Speaker 1: This is Bloomberg Business. Wait inside from the reporters and
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Speaker 1: Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Speaker 2: Let's get into it because we did hear from Jays Powell,
Speaker 2: and we've got a great twosome to talk about it.
Speaker 2: Bloomberg News International Economics and Policy correspondent and deadhead Michael McKee.
Speaker 3: He's got his ticket.
Speaker 4: On his phone.
Speaker 3: I saw him walk in. He's here.
Speaker 4: I walked in listening to last year's concert.
Speaker 3: Oh did you realize you reading?
Speaker 4: Yeah? The opening song? Do you remember that?
Speaker 5: I heard? I heard I didn't go to last year's concert.
Speaker 5: It was a mistake, and I heard it was amazing.
Speaker 4: What was the quest? The opening song was playing in
Speaker 4: the band.
Speaker 5: I just hope there's no welcoming in the rain tonight
Speaker 5: or tomorrow.
Speaker 4: Okay, tomorrow is the problem.
Speaker 3: Yeah, all right, guys, let's focus focus kids.
Speaker 2: All right, Let's get Bloomberg News Economics editor Molly Smith.
Speaker 2: She's also here in our Bloomberg Interactive Broker studio.
Speaker 3: So Mike, let's start with you.
Speaker 2: I did take a kind of peek into TV and
Speaker 2: we basically got the same thing from JP.
Speaker 4: Yeah.
Speaker 6: Well, his opening statement was exactly the same, almost word
Speaker 6: for word. They just moved a few paragraphs around, but
Speaker 6: they didn't change any of the language to keep it
Speaker 6: as we got from his opening statement last Wednesday. So
Speaker 6: I think he walked in there going I'm not going
Speaker 6: to make news, and he generally succeeded, other than perhaps
Speaker 6: on the Grateful Dead or Dead in Company.
Speaker 3: But that was pretty funny.
Speaker 4: But he did he did. Uh yeah, you know.
Speaker 6: I talked to some people at the FED who were
Speaker 6: very disappointed that I and Steve Leisman from CNBC, the
Speaker 6: two big dead heads of the FED Press Corps, did
Speaker 6: not ask him at the press conference.
Speaker 5: I can't believe you guys didn't either. Leasman plays in
Speaker 5: like a dead cover band.
Speaker 3: Yes, and for me to do it or why.
Speaker 6: It just didn't seem like the the right atmosphere at
Speaker 6: the time when I got called on.
Speaker 4: I mean, Matt and I had worked on questions.
Speaker 6: That would I know, what would incorporate the lyrics, but
Speaker 6: we didn't get a chance.
Speaker 2: But you got to kind of know the room and
Speaker 2: if he's not in the mood for it, right, like
Speaker 2: you just kind of pass on it.
Speaker 3: Okay, So nothing new, Molly, come on in on this.
Speaker 3: Are you a deadhead? Have you ever been to a
Speaker 3: dead concert?
Speaker 4: I have not, and we can remedy that we would.
Speaker 7: Yeah, tonight, I'll hear my schedule.
Speaker 3: I'm gonna tell you it would be quite an experience
Speaker 3: knowing who's going. Okay, So what did you take away
Speaker 3: from j Powell?
Speaker 7: Yeah, pretty boring today, honestly, which I think is Yeah,
Speaker 7: to Mike's point, mission accomplished on that. He really did
Speaker 7: get grilled a lot on both sides about the Fed's
Speaker 7: response to the banking failures in March, and I was
Speaker 7: kind of surprised, thinking, you know, we just had last
Speaker 7: week's FED meeting and that was like a couple you know,
Speaker 7: the big surprise sing like there are another two rate
Speaker 7: hikes possibly to come this year and that should be
Speaker 7: top of mind for most lawmakers, and that inflation is still,
Speaker 7: you know, pretty rampant and affecting their constituents pretty seriously
Speaker 7: right now.
Speaker 3: But they really just went hard on the banking stuff.
Speaker 7: And I think Jay generally give us a whole lot
Speaker 7: to work with on that would often defer to a
Speaker 7: Vice Chair of Supervision, Michael Barr, who prepared a report
Speaker 7: and the aftermath of SPVs collapse and also deflected some
Speaker 7: other questions to the FDIC, which has handled some of
Speaker 7: these banks that have since failed.
Speaker 5: The bank failures actually was pointed out to me in
Speaker 5: a note today by Veronique de Rugid. You know, she's
Speaker 5: an economist at Mercadis, and you know from her perspective
Speaker 5: the fact that the FED isn't and again this is
Speaker 5: from her perspective, the fact that the FED hasn't been
Speaker 5: straight with the American people about this. The condition of
Speaker 5: the US banking system is part of the reason that
Speaker 5: they don't have credibility with the market.
Speaker 7: How has he not been straight with them?
Speaker 5: Because they say the banking system in this country is
Speaker 5: sound and resilient, and she points out that there are
Speaker 5: some examples that clearly show it's not sound and resilient.
Speaker 7: Yeah, but those are to be fair, would you say
Speaker 7: those are more the exception than the rule?
Speaker 5: Well, you asking me, or Vernique, because.
Speaker 7: Asking you you're an intelligent guimet.
Speaker 5: Yeah, of course, because we've only seen a couple of
Speaker 5: bank failures and they are what six thousand banks in America.
Speaker 7: Yeah, No, there's no systemic risk really from any of them.
Speaker 7: It doesn't seem.
Speaker 1: Yeah, as J.
Speaker 4: Powell pointed out, there's some bad bank managers out there.
Speaker 1: Yeah, you know.
Speaker 7: He kept saying like, yeah, like overwhelmingly banks have handled
Speaker 7: interest rate risk well that there are a few of
Speaker 7: them that did not.
Speaker 5: But what I'm trying to get at is why does
Speaker 5: the FED have such little credibility. We had guests on
Speaker 5: the cheap economists from the biggest banks on surveillance last week,
Speaker 5: one after the other said they don't believe the Fed's
Speaker 5: going to continue to raise rates. They think it's over history.
Speaker 6: I mean, that's just learned behavior. The FED has always
Speaker 6: stepped in when markets get bad. And you have a
Speaker 6: whole generation of traders who grew up with no idea
Speaker 6: of what it's like to have the FED on the sideline.
Speaker 6: And you talk to the people in the old bond
Speaker 6: vigilante days who were many years before Carol and I,
Speaker 6: and they they knew. But the modern day folks, I mean,
Speaker 6: the Fed's been in the markets for twenty.
Speaker 2: Years now, but like you look at the warp function,
Speaker 2: I mean, traders are still betting on a cut this year.
Speaker 5: To listeners, right, warp is the world function on the
Speaker 5: Bloomberg terminal that shows.
Speaker 6: Expects, and they're not betting on a cut anymore this year.
Speaker 6: As a matter of fact, they still have rates.
Speaker 3: Not in December.
Speaker 4: Nope, nope, not in December.
Speaker 7: Most of those are fully priced out.
Speaker 4: Here's here's the confusion.
Speaker 6: And this is a I run under this a lot
Speaker 6: because people don't understand how WARP works.
Speaker 5: Yeah, because I agree with Carrol, look at me, like
Speaker 5: there's gonna be one.
Speaker 6: Carrol applied rate. It goes up to a high in
Speaker 6: November of five point three to two percent hike together,
Speaker 6: and then it gets and then it gets cut down
Speaker 6: back to where we are now. So in essence, it's
Speaker 6: not cutting rates from where we are now. And it
Speaker 6: presumes that you get up there also.
Speaker 5: I get I get you, Carol.
Speaker 3: I know, all right, get this boy out of here.
Speaker 3: You're out of here. Not Matt, Mike, Okay.
Speaker 2: But the point is, and Remy made the point too
Speaker 2: in our simulcast, that markets look at where yields have
Speaker 2: kind of eased from the movement up higher earlier. So
Speaker 2: it does feel like within the trade investors see something
Speaker 2: different versus what the FEDS.
Speaker 4: Well, the interesting thing is, and I've asked a lot.
Speaker 3: Of used to like you, Mike, I'm just gonna put
Speaker 3: it out there.
Speaker 4: Always loved juice, sweetie.
Speaker 6: I've asked a lot of strategists about this, and basically
Speaker 6: what you have is the general belief among strategists at
Speaker 6: all the major banks and everywhere else is that the
Speaker 6: FED is not going to cut rates. They're basing their
Speaker 6: buying strategy in the markets on the idea the FED
Speaker 6: is not going to cut rates. But if inflation comes
Speaker 6: down fast, either because the FED does a super job
Speaker 6: or because we have a recession, then the FED would
Speaker 6: be cutting rates. And that is a possibility. So you
Speaker 6: put some money in options on that possibility. You take
Speaker 6: out an option on a FED rate cut in December. Yeah,
Speaker 6: I mean, Ira Jersey's really good on this. If you
Speaker 6: if you have him on, he's really good at how
Speaker 6: this is not really real?
Speaker 3: Also, a man's blane warped me.
Speaker 2: I can't, I can't, can I so respect Mike?
Speaker 7: Can you know?
Speaker 3: I would have the.
Speaker 5: Money, by the way, and said, what the FED is
Speaker 5: doing right now is essentially passive tightening. That's the phrase
Speaker 5: he used, right, So I to your point. Right, if
Speaker 5: inflation comes down and they don't that they just leave
Speaker 5: them where they are. That's passive tightening. And I wonder
Speaker 5: if some members of the Fed things that think that's
Speaker 5: what they should be doing right now.
Speaker 7: Well, Jay did today then again say that not only
Speaker 7: is this not a skip, which he said last week,
Speaker 7: but then today he said it's not a pause. So
Speaker 7: I don't really know what what the terminology is. But
Speaker 7: either way, they did not hike rates last week, and
Speaker 7: the idea right now is we're going to see all
Speaker 7: the data, how it comes in and make our next
Speaker 7: move based off of that. So yeah, I like that
Speaker 7: passively tightening phrase as well, and that does seem to
Speaker 7: be what they have been communicating to us.
Speaker 3: Do you feel like Jape Halmke has been pretty clear.
Speaker 3: I mean, I feel like they're data dependent. I believe that.
Speaker 6: Yeah, I mean they've they've been clear to a point.
Speaker 6: I mean, they're no longer trying to give straight guidance
Speaker 6: We're going to do X on such and such a date.
Speaker 6: They don't want the markets to price and cuts, so
Speaker 6: they put in the high dot plot and they talk
Speaker 6: about the fact that we're going to raise rates more.
Speaker 4: But they're not putting a date on it. They're not
Speaker 4: putting conditions on it.
Speaker 6: What they need to see, anything's possible, which is a
Speaker 6: very unusual condition for people on Wall Street, let alone.
Speaker 4: You know, whatever age they are, however long they've been around.
Speaker 3: Might he just get this right?
Speaker 4: Oh sure, there's a chance they can get it right.
Speaker 6: And everybody will be gobsmacked by that and say that's
Speaker 6: never happened before, which is why they don't think they'll
Speaker 6: accomplish it, because it's never happened before.
Speaker 5: Someday they'll write books about nineteen ninety four. They sort
Speaker 5: of did, but they have that was the only other
Speaker 5: soft land. Well, yeah, they didn't have a big inflation.
Speaker 5: They were trying to get out in front of inflation,
Speaker 5: and they did and they raise rates and they destroyed
Speaker 5: the bond market, but they did not destroy the economy.
Speaker 3: So passive tightening is that what we're calling it?
Speaker 5: What was it? That's what Raphael Bostic said, tightening, passive tightening.
Speaker 5: I mean they don't actually raise rates, but the real
Speaker 5: rate goes higher as inflation comes down.
Speaker 7: And Jay also did say today too, he doesn't really
Speaker 7: know where the terminal rate is going to be like
Speaker 7: what that rate is that accomplishes getting maximum employment plus
Speaker 7: price stability? So who the heck? I we could have
Speaker 7: two more hikes, we could have two cuts, we could
Speaker 7: have nothing.
Speaker 5: So by the way, we should have more hikes from
Speaker 5: the BOE and the ECB because their rates will still
Speaker 5: well on to watch.
Speaker 6: That's tune in tomorrow as our friends at the Bank
Speaker 6: of England have their media.
Speaker 3: They are having a tough fight there when it comes
Speaker 3: to inflation. All right, love you both.
Speaker 2: Michael McKey, international economics and Policy correspondent at Bloomberg News.
Speaker 2: Off to a dead concert. Molly Smith, Economics editor at
Speaker 2: Bloomberg News. Not off to a dead concert, that is.
Speaker 3: Too This is Bloomberg.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 3: It's not too right.
Speaker 5: What are incredible musicians?
Speaker 3: But do you love the Daryl Hall with Daryl I
Speaker 3: mean with the long hair.
Speaker 5: Yeah, yeah, me too for sure.
Speaker 3: But then he got a cut.
Speaker 5: It was a little bit of a mullet. I like that.
Speaker 3: Yeah I can. Yeah, I don't like mullets. All right.
Speaker 2: So, Matt, we talked yesterday about a story that concerns
Speaker 2: have been highlighted when it comes to the private credit world,
Speaker 2: pressures of higher interest.
Speaker 3: Rates, what it means for those borers floating rates. As
Speaker 3: you said, Oh my gosh.
Speaker 5: Safe to say that you and I are both pretty
Speaker 5: well obsessed with private credit and I am.
Speaker 2: I am anywhere where I feel like I don't have
Speaker 2: a total handle on it, and everybody's.
Speaker 3: Like, don't worry, it's going to be okay.
Speaker 2: So let's get into the private world, which includes of
Speaker 2: course private equity with us. As Kate Ambrose, CEO of
Speaker 2: the Global Private Capital Association, it's a nonprofit, nonprofit, independent
Speaker 2: membership organization representing private capital investors who manage some two
Speaker 2: trillion in assets globally. We're talking about a KKR, We're
Speaker 2: talking about Bill and Melinda Gates Cousters, we're talking about
Speaker 2: the former Silicon Valley Bank, academic institutions, and more so
Speaker 2: looking forward to our conversation and she's here in our
Speaker 2: Bloomberg interaction.
Speaker 5: Is this essentially a lobbying group or when I see
Speaker 5: nonprofit together with private equity, like alarm bells go off?
Speaker 5: Why does private equity need a nonprofit?
Speaker 4: Right?
Speaker 8: Love that question, love it. We are a very unique organization.
Speaker 8: The organization was founded as the Emerging Markets Private Equity
Speaker 8: Association by the IFC of the World Bank over twenty
Speaker 8: years ago.
Speaker 3: Oh my god.
Speaker 8: It was founded by the first LPs in funds in
Speaker 8: emerging markets and grew to some prominence at the period
Speaker 8: of time that there was this idea that emerging markets
Speaker 8: was going to be an asset class in and of itself,
Speaker 8: that was going to be faster demograph younger demographics, faster growth,
Speaker 8: that would be a rising time that would lift all boats,
Speaker 8: and grew to some significant size. I joined in twenty
Speaker 8: nineteen as CEO and really to reposition the organization for
Speaker 8: the future, to reflect what's going on in the world today.
Speaker 8: The terminology emerging markets is forty years out of date.
Speaker 8: You know, it's forty years old. It's just completely outdated.
Speaker 8: China's the world's second lard economy, so many of the opportunities
Speaker 8: is so much capital flows from these places in the world.
Speaker 8: So we are now the Global Private Capital Association. The
Speaker 8: regions that we cover our Asia, Latin America, Africa, Central
Speaker 8: and Eastern Europe, and the Middle East. But our board
Speaker 8: includes for example Bill Ford of General Atlantic, one of
Speaker 8: the world's largest private equity firms as you mentioned KKR.
Speaker 8: Others are members. We have for example Tamasek, the Singapore
Speaker 8: sovereign from their chief Investment.
Speaker 5: Office are fascinating. So essentially it was the organization was
Speaker 5: started to kind of shepherd growth through private equity in
Speaker 5: these markets exactly.
Speaker 3: And the reposition so nonprofit, is that wrong?
Speaker 8: We are So we are the same structure as a
Speaker 8: national Venture capital Association in the US or a private
Speaker 8: equity council, which indeeder lobby groups. The beauty, and this
Speaker 8: is why we use the word independent, is that because
Speaker 8: we cover all of these markets, we're not there to
Speaker 8: lobby on behalf of lower tax rates for or preferential
Speaker 8: regulatory treatment for our members. We're really there to evangelize
Speaker 8: capital and educate on the opportunities across global markets. And
Speaker 8: the last thing I'll say is we are not a
Speaker 8: US lobby group. We are truly a global organization. Again,
Speaker 8: our board includes the leading fund managers from India, Africa,
Speaker 8: Latin America, both global firms.
Speaker 3: And local So where's your funding come from?
Speaker 8: Membership dues? So over three hundred member firms pay dues
Speaker 8: to be members of the organization. We have a very
Speaker 8: dynamic research platform. I can throw some data off the
Speaker 8: top of my head in terms of fundraising and trends
Speaker 8: and as I private exit.
Speaker 5: But so, but what I'm getting is that the World
Speaker 5: Bank said we need to shepherd growth through this mechanism
Speaker 5: private equity, and a good way to do that just
Speaker 5: put together an organization to support it. I guess what.
Speaker 8: So the IFC is the International Finance Corporation and they
Speaker 8: were limited partners in funds, so they actually put money
Speaker 8: into funds.
Speaker 5: See.
Speaker 8: And there's a whole universe of development finance institutions, including
Speaker 8: the US DFC, which is what the US uses to
Speaker 8: compete with China. Frankly around the world putting money into funds.
Speaker 8: It really it's more commercial than sort of what we're describing.
Speaker 8: But we are a nonprofit organization.
Speaker 2: YESDFC, the Development Finance Corporation. Okay, so if you had
Speaker 2: to say your top priority in your organization, number one,
Speaker 2: just one?
Speaker 3: What is it?
Speaker 9: Wow?
Speaker 5: That's tough.
Speaker 8: There's kind of twins, so I may cheat. One is
Speaker 8: to just re educate the world on the opportunities and
Speaker 8: the realities and the risks of investing in these markets.
Speaker 8: And the second would be to influence capital towards greater
Speaker 8: long term, inclusive growth and environmental private capital, yes, crivate capital.
Speaker 3: I am obsessed, Matt, We're both obsessed.
Speaker 2: And I feel like I keep saying this last couple
Speaker 2: of times I've been at Milka and we've done broadcasts.
Speaker 2: Doesn't seem like anybody cares about the public markets. It's
Speaker 2: all about the private markets, private credit, private.
Speaker 5: Equall those people you're hanging around the wrong people public
Speaker 5: But well, yes.
Speaker 2: Yes, but there's also right but so but I mean,
Speaker 2: tell us about from your perspective, because I think there's
Speaker 2: some nervousness in terms of the private capital world, especially
Speaker 2: as we see rates going out that you know, there
Speaker 2: doesn't feel like there's as much transparency and that that
Speaker 2: could be problematic interesting transancy.
Speaker 8: But well, okay, great, I mean absolutely, the scale of
Speaker 8: capital is remarkable, and this is sort of private capital,
Speaker 8: private capital exactly. For example, last year alone one point
Speaker 8: three trillion, you know, it's one point two one point
Speaker 8: three but critically, that's just what's raised by fund managers.
Speaker 8: You've got to throw in there all the Canadian pension plans.
Speaker 8: By the way, CPP is also on our board of
Speaker 8: directors as his future fund from Australia. It's trillions and
Speaker 8: trillions of dollars of liquidity. It's just so that the
Speaker 8: scale of money that is availa. You've got all the
Speaker 8: Chinese billionaires, you've got family offices.
Speaker 5: You know, there's so much everybody wants in right now.
Speaker 5: Because the thing is, there's also so much talk of
Speaker 5: the opportunity in private credit. It's become uh, kind of
Speaker 5: the darling of investors really from retail up now.
Speaker 8: Right Well, I was speaking across all private private capital
Speaker 8: strategies in private equity, venture capital, infrastructure, real assets. So
Speaker 8: there's a lot in there.
Speaker 3: What's really hot right now.
Speaker 8: So the two Well, you're mentioning private credit, which absolutely
Speaker 8: is a huge driver. So if I had to say
Speaker 8: a strategy that's going really quickly, I'd say private credit.
Speaker 8: And there was fourteen billion dollars in private credit fundraising
Speaker 8: last year. KKR had a big Asia private credit fund,
Speaker 8: Apollo had a big private credit fund, big manager in
Speaker 8: India's raising one point six billion for their private credit
Speaker 8: fund just focused on India. Then the other I would
Speaker 8: highlight two other big drivers particularly in our markets, climate
Speaker 8: and everything anything sustainability focused, huge driver.
Speaker 3: Seriously absolutely different from the ESG.
Speaker 8: Absolutely absolutely huge driver. And I would make this critical
Speaker 8: distinction ESG. It's kind of like the working with terminology
Speaker 8: like emerging markets. It can mean anything, right, what is he?
Speaker 8: What is impact? I mean, the definitions.
Speaker 5: Really are there. There's a lot of resulais.
Speaker 8: Particularly it's funny when you say, you know transparency. I
Speaker 8: believe that there's actually a greater opportunity for transparency and
Speaker 8: private capital strategies because you can see what's in portfolios.
Speaker 8: You can see you can look at the portfolio company.
Speaker 3: Level, not every portfolio.
Speaker 8: Well, in the I guess I would say in the
Speaker 8: markets that we represent going in.
Speaker 2: But if you're a pension fund, you can look at it, right, Yeah,
Speaker 2: I mean.
Speaker 7: Good.
Speaker 8: So I'm speaking specifically to the markets that we're in,
Speaker 8: and in the markets that we're in, you know governance,
Speaker 8: governance and transparency and you know going in and cleaning
Speaker 8: up that type of stuff from the outset, and there's
Speaker 8: so much leverage. So I don't know, when you're thinking
Speaker 8: from a risk perspective, you're thinking about the amount of
Speaker 8: leverage that's been put on.
Speaker 2: If KKR Apollo has a fun I don't necessarily know
Speaker 2: everything that's in it.
Speaker 8: You know, here's another driver, ID would point right though, Yeah,
Speaker 8: I honestly can't answer that.
Speaker 1: No.
Speaker 5: I think Carol and I both have been grappling with
Speaker 5: UH trying to value the entire size of the private
Speaker 5: credit market, for example, and that data is difficult for us.
Speaker 8: Private credit is going to be a much less transparent
Speaker 8: than private equity. Correct, yes, because in private equity you're
Speaker 8: talking about typically investments and so. But private credit is
Speaker 8: absolutely less private equity.
Speaker 2: If you're not if you're getting into private firms, I
Speaker 2: guess there's announcements.
Speaker 8: There has to be, like to say that the deal
Speaker 8: portfolio is on the website. And I would make another point,
Speaker 8: which is one of the things that I find really
Speaker 8: exciting about what I do in the opportunity. The way
Speaker 8: the industry is changing just in the space of the
Speaker 8: last five years. The level of accountability and the shift
Speaker 8: in thinking in private capital globally is remarkable. You look
Speaker 8: at you know, the examples of is being pushed out
Speaker 8: because even a hint of impropriety, there is so much
Speaker 8: more focus on long term reputation because let's face it,
Speaker 8: you know one bad step reputationally is you know, it
Speaker 8: has a major impact and look at exactly and then
Speaker 8: but I do wonder about private equity concentration and fields
Speaker 8: and we've talked about it with healthcare or you know,
Speaker 8: in vet service.
Speaker 3: I mean there's a lot of concentration.
Speaker 8: Well, I got to say, just not in the markets
Speaker 8: that I focus on. So this is our platform, which
Speaker 8: is basically that there is such a scale of capital
Speaker 8: availability invested, the leverage ratios, there's virtually no leverage in
Speaker 8: the markets we represent. Each is a huge Again, you know,
Speaker 8: there's very little leverage, and you're investing in rather than
Speaker 8: sort of trading portfolio company important to manager to manager,
Speaker 8: You're investing in things from the bottom.
Speaker 3: Come back soon.
Speaker 2: Kate Ambrose, CEO at the Global Private Capital Association, Here
Speaker 2: in studio.
Speaker 1: Right here on Bloomberg, you're listening to the Bloomberg Business
Speaker 1: Week podcast. Catch us live afternoons from three to six
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Speaker 3: Hey.
Speaker 2: Earlier this year, Jeff Green we caught up with and
Speaker 2: he's been reporting how women gained thirty four seats on
Speaker 2: the boards of S and P five hundred companies in
Speaker 2: the first two months of the year. It was the
Speaker 2: strongest start since at least twenty nineteen, bolstered by the
Speaker 2: naming of three female chief executive officers officers. Matt I
Speaker 2: will say, I will be so happy when we stop
Speaker 2: counting women on boards, CEOs and all that good stuff.
Speaker 5: Well, I'll be happy when the market punishes you for
Speaker 5: not having the diversity that you need, right, because the
Speaker 5: idea is that if you increase diversity on your board
Speaker 5: in your company, then you will grow your revenues and
Speaker 5: also make you more money and profits.
Speaker 3: Diversity means financial So at.
Speaker 5: Some point, you know, assuming that that's true, good companies
Speaker 5: will have diverse boards words and those that don't have
Speaker 5: diverse boards won't do as well. Ask the idea, right,
Speaker 5: So let's.
Speaker 3: See what our next guest has to say. She's got
Speaker 3: a front row to a front row seat to all
Speaker 3: of this.
Speaker 2: Heather Spielsberry is chief operating officer at Fifty to Fifty
Speaker 2: Women on Boards. It's a nonprofit committed to quote, integrating
Speaker 2: diversity and inclusion into the fabric of corporate governance. I've
Speaker 2: got that from their website. She's with us on zoom
Speaker 2: from LA. Sorry about the frivolity, it's just one of
Speaker 2: those days, Heather.
Speaker 3: Good to have you here.
Speaker 2: It's not frivolous when we talk about the importance of
Speaker 2: diversity on boards direct companies. Tell us a little bit
Speaker 2: about your organization and whether or not we're making progress here.
Speaker 10: Sure.
Speaker 11: Well, first of all, thank you so much for having
Speaker 11: me and for having fifty to fifty Women on Boards.
Speaker 11: It's great to be here with you today and appreciate
Speaker 11: that introduction. That was fantastic. So we're a nonprofit organization that,
Speaker 11: like you said, helps elevate women in the pipeline to
Speaker 11: corporate board service. And we do this through educational programs
Speaker 11: for corporations to ensure that they understand the importance of
Speaker 11: having a diverse board and what it means for them
Speaker 11: from profitability standpoint, productivity, and also workforce engagement. And then
Speaker 11: we also invite companies to then bring their women employees
Speaker 11: and clients into the fold and our in person strategic
Speaker 11: networking events that are held throughout the year across the
Speaker 11: globe in the United States, Mexico, Canada, Europe, Athens, Greece,
Speaker 11: and Tokyo, Japan. So that's our way of making sure
Speaker 11: that people understand what it means to have a diverse
Speaker 11: board and why it's so important. And to your point earlier,
Speaker 11: I heard you talking, but it is sad that we're
Speaker 11: still talking about gender. But until we get there, I
Speaker 11: think we have to reinforce why it's so important to have.
Speaker 2: But as Bad says, if we you know we McKinley's
Speaker 2: been doing research for years. I mean I think I
Speaker 2: have a child as old as do you know what's
Speaker 2: been doing research.
Speaker 5: I'll go back. Funny, Carol and I have been working
Speaker 5: together for twenty years, and about twenty years ago, Mindy
Speaker 5: Grossman I think told us both this story about when
Speaker 5: she was on the board at Nike and they were like,
Speaker 5: we need to sell more shoes to women, and she
Speaker 5: looked around the room and she was the only female
Speaker 5: there and she's like, well, maybe if you get more
Speaker 5: of me, you could sell more shoes to these women.
Speaker 5: So that reinforced my idea, that made me into a
Speaker 5: kind of gender diversity evangelist. I've been saying since then,
Speaker 5: if you want to sell more shoes to women, put
Speaker 5: more women on your board.
Speaker 11: Right, Is that true?
Speaker 5: Is that proving to be true? Is it proving to work?
Speaker 12: Yeah?
Speaker 11: It is, And it's important to note that it's we
Speaker 11: start with women because women are still lacking on corporate boards,
Speaker 11: and women of color of course, so once we can
Speaker 11: get there, then we can talk about other underrepresented groups.
Speaker 11: We're not even there yet, So I think our point
Speaker 11: is really to elevate women in the pipeline because women
Speaker 11: tend to bring diversity as well with them, so they'll
Speaker 11: bring diverse candidates into the fold from a leadership standpoint
Speaker 11: and also a board service standpoint. So I think that's
Speaker 11: the goal. And what she was trying to say was
Speaker 11: it can't just be her in the room. And she's right.
Speaker 11: We know from our research and we look at the
Speaker 11: wrustle three thousand companies, but there's still sixty companies that
Speaker 11: have zero women, and there's still three hundred and sixty
Speaker 11: four that only have one woman. And that's not a cohort.
Speaker 11: That's not enough to help.
Speaker 3: Why why Heather, Why?
Speaker 2: And going back to the point if the research has
Speaker 2: been there for such a long time about the importance
Speaker 2: of diversity and what it can mean financially. I mean,
Speaker 2: I've always feel like, follow the money. Everybody follows the money,
Speaker 2: So why aren't we following the money if it really
Speaker 2: has a financial impact.
Speaker 11: The thing we hear time and time again is that
Speaker 11: companies cannot find diverse candidates or can't find women candidates
Speaker 11: to fit the exact.
Speaker 3: Is that true, expertise or it's.
Speaker 11: Not true, But here's what happens, And it's like anything.
Speaker 11: I equate it to looking for a new employee, or
Speaker 11: even when you're looking for a restaurant right when you're
Speaker 11: so hungry you can't find anything or you don't know
Speaker 11: where to go, because it's an automatic need and a
Speaker 11: position to fill. But what you need to do is
Speaker 11: to develop your board and your board governance to say, hey,
Speaker 11: we need to develop succession planning and programming that so
Speaker 11: and so and so is timed out or his time
Speaker 11: serving on the board or her time serving on the
Speaker 11: board is done. We have someone else in the pipeline
Speaker 11: where we're going to elevate based on the expertise and
Speaker 11: skills we're looking for, and so that way it makes
Speaker 11: finding a candidate that much easier. It's also one of
Speaker 11: the reasons we launched fifty Women to Watch for boards
Speaker 11: this year was because we were tired of hearing that
Speaker 11: excuse of we can't find qualified candidates or women of
Speaker 11: color who fit this exact mold, and it's like they're there,
Speaker 11: they exist. There is a list that we've launched yesterday
Speaker 11: where you can search by primary expertise, industry, race, and ethnicity.
Speaker 11: It's all there for you to search to be able
Speaker 11: to find these vetted to candidates that we're hoping that
Speaker 11: these corporations that still are lacking women can tap into
Speaker 11: and use it as opposed to saying we can't find
Speaker 11: the right candidates.
Speaker 5: So are you talking to corporations and showing that I mean,
Speaker 5: obviously we're talking about your your list here, but are
Speaker 5: you have you emailed the heads of hr every fortune
Speaker 5: five hundred company here's the list.
Speaker 11: Yeah, yeah, we're doing that outreach. It's tough to reach
Speaker 11: out to every chro so sometimes you have to do
Speaker 11: it through public listings, including their investment relations team, and
Speaker 11: send them notes to ensure that they're aware that we're
Speaker 11: asking them to add more women to their boards. It's
Speaker 11: really it's an effort. It takes not only our organization,
Speaker 11: but other organizations who are on a mission to do
Speaker 11: the same thing, to say, hey, here's a list you
Speaker 11: can tap into, or here's my members that you can
Speaker 11: tap into, and collectively we've all decided that this is
Speaker 11: the mission that we're after, and this is how we're
Speaker 11: going to go and approach companies and encourage them to
Speaker 11: add women and why it's so important for their business.
Speaker 11: But again, to your point, it's an educational process, and
Speaker 11: then part of that process is saying, here's vetted candidates
Speaker 11: you can tap into. So, yes, that's part of the goal.
Speaker 2: Hey, real quickly, thirty seconds, here are female CEOs or
Speaker 2: maybe minority CEOs more likely to put women on their board?
Speaker 3: Just very quickly.
Speaker 11: They are, And we have research to back that up
Speaker 11: in our when women lead research. But it is true
Speaker 11: that when a women is the CEO, the board is
Speaker 11: more diverse, and the workplace culture is more diverse, and
Speaker 11: they're more apps to bringing more women up with them
Speaker 11: in the fold and diverse candidates and underrepresented groups.
Speaker 2: Well, really cool to check in with you so appreciate it.
Speaker 2: Heather Spilsbery. She's chief operating officer at fifty to fifty
Speaker 2: Women on Boards, joining us on Zoom from Los Angeles.
Speaker 2: As we said, it's a nonprofit and they are all
Speaker 2: about diversity inclusion when it comes to corporate governors. I
Speaker 2: mean on board, you can measure it. You know exactly
Speaker 2: who's on a corporate board. If you're a publicly held
Speaker 2: entity or even most entities, right you can check out
Speaker 2: the board and get an idea if it's diverse.
Speaker 5: Absolutely.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 1: the Bloomberg Business App and YouTube. You can also listen
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Speaker 1: Just say Alexa, play Bloomberg eleven thirty.
Speaker 5: Say you on a rebel? No, we all want to
Speaker 5: change the world. See a little bit of a Can
Speaker 5: we play this?
Speaker 7: What do you mean?
Speaker 5: I feel like you don't we have to pay somebody
Speaker 5: if we play this. I don't know why. It's specifically
Speaker 5: the Beatles, but I feel like it's expensive to play
Speaker 5: the Beatles.
Speaker 3: I think you're allot to play a certain amount.
Speaker 5: Like less than thirty seconds.
Speaker 3: So you know what's really important. We're going to talk
Speaker 3: about a revolution that's going on.
Speaker 5: Yeah, I've I've been on Reddit lately. I know what's
Speaker 5: going on.
Speaker 2: So let's get to it, because this story it has
Speaker 2: to do with really kind of a changing world, whether
Speaker 2: it's the ad market online, whether it's AI.
Speaker 3: There's a lot of stuff.
Speaker 2: That we're trying to figure out in a very new
Speaker 2: environment for the social media world. And our Joshua Brustin
Speaker 2: gets into it in the new upcoming issue of Bloomberg
Speaker 2: business Week magazine.
Speaker 3: So let's get to it.
Speaker 2: Joshua of course here with us along with the editor
Speaker 2: of Bloomberg business Week magazine, Jil Whatever. Joshua, by the way,
Speaker 2: is Bloomberg business Week Technology Editor. So the story is
Speaker 2: very telling, right as we talk so much about AI
Speaker 2: Joel and trying to understand.
Speaker 3: The importance of data going forward. It's important to AI
Speaker 3: generative AI.
Speaker 10: Yeah, and then there's Reddit, which is just I think,
Speaker 10: you know, for the past couple of years, become the
Speaker 10: great hope of the Internet. It is, you know, as
Speaker 10: we've seen.
Speaker 5: Weird so weird. I remember it is no one's hope.
Speaker 10: You know what the genius of Reddit though, was that
Speaker 10: it reminded us of how great the Internet was, like
Speaker 10: in two thousand and two, before there were social networks
Speaker 10: and stuff, and it just was it's so basic, you know,
Speaker 10: it just puts it all out there.
Speaker 3: Yeah.
Speaker 5: I learned everything I know about crypto originally on Reddit,
Speaker 5: like before anyone before it was one thousand dollars bitcoin.
Speaker 5: I went on Reddit, I joined the subreddit, I got
Speaker 5: to know people. I bought my first bitcoin through the subreddit,
Speaker 5: you know, for six hundred bucks.
Speaker 10: Yeah, what's your handle?
Speaker 11: Like?
Speaker 10: Leather jacket? I can't tell you. No inside joke there
Speaker 10: from yesterday. What struck me about this though?
Speaker 5: Podcast Also, if.
Speaker 10: You were going to swallow the internet, Reddit would be
Speaker 10: a pretty great place to start, and that sort of
Speaker 10: it's kicked off this current controversy and reminder Reddits still
Speaker 10: not a publicly traded company, which has also been part
Speaker 10: of this.
Speaker 9: So, Josh, what happened, Well, what happened started in April
Speaker 9: when Reddit said it was going to start charging for
Speaker 9: API usage. This is basically how you would systemically ingest
Speaker 9: Reddit data for your own for your own programs and
Speaker 9: As you mentioned, one big use of the Reddit API
Speaker 9: is to take data and use it to train AI models.
Speaker 9: It's part of the model that is used to train
Speaker 9: chat GPT. I think Google's model uses it as well.
Speaker 9: And it's just this big data set of people talking.
Speaker 9: And if you want to teach a computer to talk
Speaker 9: like a person, Reddit it's one place to start.
Speaker 10: So Reddit wants to make sure smart.
Speaker 5: I guess start training with Reddit. I mean, actually, my
Speaker 5: wife works for a company I won't name it that
Speaker 5: scrapes places like Twitter and Reddit for data. They do
Speaker 5: that for corporations, so that for example, this is not
Speaker 5: a client. I'm just using it. If PEPSI wants to know,
Speaker 5: you know, how people on Twitter feel about them. This
Speaker 5: company goes and uses the Twitter API and scrapes all
Speaker 5: the mentions and figures out you know, which are positive,
Speaker 5: which are negative, and which are neutral.
Speaker 10: So yeah, yeah, that's actually learning a lot about Matt.
Speaker 10: You know, I'm glad that the revolution was hinted at
Speaker 10: the beginning because yeah, you know, and.
Speaker 9: What Reddit wants to do is make your wife's company
Speaker 9: pay for that, yes, because they're exactly some commercial use
Speaker 9: from this. And at first the announcement was made in April.
Speaker 9: You know, people said, huh, that's an interesting look at
Speaker 9: like what might happen with AI in the future. And
Speaker 9: then it became clear that this was also going to
Speaker 9: impact a lot of developers that make apps on Reddit
Speaker 9: that Reddit users really like today and Reddit users really
Speaker 9: didn't like that, And after some negotiations, if you can
Speaker 9: call it that, with the company, the company refused to
Speaker 9: change its policies, and the entire site or big parts
Speaker 9: of the site went dark last week.
Speaker 5: So I mean, for example, Carol uses Twitter, not through
Speaker 5: Twitter dot com, but she has some third party tweet
Speaker 5: deck that she uses, and tweet Deck I guess would
Speaker 5: hook up to Twitter with an API as well. And
Speaker 5: you're talking about people using Reddit with such third party apps, right.
Speaker 9: Yeah, exactly. There are some very popular Reddit readers that
Speaker 9: ingest threadit and give you a better or give you
Speaker 9: a different user interface. Those apps run ads that they
Speaker 9: don't share the revenue with Reddit, so Reddit wants some
Speaker 9: of that revenue. But also the API is used to
Speaker 9: build tools that things like the volunteer moderators that make
Speaker 9: Reddit run use just in their day to day use.
Speaker 9: And that was really kind of what moderators said, if
Speaker 9: you take this away from us, we can't do our
Speaker 9: jobs and we're giving you free labor.
Speaker 10: So, which is key part theree just rights, but Reddit
Speaker 10: power users or something else using the site in the
Speaker 10: way that seems more like employment than leisure, except for
Speaker 10: the getting paid part. Like this is one of the
Speaker 10: amazing things about the Internet. You find a community people
Speaker 10: who care and they will do all that work for free. Yeah, right,
Speaker 10: which also is I'm sure part of but you know,
Speaker 10: the AI swallowing it all likes.
Speaker 9: Yeah, at the heart of it, this is a conflict
Speaker 9: between two groups of people who said, I don't want
Speaker 9: to do something without getting paid for it or getting
Speaker 9: you know, I don't want to do something for free.
Speaker 9: If you're going to exploit me. The moderator is being exploited.
Speaker 3: By everybody else is going to get paid and being.
Speaker 9: Exploited by the AI companies, the or the third party
Speaker 9: app companies or whoever.
Speaker 6: I love.
Speaker 2: There's a quote in the professor at the Institute for
Speaker 2: Advanced Study, and I guess was in the Biden Administration's
Speaker 2: Office for Technology and Science Policy. People are anticipating that
Speaker 2: there's a change in the economy of the internet company, right,
Speaker 2: we're finding the ad model can just go so far, right,
Speaker 2: and now we're increasingly we knew data was worth something, right,
Speaker 2: We've all been trying to figure out who ultimately benefits
Speaker 2: from all that data collection, right, and now we're kind
Speaker 2: of getting to a whole new level of it because
Speaker 2: it's needed to make generative AI so much smarter, right,
Speaker 2: And that's kind of what it gets into on a bigger,
Speaker 2: broader level.
Speaker 4: Yeah.
Speaker 9: Absolutely, I think a lot of people are very nervous
Speaker 9: about the changes coming in the Internet, and there's a
Speaker 9: question about who creates value online and who is going
Speaker 9: to be compensated for that value and how.
Speaker 10: Okay, so what does this mean for that IPO that
Speaker 10: never quite happened.
Speaker 9: Well, I think it's fair to say, although Reddit will
Speaker 9: not say that part of the initial reason to do
Speaker 9: the changes were to shore up its business as it
Speaker 9: looks ahead to this IPO, and I think how it
Speaker 9: impacts it really depends on the outcome of this. There's
Speaker 9: real concern out there that if the moderators continue to
Speaker 9: be in revolt, that Reddit won't work as well and
Speaker 9: might not be as good of a business going forward.
Speaker 9: It might kind of fail to function as a service.
Speaker 10: What it reminds me of a little bit is the
Speaker 10: Dungeons and Dragon cover story that we did not so
Speaker 10: long ago. Because has Bro also tweaked the licensing agreement
Speaker 10: before the big blockbuster came out right and the nerds
Speaker 10: did not like that. There was a revolt online. Then
Speaker 10: Hasbru ultimately had to back down, but there was so
Speaker 10: much money at stake, and here we are again. I
Speaker 10: won't call Reddit users nerds.
Speaker 5: But they are nerds.
Speaker 10: Okay, well you said it, but it basically creates this
Speaker 10: moment where you've got, you know, a platform that everyone
Speaker 10: has turned to. I mean, this is the hope of
Speaker 10: what it was, back to the future, bet that the
Speaker 10: future of the Internet actually maybe looked more like Reddit,
Speaker 10: and all of a sudden, the underlying value proposition is
Speaker 10: the thing that is at risk. It is pretty crazy,
Speaker 10: Mike Drop.
Speaker 3: It's really kind of right.
Speaker 2: It's kind of heavy thinking of like how this moves forward.
Speaker 5: Well, AI is the the you know, the dawn of
Speaker 5: generative AI had made us all realize, oh, Reddit is
Speaker 5: worth something.
Speaker 10: I mean, if there's real value there, highly entertaining, right.
Speaker 5: Yeah, I mean I've loved Reddit for over a decade.
Speaker 3: You still use it.
Speaker 5: I use it all the time, like literally every day
Speaker 5: on multiple devices. But I always thought it was I
Speaker 5: always thought it was fairly worthless. Although I guess now
Speaker 5: that I think about it, it need answers for me,
Speaker 5: so many questions.
Speaker 10: Time your your eyeballs, think about how much that's worth?
Speaker 1: Right? Yeah?
Speaker 3: What is Reddit thinking? Joshua? Inside? Internally as they work
Speaker 3: this way?
Speaker 9: This through well, Reddit has said there have been some
Speaker 9: memos that have come out from inside the company where
Speaker 9: the executives said, you know, this is these flaps happen
Speaker 9: every once in a while. Reddit is a very restive community,
Speaker 9: and the idea is let's keep it. Let's keep our
Speaker 9: heads down, you know, we'll take our lumps and a
Speaker 9: month from now everything will be back to normal and
Speaker 9: we can, you know, move forward with this plan. The
Speaker 9: economics will be better and problem solved or at least,
Speaker 9: you know, problem lessened.
Speaker 5: Wait, wait, who are the evil overlords that run Reddit?
Speaker 5: Like Alexis Ohanian is gone right now, He's like a
Speaker 5: women's soccer guy. So who who are the bosses? Who's
Speaker 5: the corporate face of Reddit?
Speaker 9: So the CEO of Reddit is is Steve Huffman. The
Speaker 9: other co founder and Reddit, as you might remember, was
Speaker 9: bought by Conde Nass soon after it was founded, and
Speaker 9: it is now an independent subsidiary or it is it
Speaker 9: is Its majority owner remains Advanced Publications, which is Conde's
Speaker 9: parent company.
Speaker 10: Cool, So how do we think they might attempt to
Speaker 10: navigate this, Josh? Like, what are their options really? And
Speaker 10: they You're right, they have gone through this before. I'm
Speaker 10: thinking of remember the anti work kerfuffle where like the
Speaker 10: community sort of ousted the moderator that it had, right, Like,
Speaker 10: there's been tensions like this that have simmered before. But
Speaker 10: how do you think they go about navigating this?
Speaker 9: Yeah, this this thing, this kind of thing happened from
Speaker 9: time to time. And I think that's what Reddit is
Speaker 9: betting on. And Reddit says it's going to build a
Speaker 9: lot of moderator tools or has already released some that
Speaker 9: will replace some of these some of these third party
Speaker 9: tools that might not be able to function if they
Speaker 9: have to pay for the APIs. And I think that
Speaker 9: they'll hope that moderators will find out that, oh, these
Speaker 9: things work. Okay, maybe this isn't such a big deal
Speaker 9: after all. You know, I love Reddit, and I turns
Speaker 9: out I can continue to do my job, and you know,
Speaker 9: and they got mad and then they get better and
Speaker 9: things calmed down for a little while until the next
Speaker 9: time they get mad.
Speaker 10: And what about for the AI companies that are at
Speaker 10: their attempting to swallow the Internet?
Speaker 3: Like, what will they pay up?
Speaker 10: What do you think that dialogue looks like?
Speaker 9: It certainly seems like the AI companies are preparing to
Speaker 9: pay in some way. You know, Reddit is not the
Speaker 9: number one source of material, but there may be some
Speaker 9: licensing deals worked out, and I don't think I think
Speaker 9: the economics that are.
Speaker 5: I would provide it. That's no, You've just provided you
Speaker 5: with another question. What is the number one source of material?
Speaker 5: If not Reddit?
Speaker 10: Basically wonder like where do these lives come from?
Speaker 3: Would be going?
Speaker 5: Is Wikipedia a better source? I mean, what are these
Speaker 5: AI models?
Speaker 10: Just all of it?
Speaker 5: No hierarchy.
Speaker 9: Yeah, it's it's an immense it's a large range. I
Speaker 9: actually don't know off the top of my head what
Speaker 9: the number one is number one sources. But there's you know,
Speaker 9: there's like thousands of websites that it's scraping and you know,
Speaker 9: putting together sure millions.
Speaker 2: Even what does this mean for Elon and Twitter, potentially
Speaker 2: you're trying to figure it out too well.
Speaker 9: One thing that this shows is that you know, Reddit
Speaker 9: users have some power over the site, whereas Twitter users don't. Really.
Speaker 9: I mean, people are mad at Elon, and Elon's like, well,
Speaker 9: go go ahead, you can leave if you want, but
Speaker 9: they can't shut Twitter down and.
Speaker 5: They don't leave. By the way, if you look at
Speaker 5: the data, actually use to increase.
Speaker 3: Everybody lost their checks and we're like, okay.
Speaker 5: Everybody said, like when when Trump got elected, people are like,
Speaker 5: I'm gonna move out of this country if Trump gets elected,
Speaker 5: fast forward, nobody moved out. Same thing about with Twitter.
Speaker 5: You know, they said I'm gonna quit Twitter if Elon
Speaker 5: must take They're all still there.
Speaker 10: I'm genuine curious here when you go to Reddit, like
Speaker 10: what are the sub threads that you traffic in?
Speaker 5: I feel like that's such a private question, which is
Speaker 5: why I won't even tell you my handle. Like the
Speaker 5: last thing in the world I want is for anybody
Speaker 5: to see my money.
Speaker 2: I've worked with Matt for so long and he said
Speaker 2: something earlier, and I'm like, you still surprised me twenty
Speaker 2: plus years in coming.
Speaker 9: He's surprises you don't maintain multiple Twitter or redd it
Speaker 9: had I do have, I do have family friendly.
Speaker 5: I mean, so I look at so I look and
Speaker 5: I look at like a leather jackets thing. Although for
Speaker 5: that I use even more embarrassing forums than Reddit, like, uh.
Speaker 10: We learned yesterday, Matt.
Speaker 5: I'm kind of obsessed with leather jackets. I'm also kind
Speaker 5: of obsessed with leather boots and shoes, and Reddit has
Speaker 5: a very good forum for for boots.
Speaker 10: So we actually didn't ask you about this yesterday. In
Speaker 10: video CEO Jensen very very much one owns the leather jacket.
Speaker 10: Where do you rank his leather jacket like critique?
Speaker 5: I don't get more than one though exactly so I
Speaker 5: don't They didn't look so amazing. I don't think he's
Speaker 5: getting them from like the best shinky horse hide tanneries
Speaker 5: in Japan.
Speaker 10: You should reach out.
Speaker 9: I think that was he on the Reddit forum.
Speaker 5: Could the thing is for jackets, You've got to go
Speaker 5: to the Fedora lounge, which is even worse.
Speaker 10: I think I think there needs to be uh, you know,
Speaker 10: fashion consulting with with Matt, I'll reach out to and video.
Speaker 3: How come somebody put chaps in our ib chat? Did
Speaker 3: you say chaps, chaps, chaps, I don't know.
Speaker 5: Leather pants is what he's asking about. I have a
Speaker 5: few pairs.
Speaker 3: Of chips, you know, but that's for riding your motorcycle.
Speaker 1: And we're good.
Speaker 3: Are you all right? Maybe not? Okay? Talk about a revolution.
Speaker 3: We just had one.
Speaker 2: That's a wrap, guys, Thank you so much. Josha Brustin,
Speaker 2: Tech editor at Bloomberg Business Week.
Speaker 3: Here in studio long Till Webber.
Speaker 2: The editor of Bloomberg Business Week, is Story and the
Speaker 2: new issue a BusinessWeek magazine on newstands tomorrow, online at
Speaker 2: Bloomberg dot com, slash business Weekend on the Bloomberg and
Speaker 2: on leather chaps.
Speaker 3: We're taking a break. This is Bloomberg, Um, brother Marco.
Speaker 4: A journal.
Speaker 5: How about you let me drived? No, no, no no, who's
Speaker 5: going to drug honey? Please? I'll do the driving gravel.
Speaker 3: Let's mate, I want to try it.
Speaker 5: It's a good question time.
Speaker 1: This is the drive to the Globe dot com.
Speaker 4: I think we'll buy around yother.
Speaker 1: Don on Bloomberg Radio.
Speaker 3: All right, let's get to it, folks.
Speaker 2: Just about eighteen minutes left in today's trading session. Bouncing
Speaker 2: around on the equity side, another leg down, off our
Speaker 2: highs of the session, down the most on the Nawdack
Speaker 2: because you just heard from Charlie and Bill uh In
Speaker 2: the meantime, we've seen rates also bout and around following
Speaker 2: that first day of testimony from Fetcher J.
Speaker 3: Powell up on Capitol Hill.
Speaker 2: We get more testimony tomorrow mat but it's usually kind
Speaker 2: of like the same old movie.
Speaker 5: Yeah, it's always interesting to me, you know, because I
Speaker 5: guess I love it the questions that they ask sometimes,
Speaker 5: and I'm sure they are the most educated and well
Speaker 5: informed people in the country, but sometimes make me lose
Speaker 5: faith in our leaders just for a brief moment.
Speaker 2: I used to work with who would be like really,
Speaker 2: now I do feel like it's very political and very grandstanding, right, like, of.
Speaker 5: Course, what I'm doing for you folks, that's an understatement.
Speaker 3: Yeah.
Speaker 5: The interesting thing this time is that you have so
Speaker 5: many people out there who don't believe that the FED
Speaker 5: is going to raise rates again, who think that this
Speaker 5: cycle is over, even though the dot plot showed us
Speaker 5: two more increases and pal said at the last meeting
Speaker 5: that they were going to raise rates again. Now he
Speaker 5: comes back and says once again that they are going
Speaker 5: to raise rates, so they.
Speaker 3: Like, folks, let me draw you a picture.
Speaker 2: Yeah, let's see what the market picture is. According to
Speaker 2: our next guest, our drive to the Closed guest on
Speaker 2: this Wednesday is Phil Taves. He's CEO portfolio manager also
Speaker 2: at Tave's Asset Management, also the founder of Behavioral Investing Institute,
Speaker 2: which is an organization organization excuse me, devoted to helping
Speaker 2: advisors manage investor behavior through market challenges, which is I
Speaker 2: would say, a really timely thing and useful thing.
Speaker 3: Right now. He's on Zoom in New York City.
Speaker 2: Feel nice to have you here with Matt and myself
Speaker 2: on business week. This market environment a lot of momentum
Speaker 2: to the upside despite the huge short position that's out there.
Speaker 2: When it comes to the s and P five hundred,
Speaker 2: what would you bet more to the upside, more to
Speaker 2: the downside? How do you see it?
Speaker 12: Well, I don't want to ruin by the way, it's
Speaker 12: a pleasure to be with you again always. I don't
Speaker 12: want to ruin my reputation as a doom and gloomer,
Speaker 12: but I guess I don't want to spoil that. But
Speaker 12: the reality is that sometimes you just have to embrace
Speaker 12: the boom. And I think at the moment, you know
Speaker 12: you're right. Last couple of days we've seen a move down,
Speaker 12: but we have such a huge rally before that, and
Speaker 12: there's just so much money on the sidelines. I feel
Speaker 12: like I almost bet on momentum at this moment.
Speaker 2: Yes, sometimes I embrace a second or third glass of wine.
Speaker 2: It's not always the best thing for me. So I'm
Speaker 2: just curious, like, if you embrace it, is it?
Speaker 3: Are you just writing the momentum?
Speaker 2: It doesn't mean that fundamentally that supports that momentum.
Speaker 12: No, I think fundamentally it doesn't support it. There's a
Speaker 12: great word that John Kenneth Galbreath came up with, which
Speaker 12: is bezel, from the word embezzlement, and the way Charlie
Speaker 12: Munger uses it is the difference between the price we're
Speaker 12: paying for assets and fundamental value. So if you ask
Speaker 12: that question that way, then no, we don't deserve to
Speaker 12: continue to rally because we're, you know, above where we
Speaker 12: should be. The huge thing that I think, if historical
Speaker 12: precedent matters, and I guess to some like maybe quarts
Speaker 12: it doesn't, But if historical precedent matters, interest rate trends
Speaker 12: are really long term things. So you know, twenty five
Speaker 12: years latter half of the nineteenth century, and then it's
Speaker 12: like twenty year chunk, twenty year chunk, you know, between
Speaker 12: nineteen forty five and nineteen eighty one rates where we're
Speaker 12: going moving higher and you know, been down for forty years,
Speaker 12: and so why do we think that rates are just
Speaker 12: going to move up for eighteen months and then it's
Speaker 12: going to end. And also the history of inflation is different.
Speaker 12: The history of inflation is that inflation goes up between
Speaker 12: four and nine years, not eighteen months. So I think
Speaker 12: the longer term we're going to be probably higher for
Speaker 12: longer than we would want to be with rates. I
Speaker 12: think longer term that is a negative for potential for stocks,
Speaker 12: at least based on current valuations. So but ride the momentum.
Speaker 12: Let's go with it. There's so much cash on the sideline.
Speaker 5: Yeah, you're not alone.
Speaker 12: By the way, stop talking for sex game stax.
Speaker 5: Well you're not alone. I noticed today that KKR chief
Speaker 5: macro strategist Henry McVeigh said investors are poorly positioned for growth,
Speaker 5: maybe unexpected growth that's going to be stronger than the
Speaker 5: market thinks this year and McVeigh also said inflation maybe
Speaker 5: tamer than the markets expect this year, only a little bit.
Speaker 5: But he said that KKR is going to embrace more risk,
Speaker 5: at least right now in the short term. They are
Speaker 5: looking at more opportunities, and but I feel like there's
Speaker 5: a limit right to the amount of risk that you
Speaker 5: want to embrace. And our producer, when he was preparing
Speaker 5: us for today's show, said that you like Kathy Woods
Speaker 5: arc and I thought, that's just nuts. Is that are
Speaker 5: you advising people? Because that seems like, you know, putting
Speaker 5: it all on black twenty one.
Speaker 3: There's a lot of investors who don't think it's nuts
Speaker 3: because they've been port.
Speaker 4: So I did not say that.
Speaker 12: So anyway, what I said is that the graph for
Speaker 12: end video looks a lot like the graph of an
Speaker 12: rc ETF did back at the end of twenty twenty
Speaker 12: one when it was just parabolic up and then we've
Speaker 12: know what happened parabolic down after that. So that tends
Speaker 12: to me what's supporting the market right now? You've got
Speaker 12: just a handful of stocks up hugely, and that's what
Speaker 12: we all know. That's all the games of the s
Speaker 12: and P five hundred, So it wouldn't take much much
Speaker 12: to tip us lower. But you know, we actually come
Speaker 12: with a fully baked solution. I think what's important for
Speaker 12: investors is that they maintain their full equity allocation right now,
Speaker 12: but do it in a way that makes sense and
Speaker 12: addresses contingency. Take half of it and put it in
Speaker 12: hedge equity funds, stuff that has options underneath it that
Speaker 12: can appreciate if the market moves lower. So that way
Speaker 12: you need you're there with stock over the long haul.
Speaker 12: During periods of inflation, historically, stocks have done reasonably well,
Speaker 12: at least they've kept up with inflation much better than
Speaker 12: bonds have. So I think get your bond allocation, or
Speaker 12: get your stock allocation done if you've been avoiding doing
Speaker 12: it because Mike Wilson persuaded you not to just get
Speaker 12: your allocation done, but but do with hedge equity funds.
Speaker 3: Wow, smackdowns. You don't want smackdowns here? Wow, you're going
Speaker 3: to lock your door there, buddy, Well it's interesting.
Speaker 2: So then where would you put money to work in
Speaker 2: this market environment?
Speaker 5: You just buy the cues have outperformed every active asset
Speaker 5: manager for the last fifteen years.
Speaker 12: Yeah, I mean, I think it would be nice to
Speaker 12: have some there. One of our funds, thhlg X, has
Speaker 12: a seventy percent allocation SMP and thirty for thirty percent
Speaker 12: allocation of triple cues. But it all has options underneath it,
Speaker 12: and we can trend follow out of that into cash
Speaker 12: positions if you need to be so. I think it's
Speaker 12: great to have growth right now. You know, if you're
Speaker 12: just on small and mid has disappointed on a relative basis,
Speaker 12: although part of that could be returned to the mean.
Speaker 12: You know, after what we saw about a month ago,
Speaker 12: part of that small cap deterioration was built of regional banks.
Speaker 12: So if we can see a recovery there, you know,
Speaker 12: I think it's probably being allocated across the diversified equity portfolio.
Speaker 12: Isn't a terrible idea right now.
Speaker 5: I'm just looking at th h lg X and I
Speaker 5: see or I wonder what you can tell us about
Speaker 5: the top holdings. What do you have in THHLGX, And
Speaker 5: just got about.
Speaker 12: It's just a hedged index strategy. So we own s
Speaker 12: and P five hundred index positions through futures contracts, and
Speaker 12: the same thing with triple ques. We just owned the
Speaker 12: futures contracts in there. But the way that works is
Speaker 12: if it trust. If markets start to roll over, they
Speaker 12: move the lower target exit level, we move to the
Speaker 12: sideline so we can be in treasury bills.
Speaker 4: If that happens.
Speaker 12: We spend most of twenty twenty two in t bills
Speaker 12: in that fund. The other thing we have, though, is,
Speaker 12: you know, options protection is so cheap right now later
Speaker 12: about twelve percent below market for full notional so it
Speaker 12: costs almost nothing.
Speaker 2: So right it up and just be ready to bail
Speaker 2: and find another way out.
Speaker 3: It sounds like Phil really fun Phil Taves, CEO at
Speaker 3: TAS Asset Management on zoomerm, New York. So he's looking
Speaker 3: over your shoulder.
Speaker 5: Now, is Mike Wilson coming exactly?
Speaker 10: This is Blue Worth.
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Speaker 7: Mm hmm