which is innovation, you know, And we're
Speaker 12: in the middle of a great innative phase right now,
Speaker 12: which is really cool, and we're trying to bring the
Speaker 12: best of that to our clients.
Speaker 5: So how do you put the money to work and
Speaker 5: make sure that you're taking advantage of that.
Speaker 12: Well, we we're a manager manager, so we don't pick
Speaker 12: stocks ourselves. We find the best managers in the world
Speaker 12: to do that. And so what we're really trying to
Speaker 12: do is find a mix of these managers and styles
Speaker 12: and strategies so that if you have this large family
Speaker 12: enterprise across these generations, that you take advantage of this
Speaker 12: credibble market that we've had for the last two years,
Speaker 12: maybe three, depending on what this year does, but do
Speaker 12: it in a way to where you have some guide,
Speaker 12: guardrails and protection so that you sort of get away
Speaker 12: from those impulses to jump away from a scary market.
Speaker 12: Because the one thing that's consistent about our client base
Speaker 12: is they all pay taxes at a very high rate.
Speaker 12: And if you don't bring taxes into that investment discussion,
Speaker 12: you're making a big mistake. So that says to us,
Speaker 12: be strategic. You know, have some things in the portfolio
Speaker 12: that are there for a rainy day, but make sure
Speaker 12: that the foundation is growth oriented. All right.
Speaker 3: So these are big broad macro you know, theme themes
Speaker 3: and ideas that you're talking about, can you drill down?
Speaker 3: I am really curious about So when you've got, you know,
Speaker 3: a high net worth family who comes and wants to
Speaker 3: put the money to work for a longer term and
Speaker 3: or thinking about, you know, preserving what they've got and
Speaker 3: growing that but you know at a maybe certain level
Speaker 3: of risk, but they don't want to lose even you know,
Speaker 3: their initial amount of money that they're bringing to you.
Speaker 4: Where do you put it though? Like is it?
Speaker 3: I mean the AI theme that we talk about is
Speaker 3: that opportunities absolutely.
Speaker 12: I mean you would have large cap growth managers on
Speaker 12: both the public side and then you have private capital
Speaker 12: man I mean every asset class that you hear people
Speaker 12: come in here and talk about and saying that we're
Speaker 12: doing this in wealth management. Usually our clients would have
Speaker 12: some sector of that, some chunk. Now, most of our
Speaker 12: clients they don't. It's rare that they show up with
Speaker 12: two hundred million dollars in a bucket and say, here,
Speaker 12: manage my money.
Speaker 8: How do they show up? Then they would show up
Speaker 8: with an.
Speaker 12: Operating business or perhaps an existing structure where they had
Speaker 12: a bunch of private investments. And so our job is
Speaker 12: going to be to see where their risk is, where
Speaker 12: their exposure is, how to round that out in a
Speaker 12: way that they're prepared for whatever environments are going to come.
Speaker 5: What are the other services that you offer apart from
Speaker 5: finding managers to deploy capital too. I mean, are you
Speaker 5: helping with the nitty gritty of estate planning those sorts
Speaker 5: of things.
Speaker 12: One hundred percent. I mean we we've started back in
Speaker 12: the day handling every aspect for the pitcair And family,
Speaker 12: and so our DNA is to be very comprehensive. As
Speaker 12: we've evolved. Many times we'll just take a slice of that.
Speaker 12: A family'll come to us and say we really need
Speaker 12: to support our next gen households and we need investments
Speaker 12: in the next will come along and say they need
Speaker 12: something else. But I was working with a family last
Speaker 12: week in Florida. They need everything they need household support,
Speaker 12: bill pay, insurance.
Speaker 5: Investments, prenuptial agreements for the kids who are getting well.
Speaker 12: We wouldn't write them, but we'd advise on them.
Speaker 8: Okay, those sorts of things.
Speaker 3: What would you say about in a environment where we
Speaker 3: talked about case shape recovery. Some people a part of
Speaker 3: the US society are doing really, really well, and we
Speaker 3: talk about wealth creation for those that are wealthy. It
Speaker 3: has just taken off even more over the last couple
Speaker 3: of years, but not everybody is seeing that kind of wealth.
Speaker 3: Those gaps are never good for society. So I mean,
Speaker 3: how do you think about wealth creation kind of reaching
Speaker 3: more of Americans.
Speaker 12: We believe that really families and family businesses do more
Speaker 12: for employment and do more throughout the spectrum of the
Speaker 12: American society. And not only that, you know, we really
Speaker 12: work hard on the philanthropic side for our businesses. So
Speaker 12: we have a lot of families who are really committed
Speaker 12: to different philipthropic missions and whether we're running the foundations
Speaker 12: or advising them on how to structure their assets so
Speaker 12: that they can fulfill that goal. You know, this is
Speaker 12: family by family decision. We can't decide for the families
Speaker 12: how they want to pursue that. But there's very few
Speaker 12: families that don't have some desires along those lines.
Speaker 5: Well, how do they like, what are the how would
Speaker 5: you generalize the type of support that they like to give, Like,
Speaker 5: what are the themes that sort of bind them together?
Speaker 12: So maybe they have a foundation that that that they
Speaker 12: want to know how long that foundation can last. We
Speaker 12: want to support these two entities and would like to
Speaker 12: support a third, but we want to know the ramifications
Speaker 12: behind that. You know, maybe that foundation has been run
Speaker 12: by a large bank or another institution. Is that the
Speaker 12: right place to have it do. We want to diversify,
Speaker 12: so we're going to do all that, and then we're
Speaker 12: also going to do a lot of the actual block
Speaker 12: and the tackling if they need that administration around that
Speaker 12: foundation as well.
Speaker 3: Rick just got about twenty seconds left here. You guys
Speaker 3: have managed money for a long time through bear markets, bullmarkets.
Speaker 3: Any signs out there that things are getting a little
Speaker 3: rich and a little worrisome.
Speaker 12: Just quickly, Well, yeah, valuations are high. I don't think
Speaker 12: in the third year of a bull market is always
Speaker 12: a tough market. And you've got to realize that. You
Speaker 12: know our debt situation. We're spending seven percent of GDP
Speaker 12: with a full employment and look at this stock market today.
Speaker 4: Yeah, there's a little disconnection.
Speaker 12: So we have AI on the other side. So yes,
Speaker 12: stay diverse and win.
Speaker 4: Rick, thank you so much.
Speaker 3: Rick Pitcaren, He's chief investment officer the pit Karen Family Offices.
Speaker 4: Joining us right here in studio.
Speaker 8: This is Blombo.
Speaker 2: This is the Bloomberg Business Week podcast, available on Apple, Spotify,
Speaker 2: and anywhere else you get your podcasts. Listen live weekday
Speaker 2: afternoons from two to five pm Eastern on Bloomberg Dot
Speaker 2: the iHeartRadio app tune In, and the Bloomberg Business App.
Speaker 2: You can also watch us live every weekday on YouTube
Speaker 2: and always on the Bloomberg terminal