Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is Bloomberg Business
Speaker 1: Week with Carol Messer and Tim Steneveek on Bloomberg Radio.
Speaker 2: When you your face will from that will bring everybody down.
Speaker 3: So don't worry big.
Speaker 2: Don't worry.
Speaker 4: Well.
Speaker 5: In Video's rise to three trillion dollars in market cap
Speaker 5: has been swift. It's added two trillion dollars to its
Speaker 5: market value just since November. For some context, Carol, that
Speaker 5: two trillion dollars that it's added is more than the
Speaker 5: market cap of all but seven companies in the S
Speaker 5: and P five hundred.
Speaker 3: That's context and perspective.
Speaker 5: That's just the market cap that it's added in the
Speaker 5: last few months. Great anyone, Some people think it is.
Speaker 3: Although some would say there are fundamentals there too.
Speaker 4: Well.
Speaker 5: Analysts are still really bullish on it. It's got sixty
Speaker 5: five buys seven holds in zero cells according to data
Speaker 5: compile by Bloomberg, So a lot of bulls out there.
Speaker 5: Our next guest not one of them. In fact, he
Speaker 5: likens Nvidia in twenty twenty four to Cisco in the
Speaker 5: year two thousand, just to remind her a little history
Speaker 5: lesson Cisco stock, Dove close to ninety percent in the
Speaker 5: dot com bubble.
Speaker 3: I think Kathy Wood has also written about that in
Speaker 3: terms of Cisco.
Speaker 5: Cisco. Yeah, but right, she got out of in Video
Speaker 5: and she's missed this rough.
Speaker 3: Up she did, all right. So back with us is
Speaker 3: Jared Dillion. He's the editor and publisher of the market
Speaker 3: newsletter The Daily Dirt. N App a former Bloomberg opinion columnist,
Speaker 3: also the author of several books, including his newest No Worries,
Speaker 3: How to Live a Stress Free Financial Life, which we
Speaker 3: have had fun at going through and talking about. He
Speaker 3: joins us in our Bloomberg Interactive Broker Studio. Great to
Speaker 3: have you back. How are you.
Speaker 2: It's great to be back, Thank you.
Speaker 3: So let's start with Nvidia. Why do you think it's
Speaker 3: a bubble?
Speaker 2: Uh g waits, look at the chart, but just because
Speaker 2: the chart goes up, it's gone parabolic. So it's here's
Speaker 2: let me give you something for context. So you said
Speaker 2: Cisco went down nine percent in two thousand, If in
Speaker 2: Video goes down seventy five percent, which I think it
Speaker 2: had close to a drawdown like that before in twenty
Speaker 2: twenty two, if it had a seventy five percent draw down,
Speaker 2: it would still be a seven hundred and fifty billion
Speaker 2: dollar company, which is incredible. So the way I look
Speaker 2: at this is you've had narrowing market leadership. Okay, So
Speaker 2: when I had started my career in nineteen ninety nine,
Speaker 2: I was actually on the options exchange in San Francisco,
Speaker 2: and you had a number of stocks that were leading,
Speaker 2: and it became narrower and narrower, and you had one
Speaker 2: stock left. It was Cisco. They missed on earnings. I
Speaker 2: think it was like March eleventh of two thousand and
Speaker 2: then it was down from there. Six months ago people
Speaker 2: were talking about the Magnificent seven, and then it became
Speaker 2: the Magnificent four. And now there's one stock left. And
Speaker 2: that's that is the definition of narrowing breath.
Speaker 5: You know.
Speaker 2: The interesting thing about this is that the median pe
Speaker 2: of non tech company is non expensive. If you look
Speaker 2: at the non tech part of the SMP, right, it's
Speaker 2: actually not super expensive. It's the tech part that makes
Speaker 2: it overvalue.
Speaker 5: So, okay, so what would you say to the folks
Speaker 5: who come out and say, well, in Nvidia's got a
Speaker 5: real mode, there's real demand for its chips and what
Speaker 5: it provides. Look no further than the backlog and the
Speaker 5: companies that are lining up to buy it. So there
Speaker 5: is a story there that it's fundamentally worth this much.
Speaker 3: I mean, revenues expected to grow about one hundred percent
Speaker 3: year over year. Yeah, I'm in twenty twenty five, now,
Speaker 3: mind you, in twenty twenty four it was a lot
Speaker 3: more just acts. This is quarter to quarter. But anyway,
Speaker 3: I'm just saying it's still it's a doubling of revenue.
Speaker 2: Yeah, I mean the same was also true of Cisco
Speaker 2: in two thousand and when it got to the peak.
Speaker 2: You had to say how many routers do they have
Speaker 2: to sell in order to make this valuation worthwhile? And
Speaker 2: it was just an astronomical number. So you know what
Speaker 2: the pushback I get an in video. And by the way,
Speaker 2: I'm not short in video. I'm not suicidal, right Like,
Speaker 2: I don't you own it in video? No, I don't
Speaker 2: own it either in an index fund. I guess technically
Speaker 2: I do, Okay. So but the pushback I get all
Speaker 2: the time is revenue growth. Revenue growth, But if you
Speaker 2: look at the second derivative of that, when that turns,
Speaker 2: that's when it's vulnerable. Look when I talk to young people,
Speaker 2: what former students of mine, former intern stuff like that,
Speaker 2: And I ask them what stocks they own. They all
Speaker 2: own in Vidia. It is it is a consensus stock.
Speaker 2: Everybody owns it. You know, I've seen this before.
Speaker 5: Let's worries someme to you. Yeah, Hey, speaking of bubbles,
Speaker 5: You've written a lot on Twitter and in your newsletter
Speaker 5: recently about private equity. You think it's in a bubble.
Speaker 5: You recently wrote that you don't think private equity will
Speaker 5: be the cause of the next crisis, but it will
Speaker 5: greatly exacerbate it and prolong the pain over a period
Speaker 5: of years. What are you seeing in private equity that
Speaker 5: you don't think others see.
Speaker 2: You know, private equity made sense in the twenty tens
Speaker 2: when you could buy companies at four or five times
Speaker 2: and interest rates were zero. I mean, it made sense
Speaker 2: to buy cheap companies and lever up. But now they're
Speaker 2: buying companies at ten to twelve times and interest rates
Speaker 2: are five and a half percent. It makes a lot
Speaker 2: less sense. There are seventeen thousand, three hundred private equity
Speaker 2: firms in the United States, and they're all competing for deals.
Speaker 2: They're rolling up every asset imaginable, whether it's pizza parlors
Speaker 2: or bowling alleys or minor league baseball teams. It's really
Speaker 2: reached the point of saturation and there's so much competition
Speaker 2: for deals that they're getting more and more overvalued. Plus
Speaker 2: there's no exits. People have written about that before. There's
Speaker 2: no IPOs, there's no acquisitions, there's no exits. There was
Speaker 2: an article written the other day about I can't remember
Speaker 2: the context, but basically someone in private equity said they
Speaker 2: predicted the next decade is going to be pretty rough.
Speaker 3: Scott Climban Apollo GA Managements. Scott climent said the private
Speaker 3: equity industry must face up to the reality of lower evaluations.
Speaker 3: Everything is not going to be okay. And that was
Speaker 3: our Bloomberg story that he put out there. He did
Speaker 3: a session at Super Return International in Berlin, so like
Speaker 3: they've been weighing in on this. I mean, it is
Speaker 3: kind of interesting, right, what works in a zero rate environment.
Speaker 3: It's like when the tide goes out, right, Yeah, you
Speaker 3: get to see everything. And I mean we have been
Speaker 3: spoiled for what two decades or so of really cheap
Speaker 3: no cost in terms of leveraging up right, money has
Speaker 3: been so cheap it's very different in an environment that
Speaker 3: even if historically it's low percentage wise, it's still a
Speaker 3: different investing environment.
Speaker 2: It's a completely different investing environment. And you know, I
Speaker 2: don't know the path of interest rates in the future,
Speaker 2: but private equity is very vulnerable to rising interest rates.
Speaker 2: Let's say we had in you know, after the election,
Speaker 2: we have a resurgence of inflation, Inflation goes back to
Speaker 2: six percent, ten year yields go from four and a
Speaker 2: half to five and a half or six. You're going
Speaker 2: to see the big private equity firms they'll be down
Speaker 2: thirty percent on that because.
Speaker 3: Of taking markdowns in their investments, or just because of
Speaker 3: companies that just can't survive in a higher rate environment.
Speaker 3: So when they go to refinance or whatever, they're like,
Speaker 3: I can't do this.
Speaker 5: Okay, play this out for us though, And maybe someone
Speaker 5: listening or watching right now would say, you know what
Speaker 5: if a private equity firm, or if private equity goes bust,
Speaker 5: that doesn't really affect me because I don't own any
Speaker 5: private equity. I don't have a portion of my portfolio
Speaker 5: in private equity. What are the implications of you think
Speaker 5: a bubble in private equity?
Speaker 2: Well, one of the things you started off with. You
Speaker 2: read from my newsletter and you said, I said that
Speaker 2: private equity wouldn't be the cause of the downturn, but
Speaker 2: it would exacerbate it. Private valuations should mirror public valuations.
Speaker 2: So if we have say a twenty percent draw down
Speaker 2: in the SMP, then correspondingly there should be a twenty
Speaker 2: percent draw down in private valuations. So the question is
Speaker 2: is that whether with ten year lockups private equity can
Speaker 2: earn that now over time, right or or there is
Speaker 2: a liquidity event. And the one thing about markets is
Speaker 2: that liquidity always finds a way.
Speaker 3: Well, it's also if you're working like we did the
Speaker 3: story about you know, the plumber who sold out this
Speaker 3: kind of the star plumber in UK, you sold out
Speaker 3: to a private equity fund, made a lot of money,
Speaker 3: but kind of sorry that he did it. And ultimately
Speaker 3: we talk about you know, private equity kind of going
Speaker 3: into all these markets. But if a company in a
Speaker 3: zero rate environment or cheap you know, cost of money
Speaker 3: environment versus where we are today higher for longer or
Speaker 3: high for longer, you know, if that business can't survive, well,
Speaker 3: then you think about the business closing down, people losing jobs, like,
Speaker 3: that's what I think about, like, right, the shutting down
Speaker 3: of businesses that starts to have a serious economic impact.
Speaker 2: By the way, the first, the first time I really
Speaker 2: heard about this was my brother has a very interesting job.
Speaker 2: He is a broker for dental practices. So he helps
Speaker 2: dentists transition when they're retiring and a young dentist will
Speaker 2: buy the practice. As of about five years ago, he
Speaker 2: was selling all of it practices to private equity and
Speaker 2: they were paying like twelve times for dental practices. And
Speaker 2: since interest rates went up, valuations have come down a
Speaker 2: little bit, but there's still like ten times for dental practices.
Speaker 3: So, well you think about it.
Speaker 5: I hope those private equity guys notfl cavities, That's all
Speaker 5: I'm saying.
Speaker 3: No, but you do think, right, they look at the balance,
Speaker 3: you right, the money coming in the insurance, and like
Speaker 3: I get kind of why they find it interesting.
Speaker 2: Right, Yeah, absolutely, Yeah.
Speaker 5: Hey, we got thirty seconds and then we're going to
Speaker 5: come back with you give us thirty seconds on why
Speaker 5: you think payrolls are going to be a bad are
Speaker 5: going to come in under dem.
Speaker 2: We've had kind of a run of bad data, especially
Speaker 2: the labor market. Data. I mean the Jolts was kind
Speaker 2: of a mess, and I mean Chicago pm I was
Speaker 2: a complete what's that.
Speaker 3: We're going to debate?
Speaker 2: Keep out, Okay, I mean Chicago pm I was completely
Speaker 2: I would say over the last two weeks the data
Speaker 2: has become significantly.
Speaker 5: Softer, softer, but not more.
Speaker 2: The Chicago PMI was pretty much a mess. Thirty five
Speaker 2: point four is like deep recession territory. So I'm a bear.
Speaker 3: Sorry, Okay, okay, I mean we have had an inverted
Speaker 3: yilkart for a long time.
Speaker 2: Yes, for two years.
Speaker 5: So look at some point, I'm gonna I'm in between
Speaker 5: you guys. I'm gonna let this continue. After we do
Speaker 5: some news. We're talking to Jered Dillion of The Daily
Speaker 5: Dirt down Balls and the author of No Worries, How
Speaker 5: to Live a Stress Free Financial Life.
Speaker 3: I want to get back to our guests. Jared Dillion
Speaker 3: is still with us. He's the editor and publisher of
Speaker 3: the market newsletter. It is called The Daily Dirt app.
Speaker 3: He's a former Bloomberg opinion columnist, also the author of
Speaker 3: several books, including his newest No Worries, How to Live
Speaker 3: a Stress Free Financial Life, which we have talked about
Speaker 3: in the past, and we highly recommend you check out
Speaker 3: our podcast feed for that conversation. Jared, we were talking
Speaker 3: about before we took a break to do some news
Speaker 3: about the job market and your expectations. We talked earlier
Speaker 3: with our Rich Miller, who pointed out that the US
Speaker 3: job market may be a lot less vibrant than the
Speaker 3: FED believes to seem to think it is, and he
Speaker 3: talked about the quarterly senses of employment and wages, these
Speaker 3: new figures that have come out that says maybe payrolls
Speaker 3: have grown about sixty thousand less per month on average
Speaker 3: last year than the roughly two hundred and fifty thousand
Speaker 3: run rates. So there's some debate about whether or not
Speaker 3: these statistics are actually showing the labor market that maybe
Speaker 3: it's not really as strong as it is. Talk a
Speaker 3: little bit more about your concerns or specifically why you
Speaker 3: think the labor market is maybe starting to come undone.
Speaker 2: Well, I think do you remember back during the pandemic
Speaker 2: when we had the labor shortages right, Well, you would
Speaker 2: go into a restaurant and they would only be serving
Speaker 2: like four tables because people weren't showing up to work,
Speaker 2: like there was just so many jobs available versus the
Speaker 2: number of job seekers, and that was a distortion that
Speaker 2: was caused as a result of the massive amount of
Speaker 2: stimulus that we pumped into the economy. And I think
Speaker 2: what's happening is that has taken four years to unwind,
Speaker 2: and I think it's finally unwinding after four years. So
Speaker 2: if you look at the chart of job openings, so.
Speaker 3: The shortages are finally unwinding.
Speaker 2: Yes, yes, So if you look at a chart of
Speaker 2: job openings, you're seeing its coming back down to pre
Speaker 2: pandemic levels. So I think, really the equilibrium rate for
Speaker 2: the unemployment rate is four and a half to five percent,
Speaker 2: and I think we'll get there over the next six
Speaker 2: to twelve months.
Speaker 5: You want to talk private credit.
Speaker 3: I do want to talk private credit.
Speaker 5: I'm gonna give you a chance to do this.
Speaker 3: I get to my So we talked a lot about
Speaker 3: private equity and your career.
Speaker 5: Ask question private.
Speaker 3: Credit, Tim, And I know, like we've you know, been
Speaker 3: at Milkin and it's like everybody's in private credit. It's
Speaker 3: all good. The risk is spread around. What do you
Speaker 3: think why.
Speaker 2: I am thinking about here's the thing. We haven't really
Speaker 2: had a credit cycle. The down half of a credit
Speaker 2: cycle since two thousand and eight. We had a credit
Speaker 2: bear market in two thousand and two, we had a
Speaker 2: credit bear market in two thousand and eight. We almost
Speaker 2: had one during the pandemic, but the FED started buying
Speaker 2: corporate bond ETFs and they basically jawbone the credit markets higher.
Speaker 2: So we really haven't had a down turning credit in
Speaker 2: sixteen years. And bear markets and credit are awesome. They're
Speaker 2: great if you are an income investor. You can get
Speaker 2: investment grade bonds at eight to ten percent yields, you
Speaker 2: can get high yield at fourteen percent yields. It is
Speaker 2: like I've been waiting for an environment like that for
Speaker 2: a long time. And I think that if private credit
Speaker 2: comes on glued, you know, like I said before about
Speaker 2: private equity, correspondingly it should match with the public markets.
Speaker 2: I think we might get that opportunity.
Speaker 3: So what is that unwinding or what does that scenario
Speaker 3: look like? Does it look like a GFC? What does
Speaker 3: it look like?
Speaker 2: I don't know what it looks like. No, I don't
Speaker 2: think it looks like a financial crisis. But you know,
Speaker 2: like we if we are overdue for a bear market
Speaker 2: and credit, like you we have built up a lot
Speaker 2: of excesses over.
Speaker 3: Time, so there's a lot of money. There's still a
Speaker 3: lot of liquidity out there.
Speaker 2: One point eight trillion in private credit. It's a lot.
Speaker 5: Okay, talk stop, sith Gil, It's gonna do a YouTube tomorrow.
Speaker 5: He is, yes, Yes, this is breaking in the last
Speaker 5: couple hours.
Speaker 2: Okay.
Speaker 5: So you argue that what's happening when it comes to
Speaker 5: GameStop is market manipulation. You acknowledge you're not a lawyer,
Speaker 5: but you think that Roaring Kitty what he's doing should
Speaker 5: be looked at by regulators.
Speaker 2: So the pushback I get from people on this is, well,
Speaker 2: he's not really doing anything different than Bill Ackman or
Speaker 2: Muddy Waters or Hindenberg. He builds up a position, he
Speaker 2: announces the position, and then it moves in his favor. Right.
Speaker 2: But the way I look at this is that it
Speaker 2: really comes down to intent. You know, when Bill Ackman
Speaker 2: does it, there is an investment thesis behind it. There's
Speaker 2: like a core investment thesis that's based on fundamentals and facts.
Speaker 2: His intent is specifically to manipulate the stock higher. So,
Speaker 2: like I said, I'm not a lawyer, I don't really
Speaker 2: understand securities law. But if if the SEC allowed this
Speaker 2: to happen, just you know, just like from a just
Speaker 2: from a philosophical standpoint, imagine that there were one hundred
Speaker 2: people doing this or a thousand people doing this and
Speaker 2: the market was manipulated in many different ways. Like, that's
Speaker 2: not really a result that you would want to have.
Speaker 3: So could he not just be buying it because he
Speaker 3: likes it?
Speaker 2: I mean, that would if if that would be his
Speaker 2: defense for sure. I mean, and that's that's what he
Speaker 2: said in front of Congress when he was when he
Speaker 2: was zooming in to that congressional hearing, he said, I
Speaker 2: like the stock, and that was that was basically his defense,
Speaker 2: you know.
Speaker 3: But I mean, where's everybody else who's following you know,
Speaker 3: are they doing their institutional research or fundamental research? Because
Speaker 3: some would say the institutional guys got involved because they
Speaker 3: were like wanted a piece of the action. Now were
Speaker 3: they doing their fundamental research when they were potentially chasing it?
Speaker 2: Absolutely not.
Speaker 3: So it's like, where do you go with this?
Speaker 2: Yeah, I mean good for game stop obviously, but ninety
Speaker 2: percent of the people who follow him will end up
Speaker 2: losing money.
Speaker 5: So I want to spend a couple of minutes on
Speaker 5: the book. Oh yeah, you have a couple of minutes left.
Speaker 2: Yep.
Speaker 5: If you joined this last time or heard last time,
Speaker 5: you know that Jared and his wife have separate bank accounts.
Speaker 5: They keep everything separated. It's the key too happy marriage.
Speaker 5: Never lend money to family members. These are just a
Speaker 5: couple of the lessons in the book which both Carol
Speaker 5: and I loved. I don't think we talked about the
Speaker 5: awesome portfolio last and you were on, yeah, talk about
Speaker 5: what this is. It's this portfolio construction that you say
Speaker 5: is kind of bulletproof.
Speaker 2: So the conventional wisdom for retail investors is that you
Speaker 2: put all your money in the S and P five
Speaker 2: hundred and you ride out the volatility and at the
Speaker 2: end you have a big pile of money. Right. The
Speaker 2: problem is when you invest in an index, you get
Speaker 2: the returns of the index, which are very very good,
Speaker 2: but you also get the volatility of the index. Yea
Speaker 2: SMP five hundred is very volatile, Like in an average year,
Speaker 2: it'll move fifteen to twenty percent up and down. So
Speaker 2: what that causes you over a forty year investing career
Speaker 2: is a lot of ups and down. Sometimes a lot
Speaker 2: of heartache. And you you know, sometime in that forty
Speaker 2: year investing career you will have a bear market that
Speaker 2: exceeds fifty percent or more. Right, you will see your
Speaker 2: life savings cut in half. Now, what the Awesome Portfolio
Speaker 2: does is it takes five asset classes stocks, bonds, gold, cash,
Speaker 2: and real estate and it splits them into twenty percent portions.
Speaker 2: This portfolio returns about a percent less than the S
Speaker 2: and P five hundred with almost half the volatility.
Speaker 3: Well that's a big change, and the draw.
Speaker 2: Downs are much lower. So the worst draw down in
Speaker 2: the history of the Awesome Portfolio has been twelve percent. Okay,
Speaker 2: in two thousand and eight, the S and P five
Speaker 2: hundred was down thirty eight percent. The Awesome Portfolio is
Speaker 2: down nine percent. So if you say the worst year
Speaker 2: I can possibly have in my investing career is down
Speaker 2: twelve percent, that is the kind of volatility you can
Speaker 2: ride out.
Speaker 3: So is that actuality or just back testing you just
Speaker 3: got about?
Speaker 2: No, that's historical. That's that's historical.
Speaker 5: There's a whole chapter in the book about the Austin Portfolio.
Speaker 3: This is why we wanted to bring him back. It's
Speaker 3: just such fun to get his perspective. Jared, thank you
Speaker 3: so much.
Speaker 2: Thank you very much.
Speaker 3: Jared Dillion, editor and publisher of the Market newsletter at
Speaker 3: The Daily Dirt napp his book No Worries, How to
Speaker 3: Live a stress Free Financial life, Separate bank Accounts to
Speaker 3: husband and.
Speaker 5: Wife, the key to a happy marriage. According to Jared,
Speaker 5: this is Bloomberg.
Speaker 1: This is Bloomberg Business Week inside from the reporters and
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Speaker 1: global business, finance and tech news as it happens. Bloomberg
Speaker 1: Business Week with Carol Messer and Tim Stenebeck on Bloomberg Radio.
Speaker 5: It is Bloomberg Business Week. Carol, I don't know if
Speaker 5: you saw this. Maybe you had time to read it
Speaker 5: on your two hour trip from JFK home yesterday.
Speaker 3: I could have knitted everybody a sweater in that time.
Speaker 5: New York Magazine's curbed was out with the piece. Last
Speaker 5: week had a right headline, the private helicopter to the
Speaker 5: private jet is the new flying private. So it talks
Speaker 5: about the increasing number of folks who are taking a
Speaker 5: car to the West thirtieth Street helipad here in Manhattan.
Speaker 5: That chopper is warmed up. It's waiting for them. They
Speaker 5: make a five to seven minute helicopter ride to Titoborow
Speaker 5: to catch their private jet. They're cruising over the gridlock
Speaker 5: below them. I think you were in that gridlock last night.
Speaker 5: It definitely was saving twenty minutes to an hour depending
Speaker 5: on traffic.
Speaker 3: I don't know. It sounds pretty magical, Tim.
Speaker 5: Yeah, it sounds a lot better than the two hours
Speaker 5: you spent getting from JFK.
Speaker 2: Home last night.
Speaker 3: Yeah, a lot better.
Speaker 5: For check on private aviation though, which we should note
Speaker 5: is off its pandemic peaks. We welcome back Jeanine Janirelli,
Speaker 5: founder and president of par Avion. It's a private aircraft
Speaker 5: broker that specializes in pre owned business jets. Jeanine joins
Speaker 5: us from the Saratoga Racecourse in Saratoga Springs, New York,
Speaker 5: where racing is already under away ahead of Saturdays at
Speaker 5: Belmont Steaks. Jeanine, how are you great?
Speaker 4: How are you all doing today?
Speaker 5: Yeah, we're doing well. Welcome back to the program. We'll
Speaker 5: get to Belmont in a minute. But give us a
Speaker 5: big picture of how your business is going, given that
Speaker 5: we are off of pandemic highs. When it comes to
Speaker 5: private aviation.
Speaker 4: Well, it's a little bit of the up and down.
Speaker 6: I hate to use that sort of analogy, but we
Speaker 6: are in an election year. An election year takes its
Speaker 6: toll on aircraft sales. The closer we get to that election,
Speaker 6: the more the market starts to slow down. There's a
Speaker 6: lot of concern as to what the rules are going
Speaker 6: to be with the new party that comes in.
Speaker 4: So I didn't necessarily mean a party. Yeah, sorry, political party.
Speaker 5: Talk a little bit about that. Does this happen every
Speaker 5: four years? Does it happen when there's a surprise? What's
Speaker 5: the track record here?
Speaker 4: It does?
Speaker 6: The business jet market does not like surprises, It does
Speaker 6: not like instability, It doesn't like anything to upset the
Speaker 6: apple cart. And it does happen every four years regardless.
Speaker 6: And you know, I wish I could tell you why.
Speaker 4: It's just that I can tell you that the people
Speaker 4: in the trade plan for it.
Speaker 5: So how is it manifesting in your business right now?
Speaker 6: Oh, it's much slower than it was two years ago.
Speaker 6: And even in comparison to last year, I can see
Speaker 6: that the buyers are being much more cautious before they
Speaker 6: actually open their pursus. They're spending a great deal of
Speaker 6: time reviewing the asset, and sometimes they get really close
Speaker 6: and then they back themselves up and we just have
Speaker 6: to wait them out.
Speaker 3: I don't understand because we know fairly regularly talk about
Speaker 3: the wealthier getting wealthy, and I'm not just talking about billionaires,
Speaker 3: but I'm just talking about in general, and so I'm
Speaker 3: trying to understand. Remind us who Janine in general is
Speaker 3: your typical buyer.
Speaker 6: Now, for me, the classic buyer is an entrepreneur, self made.
Speaker 6: They built their business, they sold their business. They're independently wealthy.
Speaker 4: That's the thing. Both of my personal business a portion
Speaker 4: of them that is also corporate.
Speaker 6: Corporate's perhaps a bit more consistent because they look to
Speaker 6: turn their aircraft over every five to seven years because
Speaker 6: they want to have warranty coverage for the aircraft. They
Speaker 6: don't want any surprises either, But that comes more from
Speaker 6: the operational side.
Speaker 3: And is it American buyers or global buyers? Like I'd
Speaker 3: love any kind of geographic color you can give us.
Speaker 6: Well, this is I would say, more specific to the
Speaker 6: United States. I mean, we are the largest marketplace in
Speaker 6: the world for business aircraft, and the drivers for why
Speaker 6: people acquire aircraft here are a little bit different than
Speaker 6: the rest of the world. We also are one of
Speaker 6: the most friendly environment for operating aircraft privately, are the
Speaker 6: US's Yes, absolutely, And one of the big reasons for
Speaker 6: that is the airspace, the available airspace, the ability to
Speaker 6: fly direct from point to point.
Speaker 4: The airspace is so tightly congested.
Speaker 6: Let's just take Europe for example, or regulated that you
Speaker 6: have to get a slot for arrivals and departures, and
Speaker 6: most of the airport, particularly at very busy times of
Speaker 6: the year, it's a deterrent to operating your aircraft freely,
Speaker 6: and we are the essence of freedom here in the
Speaker 6: United States.
Speaker 3: Who's been selling aircraft, who's been looking to offload?
Speaker 6: Well, I wouldn't use the word offload, because I don't
Speaker 6: see people dumping their aircraft. What you're seeing as a transition.
Speaker 6: People who tested the market in the pandemic, who bought
Speaker 6: small jets, are actually looking to upgrade. So I have
Speaker 6: a number of inquirries based on the airplanes that I
Speaker 6: have that are going from small jets to medium to
Speaker 6: large cabin.
Speaker 5: Well, in terms of you talked about the typical client,
Speaker 5: you have the entrepreneur person who sells their business is
Speaker 5: self made, is independently wealthy. What do they then go
Speaker 5: do with that aircraft? The question that I have is
Speaker 5: are they one hundred percent flying on it themselves or
Speaker 5: are they leasing it out or chartering it to other
Speaker 5: folks when they're not using it?
Speaker 6: So I think the perspective that most of the buyers
Speaker 6: today take is what's the easiest way to place the
Speaker 6: aircraft into service and continue that service, And generally that
Speaker 6: would be a management company as opposed to an independent
Speaker 6: flight department. And when you're with the management company, there's
Speaker 6: usually the added benefit of saying, would you like to
Speaker 6: charter the airplane? And I would say that the vast
Speaker 6: majority of people who have aircraft under managed will certainly
Speaker 6: agree to also chartering.
Speaker 5: Are they are they chartering when the management company is
Speaker 5: managing it? Do they handle everything including pilots or do
Speaker 5: you have the same pilots.
Speaker 2: All the time?
Speaker 3: No?
Speaker 6: Everything, Well, that's an arrangement you have to make with
Speaker 6: the management company. But generally, yes, you can specify that
Speaker 6: you would like flight crew stick with your airplane.
Speaker 3: Asking for a friend, asking a friend that's good and served,
Speaker 3: how much of what you're doing? Though it sounds like
Speaker 3: you said individual like entrepreneurs and son and so forth.
Speaker 3: How much work do you do with actually corporations and companies?
Speaker 6: You know, my personal business, it's probably about twenty five
Speaker 6: percent with corporate and I represent a couple of corporations
Speaker 6: at this particular time who will remain nameless in the
Speaker 6: acquisition of aircraft.
Speaker 4: They are actually modifying their fleet.
Speaker 6: They buy new aircraft, but they supplement that uplift with
Speaker 6: the pre owned airplane.
Speaker 5: What's the most popular size aircraft right now yourself?
Speaker 6: Right now, you know, I don't have it, But the
Speaker 6: most popular is the small jet the market. It has
Speaker 6: an appetite for the small airplane six to a passengers.
Speaker 6: I have super midsize and large cabin airplanes, and the
Speaker 6: buyers right at the moment are far and few between.
Speaker 5: Well, okay, give us the price range for a small
Speaker 5: to mid size versus the super heavies.
Speaker 6: So the small you're probably looking at three to eight million,
Speaker 6: maybe a little bit more than new the aircraft, the
Speaker 6: super mid size depending on the age of the airplane,
Speaker 6: anywhere from seven to fifteen, sixteen seventeen million, and then
Speaker 6: the large category. Again, age is a big influencer in
Speaker 6: terms of the price point.
Speaker 4: But let's talk.
Speaker 6: About newer aircraft, newer being fifteen years or newer, and
Speaker 6: we're probably twenty million and up.
Speaker 3: Yeah, But as I say, it's not the initial purchase
Speaker 3: is the epkey. God, I'm just gonna say, I'm just
Speaker 3: gonna it up. Just kip it out there. I'm just saying,
Speaker 3: or some I hear the bell Mot Stakes tell us
Speaker 3: a little bit about the weekend and the amount of
Speaker 3: activity that you're seeing of people, you know, chartering a
Speaker 3: private jet to go up and see the race.
Speaker 6: Well, so I hear, and just like any major sporting event,
Speaker 6: you should see an uptick in the traffic into the
Speaker 6: greater area Albany Saratoga. I went by the Saratoga Airport
Speaker 6: earlier today and they looked busy in the sense of
Speaker 6: people arriving, dropping their passengers and moving on. There weren't
Speaker 6: a whole lot of airport is parked there, but the
Speaker 6: ramp space is pretty limited, and especially because they have
Speaker 6: some construction going on, but the area airports are prepared
Speaker 6: for an influx that you know you'll see one hundred
Speaker 6: percent increase in travel. And the Belmont Stakes Festival kicks
Speaker 6: off today. As you can see from the background and
Speaker 6: the activity.
Speaker 5: You seen any races yet?
Speaker 4: Oh? Yes?
Speaker 5: You want any money yet?
Speaker 4: On ahead for the moment?
Speaker 5: Okay, enough to buy a maybe small?
Speaker 2: Yeah?
Speaker 6: Oh, I can't even buy a cocktail here with what
Speaker 6: I want all right?
Speaker 3: Seize the gray, resilience. Do you have a favorite?
Speaker 2: Uh?
Speaker 6: You know, I have to go with seize the gray
Speaker 6: first of all, on partial grays, that's the color of
Speaker 6: most of the horses that I've owned personally.
Speaker 4: Who doesn't loved Wayne Lucas, I.
Speaker 6: Mean love a legend in the business, and you know,
Speaker 6: a rookie basically jockey, gotta go and seize the gray.
Speaker 3: I'm looking at odds eight to one. We will see
Speaker 3: what happens. Janine Jennarelli joining US founder and president at
Speaker 3: Paravian on site to add the Saratoga Racecourse in Saratoga Springs,
Speaker 3: New York races this weekend. This is Bloomberg