Speaker 1: This is Bloomberg Business Week inside from the reporters and
Speaker 1: editors who bring you America's most trusted business magazine, plus
Speaker 1: global business, finance and tech news as it happened. Bloomberg
Speaker 1: Business Week with Carol Messier and Bloomberg Quick Takes. Tim
Speaker 1: Stinovic on Bloomberg Radio. Hi, everyone, welcome to the weekend
Speaker 1: edition of Bloomberg Business Week. We've got a special program
Speaker 1: as we bring you highlights from our coverage of the
Speaker 1: Milk and into two global conference just held in Beverly Hills.
Speaker 1: There was the installment of the annual Convening of Global Leaders.
Speaker 1: Everyone was there, government officials, we had people from finance, health,
Speaker 1: academia and philanthropy, and we were there just ahead of
Speaker 1: the Federal Reserve's first fifty basis point interest rate hike
Speaker 1: since the year two thousand. Got to say the world
Speaker 1: was open, I mean it was packed. There were a
Speaker 1: few celebrities floating around everywhere at all. Right, that's for
Speaker 1: big broader topics that we got to rising rates, storing inflation,
Speaker 1: and the health of the U S. Consumer. They were
Speaker 1: among the big subjects that we talked about with the
Speaker 1: likes of former Bank of England governor Mark Carney, Low
Speaker 1: CEO Marvin Ellison, and Stitch Fixed CEO Elizabeth Spalding, among
Speaker 1: many more. All of that to come. We begin, though
Speaker 1: with Bloomberg News editor at Large and Bloomberg New Economy
Speaker 1: editorial director Eric Shatzker, always talking to the heavy weights
Speaker 1: when it comes to the world of finance, and he
Speaker 1: joined us Fresh often in depth discussion with Apolo co
Speaker 1: founder and CEO Mark Rowan. The thing that makes Apollo interesting,
Speaker 1: different from Blackstone, different from Carlisle, different from KKR pure firms,
Speaker 1: if you like, is that the overwhelming percentage of its
Speaker 1: assets is in fixed income and not just fixed income.
Speaker 1: You think fixed income, you think bonds, you think loans,
Speaker 1: publicly traded loans. No, what they do is what you
Speaker 1: know we call private credit. In fact, they have what
Speaker 1: they call a yield business that has three and sixty
Speaker 1: billion dollars of private credit and it and as a
Speaker 1: result of that, they have a slightly different perspective on
Speaker 1: the world. They don't get stressed out by days like
Speaker 1: the one we've seen. Try inspired today in the stock
Speaker 1: market where the Dow is down five and then it's
Speaker 1: up fifty. They can sleep through that stuff quite easily
Speaker 1: because they for the most part, don't manage daily liquidity vehicles.
Speaker 1: And his view is that, um, the correction is not
Speaker 1: over the you know, he sees what everybody sees, right.
Speaker 1: He's concerned about inflation, is concerned about rates. UM. If
Speaker 1: you were in a again, a daily liquidity vehicle, or
Speaker 1: an individual bond or an individual loan, you'd be more
Speaker 1: concerned about these things, um, because you have to take
Speaker 1: that daily hit if the market is weakening. If you're
Speaker 1: in these vehicles, the funds, for example, I don't have
Speaker 1: the vehicle. Sounds like it's a car. It's a fund, right,
Speaker 1: or a product um where you can't cash out immediately.
Speaker 1: It's actually much easier to sleep at night, both the
Speaker 1: managers and for the clients because you can ride out
Speaker 1: these storms. Right. This is a storm of volatility that
Speaker 1: we're living through in the market. And it's one of
Speaker 1: the reasons why the mood here at Milken isn't darker
Speaker 1: because most of the people here come out of the
Speaker 1: Mike Milkin, Drexel, Burnham Lambert legacy, and they are managers
Speaker 1: of private equity, private credit. Those are the people who
Speaker 1: can for the time being, we see it with the
Speaker 1: guests that we talk to in private equity. It's just
Speaker 1: a very different fel They're not stressed. They aren't stressed
Speaker 1: as much. Eric. One of the most fascinating parts about
Speaker 1: the conversation that you had earlier with Mark Rowan was
Speaker 1: what he said happens over the next five years when
Speaker 1: it comes to retail investors and the idea that he
Speaker 1: thinks that within the next five years or five years
Speaker 1: from now, we will see retail investor portfolios made up
Speaker 1: of alternative investments because and a lot of this will
Speaker 1: be fixed income replacement. These vehicles that I've been talking
Speaker 1: about because um their belief Well, first of all, they're
Speaker 1: designing products that will appeal to the retail investor. Right now,
Speaker 1: the retail investor only has access to products that resemble
Speaker 1: institutional products, and the retail investors needs are different from
Speaker 1: the institutional investors needs. So first it's about product development,
Speaker 1: but secondly, it's about the retail investor, particularly at a
Speaker 1: time like this, waking up to the reality that there's
Speaker 1: no point paying for public market liquidity if you don't
Speaker 1: need public market liquidity. This is the same realization that
Speaker 1: institutional investors like pension funds and endowments came to over
Speaker 1: the past thirty years, led by the now late David
Speaker 1: Swenson from Yale, who pioneered the endowment model. If you
Speaker 1: don't need the money, now, why put it into a
Speaker 1: vehicle that gives you access to liquidity? Now it doesn't
Speaker 1: make sense. You're paying for something you don't need. It
Speaker 1: is the evolution of a theme. It's not like a
Speaker 1: switch flipped and all of a sudden we went from
Speaker 1: a world of public markets to a world of private markets.
Speaker 1: As I say, this has been slowly building. It starts
Speaker 1: with the most sophisticated participants, the Yale endowments, for example,
Speaker 1: the Harvard Endowments, smart sovereign wealth funds like Norwegian Sovereign
Speaker 1: well Fun, the Singaporeans for example. They figured this stuff
Speaker 1: out a long time ago, and now the wisdom of
Speaker 1: that choice is becoming apparent to other people and this
Speaker 1: becomes more urgent for them. If we're living through a
Speaker 1: time of high inflation, rising rates, declining equity valuations, widening
Speaker 1: credit spreads, where you're you're losing money, uh due to
Speaker 1: the fact that you're in a public market. I want
Speaker 1: to get to Citadel Security, Ken Griffin Big takeaways from
Speaker 1: your discussion. I must confess part of it happened while
Speaker 1: we were on Bloomberg Radio, so I didn't get to
Speaker 1: tune in. Well, I would say this. Ken also says that, well,
Speaker 1: the sort of the macro headline out of the conversation
Speaker 1: is that this is the most uncertain period since two
Speaker 1: and uncertainty doesn't necessarily mean things have a leg to
Speaker 1: go lower, but it does mean more volatility. Um, specifically
Speaker 1: as it concerns Citadel. He said, these are the toughest
Speaker 1: four months since two thousand eight. He said, in fact,
Speaker 1: when we got off the panel and he told me
Speaker 1: he cracked three teeth wo stress, Yes, because of the
Speaker 1: stress um and uh like what an anecdote, right, Um,
Speaker 1: there isn't a nut. He's he's waking up to the
Speaker 1: reality of crypto. For a long time, Ken was a
Speaker 1: skeptic and he's still skeptical on the usefulness of crypto
Speaker 1: and even blockchain. Is it going to matter? Is it
Speaker 1: going to change the world? Um, But they're building a business.
Speaker 1: They're building a big market, making an exchange business around crypto.
Speaker 1: Fascinating conversation as always, well, both of those conversations. Check
Speaker 1: him out on the Bloomberg Termol and of course our
Speaker 1: Eric Shatsker here of bloom Bank. If you're having me,
Speaker 1: that was Eric Shatsker. He's Bloomberg News Editor at Large
Speaker 1: and Bloomberg New Economy Editorial Director. Check out his full
Speaker 1: interviews with Apollo's Mark Rowan and Citadel's Ken Griffin. You
Speaker 1: can do that at Bloomberg dot com. Coming up next,
Speaker 1: much more from Milk in two, including a four dred
Speaker 1: million dollar question for the team over at Goldman Sachs
Speaker 1: Asset Management. You're listening to Bloomberg Business Week. This is Bloomberg.
Speaker 1: This is Bloomberg Business Week with Carol Messer and Bloomberg
Speaker 1: Quick Takes. Tim Stinovik from Bloomberg Radio. Our latest trip
Speaker 1: to the West Coast where the Milk and Institute Global Conference.
Speaker 1: It gave us a chance to catch up with company
Speaker 1: leaders and policymakers alike. It also allowed us to take
Speaker 1: the pulse of individual investors. Katie Coach is the Chief
Speaker 1: Investment Officer of Public Equity at Goldman Sachs Asset Management.
Speaker 1: Her group oversees some four billion dollars in assets, and
Speaker 1: she's trying to get her clients used to the level
Speaker 1: of volatility not seen since the Great Recession. We talked
Speaker 1: with her just ahead of the FED decision. The public
Speaker 1: markets have already priced some of this in. So the
Speaker 1: fact that markets are down already for the year, and
Speaker 1: tech assets are down and UM some of the growthiest
Speaker 1: parts attack down fifty UM actually suggests to me that
Speaker 1: while it is a tough operated environment, some of it
Speaker 1: has been priced in. That's the first thing I would
Speaker 1: say in just a quick second thing is that I
Speaker 1: think people have to moderate their return expectations. And that's
Speaker 1: something I really worry about for a lot of our
Speaker 1: clients because most of what we're doing at Goldman Successet
Speaker 1: Management is help people retire with security and dignity. It's
Speaker 1: also that capital preservation a percent and especially if you're
Speaker 1: on a fixed income, and I just think it's gonna
Speaker 1: be the sixty portfolio that returned eight percent real returns
Speaker 1: in the last cycle has returned negative eight percent this year.
Speaker 1: I don't think that we're going to have a lost
Speaker 1: decade like the seventies, but I think return is going
Speaker 1: to be harder to come by, and we're working really
Speaker 1: hard to find those opportunities for clients where we can
Speaker 1: get some return. What's more realistic returns at this because
Speaker 1: I do think investors have gotten spoiled a bit. Well,
Speaker 1: the hundred year return is for that portfolio is about
Speaker 1: five So I think that's real, right, five percent real returns,
Speaker 1: And I think that's a reasonable expectation. Hopefully, you know,
Speaker 1: we can get to over the next decade. But it's
Speaker 1: gonna take a it's gonna take a lot of hard
Speaker 1: work and looking in new places too. That's a that's
Speaker 1: really moderating from what we saw just in the s
Speaker 1: the last three years. Yeah, well, it's a little bit
Speaker 1: harder to generate returns when capital costs something. Inflation is
Speaker 1: back and investors are wanna like have and and profitabilities moderating,
Speaker 1: and investors are not willing to buy growth at any price.
Speaker 1: It's it's it's a tougher environment. So where are we
Speaker 1: in the cycle? When when would we see a return
Speaker 1: to what we saw over the last you know, fifteen years.
Speaker 1: I think it's going to take a while for us
Speaker 1: to to work ourselves out of this. I will say
Speaker 1: that you know, just most of what we do in
Speaker 1: our business as we look at the world bottom up
Speaker 1: for opportunities and I want to acknowledge my bias and
Speaker 1: saying this because I run an active business. But if
Speaker 1: you have a more difficult operating backdrop and capital is
Speaker 1: not free as an example, actually you should get a
Speaker 1: lot of differentiated returns at the company levels and picking
Speaker 1: sectors and spots. So I'll just end by saying, you know,
Speaker 1: people are throwing in the towel on growth. I think
Speaker 1: this would be a very inopportune moment, and we're not
Speaker 1: doing that for our clients to give up on growth
Speaker 1: if growth is scarce, which we are probably headed into
Speaker 1: environment where that's true, it will eventually rerate and you
Speaker 1: can buy some amazing growth opportunities in the tech space
Speaker 1: at actually valuations that are two thirds cheaper than they
Speaker 1: were six months ago. But in software in particular. Um So,
Speaker 1: there's a very famous quote from Robert Smith. He says
Speaker 1: software is better than first lean debt um, which meaning
Speaker 1: that these these this software is so central to the
Speaker 1: running of a business that these management teams are going
Speaker 1: to absolutely continue to pay that that software build, maybe
Speaker 1: even before the means. It's a it's a great phase.
Speaker 1: When I we meet lots of management companies across the
Speaker 1: sorry management teams and CEOs across the world. I have
Speaker 1: yet to meet one that says, you know what, when
Speaker 1: this environment becomes difficult, I'm cutting my tech bill. I
Speaker 1: think they'll cut back on T and A, but I
Speaker 1: don't think they're gonna stop digitalizing their business if they
Speaker 1: want to win in their categories. So I like to
Speaker 1: own things for my clients that my other CEOs are
Speaker 1: buying and software, digitalization of businesses, working, moving workloads to
Speaker 1: the cloud. Obviously cyber incredible space to be because the
Speaker 1: current geopolitical backdrop is creating big tail winds around that.
Speaker 1: We're talking with Katie Cotch. She's the CEO of Public
Speaker 1: Equity of our Goldman Successet Management. It's so funny that
Speaker 1: you say that about technology. I did a panel here
Speaker 1: at milk and yesterday about retails new reality. So it
Speaker 1: was the CEO of Lows, it was the CEO of Kroger,
Speaker 1: the CEO of stitch Fits. Authentic brands keep saying wrong,
Speaker 1: authentic brands, thank you. But what's interesting is the theme
Speaker 1: was technology incluse of it and we saw it even
Speaker 1: increasingly so right during the pandemic. And they all said,
Speaker 1: like that's top of mind for you, Like nobody right,
Speaker 1: like they've got to be there and they're not like
Speaker 1: first companies they check enabled. Because what did they say
Speaker 1: about the consumer where they worried about consumers? I have
Speaker 1: to say there was like out of the gate cautious optimism.
Speaker 1: That was like kind of the theme. Um, they are
Speaker 1: still seeing consumers spend in terms of authentic brands, said,
Speaker 1: you know, consumers are buying a larger ticket, but they're
Speaker 1: spending less time on platforms and they're buying less stuff.
Speaker 1: So there may be spending on a fewer items and stuff. Um,
Speaker 1: but Roger still seeing people eat at home and buy
Speaker 1: food and all that stuff, and and Lows is still
Speaker 1: busy in terms of the home improvement market. But I
Speaker 1: do felt like they're is like everybody's sitting in a
Speaker 1: little bit on the you know. I mean I think
Speaker 1: that's the I think that's the right takeaway from that.
Speaker 1: I mean, the right now data on the consumer is
Speaker 1: very strong. I run in addition to a fundamental business,
Speaker 1: a quant business, and we're ingesting that credit card data
Speaker 1: all day long. And the right now data suggests that
Speaker 1: consumers strong spent has shift to experience over things, which
Speaker 1: you alluded to. Carol that's for sure. Travel right now
Speaker 1: strong be like concerts as and experience. But I have
Speaker 1: to say at the margin, I'm a little bit more
Speaker 1: concerned about the next six and twelve months for the consumer.
Speaker 1: I don't know if you guys filled up your gas tank.
Speaker 1: Well you've been out here and just talking about it
Speaker 1: six dollars ago. And and actually you said the low
Speaker 1: CEO was on that. We met with the low CEO
Speaker 1: Home Depot CEO. They said, once gas gets, you know,
Speaker 1: meaningfully over four dollars, which six is, it really starts
Speaker 1: to to hit their their core consumer. I love that
Speaker 1: you said who you talk to? I mean, who do
Speaker 1: you talk to? What metrics are you following? That gives
Speaker 1: you some clues. I mean, obviously there are a lot
Speaker 1: of metrics we all follow, but I do feel like
Speaker 1: it's the nuances and data that will tell us be
Speaker 1: much richer. I think you have to look at a
Speaker 1: cross sections. So for example, you know Visa MasterCard had
Speaker 1: great earnings last week. You know these in particular revenues
Speaker 1: up five percent, as I said, showing consumer very strong.
Speaker 1: But if you look at PayPal um, which is actually
Speaker 1: more e commerce space and generally targets a lower end consumer,
Speaker 1: it wasn't as good, and so I think you do
Speaker 1: have to be nuanced about it. You have to be
Speaker 1: looking at all a cross sections of the consumer, and
Speaker 1: I think we have to be prepared for some weakness there.
Speaker 1: And so pulling that together from yeah, I mean we're
Speaker 1: gonna I mean I want, um, I want people to
Speaker 1: stay invested because that's the best thing to do for
Speaker 1: building wealth long term. UM. And so I don't want
Speaker 1: to do any fearmongering. But of course, essentially this country
Speaker 1: is going to have a recession. The world, it's cyclical,
Speaker 1: and I hope it's a shallow one and I hope
Speaker 1: the impact on humans is very low, and I hope
Speaker 1: people stay invested through it because it's really difficult to time.
Speaker 1: And actually historically markets have rallied very aggressively once we
Speaker 1: realized that we were in the in the early innings
Speaker 1: of a of a recession. So let's you know, stay
Speaker 1: calm and balanced about that and then own assets that
Speaker 1: can perform. And I would just end by saying, you know,
Speaker 1: what are the consumer things that can perform? I already
Speaker 1: said concerts, that's an affordable experience. I would say beauty, um,
Speaker 1: you'll appreciate this, Carol, I had this. This s much
Speaker 1: a ton of makeup, because you look good, even for
Speaker 1: a lady on radio. You're looking amazing. But like I
Speaker 1: got my hair cut two weekends ago, and I asked
Speaker 1: my hairdresser this question, how do you perform, you know,
Speaker 1: through recessions? And she said, never, never went negative in
Speaker 1: two thousand and eight. I mean, that's that's an incredible business.
Speaker 1: We we don't, we don't, we can't. We can't invest
Speaker 1: in my hairdresser as amazing as she is. Shout out
Speaker 1: to sheer love and Truthsburry in New Jersey. Um, but
Speaker 1: but actually, alta beauty is something that we own. So
Speaker 1: we're gonna wear a lipstick in a recession. I mean,
Speaker 1: I'm not trying to be flipping it back. Yeah, and
Speaker 1: that stuff will do that. That stuff can do well
Speaker 1: against even a tougher economic backdrop. That was Katie Cotch.
Speaker 1: She's c I O of Public Equity at Goldman Sachs
Speaker 1: Asset Management. Still ahead on Bloomberg Business Week, the former
Speaker 1: head of the Bank of England says central banks can
Speaker 1: tame inflation. The question is do they have the will
Speaker 1: Brookfield Vice chair Mark Arney breaks it down on the
Speaker 1: other side. This is Bloomberg Broadcasting from the financial capital
Speaker 1: of the World, Bloomberg eleven Rio in New York to Washington,
Speaker 1: d C. Bloomberg to Boston, Bloomberg one O six one
Speaker 1: to San Francisco, Bloomberg nine six to the country Sirius
Speaker 1: XM number one ninety and around the globe the Bloomberg
Speaker 1: Business and Bloomberg Radio dot Com. This is Bloomberg Business
Speaker 1: Week with Carol Matter and Bloomberg Quick Takes Tim Stenovan
Speaker 1: on Bloomberg Radio. For the first time since two thousand,
Speaker 1: we saw the US Federal Reserve jack up interest rates
Speaker 1: by fifty basis points, and similar hikes could be in
Speaker 1: the offing if inflation doesn't taper off soon. We were
Speaker 1: at the milk In Institute Global Conference just ahead of
Speaker 1: the f O m c's announcement, and we asked Brookfield
Speaker 1: Asset Management Vice chair and former Bank of England Governor
Speaker 1: Mark Karney if rising prices should be more than a
Speaker 1: short term concern for policymakers. Central banks ultimately can get
Speaker 1: on top of inflation if they want to. Now they're
Speaker 1: behind the curve. I think we all wreck guys at
Speaker 1: all the central banks, in different ways of saying it,
Speaker 1: are admitting that they would prefer to have been in
Speaker 1: that position that end up in a deflationary spiral because
Speaker 1: of COVID. So we are where we are, the waters
Speaker 1: under the bridge. They've got to catch up. Um Now,
Speaker 1: they have to have the determination to get inflation back
Speaker 1: to those targets somewhere around two percent over the course
Speaker 1: of the next couple of years. The other half of
Speaker 1: your question, so there, But the importance of your question,
Speaker 1: Tim is there are some longer term forces that are inflationary.
Speaker 1: So this element of whether you call it deglobalization, globalization,
Speaker 1: fragmentation of global economy, that's gonna add costs. Whether you
Speaker 1: look at elements of the energy transition, not just the
Speaker 1: short term energy crisis, but the restructuring of a lot
Speaker 1: of industries because of that, that's gonna add costs. Where
Speaker 1: you look at government spending because of additional for spending
Speaker 1: on defense or healthcare, that adds costs. So all of
Speaker 1: those things add costs. You need to react to those
Speaker 1: and by the way, you need you know, better policy
Speaker 1: um on the fiscal side, on the climate policy side
Speaker 1: to help smooth that um. So look, we can get ultimately,
Speaker 1: inflation is a choice. We can get the level of
Speaker 1: inflation that we deserve, uh, when central banks do their job,
Speaker 1: But they are leaning against some pretty big forces that
Speaker 1: have really built up in the last couple of years. Mark,
Speaker 1: are you concerned about, especially when it comes to climate
Speaker 1: initiatives and you know, promises in goals that have been
Speaker 1: laid out, that if the economy seems to get into
Speaker 1: a trickier state and a tougher situation, that those positions
Speaker 1: and those policies are pushed aside. Again, well, Carol, I
Speaker 1: think we got again distinguished between the short and the
Speaker 1: medium term. Now, on the short term side, there's a
Speaker 1: scramble for energy, particularly in Europe. Many of the sources
Speaker 1: and and in the emerging world as well, and many
Speaker 1: of the sources are higher emission emitting sources, in some
Speaker 1: cases coal, and that's going to use up more of
Speaker 1: our carbon budget in the short term. So that's you know,
Speaker 1: unequivocally bad news for the climate transition. However, what this
Speaker 1: crisis is doing is concentrating the minds of companies of
Speaker 1: countries to say, um, well, maybe the system we have
Speaker 1: right now isn't that great it's highly volatile, it's expensive,
Speaker 1: it has issues in terms of reliability, um, and it's
Speaker 1: destroying the climate at the same time. And any major
Speaker 1: decision on climate takes about five years to have an impact.
Speaker 1: So whether you're putting in a new L and G train, um,
Speaker 1: whether you're constructing large gale off store wind, when you're
Speaker 1: doing something the nuclear side or hydrogen, it takes that
Speaker 1: amount of time. So governments and we're seeing this, if
Speaker 1: I may, just in Europe, we're seeing them take a
Speaker 1: step back and say, Okay, where do we want to be?
Speaker 1: And their answer thus far has been we're gonna triple hydrogen,
Speaker 1: We're gonna aggressively ramp up offshore wind, we're gonna ramp
Speaker 1: up solar, we're gonna move on storage. So the answers
Speaker 1: are all falling on the clean energy side. That's good news.
Speaker 1: That helps balance the bad news in the short term. Well,
Speaker 1: and I do think about in the pandemic right that
Speaker 1: we see, you know, the increasing in digitization, whether it
Speaker 1: was the embracing of e commerce or telemedicine, like so
Speaker 1: many things happen in a much shorter time frame. Will
Speaker 1: we see that it's that's like in terms of energy
Speaker 1: and the transition because of what's happening. Like Carl, it's
Speaker 1: a hugely important point. I agree absolutely with everything you said,
Speaker 1: because we did see that acceleration. It was forced, you know, necessity.
Speaker 1: It's out of necessity. Companies had to keep going. We
Speaker 1: saw the acceleration and there's no turning back from that.
Speaker 1: UM And actually it's not good for economy. We and
Speaker 1: for people's livelihoods right where they get better service and
Speaker 1: more flexibility and work. I see you can't work from home,
Speaker 1: but others can. UM seven months from home. Fantastic with
Speaker 1: your own Bloomberg perfect. But on the energy transition, we've
Speaker 1: aren't seen this acceleration. I gave you the numbers for Europe. Uh,
Speaker 1: we've seen a similar thing in the UK. The question though, is,
Speaker 1: and this is where the jury is still out. There
Speaker 1: is a knee because of Russia. We're not we we
Speaker 1: are you know, they don't deserve it. I mean that's
Speaker 1: an understatement, but we cannot rely on Russian hydrocarbons. We
Speaker 1: need to bring other hydrocarbons on stream, and the challenge
Speaker 1: is going to be to do that in a way
Speaker 1: that you know that those are going to transition off
Speaker 1: in time not to lock in a bunch of committed carbon. Well, look,
Speaker 1: we know the transition is going to be boppy, it's
Speaker 1: going to be a challenge, it's going to take years.
Speaker 1: When is it no longer a transition? When have we transitioned? Well,
Speaker 1: that's great, right, I mean it's to land it it's
Speaker 1: twenty I think the key thing, though, tim is what
Speaker 1: so it's a long way off in many respects, although
Speaker 1: we have to start now in many respects today. The
Speaker 1: decisions we take, which is why you're asking me the
Speaker 1: questions rightly, is the decision we take over the next
Speaker 1: few years are really going to determine whether we can
Speaker 1: make that transition. For now, what we're doing in the
Speaker 1: financial sector, and one of those acronyms who read out
Speaker 1: kindly at the start, chief fans, you know, with a
Speaker 1: hundred and forty trillion of global financial assets, is to
Speaker 1: assign those assets to the transition, to manage those balance
Speaker 1: sheets to the transition, and to report to people what
Speaker 1: proportion of the balance sheets are supporting the transition today,
Speaker 1: what do they expect to tomorrow and where where where
Speaker 1: did they get to? That was former Bank of England
Speaker 1: Governor Mark Carney now Vice chair over at Brookfield. He's
Speaker 1: also the UN Special Envoy for Climate Action Finance and
Speaker 1: chair of g FANS, the Glasgow Financial Alliance for NIT zero.
Speaker 1: You're listening to Bloomberg Business Week. Coming up next, we
Speaker 1: dig into the lucrative world of private equity. We do
Speaker 1: that with a forty year into three veteran. We're gonna
Speaker 1: catch up with New Mountain Capital founder and CEO Steve Klinsky.
Speaker 1: This is Bloomberg. You're listening to Bloomberg Business Week with
Speaker 1: Carol Messer and Bloomberg Quick Takes Tim Stinovy from Bloomberg
Speaker 1: Radio private equity and venture capital firms. They are coming
Speaker 1: off a record year of deal making, driven by a
Speaker 1: pandemic lead, drop in valuations and stockpiles of cash to
Speaker 1: finance that shopping spree. Funds tapped a billions of dollars
Speaker 1: in uninvested capital and in the year with dry powder
Speaker 1: down about from and at the lowest level in four years. Now,
Speaker 1: of course, things look a little different in the current
Speaker 1: market environment, and to find out where we stand today,
Speaker 1: we turned to Steve Klinsky, founder and CEO at the
Speaker 1: private equity firm New Mountain Capital. Steve founded the leverage
Speaker 1: buyout group of Goldman Sacks back in the early nineteen
Speaker 1: eighties and spent over a decade at Forceman Little. He
Speaker 1: joined us at the Milk and Institute Global Conference with
Speaker 1: insight into the appetite for m and right now, as
Speaker 1: far as new acquisitions, it's gotten off to a slower
Speaker 1: start because it was such a busy layer last year.
Speaker 1: But from what we can see, there's a lot of
Speaker 1: deal activity picking up under the waves. So I don't
Speaker 1: think it's a permanent shift and deal activity when you
Speaker 1: say it's okay, so you don't think it's a permanent ship.
Speaker 1: But is there people kind of holding back a little
Speaker 1: bit because of the volatility? Well, I think valuations could
Speaker 1: adjust certainly on the ones that were based on you know,
Speaker 1: a lot of optimism about the future without real earnings.
Speaker 1: I think there's been a major adjustment. And you know,
Speaker 1: good pe is tied to discounted cash flows, so it
Speaker 1: shouldn't have you know, change very much, but the kind
Speaker 1: of venturing stuff can really change. How do you watch
Speaker 1: volatility in the public markets when you look at you know,
Speaker 1: the SMP five being in a fair market right now
Speaker 1: being in correction now, Yeah, does it feel pretty good
Speaker 1: to be in private equity. Well, you know, I'm a
Speaker 1: huge fan of the private equity class, partly because we
Speaker 1: don't have all the volatility of the public market. But
Speaker 1: you can't ignore it. Well, you know, if you were
Speaker 1: trying to take a company public, had clearly matters to you,
Speaker 1: because the window to go public, if you plan, that's
Speaker 1: pretty well shut. On the other hand, as a private
Speaker 1: equity firm who's mature, you're always selling companies and always
Speaker 1: buying companies, so your opportunities for new acquisitions are better
Speaker 1: than ever. And there you know, it creates a lot
Speaker 1: of opportunities on the ice side as well, So you
Speaker 1: kind of welcome the volatility here. I don't welcome the volatility.
Speaker 1: I'm glad we're not in the volatility. And all I'm
Speaker 1: saying is if valuations get lower, it affects you somewhat
Speaker 1: on what you're selling and makes your life somewhat better
Speaker 1: on what you're buying. So we're not a one directional,
Speaker 1: you know field, because we're always buying and selling at
Speaker 1: the same time. Stef you wrote a really interesting article
Speaker 1: for the Harvard Business Review, and it really um you know,
Speaker 1: I think for a long time, private equity had kind
Speaker 1: of a bit of a bad rap in terms of
Speaker 1: buying selling, you know, getting rid of the costs and
Speaker 1: turn to get around quickly. I mean that was like
Speaker 1: about a ten year runway with with a particular company
Speaker 1: that I think you took from about a half a
Speaker 1: billion valuation too. Was it more than nine or ten
Speaker 1: when you're seven? Yeah, pretty significan Again, what is it about?
Speaker 1: What is it about the significance of private markets in
Speaker 1: today's environment and having that long runway? Yeah, Well I
Speaker 1: wrote the article because I've been in private equity for
Speaker 1: over forty years. It's really evolved from using a lot
Speaker 1: of leverage with a few investment bankers to really being
Speaker 1: a form of business. So my own firm has two
Speaker 1: hundred people at headquarters. We employ over sixty thou in
Speaker 1: the field. And what private equity really means is you
Speaker 1: can be like a small shareholder based like a family business,
Speaker 1: where you're close to the company, your hands on, but
Speaker 1: it's all merit based, and you can also bring in
Speaker 1: all the skills of a big corporation actively you're in it.
Speaker 1: So it's the combination of like what the world was
Speaker 1: before the railroads came around in the eighteen hundreds. Uh,
Speaker 1: you know, then everything became professionalized and the shareholders were
Speaker 1: kind of absent to bringing the best of hands on
Speaker 1: shareholders plus professional skills together, and it's adding value in
Speaker 1: all sorts of ways. I mean, the company you're talking
Speaker 1: about that at the article about started as a very
Speaker 1: sleepily sleepy six million dollar software business ended up being
Speaker 1: worth over eight billion. And it wasn't because we had
Speaker 1: one lucky break. It was just change after change after
Speaker 1: change to continually make it better in every way. So
Speaker 1: it's really hands on management of private businesses. So that
Speaker 1: what tells you it's the outpoint? Is it duration or
Speaker 1: is it the maturation of the business. What is it? Well,
Speaker 1: you come to a certain you know, our LPs expect
Speaker 1: money back at certain times or not, but it sounds
Speaker 1: like they're more patient, well because we had gotten them
Speaker 1: a lot of money back along the way as well,
Speaker 1: So things are different. And on this particular one, Panasonic
Speaker 1: had bought and they were ready to buy the rest
Speaker 1: and otherwise we would have probably held it longer and
Speaker 1: kept it, you know, because it had great I think
Speaker 1: I hope Panasonic does great with it. We didn't sell
Speaker 1: it because we didn't like it, we sold it because
Speaker 1: you know it was ready to go. But so it's
Speaker 1: always a judgment question. But the key is to take
Speaker 1: a safe business and continually add value. So my firm
Speaker 1: is called New Mountain because we're trying to build new
Speaker 1: mountains and the areas where we invest. Steve Um, I'm
Speaker 1: wondering about allocations to private equity right now. Given the
Speaker 1: success of private equity returns over the last decade plus,
Speaker 1: are we going to start seeing institutional investors LPs increase
Speaker 1: their allocations to private equity. Well, private equity has been
Speaker 1: you know it has. It has been the highest returning
Speaker 1: asset class for a long time, and it's less volatile
Speaker 1: and it's a good diversifier. So even if public markets
Speaker 1: were better in a year, it's nice to not have
Speaker 1: everything on the Fang stocks or everything on a few
Speaker 1: public stocks. So the the in general, the institutions are
Speaker 1: putting more money into private equity as as we go.
Speaker 1: But it's hard in an environment like this if your
Speaker 1: public equities take a hit and you look at your
Speaker 1: asset allocation and suddenly private equity has this outside allocation
Speaker 1: because the valuation hasn't dropped. The same. Well that you're
Speaker 1: exactly right. That's called the denominator problem in my business,
Speaker 1: where they want to give to you, but there are
Speaker 1: a percentage of a shrinking pie and they say, we
Speaker 1: wish we could and we can't. So that it does
Speaker 1: make it does portend something challenging for this year when
Speaker 1: it comes to raising capital, Well it might, but that
Speaker 1: over time they have the chance to go back and
Speaker 1: get somewhat more allocated. I mean a typical institution might
Speaker 1: be eight or ten percent of their assets and you know,
Speaker 1: T bills have been issuing, you know, the fixed income
Speaker 1: has been terrible for them. Everything other than you know,
Speaker 1: public's were good until this year. Private has continued to
Speaker 1: be very good. So they'll have to go back and
Speaker 1: get somewhat more allocated. We're still just a small percentage
Speaker 1: of their buckets. So okay, So opportunities for you in
Speaker 1: this environment which we're trying to figure out, does it
Speaker 1: ultimately where is it a higher rate environments, lower growth environment,
Speaker 1: a stagflationary environment? So is that more opportunities? Like how
Speaker 1: how do you find the value there? Well, we've always
Speaker 1: been set up to be as a cliptical as possible,
Speaker 1: so I I do worry about stagflation. I think we
Speaker 1: could be in for very choppy waters. The strategies that
Speaker 1: could work under stagflation, which we're all doing, is one
Speaker 1: is taking a good business in a US to have
Speaker 1: industry and making the business better. So if you really
Speaker 1: make a business better, you create value to floating rate
Speaker 1: debt is good. We have a very large credit arm
Speaker 1: that loans lens floating so as rates, dad's better than ever.
Speaker 1: And we also have a strategy where we lease the
Speaker 1: building back to people on a net lease and you
Speaker 1: have rent escalators that cover inflation and the building goes
Speaker 1: up in value. So though those are the three ways
Speaker 1: we're playing it, we also have a fund that can
Speaker 1: buy minority interests, so if someone has to delever their balance,
Speaker 1: we could give them equity to de lever. But what
Speaker 1: you don't want to do is just, you know, expect
Speaker 1: good economic conditions, because inflation seems real, supply chain constraints
Speaker 1: seem real. I mean, the consumer could slow down. So
Speaker 1: I'm not optimistic about you're not optimistic. I mean I
Speaker 1: think we could be in for very choppy water. So
Speaker 1: what does that mean specifically and for how long? In
Speaker 1: your view? Well, I don't know. You know, I grew up.
Speaker 1: I grew up in the seventies and the stock market
Speaker 1: and I started my job in Goldman and the interest
Speaker 1: rates were the highest in history of the day before
Speaker 1: I started. We're key tenure Tebill World, Treasures World. The
Speaker 1: stock market was lower in eighty one than it was
Speaker 1: in sixty eight. So I mean, it doesn't necessarily fix
Speaker 1: in a month. I mean it could be. So the
Speaker 1: key is build businesses, add value and then you know
Speaker 1: floating rate and inflation protection. So let me ask you,
Speaker 1: because we add nauseams, you know, talk about the FED,
Speaker 1: but you know a minute by minute. And I'm not
Speaker 1: saying it's not important, but I do wonder for someone
Speaker 1: like yourself, where you're making these investment decisions, how how
Speaker 1: obviously that affects the macro and maybe some of the deals,
Speaker 1: But how important is it? I mean for us, I
Speaker 1: mean if the point to I mean, if the basis
Speaker 1: points are a hundred basis points higher, interests really doesn't matter.
Speaker 1: I mean, we're we're looking at what can we do
Speaker 1: with the business to take earnings from one level to
Speaker 1: another by adding technology, adding international markets, changing the business,
Speaker 1: and that's kind of background. Okay, so even though things
Speaker 1: might be choppy, you don't think it's going to be
Speaker 1: toppy for years. That might affect the growth pattern or trajectory. No,
Speaker 1: I think it affects different industries differently. So if you're
Speaker 1: a fashion retail or, you may get hit very bad.
Speaker 1: If you're upgrading the electric system in America, which we're doing,
Speaker 1: or you're providing life science supplies, which we do, or
Speaker 1: you're doing digital transformations, those industries should do well no
Speaker 1: matter what. And then if you can improve those businesses,
Speaker 1: you're in a good industry and you really have built
Speaker 1: the business. That's an effective air strategy. Okay, okay, thirty seconds.
Speaker 1: I'm doing a panel on E s G later and capital. Yeah,
Speaker 1: we even talked once about E s G. How important
Speaker 1: is the S G t LPs right now? Exceptionally we've
Speaker 1: had a social dash boards and so eight. One of
Speaker 1: the reasons they may be head of the you know,
Speaker 1: the so called industry, is because we've been a leader
Speaker 1: on that. We've added or created over sixty thousand jobs
Speaker 1: and net of any job losses, seventy four billion of
Speaker 1: gains created, never had a bankruptcy, never miss an interest payment,
Speaker 1: and the whole private equity field is very much on
Speaker 1: the forefront of formal e s G. You reporting because
Speaker 1: their LPs wanted, and we're extremely transparent about that. As
Speaker 1: an industry. Do you think we do move aggressively in
Speaker 1: terms of regulars giving us so that we can understand
Speaker 1: e g. S G. Investment Apple to Apple? Well, I
Speaker 1: I really believe the LPs absolutely understand every firm down
Speaker 1: to who works there by name, in a way that
Speaker 1: they can't in a giant public company. So I think,
Speaker 1: you know, I don't know that the regulators need to
Speaker 1: do what they're trying to do. I don't think it's
Speaker 1: really driven by the LPs insisting on It does start
Speaker 1: to seem like there might be more change from within
Speaker 1: rather than change from outside. If you have consortions towards
Speaker 1: sort of banning together to come up with his standardized
Speaker 1: metric to measure esty and impact. Yeah, I mean, you know,
Speaker 1: there's the LPs are very big and sophisticated institutions. They're
Speaker 1: getting bigger all the time, and there are clients and
Speaker 1: we try to keep them happy and do a good JOPP. Plus,
Speaker 1: we want our kids to be proud of what we
Speaker 1: do for Livings. That's Steve Klinsky. He's the founder and
Speaker 1: CEO of the private equity firm New Mountain Capital. And
Speaker 1: that rubs up the first hour of the weekend edition,
Speaker 1: a special edition of Bloomberg Business Week from Bloomberg Radio.
Speaker 1: We were live at the Milk and Institute Global Conference.
Speaker 1: I'm Carol Masso and I'm Tim Stanovac. Coming up in
Speaker 1: our next hour. Much more from Milk in two with
Speaker 1: the who's who in private market and publicly traded company's
Speaker 1: gonna hear from my panel with the chief executives of Loews, Kroger,
Speaker 1: Stitch Fix and Authentic Brands. And a credit market breakdown
Speaker 1: with Crescent Capital Groups, Mark at A Nazio. Plus geopolitics
Speaker 1: and what Russia's invasion of Ukraine means for investors who'll
Speaker 1: get into that with star Wars Capital Group CEO Barry
Speaker 1: Sternlock coming up next, though the startup landscape with interest
Speaker 1: rates on the rise. This is Bloomberg. This is Bloomberg
Speaker 1: Business Week inside from the reporters and editors who bring
Speaker 1: you America's most trusted business magazine, plus global business, finance
Speaker 1: and tech news as it happened. Sloomberg Business Week with
Speaker 1: Cairol Messier and Bloomberg Quick Takes Tim Stinovic on Bloomberg
Speaker 1: Radio Plenty ahead in our second hour of the weekend
Speaker 1: edition of Bloomberg Business Week, including a CEO roundtable from
Speaker 1: the Milk and Institute Global Conference. This is a special show.
Speaker 1: He really is a look at how companies are adapting
Speaker 1: to the changing taste of American consumers. You've spoke with
Speaker 1: the heads of Loews, Kroger, stitch Fix and more. Plus
Speaker 1: Russia's war in Ukraine and China's ongoing COVID struggles will
Speaker 1: continue to ripple through global financial markets where Starward Capitals
Speaker 1: Barry Sterlick thinks investors can find a safe haven. First
Speaker 1: up this hour, look at the environment for investing in
Speaker 1: global startups right now. Sheila Patel is a vice chairman
Speaker 1: of the global multi stage investment firm b Capital, formerly
Speaker 1: the chairman of Goldman Sachs Asset Management. She joined us
Speaker 1: at Milkin just ahead of the federal reserves half point
Speaker 1: rate hike this past week. You get so many different
Speaker 1: viewpoints at a conference like this, and so many international viewpoints.
Speaker 1: It's great to see people back from all around the world,
Speaker 1: and their perspectives are different. I think you get an
Speaker 1: insight into technologies that people care about, into areas where
Speaker 1: they plan to invest, places of innovation. But you also
Speaker 1: get an under current of what people are really afraid
Speaker 1: of in the markets, what they're concerned about, um, the
Speaker 1: perspective on inflation. So answer those questions, what are people
Speaker 1: afraid about? So, you know, geopolitics, ongoing uncertainty, hard to
Speaker 1: figure out what what impact that has in so many dynamics.
Speaker 1: It's it's of course the incredible loss of life and
Speaker 1: the tragedy that we see unfolding. It's the follow on
Speaker 1: tragedies in terms of thinking about global food supply and
Speaker 1: and and the dislocation of people. And then it's of
Speaker 1: course the macro implications of that. At the same time
Speaker 1: you see the FED potentially raising rates, you see inflation
Speaker 1: and the influence that that's had on on the consumer
Speaker 1: and on markets. So there's a lot of cross currents.
Speaker 1: And and as usual, we're in May, so nobody's feeling
Speaker 1: too great about the markets today. Well, I'm wondering if
Speaker 1: all of those challenges, those head winds that you brought up.
Speaker 1: Because you invest in startups, they create opportunities for companies
Speaker 1: that see the challenges of today or see the challenges
Speaker 1: that are around the corner, and they say, we've got
Speaker 1: a new way to help get us out of these look.
Speaker 1: I think that's what makes it so exciting to be
Speaker 1: in this space and one of the reasons it after
Speaker 1: having been with Goldman for so many years, I moved
Speaker 1: into mentor and growth because I see so much hope
Speaker 1: for the future and technology. We focus on areas like healthcare,
Speaker 1: UM enterprise climate tech is a new additional, you know,
Speaker 1: focus area for US, um AI fintech, and you see
Speaker 1: the ways in which it's helping right the ways in
Speaker 1: which it can make change. UM mental health has been
Speaker 1: a big area of focus for us in the connection
Speaker 1: with mental health and digital health and access. So whether
Speaker 1: you think about a company like silver Cloud UM where
Speaker 1: where we actually had a monetization events because of how
Speaker 1: successful they've been, or Uplift, a recent investment that really
Speaker 1: provides a network and access point for psychiatrists and psychologists
Speaker 1: and access UM for people in a in a new
Speaker 1: unique way to those support networks UM. I think we
Speaker 1: see real potential there for innovation in healthcare and digital
Speaker 1: access to medicine. In UM creation of new their pays
Speaker 1: in new growth in that you think about enterprise, you
Speaker 1: don't necessarily think about help in the world. But enterprise
Speaker 1: actually helps companies become more efficient and that's that's a
Speaker 1: really good thing when you're in a challenging market environment
Speaker 1: as well, and so on and on. I think you
Speaker 1: look through what's going on in technology, and what we
Speaker 1: have to try to do is dislodge this idea that
Speaker 1: tech is some monolith and it's all the same. There's
Speaker 1: so many different facets of tech and so many different
Speaker 1: ways in which it can it can help us in
Speaker 1: challenging times where if you had to pick one area
Speaker 1: in terms of whether it's you know, an E. S
Speaker 1: G or green aspect, or whether it's healthcare. Like I'm
Speaker 1: hearing a lot about healthcare again, and maybe it just
Speaker 1: because we came out the pandemic and realize, right, there's
Speaker 1: there's ways we can do it, whether it's telemedicine or
Speaker 1: or how we need to increase access. Is there one
Speaker 1: area in particular where you feel like you're committing a
Speaker 1: lot more investments at this point or finding opportunities to Yeah, Look,
Speaker 1: I think all the areas I mentioned, I'm kind of
Speaker 1: passionate about. But I would say, you know, healthcare is
Speaker 1: a great example. I'm pretty passionate about that, having been
Speaker 1: a beneficiary of of creative medicine myself and and you know,
Speaker 1: seeing the benefits that can bring. And I think the
Speaker 1: pandemic is a good is a good indicator, an example
Speaker 1: of change in an accelerated pace. Nobody was seeing their
Speaker 1: doctor digitally, you know, virtually, uh, three years ago. Now
Speaker 1: people almost crave it, crave that kind of access, including
Speaker 1: all different generations. And that generational change is huge because
Speaker 1: getting the older generations can necessarily want to use that
Speaker 1: would have taken ten years or never. Instead it's now normalized. Similarly, fintech,
Speaker 1: most people think fintech finance companies not benefiting people. Actually
Speaker 1: ease of payments, reducing friction um particularly think about places
Speaker 1: like India where they were twenty middlemen and now you
Speaker 1: can reduce that to no whittle men and really get people,
Speaker 1: you know, the money that they deserve and allow them
Speaker 1: to spend it the way they need to for their families.
Speaker 1: There's there's a lot of innovation out there that can
Speaker 1: do good. You mentioned some of the challenge is that
Speaker 1: the MAC record we're seeing in the macro economic environment,
Speaker 1: I'm wondering how these are manifesting in the individual companies
Speaker 1: that you support. In the last minute that we have,
Speaker 1: how do you take an approach at be Capital to
Speaker 1: sort of help the challenges that these companies face uh
Speaker 1: with when it comes to talent, when it comes to technology,
Speaker 1: when it comes to other obstacles that they're facing. Well,
Speaker 1: I think there's two parts. One is we always have
Speaker 1: a focus, even in the initial stages of investment, in
Speaker 1: evaluating unit economics, cash flows, really working with companies that
Speaker 1: get it in terms of how performance has to look
Speaker 1: in good and bad. But the second pieces, we're very
Speaker 1: committed and active in our investments and BCG is our
Speaker 1: strategic partner, so our companies are very interested in BCG's
Speaker 1: work on strategic pricing models, potential introductions to new clients,
Speaker 1: thinking about ways to grow that fit the economy that
Speaker 1: we're living in today, and that's a huge benefit we
Speaker 1: offer to our invested portfolio companies. So when you make
Speaker 1: the investment, do you think it will be a longer
Speaker 1: runway like the bringing them to public because you can
Speaker 1: because there's so much private market just quickly. Absolutely, I
Speaker 1: think there's plenty of ways to grow. Strategic exits and
Speaker 1: partnerships with corporates is another way that companies have potential
Speaker 1: monetization value that is not just related to the public markets.
Speaker 1: That was Sheli Pittel, vice chairman over at b Capital.
Speaker 1: You're listening to Bloomberg Business Week. Coming up Barry sternlickt
Speaker 1: of Starwood Capital, well known to the Bloomberg audience. He
Speaker 1: warns billions of dollars remain at stake for global investors
Speaker 1: as Russia's war in Ukraine intensifies. This is Bloomberg. This
Speaker 1: is Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes.
Speaker 1: Tim Stenovian from Bloomberg Radio. Geopolitics, supply, chains and spacks,
Speaker 1: all topics we covered in depth with our next guest
Speaker 1: from the Milk and Institute Global Conference this past week.
Speaker 1: We're talking about Barry stern Licht, the chairman and CEO
Speaker 1: of Starwood Capital Group, also the founder of the thirty
Speaker 1: year old private investment firm that oversees a hundred and
Speaker 1: twenty billion dollars in assets. The firm's primary focus is
Speaker 1: on global real estate. Some of those holdings are in
Speaker 1: europe investments that are being jeopardized by Russia's ongoing war
Speaker 1: in Ukraine. I'm not even sure Putin knows what his
Speaker 1: endgame is, so, you know, and and it's not a
Speaker 1: zero possibility that he escalates this, right because that's where
Speaker 1: people do desperate things. And it's also like he's not
Speaker 1: exactly be welcomed into Western society anytime soon. So you know,
Speaker 1: Russia's chosen a direction which is shocking in the modern age.
Speaker 1: I think a lot of people are just astonished that
Speaker 1: U seeing civilians mass occurred and and the West doesn't
Speaker 1: know what to do. If there were in nuclear um
Speaker 1: halo over this whole conversation, they would go in and help.
Speaker 1: But obviously the West is death and the Europeans having
Speaker 1: fought two World wars on their on their territories. You know,
Speaker 1: I was over in Germany just two weeks ago, and
Speaker 1: Americans are focused on the NFL draft and and the
Speaker 1: NBA playoffs, and and the Germans are nervous. I mean,
Speaker 1: everyone's slightly know. The closer you get to the border,
Speaker 1: the more nervous you are. And Poland separates them. In
Speaker 1: the Baltics, we've investments in the Nordics and in Norway
Speaker 1: and Finland. We're actually selling some stuff we have in
Speaker 1: Finland right now, so it's um, it's definitely a cloud.
Speaker 1: It's a sort of a big storm cloud on the
Speaker 1: investing horizon. Whatever you're investing in. You know, you wake
Speaker 1: up in the morning and they've done something crazy. You're nervous.
Speaker 1: So nervousness needs the equity markets decline. Probably we've slowed
Speaker 1: done our pace of investing. We invested sixteen billion dollars
Speaker 1: in property globally last year and that's just equity, so
Speaker 1: probably was thirty or fourty billion dollars total. And we've
Speaker 1: we've we're still cherry picking, but it's it's just more
Speaker 1: cautious and cautiousness is what's going to cause the economy
Speaker 1: too slow across the board. There's no doubt that it
Speaker 1: was slow. Okay, you said your cherry picking. What are
Speaker 1: the opportunities that you're finding right now? You know, one
Speaker 1: of the beauties of the public markets, as they screw
Speaker 1: things up, they go to excess company's way over net
Speaker 1: asset value and at deep discounts to asset guys. So
Speaker 1: we try to find that things where we think they're wrong.
Speaker 1: And uh, we've taken private a company in Japan that
Speaker 1: owned a bunch of office buildings that we thought the
Speaker 1: markets had wrong. We've done the same on two transactions
Speaker 1: in the UK a UH. In the US, um less
Speaker 1: take privates right now. Um. Although because the costs of
Speaker 1: financing has suddenly gotten quite expensive, not just the specter
Speaker 1: of rates. You know, a lot of real estate players
Speaker 1: like US black Stone, UM KKR, areas, Oh Tree, we
Speaker 1: floated debt. We bought properties with floating debt and we'd
Speaker 1: protect ourselves. The banks required us to buy caps so
Speaker 1: that we wouldn't have too much exposure to hire interest rates. UM.
Speaker 1: Those it's a little expensive right now and um and
Speaker 1: and obviously interest rates have moved up, but also spreads
Speaker 1: have moved out, So the credit markets are telling you
Speaker 1: that things are not normal. I always think the bond
Speaker 1: guys are smarter than the equity guys. With the equity
Speaker 1: guys have a lot of evolved, very emotional, but the
Speaker 1: credit guys just look at credit and we look at
Speaker 1: the world situation and like triple as in the real
Speaker 1: estate world have gapped out from sort of eight to
Speaker 1: one six seventy so and everything prices off the triple A.
Speaker 1: So it turns out it costs of financing to acquire anything.
Speaker 1: And it's the same as true in the in the
Speaker 1: private equity world has increased and the banks actually are
Speaker 1: you know, the stocks are down and they're a little
Speaker 1: less aggressive on lending. They're also feeling a little bit
Speaker 1: like the they're a little full, so you know, it's
Speaker 1: not nervous, both full and nervous. And you know, like
Speaker 1: things like we're the largest owner of apartments in the
Speaker 1: United States. You have a d and fifteen thousand units,
Speaker 1: both affordable and market rate housing. It's been an unbelievable
Speaker 1: twelve months, it's really and rents are still galloping ahead,
Speaker 1: and I'm trying to understand the interplay between inflation and
Speaker 1: interest rates. Instruments are rising. We can offset a big
Speaker 1: jump in rates if we have big jumping rents. So
Speaker 1: you're having that jump. The question is how long will
Speaker 1: it last? And and that's where inflation comes in, because
Speaker 1: normally you'd say it's going to top out, and you're
Speaker 1: seeing rental growth double digits in almost every major market
Speaker 1: in the United States, every minor markets, all apartment rents,
Speaker 1: So it's kind of and and yet you know it's
Speaker 1: um yields on property or holding fairly steady even though
Speaker 1: interest rates have gone up. But that feels like that
Speaker 1: might not hold. I mean, I think the specter of
Speaker 1: the FED tightening, and the FED showed up so late
Speaker 1: to this game. And we still have a lot of
Speaker 1: spending coming, and and the infrastructure bill, they haven't spent
Speaker 1: any money. There's at one point two trillion dollars the
Speaker 1: States haven't even spent. The foreigner a billion they were
Speaker 1: getting from the American Recovery Act. Some of it hasn't
Speaker 1: even allocated yet. So I was with the mayor of
Speaker 1: Miami the other day and he's like, he's getting a
Speaker 1: billion dollars from the government, can do whatever he wants
Speaker 1: with it. That's an inflationary though. I mean, it's like
Speaker 1: and then China shut down, like it was bad, but
Speaker 1: it was open. Now they closed, And I can't even
Speaker 1: imagine these parts and shortages we're gonna have going for
Speaker 1: this is I see some people say inflation is topping out.
Speaker 1: The supply chain isn't gonna be impacted by interest rates, right,
Speaker 1: It's really he can he can cause a slowdown in
Speaker 1: a way in demand and they'll be layoffs and wage pressure.
Speaker 1: That's the wrong thing of inflation that you're trying to
Speaker 1: doesn't open ports, it doesn't make us more efficient, and
Speaker 1: it doesn't open the logistics properties that are full and
Speaker 1: they can't stop sitting the ocean because I can't get
Speaker 1: into the port and it can't get in a wahouse.
Speaker 1: So so how should so even though you're not necessarily
Speaker 1: cautiously optimistic, maybe you're more cautious. I'm cautious right now.
Speaker 1: What are some takeaways for our investor audience and how
Speaker 1: they should be thinking about where they're allocating. I think
Speaker 1: I think property, you know, I used to say that
Speaker 1: when my favorite as a class because their liquid you
Speaker 1: can get out of them so easily. But I think
Speaker 1: property is a great place to hide. I mean, even
Speaker 1: now when prices are so high. Well, it depends on
Speaker 1: what you're what we're you're hiding, you know? Um, yes,
Speaker 1: in general, but why inflation is making replacement costs enormously challenging,
Speaker 1: and you it's probably up the cost of construction, so
Speaker 1: rents have to rise in order to justify new construction.
Speaker 1: Plus a lot of new product probably won't get built
Speaker 1: because it's just instead of taking to two years, is
Speaker 1: gonna take three or four years. So property is a
Speaker 1: short duration assets apartments, hotels, you can mark the rents
Speaker 1: to market inflation every day, and so you know, I
Speaker 1: kind of I think it's I think it's a safe
Speaker 1: place to hide. You know, the mortgage reads we have
Speaker 1: soured property trust. It pays an eight percent dividend. We'll
Speaker 1: we'll be paying that a percent of it as far
Speaker 1: as I can see, as far as I could tell
Speaker 1: um and right that you could. Well, we have a
Speaker 1: lot of property games in the book. So you know
Speaker 1: we have one last We've got a minute left room. Yeah,
Speaker 1: could bunch of backs, Yeah, what are you? What are
Speaker 1: you gonna do with them? I think the two I
Speaker 1: did our real companies, and I'm long from investors, so
Speaker 1: I haven't sold a share either one of them. Kind
Speaker 1: of invalid three D kind of crushing it. I mean,
Speaker 1: they the revenues have doubled, and since we did it
Speaker 1: and they beta's quadrupled. The market is throwing the good
Speaker 1: stuff out with the baby. With the bathwater. We'll sip
Speaker 1: through all this. Spacks are going to be the good
Speaker 1: companies will either figure out how to get back or
Speaker 1: they'll sell them, they'll be acquired and the bad stuff
Speaker 1: will go to the way the Dodo bird. There's some
Speaker 1: really stupid deals that were done, many of which I
Speaker 1: passed on they went public. I was looking at one
Speaker 1: the other day. It's a n cents and went probably
Speaker 1: a ten. I couldn't believe it. And it was these
Speaker 1: were name sponsors that basically threw trash into the into
Speaker 1: the public markets, trying to get out of deals in
Speaker 1: a moment in time, and you know there but I
Speaker 1: was talking to Fellow about d D. D D went
Speaker 1: public at fourteen. It's a dollar e D. It's not
Speaker 1: as back. It wasn't as back. Yeah, it wasn't a
Speaker 1: spack regulatory Oscar help Care thirty nine, thirty six, Goldman
Speaker 1: Sacks led I p O. It's now seven. So the
Speaker 1: SparcS have gotten a little bit of a bad name.
Speaker 1: I mean there were some good companies done, but you know,
Speaker 1: the market market is everything to excess. It did too
Speaker 1: many sparks and now it's taking them all to zero practically,
Speaker 1: so they'll they'll be it'll be great opportunities. That's very stern.
Speaker 1: Like the chairman and CEO also the founder of Starwood
Speaker 1: Capital Group still to come on Bloomberg Business Week, Crescent
Speaker 1: Capital Group's Mark at A Nazio on credit markets and
Speaker 1: the one area where Americans may finally see relief from inflation.
Speaker 1: This is Bloomberg Broadcasting from the financial capital of the world,
Speaker 1: Bloomberg eleven Frio in New York to Washington, d C.
Speaker 1: Bloomberg to Boston, Bloomberg one oh six one to San Francisco,
Speaker 1: Bloomberg nine sixty to the country Sirius XM Chado one
Speaker 1: nineteen and around the globe the Bloomberg Business app and
Speaker 1: Bloomberg Radio dot Com. This is Bloomberg Business Week. Well,
Speaker 1: this past week at the annual Milken Institute Global Conference,
Speaker 1: we had the chance to hit practically every corner of
Speaker 1: global finance, including the private credit market. Caroline I caught
Speaker 1: up with Mark out A Nazio. He's co founder and
Speaker 1: managing partner at Crescent Capital Group, and he says a
Speaker 1: lot has changed in his industry since the two thousand
Speaker 1: eight financial crisis. I would say, a lot of what
Speaker 1: we used to, you know, think is, you know, in
Speaker 1: our little corner of the world. If a company had
Speaker 1: good numbers in five when I worked for Mike from
Speaker 1: for Milkin, As he often says, there were ten thousands
Speaker 1: who say they worked from a hundred of us actually
Speaker 1: did work directly from You look at that company, and
Speaker 1: you didn't worry about whether, you know, China was going
Speaker 1: to have an accommodate of credit policy and you know,
Speaker 1: fiscal policy, excuse me, and and then maybe that would
Speaker 1: spur global growth and which would then help us now
Speaker 1: looking forward, so yeah, now you have to look at
Speaker 1: at everything and with the you know, one world, and uh,
Speaker 1: you know, there's a lot of there's a lot of
Speaker 1: reasons to have inflation, starting with you know, energy prices
Speaker 1: and cost of food, especially in Europe. So you know
Speaker 1: that all sort of ripples through. Uh, interest rates tend
Speaker 1: to work their magic in both directions. But thirty your
Speaker 1: mortgage at five and a half percent, at some point
Speaker 1: people are gonna stop buying houses, right because most folks
Speaker 1: to buy houses are trying to lock in a thirty
Speaker 1: you know, thirty year mortgage. So we'll see some relief
Speaker 1: in the housing market. We'll see that inflation come down.
Speaker 1: You would, you would think so, Although the question is
Speaker 1: when saying the real estate investors are going to say, oh,
Speaker 1: you know, inflation is great for housing prices next two years,
Speaker 1: and they were all saying next two years in the
Speaker 1: real estate it's going to be good for them, and
Speaker 1: it may be, and especially in markets like California where
Speaker 1: there's usually lag anyway, so you know, we'll we'll see
Speaker 1: when all this comes to bear, and there may be
Speaker 1: some some offsetting moves by the Fed. And also you
Speaker 1: know in Europe with fiscal policy, and we talked about
Speaker 1: China that you know it's gonna be it's gonna be
Speaker 1: a little bit of an ebb and flow. I think,
Speaker 1: So where's the opportunity for you or how much more
Speaker 1: difficult is it? You know? I remember I was in
Speaker 1: a credit committee my old firm before we spend presting
Speaker 1: out of TCW into two thousand and seven, and all
Speaker 1: of the assembled geniuses, including me, and that's the tongue
Speaker 1: of Jake where where you know noted the idea was
Speaker 1: sunny Scott. I remember very clearly, you know, bright sunshine,
Speaker 1: no clouds anywhere. This was in June of oh seven.
Speaker 1: Nothing is gonna happen right, exactly wrong. So you know
Speaker 1: I talked about it being the golden age of private
Speaker 1: credit when knows I'm bloomberg in October, and there's still
Speaker 1: a huge amount of reason to see that. You know,
Speaker 1: there's two trillion dollars of dry powder in private equity.
Speaker 1: You're gonna need a multiple of that to finance. We
Speaker 1: only have a fraction of that set up now in
Speaker 1: private credits. So the supply demand characteristics are terrific. You
Speaker 1: have floating rates, so as rates go up, our investors
Speaker 1: yields and returns go up. We don't you know, you
Speaker 1: mark quarterly, you don't more daily, so that that's favorable
Speaker 1: in any event, is going to keep ratcheting up. And uh,
Speaker 1: you know, frankly, to this point, you have only good
Speaker 1: news through quarterline. We have two private companies in our portfolio.
Speaker 1: Virtually everyone is reporting year over year, you know, gained
Speaker 1: some as high as fifty a year over year. Are
Speaker 1: they as positive about the next year? So far, they
Speaker 1: are passing on for the most case, you know, inflationary
Speaker 1: costs in terms of price increases. They have learned how
Speaker 1: to handle supply chain disruption, and they're still struggling with
Speaker 1: employment and labor costs. So that's you know, but if
Speaker 1: you can run sensitivity analysis when you're lending it four
Speaker 1: to six times. Somebody's paying twelve to twenty times for
Speaker 1: a company, and you have a huge amount of cash
Speaker 1: flow coverage even with you know, interest rates spike or
Speaker 1: quill at three three basis points and economics you know,
Speaker 1: I should say, company by company downturn and cash for
Speaker 1: we still have plenty of interest covers. So what what?
Speaker 1: So then the question, well, what could go wrong? We have?
Speaker 1: What we have to do as investors is you know,
Speaker 1: look around the corner and see where you know, what's lurking?
Speaker 1: And god's my question, it's not but it's not maybe
Speaker 1: the same for every company, right in terms of industries,
Speaker 1: But what what could go on a macro level wrong? Well,
Speaker 1: obviously the situation in the Ukraine is very troubling, right,
Speaker 1: and you have an errant missile which worries me. Doesn't
Speaker 1: have to even be a nuclear one, you know, it
Speaker 1: could just be a missile that lands in an adjacent
Speaker 1: country and and you have you have issues, and that's
Speaker 1: that's probably my number one concerned because that's completely exciting
Speaker 1: inside of anybody's hands. And like right now, if you
Speaker 1: look at at our our business, which example, just looking
Speaker 1: at what we do and not you know what a
Speaker 1: stock picker would look at. You know, we we have
Speaker 1: exactly I think one company under those two hundreds that
Speaker 1: has a data center in the Ukraine and and most
Speaker 1: of our European you know, investments are in developed countries
Speaker 1: obviously almost back from low right in the US. So
Speaker 1: there's not that, you know, and I think that you know,
Speaker 1: some of the challenges in the world is it It
Speaker 1: feels like it's over there, right, and and it's not
Speaker 1: affecting us. I mean, you know, wealth creation has been astronomical,
Speaker 1: maybe the greatest it's been in history. Yeah, we talked
Speaker 1: about rising house prices and all that, but you know,
Speaker 1: there's acute housing shortages and people who need to have
Speaker 1: a decent place to live can't afford to buy a house.
Speaker 1: That's that's a big problem. That was Mark at An
Speaker 1: Asio co founder and a managing partner at Crescent Capitol Group,
Speaker 1: also chairman and principal owner of the Milwaukee Brewery. All right,
Speaker 1: you're listening to Bloomberg Business Week coming up, retails, new reality,
Speaker 1: my Palem, discussion with the CEOs of Low's, Kroger, Stitch Fix,
Speaker 1: and more. This is Bloomberg. You're listening to Bloomberg Business
Speaker 1: Week with Carol Messer and Bloomberg Quick Takes Tim Stinovich
Speaker 1: from Bloomberg Radio. Since the middle of we've seen the
Speaker 1: pandemic change consumer behavior and spur digital commerce growth globally. Now,
Speaker 1: retailers are trying to customize the shopping experience and to
Speaker 1: better manage their supply chains and inventory. On Monday, at
Speaker 1: the Milken Institute Global Conference, Carol hosted a panel called
Speaker 1: Retails New Reality, Technology, Innovation and Consumer Behavior. It was
Speaker 1: an all star lineup taking part where Low CEO Marvin Ellison,
Speaker 1: Kruger CEO Rodney McMullen, Authentic Brand CEO Jamie Salter, Stitch
Speaker 1: Fix CEO Elizabeth Spaulding, and Wayfair's new Chief Technology Officer
Speaker 1: Fiona tan I. Began by asking the Low CEO about
Speaker 1: the customers spending outlook. With the price of goods and
Speaker 1: interest rates on the rise. In the US, roughly fifty
Speaker 1: of the homes are over forty years old, and two
Speaker 1: thirds of our business is driven in repair and maintenance.
Speaker 1: So the age of homes, the home price appreciation, and
Speaker 1: the availability or lackter of of new home construction will
Speaker 1: he drives demand and so although there are a lot
Speaker 1: of other macro factors that we are concerned about, whether
Speaker 1: it's inflation or interest rates. When we look at the
Speaker 1: correlation between our business UH and and key macro indicators
Speaker 1: is age of homes, price of homes, UH, supply and
Speaker 1: demand of homes and the consumer confidence based on that
Speaker 1: because that will drive their investments. All right, So optimistic, optimistic, optimistic,
Speaker 1: but cautiously optimistic. I heard that a lot. How about
Speaker 1: for you, Rodney, I would definitely would agree with the
Speaker 1: same thing. But people are shopping and they're cooking at
Speaker 1: home still, I know we are. Yeah, it's one of
Speaker 1: the things for us. People have learned how to cook
Speaker 1: at home because of COVID and people that had no
Speaker 1: idea how to cook. And what the customers telling us
Speaker 1: is they like it. And years ago Columbia University put
Speaker 1: together a research paper where when families eat as a family,
Speaker 1: they stay connected as a family, the kids get in
Speaker 1: less trouble. And what we're finding is people actually enjoyed that.
Speaker 1: And one of the things that we work hard on
Speaker 1: is how do you keep inspiring people on trying to
Speaker 1: find new ideas. And we actually use our technology and
Speaker 1: some of our internal AI work in terms of suggesting
Speaker 1: things that you might like. If you like this, you'll
Speaker 1: probably like this, and it works and it works. We
Speaker 1: also do it from a health standpoint. But all those
Speaker 1: things you know, we want. When you think food, you
Speaker 1: think Kroger and uh, you know, we think people will
Speaker 1: go to the app. Sometimes it will be a store,
Speaker 1: sometimes it will be pick up, sometimes it will be delivery,
Speaker 1: and we just want to make it easy on somebody
Speaker 1: to have an incredibly great meal as a family and
Speaker 1: or with family and friends, and do ever how much
Speaker 1: work they want to do. So if they want to
Speaker 1: go from scratch, they can do that, or if they
Speaker 1: want to get a meal kit, they can do that
Speaker 1: where they do a little bit of the work. But
Speaker 1: the surgery saw on people shopping and cooking at home
Speaker 1: because I had to try the pandemic. It's staying. Absolutely
Speaker 1: everything that we're seeing it's staying. The only trend change
Speaker 1: is some people that were online has moved back to
Speaker 1: the store. But it's almost a that's still shopping with
Speaker 1: us within our infrastructure. Elizabeth, I want to bring you
Speaker 1: in at this juncture. UM tell me about you. You
Speaker 1: also put out a physical quarter for the second what
Speaker 1: are you raise some guidance better than guidance? UM? How
Speaker 1: the environment feel? You know, I think we've just seen
Speaker 1: a real fundamental shift in how consumers shop. And I
Speaker 1: think for stitch Fix, you know, our mission is to
Speaker 1: change the way the world gets dressed every day to
Speaker 1: be their most confident self. And during COVID UM, the
Speaker 1: model of stitch Fix became more resonant than ever. We
Speaker 1: solve these three really fundamental issues that people have around shopping, discovery,
Speaker 1: fit and human relationships and really the what and the
Speaker 1: how of people shopping during COVID change, and we think
Speaker 1: really permanently, you know, we saw consumers asking us, you know,
Speaker 1: I'm like in I'm on zoom calls, I'm working from home,
Speaker 1: I don't have comfy clothes, and so we saw like
Speaker 1: a ten x rise and that of course at the
Speaker 1: beginning of COVID. Now we're seeing people like I have
Speaker 1: no idea what to where when I go back to
Speaker 1: the office. And so I think what we're hearing is
Speaker 1: just a shift to comfort, a shift to versatility UM.
Speaker 1: And then clients really valuing the fact that we can
Speaker 1: provide and kind of cut through the noise of online
Speaker 1: shopping and just shopping in general, like such a big
Speaker 1: fundamental problem is you know, finding style that resonates and
Speaker 1: actually clothes that fit me. And so really our focus
Speaker 1: has been on adapting to those we preferences, but making
Speaker 1: it easier to access to how and really the original
Speaker 1: model of stitch Fix, you know, it's all powered by
Speaker 1: data science and our styling community. It started off sending
Speaker 1: our clients five items at a time sight up, seeing
Speaker 1: them keeping what they love, sending back what they didn't.
Speaker 1: And now we've been able to really lean into fulfilling
Speaker 1: even more of their wardrobe given more than ever. Trying
Speaker 1: close out in the comfort of your own home became
Speaker 1: more residant than ever during these last two years, and
Speaker 1: we really think that behavior is here to stay. Jamie,
Speaker 1: come on in on it. What are you seeing? How
Speaker 1: does it feel? I would say that the cons you
Speaker 1: cautiously optimistic too. I think the consumer is changing a
Speaker 1: lot um dress clothes for sure, for men are very
Speaker 1: hot right now. Do I think it's here to stay?
Speaker 1: I don't. I do think that they will sort of
Speaker 1: come back to, you know, wearing those comfany clothes. But
Speaker 1: as we see people go back to work, they are
Speaker 1: getting out of their sweatpants. Um, the younger generation does
Speaker 1: not want to go back to work. So that is
Speaker 1: somewhat of a problem of what's going on right now
Speaker 1: in America is the younger generation does not want to
Speaker 1: go back to work. The older generation does want to
Speaker 1: go back to work. So we are seeing a shift
Speaker 1: of what people do where based on really their age demographic. Fiana,
Speaker 1: what are you guys seeing because I know one of
Speaker 1: the big plays um we heard from Morvin is just
Speaker 1: a focus on the home. Uh. And you guys certainly
Speaker 1: saw it during the pandemic, Yes, for sure, and as
Speaker 1: Marvin said, write a lot of um work going on
Speaker 1: at home at with the home and how we're outfitting
Speaker 1: the home. And so what we saw was in the year,
Speaker 1: for sure, a lot of customers coming in for the
Speaker 1: first time and a lot of them have come back,
Speaker 1: so they've become repeat customers. And it's a lot of
Speaker 1: it's going to be for our category, especially how do
Speaker 1: we help out customers have the largest selection, but so
Speaker 1: very much so to find what they're looking for because
Speaker 1: it's a hard category. If you think about it, is
Speaker 1: like hard. You're mostly unbranded and and very style conscious,
Speaker 1: very emotional and how do we help people discover and
Speaker 1: find what they want when you're a digital e commerce company.
Speaker 1: And so that's the part around. A lot of the
Speaker 1: strategy was very similar, right, It's very long term focused
Speaker 1: on you know, getting getting items to customers very quickly,
Speaker 1: giving them a large selection, help with them find it,
Speaker 1: and then being confident that what they bought is what
Speaker 1: they expected. Again, you know, given the category that we're in,
Speaker 1: it's very expensive to ship, it's you know, possible of
Speaker 1: damages and stuff, and we want to make sure also
Speaker 1: that they know what they're getting, um excite unseen. So
Speaker 1: that's something that we've done a lot of investment and
Speaker 1: a lot of it's pretty similar to what you do.
Speaker 1: It such fixed but it's like how do you how
Speaker 1: do you understand the products that we're selling and understand
Speaker 1: the customer and kind of help them with the best fit.
Speaker 1: Does it feel like we're even close to pre pandemic? Yes,
Speaker 1: it depends on It depends on the category, depends on
Speaker 1: the business function. As an example, from an online perspective,
Speaker 1: it's still it feels like you're getting closer to pre
Speaker 1: pandemic levels, but but you still have an increase in
Speaker 1: demand then you had pre pandemic, If that makes any sense,
Speaker 1: I mean, because you've you've witnessed so many people who
Speaker 1: were reluctant to use digital commerce for things as simple
Speaker 1: as getting groceries delivered, or getting a prescription delivered, or
Speaker 1: using a locker to buy online and pick up in
Speaker 1: the store, or using curbside. Now that they became comfortable
Speaker 1: with those types of transactions, those transactions are still relatively
Speaker 1: on the rise, and there are a larger percent of
Speaker 1: the digital commerce, at least for my company, that it
Speaker 1: was before the pandemic. So I think it just depends. Yeah, well,
Speaker 1: I was just going to try and say, I think
Speaker 1: the PrePost I don't think there's any going back to
Speaker 1: where we were before. And I just think there are
Speaker 1: all these fundamental changes that have occurred in consumer preferences
Speaker 1: where they're spending your time. We saw during that first
Speaker 1: month in lockdown of people who had never shop for
Speaker 1: clothes online shopped online so kind of broke through this
Speaker 1: barrier that I think, you know, our category had been
Speaker 1: just really sticky because a lot of it requires um,
Speaker 1: you know, so much of e commerce has historically been
Speaker 1: search based shopping. You know, people through their whole product
Speaker 1: catalog online and then we as consumers have to do
Speaker 1: all the work to filter, scroll, figure out what works
Speaker 1: for us. And if you think about the last few years,
Speaker 1: you know, we have more requests than ever people referencing
Speaker 1: things they've seen on TikTok, and if you think about
Speaker 1: that channel of recommendation, it's serendipitous discovery. And so we
Speaker 1: really view ourselves as a model that is playing to
Speaker 1: that strength of recommendation and relevance. And more than ever,
Speaker 1: I think consumers want to replicate that human relationship online
Speaker 1: and remove all that noise and clutter where it's like
Speaker 1: will these glows fit me? And does it reflect my style?
Speaker 1: And so I just I don't think the behavior will
Speaker 1: you know, what's interesting is like what we're shopping for
Speaker 1: has change. But also I don't I don't think people
Speaker 1: want to go back and spend the time that they
Speaker 1: were spending the same way that they were spending in
Speaker 1: the past in terms of you know, trying stuff and
Speaker 1: addressing room. I just think that behavior and really shifted,
Speaker 1: and of course there may be moments you want to
Speaker 1: do that, but I think we're not going back to
Speaker 1: the behavior we had back well, Jamie, and I thought
Speaker 1: your team shared with me that people are buying, maybe
Speaker 1: spending maybe more, but they they're not spending a lot
Speaker 1: of time online like they just want to be done
Speaker 1: and move on. Well, well, we're seeing is a lot
Speaker 1: of people go online, they pick it out, they go
Speaker 1: to the mall, they go to the store, they buy,
Speaker 1: They go to the store to buy, they go to
Speaker 1: the store to buy. So we're seeing physical actually outpacing
Speaker 1: dot com right now when you compare to twenty, for sure,
Speaker 1: we're we're beating the levels, uh physically versus digitally. If
Speaker 1: you compare to nineteen, it's a little bit different, but
Speaker 1: definitely people are going back into shopping, but they are
Speaker 1: more precise. They know what they're buying. They come in
Speaker 1: the store, they don't browse. They come in they know
Speaker 1: exactly what they want to get. They go right to
Speaker 1: the section, they pick it out, they go try it on,
Speaker 1: sometimes sometimes they don't, and they buy it. So you're
Speaker 1: seeing less traffic, more revenue. That was Authentic Brand CEO
Speaker 1: Jamie Salter. Part of Carol's panel discussion included Elizabeth Spalding
Speaker 1: of stitch Fix, Kroger CEO Rodney McMullan, Lows CEO Marvin Ellison,
Speaker 1: and Wayfair CTO Fionatan. You can find the full discussion
Speaker 1: at Milken Institute dot org. And that wraps up the
Speaker 1: weekend edition of Bloomberg Business Week from Bloomberg Radio. Thanks
Speaker 1: so much for joining us. I'm Carol Masser and I'm
Speaker 1: Tim Stanobek. Be sure to tune into Bloomberg Business Week
Speaker 1: Radio Monday through Friday. It starts at two pm Wall
Speaker 1: Street Time on Bloomberg Radio. You can also watch your
Speaker 1: daily broadcast on YouTube. Just search Bloomberg Global News and
Speaker 1: check out our Bloomberg Business Week podcast. You can find
Speaker 1: it at Bloomberg dot com, Apple, or wherever you get
Speaker 1: your podcasts. Bloomberg Business Week is available on newsstands now,
Speaker 1: at Bloomberg dot com and on the Bloomberg Terminal. You
Speaker 1: can also see me on Bloomberg Quick Take, available on
Speaker 1: Bloomberg dot com, slash qt, and streaming platforms like Roku,
Speaker 1: Apple TV, Samsung TV, and more. And check out the
Speaker 1: Milken platform because you can catch all of our panels
Speaker 1: that we did there. Yeah, Milken Institute dot org. This
Speaker 1: is Bloomberg