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Speaker 2: When you think of what's needed in phones, a lot
Speaker 2: of stuff, including semiconductors, which gets us to our next story.
Speaker 2: Elliott Investment Management investing more than two and a half
Speaker 2: billion dollars in Texas Instruments, pushing the chip maker to
Speaker 2: improve free cash flow, setting the stage for another campaign
Speaker 2: by the influential activist investor. I should point out that
Speaker 2: shares of Texas Instruments, we're up about three and a
Speaker 2: half percent earlier in the session. They're now down just
Speaker 2: a little bit, just to hair down two tenths of
Speaker 2: a percent. So Linn is sticking with us. But we
Speaker 2: want to add to the conversation our own Ian King,
Speaker 2: US semi conductor networ working reporter here at Bloomberg News.
Speaker 2: He's out there in San Francisco, TI, Texas instrument activist
Speaker 2: investor pushing for some change. Talk to us about the
Speaker 2: significance of this move and what might happen to TI
Speaker 2: as a result.
Speaker 3: So this is a little bit of a head scratcher,
Speaker 3: if I'm honest. They normally, you know, they normally go
Speaker 3: after management teams that are seen as being sleepy or
Speaker 3: a little bit unaware. TI has been explicit about what
Speaker 3: it's going to do, it's spending plans, and how it's
Speaker 3: going to deploy cash. What Elliott is doing, which is
Speaker 3: a little bit unusual, is actually challenging a semiconductor company's
Speaker 3: view of the semiconductor market. So this is a bit
Speaker 3: of an unusual move for them, And I have to say,
Speaker 3: this is not a management team that really a lot
Speaker 3: of investors or analysts for that matter, dislike. They're widely
Speaker 3: viewed as being pretty competent.
Speaker 4: And take a step back here and remind everybody Texas Instruments,
Speaker 4: a storied company with a huge that makes semiconductors that
Speaker 4: go into pretty much everything. I was looking at their
Speaker 4: customers on the SPLC function, the supply chain function, on
Speaker 4: the Bloomberg terminal, everybody's their customer. Remind us what TI's
Speaker 4: specialty is.
Speaker 3: Yeah, it's an analog, an embedded chip. So basically we're
Speaker 3: not talking about the most advanced in terms of process technology,
Speaker 3: but we are talking about things like a chip that
Speaker 3: goes behind the button when you press it to switch
Speaker 3: the power on and off, something that moderates power insider device.
Speaker 3: So they are pretty much everywhere, and their pitch is that, like, look,
Speaker 3: over time, everything becomes more and more technology enabled, everything
Speaker 3: gets electronic functions, So our chips have a bigger and
Speaker 3: bigger role into that. And that's been the case. But
Speaker 3: we're going through one of the cycles that the chip
Speaker 3: industry goes through that we've talked about, and that's where
Speaker 3: they are right now. So it's not like they don't
Speaker 3: have cash, but they are prioritizing spending on manufacturing and
Speaker 3: bringing the manufacturing back into this country.
Speaker 2: Way go figure, Ian, They're actually running their business and
Speaker 2: you know, thinking about the future and what they need
Speaker 2: to do. Link come on in on this conversation in
Speaker 2: terms of TI and what they are doing, and you
Speaker 2: know kind of what happens next to you.
Speaker 5: Yeah, I'll just build on what Ian was saying. He
Speaker 5: was referencing this broader, very ambitious plan that Texas Instruments
Speaker 5: has to basically overhaul its business. It's going to bring
Speaker 5: all manufacturing back in house and have virtually no like
Speaker 5: contractors to help make its ship support. That is a
Speaker 5: bet on short term pain for long term gain, and
Speaker 5: that's what they've been saying for in recent months. Ian
Speaker 5: and I were exchanging messages this morning about it, thinking
Speaker 5: they have been telegraphing this squeeze on free cash flow
Speaker 5: for quite some time now, so it is a little
Speaker 5: puzzling that Elliott is coming into it and starting to
Speaker 5: raise concerns after the executive management team has been spending
Speaker 5: a lot of time proactively laying out these concerns themselves
Speaker 5: and saying, but don't worry. At the end of the day,
Speaker 5: free free cash flow per share is still our main focus.
Speaker 6: It's just longer term and not short term.
Speaker 5: The last, you know, the last point that Ian made
Speaker 5: about how we're in this AI cycle to be sure,
Speaker 5: it's not in video, right, It's not Micron, it's not
Speaker 5: one of the big AI super semiconductor stocks, and you
Speaker 5: know that they don't have that going for it.
Speaker 2: So but it's chips that go in like everything that
Speaker 2: go into everything. I'm thinking Monday and like everything has
Speaker 2: an on and off switch here, I don't know So
Speaker 2: that's what I find interesting. I like, it's not like surprise,
Speaker 2: we're doing this right, They've laid it out, so I
Speaker 2: don't know what's next. Are there other investors that are
Speaker 2: going to be like, knock it off? Like how? I
Speaker 2: don't know, how do you see this playing out?
Speaker 3: I mean that there is a theme here which obviously
Speaker 3: Eliot is tapping into, which is this is a company which,
Speaker 3: over the last few years, aside from its strategy for
Speaker 3: which markets is in, has been really heavily focused on
Speaker 3: investor returns. It has I think the second highest dividend
Speaker 3: yield of any chip company out there, and it's spent
Speaker 3: a lot on buybacks. So what's happening here is that
Speaker 3: that pool of cash for buybacks is going away in
Speaker 3: the short term, very very clear. So that's an investor
Speaker 3: class that's perhaps going to be slightly alienated. But you know,
Speaker 3: this is literally the first that we've heard about any
Speaker 3: long term real kind of unhappiness with it. And the
Speaker 3: stock of course, it's lagged a rally that Lynda just
Speaker 3: alluded to, but it's still up.
Speaker 4: And you cover chips, you don't cover activism, And I'm
Speaker 4: wondering if this is something that happens in your world
Speaker 4: quite a bit, or if it's pretty rare to see
Speaker 4: an activist take a stake in a company like this.
Speaker 3: No, it has happened. I mean, you remember what happened
Speaker 3: with Qualcomm and when they were trying to fend off
Speaker 3: the Broadcom takeover and what they were going to do.
Speaker 3: And in general, TI has actually led one trend in
Speaker 3: the chip industry, which is to give dividend to pay
Speaker 3: you know, to use that cash more and more, less
Speaker 3: for R and D and more and more for investor payouts.
Speaker 3: And that's become a thing over the last decade that
Speaker 3: chip companies never did, but they really do now and
Speaker 3: they have to do it. TI has been a leader
Speaker 3: in that, if anything, All right, So.
Speaker 2: What do we watch out for Lynn, you know, kind
Speaker 2: of what's next year?
Speaker 6: Yeah?
Speaker 5: I think the big question is whether Elliott will go
Speaker 5: after board seats. Okay, I think you know there are
Speaker 5: two paths that this could take. One they could sit
Speaker 5: there and negotiate some kind of change in capital plan
Speaker 5: with TI specifically and hammer out agreement there. Or they
Speaker 5: can make a more aggressive play for some board representation
Speaker 5: and force change.
Speaker 2: Well, Ian, would that be a mistake? If they kind
Speaker 2: of push back and TI has to kind of rethink
Speaker 2: its plans or do something different because of this this
Speaker 2: activist investor, Is that a bad thing in your view?
Speaker 3: Well, do you believe Elliott Management's view of the semi
Speaker 3: conductor industry or Texas Instruments management view of this semiconduction industry.
Speaker 3: What's underpinning what TI is doing is what's happening in
Speaker 3: China where there's a lot of production coming online of
Speaker 3: this type of chip. What TI is saying, Hey, we
Speaker 3: can do this ourselves. We can shift to a new
Speaker 3: level of technology for this, so that even when all
Speaker 3: of these Chinese factories come online, will be in a
Speaker 3: very strong position. That's the future bet that they're making.
Speaker 3: Whether Elliott understands out or whether they've decided to ignore
Speaker 3: that is another matter, And I guess we'll see how
Speaker 3: that plays out when they have to argue their cases
Speaker 3: in front of the shareholders to see if they can
Speaker 3: gain momentum.
Speaker 2: Yeah, these aren't the chips land that are protected by
Speaker 2: the US government. We put on controls and stuff. These
Speaker 2: aren't protected, right.
Speaker 5: And that's the other shit to drop here. You know,
Speaker 5: it's been widely expected that Texas Instruments will be among
Speaker 5: the companies in America that benefits from the chip sack
Speaker 5: and get some funding. Whether Elliott has baked that kind
Speaker 5: of subsidy into their strategy that they're pushing with the
Speaker 5: company is unclear.
Speaker 2: I feel like it's a scratch your head kind of Tuesday.
Speaker 2: Can I just put that out there? I think you
Speaker 2: said it really well. It's like, I don't know, people
Speaker 2: just like woke up, had a long weekend, and we're like,
Speaker 2: we got to do something.
Speaker 5: I've got to go after tea I today it's a
Speaker 5: little lucky.
Speaker 4: Buy some of your cellular a couple of billion dollars
Speaker 4: plus some into TI.
Speaker 2: What's wrong with people?
Speaker 4: Long weekend?
Speaker 2: Just go and make some more burgers and hot dogs
Speaker 2: and just like extend that weekend. Listen to both of you.
Speaker 2: We really appreciate it. We covered a lot of ground
Speaker 2: and so appreciate it. Ian King, US semiconductor and networking
Speaker 2: reporter at Bloomberg News right there in our San Francisco bureau,
Speaker 2: and Linda Wan thank you as well, imagining editor of
Speaker 2: Technology and Global Cybersecurity at Bloomberg News. Here in studio, you're.
Speaker 1: Listening to the Bloomberg Business Week podcast. Can't Us Live
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Speaker 2: Bloomberg's will Wait He follows climate change for us and more,
Speaker 2: really kind of just what's going on in the energy space,
Speaker 2: all the energy space in particular, recently wrote the battle
Speaker 2: in climate change has become more urgent, and people are
Speaker 2: realizing that carbon free nuclear power will play an important part.
Speaker 2: A twenty twenty three p Research Center survey found that
Speaker 2: fifty seven percent of Americans so they support the use
Speaker 2: of more nuclear power. That's up from forty three percent
Speaker 2: in twenty twenty. Young activists, including last year's Miss America,
Speaker 2: are flooding TikTok and Instagram with quirky videos extolling the
Speaker 2: virtues of fission. It's a sharp shift, needless to say,
Speaker 2: from the anti nuke protesters marching in the streets in
Speaker 2: decades past. It's definitely a different tone.
Speaker 4: It feels like, yeah, it certainly does well. Here with
Speaker 4: an update on the industry and back with us is
Speaker 4: Maria Korsnik, President and CEO of the Nuclear Energy Institute.
Speaker 4: She joins us from Washington at DC. Maria, good to
Speaker 4: see you again. How do you explain the shift in
Speaker 4: what we've seen in recent years that Carol just mentioned
Speaker 4: In past decades people marching to stop nuclear power plants
Speaker 4: from being built, to now people extolling the value of fission.
Speaker 7: Yes, well, hi, and it's great to be with you again.
Speaker 7: The landscape is really changing for nuclear. It's a confluence
Speaker 7: of events. There's energy security concerns, there's climate security concerns,
Speaker 7: there's the need for clean energy jobs. We have bipartisans
Speaker 7: support and sort of all these events are coming together
Speaker 7: to really put nuclear in a great new light.
Speaker 2: Well, speaking of that, Southern Company added two more reactors
Speaker 2: to its Vogel power plant, Unit three and Unit four.
Speaker 2: It's now the biggest NW plant in the United States.
Speaker 2: The project, though, finished seven years behind schedule in about
Speaker 2: fifteen billion dollars over budget. So how do you quantify
Speaker 2: that or qualify that a success story or a failure.
Speaker 7: So I'd call it a success story, but not hiding
Speaker 7: from some of the items that you brought up. But
Speaker 7: they built two units, Unit three and Unit four because
Speaker 7: they already had two units on that property. So I
Speaker 7: think the success story is that you look at unit
Speaker 7: three and unit four and how long did it take
Speaker 7: some things to happen on three because that was the
Speaker 7: first of a kind, And then how much better did
Speaker 7: it get on unit four? For example, that testing was
Speaker 7: completed and half the time on unit four than unit three.
Speaker 7: Another one was a thirty five percent faster from let's
Speaker 7: call it the initial start to when it was actually
Speaker 7: generating and connected to the grid. So, just like any
Speaker 7: sort of new startup company, you know, you start to
Speaker 7: work down and get more efficient and costs less. So
Speaker 7: these are two examples. What do we think that next
Speaker 7: out of point will be? And what do we think
Speaker 7: that next out of.
Speaker 8: Point would be.
Speaker 7: It was excellent learning from units three to four, and
Speaker 7: it puts us in great position to build more.
Speaker 4: I think some person my listening right now say, wait
Speaker 4: a second, this is not a startup because nuclear power
Speaker 4: plants have been in operation in the United States and
Speaker 4: being been built in the United States for decades. Shouldn't
Speaker 4: we know by now how to bring them in within
Speaker 4: a timeline and within a budget.
Speaker 7: Yeah, you're absolutely right. We have a wonderful operating fleet
Speaker 7: that we have today. Ninety four reactors now. But when
Speaker 7: I say startup, it's because this particular type of reactor
Speaker 7: had not yet been built.
Speaker 8: This is an advanced reactor. There's a lot more passive.
Speaker 7: Features than what had been in the previous designs. And so,
Speaker 7: like anything, you can say, well, we all drive cars,
Speaker 7: well we do, but that doesn't mean all the cars
Speaker 7: are the same.
Speaker 8: And so it's the same way with nuclear.
Speaker 7: Absolutely we know how these operate, but this particular model
Speaker 7: hadn't been constructed.
Speaker 8: And yet we'll be more built in the future.
Speaker 7: There's already more that the people are interested in building,
Speaker 7: and so we look forward to see how.
Speaker 8: Much even more efficient that we can get. You know,
Speaker 8: if we had continued to.
Speaker 7: Build nuclear, we would be better and more efficient at it.
Speaker 8: Like anything else you do, you don't do it for
Speaker 8: a while, you're not as efficient.
Speaker 2: You know, if nuclear was the answer to so much, Mario,
Speaker 2: wouldn't we see it much more around? If you will,
Speaker 2: wouldn't it be kind of more ubiquitous than it really is?
Speaker 7: Well, it's twenty percent of our energy grid today, and
Speaker 7: so I would say, in a lot of cases, it
Speaker 7: sort of is everywhere.
Speaker 8: And I think as you.
Speaker 7: Look ahead to the future, My gosh, demand, demand, demand.
Speaker 7: I think we're all hearing it about how much clean
Speaker 7: energy is needed, whether it's for AI or machine learning
Speaker 7: or just reshoring the manufacturing sector, which we're all very
Speaker 7: interested to do.
Speaker 8: The demand on the grid is really.
Speaker 7: Increasing, and for that you're going to need reliable, resilient.
Speaker 8: Twenty four to seven power. That's what nuclear is good at.
Speaker 7: It's clean, it's there when you need it, and it's
Speaker 7: very reliable.
Speaker 8: And we've proven that urine.
Speaker 9: And eure out.
Speaker 2: You know where I'm going to go here. I mean
Speaker 2: to worry about concerns. I think while more Americans seem
Speaker 2: to be behind it. If you said, Okay, we're going
Speaker 2: to put the nuclear facility or a nuclear plant plant
Speaker 2: in your backyard, they'd say, maybe not so much. So
Speaker 2: why should we believe it will be safe? And the
Speaker 2: waste is still an issue in terms of you know,
Speaker 2: what you do with at the disposal of it.
Speaker 8: So let's talk about that.
Speaker 7: Because out in Wyoming they're talking about building a new
Speaker 7: plant and there were four different communities that fought to
Speaker 7: have the nuclear plant in their backyard.
Speaker 8: And so I think the narrative is very much changing.
Speaker 7: I think people are taking a hard look at what
Speaker 7: it's really going to take to power our grid with
Speaker 7: clean energy, and they realize that nuclear is in fact
Speaker 7: a very good option.
Speaker 8: And so I think the conversation.
Speaker 7: Is really, you know, very much changing around nuclear in
Speaker 7: a very positive way. If you look at the States,
Speaker 7: for example, there's been over two hundred bills in support
Speaker 7: of bringing nuclear to the States. That was nothing that
Speaker 7: we saw a decade ago, even five or six years.
Speaker 7: We're getting bipartisan support here at the federal level.
Speaker 9: And it's not just in the United States. Canada one's nuclear.
Speaker 9: Countries across Europe are interested in nuclear. I was just
Speaker 9: in Ghana a few months ago, Ghana on's nuclear. So
Speaker 9: it's really not just a US thing, it's really a
Speaker 9: worldwide thing.
Speaker 8: I was at the yeah top twenty eight.
Speaker 4: Yeah, we spoke to you. We spoke to you just
Speaker 4: after that. I remember that just a few months ago.
Speaker 1: Maria.
Speaker 4: Actually right, everybody wants nuclear, nobody wants nuclear waste. You
Speaker 4: literally cannot sell this stuff to anyone where do we
Speaker 4: put it? What's the answer.
Speaker 8: So the answer to that is, what don't we call
Speaker 8: it future nuclear fuel?
Speaker 7: In fact, you know, it's not just something that can't
Speaker 7: be used again, and so you have a lot of
Speaker 7: those conversations happening today about potentially recycling.
Speaker 8: And at the end of the day, the fuel is.
Speaker 7: Very safely stored where it's at Finland, in fact, which
Speaker 7: I head to next week. Just open there deep geologic
Speaker 7: repository and like that. We will find one of those
Speaker 7: here in the United States. In the meantime, we'll collect
Speaker 7: it in fewer places. Right now, it's stored at whatever
Speaker 7: plant that it was used at, and we can consolidate
Speaker 7: that fuel as we're looking for the long term fuel
Speaker 7: storage answer save one. At the end of the day,
Speaker 7: it's not nearly the high volume that many people.
Speaker 2: Safe to say, though there are concerns. I mean Germany,
Speaker 2: what they just switched off the last three nuclear power
Speaker 2: stations last year. It's never there are concerns that you
Speaker 2: see movement forward, movement backward, because there are legitimate concerns.
Speaker 2: It just got about thirty seconds left here.
Speaker 7: Yeah, and Germany is one of the few places and honestly,
Speaker 7: I think that we'll see Germany lift to regret that
Speaker 7: Japan is restarting their plans. Most of every country in
Speaker 7: Europe that has nuclear today is extending those plants and
Speaker 7: looking to build new You know again, it's really a
Speaker 7: worldwide consensus that more nuclear is needed in our future.
Speaker 2: All right, going to leave it there, Hey, listen, Thanks,
Speaker 2: We always appreciate some time with you. Over your course,
Speaker 2: Net President, CEO of the Nuclear Energy Institute, joining us.
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Speaker 2: Well, it plays a critical role in New York's food system,
Speaker 2: and yet it's got some pretty serious problems. We're talking
Speaker 2: about the Hunts Point Produce Market, which is a combination
Speaker 2: rail yard, truck depot trading floor that quietly supplies about
Speaker 2: sixty percent of the city's fresh groceries two billion dollars
Speaker 2: worth of fruit and vegetables each year. Organized as a cooperative,
Speaker 2: the market offers an entry point for both suppliers and buyers,
Speaker 2: who would otherwise struggle to compete with national chains and
Speaker 2: distributors such as Cisco Walmart and Whole Foods. It also
Speaker 2: keeps the many neighborhood the big chains ignore from becoming
Speaker 2: food deserts. So it sounds pretty terrific, right There is
Speaker 2: a hitch. Turns out, it's also a major polluter. This
Speaker 2: Bloomberg BusinessWeek story will be featured in the forthcoming issue
Speaker 2: of Bloomberg BusinessWeek magazine. You can read it now on
Speaker 2: the Bloomberg and at Bloomberg dot com. Slash BusinessWeek with
Speaker 2: more Bloomberg News City Lab reporter Fulla a Kinemby excuse me,
Speaker 2: just joining us here in studio Fulla a chinnyby Fula.
Speaker 2: First of all, for those not from New York City,
Speaker 2: lay out what HUDs Point Produce Market is all about.
Speaker 10: Thanks Hails. It's a huge part of the city's food system.
Speaker 10: What's unique about the city, the city's food system, I
Speaker 10: guess when you compare it to other American cities, is
Speaker 10: that we have this huge ecosystem of small grocers and
Speaker 10: you know, ethnic grocery stores and just fruit stands and
Speaker 10: and so all these all these stories that you could
Speaker 10: just pop into when you're sort of walking around the city.
Speaker 10: They're also applied by the hunts Point Market and so it,
Speaker 10: like you said, supplies sixty percent of the city's fresh produce.
Speaker 2: I went to school uptown in New York City and
Speaker 2: everywhere like one hundred and sixteen Street, one tenth Street,
Speaker 2: like that was such a part of it, and that's
Speaker 2: such a big part of the city's fabric. I feel like,
Speaker 2: take us to you went and you visit it and
Speaker 2: talk about some of the like main hours where you're
Speaker 2: seeing so much activity at the market.
Speaker 10: So the interesting part about the market is the way
Speaker 10: we shop grocery stores, you know, during the day or
Speaker 10: after work. Yeah, normal hos right, grocery stores and these
Speaker 10: chains they shop the market after hours, so they between
Speaker 10: ten ten pm and you know, around three, four or
Speaker 10: five am, they're there shopping for their product for the
Speaker 10: next day. Because in a lot of ways, the Hunts
Speaker 10: Point Market serves as sort of the warehouse space for
Speaker 10: these tiny groceries. You know, like in New York we
Speaker 10: all have we're all looking for more space, more real estate,
Speaker 10: and these grocery searches don't have it, and so the
Speaker 10: market sort of serves as their warehouses. So anyway, when
Speaker 10: you go at night, it's it's sort of this bustling
Speaker 10: kind of trading floor. Right, you see people with cash
Speaker 10: in hand, sort of buying, buying palaces and fruit, buying
Speaker 10: palaces and vegetables. You see like the create the hand cards.
Speaker 2: Old fashion, yeah, pretty old fashion.
Speaker 1: Yeah.
Speaker 3: Yeah.
Speaker 2: So they're negotiating back and.
Speaker 10: Forth, negotiating back and forth, filling up trucks with boxes,
Speaker 10: and they're sort of a a it's a buzzing place,
Speaker 10: and it's crazy because during the day it's it's a
Speaker 10: little it's a little quiet. It just looks like a
Speaker 10: truck yard.
Speaker 2: One hundred and if you've ever driven past it, that's
Speaker 2: exactly what it looks like. One hundred and thirteen acres.
Speaker 2: As you said, busiest ten pm to three am. The
Speaker 2: problem is it's been around for a long time, right,
Speaker 2: and it's getting old and outdated. Not getting it's been
Speaker 2: old and outdated. Tell us a little bit about what's
Speaker 2: old about it, what's outdated about it.
Speaker 10: So the market moved up to Hunt Point in nineteen
Speaker 10: sixty seven and they haven't updated the facilities since. And
Speaker 10: so like much of American infrastructure, it's sort of crumbling, right,
Speaker 10: And and so the physical the physical plan is old.
Speaker 10: They have old old refrigerator, old refrigerators, the electrical grid
Speaker 10: is tapped out, and so as a result, there's not
Speaker 10: enough space to store all the fruits safely. And so
Speaker 10: what they do is there are hundreds of diesel trucks
Speaker 10: just running twenty four to seven to store the rest
Speaker 10: of the fruit, to keep it cold, to keep it
Speaker 10: fresh for folks like us to consume the next morning, and.
Speaker 2: So great for us. Not great for the people who
Speaker 2: live in around there.
Speaker 10: Not great at all. Hunt Point has some of the
Speaker 10: highest rates of childhood asthma in the city in the
Speaker 10: US as a result.
Speaker 2: How long have they known about this? That this has
Speaker 2: been a problem for a while, It's.
Speaker 10: Been a problem for the better part of twenty thirty years.
Speaker 2: Why hasn't it been dealt with?
Speaker 10: It's expensive, right, they're looking to the market is looking
Speaker 10: to raise six hundred and fifty million to do renovations
Speaker 10: to you know, upgrade the refrigerator space, to upgrade the grid,
Speaker 10: to you know, get those trucks offline, right, the trucks
Speaker 10: that are running constantly, and to sort of modernize the market.
Speaker 10: And so so far the city, the state government, and
Speaker 10: the federal government have chipped in a couple hundred million,
Speaker 10: but in order to start work. They need the rest
Speaker 10: of the money. They need about another three hundred million
Speaker 10: dollars to get started.
Speaker 2: Easy peasy. So where is that money supposed to come from.
Speaker 10: They're hoping it comes from the city. The rest comes
Speaker 10: from the city government. I mean, that's the hope. But
Speaker 10: I mean they've been trying for the past two years
Speaker 10: and it hasn't happened yet. But as we said, you know,
Speaker 10: it's a vital part of the food system.
Speaker 2: Well it's so as you say, vital part of the
Speaker 2: food system. So those folks who are using it, what
Speaker 2: are they doing because they've got to they've got to
Speaker 2: make sure that the produce that they're buying or that
Speaker 2: they're you know, transporting, that it's kept safe. Are they
Speaker 2: having to pay for some of the upgrades or doing
Speaker 2: whatever they need to do to make sure it works
Speaker 2: for them.
Speaker 1: Yeah.
Speaker 10: So they're twenty seven vendors at the market, and most
Speaker 10: of them are family businesses. Right, this is not an
Speaker 10: easy business to get into. Right, you passed down the knowledge,
Speaker 10: you passed down that you're dealing with perishable, perishable items
Speaker 10: and it's sort of it's a specialized trade. And so
Speaker 10: for some of the larger, larger venues at the market,
Speaker 10: they're able to afford upgrades, right, Like I went to
Speaker 10: one of I went to Casmans Catsman Produce, and in
Speaker 10: their warehouses, you know, their their warehouses are fully refrigerated
Speaker 10: and fully they have you know, the latest technology. If
Speaker 10: it gets too cold in their room with apples, then
Speaker 10: an alarm starts beating, right, and and so so they're
Speaker 10: they're fine for the most part. But for some of
Speaker 10: the smaller vendors and some of the vendors that don't
Speaker 10: have those resources, they can't they can't afford to take
Speaker 10: on that expense or to to front that expense on
Speaker 10: their own, and so they're sort of stuck waiting for
Speaker 10: waiting for help and waiting for the city to chip in.
Speaker 2: Tell me if I've got this right, because I thought
Speaker 2: I got from your story that it needs to be
Speaker 2: fully funded for them to start making any major changes
Speaker 2: to break ground.
Speaker 10: Essentially, Yeah, for these city construction projects, you need all
Speaker 10: the money in hand before you could start. And so
Speaker 10: if they started now, then the vendors would have to
Speaker 10: kick in the remaining three hundred million dollars. And that's
Speaker 10: just not that's just not feasible.
Speaker 2: How is it that you know something that is so
Speaker 2: vital to the city that it's not As you said,
Speaker 2: it's been around for several decades, some of these issues,
Speaker 2: some of these problems. What did you get from city
Speaker 2: government as you talk to people to find out kind
Speaker 2: of accountability, if you will, and why this hasn't been
Speaker 2: fixed already? What did you come up with?
Speaker 10: I think it's sort of a again, like a lot
Speaker 10: of infrastructure and a lot of things like that. It's
Speaker 10: just sort of back of mind. People aren't really thinking
Speaker 10: about it. It's hard to sell right, Like it's hard
Speaker 10: to explain what it is. People go to Gercy store,
Speaker 10: they pick up their food, They pick up their food,
Speaker 10: they don't really think about where it came from or
Speaker 10: how I got there.
Speaker 2: Well, then, you know, you know, I started with you
Speaker 2: kind of taking us there because I feel like it's
Speaker 2: one of these things that, as you say, we just
Speaker 2: pick up our produce and we just assume it's going
Speaker 2: to be there. Everything's going to be fine, The supply
Speaker 2: chain is going to be fine. We learned during the
Speaker 2: pandemic supply chains aren't so fine, and they actually kept
Speaker 2: running correct during the pandemic.
Speaker 10: Yeah, so the market didn't close for one day during
Speaker 10: the pandemic. And in fact, the CEO there was in
Speaker 10: constant contact with the city government giving updates about what's
Speaker 10: coming in, what isn't coming in, And so there's this
Speaker 10: window and there's this connection to city government this area.
Speaker 10: It's important for the government to know where the food
Speaker 10: is and that the food supply is safe.
Speaker 2: Who who owns it all? And tell us about the
Speaker 2: CEO a little bit. This is mister Grant, correct.
Speaker 10: Yes, Philip Grant is the CEO. And so the market
Speaker 10: is structured as a co op, and so the vendors,
Speaker 10: the vendors own the market in the past. So when
Speaker 10: it first got to Hunts One in nineteen sixty seven,
Speaker 10: the city, the city was running it. But you know,
Speaker 10: after the financial crisis in the seventies, the city didn't
Speaker 10: really have the wherewithal to handle the operations of the market,
Speaker 10: and so the vendors took it over. And so the
Speaker 10: vendors own and operate the market and it runs as
Speaker 10: a co op.
Speaker 2: Well, it's interesting too, and you think about the vendors ownership,
Speaker 2: one would assume right that they've got to be kind
Speaker 2: of have a financial stake in this and certainly financial
Speaker 2: stake to improve it as well. You know, this is
Speaker 2: one of those things again like if you're in New
Speaker 2: York City, you just assume it's going to be there.
Speaker 2: It's been around for such a long time. It's kind
Speaker 2: of an institution, if you will, always think about the
Speaker 2: seafood market that used to be, you know, down at
Speaker 2: the seaport again, and just so vital in terms of
Speaker 2: the food supply and UH supply chain. As you covered
Speaker 2: this and reported this out, what were some of the
Speaker 2: things that just struck you and telling the story.
Speaker 10: I mean, I think I think that this is sort
Speaker 10: of one of the last UH markets like this in
Speaker 10: the US. It's definitely the biggest one, but you know,
Speaker 10: inn other in other cities, you're sort of relying on
Speaker 10: Walmart or or Costco or a large grocery chain and right,
Speaker 10: and so the difference between those chains and Hunts Point
Speaker 10: is that what they do is they contract with huge
Speaker 10: farms and they run they run their trucks from the
Speaker 10: huge farms to to you know, the distribution center for
Speaker 10: the Walmart distribution center to the.
Speaker 2: Store right right, they're just direct from the farm, direct.
Speaker 10: From the farmer. And so This difference is that hunts
Speaker 10: Point is sourcing from all all over the world, and
Speaker 10: there's they're sourcing at a level where you know, they
Speaker 10: can they can keep things affordable for for these small
Speaker 10: grocers and they can keep these small grocery competitive with
Speaker 10: with like these larger chains.
Speaker 2: Full of what's next? Because the problem has been there
Speaker 2: for a while and it sounds like there needs to
Speaker 2: be some major investment. What's next in terms of in
Speaker 2: what are you're going to be watching to find out
Speaker 2: kind of what's the next step for here.
Speaker 10: So if we're watching to see if they can get
Speaker 10: the rest of this money secured, they're they're looking to
Speaker 10: start construction as soon as possible because they're their lease
Speaker 10: is up in twenty thirty one. And also, yeah, their
Speaker 10: lease is up in twenty thirty thirty one, so they
Speaker 10: need to start work immediately. And also some of these
Speaker 10: grands twenty thirty one, Yeah, and some of these.
Speaker 2: Grants, but they don't get the money then what who knows?
Speaker 10: Yeah, who knows They're gonna have some serious issues.
Speaker 2: It's hard to imagine to imagine it wouldn't it wouldn't
Speaker 2: be there. Yeah, one thing I did want to ask
Speaker 2: you though, and you know I realized is that in
Speaker 2: terms of other cities do they also have major form markets.
Speaker 10: So so there are a few cities that that that
Speaker 10: have markets, and they're historically pretty much every major American
Speaker 10: city had had one of these, right, And over the
Speaker 10: years they started to become obsolete. And as as yeah,
Speaker 10: as as these grocery chains got larger and larger, in
Speaker 10: these groceres, suppliers got larger and larger, there is less
Speaker 10: of a need. But I mean, just to come back
Speaker 10: to New York having this robust like ecosystem of small
Speaker 10: grocery stores, and that's just not the case in a
Speaker 10: lot of these other cities. I spoke to folks in
Speaker 10: Phoenix who who are looking at sort of reviving their market.
Speaker 2: You know, they're interesting.
Speaker 10: Their market folded in the eighties and now they only
Speaker 10: have two produce suppliers in the whole in what is
Speaker 10: a large city, right, a grow and a growing city, right,
Speaker 10: And so they're looking to revitalize it because there are
Speaker 10: food deserts in the southern part of the city, and
Speaker 10: they're looking at ways to supply smaller grocery stores and supply.
Speaker 2: Smaller It's such an important story and I feel like
Speaker 2: we've talked about food deserts a lot, and that unless
Speaker 2: you kind of broaden it out, you're kind of you
Speaker 2: have to suc come to just a few big suppliers,
Speaker 2: if not one big supplier in a certain area. So
Speaker 2: it's an important part, very important too. I feel like
Speaker 2: the fabric and the health of our city, no doubt
Speaker 2: about it. Full of thank you, I really appreciate it.
Speaker 2: Full of a Kenneby. He is Bloomberg News City Lab
Speaker 2: reporter joining us here in studio. As we mentioned this
Speaker 2: story Upburg Business Week story will be featured in the
Speaker 2: forthcoming issue of Bloomberg BusinessWeek magazine, but you can read
Speaker 2: it now on the Bloomberg and also at bloomberg dot
Speaker 2: com slash business Weeks, so be sure to check it out.
Speaker 6: MC journal.
Speaker 2: Now about you, let me drive? No no, no, no, honey, please,
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Speaker 3: I want to drive.
Speaker 5: It's good question.
Speaker 1: This is the drive to the globe.
Speaker 6: Doing well by around.
Speaker 1: Each other down on Bloomberg Radio.
Speaker 2: All right, everybody, eighteen minutes left in today's trading session
Speaker 2: on this Tuesday trade. As I try to remember that
Speaker 2: we did have that long holiday week, I felt like,
Speaker 2: I don't know about you, but I felt like I
Speaker 2: was gone for a week.
Speaker 10: It was it was really nice.
Speaker 4: It was nice to have three days off.
Speaker 2: You know, suggestion box, Maybe we do these three days
Speaker 2: you know what?
Speaker 4: Some people say, what Bernie Sanders for example, Yes, that
Speaker 4: is if we continue it well like this, we'll see
Speaker 4: a four day work week.
Speaker 11: At some point.
Speaker 2: Yeah, I'll call the exchanges, Hey, how are you with that?
Speaker 2: For day trade.
Speaker 4: I've spoken to some very powerful people, yes, who said
Speaker 4: that they think, who will remain named less you said,
Speaker 4: they think we'll see a four day work week in
Speaker 4: our lifetimes.
Speaker 2: But not if you're tied to the financial.
Speaker 4: People who work in this building, who come in five
Speaker 4: days a.
Speaker 2: Week, to the financial markets.
Speaker 4: That's the thing. If we tie it to the financial markets,
Speaker 4: then I don't know that's going to be a thing.
Speaker 2: See what Honor has to say. Let's get to it.
Speaker 2: We actually want to talk a little bit about private
Speaker 2: credit because we see a bunch of headlines Pigeon Private
Speaker 2: Capital their division of Prudential Financials asset management business. They
Speaker 2: established a European long term investment fund private Credits Historic Rise.
Speaker 2: We've talked about this a lot here at Bloomberg creating
Speaker 2: a problem that most asset managers would love to have,
Speaker 2: and that's too much cash in their coffee. You've got
Speaker 2: to put it to work. But you know, yeah, you
Speaker 2: got to figure it through. So let's get to it
Speaker 2: with Anna Arsa. She is global head of private credit
Speaker 2: and Financial Institutions that Moody's Investor Service. And great to
Speaker 2: have you back here with Tim and myself. So private credit,
Speaker 2: private credit, everybody wants a piece of it increasingly. What's
Speaker 2: top of mind for you guys and what you are
Speaker 2: tracking specifically at Moody's in a space where we sometimes
Speaker 2: say it's a little fuzzy.
Speaker 11: Thank you for having me again. Always pleasure to have
Speaker 11: this discussion with you. Listen, it's a very.
Speaker 6: It still remains hot topic.
Speaker 11: I think we start thirty interview private credit and every
Speaker 11: time we have this discussionpoiler and water and that's actually
Speaker 11: being a credit analyst and coming from the credit rank.
Speaker 6: That's what words is.
Speaker 11: And let me just kind of say that, as you said,
Speaker 11: everybody wants a piece of this action, meaning either to
Speaker 11: invest in the business or build a business. And we
Speaker 11: when when the business is relatively mature, and particularly now
Speaker 11: with the opening of the leverage finance market, and I'm
Speaker 11: talking about direct lending specifically. We are worried that credit
Speaker 11: terms will suffer and eventually there will be deals who
Speaker 11: are done maybe less prudentially when there was less competition,
Speaker 11: particularly between the public and the private markets and leverage lending.
Speaker 11: So we are concerned and we're seeing actually creates terms iteriation.
Speaker 6: We are seeing.
Speaker 11: Competition for talent as well, and at the same time
Speaker 11: a lot of dry powder being raised that has to
Speaker 11: be deployed and maybe deploy the terms that are going.
Speaker 6: To be less favorable for credators in the near term
Speaker 6: and media terms.
Speaker 2: All right, so bummer for the creditors, right, the folks
Speaker 2: who need to borrow the money. But having said that,
Speaker 2: as we kicked it off with Anna, the idea that
Speaker 2: so many people want to be a part of it,
Speaker 2: doesn't that I'm playing devil's advocate a little bit, But
Speaker 2: doesn't that kind of spread around the risk in the
Speaker 2: private credit market so that there's not just you know,
Speaker 2: one entity, one lending entity, if you will, that's kind
Speaker 2: of stuck holding the bag if things go wrong. An
Speaker 2: investor in disposure, same thing.
Speaker 6: That is, diversification is always good of risks.
Speaker 11: The issue is that our statistics have shown that the
Speaker 11: biggest fundraising actually is going now.
Speaker 6: Increasingly to the law players.
Speaker 11: So therefore this is becoming a more concentrated market.
Speaker 6: Sorry for that.
Speaker 11: This has been a more concentrated market both on the
Speaker 11: private equity side, but particularly private credit fundraising is indeed
Speaker 11: going to the.
Speaker 6: Largest and more established players.
Speaker 11: So with that being said, we are diversification is very
Speaker 11: interesting because it is the same pension funds, an insurance
Speaker 11: company who are investing on the private equity side, and
Speaker 11: also or sovereign funds are also investing in the private credits,
Speaker 11: so they're all increasing their exposure.
Speaker 6: The good thing is here is from.
Speaker 11: A systemic risk perspective, these are different funds with different
Speaker 11: investment than underlying so there is not that big concentration
Speaker 11: of one type of a risk, let's call it, you know,
Speaker 11: subprem mortgage, US supparate mortgage or US office commercial real
Speaker 11: estate in one type of fund is diversified to many
Speaker 11: real money investors that have a long term perspective and
Speaker 11: long term investment horizon and also without necessarily immediate liquidity
Speaker 11: call or risk.
Speaker 6: So that's the good about this market.
Speaker 11: You're absolutely right, the specification of the investment community and
Speaker 11: also not imminent liquidity draw that these kind of investors
Speaker 11: are coming in with.
Speaker 4: When I'm wondering, are you going to come on our
Speaker 4: show and say that private credit is not hot? When
Speaker 4: does that happen?
Speaker 6: You know what?
Speaker 11: That's so, if you think about where we are in
Speaker 11: what eating a lot of us have been talking about
Speaker 11: private credit as equivalent to direct lending, and direct lending
Speaker 11: is just another middle market now expanding to larger middle
Speaker 11: market leverage trends business, but private credit is beyond that.
Speaker 11: There's a lot of talk about potentially the abs private
Speaker 11: credit market, which you know, if you listen to various
Speaker 11: pondents in anywhere between ten and forty trivia, any kind
Speaker 11: of asset from any bank.
Speaker 6: That potentially can be sold.
Speaker 11: Is that auto, is that aircraft, receivables, is that potentially
Speaker 11: data centers or explain as even you know, commercial real estate,
Speaker 11: that the potentially can be packaged in a private securitizations
Speaker 11: that will have basically been deployed into the kind of
Speaker 11: the investner community, same insurance companies, pension funds, summern funds.
Speaker 11: So therefore, if you take a broader picture of private
Speaker 11: credit of any credit provision that's not done by the banks,
Speaker 11: but financing our economy. That means that this is going
Speaker 11: to be here to stay.
Speaker 6: For quite a long time.
Speaker 2: So all right, Moody's, we know who you are, and
Speaker 2: you guys look at these things and try to assess risk.
Speaker 2: So where's the risk and the private credit market today?
Speaker 11: So the risks are really again they are mostly housed
Speaker 11: again within institutional investors that are sophisticated investors, and the
Speaker 11: sub funds and again pension funds have the largest part
Speaker 11: of this, then insurance companies, then sovereign funds. The growth
Speaker 11: into retail funds and is what we are being raising
Speaker 11: as a particular concern if you look at where the
Speaker 11: new BDC formation and business development companies were a fit
Speaker 11: of of your viewers here is that there is like
Speaker 11: the largest funds that have been grown is with retail
Speaker 11: or high it worth money.
Speaker 6: And the question there is these type of funds have
Speaker 6: a different kind.
Speaker 11: Of liquidity calls if you were, an ability for retail
Speaker 11: investors to basically.
Speaker 6: Call their money in a quarterly basis right, and that's
Speaker 6: where the biggest growth has been.
Speaker 11: So one can say you can be double's advocate, well,
Speaker 11: shouldn't retail and highnted word individual also benefit from the
Speaker 11: growth of private markets And the answer to that is
Speaker 11: of course.
Speaker 6: But the second one.
Speaker 11: Is this done in the prudential way sufficiently with the
Speaker 11: right disclosure, so afterwards they really know what they're getting,
Speaker 11: and then they will not get their money, you know, overnight.
Speaker 2: It's so funny that you say this. I was just
Speaker 2: having a discussion with someone in preparation for a panel
Speaker 2: and this whole idea of even a credit investors, do
Speaker 2: they understand liquid versus ill liquid?
Speaker 7: Right?
Speaker 2: Because private credit not as liquid is certainly kind of
Speaker 2: your bread and butter investments, and so do they understand
Speaker 2: going into one of them, or going into a private
Speaker 2: credit fund that if they need the money or want
Speaker 2: the money, it's not so easy to pull out correct.
Speaker 11: Exactly, So typically how these fonds are orchestrated.
Speaker 2: And just got about thirty seconds.
Speaker 6: Yeah, yes, you can have a quarterly you know.
Speaker 11: Small portion of liquidity is funds that have established or
Speaker 11: beacon this space have a provision of bank clients to
Speaker 11: provide for that and more liquid access. But not The
Speaker 11: point being is that investors need to really be aware
Speaker 11: that this is an new liquid access and they're locked
Speaker 11: for some period of time and they cannot take their
Speaker 11: money back, and growth in that area can create disclosure risks.
Speaker 6: Risks, that's what the fonds to watch for.
Speaker 2: Yeah, it's just you know, certainly a topic that fascinates
Speaker 2: us in a big way. Put a private credit story
Speaker 2: on the most on the Bloomberg and it tends to
Speaker 2: be among the most.
Speaker 4: Right a million bucks a year salary.
Speaker 1: Some of those.
Speaker 2: Folks, Anna are so global head of private credit financial
Speaker 2: institutions at mood These investors service, I always fund to
Speaker 2: check in with. You really appreciate it.
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