WEBVTT - Bloomberg Wall Street Week: Ailman, Bernard, Summers 0:00:00.240 --> 0:00:04.960 This is Bloomberg Wall Street Week. Market shruggle, higher consumer prizes. 0:00:05.040 --> 0:00:07.400 The economy is in the process of rebounding. Will the 0:00:07.480 --> 0:00:10.479 utter Reserve have its own digital currency? The financial stories 0:00:10.520 --> 0:00:12.879 that cheap hard work. Many people think the eels are 0:00:12.880 --> 0:00:15.080 just going to keep marching up. We have more spending 0:00:15.120 --> 0:00:17.160 coming out of Congress. One of the big questions I 0:00:17.200 --> 0:00:19.880 think on investor's minds inflation through the eyes of the 0:00:19.880 --> 0:00:23.560 most influential voices. Larry Summer is the former Treasury Secretary 0:00:23.640 --> 0:00:27.240 Bryan Wynhan a backup America, Will Smart, CEO of Charlie Sharp. 0:00:27.360 --> 0:00:31.560 Bloomberg wool Street Week with David Weston from Bloomberg Radio. 0:00:32.000 --> 0:00:35.880 Now you see it, now you don't. Concerns about inflation 0:00:36.000 --> 0:00:38.160 and tightening went up in a proof of smoke this week, 0:00:38.479 --> 0:00:40.919 and all it took was a few more words from 0:00:40.920 --> 0:00:43.839 Fed chair J. Powell. This is Bloomberg Wall Street Week. 0:00:44.120 --> 0:00:47.760 I'm David Weston. Whatever the market saw this week, they 0:00:47.800 --> 0:00:50.600 certainly liked it, as equities were up across the board, 0:00:50.680 --> 0:00:54.280 the SMP ending the week at another record high, joining 0:00:54.280 --> 0:00:56.440 the Dow Jones and the NASTAC and rising more than 0:00:56.480 --> 0:00:59.960 two percent, while the ten year Treasury added nine basis points, 0:01:00.200 --> 0:01:03.120 and the yield curve overall steeping about ten basis points. 0:01:03.360 --> 0:01:05.200 To give us a sense of how investors see this 0:01:05.480 --> 0:01:07.399 round trip with the market to the last two weeks. 0:01:07.480 --> 0:01:10.399 Welcome now Barbara and Bernard. She is founder of Windcrest 0:01:10.480 --> 0:01:13.920 Capital and Chris Alman, Calcar's chief investment officer. Welcome to 0:01:13.959 --> 0:01:16.080 both of you to Wall Street Week. So Barbara and 0:01:16.160 --> 0:01:18.440 let me start with you first. We had sort of 0:01:18.440 --> 0:01:20.760 two versions from what at least what the market saw 0:01:20.959 --> 0:01:22.760 and what's going on. One is we gotta be worried 0:01:22.800 --> 0:01:24.760 on inflation. It may be sticking around. The other is, 0:01:24.840 --> 0:01:26.640 don't worry about it. It's a long way off. It's 0:01:26.680 --> 0:01:29.399 not the bigger problem. Which was right, I categorize this 0:01:29.480 --> 0:01:31.800 market is all great and no fear, and that's exactly 0:01:31.840 --> 0:01:34.319 what you saw this week. You know, if I Finance 0:01:34.360 --> 0:01:36.759 were taught the love of seventy two, which essentially means 0:01:36.840 --> 0:01:39.200 if you're annulyzing your returns at seven percent a year, 0:01:39.240 --> 0:01:41.360 you're going to double your money every ten years. The 0:01:41.440 --> 0:01:46.559 pp I clopped six point two. That's really meaningful because 0:01:46.560 --> 0:01:50.040 by that same math, you're losing half of your purchasing 0:01:50.040 --> 0:01:52.560 power every eleven point two years, and this is what 0:01:52.640 --> 0:01:56.360 the market really needs to be focused on. Inflation is 0:01:56.400 --> 0:01:59.160 here to stay. It's not transitory. How will try to 0:01:59.240 --> 0:02:02.960 paint it, is this inflation rat going through the anaconda. 0:02:03.160 --> 0:02:05.200 We all see the bulge in it's moving, don't worry 0:02:05.200 --> 0:02:09.720 about it. I disagree because of the way inflation is calculated. 0:02:09.840 --> 0:02:13.600 It's a year on year number. So sure, cars being 0:02:13.680 --> 0:02:16.639 up thirty five, used cars being up thirty this year 0:02:17.000 --> 0:02:20.640 maybe part of a reopening trade. Lumber being up maybe 0:02:20.639 --> 0:02:23.120 part of a reopening trade, and people going back and stop, 0:02:23.600 --> 0:02:26.320 you know, working on their porches. Maybe why lumbers falling. 0:02:26.880 --> 0:02:31.120 But things like wages, wage, that's sticky, that's not falling. 0:02:31.400 --> 0:02:35.080 And so even if you had zero percent inflation next year, 0:02:35.400 --> 0:02:39.079 that's still a six point increase in the cost of goods, 0:02:39.360 --> 0:02:42.880 So that, in my opinion, is permanent. Um. The other 0:02:42.960 --> 0:02:47.000 thing I would say is that Al kept talking about 0:02:47.040 --> 0:02:50.959 an inclusive and equitable recovery, and what you've gone from 0:02:51.040 --> 0:02:54.799 is an administration that was obsessed with wealth creation to 0:02:54.960 --> 0:02:59.280 one that's really obsessed with wealth redistribution that is inflationary 0:02:59.320 --> 0:03:02.119 as well. And you also look at the Biden administration, 0:03:02.160 --> 0:03:05.240 they're quite focused on decarbonization that is going to take 0:03:05.280 --> 0:03:10.880 a sustained investment, and investment is inflationary. So for multiple reasons, 0:03:11.240 --> 0:03:13.680 I think inflation is here to stay. I think it's 0:03:13.720 --> 0:03:16.959 being underappreciated um and it's something we really need to 0:03:17.000 --> 0:03:19.600 focus on. So Chris Alwin, give us your perspective. You 0:03:19.639 --> 0:03:21.720 are all long term investor. You have a lot of 0:03:21.800 --> 0:03:23.919 money to invest, you also have a lot of obligations 0:03:23.919 --> 0:03:26.559 in the out years. At this point, are you adjusting 0:03:26.680 --> 0:03:30.519 your investment calculus because of the prospect of increased inflation? 0:03:30.800 --> 0:03:33.200 We are, And I agree with Barbara Anna. I think 0:03:33.200 --> 0:03:35.880 that inflation is here to stay, and I think that 0:03:36.000 --> 0:03:39.720 it's subtle and creeping. In the way the government measures 0:03:39.840 --> 0:03:43.000 c p I is not effective at all. But if 0:03:43.000 --> 0:03:45.760 you ask the average person, they're feeling it. They see 0:03:45.760 --> 0:03:48.680 it in prices they're paying, and as she pointed out, 0:03:49.280 --> 0:03:52.640 it's going to be a wage pull as well as 0:03:52.680 --> 0:03:56.119 a price push on inflation. So I'm not sure when 0:03:56.160 --> 0:03:58.720 CPI will really pick it up, but I know we 0:03:58.960 --> 0:04:02.120 feel it and it showing up in lots of different places. 0:04:02.200 --> 0:04:04.760 So as a long term pension plan, as you put 0:04:04.840 --> 0:04:08.760 David with a thirty year horizon, inflation is the real threat. 0:04:08.840 --> 0:04:12.960 So we're actually increasing our inflation sensitive assets, which is 0:04:12.960 --> 0:04:16.520 a whole basket of different things, uh, and increasing it 0:04:16.600 --> 0:04:18.840 pretty steadily over time. We really wanted to be a 0:04:18.920 --> 0:04:21.880 larger percentage of our portfolio. So Barbara, and let me 0:04:21.880 --> 0:04:23.280 ask you about something that was a little bit a 0:04:23.320 --> 0:04:26.880 debate this week on Bloomberg between Severda supermani and of 0:04:26.960 --> 0:04:29.679 Bank of America and Jonathan Golub from the Credit Suite 0:04:29.920 --> 0:04:32.440 about whether an investor should take ano account the ability 0:04:32.440 --> 0:04:36.080 of a company to pass on increased costs to customers. 0:04:36.760 --> 0:04:38.839 Is that doable because some people think it is something 0:04:38.839 --> 0:04:41.960 that is that one way to try to compensate for inflation. 0:04:42.000 --> 0:04:44.480 We're expecting absolutely. I mean, I think you want to 0:04:44.520 --> 0:04:46.960 invest in companies with a high inflation pass through, right. 0:04:47.279 --> 0:04:49.920 If you look at something like Amazon, it's nothing more 0:04:50.000 --> 0:04:53.000 than a price comparison website. If you're selling white goods 0:04:53.160 --> 0:04:56.360 through a price comparison website, it's really hard to pass 0:04:56.400 --> 0:05:00.080 through those costs. You know. You also had Worldpool this 0:05:00.080 --> 0:05:02.640 this this week say they were trying to increase costs, 0:05:03.200 --> 0:05:06.320 but it's you know, it's a crisis. Steals up substantially, 0:05:06.360 --> 0:05:08.640 It's gonna hit margins. So I don't want to be 0:05:08.680 --> 0:05:10.560 in those companies. I want to be in companies with 0:05:10.600 --> 0:05:13.200 a very high inflation passed through rate. Chris, let me 0:05:13.360 --> 0:05:15.320 ask a slightly different question. Another thing that happened this 0:05:15.360 --> 0:05:17.840 week was infrastructure. I mean, it's not there yet, but 0:05:18.000 --> 0:05:21.279 certainly the President announced bipartisan agreement. It looks more likely 0:05:21.279 --> 0:05:22.680 than it did last week. I think it's fair to 0:05:22.720 --> 0:05:25.320 say that, Uh, to what extent does that affect an 0:05:25.360 --> 0:05:29.440 investor's perspective of infect we get a substantial investment infrastructure, 0:05:29.560 --> 0:05:31.520 What does that mean for the long term growth of 0:05:31.520 --> 0:05:33.680 the economy. Well, David, I remember you and I talking 0:05:33.680 --> 0:05:37.679 about inflate infrastructure a couple of years ago. You watch 0:05:37.800 --> 0:05:41.000 Washington much closer than I do. So, yes, we got closer. 0:05:42.240 --> 0:05:45.640 I'll believe it when I see it. But longer term, 0:05:45.680 --> 0:05:49.080 I think it is an interesting area. UM. You know, 0:05:49.440 --> 0:05:53.120 we really do think that that internet services an infrastructure 0:05:53.120 --> 0:05:57.880 type of investment. Broadband UH and the charging stations. That's reality, 0:05:57.960 --> 0:06:00.760 that that's going to be an investment opportunity. UH. The 0:06:00.839 --> 0:06:03.080 government needs to step in and be in the first 0:06:03.120 --> 0:06:06.000 lost position. But I think you'll see private capital flow. 0:06:06.320 --> 0:06:09.240 There's a ton of capital not just in the USA 0:06:09.320 --> 0:06:13.000 but around the world. It's very interested in long, stable 0:06:13.040 --> 0:06:17.159 returns from an infrastructure play. And they love the USA 0:06:17.320 --> 0:06:20.200 because we have a rule of law. We have very 0:06:20.240 --> 0:06:23.520 clean rules and contracts. But they've got to see an 0:06:23.520 --> 0:06:26.560 opportunity where they can make a steady return out of it. 0:06:26.760 --> 0:06:30.360 So the USA always has that challenge in infrastructure and 0:06:30.440 --> 0:06:34.239 just full bonds are always the cheapest form of cost 0:06:34.360 --> 0:06:38.400 of capital to build something, but let's face it, they're 0:06:38.440 --> 0:06:41.039 not good at maintaining it. So if you want to 0:06:41.040 --> 0:06:44.039 build something and maintain it, you've got to have some 0:06:44.120 --> 0:06:46.640 private capital in there. And that's going to be the 0:06:46.720 --> 0:06:48.880 challenge with this bill is figuring out with all this 0:06:49.000 --> 0:06:52.760 federal money coming in, how does private capital fit in 0:06:52.800 --> 0:06:55.440 that capital stack. Okay, our panel of Chris Element of 0:06:55.520 --> 0:06:58.600 Kelster's and Barbara and Bernard of Windcrest Capital will be 0:06:58.640 --> 0:07:00.600 staying with us as we turn to the E s 0:07:00.680 --> 0:07:04.479 G investing and how it could change our world. This 0:07:04.600 --> 0:07:12.480 is Wall Street Week on Bloomberg. This is Bloomberg Wall 0:07:12.560 --> 0:07:16.360 Street Week with David Weston from Bloomberg Radio. E s 0:07:16.400 --> 0:07:19.280 G Environmental, Social and Governance Investing. He's gonna a lot 0:07:19.280 --> 0:07:21.720 of talk these days, and lately it's getting some action 0:07:21.760 --> 0:07:24.720 as well, with the Engine Number one Dissidents Shareholder group 0:07:24.960 --> 0:07:27.680 up ending the x ON Mobile board and this week 0:07:27.760 --> 0:07:30.360 launching an e t F to take that campaign into 0:07:30.400 --> 0:07:33.440 other boardrooms as well. Chris Alement of Callister's and Barbara 0:07:33.480 --> 0:07:36.360 and Bernard of Windcrest Capital are still with us. So Chris, 0:07:36.440 --> 0:07:37.480 I want to start with you because you had a 0:07:37.480 --> 0:07:39.480 little something to do with this with Engine number one. 0:07:39.800 --> 0:07:42.600 Give us your sense of why you back these dissidents 0:07:42.600 --> 0:07:44.160 and what effect you think it's going to have on 0:07:44.200 --> 0:07:48.400 ex On. David, we have been having engagement and dialogue 0:07:48.440 --> 0:07:52.160 with the integrated oil companies for several years now because 0:07:52.200 --> 0:07:55.920 we're really concerned about the future and then and it's 0:07:55.920 --> 0:07:58.160 going to be a lower carbon and these companies have 0:07:58.280 --> 0:08:02.560 to change and adjust. XL Mobibile has just been calcil Trent. 0:08:02.720 --> 0:08:06.400 They have just ignored shareholders for several years. New York 0:08:06.400 --> 0:08:09.320 Common May to run at them um New York City 0:08:09.360 --> 0:08:13.160 Calipers and they just rebuffed everybody. We felt that it's 0:08:13.200 --> 0:08:17.640 time to change at the top. When Engine went approached 0:08:17.720 --> 0:08:21.400 us and said they're going to propose an alternative slate 0:08:21.440 --> 0:08:24.480 for a board, we said we would get behind them. 0:08:24.480 --> 0:08:26.680 So when they announced in December, we came out the 0:08:26.720 --> 0:08:30.720 same day endorsing their slate UH. And that was intentional, 0:08:30.760 --> 0:08:34.920 and we worked behind that UH, supporting their effort. We 0:08:34.920 --> 0:08:38.080 weren't proxy solicitors. What we were doing was really just 0:08:38.200 --> 0:08:42.360 calling our huge network of institutional investors in all the 0:08:42.400 --> 0:08:45.520 groups and raising this and making them aware. UH. And 0:08:45.640 --> 0:08:48.119 I think in the end it was Exon's own actions 0:08:48.200 --> 0:08:52.240 of adding board members suddenly talking about carbon sequestration. They 0:08:52.360 --> 0:08:56.559 really changed their tune because they realized that shareholders were 0:08:57.000 --> 0:09:00.800 unhappy and we're frustrated. And look at that stock chart. 0:09:00.920 --> 0:09:03.520 It really turned around. Now all the integrated oils have 0:09:03.640 --> 0:09:06.320 come up, but look at Exon relative to the others. 0:09:06.960 --> 0:09:09.640 And I think the fact that we were finally engaging 0:09:09.679 --> 0:09:13.080 with them and making some traction with management was waking 0:09:13.600 --> 0:09:16.400 the shareholders up and they cared and it was a 0:09:16.480 --> 0:09:19.840 huge move. So I think the the announcement that we 0:09:19.920 --> 0:09:23.040 saw that we elected three they elected three board members 0:09:23.040 --> 0:09:26.600 onto the Excellent Mobile board is dramatic and it really 0:09:26.679 --> 0:09:29.160 is going to signal a change from the top. Now 0:09:29.200 --> 0:09:32.280 their hard work begins. I don't want ex On Mobile 0:09:32.320 --> 0:09:37.400 to become a codact a Blockbuster video store, or I'll 0:09:37.400 --> 0:09:40.320 go back in my time a warehouse record store. We 0:09:40.360 --> 0:09:43.440 want to see ex On Mobile actually exist twenty and 0:09:43.520 --> 0:09:46.440 thirty years from now. But they've got to change and 0:09:46.520 --> 0:09:49.040 adapt to be able to do that. They can't just 0:09:49.520 --> 0:09:53.200 stick their head in an oil and gas only and 0:09:53.360 --> 0:09:57.400 I now we've received criticism that because that's their main calling. 0:09:57.800 --> 0:10:00.319 But they can adapt and they can adjust. Have a 0:10:00.520 --> 0:10:04.559 become an energy company, and we're gonna need the hydrocarbons 0:10:04.559 --> 0:10:07.320 into the future, but we're not gonna in necessarily need 0:10:07.360 --> 0:10:09.360 to burn them. We're gonna use them for lubricants and 0:10:09.440 --> 0:10:12.439 other things. So they've got a product mix, They've got 0:10:12.440 --> 0:10:16.440 a very solid company, they have good research. I'm optimistic 0:10:16.480 --> 0:10:19.040 with a new fresh board at the top and a 0:10:19.160 --> 0:10:21.680 change of tone at the top that this company can 0:10:21.760 --> 0:10:25.440 can adjust and adapt into the future and survive as 0:10:25.480 --> 0:10:27.679 we're seeing with all the major oils having to do 0:10:27.800 --> 0:10:33.360 to recognize the future is lower and lower carbon emissions. Barbara, 0:10:33.400 --> 0:10:35.400 and what about it. You're an expert in E s 0:10:35.480 --> 0:10:38.440 G investing and something I think of an enthusiast for Chris, 0:10:38.480 --> 0:10:40.920 what I think you did was great, and if you 0:10:40.960 --> 0:10:44.679 can change their capital allocations decisions and save your investment. 0:10:45.120 --> 0:10:48.040 Good on you. That is phenomenal. But what happened this 0:10:48.080 --> 0:10:51.520 week with the launch of another index tracking e t F, 0:10:51.760 --> 0:10:54.320 I don't think is the answer. There is no energy 0:10:54.360 --> 0:10:58.320 transition without an investor transition. So E s G one 0:10:58.360 --> 0:11:01.240 point oh was by the end X and slightly overweight 0:11:01.280 --> 0:11:04.120 tech and underweight oil and gas and charge a premium 0:11:04.160 --> 0:11:07.199 for it. So we've gone from passive B s G 0:11:07.520 --> 0:11:09.959 to what I would now call passive aggressive E s 0:11:10.040 --> 0:11:13.080 G with engine one point oh. And while it's good 0:11:13.080 --> 0:11:15.240 and I hope you know I wish them, I wish 0:11:15.280 --> 0:11:17.960 them well. I think E s G two point oh 0:11:18.160 --> 0:11:20.520 is not engine number one. E s G two point 0:11:20.520 --> 0:11:23.480 oh is the little engine that could, and the little 0:11:23.559 --> 0:11:28.000 engine that could invest in the renewables and the copper 0:11:28.080 --> 0:11:30.960 and nickel and lithium minds that are mining and sustainable 0:11:30.960 --> 0:11:34.080 ways that are going to drive this transition. It's investing 0:11:34.120 --> 0:11:38.040 in E s G leaders who are decarbonizing and are 0:11:38.120 --> 0:11:41.000 disrupting their models because we do need, as Chris says, 0:11:41.040 --> 0:11:44.520 their services, but we need them with less carbon. So 0:11:45.040 --> 0:11:46.599 I don't think E s G two point I was 0:11:46.600 --> 0:11:49.760 about the index at all. I think it's about decarbonization, 0:11:49.840 --> 0:11:53.319 and it takes investment, not divestment. If you listen to 0:11:53.320 --> 0:11:56.480 all they wrote a report they said we need fifty 0:11:56.520 --> 0:11:59.959 trillion to solve climate change. A hundred and three trillion 0:12:00.360 --> 0:12:04.040 has been committed for the un principle responsible investment, two 0:12:04.120 --> 0:12:07.200 times what's needed. So the problem isn't the money. The 0:12:07.240 --> 0:12:10.600 problem is it's going to all the wrong places. And so, Chris, 0:12:10.679 --> 0:12:13.960 I'm so excited that institutional capital is finally starting to 0:12:13.960 --> 0:12:17.560 work together. But what I now that you've got directors 0:12:17.720 --> 0:12:19.840 and now that you've got disclosure, I think the next 0:12:19.880 --> 0:12:23.560 step is using your health to advocate for policy change, 0:12:24.160 --> 0:12:27.360 because if you enact attack on carbon, you're going to 0:12:27.480 --> 0:12:30.640 get the same the same result without having to jump 0:12:30.720 --> 0:12:32.120 up and down on the board room. When you change 0:12:32.120 --> 0:12:36.280 the incentive, you change behaviors. Chris, what do you say? No, Barbara, 0:12:36.320 --> 0:12:38.120 and I agree with you. I was just gonna say that, 0:12:38.400 --> 0:12:40.840 you know, and I think that the key is we 0:12:40.960 --> 0:12:44.319 have been making very large sustainable and long term investments. 0:12:44.360 --> 0:12:48.319 We've been allocating more money to more sustainable companies. What 0:12:48.360 --> 0:12:51.160 we're trying to do is to recognize that everybody, whether 0:12:51.200 --> 0:12:53.880 it's an index and there's just still a lot of 0:12:53.920 --> 0:12:57.640 money in index funds, but that all the companies, if 0:12:57.640 --> 0:13:00.000 they want to survive in the future, have to change 0:13:00.080 --> 0:13:04.520 and adapt um. They can't just stay stuck in the 0:13:04.640 --> 0:13:07.560 current methodology. And and you're right, David, We've got to 0:13:07.559 --> 0:13:10.280 take carbon out of the atmosphere. We've got to change 0:13:10.320 --> 0:13:14.080 the way we get energy, the way we transport, and 0:13:14.240 --> 0:13:17.800 especially the way we do agriculture, and then ultimately certain 0:13:17.800 --> 0:13:21.200 things like as we've talked, concrete steel manufacturers have to 0:13:21.240 --> 0:13:25.560 find new, better ways, less carbon intensive ways to do that. 0:13:26.080 --> 0:13:31.240 So for us, it's it's a holistic investment including our index, 0:13:31.559 --> 0:13:35.000 not excluding it, but including it. And it is active management. 0:13:35.000 --> 0:13:37.320 I've said for a while, but I think of E, 0:13:37.559 --> 0:13:41.640 S and G climate change is the one active decision 0:13:41.720 --> 0:13:43.640 people have to make, and they have to make it 0:13:43.679 --> 0:13:46.800 now because in the next ten to twenty years the 0:13:46.840 --> 0:13:49.880 world is going to radically change and you can't just 0:13:49.960 --> 0:13:53.000 sit on an index and wait. You need to invest 0:13:53.080 --> 0:13:57.079 and make active decisions ahead of that to create capture 0:13:57.120 --> 0:14:01.640 those opportunities. So we think that the changes is inevitable. 0:14:01.840 --> 0:14:05.000 We've got a big sustainable portfolio that we already invest 0:14:05.760 --> 0:14:09.360 over a billion in new sustainable solutions and we're gonna 0:14:09.640 --> 0:14:12.040 increase that over time. So this is a truly great 0:14:12.040 --> 0:14:13.880 discussion on s G. I want both of you come 0:14:13.920 --> 0:14:15.560 back and have it at greater the links because we 0:14:15.600 --> 0:14:16.839 have more to talk about. But I want to throw 0:14:16.840 --> 0:14:18.520 you a curve ball right now. I'll go to view Barbara, 0:14:18.520 --> 0:14:21.440 and because we now know the game stop that meme 0:14:21.480 --> 0:14:24.240 stock has been added, the Russell one thousand. That's just 0:14:24.320 --> 0:14:26.160 happened at the end of the week. So what do 0:14:26.200 --> 0:14:28.040 you make of these meme stocks? Are they changing the 0:14:28.160 --> 0:14:32.400 entire index investing scene? Oh goodness, you know I don't. 0:14:32.680 --> 0:14:35.080 I love to short, but I don't even involved in 0:14:35.120 --> 0:14:38.080 those of these. It's not a good investment, right, and 0:14:38.120 --> 0:14:41.000 so it's it's a heartbreaking to see companies like that 0:14:41.040 --> 0:14:43.920 getting an index. We all know it's not worth what 0:14:44.040 --> 0:14:47.160 it is to what it's trading for today. Um, so yeah, 0:14:47.200 --> 0:14:49.720 I don't. I'm not I'm not for passive investing. There 0:14:49.760 --> 0:14:51.840 you go. I really appreciate this panel has been terrific. 0:14:51.880 --> 0:14:54.920 It's our panel of Chris Aleman, he's Calcier's c I O, 0:14:55.040 --> 0:14:59.160 and Barbara and Bernard CEO and founder of Windcrest Capital 0:14:59.560 --> 0:15:02.040 coming up. So many ways to take a company of 0:15:02.040 --> 0:15:05.600 public from I p O s to direct listings to spacts. 0:15:05.680 --> 0:15:09.080 Which one is right for you? We asked Stacy Cunningham, 0:15:09.320 --> 0:15:13.040 the president of the New York Stock Exchange. That's next 0:15:13.080 --> 0:15:19.520 on Wall Street Week on Bloomberg. This is Bloomberg Wall 0:15:19.560 --> 0:15:24.520 Street Week with David Weston from Bloomberg Radio. Spacks companies 0:15:24.520 --> 0:15:27.480 are turning to blank check mergers to go public more 0:15:27.520 --> 0:15:30.560 than ever before. Just this year, there have been more 0:15:30.560 --> 0:15:34.160 than five hundred and fifty SPACs so far, which is 0:15:34.160 --> 0:15:37.120 more than all of two twenty when more than eighty 0:15:37.160 --> 0:15:41.320 three billion dollars flooded into the space. Here's James Zelter 0:15:41.560 --> 0:15:45.000 of Apollo, So with it with this fact product really 0:15:45.080 --> 0:15:48.240 gaining emergence in the equity markets because of what's going 0:15:48.280 --> 0:15:50.960 on the I P O process, You know, is our 0:15:51.320 --> 0:15:55.800 is our ecosystem of clients and borrowers are our spac issuers. 0:15:56.440 --> 0:15:58.680 We want to make sure that we have the tools 0:15:58.680 --> 0:16:01.000 to respond to them. But this back boom is seeing 0:16:01.040 --> 0:16:04.000 some bumps in the road. A blank check company might 0:16:04.080 --> 0:16:06.840 get you public, but thus far the returns after you 0:16:06.880 --> 0:16:10.640 get the deal done haven't been all that impressive. One 0:16:10.680 --> 0:16:14.880 index that tracks SPACs is down since it's February. High 0:16:15.160 --> 0:16:18.800 fading trading volumes and the possibility of tighter monetary conditions 0:16:18.840 --> 0:16:21.720 are taking a toll on companies that went public through 0:16:21.760 --> 0:16:24.840 blank check mergers. Bab. It is not just something about 0:16:24.840 --> 0:16:27.800 one stock rising. It's a concept. It's about the fact 0:16:27.800 --> 0:16:30.800 that everyone believes it's some new newould saying that this 0:16:30.920 --> 0:16:34.160 concept is here to stay and about to change the world. 0:16:34.240 --> 0:16:37.240 So it is um as I say, a good idea 0:16:37.480 --> 0:16:42.280 going too far. That's Rashier Sharma from Morgan Stanley Investment Management. 0:16:42.520 --> 0:16:45.440 SPACs provide a shortcut to the stock market which business 0:16:45.440 --> 0:16:47.840 is seeking to go public are eager to take on 0:16:47.880 --> 0:16:50.360 the other side of the equation. Investors and SPACs have 0:16:50.480 --> 0:16:52.960 the chance to score a big gain, but know that 0:16:53.000 --> 0:16:55.760 they'll get their money back if the SPAC doesn't meet 0:16:55.800 --> 0:16:58.920 its deadline in getting a big deal done. Here's Social 0:16:58.960 --> 0:17:02.840 Capitals Schamath, Paula Hapatia. It evens the playing field. It 0:17:02.920 --> 0:17:07.040 democratizes access to high growth companies. How because it allows 0:17:07.080 --> 0:17:12.320 retail and it allows long tailed institutional investors. Folks that 0:17:12.400 --> 0:17:16.480 may not have necessarily been Tier one hatch funds now 0:17:16.520 --> 0:17:19.280 they can also play. Regulators have struggled to keep up 0:17:19.320 --> 0:17:22.200 with this back craze, and now the SEC is taking 0:17:22.200 --> 0:17:26.240 a closer look, at least at the disclosure issues. Investors 0:17:26.240 --> 0:17:29.240 in blank check companies give cash to sponsors before they 0:17:29.280 --> 0:17:32.359 know what company they will be investing in. It's really 0:17:32.400 --> 0:17:37.000 making sure that the sponsor who's behind that is fully 0:17:37.040 --> 0:17:43.320 disclosing their take on it. These are very expensive dilutive products. 0:17:43.480 --> 0:17:47.720 That's SEC Chair Gary Gensler. Another concern with SPACs is 0:17:47.760 --> 0:17:50.840 that companies can pitch to investors based on their forward 0:17:50.840 --> 0:17:55.520 looking financials, which isn't allowed in a traditional I p O. Again, 0:17:55.840 --> 0:17:59.920 here's Gensler, and it's those disclosures. Ensuring that the red 0:18:00.000 --> 0:18:03.840 tail investors get the right disclosures and are protected and 0:18:03.920 --> 0:18:08.320 somebody's not misleading them, and secondarily that they're participating just 0:18:08.400 --> 0:18:11.760 like the the institutional investors. So how do you know 0:18:11.920 --> 0:18:14.720 which way of going public is right for you? When 0:18:14.720 --> 0:18:16.719 we turn now to the woman really at the center 0:18:16.800 --> 0:18:19.760 of this process, she is Stacy Cunningham, President of the 0:18:19.800 --> 0:18:21.919 New York Stock Exchange. Stacy, thank you so much for 0:18:21.960 --> 0:18:23.720 being with us on Wall Street Week. There are so 0:18:23.760 --> 0:18:26.800 many different ways I p o s and direct listings 0:18:26.840 --> 0:18:30.400 and SPACs. Now what determines which is the best way 0:18:30.440 --> 0:18:33.400 to take a given company public. It depends on the company. 0:18:33.680 --> 0:18:36.440 If you want to raise money the traditional way, you 0:18:36.520 --> 0:18:38.879 might consider using an I p O, going out on 0:18:38.920 --> 0:18:41.159 the road show with your bankers who are holding your 0:18:41.200 --> 0:18:44.120 hand throughout the process, and working to get that established 0:18:44.119 --> 0:18:46.720 investor base that you want for the long term. And 0:18:46.760 --> 0:18:48.960 that's the reason why so many companies continue to choose 0:18:48.960 --> 0:18:51.399 the I p O processes. They want to choose that 0:18:51.440 --> 0:18:54.320 investor based with the allocation process. If you want to 0:18:54.320 --> 0:18:57.320 have more control around timing and price and work with 0:18:57.359 --> 0:18:59.760 a counterparty, a spact might make more sense for you 0:19:00.320 --> 0:19:03.840 as an issuer, and so you there's less dependency on 0:19:03.880 --> 0:19:06.600 market conditions. With this fact process, you have a little 0:19:06.600 --> 0:19:10.240 bit more control. And then a direct listing really takes 0:19:10.240 --> 0:19:13.760 the elements of of democratizing access to that first day. 0:19:13.840 --> 0:19:15.879 All investors are on a level playing field with a 0:19:15.920 --> 0:19:19.400 direct listing, so retail and institutional alike can just enter 0:19:19.440 --> 0:19:22.520 their their interest and the market prices that opening. And 0:19:22.560 --> 0:19:25.200 so if you're focused on cost of capital and having 0:19:25.280 --> 0:19:28.280 equal access to all investors, that's been a real driver 0:19:28.400 --> 0:19:32.080 for many of those companies choosing a direct listing. Another 0:19:32.200 --> 0:19:35.400 element of the direct listing that's been interesting to companies 0:19:35.800 --> 0:19:38.560 is being able to provide forward looking guidance. And so 0:19:38.600 --> 0:19:41.400 if it's a company that wants to talk about their 0:19:41.440 --> 0:19:44.560 future projections, they've been able to do so within a 0:19:44.640 --> 0:19:47.720 direct listing. They were also relying on that within a spack, 0:19:47.880 --> 0:19:50.879 But the SEC put out some guidance in April about 0:19:50.920 --> 0:19:54.520 the more accounting in spacts and about that future guidance 0:19:54.560 --> 0:19:57.720 because it wasn't uh. Companies have been relying on the 0:19:57.840 --> 0:20:02.200 the a safe harbor provision that is typical for mergers 0:20:02.480 --> 0:20:04.520 to be able to provide that future guidance. In the 0:20:04.560 --> 0:20:06.560 SEC said, wait a minute, that might not apply here 0:20:06.920 --> 0:20:09.280 because as a spack you're really becoming a public company 0:20:09.320 --> 0:20:11.840 for the first time. And so those that those were 0:20:11.880 --> 0:20:14.560 elements that are being slowed down this back market a bit, 0:20:14.680 --> 0:20:17.040 and you're starting to pick them up. The important thing 0:20:17.200 --> 0:20:20.040 is is companies have choices now and they're looking at 0:20:20.080 --> 0:20:22.800 what is the right path to the public markets for them. 0:20:22.880 --> 0:20:25.320 At the end of the day, no matter which path 0:20:25.359 --> 0:20:28.320 they choose, they become a public company and investors are 0:20:28.320 --> 0:20:30.480 going to price their their their stock in the public 0:20:30.520 --> 0:20:32.960 markets exactly the same way. Thank you. So much for 0:20:33.000 --> 0:20:35.000 being with us on Wall Street Week. That's Stacy Huntingham. 0:20:35.160 --> 0:20:39.280 She is the president of the New York Stock Exchange. Thanks. 0:20:39.280 --> 0:20:41.640 Coming up, we get the take of our special contributor 0:20:41.760 --> 0:20:44.920 Larry's Summers of Harvard on a trust policy and whether 0:20:44.960 --> 0:20:48.400 the Biden administration just might be headed in the wrong direction. 0:20:48.800 --> 0:20:56.000 That's next down Wall Street Week on Bloomberg. This is 0:20:56.080 --> 0:21:00.399 Bloomberg Wall Street Week with David Weston from Bloomberg Radio. 0:21:00.640 --> 0:21:02.480 And to wrap up the week, we're joined once again 0:21:02.480 --> 0:21:05.879 by our special contributor, Larry Summers of Harvard. So, Larry, 0:21:05.880 --> 0:21:08.200 We've had a lot of infrastructure Weeks over the last 0:21:08.200 --> 0:21:10.960 few years. Maybe this one really will be infrastructure Week 0:21:11.000 --> 0:21:12.800 because President Biden came out of the White House and 0:21:12.840 --> 0:21:16.920 announced a bipartisan agree at least on a framework on infrastructure. 0:21:16.920 --> 0:21:20.399 There has about five eight billion dollars in new money. 0:21:20.520 --> 0:21:22.719 What do you make of what was agreed to? I 0:21:22.800 --> 0:21:25.960