WEBVTT - Also Sticky 0:00:02.720 --> 0:00:07.200 Bloomberg Audio Studios, podcasts, radio news. 0:00:08.240 --> 0:00:10.760 Tell me about New Orleans. I went to New Orleans 0:00:10.840 --> 0:00:14.760 where the streets sticky little yeah, and like get out 0:00:14.800 --> 0:00:16.600 of the knees and like the floor. 0:00:16.680 --> 0:00:18.400 It was scienti e. Sampling of the streets. 0:00:18.640 --> 0:00:21.439 How is the uh the vibe? The conference? 0:00:21.600 --> 0:00:24.119 It was good, you know, like I guess that I 0:00:24.160 --> 0:00:26.280 had this image of my mind in my mind if 0:00:26.320 --> 0:00:29.479 it's like a super fun conference and then at the 0:00:29.520 --> 0:00:31.280 end of the day it's an I'm a night lock conference. 0:00:31.320 --> 0:00:33.240 You know, I don't know what you're saying. 0:00:33.320 --> 0:00:35.520 We'll leave it to the readers, the listeners imagination. 0:00:36.880 --> 0:00:38.159 Well, I was in Las. 0:00:38.080 --> 0:00:40.920 Vegas, also sticky. 0:00:41.000 --> 0:00:44.599 Yes, Las Vegas is also grim, but. 0:00:44.760 --> 0:00:46.640 It was nice, like I don't want. 0:00:47.120 --> 0:00:48.480 Yeah, New Orleans is beautiful. 0:00:48.640 --> 0:00:53.520 Bourbon Street is a strange place, but nice. Yeah, it's good. 0:00:53.520 --> 0:00:55.040 There's mules pulling carriages. 0:00:55.320 --> 0:00:57.720 I didn't see mules pulling carriages a little like street car, 0:00:57.880 --> 0:00:58.560 like a little tram. 0:01:00.080 --> 0:01:02.280 Yeah, there was none of that in Las Vegas. But 0:01:02.400 --> 0:01:06.479 we went to the Titanic Museum, which for some reason 0:01:06.520 --> 0:01:10.080 is in Las Vegas, famously land locked, and it was 0:01:10.120 --> 0:01:13.640 a great conference. Got to talk shop with a lot 0:01:13.680 --> 0:01:17.880 of et F folks a lot of fans of the podcast, Yeah, 0:01:17.959 --> 0:01:18.640 which is cute. 0:01:18.760 --> 0:01:22.240 They're like, Katie, we like the podcast. All that we 0:01:22.280 --> 0:01:23.959 ask is more ETF content. 0:01:24.080 --> 0:01:29.920 Actually, yes, yeah, I did text that to you. Yeah, 0:01:30.080 --> 0:01:33.600 that was cute. Any other news, Yeah, I bought a 0:01:33.640 --> 0:01:37.400 house a house. Yeah, well, nothing's been signed, but they 0:01:37.480 --> 0:01:39.679 selected our offers, so we're really thrilled. 0:01:39.720 --> 0:01:40.400 Congratulation. 0:01:40.600 --> 0:01:46.080 Thank you. That's fun to laugh with a good friend. 0:01:47.120 --> 0:01:50.720 Should I tell the listeners that I'm pregnant, You're going 0:01:50.760 --> 0:01:51.080 to say. 0:01:51.000 --> 0:01:53.120 Should you tell the listeners you're a street address, but 0:01:53.360 --> 0:01:55.760 both the address of your house and the name and 0:01:55.800 --> 0:01:57.040 SOUCHI a security number. 0:01:56.800 --> 0:01:59.200 Of one on one. 0:02:00.080 --> 0:02:02.840 It doesn't No, she's not across the finish. 0:02:03.000 --> 0:02:04.960 Congratulations in your house and your pregnancy. 0:02:05.080 --> 0:02:05.480 Thank you. 0:02:05.800 --> 0:02:08.359 It was like, really, all the listeners where to send 0:02:08.760 --> 0:02:09.560 the baby gifts? 0:02:09.720 --> 0:02:13.959 Please don't send me anything, Please don't do that. But yeah, 0:02:14.160 --> 0:02:16.720 I needed a place to live because our rent, our 0:02:16.800 --> 0:02:18.960 lease is up at the end of May, and then 0:02:18.960 --> 0:02:21.320 I'm doing August. I love deadlines. 0:02:21.600 --> 0:02:23.280 We're gonna say the baby's name on this podcast. 0:02:23.360 --> 0:02:23.960 Julia. 0:02:24.760 --> 0:02:25.600 Her name is Julia? 0:02:25.760 --> 0:02:25.959 Really? 0:02:26.200 --> 0:02:28.200 Yeah? Have I not told you that. 0:02:28.360 --> 0:02:30.359 I don't know my mother's name is. 0:02:33.200 --> 0:02:33.960 I never do that. 0:02:34.080 --> 0:02:37.360 Yeah, I don't really get that. I've been cooking up 0:02:37.400 --> 0:02:40.320 this name for like the past decade. So I'm excited 0:02:40.320 --> 0:02:43.959 to finally have something to name Julia my mother's name is. 0:02:45.919 --> 0:02:46.320 I know. 0:02:46.520 --> 0:02:50.600 Actually I love the name August. Gus for sure. I 0:02:50.639 --> 0:02:52.720 have a horse name that my husband thinks that's weird. 0:02:52.919 --> 0:02:58.080 But it's weird because you have a horse named Gus, 0:02:58.160 --> 0:03:01.280 or because if you have a boy, you're going to 0:03:01.400 --> 0:03:04.239 give the boy the name of the horse. 0:03:04.919 --> 0:03:08.280 We're going to name a child after horse. Yeah, And 0:03:08.320 --> 0:03:09.600 he's like, we can't do that. 0:03:10.040 --> 0:03:12.240 In some sense, this is the least surprising thing I've 0:03:12.280 --> 0:03:12.720 ever heard. 0:03:14.080 --> 0:03:17.519 Yeah, but you know, it's just such a handsome name. August. 0:03:17.880 --> 0:03:20.360 Yeah. Good for a horse. 0:03:21.919 --> 0:03:23.400 Yeah, come on, it's a multi purpose. 0:03:25.000 --> 0:03:27.639 Hello, and welcome to the Money Stuff Podcast. You're a 0:03:27.720 --> 0:03:31.359 weekly podcast where you talk about stuff related to money. 0:03:32.240 --> 0:03:34.239 I'm Matt Levine and I read the Money Stuff column 0:03:34.240 --> 0:03:35.240 for Bloomberg Opinion. 0:03:36.280 --> 0:03:38.880 And I'm Katie Greifeld, a reporter for Bloomberg News and 0:03:38.920 --> 0:03:40.440 an anchor for Bloomberg Television. 0:03:50.240 --> 0:03:52.280 So we had a podcast last week about private credit. 0:03:52.360 --> 0:03:54.320 Huh, we sure did this week? 0:03:55.800 --> 0:03:57.560 Well, you can't get away from it. It's like every 0:03:57.560 --> 0:03:59.600 other Readspike on the Terminal is about private credit. 0:03:59.680 --> 0:04:01.600 Yeah. So what I'm seeing on our podcast last week 0:04:01.720 --> 0:04:03.560 was like, it's the bigges. It's the most important or 0:04:03.600 --> 0:04:08.120 most interesting or biggest story in finance. And who was 0:04:08.120 --> 0:04:10.880 it who said that? As a golden executive who said 0:04:10.880 --> 0:04:15.200 that that private the private markets clients love the Iran 0:04:15.320 --> 0:04:18.760 war because it destrides from their problems, which, yeah, sort 0:04:18.800 --> 0:04:20.440 of thing you don't say out loud, but. 0:04:20.360 --> 0:04:22.039 He did, and we're thankful for it. 0:04:22.360 --> 0:04:24.720 But here on this podcast, we're sticking. 0:04:24.360 --> 0:04:25.039 To private credit. 0:04:25.200 --> 0:04:28.119 Yeah, Apollo and Aries those were the big ones this week. 0:04:28.720 --> 0:04:31.800 Yeah, I think by it said it's increasing, right, the 0:04:31.800 --> 0:04:34.080 more bad headlines there are about with their all requests 0:04:34.080 --> 0:04:36.920 and bad redemption requests, the more the next one gets 0:04:36.920 --> 0:04:40.880 a bigger redemption request. So now Apollo and Areas both 0:04:40.920 --> 0:04:44.120 got like eleven plus percent redemption requests from their private 0:04:44.400 --> 0:04:48.080 business of album companies. Yeah, and they both stuck to 0:04:48.120 --> 0:04:49.880 their guns and said we'll give you back five percent 0:04:50.000 --> 0:04:52.039 and the rest you can come back next time. 0:04:52.480 --> 0:04:53.040 Yeah. 0:04:53.080 --> 0:04:56.240 So you know that's uh, that seems to be the. 0:04:56.160 --> 0:04:59.600 Playbook, which for everyone except that one. 0:04:59.480 --> 0:05:01.680 Plus yeah, a couple. There are a couple of exceptions. 0:05:01.480 --> 0:05:05.440 There's the Blackstone one where they pass the hat and 0:05:06.320 --> 0:05:10.040 cast out like nine percent by like raising money from 0:05:10.279 --> 0:05:13.400 Blackstone itself and some of its employees. And there's also 0:05:13.480 --> 0:05:15.680 like the Blue Owl obedc two to one, which is 0:05:15.720 --> 0:05:19.800 like they sort of limited it, but they also said 0:05:19.839 --> 0:05:22.120 they're winding it down and returning more capital, so it's 0:05:22.160 --> 0:05:24.400 like kind of a mixed bag. But yeah, most of them, 0:05:24.600 --> 0:05:29.839 I said, look, these are long term SI liquid vehicles. 0:05:30.120 --> 0:05:31.960 Yeah, the deal is. 0:05:31.920 --> 0:05:35.360 That you are locking up your money in illiquid assets 0:05:35.400 --> 0:05:39.000 in order to earn the higher returns that are maybe 0:05:39.080 --> 0:05:42.960 promised to liquid assets. And you can get a little 0:05:42.960 --> 0:05:44.400 bit of your money out, but like you can't get 0:05:44.400 --> 0:05:45.680 a lot of them your runny out. And that was 0:05:45.720 --> 0:05:48.480 the deal. How do you think, said in an interview. 0:05:48.920 --> 0:05:51.400 It's not like it's on page ninety two of the perspectives, 0:05:51.400 --> 0:05:52.320 it's on page one. 0:05:52.520 --> 0:05:54.120 Yeah, it's true, And. 0:05:54.000 --> 0:05:55.600 Like they were like, yeah, that's the deal. And if 0:05:55.640 --> 0:05:57.960 we if we cast more people out, that would be 0:05:58.680 --> 0:06:01.760 failing in our funuciar dity to the people who stay in, 0:06:02.560 --> 0:06:05.240 which is true for two reasons. One, it's like, oh, 0:06:05.240 --> 0:06:08.040 we have this like liquid stuff, and we're not gonna 0:06:08.120 --> 0:06:09.800 we don't want to do fire sales, and so we're 0:06:09.839 --> 0:06:12.359 going to keep the stuff and cash up people a 0:06:12.360 --> 0:06:14.960 little bit, but not sell loans to cash more people out. 0:06:15.400 --> 0:06:17.200 But the only reason it's true is, like, you know, 0:06:17.600 --> 0:06:19.119 this is what we talked about with the buzz. People 0:06:19.120 --> 0:06:22.520 have a lot of doubts about the marks and these funds. Yeah, 0:06:22.600 --> 0:06:25.120 people have a lot of doubts that when a private 0:06:25.160 --> 0:06:28.800 credit fund says it's NAV is whatever, that that NAV 0:06:28.960 --> 0:06:31.920 reflects like the actual market value of the loans. And 0:06:31.960 --> 0:06:34.919 so one concern you'd have is if you're running one 0:06:34.920 --> 0:06:36.800 of these funds is like if people come to you 0:06:36.839 --> 0:06:38.880 to cash out and you cash them at you cash 0:06:38.920 --> 0:06:42.200 them out at NAV, and if the NAV is way 0:06:42.240 --> 0:06:45.000 too high, then you're cashing them at way too high. 0:06:45.120 --> 0:06:47.360 You're giving them too much value, and then people who 0:06:47.400 --> 0:06:49.559 stay in the fund are getting diluted by you cashing 0:06:49.600 --> 0:06:53.880 these people out. And so when these fund managers say, 0:06:54.480 --> 0:06:57.040 is part of you know, our job as FIDI shares 0:06:57.080 --> 0:06:59.480 the people staying in the fund, we can't cash out 0:06:59.480 --> 0:07:02.280 more than five percent. Like that's true, but it's also 0:07:02.320 --> 0:07:03.680 like a little bit of a worrying thing to say, 0:07:03.680 --> 0:07:05.640 because it suggests that, like you also might be a 0:07:05.640 --> 0:07:06.880 little bit worried about your iyvay. 0:07:06.920 --> 0:07:07.400 Yeah. 0:07:07.480 --> 0:07:12.560 Well, so if you had super large redemptions that you redeemed, 0:07:13.200 --> 0:07:15.400 what are you selling to meet them? There was a 0:07:15.480 --> 0:07:17.760 quote in a Bloomberg story out this week from the 0:07:17.800 --> 0:07:20.960 global head of credit strategy over at City who said 0:07:20.960 --> 0:07:23.600 that if you start meeting redemptions that are too large, 0:07:24.040 --> 0:07:26.560 what does the surviving portfolio start to look like? 0:07:27.240 --> 0:07:30.320 It's like the least liquid. Yeah, weirdest cats and dogs 0:07:30.320 --> 0:07:31.800 in the portfolio probably right. 0:07:32.080 --> 0:07:34.440 Yeah, so that's fair. 0:07:34.880 --> 0:07:36.560 It is fair. I have a lot of sympathy with 0:07:36.600 --> 0:07:38.400 iry fix saying it's on page one of the perspective. 0:07:38.400 --> 0:07:38.800 It is right. 0:07:38.880 --> 0:07:40.000 Yeah, that's what this deal is. 0:07:40.200 --> 0:07:43.000 This is I liquid stuff. The role of this is 0:07:43.560 --> 0:07:47.520 this is you are a wealthy person. A small portion 0:07:47.600 --> 0:07:50.120 of your money is in ill liquid stuff that you 0:07:50.160 --> 0:07:53.160 won't need for years, and this is that, right, and 0:07:53.640 --> 0:07:56.720 so you shouldn't need the money. The private credit fund 0:07:56.760 --> 0:07:59.520 is in the business of writing through periods of volatility 0:07:59.560 --> 0:08:01.760 by not giving your money. Pack's like becoming clear this 0:08:01.840 --> 0:08:03.800 is the product working as intended. It's just that you know, 0:08:03.800 --> 0:08:04.720 people are mad about it. 0:08:05.000 --> 0:08:06.720 Yeah, functioning as sold. 0:08:06.800 --> 0:08:09.360 There's a great Bloomberg article. You know, there's like a 0:08:09.400 --> 0:08:12.280 phrase liquidity illusion, Yeah, which just an annoying phrase. A 0:08:12.280 --> 0:08:15.800 great Bloomberg article about people talking about liquidity confusion. Yeah, 0:08:15.800 --> 0:08:17.720 where they're like, you know, they quite like Blue Owl 0:08:17.760 --> 0:08:20.600 and Apollo people saying basically sort of saying, yeah, we 0:08:20.600 --> 0:08:22.920 don't know how these things were sold. Maybe the advisors 0:08:22.960 --> 0:08:26.360 didn't maybe highlight this enough. This is again what I 0:08:26.360 --> 0:08:27.200 was talking about last year. 0:08:27.240 --> 0:08:29.560 Yeah, I don't know, man, we did have that conversation, 0:08:29.640 --> 0:08:32.720 like where was the potential point of miscommunication? I have 0:08:32.800 --> 0:08:34.199 one of the Apollo quotes in front of me, so 0:08:34.240 --> 0:08:36.120 I'm going to read it. This was coming from Jim 0:08:36.240 --> 0:08:40.160 Zelter speaking at a conference that maybe the industry may 0:08:40.200 --> 0:08:44.760 have failed to clearly explain liquidity restrictions. Quote, certain distribution 0:08:44.920 --> 0:08:47.960 channels in certain parts of the globe may have not 0:08:48.000 --> 0:08:51.480 fully communicated the risks inherent to the asset class, he 0:08:51.600 --> 0:08:54.679 said in Melbourne. And so you have a mismatch right 0:08:54.679 --> 0:08:58.080 now in shorter term redemptions. Sheesh, I don't know what 0:08:58.080 --> 0:08:59.440 do you do about that certain. 0:08:59.240 --> 0:09:01.960 Parts of the globe. Is interesting because my impression is 0:09:02.000 --> 0:09:04.920 like that part of the globe is the USA, but 0:09:04.960 --> 0:09:09.560 I don't really know. My impression is Financial Advisor sold 0:09:09.559 --> 0:09:12.040 product that like there are a lot of like dentists 0:09:12.040 --> 0:09:14.120 in the US who are trying to get out of 0:09:14.120 --> 0:09:17.720 these things. Those dentists people were like literally sending made 0:09:17.920 --> 0:09:21.280 dentist forums discussing. Yeah, the fighter's private credit funds. 0:09:21.280 --> 0:09:22.800 We talked about this. I think when it comes to 0:09:22.840 --> 0:09:27.520 the Blackstone example, like Okay, yes they are functioning as designs, 0:09:27.960 --> 0:09:31.560 but it still doesn't feel good necessarily, And when you 0:09:31.559 --> 0:09:34.600 think about future fund raising, it's certainly the. 0:09:34.679 --> 0:09:39.400 Future fundraising is really interesting, right, One like fascinating thing 0:09:40.000 --> 0:09:41.839 and I wrote about this this week is that all 0:09:41.880 --> 0:09:46.000 these funds are getting like big redemption requests. They're also 0:09:46.040 --> 0:09:48.120 getting big ish inflows. 0:09:48.280 --> 0:09:50.319 Yeah, not as big for now for. 0:09:50.360 --> 0:09:55.120 Now, yeah, but like like really now now you're like 0:09:55.400 --> 0:09:58.520 I want in at NAV. It's just an interesting vibe 0:09:58.640 --> 0:10:01.360 because they're clearly people who are looking around and saying 0:10:01.360 --> 0:10:03.960 this is oversold, this is overblown, Like it's not as 0:10:03.960 --> 0:10:07.040 bad as it seems. We're gonna buy at the lows, right. So, 0:10:07.120 --> 0:10:09.160 like BoA's wine scene is like I'll pay sixty five 0:10:09.200 --> 0:10:11.840 cents on the dog, but the people who are sending 0:10:11.880 --> 0:10:15.319 their checks to these funds right now are paying NAVY. 0:10:15.400 --> 0:10:17.680 They're not buying a discounts, they're not buying it lows. 0:10:18.040 --> 0:10:20.200 They are just like, yeah, we trust that it's fine 0:10:20.240 --> 0:10:22.840 what we want in and it's just sort of a strange, 0:10:22.880 --> 0:10:25.520 like like non clearing market, right, Like all these people 0:10:25.600 --> 0:10:28.000 want out at NAV, they can't all get out. Other 0:10:28.080 --> 0:10:30.880 people want in at NAV. Why. 0:10:31.720 --> 0:10:34.320 I mean, there's been five billion dollars of inflows so 0:10:34.440 --> 0:10:36.080 far this quarter. 0:10:36.640 --> 0:10:39.959 Yeah, I think both the Apollo Fund and the Blackstone 0:10:39.960 --> 0:10:41.880 Fund that we talked about, they both had inflos that 0:10:41.920 --> 0:10:44.920 were kind of around the amount that they actually cashed out. 0:10:45.080 --> 0:10:47.080 So like the Apollo Fund got like around five percent 0:10:47.120 --> 0:10:50.240 infos paid out about five percent outflows. You know, got 0:10:50.320 --> 0:10:52.920 requests for like eleven percent outflows, and that's like seems 0:10:52.960 --> 0:10:55.600 to be kind of normal. Like their infos and outflows 0:10:56.040 --> 0:10:58.760 roughly matched when you cut out the outflows they didn't 0:10:58.800 --> 0:10:59.560 actually pay out. 0:10:59.720 --> 0:11:03.560 Yeah, I will say, I mean this quarter, we don't 0:11:03.559 --> 0:11:05.800 know what in the quarter, that's right, Yeah, that's right. 0:11:06.040 --> 0:11:09.120 Did any of them come in the last four weeks? 0:11:09.440 --> 0:11:11.640 I would like to know did you see this story? 0:11:11.960 --> 0:11:15.120 JP Morgan planning a private credit fund that allows seven 0:11:15.160 --> 0:11:16.400 point five percent redemption. 0:11:16.840 --> 0:11:20.360 That's a exelling, but that's like the credit card that 0:11:20.440 --> 0:11:22.760 has got to Yeah, I don't know that's what you 0:11:22.760 --> 0:11:23.400 want to lead with. 0:11:23.840 --> 0:11:24.840 They're leading with it. 0:11:25.280 --> 0:11:25.800 Well, I don't know. 0:11:25.760 --> 0:11:27.840 If that's that reassuring whatever. 0:11:28.280 --> 0:11:31.160 It's also public and private credit, so some of it 0:11:31.200 --> 0:11:32.240 will be in private. 0:11:32.400 --> 0:11:35.120 But the future fundraising stuff is really interesting, right because 0:11:35.160 --> 0:11:37.200 you know, two months ago, the whole story in private 0:11:37.240 --> 0:11:39.760 credit and private markets generally, it was like, we're going 0:11:39.840 --> 0:11:42.199 to open up the frown case. We're going to raise trillions. 0:11:41.920 --> 0:11:45.160 Of dollars from put this in your retirement accounts, and 0:11:45.679 --> 0:11:47.960 like this does not undermine the case for pretty good 0:11:48.000 --> 0:11:49.080 in your retirement account. 0:11:49.160 --> 0:11:50.760 It doesn't, but it does. 0:11:51.200 --> 0:11:56.040 Perception is everything, yes, everything in this business. And I 0:11:56.040 --> 0:11:58.040 don't know when it comes to future fund raising, maybe 0:11:58.160 --> 0:12:01.280 seven and a half percent redemption on a totally basis, 0:12:02.040 --> 0:12:08.320 maybe that'll ancise some of these you know word skeptical investors. 0:12:09.120 --> 0:12:12.240 Like somebody email me like, if this didn't exist, there 0:12:12.240 --> 0:12:14.599 weren't these BDCs, if there hadn't been this rise in 0:12:14.640 --> 0:12:18.000 private credit, all this stuff, all these loans would more 0:12:18.080 --> 0:12:22.520 or less exist in like highyield funds. All these companies 0:12:22.559 --> 0:12:25.640 that borrow from you know, Apollo and Areas and HPS 0:12:25.640 --> 0:12:28.679 and whatever would be borrowing from the bank loan or 0:12:28.679 --> 0:12:32.120 the high yield market, and there'd be like CLO funds 0:12:32.160 --> 0:12:36.600 and high yield funds would own the debt and when 0:12:36.679 --> 0:12:41.080 people got nervous about software apocalypse and whatever, they would 0:12:41.440 --> 0:12:43.959 cash out of those funds, and those funds would sell 0:12:44.000 --> 0:12:46.360 the debt and the price of the debt would go down, 0:12:46.800 --> 0:12:50.640 and we would have like a different possibly also bad situation. Right, 0:12:51.040 --> 0:12:53.760 Spreads would widen, prices would go down, people would get nervous, 0:12:53.800 --> 0:12:55.800 people would go like, you know, the debt of these 0:12:55.840 --> 0:12:58.600 companies is collapsing, but they'd all get their money back 0:12:58.679 --> 0:13:01.040 at whatever the mark was. You know, here it's like 0:13:01.240 --> 0:13:03.640 there hasn't been fi ourselves at the market is still 0:13:03.640 --> 0:13:07.000 functioning on the loan side, and then on the fund side, 0:13:07.040 --> 0:13:08.760 everyone's complaining they can't get the money out. 0:13:09.040 --> 0:13:23.120 Yeah. 0:13:23.320 --> 0:13:24.920 Do you want to turn tractly to Larry Think? 0:13:25.400 --> 0:13:29.360 Yeah, actually you mentioned Larry Think, and uh, you know, 0:13:29.400 --> 0:13:31.000 he's had a lot to say in the past week, 0:13:31.240 --> 0:13:33.960 some of it just in the written word. And you'll 0:13:34.000 --> 0:13:37.920 never believe this. He thinks that Americans should buy more stocks. 0:13:38.320 --> 0:13:41.520 It's so great I wrote about this. He's right in 0:13:41.559 --> 0:13:44.839 a very conceptual way, but also like as an index 0:13:44.880 --> 0:13:47.040 one manager. It is very much his book. But like 0:13:47.480 --> 0:13:49.760 you know, he wrote the letter as annual chairman's letter 0:13:49.800 --> 0:13:53.839 to investors. What he talks about, what's upon a time 0:13:53.840 --> 0:13:54.840 where we talked about ESG. 0:13:54.960 --> 0:13:56.240 Now it's talked about the climate. 0:13:56.559 --> 0:13:59.640 He talks about Yeah, like whatever's top of mind this year? 0:13:59.640 --> 0:14:02.000 It is neither iran nor private credit. Oh it is 0:14:02.080 --> 0:14:06.040 AIE a big popular top of mind thing. And he's like, yeah, 0:14:06.080 --> 0:14:07.640 what's going to happen with AI. It's going to put 0:14:07.679 --> 0:14:09.480 a lot of people out of work, you know, And 0:14:09.520 --> 0:14:12.360 it's like great classic stuff, right, It's like people are 0:14:12.360 --> 0:14:13.960 worried that AI is going to take all the jobs. 0:14:14.960 --> 0:14:17.360 What does it mean for AD to take all the jobs? Well, 0:14:17.400 --> 0:14:18.960 it means you don't have a job, and it also 0:14:19.040 --> 0:14:22.480 means that like the money that you would have gotten 0:14:22.480 --> 0:14:24.800 paid goes somewhere, and it probably goes to corporate profits. 0:14:25.360 --> 0:14:29.000 And so he writes in the letter, when we talk 0:14:29.040 --> 0:14:31.680 about the economic disruption of AI, most of the conversation 0:14:31.800 --> 0:14:35.360 is about jobs. But history suggests that transformative technologies create 0:14:35.440 --> 0:14:37.800 enormous value, and much of that value accrues to the 0:14:37.800 --> 0:14:40.160 companies that build and deploy them into the investors who 0:14:40.200 --> 0:14:43.520 own them. So it's like, look, in the future. He 0:14:43.520 --> 0:14:45.680 doesn't say this, I say this. In the future, there 0:14:45.720 --> 0:14:47.840 will be no jobs, but instead of jobs, there will 0:14:47.880 --> 0:14:51.640 be corporate profits. And so you as a person should 0:14:52.200 --> 0:14:55.080 transition from having a job to owning the shares of 0:14:55.120 --> 0:14:56.960 the companies that will make all the profits. How can 0:14:57.040 --> 0:14:59.239 you do that, Well, flacrock has index. 0:14:59.000 --> 0:15:01.760 Ones good news, good news. 0:15:02.080 --> 0:15:04.760 So I'm parodying this, but I also the kind of 0:15:04.760 --> 0:15:06.520 think it's true, right, I mean, if you were really 0:15:06.560 --> 0:15:12.560 worried about AI like significantly displacing human labor, right, that's 0:15:12.600 --> 0:15:15.120 a good problem, right, Like in a world where like 0:15:15.280 --> 0:15:17.040 robots do all of our work for us and we 0:15:17.080 --> 0:15:18.720 don't have to work, and we sit around and just. 0:15:18.720 --> 0:15:20.280 Like eat bon bons. 0:15:20.320 --> 0:15:24.560 Yeah, they consume the production that the robots produce. That's 0:15:24.600 --> 0:15:26.560 great in the aggregate, but then it's like, if you 0:15:26.600 --> 0:15:28.000 don't have any way to pay for the production that 0:15:28.000 --> 0:15:30.400 the robots produced, then that's bad for you. Yeah, And 0:15:30.480 --> 0:15:32.400 so how do you do that, Well, you give everyone 0:15:32.400 --> 0:15:34.120 a share in the companies that own the robots and 0:15:34.160 --> 0:15:36.800 then you're fine, and like how you do that? A 0:15:36.840 --> 0:15:39.480 classic story is universal basic income, which is basically like 0:15:39.520 --> 0:15:43.280 the government takes some money from the robot companies and 0:15:43.360 --> 0:15:45.160 gives it to you so you can pay for food 0:15:45.160 --> 0:15:48.160 and stuff. But like you know, they call that universal 0:15:48.200 --> 0:15:50.560 basic index fund ownership in other ways, like make sure 0:15:50.560 --> 0:15:52.400 that everyone owns a share of the index fund, and 0:15:52.440 --> 0:15:54.960 the index fund owns the companies that own the robots, 0:15:54.960 --> 0:15:55.520 and then it's fun. 0:15:55.680 --> 0:15:58.320 Yeah, well while there are still jobs. One of things 0:15:58.360 --> 0:16:03.600 proposals was that employers should basically set up emergency savings 0:16:03.600 --> 0:16:07.240 accounts of up to twenty five hundred dollars so that 0:16:07.320 --> 0:16:12.400 their staff can invest in the markets, which was slightly interesting. 0:16:12.440 --> 0:16:16.560 It's like a private side answer to Trump accounts or 0:16:16.640 --> 0:16:19.560 something along those lines, right, I mean. 0:16:19.480 --> 0:16:22.400 Like all this stuff is like it's sounds like aggreate. 0:16:22.400 --> 0:16:25.000 Conceptual level, it's like, yeah, well, all on the robots 0:16:25.040 --> 0:16:27.400 and then it'll be great. But then it's on practical level, 0:16:27.440 --> 0:16:30.040 it's like you'll have a twenty five hundred dollars emergency 0:16:30.080 --> 0:16:31.720 fund that will and share it on the robots, and 0:16:31.720 --> 0:16:34.720 then like, okay, how will you pay for food for 0:16:34.720 --> 0:16:35.480 the rest of your life. 0:16:35.520 --> 0:16:37.560 If one has jobs, don't worry about it. 0:16:39.880 --> 0:16:43.080 I will say, it's very easy to have the cynical 0:16:43.520 --> 0:16:47.040 take that. Yes, this is Larry Fink talking his own book, but. 0:16:46.680 --> 0:16:48.760 It's a good book. I mean his book is like 0:16:48.800 --> 0:16:51.000 everyone should own like a share of the economy, which 0:16:51.160 --> 0:16:52.200 like it, it's like a fine book. 0:16:52.280 --> 0:16:55.360 Yeah, but also propositions his. 0:16:55.400 --> 0:16:59.000 Starting point that AI is going to exacerbate wealth inequality. 0:16:59.360 --> 0:17:04.679 That's not controversial, you know, like silly. 0:17:04.480 --> 0:17:05.879 Version of it, which is that there will be no 0:17:05.920 --> 0:17:07.920 one will have any jobs anymore and we'll just eat 0:17:07.920 --> 0:17:10.680 what the robots produce. But like the non silly version 0:17:10.800 --> 0:17:12.439 is like, yeah, they'll be like you know, there'll be 0:17:12.480 --> 0:17:13.320 winners and losers from A. 0:17:13.680 --> 0:17:13.920 Yeah. 0:17:14.240 --> 0:17:17.679 Though, by the way, like exascerate inequality, it's unclear, like 0:17:17.760 --> 0:17:19.919 exactly what the dynamics are, right, And so one thing 0:17:19.960 --> 0:17:22.000 he writes about in the letter is that like the 0:17:22.040 --> 0:17:25.520 skilled trades, there are jobs that will be displaced by AI. Yeah, 0:17:25.600 --> 0:17:27.600 there'll be more and less displaced by AI, and like 0:17:28.359 --> 0:17:31.320 plumbers and electricians will be less displaced by AI. And 0:17:31.320 --> 0:17:33.480 in fact, you'll need a lot of electricians to maintain 0:17:33.520 --> 0:17:37.280 the data centers. Yeah, and like podcasters and index fund 0:17:37.280 --> 0:17:40.679 managers will be more displaced by AI, and so you know, 0:17:40.880 --> 0:17:43.320 it's unclear exactly how the inequality runs, but like you know, 0:17:44.000 --> 0:17:45.320 Mark Zuckerberg will do great. 0:17:45.600 --> 0:17:49.639 Yeah good, Just worried. But I was speaking to a 0:17:49.720 --> 0:17:54.360 Lapshaw this week. He co wrote the Sacrini piece that 0:17:54.520 --> 0:17:57.280 tanked the markets that one day in February. I was 0:17:57.320 --> 0:18:01.200 on vacation. He wrote a part three this week, and 0:18:01.359 --> 0:18:03.200 we talked to him on the television. 0:18:04.840 --> 0:18:05.240 Fair one. 0:18:05.480 --> 0:18:08.560 No, I mean we talked about it. So he had 0:18:08.600 --> 0:18:12.720 an interesting one. I don't know, I feel like part 0:18:12.720 --> 0:18:15.160 two was the one that really was it part two? 0:18:16.000 --> 0:18:19.520 But yeah, yeah, I was on vacation, so you know part. 0:18:19.320 --> 0:18:22.840 One was like the hipster breakfast that nobody read. 0:18:23.119 --> 0:18:25.879 Yeah, yeah, I was on vacation. So I was like, 0:18:25.880 --> 0:18:29.280 I'll just let this blow over. Fine, and then there 0:18:29.320 --> 0:18:33.520 was a war anyway, So he wrote that the AI 0:18:33.600 --> 0:18:36.800 complex and the consumer economy are increasingly on opposite sides 0:18:36.840 --> 0:18:40.160 of the same trade. Every investment today in an AI 0:18:40.280 --> 0:18:44.440 company or beneficiary carries an implicit short on the consumer economy, 0:18:44.440 --> 0:18:45.640 and I thought that was kind of interesting. 0:18:45.720 --> 0:18:47.680 What does that mean consumer economy? 0:18:48.240 --> 0:18:54.280 Because basically, if you're replacing human workers. That's a dollar 0:18:54.400 --> 0:18:57.120 of household income that's lost, so people will have less 0:18:57.119 --> 0:18:57.840