WEBVTT - Daybreak Weekend: Fed Preview, London Tech Week, India Eco Data 0:00:02.440 --> 0:00:07.360 Bloomberg Audio Studios, Podcasts, Radio News. 0:00:08.840 --> 0:00:12.479 Welcome to a special edition of Bloomberg Daybreak Weekend, our 0:00:12.520 --> 0:00:14.760 global look at the top stories in the coming week 0:00:15.280 --> 0:00:18.480 from all of our Daybreak anchors, including Tom Busby. This 0:00:18.560 --> 0:00:22.599 is not Tom Busby, it's Tom Kean McKee out of 0:00:22.640 --> 0:00:24.480 tantrum and said, I'm only going to talk to Tom 0:00:24.560 --> 0:00:28.520 Keen about next week. It's just so so exciting. Michael 0:00:28.560 --> 0:00:32.599 McKee joins now driving all of our economic work here, 0:00:32.680 --> 0:00:34.720 of course off a blowout two hundred and seventy two 0:00:34.800 --> 0:00:39.800 thousand job statistic. Once again, it's morning in America except 0:00:39.800 --> 0:00:42.720 for inflation. Inflation is out there and to drive Daybreak 0:00:42.760 --> 0:00:45.800 forward into next week. Am I right that we have 0:00:45.840 --> 0:00:50.080 an inflation report at eight thirty in a Fed report 0:00:50.159 --> 0:00:51.040 at two pm. 0:00:51.320 --> 0:00:54.360 Yes, the Fed will be getting the inflation numbers just 0:00:54.480 --> 0:00:57.640 before they vote. However, they've probably done most of the math, 0:00:57.760 --> 0:01:02.440 and generally economists are pretty good at forecasting the price indexes, 0:01:02.520 --> 0:01:06.840 so there might be a surprise. But if there's no surprise, 0:01:06.959 --> 0:01:10.200 then not going to change anything in their outlook. They 0:01:10.240 --> 0:01:12.800 will have submitted their views on what they think is 0:01:12.800 --> 0:01:15.160 going to happen going forward, and we'll get the dot 0:01:15.200 --> 0:01:17.000 plot and we'll see what they say. 0:01:17.120 --> 0:01:19.320 Is this a two hour conversation you and I could 0:01:19.319 --> 0:01:21.680 have it? I mean, there's so much going on. Yeah, 0:01:21.800 --> 0:01:24.679 my head's absolutely spinning about this from the jobs report, 0:01:24.720 --> 0:01:26.840 and we can look back at that. We'll touch on 0:01:26.880 --> 0:01:29.200 that in a moment, but let's stay on inflation now. 0:01:29.680 --> 0:01:32.600 I was making a joke with Claudia Sam about the 0:01:32.720 --> 0:01:36.679 lift in cat food prices, which is tangible. Are we 0:01:36.800 --> 0:01:41.920 still seeing the shock in goods prices like Claudius Sam 0:01:42.080 --> 0:01:44.720 saw with Puffy the cat. 0:01:44.840 --> 0:01:47.760 Not the same way food prices and I'm sorry her 0:01:47.800 --> 0:01:49.960 cat food went up, But food prices have been flat 0:01:50.000 --> 0:01:50.640 for the last. 0:01:50.480 --> 0:01:51.080 Couple of months. 0:01:51.080 --> 0:01:53.880 They haven't been rising, when one of the bright spots 0:01:54.080 --> 0:01:58.760 for inflation. Overall goods inflation has gone up a little 0:01:58.800 --> 0:02:02.520 bit in the last two months, but very little. It's 0:02:02.520 --> 0:02:05.440 still services price inflation that is rising, and that's been 0:02:05.920 --> 0:02:09.440 the Fed's worry because labor is such a big part 0:02:09.480 --> 0:02:13.240 of service price costs. Labor went up, and we saw 0:02:13.560 --> 0:02:15.960 an increase in average hourly earnings. 0:02:16.000 --> 0:02:17.680 Well, let's span the globe as they used to do 0:02:17.760 --> 0:02:21.240 on Wide World of Sports. Claudia Sam's got the cats, 0:02:21.400 --> 0:02:24.000 cat food up. I got vet Bill and Kennel Fee, 0:02:24.040 --> 0:02:27.079 and let me tell you. I can tell you service 0:02:27.160 --> 0:02:33.200 sector online is up, and it's not up modest like 0:02:33.280 --> 0:02:37.000 these are real jumps. Let's talk about service sector inflation 0:02:37.120 --> 0:02:39.800 that we're gonna see the same day as the Fed. 0:02:39.919 --> 0:02:44.120 It's still tangible, isn't it. It's not disinflation, right. 0:02:44.440 --> 0:02:49.120 Well, it's disinflation, but it's not deflation. Certainly, it's not flat. 0:02:49.200 --> 0:02:51.919 It's been going up at a slightly slower pace. Give 0:02:51.919 --> 0:02:54.400 me a note. Well, it's been rising about four tenths 0:02:54.400 --> 0:02:57.200 a month, and the Fed wants to see that down 0:02:57.320 --> 0:03:00.959 around two tenths or or lower. The question is how 0:03:00.960 --> 0:03:03.079 fast do they get there? How fast do we see 0:03:03.080 --> 0:03:04.320 this stuff squeeze out? 0:03:04.360 --> 0:03:04.520 Now? 0:03:04.520 --> 0:03:08.280 We had the big rise in average hourly earnings last month, 0:03:08.760 --> 0:03:12.639 and some of that may have been the rise in 0:03:12.680 --> 0:03:19.080 California's minimum wage, which mostly affects service industry workers. So 0:03:20.280 --> 0:03:24.160 you have that service industry inflation still coming through because 0:03:24.160 --> 0:03:27.560 I'm sure restaurants raise their costs to try to recoup 0:03:27.919 --> 0:03:30.680 some of what they had to pay in the additional wages. 0:03:31.440 --> 0:03:34.160 But then it's a one off. Do we then see 0:03:34.240 --> 0:03:39.200 next month that it drops back that's the guess the 0:03:39.240 --> 0:03:40.200 FED has to make. 0:03:40.480 --> 0:03:43.600 Let's go to the FED meeting, and I'm going to 0:03:43.640 --> 0:03:46.840 start with something I believe I've never seen. We had 0:03:46.880 --> 0:03:53.440 an ECB rate cut last week, inflation forecasts up by 0:03:53.440 --> 0:03:57.960 the ECB. I believe I've never seen that. The Fed's 0:03:58.000 --> 0:04:01.680 not going to do that. When they cut, They've got 0:04:01.680 --> 0:04:04.360 to have an inflation forecast coming down, don't. 0:04:04.080 --> 0:04:06.960 They Yes, absolutely, and we get a new forecast from them. 0:04:07.080 --> 0:04:10.040 They'll put out their summary of Economic Projections with the 0:04:10.080 --> 0:04:13.880 dots with the dot plot, and they will have new 0:04:13.920 --> 0:04:18.400 inflation forecasts. Whether they'll change it or not is a question, 0:04:18.480 --> 0:04:20.720 because these are forecasts where we're going to be at 0:04:20.720 --> 0:04:23.039 the end of this year, at the end of next year, 0:04:23.360 --> 0:04:26.600 and they've already forecast that inflation is going to drop 0:04:26.640 --> 0:04:28.840 and drop slowly, but it's going to get there. So 0:04:28.920 --> 0:04:31.400 we may not see a big change in the inflation forecast. 0:04:31.880 --> 0:04:34.080 It's pretty clear now that we will see a change 0:04:34.080 --> 0:04:38.919 in the dot plot because everybody, including City Group, on 0:04:39.040 --> 0:04:42.400 Friday after the Jobs report, priced out their July rate cut. 0:04:42.560 --> 0:04:46.080 So you don't have three rate cuts anymore. You're going 0:04:46.160 --> 0:04:48.880 to have two or one. That's going to be the 0:04:48.920 --> 0:04:51.599 issue for the beneficials submitting their guesses. 0:04:51.720 --> 0:04:56.000 Tom Buzby would be polite on Bloomberg Daybreak, I'm not 0:04:56.040 --> 0:04:58.400 going to be polite. Do you have a question yet 0:04:58.440 --> 0:04:59.040 for the chairman? 0:05:00.279 --> 0:05:04.680 Well, the question that presents itself following what we've seen 0:05:04.800 --> 0:05:09.040 in the last week, and we saw stronger than expected 0:05:09.120 --> 0:05:15.400 ism numbers, stronger than expected hiring, is are you tight enough? 0:05:16.360 --> 0:05:19.080 Does the Fed have enough restraint on the economy to 0:05:19.200 --> 0:05:22.960 bring inflation down? And we'll get a partial answer to 0:05:23.000 --> 0:05:27.120 that from the CPI numbers, But there have been questions 0:05:27.120 --> 0:05:30.080 about whether the Fed is restrictive enough and if we're 0:05:30.080 --> 0:05:33.680 still getting jobs reports like this, one could argue maybe 0:05:33.680 --> 0:05:36.240 they're not. Their argument has been we just haven't waited 0:05:36.279 --> 0:05:36.839 long enough. 0:05:37.200 --> 0:05:41.039 Is our international economics and policy correspondent, Michael. Thank you 0:05:41.120 --> 0:05:44.640 so much, and now we dash to big tech. Of course, 0:05:45.279 --> 0:05:49.760 to Apple, Tom Busby, I'll look at the Worldwide Developers 0:05:49.800 --> 0:05:51.520 Conference in Cooper. 0:05:51.279 --> 0:05:54.919 Tino on Monday. Apple kicks off it's week long Worldwide 0:05:54.920 --> 0:05:57.800 Developers Conference event for twenty twenty four, but this year 0:05:57.839 --> 0:06:01.039 is different. It is all about a for more on 0:06:01.120 --> 0:06:03.720 the event and what to expect. We're joined by Mark German, 0:06:04.040 --> 0:06:08.160 Bloomberg's chief correspondent on Global Technology Now Mark, there may 0:06:08.200 --> 0:06:11.080 be a lot going on at Apple's Worldwide Developers Conference, 0:06:11.080 --> 0:06:13.720 but it looks like it's AI strategy and a rather 0:06:13.920 --> 0:06:17.160 unlikely AI partnership will be the big focus. So what 0:06:17.200 --> 0:06:18.360 do you expect to see. 0:06:18.520 --> 0:06:21.720 It's all going to be about artificial intelligence at Apple 0:06:21.800 --> 0:06:24.920 for the foreseeable future, and at the conference on Monday, 0:06:24.960 --> 0:06:29.440 they're going to introduce new versions of iOS, macOS, Ipedos 0:06:29.440 --> 0:06:32.520 with AI at the very forefront, and the big idea 0:06:32.680 --> 0:06:35.800 is to integrate artificial intelligence in a way that syncs 0:06:35.880 --> 0:06:39.520 with your day to day capabilities in your applications, with 0:06:39.920 --> 0:06:42.640 a strong privacy focus, So you're not going to see 0:06:42.680 --> 0:06:47.159 whizbang features like image generation. Things like open AI and 0:06:47.200 --> 0:06:49.520 Google gem and I have shown and they're really intricate 0:06:49.560 --> 0:06:54.120 demos recently. You're going to see things like summarizing incoming notifications, 0:06:54.560 --> 0:06:58.520 automatically replying to text messages and emails, the ability to 0:06:58.600 --> 0:07:02.400 quickly edit photos using AI. But there's also going to 0:07:02.440 --> 0:07:06.479 be an interesting partnership with OpenAI for an integrated chatbot 0:07:06.640 --> 0:07:10.040 because Apple knows that some consumers want that functionality as well. 0:07:10.120 --> 0:07:13.280 So it's going to be a very broad AI strategy 0:07:13.360 --> 0:07:15.720 here for Apple to set the stage for the next 0:07:15.720 --> 0:07:16.880 three years at the company. 0:07:17.040 --> 0:07:20.200 Now, Apple a little late maybe to the AI boom, 0:07:20.240 --> 0:07:25.360 Microsoft Alpha Bit, even Amazon way ahead. Is this partnership 0:07:25.440 --> 0:07:28.200 with open ai. Do you see it as temporary? How 0:07:28.240 --> 0:07:30.640 soon will Apple have its own AI chatbot? 0:07:30.920 --> 0:07:34.120 Apple certainly is very late to the game here regarding 0:07:34.200 --> 0:07:39.000 generatord AI or these modern sets of artificial intelligence based 0:07:39.000 --> 0:07:42.320 on technology known as a large language model. It's so interesting. 0:07:42.360 --> 0:07:45.120 Apple was ahead of the game for many years with Siri, 0:07:45.360 --> 0:07:47.920 which was introduced at the end of twenty eleven, but 0:07:48.000 --> 0:07:52.000 they got lapped very quickly by Amazon Alexa and Google Assistant, 0:07:52.160 --> 0:07:54.360 and then they got lapped again with the introduction of 0:07:54.400 --> 0:07:58.000 open AI's chat GPT in November of twenty twenty two. 0:07:58.160 --> 0:08:00.400 So it's fair to say they were caught absolutely flat 0:08:00.400 --> 0:08:02.920 put it. They spent the last year and change trying 0:08:02.960 --> 0:08:06.520 to reverse that and integrate as much AI as possible 0:08:06.800 --> 0:08:10.040 through a program known internally as Project gray Matter. Now, 0:08:10.120 --> 0:08:13.720 the OpenAI partnership is interesting because this is specifically for 0:08:13.800 --> 0:08:18.320 a chatbot component and the generation of text messages and 0:08:18.560 --> 0:08:20.880 different things that you can use check GPT for, such 0:08:20.880 --> 0:08:24.680 as writing email. Now. I anticipate this partnership to be 0:08:25.200 --> 0:08:27.280 long term in the sense that it will exist for 0:08:27.320 --> 0:08:29.640 the next few years or so. But in an even 0:08:29.720 --> 0:08:32.760 longer term, maybe five to ten years, you're going to 0:08:32.800 --> 0:08:35.520 see Apple shift to its own chatbot, but it's going 0:08:35.559 --> 0:08:37.520 to take a while for Apple to get there. There 0:08:37.559 --> 0:08:40.800 are still concerns with chatbots and generative AI. There's the 0:08:40.840 --> 0:08:43.800 idea of what's known as a hallucination, which is AI 0:08:44.000 --> 0:08:48.880 and generative AI reporting incorrect information, to taking information from 0:08:48.920 --> 0:08:51.960 the Internet and presenting it in an incorrect way. And 0:08:52.000 --> 0:08:55.200 that's what Apple's trying to avoid, and by using open AI, 0:08:55.400 --> 0:08:58.920 they're pushing the onus on them rather than taking responsibility 0:08:59.520 --> 0:09:01.920 for those incorrect information suggestions. 0:09:02.160 --> 0:09:06.920 Now, aside from those incorrect incorrect information, those hallucinizations, is 0:09:06.960 --> 0:09:10.199 there is there a danger of outsourcing It's AI to 0:09:10.240 --> 0:09:13.160 Open Eye right now? I mean that CEO Sam Altman, 0:09:13.240 --> 0:09:16.120 controversial figure, ousted from the company for a short time 0:09:16.200 --> 0:09:19.560 last year. Reasons not quite clear. Are you getting into 0:09:19.559 --> 0:09:21.080 bed with someone maybe you shouldn't. 0:09:21.280 --> 0:09:24.320 I think the only concern with partnering with open ai 0:09:24.600 --> 0:09:29.240 is actually its corporate structure, right who owns the company? 0:09:29.480 --> 0:09:33.360 How's the company operated. Can that board take out their 0:09:33.400 --> 0:09:35.800 executive team again like they did at the end of 0:09:35.880 --> 0:09:39.559 last year, right? Can that company fall flat on its face? 0:09:39.640 --> 0:09:43.160 Can it fall apart? Does it have the necessary agreements 0:09:43.200 --> 0:09:47.160 in place to keep that chat GPT server infrastructure up 0:09:47.320 --> 0:09:50.320 for the hundreds of millions of Apple customers? So those 0:09:50.360 --> 0:09:53.360 are my real concerns with the Open Ai partnership. Right, 0:09:53.720 --> 0:09:56.640 I'm not concerned with how controversial Sam Altman has become. 0:09:57.080 --> 0:09:59.000 I think that you and I care about it. I 0:09:59.040 --> 0:10:00.760 think a lot of our readers care about it. I 0:10:00.760 --> 0:10:03.160 think Wall Street cares about it, and tech fans care 0:10:03.160 --> 0:10:06.320 about it. But don't forget there's over two billion Apple 0:10:06.360 --> 0:10:09.280 devices in use. Right, I would venture to say that 0:10:09.400 --> 0:10:12.400 ninety nine percent of people who use an iPhone don't 0:10:12.440 --> 0:10:15.200 know or care who Sam Altman is, and they certainly 0:10:15.280 --> 0:10:19.840 don't care about his controversies, his arguments with Scarlett Johansson, 0:10:20.200 --> 0:10:22.560 or any of those issues. But Apple wants is a 0:10:22.559 --> 0:10:25.360 product that functions, and Open AI at this point offers 0:10:25.400 --> 0:10:28.200 the best technology in terms of a chatbot, in terms 0:10:28.240 --> 0:10:31.559 of providing generative AI technology, So that's why they went 0:10:31.600 --> 0:10:35.160 with them. Now, the good news here is that Microsoft 0:10:35.280 --> 0:10:38.120 is a big backer of Open Ai, and obviously Apple 0:10:38.160 --> 0:10:41.120 can trust Microsoft. They've been partners on many different initiatives 0:10:41.320 --> 0:10:43.800 for a number of years. In addition to rivals and 0:10:44.120 --> 0:10:47.000 chat GPT runs on Azure. Do you do have sort 0:10:47.000 --> 0:10:49.599 of that adult in the room perspective there of Microsoft 0:10:49.640 --> 0:10:51.320 to make sure this thing remains up and running. 0:10:51.600 --> 0:10:54.720 So you have these billions of devices, what changes will 0:10:54.720 --> 0:10:58.160 the iPhone user or iPad user expectancy and when will 0:10:58.200 --> 0:11:02.599 they see them? This new leap in AI with Chad GPT, 0:11:02.840 --> 0:11:03.280 So the. 0:11:03.200 --> 0:11:05.079 Big changes you're going to see are going to begin 0:11:05.280 --> 0:11:07.760 rolling out in September, right, that's going to be as 0:11:07.800 --> 0:11:12.559 part of iosaighteen, iPadOS eighteen, and Macros fifteen. And you're 0:11:12.600 --> 0:11:14.480 going to see things like, if you missed a bunch 0:11:14.480 --> 0:11:17.480 of notifications, you'll get a summary of everything you missed. 0:11:17.800 --> 0:11:20.559 If you record a voice memo, you'll get an instant transcription. 0:11:21.040 --> 0:11:23.360 If you're using the notes app to record a meeting, 0:11:23.679 --> 0:11:25.800 you'll get a summary of what happened in that meeting. 0:11:26.440 --> 0:11:29.040 If you want to reply to your text message or emails, 0:11:29.120 --> 0:11:32.480 you'll get suggested full length applies that are based on 0:11:32.720 --> 0:11:35.800 what the incoming email or text message was. If you 0:11:35.800 --> 0:11:38.280 get a bunch of emails coming in. You'll get Gmail 0:11:38.520 --> 0:11:41.560 AI like classification, putting your emails in folders for you 0:11:41.920 --> 0:11:45.600 based on if something's important, work related, personal, or maybe 0:11:45.600 --> 0:11:49.360 it's spam right, you'll get a higher level of email classification. 0:11:49.559 --> 0:11:52.280 So there's a lot of AI coming in a deeply 0:11:52.320 --> 0:11:55.760 integrated fashion across all of Apples apps. Not only a 0:11:55.760 --> 0:11:58.320 partnership with open Ai to power some of this, but 0:11:58.400 --> 0:12:01.200 it's an in house on device large language model from 0:12:01.240 --> 0:12:03.920 Apple as well as an in house large language model 0:12:03.960 --> 0:12:06.800 that runs on Apple Cloud servers. So a ton of 0:12:06.840 --> 0:12:10.680 AI based functionality coming here. This is AI everywhere for Apple. 0:12:11.280 --> 0:12:13.680 It's code named Project gray Matter. That's the part of 0:12:13.679 --> 0:12:16.440 a brain that there's a lot of the processing. So 0:12:16.640 --> 0:12:18.360 this is going to be a very big initiative for 0:12:18.400 --> 0:12:18.880 the company. 0:12:19.160 --> 0:12:21.599 Well, a lot to look forward to at Apple's Worldwide 0:12:21.679 --> 0:12:24.400 Developers Conference. It kicks off on Monday, and our thanks 0:12:24.440 --> 0:12:29.000 to Mark German, Bloomberg chief correspondent on global technology, coming 0:12:29.040 --> 0:12:31.160 up on Bloomberg day Break weekend to look ahead to 0:12:31.360 --> 0:12:35.439 London Tech Week. I'm Tom Busby and this is Bloomberg. 0:12:45.080 --> 0:12:47.400 This is Bloomberg day Break Weekend, our global look ahead 0:12:47.440 --> 0:12:49.680 at the top stories for investors in the coming week. 0:12:49.960 --> 0:12:52.720 I'm Tom Busby in New York. Up later in our 0:12:52.760 --> 0:12:55.760 program to look ahead to India's inflation and trade data 0:12:55.840 --> 0:12:59.880 following its faithful elections. First, the tech sector is booming, 0:13:00.080 --> 0:13:04.280 fueling all time highs on Wall Street thanks to artificial intelligence. 0:13:04.320 --> 0:13:07.160 Giants like Nvidia and the rise of AI will be 0:13:07.240 --> 0:13:10.520 front and center at the upcoming London Tech Week conference, 0:13:10.880 --> 0:13:13.720 bringing together industry leaders from all over the world. And 0:13:13.760 --> 0:13:16.160 for more, Let's go to London and bring in Bloomberg 0:13:16.200 --> 0:13:19.000 Daybreak eurobanker Caroline hepgar Tom. 0:13:19.040 --> 0:13:23.640 As the world contemplates the tech sectors phenomenal growth and transformation, 0:13:24.080 --> 0:13:27.480 many will be asking questions about the future. Are the 0:13:27.520 --> 0:13:32.359 gains sustainable, is the progress ethical? And perhaps more crucially, 0:13:32.679 --> 0:13:37.160 what comes next? Not everyone is convinced. Recently, economics professor 0:13:37.160 --> 0:13:41.200 and Nobel laureate Paul Romer told Bloomberg that confidence in 0:13:41.360 --> 0:13:46.560 artificial intelligence risks repeating the mistakes of the crypto bubble 0:13:46.800 --> 0:13:50.520 of only two years ago. A tech sector bubble popping 0:13:50.880 --> 0:13:53.640 moment is certainly a fear shared by others in the industry. 0:13:53.920 --> 0:13:57.760 Some investors are wary that AI in particular has been overhyped, 0:13:58.040 --> 0:14:03.120 and regulators are fearful of abuse of the technology concerns 0:14:03.160 --> 0:14:06.200 about the future aside, though, tech is also a sector 0:14:06.240 --> 0:14:10.520 that presents enormous opportunities right now for market players who 0:14:10.559 --> 0:14:13.360 are willing to take on risk. It's one of the 0:14:13.360 --> 0:14:16.560 reasons that Apollo Asset Management is so keen to do 0:14:16.720 --> 0:14:20.120 even more deals in the space. After an eleven billion 0:14:20.160 --> 0:14:24.960 dollar collaboration with Intel, the firms co president Scott Kleinman 0:14:25.200 --> 0:14:29.520 told Bloomberg to expect more ventures like it in the future. 0:14:29.880 --> 0:14:31.400 I think you're going to see more and more of 0:14:31.400 --> 0:14:35.920 this coming because absolutely more from a follow but in 0:14:35.960 --> 0:14:39.200 general just the need for this type of capital is insatiable, 0:14:39.200 --> 0:14:39.920 which really, I mean. 0:14:39.800 --> 0:14:41.560 We saw on the earnings report right all these tech 0:14:41.600 --> 0:14:44.320 giants having an insane amount of capex to try to 0:14:44.320 --> 0:14:45.560 get their AI capacity up. 0:14:45.560 --> 0:14:46.920 Intel obviously is one of them. 0:14:47.160 --> 0:14:49.600 They did, though, say that their manufacturing won't be profitable 0:14:49.720 --> 0:14:52.400 until twenty twenty seven, So how much of this also 0:14:52.480 --> 0:14:56.400 is not just apollow backing AI, but apollow backing Intel 0:14:56.440 --> 0:14:57.320 for the long term. 0:14:57.360 --> 0:15:02.400 Absolutely, this is all about partner select structuring. Every situation 0:15:02.480 --> 0:15:04.560 is going to be different. That's the beauty of private capital. 0:15:04.600 --> 0:15:07.400 It doesn't have to fit one single box. You can 0:15:07.440 --> 0:15:09.840 really be creative to meet the needs of the project, 0:15:09.920 --> 0:15:13.080 the needs of the counterparty. And this is just a 0:15:13.120 --> 0:15:15.720 great example of how you're going to see more and 0:15:15.760 --> 0:15:16.040 more of this. 0:15:16.360 --> 0:15:17.720 If you're going to see more of it, I mean, 0:15:17.720 --> 0:15:19.560 does Intel need more They're trying to take a crack 0:15:19.600 --> 0:15:21.680 at video that is no easy feed, right. 0:15:21.720 --> 0:15:23.880 Well, I think Intel's announced over one hundred and fifty 0:15:23.880 --> 0:15:27.120 billion dollars a project, So that's just one of I 0:15:27.160 --> 0:15:30.880 think many companies across lots of different industries that really 0:15:31.000 --> 0:15:31.960 need this type of capital. 0:15:32.000 --> 0:15:33.760 We're talking to other companies to besides Intel for this 0:15:33.800 --> 0:15:34.200 type of thing. 0:15:34.280 --> 0:15:37.120 Well, no comment, but you can probably assume, well is 0:15:37.120 --> 0:15:37.640 the last. 0:15:37.440 --> 0:15:39.040 Thing on this, Scott, because I mean, we are here 0:15:39.080 --> 0:15:41.240 in Europe, this is a europe deal. It's a plant 0:15:41.480 --> 0:15:45.160 in Ireland and Europe has been behind on manufacturing. 0:15:45.200 --> 0:15:47.200 Is there some way that this is almost. 0:15:47.120 --> 0:15:49.840 A test tube, that's a test trial and if this works, 0:15:49.880 --> 0:15:51.200 maybe you do more in Europe like this? 0:15:51.560 --> 0:15:53.840 Well, I think just zooming out a little bit. I 0:15:53.880 --> 0:15:56.240 do think you touch on an important point, which is 0:15:57.120 --> 0:15:59.520 if you compare the growth rates in hero versus the 0:15:59.520 --> 0:16:02.320 growth rates in the US, obviously, it's undeniable. 0:16:02.360 --> 0:16:02.960 What's happening. 0:16:03.440 --> 0:16:07.200 A big part of that is companies access to capital. 0:16:07.600 --> 0:16:10.120 Right in the US, in addition to the banking system, 0:16:10.160 --> 0:16:13.760 you have a very robust capital markets, a securitization market, 0:16:13.960 --> 0:16:16.920 a very deep private capital market. In Europe, all of 0:16:16.960 --> 0:16:19.640 those things either don't exist or are very very small, 0:16:19.760 --> 0:16:23.000 very fragmented, very nascent, And I think you need to 0:16:23.000 --> 0:16:25.360 see more and more of this and you will start 0:16:25.360 --> 0:16:28.360 to see private capital play a bigger role here in Europe. 0:16:28.880 --> 0:16:30.960 Yeah, it's a tougher environment though, because there does feel 0:16:31.000 --> 0:16:32.080 to be more regulation here. 0:16:32.120 --> 0:16:33.920 So how does that impact your global. 0:16:33.640 --> 0:16:36.920 Allocation That there's opportunities here, but they're a little bit 0:16:36.920 --> 0:16:37.720 harder to execute. 0:16:37.840 --> 0:16:40.760 Well, it just makes it more complicated. But you're seeing it. 0:16:41.080 --> 0:16:45.600 I think European leaders are starting to recognize that Europe 0:16:45.680 --> 0:16:49.240 is choked for capital, that that is limiting the amount 0:16:49.280 --> 0:16:51.760 of growth that Europe is falling behind, and it. 0:16:51.760 --> 0:16:53.080 Needs this type of capital. 0:16:53.120 --> 0:16:55.960 It needs to encourage private capital, it needs to encourage 0:16:56.000 --> 0:16:57.760 securitization in order. 0:16:57.600 --> 0:16:58.400 To make that happen. 0:16:58.760 --> 0:17:00.880 And you know, I know you're been talking about it 0:17:00.920 --> 0:17:03.080 for a while, but you know, hopefully this is a 0:17:03.080 --> 0:17:04.760 bit of the wake up call it needs to get going. 0:17:04.880 --> 0:17:07.440 There's also a rate divergent story happening in the first 0:17:07.440 --> 0:17:09.679 cut of this cycle from the ECB. Does that make 0:17:09.680 --> 0:17:12.160 a difference to it all that maybe there's easier policy here. 0:17:13.359 --> 0:17:16.520 No, I think that's more indicative of the need of 0:17:16.560 --> 0:17:20.120 the economy needs to get boosted by i'd say artificial 0:17:20.160 --> 0:17:22.920 lowering of rates, as opposed to the US, where we've 0:17:22.960 --> 0:17:25.479 been saying for some time the economy is so strong 0:17:25.800 --> 0:17:27.719 rate cuts probably don't make sense yet, right. 0:17:27.800 --> 0:17:29.320 Do you think that there's some people in the US 0:17:29.359 --> 0:17:31.440 then that just have been doing the extend and pretend 0:17:31.800 --> 0:17:34.040 that they bought deals at high valuations and have just 0:17:34.040 --> 0:17:36.280 been hoping for a rate cut. So what happens if 0:17:36.320 --> 0:17:38.280 we don't get one this year and maybe only a 0:17:38.280 --> 0:17:38.960 few next year? 0:17:39.520 --> 0:17:41.040 Oh? I think that's absolutely right. 0:17:41.200 --> 0:17:44.600 I think you're going to see a lot of gps 0:17:44.640 --> 0:17:47.560 and LPs coming to the recognition that it's going to 0:17:47.560 --> 0:17:49.520 be a pretty dry spell for the next few years. 0:17:49.760 --> 0:17:53.920 Visa VIV the old portfolio of private equity companies. 0:17:53.920 --> 0:17:57.320 It's going to take longer to monetize valuation gap between 0:17:57.359 --> 0:18:00.479 where folks loaded up on deals versus where where the 0:18:00.520 --> 0:18:03.440 market is today is just there's a big gap and 0:18:04.080 --> 0:18:06.840 it's going to be I think a little bit tougher 0:18:07.080 --> 0:18:10.280 for private equity firms to see the type of returns 0:18:10.280 --> 0:18:12.040 that they were looking for versus years past. 0:18:12.080 --> 0:18:14.679 What does that actually look like or what causes that 0:18:14.760 --> 0:18:16.199 dam to break? And then what does it look like 0:18:16.240 --> 0:18:16.840 when it does. 0:18:17.240 --> 0:18:19.119 Yeah, I don't know that it's so much a dam. 0:18:19.520 --> 0:18:22.480 I think the reality is private equity loaded up at 0:18:22.520 --> 0:18:23.000 the top. 0:18:22.840 --> 0:18:25.400 Of the market using very inexpensive debt. 0:18:25.800 --> 0:18:29.840 Valuation environment has fundamentally changed, and as a result, private 0:18:29.840 --> 0:18:32.280 equity sponsors are just going to have to hold companies longer, 0:18:32.359 --> 0:18:35.480 have to grow into those capital structures, are going to 0:18:35.480 --> 0:18:38.400 need to take on equity to get some refinancings done, 0:18:38.640 --> 0:18:41.959 and all that means it's just math that returns are 0:18:41.960 --> 0:18:43.280 going to be lower over the next few years. 0:18:43.359 --> 0:18:45.639 Well, I'm sure LP's investors who hear the idea that 0:18:45.680 --> 0:18:47.320 they need to hold on for companies longer are not 0:18:47.359 --> 0:18:49.280 going to be happy with that. They've been clamoring to 0:18:49.280 --> 0:18:51.760 get their cash back. So how do they do both 0:18:51.760 --> 0:18:52.520 at the same time. 0:18:53.640 --> 0:18:56.240 They generally don't. They generally don't. 0:18:56.880 --> 0:18:59.200 I think you're going to see sponsors looking for creative 0:18:59.200 --> 0:19:03.600 ways to return and capital, whether that's through structured equity 0:19:03.640 --> 0:19:07.560 investments or other things into these portfolio companies. But eventually 0:19:07.640 --> 0:19:10.040 sponsors are just going to have to accept the valuation 0:19:10.200 --> 0:19:11.480 environment is lower. 0:19:11.359 --> 0:19:12.560 And start selling companies. 0:19:12.680 --> 0:19:14.280 So you're getting ready to buy some deals so you 0:19:14.280 --> 0:19:16.280 get absolutely absolutely. 0:19:15.720 --> 0:19:16.919 Are you hiring to match that? 0:19:17.720 --> 0:19:19.600 No, we have a pretty robust We have you know, 0:19:19.640 --> 0:19:22.679 several hundred people already here in Europe and feel like 0:19:22.720 --> 0:19:24.040 we have a good footprint down. 0:19:24.119 --> 0:19:25.879 Okay, so you're ready, You're ready for the deals of 0:19:25.880 --> 0:19:28.280 what they come. Absolutely, Look what kind of valuation. 0:19:27.920 --> 0:19:30.080 Discounts do you think we're talking? How hefty could they get? 0:19:30.280 --> 0:19:32.800 Well, I don't think it's so much discounts as it is. 0:19:32.880 --> 0:19:36.240 The current environment is just you know, repriced. When deals 0:19:36.240 --> 0:19:38.639 are purchased at a zero percent rate, that implied a 0:19:38.720 --> 0:19:43.119 valuation environment of x at a five percent rate, you know, 0:19:43.240 --> 0:19:45.800 rich free rate. You know that valuation environment is lower. 0:19:45.840 --> 0:19:49.639 And whether marks reflect that or not tbd. But the 0:19:49.720 --> 0:19:51.000 reality is it's coming. 0:19:51.359 --> 0:19:55.040 That was Apollo Asset Management's co president Scott Kleinman speaking 0:19:55.080 --> 0:19:58.840 to Boombak's Danny Berger at the Super Return International Conference 0:19:58.880 --> 0:20:02.000 in Berlin. Well, the future of tech is just one 0:20:02.040 --> 0:20:05.600 of the many issues that will be discussed at London 0:20:05.680 --> 0:20:08.760 Tech Week in the next few days, and I've been 0:20:08.840 --> 0:20:13.440 looking ahead to the conference with Bloomberg's EMEA technology reporter 0:20:13.840 --> 0:20:14.800 Amy Thompson. 0:20:15.400 --> 0:20:17.240 If you look at the lineup so far this year, 0:20:17.680 --> 0:20:20.959