WEBVTT - Stock Rally Takes a Break as Crypto World Gets Hit 0:00:02.520 --> 0:00:07.000 Bloomberg Audio Studios, Podcasts, radio News. 0:00:08.640 --> 0:00:13.000 This is Bloomberg Business Week Daily reporting from the magazine 0:00:13.000 --> 0:00:17.599 that helps global leaders stay ahead with insight on the people, companies, 0:00:17.640 --> 0:00:22.520 and trends shaping today's complex economy, plus global business finance 0:00:22.560 --> 0:00:25.880 and tech news as it happens. The Bloomberg Business Week 0:00:25.960 --> 0:00:30.880 Daily Podcast with Carol Masser and Tim Stenebek on Bloomberg 0:00:31.000 --> 0:00:32.280 Radio Field. 0:00:32.400 --> 0:00:37.479 Kind of mellow this Monday after Thanksgiving, and it's not 0:00:37.560 --> 0:00:39.440 like there's a good meeting in a week and a 0:00:39.479 --> 0:00:39.839 half too. 0:00:40.200 --> 0:00:44.479 Is everyone just they're bringing turkey for lunch for leftovers. Yeah, 0:00:44.560 --> 0:00:46.839 and they're falling asleep at their desk because of the 0:00:47.520 --> 0:00:49.560 ingredient in turkey that makes you fall asleep, supposedly, I 0:00:49.600 --> 0:00:50.360 don't know if that's true. 0:00:50.440 --> 0:00:50.920 It could be. 0:00:51.120 --> 0:00:51.519 I don't know. 0:00:51.760 --> 0:00:52.199 I don't know. 0:00:52.240 --> 0:00:53.640 Maybe maybe watch any football. 0:00:54.280 --> 0:00:55.680 We didn't really watch football. 0:00:55.720 --> 0:00:57.280 I was in Ohio, so we had to watch the 0:00:57.320 --> 0:00:58.600 Ohio State Michigan game. 0:00:58.640 --> 0:00:59.680 For your wife for. 0:00:59.600 --> 0:01:03.360 A while, for every family, for anybody you walked into, 0:01:04.240 --> 0:01:06.600 anybody you've ran into in the entire state, if you 0:01:06.600 --> 0:01:09.559 were walking down the street. That's how it works there. 0:01:09.640 --> 0:01:11.280 It's a big ye fall state. 0:01:12.160 --> 0:01:14.600 Go you go Ohio State, is what I have to say. 0:01:14.720 --> 0:01:17.399 Well, yeah, it was a lot of football this past weekend. 0:01:17.480 --> 0:01:19.640 Let's let's go talk a little bit about the markets, 0:01:19.680 --> 0:01:21.600 because we've been bouncing around here and it does look 0:01:21.640 --> 0:01:23.440 like we're counting down in next week's SPED meeting. 0:01:23.920 --> 0:01:25.240 With US right now is Doug Sioca. 0:01:25.280 --> 0:01:28.720 He's chief executive officer partner at Kavar Capital Partners. The 0:01:28.760 --> 0:01:31.640 firm has about one point six billion in assets under management. 0:01:31.680 --> 0:01:35.200 He joins US from Leewood, Kansas. Doug, there is so 0:01:35.480 --> 0:01:37.640 much going on, so many important things. You've got that 0:01:37.720 --> 0:01:41.880 next FED meeting, next FED share, the spend on AI, 0:01:42.319 --> 0:01:45.520 the crypto fallout, so many important things. But we've got 0:01:45.520 --> 0:01:48.120 to start Tim with what's really the most important thing, 0:01:48.160 --> 0:01:51.440 and that is the Kansas City Chiefs. We got to 0:01:51.480 --> 0:01:54.720 ask they're in danger of missing the playoffs for the 0:01:54.720 --> 0:01:56.720 first time in more than a decade. They've been in 0:01:56.720 --> 0:01:59.680 the last three Super Bowls. I'm always rooting for them, 0:02:00.200 --> 0:02:04.880 watching them play. They always come back, Yet this year 0:02:05.000 --> 0:02:09.200 seems like it's something different. How painful is that for you? 0:02:07.880 --> 0:02:10.080 You know, it's tough. 0:02:10.160 --> 0:02:12.720 It's more painful to hear Tim ruding for the Ohio. 0:02:12.440 --> 0:02:16.240 State book guy, Come on, Isabelle, but we do. 0:02:16.320 --> 0:02:18.360 He's still a lot of counts in our Chiefs. It's 0:02:18.680 --> 0:02:21.320 it's funny and maybe an a lot of markets. There's 0:02:21.400 --> 0:02:24.680 mean reversion that tends to take place. And the Chiefs 0:02:24.680 --> 0:02:29.160 have lost six games, all within one score, and really 0:02:29.200 --> 0:02:31.320 the last seven or eight years they've seen win all 0:02:31.440 --> 0:02:33.960 those one score games. So they may have used up 0:02:33.960 --> 0:02:36.200 some of this year's luck and prior seasons, but we're 0:02:36.200 --> 0:02:37.600 still a long way to go. If I think that 0:02:37.960 --> 0:02:39.720 if they can win ten eleven games, they have a 0:02:39.760 --> 0:02:41.000 decent chance to get into the playoffs. 0:02:41.040 --> 0:02:42.320 So we're still hopeful. 0:02:42.520 --> 0:02:48.480 Wow, what's easier the market? The equity market continuing to 0:02:48.520 --> 0:02:51.520 move to the upside, or the Chiefs actually getting a 0:02:51.639 --> 0:02:53.240 chance at another Super Bowl? 0:02:53.840 --> 0:02:55.959 Hey? You know, I mean this look the stock market, 0:02:56.280 --> 0:02:57.639 and we wrote a piece a couple of months ago. 0:02:57.720 --> 0:03:00.480 It just talked about these all time highs, and certainly 0:03:00.480 --> 0:03:02.760 there's an obsession about where we go and you get 0:03:02.760 --> 0:03:07.320 to those inflection points, which is defensible, right, but you know, 0:03:07.320 --> 0:03:09.080 it's how could we not be at all time highs 0:03:09.080 --> 0:03:11.079 and we have earnings growing as fast as they have, 0:03:11.160 --> 0:03:13.440 We have a fed that's in a very accomodative posture. 0:03:13.480 --> 0:03:16.440 We have low taxes and regulation, and we're in the 0:03:16.480 --> 0:03:19.680 midst of one of the greatest ever like tangible technological 0:03:19.720 --> 0:03:21.960 revolutions our country in the world has ever seen. So 0:03:22.360 --> 0:03:24.880 are not too terribly surprised that we're at all time highs, 0:03:25.040 --> 0:03:27.280 Nor are we too terribly surprised when we see a 0:03:27.320 --> 0:03:30.400 little bit of consternation and maybe some in intermittent volatility 0:03:30.400 --> 0:03:32.080 that transpires around these levels. 0:03:32.800 --> 0:03:36.080 So okay, so let's broaden this out a little bit 0:03:36.480 --> 0:03:38.880 and think about the people who are in control of 0:03:38.880 --> 0:03:41.520 interest rates, and that would be, of course, the Federal Reserve. 0:03:41.920 --> 0:03:45.200 We spoke with Christina Lee a little earlier, and it 0:03:45.280 --> 0:03:48.400 seems like Carol people are pretty set on the fact 0:03:48.400 --> 0:03:51.000 that it could be Kevin Hasset, the president of City's 0:03:51.000 --> 0:03:53.240 made a decision. Yeah, we just don't know who that is. 0:03:53.560 --> 0:03:57.040 Now Kevin Hassett as FED chair. Does it change your view? 0:03:57.120 --> 0:03:58.680 What do you? What do you make of it? 0:03:59.480 --> 0:04:02.280 You know, we knew whoever President Trump was going to 0:04:02.280 --> 0:04:05.280 pick was going to be very dubbish, and Kevin certainly 0:04:05.320 --> 0:04:07.320 came to the top of almost all lists over the 0:04:07.320 --> 0:04:08.480 course the last couple months. 0:04:09.320 --> 0:04:10.360 I didn't think anyone. 0:04:10.080 --> 0:04:12.080 Ever thought Miron was going to get the nod as 0:04:12.120 --> 0:04:15.360 the Cherokee likely would never get confirmed. Kevin Walsh seen 0:04:15.400 --> 0:04:18.159 to fall off the table. Going back to the fighting Irish. 0:04:18.200 --> 0:04:20.000 I had a saft spot for Chris Waller since he 0:04:20.080 --> 0:04:22.640 used to teach economics at the university, but I think 0:04:23.440 --> 0:04:24.080 Kevin Hass. 0:04:23.920 --> 0:04:25.120 Would be a very good choice. 0:04:25.960 --> 0:04:26.560 And I do think. 0:04:26.560 --> 0:04:28.760 Look, I mean the FED wants to cut rates, Carol 0:04:28.800 --> 0:04:30.640 mentioned on the lead in We've got a FED meeting 0:04:30.720 --> 0:04:34.080 the next week and a half. I think that the 0:04:34.200 --> 0:04:36.480 Fed we've got this theory that they're in this sort of. 0:04:36.400 --> 0:04:38.719 This triangulation of FED tension. 0:04:39.160 --> 0:04:41.520 Right. As I mentioned, we have a really strong economy, 0:04:42.400 --> 0:04:46.120 but it's very uneven in its benefit distribution. We have 0:04:46.279 --> 0:04:49.480 a fear of excellss liquidity if we see a lowering 0:04:49.560 --> 0:04:52.240 of interest rates. But it's also a time where it's 0:04:52.279 --> 0:04:55.800 a very very significant cohort of the consumer that is 0:04:56.040 --> 0:04:59.680 dying for a little reprieve with lower rates because they 0:04:59.720 --> 0:05:02.600 have of floating rate depth, because they have jobs, and 0:05:02.600 --> 0:05:05.280 it'll keep up with the cost of living in the 0:05:05.279 --> 0:05:07.880 increasing price of things because they don't have money in 0:05:07.920 --> 0:05:10.120 the market. Right. And then the third thing is we 0:05:10.160 --> 0:05:16.599 have this incredible technological revolution. It's ubiquitous in its industry application, 0:05:16.680 --> 0:05:20.239 and it's unprecedented in its efficiency elevation. 0:05:20.760 --> 0:05:22.760 But it's exacerbating unemployment. 0:05:23.400 --> 0:05:25.960 Right, So the Fed really is at a consternation point. 0:05:25.960 --> 0:05:27.920 I think they do want to cut rates. They've talked 0:05:27.960 --> 0:05:30.599 about doing it as an insurance cut. We think of 0:05:30.640 --> 0:05:33.680 it more like a cohort cut to a certain very 0:05:33.680 --> 0:05:35.400 important part of the underlying consumer. 0:05:35.640 --> 0:05:37.560 Well, what does the path look like beyond December? 0:05:37.640 --> 0:05:41.320 Then, yeah, that's a great that's a really good question, Tim, 0:05:41.640 --> 0:05:43.599 you know, I think again, maybe that comes back to 0:05:43.720 --> 0:05:47.560 Hassett where you know, interestingly, President Trump had said for 0:05:47.600 --> 0:05:52.080 a while in some of his his detigradation of Chair 0:05:52.200 --> 0:05:54.479 Powell that shoot, we need to be closer to where 0:05:54.560 --> 0:05:56.200 Japan is in Europe is, and we need to cut 0:05:56.279 --> 0:05:58.520 rates by three and fifty basis points. While we look 0:05:58.520 --> 0:06:00.760 at the bottom market this morning or in the midst 0:06:00.800 --> 0:06:02.240 of one of the biggest sell offs we've had in 0:06:02.240 --> 0:06:05.080 the last couple of months, because there was an expectation 0:06:05.160 --> 0:06:08.440 over night that Japan is going to hike rates. So 0:06:08.520 --> 0:06:12.120 if we have sort of a monetary policy that's not 0:06:12.279 --> 0:06:16.680 globally coordinated, that could create a little more consternation to 0:06:16.760 --> 0:06:19.000 fixed income markets, but it could underscore the need for 0:06:19.000 --> 0:06:21.200 the US to be able to accommodative more so than 0:06:21.240 --> 0:06:22.840 we otherwise would have to be if the rest of 0:06:22.880 --> 0:06:23.920 world was on the same page. 0:06:24.000 --> 0:06:27.360 Hey, I want to go back to though I don't disagree, 0:06:27.400 --> 0:06:29.440 I think a lot of people don't disagree that when 0:06:29.440 --> 0:06:31.480 you look at the K shaped economy, that there are 0:06:31.560 --> 0:06:34.800 many folks that are struggling in this economic environment. 0:06:34.880 --> 0:06:37.040 And you're right, Doug, they're not in the equity markets. 0:06:37.040 --> 0:06:40.840 We now are talking about the three A pillars, whether 0:06:40.880 --> 0:06:43.640 it's you know, acid prices going up because of the 0:06:43.640 --> 0:06:48.560 spend on AI and that is making the rich people 0:06:48.640 --> 0:06:51.919 even richer affluent, and so you know, they have a 0:06:51.920 --> 0:06:53.920 lot of money to spend, and we know the wealthier 0:06:53.960 --> 0:06:59.000 consumer is really important to the overall consumer spend. Having 0:06:59.120 --> 0:07:04.720 said that, society wise, socially, it's important right to take 0:07:04.760 --> 0:07:07.200 care of all citizens because there's a lot of Americans 0:07:07.200 --> 0:07:09.760 that aren't in the equity market. Having said that, the 0:07:09.800 --> 0:07:13.960 Fed's mandate is to watch inflation and to watch the 0:07:14.040 --> 0:07:17.280 labor market. And is there a risk if they go 0:07:17.480 --> 0:07:20.920 on a trajectory of cutting rates, if they just do 0:07:21.000 --> 0:07:23.040 it in December. Do you think there's any risk of 0:07:23.080 --> 0:07:27.080 creating some excess liquidity in a market where you say, 0:07:27.120 --> 0:07:29.880 earnings look good and there's a lot of good stuff 0:07:29.880 --> 0:07:33.600 out there. So is there, you know, the possibility of 0:07:33.600 --> 0:07:35.960 a risk and who knows how that plays out and 0:07:35.960 --> 0:07:36.960 what kind of a crisis. 0:07:37.000 --> 0:07:38.560 Maybe none, but I just wonder. 0:07:39.560 --> 0:07:41.000 I love it's crisis, like Carol. 0:07:41.040 --> 0:07:42.960 But I do think again, this goes back to this 0:07:43.680 --> 0:07:45.920 tension that the FED is really. 0:07:45.520 --> 0:07:47.960 Walking a tightrope because to your. 0:07:47.840 --> 0:07:51.880 Point, I do think widespread prosperity is one of the 0:07:51.920 --> 0:07:53.480 things that makes our. 0:07:53.400 --> 0:07:54.520 Country so special. 0:07:54.560 --> 0:07:57.680 With that expectation that is it is creating to reach 0:07:57.760 --> 0:08:03.000 for full participation. I think the issue becomes like if 0:08:03.000 --> 0:08:06.600 things used to become on affordable that you're helping this 0:08:06.760 --> 0:08:09.160 important color with one hand and you're knocking them back 0:08:09.200 --> 0:08:09.720 with the other. 0:08:09.960 --> 0:08:11.400 So that's the part. 0:08:11.200 --> 0:08:14.640 Where they unfortunately have a pretty blunt instrument. Yeah, there 0:08:14.720 --> 0:08:17.240 might be other ways, right, whether that is just balance 0:08:17.280 --> 0:08:20.880 sheet management of things along those lines, whether that becomes 0:08:20.880 --> 0:08:23.440 some of the entore that takes place with fiscal policy 0:08:23.480 --> 0:08:27.320 incentives to increase employment because it is a really challenging time, 0:08:27.320 --> 0:08:28.160 without question, No. 0:08:28.360 --> 0:08:30.120 And listen. Totally agree. 0:08:30.240 --> 0:08:32.000 It's got of the wealth has to spread out to 0:08:32.040 --> 0:08:35.400 a lot more folks across the country. Doug Cioka always 0:08:35.400 --> 0:08:37.720 appreciate it, ca our capital partners. 0:08:37.520 --> 0:08:40.320 Stay with us. More from Bloomberg Business Week Daily coming 0:08:40.400 --> 0:08:41.360 up after this. 0:08:44.720 --> 0:08:48.560 You're listening to the Bloomberg Business Week Daily Podcast. Catch 0:08:48.640 --> 0:08:51.280 us live weekday afternoons from two to five East during 0:08:51.520 --> 0:08:55.439 Listen on Applecarplay and Android Auto with the Bloomberg Business app, 0:08:55.600 --> 0:08:58.160 or watch us live on YouTube. 0:08:59.160 --> 0:09:02.080 Let's get now to developments in AI big tech. As 0:09:02.160 --> 0:09:04.440 the king of AI bel whether as we're talking about, 0:09:04.480 --> 0:09:08.040 Nvidia invested two billion dollars in chip design software maker 0:09:08.080 --> 0:09:11.640 Synopsis as part of a broader engineering and designed tie 0:09:11.679 --> 0:09:14.880 up aiming tim to infuse its AI computing technology into 0:09:14.880 --> 0:09:15.640 more industries. 0:09:15.880 --> 0:09:18.040 With the Tech Roundup, we had to the Bloomberg News 0:09:18.040 --> 0:09:20.240 studio and bureau in San Francisco, where we find the 0:09:20.280 --> 0:09:23.440 co host of Bloomberg Tech, Ed Ludlow, ed, why is 0:09:23.760 --> 0:09:24.840 Nvidia doing this? Why? 0:09:24.880 --> 0:09:27.240 Now, Yeah, I guess there's a question of why is 0:09:27.280 --> 0:09:29.600 Nvidia doing this? And then what does Synopsis get out 0:09:29.600 --> 0:09:33.079 of it? You know, so, like Synopsis makes the software 0:09:33.120 --> 0:09:36.679 by which chips are designed but also validated. So before 0:09:36.720 --> 0:09:39.360 you send a chip through the fab to be manufactured, 0:09:39.400 --> 0:09:41.480 you want to know that that design works. And that's 0:09:41.520 --> 0:09:44.120 a big part of what Synopsis does with all kinds 0:09:44.160 --> 0:09:47.000 of tech companies. And so part of the interpretation of 0:09:47.040 --> 0:09:49.800 why is Nvidia doing this is it's a sales channel 0:09:50.040 --> 0:09:53.880 because Synopsis is basically saying, imagine how good our software 0:09:53.920 --> 0:09:58.000 would be if it was underpinned by Nvidia's GPUs and 0:09:58.040 --> 0:10:01.520 in Vidia's catalog of software, which largely it is called 0:10:01.600 --> 0:10:04.800 Kuda X. It's basically a library of building blocks for 0:10:04.840 --> 0:10:08.400 AI that just make existing software platforms better. And so 0:10:08.840 --> 0:10:10.199 the next thing you're going to ask me about it's 0:10:10.200 --> 0:10:14.720 probably circular financing. But from perspective, you know, it gives 0:10:14.720 --> 0:10:17.360 them entry to a tool or a platform that lots 0:10:17.360 --> 0:10:18.160 of people are using. 0:10:20.120 --> 0:10:24.720 So circular finance, I mean, come on, like Carols, did it? 0:10:24.800 --> 0:10:27.680 Is it just getting crazy or so? 0:10:28.160 --> 0:10:31.120 I don't know the parties on this specific deal in 0:10:31.200 --> 0:10:34.600 video and Synopsis would say this is not circular financing. 0:10:34.720 --> 0:10:36.480 In the same way that the graphic you're showing to 0:10:36.520 --> 0:10:44.080 our video audience illustrates, there is no requirement that Synopsis purchases. 0:10:43.440 --> 0:10:45.719 From Nvidia in videos GPUs. 0:10:46.240 --> 0:10:49.040 Additionally, and this is all according to Nvidia CEO Jensen 0:10:49.040 --> 0:10:52.040 Wong who was speaking this morning. Additionally, as I said, 0:10:52.080 --> 0:10:55.680 Synopsis does business with all kinds of chip makers, and 0:10:56.640 --> 0:10:59.959 Nvidia also does business with other makers of chip design 0:11:00.040 --> 0:11:02.880 in software Semens is one, for example, And none of 0:11:02.920 --> 0:11:05.080 that's going to change. Everyone is free to carry on 0:11:05.120 --> 0:11:07.320 as they want. And it goes back to the why 0:11:07.400 --> 0:11:10.800 is in video doing this? You know, this is an 0:11:10.840 --> 0:11:14.640 area of the technology where we call electronic design automation 0:11:14.960 --> 0:11:17.840 EDA software and a lot of people feel that those 0:11:17.880 --> 0:11:21.679 systems which have historically been run on CPUs old engineering 0:11:21.720 --> 0:11:24.800 platforms could be a lot better if they were run 0:11:24.840 --> 0:11:28.120 on GPUs or AI accelerators. They're just better pieces of 0:11:28.160 --> 0:11:31.320 software as a result. But there are loads of players 0:11:31.320 --> 0:11:33.040 now everyone's free to have better software. 0:11:33.160 --> 0:11:34.520 Is how in video would put it? 0:11:35.000 --> 0:11:35.120 Well? 0:11:35.200 --> 0:11:39.600 Why, I mean Synopsis wants to have Envidea as a customer, right, 0:11:40.840 --> 0:11:43.680 so why did they need it? Like what does that 0:11:43.760 --> 0:11:47.440 two billion dollar investment doo? 0:11:47.600 --> 0:11:51.040 So now this is like highly analogous with the Intel situation, 0:11:51.760 --> 0:11:54.360 and it's highly analogous with the Nokia situation. And so 0:11:54.480 --> 0:11:58.720 this year I've had two specific opportunities to ask Jensen Wang, 0:11:59.080 --> 0:12:02.240 what's the rationale taking a steak, like why do you 0:12:02.360 --> 0:12:06.040 need to own between two and three percent of these companies? 0:12:06.720 --> 0:12:09.920 And his answer is always I thought it would be 0:12:09.920 --> 0:12:12.439 a great investment and that in the future that investment 0:12:12.480 --> 0:12:15.120 will pay off. So in Nvidia got these synops of 0:12:15.200 --> 0:12:17.839 shares at four one hundred and fourteen dollars and seventy 0:12:17.920 --> 0:12:18.840 nine cents apiece. 0:12:19.679 --> 0:12:21.319 The stock's now higher than that. I can't see it 0:12:21.360 --> 0:12:23.080 on the screen, four hundred and forty dollars a piece. 0:12:23.480 --> 0:12:25.760 But I remember back in October when we're in DC, 0:12:25.920 --> 0:12:27.800 I asked the same question of Jensen, why did you 0:12:27.880 --> 0:12:30.760 have to take almost three percent of Nokia? And he 0:12:30.920 --> 0:12:33.320 was like, well, it looks like a pretty genius move now, 0:12:33.360 --> 0:12:36.400 doesn't it, because Nokia shares are up twenty percent, And 0:12:36.440 --> 0:12:38.120 I just like in the moment, I couldn't believe that 0:12:38.200 --> 0:12:41.120 was his answer, But he genuinely believes that it's going 0:12:41.200 --> 0:12:43.880 to be a great investment because he sees those engineering 0:12:43.880 --> 0:12:47.120 partnerships changing the respective fields that they're going into. 0:12:47.480 --> 0:12:49.199 Okay, Ed, we only have three minutes left, but there's 0:12:49.200 --> 0:12:51.000 two more stories we want to hear with you. One 0:12:51.040 --> 0:12:53.640 is deep Seek because China's deep Seek unveiled two new 0:12:53.720 --> 0:12:56.520 versions of an experimental AI model that it released weeks ago. 0:12:56.559 --> 0:12:58.840 It adds fresh capabilities a startup set would help with 0:12:58.840 --> 0:13:03.400 combining reasoning and executing certain actions autonomously. I'm old enough 0:13:03.440 --> 0:13:06.559 to remember earlier this year when a deep Sea update 0:13:06.600 --> 0:13:09.880 comes out and tank shares of Nvidia. We don't see that, 0:13:09.920 --> 0:13:12.360 and we haven't seen that. Where is deep Seek when 0:13:12.400 --> 0:13:13.319 it comes to competition? 0:13:14.000 --> 0:13:17.160 Okay, so deep Seek the three point two has been 0:13:17.200 --> 0:13:19.200 out for a number of weeks now in the form 0:13:19.240 --> 0:13:23.600 of deep sec v three point two exp Experimental. They 0:13:23.679 --> 0:13:26.360 just dropped the exp bit and it's an open source 0:13:26.400 --> 0:13:30.960 model that against benchmarking, performs very well against GBT five 0:13:31.000 --> 0:13:34.240 Open AI islaers model. Where they've made a difference in 0:13:34.280 --> 0:13:37.440 this open source world is that, like open AI, deep 0:13:37.480 --> 0:13:39.480 Seak wants to make the tool more useful, so they 0:13:39.480 --> 0:13:42.640 had the human reasoning element. It parrots the behavior of 0:13:42.640 --> 0:13:44.760 a human, but it replies the tool in a more 0:13:44.840 --> 0:13:48.719 useful way. Markets reacted in January through April the way 0:13:48.720 --> 0:13:52.079 they did because they didn't understand how deep Seek had 0:13:52.120 --> 0:13:55.240 achieved that performance for a model at the low cost 0:13:55.240 --> 0:13:56.280 point that it did. 0:13:58.160 --> 0:14:00.600 That, does the world need to be worried? 0:14:01.400 --> 0:14:04.360 Those are our guests, like, how does this fit in? 0:14:04.640 --> 0:14:05.480 How competitive? 0:14:05.559 --> 0:14:05.760 Is it? 0:14:05.840 --> 0:14:05.960 Real? 0:14:06.040 --> 0:14:07.720 Quickly, it's competitive. 0:14:08.240 --> 0:14:10.840 Models at this scale have tens of billions of parameters 0:14:10.960 --> 0:14:13.880 or more. And what Deepseek did is called mixture of 0:14:13.920 --> 0:14:16.400 experts or MOZ designs, where if you have one hundred 0:14:16.440 --> 0:14:19.400 billion parameter model, when you run the inference, you actually 0:14:19.440 --> 0:14:21.440 run it, you don't need to access all one hundred 0:14:21.480 --> 0:14:24.280 billion parameters. They found a way of just accessing say 0:14:24.280 --> 0:14:27.520 ten billion parameters or sixty billion parameters, which makes the 0:14:27.560 --> 0:14:29.800 cost of running it in the compute much more efficient. 0:14:30.120 --> 0:14:32.920 So the model is as performance, it's just easier to run. 0:14:33.040 --> 0:14:35.400 I do feel like everything's now about efficiency in terms 0:14:35.440 --> 0:14:37.840 of power use, in just getting things done. Hey, what 0:14:37.880 --> 0:14:40.880 do we need to know about Nasiyoshi's son, the soft 0:14:40.920 --> 0:14:43.680 Bank founder who said he wouldn't have sold off in 0:14:43.760 --> 0:14:46.520 video shares of his company had unlimited money to bankroll 0:14:46.560 --> 0:14:50.560 its next investments in artificial intelligence? Is there something important 0:14:50.560 --> 0:14:52.080 here that we should acknowledge? 0:14:52.920 --> 0:14:54.920 All you need to know is that he wishes he 0:14:54.960 --> 0:14:57.200 hadn't sold it, but he didn't have enough money. He 0:14:57.280 --> 0:14:59.480 needed more money, so he sold the thing that could 0:14:59.480 --> 0:15:01.480 get him money and video shares, and then he used 0:15:01.520 --> 0:15:03.360 it to invest in the thing he thinks will make 0:15:03.440 --> 0:15:04.560 him more money in the future. 0:15:04.800 --> 0:15:06.720 Open AI. And it's as simple as that. 0:15:07.360 --> 0:15:08.200 All Right, I love it. 0:15:08.240 --> 0:15:11.440 Even he needs more money? What does that say? 0:15:11.760 --> 0:15:12.480 How about buy now? 0:15:13.040 --> 0:15:15.360 That's just society. This is the world we live in. 0:15:15.840 --> 0:15:18.560 Everybody needs more money, all right, Gonna leave it there. 0:15:18.720 --> 0:15:21.000 Ed always glad we can go around the world of 0:15:21.040 --> 0:15:23.160 technology with you. Ed Lolove. 0:15:23.160 --> 0:15:25.160 Of course, he is co host of Bloomberg Tech at 0:15:25.160 --> 0:15:29.520 Bloomberg Television. Catch Ed and Caroline Hyde eleven am Wall 0:15:29.520 --> 0:15:31.720 Street Time every Monday through Friday on Bloomberg TV. 0:15:32.920 --> 0:15:36.760 This is the Bloomberg Business Week Daily Podcast. Listen live 0:15:36.880 --> 0:15:39.560 each weekday starting at two pm Eastern up on Apple 0:15:39.640 --> 0:15:42.680 car Play and Android Auto with the Bloomberg Business App. 0:15:42.760 --> 0:15:45.520 You can also listen live on Amazon Alexa from our 0:15:45.560 --> 0:15:49.280 flagship New York station, Just Say Alexa played Bloomberg eleven 0:15:49.360 --> 0:15:52.480 thirty Well. 0:15:52.680 --> 0:15:55.600 Bloomberg opinion piece grabbed our attention today, Paul J. Davies 0:15:55.640 --> 0:15:58.040 He's based in London. He writes that quote, the lack 0:15:58.080 --> 0:16:00.800 of transparency in private credit is one and that investors 0:16:00.800 --> 0:16:03.720 and journalists could be more fearful than is warranted by 0:16:03.800 --> 0:16:08.080 historical performance. But there's illustrating data too, illuminating data rather 0:16:08.320 --> 0:16:10.640 from analysts and ratings companies that show the outlook for 0:16:10.680 --> 0:16:14.680 repayment problems and bankruptcies isn't great. In fact, it's getting worse. 0:16:14.760 --> 0:16:17.280 That Again from his column, Davis goes on to write 0:16:17.280 --> 0:16:19.640 that he's quote talking about junk rated loans made by 0:16:19.680 --> 0:16:23.040 private credit funds, mostly mid sized companies, often used to 0:16:23.040 --> 0:16:25.920 fund private equity buyouts, and similar to the leverage loans 0:16:25.920 --> 0:16:28.920 at banks underwrite and sell to investors. To be fair, 0:16:29.400 --> 0:16:31.400 there's a lot of questions that have emerged in recent 0:16:31.440 --> 0:16:33.840 weeks about private credit, and we have yet to see 0:16:34.480 --> 0:16:37.320 kind of a systemic issue or problem, at least that's 0:16:37.320 --> 0:16:38.880 what we hear from a lot of the voices we 0:16:38.920 --> 0:16:39.200 talked to. 0:16:39.440 --> 0:16:41.680 Let's bring in Christina Lee. She's managing director and co 0:16:41.760 --> 0:16:44.800 portfolio manager for US private debt strategy over at oak 0:16:44.840 --> 0:16:47.640 Tree Capital Management affirm that's gotten more than two hundred 0:16:47.640 --> 0:16:50.680 billion dollars in assets under management. Welcome, it's good to 0:16:50.680 --> 0:16:51.040 have you. 0:16:51.120 --> 0:16:52.360 Well, thank you so much for having me here. 0:16:52.440 --> 0:16:53.960 You must have been watching the events over the last 0:16:54.000 --> 0:16:58.440 few weeks. With great interest, And I'm wondering just your 0:16:58.520 --> 0:17:03.160 view on the chatter around greater concerns when it comes 0:17:03.200 --> 0:17:05.919 to private credit. And again I'm using the term like, 0:17:06.520 --> 0:17:09.159 you know, a monolith, but not all private credit is 0:17:09.200 --> 0:17:09.520 the same. 0:17:09.760 --> 0:17:09.960 Yeah. 0:17:09.960 --> 0:17:12.639 I think it's been called the Great cocker Chores, you 0:17:12.720 --> 0:17:15.800 name it. I think one of the issues that I 0:17:15.840 --> 0:17:19.120 think people are having is there's been some high profile 0:17:19.160 --> 0:17:22.200 bankruptcies that I've had recently, and people are saying, is 0:17:22.240 --> 0:17:26.080 this systemic? Is this a pattern of what's next? I 0:17:26.119 --> 0:17:27.960 think sometimes you do have to take a step back 0:17:27.960 --> 0:17:31.600 and remember we're doing some investment grade credit. You are 0:17:31.760 --> 0:17:34.960 taking risk. There will be defaults, there will be restructurings. 0:17:35.040 --> 0:17:38.120 You don't get eight to nine percent all in yields 0:17:38.359 --> 0:17:39.480 by not taking risk. 0:17:40.480 --> 0:17:45.159 Okay, So having said that, when you guys, especially you know, 0:17:45.560 --> 0:17:48.560 in terms of private credit, I think what really tripped 0:17:48.680 --> 0:17:51.320 a lot of investors or investments up in the private world, 0:17:51.440 --> 0:17:53.600 private credit, private equity for that matter, is. 0:17:53.600 --> 0:17:55.560 That there weren't the exits that were normally there. 0:17:55.640 --> 0:17:57.560 Right, we've seen them pushed off and I think it's 0:17:57.600 --> 0:18:01.359 starting to come back. But then you had renegotiated you 0:18:01.480 --> 0:18:03.520 just like all these things started to happen, and you 0:18:03.600 --> 0:18:06.080 just wonder whether it gets a little bit fuzzier and 0:18:06.119 --> 0:18:08.800 that there is more opportunities or more touch points for 0:18:08.840 --> 0:18:11.760 things to come undone roll that in and how we 0:18:11.800 --> 0:18:13.520 should be thinking about that part of it. 0:18:14.080 --> 0:18:16.919 I think defaults have been very very low in private credit, 0:18:17.320 --> 0:18:20.520 and if you were to look at various managers their 0:18:20.600 --> 0:18:23.919 loss ratios, et cetera, default rates would probably all be 0:18:24.119 --> 0:18:28.840 relatively similar. And that's because private credit hasn't really been 0:18:28.920 --> 0:18:31.520 through a downturn yet, right the advent of the class 0:18:31.520 --> 0:18:34.040 when it really started booming was maybe ten years ago. 0:18:34.480 --> 0:18:35.760 I think COVID was too short. 0:18:36.160 --> 0:18:38.760 I think what you're seeing right now also is defaults 0:18:38.760 --> 0:18:41.640 will likely rise because a lot of these bars put 0:18:41.640 --> 0:18:44.880 in capital structures when it was a zero interest rate environment, 0:18:44.960 --> 0:18:47.119