WEBVTT - Ariel Chairman & Co-CEO John Rogers Talks Small Value Companies

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio News.

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<v Speaker 2>That's pretty amazing how quickly and how dramatically sentiment shifted.

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<v Speaker 1>Romaine.

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<v Speaker 2>Yesterday we were talking about the buy everything rally, and now,

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<v Speaker 2>as you say at the top of the show, everything

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<v Speaker 2>that has a risk profile is being sold right now, a.

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<v Speaker 1>Bit of a sell everything rally. In fact, we're hitting

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<v Speaker 1>fresh session lows as we speak. And I just want

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<v Speaker 1>to pin at Katie. I mean, we talk about the

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<v Speaker 1>superlatives in this market for most of the major indices.

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<v Speaker 1>We're talking about the biggest drop one day drop since

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<v Speaker 1>well April, yeah, which of course is right around the

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<v Speaker 1>Liberation Day.

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<v Speaker 3>O juitah.

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<v Speaker 1>That sort of bubbled up and then it just seemed

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<v Speaker 1>like the last few months it just kind of people

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<v Speaker 1>forgot about tariffs, or they say we're comfortable with where

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<v Speaker 1>the tariffs were, until we got a truth social post

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<v Speaker 1>earlier this morning.

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<v Speaker 3>That's the thing.

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<v Speaker 2>The noise had definitely been turned down when it came

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<v Speaker 2>to the tariff conversation. Now, of course coming back in

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<v Speaker 2>a big way. You have the truth social post from

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<v Speaker 2>President Trump there right now basically saying that he's not

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<v Speaker 2>even sure if you there's a reason to meet with

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<v Speaker 2>President g in two weeks, and a lot of hopes

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<v Speaker 2>had been pinned to that conversation.

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<v Speaker 1>Yeah, and in fairness to the President, I mean, as

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<v Speaker 1>you know, he does fire off these missives kind of

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<v Speaker 1>on a whim. But we should point out that China

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<v Speaker 1>has actually taken a lot of measures over the last

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<v Speaker 1>few days. I mean, in fact the last few hours,

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<v Speaker 1>including more restrictions on the export of rare earth, potential investigation,

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<v Speaker 1>anti trust investigation into Qualcomm, and.

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<v Speaker 3>A couple other things that I'm forgetting.

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<v Speaker 1>So there's been some concern here. The China itself has

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<v Speaker 1>kind of ratcheted up the pressure, and maybe that's why

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<v Speaker 1>Trump felt the need to do it. You know, I

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<v Speaker 1>had his chance to sit down with John Rogers.

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<v Speaker 2>I heard about that.

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<v Speaker 1>Yeah, he runs an era, co founded Aerial Investments, and

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<v Speaker 1>I actually had a chance to talk to him about

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<v Speaker 1>a wide range of things, including his thoughts here on

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<v Speaker 1>the terror picture.

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<v Speaker 3>Take a listen as to what he had to say.

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<v Speaker 4>We're still finding ideas in small value space.

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<v Speaker 3>You know, they really have been ignored.

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<v Speaker 4>They're kind of the ugly ducklings when you compare it

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<v Speaker 4>to Nvidia and Apple and all these jobs and exciting

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<v Speaker 4>growth stories.

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<v Speaker 3>You know, the little mundane.

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<v Speaker 4>Businesses that we've invested in for forty two years just

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<v Speaker 4>seem particularly orphaned these days. So we're seeing great ideas

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<v Speaker 4>and excited to be doing the research and think there's

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<v Speaker 4>real opportunity for small value.

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<v Speaker 1>Do you see a broader future for investment in that

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<v Speaker 1>sort of entertainment space? And I guess it's more given

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<v Speaker 1>what the sphere in MSU do. It's just a little

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<v Speaker 1>bit more of a hybrid entertainment space. But I am

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<v Speaker 1>curious as to what additional value you find there.

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<v Speaker 3>Well, everywhere we.

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<v Speaker 4>Go, we talk to as many experts as we can

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<v Speaker 4>as part of our regular research and due diligence, and

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<v Speaker 4>everyone is saying, you know, post COVID, it's really is

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<v Speaker 4>sticking that the next generation of citizens here, particularly in America,

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<v Speaker 4>love experiences.

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<v Speaker 3>They want to go.

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<v Speaker 4>Out and be together to watch a ballgame, watch a movie,

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<v Speaker 4>go to a concert, go to an outsdoor stadium to

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<v Speaker 4>see music. It's something that is really I think here

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<v Speaker 4>to stay. The moment mentum is continuing to hold, and

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<v Speaker 4>so places like the sphere that has this you know,

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<v Speaker 4>magical IP people want to come and experience it together.

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<v Speaker 4>And I think it's really special. I think the Wizard

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<v Speaker 4>of Oz is just scratching the surface. It's absolutely amazing

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<v Speaker 4>and exciting to go to. But there will be other exciting,

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<v Speaker 4>amazing things. Everyone speculates, well maybe one day, you know,

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<v Speaker 4>it could be Star Wars, maybe it could be Harry Potter.

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<v Speaker 3>You never know what could be next. But those are

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<v Speaker 3>the kind of things.

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<v Speaker 4>That people want to come and appreciate in a live audience.

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<v Speaker 1>You're no stranger to investing in the entertainment space, and

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<v Speaker 1>at least prior to the tie up with Paramount sky Dance,

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<v Speaker 1>you were one of the largest shareholders in Paramount. Now

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<v Speaker 1>that that deal is done, now that David Ellison has

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<v Speaker 1>laid out his vision for what he wants to do

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<v Speaker 1>with that company, I am curious as to whether you

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<v Speaker 1>think that it can be not just profitable, but also

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<v Speaker 1>a growth story.

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<v Speaker 4>Again, well, that's still an open question. You know, it's

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<v Speaker 4>been a torture experience. I still think for sure there's

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<v Speaker 4>a lot of value there. You know, Paramount Studio is valuable,

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<v Speaker 4>CBS is valuable, they're you know, still number one year

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<v Speaker 4>after year with their content. You look at all the

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<v Speaker 4>different things, and of course Paramount Plus and Pluto. They

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<v Speaker 4>have these extraordinary assets, and so the stock I think

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<v Speaker 4>is still you know, significantly undervalued. Now whether they can

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<v Speaker 4>get the growth they hope To your question, that's a

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<v Speaker 4>that's still an open question because you're, you know, you're

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<v Speaker 4>competing with Netflix, You're competing with all the big guys,

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<v Speaker 4>Apple and Amazon, et cetera. And whether you can grow

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<v Speaker 4>in that environment is something that's really still an open question.

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<v Speaker 4>I think mister Ellison has the right idea of you know,

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<v Speaker 4>building scale, you know, building ip, making these acquisitions that

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<v Speaker 4>can really add value and hopefully potentially add significant growth

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<v Speaker 4>from revenue and profitability.

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<v Speaker 1>To that point on scale, does a deal like one

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<v Speaker 1>for Warner Brothers Discovery, should that actually come to fruition?

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<v Speaker 1>Does that se smart to you in terms of the

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<v Speaker 1>cost and what it would actually bring to paramount?

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<v Speaker 4>Well, I've been reading a lawful a lot about it

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<v Speaker 4>and talking again to as many experts as possible. I

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<v Speaker 4>think that acquisition makes a lot of sense. It brings scale,

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<v Speaker 4>as you suggest, it'll make them one of the major

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<v Speaker 4>players that will be there forever. And at the same time,

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<v Speaker 4>there's huge synergies, you know, huge cost cuts that are available.

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<v Speaker 4>You have two major studios. Maybe you could sell one

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<v Speaker 4>of the studios and the studio a lot and all

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<v Speaker 4>the real estate value that's there. But also just again

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<v Speaker 4>an extraordinary amount of synergies that are there, extraordinary amount

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<v Speaker 4>of cost cutting that's there, and we put it all together,

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<v Speaker 4>I think there's this real potential of immergier like that

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<v Speaker 4>would happen.

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<v Speaker 1>I do just have to ask you just about the

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<v Speaker 1>political climate, because that's sort of driving some of those

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<v Speaker 1>divisions these days. And I know in the past you've

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<v Speaker 1>said that you're still hopeful for America, still hopeful for

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<v Speaker 1>our economy and our markets. But when you look at

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<v Speaker 1>what's going on, particularly in the city where you sit,

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<v Speaker 1>where Aerial sits in Chicago, which has been the subject

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<v Speaker 1>of some of the ire out of the White House,

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<v Speaker 1>what do you make of it?

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<v Speaker 4>I just think it doesn't make any sense at all.

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<v Speaker 4>You know, the city has never been more beautiful, it's

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<v Speaker 4>never been you know, the safety issues are drifting away.

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<v Speaker 3>The violence is going down.

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<v Speaker 4>You know, we've had extraordinary leaders here who've worked to

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<v Speaker 4>build our city back from times where it was somewhat troubled.

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<v Speaker 4>But we know Mayor Johnson's done a great job.

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<v Speaker 3>JB. Pritzker has done a great job. You know.

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<v Speaker 4>Former Secretary of Education Arnie Duncan with his CRED program,

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<v Speaker 4>the Anti Violence Initiative have made a major difference in

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<v Speaker 4>our business community. Our civic committee headed up by Derek Douglass.

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<v Speaker 4>Everyone's come together and we're fully online together. We have

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<v Speaker 4>the same perspective that our city is really on the

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<v Speaker 4>way back.

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<v Speaker 3>Things are great.

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<v Speaker 1>We got additional headlines out of the White House with

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<v Speaker 1>regards to tariffs, potentially more tariffs on China, largely because

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<v Speaker 1>the President says that he doesn't think Jijiping is cooperating

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<v Speaker 1>enough in the negotiations. Being a small and mid cap investor,

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<v Speaker 1>particularly with some names that I would assume would have

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<v Speaker 1>tariff exposure like Mattel, does it give you a little

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<v Speaker 1>bit of concern that we still have not sort of,

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<v Speaker 1>I guess, reached some sort of resolution on where we're

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<v Speaker 1>actually going with these tariffs, what they will be, and

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<v Speaker 1>what we can count on them to be.

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<v Speaker 4>Well, none of us that are work in the Marcus

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<v Speaker 4>day to day like to see We don't like to

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<v Speaker 4>see the volatility. We don't like to see the surprises.

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<v Speaker 4>You know, we're looking for stability, and this is kind

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<v Speaker 4>of a fragile atmosphere with what ever's going on around

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<v Speaker 4>the world all.

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<v Speaker 3>The challenges that we face.

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<v Speaker 4>Having these challenges domestically around the tariffs is something I

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<v Speaker 4>think is really problematic.

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<v Speaker 1>We've also seen a revival in deal making, John that

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<v Speaker 1>we didn't necessarily see definitely coming out of last year,

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<v Speaker 1>and at the start of this year. You are Ariel

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<v Speaker 1>and your funds are investors in names like Carlisle, Lazard

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<v Speaker 1>and a few others. I am curious as to whether

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<v Speaker 1>you think the current uptick that we've seen in deal

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<v Speaker 1>making is actually going to continue and even potentially expand.

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<v Speaker 4>I think it will continue, and I think it will expand.

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<v Speaker 4>As we've had a chance to talk to the management

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<v Speaker 4>teams at both Carlisle and Wizard, do you feel like

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<v Speaker 4>the momentum is building. This regulatory environment is so much

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<v Speaker 4>more friendly or for acquisitions and mergers. I was talking

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<v Speaker 4>to a great a leader yesterday, a big brokerage firm,

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<v Speaker 4>and they were just saying how this is gonna be

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<v Speaker 4>a great time for more and more deals to happen.

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<v Speaker 4>I just can't overemphasize that. When you see the opportunities

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<v Speaker 4>both for companies to make strategic acquisitions that it's not

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<v Speaker 4>going to be questioned by the Justice Department or the

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<v Speaker 4>SEC or the other regulators are out there, the FTC

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<v Speaker 4>and the rest. I think you're gonna see one deal

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<v Speaker 4>after another.

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<v Speaker 1>John Rodgers, the founder and chairman of Aerial Investments, wide

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<v Speaker 1>ranging conversation about his investments in the small and mid

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<v Speaker 1>cap space, the state of the economy, the state of Chicago,

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<v Speaker 1>and the state of those trade tariffs.